UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A No. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 26, 2001
ORGANITECH USA, INC.
(Exact name of registrant as specified in its charter)
Delaware 00-22151 93-0969365
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
Technion Science Park
Nesher, Israel 36601, Israel
(Address of principal executive offices)
972-4-830-8320
(Registrant's telephone number, including area code)
Item 2. Acquisition or Disposition of Assets
(i) Consummation of Transaction. Reference is made to the disclosure
contained in the Current Report on Form 8-K, filed by IncubateThis! Inc., now
known as OrganiTech USA, Inc. (the "Company"), on February 9, 2001 regarding the
acquisition of all of the outstanding shares of capital stock of Organitech
Ltd., an Israeli corporation.
(ii) Financial Statements. Included under Item 7 of this Current
Report on Form 8-K are financial statements relating to Organitech Ltd., the
acquirer in the reverse acquisition, and pro forma financial information for the
Company. After reasonable inquiry, the Company is not aware of any material
factors relating to the reverse acquisition that would cause the reported
financial information relating to such acquisition not to be necessarily
indicative of future operating results.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements.
The required audited financial statements have been attached to
this filing as Annex A.
(b) Pro Forma Financial Information.
The required pro forma financial information, which gives effect
to the Company's reverse acquisition, has been attached to this filing as
Annex B.
(c) Exhibits.
Exhibit 2.1* Stock Exchange Agreement, dated as of October,
2000, among OrganiTech, Ltd., the OrganiTech
Shareholders, Incubate This!,Inc., and Sharone
Perlstein.
Exhibit 2.2* Amendment to Stock Exchange Agreement dated
January 26, 2001.
--------------------------------
* previously filed
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OrganiTECH USA, Inc.
Date: May 17, 2001 By: /s/ Lior Hessel
---------------
President
Annex A
ORGANITECH LTD.
AUDITED FINANCIAL STATEMENTS
ORGANITECH LTD.
(A COMPANY IN THE
DEVELOPMENT STAGE)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2000
Organitech Ltd.
(A company in the development stage)
Financial Statements
- --------------------------------------------------------------------------------
Contents
Page
Auditors' Report 2
Balance Sheets 3
Statements of Operations 4
Statements of Changes in Shareholders' Equity 5
Statements of Cash Flows 6
Notes to the Financial Statements 7 - 16
Auditors' Report to the Shareholders of Organitech Ltd.
We have audited the accompanying balance sheets of Organitech Ltd., - (a
development stage enterprise), ("the Company") as of December 31, 2000 and 1999
and the related statements of operations, shareholders' equity (deficit) and
cash flows for the year ended December 31, 2000 and the period from July 4, 1999
to December 31, 1999, and for the period from July 4, 1999 (inception) to
December 31, 2000. These financial statements are the responsibility of the
Company's Board of Directors and of its Management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by the Board of Directors and by Management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company (as development
stage enterprise) as of December 31, 2000 and 1999, the results of its
operations and its cash flows for the year ended December 31, 2000 and the
period from July 4, 1999 to December 31, 1999, and for the period from July 4,
1999 (inception) to December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America.
Somekh Chaikin
Certified Public Accountants (Isr.)
Haifa, May 14, 2001
Organitech Ltd.
(A company in the development stage)
Balance Sheets as of December 31,
- ---------------------------------------------------------------------------------------------
2000 1999
---------- ----------
Note U.S.$ U.S. $
-------- ---------- ----------
Current assets
Cash and cash equivalents 3 161,368 83,146
Accounts receivable 4 38,156 9,530
Prepaid expenses 50,754 --
---------- ----------
250,278 92,676
---------- ----------
Fixed assets, net 5 108,628 8,727
---------- ----------
Other assets 7D 16,880 --
---------- ----------
375,786 101,403
========== ==========
Current liabilities
Note payable to bank -- 1,107
Accounts payable 136,580 37,797
Other liabilities and accrued expenses 6 250,503 12,855
---------- ----------
387,083 51,759
---------- ----------
Long-term liabilities
Employee severance benefits 17,111 --
---------- ----------
Contingencies and Commitments 7
Shareholders' (deficit) equity
Common stock, NIS 0.01 par value,
authorized 3,000,000 shares, -
issued and outstanding - 97,143 shares in 2000 and
87,143 in 1999. 235 210
Preferred stock, NIS 0.01 par value,
Authorized 500,000 shares,-
issued and outstanding - 12,460 in 2000 and 0 in 8 30 --
1999.
Additional paid-in capital 1,143,338 114,399
Unearned compensation 9 315,313 15,715
Deficit accumulated during the development stage (1,487,324) (80,680)
---------- ----------
Total shareholders' (deficit) equity 10 (28,408) 49,644
---------- ----------
375,786 101,403
========== ==========
Mr. Lior Hessel Mr. Gendler Zohar
Director Director
The accompanying notes are an integral part of these financial statements.
3
Organitech Ltd.
(A company in the development stage)
Statements of Operations for the period ended December 31,
- ----------------------------------------------------------------------------------------------
Amounts
Accumulated
during the
Development
2000 * 1999 stage
---------- ----------- -----------
Note U.S.$ U.S. $ U.S.$
------ ---------- ----------- -----------
Research and development expenses - net of grants
from the Office of Chief Scientist 11 1,083,779 77,099 1,160,878
General and administrative expenses 12 332,718 3,065 335,783
---------- ----------- ----------
Operating loss 1,416,497 80,164 1,496,661
Financing expenses 7,420 1,632 9,052
Financing income (17,273) (1,116) (18,389)
---------- ----------- ----------
Loss before income taxes 1,406,644 80,680 1,487,324
Income taxes 13 -- -- --
---------- ----------- ----------
Net loss 1,406,644 80,680 1,487,324
========== =========== ==========
Basic and diluted net loss per share 14.94 2.06 --
========== =========== ==========
Weighted average number of shares outstanding 94,157 39,217 --
========== =========== ==========
* For the period July through December 1999.
The accompanying notes are an integral part of these financial statements.
4
Organitech Ltd.
(A company in the development stage)
Statements of Changes in Shareholders' Equity (deficit)
- -----------------------------------------------------------------------------------------------------------------------------------
Total
Preferred stock Common Stock Additional Shareholders'
-------------------- ------------------ Paid-in Unearned Accumulated equity
Amount Amount Capital compensation loss (deficit)
Number of ------- Number of ------- --------- ------------ ------------ ------------
Shares U.S.$ Shares U.S. $ U.S. $ U.S. $ U.S. $ U.S. $
-------- -------- -------- -------- --------- -------- ------------ ----------
Balance as of July 1, 1999 -- -- -- -- -- -- --
Changes during the year ended
December 31, 1999:
Issuance of common stock -- -- 87,143 210 114,399 -- -- 114,609
Issuance of employees' stock
options -- -- -- -- -- 15,715 -- 15,715
Net loss -- -- -- -- -- -- (80,680) (80,680)
-------- -------- -------- -------- --------- -------- ---------- ----------
Balance as of December 31, 1999 -- -- 87,143 210 114,399 15,715 (80,680) 49,644
-------- -------- -------- -------- --------- -------- ---------- ----------
Changes during the year ended
December 31, 2000:
Issuance of common stock -- -- 10,000 25 55,519 -- -- 55,544
Issuance of preferred stock 12,460 30 -- -- * 973,420 -- -- 973,450
Issuance of employees'
Stock options -- -- -- -- -- 299,598 -- 299,598
Net loss -- -- -- -- -- -- (1,406,644) (1,406,644)
-------- -------- -------- -------- --------- -------- ---------- ----------
Balance as of December 31, 2000 12,460 30 97,143 235 1,143,338 315,313 (1,487,324) (28,408)
======== ======== ======== ======== ========= ======== =========== ===========
* Net of issuance expenses in the amount of US$26,550.
The accompanying notes are an integral part of these financial statements.
5
Organitech Ltd.
(A company in the development stage)
Statements of Cash Flows for the period ended December 31,
- ----------------------------------------------------------------------------------------------
Amounts
Accumulated
during the
Development
2000 *1999 stage
---------- ----------- ----------
U.S.$ U.S. $ U.S.$
---------- ----------- ----------
Cash flows from operating activities:
Net loss (1,406,644) (80,680) (1,487,324)
Adjustments to reconcile net loss to net cash used in
operating activities (a) 566,524 57,050 623,574
---------- ----------- ----------
Net cash used in operating activities (840,120) (23,630) (863,750)
---------- ----------- ----------
Cash flows used in investing activities:
Purchases of property and equipment (109,545) (8,940) (118,485)
---------- ----------- ----------
Net cash used in investing activities (109,545) (8,940) (118,485)
---------- ----------- ----------
Cash flows from financing activities:
Proceeds from note payable to bank -- 1,107 1,107
Principal payments on note payable to bank (1,107) -- (1,107)
Issuance of preferred stock 973,450 -- 973,450
Issuance of common stock 55,544 114,609 170,153
---------- ----------- ----------
Net cash provided by financing activities 1,027,887 115,716 1,143,603
---------- ----------- ----------
Increase in cash and cash equivalents 78,222 83,146 161,368
Cash and cash equivalents at beginning of year 83,146 -- --
---------- ----------- ----------
Cash and cash equivalents at end of year 161,368 83,146 161,368
========== =========== ==========
(a) Adjustments to reconcile net loss provided by
operating activities:
Employee stock compensation 299,598 15,715 315,313
Depreciation 9,644 213 9,857
Severance benefits 17,111 -- 17,111
---------- ----------- ----------
326,353 15,928 342,281
---------- ----------- ----------
Changes in assets and liabilities:
Increase in accounts receivable (28,626) (9,530) (38,156)
Increase in prepaid expenses (50,754) -- (50,754)
Increase in other assets (16,880) -- (16,880)
Increase in accounts payable 98,783 37,797 136,580
Increase in other liabilities and accrued expenses 237,648 12,855 250,503
---------- ----------- ----------
240,171 41,122 281,293
---------- ----------- ----------
566,524 57,050 623,574
========== =========== ==========
* For the period July through December 1999.
The accompanying notes are an integral part of these financial statements.
6
Note 1 - General
Organitech Ltd., (the "Company") was incorporated under the laws of Israel
in July 1999. The Company is a development stage company that intends to
develop technologies that cost effectively automate the method by which
many foods, plants, and extracts are cultivated. The Company has developed
several advanced technologies that involve the automatic of the
cultivation process of plants and vegetables inside an environmentally
controlled 40 - foot methal container. This proprietary platform solution,
the GrowTech 2000, utilizes advanced hydroponic systems, growth lighting
systems, environmental control systems, robotics and computer technologies
including proprietary farming software to fully automate the entire
cultivation process.
To date, the Company has not generated any revenues from sales of the
GrowTech 2000 platform. The Company's losses could continue for the next
several years as it continues to expand research and development
activities, increase its manufacturing and sales and marketing
capabilities. The continued expansion of the Company is dependent on sales
of its GrowTech platform or additional financing from external sources.
Note 2 - Significant Accounting Policies
The following significant accounting policies are followed by Organitech
Ltd. in preparing and presenting these financial statements.
A. Basis of Presentation
The financial statements are prepared in accordance with accounting
principles accepted in the United States of America and presented in
U.S. dollars.
B. Functional Currency and Foreign Currency Transactions
The Company's functional currency is the U.S. dollar. The Company
translates its financial statements from NIS to its functional and
reporting currency using (i) historical exchange rates for all
non-monetary assets and liabilities and stockholders' equity and (ii)
an average exchange rate for the period for revenues, expenses, gains
and losses, except those arising from non monetary assets or
liabilities. Any resulting translation adjustment is recorded in the
statement of operations.
Transactions and balances denominated in dollars are presented at
their dollar amounts. Non-dollar transactions and balances are
remeasured into dollars in accordance with the principles set forth in
Statement of Financial Accounting Standards (SFAS) No. 52, "Foreign
Currency Translation", of the Financial Accounting Standards Board of
the United States (FASB). Transaction gains and losses were not
material for any period presented in these financial statements.
C. Use of estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
7
Note 2 - Significant Accounting Policies (cont'd)
D. Cash equivalents
The Company considers all highly liquid investments with maturity of
three months or less when purchased to be cash equivalents. For
purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.
E. Research and development costs
Research and Development costs are expensed as incurred. The cost of
acquired in-process research and development that has no alternative
use is charged to the statement of operations upon acquisition.
F. Research and development grants
The Company receives research and development grants from the
Government of Israel. These grants are accounted for in accordance
with the Financial Accounting Standards Board's Statement No. 68.
"Research and Development Arrangements" ("Statement 68"). The Company
records a receivable from the Government of Israel and a charge to the
statement of operations for research and development expenses when
such costs are incurred in connection with an approved grant. The
receivable is subsequently recovered from the office of the Chief
Scientist of the Government of Israel.
The research and development grants are reflected as a reduction of
gross research and developments costs.
G. Fixed assets
Fixed assets are stated at cost. Expenditures for maintenance and
repairs are included in earnings when incurred while improvements that
extend the useful life of the fixed asset are capitalized as part of
such assets.
Depreciation is calculated on the straight-line method over the
estimated useful life of the assets which are summarized as follows:
%
--------
Computers 33
Office furniture and equipment 6
Other equipment 7-15
Leasehold improvements 10
H. Impairment of long-lived assets and certain intangibles
The Company accounts for long-lived assets and certain intangible
assets in accordance with the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Assets to be Disposed Of". The Statement
requires that long-lived assets and certain intangible assets be
reviewed for impairment whenever events or circumstances indicate that
the carrying value of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
8
Note 2 - Significant Accounting Policies (cont'd)
I. Employee Severance Benefits
The Company has a defined benefit severance payment plan covering
substantially all of its employees. The cost associated with this
benefit is accrued as earned by the employees. The benefit is based on
employee's years of service and most recent monthly salary.
The Company periodically makes lump-sum cash payments to
professionally managed pension funds. These contributions are
accounted for as settlements of the accrued defined benefit severance
obligation pursuant to Financial Accounting Standard Board No. 106
"Employers' Accounting for Postretirement Benefits Other Than
Pensions" because such payments represent (a) an irrevocable action,
(b) relieves the Company of its primary responsibility for the defined
benefit severance obligation, and (c) eliminates significant risks
related to the obligation and the assets used to effect the
settlement.
J. Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.
K. Stock based compensation
The Company has adopted the Financial Accounting Standards Board's
Statement No. 123 "Accounting for Stock-Based Compensation"
("Statement 123"), which permits entities to recognize as expense over
the vesting period the fair value on the date of grant of all
stock-based awards. Alternatively, Statement 123 also allows entities
to continue to apply the provisions of Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued to Employees and related
interpretations" (APB Opinion No. 25) and provide pro forma net income
and pro forma earnings per share disclosures for employee stock option
grants as if the fair -value based method defined in Statement 123 had
been applied. The Company has elected to continue to apply the
provisions of APB No. 25 and provide the pro forma disclosure
provisions of Statement 123.
The Company applies the intrinsic value-based method prescribed in APB
25 for its stock compensation to employees and directors. As such, the
Company computes and records compensation expense for grants whose
terms are fixed with respect to the number of shares and option price
only if the market price on the date of grant exceed the exercise
price of the stock option. Compensation expense for variable plans is
estimated at the date of grant on the basis of assumptions as to the
final number of shares and exercise price. The compensation cost for
both fixed and variable plans is recorded over the period the employee
performs the service to which the stock compensation relates.
9
Note 2 - Significant Accounting Policies (cont'd)
L. Net loss per share
Basic and diluted loss per ordinary share is presented in conformity
with Statement of Financial Accounting Standard No. 128, "Earnings Per
Share" ("Statement 128") for all periods presented. Basic loss per
ordinary share is calculated by dividing the net loss attributable to
ordinary shares, by the weighted average number of ordinary shares
outstanding. The computation of diluted loss per ordinary share
assumes the issuance of ordinary shares for all potential dilutive
ordinary shares outstanding during the reporting period. The dilutive
effect of stock options is considered in earnings per share
calculations if dilutive, using the treasury stock method.
Note 3 - Cash and Cash Equivalents
Consist of:
December 31, December 31,
2000 1999
------------ -------------
U.S.$
----------------------------
Denominated in New Israeli Shekels 13,041 24,401
Denominated in foreign currencies 107,717 58,745
Bank deposits 40,610 -
------------ ------------
161,368 83,146
============ ============
Note 4 - Accounts Receivable
Consist of:
December 31, December 31,
2000 1999
------------ -------------
U.S.$
----------------------------
Value added taxes 20,279 7,108
Advances to suppliers 172 391
Employees 4,126 517
Receivable from the Chief Scientist 8,448 1,376
Tax authorities 5,131 18
Interested parties - 120
------------ ------------
38,156 9,530
============ ============
10
Note 5 - Fixed Assets, Net
Consist of:
December 31, December 31,
------------ ------------
2000 1999
U.S. $
---------------------------
Cost:
Computers 36,617 2,599
Office furniture and equipment 7,306 539
Other equipment 37,310 5,802
Communication equipment 6,678 -
Leasehold improvement 10,451 -
------------ ------------
98,362 8,940
------------ ------------
Accumulated depreciation:
Computers 3,300 138
Office furniture and equipment 142 6
Other equipment 5,616 69
Communication equipment 247 -
Leasehold improvement 552 -
------------ ------------
9,857 213
------------ ------------
Net 88,505 8,727
------------ ------------
Base stock 20,123 -
------------ ------------
108,628 8,727
============ ============
Depreciation expense amounted to US$ 213, US$ 9,644 and US$ 9,857 in 1999, 2000
and for the period from inception through December 31, 2000, respectively.
Note 6 - Other liabilities and Accrued Expenses
Consist of:
December 31, December 31,
2000 1999
------------ ------------
U.S. $
---------------------------
Advances from customers* 160,000 -
Accrued expenses 3,500 1,575
Due to employees and institutions 55,481 6,172
Due to related parties 1,965 3,134
Vacation benefits 29,557 1,974
------------ ------------
250,503 12,855
============ ============
* See note 7.
11
Note 7 - Contingencies and Commitments
A. The Company currently receives grants from the Government of Israel
through the office of the Chief Scientist of the Ministry of Industry
and Trade, commonly referred to as the Chief Scientist, for the
financing of a significant portion of the Company's research and
development expenditures in Israel.
The terms of the Chief Scientist grants restrict the Company's ability
to manufacture products or transfer technologies developed using these
grants outside of Israel. This restriction may impair the Company's
ability to outsource manufacturing or engage in similar arrangements
for those products or technologies. In addition, if the Company fails
to comply with any of the conditions imposed by the Chief Scientist, it
may be required to refund any grants previously received, together with
interest and penalties.
The Company is obligated to pay royalties to the Government of Israel
ranging from 3% to 5% on sales of products developed with the grants
from the Office of the Chief Scientist, not to exceed the total amount
of grants received.
As of December 31, 2000, the Company had received research and
development grants of US$ 245 thousand from the Office of the Chief
Scientist.
B. In February 2000, the Company signed a distribution agreement whereby
it granted to Net Alim the exclusive right to market the Company's
GrowTech platforms in Israel. Under the terms of the agreement, Net
Alim agreed to purchase two GrowTech platforms for $100,000. In March
2000, the Company received a $60,000 advance from Net Alim. In July
2000, the Company delivered the two GrowTech platforms to Net Alim.
The terms of the agreement also require that Net Alim (i) engage the
Company to maintain the Growtech systems and to compensate the Company
for such services and (ii) pay royalties to the Company based on sales
less certain expenses.
The Company is currently involved in a negotiation with Net Alim
regarding the terms of the distribution agreement.
C. In July 2000, the Company signed a memorandum of understanding with a
Singaporian company whereby the Company committed to sell two GrowTech
platforms for US$ 50,000 each. The Company received an advance of
US$100,000 for two GrowTech platforms which were scheduled to be
delivered in January 2001. As of May 14, 2001, the two GrowTech
platforms have not yet been delivered.
A six month experimental stage will commence upon delivery of the two
GrowTech platforms. The Singaporian company is committed to purchase an
additional fifteen GrowTech platforms for US$ 75,000 each and will have
exclusive sales and marketing rights in Singapore.
The Singaporian company will be released from its obligations under
this agreement if it is not satisfied with the GrowTech platforms.
D. In August 2000, the Company entered into an agreement with a leasor
whereby it leased six vehicles for a period of forty-four months. The
monthly lease payment is linked to the Israeli consumer price index.
Under the terms of the agreement, the Company was required to deposit
US$ 16,880 with the leasing company to guarantee its performance.
12
Note 8 - Preferred Stock
On July 10, 2000, the Company issued 12,460 Series A preferred shares
of a par value of NIS 0.01 each in exchange for US$ 1 million. The
preferred shares (i) have a liquidation preference, (ii) participate
equally with ordinary shareholders in dividends and (iii) are
convertible into ordinary shares at the option of the holder.
Note 9 - Stock Based Compensation
On December 23, 1999, the Company's Board of Directors approved a stock
compensation program. The stock options granted under the program
permits an employee to purchase 6,000 ordinary shares at an exercise
price of NIS 0.01 per ordinary share. The options vest ratably over a
four-year period ending in March 2003. The options expire in January
2006.
As of December 31, 2000, the Company recorded compensation expense of
US$ 315,313. The deferred compensation cost was US$ 166,172.
Had compensation expense for stock options granted under the Company's
Stock Option Plan been determined based on the fair value at the date
of grant, consistent with the method of Financial Accounting Standards
Board Statement No. 123 "Accounting for Stock-Based Compensation" ("FAS
123"), the Company's net income would not have changed.
Note 10 - Stockholders' Equity
1. In July 1999, the Company sold 20,000 ordinary shares at a price of
US$ 3 per share. The Company raised US$ 60,000 from the sale of
these ordinary shares.
On December 31, 1999, the Company sold the first 10,000 ordinary
shares at a price of US$ 3 per share. The Company raised US$ 30,000
from the sale of these ordinary shares.
In April 2000, the Company issued the additional 10,000 ordinary
shares at a price of US$ 3 per share. The Company raised US$ 60,000
from the sale of these ordinary shares.
2. In June 2000, the Company signed an agreement with IncubateThis!,
Inc. ("IncubateThis") pursuant to which the Company issued 12,460
preferred shares of a par value of NIS 0.01 each (10% of its shares)
in exchange for US$ 1 million. In addition, the Company granted
warrants to IncubateThis for the purchase of an additional 35,602
preferred shares in exchange for US$ 4 million. Further,
IncubateThis was granted an option, to invest an additional US$ 5
million based on the Company's estimated market value of US$ 50
million.
3. In May 2000, the Company granted an employee an option to acquire
2,500 ordinary shares. The exercise price is US$ 90 per share. The
option will expire on January 1, 2001, if not fully exercised, or if
partially exercised, ratably over the period between January 1, 2001
and than August 8, 2004.
13
Note 11 - Research and Development Expenses, Net
Consist of:
* Period ended
December 31, December 31, **
2000 1999 Cumulative
------------ ------------ ----------
U.S.$ U.S.$
---------------------------- ----------
Payroll and related benefits 700,364 78,978 779,342
Materials 303,468 7,354 310,822
Equipment 42,043 26,337 68,380
Subcontractors 122,580 21,358 143,938
Overhead 20,492 5,640 26,132
Patent 12,345 7,365 19,710
Vehicle expenses 26,625 - 26,625
Others 20,500 10,032 30,532
1,248,417 157,064 1,405,481
Less:
Research and development grants from
the Office of Chief Scientist (164,638) (79,965) (244,603)
------------ ------------ ----------
1,083,779 77,099 1,160,878
============ ============ ==========
* For the period July through December 1999.
** Cumulative amounts from the Company's inception.
Note 12 - General and Administrative Expenses
Consist of:
*Period ended
December 31, December 31,
2000 1999 **Cumulative
------------ ------------ ------------
U.S.$ U.S.$
---------------------------- ----------
Payroll and related benefits 211,668 - 211,668
Depreciation 9,644 213 9,857
Professional services 8,734 1,575 10,309
Office expenses 11,531 1,277 12,808
Overseas travel 23,488 - 23,488
Vehicle expenses 14,433 - 14,433
Others 53,220 - 53,220
------------ ------------ ----------
332,718 3,065 335,783
============ ============ ==========
* For the period July through December 1999.
** Cumulative amounts from the Company's inception.
14
Note 13 - Income Taxes
The Company computes its provision for income taxes on the basis of
taxable income in New Israeli Shekels and statutory tax rates as defined
under Israeli Law. The Inflationary Adjustments Law, 1985 requires that
taxable income be adjusted for the effects of inflation.
A. Net Operating Loss Carryforwards
At December 31, 2000, the Company had net operating loss carryforwards
for Israeli tax purposes of US$ 1,157 thousand. These losses are
indexed to changes in the Israeli Consumer Price Index pursuant to
Inflationary Adjustments Law, 1985. The net operating loss carry
forwards are available to offset future taxable income, if any, for an
indefinite period.
B. Deferred taxes
Future income taxes represent the tax effects of transactions which
are reported in different periods for financial and tax reporting
purposes. These differences consist of temporary differences, which
are the tax effects of differences between the tax and financial
reporting balance sheets, and tax carryforwards. The deferred taxes
were calculated in a tax rate of 36%.
Significant components of the Company's net deferred tax assets and
liabilities are as follows:
December 31, December 31,
2000 1999
------------ ------------
U.S.$
---------------------------
Deferred tax assets:
Tax Loss carryforward 416,678 28,936
Short-term Provision for employee benefits 10,640 711
Long-term Provision for employee benefits 6,160 -
------------ ------------
Total deferred tax assets 433,478 29,647
Valuation allowance 433,478 29,647
------------ ------------
Net deferred tax assets - -
============ ============
C. Reconciliation of theoretical tax expense to the actual tax expense:
*Period ended
December 31, December 31,
2000 1999
------------ ------------
U.S.$
---------------------------
Loss before income taxes as reported in
the statements of operations (1,406,644) (80,680)
------------ ------------
Computed statutory tax (36%) (506,392) (29,045)
Increase in taxes resulting from permanent differences:
Non-deductible operating expenses 1,140 (14)
------------ ------------
(505,252) (29,059)
Timing differences in respect of which valuation
allowance were recorded against deferred
tax asset:
Non-deductible expenses in respect of employees' 16,800 711
liabilities
Loss for tax purposes in the current year 387,742 28,936
Payrolls on account of employees' options 107,855 5,657
Others (7,145) (6,245)
------------ ------------
- -
============ ============
D. The Company has not received a final tax assessment for the year 1999.
15
Note 14 - Transactions and Balances with Related Parties
1. Balances with related parties
2000 1999
------------ ------------
U.S.$
---------------------------
Accounts receivable - 120
Due to related parties (1,965) (3,134)
------------ ------------
(1,965) (3,014)
============ ============
2. Transactions with related parties
December 31, December 31,
2000 1999
------------ ------------
U.S.$
---------------------------
Overhead expenses 20,492 5,640
============ ============
*For the period July through December 1999.
Note 15 - Subsequent Events
A. In January 2001, the Company signed an agreement with IncubateThis!,
Inc. ("IncubateThis") whereby IncubateThis issued 7.5 million shares of
common stock to the shareholders of Organitech Ltd. in exchange for all
of its outstanding ordinary shares not owned by IncubateThis.
The preferred shares warrants issued to IncubateThis in June 2000 and
referred to in Note 10 were cancelled in connection with this
transaction.
The Company is now a wholly-owned subsidiary of IncubateThis. The
Company's selling shareholders own approximately 67.57 percent of
IncubateThis common stock.
B. In February 2001, the Company received US$ 500 thousand as a temporary
loan from IncubateThis!, Inc. All terms with regard to the loan shall
be agreed upon in the future.
16
Annex B
OrganiTECH USA, Inc.
PRO FORMA FINANCIAL STATEMENTS
OrganiTECH USA, Inc.
Unaudited Pro Forma Consolidated
Financial Statements
As of December 31, 2000
OrganiTECH USA, Inc.
Unaudited Pro Forma Consolidated
Financial Statements
In January 2001, the OrganiTECH USA, Inc. ("OrganiTECH USA") (formerly
"IncubateThis! Inc.) signed an agreement with Organitech Ltd. ("Organitech
Israel") whereby OrganiTECH USA issued 7.5 million shares of common stock to the
shareholders of Organitech Israel in exchange for all of the outstanding
ordinary shares of the Company not already owned by OrganiTECH USA.
The 7.5 million shares of common stock issued by OrganiTECH USA to the selling
shareholders represented 67.57% of the voting common stock of OrganiTECH USA.
Accordingly, this business combination is considered to be a reverse
acquisition. As such, for accounting purposes, Organitech Israel is considered
to be the acquirer while OrganiTECH USA is considered to be the acquire.
The following unaudited pro forma consolidated balance sheet at December 31,
2000 gives effect to the business combination acquisition as if it had occurred
at December 31, 2000. The following unaudited pro forma consolidated statements
of Operations for the year ended December 31, 2000 gives effect to the business
combination as if it had occurred at January 1, 2000.
These pro-forma statements have been prepared based on, and should be read in
conjunction with, the audited financial statements of OrganiTECH USA and
Organitech Ltd. as of December 31, 2000 and for the year ended December 31,
2000.
OrganiTECH USA, Inc.
- -------------------------------------------------------------------------------
Unaudited Consolidated Pro Forma Balance Sheet as of December 31, 2000
- -------------------------------------------------------------------------------
In US dollars
Historical Combined
------------------------- --------
OrganiTECH
USA and
OrganiTECH Organitech Organitech Pro Forma Pro Forma
Note USA Israel Israel Adjustments Combined
---- ---------- ---------- ----------- ----------- ---------
Assets
Current assets:
Cash and cash equivalents 2,486,344 161,368 2,647,712 - 2,647,712
Account receivable - 53,155 53,155 - 53,155
Other assets 2b 12,800 35,755 48,555 (48,555) -
--------- ------- --------- ------- ---------
Total current assets 2,499,144 250,278 2,749,422 (48,555) 2,700,867
--------- ------- --------- ------- ---------
Long term investment
Long term prepaid expenses - 16,880 16,880 - 16,880
Investment in preferred stock 2c 1,000,000 - 1,000,000 (1,000,000) -
Fixed assets, net - 108,628 108,628 - 108,628
--------- ------- --------- ---------- --------
Total assets 3,499,144 375,786 3,874,930 (1,048,555) 2,826,375
========= ======= ========= ========== =========
2
OrganiTECH USA, Inc.
- -------------------------------------------------------------------------------
Unaudited Consolidated Pro Forma Balance Sheet as of December 31, 2000
- -------------------------------------------------------------------------------
In US dollars
Historical Combined
------------------------- --------
OrganiTECH
USA and
OrganiTECH Organitech Organitech Pro Forma Pro Forma
Note USA Israel Israel Adjustments Combined
- --------------------------------------------------------------------------------------------------------
Liabilities and
stockholders'
equity (deficit)
Current liabilities:
Accounts payable 68,523 136,580 205,103 - 205,103
Other liabilities - 250,503 250,503 - 250,503
--------- --------- --------- --------- ---------
Total current liabilities 68,523 387,083 455,606 - 455,606
--------- --------- --------- --------- ---------
Long term Liabilities
Employee severance benefits - 17,111 17,111 - 17,111
--------- --------- --------- --------- ---------
Stockholders' equity (deficit)
Common stock - 235 235 10,865 11,100
Preferred stock - 30 30 (30) -
Additional paid-in capital 4 6,684,925 1,143,338 7,828,263 (4,313,694) 3,514,569
Unearned compensation - 315,313 315,313 - 315,313
Accumulated deficit (3,254,304) (1,487,324) (4,741,628) 3,254,304 (1,487,324)
--------- --------- --------- --------- ---------
Total shareholders' equity 3,430,621 (28,408) 3,402,213 (1,048,555) 2,353,658
--------- --------- --------- --------- ---------
Total liabilities and
shareholders' equity 3,499,144 375,786 3,874,930 (1,048,555) 2,826,375
========= ========= ========= ========= =========
3
OrganiTECH USA, Inc.
- -------------------------------------------------------------------------------
Unaudited Consolidated Pro Forma statement of operations for the year ended
December 31, 2000
- -------------------------------------------------------------------------------
In US dollars
Historical
----------------------------
OrganiTECH Organitech Pro Forma
Note USA Israel Combined*
---- ---------- ---------- ---------
Revenues - - -
Research and development
expenses net of grants from
the Chief Scientist - 1,083,779 1,083,779
General and administrative 2,504,725 332,718 2,837,443
--------- --------- ---------
Operating loss 2,504,725 1,416,497 3,921,222
Interest income (18,733) (17,273) (36,006)
Interest expenses 249 7,420 7,669
Impairment on investments
and demand note receivable 342,500 - 342,500
Forgiveness of debt 1,538 - 1,538
--------- --------- ---------
Loss before income taxes 2,830,279 1,406,644 4,236,923
Income taxes 3 - - -
--------- --------- ---------
Net loss 2,830,279 1,406,644 4,236,923
--------- --------- ---------
Basic and diluted loss per
share 5 0.69 14.06 0.38
--------- --------- ---------
Weighted average number of
common shares outstanding 4,071,647 100,063 11,100,000
========= ========= =========
*There were no pro forma adjustments to the statement of operation.
4
OrganiTECH USA, Inc.
Unaudited consolidated Pro Forma Financial Statements
- -------------------------------------------------------------------------------
1. Basis of presentation
This pro forma financial information presented for informational purposes
only and is not necessarily indicative of the financial position or
operating results would have occurred had the merger been consummated at
the dates indicated, nor are they necessarily indicative of future
operating results or financial condition.
The pro forma financial information does not give effect to potential
cost savings or other synergies that could result from the merger. Plans
are currently being implemented to integrate the operations of the
combining companies, which involve certain costs. Certain of these costs
have been accounted for as accrued liabilities and included in the
purchase price at the date of the combination.
Certain reclassifications have been made to the historical financial
statements of Organitech Ltd. to conform to the pro forma combined
presentation. Such reclassifications are not material to the pro forma
combined condensed financial statements.
2. Pro Forma Adjustments and Assumptions
a. Intercompany eliminations
The transactions and the balances between the merged companies were
eliminated.
b. Other assets
OrganiTECH USA incurred certain stock issuance expenses associated
with its business combination with Organitech Israel. This pro forma
adjustment reclassifies such expenses as a reduction in additional
paid-in capital.
c. Investments in Preferred shares
In June 2000, OrganiTECH USA invested U.S.$ 1,000,000 in cash in
Organitech Israel in exchange for 12,460 preferred shares representing
an interest of 10%.
3. Tax Consequences of the Merger
The Pro Forma Combined Condensed Financial Statements assume that the
merger qualifies as a "tax free" reorganization for Israeli and U.S.
income tax purposes and accordingly assets and liabilities have been
transferred at historical cost for tax purposes.
5
OrganiTECH USA, Inc.
Unaudited consolidated Pro Forma Financial Statements
- -------------------------------------------------------------------------------
4. Purchase Price Allocation
This business combination represents a reverse acquisition involving a
"shell company" (OrganiTECH USA) and an operating company (Organitech
Israel) Accordingly, Organitech Israel (the accounting acquirer) has
recorded, pursuant to existing accounting guidance for SEC registrants,
the fair value of tangible net assets of OrganiTECH USA.
The purchase price of OrganiTECH USA was $4,000,000. The consideration
consisted of 11,100,000 ordinary shares valued at U.S.$4 million based on
the estimated fair value of the net assets of OrganiTECH USA and,
therefore, goodwill or other intangible assets were not recorded.
5. Pro Forma loss per share
Basic and diluted loss per share is calculated by dividing pro forma net
loss by the number shares used to calculate loss per share in the
historical period adjusted to give effect to the ordinary shares
subsequently issued or assumed to be used had this transaction been
consummated at the beginning of the period presented.
6