ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In this section, “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” references to “the Company” “we,” “us,” or “our,” refer to Artemis
Therapeutics, Inc. and its consolidated subsidiaries and dollar amounts are in thousands, except as otherwise stated.
This Quarterly Report on Form 10-Q contains statements that may constitute “forward-looking statements.” Generally, forward-looking statements include words or phrases such as
“anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “could,” “may,” “might,” “should,” “will,” the negative of such terms, and words and phrases of similar import. For example, when we discuss possible strategic
alternatives, we are using forward-looking statements. Such statements are based on management’s current expectations and are subject to a number of risks and uncertainties, including, but not limited to, the risks detailed from time to time in our
filings with the Securities and Exchange Commission, or the SEC. These risks and uncertainties could cause our actual results to differ materially from those described in our forward-looking statements. Any forward-looking statement represents our
expectations or forecasts only as of the date it was made and should not be relied upon as representing its expectations or forecasts as of any subsequent date. Except as required by law, we undertake no obligation to correct or update any
forward-looking statement, whether as a result of new information, future events or otherwise, even if our expectations or forecasts change.
The following discussion and analysis should be read in conjunction with the financial statements, related notes and other information included in this Quarterly Report on Form
10-Q and with the Risk Factors included in Part I, Item 1A of our Annual Report on Form 10-K.
OVERVIEW
Until January 10, 2019, we were engaged in the development of agents for the prevention and treatment of severe and potentially life-threatening infectious diseases. On January
10, 2019, we received a notice regarding the immediate termination of a certain license agreement, dated May 31, 2016 (the “License Agreement”), executed by and between the Company, Hadasit Medical Research Services and Development Ltd. and the
Hong Kong University of Science and Technology R and D Corporation Limited. We relied primarily on the License Agreement with respect to the development of Artemisone, our lead product candidate. Since the termination of the License Agreement, the
Company no longer has any operating business.
We believe that we will continue to experience losses and increased negative working capital and negative cash flows in the near future and will not be able to return to positive
cash flow without either obtaining additional financing in the near term or completing a business transaction. We have experienced difficulties accessing the equity and debt markets and raising capital and there can be no assurance that we will be
able to raise such additional capital on favorable terms, or at all, or be able to complete a business transaction. If additional funds are raised through the issuance of equity securities or completing a business transaction, our existing
stockholders will experience significant dilution. In order to conserve our cash and manage its liquidity, we have implemented cost-cutting initiatives including the reduction of employee headcount and overhead costs.
Our Board of Directors is exploring strategic alternatives, which may include future acquisitions, a merger with another company or the sale of the public shell company.
THREE MONTHS ENDED JUNE 30, 2019 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2018 (dollars in thousands)
REVENUES.
We did not have any revenue producing operations for the three months ended June 30, 2019 or for the three months ended June
30, 2018.
PROFIT FROM SALE OF OPERATIONS, NET.
We did not incur a profit from the sale of operations in the three months ended June 30, 2019 or the
three months ended June 30, 2018.
COST OF REVENUES.
We had no cost of revenues for the three months ended June 30, 2019 or for the three months ended June 30, 2018 due to
the fact that we had no revenue-producing operations.
RESEARCH AND DEVELOPMENT EXPENSES.
We incurred no research and development expenses for the three months ended June 30, 2019 compared to
$58 for the three months ended June 30, 2018. The research and development expenses consisted primarily of consulting services, patent expenses and option expenses. The decrease in research and development expenses is primarily due the termination
of the License Agreement resulting in the Company no longer having business operations. We did not capitalize research and development expenses as all such expenses were charged to operating expenses as incurred.
SELLING AND MARKETING EXPENSES.
We did not incur any selling and marketing expenses for the three months ended June 30, 2019 or for the
three months ended June 30, 2018 due to us no longer having business operations.
GENERAL AND ADMINISTRATIVE EXPENSES.
We incurred $70 in general and administrative expenses for the three months ended June 30, 2019
compared to $154 for the three months ended June 30, 2018, which consisted primarily of compensation costs for administrative, finance and general management personnel, insurance, legal, accounting and administrative costs and option expenses. The
decrease in general and administrative expenses is primarily due us no longer having business operations.
FINANCIAL INCOME, NET.
We incurred $1 in financial income for the three months ended June 30, 2019 as compared to financial income of $71
for the three months ended June 30, 2018. This decrease in financial income is primarily due to the adoption of a new accounting standard.
OTHER EXPENSES.
We incurred no capital losses in the three months ended June 30, 2019 or June 30, 2018.
NET LOSS.
We incurred a net loss of $69 for the three months ended June 30, 2019 compared to incurring a net loss of $141 for the three
months ended June 30, 2018. The decrease in net loss is primarily due to a decrease in operating expenses.
SIX MONTHS ENDED JUNE 30, 2019 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2018 (dollars in thousands)
REVENUES.
We did not have any revenue producing operations for the six months ended June, 2019 or for the six months ended June 30,
2018.
PROFIT FROM SALE OF OPERATIONS, NET.
We did not incur a profit from the sale of operations in the six months ended June 30, 2019 or the
six months ended June 30, 2018.
COST OF REVENUES.
We had no cost of revenues for the six months ended June 30, 2019 or for the six months ended June 30, 2018 due to the
fact that we had no revenue-producing operations.
RESEARCH AND DEVELOPMENT EXPENSES.
We incurred no research and development expenses for the six months ended June 30, 2019 compared to
$129 for the six months ended June 30, 2018. The research and development expenses consisted primarily of consulting services, patent expenses and option expenses. The decrease in research and development expenses is primarily due the termination
of the License Agreement resulting in the Company no longer having business operations. We did not capitalize research and development expenses as all such expenses were charged to operating expenses as incurred.
SELLING AND MARKETING EXPENSES.
We did not incur any selling and marketing expenses for the six months ended June 30, 2019 or for the six
months ended June 30, 2018 due to us no longer having business operations.
GENERAL AND ADMINISTRATIVE EXPENSES.
We incurred $90 in general and administrative expenses for the six months ended June 30, 2019
compared to $383 for the three months ended June 30, 2018, which consisted primarily of compensation costs for administrative, finance and general management personnel, insurance, legal, accounting and administrative costs and option expenses. The
decrease in general and administrative expenses is primarily due us no longer having business operations.
FINANCIAL EXPENSE (INCOME), NET.
We incurred $0 in financial expense for the six months ended June 30, 2019 as compared to financial
income of $71 for the six months ended June 30, 2018. This decrease in financial income is primarily due to the adoption of a new accounting standard.
OTHER EXPENSES.
We incurred no capital losses in the six months ended June 30, 2019 or June 30, 2018.
NET LOSS.
We incurred a net loss of $90 for the six months ended June 30, 2019 compared to incurring a net loss of $352 for the six months
ended June 30, 2018. The decrease in net loss is primarily due to a decrease in operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2019, we had an accumulated deficit of $2,166,000 and a negative working capital (current assets less current liabilities) of $116,000. Losses will probably continue for the
foreseeable future.
We do not have any material capital commitments for capital expenditures as of June 30, 2019.
Since the closing of our merger with Artemis Therapeutics Inc., a Delaware corporation and Artemis Acquisition Corp., a Delaware corporation and our wholly-owned subsidiary on
August 23, 2016, we have financed our operations primarily through private placements of our securities. On October 23, 2017, we executed securities purchase agreements relating to a private placement offering of an aggregate of 300,000 shares of
our common stock at a purchase price of $1.00 per share, and of 250 shares of the our Series C Convertible Preferred Stock, at a purchase price of $1,000.00 per share, with such shares of Series C Preferred Stock initially convertible into an
aggregate of 250,000 shares of common stock. In addition, each investor received a warrant to purchase fifty percent of the number of shares of common stock effectively purchased in the offering. The closing of the offering took place on October
23, 2017.
We have sustained significant operating losses in recent periods, which have resulted in a significant reduction in our cash reserves. Due to the termination of the License
Agreement, we no longer have any business operations. We believe that we will continue to experience losses and negative cash flows in the near future and will not be able to return to positive cash flow without obtaining additional financing in
the near term or entering into a business transaction. We have experienced difficulties accessing the equity and debt markets and raising capital or entering into a business transaction, and there can be no assurance that we will be able to raise
such additional capital on favorable terms or at all or entering into a business transaction. If additional funds are raised through the issuance of equity securities or entering into a business transaction, our existing stockholders will
experience significant further dilution. In order to conserve our cash and manage its liquidity, we have implemented cost-cutting initiatives including the reduction of employee headcount and overhead costs.
As of June 30, 2019, we had accumulated liabilities of $
254,000.
As of June 30, 2019 we had cash and cash equivalents of $7,000 and negative cash flows from operating activities of $100,000 for the period then ended. The negative cash flow
from operating activities in the period ended June 30, 2019 is attributable mainly to the net loss of $90,000, share-based compensation expenses of $8,000, a decrease in accrued expenses and other payables of $7,000, and a $11,000 increase in other
accounts receivable and prepaid expenses.
We had
positive cash flows of $100,000 from financing activities in the
six month
period ended June 30, 2019. The positive cash flow from financing activities in the
period ended June 30, 2019 is due to proceeds of $100,000 from related parties.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
On May 15, 2019, the Company issued two unsecured promissory notes
(each, a “Note” and collectively the “Notes”)
in the aggregate principal amount of
$100,000 to two related parties. $20,000 and $30,000 of the funds were received by the Company on March 22, 2019, and April 4, 2019, respectively. The balance of the funds was received in May 2019. Each Note accrues interest at a rate of 6% per
annum until the Note is repaid in full. All payments of principal, interest and other amounts under the each Note are payable by June 30, 2021. The proceeds of the Notes will be used by the Company for general working capital purposes.
OFF BALANCE SHEET ARRANGEMENTS
None.