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 former 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. In that regard, on March 6, 2022, the Company entered into a
Share Exchange Agreement (the "Share Exchange Agreement") with Manuka Ltd, an
Israeli company (the "Manuka") and the shareholders of Manuka (the
"Shareholders"). Since its inception, Manuka's business activities primarily
consisted of distributing Manuka honey imported from New Zealand, developing and
distributing supplements aimed at the beauty and skincare markets and,
developing and manufacturing skincare products based on New Zealand's manuka
honey and bee venom, among other natural ingredients. The Share Exchange
Agreement provides that, upon the terms, and subject to the conditions set forth
therein, on the closing date (the "Closing"), the Company will acquire all of
the outstanding shares of Manuka (the "Manuka Shares") from the Shareholders in
exchange for an aggregate of 92,446,687 shares of the Company's common stock
(the "Consideration Shares"), such that the Shareholders will hold, immediately
following the Closing, eighty-nine percent (89%) of the Company's issued and
outstanding share capital. At Closing, should it be required as a condition by
the Israeli Tax Authority to affect a tax ruling to approve the transactions
contemplated by the Share Exchange Agreement (the "Tax Ruling"), the Manuka
Shares and the Consideration Shares will be placed in escrow with a third-party
escrow agent pending the Closing. As required under Israeli law, following the
Closing, and upon receipt of regulatory approvals, Manuka will become the
Company's wholly owned subsidiary. Following the Closing, (i) the Manuka Shares
will be released to the Company and (ii) the Consideration Shares will be
released to the Shareholders. To the extent required pursuant to the Tax Ruling,
prior to the Closing, the parties will engage a trustee (the "103K Trustee")
under a separate trust agreement (the "Trust Agreement"), who shall hold in
trust (i) all Manuka Shares for the benefit of the Company, and (ii) all
Consideration Shares for the benefit of Shareholders, with the foregoing being
respectively released to the designated beneficiary pursuant to the terms of the
Trust Agreement and the Tax Ruling. The Share Exchange Agreement contains
customary representations and warranties from each party to the agreement, and
each party has agreed to customary covenants, including, among others, covenants
relating to (1) the conduct of each of Manuka's and the Company's business
during the period between the execution of the Share Exchange Agreement and the
Closing, and (2) no transfer of Manuka Shares by the Shareholders during the
period between the execution of the Share Exchange Agreement and the Closing.
There is no guarantee that the Company will be able to close the Share Exchange
Agreement or conduct the Closing.
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THREE MONTHS ENDED MARCH 31, 2022 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2021 (dollars in thousands)
REVENUES. We did not have any revenue-producing operations for the three months
ended March 31, 2022 or for the three months ended March 31, 2021.
PROFIT FROM SALE OF OPERATIONS, NET. We did not incur a profit from the sale of
operations in the three months ended March 31, 2022 or the three months ended
March 31, 2021.
COST OF REVENUES. We had no cost of revenues for the three months ended March
31, 2022 or for the three months ended March 31, 2021, 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 March 31, 2022 or for the three months ended
March 31, 2021, due to the termination of the License Agreement resulting in the
Company no longer having business operations.
SELLING AND MARKETING EXPENSES. We did not incur any selling and marketing
expenses for the three months ended March 31, 2022, or for the three months
ended March 31, 2021,due to us no longer having business operations.
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GENERAL AND ADMINISTRATIVE EXPENSES. We incurred $28 in general and
administrative expenses for the three months ended March 31, 2022 compared to
$35 for the three months ended March 31, 2021, which consisted primarily of
compensation costs for administrative, finance and general management personnel,
legal, accounting and administrative costs and option expenses. The decrease in
general and administrative expenses is primarily due to a decrease in legal
expenses for the three months ended March 31, 2022 and due to us no longer
having business operations.
FINANCIAL (EXPENSE) INCOME, NET. We incurred $2 in financial expense for the
three months ended March 31, 2022 compared to $1 for the three months ended
March 31, 2021.
OTHER EXPENSES. We incurred no other expenses in the three months ended March
31, 2022 or March 31, 2021.
NET LOSS. We incurred a net loss of $30 for the three months ended March 31,
2022 and $36 for the three months ended March 31, 2021. The decrease in net loss
is primarily due to a decrease of $7 in general and administrative expenses and
an increase of $1 in financial expenses.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2022, we had an accumulated deficit of $2,515 and a negative
working capital (current assets less current liabilities) of $522. Losses will
probably continue for the foreseeable future.
We do not have any material capital commitments for capital expenditures as of
March 31, 2022.
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, the Company no longer has any business operations. The
Company believes that it 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. The Company has experienced difficulties accessing the
equity and debt markets and raising capital or entering into a business
transaction, and there can be no assurance that the Company 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, the Company's
existing stockholders will experience significant further dilution. In order to
conserve the Company's cash and manage its liquidity, the Company has
implemented cost-cutting initiatives including the reduction of employee
headcount and overhead costs.
On May 15, 2019, the Company issued two unsecured promissory notes in the
aggregate principal amount of $100,000. In that regard, one Note, with a
principal aggregate balance of $50,000, was issued to KNRY Ltd., an entity
related to Nadav Kidron, the natural person with voting and dispositive power
over the securities held by Tonak Ltd., the Company's largest shareholder.
$20,000 of the funds relating to KNRY Ltd.'s Note were received by the Company
on March 22, 2019. The balance of the funds relating to KNRY Ltd.'s Note was
received by the Company on April 4, 2019. In addition, one Note, with an
aggregate principal balance of $50,000, was issued to Cutter Mill Capital LLC,
an existing shareholder of the Company. 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 each Note are payable by June 30, 2021. The
proceeds of the Notes were used by the Company for general working capital
purposes.
In addition, on November 4, 2021, the Company issued two Subsequent Notes in
the aggregate principal amount of $60,000, with original issuance dates of
August 15, 2021 and September 19, 2021. In that regard, one Subsequent Note,
with a principal aggregate balance of $30,000, was issued to KNRY Ltd., an
entity related to Nadav Kidron, the natural person with voting and dispositive
power over the securities held by Tonak Ltd., the Company's largest shareholder
and one Subsequent Note, with an aggregate principal balance of $30,000, was
issued to Harmony (H.A.) Investments Ltd. Each Subsequent Note accrues interest
at a rate of 10% per annum until the Subsequent Note is repaid in full. All
payments of principal, interest and other amounts under each Subsequent Note are
payable by December 19, 2021. The proceeds of the Notes were used by the Company
for general working capital purposes.
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The Company is currently in default on the Notes and the Subsequent Notes and
intends to negotiate an extension for their repayment, however there is no
guarantee that we will be successful in doing so.
As of March 31, 2022, we had accumulated liabilities of $529.
As of March 31, 2022, we had cash and cash equivalents of $2 and negative
cash flows from operating activities of $1 for the period then ended. The
negative cash flow from operating activities in the period ended March 31, 2022
is attributable mainly to the net loss of $30, share-based compensation expenses
of $4, a decrease in other accounts receivable and prepaid expenses of $1 and an
increase in accrued expenses and other payables of $26.
OFF BALANCE SHEET ARRANGEMENTS
None.
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