UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
6-K
Report
of Foreign Private Issuer
Pursuant
to Rule 13a-16 or 15d-16
of
the Securities Exchange Act of 1934
For the
month of June, 2010
Commission
File Number: 000-51310
XTL Biopharmaceuticals
Ltd.
(Translation
of registrant’s name into English)
Kiryat
Weizmann Science Park
3
Hasapir Street, Building 3, PO Box 370
Rehovot 76100,
Israel
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual reports under
cover Form 20-F or Form 40-F.
Form 20-F
x Form 40-F o
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(1): ____
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(7): ____
Indicate
by check mark whether by furnishing the information contained in this Form, the
registrant is also thereby furnishing the information to the Commission pursuant
to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes o No x
If “Yes”
is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-N/A
Incorporation
by Reference: This Form 6-K of XTL Biopharmaceuticals Ltd. dated June 1, 2010 is
hereby incorporated by reference into the registration statements on Form F-3
(File No. 333-141529, File No. 333-147024 and File No. 333-153055) filed by XTL
Biopharmaceuticals Ltd. with the Securities and Exchange Commission on March 23,
2007, October 30, 2007 and August 15, 2008, respectively, and the registration
statements on Form S-8 (File No. 333-148085, File No. 333-148754 and File No.
333-154795) filed by XTL Biopharmaceuticals Ltd. with the Securities and
Exchange Commission on December 14, 2007, January 18, 2008, and October 28,
2008, respectively.
XTL
Biopharmaceuticals Presents Its Translated From Hebrew Financial
Statements
For The Three Months Ended On March 31, 2010
| Attached hereto is an English translation (from Hebrew) of our financial statements and additional information as submitted on the Tel Aviv Stock Exchange. The following documents are included: | ||
| A. | Board of Director's Report on the Corporation’s Business Position as of March 31, 2010. | |
| B. | Interim financial information as of March 31, 2010. | |
| C. | Interim financial information as of March 31, 2010 pursuant to Regulation 38d to the Israeli securities regulations (periodic and immediate reports). | |
- 2
-
(A)
Board
of Director's Report on the Corporation’s
Business
Position as of March 31, 2010.
XTL Biopharmaceuticals
Ltd.
Board
of Director's Report on the Corporation's Business Position
As
of March 31, 2010
The Board
of Directors of XTL Biopharmaceuticals Ltd. (hereinafter - "the Company") hereby respectfully
submits the Board's annual report for the 3-month period ended March 31,
2010. The data contained herein refers to the Company and its
consolidated subsidiaries (hereinafter - "the Group"), unless otherwise expressly
stated.
The Board
report contains, inter alia, a brief description of the Company's business,
financial position, analysis of results of operations and the effect of events
during the reported period on data of the Company's consolidated financial
statements as of March 31, 2010. The report was prepared on the
assumption that the directors' report for the year ended December 31, 2009 is
also available to the reader.
It should
be noted that the financial statements include a comment whereby the Company's
ability to continue as a going concern is contingent on concluding the Bio-Gal
transaction and raising capital in the context thereof or from alternative
sources.
As it is
uncertain that the Bio-Gal transaction and capital raised through it, will be
concluded, there is significant doubt as to the Company's ability to continue as
a "going concern", as set forth in Item 1.3.4 below.
| 1. | Part I - Board of Directors Explanation for the Corporation's Business Position |
|
1.1
|
Summary of Company's
Business
|
|
|
The
Company is engaged in the acquisition and development of therapeutics for
the treatment of diseases for which no medical cure has yet been
discovered. The Company was established in Israel on March 9, 1993, and
controls 100% of the share capital of the U.S. Company - XTL
Biopharmaceuticals Inc. (hereinafter - "XTL Inc."), established
in 1999 under the laws of the State of Delaware,
U.S.A.
|
A-1
|
|
XTL
Inc. is engaged in developing medications and business development in the
medical realm. XTL Inc. has a fully-owned company - XTL Development Inc.
(hereinafter - "XTL
Development"), established in 2007 under the laws of the State of
Delaware and engaged in the development of therapeutics for the treatment
of diabetic neuropathic pain ("Bicifadine") until November 18, 2008, when
the Group announced that the Phase 2b clinical trial of Bicifadine had
failed to meet its endpoints, and consequently the Group ceased its
development.
|
|
|
The
Company also has certain milestone rights in the development of treatment
for Hepatitis C (hereinafter - "DOS") from Presidio Pharmaceuticals Inc.
(hereinafter - "Presidio"), a private American biotechnological
company.
|
|
|
The
Group has one operating segment.
|
|
|
The
Company is a public company traded on the Tel Aviv Stock Exchange and also
under the Pink Sheets in the U.S. through its ADRs (American Depositary
Receipt).
|
|
|
As
of the date of this report, the Company is acting to conclude the Bio-Gal
Transaction (see also Item 1.2 below), cooperation and acquisition of
holdings mainly of companies engaged in applied research in the life
sciences and Research and Development of drugs (biotechnology and
pharmaceuticals). Furthermore, the Company has certain
milestone rights in the development of treatment for hepatitis C from
Presidio, as aforementioned.
|
|
1.2
|
Significant Events
During the Period
|
|
|
·
|
On
January 26, 2010 the Company's Board authorized the allocation of 100,000
share options to a Company employee. The share options may be
exercised into 100,000 ordinary shares par value NIS 0.1 each, at an
exercise price of NIS 0.1 per share option. The fair value of all the
share options as of the date of the Board's resolution, based on the
"B&S" Model and IFRS 2 provisions, was approximately $10
thousand. The option exercise period is a maximum of 120 months
from the date of allocation thereof, such that the options will be
exercisable in equal installments at the end of each calendar quarter,
over a 3-year period from the date of their
allocation.
|
A-2
|
|
·
|
On
February 28, 2010 the Company and Bio-Gal signed an agreement for a
further extension of the transaction until April 30, 2010, to enable its
conclusion. Management expects to obtain the Israeli Tax Authorities'
approval of the Share Swap deal and to conclude the transaction in the
second quarter of 2010, although there is no certainty for the completion
of the transaction (See also Item 4.1 -Significant Events After Balance
Sheet Date in regard to the extension and Note 1.c. of the financial
statements in regard to the Bio-Gal
transaction).
|
|
|
|
Additionally,
as of the date of the report, the Company is holding discussions with the
Israeli Tax Authorities to obtain their approval for executing the
transaction by way of a share swap with Xtepo, in conformity with Section
103 of the Israeli Income Tax Ordinance. This Section deals with company
mergers and enables the authorities, when approving a transaction, to
impose various restrictions and limit the carryforward losses to be
utilized in the future. Management's expectations, and according to the
progress of these discussions, it is highly probable that the Tax
Authorities will insist on deleting a significant amount of the Company's
carryforward losses and will impose further restrictions under the
law.
|
|
|
·
|
On
March 2, 2010, at the Extraordinary Meeting of Shareholders, the Company's
shareholders approved the Bio-Gal transaction and share swap, according to
the agreement signed between the parties on December 31, 2009 and
announced to the public on January 14,
2010.
|
|
|
·
|
On
March 2, 2010, the Annual General Meeting of Shareholders convened and
approved the following:
|
|
1.
|
Re-appointment
of the external auditors - Kesselman and Kesselman, C.P.A., as the
Company's auditors for the year 2009, and empowered the Board to determine
their fees.
|
|
| 2. |
Re-election
of directors: approval of the re-election of Messrs. Marc Allouche, Amit
Yonay, Boaz Shweiger, and David Grossman as Company Directors until the
next Annual Meeting, including a grant of 150,000 share options each
(excluding David Grossman who also serves as the Company's
CEO). The options are registered, non-marketable, and
exercisable into Company shares as follows: 150,000 ordinary shares par
value NIS 0.1 each, at an exercise price of NIS 0.298 per
option. The fair value of all the options, based on the
"B&S" Model and IFRS 2 provisions as of the date of the Board's
resolution, was approximately $36 thousand. The maximum exercise period is
120 months from the allocation date, such that 33.33% of the options may
be exercised immediately upon allocation, while the remaining 66.67% may
be exercised in equal monthly installments as of the allocation date, over
a 24-month period.
|
A-3
|
3.
|
Subject
to concluding the Bio-Gal transaction, the employment terms of Mr. David
Grossman, CEO and Director, were approved, including a grant of 1,610,000
registered, non-marketable options, exercisable into Company shares as
follows: 1,610,000 ordinary shares, par value NIS 0.1 each, at an exercise
price of NIS 0.075 per option. The fair value of all the
options, based on the "B&S" Model and IFRS 2 provisions, as of the
date of the Board's resolution, was approximately $136 thousand. The
maximum exercise period is 120 months from the allocation date, such that
33.33% of the options may be exercised immediately upon allocation, while
the remaining 66.67% may be exercised in equal monthly installments as of
the allocation date, over a 24-month period.
|
|
|
The
Company has further undertaken to make up the difference, on the actual
exercise date, between the par value of the shares and the exercise price
under this plan, by swapping the amounts from share premiums into share
capital.
|
|
|
·
|
In
March, 2010 the Company terminated the Agreement with DOV in regard to the
Bicifadine drug research, pursuant to which all the rights thereunder were
reverted to DOV, in coordination with
it.
|
A-4
|
1.3
|
Financial Position,
Results of Operations, Liquidity and Financing
Sources
|
| 1.3.1 | Financial Position |
| Significant balance sheet data ($ thousands): |
|
As of
March
31, 2010
|
As of
December
31, 2009
|
|||||||||||||||
|
Amount
$
Thous.
|
% of
Balance
Sheet
|
Amount
$
Thous.
|
% of
Balance
Sheet
|
|||||||||||||
|
Item
|
|
|
||||||||||||||
|
Total
balance sheet
|
511 | 100 | % | 715 | 100 | % | ||||||||||
|
Equity
|
(222 | ) | -43 | % | 7 | 1 | % | |||||||||
|
Current
assets
|
335 | 66 | % | 557 | 78 | % | ||||||||||
|
Fixed
assets
|
20 | 4 | % | 23 | 3 | % | ||||||||||
|
Other
investments
|
156 | 31 | % | 135 | 19 | % | ||||||||||
|
Short
term liabilities
|
733 | 143 | % | 708 | 99 | % | ||||||||||
|
Shareholders
Equity
|
|
|
|
As
of March 31, 2010, the deficit in shareholders' equity amounts to $222
thousand - a decrease of $229 thousand from December 31, 2009,
reflecting 43% of the total balance sheet, compared to 1% as of December
31, 2009. The decrease in equity derives mainly from losses
incurred during the period, less non-cash expenses in respect of
share-based payment.
|
|
|
Assets
|
|
|
As
of March 31, 2010, current assets decreased by $222 thousand to a total of
$335 thousand - reflecting a decrease of 40% compared to current assets as
of December 31, 2009.
|
|
|
The
change derives mainly from the decrease in cash and cash equivalent
balances as of March 31, 2010, amounting to $251 thousand, a decrease of
$161 thousand, compared to a cash balance of $412 thousand as of December
31, 2009. This decrease originates from the negative cash
balance deriving mainly from the cash flow for current
operations.
|
A-5
|
|
Total
fixed assets as of March 31, 2010 amounted to $20 thousand compared to $23
thousand as of December 31, 2009 - with no significant
change.
|
|
|
Other
long-term investments as of March 31, 2010 amounted to $156 thousand,
originating from capitalization of costs connected with the Bio-Gal
transaction in the course of year 2009 and the first quarter of
2010. During the first quarter of 2010, costs amounting to $21
thousand were capitalized.
|
|
|
Liabilities
|
|
|
As
of March 31, 2010 the balance of liabilities to suppliers and service
providers amounted to $150 thousand, compared to $192 thousand as of
December 31, 2009. The decrease derives primarily from
repayment of liabilities to suppliers during the period and a reduction in
the Company's current expenses.
|
|
|
As
of March 31, 2010, accounts payable in the balance sheet amounted to $583
thousand, compared to $516 thousand as of December 31,
2009. The increase derives primarily from the growth in accrued
expenses to service providers in connection with the Bio-Gal transaction,
and a liability for the CEO's salary, to be paid subject to conclusion of
the Bio-Gal transaction.
|
A-6
|
1.3.2
|
Analysis of Results of
Operations
|
|
|
Summary of Statement
of Operations (U.S. $
thousands):
|
|
3-months ended
March 31
|
Year ended
Dec. 31
|
|||||||||||
|
2010
|
2009
|
2009
|
||||||||||
|
$
Thousand
|
||||||||||||
|
Administrative
and general expenses
|
335 | (1,646 | )*) | (2,429 | )*) | |||||||
|
Other
gains - net
|
- | - | 139 | |||||||||
|
Profit
(loss) from operations
|
(335 | ) | 1,646 | 2,568 | ||||||||
|
Financial
income (expenses), net
|
(1 | ) | 7 | (4 | ) | |||||||
|
Profit
(loss) before income tax
|
(336 | ) | 1,653 | 2,564 | ||||||||
|
Tax
benefit
|
- | - | 23 | |||||||||
|
Net
profit (loss) attributed to Company owners
|
(336 | ) | 1,653 | 2,587 | ||||||||
|
*)
|
Includes
reversal of option compensation expenses relating to former Company
Chairman due to non-fulfillment of terms of options and their forfeiture
upon his departure; for entire year 2009 include also reversal of options
of CEO who terminated his position during Q2
2009.
|
|
**)
|
The
Company was not engaged in any development activity during the period, and
is currently in the process of concluding the Bio-Gal
transaction, leading to the resumption of development activity in Multiple
Myeloma (see Item 1.2 above).
|
General and Administrative
Expenses
General
and administrative expenses (income) for the 3-months ended March 31, 2010 and
2009 amounted to $335 thousand, and income of $(1,646) thousand,
respectively.
The
growth in expenses derives mainly from the following reasons:
In the
course of the first quarter of 2009, the Company recorded a decrease in general
and administrative expenses owing to a reversal of expenses from previous years
in the amount of $2.65 m. relating to the former Chairman's options due to
non-fulfillment of the option terms and their forfeiture upon his
departure. The general and administrative expenses for the first
quarter of 2009, after neutralizing the effect of reversal of expenses as above,
amounted to $998 thousand, compared to $335 thousand in the first quarter of
2010 - reflecting a decrease of $663 thousand, deriving mainly from the decrease
in payroll expenses due to staffing reduction, decrease in office rental
expenses due to closing down the U.S. offices and reducing office space along
with operating expenses in Israel. This was part of the Restructuring
Plan implemented by the Company immediately after its announcement that the
Phase 2 clinical trial in the Bicifadine had failed to meet its clinical
endpoints at the end of November 2008, as outlined in Note 1 of the financial
statements.
A-7
|
|
Other gains (Losses),
Net
|
|
|
No
other gains (losses) were generated for the Company in the 3-month period
ended March 31, 2010 and 2009.
|
Financial
Expenses
|
|
Financial
expenses in the 3-month period ended March 31, 2010 amounted to $1
thousand compared to financial income of $7 thousand during the
corresponding period last year. The decrease in financial
expenses derives primarily from the decrease in the balance of Company
bank deposits.
|
Income
Taxes
|
|
No
income tax expenses (income) were generated for the Company in the 3-month
periods ended March 31, 2010 and
2009.
|
Net Profit (Loss) for the
Period
|
Losses
for the 3-month period ended March 31, 2010 amounted to $336 thousand,
compared to a net profit of $1,653 thousand in the corresponding period
last year. The decrease in profit (increase in losses) derives
primarily from the reversal of expenses (decrease in expenses) from
previous years in the first quarter of 2009 with respect to the former
Company Chairman's options, due to non-fulfillment of the option terms and
their forfeiture after his departure, amounting to $2.65 m., causing a
set-off in current general and administrative expenses and recording a
profit (see explanation under Item "General and Administrative Expenses"
above).
|
|
|
Basic
and diluted loss per share
in the 3-month period ended March 31, 2010 stood at $0.006 per share,
compared to basic and diluted profit per
share of $0.028 in the corresponding period last
year.
|
A-8
| 1.3.3 |
Cash
Flows
|
|
|
The
cash flows used for operating activity in the 3-month period ended March
31, 2010 amounted to $135 thousand, compared to $1,911 thousand in the
corresponding period last year. The decrease in negative cash
flow stemmed from discontinuing the Company's development activity,
limiting operations and reducing staffing, in consequence of the
Restructuring Plan implemented from the end of 2008, after the
announcement that the Phase 2b clinical trial had failed to meet its
endpoints as abovementioned.
|
|
|
The
cash flows used in investment operations during the 3-month periods ended
March 31, 2010 and 2009 amounted to $26 thousand, deriving from
expenditures incurred in connection with the Bio-Gal
transaction. In the corresponding period last year, no cash was
generated (used) by the Company from investment
activity.
|
|
|
The
Company had no financing activity in the 3-month periods ended March 31,
2010 and 2009.
|
|
1.3.4
|
"Going Concern"
Comment
|
The
financial statements as of March 31, 2010 include a comment whereby the
Company's ability to continue as a going concern is contingent on concluding the
Bio-Gal transaction or raising capital from alternative sources. Below is the
text:
"Without
qualifying our opinion, we draw your attention to note 1(c) of the consolidated
financial statements, which addresses that the Company's ability to continue
operating as a going concern is dependent on the Bio-Gal transaction and the
ability to raise additional funds as part of this transaction, or from
alternative sources. The transaction has not yet been completed, among others,
due to the delay in obtaining approval from the tax authorities.
Notwithstanding, there is uncertainty regarding completion of the Bio- Gal
transaction and the ability to raise funds as part of this transaction, or from
alternative sources. Therefore, there is substantial doubt regarding the
Company's ability to continue operating as a going concern. These financial
statements include no adjustments of the values of assets and liabilities and
the classification thereof, if any, that will apply if the Company is unable to
continue operating as a going concern".
|
|
(For
further details - see Note 1.c. to the financial
statements).
|
A-9
| 1.3.5 | Financing Sources |
|
|
The
Company finances its activity through equity funds and suppliers credit.
As of March 31, 2010, it reported a credit balance of cash and cash
equivalents amounting to $251 thousand. Ongoing activity is
contingent on concluding the Bio-Gal transaction, which is expected to
generate for the Company indirectly (through "Xtepo" - a private company
to be acquired under the transaction) the sum of $1.5 million, and/or on
external financing sources by way of capital
raising.
|
|
2.
|
Part II - Market Risk
Exposure
|
|
2.1
|
Market Risk Exposure
and Management Method
|
|
|
The
Company manages financial risks subject to the policy approved by the
Board of Directors and Management.
|
|
|
The
Company identifies and evaluates the major risks it faces on the basis of
Management's considerations.
|
|
The
officer in charge of market risk management is Mr. Ronen Twito, CFO of the
Company.
|
|
2.1.1
|
Exchange Rate
Risks
|
|
|
The
Company denominates most of its expenses in U.S. dollars, against which it
maintains liquid resources in U.S. dollars or linked
thereto. However, since part of
its expenditures are denominated in NIS, the Company is
exposed to changes in US$/NIS exchange rates. To reduce currency risks,
part of the liquid resources are maintained in NIS, up to the amount of
NIS liabilities.
|
|
|
To
hedge economic exposure, which does not contradict accounting exposure,
the Company maintains most of its current assets in foreign currency or
linked thereto.
|
|
2.1.2
|
Risks Deriving from
Economic Environmental Changes
|
|
|
Management
estimates that there is no significant exposure at present to the current
global economic crisis, as there are no sales at this stage. Furthermore,
since the investment policy is limited to bank deposits only, the Company
is not exposed to changes in the value of marketable
securities
|
A-10
|
2.2
|
Linkage-Based
Report
|
|
|
Balance Sheet Linkage
as of March 31, 2010
|
|
U.S.$
|
NIS
|
Non-
Monetary
|
Total
|
|||||||||||||
|
U.S.
$ thousands
|
||||||||||||||||
|
Assets
|
||||||||||||||||
|
Cash
and cash equivalents
|
233 | 18 | - | 251 | ||||||||||||
|
Accounts
receivable
|
4 | 7 | 33 | 44 | ||||||||||||
|
Restricted
deposits
|
40 | - | - | 40 | ||||||||||||
| 277 | 25 | 33 | 335 | |||||||||||||
|
Liabilities
|
||||||||||||||||
|
Trade
payables
|
136 | 14 | - | 150 | ||||||||||||
|
Accounts
payable
|
424 | 159 | - | 583 | ||||||||||||
| 560 | 173 | - | 733 | |||||||||||||
|
Assets
net of liabilities
|
(283 | ) | (148 | ) | 33 | (398 | ) | |||||||||
|
|
Balance Sheet Linkage
as of March 31, 2009
|
|
U.S.$
|
NIS
|
Non-
Monetary
|
Total
|
|||||||||||||
|
U.S.
$ thousands
|
||||||||||||||||
|
Assets
|
||||||||||||||||
|
Cash
and cash equivalents
|
992 | 21 | - | 1,013 | ||||||||||||
|
Accounts
receivable
|
76 | 12 | 107 | 195 | ||||||||||||
|
Income
tax receivable
|
49 | - | - | 49 | ||||||||||||
|
Restricted
deposits
|
71 | - | - | 71 | ||||||||||||
| 1,188 | 33 | 107 | 1,328 | |||||||||||||
|
Liabilities
|
||||||||||||||||
|
Trade
payables
|
286 | 30 | - | 316 | ||||||||||||
|
Accounts
payable
|
367 | 53 | - | 420 | ||||||||||||
|
Liability
for share appreciation rights
|
54 | - | - | 54 | ||||||||||||
| 707 | 83 | - | 790 | |||||||||||||
|
Monetary
assets net of monetary liabilities
|
481 | (50 | ) | 107 | 538 | |||||||||||
A-11
|
2.3
|
Sensitivity
Analysis
|
| Below is a report on financial risk exposure: | |
| Sensitivity to Changes in Exchange Rates of U.S. $/NIS |
|
Profit (Loss) from
Changes
|
Profit (Loss) from
Changes
|
|||||||||||||||||||
|
+10%
|
+5%
|
Fair Value as of
31.03.10
|
-5%
|
-10%
|
||||||||||||||||
|
U.S.
$ thousands
|
||||||||||||||||||||
|
Cash
and cash equivalents
|
2 | 1 | 18 | (1 | ) | (2 | ) | |||||||||||||
|
Accounts
receivable
|
1 | 0 | 7 | 0 | (1 | ) | ||||||||||||||
|
Trade
payables
|
(1 | ) | (1 | ) | (14 | ) | 1 | 1 | ||||||||||||
|
Accounts
payable
|
(16 | ) | (8 | ) | (159 | ) | 8 | 16 | ||||||||||||
|
Balance
sheet exposure - linkage
|
(14 | ) | (8 | ) | (148 | ) | 8 | 14 | ||||||||||||
| 2.4 | Effectiveness of Internal Control on Financial Reporting and Disclosure |
|
|
On
November 24, 2009, the Knesset Finance Committee approved the proposal of
the Israel Securities Authorities to adopt regulations dealing with
internal audit controls and disclosure of financial reporting within a
corporation, designed to produce a reasonable measure of assurance in the
statements and their compliance with the provisions prescribed by law
(Securities Regulations (Periodic and Immediate Statements), (Amendment
No. 3), 2009 (hereinafter - "the Amendment")). The Amendment
was published in the Official, December
2009.
|
|
The
above provisions will become effective as of the periodic report for
December 31, 2010 (hereinafter - "the Commencement
Date"). Notwithstanding the aforesaid, according to the
provisions of the Amendment, in the period from publication until
Commencement Date, the Board report will outline the Company's preparatory
and progressive stages in implementing the said provisions (hereinafter -
"implementing the
Project").
|
A-12
Disclosure
of the steps taken by the Company in implementing the project by the date of
this report:
|
A.
|
Mr.
Ronen Twito, CFO, has been appointed as the responsible officer for
implementing the Project.
|
|
B.
|
Under
the mapping process and in order to specify procedures and identify
material business risks, a weighted evaluation of quantitative and
qualitative factors was performed.
|
|
The
quantitative considerations taken into account include, inter alia, giving
proportional relevance to each financial balance and movement in the
reports as published by the Company with respect to the overall balances
or movements in the financial statements.
|
|
|
The
qualitative considerations taken into account include, inter alia, the
complexity of the accounting process involving recordkeeping of financial
reporting, complexity of the data systems supporting the business process,
overall corporate risks, impact of extra-organizational factors, the
Company's activity or inactivity in certain areas, etc.
|
|
|
Based
on the procedures reviewed, five control procedures considered to be
material for the financial reporting were identified:
|
|
| 1. ELC-Entity Level Controls | |
|
2.
Process
of closing the financial statements
|
|
| 3. ITGC (Information Technology General Controls) | |
| 4. Company Treasurer | |
| 5. Equity |
The
Company is pursuing its preparatory activity to comply with the 2010 milestones,
as defined in the regulations.
A-13
|
3.
|
Part III - Corporate
Governance Aspects
|
|
3.1
|
Corporate Board of
Directors
|
|
|
1.
|
During
the reported period, 5 Board meetings and 3 Audit Committee meetings were
held.
|
| 2. |
The
Company has not adopted, in its Articles of Association, a
provisionrelating to the office of independent
directors.
|
|
4.
|
Part IV - Corporate
Financial Reporting
|
|
4.1
|
Significant Events
After Balance Sheet Date
|
|
|
On
April 26, 2010 the Company and Bio-Gal signed an agreement for a further
extension of the transaction till June 30, 2010, to enable its conclusion
such that all the provisions specified for the closing shall apply on the
new date. The remaining provisions of the agreement remain without
change. The Company is acting to expedite fulfillment of the
terms of the closing as soon as
possible.
|
|
4.2
|
Disclosure
of Proceedings for Approval of Financial Statements
|
|
|
The
Board of Directors is the body responsible for overseeing the Company's
internal controls and is the organ that deals with financial statements
and approves them, after the members of the Board have received a draft of
the statements a few days prior to the meeting. There is a procedure at
the Company whereby the Audit Committee reviews the financial statements
and passes its recommendations to the
Board.
|
|
|
In
the course of the Board meeting, the CEO, Mr. David Grossman, and the CFO,
Mr. Ronen Twito, review at length the principal items of the financial
statements, including significant transactions executed or to be executed,
as well as any changes that have taken place at the Company during the
reported period, compared to the corresponding periods. In this
context, a discussion is held with the participation of the CEO, CFO and
the auditors, during which the Board members raise questions relating to
the financial statements.
|
|
|
At
the end of the discussion, once it has become clear that the financial
statements adequately reflect the Company's business position and the
results of its operations, the financial statements are
approved.
|
A-14
On May
30, 2010 the Board approved the Company's financial statements as of March 31,
2010 in the presence of the following directors: Amit Yonay (Chairman
of the Board), Dafna Cohen, Jaron Diament, Boaz Shweiger, Marc Allouche and
David Grossman - after the Audit Committee had, prior to the meeting, reviewed
the financial statements and submitted its recommendations to the Board of
Directors plenum.
|
May
30, 2010
|
|
|
||
|
Date
|
Amit Yonay, Chairman | David
Grossman,
Director
and CEO
|
A-15
(B)
Interim
financial information as of March 31, 2010.
XTL
BIOPHARMACEUTICALS LTD.
INTERIM
FINANCIAL INFORMATION
AS
OF MARCH 31, 2010
INDEX
|
Page
|
|
|
Auditors'
Review Report
|
2
|
|
Condensed
Consolidated Financial Statements - in U.S. dollars:
|
|
|
Statements
of Financial Position
|
3
|
|
Statements
of Comprehensive Income (Loss)
|
4
|
|
Statements
of Changes in Equity
|
5
|
|
Statements
of Cash Flows
|
6
- 7
|
|
Selected
Explanatory Notes to the Condensed Consolidated Financial
Statements
|
8
- 12
|
B-1
 |
|
|
Kesselman
& Kesselman
Certified
Public Accountants
Trade
Tower, 25 Hamered Street
Tel
Aviv 68125 Israel
P.O
Box 452 Tel Aviv 61003
Telephone
+972-3-7954555
Facsimile
+972-3-7954556
|
|
|
Auditors' review report to the shareholders of XTL
Biopharmaceuticals Ltd.
|
Introduction
We have
reviewed the accompanying financial information of XTL Biopharmaceuticals
Ltd and its subsidiaries (hereafter - the group), which includes
the condensed consolidated statement of financial position as of March
31, 2010 and the related condensed consolidated statements of comprehensive
income, changes in shareholders' equity/capital deficiency ,and cash flows for
the three-month period then ended. The Board of Directors and management are
responsible for the preparation and fair presentation of this interim financial
information in accordance with IAS 34 "Interim Financial Reporting", and they
are also responsible to draw up interim financial information based on Chapter D
to the Israel Securities Regulations (Periodic and Immediate Reports), 1970. Our
responsibility is to express a conclusion on this interim financial information
based on our review.
Scope
of review
We
conducted our review in accordance with Israeli Review Standard No. 1, issued by
the Israeli Institute of Certified Public Accountants, "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity." A
review of interim financial information consists of making inquiries, primarily
of persons responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less in scope
than an audit conducted in accordance with auditing standards generally accepted
in Israel and consequently does not enable us to obtain
assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on
our review, nothing has come to our attention that causes us to believe that the
accompanying interim financial information is not prepared, in all material
respects, in accordance with IAS 34.
In
addition to what is said in the previous paragraph, based on our review, nothing
has come to our attention that causes us to believe that the accompanying
interim financial information does not comply, in all material respects, with
the disclosure provisions of Chapter D of the Israel Securities Regulations
(Periodic and Immediate Reports), 1970.
Without
qualifying our opinion, we draw your attention to note 1(c) of the consolidated
financial statements, which addresses that the Company's ability to continue
operating as a going concern is dependent on the Bio-Gal transaction and
the ability to raise additional funds as part of this transaction, or from
alternative sources. The transaction has not yet been completed, among others,
due to the delay in obtaining approval from the tax authorities.
Notwithstanding, there is uncertainty regarding completion of the Bio- Gal
transaction and the ability to raise funds as part of this transaction, or from
alternative sources. Therefore, there is substantial doubt regarding the
Company's ability to continue operating as a going concern. These financial
statements include no adjustments of the values of assets and liabilities and
the classification thereof, if any, that will apply if the Company is unable to
continue operating as a going concern.
|
Tel-Aviv, Israel
|
Kesselman
& Kesselman
|
|
May
30, 2010
|
Certified
Public Accountants (Isr.)
|
|
A
member of PricewaterhouseCoopers
|
|
|
International
Limited
|
B-2
|
XTL
BIOPHARMACEUTICALS LTD.
|
| CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION |
|
March
31,
|
December
31,
|
|||||||||||
|
2010
|
2009
|
2009
|
||||||||||
|
Unaudited
|
Audited
|
|||||||||||
|
U.S.
dollars in thousands
|
||||||||||||
|
ASSETS
|
||||||||||||
|
CURRENT
ASSETS:
|
||||||||||||
|
Cash
and cash equivalents
|
251 | 1,013 | 412 | |||||||||
|
Employee
benefit assets
|
- | 12 | - | |||||||||
|
Accounts
receivable
|
44 | 195 | 33 | |||||||||
|
Income
taxes receivable
|
- | 49 | 72 | |||||||||
|
Restricted
deposits
|
40 | 71 | 40 | |||||||||
| 335 | 1,340 | 557 | ||||||||||
|
NON-CURRENT
ASSETS:
|
||||||||||||
|
Fixed
assets, net
|
20 | 36 | 23 | |||||||||
|
Other
investments
|
156 | - | 135 | |||||||||
| 176 | 36 | 158 | ||||||||||
|
Total
assets
|
511 | 1,376 | 715 | |||||||||
|
LIABILITIES
AND EQUITY (DEFICIENCY)
|
||||||||||||
|
CURRENT
LIABILITIES:
|
||||||||||||
|
Trade
payables
|
150 | 316 | 192 | |||||||||
|
Other
accounts payable
|
583 | 420 | 516 | |||||||||
|
Liability
for share appreciation rights
|
- | 54 | - | |||||||||
| 733 | 790 | 708 | ||||||||||
|
EQUITY
(DEFICIENCY) ATTRIBUTABLE TO EQUITY
HOLDERS
OF THE COMPANY:
|
||||||||||||
|
Ordinary
share capital
|
1,445 | 1,445 | 1,445 | |||||||||
|
Share
premium
|
139,786 | 139,786 | 139,786 | |||||||||
|
Accumulated
deficit
|
(141,453 | ) | (140,645 | ) | (141,224 | ) | ||||||
|
Total
equity (deficiency)
|
(222 | ) | 586 | 7 | ||||||||
|
Total
liabilities and equity
|
511 | 1,376 | 715 | |||||||||
The
accompanying notes are an integral part of the condensed financial
statements.
|
Amit
Yonay
|
David
Grossman
|
Ronen
Twito
|
||
|
Chairman
of the Board
|
Director
and CEO
|
CFO
|
Date of
approval of the financial statements by the Company's Board: May 30,
2010.
B-3
|
XTL
BIOPHARMACEUTICALS LTD.
|
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
|
Three
months ended
March
31,
|
Year
ended
December
31,
|
|||||||||||
|
2010
|
2009
|
2009
|
||||||||||
|
Unaudited
|
Audited
|
|||||||||||
|
U.S.
dollars in thousands
(except
per share data)
|
||||||||||||
|
General
and administrative expenses
|
335 | *)(1,646) | *)(2,429) | |||||||||
|
Other
gains, net
|
- | - | 139 | |||||||||
|
Operating
income (loss)
|
(335 | ) | 1,646 | 2,568 | ||||||||
|
Finance
income
|
- | 12 | 6 | |||||||||
|
Finance
costs
|
1 | 5 | 10 | |||||||||
|
Finance
income (costs), net
|
(1 | ) | 7 | (4 | ) | |||||||
|
Income
(loss) before taxes on income
|
(336 | ) | 1,653 | 2,564 | ||||||||
|
Tax
benefit
|
- | - | 23 | |||||||||
|
Net
income (loss) for the period attributable to equity holders of the
Company
|
(336 | ) | 1,653 | 2,587 | ||||||||
|
Basic
and diluted earnings (loss) per share
(in U.S. dollars)
|
(0.006 | ) | 0.028 | 0.044 | ||||||||
* In
March 2009, a deduction of general and administrative expenses in amount of
approximately $2.65 million was recorded due to forfeiture of
performance-related options that were granted to the former chairman of the
board. In April 2009, an additional deduction in amount of approximately $1.45
million was recorded due to forfeiture of performance-related options that were
granted to the former CEO of the company.
The
accompanying notes are an integral part of the condensed financial
statements.
B-4
|
XTL
BIOPHARMACEUTICALS LTD.
|
| CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIENCY) |
|
Three
months ended March 31, 2010
|
||||||||||||||||
|
Attributable
to equity holders of the Company
|
||||||||||||||||
|
Share
capital
|
Share
premium
|
Accumulated
deficit
|
Total
|
|||||||||||||
|
U.S.
dollars in thousands
|
||||||||||||||||
|
Balance
at January 1, 2010 (audited)
|
1,445 | 139,786 | (141,224 | ) | 7 | |||||||||||
|
Loss
for the period
|
- | - | (336 | ) | (336 | ) | ||||||||||
|
Share-based
payment to employees and others
|
- | - | 107 | 107 | ||||||||||||
|
Balance
at March 31, 2010 (unaudited)
|
1,445 | 139,786 | (141,453 | ) | (222 | ) | ||||||||||
|
Three
months ended March 31, 2009
|
||||||||||||||||
|
Attributable
to equity holders of the Company
|
||||||||||||||||
|
Share
capital
|
Share
premium
|
Accumulated
deficit
|
Total
|
|||||||||||||
|
U.S.
dollars in thousands
|
||||||||||||||||
|
Balance
at January 1, 2009 (audited)
|
1,445 | 139,786 | (139,757 | ) | 1,474 | |||||||||||
|
Income
for the period
|
- | - | 1,653 | 1,653 | ||||||||||||
|
Share-based
payment to employees and others
|
- | - | (2,541 | ) | (2,541 | ) | ||||||||||
|
Balance
at March 31, 2009 (unaudited)
|
1,445 | 139,786 | (140,645 | ) | 586 | |||||||||||
|
Year
ended December 31, 2009
|
||||||||||||||||
|
Attributable
to equity holders of the Company
|
||||||||||||||||
|
Share
capital
|
Share
premium
|
Accumulated
deficit
|
Total
|
|||||||||||||
|
U.S.
dollars in thousands
|
||||||||||||||||
|
Balance
at January 1, 2009 (audited)
|
1,445 | 139,786 | (139,757 | ) | 1,474 | |||||||||||
|
Income
for the year
|
- | - | 2,587 | 2,587 | ||||||||||||
|
Share-based
payment to employees and others
|
- | - | (4,180 | ) | (4,180 | ) | ||||||||||
|
Transfer
to equity for liability for share appreciation rights
|
- | - | 126 | 126 | ||||||||||||
|
Balance
at December 31, 2009 (audited)
|
1,445 | 139,786 | (141,224 | ) | 7 | |||||||||||
The
accompanying notes are an integral part of the condensed financial
statements.
B-5
|
XTL
BIOPHARMACEUTICALS LTD.
|
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
Three
months ended
March
31,
|
Year
ended
December
31,
|
|||||||||||
|
2010
|
2009
|
2009
|
||||||||||
|
Unaudited
|
Audited
|
|||||||||||
|
U.S.
dollars in thousands
|
||||||||||||
|
Cash flows from
operating activities:
|
||||||||||||
|
Net
income (loss) for the period attributable to equity holders of the
Company
|
(336 | ) | 1,653 | 2,587 | ||||||||
|
Adjustments
to reconcile net income (loss) to net cash used in operating
activities (a)
|
201 | (3,564 | ) | (5,075 | ) | |||||||
|
Net
cash used in operating activities
|
(135 | ) | (1,911 | ) | (2,488 | ) | ||||||
|
Cash flows from
investing activities:
|
||||||||||||
|
Decrease
in restricted deposit
|
- | - | 31 | |||||||||
|
Other
investments
|
(26 | ) | - | (55 | ) | |||||||
|
Net
cash used in investing activities
|
(26 | ) | - | (24 | ) | |||||||
|
Decrease
in cash and cash equivalents
|
(161 | ) | (1,911 | ) | (2,512 | ) | ||||||
|
Cash
and cash equivalents at the beginning of the period
|
412 | 2,924 | 2,924 | |||||||||
|
Cash
and cash equivalents at the end of the period
|
251 | 1,013 | 412 | |||||||||
The
accompanying notes are an integral part of the condensed financial
statements.
B-6
|
XTL
BIOPHARMACEUTICALS LTD.
|
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS |
|
Three
months ended
March
31,
|
Year
ended
December
31,
|
||||||||||||
|
2010
|
2009
|
2009
|
|||||||||||
|
Unaudited
|
Audited
|
||||||||||||
|
U.S.
dollars in thousands
|
|||||||||||||
|
(a)
|
Adjustments to
reconcile net income (loss) to net cash used in operating
activities:
|
||||||||||||
|
Income
and expenses not involving cash flows:
|
|||||||||||||
|
Depreciation
and amortization
|
3 | 5 | 13 | ||||||||||
|
Loss
on sale of fixed assets
|
- | - | 5 | ||||||||||
|
Amounts
recognized for options granted to employees and others
|
107 | (2,541 | ) | (4,180 | ) | ||||||||
|
Change
in employee benefit liabilities, net
|
- | (447 | ) | (435 | ) | ||||||||
|
Change
in liability for share appreciation rights
|
- | 47 | 119 | ||||||||||
| 110 | (2,936 | ) | (4,478 | ) | |||||||||
|
Changes
in operating asset and liability items:
|
|||||||||||||
|
Decrease
in accounts receivable and income taxes receivable
|
61 | 110 | 249 | ||||||||||
|
Increase
(decrease) in other accounts payable
|
72 | (100 | ) | (542 | ) | ||||||||
|
Decrease
in trade payables
|
(42 | ) | (638 | ) | (304 | ) | |||||||
| 91 | (628 | ) | (597 | ) | |||||||||
| 201 | (3,564 | ) | (5,075 | ) | |||||||||
|
(b)
|
Additional information
on cash flows from operating activities:
|
||||||||||||
|
Interest
received
|
- | 3 | 3 | ||||||||||
|
Refund
of taxes on income
|
72 | - | - | ||||||||||
|
(c)
|
Non-cash
investing activities for the period ended March 31, 2010 totaled at
approximately $ 21 thousand and it derives from deferred charges in
connection with Bio-Gal transaction (see note 1b) which were recorded in
the line item "other investments".
|
||||||||||||
The
accompanying notes are an integral part of the condensed financial
statements.
B-7
|
XTL
BIOPHARMACEUTICALS LTD.
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2010
(UNAUDITED)
|
NOTE
1:- GENERAL
|
|
a.
|
A
general description of the Company and its activity:
|
|
XTL
Biopharmaceuticals Ltd. ("the Company") is engaged in the acquisition and
development of therapeutics, among others, for the treatment of unmet
medical needs. The Company was incorporated under the Israeli Companies
Ordinance on March 9, 1993. The Company owns 100% of a U.S. company,
XTL Biopharmaceuticals Inc. ("XTL Inc."), which was incorporated in 1999
under the laws of the State of Delaware.
XTL
Inc. is engaged in development of therapeutics and business development in
the medical realm. XTL Inc. has a wholly-owned subsidiary, XTL Development
Inc. ("XTL Development"), which was incorporated in 2007 under the laws of
the State of Delaware and was engaged in development of therapeutics for
the treatment of diabetic neuropathic pain ("Bicifadine"). On November 18,
2008, the Group announced that the Phase 2b clinical trial of Bicifadine
failed to meet its endpoints and, as a result, the Group ceased its
development. Further, the Company has certain milestone rights in the
development of treatment for hepatitis C ("DOS") from Presidio
Pharmaceuticals Inc. ("Presidio"), a U.S. privately-held biotechnology
company.
The
Company and the subsidiaries ("the Group") operate in one business
segment.
The
Company is a public company traded on the Tel-Aviv Stock Exchange and in
the regulatory framework of the Pink Sheets in the U.S. through the
Company's ADRs (American Depositary Receipt).
As
of the date of these financial statements, the Company is seeking to
complete the Bio-Gal transaction (see also b below), cooperation and
acquisition of holdings mainly in companies engaged in applied research in
the life science and in the research and development of clinical
(biotechnology and
pharmaceuticals).
|
|
|
b.
|
On
December 31, 2009, the Company amended the original Bio-Gal agreement
from March 18, 2009 to acquire 100% of the shares of Xtepo Ltd.
("Xtepo"), a private Israeli company which was established by Bio-Gal
shareholders for the purpose of this transaction and to whom the license
for the use of the patent for EPO drug for Multiple Myeloma will be
assigned and who will have an amount of approximately $ 1.5 million
in its account, by allocating 133,063,688 Ordinary shares of NIS 0.1
par value each of the Company representing after their allocation 69.44%
of the Company's issued and outstanding share capital. In addition, an
amendment to the agreement determines that Bio-Gal will not be entitled to
the additional payment of $ 10 million, as determined in the original
transaction outline.
|
| The Company is also obligated to pay 1% royalties on net sales of the product and $ 350 thousand upon the successful completion of a Phase 2 clinical trial. The payment conditions for the above amount are at the earlier of occurrence of either events: |
|
|
1.
|
Raising
a minimum of $ 2 million by the Company or Xtepo after the completion of a
Phase 2 clinical trial.
|
| 2. |
Six
months after the completion of a Phase 2 clinical
trial.
|
B-8
|
XTL
BIOPHARMACEUTICALS LTD.
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2010
(UNAUDITED)
|
NOTE
1:- GENERAL
(Cont.)
| The closing of the transaction is subject to obtaining an approval from the Tax Authorities to carry out the share swap, exercising the options by Xtepo's investors such that on the transaction date, Xtepo will have approximately $ 1.5 million available at hand and fulfillment of any other prerequisites. | ||
|
|
c.
|
As
of March 31, 2010, the Company has accumulated losses in the amount of
approximately $ 141 million and deficit in the amount of $ 222
thousand. The continuation of the Company's operations is dependent on
closing the Bio-Gal transaction and raising the respective funds or
raising funds from alternative sources. As stated in b above, on December
31, 2009, the Company signed an amendment to the agreement with Bio-Gal.
Likewise, on March 2, 2010, at a postponed shareholders' meeting, the
Company's shareholders approved the new outline for the Bio-Gal
transaction as stated above. As of the date of the approval of these
financial statements, the Company is holding discussions with the Israeli
tax authorities in order to receive its approval according to section 103
of the Israeli income tax ordinance. This section enables the Israeli tax
authorities, when approving a transaction, to impose various restrictions
and reduce the carryforward losses to be utilized in the future. According
to management and to the progress in the discussions with the tax
authorities, the tax authorities will insist on deleting a significant
amount of the carryforward losses to be utilized in the future and will
impose further restrictions according to the law. In addition,
an approval that the options have been exercised by Xtepo's investors, so
that on the transaction date, Xtepo will have approximately $ 1.5 million
available at hand, has not yet been obtained. This, along with the
approval from the Israeli tax authorities and other prerequisites,
represent prerequisites that are required for executing the
transaction.
|
| The Company's management believes that it is probable that the above approvals will be obtained within a reasonable period of time and will enable closing, raising funds and continuation of operations. However, closing the transaction and such raising are subject to uncertainty. If the transaction and raising are not effected in the coming weeks, there are significant doubts about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the fair value of assets and liabilities that might result, if any. |
NOTE
2:- BASIS
OF PRESENTATION OF THE CONDENSED FINANCIAL STATEMENTS
The
condensed consolidated financial information of the Company as of March 31, 2010
and for the interim period of three months then ended ("interim financial
information") has been prepared in accordance with IAS 34, "Interim Financial
Reporting" ("IAS 34") and includes the additional disclosure requirements of the
Securities Regulations (Periodic and Immediate Reports), 1970. This interim
financial information should be read in conjunction with the annual financial
statements for 2009 and the accompanying notes which have been prepared in
accordance with International Financial Reporting Standards ("IFRS") and
included the additional disclosure requirements of the Israeli Securities
Regulations (Annual Financial Statements), 2010.
The
interim financial information is reviewed but not audited.
B-9
|
XTL
BIOPHARMACEUTICALS LTD.
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2010
(UNAUDITED)
|
NOTE
3:- SIGNIFICANT
ACCOUNTING POLICIES
The
significant accounting policies and methods of computation adopted in the
preparation of the interim financial information are consistent with those
followed in the preparation of the annual financial statements for 2009, except
as noted below:
|
|
a.
|
The
following standards, amendments to standards or interpretations are
mandatory for the accounting periods beginning January 1,
2010:
|
|
|
1.
|
IAS
27 (revised), "Consolidated and Separate Financial Statements" ("IAS 27R")
(effective for annual periods beginning on or after July 1, 2009).
IAS 27R requires the effects of all transactions with non-controlling
interests to be recorded in equity if there is no change in control and
these transactions will no longer result in goodwill or gains and losses.
IAS 27R also specifies the accounting when control of the entity is lost.
Any remaining interest in the entity is remeasured to fair value, and a
gain or loss is recognized in profit or loss. The Group will apply IAS 27R
prospectively to all transactions with non-controlling interests from
January 1, 2010. The application of IAS 27R has no impact on the
financial statements for the three months period ended March 31,
2010.
|
|
|
2.
|
IFRS
3 (revised), "Business Combinations" ("IFRS 3") (effective for annual
periods beginning on or after July 1, 2009). The revised standard
continues to apply the acquisition method to business combinations, with
some significant changes. For example, all payments to purchase a business
are to be recorded at fair value at the acquisition date, with contingent
payments classified as debt subsequently remeasured through the statement
of income. There is a choice on an acquisition-by-acquisition basis to
measure the non-controlling interest in the acquiree at fair value or at
the non-controlling interest's proportionate share of the acquiree's net
assets. All acquisition-related costs should be expensed. The Company will
apply IFRS 3R prospectively to all business combinations from
January 1, 2010. The application of IFRS 3R has no impact on the
financial statements for the three months period ended March 31,
2010.
|
|
|
b.
|
The
new standards and amendments to existing standards that are not yet
effective and have not been early adopted by the Group have been disclosed
in the annual financial statements of the Group for
2009.
|
B-10
|
XTL
BIOPHARMACEUTICALS LTD.
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2010
(UNAUDITED)
|
NOTE
4:- EVENTS
DURING THE PERIOD
|
|
a.
|
As
for the Company's engagement with
Bio-Gal:
|
|
|
1.
|
In
furtherance to the approval of the Company's engagement with Bio-Gal by
the Company's Board on December 31, 2009, on January 14, 2010,
the Company published an extraordinary private placement report for the
acquisition of 100% of the shares of Xtepo Ltd. (a private company which
was established by for the purpose of this transaction and to whom the
intangible asset of Bio-Gal will be assigned) by allocating 133,063,688
Ordinary shares of NIS 0.1 par value each of the Company representing
after their allocation 69.44% of the Company's issued and outstanding
share capital. In addition, the Company convened an extraordinary general
meeting of shareholders which approved said engagement on March 2,
2010 (see also Note 1b regarding prerequisites required for executing
the transaction).
|
|
|
2.
|
On
February 28, 2010, the parties to the agreement signed on an
extension to the date set for the fulfillment of the prerequisites to
April 30, 2010 ("the new date") such that all the provisions
stipulated at the execution date as in the agreement will apply to the new
date. The other provisions in the agreement will remain intact. The
Company is acting to fulfill the conditions of the agreement as soon as
possible (see also Note 5a).
|
|
|
b.
|
Below
is information about share-based payments granted during the period to
directors, the CEO (who also acts as a director in the Company) and to
another employee:
|
|
|
1.
|
On
January 18, 2010, the Company's Board approved to grant 450,000 share
options to directors in the Company to purchase 450,000 Ordinary shares of
NIS 0.1 each at an exercise price equal to NIS 0.298 per share.
Pursuant to the guidance of IFRS 2, the fair value of all share options at
the date when the Board accepted the resolution, using the Black-Scholes
model was approximately $ 36 thousand. The option term is for a
period of 10 years from the grant date. 33% of the options are exercisable
immediately and the remaining options are exercisable in 24 tranches every
month over a two-year period.
|
| On March 2, 2010, the annual meeting of shareholders approved to grant options to the directors. |
|
|
2.
|
On
January 18, 2010, the Company's Board approved to grant 1,610,000
share options to the Company's CEO to purchase 1,610,000 Ordinary shares
of NIS 0.1 each at an exercise price equal to NIS 0.075 per
share. Pursuant to the guidance of IFRS 2, the fair value of all share
options at the date when the Board accepted the resolution, using the
Black-Scholes model was approximately $ 136 thousand. The option term
is for a period of 10 years from the grant date. 33% of the options are
exercisable immediately and the remaining options are exercisable in 24
tranches every month over a two-year period.
|
| On March 2, 2010, the annual meeting of shareholders approved to grant options to the Company's CEO, subject to the closing of Bio-Gal transaction (see 1b). |
|
|
3.
|
On
January 26, 2010, the Company's Board approved to grant 100,000 share
options to an employee in the Company to purchase 100,000 Ordinary shares
of NIS 0.1 each at an exercise price equal to NIS 0.1 per share.
Pursuant to the guidance of IFRS 2, the fair value of all share options
using the Black-Scholes model was approximately $ 10 thousand. The
option term is for a period of 10 years from the grant date. The options
are exercisable in twelve equal quarterly tranches over a three-year
period.
|
B-11
|
XTL
BIOPHARMACEUTICALS LTD.
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2010
(UNAUDITED)
|
NOTE
4:- EVENTS
DURING THE PERIOD (Cont.)
| The value of each option in the above grants is based on the following inputs: expected dividend of 0%, expected standard deviation of 175%, risk-free interest rate of 3.9%-4.3% and expected life of five years. | ||
|
|
c.
|
On
March 2, 2010, after receiving the Board's approval, the annual
meeting of shareholders approved the employment terms of the Company's
CEO, Mr. David Grossman and, accordingly, a personal employment agreement
has been signed with him which will become effective after the completion
of the Bio-Gal transaction. The employment agreement contains payment for
his service from the date of joining the Company (February 2009). In this
period, pursuant to the agreement, the Company recognized a liability for
salary expenses of approximately $ 27 thousand and this in
furtherance to management estimate that the transaction will be completed
within a reasonable period of time and the employment agreement will
become effective.
|
|
|
d.
|
In
March 2010, the Company terminated the engagement with DOV Pharmaceutical
Inc., the patent holders of the Bicifadine compound, and all the rights
under the engagement were returned to DOV Pharmaceutical Inc. in
coordination with it.
|
NOTE
5:- EVENTS
AFTER THE BALANCE SHEET DATE
On
April 26, 2010, the Company and Bio-Gal signed on an additional extension
of the transaction to June 30, 2010 and this to enable the execution of the
transaction, such that all the provisions set in the agreement to be
accomplished by the execution date apply to the new date. The other provisions
in the agreement remain intact. The Company is acting to fulfill the closing
conditions of the transaction as soon as possible.
B-12
(C)
Interim
financial information as of March 31, 2010 pursuant to
Regulation
38d to the Israeli securities regulations (periodic and immediate
reports).
XTL
BIOPHARMACEUTICALS LTD.
INTERIM
FINANCIAL REPORTING
AS
OF MARCH 31, 2010
SEPARATE
FINANCIAL INFORMATION IN ACCORDANCE WITH REGULATION 38D TO THE
ISRAELI
SECURITIES REGULATIONS (PERIODIC AND IMMEDIATE REPORTS), 1970
UNAUDITED
INDEX
|
Page
|
|
|
Auditors'
Review Report
|
2
|
|
Financial
Data - in U.S. dollars:
|
|
|
Assets
and Liabilities Included in the Condensed Consolidated Interim Statements
Attributable to the Company as a Parent
|
3
|
|
Revenues
and Expenditures Included in the Condensed Consolidated Interim Statements
Attributable to the Company as a Parent
|
4
|
|
Cash
Flows Included in the Condensed Interim Statements
Attributable to the Company as a
Parent
|
5
- 6
|
|
Selected
Notes and Additional Information to the Separate Interim Financial
Information
|
7
- 8
|
C-1
|
|
|
Kesselman
& Kesselman
Certified
Public Accountants
Trade
Tower, 25 Hamered Street
Tel
Aviv 68125 Israel
P.O
Box 452 Tel Aviv 61003
Telephone
+972-3-7954555
Facsimile
+972-3-7954556
|
|
Auditors'
review Report to the shareholders of XTL Biopharmaceuticals
Ltd.
Introduction
We have
reviewed the accompanying interim separate financial information set forth in
regulation 38d' of the Israeli Securities Regulations (Interim and Immediate
Reports) - 1970 of XTL Biopharmaceuticals Ltd (hereafter - the "Company"), as of
March 31, 2010 and for the period then ended. The Board of Directors and
management are responsible for the preparation and fair presentation of this
interim financial information. Our responsibility is to express a conclusion on
this interim financial information based on our review.
Scope
of Review
We
conducted our review in accordance with Israeli Review Standard No. 1, issued by
the Israeli Institute of Certified Public Accountants, "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity." A
review of interim financial information consists of making inquiries, primarily
of persons responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less in scope
than an audit conducted in accordance with auditing standards generally accepted
in Israel and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Conclusion
Based on
our review, nothing has come to our attention that causes us to believe that the
accompanying interim separate financial information is not prepared, in all
material respects, in accordance with regulation 38d' of the Israeli Securities
Regulations (Interim and Immediate Reports) - 1970.
Without
qualifying our opinion, we draw your attention to note 1(c) of the consolidated
financial statements, which addresses that the Company's ability to continue
operating as a going concern is dependent on the Bio-Gal transaction and
the ability to raise additional funds as part of this transaction, or from
alternative sources. The transaction has not yet been completed, among others,
due to the delay in obtaining approval from the tax authorities.
Notwithstanding, there is uncertainty regarding completion of the Bio- Gal
transaction and the ability to raise funds as part of this transaction, or from
alternative sources. Therefore, there is substantial doubt regarding the
Company's ability to continue operating as a going concern. These financial
statements include no adjustments of the values of assets and liabilities and
the classification thereof, if any, that will apply if the Company is unable to
continue operating as a going concern.
|
Tel-Aviv,
Israel
|
Kesselman
& Kesselman
|
|
May 30,
2010
|
Certified
Public Accountants (Isr.)
|
|
A
member of PricewaterhouseCoopers
|
|
|
International
Limited
|
C-2
|
XTL
BIOPHARMACEUTICALS LTD.
|
|
Separate
Interim Financial Information in accordance with Regulation
38D
to
the Israeli Securities Regulations (Periodic and Immediate Reports),
1970
|
|
Assets
and Liabilities Included in the Condensed Consolidated Interim
Statements
Attributable
to the Company as a Parent
|
|
March
31,
|
December
31,
|
|||||||||||
|
2010
|
2009
|
2009
|
||||||||||
|
Unaudited
|
Audited
|
|||||||||||
|
U.S.
dollars in thousands
|
||||||||||||
|
ASSETS
|
||||||||||||
|
CURRENT
ASSETS:
|
||||||||||||
|
Cash
and cash equivalents
|
248 | 982 | 406 | |||||||||
|
Employee
benefit assets
|
- | 12 | - | |||||||||
|
Accounts
receivable
|
40 | 122 | 29 | |||||||||
|
Receivables
for investees
|
1,592 | 2,977 | 1,634 | |||||||||
|
Restricted
deposits
|
40 | 71 | 40 | |||||||||
| 1,920 | 4,164 | 2,109 | ||||||||||
|
NON-CURRENT
ASSETS:
|
||||||||||||
|
Fixed
assets, net
|
18 | 30 | 20 | |||||||||
|
Other
investments
|
156 | - | 135 | |||||||||
| 174 | 30 | 155 | ||||||||||
|
Total
assets attributable to the Company as a parent
|
2,094 | 4,194 | 2,264 | |||||||||
|
LIABILITIES
AND EQUITY (DEFICIENCY)
|
||||||||||||
|
CURRENT
LIABILITIES:
|
||||||||||||
|
Trade
payables
|
83 | 50 | 88 | |||||||||
|
Other
accounts payable
|
540 | 317 | 441 | |||||||||
| 623 | 367 | 529 | ||||||||||
|
Net
amount attributable to the owners of the parent of total assets less total
liabilities reflecting in the consolidated financial statements financial
information about investees
|
1,693 | 3,241 | 1,728 | |||||||||
|
Total
liabilities attributable to the Company as a parent
|
2,316 | 3,608 | 2,257 | |||||||||
|
EQUITY
(DEFICIENCY) ATTRIBUTABLE OWNERS OF THE COMPANY:
|
||||||||||||
|
Ordinary
share capital
|
1,445 | 1,445 | 1,445 | |||||||||
|
Share
premium
|
139,786 | 139,786 | 139,786 | |||||||||
|
Accumulated
deficit
|
(141,453 | ) | (140,645 | ) | (141,224 | ) | ||||||
|
Total
equity (deficiency)
|
(222 | ) | 586 | 7 | ||||||||
|
Total
liabilities and equity attributable to the Company as a
parent
|
2,094 | 4,194 | 2,264 | |||||||||
The
accompanying notes and additional information are an integral part of the
condensed financial data.
|
Amit
Yonay
|
David
Grossman
|
Ronen
Twito
|
||
|
Chairman
of the Board
|
Director
and CEO
|
CFO
|
Date of
approval of the financial statements by the Company's Board: May 30,
2010.
C-3
|
XTL
BIOPHARMACEUTICALS LTD.
|
|
Separate
Interim Financial Information in accordance with Regulation
38D
to
the Israeli Securities Regulations (Periodic and Immediate Reports),
1970
|
|
Revenues
and Expenditures Included in the Condensed Consolidated Interim
Statements
Attributable
to the Company as a Parent
|
|
Three
months ended
March
31,
|
Year
ended
December
31,
|
|||||||||||
|
2010
|
2009
|
2009
|
||||||||||
|
Unaudited
|
Audited
|
|||||||||||
|
U.S.
dollars in thousands
|
||||||||||||
|
General
and administrative expenses (income)
|
371 | (2,072 | ) | (1,363 | ) | |||||||
|
Other
gains, net
|
- | - | 140 | |||||||||
|
Operating
income (loss)
|
(371 | ) | 2,072 | 1,503 | ||||||||
|
Finance
income
|
- | 12 | 6 | |||||||||
|
Finance
costs
|
1 | 3 | 7 | |||||||||
|
Finance
income (costs), net
|
(1 | ) | 9 | (1 | ) | |||||||
|
Income
(loss) after finance income (costs)
|
(372 | ) | 2,081 | 1,502 | ||||||||
|
Gain
(loss) from investees
|
36 | (428 | ) | 1,085 | ||||||||
|
Income
(loss) for the period attributable to the Company as a
parent
|
(336 | ) | 1,653 | 2,587 | ||||||||
The
accompanying notes and additional information are an integral part of the
condensed financial data.
C-4
|
XTL
BIOPHARMACEUTICALS LTD.
|
|
Separate
Interim Financial Information in accordance with Regulation
38D
to
the Israeli Securities Regulations (Periodic and Immediate Reports),
1970
|
|
Cash
Flows Included in the Condensed Consolidated Interim
Statements
Attributable
to the Company as a
Parent
|
|
Three
months ended
March
31,
|
Year
ended
December
31,
|
|||||||||||
|
2010
|
2009
|
2009
|
||||||||||
|
Unaudited
|
Audited
|
|||||||||||
|
U.S.
dollars in thousands
|
||||||||||||
|
Cash flows from
operating activities:
|
||||||||||||
|
Net
income (loss) for the period
|
(336 | ) | 1,653 | 2,587 | ||||||||
|
Adjustments
to reconcile net income (loss) to net cash used in operating
activities (a)
|
162 | (2,111 | ) | (4,947 | ) | |||||||
|
Net
cash flows from operating activities relating to transactions with
investees
|
42 | (867 | ) | 483 | ||||||||
|
Net
cash used in operating activities
|
(132 | ) | (1,325 | ) | (1,877 | ) | ||||||
|
Cash flows from
investing activities:
|
||||||||||||
|
Increase
in restricted deposit
|
- | - | 31 | |||||||||
|
Other
investments
|
(26 | ) | - | (55 | ) | |||||||
|
Net
cash used in investing activities
|
(26 | ) | - | (24 | ) | |||||||
|
Decrease
in cash and cash equivalents
|
(158 | ) | (1,325 | ) | (1,901 | ) | ||||||
|
Cash
and cash equivalents at the beginning of the period
|
406 | 2,307 | 2,307 | |||||||||
|
Cash
and cash equivalents at the end of the period
|
248 | 982 | 406 | |||||||||
The
accompanying notes and additional information are an integral part of the
condensed financial data.
C-5
|
XTL
BIOPHARMACEUTICALS LTD.
|
|
Separate
Interim Financial Information in accordance with Regulation
38D
to
the Israeli Securities Regulations (Periodic and Immediate Reports),
1970
|
|
Cash
Flows Included in the Condensed Consolidated Interim
Statements
Attributable
to the Company as a
Parent
|
|
Three
months ended
March
31,
|
Year
ended
December
31,
|
||||||||||||
|
2010
|
2009
|
2009
|
|||||||||||
|
Unaudited
|
Audited
|
||||||||||||
|
U.S.
dollars in thousands
|
|||||||||||||
|
(a)
|
Adjustments to
reconcile net income (loss) to net cash used in operating
activities:
|
||||||||||||
|
Income
and expenses not involving cash flows:
|
|||||||||||||
|
Depreciation
and amortization
|
2 | 2 | 8 | ||||||||||
|
Loss
on sale of fixed assets
|
- | - | 4 | ||||||||||
|
Share-based
payment transactions
|
107 | (2,541 | ) | (4,180 | ) | ||||||||
|
Change
in employee benefit liabilities
|
- | - | 12 | ||||||||||
|
Company's
share of losses (earnings) of investees
|
(35 | ) | 428 | (1,085 | ) | ||||||||
|
Change
in liability for share appreciation rights
|
- | - | 119 | ||||||||||
| 74 | (2,111 | ) | (5,122 | ) | |||||||||
|
Changes
in operating asset and liability items:
|
|||||||||||||
|
Decrease
(increase) in accounts receivable
|
(11 | ) | 18 | 111 | |||||||||
|
Decrease
in trade payables
|
(5 | ) | (12 | ) | (54 | ) | |||||||
|
Increase
(decrease) in other accounts payable
|
104 | (6 | ) | 118 | |||||||||
| 88 | - | 175 | |||||||||||
| 162 | (2,111 | ) | (4,947 | ) | |||||||||
|
(b)
|
Non-cash
investing activities for the period ended March 31, 2010 total
approximately $ 21 thousand and it derives from deferred charges in
connection with Bio-Gal transaction (see note 1c to the consolidated
financial statements) which were recorded in the line item "other
investments".
|
||||||||||||
The
accompanying notes and additional information are an integral part of the
condensed financial data.
C-6
|
XTL
BIOPHARMACEUTICALS LTD.
|
|
Selected
Notes and Additional Information to the Separate Interim Financial
Information in accordance
with
Regulation 38D to the Israeli Securities Regulations (Periodic and
Immediate Reports),
1970
|
|
NOTE
1:-
|
BASIS
OF PREPARATION OF THE SEPARATE FINANCIAL INFORMATION IN ACCORDANCE WITH
REGULATION 38D TO THE ISRAELI SECURITIES REGULATIONS (PERIODIC AND
IMMEDIATE REPORTS), 1970
|
a.
Definitions:
|
The
Company
|
-
|
XTL
Biopharmaceuticals Ltd.
|
|
|
The
separate financial information
|
-
|
separate
interim financial information in accordance with Regulation 38D to the
Israeli Securities Regulations (Periodic and Immediate Reports),
1970
|
Unless
stated otherwise, all the terms used within the scope of the separate financial
information are as these terms are defined in the condensed consolidated
financial statements of the Company as of March 31, 2010 and for the three
months period then ended ("condensed interim consolidated
statements").
|
Investee
|
-
|
subsidiary
|
|
|
Intragroup
transaction
|
-
|
transactions
of the Company and subsidiaries
|
|
|
Intragroup
balances, income and expenses and cash flows
|
-
|
balances,
income and expenses and cash flows, as the case may be, resulting from
intragroup transactions that have been eliminated in the consolidated
statements
|
b.
The principles of preparation of the separate financial
information:
The
separate interim financial information has been prepared in accordance with
Regulation 38D to the Israeli Securities Regulations (Periodic and Immediate
Reports), 1970 ("Periodic Report Regulations"). Accordingly, financial data of
the interim consolidated statements of the corporation as stated in Regulation
9C to the Periodic Report Regulations ("Regulation 9C"), with the obligated
changes, will be disclosed in the interim statement along with the auditors'
review report.
Accordingly,
the separate interim financial information comprises financial data of the
condensed consolidated financial statements of the Company as of March 31, 2010
and for the three months period then ended ("condensed interim consolidated
financial statements") attributable to the Company as the parent.
This
separate interim financial information should be read in conjunction with the
separate financial information of the Company as of December 31, 2009 and for
each of the three years in the period then ended ("the Company's separate
financial information for 2009") and the accompanying notes which have been
prepared in accordance with Regulation 9C to the Periodic Report Regulations, as
well as particulars specified in the Tenth Addendum to these Regulations and
subject to the clarifications specified in the "Clarification Regarding the
Separate Financial Statement of the Corporation" which was published on the
website of the Israeli Securities Authority on January 24, 2010 and which
address how to apply said Regulation and Addendum ("IAS Staff
Clarification").
The
significant accounting policies and methods of computation adopted in the
preparation of the separate interim financial information are consistent with
those followed in the preparation of the Company's separate financial
information for 2009 as elaborated therein.
C-7
|
XTL
BIOPHARMACEUTICALS LTD.
|
|
Selected
Notes and Additional Information to the Separate Interim Financial
Information in accordance
with
Regulation 38D to the Israeli Securities Regulations (Periodic and
Immediate Reports),
1970
|
|
NOTE
1:-
|
BASIS
OF PREPARATION OF THE SEPARATE INTERIM FINANCIAL INFORMATION IN ACCORDANCE
WITH REGULATION 38D TO THE ISRAELI SECURITIES REGULATIONS (PERIODIC AND
IMMEDIATE REPORTS), 1970
|
The
interim financial information is reviewed but not audited.
The
separate interim financial information does not constitute financial statements,
including separate financial statements, which are prepared and presented in
accordance with International Financial Reporting Standards ("IFRS") in general,
and the provisions of International Accounting Standard 27, "Consolidated and
Separate Financial Statements" in particular and it does not constitute interim
financial information prepared in accordance with IAS 34, "Interim Financial
Reporting".
Nonetheless,
the accounting policy specified in Note 3 to the condensed interim consolidated
financial statements regarding the significant accounting policies and the
method by which the financial data were classified in the condensed interim
consolidated financial statements were applied for the purpose of presenting the
separate interim financial information and this with the obligated changes
resulting from the above regarding the significant accounting policies and
methods of computation adopted in the preparation of the separate interim
financial information.
|
|
c.
|
As
for the issue of going concern - see Note 1c to the financial
information for interim period as of March 31,
2010.
|
|
NOTE
2:-
|
EVENTS
AFTER THE BALANCE SHEET DATE
|
| In May 2010, the Company invested, by way of contribution to capital, a current intercompany balance in the amount of approximately $1.5 million with XTL Inc., a fully owned subsidiary. |
C-8
Contact:
Investor
Relations: ir@xtlbio.com; Tel: +972 3 612
7011
Cautionary
Statement
Some of
the statements included in this Form 6-K may be forward-looking statements that
involve a number of risks and uncertainties. For those statements, we claim the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.
- 6
-
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
| XTL BIOPHARMACEUTICALS LTD. | |||
|
Date:
June 1, 2010
|
By:
|
/s/ David Grossman | |
| David Grossman | |||
| Chief Executive Officer | |||