EX-99.1 2 v398380_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

ALCOBRA LTD. AND ITS SUBSIDIARY

 

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF JUNE 30, 2014

 

U.S. DOLLARS IN THOUSANDS

 

UNAUDITED

 

INDEX

 

  Page
   
Consolidated Balance Sheets 2 - 3
   
Consolidated Statements of Operations 4
   
Statements of Changes in Shareholders' Equity 5
   
Consolidated Statements of Cash Flows 6
   
Notes to Consolidated Financial Statements 7 - 12

 

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ALCOBRA LTD. AND ITS SUBSIDIARY

 

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

 

   June 30,   December 31, 
   2014   2013 
   Unaudited     
ASSETS          
           
CURRENT ASSETS:          
Cash and cash equivalents  $6,912   $22,095 
Short-term bank deposit   32,025    28,008 
Receivables and prepaid expenses   1,022    115 
           
Total current assets   39,959    50,218 
           
LONG-TERM ASSETS:          
Other long-term assets   107    57 
Property and equipment, net   105    49 
           
Total long-term assets   212    106 
           
TOTAL ASSETS  $40,171   $50,324 

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

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ALCOBRA LTD. AND ITS SUBSIDIARY

 

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands, (except share and per share data)

 

   June 30,   December 31, 
   2014   2013 
   Unaudited     
LIABILITIES AND SHAREHOLDERS' EQUITY          
           
CURRENT LIABILITIES:          
Trade payables  $1,457   $47 
Accrued expenses and other liabilities   3,296    1,589 
           
Total current liabilities   4,753    1,636 
           
SHAREHOLDERS' EQUITY:          
Ordinary shares of NIS 0.01 par value -
50,000,000 shares authorized at June 30, 2014 and December 31, 2013; 13,999,733 and 13,941,033 issued shares at June 30, 2014 and December 31, 2013, respectively; 13,695,409 and 13,636,709 shares outstanding at June 30, 2014 and December 31, 2013, respectively		   39    39 
Treasury shares (304,324 ordinary shares at June 30, 2014 and December 31, 2013)        -*)    -*)
Additional paid- in capital   69,659    67,383 
Accumulated deficit   (34,280)   (18,734)
           
Total shareholders' equity   35,418    48,688 
           
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $40,171   $50,324 

 

*)Represents an amount lower than $1.

 

The accompanying notes are an integral part of the consolidated financial statements.

 

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ALCOBRA LTD. AND ITS SUBSIDIARY

 

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands, (except share and per share data)

 

   Six months ended 
   June 30, 
   2014   2013 
   Unaudited 
         
Research and development expenses  $11,440   $396 
Pre commercialization expenses   1,089    - 
General and administrative   3,137    1,114 
           
Operating loss   15,666    1,510 
           
Financial expenses (income), net   (135)   206 
           
Loss before taxes on income   15,531    1,716 
Taxes on income   15    - 
           
Net loss attributable to holders of Ordinary shares  $15,546   $1,716 
           
Net basic and diluted loss per share  $(1.14)  $(0.20)
Weighted average number of Ordinary shares used in computing basic and diluted net loss per share   13,649,427    8,397,070 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

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ALCOBRA LTD. AND ITS SUBSIDIARY

 

 

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

U.S. dollars in thousands, except share data

 

   Ordinary shares   Preferred A shares   Preferred B shares   Additional
paid-in		   Accumulated   Total
shareholders'		 
   Number   Amount   Number   Amount   Number   Amount   capital   deficit   equity 
                                     
Balance as of January 1, 2013   7,794,256   $4    -   $  -*)    -   $   -*)  $7,615   $(8,186)  $(567)
Exercise of options   208,708    1    -    -    -    -    28    -    29 
Issuance of shares upon cashless exercise of warrants   85,192       -*)   -    -    -    -    -    -      -*) 
Issuance of shares upon conversion of convertible notes   123,553       -*)   -    -    -    -    980    -    980 
Issuance of shares upon initial public offering ($8.00 per share), net of $3,080 issuance expenses   3,125,000    28    -    -    -    -    21,892    -    21,920 
Issuance of shares upon secondary public offering ($16.50 per share), net of $2,616 issuance expenses   2,300,000    6    -    -    -    -    35,328    -    35,334 
Share based compensation related to options granted to consultants and employees   -    -    -    -    -    -    1,540    -    1,540 
Net loss   -    -    -    -    -    -    -    (10,548)   (10,548)
                                              
Balance as of December 31, 2013   13,636,709    39    -       - *)   -       -*)   67,383    (18,734)   48,688 
Exercise of options   -    -    -    -    -    -    -    -    - 
Issuance of shares upon cashless exercise of warrants   58,700       -*)   -    -    -    -      -*)    -      -*) 
Share based compensation related to options granted to consultants and employees   -    -    -    -    -    -    2,276    -    2,276 
Net loss                                      (15,546)   (15,546)
                                              
Balance as of June 30, 2014 (unaudited)   13,695,409   $39    -   $-    -   $-   $69,659   $(34,280)  $35,418 

 

*)Represents an amount lower than $1.

 

The accompanying notes are an integral part of the consolidated financial statements.

 

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ALCOBRA LTD. AND ITS SUBSIDIARY

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands, except share data

 

   Six months ended 
   June 30, 
   2014   2013 
   Unaudited 
Cash flow from operating activities:          
Net loss  $(15,546)  $(1,716)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation   14    3 
Interest on convertible notes   -    203 
Stock based compensation   2,276    744 
Gain from sale of property and equipment   -    1 
Change in operating assets and liabilities:          
Receivables and prepaid expenses   (907)   (4)
Decrease in long-term deposit   -    (4)
Other long-term assets   (50)   - 
Trade payables   1,410    44 
Accrued expenses and other liabilities   1,707    193 
           
Net cash used in operating activities   (11,096)   (536)
           
Cash flow from investing activities:          
Purchase of property and equipment   (70)   (3)
Investment in short-term bank deposit   (4,017)   (4,000)
           
Net cash used in investing activities   (4,087)   (4,003)
           
Cash flow from financing activities:          
Issuance of share capital upon initial public offering   -    21,920 
Proceeds from issuance of convertible notes   -    115 
           
Net cash provided by financing activities   -    22,035 
           
Increase (decrease) in cash and cash equivalents   (15,183)   17,496 
Cash and cash equivalents at the beginning of the period   22,095    97 
Cash and cash equivalents at the end of the period   6,912    17,593 
           
Supplemental disclosure of non-cash activities:          
Issuance of ordinary shares upon conversion of convertible notes   -    979 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

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ALCOBRA LTD. AND ITS SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share data

 

NOTE 1:-GENERAL

 

a.Alcobra Ltd. was incorporated in Israel and commenced its operation on February 7, 2008. During July 2013, a wholly-owned subsidiary was incorporated in the State of Delaware named Alcobra Inc. (the "Subsidiary").
   
b.Alcobra Ltd. and the Subsidiary (collectively "the Company") are an emerging biopharmaceutical company primarily focused on the development and commercialization of a proprietary drug candidate, to treat Attention Deficit Hyperactivity Disorder ("ADHD"), and other potential cognitive dysfunctions including Fragile X. The Company's objective is to conduct additional clinical trials for its drug called MDX (the "Drug") and, if those trials are successful, seek marketing approval from the U.S. Food and Drug Administration (the "FDA") and other worldwide regulatory bodies.

 

c.As reflected in the accompanying unaudited interim consolidated financial statements, the Company has not generated revenue from the sale of any product, and does not expect to generate significant revenue unless and until obtaining of marketing approval and commercializing the Drug. The Company incurred a loss for the six month period ended June 30, 2014 of $15,546 and had a negative cash flow from operating activities of $11,096 during the six month period ended June 30, 2014. The accumulated deficit as of June 30, 2014 is $34,280.

  

NOTE 2:-UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete consolidated financial statements. The Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the 2013 annual consolidated financial statements and the notes thereto.

 

Operating results for the six month period ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ended December 31, 2014.

 

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ALCOBRA LTD. AND ITS SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share data

 

NOTE 3:-SIGNIFICANT ACCOUNTING POLICIES

 

The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2013 are applied consistently in these consolidated financial statements. For further information, refer to the consolidated financial statements as of December 31, 2013.

 

a.Use of estimates:

 

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company's management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the consolidated financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

  

NOTE 4:-CONTINGENT LIABILITIES AND COMMITMENTS

 

a.The Company is engaged in two operating lease agreements for its facilities. Future minimum non-cancelable rental payments under the operating lease are $476.

 

b.The Company has an operating lease agreement for its vehicles until 2017. Future minimum payments under the lease amounted to $18.

 

c.Royalty bearing Government grants:

 

The Company partially financed its research and development expenditures under programs sponsored by the Office of Chief Scientist ("OCS") for the support of certain research and development activities conducted in Israel.

 

In connection with its research and development, the Company received $106 of participation payments from the OCS through June 30, 2014. In return for the OCS's participation, the Company is committed to pay royalties at a rate of 3%-5% of sales of the developed product linked to U.S dollars, up to 100% of the amount of grants received (100% plus interest at LIBOR). The Company's total commitment for royalties payable with respect to future sales, based on OCS participations received or accrued, net of royalties paid or accrued, totaled approximately $116 as of June 30, 2014. In addition, the OCS may impose certain conditions on any arrangement under which it permits the Company to transfer technology or development out of Israel.

 

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ALCOBRA LTD. AND ITS SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share data

 

NOTE 5:-SHAREHOLDERS' EQUITY

 

a.Share capital:

 

The Ordinary Shares confer upon their holders the right to participate and vote in general shareholders meetings of the Company and to share in the distribution of dividends, if any declared by the Company.

 

b.2010 incentive option plan (“2010 Plan”):

 

A summary of the Company's options activity (for employees and directors) under the 2010 Plan is as follows:

 

   Six months ended June 30, 2014 
   Number of
options		   Weighted average
exercise price		 
         
Outstanding at beginning of period   805,300   $6.86 
Granted   529,500    20.13 
           
Outstanding at end of period   1,334,800    12.12 
           
Vested and expected to vest   1,334,800    12.12 
           
Options exercisable at the end of the period   506,921   $4.74 

 

The weighted average grant date fair value of options granted during the period ended June 30, 2014 was $13.16. As of June 30, 2014, the weighted-average remaining contractual term of the outstanding options is 8.04 years. As of June 30, 2014, the weighted-average remaining contractual term of the exercisable options is 6.96 years; the aggregated intrinsic value of outstanding options is $8,505 and the aggregated intrinsic value of exercisable options is $6,625. As of June 30, 2014, the unrecognized compensation cost is $1,804 and $1,813 to be recognized in 2014 and 2015, respectively.

 

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ALCOBRA LTD. AND ITS SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share data

 

NOTE 5:-SHAREHOLDERS' EQUITY (Cont.)

 

c.Options granted to consultants:

 

The Company granted options to certain service providers and accounted for these options in accordance with ASC 505-50 (Equity-Based Payments to Non-Employees).

 

The outstanding options granted to the Company's consultants are as follows:

 

Grant date  Number of
options		   Exercise
price		   Expiration date
            
February 28, 2010   8,805   $2.1840   February 28, 2020
February 13, 2011   1,174    0.0005   February 13, 2021
February 17, 2011   3,804    0.0005   February 17, 2021
              
    13,783*)        

 

*) All options were fully vested on grant date.

 

d.Warrants granted to underwriters:

 

The outstanding warrants granted to the Company's underwriters are as follows:

 

Grant date  Number of
warrants		   Exercise
price		   Expiration date
              
May 28, 2013   52,083   $12.00   May 28, 2015
May 28, 2013   52,083    16.00   November 28, 2015
May 28, 2013   52,084    20.00   May 28, 2016
              
    156,250         

 

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ALCOBRA LTD. AND ITS SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share data

 

NOTE 5:-SHAREHOLDERS' EQUITY(Cont.)

 

e.Share-based payment:

 

The share based expense recognized in the consolidated financial statements for services received from employees and non-employees is shown in the following table:

 

   Six months ended
June 30,		 
   2014   2013 
   Unaudited 
         
Research and development   1,015    177 
Pre-commercialization expenses   294    - 
General and administrative expenses   967    567 
           
    2,276    744 

 

NOTE 6:-RELATED PARTY BALANCES AND TRANSACTIONS

 

Balances with related parties:

 

   June 30,
2014		   December 31,
2013		 
   Unaudited     
           
Other accounts payable  $23   $5 

 

Related parties' expenses:

 

   Six months ended
June 30,		 
   2014   2013 
   Unaudited 
Amounts charged to:          
           
General and administrative expense  $341   $73 
           
   $341   $73 

 

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ALCOBRA LTD. AND ITS SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share data

 

NOTE 7:-FINANCIAL EXPENSES, NET

 

   Six months ended
June 30,		 
   2014   2013 
Financial expenses:          
Interest expense  $-   $2 
Exchange rate   12    1 
Convertible notes expenses   -    203 
           
    12    206 
Financial income:          
Interest income   (147)   - 
           
    (147)   - 
           
   $(135)  $206 

  

NOTE 8:-SUBSEQUENT EVENTS

 

a.On July 14, 2014, the Company filed a shelf registration statement with the U.S. Securities and Exchange Commission, of up to $100,000 of the Company Ordinary Shares, NIS 0.01 par value, which was declared effective on August 1, 2014.

 

b.On December 16, 2014 the Board of Directors of the Company adopted the following resolutions:

 

(1)Approval to increase the shares reserved for issuance upon exercise of options granted under the 2010 Plan by 232,500.
(2)Approval of the grant by the Company (the "New Grant"), subject to the terms and condition of the 2010 Plan, of options to purchase 604,845 of the Company's Ordinary Shares, NIS 0.01 per share, at an exercise price of $3.29 per share subject to four year vesting.
(3)Approval of the cancellation of 372,345 unvested options to certain officers as part of the New Grant.

 

c.On November 14, 2014, a securities class action was filed in the United States District Court for the Southern District of New York against the Company and certain of its current and former executive officers. The main allegation is that the Company issued false and misleading analyst reports and ratings about the business operations which resulted in artificial inflation of the value of the Company's securities. The complaints alleged violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The Company has not been served and at this preliminary stage cannot assess the exposure under such complaint.

 

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