6-K 1 v353850_6k.htm FORM 6-K

 

  

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 August, 2013

 

Commission File Number: 000-51310

 

  XTL Biopharmaceuticals Ltd.  
  (Translation of registrant’s name into English)  

 

85 Medinat Hayehudim St., Herzliya

Pituach, PO Box 4033,

Herzliya 46140, 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    ¨

 

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    ¨            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 

 

 
 

  

XTL Biopharmaceuticals Ltd. (the “Company”) Presents Its Translated From Hebrew Interim Financial Statements as of June 30, 2013

 

Attached hereto is an English translation (from Hebrew) of our interim financial statements and additional information as submitted on the Tel Aviv Stock Exchange.

 

The following documents are included:

 

A.     Board of Directors' Report as of June 30, 2013.

 

B.     Reviewed Condensed Consolidated Financial Statements as of June 30, 2013.

 

C.     Separate Financial Information as of June 30, 2013 in accordance with Regulation 38d of the Israeli Securities Regulations (Periodic and Immediate Reports) - 1970.

 

D.     Interim Report on the Effectiveness of Internal Control over Financial Reporting and Disclosure as of June 30, 2013, Pursuant to Regulation 38c(a) of the Israeli Securities Authority.

 

E.      Condensed Pro Forma Interim Consolidated Financial Statements as of June 30, 2012, in accordance with Regulation 38b of the Israeli Securities Regulations (Periodical and Immediate Reports) – 1970.

  

 
 

 

Description: XTLbio Logo without conquering

 

 

XTL BIOPHARMACEUTICALS LTD.

 

 

DIRECTORS' REPORT ON THE CORPORATION'S STATE OF AFFAIRS

 

FOR THE SIX MONTHS ENDED JUNE 30, 2013

 

 

The Board of Directors (the “Board”) of XTL Biopharmaceuticals Ltd. (the “Company”) hereby presents the Company's interim consolidated financial statements as of June 30, 2013 and for the six months then ended (the “Reporting Period”), in conformity with the Israeli Securities Regulations (Periodic and Immediate Reports), 1970 (the “Reporting Regulations”).

 

The data presented in this report relate to the Company and its subsidiaries on a consolidated basis (the “Group”), unless explicitly stated otherwise.

 

The directors' report contains, among other things, a condensed description of the Company's business, its financial position, an analysis of operating results and the effect of events during the reporting period on the data in the consolidated financial statements of the Company as of June 30, 2013 (the “Financial Statements”). The material changes in the Company's business compared to the information presented in the Company's periodic report for 2012, in conformity with Regulation 39a to the Reporting Regulations, are specified in section 1.2 below.

 

The directors' report was prepared based on the assumption that the reader also has at its disposal the Company's directors' report for the year ended December 31, 2012.

 

1.PART 1 - THE BOARD OF DIRECTORS' EXPLANATIONS FOR THE STATE OF THE CORPORATION'S BUSINESS

 

1.1A condensed description of the Company's business

 

The Company was incorporated under the Israeli Companies Law on March 9, 1993. The Company is engaged in the development of therapeutics for the treatment of unmet medical needs, improvement of existing medical treatment and business development in the medical realm.

A-1
 

 

In the reporting period, the Company's American Depository Receipts ("ADRs") were traded on the NASDAQ's Pink Sheets and as of the date of the approval of the financial statements, effective July 15, 2013, the Company's ADRs have been traded on the NASDAQ's main list (see details in section 4.1.1 below) and its securities are traded on the Tel-Aviv Stock Exchange ("TASE").

 

On July 25, 2012, the Company completed the acquisition of about 50.79% of the issued and outstanding share capital of InterCure Ltd. ("InterCure"), a public company whose shares are traded on the TASE and is engaged in the research, development, marketing and sale of home medical devices for the non-medicinal and non-invasive treatment of various diseases such as hypertension, congestive cardiac failure, insomnia and stress. On May 16, 2013, the Board approved the conversion of the loan which had been extended to InterCure into 7,620,695 Ordinary shares of InterCure as predetermined in the acquisition agreement. Following said conversion and as of the date of the financial statements, the Company holds about 54.72% of InterCure's issued and outstanding share capital.

 

On November 21, 2012, the Company acquired about 31.35% of the shares of Proteologics Ltd. ("Proteologics"), a public company whose shares are traded on the TASE. As of June 30, 2013, the Company holds about 30.82% of Proteologics' issued and outstanding share capital (see also Note 12 to the annual consolidated financial statements for 2012 and section 4.1.10 below).

 

As of the date of the financial statements, the Company is planning and preparing for the implementation of a phase 2 clinical trial of the recombinant EPO ("rHuEPO") drug for treating Multiple Myeloma patients. As part of said preparations, the Company is conducting a study which consists of collecting preliminary data on the existence of specific proteins in the blood of a group of Multiple Myeloma patients to assist in targeting the phase 2 clinical trial protocol. The Company has expanded the study to additional centers in order to collect additional data beyond the original study plan. The data collected in the preliminary study will be combined in the plans and preparations for the implementation of the phase 2 clinical trial, as needed, whose approval the Company expects to obtain during the first half of 2014. The study’s timetable has been extended due to expansion of the preliminary study, as well as an ongoing Company review of both data collected in the study and potential medical centers for conducting phase 2 experiments in the future, due to, inter alia, the Company's return to the NASDAQ main list.

 

On November 30, 2011, the Company completed the MinoGuard transaction according to which the Company acquired the activity of MinoGuard Ltd. ("MinoGuard"), founded by Mor Research Applications Ltd. ("Mor"), by obtaining an exclusive license to MinoGuard's entire technology, including the SAM-101 drug (combined drug to treat mental disorders focusing on schizophrenia) in return for royalties on sales and milestone payments to be provided throughout the clinical development process with no additional consideration. The drug is based on a combination of existing antipsychotic drugs and a known medicinal compound (Minocycline).

A-2
 

 

The Company has rights in patents and other assets in the field of treating Hepatitis C (the DOS program) which have been transferred to Presidio Pharmaceuticals Inc. ("Presidio") and returned to the Company by Presidio in August 2012 (see more details in Note 18a to the annual consolidated financial statements for 2012). The Company intends to examine the renewal of activity in the field of Hepatitis C and/or locate strategic partners for the continued development and marketing of drugs for treating Hepatitis C based on the DOS technology.

 

The following are the Company's subsidiaries as of June 30, 2013:

 

a.InterCure - a publicly traded company on the TASE. InterCure has two subsidiaries - InterCure Inc., incorporated in the U.S., and InterCure UK, incorporated in the UK (inactive).

 

b.Xtepo Ltd. ("Xtepo") - a private company incorporated in Israel in November 2009 which holds a license for the exclusive use of the patent for rHuEPO drug for treating Multiple Myeloma patients.

 

c.XTL Biopharmaceuticals Inc. ("XTL Inc.") - a U.S. company incorporated in 1999 under the laws of the State of Delaware, USA and was engaged in development of therapeutics and business development in the medical realm. XTL Inc. has a wholly-owned subsidiary (a sub-subsidiary of the Company) - XTL Development Inc. ("XTL Development"), which was incorporated in 2007 under the laws of the State of Delaware, USA. As of the date of the approval of the financial statements, XTL Inc. and XTL Development are inactive.

 

1.2Significant events during the reporting period

 

1.2.1On February 21, 2013, the Company's special general meeting of shareholders and the general meeting of holders of warrants (series 2) of the Company decided to extend the exercise period of said warrants from February 27, 2013 to December 31, 2013. On March 12, 2013, the decision was approved by the District Court pursuant to Section 350 to the Israeli Companies Law, 1999.

 

1.2.2In keeping with the negotiations held between the Company and Kitov Pharmaceuticals Ltd. (see Note 18a to the annual consolidated financial statements for 2012), on March 5, 2013, the parties to the transaction decided to cease the negotiations as they failed to yield any binding agreement.

 

1.2.3During the reporting period, holders of the Company's warrants (series 2) exercised 31,410 warrants (series 2) into 31,410 Ordinary shares of NIS 0.1 par value each for an average exercise increment of NIS 1.02 per warrant. The overall proceeds from the exercise of the warrants (series 2) totaled approximately US $9,000.

 

1.2.4During the reporting period, 130,000 non-marketable stock options of the Company were exercised into 130,000 Ordinary shares of NIS 0.1 par value each for an average exercise increment of NIS 0.28 per stock option. The proceeds from the exercise of the stock options totaled approximately US $9,000.

 

A-3
 

  

1.2.5InterCure

 

1.2.5.1On January 21, 2013, InterCure announced that the examination conducted as part of the process of concluding the engagement with Mr. Erez Gavish, the former CEO ("Mr. Gavish"), revealed several issues which require inspection in connection with InterCure's actions during Mr. Gavish's term as CEO, including the legal validity granted to the license agreement of October 2011 signed between InterCure and a company controlled by Dr. Benjamin Gavish ("Dr. Gavish"). InterCure's Board appointed a committee which includes an external attorney hired for this purpose and another director in InterCure in order to investigate the issue and provide InterCure’s Board with conclusions. In addition, a notice was delivered to Mr. Gavish and Dr. Gavish on the establishment of said committee which summoned the two to provide explanations regarding the issues under inspection and requested that they inform any of their future potential partners or investors of the inspection and the legal validity of said license agreement. On April 7, 2013, InterCure announced that on April 4, 2013, an originating summons had been filed by Yazmonit Ltd., a company controlled by Dr. Gavish, against it with the Tel-Aviv-Jaffa District Court according to which the Court is asked to render a verdict which declares that the license agreement had been approved and signed and the rights therein had been conferred and transferred by the respondent to the petitioner as required by law. Moreover, on May 13, 2013, InterCure filed a petition with the Court for dismissing the originating summons in limine and assigning the motion to a standard legal procedure. See details in section 4.1.4 below.

 

1.2.5.2On March 21, 2013, Prof. Reuven Zimlichman was appointed as InterCure's medical director. According to the consulting agreement with Prof. Zimlichman, he will provide InterCure with services consisting of R&D consulting, IP and medical regulation management. Prof. Zimlichman will be granted 130,000 stock options exercisable into 130,000 Ordinary shares of InterCure for an exercise increment of NIS 0.54 per stock option. The stock options vest in 12 equal portions each quarter over a period of three years from the grant date. Alternatively, if as a result of the signing of an agreement between InterCure and a medical institution (such as a sickness fund) for the sale of InterCure's products through the medical institution the total sales of InterCure's products exceed US$ 175,000, then 30% of the then unvested stock options will vest. The fair value of all the stock options using the Black and Scholes model in accordance with the provisions of IFRS 2 as of the date of InterCure's Board's approval approximates US $9,000. The exercise period of the stock options is a maximum of 10 years from the date of grant.

 

The value of each option is based on the following inputs: expected dividend of 0%, expected standard deviation of 92.21%, risk-free interest rates of 2.76%-3.21% and expected life of 5-6.5 years.

 

A-4
 

 

 

 

1.2.5.3On June 26, 2013, InterCure's Board approved the appointment of Mr. Ofer Gilboa as the CEO of InterCure instead of Mr. Ronen Twito, the Company's CFO and Deputy CEO who terminated his tenure as temporary CEO of InterCure. The agreement provides for a letter of exemption and indemnification, and the inclusion of Mr. Gilboa in InterCure's directors' and officers' liability insurance policy. In addition, according to Mr. Gilboa's employment agreement, as approved by InterCure's Board, he will be granted 650,000 stock options which are exercisable into Ordinary shares of InterCure at an exercise price of NIS 0.23 per stock option. The stock options vest over a period of three years whereby 1/12 of stock options will vest at the end of each quarter. The fair value of the entire stock options using the Black and Scholes model pursuant to the provisions of IFRS 2 as of the date of InterCure's Board's approval was approximately US $9,000. The exercise period is for a maximum of ten years from the allocation date. The value of each option is based on the following inputs: expected dividend rate of 0%, expected standard deviation rate of 39.01%, risk-free interest rate of 1% and expected life of 5-6.5 years. Also according to the employment agreement, if InterCure's revenues exceed $ 5 million and the EBITDA is not less than $ 1 million, Mr. Gilboa will be entitled to a bonus of $25,000. It was also determined that Mr. Gilboa will be entitled to a bonus of 1% of any capital raising round in InterCure over a period of 36 months from commencing his tenure, provided that the investments are made by third parties that are unrelated to InterCure, and up to a maximum bonus of $100,000. Mr. Gilboa's employment terms were approved by the meeting of InterCure's shareholders of August 15, 2013, after the reporting date (see also section 4.1 regarding significant events after the reporting date).
A-5
 
1.3The financial position, operating results, liquidity and financing resources

 

The Company has incurred continuing losses and its entire income at this stage originates from InterCure, a subsidiary in which control was acquired on July 25, 2012. The Company depends on outside financing resources to continue its activities. Based on existing business plans, the Company's management estimates that its outstanding cash and cash equivalent balances, including short-term deposits, will allow the Company to finance its activities at least until the fourth quarter of 2014 (independently of InterCure). However, the amount of cash which the Company will need in practice to finance its activities depends on numerous factors which include, but are not limited to, the timing, planning and execution of clinical trials of existing drugs and future projects which the Company might acquire or other business development activities such as acquiring new technologies and/or changes in circumstances which are liable to cause significant expenses to the Company in excess of management's current and known expectations as of the date of these financial statements and which will require the Company to reallocate funds against plans, also due to circumstances beyond its control.

 

The Company expects to incur additional losses in 2013 arising from research and development activities, testing additional technologies and operating activities. These losses will be reflected in negative cash flows from operating activities. Accordingly, in order to complete the clinical trials aimed at developing a product until obtaining its marketing approval, the Company will be forced to raise additional funds in the future by issuing securities. Should the Company fail to raise additional capital in the future under standard terms, it will be required to dispose of marketable securities held by it or minimize its activities, sell or grant a sublicense to third parties to use all or part of its technologies.

 

1.3.1The financial position

 

Balance sheet highlights (U.S. dollars in thousands)

 

   June 30, 2013   December 31, 2012 
Line item  Amount   % of total
balance sheet
   Amount   % of total
balance sheet
 
   $000       $000     
                 
Total balance sheet   9,380    100%   11,086    100%
Equity attributable to equity holders of the Company   6,276    67%   7,353    66%
Non-controlling interests   1,722    18%   2,071    19%
Current assets   2,605    28%   3,792    34%
Investment in associate   1,965    21%   2,336    21%
Property, plant and equipment, net   70    1%   72    1%
Intangible assets, net   4,740    51%   4,886    44%
Current liabilities   1,369    15%   1,649    15%
Non-current liabilities   13    0%   13    0%

 

A-6
 

Explanations for the developments in items in the statement of financial position:

 

Equity

 

The Company's equity as of June 30, 2013 (including non-controlling interests) was approximately $7,998,000. Equity attributable to equity holders of the Company as of June 30, 2013 totaled $6,276,000, a decrease of approximately $1,077,000 from December 31, 2012, representing about 67% of total balance sheet compared to 66% of total balance sheet as of December 31, 2012. The decrease in equity attributable to equity holders of the Company is mainly a result of the loss for the period (offset by share-based payment expenses).

 

The balance of non-controlling interests as of June 30, 2013 was approximately $1,722,000, representing the other shareholdings in InterCure compared to $2,071,000 as of December 31, 2012. The decrease is mainly a result of the loss for the period (offset by share-based payment expenses) and the increase in the Company's stake in InterCure following the conversion of the loan that had been extended to InterCure according to the acquisition agreement. As of June 30, 2013, the Company holds about 54.72% of InterCure's issued and outstanding share capital (see more details in section 1.1 above).

 

Assets

 

The Group's total current assets as of June 30, 2013 amounted to approximately $2,605,000, a decrease of approximately $1,187,000, compared to approximately $3,792,000 as of December 31, 2012. The change is primarily a result of a decrease in the Group's balances of cash and short-term deposits which totaled approximately $2,053,000 as of June 30, 2013, a decrease of approximately $1,259,000 compared to the balances of cash and short-term deposits totaling approximately $3,312,000 as of December 31, 2012. This decrease is mainly a result of the Group's current operations. The balances of cash and short-term deposits as of June 30, 2013, excluding InterCure, totaled approximately $1,678,000, a decrease of approximately $668,000 compared to the balance as of December 31, 2012, which is mainly explained by the cash flows used in operating activities.

 

The carrying amount of trade receivables as of June 30, 2013 was approximately $97,000 compared to approximately $76,000 as of December 31, 2012. The balance arises from InterCure's trade receivables.

 

The balance of trade receivables mainly arises from sales to UK and U.S. chains. The Company's current standard payment terms for retail distribution channels are 30 credit days and 3-5 days for direct sale channels.

 

A-7
 

The carrying amount of inventories as of June 30, 2013 totaled approximately $265,000 compared to approximately $229,000 as of December 31, 2012. The increase in inventories is principally explained by the fact that until the date of completing InterCure's debt refinancing and the transaction with the Company and Medica Fund as described above, InterCure held minimal inventory levels based on its limited financial resources prior to the debt refinancing.

 

The carrying amount of other accounts receivable in the statement of financial position as of June 30, 2013 totaled approximately $168,000 (approximately $114,000 excluding InterCure) compared to approximately $153,000 as of December 31, 2012 (approximately $117,000 excluding InterCure) with no material change. The balance mainly includes Government authorities and prepaid expenses.

 

The investment in an associate includes the Company's investment in Proteologics. As of June 30, 2013, the investment totaled approximately $1,965,000 compared to approximately $2,336,000 as of December 31, 2012. The investment is recorded in the Company's books under the equity method. During the period, the Company recorded equity losses from the investment in an associate totaling approximately $449,000, offset by an increase in the investment from foreign currency translation differences of foreign operations of approximately $68,000.

 

Property, plant and equipment as of June 30, 2013 totaled approximately $70,000 (approximately $34,000 excluding InterCure) compared to approximately $72,000 as of December 31, 2012 (approximately $31,000 excluding InterCure) with no material change.

 

The carrying amount of intangible assets as of June 30, 2013 was approximately $4,740,000 compared to approximately $4,886,000 on December 31, 2012. The balance comprises the license for the exclusive use of the rHuEPO drug patent for treating Multiple Myeloma and the related knowhow and studies underlying the patent in a total of approximately $2,265,000, in addition to transaction costs of approximately $187,000. The balance also includes technology totaling approximately $1,711,000 and brand name totaling approximately $443,000 from the InterCure acquisition transaction of July 2012. The change in the carrying amount as of June 30, 2013 compared to December 31, 2012 arises mainly from the current amortization of said technology and brand name.

 

Current liabilities

 

The carrying amount of current liabilities as of June 30, 2013 totaled approximately $1,369,000 (approximately $594,000 excluding InterCure), compared to approximately $1,649,000 as of December 31, 2012 (approximately $757,000 excluding InterCure). The decrease is primarily a result of the repayment of liabilities to professional service providers and the payment of grants to officers for the capital raising of 2012.

 

A-8
 

 

1.3.2Analysis of the operating results

 

Condensed statements of income (U.S. dollars in thousands)

 

In the first half of 2012, the Company did not include the results of InterCure whose results have only been consolidated in the Group's financial statements starting from the acquisition date, i.e. the third quarter of 2012.

 

   Six months ended
June 30,
   Three months ended
June 30,
   Year ended December 31, 
   2013   2012   2013   2012   2012 
   $000 
                     
Revenues   1,185    -    512    -    938 
Cost of sales   (387)   -    (188)   -    (380)
                          
Gross profit   798    -    324    -    558 
                          
Research and development expenses   (43)   (43)   (25)   (26)   (99)
Selling and marketing expenses   (1,294)   -    (608)   -    (848)
General and administrative expenses   (1,394)   (975)   (694)   (591)   (2,769)
Other gains, net   10    -    3    -    802 
                          
Operating loss   (1,923)   (1,018)   (1,000)   (617)   (2,356)
                          
Finance income (expenses), net   26    (26)   15    (58)   45 
                          
Earnings (losses) from investment in associate   (449)   -    (259)   -    569 
                          
Loss for the period   (2,346)   (1,044)   (1,244)   (675)   (1,742)
                          
Other comprehensive income:                         
Foreign currency translation differences   68    -    17    -    114 
                          
Total other comprehensive income   68    -    17    -    114 
                          
Total comprehensive loss for the period   (2,278)   (1,044)   (1,227)   (675)   (1,628)
                          
Loss for the period attributable to:                         
Equity holders of the Company   (1,875)   (1,044)   (1,003)   (675)   (1,390)
Non-controlling interests   (471)   -    (241)   -    (352)
                          
Total loss for the period   (2,346)   (1,044)   (1,244)   (675)   (1,742)
                          
Total comprehensive loss for the period attributable to:                         
Equity holders of the Company   (1,807)   (1,044)   (986)   (675)   (1,276)
Non-controlling interests   (471)   -    (241)   -    (352)
                          
Total comprehensive loss for the period   (2,278)   (1,044)   (1,227)   (675)   (1,628)

 

A-9
 

Revenues

 

The Company's sales in the six and three months ended June 30, 2013 totaled approximately $ 1,185,000 and approximately $ 512,000, respectively. These sales originated from InterCure, whose majority of revenues are from sales to customers in the online markets. In the first quarter of 2013, sales in InterCure totaled approximately $ 673,000.

 

Gross profit

 

Gross profit in the six and three months ended June 30, 2013 totaled approximately $ 798,000 and approximately $ 324,000, respectively (approximately $ 903,000 and approximately $ 376,000 excluding amortization of excess cost in the transaction, respectively).

 

Cost of sales in the six and three months ended June 30, 2013 includes amortization of excess cost attributable to technology identified in the acquisition and totaled approximately $ 105,000 and approximately $ 53,000, respectively.

 

Research and development expenses

 

Research and development expenses in the six and three months ended June 30, 2013 totaled approximately $43,000 and approximately $25,000, respectively, similarly to the corresponding periods of previous year. Research and development expenses comprise mainly medical regulation costs, clinical insurance expenses and other medical consulting costs. Research and development expenses attributable to InterCure in the six and three months ended June 30, 2013 totaled approximately $19,000 and approximately $11,000, respectively.

 

A-10
 

 

Selling and marketing expenses

 

Selling and marketing expenses in the six and three months ended June 30, 2013 totaled approximately $1,294,000 and approximately $608,000, respectively, originating entirely from InterCure. Selling and marketing expenses include advertising expenses (mainly media expenses) of approximately $560,000 and approximately $239,000, respectively, in the six and three months ended June 30, 2013, compared to a gross profit of approximately $903,000 and approximately $376,000, respectively (less amortization of excess cost), which represents an average contribution (gross profit less direct/online advertising costs divided by direct/online advertising expenses) of about 61% and 57%, respectively. These expenses also include expenses in respect of share-based payments to InterCure's service providers of approximately $296,000 and approximately $159,000, respectively.

 

General and administrative expenses

 

General and administrative expenses in the six and three months ended June 30, 2013 totaled approximately $1,394,000 and approximately $694,000, respectively, compared to approximately $975,000 and approximately $591,000 in the corresponding periods of last year, respectively. General and administrative expenses in said periods excluding InterCure totaled $1,036,000 and approximately $510,000, respectively. The increase in general and administrative expenses (excluding expenses attributable to InterCure) in relation to the corresponding periods of last year is principally explained by the increase in share-based payments to employees and directors in respect of which the expenses in the period are recorded according to the Black and Scholes model and the staircase method so that the expense is higher in initial periods and offset by grants to employees in connection with the capital raising in the corresponding periods of last year. Moreover, general and administrative expenses attributable to InterCure in said periods totaled approximately $358,000 and approximately $184,000, respectively, and consist mainly of salaries, professional services, patent maintenance and share-based payment to directors and employees.

 

Other gains, net

 

In the six and three months ended June 30, 2013, other gains were recorded totaling approximately $10,000 and approximately $3,000, respectively. These gains arise from the exercise and expiration of stock options in Proteologics during the reporting period.

A-11
 

 

Finance income (expenses), net

 

Finance income, net in the six and three months ended June 30, 2013 totaled approximately $26,000 thousand and approximately $15,000, respectively, compared to finance expenses, net of approximately $26,000 and approximately $58,000, respectively, in the corresponding periods of last year. The increase in finance income derives mainly from exchange rate gains originating from the revaluation of the NIS in relation to the U.S. dollar in respect of balances of NIS financial assets, net.

 

Losses from investment in associate

 

In the six and three months ended June 30, 2013, the Company incurred losses from the investment in Proteologics, recorded under the equity method, totaling approximately $449,000 and approximately $259,000, respectively. As of June 30, 2013, the Company holds about 30.82% of Proteologics' issued and outstanding share capital. In said periods, Proteologics recorded losses totaling approximately NIS 4,928 thousand and approximately NIS 2,961 thousand (approximately $1,347,000 and approximately $816,000), respectively (excluding amortization of excess cost totaling approximately $103,000 and approximately $21,000, respectively). 

 

Taxes on income

 

The Group did not record taxes on income or tax benefits in the reporting period or in the corresponding period of last year.

 

Loss and comprehensive loss for the period

 

The loss attributable to equity holders of the Company in the six and three months ended June 30, 2013 totaled approximately $1,875,000 and approximately $1,003,000, respectively, compared to approximately $1,044,000 and approximately $675,000 in the corresponding periods of last year, respectively. The increase in loss compared to the corresponding periods of last year is mainly explained by the loss from InterCure and equity losses from the investment in Proteologics which had both been acquired in the second half of 2012.

 

The comprehensive loss attributable to equity holders of the Company in the six and three months ended June 30, 2013 totaled approximately $1,807,000 and approximately $986,000, respectively, compared to approximately $1,044,000 and approximately $675,000 in the corresponding periods of last year, respectively. The Company's comprehensive loss includes the effect of foreign currency translation differences from the investment in Proteologics whose functional currency is the NIS.

 

A-12
 

Basic and diluted loss per share in the reporting period amounted to approximately $ 0.008 compared to $ 0.005 in the corresponding period of last year.

 

Cash flows

 

Cash flows used in operating activities in the six and three months ended June 30, 2013 totaled approximately $1,221,000 and approximately $668,000, respectively, compared to cash flows used in operating activities of approximately $627,000 and approximately $344,000 in the corresponding periods of last year, respectively. InterCure's share in the cash flows used in operating activities in said periods totaled approximately $516,000 and approximately $314,000, respectively. Cash flows used in the Group's operating activities in the reporting period excluding InterCure totaled approximately $705,000. The increase compared to the corresponding period of last year mainly arises from payments made in the period to professional service providers and the payment of grants to officers in connection with the capital raising round of 2012.

 

Cash flows provided by (used in) investing activities in the six and three months ended June 30, 2013 totaled approximately $499,000 and approximately $(3,000), respectively, compared to cash flows used in investing activities of approximately $640,000 and approximately $1,621,000 in the corresponding periods of last year, respectively. The changes between the periods mostly reflect the movement in short-term deposits in the periods.

 

Cash flows provided by financing activities in the six and three months ended June 30, 2013 totaled approximately $18,000 and approximately $9,000, respectively, originating from the exercise of warrants (series 2) and non-marketable options in said periods. Cash flows provided by financing activities in the corresponding periods of last year totaled approximately $3,806,000 and approximately $36,000, respectively, originating from the private placement of March 2012 and the exercise of warrants (series 2).

A-13
 

 

Financing resources

 

The Group's income from operations at this stage derives solely from InterCure, the subsidiary. The Group finances its R&D operations from raising capital, its own capital and from current credit from suppliers and service providers. As of June 30, 2013, the Group's balance of cash and cash equivalents and short-term deposits amounted to approximately $2,053,000 (approximately $1,678,000 excluding cash in InterCure). In the six months ended June 30, 2013, warrants (series 2) were exercised for an exercise increment of approximately $9,000 (see 1.2.3 above) and non-marketable stock options were exercised for an exercise increment of approximately $9,000 (see 1.2.4 above).

 

1.3.3Pro forma financial statements

 

In conformity with the provisions of Regulation 38b to the Israeli Securities Regulations (Periodic and Immediate Reports), 1970, the Company prepared pro forma financial statements. The pro forma financial statements have been presented in order to reflect the Group's operating results had the InterCure acquisition transaction been completed on January 1, 2012. See more details about pro forma data in the pro forma financial statements.

A-14
 

 

2.PART 2 - EXPOSURE TO MARKET RISKS AND THEIR MANAGEMENT

 

2.1Exposure to market risks and their management

 

a.The person responsible for managing market risks in the Group according to Board policy is Ronen Twito, the Company's Deputy CEO and CFO.

 

b.Description of the market risks to which the Group is exposed - the Group's activities expose it to a variety of market risks including the changes in the exchange rates of the NIS in relation to the U.S. dollar (the Group's functional currency).

 

c.The policy of the Group in managing market risks - on March 29, 2012, the Board determined that the Company's management is authorized to act, from time to time, to hold NIS at an amount sufficient for the repayment of NIS-denominated liabilities on a timely basis, for a consecutive period of nine to twelve months each time. InterCure's Board decided to invest the majority of cash balances in InterCure in short-term dollar-linked deposits and the remaining cash balances in NIS deposits.

 

d.Supervision of risk management policy - the Group identifies and assesses the principal risks facing it. The financial risks management is performed by the Group subject to the policy approved by the Company's Board.

 

2.1.1Exchange rate risk

 

Most of the Group's revenues and expenses are denominated in U.S. dollars and partly in British Pound against which the Group holds its available liquid resources in or linked to dollars. Nevertheless, in respect of some of the expenses which are denominated in NIS and create exposure to the changes in the exchange rate of the NIS in relation to the dollar, the Group holds part of its liquid resources in NIS, based on the decision of the Board as above, in order to minimize the currency risk.

 

As a hedge against economic exposure, which does not significantly contradict the accounting exposure, the Company holds the majority of its current assets in or linked to dollar.

A-15
 

 

2.1.2Risks arising from changes in the economic environment and the global financial crisis

 

In recent years, the world has experienced several events both in the political-security realm and in the economic realm which have shaken the international markets in general and the Israeli market in particular. In the second quarter of 2013, the tensions in Israel's southern and northern borders persisted in the backdrop of the civil war in Syria, the coup in Egypt (which was also expressed by terrorist attacks out of the Sinai border) as well as the continuing tensions arising from Iran's pursuit of its nuclear plan. These factors are liable to harm growth and the market's activity and stability.

 

As for the global economic crisis which has been felt for the last few years, during the last two years, the European economy showed signs of deterioration as reflected, among others, by lowering the credit rating of several countries in the Eurozone by international rating agencies including France, Spain, Italy, Ireland, Greece, Portugal, Belgium, Cyprus and Slovenia. This credit downgrading has led to the resignation of prime ministers in some of those countries after having been asked to implement extensive budget cuts.

 

The Group's management estimates that since the Group's investment policy is to invest only in bank deposits in currencies that are used for its current needs (U.S. dollar, which is the Group's functional currency and NIS - based on its needs and the Board's decision), it is not directly exposed to changes in the market prices of quoted securities.

 

Also, since the Group is in development stages and has no revenues from operations at this stage (excluding InterCure) and its expense budget relies on several suppliers and service providers, the events described above have relatively low impact on its results, compared to product sales companies. Nevertheless, since the Group funds its operations mainly from its own equity, as above, the events described above could have a significant effect on the Group's ability to raise funds in the future in order to finance its plans and activity, which will require the Company to minimize its activities, sell or grant a sublicense to third parties to use all or part of its technologies in order to support its operations (see Note 1b to the annual consolidated financial statements).

 

As for InterCure, the financial crisis in the main markets of the U.S. and the UK continues to significantly affect InterCure. The developments and crises in the markets in general and particularly the economic slowdown, reduced consumer spending and decrease in the Consumer Confidence Index are all liable to adversely affect InterCure's business results, available cash flows, value of assets, business position, financial covenants, ability to distribute dividends and ability to raise financial resources, if needed, as well as the financing terms of such raising.

A-16
 

 

Report of linkage bases

 

Linkage basis of balance sheet items as of June 30, 2013

 

   U.S.$   NIS   Other currencies   Non-monetary   Total 
   $000 
Assets:                         
Cash and cash equivalents   645    322    28    -    995 
Short-term deposits   503    555    -    -    1,058 
Trade receivables   66    2    29    -    97 
Other accounts receivable   -    116    -    52    168 
Restricted deposits   -    22    -    -    22 
Inventories   -    -    -    265    265 
                          
    1,214    1,017    57    317    2,605 
Liabilities:                         
Trade payables   330    329    3    -    662 
Other accounts payable   399    228    -    80    707 
Employee benefit liabilities   -    -    -    13    13 
                          
    729    557    3    93    1,382 
                          
Monetary assets less monetary liabilities   485    460    54    224    1,223 

 

Linkage basis of balance sheet items as of June 30, 2012

 

   U.S.$   NIS   Other currencies   Non-monetary   Total 
   $000 
Assets:                         
Cash and cash equivalents   1,232    1,393    1    -    2,626 
Short-term deposits   2,004    -    -    -    2,004 
Accounts receivable   37    51    -    21    109 
Restricted deposits   -    20    -    -    20 
                          
    3,273    1,464    1    21    4,759 
Liabilities:                         
Trade payables   119    19    1    -    139 
Other accounts payable   296    306    -    -    602 
                          
    415    325    1    -    741 
                          
Monetary assets less monetary liabilities   2,858    1,139    -    21    4,018 

 

A-17
 

 

2.2Sensitivity analysis

 

Reporting on the exposure to financial risks

 

Sensitivity to changes in the exchange rate of the dollar in relation to the NIS

 

   Gain (loss) from changes       Gain (loss) from changes 
   +10%   +5%   30.6.2013   -5%   -10% 
   $000 
                     
Cash and cash equivalents   32    16    322    (16)   (32)
Short-term deposits   56    28    555    (28)   (56)
Trade receivables   -    -    2    -    - 
Other accounts receivable   12    6    116    (6)   (12)
Short-term restricted deposits   2    1    22    (1)   (2)
Trade payables   (33)   (16)   (329)   16    33 
Other accounts payable   (23)   (11)   (228)   11    23 
                          
Exposure in the linkage balance sheet   46    24    460    (24)   (46)

 

A-18
 

 

3.PART 3 - CORPORATE GOVERNANCE ASPECTS

 

3.1Policy of granting donations

 

As of the reporting date, the Company did not determine a policy on granting donations and during the reporting period the Company did not make any donations.

 

3.2The Company's internal auditor

 

There was no material modification to the data pertaining to the Company's internal auditor as it was shown in the Company's periodic report for the year ended December 31, 2012.

 

3.3The Company's Board

 

3.3.1In the reporting period, eight meetings of the Board were held and three meetings of the committee that examines the financial statements/the audit committee.

 

3.3.2There was no material modification to the data pertaining to directors with accounting and financial qualifications as it was shown in the Company's periodic report for the year ended December 31, 2012.

 

3.3.3The Company did not adopt in its articles a provision regarding the tenure of independent directors.

 

3.4The Company's auditor

 

There was no material modification to the data pertaining to the Company's auditor as it was shown in the Company's periodic report for the year ended December 31, 2012.

 

3.5Disclosure of the financial statements approval process

 

The Company's Board transferred the overall responsibility to the financial statements to the members of the audit committee as the committee that examines the financial statements. Below are the names and details of the members of the committee that examines the financial statements:

 

Chairman of the committee - Mr. Jaron Diament, external director, expert in accounting and financing.

 

Mrs. Dafna Cohen - external director, expert in accounting and financing.

 

Mr. Marc Allouche - director, expert in accounting and financing.

A-19
 

 

As for details of their qualifications, education, experience and knowledge, see chapter D, Regulation 26 to the periodic report of 2012.

 

After being nominated, the committee's members gave the Company a declaration pursuant to the provisions of article 3 to the Companies Regulations (Directives and Conditions for Approving Financial Statements), 2010 as to having accounting and financing qualifications in accordance with the Companies Regulations (Conditions and Tests of Director with Accounting and Financing Qualification and Director with Professional Qualification), 2005.

 

Several days before the meeting of the committee, the Company's draft consolidated financial statements, draft report on the description of the corporation's business, draft directors' report, draft report on separate financial information and draft report on the effectiveness of internal control over financial reporting and disclosure are delivered to the members of the committee.

 

The meeting of the committee that examines the financial statements, which was held on August 25, 2013, was also attended, besides the members of the committee, by the Company's CEO, Mr. David Grossman, the Deputy CEO and CFO, Mr. Ronen Twito, the Company's legal consultants, Attorney Ronen Kantor and Attorney Ron Soulema, and representatives of the Company's auditors (Kesselman & Kesselman, CPAs), CPA Ido Heller and CPA Tziona Edri.

 

At the meeting of the committee in which the financial statements are discussed, the Company's CEO and Deputy CEO and CFO review in a detailed manner the key points of the financial statements, the Company's financial results, financial position and cash flows. This presentation comprises an analytical analysis and it gives details of the composition of and movement in material items and a comparison is made to previous periods.

 

In the meeting, a discussion is held on the issue of estimates and judgments made in connection with the preparation of the financial statements as well as valuations used in the preparation of the financial statements and internal controls over financial reporting. In the framework of the discussion, the auditors give their reference to the audit procedure and to the data in the financial statements. Also, the Company's CEO and Deputy CEO and CFO review significant transactions that were carried out and any changes that occurred in the Company during the reporting period compared to corresponding periods presented. In this framework, a discussion is held during which the members of the committee raise questions regarding the financial statements.

 

In the framework of the discussion, the committee forms its recommendation to the Board about the estimates and judgments made in connection with the financial statements, internal controls over financial reporting, overall financial statements disclosures and appropriateness, accounting policies adopted and the accounting treatment applied to the Company's material issues, valuations and impairment losses of assets, including the assumptions and estimates used to support the data in the financial statements.

A-20
 

 

The committee that examines the financial statements transferred its recommendations to approve the financial statements to the Board's members. The members of the Company's Board believe that the recommendations of the committee that examines the financial statements have been transferred a reasonable amount of time before the discussion, considering the scope and complexity of the recommendations. The Company's Board stated that a two-day difference between the meeting of the committee in the issue of the Company's financial statements as of June 30, 2013 and the meeting of the Company's Board in the issue of their approval would be considered a reasonable amount of time.

 

On August 29, 2013, after it was made clear that the financial statements reflect properly the financial position of the Company and its operating results, the Company's Board approved the financial statements of the Company as of June 30, 2013 in the presence of the following directors: Amit Yonay (Chairman of the Board), Dafna Cohen, Jaron Diament, Marc Allouche and David Grossman.

A-21
 

 

4.PART 4 - THE CORPORATION'S FINANCIAL REPORTING

 

4.1Significant events after the reporting date

 

4.1.1Listing for trade on the NASDAQ - on July 10, 2013, the Company's management received a notice from the NASDAQ's representatives stating that the admission committee had approved the Company's application to relist its ADRs for trade on the NASDAQ. Accordingly, on July 15, 2013, the Company's ADRs began trading on the NASDAQ.

 

4.1.2Appointing a CFO in InterCure - CPA Uri Ben-Or - on July 11, 2013, InterCure appointed CPA Uri Ben-Or as CFO.

 

4.1.3On July 17, 2013, InterCure announced that it had reached a settlement with Mr. Gavish and Dr. Gavish in connection with the amendment of the license agreement. According to the amendment, Yazmonit will not be able to market its products under InterCure's RESPeRATE ™ brand name and trademark.

 

4.1.4Blind trust agreement signed by InterCure for the sale of the Company's shares held by it - on July 22, 2013, InterCure announced that it had entered into a blind trust agreement with S.G.S. Trusts Ltd. for the gradual sale of the Company's shares over a period of two years and subject to the terms defined by the InterCure's Board. These shares had been allocated to InterCure in the debt refinancing agreement signed by InterCure with its creditors on July 25, 2012 pursuant to which the Company acquired control over InterCure.

 

4.1.5Exercise of warrants - on July 31, 2013, holders of warrants (series 2) of the Company exercised 30,000 warrants (series 2) into 30,000 Ordinary shares of NIS 0.1 par value each in consideration of an average exercise increment of approximately NIS 0.99 per warrant. The proceeds from the exercise of the warrants (series 2) totaled approximately $8,000.

 

4.1.6Exercise of warrants - on August 12, 2013, holders of the Company's warrants (series 2) exercised 24,889 warrants (series 2) into 24,889 Ordinary shares of NIS 0.1 par value each for an average exercise increment of NIS 0.98 per warrant. The overall proceeds from the exercise of the warrants (series 2) totaled approximately $7,000.
A-22
 

 

4.1.7On August 15, 2013, the general meeting of InterCure's shareholders approved the following issues:

 

4.1.7.1Approval of the remuneration offered to InterCure's new CEO, Mr. Ofer Gilboa, through a company that is wholly controlled by him, including the grant of a letter of exemption and indemnification and the inclusion of Mr. Gilboa in InterCure's officers' and directors' liability insurance policy.

 

4.1.7.2Approval of a change in the exercise increment of non-marketable stock options that had been granted to employees and officers in InterCure, including directors in InterCure who act as officers (or directors) in the Company (see also 4.1.8 below).

 

4.1.7.3Approval of a change in the terms of the options previously granted to InterCure's former CEO, Mr. Ronen Twito, who acts as the Company's CFO and Deputy CEO (see also 4.1.8 below).

 

4.1.8Changing the terms of the stock options granted to employees and officers in InterCure and to InterCure's former CEO - on August 15, 2013, following the approval of the Board of June 26, 2013, the general meeting of InterCure's shareholders approved a change in the exercise increment of 1,238,333 non-marketable stock options granted to employees and officers in InterCure, including directors in InterCure who act as officers in the Company, from an amount of $ 0.15 (54 Agorot) per stock option to an amount equivalent to 10% above the average price of InterCure's share on the TASE in the three trading days that preceded the date of the Board's decision, namely $ 0.063 (22.73 Agorot). The general meeting also approved a change in the terms of the options previously granted to InterCure's former CEO, Mr. Ronen Twito, who acts as the Company's CFO and Deputy CEO. The total economic value of the change in the option terms as above according to the Black and Scholes model pursuant to the provisions of IFRS 2 as of the date of the Board's approval approximates $12,000.

 

4.1.9On August 19, 2013, Dr. Ben-Zion Weiner resigned from the board of directors of the Company. Dr. Weiner did however notify the Company that he would favorably consider joining the Company's Scientific Advisory Board if so requested.

 

4.1.10

On August 22, 2013, Proteologics announced that following discussions on its development strategy, Proteologics' Board of Directors reached the following resolutions: 1. to seek out potential buyers for Proteologics' operations in the Ubiquitin field, being Proteologics' main operating field, in light of the fact that said Ubiquitin products are still in early development stages, and in light of the Board's estimate that current monetary resources are insufficient to bring these products to a significant milestone; 2. to immediately devise a plan of action under the Board's resolution. In addition, the Board has appointed a sub-committee to consider alternative operations for Proteologics. Upon realizing said resolutions, Proteologics shall remain without significant business operations, and accordingly, shall not continue to operate as a going concern. As of the date of approval of the financial statements, the Company estimates that the aforementioned resolutions will bear no material adverse effect on the value of the Company's investment in Proteologics.

 

Critical accounting estimates

 

There was no material modification to the critical accounting estimates as it was shown in the Company's periodic report for the year ended December 31, 2012.

 

August 29 2013        
Date   Amit Yonay, Chairman of the Board   David Grossman, CEO and Director

 

 

A-23
 

 

 

 XTL BIOPHARMACEUTICALS LTD.

 

INTERIM FINANCIAL INFORMATION

  

AS OF JUNE 30, 2013

 

UNAUDITED

 

 

INDEX

 

 

  Page
   
Auditors' Review Report 2
   
Condensed Consolidated Financial Statements - in U.S. dollars:  
   
Condensed Consolidated Statements of Financial Position 3 - 4
   
Condensed Consolidated Statements of Comprehensive Loss 5
   
Condensed Consolidated Statements of Changes in Equity 6 - 10
   
Condensed Consolidated Statements of Cash Flows 11 - 13
   
Notes to Financial Statements 14 - 26

 

 

- - - - - - - - - - - -

 
 

 

 

  

Auditors' review Report to the shareholders of XTL Biopharmaceuticals Ltd.

 

Introduction

 

We have reviewed the accompanying financial information of XTL Biopharmaceuticals Ltd (hereafter - the company) and its subsidiaries, which includes the condensed consolidated statement of financial position as of June 30, 2013 and the related condensed consolidated statement of comprehensive loss, changes in shareholders' equity, and cash flows for the six and three month periods 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.

 

Tel-Aviv, Israel
August 29, 2013
Kesselman & Kesselman
Certified Public Accountants (Isr.)
A member firm of PricewaterhouseCoopers International Limited

 

B-2
 

XTL BIOPHARMACEUTICALS LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

 

   June 30,   December 31, 
   2013   2012   2012 
   Unaudited   Audited 
   U.S. dollars in thousands 
             
ASSETS               
                
CURRENT ASSETS:               
Cash and cash equivalents   995    2,626    1,696 
Short-term deposits   1,058    2,004    1,616 
Trade receivables   97    -    76 
Other accounts receivable   168    109    153 
Restricted deposits   22    20    22 
Inventories   265    -    229 
                
    2,605    4,759    3,792 
                
NON-CURRENT ASSETS:               
Investment in associate   1,965    -    2,336 
Property, plant and equipment, net   70    31    72 
Intangible assets, net   4,740    2,457    4,886 
                
    6,775    2,488    7,294 
                
Total assets   9,380    7,247    11,086 

 

 

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

B-3
 

XTL BIOPHARMACEUTICALS LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

 

   June 30,   December 31, 
   2013   2012   2012 
   Unaudited   Audited 
   U.S. dollars in thousands 
             
LIABILITIES AND EQUITY               
                
CURRENT LIABILITIES:               
Trade payables   662    139    743 
Other accounts payable   707    602    906 
                
    1,369    741    1,649 
                
NON-CURRENT LIABILITIES:               
Employee benefit liabilities   13    -    13 
                
    13    -    13 
                
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:               
Ordinary share capital   6,001    5,777    5,997 
Share premium and options   147,489    144,749    147,475 
Accumulated deficit   (144,935)   (144,020)   (143,560)
Treasury shares   (2,469)   -    (2,469)
Foreign currency translation adjustments of foreign operations   181    -    114 
Reserve from transactions with non-controlling interests   9    -    (204)
                
    6,276    6,506    7,353 
Non-controlling interests   1,722    -    2,071 
                
Total equity   7,998    6,506    9,424 
                
Total liabilities and equity   9,380    7,247    11,086 

 

 

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

 

         
Amit Yonay   David Grossman   Ronen Twito
Chairman of the Board   Director and CEO   Deputy CEO and CFO

 

 

Date of approval of the financial statements by the Company's Board: August 29, 2013.

B-4
 

XTL BIOPHARMACEUTICALS LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

 

   Six months ended
June 30,
   Three months ended
June 30,
   Year ended
December 31,
 
   2013   2012   2013   2012   2012 
   Unaudited   Audited 
   U.S. dollars in thousands (except per share data) 
                     
Revenues   1,185    -    512    -    938 
Cost of sales   (387)   -    (188)   -    (380)
                          
Gross profit   798    -    324    -    558 
                          
Research and development expenses   (43)   (43)   (25)   (26)   (99)
Selling and marketing expenses   (1,294)   -    (608)   -    (848)
General and administrative expenses   (1,394)   (975)   (694)   (591)   (2,769)
Other gains, net   10    -    3    -    802 
                          
Operating loss   (1,923)   (1,018)   (1,000)   (617)   (2,356)
                          
Finance income   39    16    18    (17)   60 
Finance expenses   (13)   (42)   (3)   (41)   (15)
                          
Finance income (expenses), net   26    (26)   15    (58)   45 
                          
Earnings (losses) from investment in associate   (449)   -    (259)   -    569 
                          
Loss for the period   (2,346)   (1,044)   (1,244)   (675)   (1,742)
                          
Other comprehensive income:                         
Item which can be classified to profit or loss:                         
Foreign currency translation differences   68    -    17    -    114 
                          
Total other comprehensive income   68    -    17    -    114 
                          
Total comprehensive loss for the period   (2,278)   (1,044)   (1,227)   (675)   (1,628)
                          
Loss for the period attributable to:                         
Equity holders of the Company   (1,875)   (1,044)   (1,003)   (675)   (1,390)
Non-controlling interests   (471)   -    (241)   -    (352)
                          
    (2,346)   (1,044)   (1,244)   (675)   (1,742)
Total comprehensive loss for the period attributable to:                         
Equity holders of the Company   (1,807)   (1,044)   (986)   (675)   (1,276)
Non-controlling interests   (471)   -    (241)   -    (352)
                          
    (2,278)   (1,044)   (1,227)   (675)   (1,628)
                          
Basic and diluted loss per share (in U.S. dollars)   (0.008)   (0.005)   (0.004)   (0.003)   (0.006)

 

 

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

B-5
 

XTL BIOPHARMACEUTICALS LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

   Six months ended June 30, 2013 
   Attributable to equity holders of the Company         
   Share
capital
  

Share

premium and options

  

Accumulated

deficit

  

Treasury

shares

  

Foreign

currency translation adjustments of foreign

operations

   Reserve from transactions with non-controlling interests   Total   Non-controlling interests   Total
equity
 
   U.S. dollars in thousands 
                                     
Balance as of January 1, 2013 (audited)   5,997    147,475    (143,560)   (2,469)   114    (204)   7,353    2,071    9,424 
                                              
Loss for the period   -    -    (1,875)   -    -    -    (1,875)   (471)   (2,346)
Other comprehensive income   -    -    -    -    68    -    68         68 
                                              
Total comprehensive loss   -    -    (1,875)   -    68    -    (1,807)   (471)   (2,278)
                                              
Share-based payment to employees and others   -    -    500    -    -    -    500    335    835 
Conversion of convertible loan into capital in subsidiary   -    -    -    -    -    213    213    (213)   - 
Exercise and expiration of stock options in associate   -    -    -    -    (1)   -    (1)   -    (1)
Exercise of warrants and stock options into shares   4    14    -    -    -    -    18    -    18 
                                              
Balance as of June 30, 2013 (unaudited)   6,001    147,489    (144,935)   (2,469)   181    9    6,276    1,722    7,998 
                                              

 

 

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

B-6
 

XTL BIOPHARMACEUTICALS LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

   Six months ended June 30, 2012 
   Attributable to equity holders of the Company         
   Share
capital
  

Share

premium and options

  

Accumulated

deficit

   Treasury shares  

Foreign

currency

translation adjustments of

foreign

operations

   Reserve from transactions with non-controlling interests   Total   Non-controlling interests   Total
equity
 
   U.S. dollars in thousands 
                                     
Balance as of January 1, 2012 (audited)   5,335    141,385    (143,276)   -    -    -    3,444    -    3,444 
                                              
Loss for the period   -    -    (1,044)   -    -    -    (1,044)   -    (1,044)
Other comprehensive income   -    -    -    -    -    -    -    -    - 
                                              
Total comprehensive loss   -    -    (1,044)   -    -    -    (1,044)   -    (1,044)
                                              
Share-based payment to employees and others   -    -    300    -    -    -    300    -    300 
Issuance of shares and options   309    2,109    -    -    -    -    2,418    -    2,418 
Exercise of warrants and stock options into shares   133    1,255    -    -    -    -    1,388    -    1,388 
                                              
Balance as of June 30, 2012 (unaudited)   5,777    144,749    (144,020)   -    -    -    6,506    -    6,506 

 

 

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

B-7
 

XTL BIOPHARMACEUTICALS LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

   Three months ended June 30, 2013 
   Attributable to equity holders of the Company         
   Share
capital
  

Share

premium and options

  

Accumulated

deficit

  

Treasury

shares

  

Foreign

currency translation adjustments of foreign

operations

   Reserve from transactions with non-controlling interests   Total   Non-controlling interests   Total
equity
 
   U.S. dollars in thousands 
                                     
Balance as of April 1, 2013 (unaudited)   5,998    147,483    (144,146)   (2,469)   164    (204)   6,826    2,001    8,827 
                                              
Loss for the period   -    -    (1,003)   -    -    -    (1,003)   (241)   (1,244)
Other comprehensive income   -    -    -    -    17    -    17    -    17 
                                              
Total comprehensive loss   -    -    (1,003)   -    17    -    (986)   (241)   (1,227)
                                              
Share-based payment to employees and others   -    -    214    -    -    -    214    175    389 
Conversion of convertible loan into capital in subsidiary   -    -    -    -    -    213    213    (213)   - 
Exercise of warrants and stock options into shares   3    6    -    -    -    -    9    -    9 
                                              
Balance as of June 30, 2013 (unaudited)   6,001    147,489    (144,935)   (2,469)   181    9    6,276    1,722    7,998 

 

 

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

B-8
 

XTL BIOPHARMACEUTICALS LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

   Three months ended June 30, 2012 
   Attributable to equity holders of the Company         
   Share
capital
  

Share

premium and options

  

Accumulated

deficit

  

Treasury

shares

  

Foreign

currency

translation adjustments of

foreign

operations

   Reserve from transactions with non-controlling interests   Total   Non-controlling interests   Total
equity
 
   U.S. dollars in thousands 
                                     
Balance as of April 1, 2012 (unaudited)   5,772    144,699    (143,609)   -    -    -    6,862    -    6,862 
                                              
Loss for the period   -    -    (675)   -    -    -    (675)   -    (675)
Other comprehensive income   -    -    -    -    -    -    -    -    - 
                                              
Total comprehensive loss   -    -    (675)   -    -    -    (675)   -    (675)
                                              
Share-based payment to employees and others   -    -    264    -    -    -    264    -    264 
Exercise of warrants and stock options into shares   5    50    -    -    -    -    55    -    55 
                                              
Balance as of June 30, 2012 (unaudited)   5,777    144,749    (144,020)   -    -    -    6,506    -    6,506 

 

 

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

 

B-9
 

XTL BIOPHARMACEUTICALS LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

   Year ended December 31, 2012 
   Attributable to equity holders of the Company         
   Share
capital
  

Share

premium and options

  

Accumulated

deficit

  

Treasury

shares

  

Foreign

currency translation adjustments of foreign

operations

   Reserve from transactions with non-controlling interests   Total   Non-controlling interests   Total
equity
 
   U.S. dollars in thousands 
                                     
Balance as of January 1, 2012 (audited)   5,335    141,385    (143,276)   -    -    -    3,444    -    3,444 
                                              
Loss for the year   -    -    (1,390)   -    -    -    (1,390)   (352)   (1,742)
Other comprehensive income   -    -    -    -    114    -    114    -    114 
                                              
Total comprehensive loss   -    -    (1,390)   -    114    -    (1,276)   (352)   (1,628)
                                              
Share-based payment to employees and others   -    -    1,106    -    -    -    1,106    193    1,299 
Issuance of shares for business combination   176    2,293    -    (2,469)   -    -    -    1,858    1,858 
Issuance of shares and options   309    2,109    -    -    -    -    2,418    -    2,418 
Conversion of convertible loan into capital in subsidiary   -    -    -    -    -    (204)   (204)   372    168 
Exercise of warrants and stock options into shares   177    1,688    -    -    -    -    1,865    -    1,865 
                                              
Balance as of December 31, 2012 (audited)   5,997    147,475    (143,560)   (2,469)   114    (204)   7,353    2,071    9,424 

 

 

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

B-10
 

XTL BIOPHARMACEUTICALS LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   Six months ended
June 30,
   Three months ended
June 30,
   Year ended
December 31,
 
   2013   2012   2013   2012   2012 
   Unaudited   Audited 
   U.S. dollars in thousands 
Cash flows from operating activities:                         
                          
Loss for the period   (2,346)   (1,044)   (1,244)   (675)   (1,742)
Adjustments to reconcile loss to net cash used in operating activities (a)   1,125    417    576    331    236 
                          
Net cash used in operating activities   (1,221)   (627)   (668)   (344)   (1,506)
                          
Cash flows from investing activities:                         
                          
Acquisition of subsidiary, less cash received (d)   -    -    -    -    733 
Investment in associate   -    -    -    -    (1,658)
Decrease in restricted deposit   -    -    -    -    1 
Decrease (increase) in short-term bank deposits   582    (617)   (1)   (1,599)   (170)
Purchase of property, plant and equipment   (10)   (1)   (2)   -    (6)
Loan granted        (22)   -    (22)     
Purchase of intangible assets   (73)   -    -    -    (80)
Other investments   -    -    -    -    (29)
                          
Net cash provided by (used in) investing activities   499    (640)   (3)   (1,621)   (1,209)
                          
Cash flows from financing activities:                         
                          
Proceeds from issuance of shares and options   -    2,418    -    (19)   2,418 
Receipts from exercise of stock options into shares   18    1,388    9    55    1,865 
                          
Net cash provided by financing activities   18    3,806    9    36    4,283 
                          
Increase (decrease) in cash and cash equivalents   (704)   2,539    (662)   (1,929)   1,568 
                          
Gains (losses) from exchange rate differences on cash and cash equivalents   3    (36)   (12)   (58)   5 
                          
Cash and cash equivalents at the beginning of the period   1,696    123    1,669    4,613    123 
                          
Cash and cash equivalents at the end of the period   995    2,626    995    2,626    1,696 

 

 

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

B-11
 

XTL BIOPHARMACEUTICALS LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

   

     Six months ended
June 30,
   Three months ended
June 30,
   Year ended
December 31,
 
     2013   2012   2013   2012   2012 
     Unaudited   Audited 
     U.S. dollars in thousands 
(a) Adjustments to reconcile loss to net cash used in operating activities:                         
                            
  Income and expenses not involving cash flows:                         
                            
  Depreciation and amortization   157    2    79    1    136 
  Loss from disposal of property, plant and equipment   -    -    -    -    2 
  Share-based payment transactions to employees and others   835    300    389    264    1,299 
  Revaluation of short-term deposits   (24)   (14)   (6)   (4)   (75)
  Exchange rate differences on operating activities   (3)   36    12    58    (5)
  Gain from bargain purchase   -    -    -    -    (795)
  Change in employee benefit liabilities, net   -    -    -    -    2 
  Loss (gain) from change in holding rate in associate   (10)   -    (3)   -    5 
  Losses (earnings) from investment in associate   449    -    259    -    (569)
                            
      1,404    324    730    319    - 
  Changes in operating asset and liability items:                         
                            
  Decrease (increase) in trade receivables   (21)   -    2    -    3 
  Decrease (increase) in other accounts receivable   (15)   (19)   (2)   3    (23)
  Decrease (increase) in inventories   (36)   -    58    -    (44)
  Increase (decrease) in trade payables   (8)   51    (141)   32    199 
  Increase (decrease) in other accounts payable   (199)   61    (71)   (23)   101 
                            
      (279)   93    (154)   12    236 
                            
      1,125    417    576    331    236 
                            
(b) Additional information on cash flows from operating activities:                         
                            
  Interest received   18    22    2    6    40 

 

 

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

B-12
 

XTL BIOPHARMACEUTICALS LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

     Six months ended
June 30,
   Three months ended
June 30,
   Year ended
December 31,
 
     2013   2012   2013   2012   2012 
     Unaudited   Audited 
     U.S. dollars in thousands 
                       
(c) Non-cash activities:                         
                            
  Purchase of property, plant and equipment and intangible assets on suppliers' credit   -    -    -    -    73 
                            
  Issuance of treasury shares to subsidiary   -    -    -    -    2,469 
                            
  Conversion of convertible loan into capital in subsidiary   377    -    377    -    168 
                            
(d) Acquisition of newly consolidated subsidiary:                         
                            
  Working capital (excluding cash and cash equivalents)   -    -    -    -    517 
  Property, plant and equipment   -    -    -    -    (51)
  Intangible assets   -    -    -    -    (2,397)
  Gain from bargain purchase   -    -    -    -    795 
  Non-current liabilities   -    -    -    -    11 
  Non-controlling interests   -    -    -    -    1,858 
                            
      -    -    -    -    733 
                            

  

 

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

B-13
 

XTL BIOPHARMACEUTICALS LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2013 (UNAUDITED)

 

NOTE 1:- GENERAL

 

a.A general description of the Company and its activity:

 

XTL Biopharmaceuticals Ltd. ("the Company") is engaged in the development of therapeutics, among others, for the treatment of unmet medical needs, improvement of existing medical treatment and business development in the medical realm. The Company was incorporated under the Israeli Companies Law on March 9, 1993. The registered office of the Company is located at 85 Medinat Hayehudim Street, Herzliya 46766. The Company owns 100% of Xtepo Ltd. ("Xtepo") and 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, USA.

 

In the reporting period, the Company's American Depository Receipts ("ADRs") were traded on the NASDAQ's Pink Sheets and as of the date of approval of the financial statements, effective from July 15, 2013, the Company's ADRs have been traded on the NASDAQ's main list (see also Note 6 regarding events after the reporting period) and its securities are traded on the Tel-Aviv Stock Exchange ("TASE").

 

On July 25, 2012, the Company completed the acquisition of about 50.79% of the issued and outstanding share capital of InterCure Ltd. (as of the date of acquisition) ("InterCure"), a public company whose shares are traded on the TASE and is engaged in the research, development, marketing and sale of home medical devices for the non-medicinal and non-invasive treatment of various diseases such as hypertension, congestive cardiac failure, insomnia and stress. Also in the context of the acquisition, the Company extended InterCure a loan convertible into shares of InterCure. On May 16, 2013, the Company informed InterCure of its decision to convert the entire convertible loan which had been extended by the Company in the context of the acquisition into 7,620,695 Ordinary shares of InterCure as predetermined in the acquisition agreement. Following said conversion and as of June 30, 2013, the Company holds about 54.72% of InterCure's issued and outstanding share capital.

 

On November 21, 2012, the Company acquired about 31.35% of the shares of Proteologics Ltd. ("Proteologics"), a public company whose shares are traded on the TASE, in consideration of approximately NIS 6.5 million (approximately $ 1.7 million) paid in cash. As of June 30, 2013, the Company holds about 30.82% of Proteologics' issued and outstanding share capital (see also Note 12 to the annual consolidated financial statements for 2012 and Note 6 events after the reporting period).

 

As of the date of the financial statements, the Company is in stages of planning and preparing for the implementation of a phase 2 clinical trial of the recombinant EPO ("rHuEPO") drug for treating Multiple Myeloma patients. As part of said preparations, the Company is conducting a study which consists of collecting preliminary data on the existence of specific proteins in the blood of a group of Multiple Myeloma patients to assist in targeting the phase 2 clinical trial protocol. The Company has expanded the study to additional centers in order to collect additional data beyond the original study plan. The data collected in the preliminary study will be combined in the plans and preparations for the implementation of the phase 2 clinical trial, as needed, which the Company expects to obtain during the first half of 2014. Schedule has extended due to expansion of the preliminary study, as well as an ongoing Company review of both data collected in the study and potential medical centers for conducting phase 2 experiment in the future, due to, inter alia, the Company's return to the NASDAQ main list.

B-14
 

XTL BIOPHARMACEUTICALS LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2013 (UNAUDITED)

 

NOTE 1:- GENERAL (Cont.)

 

On November 30, 2011, the Company completed the MinoGuard transaction according to which the Company acquired the activity of MinoGuard Ltd. ("MinoGuard"), founded by Mor Research Applications Ltd. ("Mor"), by obtaining an exclusive license to MinoGuard's entire technology, including the SAM-101 drug (combined drug to treat mental disorders focusing on schizophrenia) in return for royalties on sales and milestone payments to be provided throughout the clinical development process with no additional consideration. The drug is based on a combination of existing antipsychotic drugs and a known medicinal compound (Minocycline).

 

The Company has rights in patents and other assets in the field of treating Hepatitis C (the DOS program) which have been transferred to Presidio Pharmaceuticals Inc. ("Presidio") and returned to the Company by Presidio in August 2012 (see more details in Note 18a to the annual consolidated financial statements for 2012). The Company intends to examine the renewal of activity in the field of Hepatitis C and/or locate strategic partners for the continued development and marketing of drugs for treating Hepatitis C based on the DOS technology which had been returned by Presidio.

 

The following are the Company's subsidiaries as of June 30, 2013:

 

InterCure - a publicly traded company on the TASE. InterCure has two subsidiaries - InterCure Inc., incorporated in the U.S., and InterCure UK, incorporated in the UK (inactive).

 

Xtepo - a private company incorporated in Israel in November 2009 which holds a license for the exclusive use of the patent for rHuEPO drug for treating Multiple Myeloma patients.

 

XTL Inc. - was engaged in the development of therapeutics and business initiatives 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, USA.

 

As of the date of the approval of the financial statements, XTL Inc. and XTL Development are inactive.

 

The interim financial information is reviewed and not audited.

 

b.The Company has incurred continuing losses and its entire income at this stage originates from InterCure, a subsidiary in which the control was acquired on July 25, 2012. The Company depends on outside financing resources to continue its activities. Based on existing business plans, the Company's management estimates that its outstanding cash and cash equivalent balances, including short-term deposits, will allow the Company to finance its activities at least until the fourth quarter of 2014. However, the amount of cash which the Company will need in practice to finance its activities depends on numerous factors which include, but are not limited to, the timing, planning and execution of clinical trials of existing drugs and future projects which the Company might acquire or other business development activities such as acquiring new technologies and/or changes in circumstances which are liable to cause significant expenses to the Company in excess of management's current and known expectations as of the date of these financial statements and which will require the Company to reallocate funds against plans, also due to circumstances beyond its control.

 

B-15
 

XTL BIOPHARMACEUTICALS LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2013 (UNAUDITED)

  

NOTE 1:- GENERAL (Cont.)

 

The Company expects to incur additional losses in 2013 arising from research and development activities, testing additional technologies and operating activities, which will be reflected in negative cash flows from operating activities. Accordingly, in order to complete the clinical trials aimed at developing a product until obtaining its marketing approval, the Company will be forced to raise additional funds in the future by issuing securities. Should the Company fail to raise additional capital in the future under standard terms, it will be required to dispose of marketable securities held by it or minimize its activities, sell or grant a sublicense to third parties to use all or part of its technologies.

 

NOTE 2:- BASIS OF PREPARATION OF THE CONDENSED FINANCIAL STATEMENTS

 

a.The condensed consolidated financial information of the Group as of June 30, 2013 and for the interim periods of six and 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 in accordance with Chapter D of the Securities Regulations (Periodic and Immediate Reports), 1970. This interim financial information does not contain all the information and disclosures that are required in the framework of the annual financial statements. This interim financial information should be read in conjunction with the annual financial statements for 2012 and the accompanying notes which have been prepared in accordance with International Financial Reporting Standards ("IFRS") and included the additional disclosure requirements in accordance with the Israeli Securities Regulations (Annual Financial Statements), 2010.

 

b.Estimates - the preparation of the interim financial statements requires the Group's management to make judgments and to use accounting estimates and assumptions that have an effect on the application of the Group's accounting policies and on the reported amounts of assets, liabilities and expenses. Actual results could differ from those estimates.

 

In the preparation of these condensed consolidated interim financial statements, the significant judgment exercised by management in applying the Group's accounting policies and the uncertainties involved in the key sources of the estimates were identical to those in the annual consolidated financial statements for the year ended December 31, 2012.

  

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES

 

The Group's 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 2012, except for standards, amendments or interpretations to existing standards that became effective and that are mandatory for the accounting periods beginning January 1, 2013 as described below:

 

a.IFRS 10, "Consolidated Financial Statements" ("IFRS 10"):

 

IFRS 10 supersedes all existing guidance on the control and consolidation of financial statements in IAS 27, "Consolidated and Separate Financial Statements" ("IAS 27") and SIC 12, "Consolidation - Special Purpose Entities". IFRS 10 redefines "control". The new definition focuses on the requirement that power and variable returns should exist in order for control to exist. "Power" is the current ability to direct the activities which significantly affect the returns. IFRS 10 contains, inter alia, guidance relating to differentiating between participating rights and protective rights as well as guidance relating to cases where an investor is acting on behalf of another party or on behalf of a group of parties (agent/principal relationships). The core principle whereby a consolidated entity presents the accounts of a parent company and its subsidiaries as a single entity remains unchanged as well as the mechanics of consolidation.

 

B-16
 

XTL BIOPHARMACEUTICALS LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2013 (UNAUDITED)

  

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

  

The Group has adopted IFRS 10 for the first time for the annual period commencing on January 1, 2013. The adoption of IFRS 10 did not have a material impact on the Group's consolidated financial statements.

 

b.IAS 27 (Revised), "Separate Financial Statements" ("IAS 27R"):

 

IAS 27R supersedes IAS 27 and only addresses separate financial statements. The existing guidance for separate financial statements has remained unchanged in IAS 27R.

 

The Group has adopted IAS 27R for the first time for the annual period commencing on January 1, 2013. Since IAS 27R does not address consolidated financial statements, its initial adoption did not have any effect on the Group's consolidated financial statements.

 

c.IAS 28 (Revised), "Investments in Associates" ("IAS 28R"):

 

IAS 28R replaces IAS 28 in its previous format. The key changes contained in IAS 28R compared to IAS 28 relate to adding explicit references to the application of the equity method when accounting for investments in joint ventures as a result of the new guidance prescribed by IFRS 11.

 

The Group has adopted IAS 28R for the first time for the annual period commencing on January 1, 2013. The adoption of IAS 28R did not have any effect on the Group's consolidated financial statements.

 

d.IFRS 12, "Disclosure of Interests in Other Entities" ("IFRS 12"):

 

IFRS 12 prescribes disclosure requirements addressing accounting issues prescribed in IFRS 10 and IFRS 11, "Joint Arrangements" ("IFRS 11") and supersedes the existing disclosure requirements in IAS 28. The disclosure requirements prescribed in IFRS 12 include: significant judgments and assumptions; rights in subsidiaries; rights in joint arrangements and in associates; and rights in structured entities not consolidated in the financial statements.

 

The Group has adopted IFRS 12 for the first time for the annual period commencing on January 1, 2013. The initial adoption of IFRS 12 is expected to expand certain disclosures in the Group's consolidated financial statements regarding its rights in other entities.

 

e.IFRS 13, "Fair Value Measurement" ("IFRS 13"):

 

IFRS 13 focuses on improving the consistency and minimizing the complexity of fair value measurements by providing an accurate definition of the term "fair value" and offering a single source of guidance for the measurement of fair value and for the disclosure requirements of fair value measurement to be used by all the various IFRS standards. The requirements prescribed in IFRS 13 do not expand the use of fair value accounting but do provide guidance as to its adoption in cases where its use is required or allowed by other IFRS standards.

 

B-17
 

XTL BIOPHARMACEUTICALS LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2013 (UNAUDITED)

  

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

The Group has adopted IFRS 13 for the first time for the annual period commencing on January 1, 2013. IFRS 13 was adopted prospectively from said annual period. The disclosure requirements of IFRS 13 need not be applied to comparative figures relating to periods before the date of its initial adoption. The initial adoption of IFRS 13 did not have a material effect on the Group's consolidated financial statements.

 

f.IAS 19 (Revised 2011), "Employee Benefits" ("IAS 19R"):

 

IAS 19R introduces significant changes in the manner of recognizing and measuring defined benefit plans and benefits in respect of employee dismissal and provides new disclosure requirements for all types of employees benefits within the scope of IAS 19 as follows:

 

-The remeasurement of the net defined benefit liability (formerly - actuarial gains and losses) will be recognized in other comprehensive income and not in profit or loss.

 

-The "corridor" approach which allowed the deferral of actuarial gains or losses has been eliminated.

 

-Income from the plan assets is recognized in profit or loss based on the discount rate used to measure the employee benefit liabilities. The return on plan assets excluding the aforementioned income recognized in profit or loss is included in the remeasurement of the net defined benefit liability.

 

-The distinction between short-term employee benefits and long-term employee benefits is based on the expected settlement date and not on the date on which the employee first becomes entitled to the benefits.

 

-Past service cost arising from changes in the plan is recognized immediately.

 

The Group has retrospectively adopted IAS 19R commencing on January 1, 2013 for all reported periods. The initial adoption of IAS 19R did not have a material effect on the Group's consolidated financial statements.

 

g.IAS 1 (Revised), "Presentation of Financial Statements" ("IAS 1R"):

 

IAS 1R modifies the manner of disclosure of items of other comprehensive income in the statement of comprehensive income according to the following principles:

 

-The items presented in other comprehensive income should be separated into two groups based on whether they can be reclassified in the future to profit or loss. Accordingly, items which cannot be reclassified in the future to profit or loss will be presented separately from the re-classifiable items.

 

B-18
 

XTL BIOPHARMACEUTICALS LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2013 (UNAUDITED)

  

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

-Entities that choose to present the items of other comprehensive income before the respective tax will be required to separately present the tax effect of each of the abovementioned groups.

 

-The title of the statement of comprehensive income was changed to "statement of profit or loss and other comprehensive income"; however, IAS 1 allows entitie4s to use other titles.

 

The Group has adopted IAS 1R for the first time for the annual period commencing on January 1, 2013 retrospectively for all reported periods. Since all of the Group's items of other comprehensive income may be reclassified in the future to profit or loss, the initial adoption of IAS 1R did not have a material impact on the Group's consolidated financial statements.

 

h.IAS 34 (Revised), "Interim Financial Reporting" ("IAS 34R"):

 

IAS 34R, which forms part of the Annual Improvements document issued in May 2012, clarifies the disclosure requirements in interim financial reporting regarding segment assets and segment liabilities. According to IAS 34R, disclosure must be provided in the interim financial statements for the measure of total assets and total liabilities attributed to a certain reporting segment if these amounts are regularly provided to the Chief Operating Decision Maker ("CODM") and in the event of a material change in the measures already disclosed in respect of said reporting segment in the latest annual financial statements.

 

The Group has adopted IAS 34R for the first time for the annual period commencing on January 1, 2013. The initial adoption of IAS 34R did not have a material impact on the Group's consolidated financial statements. 

B-19
 

XTL BIOPHARMACEUTICALS LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2013 (UNAUDITED)

  

NOTE 4:- SIGNIFICANT EVENTS DURING THE PERIOD

 

a.On January 21, 2013, InterCure announced that the examination conducted as part of the process of concluding the engagement with Mr. Erez Gavish, the former CEO ("Mr. Gavish"), revealed several issues which require inspection in connection with InterCure's actions during Mr. Gavish's term as CEO, including the legal validity of the license agreement of October 2011 signed between InterCure and a company controlled by Dr. Benjamin Gavish ("Dr. Gavish"). InterCure's Board appointed a committee which includes an external attorney hired for this purpose and another director in InterCure in order to investigate the issue and provide the Board with conclusions. In addition, a notice was delivered to Mr. Gavish and Dr. Gavish on the establishment of said committee which summoned the two to provide explanations regarding the issues under inspection and requested that they inform any of their future potential partners or investors of the inspection of the legal validity of said license agreement. On April 7, 2013, InterCure announced that on April 4, 2013, an originating summons had been filed by Yazmonit Ltd., a company controlled by Dr. Gavish, against it with the Tel-Aviv-Jaffa District Court according to which the Court is asked to render a verdict which declares that the license agreement had been approved and signed and the rights therein had been conferred and transferred by the respondent to the petitioner as required by law. Moreover, on May 13, 2013, InterCure filed a petition with the Court for dismissing the originating summons in limine and assigning the motion to a standard legal procedure. See Note 6 events after the reporting period regarding a compromise agreement signed between the parties involved.

 

b.On February 21, 2013, the Company's special general meeting of shareholders and the general meeting of holders of warrants (series 2) of the Company decided to extend the exercise period of said warrants from February 27, 2013 to December 31, 2013. On March 12, 2013, the decision was approved by the District Court pursuant to Section 350 to the Israeli Companies Law, 1999.

 

c.In keeping with the negotiations held between the Company and Kitov Pharmaceuticals Ltd. (see Note 18a to the annual consolidated financial statements for 2012), on March 5, 2013, the parties to the transaction decided to cease the negotiations as they failed to yield any binding agreement.

 

d.On March 21, 2013, Prof. Reuven Zimlichman was appointed as InterCure's medical director. According to the consulting agreement with Prof. Zimlichman, he will provide InterCure with services consisting of R&D consulting, IP and medical regulation management. Prof. Zimlichman will be granted 130,000 stock options exercisable into 130,000 Ordinary shares of InterCure for an exercise increment of NIS 0.54 per stock option. The stock options vest in 12 equal portions each quarter over a period of three years from the grant date. Alternatively, if as a result of the signing of an agreement between InterCure and a medical institution (such as a sickness fund) for the sale of InterCure's products through the medical institution the total sales of InterCure's products exceed US$ 175,000, then 30% of the then unvested stock options will vest. The fair value of all the stock options using the Black-Scholes model in accordance with the provisions of IFRS 2 as of the date of InterCure's Board's approval approximates $9,000. The exercise period of the stock options is a maximum of 10 years from the date of grant.

 

B-20
 

XTL BIOPHARMACEUTICALS LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2013 (UNAUDITED)

  

NOTE 4:- SIGNIFICANT EVENTS DURING THE PERIOD (Cont.)

 

The value of each option is based on the following inputs: expected dividend of 0%, expected standard deviation of 92.21%, risk-free interest rates of 2.76%-3.21% and expected life of 5-6.5 years.

 

e.On June 26, 2013, Mr. Ofer Gilboa was appointed as CEO of InterCure. The agreement provides for a letter of exemption and indemnification, and the inclusion of Mr. Gilboa in InterCure's directors' and officers' liability insurance policy. In addition, according to Mr. Gilboa's employment agreement, he will be granted 650,000 stock options which are exercisable into Ordinary shares of InterCure at an exercise price of NIS 0.23 per stock option. The stock options vest over a period of three years whereby 1/12 of stock options will vest at the end of each quarter. The fair value of the entire stock options using the Black-Scholes model pursuant to the provisions of IFRS 2 as of the date of InterCure's Board's approval was approximately $19,000. The exercise period is for a maximum of ten years from the allocation date. The value of each option is based on the following inputs: expected dividend rate of 0%, expected standard deviation rate of 39.01%, risk-free interest rate of 1% and expected life of 5-6.5 years. Also according to the employment agreement, if InterCure's revenues exceed $ 5 million and the EBITDA is not less than $ 1 million, Mr. Gilboa will be entitled to a bonus of $25,000. It was also determined that Mr. Gilboa will be entitled to a bonus of 1% of any capital rising round in InterCure over a period of 36 months from commencing his tenure, provided that the investments are made by third parties that are unrelated to InterCure, and up to a maximum bonus of $100,000. See also Note 6 events after the reporting period.

 

f.During the reporting period, holders of the Company's warrants (series 2) exercised 31,410 warrants (series 2) into 31,410 Ordinary shares of NIS 0.1 par value each for an average exercise increment of NIS 1.02 per warrant. The overall proceeds from the exercise of the warrants (series 2) totaled approximately $9,000.

 

g.During the reporting period, 130,000 non-marketable stock options of the Company were exercised into 130,000 Ordinary shares of NIS 0.1 par value each for an average exercise increment of NIS 0.28 per stock option. The proceeds from the exercise of the stock options totaled approximately $9,000.

 

B-21
 

XTL BIOPHARMACEUTICALS LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2013 (UNAUDITED)

  

NOTE 5: SEGMENT REPORTING

 

The Group's management has established operating segments in accordance with reports reviewed by the Chief Operating Decision Maker ("CODM") and which are used to make strategic decisions. Until July 25, 2012, the Company had a single operating segment - drug development. Effective from said date, following the acquisition of InterCure, the CODM reviews the business activities both according to the nature of the activity and the geographical location of the activity. With respect to the nature of the activity, the CODM reviews the operating results of the drug development activity and of the medical device activity. From a geographical standpoint, the CODM reviews the performance of sales of medical devices in the U.S., the UK and the rest of the world.

 

Segment reporting data for the six and three months ended June 30, 2013 and for the year ended December 31, 2012:

 

  

Six months ended June 30, 2013 (unaudited)

 
   Medical devices   Drug         
   U.S.   UK   Other   development   Adjustments   Total 
   U.S. dollars in thousands 
Revenues:                              
                               
External customers   1,010    164    11    -    -    1,185 
Inter-segment revenues   -    -    483    -    (483)   - 
                               
Total revenues   1,010    164    494    -    (483)   1,185 
                               
Segment results before current amortization of intangible assets identified in acquisition   5    3    2    (151)   -    (141)
                               
Current amortization of intangible assets identified in acquisition   (111)   (17)   -    -    -    (128)
                               
Segment results   (106)   (14)   2    (151)   -    (269)
                               
Unallocated joint expenses                            (1,664)
Other income, net                            10 
Financial income, net                            26 
Losses from investment in associate                            (449)
                               
Loss for the period                            (2,346)

B-22
 

XTL BIOPHARMACEUTICALS LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2013 (UNAUDITED)

  

NOTE 5: SEGMENT REPORTING (Cont.)

 

  

Three months ended June 30, 2013 (unaudited)

 
   Medical devices   Drug         
   U.S.   UK   Other   development   Adjustments   Total 
   U.S. dollars in thousands 
Revenues:                              
                               
External customers   436    73    3    -    -    512 
Inter-segment revenues   -    -    (53)   -    53   - 
                               
Total revenues   436    73    (50)   -    53   512 
                               
Segment results before current amortization of intangible assets identified in acquisition   (11)   (6)   (3)   (83)   -    (103)
                               
Current amortization of intangible assets identified in acquisition   (55)   (8)   -    -    -    (63)
                               
Segment results   (66)   (14)   (3)   (83)   -    (166)
                               
Unallocated joint expenses                            (837)
Other income, net                            3 
Financial income, net                            15 
Losses from investment in associate                            (259)
                               
Loss for the period                            (1,244)

B-23
 

XTL BIOPHARMACEUTICALS LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2013 (UNAUDITED)

  

NOTE 5: SEGMENT REPORTING (Cont.)

 

   Year ended December 31, 2012 (audited) 
   Medical devices   Drug         
   U.S.   UK   Other   development   Adjustments   Total 
   U.S. dollars in thousands 
Revenues:                              
                               
External customers   766    167    5    -    -    938 
Inter-segment revenues   -    -    583   -    (583)   - 
                               
Total revenues   766    167    588   -    (583)   938 
                               
Segment results before current amortization of intangible assets identified in acquisition   28   (18)   2   (388)   -    (376)
                               
Current amortization of intangible assets identified in acquisition   (140)   (35)   (1)   -    -    (176)
                               
Segment results   (112)   (53)   1   (388)   -    (552)
                               
Unallocated joint expenses                            (2,606)
Other income, net                            802 
Financial income, net                            45 
Losses from investment in associate                            569
                               
Loss for the period                            (1,742)

 

NOTE 6:- EVENTS AFTER THE REPORTING PERIOD

 

a.On July 10, 2013, the Company's management received a notice from the NASDAQ's representatives stating that the admission committee has approved the Company's application to relist its ADRs for trade on the NASDAQ. Accordingly, on July 15, 2013, the Company's ADRs began trading on the NASDAQ.

 

b.On July 17, 2013 InterCure announced that it had reached a compromise with Mr. Gavish and Dr. Gavish with regard to the amendment of said licensing agreement. According to the amendment, Yazmonit can no longer Market its products under InterCure's brand name and trademark – RESPeRATETM.

 

c.On July 22, 2013, InterCure announced that it had entered into a blind trust agreement with S.G.S. Trusts Ltd. ("the trustee") for the gradual sale of the 7,165,662 Company shares that had been allocated to InterCure in the acquisition agreement over a period of two years. According to the blind trust agreement, the Company's shares will be deposited with the trustee who will sell them during trade on the TASE in compliance with the mechanism and limitations prescribed in the blind trust agreement over a period of two years.

 

d.On July 31, 2013, holders of warrants (series 2) of the Company exercised 30,000 warrants (series 2) into 30,000 Ordinary shares of NIS 0.1 par value each in consideration of an average exercise increment of approximately NIS 0.99 per warrant.

B-24
 

XTL BIOPHARMACEUTICALS LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2013 (UNAUDITED)

  

NOTE 6:- EVENTS AFTER THE REPORTING PERIOD (Cont.)

 

The proceeds from the exercise of the warrants (series 2) totaled approximately $8,000.

 

e.On August 5, 2013, the Law for Changing National Priorities (Legislative Amendments for Achieving Budget Targets for 2013-2014), 2013 ("the Law") was issued in the official Government records, according to which the following changes were prescribed:

 

1.Effective from the 2014 tax year and thereafter, increasing the corporate tax rate to 26.5% (instead of 25%).

 

2.Effective from the 2014 and thereafter, increasing the tax rates applicable to income from preferred enterprises pursuant to the Law for the Encouragement of Capital Investments, 1959 ("the Encouragement Law") to 9% in development area A (instead of 7% in 2014 and 6% from 2015 and thereafter) and 16% in other areas (instead of 12.5% in 2014 and 12% from 2015 and thereafter). Moreover, the tax rate applicable to dividends originating from preferred income as defined in the Encouragement Law distributed from January 1, 2014 and thereafter will increase to 20% (instead of 15%).

 

3.When revaluation gains are distributed by a company to its shareholders, the asset underlying the revaluation gains that are recorded in the distributing company's financial statements will be viewed as an asset sold on the distribution date (notional sale) and therefore the revaluation gains will be taxable. Revaluation gains have been defined in the Law as retained earnings that are not corporate taxable within the scope determined by the Minister of Finance, with the Knesset's Finance Committee's approval, in an amount exceeding NIS 1 million and the tax thereon will be calculated on accumulative basis from the date of the asset's acquisition.

 

The Law is not expected to have an effect on the Company's financial statements.

 

f.On August 12, 2013, holders of warrants (series 2) of the Company exercised 24,889 warrants (series 2) into 24,889 Ordinary shares of NIS 0.1 par value each in consideration of an average exercise increment of approximately NIS 0.98 per warrant. The proceeds from the exercise of the warrants (series 2) totaled approximately $7,000.

 

g.On August 15, 2013, following InterCure's Board's approval, the general meeting of InterCure's shareholders approved the following:

 

1.Approval of remuneration offered to the new CEO, Mr. Ofer Gilboa, through a company wholly owned by him, including grant of an exemption and indemnification letter to him, and his incorporation in InterCure's directors and officers' liability insurance policy.

B-25
 

XTL BIOPHARMACEUTICALS LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2013 (UNAUDITED)

  

NOTE 6:- EVENTS AFTER THE REPORTING PERIOD (Cont.)

 

2.Change in the exercise increment of 1,238,333 non-marketable stock options granted to employees and officers in InterCure, including directors in InterCure who act as officers in the Company, from an amount of $ 0.15 (54 Agorot) per stock option to an amount equivalent to 10% above the average price of InterCure's share on the TASE in the three trading days that preceded the date of the Board's decision, namely $ 0.063 (22.73 Agorot). The general meeting also approved a change in the terms of the options previously granted to InterCure's former CEO, Mr. Ronen Twito, who acts as the Company's CFO and Deputy CEO. The total economic value of the change in the option terms as above according to the Black-Scholes model pursuant to the provisions of IFRS 2 as of the date of the Board's approval approximates $12,000.

 

h.On August 19, 2013, Dr. Ben-Zion Weiner resigned from the board of directors of the Company. Dr. Weiner did however notify the Company that he would favorably consider joining the Company's Scientific Advisory Board if so requested.

  

i.

On August 22, 2013, Proteologics announced that following discussions on its development strategy, Proteologics' Board of Directors reached the following resolutions: 1. to seek out potential buyers for Proteologics' operations in the Ubiquitin field, being Proteologics' main operating field, in light of the fact that said Ubiquitin products are still in early development stages, and in light of the Board's estimate that current monetary resources are insufficient to bring these products to a significant milestone; 2. to immediately devise a plan of action under the Board's resolution. In addition, the Board has appointed a sub-committee to consider alternative operations for Proteologics. Upon realizing said resolutions, Proteologics shall remain without significant business operations, and accordingly, shall not continue to operate as a going concern. As of the date of approval of the financial statements, the Company estimates that the aforementioned resolutions will bear no material adverse effect on the value of the Company's investment in Proteologics.

 

- - - - - - - - - - - -

B-26
 

 

 

XTL BIOPHARMACEUTICALS LTD.

 

INTERIM FINANCIAL REPORTING

 

AS OF JUNE 30, 2013

 

SEPARATE FINANCIAL INFORMATION DISCLOSED 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 Consolidated Financial Statements

  Attributable to the Company Itself as a Parent

3
   

Income and Expenses Included in the Consolidated Financial Statements

  Attributable to the Company Itself as a Parent

4
   

Cash Flows Included in the Statements

  Attributable to the Company Itself as a Parent

5 - 6
   
Notes and Additional Information to the Financial Data 7 - 9

 

 
 

 

To the shareholders of

XTL Biopharmaceuticals Ltd.

  

Re:Special report of for the review of the separate interim financial information according to regulation 38(d) to the Israel Securities Regulations (Periodic and Immediate Reports) - 1970

  

Introduction

 

We have reviewed the accompanied separate interim financial information according to regulation 38(d) to the Israel Securities Regulations (Periodic and Immediate Reports) - 1970 of XTL Biopharmaceuticals Ltd (hereafter - the Company), as of June 30, 2013 and for the six and three month periods 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 (Periodic and Immediate Reports) - 1970.

 

 

Tel-Aviv, Israel
August 29, 2013
Kesselman & Kesselman
Certified Public Accountants (Isr.)
A member firm of PricewaterhouseCoopers International Limited

 

 

 

  

 

Kesselman & Kesselman, Trade Tower, 25 Hamered Street, Tel-Aviv 68125, Israel, P.O Box 452 Tel-Aviv 61003

Telephone: +972 -3- 7954555, Fax:+972 -3- 7954556, www.pwc.co.il

 

C-2
 

 

XTL BIOPHARMACEUTICALS LTD.

 

Separate Interim Financial Information disclosed in accordance with Regulation 38d

to the Israeli Securities Regulations (Periodic and Immediate Reports), 1970

 

Assets and Liabilities Included in the Consolidated Financial Statements

Attributable to the Company Itself as a Parent

  

   June 30,   December 31, 
   2013   2012   2012 
   Unaudited   Audited 
   U.S. dollars in thousands 
ASSETS               
                
CURRENT ASSETS:               
Cash and cash equivalents   494    1,419    241 
Short-term deposits   503    2,004    1,008 
Accounts receivable   98    96    109 
Convertible loan extended to investee   -    -    352 
Receivables for investees   55    78    94 
Restricted deposits   22    20    22 
                
    1,172    3,617    1,826 
NON-CURRENT ASSETS:               
Property, plant and equipment   34    31    31 
Intangible assets   5    5    5 
                
    39    36    36 
                
Net amount attributable to equity holders of the parent of total assets less total liabilities reflecting in the consolidated financial statements financial information of investees   6,408    3,685    6,541 
                
Total assets attributable to the Company itself as a parent   7,619    7,338    8,403 
                
LIABILITIES AND EQUITY               
                
CURRENT LIABILITIES:               
Trade payables   98    84    97 
Payables for investees   821    177    365 
Other accounts payable   424    571    588 
                
    1,343    832    1,050 
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:               
Ordinary share capital   6,001    5,777    5,997 
Share premium   147,489    144,749    147,475 
Accumulated deficit   (144,935)   (144,020)   (143,560)
Treasury shares   (2,469)   -    (2,469)
Foreign currency translation adjustments of foreign operations   181    -    114 
Reserve from transactions with non-controlling interests   9    -    (204)
                
Total equity   6,276    6,506    7,353 
                
Total liabilities and equity   7,619    7,338    8,403 

 

The accompanying notes and additional information are an integral part of the financial data.

 

         
Amit Yonay   David Grossman   Ronen Twito
Chairman of the Board   Director and CEO   Deputy CEO and CFO

 

Date of approval of the financial statements by the Company's Board: August 29, 2013.

 

C-3
 

 

XTL BIOPHARMACEUTICALS LTD.

 

Separate Interim Financial Information disclosed in accordance with Regulation 38d

to the Israeli Securities Regulations (Periodic and Immediate Reports), 1970

 

Income and Expenses Included in the Consolidated Financial Statements

Attributable to the Company Itself as a Parent

  

   Six months ended
June 30,
   Three months ended
June 30,
   Year ended
December 31,
 
   2013   2012   2013   2012   2012 
   Unaudited   Audited 
   U.S. dollars in thousands 
                     
Research and development expenses   (24)   (43)   (14)   (26)   (92)
General and administrative expenses   (1,005)   (936)   (491)   (571)   (2,379)
Other gains, net   10    -    3    -    787 
                          
Operating loss   (1,019)   (979)   (502)   (597)   (1,684)
                          
Finance income   30    8    11    (4)   51 
Finance expenses   (33)   (29)   (14)   (26)   (57)
                          
Finance expenses, net   (3)   (21)   (3)   (30)   (6)
                          
Loss after financing   (1,022)   (1,000)   (505)   (627)   (1,690)
                          
Net amount attributable to equity holders of the parent of total income less total expenses reflecting in the condensed consolidated financial statements operating results of investees   (853)   (44)   (498)   (48)   300 
                          
Loss for the period attributable to the Company itself as a parent   (1,875)   (1,044)   (1,003)   (675)   (1,390)
                          
Other comprehensive income:                         
Item which can be classified to profit or loss:                         
Foreign currency translation differences   68    -    17    -    114 
                          
Total other comprehensive income   68    -    17    -    114 
                          
Total comprehensive loss for the period attributable to equity holders of the parent   (1,807)   (1,044)   (986)   (675)   (1,276)

  

The accompanying notes and additional information are an integral part of the financial data.

 

C-4
 

 

XTL BIOPHARMACEUTICALS LTD.

 

Separate Interim Financial Information disclosed in accordance with Regulation 38d

to the Israeli Securities Regulations (Periodic and Immediate Reports), 1970

 

Cash Flows Included in the Consolidated Financial Statements

Attributable to the Company itself as a Parent

  

   Six months ended
June 30,
   Three months ended
June 30,
   Year ended
December 31,
 
   2013   2012   2013   2012   2012 
   Unaudited   Audited 
   U.S. dollars in thousands 
                     
Cash flows from operating activities:                         
                          
Loss for the period   (1,875)   (1,044)   (1,003)   (675)   (1,390)
Adjustments to reconcile loss to net cash used in operating activities (a)   1,171    466    624    362    139 
Net cash flows from operating activities relating to transactions with investees   415    (20)   292    (172)   125 
                          
Net cash used in operating activities   (289)   (598)   (87)   (485)   (1,126)
                          
Cash flows from investing activities:                         
                          
Acquisition of subsidiary   -    -    -    -    (149)
Investment in associate   -    -    -    -    (1,658)
Decrease (increase) in short-term bank deposits   529    (1,808)   20    (2,000)   (798)
Purchase of property, plant and equipment   (7)   (1)   (2)   -    (6)
Loan granted   -    (22)   -    (22)   - 
Other investments   -    -    -    -    (29