NOTE 1:- GENERAL
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a.
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BrainsGate Ltd. (the "Company"), an Israeli corporation, was incorporated and commenced operations on July 30, 2000. The Company is developing medical devices for the treatment of Central Nervous System ("CNS") disorders and for drug delivery to the CNS.
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b.
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In January 2014, the Company established a wholly-owned subsidiary in the United States, BrainsGate Inc. (the "Subsidiary"). The sole purpose of the Subsidiary is to provide the United States Food and Drug Administration ("FDA") a local address for the clinical trial related communication and has no operating activities.
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c.
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Since inception, the Company has incurred recurring operating losses and negative cash flows from operating activities. The Company's accumulated deficit as of March 31, 2016 amounted to $ 83,549 and the Company expects such losses to continue in the foreseeable future. The Company is still in the development stage and its ability to continue to operate is dependent upon additional financial support until profitability is achieved.
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In January 2015 the Company affected a financing round as further described in the annual Financial Statments. Subject to meeting a certain milestone, a second tranche of said financing amounting to $ 15.4 Million shall become due. In the event the Company fails to achieve this milestone and the Company will not have sufficient fund to cover its budget deficit through March, 2017, it intends to take cost reduction measures until it secures additional funding.
These conditions raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
There are no assurances, however, that the Company will be successful in obtaining an adequate level of financing needed for the long-term development and commercialization of its products.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP").
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a.
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Financial statements in U.S. dollars
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The Company's financing activities including equity transactions are incurred in U.S. dollar ("Dollar"). A substantial portion of the Company's expenses are denominated and determined in Dollar. The Company's management believes that the dollar is the currency of the primary economic environment in which the Company operates. Thus, the functional and reporting currency of the Company is the Dollar.
Accordingly, monetary accounts maintained in currencies other than the Dollar are re-measured into Dollars in accordance with ASC 830, "Foreign Currency Matters." All
transaction gains and losses of the re-measurement of monetary balance sheet items are reflected in the statements operations as financial income or expenses, as appropriate.
BRAINSGATE LTD.
NOTES TO INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Cash equivalents are short-term unrestricted highly liquid investments that are readily convertible to cash with original maturities of three months or less at acquisition.
Restricted cash of is an interest bearing saving account which is used as a guarantee for lease commitments.
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d.
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Short-term bank deposits
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Short-term bank deposits are deposits with maturities of more than three months but less than one year. The short-term deposits are presented at cost.
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e.
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Property and equipment:
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Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets at the following rates:
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets.
The annual depreciation rates are as follows
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Computers and peripheral equipment
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33
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Lab equipment
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15
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Office furniture and equipment
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6-15
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Leasehold improvements
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Lesser of estimated useful
life or remaining lease term
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f.
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Impairment of long-lived assets
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The long-lived assets of the Company are reviewed for impairment in accordance with ASC 360, "Property, Plant, and Equipment" whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. As of March 31, 2016 and December 31, 2015, no impairment losses have been identified.
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g.
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Royalty-bearing grants
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The Company received royalty-bearing grants for approved research and development projects. These grants are recognized at the time the Company is entitled to such grants on the basis of the costs incurred as provided by the relevant agreement and included as a deduction from research and development expenses.
BRAINSGATE LTD.
NOTES TO INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The preparation of financial statements in conformity with the U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company's management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they were made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
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i.
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Fair value of financial instruments
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The carrying amounts of Company's financial instruments, including cash and cash equivalents, restricted cash, other accounts receivable, trade payables and accrued liabilities approximate their fair value, due to their short-term maturity of such instruments.
The Company adopted ASC 820 which clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.
As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
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Level 1
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-
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Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
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Level 2
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-
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Include other inputs that are directly or indirectly observable in the marketplace.
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Level 3
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-
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Unobservable inputs which are supported by little or no market activity.
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The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
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j.
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Warrants to purchase preferred shares
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The Company accounts for freestanding warrants to purchase shares of its preferred shares as a liability on its balance sheet at fair value. The warrants to purchase preferred shares are recorded as a liability as the underlying preferred shares are contingently redeemable which are not within the control of the Company (upon a deemed liquidation event) and, therefore, may obligate the Company to transfer assets in the future. The warrants are subject to remeasurement to fair value at each balance sheet date and any change in fair value is recognized as a component of financial income (expense), net, on the statements of comprehensive loss. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants, the completion of deemed liquidation event or upon IPO.
BRAINSGATE LTD.
NOTES TO INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
These warrants were classified as level 3 in the fair value hierarchy since some of the inputs used in the valuation were determined based on management’s assumptions.
The Company's account for income taxes and uncertain tax positions in accordance with ASC Topic 740, "Income Taxes" ("ASC 740"). ASC 740 prescribes the use of the liability method, according to which deferred tax assets and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided to reduce deferred tax assets to the amounts that are more likely-than-not to be realized.
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l.
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Research and development costs, net:
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Research and development costs are charged to the statement of operations as incurred.
The Company's liability for severance pay for its Israeli employees is calculated pursuant to Israel's Severance Pay Law. Some of the Israeli employees are included under section 14 of the Israeli Severance Compensation Law ("Section 14"). Under Section 14, the Company's monthly deposits, at a rate of 8.33% of such employees' monthly salary, are made on their behalf with insurance companies on account of severance pay. Payments in accordance with Section 14 release the Israeli companies from any future severance payments in respect of those employees. Deposits under Section 14 are not recorded as an asset in the Company's balance sheet. Employees that are not subject to section 14 of the Israeli Severance Pay Law are entitled to a severance pay of one month's salary for each year of employment or a portion thereof. The Company's severance pay liability for employees, that are not subject to Section 14, is fully provided by an accrual and the monthly deposits with insurance policies is recorded as an asset in the Company's balance sheet.
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n.
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Accounting for share-based compensation
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The Company accounts for share-based compensation in accordance with ASC 718, "Compensation - Share compensation," ("ASC 718") which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based payment awards made to employees, directors and non-employees. ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's statement of operations.
The Company recognizes these compensation costs net of a forfeiture rate and recognizes the compensation costs for only those shares expected to vest on an accelerated method over the requisite service period for each separately vesting portion of the award, which is the option vesting term of four years.
BRAINSGATE LTD.
NOTES TO INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The Company evaluated all events or transactions that occurred subsequent to March 31, 2016 through, the date of approval of these consolidated financial statements and has determined that there are no subsequent events that require disclosure or recognition in the consolidated financial statement.
Certain amounts in prior years have been reclassified to conform to the current year's presentation.
NOTE 3:- UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information. Accordingly, they do not include all the information and footnotes required by United States generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months period ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.
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NOTE 4:-
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COMMITMENTS AND CONTINGENT LIABILITIES
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In November 2006, the Company entered into an office lease agreement which expired on December 31, 2008. Since then the Company exercised its option to extend the lease agreement, with the most recent extension period being until December 31, 2017. Aggregate minimum rental commitments under non-cancelable leases as of March 31, 2016, are as follows:
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March 31,
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2017
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$
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82
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2018
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$
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82
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$
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164
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Total rent expenses for the three months ended March 31, 2016 and the year ended 2015 amounted to $ 25 and $ 75, respectively.
BRAINSGATE LTD.
NOTES TO INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
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NOTE 4:-
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COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
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In January 2013, the Company and a third party entered into an agreement with the Canada-Israel Industrial Research and Development Foundation ("the CIIRDF"), according to which
the Company and the third party are entitled to receive a participation in research and development expenses ("R&D") in the amount of CAD $ 640 thousands ($ 635), for R&D conducted in the period of 24 months. The Company and the third party share in the participation is 56.4% and 43.6%, respectively. In accordance with the participation conditions, the Company and the third party will pay jointly and severally the fund royalties at the rate of 2.5% of sales of the product developed jointly by the parties, up to the equivalent of all of the amount of the grants received.
As of December 31, 2015 100% of the above mentioned CIIRDF participation was received by the Company. During the year ended December 31, 2015, $ 95 were recorded as reduction from R&D expenses.
In November 2015, the Company and a third party entered into an agreement with the BIRD fund (the “BIRD”), according to which the Company and the third party are entitled to receive a participation in R&D expenses in the amount of US $ 800 thousand, for R&D conducted in the period of 24 months, commencing March 1, 2015. The Company and the third party equally share in the participation. In accordance with the participation conditions, the Company and the third party will pay jointly and severally the fund royalties at a varying rate of sales of the product developed jointly by the parties, up to the equivalent of 150% of the amount of the grants received.
As of December 31, 2015 a total of $ 64 were received by the Company from BIRD. During the year ended December 31, 2015, $ 64 were recorded as reduction from R&D expenses.
During the three months ended March 31, 2016 no amounts were recorded as reduction from R&D expenses.
The Company granted a bank guarantee in the amount of $ 38 to secure the lease agreement.
NOTE 5:- SHARE CAPITAL
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1.
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In June 2011, the authorized share capital was increased by 58,400,000 Ordinary shares, and a new class of Preferred D shares in a total of 36,070,000 shares was formed.
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2.
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In July 2011, the Company signed a share purchase agreement for the purchase of Series D Preferred shares of the Company, par value NIS 0.01 each. According to the agreement the Company will issue to the investors up to 28,853,632 Preferred D shares and warrants to purchase an additional 7,213,409 Preferred D shares (the "Old Warrants") in consideration for gross proceeds in the amount of up to $ 22,000.
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The initial investments for the purchase of 26,230,575 Preferred D shares and 6,557,643 warrants were consummated in three installments, as follows:
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i.
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At the closing - 8,743,525 shares and 2,185,881 warrants were issued for gross proceeds in the amount of approximately $ 6,667;
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BRAINSGATE LTD.
NOTES TO INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 5:- SHARE CAPITAL (Cont.)
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ii.
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In January 2012 - 8,743,525 shares and 2,185,881 warrants were issued for gross proceeds in the amount of approximately $ 6,667;
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iii.
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On July 1, 2012 - 8,743,525 shares and 2,185,881 warrants were issued for gross proceeds in the amount of approximately $ 6,667;
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The Old Warrants are exercisable during the period beginning on the issuance date and ending on the earlier of: (a) consummation of an merger and acquisition transaction; or (b) qualified initial public offering. The Old Warrants are entitled to net settlement (cashless).
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3.
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On January 22, 2015, the Company effected a Series BB Preferred financing round with some of its existing shareholders as well as with a new investor (collectively the "Investors"), for an aggregate of up to US $ 26,418 that shall be paid to the Company in two installments (the "Transaction"). Assuming that the milestone closing shall occur the Company shall issue and allot to the Investors an aggregate of up to (i) 26,418,091 Preferred BB shares and (ii) warrants to purchase up to an additional 6,604,526 Preferred BB shares (see below). The first installment of $ 11,000 was due upon closing and 11,000,000 Preferred BB shares were issued in consideration for such first installment. The second installment is dependent upon fulfillment of a millstone, as defined in the Share Purchase Agreement by and between the Company and the Investors (the "Agreement").
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In addition to the abovementioned Transaction, prior to the initial closing of the Transaction, the Company's equity was re-capitalized in a way that all outstanding Preferred shares were converted into Ordinary shares of the Company, based on the conversion price in effect immediately prior to the financing round, and the Old Warrants were amended such that the underlying shares shall be Ordinary Shares (the "Recapitalization").
As part of the Recapitalization and the Transaction, the Company issued Preferred AA Shares to its existing shareholders who participated in the Transaction. Each such shareholder received a number of Preferred AA shares that is equal to the total dollar amount such investor invested in the Company to that date. Preferred AA shares provide their holders a liquidation preference of $ 1 per share in the event of an Exit Event (as defined in the Agreement) for which the total value is equal or lower than $ 150 million ("the AA Liquidation Preference").
Preferred BB shares are entitled to a $ 1 liquidation preference that is senior to all other distributions. The AA Liquidation Preference is senior to all other distributions except the Preferred BB liquidation preference. Preferred AA shares are not entitled to further distributions beyond the AA Liquidation Preference. After payment of the liquidation preferences of the AA and BB liquidation preferences, Preferred BB shareholders are entitled to pro rata participation in all remaining distributions.
In addition, as part of the Transaction, upon the initial closing, each investor was issued warrants, representing 25% of its investment in the Transaction. These warrants are exercisable into such number of Preferred BB in a 1:1 ratio ("the New Warrants").
According to ASC 815 "Derivatives and Hedging", the Old Warrants are classified as equity and presented in shareholders' equity according to the fair value of the warrants at the issuance date. Since the Recapitalization modified the terms of the Old
Warrants, they were revaluated to fair value and an amount of $ 176 was reclassified from Deficit accumulated to the Warrants.
BRAINSGATE LTD.
NOTES TO INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 5:- SHARE CAPITAL (Cont.)
According to ASC 480-10 "Distinguishing Liabilities and Equity", the New Warrants are classified as a freestanding liability instrument that is measured at fair value at each reporting date, based on its fair value, with changes in the fair values being recognized in the Company's statement of comprehensive loss as financial income or expense.
The Company also considered the recapitalization as a modification for its outstanding options to employees. Therefore, in accordance with ASC 718-20-55-2 the Company measured the fair value of the modified award with the fair value of the original award immediately before the modification. The Company recorded in 2015 a share-based payment charge in the amount of approximately $ 855.
In addition, since the fair value of the ordinary shares after the Recapitalization was higher than the fair value of some of the Preferred shares held by the shareholders before the Recapitalization, the Company recorded a deemed dividend to those shareholders in the amount of $ 761.
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b.
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The rights of Ordinary and Preferred shares
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Subject to the rights and privileges of the Preferred Shares, the Ordinary Shares shall rank pari passu between them and shall entitle their holders:
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a)
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To receive notices of, and to attend, General Meetings where each Ordinary Share shall have one vote for all purposes; and
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b)
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To share equally, on a per share basis, in such Bonus Shares, bonuses, profits or Distributions as may be declared by the Board and approved by the Shareholders out of funds legally available therefor; and
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c)
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Upon liquidation or dissolution - to participate in the distribution of the assets of the Company legally available for distribution to Shareholders after payment of all debts and other liabilities of the Company (in each case, proportionally to the number of Ordinary Shares outstanding and the amounts paid by Shareholders on account of their Shares, if not paid in full, before calls for payment were made); and
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d)
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To appoint, dismiss, and replace directors of the Company pursuant to the provisions of the articles of association.
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2.
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Preferred AA and BB shares:
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Other than such voting rights as set forth in these Articles and the right to participate in distributions as described below, the Preferred AA Shares shall have no rights whatsoever (including, without limitation, anti-dilution rights, pre-emptive, redemption or conversion rights). All rights attached to the Preferred AA Shares shall be automatically extinguished and all Preferred AA Shares shall be automatically forfeited for no consideration, immediately prior to the closing of: (i) an IPO or (ii) an M&A Transaction as part of which all other shares and convertible securities (including options and warrants) of the Company are acquired, assumed or cancelled and the Preferred AA Shares do not entitle their holders to participate in the distribution of the Distributable Assets as described below. Except as it relates to voting rights, the Preferred AA Shares shall not be
counted (in the numerator or the denominator) for the purpose of any holdings, Company valuation, or pro-rata portions calculations pursuant to these Articles, applicable law, or otherwise. It is clarified that (i) the Preferred AA Shares shall not be convertible into Ordinary Shares and (ii) for purposes of the voting rights
as set forth in these Articles and the right to participate in distributions as set forth below, the number of Preferred AA Shares and the Original Issue Price thereof shall be adjusted upon consummation, and in accordance with the terms, of any Recapitalization Event, in each case to reflect the same economic rights attached to such shares as immediately prior to consummation of such Recapitalization Event.
BRAINSGATE LTD.
NOTES TO INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 5:- SHARE CAPITAL (Cont.)
In the event of Liquidation or Distribution, any assets of the Company legally available for distribution to the Shareholders in such Liquidation or actually distributed in such Distribution (the "Distributable Assets") shall be distributed to the Shareholders pursuant to the following order of preference:
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a)
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Each holder of Preferred BB Shares shall be entitled to receive for each Preferred BB Share held by it, prior to and in preference to the holders of Preferred AA Shares and Ordinary Shares, an amount equal to the Original Series BB Issue Price, plus an amount equal to declared but unpaid Dividends on such Preferred BB Share and less any preferential amount previously paid in respect of such Preferred BB Shares. In the event that the Distributable Assets shall be insufficient for the payment in full of the Series BB Preference to all holders of Preferred BB Shares, then all of such Distributable Assets shall be distributed among the holders of Preferred BB Shares in proportion to the Series BB Preference that would have been paid to each such holder had the Distributable Assets been sufficient to pay such Series BB Preference in full;
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b)
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After payment in full of the Series BB Preference to all holders of Preferred BB Shares, each holder of Preferred AA Shares shall be entitled to receive, out of the remaining Distributable Assets, for each Preferred AA Share held by it, prior to and in preference to any payments to the holders of Ordinary Shares, an amount equal to the Original Series AA Issue Price (as adjusted pursuant to these Articles and/or Recapitalization Event) as multiplied by a fraction: (i) the numerator of which is the total number of Preferred AA shares actually issued upon the Initial Closing (as defined in the Series BB SPA, namely 65,685,652, and (ii) the denominator of which is then outstanding Preferred AA Shares, plus an amount equal to declared but unpaid Dividends on such Preferred AA Share and less any preferential amount previously paid in respect of such Preferred AA Share. In the event that the remaining Distributable Assets after the full payment of the Series BB Preference shall be insufficient for the payment in full of the Series AA Preference to all holders of Preferred AA Shares, then all of such remaining Distributable Assets shall be distributed among the holders of Preferred AA in proportion to the Series AA
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Preference that would have been paid to each such holder had the remaining Distributable Assets after the full payment of the Series BB Preference been sufficient to pay such Series AA Preference in full;
BRAINSGATE LTD.
NOTES TO INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 5:- SHARE CAPITAL (Cont.)
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c)
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After payment in full of the Series BB Preference and, if applicable, the Series AA Preference, the remaining Distributable Assets, if any, shall be distributed pro-rata among all the Shareholders, in proportion to their respective holdings in the Company on a pro-rata and as-converted basis (but, for the avoidance of doubt, excluding the
Preferred AA Shares from such calculation).
This distribution right shall not apply in the event the total consideration of the transaction is equal to or exceeds $ 150 million.
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Under the Company's 2003 Share Option Plan ("the Plan"), options may be granted to officers, directors, employees and consultants of the Company.
Pursuant to the Plan, the Company reserved for issuance 10,226,446 Ordinary shares. As of December 31, 2015, an aggregate of 1,435,915 share options of the Company are still available for future grant.
The exercise price of the options granted under the plan may not be less than the nominal value of the shares into which such options are exercisable. The options vest primarily over four years. Any options, which are forfeited or not exercised before expiration, become available for future grants.
Options granted to employees:
During February 2016, the Company's Board of Directors approved the granting of options to purchase 150,000 Ordinary Shares of the Company, nominal value NIS 0.01 per share to certain employees.
A summary of the Company's option activity related to options to employees, and related information is as follows:
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Weighted average exercise price
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Outstanding at the beginning of the year
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8,031,789
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$
|
0.08
|
|
|
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|
|
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|
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Granted
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150,000
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$
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0.08
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Exercised
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(31,637
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)
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$
|
0.08
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|
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Forfeited or Expired
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(112,499
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)
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|
$
|
0.08
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|
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Outstanding at the end of the year
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8,100,927
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|
$
|
0.08
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The Company accounts for its options to employees under the fair value method of ASC 718. The fair value for these options was estimated using a Black-Scholes option-pricing model with the following weighted-average assumptions for the three months ended March 31, 2016:
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Dividend yield
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0%
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|
Expected volatility
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77%
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Risk-free interest
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2.03%-2.38%
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Expected life
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6.25 years
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BRAINSGATE LTD.
NOTES TO INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 5:- SHARE CAPITAL (Cont.)
The following table sets forth the total share-based compensation expense resulting from options granted to employees, non-employees and directors included in the Company's Statement of Comprehensive Loss:
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Three months ended March 31, 2016
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Research and development, net
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$
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31
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|
|
General and administrative
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|
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13
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|
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|
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|
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Total share-based compensation expense
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$
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44
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NOTE 6:- RECONCILIATION TO IFRS
As described in Note 2, the Company prepares its financial statements in accordance with U.S. GAAP.
The differences between U.S. GAAP and IFRS are as follows:
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a.
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Employee retirement benefits:
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According to U.S. GAAP, the balance sheets presentation of employee retirement benefits is in gross amounts. According to IFRS, the balance sheets presentation of employee retirement benefits is in net amounts and according to actuarial assessment.
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b.
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Financial income and expenses:
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According to U.S. GAAP, the statement of comprehensive loss presentation of financial income and expenses is in net amounts. According to IFRS, the statement of comprehensive loss presentation of financial income and expenses is in gross amounts.
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c.
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Warrants to Ordinary shares:
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According to U.S. GAAP, warrants granted to investors, with cashless mechanism are treated as equity and presented in shareholders' equity. According to IFRS, such warrants are accounted for as derivative instruments which are measured at fair value through
profit and loss.
BRAINSGATE LTD.
NOTES TO INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 6:- RECONCILIATION TO IFRS (Cont.)
The effects of the differences between the GAAPs, on the Company's financial statements are detailed below:
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March 31, 2016 (Unaudited)
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|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
7,052
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|
|
$
|
-
|
|
|
$
|
7,052
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
$
|
691
|
|
|
$
|
(620
|
)
|
|
$
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
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|
$
|
7,743
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|
|
$
|
(620
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)
|
|
$
|
7,123
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
2,246
|
|
|
$
|
-
|
|
|
$
|
2,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
$
|
1,151
|
|
|
$
|
537
|
|
|
$
|
1,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
3,397
|
|
|
$
|
537
|
|
|
$
|
3,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity (deficiency)
|
|
$
|
4,346
|
|
|
$
|
(1,157
|
)
|
|
$
|
3,189
|
|
|
|
|
March 31, 2015 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
12,315
|
|
|
$
|
-
|
|
|
$
|
12,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
$
|
713
|
|
|
$
|
(635
|
)
|
|
$
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
13,028
|
|
|
$
|
(635
|
)
|
|
$
|
12,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
2,243
|
|
|
$
|
-
|
|
|
$
|
2,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
$
|
1,162
|
|
|
$
|
872
|
|
|
$
|
2,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
3,405
|
|
|
$
|
872
|
|
|
$
|
4,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity (deficiency)
|
|
$
|
9,623
|
|
|
$
|
(1,507
|
)
|
|
$
|
8,116
|
|
|
|
|
December 31, 2015 (Audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
8,436
|
|
|
$
|
-
|
|
|
$
|
8,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
$
|
661
|
|
|
$
|
(585
|
)
|
|
$
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
9,097
|
|
|
$
|
(585
|
)
|
|
$
|
8,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
2,291
|
|
|
$
|
-
|
|
|
$
|
2,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
$
|
1,115
|
|
|
$
|
572
|
|
|
$
|
1,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
3,406
|
|
|
$
|
572
|
|
|
$
|
3,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity (deficiency)
|
|
$
|
5,691
|
|
|
$
|
(1,157
|
)
|
|
$
|
4,534
|
|
BRAINSGATE LTD.
NOTES TO INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 6:- RECONCILIATION TO IFRS (Cont.)
|
|
b.
|
Statements of comprehensive loss:
|
|
|
|
Three months ended
March 31, 2016 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development, net
|
|
$
|
1,140
|
|
|
$
|
-
|
|
|
$
|
1,140
|
|
|
General and administrative
|
|
|
250
|
|
|
|
-
|
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
1,390
|
|
|
|
-
|
|
|
|
1,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing expenses
|
|
|
2
|
|
|
|
4
|
|
|
|
6
|
|
|
Financing income
|
|
|
-
|
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net comprehensive loss
|
|
$
|
1,392
|
|
|
$
|
-
|
|
|
$
|
1,392
|
|
|
|
|
Three months ended
March 31, 2015 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development, net
|
|
$
|
1,224
|
|
|
$
|
-
|
|
|
$
|
1,224
|
|
|
General and administrative
|
|
|
838
|
|
|
|
-
|
|
|
|
838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
2,062
|
|
|
|
-
|
|
|
|
2,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing expenses
|
|
|
264
|
|
|
|
178
|
|
|
|
442
|
|
|
Financing income
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net comprehensive loss
|
|
$
|
2,326
|
|
|
$
|
176
|
|
|
$
|
2,502
|
|
|
|
|
Year ended
December 31, 2015 (Audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development, net
|
|
$
|
4,635
|
|
|
$
|
-
|
|
|
$
|
4,635
|
|
|
General and administrative
|
|
|
1,743
|
|
|
|
-
|
|
|
|
1,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
6,378
|
|
|
|
-
|
|
|
|
6,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing expenses
|
|
|
9
|
|
|
|
334
|
|
|
|
343
|
|
|
Financing income
|
|
|
-
|
|
|
|
(508
|
)
|
|
|
(508
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net comprehensive loss
|
|
$
|
6,387
|
|
|
$
|
(174
|
)
|
|
$
|
6,213
|
|
BRAINSGATE LTD.
NOTES TO INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 6:- RECONCILIATION TO IFRS (Cont.)
|
|
c.
|
Shareholders' equity (deficiency) items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2016 U.S. GAAP
|
|
$
|
139
|
|
|
$
|
167
|
|
|
$
|
28
|
|
|
$
|
87,561
|
|
|
$
|
(83,549
|
)
|
|
$
|
4,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2016 – IFRS
|
|
$
|
139
|
|
|
$
|
167
|
|
|
$
|
28
|
|
|
$
|
84,500
|
|
|
$
|
(81,645
|
)
|
|
$
|
3,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Differences
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,061
|
|
|
$
|
(1,904
|
)
|
|
$
|
1,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2015 U.S. GAAP
|
|
$
|
139
|
|
|
$
|
167
|
|
|
$
|
28
|
|
|
$*)
|
87,385
|
|
|
$
|
(78,096
|
)
|
|
$
|
9,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2015 – IFRS
|
|
$
|
139
|
|
|
$
|
167
|
|
|
$
|
28
|
|
|
$
|
84,324
|
|
|
$
|
(76,542
|
)
|
|
$
|
8,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Differences
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,061
|
|
|
$
|
(1,554
|
)
|
|
$
|
1,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015 U.S. GAAP
|
|
$
|
139
|
|
|
$
|
167
|
|
|
$
|
28
|
|
|
$*)
|
87,514
|
|
|
$
|
(82,157
|
)
|
|
$
|
5,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015 – IFRS
|
|
$
|
139
|
|
|
$
|
167
|
|
|
$
|
28
|
|
|
$
|
84,453
|
|
|
$
|
(80,253
|
)
|
|
$
|
4,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Differences
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,061
|
|
|
$
|
(1,904
|
)
|
|
$
|
1,157
|
|
BRAINSGATE LTD.
NOTES TO INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 6:- RECONCILIATION TO IFRS (Cont.)
|
|
d.
|
Changes in shareholders' equity (deficiency):
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in
|
|
|
Deficit
|
|
|
Total
shareholders'
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2016 (audited)
|
|
|
54,719,037
|
|
|
$
|
139
|
|
|
|
65,685,652
|
|
|
$
|
167
|
|
|
|
11,000,000
|
|
|
$
|
28
|
|
|
$
|
84,453
|
|
|
$
|
(80,253
|
)
|
|
$
|
4,534
|
|
|
Exercise of options
|
|
|
31,637
|
|
|
*)
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
-
|
|
|
|
3
|
|
|
Cost of Share-based compensation related to options granted to employees and directors
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
41
|
|
|
|
-
|
|
|
|
41
|
|
|
Cost of Share-based compensation related to options granted to service providers
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
-
|
|
|
|
3
|
|
|
Total comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,392
|
)
|
|
|
(1,392
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2016 (unaudited)
|
|
|
54,750,874
|
|
|
$
|
139
|
|
|
|
65,685,652
|
|
|
$
|
167
|
|
|
|
11,000,000
|
|
|
$
|
28
|
|
|
$
|
84,500
|
|
|
$
|
(81,645
|
)
|
|
$
|
3,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in
|
|
|
Deficit
|
|
|
Total
shareholders'
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2015 (audited)
|
|
|
1,158,886
|
|
|
$
|
3
|
|
|
|
38,114,886
|
|
|
$
|
97
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
73,668
|
|
|
$
|
(74,040
|
)
|
|
$
|
(272
|
)
|
|
Cost of Share-based compensation related to options granted to employees and directors
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
674
|
|
|
|
-
|
|
|
|
674
|
|
|
Cost of Share-based compensation related to options granted to service providers
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
55
|
|
|
|
-
|
|
|
|
55
|
|
|
Conversion of Preferred shares to Ordinary shares as part of recapitalization
|
|
|
53,527,400
|
|
|
|
136
|
|
|
|
(38,114,886
|
)
|
|
|
(97
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(39
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Issuance of preferred BB shares in January 2015, net of issuance expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65,685,652
|
|
|
|
167
|
|
|
|
11,000,000
|
|
|
|
28
|
|
|
|
9,966
|
|
|
|
-
|
|
|
|
10,161
|
|
|
Total comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,502
|
)
|
|
|
(2,502
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2015 (unaudited)
|
|
|
54,686,286
|
|
|
$
|
139
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65,685,652
|
|
|
$
|
167
|
|
|
|
11,000,000
|
|
|
$
|
28
|
|
|
$
|
84,324
|
|
|
$
|
(76,542
|
)
|
|
$
|
8,116
|
|
|
|
*)
|
Represents an amount lower than $ 1 thousands.
|
BRAINSGATE LTD.
NOTES TO INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 6:- RECONCILIATION TO IFRS (Cont.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in
|
|
|
Deficit
|
|
|
Total
shareholders'
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2015 (audited)
|
|
|
1,158,886
|
|
|
$
|
3
|
|
|
|
38,114,886
|
|
|
$
|
97
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
73,668
|
|
|
$
|
(74,040
|
)
|
|
$
|
(272
|
)
|
|
Exercise of option
|
|
|
32,751
|
|
|
*)
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
-
|
|
|
|
3
|
|
|
Cost of Share-based compensation related to options granted to employees and directors
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
792
|
|
|
|
-
|
|
|
|
792
|
|
|
Cost of Share-based compensation related to options granted to service providers
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63
|
|
|
|
-
|
|
|
|
63
|
|
|
Conversion of Preferred shares to Ordinary shares as part of recapitalization
|
|
|
53,527,400
|
|
|
|
136
|
|
|
|
(38,114,886
|
)
|
|
|
(97
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(39
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Issuance of preferred BB shares in January 2015, net of issuance expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65,685,652
|
|
|
|
167
|
|
|
|
11,000,000
|
|
|
|
28
|
|
|
|
9,966
|
|
|
|
-
|
|
|
|
10,161
|
|
|
Total comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,213
|
)
|
|
|
(6,213
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015
|
|
|
54,719,037
|
|
|
$
|
139
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
65,685,652
|
|
|
$
|
167
|
|
|
|
11,000,000
|
|
|
$
|
28
|
|
|
$
|
84,453
|
|
|
$
|
(80,253
|
)
|
|
$
|
4,534
|
|
*) Represents an amount lower than $ 1 thousand.