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OPERATING AND FINANCIAL REVIEW AND PROSPECTS
the following discussion of our operating and financial condition and prospects in conjunction with the financial statements
and the notes thereto included elsewhere in this 6-K, as well as in our Annual Report on Form 20-F filed on March 31, 2016.
requires otherwise, references in this report to "XTL," the "Company," "we," "us"
and "our" refer to XTL Biopharmaceuticals Ltd, an Israeli company and our consolidated subsidiaries.
our consolidated financial statements in United States dollars and in accordance with International Financial Reporting Standards,
("IFRS") as issued by the International Accounting Standards Board ("IASB"). All references herein to "dollars"
or "$" are to US dollars, and all references to "Shekels" or "NIS" are to New Israeli Shekels.
Certain amounts presented herein may not sum due to rounding.
Forward Looking Statements
The following discussion
contains "forward-looking statements," including statements regarding expectations, beliefs, intentions or strategies
for the future. These statements may identify important factors which could cause our actual results to differ materially from
those indicated by the forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance
on such forward-looking statements. Factors that could cause our actual results to differ materially from those expressed or implied
in such forward-looking statements include, but are not limited to:
statements attributable to us or persons acting on our behalf speak only as of the date of the 6-K to which this discussion is
attached and are expressly qualified in their entirety by the cautionary statements included herein. We undertake no obligations
to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect
the occurrence of unanticipated events. In evaluating forward-looking statements, you should consider these risks and uncertainties.
We are a biopharmaceutical
company engaged in the acquisition and development of pharmaceutical drugs for the treatment of unmet medical needs. Our current
drug development program is focused on the treatment of systemic lupus erythematosus.
as a corporation under the laws of Israel in 1993, and commenced operations to use and commercialize technology developed at the
Weizmann Institute in Rehovot, Israel. Since commencing operations, our activities have been primarily devoted to developing our
technologies and drug candidates, acquiring pre-clinical and clinical-stage compounds, raising capital, purchasing assets for our
facilities, and recruiting personnel. We have had no drug product sales to date. Our major sources of working capital have been
proceeds from various private and public offerings of our securities and option and warrant exercises.
We have incurred negative
cash flow from operations each year since our inception and we anticipate incurring negative cash flows from operating activities
for the foreseeable future. We have spent, and expect to continue to spend, substantial amounts in connection with implementing
our business strategy, including our planned product development efforts, our clinical trials, and potential in-licensing and acquisition
Our research and development
expenses in the six months ended June 2016 and 2015 primarily consisted of expenses related to the hCDR1 development plan. As part
of the preparations for future clinical trials of hCDR1, during the six months ended June 2016 and 2015 we engaged regulatory and
clinical consultants and completed work on Chemistry, Manufacturing and Control ("CMC") including production and testing
of the drug substance and representative batches of the drug product.
Our general and administrative
expenses in the six months ended June 2016 and 2015 consisted primarily of salaries, consultant fees, and related expenses for
executive, finance and other administrative personnel, professional fees, director fees and other corporate expenses, including
investor relations, business development costs and facilities related expenses. We expense our general and administrative expenses
Our results of operations
in the six months ended June 30, 2016 include non-cash compensation expense as a result of the grants of XTL stock options and
issuance of restricted shares to a third party. Compensation expense for awards of options granted to employees and directors represents
the fair value of the award (measured using the Black-Scholes valuation model) recorded over the respective vesting periods of
the individual stock options (see details below.)
For awards of options
and warrants to consultants and other third-parties, according to IFRS 2, the treatment of such options and warrants is the same
as employee options compensation expense (see note 17 to the consolidated financial statements for the year ended December 31,
2015). We record compensation expense based on the fair value of the award at the grant date according to the Black-Scholes valuation
model. According to the IFRS 2, in non-performance-based options, the Company recognizes options expenses using the graded vesting
method (accelerated amortization). Graded vesting means that portions of a single option grant will vest on several dates, equal
to the number of tranches. The Company treats each tranche as a separate share option grant; because each tranche has a different
vesting period, and hence the fair value of each tranche is different. Therefore, under this method the compensation cost amortization
is accelerated to earlier periods in the overall vesting period.
Our planned clinical
trials will be lengthy and expensive. Even if these trials show that our drug candidates are effective in treating certain indications,
there is no guarantee that we will be able to record commercial sales of any of our product candidates in the near future or generate
licensing revenues from upfront payments associated with out-licensing transactions. In addition, we expect losses in our drug
development activity to continue as we continue to fund development of our drug candidates. As we continue our development efforts,
we may enter into additional third-party collaborative agreements and may incur additional expenses, such as licensing fees and
milestone payments. As a result, our periodical results may fluctuate and a period-by-period comparison of our operating results
may not be a meaningful indication of our future performance.
Results of Operations for the three months ended June 30,
2016 compared to the three months to June 30, 2015
We did not record any
revenues during each of the three-month periods ended June 30, 2016 and 2015.
Research and development expenses
Research and development
expenses for the three months ended June 30, 2016 were $122,000 compared to $69,000 in the same period in 2015. The increase in
expenses in 2016 compared to 2015 for this period is mainly due to our focus on preparing hCDR1 for an upcoming clinical trial
including regulatory consulting and the completion of production and testing of the drug product.
General and administrative expenses
General and administrative
expenses for the three months ended June 30, 2016 were $344,000 compared to $412,000 in the same period in 2015. The decrease in
expenses in 2016 compared to 2015 for this period is mainly due to lower employee compensation.
Financial (expense) income, net
net for the three months ended June 30, 2016 was ($11,000) compared to Financial income of $54,000 in the three months ended June
30, 2015. The decrease in financial income, net was mainly due to changes in fair value of marketable securities held in InterCure,
a former subsidiary and exchange rate differences.
Loss from continuing operations
Loss from continuing
operations for the three months ended June 30, 2016 was $0.5 million compared to $0.4 million in the same period last year. The
increase in loss from continuing operations was mainly due to the decrease in financial income, net.
three months ended June 30, 2016 was $0.5 million compared to $0.4 million in the same period last year. The increase in total
loss was due to the increased loss from continuing operations
Results of Operations for the six months ended June 30, 2016
compared to the six months to June 30, 2015
We did not record any
revenues during each of the six-month periods ended June 30, 2016 and 2015.
Research and development expenses
Research and development
expenses for the six months ended June 30, 2016 were $355,000 compared to $111,000 for the same period in 2015. The increase in
expenses in 2016 compared to 2015 for this period is mainly due to our focus on preparing hCDR1 for an upcoming clinical trial
including regulatory consulting and the completion of production and testing of the drug product.
General and administrative expenses
General and administrative
expenses for the six months ended June 30, 2016 were $0.7 million, showing no change from the general and administrative expenses
for the same period in 2015.
Financial income, net