b.	On October 6, 2005, 350,000 options were granted under the Stock Option Plan. The exercise price has been determined at $0.93 per common share which was equivalent to 90% of the traded market price on the date of grant.

c.	On October 20, 2005, 30,000 options were granted under the Stock Option Plan. The exercise price has been determined at $1.35 per common share which was equivalent to the traded market price on the date of grant.

1.	25% of the options - On the first anniversary commencing the grant date

2.	75% of the options - On the last day of each of the 36 months following the first anniversary of the grant date, the options shall vest in equal monthly installments.

d.

On December 20, 2005, the company entered into subscription agreement for the sale of 1,333,334 units at a purchase price of $0.75 per unit for a total consideration of $1,000,000. Each unit comprising one share of the Company's common stock and one common share purchase warrant exercisable for three years. Every warrant can be exercisable to one Share at a price of $1.20 per common Share.

e.

On December 20, 2005, the company entered into subscription agreement for the sale of 222,222 units at a purchase price of $0.90 per unit for a total consideration of $200,000. Each unit comprising one share of the Company's common stock and one common share purchase warrant exercisable for three years. Every 2 warrants can be exercisable to one common Share at a price of $1.15 per Share.

f.	On December 21, 2005, 250,000 options were granted under the Stock Option Plan. The exercise price has been determined at $1.34 per common share which was equivalent to the traded market price on the date of grant. As to the exercise terms of the options - see exercise terms in note 3c.

g.	On January 12, 2006, 50,000 options were granted under the Stock Option Plan. The exercise price has been determined at $1.10 per common share which was equivalent to the traded market price on the date of grant. As to the exercise terms of the options - see note 4d.

h.	On March 15, 2006, 50,000 options were granted under the Stock Option Plan. The exercise price has been determined at $1.37 per common share which was equivalent to the traded market price on the date of grant. As to the exercise terms of the options - see exercise terms in note 3c.

a.	On April 15, 2005, the CEO of the subsidiary who also served as the Acting CEO of the company had resigned from its position as the acting CEO of the company, and will continue as the CEO of the subsidiary.

b.

On April 16, 2006, the Company entered into an employment agreement (the "Agreement") with Patrick Schnegelsberg pursuant to which Mr. Schnegelsberg will serve as CEO of the Company, effective April 15, 2006. Mr. Schnegelsberg shall receive a salary of $200,000 and an annual bonus of up to $200,000 upon achieving certain objectives. Pursuant to a separate agreement between the company and Mr. Schnegelsberg, the company agreed to indemnify Mr. Schnegelsberg for substantially all liabilities he may incur as a result of his employment by or service to the company.

c.	On May 2, 2006 the company amended the vesting of the 350,000 options granted on October 6, 2005.

1.	25% of the options - On the first anniversary commencing the grant date

2.	75% of the options - On the last day of each of the 36 months following the first anniversary of the grant date, the options shall vest in equal monthly installments.

d.	On May 2, 2006 the company amended the vesting of the 50,000 options granted on January 12, 2006.

1.	25% of the options - On October 1, 2006.

2.	75% of the options - On the last day of each of the 36 months following October 1, 2006, the options shall vest in equal monthly installments.

e.

On May 4, 2006, 500,000 (100,000 for each of its five board members) options were granted under the Stock Option Plan. The exercise price has been determined at $1.29 per common share (see also note 4b regarding the determined exercise price). As to the exercise terms of the options - see exercise terms in note 3c.

·	Low-dose, preventative therapy for disease-free, high-risk individuals,

·	Strong dose for use in conjunction with surgery and other cancer treatments, and

·	Maintenance dose for use to prevent recurrence of cancer growth.

·

Others

Other Strategic Plans

We are considering in-licensing and other means of obtaining additional lead molecules for our product portfolio. The aim of this is to create a well-balanced product portfolio including lead molecules in different stages of development and addressing different medical needs.

 

 

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Critical accounting policies and estimates

Management's discussion and analysis of the financial condition and results of operations is based upon the consolidated financial statements, which have been prepared in accordance with accounting principals generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, expenses and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and judgments. We base our estimates on various factors, including historical experience that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Going concern assumption

The financial statements have been prepared assuming the Company will continue as a going concern. Through March 31, 2006, the Company has incurred losses in an aggregate amount of $2,750,261. Such losses have resulted from the Company’s activities as a development stage company. We estimate that the cash reserves available on March 31, 2006 will be sufficient to cover the planned expenses through September 30, 2006. The Company's continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required and ultimately to attain profitability.

 

Valuation of options and warrants

We granted options to purchase common shares of our company to employees and consultants as well as issue warrants in connection with fund raising. The fair value of the options and warrants is estimated by using the Black Scholes option-pricing model, and is based on certain assumptions regarding the expected dividends, expected volatility, expected life of the options and warrant and the risk free interest rate.

 

Results of Operations

Six months ended March 31, 2006 and 2005

The following table summarizes certain statement of operations data for the company for the six months period ended March 31, 2006 and 2005 (in US$):

		Six months ended March 31,
		2006			2005
Research and development costs		$	599,543		$	114,998
General and administrative expenses			455,188			347,881
Financial income net			(17,088	)		(5,274	)
Net loss for the period		$	1,037,643		$	457,605

Research and development costs.

Research and development expenses are the costs incurred in the process of our pre-clinical trial and clinical trial.

 

 

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During the six months ended March 31, 2006 and March 31, 2005 the research and development expenses included, among other, the clinical trial and pre-clinical trial expenses, the consultants compensation, costs related to the registered patents as well as salaries and related expenses.

During the six months ended March 31, 2006 the research and development expenses totaled $599,543, compared to $114,998 during the six months ended March 31, 2005. The increase in costs is due to the conducted Phase 2 trial whereas during the six months ended March 31, 2005 the costs were related to the pre-clinical activity.

General and administrative expenses

The general and administrative expense includes the salaries and related expenses of the company's management, consulting, legal and professional fees, traveling, business development costs as well as insurance expenses.

For the six months ending March 31, 2006 the General and administrative expense totaled $455,188 compared to $347,881 for the six months ended March 31, 2005. Costs incurred related to general and administrative in the six months ended March 31, 2006 reflect an increase in activities as well as increased number of employees as compared to the six months period ending March 31, 2005.

Financial income/expense, net

During the six months ending March 31, 2006 and March 31, 2005, the company generated interest income on available cash and cash equivalents balance.

Liquidity and Capital Recourses

Financing activities

Through March 31, 2006, the Company has incurred losses in an aggregate amount of $2,750,261. We have financed our operation from private placement of common stock. Through March 31, 2006 we raised a total of $3,652,829, net of transaction cost, through private placements and we anticipate that additional financing will be through similar sources. Our financing activates for the six months period ending March 31, 2006 include the following:

On October 31, 2005, the company entered into subscription agreement for the sale of 666,666 units at a purchase price of $0.75 per unit for a total consideration of $500,000.

On December 20, 2005, the company entered into subscription agreement for the sale of 1,333,334 units at a purchase price of $0.75 per unit for a total consideration of $1,000,000.

On December 20, 2005, the company entered into subscription agreement for the sale of 222,222 units at a purchase price of $0.90 per unit for a total consideration of $200,000.

Employee's stock options plan

On October 6, 2005 we granted options to purchase up to 350,000 common shares of our company at an exercise price of $0.93 to Mr. Chaime Orlev.

On October 20, 2005 we granted options to purchase up to 30,000 common shares of our company at an exercise price of $1.35 to an employee.

On December 21, 2005 we granted options to purchase up to 250,000 common shares of our company at an exercise price of $1.34 to an employee.

 

 

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On January 12, 2006 we granted options to purchase up to 50,000 common shares of our company at an exercise price of $1.10 to an employee.

On March 15, 2006 we granted options to purchase up to 50,000 common shares of our company at an exercise price of $1.37 to a director of the company.

On April 17, 2006 we granted options to purchase up to 1,400,000 common shares of our company at an exercise price of $1.29 to Mr. Patrick Schnegelsberg.

On May 4, 2006 we granted options to purchase up to 100,000 common shares of our company at an exercise price of $1.29 to each of the five members of the board for a total of 500,000 options.

Summary of financing activities

Through March 31, 2006 we raised approximately $3.6 Million through private placements of our securities. As of March 31, 2006 the cash and cash equivalents totaled $1,354,514. We anticipate that these reserves will be sufficient to fund operation through September 30, 2006. Continuation of our current operations after utilizing the mentioned reserves during the year ending September 30, 2006, is dependent upon obtaining financial support from investors until profitable results are achieved.

Planned Expenditures

The estimate expenses referenced herein are in accordance with the business plan. As the technology is still in the development stage, it can be expected that there will be changes in some budgetary items. Our planned expenditures for the next 12 months include:

Category		Amount
Research &Development			1,184,000
Business Development			202,000
General & Administrative Expenses			1,315,000
Total			2,701,000

We are considering an additional clinical trial to demonstrate clinical efficacy of IVIg, sourced from a specific population, of Melanoma patients. We began initial process of this trial during 2006. The decision to proceed past the initial process will be based on several major factors, one of which is the ability of the company to attract sufficient financing on acceptable terms. If we decide to continue this additional trial past the initial process, we anticipate that our related clinical trial costs over the next 12 months would increase by approximately $1,648,000.

Related party transactions 

Mr. Yair Aloni, a director of our company, and Professor Yehuda Shoenfeld, M.D., the Chief Scientist of our subsidiary, Gammacan, Ltd., are authorized signatories of ARP Biomed Ltd. for the Intellectual Property Purchase and Sale Agreement we entered into with ARP Biomed Ltd. on June 11, 2004. Mr. Aloni is the Chief Executive Officer of ARP.

On June 6, 2005, the Company and Gammacan, Ltd. appointed Vered Caplan as acting Chief Executive Officer of both companies, effective July 2, 2005. Vered Caplan will devote approximately 70% of her business time to the affairs of Gammacan, Ltd. and the Company. Vered Caplan shall receive a salary of $6,475 per month. On April 15, 2006 Vered Caplan has resigned form her position as the acting Chief Executive Officer of the company. Vered Capalan will remain as the Chief Executive Officer of Gammacan, Ltd.

 

 

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On April 16, 2006, the Company entered into an employment agreement (the "Agreement") with Patrick Schnegelsberg pursuant to which Mr. Schnegelsberg will serve as Chief Executive Officer of the Company, effective April 15, 2006. Mr. Schnegelsberg shall receive a salary of $200,000 and an annual bonus of up to $200,000 upon achieving certain objectives. Pursuant to a separate agreement between the Company and Mr. Schnegelsberg, the Company agreed to indemnify Mr. Schnegelsberg for substantially all liabilities he may incur as a result of his employment by or service to the Company. Mr. Schnegelsberg was granted 1,400,000 stock options of the Corporation, pursuant to the Corporation's 2004 Stock Option Plan, adopted by the Board on August 17, 2004. Options are exercisable at an exercise price of $1.29 per share. 350,000 of the Options shall vest on the first anniversary from their date of grant, and the remaining Options shall vest in 36 equal monthly instalments thereafter

 

 

 

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ITEM 3. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. As of March 31, 2006, the Company’s management carried out an evaluation, under the supervision of the Company’s Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s system of disclosure controls and procedures pursuant to the Securities and Exchange Act , Rule 13a-15(d) and 15d-15(d) under the Exchange Act.  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective, as of the date of their evaluation, for the purposes of recording, processing, summarizing and timely reporting material information required to be disclosed in reports filed by the Company under the Securities Exchange Act of 1934.

Changes in internal controls. There were no changes in the Company’s internal controls over financial reporting, that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially effect, the Company’s internal control over financial reporting.

 

 

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PART II

ITEM 1 LEGAL PROCEEDINGS

From time to time the Company is subject to litigation incidental to its business. Such claims, if successful, could exceed applicable insurance coverage. The Company is not currently a party to any material legal proceedings.

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On October 31, 2005 the company entered into subscription agreements for the sale of 666,666 units to an offshore investor at a purchase price of $0.75 per unit for a total consideration of $500,000. Each unit comprising one share of the Company's common stock and one common share purchase warrant exercisable for three years for ½ (half) a share at a price of $1.00 per Share.

On December 20, 2005 the company entered into a subscription agreement for the sale of 1,333,334 units to an accredited investor at a purchase price of $0.75 per unit for a total consideration of $1,000,000. Each unit comprising one share of the Company's common stock and one common share purchase warrant exercisable for three years for one share at a price of $1.20 per share.

On December 20, 2005 the company entered into a subscription agreement for the sale of 222,222 units to an accredited investor at a purchase price of $0.90 per unit for a total consideration of $200,000. each unit comprising one share of the Company's common stock and one common share purchase warrant exercisable for three years for ½ (half) a share at a price of $1.15 per share.

For each sale of these units we relied on either the exemption from registration provided for accredited investors pursuant to Rule 506 of Regulation D, or Regulation S promulgated under the Securities Act of 1933, as amended.

ITEM 3  DEFAULTS UPON SENIOR SECURITIES

Not applicable.

 

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5 OTHER INFORMATION

 

Not applicable. 

 

 

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ITEM 6 EXHIBITS

31.1

- Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended

 

31.2

- Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended

32.1

- Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)

32.2

- Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	GAMMACAN INTERNATIONAL, INC.
May 9, 2006	By:	/s/ CHAIME ORLEV
		Chaime Orlev,
		Chief Financial Officer