6-K
Check-Cap Ltd (MBAI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For August 2020
Commission File No. 001-36848
Check-Cap Ltd.
Check-Cap Building
Abba Hushi Avenue
P.O. Box 1271
Isfiya, 30090
Mount Carmel, Israel
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES.)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ 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): ____
This Form 6-K (including the text under the headings “Financial Results for the Second Quarter Ended June 30, 2020,” “Financial Results for the Six Months Ended June 30, 2020,” the accompanying financial statements, and “Forward Looking Statements” in Exhibit 99.1 and Exhibit 99.2) is incorporated by reference into the Post-Effective Amendment No. 1 to the Form S-8 Registration Statement File No. 333-203384, Form S-8 Registration Statement File No. 333-226490, and into the Form F-3 Registration Statements File Nos. 333-211065 and 333-225789.
Other Information
On August 6, 2020, Check-Cap Ltd. (the “Company”) issued a press release announcing its financial results for the second quarter of 2020. In addition, the Company released its consolidated financial statements as of June 30, 2020 (Unaudited).
A copy of both the press release and consolidated financial statements as of June 30, 2020 (Unaudited) are attached hereto as Exhibits 99.1 and 99.2 are incorporated herein by reference.
| Exhibit | |
|---|---|
| Exhibit No. | Description |
| 99.1 | Press Release, dated August 6, 2020 |
| 99.2 | Consolidated Financial Statements as of June 30, 2020 (Unaudited) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Check-Cap Ltd. | ||
|---|---|---|
| By: | /s/ Alex Ovadia | |
| Name: Alex Ovadia | ||
| Date: August 6, 2020 | Title: Chief Executive Officer |
Exhibit 99.1
Check-Cap Reports Second Quarter 2020 Financial Results and Corporate Highlights
IDE submission to the FDA for C-Scan® planned for the end of 2020; Initiation of a U.S. pivotal study planned for 2021
ISFIYA, Israel, August 6, 2020 - Check-Cap Ltd. (the "Company" or "Check-Cap") (NASDAQ: CHEK), (NASDAQ: CHEKZ), a clinical stage medical diagnostics company advancing the development of C-Scan®, the first and only patient-friendly preparation-free screening test to detect polyps before they may transform into colorectal cancer, today announced financial results for the second quarter and six months ended June 30, 2020.
Second Quarter and Recent Highlights:
· Strengthened balance sheet through gross proceeds of $16.3 million in registered direct offerings and a private placement of ordinary shares in the first half of 2020, followed by $9.6 million in a warrant exercise financing in July 2020. Company believes that it has sufficient capital to fund its ongoing operations and plans for at least the next 12 months.
· Investigational Device Exemption (IDE) submission to the FDA planned for the end of 2020, with initiation of a U.S. pivotal study of C-Scan planned for 2021.
“I am happy with the progress we made during the first six months of 2020 and delighted to observe our team’s commitment despite the ongoing global COVID-19 crisis. While some of the measures we took at the beginning of the pandemic slowed our anticipated progress, we have resumed near normal operations, including resuming ongoing collection of clinical data in Israel in the third quarter of 2020, and have been successfully adapting ourselves to the dynamic environment. " said Alex Ovadia, chief executive officer of Check-Cap. "We anticipate IDE submission to the FDA by the end of 2020 and continue to refine and advance C-Scan to support initiation of a U.S. pivotal study in 2021. This includes establishing manufacturing capacity, quality infrastructure and collection of substantial additional data on device usability."
Mr. Ovadia added, "We have strengthened our ability to achieve corporate objectives with a total of $25.8 million raised during 2020. As a result, and despite these challenging times, we believe that we are well-positioned to fund our ongoing operations well into 2021, including our plans toward the initiation of the pivotal U.S. trial, while exploring partnerships with potential strategic industry leaders. There is a significant global unmet need for a non-invasive, preparation-free, colon cancer screening technology to detect polyps before they may transform into colorectal cancer, compared to colonoscopy which is the current standard of care. We truly believe the patient-friendly C-Scan system can increase screening rates globally by eliminating the rigorous and unpleasant preparation that colonoscopy and other tests require,” said Alex Ovadia.
COVID-19 Corporate Update
In April 2020, as a consequence of the COVID-19 pandemic, the Company communicated it was taking necessary precautions to ensure the safety and well-being of its employees and their families in accordance with the directive of the Israel Ministry of Health, including enabling the majority of employees to work remotely and the remainder to continue working from the Company’s headquarters. In parallel, the Company temporarily suspended interactions between hospitals and healthcare professionals with its employees and clinical trial patients and temporarily implemented several cost saving measures.
As a result of the lifting of many government restrictions to control the spread of COVID-19 and the Company’s recent fundraisings, the Company resumed near normal operations including resuming its ongoing collection of clinical data in Israel in the third quarter of 2020 and it continues to implement health and safety measures according to guidelines from the Israel Ministry of Health.
It is too early to assess the full impact of COVID-19, but COVID-19 has affected our ability to initiate our planned pivotal study and commence pilot sales in Israel and Europe in our original timeframe. The extent to which the COVID-19 pandemic impacts the Company’s operations and planned timelines will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, the impact on the global economy, the impact of a second and any further waves of COVID-19 and the actions that may be required to contain the COVID-19 pandemic or treat its impact.
Financial Results for the Second Quarter Ended June 30, 2020
Research and development expenses were $2.1 million for the three months ended June 30, 2020, compared to $2.6 million for the same period in 2019. The decrease is primarily due to (i) a decrease of $0.3 million in clinical expenses mainly due to suspension of clinical activities in the second quarter of 2020 due to the COVID-19 pandemic, (ii) higher expenses for the pilot study in the U.S and post CE study in 2019, and (iii) a decrease of $0.2 million in other research and development expenses mainly due to several cost reduction measures implemented by the Company in the second quarter of 2020.
General and administrative expenses remained constant at $0.9 million for the three months ended June 30, 2020, and three months ended June 30, 2019.
Operating loss was $2.9 million for the three months ended June 30, 2020, compared to an operating loss of $3.5 million for the same period in 2019.
Net loss was $2.9 million for the three months ended June 30, 2020, compared to $3.4 million for the same period in 2019.
Cash and cash equivalents, restricted cash and short-term bank deposits totaled $16.4 million as of June 30, 2020, compared with $9.3 million as of March 31, 2020 and $8.0 million as of December 31, 2019. During the second quarter of 2020, the Company completed three registered direct offerings resulting in gross proceeds of $11.5 million (approximately $10.1 million net of offering expenses). Subsequent to the end of the second quarter, on July 27, 2020, the Company completed a warrant exercise financing resulting in gross proceeds of $9.6 million (approximately $8.7 million net of offering expenses). The Company believes that it has sufficient capital to fund its ongoing operations and plans for at least the next 12 months.
The number of outstanding ordinary shares as of June 30, 2020 was 30,172,943. As of August 4, 2020, the number of our outstanding ordinary shares was 46,231,661.
Financial Results for the Six Months Ended June 30, 2020
Research and development expenses were $4.5 million for the six months ended June 30, 2020, compared to $4.9 million for the same period in 2019. The decrease is primarily due to (i) a decrease of $0.5 million in clinical expenses mainly due to suspension of clinical activities in the second quarter of 2020 due to the COVID-19 pandemic, (ii) higher expenses for the pilot study in the U.S and post CE study in 2019, (iii) a decrease of $0.2 million in other research and development expenses mainly due to several cost reduction measures implemented by the Company in the second quarter of 2020, and (iv) a decrease of $0.2 million in share-based compensation. The foregoing decrease was offset in part by an increase of $0.4 million in salaries and related expenses as a result of an expansion in head count as compared to the same period in 2019.
General and administrative expenses were $1.9 million for the six months ended June 30, 2020, compared to $1.7 million for the same period in 2019. The increase was primarily due to an increase of $0.1 million in share-based compensation and $0.2 million in other general expenses, offset in part by a decrease of $0.1 million in professional services expenses.
Operating loss was $6.4 million for the six months ended June 30, 2020, compared to $6.7 million in the same period in 2019.
Net loss was $6.3 million for the six months ended June 30, 2020, compared to $6.5 million for the same period in 2019.
Net cash used in operating activities was $6.4 million for the six months ended June 30, 2020, compared to Net cash used in operating activities of $6.3 million for the same period in 2019.
[Financial Tables to Follow]
About Check-Cap
Check-Cap is a clinical stage medical diagnostics company aiming to redefine colorectal cancer (CRC) screening and prevention through the introduction of C-Scan®, the first and only patient-friendly preparation-free screening test to detect polyps before they may transform into colorectal cancer. The Company’s disruptive capsule-based screening technology aims to significantly increase screening adherence worldwide and help millions of people to stay healthy through preventive CRC screening. C-Scan uses an ultra-low dose X-ray capsule, an integrated positioning, control and recording system, as well as proprietary software to generate a 3D map of the inner lining of the colon. C-Scan is non-invasive and requires no preparation or sedation, allowing the patients to continue their daily routine with no interruption as the capsule is propelled through the gastrointestinal tract by natural motility.
Legal Notice Regarding Forward-Looking Statements
This press release contains "forward-looking statements." Words such as "may," "should," "could," "would," "predicts," "potential," "continue," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," and similar expressions, as well as statements in future tense, often signify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information that the Company has when those statements are made or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. For a discussion of these and other risks that could cause such differences and that may affect the realization of forward-looking statements, please refer to the "Forward-looking Statements" and "Risk Factors" in the Company's Annual Report on Form 20-F for the year ended December 31, 2019 and other filings with the Securities and Exchange Commission (SEC). Investors and security holders are urged to read these documents free of charge on the SEC's web site at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.
Investor Contacts
Irina Koffler
LifeSci Advisors, LLC
646.970.4681
ikoffler@lifesciadvisors.com
Meirav Gomeh-Bauer
LifeSci Advisors, LLC
+972(0)-54-476-4979
Meirav@lifesciadvisors.com
CHECK CAP LTD
CONSOLIDATED UNAUDITED BALANCE SHEETS
(U.S. dollars in thousands, except share and per share data)
| June 30, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||
| Assets | ||||||
| Current assets | ||||||
| Cash and cash equivalents | 8,390 | 7,685 | ||||
| Restricted cash | 350 | 350 | ||||
| Short-term bank deposit | 7,656 | - | ||||
| Prepaid expenses and other current assets | 503 | 400 | ||||
| Total current assets | 16,899 | 8,435 | ||||
| Non-current assets | ||||||
| Property and equipment, net | 630 | 540 | ||||
| Operating leases | 347 | 454 | ||||
| Total non-current assets | 977 | 994 | ||||
| Total assets | 17,876 | 9,429 | ||||
| Liabilities and shareholders' equity | ||||||
| Current liabilities | ||||||
| Accounts payable and accruals | ||||||
| Trade | 643 | 989 | ||||
| Other | 258 | 490 | ||||
| Employees and payroll accruals | 1,471 | 1,101 | ||||
| Operating lease liabilities | 204 | 222 | ||||
| Total current liabilities | 2,576 | 2,802 | ||||
| Non-current liabilities | ||||||
| Royalties provision | 177 | 182 | ||||
| Operating lease liabilities | 121 | 211 | ||||
| Total non-current liabilities | 298 | 393 | ||||
| Shareholders' equity | ||||||
| Share capital, Ordinary shares, 2.4 NIS par value (90,000,000 authorized shares as of June 30, 2020 and December | ||||||
| 31, 2019, respectively; 30,172,943 and 8,272,908 shares issued and outstanding as of June 30, 2020 and December | ||||||
| 31, 2019, respectively) | 20,348 | 5,407 | ||||
| Additional paid-in capital | 78,110 | 77,964 | ||||
| Accumulated deficit | (83,456 | ) | (77,137 | ) | ||
| Total shareholders' equity | 15,002 | 6,234 | ||||
| Total liabilities and shareholders' equity | 17,876 | 9,429 |
CHECK CAP LTD
CONSOLIDATED UNAUDITED STATEMENTS OF COMPREHENSIVE LOSS
(U.S. dollars in thousands, except share and per share data)
| Six months ended June 30, | Three months ended June 30, | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | ||||||
| Research and development expenses, net | 4,513 | 4,909 | 2,051 | 2,570 | |||||
| General and administrative expenses | 1,855 | 1,749 | 898 | 924 | |||||
| Operating loss | 6,368 | 6,658 | 2,949 | 3,494 | |||||
| Finance income, net | 49 | 153 | 61 | 139 | |||||
| Loss before income tax | 6,319 | 6,505 | 2,888 | 3,355 | |||||
| Taxes on income | - | - | - | - | |||||
| Net loss | 6,319 | 6,505 | 2,888 | 3,355 | |||||
| Other comprehensive loss: | |||||||||
| Change in fair value of cash flow hedge | - | 13 | - | (4 | ) | ||||
| Comprehensive loss | 6,319 | 6,518 | 2,888 | 3,351 | |||||
| Net loss per ordinary share - basic and diluted | 0.38 | 0.85 | 0.12 | 0.41 | |||||
| Weighted average number of ordinary shares outstanding - basic and diluted | 16,676,469 | 7,663,045 | 23,396,152 | 8,238,034 |
CHECK CAP LTD.
CONSOLIDATED UNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(U.S. dollars in thousands, except share and per share data)
| Additional | Other | Total | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| paid-in | comprehensive | Accumulated | shareholders’ | |||||||||||
| Amount | capital | loss | deficit | equity | ||||||||||
| Balance as of January 1, 2020 | 8,272,908 | $ | 5,407 | $ | 77,964 | $ | - | $ | (77,137 | ) | $ | 6,234 | ||
| Issuance of ordinary shares in private | ||||||||||||||
| placement, net of issuance expenses in | ||||||||||||||
| an amount of approximately 30 | 2,720,178 | 1,894 | 2,837 | - | - | 4,731 | ||||||||
| RSU vesting | 6,633 | 4 | (4 | ) | - | |||||||||
| Share-based compensation | - | - | 123 | - | - | 123 | ||||||||
| Net loss | - | - | - | - | (3,431 | ) | (3,431 | ) | ||||||
| Balance as of March 31, 2020 | 10,999,719 | $ | 7,305 | $ | 80,920 | - | $ | (80,568 | ) | $ | 7,657 | |||
| Issuance of ordinary shares and warrants in the April – May 2020 Financings, net of issuance expenses in an amount of 1,361 | 19,166,670 | $ | 13,039 | $ | (2,900 | ) | - | - | $ | 10,139 | ||||
| RSU vesting | 6,554 | $ | 4 | (4 | ) | - | ||||||||
| Share-based compensation | - | - | $ | 94 | - | $ | 94 | |||||||
| Net loss | - | - | - | - | $ | (2,888 | ) | $ | (2,888 | ) | ||||
| Balance as of June 30, 2020 | 30,172,943 | $ | 20,348 | $ | 78,110 | $ | - | $ | (83,456 | ) | $ | 15,002 |
All values are in US Dollars.
| Balance as of January 1, 2019 | 5,330,684 | $ | 3,456 | $ | 72,888 | $ | (13 | ) | $ | (63,301 | ) | $ | 13,030 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Issuance of ordinary shares and warrants in the 2019 | |||||||||||||||
| registered direct offering, net of issuance | |||||||||||||||
| expenses in an amount of $987 | 2,906,376 | 1,928 | 4,583 | - | - | 6,511 | |||||||||
| RSU vesting | 718 | (* | ) | - | (* | ) | |||||||||
| Share-based compensation | - | - | 83 | - | - | 83 | |||||||||
| Other comprehensive loss | - | - | - | 17 | - | 17 | |||||||||
| Net loss | - | - | - | - | (3,150 | ) | (3,150 | ) | |||||||
| Balance as of March 31, 2019 | 8,237,778 | $ | 5,384 | $ | 77,554 | $ | 4 | $ | (66,451 | ) | 16,491 | ||||
| Share-based compensation | - | 186 | 186 | ||||||||||||
| RSU vesting | 684 | (* | ) | - | - | - | (* | ) | |||||||
| Other comprehensive loss | - | - | - | (4 | ) | - | (4 | ) | |||||||
| Net loss | - | - | - | - | (3,355 | ) | (3,355 | ) | |||||||
| Balance as of June 30, 2019 | 8,238,462 | $ | 5,384 | $ | 77,740 | $ | - | $ | (69,806 | ) | 13,318 |
(*) Represents amount less than 1 thousand.
CHECK-CAP LTD.
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands, except share and per share data)
| Six months ended | ||||||
|---|---|---|---|---|---|---|
| June 30, | ||||||
| 2020 | 2019 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
| Net loss for the period | (6,319 | ) | (6,505 | ) | ||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||
| Depreciation | 68 | 55 | ||||
| Share-based compensation | 217 | 269 | ||||
| Financial (income) expenses, net | (14 | ) | (32 | ) | ||
| Changes in assets and liabilities items: | ||||||
| Decrease (increase) in prepaid and other current assets and non-current assets | (100 | ) | 50 | |||
| Increase (decrease) in trade accounts payable, accruals and other current liabilities | (591 | ) | (204 | ) | ||
| Increase (decrease) in employees and payroll accruals | 370 | 15 | ||||
| Increase (decrease) in royalties provision | (5 | ) | 3 | |||
| Net cash used in operating activities | (6,374 | ) | (6,349 | ) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||
| Purchase of property and equipment | (140 | ) | (49 | ) | ||
| Proceeds from (investment in) short-term bank and other deposit | (7,651 | ) | (370 | ) | ||
| Net cash used in investing activities | (7,791 | ) | (419 | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||
| Issuance of ordinary shares and warrants in the 2019 registered direct offering, net of issuance expenses | - | 6,511 | ||||
| Issuance of ordinary shares in the private placement, net of issuance expenses | 4,731 | - | ||||
| Issuance of ordinary shares and warrants in the 2020 registered direct offerings, net of issuance expenses | 10,139 | |||||
| Net cash provided by financing activities | 14,870 | 6,511 | ||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 705 | (257 | ) | |||
| Cash, cash equivalents and restricted cash at the beginning of the period | 8,035 | 8,922 | ||||
| Cash, cash equivalents and restricted cash at the end of the period | 8,740 | 8,665 |
CHECK-CAP LTD.
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands, except share and per share data)
Supplemental information for Cash Flow:
| Six months ended<br><br> <br>June 30, | ||||
|---|---|---|---|---|
| 2020 | 2019 | |||
| Supplemental disclosure of non-cash flow information | ||||
| Purchase of property and equipment included in accounts payable and accrued expenses | 15 | - | ||
| Recognition of operating leases and operating lease liabilities from adoption of ASU 2016-02 | - | 490 |
Exhibit 99.2
CHECK CAP LTD.
CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
AS OF JUNE 30, 2020
CHECK CAP LTD.
CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS AS OF JUNE 30, 2020
Table of Contents
| Page | |
|---|---|
| Financial Statements: | |
| Consolidated Unaudited Balance Sheets | 3 |
| Consolidated Unaudited Statements of Comprehensive Loss | 4 |
| Consolidated Unaudited Statements of Changes in shareholders’ Equity | 5 |
| Consolidated Unaudited Statements of Cash Flows | 6-7 |
| Notes to Consolidated Unaudited Financial Statements | 8-14 |
2
CHECK CAP LTD
CONSOLIDATED UNAUDITED BALANCE SHEETS
(U.S. dollars in thousands, except share and per share data)
| June 30, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||
| Assets | ||||||
| Current assets | ||||||
| Cash and cash equivalents | 8,390 | 7,685 | ||||
| Restricted cash | 350 | 350 | ||||
| Short-term bank deposit | 7,656 | - | ||||
| Prepaid expenses and other current assets | 503 | 400 | ||||
| Total current assets | 16,899 | 8,435 | ||||
| Non-current assets | ||||||
| Property and equipment, net | 630 | 540 | ||||
| Operating leases | 347 | 454 | ||||
| Total non-current assets | 977 | 994 | ||||
| Total assets | 17,876 | 9,429 | ||||
| Liabilities and shareholders' equity | ||||||
| Current liabilities | ||||||
| Accounts payable and accruals | ||||||
| Trade | 643 | 989 | ||||
| Other | 258 | 490 | ||||
| Employees and payroll accruals | 1,471 | 1,101 | ||||
| Operating lease liabilities | 204 | 222 | ||||
| Total current liabilities | 2,576 | 2,802 | ||||
| Non-current liabilities | ||||||
| Royalties provision | 177 | 182 | ||||
| Operating lease liabilities | 121 | 211 | ||||
| Total non-current liabilities | 298 | 393 | ||||
| Shareholders' equity | ||||||
| Share capital, Ordinary shares, 2.4 NIS par value (90,000,000 authorized shares as of June 30, 2020 and December | ||||||
| 31, 2019, respectively; 30,172,943 and 8,272,908 shares issued and outstanding as of June 30, 2020 and December | ||||||
| 31, 2019, respectively) | 20,348 | 5,407 | ||||
| Additional paid-in capital | 78,110 | 77,964 | ||||
| Accumulated deficit | (83,456 | ) | (77,137 | ) | ||
| Total shareholders' equity | 15,002 | 6,234 | ||||
| Total liabilities and shareholders' equity | 17,876 | 9,429 |
The accompanying notes to the consolidated unaudited financial statements are an integral part of them.
3
CHECK CAP LTD
CONSOLIDATED UNAUDITED STATEMENTS OF COMPREHENSIVE LOSS
(U.S. dollars in thousands, except share and per share data)
| Six months ended June 30, | Three months ended June 30, | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | ||||||
| Research and development expenses, net | 4,513 | 4,909 | 2,051 | 2,570 | |||||
| General and administrative expenses | 1,855 | 1,749 | 898 | 924 | |||||
| Operating loss | 6,368 | 6,658 | 2,949 | 3,494 | |||||
| Finance income, net | 49 | 153 | 61 | 139 | |||||
| Loss before income tax | 6,319 | 6,505 | 2,888 | 3,355 | |||||
| Taxes on income | - | - | - | - | |||||
| Net loss | 6,319 | 6,505 | 2,888 | 3,355 | |||||
| Other comprehensive loss: | |||||||||
| Change in fair value of cash flow hedge | - | 13 | - | (4 | ) | ||||
| Comprehensive loss | 6,319 | 6,518 | 2,888 | 3,351 | |||||
| Net loss per ordinary share - basic and diluted | 0.38 | 0.85 | 0.12 | 0.41 | |||||
| Weighted average number of ordinary shares outstanding - basic and diluted | 16,676,469 | 7,663,045 | 23,396,152 | 8,238,034 |
The accompanying notes to the consolidated unaudited financial statements are an integral part of them.
4
CHECK CAP LTD.
CONSOLIDATED UNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(U.S. dollars in thousands, except share and per share data)
| Additional | Other | Total | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| paid-in | comprehensive | Accumulated | shareholders’ | |||||||||||
| Amount | capital | loss | deficit | equity | ||||||||||
| Balance as of January 1, 2020 | 8,272,908 | $ | 5,407 | $ | 77,964 | $ | - | $ | (77,137 | ) | $ | 6,234 | ||
| Issuance of ordinary shares in private | ||||||||||||||
| placement, net of issuance expenses in | ||||||||||||||
| an amount of approximately 30 | 2,720,178 | 1,894 | 2,837 | - | - | 4,731 | ||||||||
| RSU vesting | 6,633 | 4 | (4 | ) | - | |||||||||
| Share-based compensation | - | - | 123 | - | - | 123 | ||||||||
| Net loss | - | - | - | - | (3,431 | ) | (3,431 | ) | ||||||
| Balance as of March 31, 2020 | 10,999,719 | $ | 7,305 | $ | 80,920 | - | $ | (80,568 | ) | $ | 7,657 | |||
| Issuance of ordinary shares and warrants in the <br> April – May 2020 Financings, net of issuance | ||||||||||||||
| expenses in an amount of 1,361 (1) | 19,166,670 | $ | 13,039 | $ | (2,900 | ) | - | - | $ | 10,139 | ||||
| RSU vesting | 6,554 | $ | 4 | (4 | ) | - | ||||||||
| Share-based compensation | - | - | $ | 94 | - | $ | 94 | |||||||
| Net loss | - | - | - | - | $ | (2,888 | ) | $ | (2,888 | ) | ||||
| Balance as of June 30, 2020 | 30,172,943 | $ | 20,348 | $ | 78,110 | $ | - | $ | (83,456 | ) | $ | 15,002 |
All values are in US Dollars.
| Balance as of January 1, 2019 | 5,330,684 | $ | 3,456 | $ | 72,888 | $ | (13 | ) | $ | (63,301 | ) | $ | 13,030 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Issuance of ordinary shares and warrants in | |||||||||||||||
| the 2019 registered direct offering, net of | |||||||||||||||
| issuance expenses in an amount of $987 (2) | 2,906,376 | 1,928 | 4,583 | - | - | 6,511 | |||||||||
| RSU vesting | 718 | (* | ) | - | (* | ) | |||||||||
| Share-based compensation | - | - | 83 | - | - | 83 | |||||||||
| Other comprehensive loss | - | - | - | 17 | - | 17 | |||||||||
| Net loss | - | - | - | - | (3,150 | ) | (3,150 | ) | |||||||
| Balance as of March 31, 2019 | 8,237,778 | $ | 5,384 | $ | 77,554 | $ | 4 | $ | (66,451 | ) | 16,491 | ||||
| Share-based compensation | - | 186 | 186 | ||||||||||||
| RSU vesting | 684 | (* | ) | - | - | - | (* | ) | |||||||
| Other comprehensive loss | - | - | - | (4 | ) | - | (4 | ) | |||||||
| Net loss | - | - | - | - | (3,355 | ) | (3,355 | ) | |||||||
| Balance as of June 30, 2019 | 8,238,462 | $ | 5,384 | $ | 77,740 | $ | - | $ | (69,806 | ) | 13,318 | ||||
| (1) | See Note 5(2). | ||||||||||||||
| --- | --- | ||||||||||||||
| (2) | Includes pre-funded warrants to purchase 1,024,876 ordinary shares at a purchase price of $2.57 per pre-funded warrant, issued in connection with the 2019 registered direct offering. | ||||||||||||||
| --- | --- | ||||||||||||||
| (*) | Represents amount less than 1 thousand. | ||||||||||||||
| --- | --- |
5
CHECK-CAP LTD.
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands, except share and per share data)
| Six months ended | ||||||
|---|---|---|---|---|---|---|
| June 30, | ||||||
| 2020 | 2019 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
| Net loss for the period | (6,319 | ) | (6,505 | ) | ||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||
| Depreciation | 68 | 55 | ||||
| Share-based compensation | 217 | 269 | ||||
| Financial (income) expenses, net | (14 | ) | (32 | ) | ||
| Changes in assets and liabilities items: | ||||||
| Decrease (increase) in prepaid and other current assets and non-current assets | (100 | ) | 50 | |||
| Increase (decrease) in trade accounts payable, accruals and other current liabilities | (591 | ) | (204 | ) | ||
| Increase (decrease) in employees and payroll accruals | 370 | 15 | ||||
| Increase (decrease) in royalties provision | (5 | ) | 3 | |||
| Net cash used in operating activities | (6,374 | ) | (6,349 | ) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||
| Purchase of property and equipment | (140 | ) | (49 | ) | ||
| Proceeds from (investment in) short-term bank and other deposit | (7,651 | ) | (370 | ) | ||
| Net cash used in investing activities | (7,791 | ) | (419 | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||
| Issuance of ordinary shares and warrants in the 2019 registered direct offering, net of issuance expenses | - | 6,511 | ||||
| Issuance of ordinary shares in the private placement, net of issuance expenses | 4,731 | - | ||||
| Issuance of ordinary shares and warrants in the 2020 registered direct offerings, net of issuance expenses | 10,139 | |||||
| Net cash provided by financing activities | 14,870 | 6,511 | ||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 705 | (257 | ) | |||
| Cash, cash equivalents and restricted cash at the beginning of the period | 8,035 | 8,922 | ||||
| Cash, cash equivalents and restricted cash at the end of the period | 8,740 | 8,665 |
6
CHECK-CAP LTD.
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands, except share and per share data)
Supplemental information for Cash Flow:
| Six months ended<br><br> <br>June 30, | ||||
|---|---|---|---|---|
| 2020 | 2019 | |||
| Supplemental disclosure of non-cash flow information | ||||
| Purchase of property and equipment included in accounts payable and accrued expenses | 15 | - | ||
| Recognition of operating leases and operating lease liabilities from adoption of ASU 2016-02 | - | 490 |
The accompanying notes to the consolidated unaudited financial statements are an integral part of them.
7
CHECK CAP LTD
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)
NOTE 1 - GENERAL INFORMATION
| A. | General |
|---|---|
| 1) | Check-Cap Ltd. (together with its wholly-owned subsidiary, the "Company") was incorporated under the laws of the State of Israel. The registered address of its offices is 29 Abba Hushi Ave, Isfiya 3009000, Israel. |
| --- | --- |
| 2) | Check-Cap Ltd has a wholly-owned subsidiary, Check-Cap US, Inc., incorporated under the laws of the State of Delaware on May 15, 2015. |
| --- | --- |
| 3) | The Company is a clinical-stage medical diagnostics company aiming to redefine colorectal cancer (CRC) screening and prevention through the introduction of C-Scan®, the first and only patient-friendly preparation-free screening test to<br> detect polyps before they may transform into cancer. The Company’s disruptive capsule-based screening technology aims to significantly increase screening adherence worldwide and help millions of people to stay healthy through preventive CRC<br> screening. C-Scan uses an ultra-low dose X-ray capsule, an integrated positioning, control and recording system, as well as proprietary software to generate a 3D map of the inner lining of the colon. C-Scan is non-invasive and requires no<br> preparation or sedation, allowing the patients to continue their daily routine with no interruption as the capsule is propelled through the gastrointestinal tract by natural motility. |
| --- | --- |
| 4) | On February 24, 2015 the Company consummated an Initial Public Offering in the U.S. (the "IPO") concurrently with a Private Placement (the "Private Placement").<br><br> <br><br><br> <br>On August 11, 2016, the Company consummated a registered direct offering of ordinary shares and pre-funded warrants.<br><br> <br><br><br> <br>On June 2, 2017, the Company consummated a registered direct offering of ordinary shares and a simultaneous private placement of warrants.<br><br> <br><br><br> <br>On November 22, 2017, the Company consummated a registered direct offering of ordinary shares and a simultaneous private placement of warrants.<br><br> <br><br><br> <br>On May 8, 2018, the Company consummated an underwritten public offering of ordinary shares, pre-funded warrants and warrants.<br><br> <br><br><br> <br>On February 6, 2019, the Company consummated a registered direct offering of ordinary shares, and pre-funded warrants and warrants.<br><br> <br><br><br> <br>In February 2020, the Company consummated a private placement of ordinary shares, See Note 5(1).<br><br> <br><br><br> <br>During April and May 2020, the Company consummated three registered direct offerings of ordinary shares and simultaneous private placements of warrants. See Note<br> 5(2).<br><br> <br><br><br> <br>On July 27, 2020, the Company consummated a warrant exercise transaction to purchase ordinary shares and a simultaneous private placement of warrants. See Note 7.<br><br> <br><br><br> <br>The Company's ordinary shares and Series C Warrants are listed on the NASDAQ Capital Market under the symbols "CHEK" and CHEKZ”, respectively. |
| --- | --- |
| 5) | On June 5, 2020, the Company announced that it received a notification from the Nasdaq Listing Qualifications that it is not in compliance with the minimum bid price requirement for continued listing set forth in Listing Rule 5550(a)(2),<br> which requires listed securities to maintain a minimum bid price of $1.00 per share. Further, on April 16, 2020, in response to the COVID-19 pandemic (“COVID-19”), and the resulting related market conditions, Nasdaq has elected to provide<br> temporary relief from the bid price requirements by tolling compliance through June 30, 2020. As a result of the tolling of the bid price requirements, the Company has 180 calendar days from July 1, 2020, or until December 28, 2020, to regain<br> compliance with the minimum bid price requirement. The Company may regain compliance, if at any time during this 180 day period, the closing bid price of its ordinary shares is at least $1 for a minimum of ten consecutive business days, in<br> which case the Company will be provided with a written confirmation of compliance and the matter will be closed. The Company may then be eligible for an additional 180-day grace period if it meets the Nasdaq Capital Market's initial listing<br> standards with the exception of the minimum bid price requirement. |
| --- | --- |
8
CHECK CAP LTD
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)
NOTE 1 - GENERAL INFORMATION (Cont.)
| 6) | In late 2019, a novel strain of COVID-19, also known as coronavirus, was reported in Wuhan, China. While initially the outbreak<br> was largely concentrated in China, it has now spread globally, including to Israel and the United States. In March 2020, the World Health Organization declared COVID-19 a pandemic and recommended containment and mitigation measures<br> worldwide. Accordingly, many countries around the world, including Israel, have implemented significant governmental measures to control the spread of the virus, including temporary closure of businesses, severe restrictions on travel and<br> the movement of people, and other material limitations on the conduct of business. As a consequence, the Company has experienced temporary disruptions to its operations and temporarily suspended its clinical studies. Further, in accordance<br> with the directive of the Israel Ministry of Health, during the first wave of the COVID-19 pandemic in Israel, the majority of the Company’s employees worked remotely while a select few continued to work from its headquarters. Also, the Company temporarily suspended interactions between hospitals and healthcare professionals and its employees and clinical trial patients. In<br> addition, to manage this crisis, the Company implemented several cost reduction measures, including a temporary 15% reduction in salaries for all employees and management and the fees of the members of its board of directors and lowered<br> monthly expenditures by temporarily placing a number of operational employees on unpaid leave. As a result of lowered infection rates in Israel in June 2020, which resulted in the lifting of many government restrictions to control the<br> spread of the virus as well as the Company’s improved financial position following its financings in April and May 2020, the Company resumed near normal operations and restored salaries to their original levels. However, during July 2020,<br> infection rates in Israel began to significantly increase and the country is in the midst of a “second wave”. Consequently, the Company has taken few<br> measures according to the Israel Ministry of Health’s guidelines, including remote working whenever possible, physical separation between employees and daily employee health monitoring. It is still too early to assess the full impact of the<br> coronavirus outbreak, but coronavirus is affecting the Company’s ability to initiate its planned pivotal study and commence pilot sales in Israel and Europe in its original timeframe. The extent to which the COVID-19 pandemic shall impact<br> the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, the impact on the global economy, the impact of a second<br> and third wave of COVID-19 and the actions that may be required to contain the coronavirus or treat its impact. In particular, the continued spread of the coronavirus globally, could materially adversely impact the Company’s operations and<br> workforce, including its research and clinical trials and its ability to continue raise capital, could affect the operations of key governmental agencies, such as the FDA, which may delay its development plans, and could result in the<br> inability of the Company’s suppliers to deliver components or raw materials on a timely basis or at all, each of which in turn could have a material adverse impact on the Company’s business, financial condition and results of operation. |
|---|---|
| 7) | The consolidated financial statements of the Company as of and for the six months ended June 30, 2020 include the financial statements of the Company and its wholly-owned U.S. subsidiary. |
| --- | --- |
| B. | Going concern and management plans<br><br> <br><br><br> <br>The accompanying consolidated unaudited financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of<br> business. Since its inception, the Company has devoted substantially all of its efforts to research and development, clinical trials, recruiting management and technical staff, acquiring assets and raising capital. The Company is still<br> in its development and clinical stage and has not yet generated revenues. The extent of the Company's future operating losses and the timing of becoming profitable are uncertain. The Company has incurred losses net of $6,319 and $6,505<br> for the six months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, the Company's accumulated deficit was $83,456. The Company has funded its operations to date primarily through equity financings and through grants from<br> the Israel Innovation Authority of the Ministry of Economy and Industry (formerly the Office of the Chief Scientist of the Ministry of Economy and Industry). |
| --- | --- |
9
CHECK CAP LTD
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)
NOTE 1 - GENERAL INFORMATION (Cont.)
| B. | Going concern and management plans (Cont.)<br><br> <br><br><br> <br>Additional funding will be required to complete the Company's research and development and clinical trials, to attain regulatory approvals, to<br> begin the commercialization efforts of the Company's C-Scan system and to achieve a level of sales adequate to support the Company's cost structure.<br><br> <br><br><br> <br>To meet its capital needs, the Company is considering multiple alternatives, including, but not limited to, additional equity financings and<br> other funding transactions. While the Company has been successful in raising financing in the past, there can be no assurance that it will be able to do so in the future on a timely basis on terms acceptable to the Company, or at all.<br> Uncertain market conditions and approval by regulatory bodies and adverse results from clinical trials may (among other reasons) adversely impact the Company's ability to raise capital in the future.<br><br> <br><br><br> <br>The Company believes that following the above financings, current cash on hand will be sufficient to fund operations for at least 12 months from the date of issuance of these consolidated unaudited financial<br> statements. Management expects that the Company will continue to generate losses from the development, clinical development and regulatory activities of the Company's C-Scan system, which will result in a negative cash flow from operating<br> activity. This has led management to conclude that substantial doubt about the Company's ability to continue as a going concern exists. In the event the Company is unable to successfully raise additional capital, the Company will not have<br> sufficient cash flows and liquidity to finance its business operations as currently contemplated. Accordingly, in such circumstances the Company would be compelled to immediately reduce general and administrative expenses and delay<br> research and development projects and clinical trials, until it is able to obtain sufficient financing. If such sufficient financing is not received timely, the Company would then need to pursue a plan to license or sell its assets, seek<br> to be acquired by another entity, cease operations and/or seek bankruptcy protection. The Company's consolidated unaudited financial statements do not reflect any adjustments that might result from the outcome of this uncertainty. |
|---|
NOTE 2- CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
The accompanying consolidated unaudited financial statements have been prepared in a condensed format and include the consolidated unaudited financial operations of the Company as of June 30, 2020 and for the six and three month periods then ended, in accordance with U.S. GAAP, relating to the preparation of financial statements for interim periods.
Accordingly, the accompanying consolidated unaudited financial statements do not include all the information and footnotes required by generally accepted accounting principles for complete set of financial statements. These consolidated unaudited financial statements should be read in conjunction with the audited financial statements and the accompanying notes of the Company for the year ended December 31, 2019 that are included in the Company's Annual Report on Form 20-F, filed with the Securities and Exchange Commission on March 6, 2020 (the "Annual Report"). 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 six months ended June 30, 2020, are not necessarily indicative of the results that may be expected for the year ended December 31, 2020.
10
CHECK CAP LTD
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)
NOTE 3- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies that have been applied in the preparation of the unaudited consolidated financial statements are identical to those that were applied in preparation of the Company’s most recent annual financial statements in connection with its Annual Report on Form 20-F except for the adoption of the following:
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments – Credit Losses” to improve information on credit losses for financial assets and net investment in leases that are not accounted for at fair value through net income. The ASU replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. This ASU was effective for the Company beginning on January 1, 2020. This standard did not have a material impact on the Company’s consolidated unaudited financial statements.
In August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and was effective for the Company beginning on January 1, 2020. The standard did not have a material impact on the Company’s consolidated unaudited financial statements.
NOTE 4- LEASES
On January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”) using the modified retrospective approach for all lease arrangements at the beginning period of adoption.
The Company leases, approximately 900 square meters at a facility located in Isfiya, Israel under an operating lease agreement expiring on May 31, 2022. In addition, the Company leases vehicles under various operating lease agreements.
As of June 30, 2020, the Company’s operating lease assets and lease liabilities (both the current and non-current portion) for operating leases totalled $347 and $325, respectively.
Supplemental cash flow information related to operating leases was as follows:
| Six<br><br> <br>Months<br><br> <br>Ended<br><br> <br>June 30,<br><br> <br>2020 | ||
|---|---|---|
| Cash payments for operating leases | $ | 113 |
The Company uses its incremental borrowing rate as the discount rate for its leases, as the implicit rate in the lease is not readily determinable. As of June 30, 2020, the Company’s operating leases had a weighted average remaining lease term of 1.8 years and a weighted average borrowing rate of approximately 5%. Upon adoption of ASC 842, discount rates for existing operating leases were established as of January 1, 2019. Future lease payments under operating leases as of June 20, 2020 were as follows:
| Operating | |||
|---|---|---|---|
| Leases | |||
| Remainder of 2020 | $ | 103 | |
| 2021 | $ | 179 | |
| 2022 | $ | 56 | |
| 2023 | $ | - | |
| Total future lease payments | $ | 338 | |
| Less imputed interest | (13 | ) | |
| Total lease liability balance | $ | 325 |
11
CHECK CAP LTD
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)
NOTE 5 - SHAREHOLDERS' EQUITY
The following changes occurred during the six months ended June 30, 2020:
| 1. | On December 19, 2019, the Company entered into definitive agreements with certain investors to sell an aggregate of 2,720,178 ordinary shares at a purchase price of $1.75 per share in a private placement,<br> resulting in gross proceeds of approximately $4,760, or approximately $4,730 net of issuance expenses in the amount of $30. The private placement was subject to customary closing conditions and was completed in February 2020. |
|---|---|
| 2. | April and May 2020 Financings: |
| --- | --- |
| A. | On April 22, 2020, the Company issued to certain institutional investors in a registered direct offering an aggregate amount of 6,666,669 ordinary shares, at a purchase price of $0.60 per share and in a simultaneous private placement<br> unregistered warrants to purchase up to an aggregate of 6,666,669 ordinary shares in a concurrent private placement (the “April 2020 Financing"). The warrants are immediately exercisable and will<br> expire five and one-half years from the issuance date at an exercise price of $0.80 per ordinary share, subject to adjustment as set forth in the warrant agreement. The Company received gross proceeds from the registered direct offering of<br> approximately $4,000. The Company also issued unregistered placement agent warrants to purchase up to an aggregate of 466,667 ordinary shares on the same terms as the warrants issued to the investors in the private placement, except that the<br> placement agent warrants have a term of five years and an exercise price of $0.75 per share. |
| --- | --- |
| B. | On May 4, 2020, the Company issued to certain institutional investors in a registered direct offering an aggregate amount of 7,500,001 ordinary shares, at a purchase price of $0.60 per share and in a simultaneous private placement<br> unregistered warrants to purchase up to an aggregate of 7,500,001 ordinary shares in a concurrent private placement (the “First May 2020 Financing"). The warrants are immediately exercisable and will expire five and one-half years from the<br> issuance date at an exercise price of $0.80 per ordinary share, subject to adjustment as set forth in the warrant agreement. The Company received gross proceeds from the registered direct offering of approximately $4,500. The Company also<br> issued unregistered placement agent warrants to purchase up to an aggregate of 525,000 ordinary shares on the same terms as the warrants issued to the investors in the private placement, except that the placement agent warrants have a term of<br> five years and an exercise price of $0.75 per share. |
| --- | --- |
| C. | On May 13, 2020, the Company issued to certain institutional investors in a registered direct offering an aggregate amount of 5,000,000 ordinary shares, at a purchase price of $0.60 per share and in a simultaneous private placement<br> unregistered warrants to purchase up to an aggregate of 5,000,000 ordinary shares in a concurrent private placement (the “Second May 2020 Financing"). The warrants are immediately exercisable and will<br> expire five and one-half years from the issuance date at an exercise price of $0.80 per ordinary share, subject to adjustment as set forth in the warrant agreement. The Company received gross proceeds from the registered direct offering of<br> approximately $3,000. The Company also issued unregistered placement agent warrants to purchase up to an aggregate of 350,000 ordinary shares on the same terms as the warrants issued to the investors in the private placement, except that the<br> placement agent warrants have a term of five years and an exercise price of $0.75 per share.<br><br> <br><br><br> <br>The Company received total gross proceeds from the April 2020 Financing, the First May 2020 Financing and the Second May 2020 Financing of approximately $11,500, or<br> $10,139, net of issuance expenses in the amount of $1,361. |
| --- | --- |
| 3. | Warrants that expired during the six months ended June 30, 2020: |
| --- | --- |
| A. | On February 24, 2020, certain warrants to purchase 178,334 and 8,334 ordinary shares at an exercise price of $90.0 and $60.72 per share, respectively, originally issued in connection with the Company’s IPO in February 2015, expired. |
| --- | --- |
| B. | On May 11, 2020, certain remaining warrants to purchase 6,512 ordinary shares, originally issued in May 2010, expired. |
| --- | --- |
12
CHECK CAP LTD
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)
NOTE 6 - SHARE-BASED COMPENSATION
| 1. | A summary of the Company's option activity related to options granted to employees, service providers and directors, and related information is as follows: | |||||
|---|---|---|---|---|---|---|
| For the six months ended June 30, 2020 | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| Weighted | ||||||
| Weighted | average | |||||
| average | remaining | |||||
| exercise price | contractual | |||||
| Number | (in ) | life (in years) | ||||
| Options outstanding at beginning of period | 547,322 | 8.3 | ||||
| Options granted | 10,584 | |||||
| Options forfeited | (33,052 | ) | ||||
| Options outstanding at end of period | 524,854 | 8.04 | ||||
| Options exercisable at end of period | 219,212 | 6.86 |
All values are in US Dollars.
| 2. | A summary of the Company’s RSU activity is as follows: | ||
|---|---|---|---|
| For the six | |||
| --- | --- | --- | --- |
| months | |||
| ended June | |||
| 30, 2020 | |||
| Unvested at beginning of year | 99,530 | ||
| Granted | - | ||
| Vested | (13,187 | ) | |
| Forfeited | (754 | ) | |
| Unvested at end of year | 85,589 |
13
CHECK CAP LTD
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)
NOTE 7 - SUBSEQUENT EVENTS
On July 23, 2020, the Company entered into a warrant exercise agreement (the “Exercise Agreement”) with several existing institutional investors who are the holders (the “Holders”) of certain warrants (the “Warrants”) to purchase the Company’s ordinary shares, par value NIS 2.40 per share, pursuant to which the Holders agreed to exercise in cash their Warrants to purchase up to an aggregate of 16,054,223 ordinary shares having exercise prices ranging from $15.00 to $0.80 per share, at a reduced exercise price of $0.60 per share. The Warrants exercised in the transaction include warrants to purchase up to 15,000,003 ordinary shares at an exercise price of $0.80 per share issued in the April 2020 Financing, the First May 2020 Financing and the Second May 2020 Financing (See note 5(2) above), Series D warrants to purchase up to 968,992 ordinary shares at an exercise price of $2.58 per share issued in February 2019 , and warrants to purchase up to 85,228 ordinary shares at an exercise price of $15.00 per share issued in November 2017.
Under the Exercise Agreement, the Company also agreed to issue to the Holders new unregistered warrants to purchase up to 19,265,068 ordinary shares (the “Private Placement Warrants”). The Private Placement Warrants are immediately exercisable, will expire five and one-half years from issuance date and have an exercise price of $0.80 per share, subject to adjustment. The Private Placement Warrants may be exercised on a cashless basis if at the time of exercise thereof, there is no effective registration statement registering the ordinary shares underlying the warrants.
The transaction closed on July 27, 2020. Upon closing, the Company issued to the Holders 16,054,223 ordinary shares and 19,265,068 warrants to purchase ordinary shares for gross proceeds of approximately $9,600 (approximately $8,700 net of offering expenses).Upon closing, the Company also issued unregistered placement agent warrants to purchase up to an aggregate of 1,123,796 ordinary shares on the same terms as the warrants issued to the investors in the private placement, except that the placement agent warrants have an exercise price of $0.75 per share.
14