UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021March 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-38807
Chemomab Therapeutics Ltd.
(Exact Name of Registrant as Specified in its Charter)
Israel | 81-3676773 | |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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Kiryat Atidim, Building 7 | ||
Tel Aviv, Israel 6158002 | ||
(Address of principal executive offices including zip code) |
Registrant’s telephone number, including area code: +972-77-331-0156
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
American Depositary Shares, each representing twenty (20) ordinary shares, no par value per share | CMMB | Nasdaq Capital Market |
Ordinary shares, no par value per share | n/a | Nasdaq Capital Market* |
*Not for trading; only in connection with the registration of American Depository Shares
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ☒ | ||
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒ |
As of November 12, 2021,May 11, 2022, the registrant had 11,400,75611,404,515 American Depositary Shares outstanding.
CHEMOMAB THERAPEUTICS LTD.
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references to “Chemomab Therapeutics Ltd.”, “Chemomab,” the “Company,” “us,” “we” and “our” refer to Chemomab Therapeutics Ltd. an Israeli company and its consolidated subsidiaries, although with respect to the presentation of financial results for historical periods that preceded the Merger (as defined below), these terms refer to the financial results of Chemomab Ltd., which was the accounting acquirer in the Merger;
•
references to “ordinary shares,” “our shares” and similar expressions refer to the Company’s ordinary shares, no nominal (par) value;
•
references to “ADS” refer to the American Depositary Shares listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “CMMB,” each representing twenty (20) ordinary shares;
•
references to “dollars,” “U.S. dollars” and “$” are to U.S. Dollars;
•
references to “NIS” are to New Israeli Shekels;
•
references to the “SEC” are to the U.S. Securities and Exchange Commission; and
•
references to the “Merger” refer to the merger involving Anchiano Therapeutics Ltd. and Chemomab Ltd., whereby a wholly owned subsidiary of Anchiano Therapeutics Ltd. merged with and into Chemomab Ltd., with Chemomab Ltd. surviving as a wholly owned subsidiary of Anchiano Therapeutics Ltd. Upon consummation of the Merger, Anchiano Therapeutics Ltd. changed its name to “Chemomab Therapeutics Ltd.” and the business conducted by Chemomab Ltd. became primarily the business conducted by the Company.
• | references to “Chemomab Therapeutics Ltd.”, “Chemomab,” the “Company,” “us,” “we” and “our” refer to Chemomab Therapeutics Ltd. an Israeli company and its consolidated subsidiaries, although with respect to the presentation of financial results for historical periods that preceded the Merger (as defined below), these terms refer to the financial results of Chemomab Ltd., which was the accounting acquirer in the Merger; |
• | references to “ordinary shares,” “our shares” and similar expressions refer to the Company’s ordinary shares, no nominal (par) value; |
• | references to “ADS” refer to the American Depositary Shares listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “CMMB,” each representing twenty (20) ordinary shares; |
• | references to “dollars,” “U.S. dollars” and “$” are to U.S. Dollars; |
• | references to “NIS” are to New Israeli Shekels; |
• | references to the “SEC” are to the U.S. Securities and Exchange Commission; and |
• | references to the “Merger” refer to the merger involving Anchiano Therapeutics Ltd. and Chemomab Ltd., whereby a wholly owned subsidiary of Anchiano Therapeutics Ltd. merged with and into Chemomab Ltd., with Chemomab Ltd. surviving as a wholly owned subsidiary of Anchiano Therapeutics Ltd. Upon consummation of the Merger, Anchiano Therapeutics Ltd. changed its name to “Chemomab Therapeutics Ltd.” and the business conducted by Chemomab Ltd. became primarily the business conducted by the Company. |
Contents
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March 31, | December 31, | |||||||||||
Note | 2022 | 2021 | ||||||||||
|
| Unaudited | Audited | |||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | 13,827 | 15,186 | ||||||||||
Short term bank deposits | 43,579 | 45,975 | ||||||||||
Other receivables and prepaid expenses | 1,934 | 1,527 | ||||||||||
| ||||||||||||
Total current assets | 59,340 | 62,688 | ||||||||||
| ||||||||||||
Non-current assets | ||||||||||||
Long term prepaid expenses | 864 | 908 | ||||||||||
Property and equipment, net | 358 | 357 | ||||||||||
Restricted cash | 85 | 55 | ||||||||||
Operating lease right-of-use assets | 309 | 345 | ||||||||||
Total non-current assets | 1,616 | 1,665 | ||||||||||
| ||||||||||||
Total assets | 60,956 | 64,353 | ||||||||||
| ||||||||||||
Current liabilities | ||||||||||||
Trade payables | 1,487 | 1,336 | ||||||||||
Accrued expenses | 1,248 | 555 | ||||||||||
Employee and related expenses | 666 | 653 | ||||||||||
Operating lease liabilities | 116 | 106 | ||||||||||
| ||||||||||||
Total current liabilities | 3,517 | 2,650 | ||||||||||
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Non-current liabilities | ||||||||||||
Operating lease liabilities - long term | 203 | 237 | ||||||||||
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Total non-current liabilities | 203 | 237 | ||||||||||
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Commitments and contingent liabilities | 0 | 0 | ||||||||||
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Total liabilities | 3,720 | 2,887 | ||||||||||
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Shareholders' equity | ||||||||||||
Ordinary shares 0 par value - Authorized: 650,000,000 shares as of March 31, 2022 and as of December 31, 2021; | - | - | ||||||||||
Issued and outstanding: 228,090,300 ordinary shares as of March 31, 2022 and as of December 31, 2021 | 0 | 0 | ||||||||||
Additional paid in capital | 98,513 | 97,639 | ||||||||||
Accumulated deficit | (41,277 | ) | (36,173 | ) | ||||||||
| ||||||||||||
Total shareholders’ equity | 57,236 | 61,466 | ||||||||||
Total liabilities and shareholders’ equity | 60,956 | 64,353 |
September 30, 2021 | December 31, 2020 | ||||||||||
Note | Unaudited | Audited | |||||||||
Assets | |||||||||||
| |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | 37,744 | 11,674 | |||||||||
Short term bank deposits | 26,524 | 24 | |||||||||
Other receivables and prepaid expenses | 1,574 | 141 | |||||||||
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Total current assets | 65,842 | 11,839 | |||||||||
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Non-current assets | |||||||||||
Long term deposit | 0- | 4 | |||||||||
Long term prepaid expenses | 952 | 0- | |||||||||
Property and equipment, net | 234 | 152 | |||||||||
Restricted cash | 53 | 53 | |||||||||
Operating lease right-of-use assets | 359 | 428 | |||||||||
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Total non-current assets | 1,598 | 637 | |||||||||
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Total assets | 67,440 | 12,476 | |||||||||
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Current liabilities | |||||||||||
Trade payables | 481 | 93 | |||||||||
Accrued expenses | 637 | 715 | |||||||||
Employee and related expenses | 451 | 438 | |||||||||
Operating lease liabilities | 61 | 70 | |||||||||
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Total current liabilities | 1,630 | 1,316 | |||||||||
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Non-current liabilities | |||||||||||
Operating lease liabilities - long term | 298 | 358 | |||||||||
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Total non-current liabilities | 298 | 358 | |||||||||
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Commitments and contingent liabilities | |||||||||||
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Total liabilities | 1,928 | 1,674 | |||||||||
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Shareholders’ equity | 1 | ||||||||||
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Ordinary shares 0 par value - Authorized: 650,000,000 shares as of September 30, 2021 and 500,000,000 shares as of December 31, 2020; | 0- | 0- | |||||||||
Issued and outstanding: 227,956,060 ordinary shares at September 30, 2021 and 9,274,838 ordinary shares at December 31, 2020 | - | - | |||||||||
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Additional paid in capital | 96,649 | 34,497 | |||||||||
Accumulated deficit | (31,137 | ) | (23,695 | ) | |||||||
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Total shareholders’ equity | 65,512 | 10,802 | |||||||||
Total liabilities and shareholders’ equity | 67,440 | 12,476 |
* Number of shares has been retroactively adjusted to reflect the share reverse split effected on March 16, 2021 (refer to Note 1)
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
13
| Three months | Three months | ||||||
Ended | Ended | |||||||
March 31, | March 31, | |||||||
2022 | 2021 | |||||||
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Research and development | 2,745 | 1,157 | ||||||
General and administrative | 2,575 | 542 | ||||||
Total operating expenses | 5,320 | 1,699 | ||||||
Financing expenses (income), net | (216 | ) | 5 | |||||
Net loss for the period | 5,104 | 1,704 | ||||||
Basic and diluted loss per Ordinary Share* | 0.022 | 0.011 | ||||||
Weighted average number of Ordinary Shares outstanding, basic, and diluted* | 228,090,300 | 156,751,771 |
Three months Ended September 30, 2021 | Three months Ended September 30, 2020 | Nine months Ended September 30, 2021 | Nine months Ended September 30, 2020 | |||||||||||||
Operating expenses | ||||||||||||||||
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Research and development | 1,487 | 1,031 | 3,951 | 3,430 | ||||||||||||
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General and administrative | 1,404 | 194 | 3,392 | 600 | ||||||||||||
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Total operating expenses | 2,891 | 1,225 | 7,343 | 4,030 | ||||||||||||
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Financing expenses (income), net | 77 | (1 | ) | 99 | (30 | ) | ||||||||||
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Net loss for the period | 2,968 | 1,224 | 7,442 | 4,000 | ||||||||||||
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Basic and diluted loss per Ordinary Share* | 0.013 | 0.009 | 0.038 | 0.030 | ||||||||||||
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Weighted average number of Ordinary Shares outstanding, basic, and diluted* | 227,956,060 | 139,397,366 | 195,292,384 | 134,360,798 |
* Number of shares has been retroactively adjusted based on the equivalent number of shares received by the accounting acquirer’s shareholders in the reverse recapitalization transaction (refer to Note 1)1B).
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
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Ordinary Shares | Additional paid in capital | Accumulated Deficit | Total Shareholders’ equity | |||||||||||||||||
Number | USD | USD | USD | USD | ||||||||||||||||
For the nine-month period ended on September 30, 2021 | ||||||||||||||||||||
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Balance as of January 1, 2021 * | 9,274,838 | 0- | 34,497 | (23,695 | ) | 10,802 | ||||||||||||||
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Share-based compensation | - | - | 43 | - | 43 | |||||||||||||||
Effect of reverse capitalization transaction | 152,299,702 | - | 2,476 | - | 2,476 | |||||||||||||||
Issuance of shares and warrants, net of issuance costs | 52,385,400 | - | 43,547 | - | 43,547 | |||||||||||||||
Net loss for the period | - | - | - | (1,704 | ) | (1,704 | ) | |||||||||||||
Balance as of March 31, 2021 | 213,959,940 | 0- | 80,563 | (25,399 | ) | 55,164 | ||||||||||||||
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Issuance of shares and warrants, net of issuance costs | 13,996,120 | - | 15,118 | - | 15,118 | |||||||||||||||
Share-based compensation | - | - | 527 | - | 527 | |||||||||||||||
Net loss for the period | - | - | - | (2,770 | ) | (2,770 | ) | |||||||||||||
Balance as of June 30, 2021 | 227,956,060 | 0- | 96,208 | (28,169 | ) | 68,039 | ||||||||||||||
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Share-based compensation | - | - | 441 | - | 441 | |||||||||||||||
Net loss for the period | - | - | - | (2,968 | ) | (2,968 | ) | |||||||||||||
Balance as of September 30, 2021 | 227,956,060 | 0- | 96,649 | (31,137 | ) | 65,512 |
* Number of shares has been retroactively adjusted to reflect the share reverse split effected on March 16, 2021 (refer to Note 1).
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
3
Ordinary | Additional | Accumulated | Total | |||||||||||||||||
Number | USD | USD | USD | USD | ||||||||||||||||
For the three-month period ended on March 31, 2022 | ||||||||||||||||||||
Balance as of January 1, 2022 * | 228,090,300 | 0 | 97,639 | (36,173 | ) | 61,466 | ||||||||||||||
Share-based compensation | - | 0 | 874 | 0 | 874 | |||||||||||||||
Net loss for the period | - | 0 | 0 | (5,104 | ) | (5,104 | ) | |||||||||||||
Balance as of March 31, 2022 | 228,090,300 | 0 | 98,513 | (41,277 | ) | 57,236 | ||||||||||||||
For the three-month period ended on March 31, 2021 | ||||||||||||||||||||
Balance as of January 1, 2021 (**) | 9,274,838 | 0 | 34,497 | (23,695 | ) | 10,802 | ||||||||||||||
Share-based compensation | - | 0 | 43 | 0 | 43 | |||||||||||||||
Effect of reverse capitalization transaction | 152,299,702 | - | 2,476 | - | 2,476 | |||||||||||||||
Issuance of shares and warrants, net of issuance costs | 52,385,400 | 0 | 43,547 | 0 | 43,547 | |||||||||||||||
Net loss for the period | - | 0 | 0 | (1,704 | ) | (1,704 | ) | |||||||||||||
Balance as of March 31, 2021 | 213,959,940 | 0 | 80,563 | (25,399 | ) | 55,164 |
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Ordinary Shares (**) | Additional paid in capital | Accumulated deficit | Total Shareholders’ equity | |||||||||||||||||
Number | USD | USD | USD | USD | ||||||||||||||||
For the nine-month period ended September 30, 2020 (*) | ||||||||||||||||||||
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Balance as of January 1, 2020 (**) | 9,274,838 | 0- | 30,117 | (17,744 | ) | 12,373 | ||||||||||||||
Share-based compensation | - | - | 46 | - | 46 | |||||||||||||||
Net loss for the period | - | - | - | (1,695 | ) | (1,695 | ) | |||||||||||||
Balance as of March 31, 2020 | 9,274,383 | 0- | 30,163 | (19,439 | ) | 10,724 | ||||||||||||||
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Share-based compensation | - | - | 28 | - | 28 | |||||||||||||||
Exercise of options | - | - | 125 | - | 125 | |||||||||||||||
Issuance of shares | - | - | 3,000 | - | 3,000 | |||||||||||||||
Net loss for the period | - | - | - | (1,081 | ) | (1,081 | ) | |||||||||||||
Balance as of June 30, 2020 | 9,274,838 | 0- | 33,316 | (20,520 | ) | 12,796 | ||||||||||||||
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Share-based compensation | - | - | 23 | - | 23 | |||||||||||||||
Exercise of options | - | - | 562 | - | 562 | |||||||||||||||
Net loss for the period | - | - | - | (1,224 | ) | (1,224 | ) | |||||||||||||
Balance as of September 30, 2020 | 9,274,838 | 0- | 33,901 | (21,744 | ) | 12,157 |
(*) Number and type of equity instruments reflects the capital of the legal parent (the Company).
(**) Number of shares has been retroactively adjusted to reflect the share reverse split effected on March 16, 2021 (refer to Note 1B).
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
45
| Three months ended March 31, 2022 | Three months ended March 31, 2021 | ||||||
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| (5,104 | ) | (1,704 | ) | ||||
Adjustments for operating activities: | ||||||||
Depreciation | 13 | 7 | ||||||
Change in other receivables and prepaid expenses | (363 | ) | 57 | |||||
Change in operating lease liability | 12 | 0 | ||||||
Change in trade payables | 151 | 281 | ||||||
Change in accrued expenses | 693 | (62 | ) | |||||
Change in employees and related expenses | 13 | 85 | ||||||
Share-based compensation | 874 | 43 | ||||||
1,393 | 411 | |||||||
Net cash used in operating activities | (3,711 | ) | (1,293 | ) | ||||
Cash flows from investing activities | ||||||||
Investment in deposits | 2,396 | 1 | ||||||
Purchase of property and equipment | (14 | ) | (3 | ) | ||||
Net cash provided by (used in) investing activities | 2,382 | (2 | ) | |||||
Cash flows from financing activities | ||||||||
Cash acquired in reverse recapitalization | 0 | 2,427 | ||||||
Issuance of shares and warrants, net of issuance costs | 0 | 45,372 | ||||||
Net cash provided by financing activities | 0 | 47,799 | ||||||
Change in cash, cash equivalents and restricted cash | (1,329 | ) | 46,504 | |||||
Cash, cash equivalents and restricted cash at beginning of period | 15,241 | 11,727 | ||||||
Cash, cash equivalents and restricted cash at end of period | 13,912 | 58,231 | ||||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Liabilities assumed, net of non-cash assets received in reverse merger | 0 | 49 | ||||||
Accrued share issuance expenses | 0 | 1,825 |
Nine months ended September 30, 2021 | Nine months ended September 30, 2020 | |||||||
Cash flows from operating activities | ||||||||
Net loss for the period | (7,442 | ) | (4,000 | ) | ||||
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Adjustments for operating activities: | ||||||||
Depreciation | 23 | 18 | ||||||
Change in other receivables and prepaid expenses | (2,145 | ) | (32 | ) | ||||
Change in trade payables | 321 | 2 | ||||||
Change in accrued expenses | (1,261 | ) | 131 | |||||
Change in employees and related expenses | 13 | 97 | ||||||
Share-based compensation | 1,011 | 97 | ||||||
| (2,038 | ) | 313 | |||||
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Net cash used in operating activities | (9,480 | ) | (3,687 | ) | ||||
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Cash flows from investing activities | ||||||||
Investment in bank deposits | (26,500 | ) | (22 | ) | ||||
Sale of asset held for sale | 1,000 | 0- | ||||||
Purchase of property and equipment | (105 | ) | (37 | ) | ||||
Net cash used in investing activities | (25,605 | ) | (59 | ) | ||||
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Cash flows from financing activities | ||||||||
Exercise of options | 0- | 687 | ||||||
Cash acquired in reverse recapitalization | 2,427 | 0- | ||||||
Proceeds from receivables on account of shares | 0- | 500 | ||||||
Issuance of shares net, of issuance costs | 15,181 | 0- | ||||||
Issuance of shares and warrants, net of issuance costs | 43,547 | 3,000 | ||||||
Net cash provided by financing activities | 61,155 | 4,187 | ||||||
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Change in cash, cash equivalents and restricted cash | 26,070 | 441 | ||||||
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Cash, cash equivalents and restricted cash at beginning of period | 11,727 | 12,285 | ||||||
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Cash, cash equivalents and restricted cash at end of period | 37,797 | 12,726 | ||||||
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Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Liabilities assumed, net of non-cash assets received in reverse merger | 49 | 0- | ||||||
Accrued share issuance expenses | 63 | 0- |
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
5
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CHEMOMAB THERAPEUTICS LTD AND ITS SUBSIDIARIES
(FORMERLY ANCHIANO THERAPEUTICS LTD.)
A. | Chemomab Therapeutics Ltd. (hereinafter - "the Company") is an Israeli based company incorporated under the laws of the State of Israel in September 2011. The Company’s registered office is located in Kiryat Atidim, Tel Aviv, Israel. The Company is a clinical-stage biotech company discovering and developing innovative therapeutics for conditions with high-unmet medical need that involve inflammation and fibrosis. | |
B. | On March 16, 2021, the Company, then known as Anchiano Therapeutics Ltd. (“Anchiano”), completed its merger with Chemomab Ltd., a privately-held Israeli limited company (“Chemomab Ltd.”). Pursuant to the Agreement and Plan of merger (the “Merger Agreement”) dated as of December 14, 2020, by and among Anchiano, CMB Acquisition Ltd., an Israeli limited company and wholly-owned subsidiary of Anchiano (“Merger Sub”), and Chemomab Ltd. Upon completion of the merger transaction, pursuant to which Merger Sub merged with and into Chemomab Ltd., with Chemomab Ltd. being the surviving entity and a wholly owned subsidiary of Anchiano (the “Merger”), the Company changed its name from “Anchiano Therapeutics Ltd.” to “Chemomab Therapeutics Ltd.” and the business conducted by Chemomab Ltd. became the primarily business conducted by the Company. | |
For accounting purposes, Chemomab Ltd. is considered to have acquired Anchiano based upon the terms of the Merger as well as other factors including; (i) Chemomab Ltd.'s former shareholders owned approximately 90% of the combined Company’s outstanding ordinary shares immediately following the closing of the Merger, and (ii) Chemomab Ltd. management holds key management positions of the combined Company. The Merger has been accounted for as an asset acquisition (reverse recapitalization transaction) rather than a business combination, as the assets acquired and the liabilities assumed by Chemomab Ltd. do not meet the definition of a business under U.S. GAAP. The net assets acquired in connection with the Merger were recorded at their estimated acquisition date fair market value as of March 16, 2021, the date of completion of the Merger.
Immediately prior to the effective date of the Merger, all preferred shares of Chemomab Ltd. were converted into ordinary shares of Chemomab Ltd. on a one-for-one basis. |
In connection with the Merger, and following the effective time of the Merger, the Company effected a reverse share split of the Company’sits ordinary shares at a ratio of 4:1 (the “Reverse Split”) and increased the number of ordinary shares underlying each American Depositary Share ("ADS") from 5 to 20. At the effective time of the Merger, each Chemomab Ltd. ordinary share outstanding immediately prior to the effective time of the Merger automatically converted into the right to receive approximately 12.86 ADSs, each representing 20 Anchiano ordinary shares of the Company, plus a warrant to purchase ADSs that may become exercisable only under certain circumstances.circumstances (the “exchange ratio”).
The exchange ratio was calculated by a formula that was determined through arms-length negotiations between the Company and Chemomab Ltd. The combined Company assumed all of the outstanding options of Chemomab Ltd., vested and not vested,unvested, under the Chemomab Share Incentive Plan (the “2015 Plan”), with such options representing the right to purchase a number of ADSs equal to approximately 12.86 multiplied by the number of Chemomab Ltd. ordinary shares previously represented by such options.
6
7
CHEMOMAB THERAPEUTICS LTD AND ITS SUBSIDIARIES
(FORMERLY ANCHIANO THERAPEUTICS LTD)
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Note 1 - General. (Cont.)
The accompanying unaudited condensed consolidated financial statements and notes to the unaudited condensed consolidated financial statements give retroactive effect to the exchange ratio and the Reverse Split for all periods presented.
The equity structure reflects the legal acquirer's equity structure. The balance sheet has been adjusted to reflect the par value of the outstanding shares of the legal acquirer, including the number of shares issued in the Merger. Any difference is recognized as an adjustment to the additional paid in capital.
Immediately after completion of the Merger, on March 16, 2021, the Company had 8,078,727 ADS issued and outstanding (9,003,357 on a fully diluted basis). In addition, immediately after the Merger, former Chemomab Ltd. former shareholders owned approximately 90% of the number of issued and outstanding ordinary shares of the Company and the shareholders of the Company immediately prior to the Merger owned approximately 10% of the number of issued and outstanding ordinary shares of the Company (all on a fully diluted basis).
On March 16, 2021, immediately prior to the effectiveness of the Merger, Anchiano had 65,675,904 ordinary shares outstanding (prior to the effect of the Reverse Split) and a market capitalization of $58.7 million. The estimated fair value of the net assets of Anchiano on March 16, 2021, prior to the Merger, was approximately $2.5 million. The fair value of ordinary shares on the Merger closing date, prior to the Merger, was above the fair value of the Company’s net assets. As the Company’s net assets were predominantly composed of cash offset against current liabilities, the fair value of the Company’s net assets as of March 16, 2021, immediately prior to the Merger, iswas considered to be the best indicator of the fair value and, therefore, the estimated preliminary purchase consideration.
The following table summarizes the net assets acquired based on their estimated fair values as of March 16, 2021, immediately prior to completion of the Merger (in thousands):
Cash and cash equivalents | $ | 2,427 | ||
Asset held for sale | 1,000 | |||
Prepaid and other assets | 236 | |||
Accrued liabilities | (1,187 | ) | ||
Net acquired assets | $ | 2,476 |
C.In connection with the Merger, on March 15, 2021, Anchiano entered into Securities Purchase Agreements with certain purchasers for the issuance and sale by Anchiano in a private placement (“Private Placement”) of approximately $45.5 million of its ADSs and accompanying warrants to purchase ADSs. The warrants have an exercise price of approximately $17.35, expire five years from the date of issuance, and if exercised in full will provide additional proceeds to the Company of $4.5 million. The closing of the Private Placement was completed on March 22, 2021.
C. | In connection with the Merger, on March 15, 2021, Anchiano entered into Securities Purchase Agreements with certain purchasers for the issuance and sale by Anchiano in a private placement (“Private Placement”) of approximately $45.5 million of its ADSs and accompanying warrants to purchase ADSs. The warrants have an exercise price of approximately $17.35 per ADS, expire five years from the date of issuance, and if exercised in full will provide additional proceeds to the Company of $4.5 million. The closing of the Private Placement was completed on March 22, 2021. |
7
8
CHEMOMAB THERAPEUTICS LTD AND ITS SUBSIDIARIES
(FORMERLY ANCHIANO THERAPEUTICS LTD)
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Note 1 - General. (Cont.)
D.Pursuant to an Asset Purchase and Assignment Agreement dated as of March 16, 2021, as amended on March 31, 2021, between the Company’s wholly owned subsidiary, Anchiano Therapeutics, Inc., a Delaware corporation (“Anchiano Delaware”) and Kestrel Therapeutics, Inc., a company organized under the laws of Delaware (“Kestrel”), Anchiano Delaware agreed to sell to Kestrel all of the rights and obligations in its business to the extent related to the research, development and commercialization of the Compounds and Products (as such terms are defined in the Collaboration and License Agreement entered into as of September 13, 2019, by and between ADT Pharmaceuticals, LLC and the Anchiano Delaware), also known as the pan-RAS and PDE10/β-catenin programs. In consideration of the sale and transfer of the Compounds and Products Kestrel paid the Company a total of USD 1 million.
E.On April 19, 2021, the Board of directors of the Company approved the grant of 122,404 options to purchase 122,404 ADSs to one employee, one Officer (a consultant), and six Board members, under the 2015 Plan. The options were granted at an exercise price of $27.26 per ADS with vesting periods ranging from three to four years. Share-based compensation expense related to the above grant recorded for the nine-month period ended September 30, 2021 was $901 thousand.
The fair value of the option granted in the nine months ended September 30, 2021 was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions:
|
| Pursuant to an Asset Purchase and Assignment Agreement dated as of March 16, 2021, as amended on March 31, 2021, between the Company’s wholly owned subsidiary, Anchiano Therapeutics, Inc., a Delaware corporation (“Anchiano Delaware”) and Kestrel Therapeutics, Inc., a company organized under the laws of Delaware (“Kestrel”), Anchiano Delaware agreed to sell to Kestrel all of the its rights and obligations in its business to the extent related to the research, development and commercialization of the Compounds and Products (as such terms are defined in the Collaboration and License Agreement entered into as of September 13, 2019, by and between ADT Pharmaceuticals, LLC and the Anchiano Delaware), also known as the pan-RAS and PDE10/β-catenin programs. In consideration of the sale and transfer of the Compounds and Products Kestrel paid the Company a total of $1.0 million. | |||
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| Based on management’s assessment, the extent to which the coronavirus will further impact 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, and the actions that may be required to contain the coronavirus or treat its impact. The Company is carefully monitoring the restrictions due to the COVID-19 outbreak and will adjust activities accordingly. |
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On July 19, 2021, the shareholders of the Company approved an amendment to the 2015 Plan under which the aggregate number of ADSs authorized for issuance under the 2015 Plan was increased by 540,000 ADSs or 10,800,000 ordinary shares.
9
F.On April 30, 2021, the Company entered into an At the Market Offering Agreement (the "ATM agreement") with Cantor Fitzgerald & Co., ("Cantor"). According to the agreement, the Company may offer and sell, from time to time, its ADSs having an aggregate offering price of up to $75 million through Cantor or the ATM agreement. From April 30, 2021 until September 30, 2021, the Company issued 699,806 ADSs at an average price of $22.75 per ADS through the ATM Prospectus Supplement, resulting in gross proceeds of $ $15,917 thousand. The offer and sale of ADSs under the ATM agreement has been registered under the Company’s effective registration statement on Form S-3 (File No. 333-255658), together with a prospectus forming a part thereof, filed with the SEC under the Securities Act of 1933, as amended (the “Securities Act”). Sales, if any, of ADS pursuant to the ATM agreement may be made in any transactions that are deemed to be “at the market” offerings as defined in Rule 415(a)(4) under the Securities Act. The Company is not obligated to sell any ADSs under the ATM agreement.
8
CHEMOMAB THERAPEUTICS LTD AND ITS SUBSIDIARIES
(FORMERLY ANCHIANO THERAPEUTICS LTD)
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Note 1 - General. (Cont.)
G.Since January 2020, the COVID-19 outbreak has dramatically expanded into a worldwide pandemic creating macro-economic uncertainty and disruption in the business and financial markets. Many countries around the world, including Israel, have been taking measures designated to limit the continued spread of the Coronavirus, including the closure of workplaces, restricting travel, prohibiting assembling, closing international borders and quarantining populated areas. The Company's clinical trial sites have been affected by the COVID-19 pandemic, and as a result, commencement of the enrollment of Company’s clinical trials of CM-101 in PSC was delayed and the enrollment rate has been affected as well. As a result, the Company extended patients recruiting to additional territories with significant recruitment potential. In addition, after enrollment in these trials, patients may drop out of the Company's trials because of the COVID-19 possible implications.
Based on management’s assessment, the extent to which the coronavirus will further impact 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, and the actions that may be required to contain the coronavirus or treat its impact. The Company is carefully monitoring the restrictions due to the COVID-19 outbreak and will adjust activities accordingly.
Note 2 - Basis of Presentation and Significant Accounting Policies
A.Basis of Preparation
The condensed interim consolidated financial statements included in this quarterly report are unaudited. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for a fair statement of the Company’s financial position as of September 30, 2021,March 31, 2022, and its results of operations for the ninethree months ended September 30,March 31, 2022, and 2021, and 2020, changes in shareholders’ equity for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, and cash flows for the ninethree months ended September 30, 2021March 31, 2022 and 2020.2021. The results of operations for the ninethree months ended September 30, 2021March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 20212022 or for any other future annual or interim period. The December 31, 2020 balance sheet was derived from the Chemomab Ltd. audited financial statements but does not include all disclosures required by U.S. GAAP. These financial statements should be read in conjunction with the audited financial statements included in the Company’s Form 8-K10-K for the year ended December 31, 20202021 as filed with the SEC. The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended December 31, 20202021 included in the Company’s Form 8-K.10-K. Since the date of such financial statements, there have been no changes to the Company’s significant accounting policies.
B.Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.
9
CHEMOMAB THERAPEUTICS LTD
(FORMERLY ANCHIANO THERAPEUTICS LTD)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Subsequent Events
On October 25, 2021 Dr. Dale Pfost was appointed as Chief Executive Officer and Board member of the Company, following the approval of his compensation terms by the shareholders of the Company.
Dr. Pfost replaced Dr. Adi Mor, who stepped down from her role as Chief Executive Officer. Dr. Mor continues to be employed by the Company as Chief Scientific Officer and to serve as a Board member of the Company.
Dr. Frost is entitled to receive option to purchase up to 459,353 ADS.
On November 8, 2021, Mr. Donald Marvin was appointed as Chief Financial Officer, Executive Vice President and Chief Operating Officer of the Company. Mr. Marvin replaced Ms. Sigal Fattal, who stepped down from her role as Interim Chief Financial Officer. Ms. Fattal will continue to serve the Company as senior consultant to Mr. Marvin.
Mr. Marvin is entitled to receive option to purchase up to 262,487 ADSs.
10
Chemomab
Chemomabblock CCL24 activity. CM-101 has demonstrated the potential to treat multiple severe and life-threatening fibrotic and inflammatory diseases.
11
Additionally, on November 4, 2021, the Company’s board of directors approved the appointment of Mr. Donald MarvinDr. Dale Pfost, our Chief Executive Officer, to the additional role of Chairman of our Board of Directors. This appointment followed the resignation of our previous Chairman of the Board, Dr. Stephen Squinto, who concurrent with his resignation effective December 19, 2021, became an ad-hoc strategic advisor and consultant to us in connection with our corporate and business strategy and corporate development.
achieve our key objectives—exploring safety and providing the pharmacokinetic data needed to assess next steps in the development of the subcutaneous formulation—while allowing us to focus our resources on our lead indications of PSC and SSc.
On March 16, 2021, we consummated a merger (the “Merger”) pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”), dated December 14, 2020, by and among us (formerly known as Anchiano Therapeutics Ltd.), CMB Acquisition Ltd., an Israeli limited company and our wholly owned subsidiary (the “Merger Sub”), and Chemomab Ltd., an Israeli limited company. Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Chemomab Ltd., with Chemomab Ltd. surviving the Merger as our wholly owned subsidiary. In connection with the Merger, on March 16, 2021, we changed our name from Anchiano Therapeutics Ltd. to Chemomab Therapeutics Ltd.
In connection with the Merger, on March 15, 2021, we entered into Securities Purchase Agreements with certain purchasers, pursuant to which we agreed to sell approximately $45.5 million of our ADSs in a private placement transaction, or the Private Placement. The Private Placement closed on March 22, 2021, at which time we sold to the purchasers 2,619,270 ADSs together with warrants to purchase up to 261,929 ADSs at an exercise price of $17.35 per ADS. The warrants will expire five years from the date of issuance, and if exercised in full, will provide proceeds of approximately $4.5 million.
Impact of COVID-19
12
Components of Operating Results
•
expenses incurred under agreements with contract research organizations or contract manufacturing organizations, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services;
•
manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial materials;
•
employee-related expenses, including salaries, related benefits, travel and share-based compensation expenses for employees engaged in research and development functions, as well as external costs, such as fees paid to outside consultants engaged in such activities;
•
license maintenance fees and milestone fees incurred in connection with various license agreements;
•
costs related to compliance with regulatory requirements; and
•
depreciation and other expenses.
• | expenses incurred under agreements with contract research organizations or contract manufacturing organizations, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services; |
• | manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial materials; |
• | employee-related expenses, including salaries, related benefits, travel and share-based compensation expenses for employees engaged in research and development functions, as well as external costs, such as fees paid to outside consultants engaged in such activities; |
• | license maintenance fees and milestone fees incurred in connection with various license agreements; |
• | costs related to compliance with regulatory requirements; and |
• | depreciation and other expenses. |
13
Results of Operations
Nine months ended | ||||||||||||||||
September 30, | Increase/(decrease) | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
(in thousands) | ||||||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | $ | 3,951 | $ | 3,430 | $ | 521 | 15 | % | ||||||||
General and administrative | 3,392 | 600 | 2,792 | 465 | % | |||||||||||
Operating loss | (7,343 | ) | (4,030 | ) | (3,313 | ) | 82 | % | ||||||||
Financing expense (income) , net | 99 | (30 | ) | 129 | 430 | % | ||||||||||
Net loss | $ | (7,442 | ) | $ | (4,000 | ) | $ | (3,442 | ) | 86 | % |
Three months ended | ||||||||||||||||
March 31, | Increase/(decrease) | |||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
(in thousands) | ||||||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 2,745 | 1,157 | 1,588 | 137 | % | |||||||||||
General and administrative | 2,575 | 542 | 2,033 | 375 | % | |||||||||||
Operating loss | 5,320 | 1,699 | 3,621 | 213 | % | |||||||||||
Financing expense (income) , net | (216 | ) | 5 | (221 | ) | (4,420 | )% | |||||||||
Net loss | $ | 5,104 | $ | 1,704 | $ | 3,400 | 200 | % |
Three months ended | ||||||||||||||||
September 30, | Increase/(decrease) | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
(in thousands) | ||||||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | $ | 1,487 | $ | 1,031 | $ | 456 | 44 | % | ||||||||
General and administrative | 1,404 | 194 | 1,210 | 623 | % | |||||||||||
Operating loss | (2,891 | ) | (1,225 | ) | 1,666 | 136 | % | |||||||||
Financing expense (income) , net | 77 | (1 | ) | 78 | 7800 | % | ||||||||||
Net loss | $ | (2,968 | ) | $ | (1,224 | ) | $ | 1,744 | 142 | % |
Research and development expenses increased by approximately $0.5 million, or 15%, for the nine months ended September 30, 2021, as compared to the same period 2020. The increase was primarily due to increased clinical and pre-clinical activities.
14
General and administrative expenses
General and administrative expenses increased by approximately $2.8 million, or 465%, for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020. The increase was primarily due to expenses related to completion of the Merger, recruiting, share based expenses and additional expenses incurred as a result of becoming a public company.
Financing expenses (income), net increased by approximately $129 thousand for the nine months ended September 30, 2021 from the comparable period of 2020.
March 31, 2022 was $216 thousand. Financing expense, net for the three months ended September 30,March 31, 2021 was $5 thousand. This reflects an increase in fiance income of $221 thousand, or 4420%, for the three months ended March 31, 2022 from the comparable period of 2021. The increase was primarily related to interest earned on bank deposits and 2020to foreign currency exchange rate gain.
Financing expense, net for the nine months ended September 30, 2021 and 2020 was primarily related to foreign currency exchange rate loss/gain.
loss.
the progress and costs of our preclinical studies, clinical trials and other research and development activities;
the scope, prioritization and number of our clinical trials and other research and development programs;
the amount of revenues and contributions we receive under future licensing, development and commercialization arrangements with respect to our product candidates;
the costs of the development and expansion of our operational infrastructure;
the costs and timing of obtaining regulatory approval for our product candidates;
the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;
the costs and timing of securing manufacturing arrangements for clinical or commercial production;
the costs of contracting with third parties to provide sales and marketing capabilities for us;
the costs of acquiring or undertaking development and commercialization efforts for any future products, product candidates or platforms;
the magnitude of our general and administrative expenses; and
any cost that we may incur under future in- and out-licensing arrangements relating to our product candidates.
15
We currently do not have any commitments for future external funding. In the future, we will need to raise additional funds, and we may decide to raise additional funds even before we need such funds if the conditions for raising capital are favorable. Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through debt or equity financings, credit facilities or by out-licensing applications of our product candidates. The sale of equity or convertible debt securities may result in dilution to our existing shareholders. The incurrence of indebtedness would result in increased fixed obligations and could also subject us to covenants that restrict our operations. We cannot be certain that additional funding, whether through grants from the Israel Innovation Authority, financings, credit facilities or out-licensing arrangements, will be available to us on acceptable terms, if at all. If sufficient funds are not available, we may be required to delay, reduce the scope of or eliminate research or development plans for, or commercialization efforts with respect to, one or more applications of our product candidates, or obtain funds through arrangements with collaborators or others that may require us to relinquish rights to certain potential products that we might otherwise seek to develop or commercialize independently.
Nine months ended | Three months ended | |||||||||||||||||||||||||||||||
September 30, | Increase/(decrease) | March 31, | Change | |||||||||||||||||||||||||||||
2021 | 2020 | $ | % | 2022 | 2021 | $ | % | |||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||
Net cash used in operating activities | $ | (9,480 | ) | $ | (3,687 | ) | (5,793 | ) | 157 | % | $ | (3,711 | ) | $ | (1,293 | ) | $ | (2,418 | ) | 187 | % | |||||||||||
%Net cash used in investing activities | (25,605 | ) | (59 | ) | (25,546 | ) | 43,298 | % | ||||||||||||||||||||||||
Net cash provided by financing activities | 61,155 | 4,187 | 56,968 | 1,360 | % | |||||||||||||||||||||||||||
Net cash provided by (used in) investing activities | $ | 2,382 | $ | (2 | ) | $ | 2,384 | (119,200 | )% | |||||||||||||||||||||||
Net cash used in financing activities | - | $ | 47,799 | $ | (47,799 | ) | (100 | )% | ||||||||||||||||||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | $ | 26,070 | $ | 441 | $ | 25,629 | 5,811 | % | $ | (1,329 | ) | $ | 46,504 | $ | (47,833 | ) | (103 | )% |
Investing activities for the nine months ended September 30, 2020 were primarily related to purchase of fixed assets.
bank deposits.
16
Contractual Commitments
Remainder of 2021 | $ | 276 | ||
2022 | 3,451 | |||
2023 | 2,533 | |||
2024-2026 | 214 | |||
Total | $ | 6,474 |
5,918 11,986$ $
Chemomab’s
accounting estimates.
17
We estimate the fair value of options granted as equity awards using a Black-Scholes options pricing model. The option-pricing model requires a number of assumptions, of which the most significant are share price, expected volatility and the expected option term (the time from the grant date until the options are exercised or expire). ChemomabThe Company determines the fair value per share of the underlying stock by taking into consideration its most recent sales of stock, as well as additional factors that Chemomabthe Company deems relevant. Chemomab’sThe Company’s board determined the fair value of ordinary shares based on valuations performed using the Option Pricing Method subject to relevant facts and circumstances. ChemomabThe Company has historically been a private company and lacks company-specific historical and implied volatility information of its stock. Expected volatility is estimated based on volatility of similar companies in the biotechnology sector. ChemomabThe Company has historically not paid dividends and has no foreseeable plans to issue dividends. The risk-free interest rate is based on the yield from governmental zero-coupon bonds with an equivalent term. The expected option term is calculated for options granted to employees and directors using the “simplified” method. Grants to non-employees are based on the contractual term. Changes in the determination of each of the inputs can affect the fair value of the options granted and the results of operations of Chemomab.
the Company.
March 31, 2022.
18
Exhibit Number | Description | |
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act | ||
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
101. INS | Inline XBRL Instance Document | |
101. SCH | Inline XBRL Taxonomy Extension Schema Document | |
101. CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101. DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101. LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101. PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | ||
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |
* | Filed herewith. | |
** |
| |
| Furnished herewith. |
19
CHEMOMAB THERAPEUTICS LTD. | |||
Date: May 12, 2022 | By: | ||
|
| /s/ Dale Pfost | |
Name: | Dale Pfost | ||
Title: | Chief Executive Officer | ||
Date: | By: | /s/ Donald Marvin | |
Name: | Donald Marvin | ||
Title: | Chief Financial Officer |
20