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 March 31,June 30, 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.)
   

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

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 ☐

 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 ☐

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 ☒

Yes ☐ No ☒
As of MayAugust 11, 2022, the registrant had 11,404,51511,431,656 American Depositary Shares outstanding.

 

CHEMOMAB THERAPEUTICS LTD.

QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31,JUNE 30, 2022
 
TABLE OF CONTENTS
 
PART I. – FINANCIAL INFORMATION
1
Item 1.Financial Statements
1
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
11
13
Item 3.Quantitative and Qualitative Disclosures About Market Risk.Risk
20
21
Item 4.Controls and Procedures.Procedures
20
22
PART II. – OTHER INFORMATION
21
23
Item 1.Legal Proceedings
21
23
Item 1A.Risk Factors
21
23
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.Proceeds
21
23
Item 3.Defaults Upon Senior Securities.Securities
21
23
Item 4.Mine Safety Disclosures.Disclosures
21
23
Item 5.Other Information.Information
21
23
Item 6.Exhibits.6.Exhibits
22
24
SIGNATURES
23
25
 
 
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS 
 
This quarterly report contains forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms including “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” or the negative of these terms or other similar expressions. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Actual results or events could differ materially from those set forth or implied by such forward-looking statements and related assumptions due to certain factors, including, without limitation, the risks set forth under the caption “Risk Factors” below, which are incorporated herein by reference as well as those business risks and factors described elsewhere in this report and in our other filings with the Securities and Exchange Commission (the “SEC”), specifically our most recent Annual Report on Form 10-K, and our Quarterly Reports on Form 10-Q filedand our Current Reports on Form 8-K filed subsequently to our most recent Annual Report on Form 10-K.8-K. All forward-looking statements speak only as of the date made, and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
 
CERTAIN TERMS USED IN THIS QUARTERLY REPORT ON FORM 10-Q 
 
As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires:
 
●
•
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.
 
PART I. – FINANCIAL INFORMATION
 
Item 1. FINANCIAL STATEMENTSFinancial Statements
 
 
Chemomab Therapeutics Ltd. and
its subsidiaries
Condensed Consolidated Interim
Financial Statements
As of March 31,June 30, 2022
(Unaudited)
 
1

Chemomab Therapeutics Ltd.
and its subsidiaries
 
Unaudited Condensed Consolidated Interim Financial Statements as of March 31,June 30, 2022

Contents

Contents
Page
Page3
  
Condensed Consolidated Interim Balance SheetsStatements of Operations
   34
  
Condensed Consolidated Interim Statements of Operations
    4
Condensed Consolidated Interim Statements of Changes in Equity5 - 6
  
Condensed Consolidated Interim Statements of Cash Flow 
67
  
Notes to the Condensed Consolidated Interim Financial Statements
7-108 - 12

2
 

Chemomab Therapeutics Ltd.
and its subsidiaries

Condensed Consolidated Balance Sheets
In USD thousands (except share amounts)
     
June 30,
  
December 31,
 
  
Note
  
2022
  
2021
 
     
Unaudited
  
Audited
 
Assets
         
          
Current assets
         
Cash and cash equivalents
     
9,883
   
15,186
 
Short term bank deposits
     
41,841
   
45,975
 
Other receivables and prepaid expenses
     
3,106
   
1,527
 
            
Total current assets
     
54,830
   
62,688
 
            
Non-current assets
           
Long term prepaid expenses
     
821
   
908
 
Property and equipment, net
     
355
   
357
 
Restricted cash
     
77
   
55
 
Operating lease right-of-use assets
     
295
   
345
 
            
Total non-current assets
     
1,548
   
1,665
 
            
Total assets
     
56,378
   
64,353
 
            
Current liabilities
           
Trade payables
     
1,433
   
1,336
 
Accrued expenses
     
1,712
   
555
 
Employee and related expenses
     
1,117
   
653
 
Operating lease liabilities
     
132
   
106
 
            
Total current liabilities
     
4,394
   
2,650
 
            
Non-current liabilities
           
Operating lease liabilities - long term
     
148
   
237
 
            
Total non-current liabilities
     
148
   
237
 
            
Commitments and contingent liabilities
     0   0 
            
Total liabilities
     
4,542
   
2,887
 
            
Shareholders' equity
 
1
         
Ordinary shares 0 par value - Authorized: 650,000,000 shares as of June 30, 2022 and as of December 31, 2021;
     

-

   

-

 
Issued and outstanding: 228,633,120 ordinary shares as of June 30, 2022 and 228,090,300 as of December 31, 2021
     
-
   
-
 
Additional paid in capital
     
99,303
   
97,639
 
Accumulated deficit
     
(47,467
)
  
(36,173
)
            
Total shareholders’ equity
     
51,836
   
61,466
 
Total liabilities and shareholders’ equity
     
56,378
   
64,353
 

      

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 

 

            

Non-current liabilities

            

Operating lease liabilities - long term

      203   237 

 

            

Total non-current liabilities

      203   237 

 

            

Commitments and contingent liabilities

      0   0 

 

            

Total liabilities

      3,720   2,887 

 

            

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 

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

3

Chemomab Therapeutics Ltd.
and its subsidiaries
 
Condensed Consolidated Interim Statements of Operations (Unaudited)
In USD thousands
(except share and per share amounts)
 

Three months

Three months

Ended

Ended

March 31,

March 31,

2022

2021

Operating expenses

Research and development

2,7451,157

General and administrative

2,575542

Total operating expenses

5,3201,699

Financing expenses (income), net

(216)5

Net loss for the period

5,1041,704

Basic and diluted loss per Ordinary Share*

0.0220.011

Weighted average number of Ordinary Shares outstanding, basic, and diluted*

228,090,300156,751,771

     Three months  Three months  Six months  Six months 
     Ended  Ended  Ended  Ended 
     
June 30,
  
June 30,
  
June 30,
  
June 30,
 
  
Note
  
2022
  
2021
  
2022
  
2021
 
                
Operating expenses               
                
Research and development     2,914   1,307   5,659   2,464 
                    
General and administrative     
3,340
   
1,446
   
5,915
   
1,988
 
                    
Total operating expenses     6,254   2,753   11,574   4,452 
                    
Financing expense, net     
480
   
17
   
264
   
22
 
                    
Loss before taxes     6,734   2,770   11,838   4,474 
                    
Taxes on income (benefit)     (544)  -   (544)  - 
                    
Net loss for the period     
6,190
   
2,770
   
11,294
   
4,474
 
                    
Basic and diluted loss per Ordinary Share (*) (**)     0.027   0.013   0.050   0.024 
                    
Weighted average number of Ordinary Shares outstanding, basic, and diluted (*) (**)     228,173,276   216,266,993   228,132,249   186,840,022 
 
 
*              (*) Number of shares has been retroactively adjusted basedto reflect the share reverse split effected on the equivalent number of shares received by the accounting acquirer’s shareholders in the reverse recapitalization transactionMarch 16, 2021 (refer to Note 1B).
(**) 20 Ordinary Shares are equal to 1 American Depositary Share (ADS).

The accompanying notes are an integral part of the condensed consolidated interim financial statements.


4

Chemomab Therapeutics Ltd.
and its subsidiaries
 
Condensed Consolidated Interim Statements of Changes in Equity (Unaudited)
In USD thousands (except share amounts)
   
Ordinary
Shares
  
Additional
paid in
capital
  
Accumulated
Deficit
  
Total 
Shareholders’
equity
 
  Number  USD  USD  USD  USD 
For the six-month period ended on June 30, 2022
               
                
Balance as of January 1, 2022
  
228,090,300
   
-
   
97,639
   
(36,173
)
  
61,466
 
Share-based compensation
  
-
   
-
   
874
   
-
   
874
 
Net loss for the period
  
-
   
-
   
-
   
(5,104
)
  
(5,104
)
Balance as of March 31, 2022
  
228,090,300
   
-
   
98,513
   
(41,277
)
  
57,236
 
                     
Share-based compensation
  
-
   
-
   
761
   
-
   
761
 
Exercise of options
  
542,820
   
-
   
29
   
-
   
29
 
Net loss for the period
  
-
   
-
   
-
   
(6,190
)
  
(6,190
)
Balance as of June 30, 2022
  
228,633,120
   
-
   
99,303
   
(47,467
)
  
51,836
 
5
 
  

Ordinary
Shares

  

Additional
paid in
capital

  

Accumulated
Deficit

  

Total
Shareholders’
equity

 
  

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 


Chemomab Therapeutics Ltd.

and its subsidiaries
Condensed Consolidated Interim Statements of Changes in Equity (Unaudited)
In USD thousands (except share amounts)
  
Ordinary
Shares (*)
  
Additional
paid in
capital
  
Accumulated
Deficit
  
Total 
Shareholders’
equity
 
  
Number
  
USD
  
USD
  USD  USD 
For the six-month period ended on June 30, 2021
               
                
Balance as of January 1, 2021 (*)
  
9,274,838
   
-
   
34,497
   
(23,695
)
  
10,802
 
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
   
-
   
80,563
   
(25,399
)
  
55,164
 
                     
Share-based compensation
  
-
   
-
   
527
   
-
   
527
 
Issuance of shares, net of issuance costs
  
13,996,120
   
-
   
15,118
   
-
   
15,118
 
Net loss for the period
  
-
   
-
   
-
   
(2,770
)
  
(2,770
)
Balance as of June 30, 2021
  
227,956,060
   
-
   
96,208
   
(28,169
)
  
68,039
 
(*) 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.
6
 

5

Chemomab Therapeutics Ltd.
and its subsidiaries
 
Condensed Consolidated Interim Statements of Cash flows (Unaudited)
In USD thousands
  
Six months
ended
June 30,
2022
  
Six months
Ended
June 30,
2021
 
Cash flows from operating activities
      
Net loss for the period
  
(11,294
)
  
(4,474
)
         
Adjustments for operating activities:
        
Depreciation
  
27
   
14
 
Change in other receivables and prepaid expenses
  
(1,483
)
  
(2,529
)
Change in operating lease liability
  
(15
)
  
-
 
Change in trade payables
  
97
   
312
 
Change in accrued expenses
  
1,157
   
(993
)
Change in employees and related expenses
  
464
   
200
 
Share-based compensation
  
1,635
   
570
 
   
1,882
   
(2,426
)
Net cash used in operating activities
  
(9,412
)
  
(6,900
)
         
Cash flows from investing activities
        
Increase in deposits
  
-
   
(21,500
)
Decrease in deposits
  
4,134
   
-
 
Sale of asset held for sale
  
-
   
1,000
 
Purchase of property and equipment
  
(25
)
  
(105
)
Net cash provided by (used in) investing activities
  
4,109
   
(20,605
)
         
Cash flows from financing activities
        
Cash acquired in reverse recapitalization
  
-
   
2,427
 
Exercise of options
  
22
   
-
 
Issuance of shares, net of issuance costs
  
-
   
15,243
 
Issuance of shares and warrants, net of issuance costs
  
-
   
43,557
 
Net cash provided by financing activities
  
22
   
61,227
 
         
Change in cash, cash equivalents and restricted cash
  
(5,281
)
  
33,722
 
         
Cash, cash equivalents and restricted cash at beginning of period
  
15,241
   
11,727
 
         
Cash, cash equivalents and restricted cash at end of period
  
9,960
   
45,449
 
         
Supplemental disclosure of non-cash investing and financing activities:
        
Liabilities assumed, net of non-cash assets received in reverse merger
  
-
   
49
 
Receivable related to exercise of options
  
7
   
-
 
Accrued share issuance expenses
  
-
   
135
 
 

Three months

ended

March 31,

2022

Three months

ended

March 31,

2021

Cash flows from operating activities

Net loss for the period

(5,104)(1,704)

Adjustments for operating activities:

Depreciation

137

Change in other receivables and prepaid expenses

(363)57

Change in operating lease liability

120

Change in trade payables

151281

Change in accrued expenses

693(62)

Change in employees and related expenses

1385

Share-based compensation

87443

1,393411

Net cash used in operating activities

(3,711)(1,293)

Cash flows from investing activities

Investment in deposits

2,3961

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

02,427

Issuance of shares and warrants, net of issuance costs

045,372

Net cash provided by financing activities

047,799

Change in cash, cash equivalents and restricted cash

(1,329)46,504

Cash, cash equivalents and restricted cash at beginning of period

15,24111,727

Cash, cash equivalents and restricted cash at end of period

13,91258,231

Supplemental disclosure of non-cash investing and financing activities:

Liabilities assumed, net of non-cash assets received in reverse merger

049

Accrued share issuance expenses

01,825

The accompanying notes are an integral part of the condensed consolidated interim financial statements.


67

 

CHEMOMAB THERAPEUTICS LTD AND ITS SUBSIDIARIES

(FORMERLY ANCHIANO THERAPEUTICS LTD.)LTD)

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Note 1 - General.

A.

A.

Chemomab Therapeutics Ltd. (hereinafter - "the Company"(the “Company") is an Israeli based-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 mergerMerger (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 becoming a wholly owned subsidiary of Anchiano (the “Merger”),.  Upon consummation of the Merger, the Company changed its name from “Anchiano Therapeutics Ltd.” to “Chemomab Therapeutics Ltd.” and the business conducted by Chemomab Ltd. became primarily 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.

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 accounting principles generally accepted in the United States (“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 itsthe Company’s 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 (the “exchange ratio”).

circumstances.

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 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.


7

 

8

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, 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, wasis 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(the “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 approximately$4.5 million. The closing of the Private Placement was completedclosed on March 22, 2021.


89

 

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 corporation (“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$1.0 million.

E.

On April 30, 2021, the Company entered into an At the Market Offering Agreement (the "ATM agreement"Agreement") with Cantor Fitzgerald & Co., ("Cantor"). PursuantAccording to the ATM agreement,Agreement, the Company may offer and sell, from time to time, its ADSs having an aggregate offering price of up to $75  $75.0 million through Cantor orpursuant to the ATM agreement.Agreement. From April 30, 2021 through March 31,June 30, 2022, the Company issuedsold 699,806 ADSs at an average price of $22.75 per ADS throughunder the ATM Prospectus Supplement,Agreement, resulting in gross proceeds of approximately$15.9 million. million. The offer and sale of ADSs under the ATM agreementAgreement 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 agreementAgreement 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.

Agreement.
On April 25, 2022, the Company filed with the SEC a prospectus supplement to the above mentioned registration statement for the issuance and sale of up to $18,125,000 of the Company's ADSs under the ATM Agreement, which is within the $75 million maximum permitted under the ATM Agreement.

On April 25, 2022, the Company filed a prospectus supplement with the SEC for the issuance and sale of up to $18,125,000 of the Company's ADSs (instead of the amount of $75 million above) in connection with the reactivation of the ATM Facility.

F.

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 patientpatients 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.

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.

10

9

 

CHEMOMAB THERAPEUTICS LTD AND ITS SUBSIDIARIES


(FORMERLY ANCHIANO THERAPEUTICS LTD)


NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

Note 1 - General. (Cont.)

On March 27, 2020 and December 27, 2020, the President of the United States signed and enacted into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Consolidated Appropriations Act, 2021 (CAA). Among other provisions, the CARES Act and the CAA provide relief to U.S. federal corporate taxpayers through temporary adjustments to net operating loss rules, changes to limitations on interest expense deductibility, and the acceleration of available refunds for minimum tax credit carryforwards. The CARES Act also includes provisions for a carryback of any net operating loss (NOL) arising in a taxable year beginning after December 31, 2017, and before January 1, 2021, to each of the five taxable years preceding the taxable year in which the loss arises (carryback period).

Chemomab Therapeutics Inc., a wholly owned subsidiary of the Company, filed an application with the US Internal Revenue Service to carryback net operating losses. The Company expects to receive the refund during the second half of 2022.

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”)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 March 31,June 30, 2022, and its results of operations for the three and six months ended March 31,June 30, 2022, and 2021, changes in shareholders’ equity for the threesix months ended March 31,June 30, 2022 and 2021, and cash flows for the threesix months ended March 31,June 30, 2022 and 2021. The results of operations for the three and six months ended March 31,June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other future annual or interim period. These financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC. The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 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.

11

CHEMOMAB THERAPEUTICS LTD AND ITS SUBSIDIARIES
10(FORMERLY ANCHIANO THERAPEUTICS LTD)
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Note 3 - Contingencies
 
During 2022, the Israeli tax authority ("ITA”) notified the Company that it had initiated a routine VAT audit to include tax years 2017 through 2020. The ITA raised several claims, mainly in respect with the recoverability of VAT with respect to Merger Agreement related expenses and the classification of the Company as a holding company. On July 2022, the ITA proposed a settlement, which the Company rejected. As a result, the ITA issued an assessment. The Company plans to appeal the ITA’s assessment. The Company has recorded a provision which is inherently subjective due to the inherent uncertainty of these matters and the judicial process. Therefore, the final outcome may differ from the estimated liability recorded by the Company during the period.

12

Item 2. MANAGEMENT’SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes for the year ended December 31, 2021, as filed in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”). Some of the information contained in this discussion and analysis, particularly with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should read “Risk Factors” in Item 1A of our 2021 Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
References to “we,” “us,” “our” and “Chemomab” in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below refer to the Company after the Merger, and, with respect to historical periods preceding the Merger, refer to Chemomab Ltd., whose business became the business of the Company upon consummation of the Merger.
 
Overview 
 
The Company is a clinical-stage biotechnology company focused on the discovery and development of innovative therapeutics for fibrotic and inflammatory diseases with high unmet need. Based on the unique and pivotal role of the soluble protein CCL24 in promoting fibrosis and inflammation, the Company developed CM-101, a monoclonal antibody designed to bind and block CCL24 activity. CM-101 has demonstrated the potential to treat multiple severe and life-threatening fibrotic and inflammatory diseases.
 
The Company has pioneered the therapeutic targeting of CCL24, a chemokine that promotes various types of cellular processes that regulate inflammatory and fibrotic activities through the CCR3 receptor. The chemokine is expressed in various types of cells, including immune cells, endothelial cells and epithelial cells. We have developed a novel CCL24 inhibiting product candidate with dual anti-fibrotic and anti-inflammatory activity that modulates the complex interplays of both of these inflammatory and fibrotic mechanisms that drive abnormal states of fibrosis and clinical fibrotic diseases. This innovative approach is being developed for difficult to treat rare diseases, also known as orphan indications or diseases, such as primary sclerosing cholangitis, or PSC, and systemic sclerosis, or SSc, for which patients have no established disease modifying standard of care treatment options.
 
CM-101, the Company’s lead clinical product candidate, is a first-in-class humanized monoclonal antibody that hindersattenuates the basic function of the soluble chemokine CCL24, also known as eotaxin-2, as a regulator of major inflammatory and fibrotic pathways. We have demonstrated that CM-101 interferes with the underlying biology of inflammation and fibrosis through a novel and differentiated mechanism of action. Based on these findings, the Company is actively developing CM-101 in Phase 2 clinical studies directed toward two distinct clinical indications including patients with liver, skin, and/or lung fibrosis. We are currently conducting a Phase 2 clinical study in PSC, a rare obstructive and cholestatic liver disease. In addition, we are planning a biological andPhase 2 clinical proof of concept studytrial in SSc focused on establishing biological and clinical proofproof-of-concept on clinically relevant aspects of conceptthis complex disease in this patient population. Although our primary focus relates to these two rare indications, an additional Phase 2 clinical study is currently ongoing in non-alcoholic steatohepatitis, or NASH. This trial willis expected to provide important safety and PK data to support the development of a CM-101 subcutaneous formulation.
 
Fibrosis is the abnormal and excessive accumulation of collagen and extracellular matrix, the non-cellular component in all tissues and organs, that provides structural and biochemical support to surrounding cells. When present in excessive amounts, collagen and extracellular matrix lead to scarring and thickening of connective tissues, affecting tissue properties and potentially leading to organ failure. Fibrosis can occur in many different tissues, including lung, liver, kidney, muscle, skin, and the gastrointestinal tract, resulting in a wide array of progressive fibrotic conditions. Fibrosis and inflammation are intrinsically linked. While a healthy inflammatory response is necessary for efficient tissue repair; after injury, an excessive, uncontrolled inflammatory response can lead to tissue fibrosis.
 
11
Recent Developments
 
New Executive Appointments
 
On February 10,June 16, 2022, our shareholders approvedboard of directors (“Board of Directors”) appointed Ms. Jill M. Quigley, JD, as a Class I director and as a member of the audit committee of the Board of Directors (the “Audit Committee”). Additionally, our Board of Directors determined Ms. Quigley to be an independent director and designated her as the Audit Committee financial expert. Ms. Quigley is a highly accomplished biotechnology executive with broad experience in public company executive management, global operations, legal affairs, finances, and board membership. Ms. Quigley, as a Class I director, will serve in such capacity until the Company’s annual general meeting to be convened in 2025. Ms. Quigley’s appointment followed Mr. Joel Maryles’ decision on May 31, 2022 not to stand for re-election as a Class I director at the Company’s annual general meeting in 2022. Following the appointment of Dr. Dale Pfost, our Chief Executive Officer, toMs. Quigley and departure of Mr. Maryles, the additional role of Chairman of our Board of Directors. This appointment followed the resignation of our previous Chairmancurrent composition of the Board,Audit Committee is Dr. Stephen Squinto, who concurrent with his resignation effective December 19, 2021, became an ad-hoc strategic advisorClaude Nicaise (chair), Dr. Alan Moses and consultant to usMs. Quigley.
13
On June 14, 2022, Mr. Ilan Vaknin, PhD, joined Chemomab as Vice President of Research & Development. Dr. Vaknin has more than 20 years of highly relevant experience in connection with our corporateimmunology, antibody development, biomarkers and business strategy and corporate development.drug development, including more than a decade in senior science roles at the biotechnology company Compugen.
New CM-101 U.S. Patent
 
On January 4,June 21, 2022, we announced the United States Patent and Trademark Office issued a new patent the United States Patent and Trademark Office issued Chemomab a new patent that covers the use of CM-101 and other anti-CCL24 antibodies and binding fragments for the treatment of a range of fibro-inflammatory liver diseases, including PSC and other cholestatic-associated disorders. Liver diseases are an important target for CCL24-associated diseases--CM-101 is currently in a Phase 2 trial for the treatment of PSC, a potentially lethal disease affecting the bile ducts of the liver, and a Phase 2 liver fibrosis study of CM-101 is now concluding. In addition, there are a number of Jack Lawler, who brings extensive experience managingother liver diseases where CM-101 might have therapeutic value. This new method of use patent adds to the protections provided by CM-101’s core composition of matter patents that have already issued in the U.S., Europe and other major global clinical trials,territories, U.S. Patent No.11365246, “Anti CCL24 (eotaxin 2) Antibodies for Use in the Treatment of Hepatic Disease” has a filing date of March 8, 2018, and a grant date of June 21, 2022, with corresponding first to expire claims in 2038 and a possible patent term extension of up to an additional five years, as Vice President of Global Clinical Development Operations.provided under the Drug Price Competition and Patent Restoration Act (35 U.S.C. §156).
 
Revisions to Chemomab’s Clinical Programs
 
On March 9, 2022, we announced that, following a comprehensive strategic review, we are making revisions towere revising our current clinical programs. The changes are designed to optimize the clinical development of lead product candidate CM-101 by maximizing the clinical information obtained, generating additional important data to support future advancement to registration trials, and decreasing the overall risk in the CM-101 clinical development program in the lead indications of PSC and SSc, as well as potentially in additional indications where the scientific rationale is strong. The key top-line changes tothat are being implemented in the clinical development programs include the following:
 
Expanding our commitment to primary sclerosing cholangitisPSC with an enlarged clinical trial that adds an important dose finding component. We plan toare significantly expandexpanding the Phase 2 clinical trial in PSC by implementing a dose finding component to the CM-101 development program. We will be increasing the size of the study to 93patients by adding two additional dose cohorts including plansto the current 10 mg/kg cohort, a lower dose cohort to evaluate both a lower5 mg/kg, and a higher dose levelcohort to evaluate 20 mg/kg. Additionally, we are changing the trial’s primary outcome to an evaluation of CM-101 to support future potential registrational trials.CM-101’s safety and tolerability. Each cohort will enroll 25 patients with PSC and the placebo cohort will enroll 18 patients. In addition, we plan to add an open-label extension to the trial to evaluate the safety, tolerability and durability of effect over longera total of 48 weeks of treatment durations.duration. We have begun regulatory submissions to support trial expansion and other relevant changes.
 
We will be performing a blinded interim safety analysis of the currently enrolling dose cohort in the PSC study, expected to be completed before the end of this year. The primary purpose of this safety analysis is to support review by the Data Monitoring Committee, a prerequisite to opening enrollment in this trial to the planned higher dose cohort of 20mg/kg.
Based on our ongoing efforts to expand the number of clinical trial sites, the current development landscape of trials in PSC, and the increased size of the study, we anticipate that the top-line data from this Phase 2 trial in PSC will be available in the second half of 2024.
Focusing our clinical efforts in systemic sclerosis on establishing earlier biological and clinical proofproof-of-concept in clinically relevant aspects of concept.this complex disease. We plan to focusare focusing our SSc trial towards establishing biological and clinical proof of concept in this patient population. We are revising the design of our planned SSc trial in a way that we believe should enable an expedited path to data supporting proof of concept data, as well asthe relevance of CCL-24 biology, provide further elucidation of the different mechanisms of action of CM-101, inand potentially detect a CM-101 clinical efficacy signal for treating the skin, lung and vascular damage seen in SSc patients. We expect to launch the trial by the end of 2022.
 
Early completionConclusion of enrollment in our safety, pharmacokinetic and biomarker liver fibrosis study, yielding a data readout targeted near the end of 2022. We will be completingconcluded enrollment in our ongoing safety, tolerability and biomarker trial that is evaluating thea subcutaneous formulation of CM-101 in NASH patients with liver fibrosis patients.fibrosis. We believe that the data from this trial could provide useful insights in support of the CM-101 development program and that the early completion of this study should be sufficient to achieve our key objectives—exploringobjectives: characterizing the safety and tolerability of CM-101 in NASH patients, assessing possible early signs of biomarker activity in these patients, and providing the tolerability and pharmacokinetic data needed to assess next steps in the development of theour current subcutaneous formulation—formulation, while allowing us to focus our resources on our lead indications of PSC and SSc.
14
We expect that the proposed changes we are making to the CM-101 development program will provide important data on the clinical dose response relationshiprelationships to inform the broader development program and to identify the optimal dose to advance into late development in later PSC trials.PSC. The modifications are also expected to generate proof of conceptmechanism data on clinicallybiologically relevant aspects of SSc, a complex rheumatological disorder, to best inform the development path for a novel, first-in-class therapeutic like CM-101, along with relevant safety and tolerability data to support the evaluation of higher doses and inform decisions on next steps in the development of theour current subcutaneous formulation.
12
Shelf Registration Statement and ATM Offering
 
On April 30, 2021, we filed a shelf registration statement on Form S-3 with the SEC (File No. 333-255658) for the issuance and sale by us of up to $200,000,000 of our ordinary shares, ADSs, debt securities, warrants and units comprising any combination of the foregoing securities (the “Shelf Registration Statement”). On the same date, we entered into thea sales agreement (the “Sales Agreement”) with Cantor Fitzgerald, pursuant to which we may offer and sell, from time to time, at our option, through or to Cantor Fitzgerald, up to an aggregate of $75,000,000 of our ADSs (the “ATM Facility”). During the period from April 30, 2021 through the date of this quarterly report on Form 10-Q, we had sold an aggregate of 699,806 ADSs pursuant to the Sales Agreement for a total gross consideration of approximately $15.9 million.
 
On April 25, 2022, we filed a prospectus supplement with the SEC for the issuance and sale of up to $18,125,000 of our ADSs in connection with the reactivation of the ATM Facility and pursuant to General Instruction I.B.6 of Form S-3, which, subject to certain exceptions, limits the amount of securities we are able to offer and sell under such registration statement to one-third of our unaffiliated public float. Any ADSs offered, or to be offered, and sold under the Sales Agreement were issued and sold, or will be issued and sold, pursuant to the Shelf Registration Statement and the applicable prospectus or prospectus supplement by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act, or if specified by us, by any other method permitted by law.
 
ImpactDuring the period from April 25, 2022 through the date of COVID-19this quarterly report on Form 10-Q, we did not sell ADSs pursuant to the Sales Agreement.
 
Impact of COVID-19
Since March 2020, the COVID-19 pandemic has dramatically expanded into a worldwide pandemic, creating macro-economic uncertainty and disruption in the business and financial markets. The continuing implications of the COVID-19 pandemic on usChemomab remain uncertain and will depend on future developments, including any adverse impact due to additional variants of the virus; its impact on our employees; the range of government mandated restrictions and other measures; and the success of the COVID-19 vaccines and their effectiveness against the virus and related variants. Furthermore, our clinical trial sites have been affected by the COVID-19 pandemic, and as a result, commencement of the enrollment in our clinical trials of CM-101 in PSC was delayed, and the enrollment rate has been affected as well. As a result, we expanded our patient recruiting efforts to additional territories. In addition, after enrollment in these trials, patients might still discontinue participation in these trials because of possible COVID-19 implications.
 
Based on management’s assessment, the extent to which the COVID-19 pandemic will furthercontinue to impact our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the ultimate duration and changing severity of the outbreak, and the actions that may be required to continue to contain the COVID-19 or treataddress its impact. We are carefully monitoring the restrictionsremaining limitations on patient recruitment due to the effects of the COVID-19 pandemic and if necessary, will adjust activities accordingly.
 
13
Corporate Information 
 
We were incorporated on September 22, 2011 under the laws of the State of Israel. In March 2021, in connection with the Merger, we changed our name from Anchiano Therapeutics Ltd. to Chemomab Therapeutics Ltd. Our principal executive offices are located at Kiryat Atidim, Building 7, Tel Aviv, Israel 6158002, and our phone number is +972-77-331-0156. Our website is: www.chemomab.com.www.chemomab.com. The information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus supplement.Quarterly Report on Form 10-Q. We have included our website address as an inactive textual reference only.
 
15
Components of Operating Results 
 
References to “we,” “us,” “our” and “Chemomab” in this “Components of Operating Results” and in the “Results of Operations” below refer to the Company after the Merger, and, with respect to historical periods preceding the Merger, refer to Chemomab Ltd., whose business became the business of the Company upon consummation of the Merger.
Revenues 
 
To date, we have not generated any revenue. We do not expect to generate any revenue unless and until we obtain regulatory approval and commercialize a product candidate, or until we receive revenue from a collaboration such as a co-development or out-licensing agreement. There can be no assurance that we will receive such regulatory approvals, and if any product candidate is approved, that we will be successful in commercializing it.
 
Research and Development Expenses 
 
Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates. These expenses include:
 
•
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.
 
We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers.
 
We do not allocate employee costs or facility expenses, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use our internal resources primarily to oversee research, as well as for managing our preclinical development, process development, manufacturing and clinical development activities. Our employees work across multiple programs and, therefore, we do not track costs by program.
 
Research and development activities are fundamental to our business. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will increase substantially over the next several quarters and years as we continue to advance the development of our product candidates. We also expect to incur additional expenses related to milestone and royalty payments payable to third parties with whom we have entered into license agreements to acquire the rights to its product candidates.
 
14
General and Administrative Expenses 
 
General and administrative expenses consist primarily of salaries, related benefits and share-based compensation expenses for personnel in executive and administrative functions. General and administrative expenses also include professional fees for legal, consulting, accounting and audit services.
 
We anticipate that our general and administrative expenses will increase in the future as we increase headcount and general activities to support our continued research activities and development of our product candidates as well as expanding our presence in the United States. We also anticipate that we will incur increased headcount, accounting, audit, legal, regulatory, compliance, director and officer insurance costs, as well as investor and public relations expenses associated with being a public company. We expect that the additional costs for these services will substantially increase our general and administrative expenses. Additionally, if and when we believe that regulatory approval of a product candidate appears likely, we expect to incur an increase in payroll and related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of any product candidate.
 
16
Results of Operations 
 
Three and Six Months Ended March 31,June 30, 2022 Compared to the Three and Six Months Ended March 31,June 30, 2021
 
Below is a summary of our results of operations for the periods indicated:3
Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021 
  
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
       
  
June 30,
  
Increase/(decrease)
 
  
2022
  
2021
  $   
%
 
  
(in thousands)
        
Operating expenses:
             
Research and development
 
$
2,914
  
$
1,307
  
$
1,607
   
123
%
General and administrative
  
3,340
   
1,446
   
1,894
   
131
%
Operating loss
  
(6,254
)
  
(2,753
)
  
3,501
   
127
%
Financing expense, net
  
480
   
17
   
463
   
2,724
%
Income Tax
  
(544
)
  
-
   
(544
)
  
100
%
Net loss
 
$
(6,190
)
 
$
(2,770
)
 
$
(3,420
)
  
123
%
Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021
 
  
Six months ended
       
  
June 30,
  
Increase/(decrease)
 
  
2022
  
2021
  $   
%
 
  
(in thousands)
        
Operating expenses:
             
Research and development
 
$
5,659
  
$
2,464
  
$
3,195
   
130
%
General and administrative
  
5,915
   
1,988
   
3,927
   
198
%
Operating loss
  
(11,574
)
  
(4,452
)
  
(7,122
)
  
160
%
Financing expense, net
  
264
   
22
   
242
   
1,100
%
Income Tax (benefit)
  
(544
)
  
-
   
(544
)
  
100
%
Net loss
 
$
(11,294
)
 
$
(4,474
)
 
$
(6,820
)
  
152
%
Our results of operations have varied in the past and can be expected to vary in the future due to numerous factors. We believe that period-to-period comparisons of our operating results are not necessarily meaningful and should not be relied upon as indications of future performance.
 
1517
Research and development expenses 
 
Research and development expenses increased by approximately $1.6 million, or 137%123%, for the three months ended March 31,June 30, 2022, as compared to the same period ofin 2021. The increase was primarily due to increased clinical and pre-clinical activities.
 
Research and development expenses increased by approximately $3.2 million, or 130%, for the six months ended June 30, 2022, as compared to the same period in 2021 also due primarily to increased clinical and pre-clinical activities.
General and administrative expenses 
 
General and administrative expenses increased by approximately $2.0$1.9 million, or 375%131%, for the three months ended March 31,June 30, 2022, as compared to the same period ofin 2021. The increase was primarily due to increase in salaries and related benefits expenses of $1.1 million mainly related to key additions to the senior management team, as well as increase in non-cash share-based expenses as well asin the amount of $0.2 million and provision for expenses incurred as a result of becoming a public company.recorded in relation to an audit by the Israeli Tax Authority.
 
General and administrative expenses increased by approximately $3.9 million, or 198%, for the six months ended June 30, 2022, as compared to the same period in 2021. The increase was primarily due to the increase in non-cash share-based expenses in the amount of $1.0 million as well as increase in salaries and related benefits expenses of $1.6 million mainly related to key additions to the senior management team, and provision for expenses recorded in relation to an audit by the Israeli Tax Authority.
Financing expenses, (income), net 
 
Financing income,expenses, net increased by approximately $463 thousand for the three months ended March 31,June 30, 2022 was $216 thousand.from the same period in 2021. Financing expense, net for the three months ended 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,June 30, 2022 from the comparable period of 2021. The increase was primarily related to interest earned on bank deposits and to foreign currency exchange rate gain.
Financing income, net for the three months ended March 31, 2022 was primarily related to interest earned on bank deposits and to foreign currency exchange rate gain.
loss. Financing expense, net for the three months ended March 31,June 30, 2021 was primarily related to foreign currency exchange rate loss which was partially offset by interest income from bank deposits.
Financing expenses, net increased by approximately $242 thousand for the six months ended June 30, 2022 from the same period in 2021. Financing expense, net for the six months ended June 30, 2022 was primarily related to foreign currency exchange rate loss which was partially offset by interest income from bank deposits. Financing expense, net for the six months ended June 30, 2021 was primarily related to foreign currency exchange rate loss.
 
Liquidity and Capital Resources 
 
Since inception, we have not generated any revenue and have incurred significant operating losses and negative cash flows from our operations, resulting in an accumulated deficit at March 31,June 30, 2022 of $41.3$47.5 million. We have funded our operations to date primarily with proceeds from the sale of our ADSs, and, prior to the Merger, other equity securities. Cash in excess of immediate requirements is invested primarily in bank deposits with a view to liquidity and capital preservation.
 
During the period from April 30, 2021 through March 31,June 30, 2022, we sold an aggregate of 699,806 ADSs pursuant to the Sales Agreement for total gross consideration of approximately $15.9 million. As of March 31,June 30, 2022, we had an aggregate of approximately $57.5$51.8 million of cash, cash equivalents and short-term deposits.
 
18
Developing product candidates, conducting clinical trials and commercializing products are expensive, and we will need to raise substantial additional funds to achieve our strategic objectives. We believe that our existing cash resources, including from the ADSs sold pursuant to the Sales Agreement, will be sufficient to fund our projected cash requirements through the end of 2023. Nevertheless, we will require significant additional financing in the future to fund our operations, including if and when we progress into additional clinical trials, obtain regulatory approval for any of our product candidates and commercialize the same. We believe that we will need to raise significant additional funds before we have any cash flow from operations, if at all. Our future capital requirements will depend on many factors, including:
 
•
•          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;
16
•
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 scope, prioritization and number of our clinical trials and other research and development programs;
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 amount of revenues and contributions we receive under future licensing, development and commercialization arrangements with respect to our product candidates;
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 costs of the development and expansion of our operational infrastructure;
the magnitude of our general and administrative expenses; and
•          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.
•
any cost that we may incur under future in- and out-licensing arrangements relating to our product candidates.
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.
 
17
Cash Flows 
 
The table below shows a summary of our cash flow activities for the periods indicated:
 
 
Three months ended
      
Six months ended
       
 
March 31,
 
Change
  
June 30,
  
Increase/(decrease)
 
 
2022
 
2021
  $  
%
  
2022
  
2021
   $   
%
 
 
(in thousands)
      
(in thousands)
        
Net cash used in operating activities
 
$
(3,711
)
 
$
(1,293
)
 
$
(2,418
)
  
187
%
 
$
(9,412
)
 
$
(6,900
)
 
$
(2,512
)
  
36
%
Net cash provided by (used in) investing activities
 
$
2,382
 
$
(2
)
 
$
2,384
 
(119,200
)%
  
4,109
   
(20,605
)
  
24,714
   
(120
)%
Net cash used in financing activities
  
-
  
$
47,799
  
$
(47,799
)
  
(100
)%
Net cash provided by financing activities
  
22
   
61,227
   
(61,205
)
  
(100
)%
Net increase (decrease) in cash, cash equivalents and restricted cash
 
$
(1,329
)
 
$
46,504
 
$
(47,833
)
  
(103
)%
 
$
(5,281
)
 
$
33,722
  
$
(39,003
)
  
(116
)%
 
19
Operating activities 
 
Net cash used in operating activities increased by $2.4$2.5 million, or 187%36%, for the threesix months ended March 31,June 30 2022 compared to the same period ofin 2021. The increase iswas primarily related to the increase in net loss of $3.4 million, as well as an increase in non-cash activities adjustment to net loss of $0.9$6.8 million, offset by an increase ofin accrued expenses of $0.7$2.2 million, decrease in other receivables of $1.0 million and changes in non-cash activities adjustment of $1.1 million.
 
Investing activities 
 
Net cash provided inby investing activities for the threesix months ended March 31,June 30, 2022 increased by approximately $2.4$24.7 million as compared to the same period ofin 2021. The increase is primarily related to withdrawalan increase in short term bank deposits. Net cash used in investing activities for the six months ended June 30, 2021 was primarily related to the deposit of proceeds received from a private placement in bank deposits.
 
Financing activities 
 
Net cash provided by financing activities for the threesix months ended March 31,June 30, 2022 decreased by approximately $48$61.2 million, as compared to the same period in 2021. The decrease is primarily related to a decrease in proceeds from the issuance of ADSs of approximately $58.7 million (net of expenses), and cash acquired in the Merger of approximately $2.4 million, in each case in the six months ended on June 30, 2021.
 
Financing activities for the six months ended June 30, 2021 reflect proceeds received from the private placement as well as sales of the Company's ADSs under the ATM program.
Contractual Commitments 
 
The Company’s contractual commitments areat June 30, 2022 were as follows at March 31, 2022 (in thousands):
 
Remainder of 2022
$

5,918

    
Remainder of 2022
  
$
5,021
 
2023
   
5,928
 
2023
  
5,741
 
2024
    
140
 
2024
   
146
 
2025-2027
      
2025-2027
   - 
Total
$

11,986

  
 
 
Total
  
$
10,908
 

18
Critical Accounting EstimatesPolicies
 
The Company’s financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of the Company’s financial statements and related disclosures in accordance with GAAP requires it to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in the Company’s financial statements. The Company bases its estimates on historical experience, known trends and events and various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company evaluates its estimates and assumptions on an ongoing basis. The Company’s actual results may differ from these estimates under different assumptions or conditions.
 
While the Company’s significant accounting policies are described in more detail in Note 2 to the Company’s consolidated financial statements included elsewhere in thisthe 2021 Annual Report, on Form 10-K, the Company believes that the following accounting estimates are those that include a higher degree of judgment or complexity and are reasonably likely to have a material impact on our financial condition or results of operations and are therefore considered critical accounting estimates.
 
20
Share-Based Compensation
 
We apply Accounting Standard Codification (ASC) 718-10, “Share-Based Payment,” which requires the measurement and recognition of compensation expenses for all share-based payment awards made to employees and directors, including employee options under the Company’sChemomab’s option plans based on estimated fair values.
 
ASC 718-10 requires that we estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The fair value of the award is recognized as an expense over the requisite service periods in the Company’sChemomab’s statements of comprehensive loss. The CompanyChemomab recognizes share-based award forfeitures as they occur, rather than estimate by applying a forfeiture rate.
 
In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting”, which simplifies the accounting for nonemployee share-based payment transactions by aligning the measurement and classification guidance, with certain exceptions, to that for share-based payment awards to employees. The amendments expand the scope of the accounting standard for share-based payment awards to include share-based payment awards granted to non-employees in exchange for goods or services used or consumed in an entity’s own operations and supersedes the guidance related to equity-based payments to non-employees. We adopted these amendments on January 1, 2019.
 
We recognize compensation expenses for the fair value of non-employee awards over the requisite service period of each award.
 
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). The 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 the Company deems relevant. The 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. The 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. The 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 the Company.
 
19
Recently-Issued Accounting Pronouncements 
 
Certain recently-issued accounting pronouncements are discussed in Note 2, Summary of Significant Accounting Policies, to the audited consolidated financial statements in our 2021 Annual Report.
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 
 
We are an emerging growth company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are not required to provide the information under this item.
 
21
Item 4. Controls and Procedures. 
 
Evaluation of Disclosure Controls and Procedures 
 
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31,June 30, 2022. Based on such evaluation, our principal executive officer and principal financial officer have concluded that that our disclosure controls and procedures were effective as of March 31,June 30, 2022.
 
Changes in Internal Control over Financial Reporting 
 
We consummated the Merger on March 16, 2021, which has been accounted for as a reverse capitalization for accounting purposes, and, upon consummation of the Merger, we reconstituted our Board of Directors and our senior management team. Following consummation of the Merger theThe Company’s management washas been in the process of strengthening the Company’s internal control over financial reporting since the Merger, including during the fiscal yearquarter ended December 31, 2021,June 30, 2022, including adopting new policies and procedures appropriate to the Company’s current business and management team and onboarding new members to our finance team – including a new Chief Financial Officer, VP Finance and director of finance.team. The foregoing actions wereare being taken solely in connection with the changes effected in connection with the Merger and not as the result of any material weakness or deficiency in the Company’s internal control over financial reporting.
 
ThereExcept as described above, there have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
2022
PART II. – OTHER INFORMATION 
 
Item 1. Legal Proceedings 
 
From time to time, we may become involved in legal proceedings relating to claims arising from the ordinary course of business. Our management believes that there are currently no claims or actions pending against us, the ultimate disposition of which could have a material adverse effect on our results of operations, financial condition or cash flows.
 
Item 1A. Risk Factors 
 
There have been no material changes from the information set forth in “Item 1A. Risk Factors” in our 2021 Annual Report.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 
 
None.
 
Item 3. Defaults Upon Senior Securities. 
 
Not applicable.
 
Item 4. Mine Safety Disclosures. 
 
Not applicable.
 
Item 5. Other Information. 
 
None.
 
2123
Item 6. Exhibits.
 
(a) The following documents are filed as exhibits to this Quarterly Report or incorporated by reference herein.
Exhibit
Number 
 
Description 
31.1*
 
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2*
 
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32.1**
 
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
32.2**
 
 
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. INSINS*
 
Inline XBRL Instance Document
101. SCHSCH*
 
Inline XBRL Taxonomy Extension Schema Document
101. CALCAL*
 
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101. DEFDEF*
 
Inline XBRL Taxonomy Extension Definition Linkbase Document
101. LABLAB*
 
Inline XBRL Taxonomy Extension Label Linkbase Document
101. PREPRE*
 
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104104*
 
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
 
Filed herewith.
**
 
Furnished herewith.
 
2224
 
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.
 
 
CHEMOMAB THERAPEUTICS LTD.
 
Date: MayAugust 12, 2022
By:
/s/ Dale Pfost
 
Name:
Dale Pfost
 
Title:
Chief Executive Officer
   
Date: MayAugust 12, 2022
By:
/s/ Donald Marvin
 
Name:
Donald Marvin
 
Title:
Chief Financial Officer
 

2325