| General. | Note 1 - General A. Chemomab Therapeutics Ltd. (hereinafter - "the Company") is an Israeli based company incorporated under the laws of B. On March 16, 2021, the Company, then known as Anchiano Therapeutics Ltd. (“Anchiano”), completed its merger 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’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, plus a warrant to purchase ADSs that may become exercisable only under certain 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 not vested, 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 CHEMOMAB THERAPEUTICS LTD (FORMERLY ANCHIANO THERAPEUTICS LTD) NOTES TO CONDENSED CONSOLIDATED 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, prior to the Merger, is 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
7 CHEMOMAB THERAPEUTICS LTD (FORMERLY ANCHIANO THERAPEUTICS LTD) NOTES TO CONDENSED CONSOLIDATED 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 E. On April 19, 2021, the Board of directors of the Company approved the grant of three The fair value of each option granted in the six months ended June 30, 2021 was estimated on the grant date using the
Value of ADS
27.26
Dividend yield
0
%
Expected volatility
70.88
%
Risk-free interest rate
1.61
%
Expected term (years)
5.7-6.2
F. On April 30, 2021, the Company entered into an At the Market Offering Agreement (the "ATM agreement") with
8 CHEMOMAB THERAPEUTICS LTD (FORMERLY ANCHIANO THERAPEUTICS LTD) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - General (Cont.) G. Since January 2020, the COVID-19 outbreak has dramatically expanded into a worldwide pandemic creating 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 pandemic and will adjust activities accordingly. |
