Check-Cap (CHEK) 6-K 4 Aug 23 2023 Q2 Check-Cap Reports Second Quarter 2023 Financial Results Financial data

Document and Entity Information

Document and Entity Information	6 Months Ended
	Jun. 30, 2023
Document and Entity Information [Abstract]
Entity Registrant Name	Check-Cap Ltd.
Document Type	6-K
Document Period End Date	Jun. 30, 2023
Amendment Flag	false
Entity Central Index Key	0001610590
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Entity Address, Address Line One	Check-Cap Building
Entity Address, Address Line Two	Abba Hushi Avenue
Entity Address, Address Line Three	P.O. Box 1271
Entity Address, City or Town	Isfiya
Entity Address, Postal Zip Code	30090
Entity Address, Country	IL

CONSOLIDATED UNAUDITED BALANCE

CONSOLIDATED UNAUDITED BALANCE SHEETS - USD ($) $ in Thousands		Jun. 30, 2023	Dec. 31, 2022
Current assets
Cash and cash equivalents		$ 2,254	$ 4,090
Restricted cash		350	352
Short-term bank deposit		29,815	37,609
Prepaid expenses and other current assets		838	579
Total current assets		33,257	42,630
Non-current assets
Property and equipment, net		245	1,751
Operating leases		223	1,060
Total non-current assets		468	2,811
Total assets		33,725	45,441
Accounts payable and accruals
Trade		783	952
Other		675	802
Employees and payroll accruals		1,946	1,261
Other current liabilities		48	56
Operating lease liabilities		83	337
Total current liabilities		3,535	3,408
Non-current liabilities
Royalties provision		0	94
Operating lease liabilities		0	627
Total non-current liabilities		0	721
Shareholders' equity
Share capital, Ordinary shares, 48 NIS par value (18,000,000 authorized shares as of June 30, 2023 and December 31, 2022, respectively; 5,849,216 and 5,844,463 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively)	[1]	83,728	83,664
Additional paid-in capital		85,075	84,941
Accumulated deficit		(138,613)	(127,293)
Total shareholders' equity		30,190	41,312
Total liabilities and shareholders' equity		$ 33,725	$ 45,441
[1]All share amounts have been retroactively adjusted to reflect a 1-for-20 reverse share split.

CONSOLIDATED UNAUDITED BALANC_2

CONSOLIDATED UNAUDITED BALANCE SHEETS (Parenthetical) - ₪ / shares	Jun. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Ordinary shares, par value per share	₪ 48	₪ 48
Ordinary shares, shares authorized	18,000,000	18,000,000
Ordinary shares, shares issued	5,849,216	5,844,463
Ordinary shares, shares outstanding	5,849,216	5,844,463

CONSOLIDATED UNAUDITED STATEMEN

CONSOLIDATED UNAUDITED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Income Statement [Abstract]
Research and development expenses, net	$ 4,480	$ 3,545	$ 8,151	$ 7,673
General and administrative expenses	1,583	1,343	2,762	3,100
Impairment of fixed assets	1,364	0	1,364	0
Operating loss	7,427	4,888	12,277	10,773
Finance Income, net	549	81	957	132
Loss before income tax	6,878	4,807	11,320	10,641
Net loss for the period	$ 6,878	$ 4,807	$ 11,320	$ 10,641
Loss per share:
Net loss per ordinary share basic	$ 1.18	$ 0.82	$ 1.94	$ 1.94
Net loss per ordinary share diluted	$ 1.18	$ 0.82	$ 1.94	$ 1.94
Weighted average number of ordinary shares outstanding - basic	5,848,565	5,840,089	5,847,392	5,497,548
Weighted average number of ordinary shares outstanding - diluted	5,848,565	5,840,089	5,847,392	5,497,548

CONSOLIDATED UNAUDITED STATEM_2

CONSOLIDATED UNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands		Ordinary Share [Member]	Additional paid-in capital [Member]	Accumulated deficit [Member]	Total
Beginning balance at Dec. 31, 2021		$ 68,787	$ 90,089	$ (108,185)	$ 50,691
Beginning balance, shares at Dec. 31, 2021	[1]	4,840,089
Issuance of ordinary shares and warrants in March 2022 registered direct offerings, net of issuance expenses in an amount of $1,150		$ 14,815	(5,965)	0	8,850
Issuance of ordinary shares and warrants in March 2022 registered direct offerings, net of issuance expenses in an amount of $1,150, shares	[1]	1,000,000
Share-based compensation		$ 0	250	0	250
Net loss		0	0	(5,834)	(5,834)
Ending balance at Mar. 31, 2022		$ 83,602	84,374	(114,019)	53,957
Ending balance, shares at Mar. 31, 2022	[1]	5,840,089
Beginning balance at Dec. 31, 2021		$ 68,787	90,089	(108,185)	50,691
Beginning balance, shares at Dec. 31, 2021	[1]	4,840,089
Net loss					(10,641)
Ending balance at Jun. 30, 2022		$ 83,602	84,648	(118,826)	49,424
Ending balance, shares at Jun. 30, 2022	[1]	5,840,089
Beginning balance at Mar. 31, 2022		$ 83,602	84,374	(114,019)	53,957
Beginning balance, shares at Mar. 31, 2022	[1]	5,840,089
Share-based compensation		$ 0	274	0	274
Net loss		0	0	(4,807)	(4,807)
Ending balance at Jun. 30, 2022		$ 83,602	84,648	(118,826)	49,424
Ending balance, shares at Jun. 30, 2022	[1]	5,840,089
Beginning balance at Dec. 31, 2022		$ 83,664	84,941	(127,293)	41,312
Beginning balance, shares at Dec. 31, 2022	[1]	5,844,463
Share-based compensation		$ 0	156	0	156
Net loss		0	0	(4,442)	(4,442)
RSUs vesting		$ 46	(46)	0	0
RSUs vesting, shares	[1]	3,375
Ending balance at Mar. 31, 2023		$ 83,710	85,051	(131,735)	37,026
Ending balance, shares at Mar. 31, 2023	[1]	5,847,838
Beginning balance at Dec. 31, 2022		$ 83,664	84,941	(127,293)	41,312
Beginning balance, shares at Dec. 31, 2022	[1]	5,844,463
Net loss					(11,320)
Ending balance at Jun. 30, 2023		$ 83,728	85,075	(138,613)	30,190
Ending balance, shares at Jun. 30, 2023	[1]	5,849,216
Beginning balance at Mar. 31, 2023		$ 83,710	85,051	(131,735)	37,026
Beginning balance, shares at Mar. 31, 2023	[1]	5,847,838
Share-based compensation		$ 0	42	0	42
Net loss		0	0	(6,878)	(6,878)
RSUs vesting		$ 18	(18)	0	0
RSUs vesting, shares	[1]	1,378
Ending balance at Jun. 30, 2023		$ 83,728	$ 85,075	$ (138,613)	$ 30,190
Ending balance, shares at Jun. 30, 2023	[1]	5,849,216
[1]All share amounts have been retroactively adjusted to reflect a 1-for-20 reverse share split.

CONSOLIDATED UNAUDITED STATEM_3

CONSOLIDATED UNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) $ in Thousands	1 Months Ended
	Mar. 31, 2022 USD ($)
Issuance expenses	$ 1,150

CONSOLIDATED UNAUDITED STATEM_4

CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (11,320)	$ (10,641)
Adjustments required to reconcile net loss to net cash used in operating activities:
Depreciation	190	159
Impairment of fixed assets	1,364	0
Share-based compensation	198	525
Financial income, net	(323)	(239)
Changes in assets and liabilities items:
Increase in prepaid and other current assets and non-current assets	(255)	(152)
Increase (decrease) in trade accounts payable, accruals and other current liabilities	(270)	320
Increase (decrease) in employees and payroll accruals	686	(293)
Decrease in royalties provision	(94)	(25)
Net cash used in operating activities	(9,824)	(10,346)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	(83)	(323)
Changes in short-term deposits	8,069	(13,000)
Net cash provided by (used in) investing activities	7,986	(13,323)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of ordinary shares in the registered direct offerings, net of issuance expenses	0	8,850
Net cash provided by financing activities	0	8,850
Net increase in cash, cash equivalents and restricted cash	(1,838)	(14,819)
Cash, cash equivalents and restricted cash at the beginning of the period	4,442	26,807
Cash, cash equivalents and restricted cash at the end of the period	2,604	11,988
Supplemental disclosure of non-cash flow information
Purchase of property and equipment included in accounts payable and accrued expenses	0	38
Assets acquired under operating lease	136	167
Supplemental disclosure of cash flow information:
Cash paid for taxes	2	3
Interest received	$ 654	$ 138

GENERAL INFORMATION

GENERAL INFORMATION	6 Months Ended
	Jun. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
GENERAL INFORMATION	NOTE 1 - GENERAL INFORMATION A. General (1) Check-Cap Ltd. (the “Company") was incorporated under the laws of the State of Israel. The registered address of its offices is 29 Abba Hushi Avenue, Isfiya 3009000, Israel. (2) The Company has a wholly-owned subsidiary, Check-Cap US, Inc., that was incorporated under the laws of the State of Delaware on May 15, 2015. (3) The . On March 21, 2023, the Company announced that following the Company’s internal assessment of the clinical data collected until such date from its calibration studies, the Company has determined that the most recent efficacy results from the Company’s calibration studies did not meet the goal in order to proceed to the powered portion of the U.S. pivotal study. The Company further announced that it had adopted a plan of actions that included conducting additional clinical data analysis and approaching the U.S. Food and Drug Administration (“FDA”) to make amendments to the U.S. pivotal study and that the Company is also implementing a cost reduction plan in order to extend its cash runway, and that the initiation of the powered portion of the U.S. pivotal study that was expected in mid-2023 is therefore temporarily postponed. On June 6, 2023, the Company announced that after further review of additional data and interaction with the FDA on a revised pivotal study protocol together with the anticipated time and investment necessary to further develop the technology, the Company’s Board of Directors has determined that it is appropriate to pursue strategic options. In addition, the Company’s Board of Directors approved a reduction in its workforce by approximately 90 percent, to reduce the Company’s cash burn, after which the Company expects to have eight remaining employees. In light of these developments, the Company discontinued the calibration studies and does not plan on commencing the powered portion of its U.S. pivotal study and plans to concentrate its resources on its essential research activities and strategic alternatives. As a result, (4) On February 24, 2015, the Company consummated an Initial Public Offering in the United States concurrently with a private placement. On August 11, 2016, the Company consummated a registered direct offering of ordinary shares and pre-funded warrants. On June 2, 2017, the Company consummated a registered direct offering of ordinary shares and a simultaneous private placement of warrants. On November 22, 2017, the Company consummated a registered direct offering of ordinary shares and a simultaneous private placement of warrants. On May 8, 2018, the Company consummated an underwritten public offering of ordinary shares, pre-funded warrants and Series C warrants. On February 6, 2019, the Company consummated a registered direct offering of ordinary shares and warrants. In February 2020, the Company consummated a private placement of ordinary shares. During April and May 2020, the Company consummated three registered direct offerings of ordinary shares and simultaneous private placements of warrants. On July 27, 2020, the Company consummated a warrant exercise transaction to purchase ordinary shares and a simultaneous private placement of warrants. During the first quarter of 2021, certain investors exercised their warrants previously issued by the Company. In July 2021, the Company consummated a registered direct offering of ordinary shares and warrants. On March 3, 2022, the Company consummated a registered direct offering of ordinary shares and warrants. The Company's ordinary shares are listed on the NASDAQ Capital Market under the symbol "CHEK". The consolidated financial statements of the Company as of and for the six months ended June 30, 2023, include the financial statements of the Company and its wholly-owned U.S. subsidiary. (5) Since its inception, the Company has devoted substantially all of its efforts to research and development, clinical trials, recruiting management and technical staff, acquiring assets and raising capital. The Company has incurred losses of $11,320 and $10,641 for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, the Company's accumulated deficit was approximately $138,613. The Company has funded its operations to date primarily through equity financings, sale of its ordinary shares and warrants, the exercise of warrants and other financing transactions and through grants from the Israel Innovation Authority of the Ministry of Economy and Industry. (6) In early 2020, the World Health Organization declared the rapidly spreading coronavirus disease (COVID-19) outbreak a pandemic. The Company experienced disruptions to its operations as a result of the COVID-19 pandemic including disruptions to the Company’s clinical studies, and as a result, faced delays in its clinical trials. The extent to which the COVID-19 pandemic shall impact the Company’s operations in the future will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

CONSOLIDATED UNAUDITED FINANCIA

CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS	6 Months Ended
	Jun. 30, 2023
Unaudited Consolidated Financial Statements [Abstract]
CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS	NOTE 2 - CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS The accompanying consolidated unaudited financial statements have been prepared in a condensed format and include the consolidated unaudited financial operations of the Company as of June 30, 2023 and for the six and three month periods then ended, in accordance with U.S. GAAP, relating to the preparation of financial statements for interim periods. Accordingly, the accompanying consolidated unaudited financial statements do not include all the information and footnotes required by generally accepted accounting principles for complete set of financial statements. These consolidated unaudited financial statements should be read in conjunction with the audited financial statements and the accompanying notes of the Company for the year ended December 31, 2022 that are included in the Company's Annual Report on Form 20-F, filed with the Securities and Exchange Commission on March 31, 2023 (the "Annual Report"). In the opinion of management, all adjustments (including adjustments related to the reduction of workforce and discontinuance of the clinical studies) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2023, are not necessarily indicative of the results that may be expected for the year ended December 31, 2023.

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	6 Months Ended
	Jun. 30, 2023
Accounting Policies [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies that have been applied in the preparation of the unaudited consolidated financial statements are identical to those that were applied in preparation of the Company’s most recent annual financial statements in connection with the Annual Report.

LEASES

LEASES	6 Months Ended
	Jun. 30, 2023
Leases [Abstract]
LEASES	NOTE 4 - LEASES The Company leases vehicles and offices under various operating lease agreements. Following the determination of Company’s Board of Directors on June 6, 2023 to discontinue the Company’s clinical studies (see Note 1 A (3)), on June 8, 2023, the Company terminated its sub-lease agreement in Petach Tikva, and the agreement shall terminate on September 8, 2023. The Company currently does not expect to extend the lease agreement of its offices in Isfiya and Petach Tikva, Israel that expire on December 31, 2023 and February 24, 2024, respectively. According to ASC 842, the changes described above are a triggering event for reassessment of the lease terms and as a result, the lease liability was remeasured as of the reassessment date with an adjustment recorded to the underlying right of use assets. At June 30, 2023, the Company’s operating lease assets and lease liabilities for operating leases totaled $223 and $83, respectively. Supplemental cash flow information related to operating leases was as follows: Six months ended June 30, 2023 Cash payments for operating leases $ 223 The Company uses its incremental borrowing rate as the discount rate for its leases, as the implicit rate in the lease is not readily determinable. As of June 30, 2023, the Company’s operating leases had a weighted average remaining lease term of 5 months and a weighted average borrowing rate of 11%. Future lease payments under operating leases as of June 30, 2023 were as follows: Operating Leases Second half of 2023 $ 130 2024 $ 3 Total future lease payments $ 133 Less imputed interest (50 ) Total lease liability balance $ 83

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION	6 Months Ended
	Jun. 30, 2023
Share-Based Payment Arrangement [Abstract]
SHARE-BASED COMPENSATION	NOTE 5 - SHARE-BASED COMPENSATION 1. A summary of the Company's option activity related to options granted to employees, service providers and directors, and related information is as follows: For the six months ended June 30, 2023 Weighted Weighted average average remaining exercise price contractual Number (in $) life (in years) Options outstanding at beginning of period 191,892 35.35 8.59 Options granted 903 2.82 Options forfeited and expired (2,901 ) 158.58 Options outstanding at end of period 189,894 33.31 8.62 Options exercisable at end of period 73,560 58.77 7.84 2. A summary of the Company’s restricted stock awards (“RSUs”) activity is as follows: For the six months ended June 30, 2023 Unvested at beginning of period 19,703 Granted - Vested (4,753 ) Forfeited (1,853 ) Unvested at end of period 13,097 On January 4, 2023, the Company's Board of Directors resolved to increase the number of ordinary shares of the Company reserved for issuance under the Check-Cap Ltd. 2015 Equity Incentive Plan by an additional 30,000 ordinary shares. Following the balance sheet date, due to the termination of the employment of Company employees (see Note 1A(3)), an aggregate of 21,759 options and RSUs expired.

IMPAIRMENT OF FIXED ASSETS

IMPAIRMENT OF FIXED ASSETS	6 Months Ended
	Jun. 30, 2023
Asset Impairment Charges [Abstract]
IMPAIRMENT OF FIXED ASSETS	NOTE 6 - IMPAIRMENT OF FIXED ASSETS On June 6, 2023, the Company announced that following a review of its business, resources and capabilities, it is exploring strategic alternatives As a result , due to changes in circumstances that indicate that the carrying amount of an asset (or asset group) may not be recoverable, the Company reviewed its long-lived assets for impairment in accordance with ASC 360-10 "Accounting for the Impairment or Disposal of Long-Lived Assets" and determined that the fixed assets are considered to be impaired by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Therefore, the Company recorded an impairment loss of 1,364 for the six months ended June 30, 2023.

LEASES (Tables)

LEASES (Tables)	6 Months Ended
	Jun. 30, 2023
Leases [Abstract]
Schedule of supplemental cash flow information related to operating leases	Six months ended June 30, 2023 Cash payments for operating leases $ 223
Schedule of future lease payments	Operating Leases Second half of 2023 $ 130 2024 $ 3 Total future lease payments $ 133 Less imputed interest (50 ) Total lease liability balance $ 83

SHARE-BASED COMPENSATION (Table

SHARE-BASED COMPENSATION (Tables)	6 Months Ended
	Jun. 30, 2023
Share-Based Payment Arrangement [Abstract]
Schedule of stock option activity	For the six months ended June 30, 2023 Weighted Weighted average average remaining exercise price contractual Number (in $) life (in years) Options outstanding at beginning of period 191,892 35.35 8.59 Options granted 903 2.82 Options forfeited and expired (2,901 ) 158.58 Options outstanding at end of period 189,894 33.31 8.62 Options exercisable at end of period 73,560 58.77 7.84
Schedule of unvested Restricted Stock Units	For the six months ended June 30, 2023 Unvested at beginning of period 19,703 Granted - Vested (4,753 ) Forfeited (1,853 ) Unvested at end of period 13,097

GENERAL INFORMATION (Detail Tex

GENERAL INFORMATION (Detail Textuals) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Net loss	$ (6,878)	$ (4,442)	$ (4,807)	$ (5,834)	$ (11,320)	$ (10,641)
Accumulated deficit	(138,613)				(138,613)		$ (127,293)
Provision for termination for employment period	611				611
Amount of retention provision	$ 217				$ 217

LEASES (Detail Textuals)

LEASES (Detail Textuals) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Operating lease assets	$ 223	$ 1,060
Operating lease liabilities	$ 83
Weighted average remaining lease term	5 months
Approximate weighted average borrowing rate	11%

LEASES (Schedule of supplementa

LEASES (Schedule of supplemental cash flow Information related to operating leases) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2023 USD ($)
Leases [Abstract]
Cash payments for operating leases	$ 223

LEASES (Schedule of future leas

LEASES (Schedule of future lease payments) (Details) $ in Thousands	Jun. 30, 2023 USD ($)
Leases [Abstract]
Second half of 2023	$ 130
2024	3
Total future lease payments	133
Less imputed interest	(50)
Total lease liability balance	$ 83

SHARE-BASED COMPENSATION (Detai

SHARE-BASED COMPENSATION (Detail Textuals) - shares		6 Months Ended
	Jan. 04, 2023	Jun. 30, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Options and RSUs expired		2,901
2015 Equity Incentive Plan
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Increase in shares available for additional grant	30,000
Options and RSUs [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Options and RSUs expired		21,759

SHARE-BASED COMPENSATION (Sched

SHARE-BASED COMPENSATION (Schedule of option activity related to options granted to employees) (Details) - $ / shares	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Number of options
Options outstanding at beginning of period	191,892
Options granted	903
Options forfeited and expired	(2,901)
Options outstanding at end of period	189,894
Options exercisable at end of period	73,560
Weighted average exercise price
Options outstanding at beginning of period	$ 35.35
Options granted	2.82
Options forfeited and expired	158.58
Options outstanding at end of period	33.31
Options exercisable at end of period	$ 58.77
Weighted average remaining contractual life
Options outstanding	8 years 7 months 13 days	8 years 7 months 2 days
Options exercisable at end of period	7 years 10 months 2 days

SHARE-BASED COMPENSATION (Sch_2

SHARE-BASED COMPENSATION (Schedule of RSU activity) (Details) - RSU's	6 Months Ended
	Jun. 30, 2023 shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Unvested at beginning of period	19,703
Granted	0
Vested	(4,753)
Forfeited	(1,853)
Unvested at end of period	13,097

IMPAIRMENT OF FIXED ASSETS (Det

IMPAIRMENT OF FIXED ASSETS (Detail Textuals) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Asset Impairment Charges [Abstract]
Impairment of fixed assets	$ 1,364	$ 0	$ 1,364	$ 0