Commission File No. 001-36848
P.O. Box 1271
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
This Form 6-K (other than Exhibits 99.1 and 99.2) are hereby incorporated by reference into the Post-Effective Amendment No. 1 to the Form S-8 Registration Statement File No. 333-203384, Form S-8 Registration Statement File Nos. 333-226490 and 333-259666, and into the Form F-3 Registration Statements File Nos. 333-211065, 333-225789 and 333-262401.
On August 16, 2023, Check-Cap Ltd. (the “Company”, or “Check-Cap”), entered into a business combination agreement (the “BCA”) with Keystone Dental Holdings, Inc., a Delaware corporation (“Keystone”), Capstone Dental PubCo, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Keystone (“PubCo”), Capstone Merger Sub Ltd., an Israeli company and a direct, wholly owned subsidiary of PubCo (“Israeli Merger Sub”), and Capstone Merger Sub Corp., a Delaware corporation and a direct, wholly owned subsidiary of PubCo (“U.S. Merger Sub”).
Pursuant to the BCA, (a) Israeli Merger Sub will merge with and into the Company (the “Israeli Merger”), with Check-Cap surviving the Israeli Merger as a direct, wholly owned subsidiary of PubCo, and (b) concurrently with or immediately following the Israeli Merger, U.S. Merger Sub will merge with and into Keystone (the “U.S. Merger” and, together with the Israeli Merger, the “Business Combination”), with Keystone surviving the U.S. Merger as a direct, wholly owned subsidiary of PubCo.
For U.S. federal income tax purposes, (a) it is intended that the U.S. Merger will qualify as a “reorganization” under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) taken together, the Business Combination will qualify as an exchange under Section 351 of the Code, and (b) the BCA is intended to constitute and hereby is adopted as a “plan of reorganization” with respect to the Business Combination within the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3(a) for purposes of Sections 354, 361 and 368 of the Code and the Treasury Regulations thereunder.
At the effective time of the Israeli Merger (the “Israeli Merger Effective Time”) (a) each Check-Cap ordinary share issued and outstanding immediately prior to the Israeli Merger Effective Time (other than treasury and dormant shares) will automatically convert into a number of shares of PubCo common stock, par value $0.01 per share (“PubCo Common Stock”) equal to the Check-Cap exchange ratio, (b) each Check-Cap option, unvested RSU and so-called CLA warrants that are outstanding immediately prior to the Israeli Merger Effective Time will automatically expire, (c) each vested Check-Cap RSU that is outstanding and unsettled immediately prior to the Israeli Merger Effective Time shall automatically convert into PubCo Common Stock, based on the number of ordinary shares underlying the RSUs and the Check-Cap exchange ratio, and (d) any outstanding and unexercised warrants with a change of control redemption feature that are not redeemed in accordance with their terms will be complied with by PubCo in accordance with their terms.
At the effective time of the U.S. Merger (the “U.S. Merger Effective Time”) (a) each share of Keystone common stock issued and outstanding immediately prior to the U.S. Merger Effective Time (excluding Keystone dissenting shares and Keystone treasury shares) will be canceled and converted into the right to receive the number of shares of PubCo Common Stock equal to the Keystone exchange ratio, and (b) each Keystone option and warrant outstanding immediately prior to the U.S. Merger Effective Time will be assumed by PubCo in accordance with their terms, subject to appropriate adjustment of the number of shares of common stock and exercise price thereof based on the Keystone exchange ratio.
Under the exchange ratio formulas in the BCA, upon the closing of the Business Combination Agreement, Check-Cap security holders are expected to own approximately 15% of PubCo while Keystone security holders are expected to own approximately 85% of PubCo, on a fully-diluted basis and assuming a Check-Cap net cash target of $22.3 million. The ownership percentages may be subject to adjustment based on Check-Cap’s net cash at closing.
The BCA contains customary representations, warranties and covenants made by the parties, including covenants relating to obtaining the requisite approvals of the security holders of Check-Cap and Keystone, indemnification of directors and officers, and Check-Cap’s and Keystone’s conduct of their respective businesses between the date of signing of the BCA and the closing.
PubCo expects to file with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4, which will include a prospectus describing the Business Combination and the shares of PubCo Common Stock to be issued in the Business Combination, and Check-Cap expects to file a proxy statement relating to a shareholder meeting to be held in connection with the Business Combination.
The closing is subject to satisfaction or waiver of certain conditions including, among other things, (i) the registration statement on Form S-4 referred to above having been declared effective by the SEC, (ii) the required approvals by the parties’ shareholders, (iii) Nasdaq listing approval with respect to PubCo Common Stock having been obtained, and the shares of PubCo Common Stock to be issued in the Business Combination pursuant to the BCA having been approved for listing (subject to official notice of issuance) on Nasdaq, (iv) any waiting period applicable to the consummation of the Business Combination under any applicable antitrust law having expired or been terminated, (v) at least 50 days having elapsed after the filing of the Israeli merger proposal with the Israeli Companies Registrar and at least 30 days having elapsed after the Check-Cap shareholder approval and the Israeli Companies Registrar having issued a certificate evidencing the Israeli Merger; (vi) the receipt of a no-action letter from the Israeli Securities Authority, (vii) the receipt of certain israeli tax rulings, and (viii) approval of the Israeli District Court with respect to the distribution of Check-Cap cash following the closing.
The BCA contains provisions granting both Check-Cap and Keystone the right to terminate the BCA for certain reasons, including, among others, (i) the Business Combination not having been consummated by January 31, 2024 (subject to certain exceptions and to potential automatic extension, the “Termination Date”), (ii) any governmental authority having issued an order, decree or ruling, or taken any other action (including the enactment of any statute, rule, regulation, decree or executive order) enjoining or prohibiting the Business Combination, or (iii) under certain conditions, there having been a material breach of any of the representations, warranties, covenants or agreements set forth in the BCA by a party to the BCA. The BCA further provides that if the BCA is terminated under certain circumstances, Check-Cap may be required to pay to Keystone a nonrefundable fee in the amount of $1,500,000 and reimburse Keystone for up to $1,500,000 of its expenses, and Keystone may be required to pay to Check-Cap a nonrefundable fee in the amount of $4,000,000, and reimburse Check-Cap for up to $1,000,000 of its expenses.
After the closing, management of PubCo is expected to consist of the current management of Keystone while the board of directors of PubCo shall consist of individuals designated by Keystone except that for a board of up to seven members, Check-Cap may designate one initial member and for a board of greater than seven members, Check-Cap may designate two initial members.
The foregoing summary does not purport to be a complete description and is qualified in its entirety by reference to the full text of the BCA, which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The BCA is incorporated herein by reference to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual or financial information about Check-Cap, Keystone, the other parties to the BCA or any of their respective subsidiaries and affiliates. The representations, warranties and covenants contained in the BCA were made only for purposes of that agreement and as of specific dates, were solely for the benefit of the parties to the BCA, may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the BCA instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of Keystone, Check-Cap, the other parties to the BCA or any of their respective subsidiaries and affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the BCA, which subsequent information may or may not be fully reflected in public disclosures by Check-Cap and Keystone. The BCA should not be read alone, but should instead be read in conjunction with the other information regarding the companies and the Business Combination that will be contained in, or incorporated by reference into, the registration statement that PubCo will file in connection with the Business Combination, as well as in the other filings that each of Check-Cap and PubCo make with the SEC.
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.
