Check-Cap Reports Second Quarter 2018 Financial Results
ISFIYA, Israel, July 31, 2018 /PRNewswire/ -- Check-Cap Ltd. (the "Company" or "Check-Cap") (NASDAQ: CHEK) (NASDAQ: CHEKW) (NASDAQ: CHEKZ), a clinical stage medical diagnostics company engaged in the development of C-Scan®, an ingestible capsule-based device for preparation-free colorectal cancer screening, today announced financial results for the second quarter and six months ended June 30, 2018.
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Recent Highlights
- Continued progress on post CE approval study using C-Scan device version 3 that incorporates the latest algorithms and system optimization. Interim results expected by end of the third quarter 2018.
- Applied to register the C-Scan Version 3 device for marketing and sale in Israel.
- Progress on manufacturing collaboration with GE Healthcare ("GE") towards U.S. pilot study initiation. Manufacturing line and U.S. pilot study initiation remain on target in the fourth quarter 2018.
- Presentation by Dr. Elizabeth E. Half, MD, Head of GI Cancer Prevention Unit and Familial Cancer Syndrome Clinic Gastroenterology Institute at the RAMBAM Healthcare Campus on a comparative study titled "Prepless CRC Screening is Feasible with a Novel X-ray Imaging Capsule," at Digestive Disease Week ongoing Advances in Colorectal Polyp Detection Session, Washington DC. Dr. Half's presentation highlighted that study data from 45 analyzed patients showed C-Scan and FIT sensitivity (ability to correctly identify polyps) of 44% and 37%, respectively, with C-Scan sensitivity increasing to 78% when >50% of the colon surface area was imaged and a linear correlation was observed between imaged area and sensitivity. In addition, C-Scan safety in the study was demonstrated, with no reported adverse events, low radiation (average radiation dose of 0.05ms), and transit time of 52±32 hrs. Further, in an updated scanning algorithm, retrospectively implemented on the study data and recently featured in a May 2018 article in Gut - an official peer-reviewed journal of the British Society of Gastroenterology, a significant increase in number of subjects with imaged area >50% was shown, from 21/45 to 41/45 (from 46% to 91%), following the new algorithm implementation. C-Scan specificity (ability to correctly identify lack of polyps) in those cases approached 90%.
- Regained compliance with Nasdaq minimum bid price requirement. The Company announced and began to trade on the NASDAQ Capital Market on a post 1-for-12 reverse share split adjusted basis in April 2018.
- Closed a $20.2 million underwritten public offering (including the exercise in full of the underwriter's option to purchase additional securities) of 3,189,381 units with each unit consisting of one ordinary share (or ordinary share equivalent) and one Series C warrant to purchase one ordinary share, along with the exercise in full by the underwriter of its option to purchase an additional 478,407 ordinary shares and Series C warrants to purchase up to 478,407 ordinary shares ("Offering").
- Received grant from Israeli Innovation Authority of approximately $300,000.
Alex Ovadia, CEO of Check-Cap, stated: "We are pleased to report a quarter of ongoing progress in our clinical, regulatory and operational activities in line with our goal to provide a patient-friendly, preparation free colon-cancer screening device. With funds to continue developing our programs through the end of 2019 secured in May 2018, we look forward to delivering on our milestones for the remainder of 2018. This includes interim data readout from our post CE Mark approval study, which is expected in 3Q18. We are also excited as we advance our GE Manufacturing line collaboration and regulatory path in the US towards the expected initiation of our U.S. pilot trial in 4Q18. We look forward to providing timely updates as we execute on our initiatives."
Financial Results for the Second Quarter Ended June 30, 2018
Research and development expenses, net were $1.7 million in the three months ended June 30, 2018, compared to $2.0 million in the same period in 2017. The decrease is primarily attributable to $273,000 decline in salaries and related expenses as a result of reduction in head count.
General and administrative expenses were $950,000 in the three months ended June 30, 2018, compared to $810,000 in the same period in 2017. The increase was primarily due to a $96,000 increase in professional fees, $98,000 increase in other general and administrative expenses and $15,000 increase in salaries and related expenses. This was offset primarily by a $69,000 decrease in share-based compensation.
Operating loss was $2.7 million for the three months ended June 30, 2018, compared to $2.8 million in the same period in 2017.
Finance income, net was $30,000 in the three months ended June 30, 2018, compared to $20,000 finance expenses in the same period in 2017.
Net loss was $2.7 million in the three months ended June 30, 2018, compared to $2.8 million in the same period in 2017.
Non-GAAP net loss was $2.6 million in the three months ended June 30, 2018, compared to $2.7 million in the same period in 2017.
Cash, cash equivalents and short-term bank deposit totaled $20 million at June 30, 2018, compared to $4.6 million at March 31, 2018. Check-Cap's cash balance as of June 30, 2018 includes the net proceeds from the May 8, 2018 underwritten public offering (the "2018 Public Offering").
Financial Results for the Six Months Ended June 30, 2018
Research and development expenses, net were $3.4 million in the six months ended June 30, 2018, compared to $3.9 million in the same period in 2017. The decrease is primarily attributable to $529,000 decrease in salaries and related expenses as a result of reduction in head count.
General and administrative expenses were $1.4 million in the six months ended June 30, 2018, compared to $1.7 million in the same period in 2017. The decrease was primarily due to a decrease of $699,000 in share based compensation due to reversal of expenses associated with an equity award of the Company's former CEO which was forfeited as a result of his separation from employment. This was partially offset by a $230,000 increase in salary and related expenses primarily due to a onetime payment to the Company's former CEO as a result of his separation from employment, a $98,000 increase in professional expenses and a $77,000 increase in other general and administrative expenses.
Operating loss was $4.8 million for the six months ended June 30, 2018, compared to $5.6 million in the same period in 2017.
Finance income, net was $9,000 in the six months ended June 30, 2018, compared to $90,000 in the same period in 2017.
Net loss was $4.8 million in the six months ended June 30, 2018, compared to $5.5 million in the same period in 2017.
Non-GAAP net loss was $5.1 million in the six months ended June 30, 2018, and in the same period in 2017.
A reconciliation of GAAP results to non-GAAP results is provided below.
Net cash used in operating activities was $4.8 million in the six months ended June 30, 2018, compared to $5 million in the same period in 2017.
The number of outstanding ordinary shares as of June 30, 2018, was 5,291,357, This number includes the 3,667,788 ordinary shares that were issued in the May 8, 2018 underwritten public offering.
[Financial Tables to Follow]
About Check-Cap
Check-Cap is a clinical-stage medical diagnostics company developing C-Scan®, an ingestible capsule-based device for preparation-free colorectal cancer screening.
Utilizing innovative ultra-low dose X-ray and wireless communication technologies, the capsule generates information on the contours of the inside of the colon as it passes naturally. This information is used to create a 3D map of the colon, which allows physicians to look for polyps and other abnormalities. Designed to improve the patient experience and increase the willingness of individuals to participate in recommended colorectal cancer screening, C-Scan removes many frequently-cited barriers, such as laxative bowel preparation, invasiveness and sedation.
Use of Non-GAAP Financial Results
In addition to disclosing financial results calculated in accordance with U.S. GAAP, the Company's financial results release contains Non-GAAP financial measures of net loss for the period that exclude the effects of share-based compensation and changes in royalties provision. The Company's management believes the Non-GAAP financial information provided in this release is useful to investors' understanding and assessment of the Company's on-going operations. Management also uses both GAAP and Non-GAAP information in evaluating and operating business internally and as such deemed it important to provide all this information to investors. The Non-GAAP financial measures disclosed by the Company should not be considered in isolation or as a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. Reconciliations between GAAP measures and Non-GAAP measures are provided later in this press release.
Legal Notice Regarding Forward-Looking Statements
This press release contains "forward-looking statements." Words such as "may," "should," "could," "would," "predicts," "potential," "continue," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," and similar expressions, as well as statements in future tense, often signify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information that the Company has when those statements are made or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. For a discussion of these and other risks that could cause such differences and that may affect the realization of forward-looking statements, please refer to "Forward-looking Statements" and "Risk Factors" in the Company's Annual Report on Form 20-F for its fiscal year ended December 31, 2017 and other filings with the Securities and Exchange Commission (SEC). Investors and security holders are urged to read these documents free of charge on the SEC's web site at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.
CHECK CAP LTD
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CONSOLIDATED UNAUDITED BALANCE SHEETS
-------------------------------------
(U.S. dollars in thousands, except share and per share data)
June 30, December 31,
-------- ------------
2018 2017
---- ----
Assets
------
Current assets
Cash and cash
equivalents 9,957 6,997
Short-term bank deposit 10,017 -
Prepaid expenses and
other current assets 371 406
--- ---
Total current assets 20,345 7,403
------ -----
Non-current assets
Property and equipment,
net 436 503
--- ---
Total non-current assets 436 503
--- ---
Total assets 20,781 7,906
====== =====
Liabilities and shareholders' equity
------------------------------------
Current liabilities
Accounts payable and accruals
Trade 531 608
Other 370 347
Other current
liabilities 4 5
Employees and payroll
accruals 890 602
--- ---
Total current
liabilities 1,795 1,562
----- -----
Non-current liabilities
Royalties provision 464 439
--- ---
Total non-current
liabilities 464 439
--- ---
Shareholders' equity
--------------------
Share capital 3,429 974
Additional paid-in
capital 72,587 57,643
Accumulated deficit (57,494) (52,712)
------- -------
Total shareholders'
equity 18,522 5,905
------ -----
Total liabilities and
shareholders' equity 20,781 7,906
====== =====
CHECK CAP LTD
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CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
-----------------------------------------------
(U.S. dollars in thousands, except share and per share data)
Six months ended June 30, Three months ended June 30,
------------------------- ---------------------------
2018 2017 2018 2017
---- ---- ---- ----
Research and development
expenses, 3,357 3,874 1,737 1,997
net
General and administrative
expenses 1,435 1,696 950 810
----- ----- --- ---
Operating loss 4,792 5,570 2,687 2,807
----- ----- ----- -----
Finance income (expenses),
net 9 90 30 (20)
--- --- --- ---
Loss before tax 4,783 5,480 2,657 2,827
Tax expenses (gains) on
income (1) 6 (2) 3
--- --- --- ---
Net loss for the period 4,782 5,486 2,655 2,830
----- ----- ----- -----
Net loss per ordinary share
basic and 1.74 3.96 0.70 2.02
diluted
Weighted average number of 2,741 1,386 3,796 1,403
ordinary shares outstanding
-basic
and diluted (in thousands)
CHECK-CAP LTD.
--------------
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(U.S. dollars in thousands, except per share data)
Six months ended
June 30,
--------
2018 2017
---- ----
CASH FLOWS FROM
OPERATING
ACTIVITIES
Net loss for the
period (4,782) (5,486)
Adjustments
required to
reconcile net loss
to net cash used
in operating
activities:
Depreciation and
amortization 82 73
Share-based
compensation (393) 347
Financial income
(expense), net 27 (158)
Changes in assets
and liabilities
items:
Decrease (increase)
in prepaid and
other current
assets 35 (182)
Increase (decrease)
in trade accounts
payable, accruals
and other current (131) 107
liabilities
Increase in
employees and
payroll accruals 288 223
Increase in
royalties
provision 25 49
--- ---
Net cash used in
operating
activities (4,849) (5,027)
====== ======
CASH FLOWS FROM
INVESTING
ACTIVITIES
Purchase of
property and
equipment (8) (81)
Proceeds from
short-term
investments (10,000) -
------- ---
Net cash (used in)
investing
activities (10,008) (81)
======= ===
CASH FLOWS FROM
FINANCING
ACTIVITIES
Exercise of pre
funded warrants
into ordinary
shares 4 82
Issuance of
ordinary shares in
the June 2017 RD
Offering, net of
issuance - 2,380
expenses in an
amount of $349
Issuance of
ordinary shares in
the 2018 Public
Offering, net of
issuance 17,858 -
expenses in an
amount of $2,381
Net cash provided
by financing
activities 17,862 2,462
====== =====
Effect of exchange
rate changes on
cash and cash
equivalents (45) 159
Net Increase
(decrease) in
cash and cash
equivalents 2,960 (2,487)
Cash and cash
equivalents at the
beginning of the
period 6,997 11,639
----- ------
Cash and cash
equivalents at the
end of the period 9,957 9,152
===== =====
CHECK-CAP LTD.
--------------
SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP RESULTS
-------------------------------------------------------
(U.S. dollars in thousands)
Six months ended June 30, Three months ended June 30,
------------------------- ---------------------------
2018 2017 2018 2017
---- ---- ---- ----
GAAP net loss for the period (4,782) (5,486) (2,655) (2,830)
Share-based compensation (1) (393) 347 43 133
Changes in royalties 25 49 7 25
--- --- --- ---
Non-GAAP net loss for the period (5,150) (5,090) (2,605) (2,672)
------ ------ ------ ------
(1) Share-based compensation:
Research and development expenses, net 34 75 10 31
General and administrative expenses:
General and administrative expenses 75 272 33 102
One time reversal of equity award to
the (502) - - -
Company's Former CEO
(393) 347 43 133
==== === === ===
Investor Contacts
Vivian Cervantes
PCG Advisory
+1-646-863-6274
vivian@pcgadvisory.com
Meirav Gomeh-Bauer
+972-54-4764979
Meirav@bauerg.com
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SOURCE Check-Cap Ltd.
Company Codes: NASDAQ-SMALL:CHEK, Frankfurt:7CC, Stuttgart:7CC