Check-Cap(CHEK) - 2023 Q1 - Quarterly Report

Executive Summary & Recent Developments Check-Cap postponed its C-Scan pivotal study, secured new patents, and extended its cash runway into Q4 2024 through a $10 million offering and cost reductions Recent Business Developments Check-Cap announced that the current efficacy results from its C-Scan calibration studies do not meet the goal to proceed to the U.S. pivotal study, leading to a temporary postponement - Efficacy results from C-Scan calibration studies did not meet the goal for the U.S. pivotal study[2] - The company's plan includes conducting additional clinical data analysis, approaching the FDA for amendments to the U.S. pivotal study protocol, and continuing calibration studies at a slower pace[2][18] - The initiation of the powered portion of the U.S. pivotal study, expected in mid-2023, is temporarily postponed[2] Intellectual Property Updates During 2022, Check-Cap was granted two new patents related to its C-Scan technology, enhancing its proprietary tracking and polyp detection capabilities - Two new patents were granted in 2022[17] - "Position Estimation of Imaging Capsule in Gastrointestinal Tract" granted in Israel, Japan, China, Europe, and the United States, covering C-Scan's proprietary tracking technology[4] - "System and method for polyp detection through capsule dynamics" granted in Japan, with corresponding patents filed in Europe and the United States[5] Financial Outlook & Liquidity The company completed a $10 million registered direct offering in March 2022, which, combined with a cost reduction plan, is expected to extend its cash runway into the fourth quarter of 2024, despite a decrease in cash and cash equivalents to $42.1 million by year-end 2022 - In March 2022, the Company consummated a $10 million registered direct offering[3][22] - Current cash on hand, combined with a cost reduction plan, is believed to be sufficient to fund ongoing operations and plans into the fourth quarter of 2024[3] Cash and Cash Equivalents (Year-over-Year) | Metric | December 31, 2022 (in millions) | December 31, 2021 (in millions) | | :------------------------------------------------------------------ | :------------------------------ | :------------------------------ | | Cash and cash equivalents, restricted cash and short-term deposits | $42.1 | $51.9 | Company Overview Check-Cap Ltd. is a clinical-stage medical diagnostics company developing the C-Scan system, a non-invasive, preparation-free screening test for colorectal cancer About Check-Cap and C-Scan Check-Cap Ltd. is a clinical-stage medical diagnostics company focused on redefining colorectal cancer (CRC) screening with its C-Scan® system, an investigational, patient-friendly, preparation-free, non-invasive screening test - Check-Cap is a clinical stage medical diagnostics company advancing C-Scan®, a patient-friendly, preparation-free screening test to detect polyps before they may transform into colorectal cancer (CRC)[1][33] - C-Scan uses an ultra-low dose X-ray capsule, an integrated positioning, control and recording system, and proprietary software to generate a 3D map of the inner lining of the colon[33] - The device is non-invasive, requires no sedation or bowel preparation, and is an investigational device not available for sale in the United States[33] Financial Results for the Fourth Quarter Ended December 31, 2022 Q4 2022 saw a reduced net loss and operating loss, driven by decreased R&D and G&A expenses and increased finance income Key Financial Metrics (Q4 2022) In the fourth quarter of 2022, Check-Cap reported a reduced net loss and operating loss compared to the prior year, primarily driven by decreases in research and development and general and administrative expenses, alongside a significant increase in finance income Fourth Quarter Financial Highlights (in thousands USD) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | | :-------------------------------------- | :------------------------------ | :------------------------------ | | Research and development expenses, net | $2,956 | $4,126 | | General and administrative expenses | $1,259 | $1,452 | | Operating loss | $4,215 | $5,578 | | Finance Income, net | $502 | $101 | | Net loss for the period | $3,713 | $5,477 | | Net loss per ordinary share (basic and diluted) | $0.635 | $1.13 | - Research and development expenses decreased by $1.17 million, primarily due to a $0.6 million reduction in salary and related expenses and a $0.6 million decrease in material expenses[6][31] - General and administrative expenses decreased by $0.193 million, mainly due to a $0.3 million decrease in salary and related expenses[19][31] - Finance income, net, increased by $401,000, primarily due to a $470,000 increase in interest income on short-term deposits[7][31] Financial Results for the Twelve Months Ended December 31, 2022 For FY 2022, the company reported increased net and operating losses due to higher R&D and G&A expenses, despite a significant rise in finance income Key Financial Metrics (FY 2022) For the full year 2022, Check-Cap experienced an increase in net loss and operating loss compared to 2021, driven by higher research and development and general and administrative expenses, despite a significant rise in finance income Full Year Financial Highlights (in thousands USD) | Metric | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :-------------------------------------- | :---------------------- | :---------------------- | | Research and development expenses, net | $14,271 | $12,349 | | General and administrative expenses | $5,763 | $4,972 | | Operating loss | $20,034 | $17,321 | | Finance Income, net | $926 | $119 | | Net loss for the period | $19,108 | $17,202 | | Net loss per ordinary share (basic and diluted) | $3.37 | $4.15 | - Research and development expenses, net, increased by approximately $1.922 million, primarily due to an increase in salary and related expenses (headcount expansion), subcontractors, share-based compensation, and clinical study expenses, partially offset by a decrease in material expenses[23][31] - General and administrative expenses increased by approximately $0.791 million, mainly due to increases in professional services, share-based compensation, and other general expenses, partially offset by a decrease in salaries[9][31] - Finance income, net, increased significantly by $807,000, primarily due to a $946,000 increase in interest income on short-term deposits, partially offset by a decrease in fair value of derivatives[25][31] Consolidated Financial Statements The consolidated financial statements for 2022 show decreased assets and equity, an increased net loss, and higher cash usage in operations with reduced financing activities Consolidated Balance Sheets Check-Cap's balance sheet as of December 31, 2022, shows a decrease in total assets and shareholders' equity compared to the previous year, primarily driven by a reduction in cash and cash equivalents Consolidated Balance Sheet Highlights (in thousands USD) | Metric | December 31, 2022 | December 31, 2021 | | :-------------------------- | :---------------- | :---------------- | | Total assets | $45,441 | $55,659 | | Cash and cash equivalents | $4,090 | $26,457 | | Short-term bank deposit | $37,609 | $25,104 | | Total current assets | $42,630 | $52,750 | | Total liabilities | $4,129 | $4,968 | | Total shareholders' equity | $41,312 | $50,691 | - Total assets decreased by $10.218 million from $55.659 million in 2021 to $45.441 million in 2022[14] - Cash and cash equivalents significantly decreased from $26.457 million in 2021 to $4.090 million in 2022[14] - Total shareholders' equity decreased by $9.379 million from $50.691 million in 2021 to $41.312 million in 2022[36] Consolidated Statements of Operations The consolidated statements of operations reflect an increased net loss for the full year 2022 compared to 2021, primarily due to higher operating expenses, despite a decrease in net loss per share Consolidated Statements of Operations (in thousands USD, except per share data) | Metric | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | | :-------------------------------------- | :---------------------- | :---------------------- | :------------------------------ | :------------------------------ | | Research and development expenses, net | $14,271 | $12,349 | $2,956 | $4,126 | | General and administrative expenses | $5,763 | $4,972 | $1,259 | $1,452 | | Operating loss | $20,034 | $17,321 | $4,215 | $5,578 | | Finance Income, net | $926 | $119 | $502 | $101 | | Net loss for the period | $19,108 | $17,202 | $3,713 | $5,477 | | Net loss per ordinary share (basic and diluted) | $3.37 | $4.15 | $0.635 | $1.13 | - Net loss for the full year 2022 was $19.108 million, an increase from $17.202 million in 2021[31] - Operating loss for the full year 2022 was $20.034 million, up from $17.321 million in 2021[31] Consolidated Statements of Cash Flows The cash flow statement indicates a significant increase in cash used in operating activities and a substantial decrease in cash provided by financing activities for the full year 2022, leading to an overall net decrease in cash and cash equivalents Consolidated Statements of Cash Flows (in thousands USD) | Metric | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | | :------------------------------------------------------------------ | :---------------------- | :---------------------- | :------------------------------ | :------------------------------ | | Net cash used in operating activities | $(18,707) | $(16,264) | $(4,147) | $(4,384) | | Net cash used in investing activities | $(12,508) | $(16,006) | $(1,113) | $(8,563) | | Net cash provided by financing activities | $8,850 | $51,024 | $0 | $(203) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(22,365) | $18,754 | $(5,260) | $(13,150) | - Net cash used in operating activities increased to $18.707 million in FY 2022 from $16.264 million in FY 2021[26][32] - Net cash provided by financing activities decreased significantly to $8.850 million in FY 2022 from $51.024 million in FY 2021, primarily due to lower proceeds from the issuance of ordinary shares[32] - The company experienced a net decrease of $22.365 million in cash, cash equivalents, and restricted cash for FY 2022, contrasting with a net increase of $18.754 million in FY 2021[32] Share Information As of December 31, 2022, Check-Cap had 5.84 million ordinary shares outstanding, with a significant increase in weighted average shares impacting per-share data Outstanding Shares & Per Share Data As of December 31, 2022, Check-Cap had 5,844,463 ordinary shares outstanding, with the weighted average number of ordinary shares increasing significantly year-over-year, contributing to a lower net loss per share despite an increased net loss - The number of outstanding ordinary shares as of December 31, 2022, was 5,844,463[8][36] Share Data Highlights | Metric | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | | :------------------------------------------------ | :---------------------- | :---------------------- | :------------------------------ | :------------------------------ | | Net loss per ordinary share (basic and diluted) | $3.37 | $4.15 | $0.635 | $1.13 | | Weighted average number of ordinary shares outstanding - basic and diluted | 5,671,786 | 4,159,870 | 5,844,163 | 4,839,930 | - All share amounts have been retroactively adjusted to reflect a 1-for-20 share reverse split[15] Legal & Investor Information This section provides a legal notice on forward-looking statements and contact information for investor and media inquiries, including details on accessing the annual report Legal Notice Regarding Forward-Looking Statements The press release includes forward-looking statements concerning the company's future performance and plans, which are subject to inherent risks and uncertainties, advising investors to review SEC filings - The press release contains forward-looking statements regarding the Company's product development, business, financial condition, and strategies[34] - These statements are subject to risks and uncertainties that could cause actual performance or results to differ materially[34] - Investors are urged to read the "Forward-looking Statements" and "Risk Factors" sections in the Company's Annual Report on Form 20-F filed with the SEC[34] Investor and Media Contacts Contact information for investor relations and media inquiries is provided, along with details on accessing the company's annual report - Investor Contacts: Irina Koffler and Meirav Gomeh-Bauer of LifeSci Advisors, LLC[28][35] - Media Contact: Mónica Rouco Molina of LifeSci Communications[29] - A copy of the Company's annual report on Form 20-F for the year ended December 31, 2022, has been filed with the SEC and is available on the Company's investor relations website[27]