PR Newswire | Nov 3, 2021 08:31AM EDT

11/03 07:30 CDT

Check-Cap Reports Third Quarter 2021 Financial Results and Corporate Update ISFIYA, Israel, Nov. 3, 2021

ISFIYA, Israel, Nov. 3, 2021 /PRNewswire/ -- Check-Cap Ltd. (the "Company" or "Check-Cap") (NASDAQ: CHEK), (NASDAQ: CHEKZ), a clinical stage medical diagnostics company advancing the development of C-Scan(r), the first and only patient-friendly, preparation-free screening test to detect polyps before they may transform into colorectal cancer (CRC), today announced financial results and provided a corporate update for the third quarter and nine months ended September 30, 2021.

Third Quarter and Recent Highlights:

* Strengthened balance sheet through gross proceeds of $35 million in a registered direct offering completed in July 2021. The Company believes that it has sufficient capital to fund its ongoing operations and plans, including the U.S. pivotal study, until well into 2023. * Strengthened clinical team with the appointment of Dr. Hanit Brenner-Lavie as Vice President of Clinical Affairs and by additional qualified clinical employees. Dr. Brenner-Lavie is leading the Company's overall clinical strategy and its implementation, including the execution of the planned U.S. pivotal trial. * Expanded C-Scan manufacturing capacity and on-premise production line. * Continued patient enrollment and data collection at Israeli sites, to further enable optimization of C-Scan's functionality and patient experience ahead of the U.S. pivotal trial. * Granting of new U.S. patent covering the C-Scan(r) proprietary tracking technology that enables real time tracking of the capsule and its activation only when it moves throughout the colon. This functionality allows for optimal scanning along the gastrointestinal (GI) tract while maintaining low energy consumption during the procedure. The patent also covers the capsule positioning data recording for the C-Scan analysis suite, which enables gastroenterologists to make a clinical decision and generate a report with their diagnosis and recommendations. This patent will expire in May 2034. Corresponding patents were issued in Japan and China and patents were approved for granting in Europe and Israel.

"This past quarter we have been actively focused on meeting our critical objectives to advance towards the initiation of the U.S. pivotal trial," said Alex Ovadia, chief executive officer of Check-Cap. "The expansion of our manufacturing capacity and the entire production process is expected to secure the robust supply chain of C-Scan devices during the trial. The hire of Dr. Brenner has further strengthened our clinical team to support initiation and management of the planned U.S pivotal trial."

Mr. Ovadia added, "In addition, our team has continued to build and fortify our patent portfolio ahead of global product commercialization. The recent granting of the patent covering our proprietary tracking technology along with our total patent portfolio secure our exclusive rights to our technology worldwide and enhances shareholder value."

Financial Results for the Third Quarter Ended September 30, 2021

Research and development expenses were $3.0 million for the three months ended September 30, 2021, compared to $2.7 million for the same period in 2020. The increase is primarily due to a $0.3 million increase in salary and related expense and a $0.1 million increase in material and subcontractors' expenses, offset in part by a $0.1 million grant received from the Israel Innovation Authority,which reduced research and development expenses.

General and administrative expenses were $1.2 million for the three months ended September 30, 2021, compared to $1.0 million for the same period in 2020. The increase is primarily due to a $0.15 million increase in other general expenses and a $0.05 million increase in salary and related expense.

Operating loss was $4.3 million for the three months ended September 30, 2021, compared to $3.6 million for the same period in 2020.

Finance income was $22,000 for the three months ended September 30, 2021, compared to $13,000 for the same period in 2020.

Net loss was $4.2 million for the three months ended September 30, 2021, compared to $3.6 million for the same period in 2020.

Cash and cash equivalents, restricted cash and short-term bank deposits as of September 30, 2021 were $56.8 million, compared with $29.3 million as of June 30, 2021 and $18.1 million as of December 31, 2020. During the first quarter of 2021, certain warrant holders exercised warrants to purchase an aggregate 24,204,682 ordinary shares, which had been issued in 2020, at exercise prices ranging from $0.75-$0.80, which generated total gross proceeds of approximately $19.2 million to the Company. In July 2021, the Company completed the sale of 25,925,926 of the Company's ordinary shares and accompanying short-term warrants to purchase up to an aggregate of 25,925,926 of the Company's ordinary shares in a registered direct offering, which resulted in gross proceeds to the Company of $35.0 million or approximately $31.8 million net of offering expenses. The Company believes that it has sufficient capital to fund its ongoing operations and plans until well into 2023.

The number of outstanding ordinary shares as of September 30, 2021 was 96,404,949. As of November 2, 2021, the number of the Company's outstanding ordinary shares was 96,404,949.

Financial Results for the Nine Months Ended September 30, 2021

Research and development expenses were $8.2 million for the nine months ended September 30, 2021, compared to $7.2 million for the same period in 2020. The increase is primarily due to a $0.8 million increase in salary and related expense and a $0.7 million increase in material and subcontractors' expenses, offset in part by a $0.3 million grant received from the Israel Innovation Authority, which reduced research and development expenses, and a $0.2 million decrease in other expenses.

General and administrative expenses were $3.5 million for the nine months ended September 30, 2021, compared to $2.8 million for the same period in 2020. The increase is primarily due to a $0.2 million increase in salary and related expense, a $0.5 million increase in other general expenses mainly associated with directors and officers insurance liability and a $0.1 million increase in professional services expenses, offset in part by $0.1 million decrease in share-based compensation.

Operating loss was $11.7 million for the nine months ended September 30, 2021, compared to $10.0 million for the same period in 2020.

Finance income was $18,000 for the nine months ended September 30, 2021, compared to $62,000 for the same period in 2020.

Net loss was $11.7 million for the nine months ended September 30, 2021, compared to $9.9 million for the same period in 2020.

Net cash used in operating activities was $11.9 million for the nine months ended September 30, 2021, compared to $9.6 million for the same period in 2020.

About Check-Cap

Check-Cap is a clinical stage medical diagnostics company aiming to redefine colorectal cancer (CRC) screening through the introduction of C-Scan(r), the first and only patient-friendly preparation-free screening test to detect polyps before they may transform into colorectal cancer and enable early intervention and cancer prevention. The Company's disruptive capsule-based screening technology aims to significantly increase screening adherence worldwide and help millions of people to stay healthy through preventive CRC screening. C-Scan uses an ultra-low dose X-ray capsule, an integrated positioning, control and recording system, as well as proprietary software to generate a 3D map of the inner lining of the colon as it travels naturally along the gastrointestinal tract. C-Scan is non-invasive and requires no sedation. Unlike other capsule technologies, it requires no bowel preparation, allowing the patients to continue their daily routine with no interruption. C-Scan is not intended to replace colonoscopy. A positive C-Scan result should be followed by colonoscopy.

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 the "Forward-looking Statements" and "Risk Factors" in the Company's Annual Report on Form 20-F for the year ended December 31, 2020 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.

Investor Contacts

Irina KofflerLifeSci Advisors, LLC646.970.4681ikoffler@lifesciadvisors.com

Meirav Gomeh-BauerLifeSci Advisors, LLC+972(0)-54-476-4979Meirav@lifesciadvisors.com

CHECK CAP LTDCONSOLIDATED UNAUDITED BALANCE SHEETS(U.S. dollars in thousands, except share and per share data)

September December 30, 31,

2 0 2 1 2 0 2 0

Assets

Current assets

Cash and cash equivalents 39,607 7,703

Restricted cash 350 350

Short-term bank deposit 16,812 10,079

Prepaid expenses and other current assets 1,117 285

Total current assets 57,886 18,417

Non-current assets

Property and equipment, net 1,565 823

Operating lease 1,124 398

Total non-current assets 2,689 1,221

Total assets 60,575 19,638

Liabilities and shareholders' equity

Current liabilities

Accounts payable and accruals

Trade 1,288 862

Other 501 345

Employees and payroll accruals 1,547 1,510

Operating lease liabilities 328 264

Total current liabilities 3,664 2,981

Non-current liabilities

Royalties provision 178 154

Operating lease liabilities 792 125

Total non-current liabilities 970 279

Shareholders' equity

Share capital, Ordinary shares, 2.4 NIS par value(360,000,000 authorized shares as of September 30, 2021 andDecember

31, 2020; 96,404,949 and 46,239,183 shares issued andoutstanding as of September 30, 2021 and December 31,2020,

respectively) 68,782 31,646

Additional paid-in capital 89,867 75,715

Accumulated deficit (102,708) (90,983)

Total shareholders' equity 55,941 16,378

Total liabilities and shareholders' equity 60,575 19,638

CHECK CAP LTD

CONSOLIDATED UNAUDITED STATEMENTS OF COMPREHENSIVE LOSS

(U.S. dollars in thousands, except share and per share data)

Nine months ended Three months ended September September

30, 30,

2021 2020 2021 2020

Research and development 8,223 7,177 3,036 2,664expenses, net

General and administrative 3,520 2,822 1,227 967expenses

Operating loss 11,743 9,999 4,263 3,631

Finance Income, net 18 62 22 13

Loss before income tax 11,725 9,937 4,241 3,618

Net loss for the period 11,725 9,937 4,241 3,618

Loss per share:

Net loss per ordinary share 0.15 0.40 0.04 0.09basic and diluted

Weighted average number ofordinary shares outstanding - 78,238,314 25,017,699 95,853,149 41,518,827basicand diluted

CHECK CAP LTD.

CONSOLIDATED UNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(U.S. dollars in thousands, except share and per share data)

Number of Additional Total

Ordinary paid-in Accumulated shareholders'

Shares Amount capital deficit equity

Balance as of 46,239,183 $ 31,646 $ 75,715 $ (90,983) $ 16,378January 1, 2021

Exercise ofwarrants, netof issuanceexpenses

an amount of 24,204,682 $ 18,099 $ 1,120 - $ 19,219$22

Issuance ofordinary shares -andwarrants

in the JulyFinancing, net

of issuanceexpenses in anamount of

$3,199 25,925,926 $ 19,011 $ 12,790 $ 31,801

RSU's vesting 35,158 $ 26 (26) -

Share-based - - $ 268 $ 268compensation

Net loss - - - $ (11,725) $ (11,725)

Balance as ofSeptember 30, 96,404,949 $ 68,782 $ 89,867 $ (102,708) $ 55,9412021

Balance as of 8,272,908 $ 5,407 $ 77,964 $ (77,137) $ 6,234January 1, 2020

Issuance ofordinary sharesin private

placement,net of issuance expenses in

an amount ofapproximately 2,720,178 $ 1,894 $ 2,837 - $ 4,731$30

Issuance ofordinary sharesand warrants

in the April- May 2020Financings, net

of issuanceexpenses in anamount of $

1,361 19,166,670 $ 13,039 $ (2,900) $ 10,139

Issuance ofordinary sharesand warrants

in

a warrantexercisefinancing, netof

Issuanceexpenses in an 16,054,223 $ 11,290 $ (2,578) - $ 8,712amount of $920

RSU's vesting 19,317 $ 12 $ (12) - -

Share-based - - $ 317 - $ 317compensation

Net loss - - - $ (9,937) (9,937)

Balance as ofSeptember 30, 46,233,296 $ 31,642 $ 75,628 $ (87,074) $ 20,1962020

CHECK CAP LTD.

CONSOLIDATED UNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(U.S. dollars in thousands, except share and per share data)

Number of Additional Total

Ordinary paid-in Accumulated shareholders'

Shares Amount capital deficit equity

Balance as of 70,473,641 $ 49,767 $ 76,951 $ (98,467) $ 28,251June 30, 2021

Issuance ofordinary shares -andwarrants

in the JulyFinancing, net

of issuanceexpenses in anamount of

$3,199 25,925,926 $ 19,011 $ 12,790 $ 31,801

RSU's vesting 5,382 $ 4 (4) -

Share-based - - $ 130 $ 130compensation

Net loss - - - $ (4,241) $ (4,241)

Balance as ofSeptember 30, 96,404,949 $ 68,782 $ 89,867 $ (102,708) $ 55,9412021

Balance as of 30,172,943 $ 20,348 $ 78,110 $ (83,546) $ 15,002June 30, 2020

Issuance ofordinary sharesand warrants

in

a warrantexercisefinancing, net of

Issuanceexpenses in an 16,054,223 $ 11,290 $ (2,578) - $ 8,712amount of $920

RSU's vesting 6,130 $ 4 $ (4) - -

Share-based - - $ 100 - $ 100compensation

Net loss - - - $ (3,618) (3,618)

Balance as ofSeptember 30, 46,233,296 $ 31,642 $ 75,628 $ (87,074) $ 20,1962020

CHECK-CAP LTD.

CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands, except share and per share data)



Nine months ended

September 30,

2021 2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss (11,725) (9,937)

Adjustments required to reconcile net loss to net cash usedin operating activities:

Depreciation 139 107

Share-based compensation 268 317

Financial income, net (47) (27)

Changes in assets and liabilities items:

Decrease (increase) in prepaid and other current assets and (819) 106non-current assets

Increase (decrease) in trade accounts payable, accruals and 243 (295)other current liabilities

Increase in employees and payroll accruals 37 106

Increase in royalties provision 24 6

Net cash used in operating activities (11,880) (9,617)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment (743) (293)

Investment in short-term bank and other deposits (6,700) (15,003)

Net cash provided by (used in) investing activities (7,443) (15,296)

CASH FLOWS FROM FINANCING ACTIVITIES

Exercise of warrants into ordinary shares, net of issuance 19,219 -expenses

Issuance of ordinary shares in the registered direct 32,008 -offerings, net of issuance expenses

Issuance of ordinary shares in private placement, net of - 4,731issuance expenses

Issuance of ordinary shares in the registered direct 10,139offerings, net of issuance expenses

Issuance of ordinary shares and warrants in a warrantexercise financing, net of - 8,712issuance expenses

Net cash provided by financing activities 51,227 23,582

Net increase (decrease) in cash, cash equivalents and 31,904 (1,331)restricted cash

Cash, cash equivalents and restricted cash at the beginning 8,053 8,035of the period

Cash, cash equivalents and restricted cash at the end of the 39,957 6,704period

Supplemental disclosure of non-cash flow information:

Purchase of property and equipment included in accountspayable and accrued 133 22expenses

Assets acquired under operating leases 968 140

Financing fees included in account payable 207

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SOURCE Check-Cap Ltd.