CHEK Check Cap Ltd

ISFIYA, Israel, Nov. 16, 2016 /PRNewswire/ -- Check-Cap Ltd. (the "Company" or "Check-Cap") (NASDAQ: CHEK, CHEKW), a clinical stage medical diagnostics company engaged in the development of an ingestible capsule for preparation-free, colorectal cancer screening, today provided a corporate update and announced its financial results for the third quarter and nine months ended September 30, 2016.

"During the past quarter, we continued to advance our ongoing clinical program and the optimization of the Check-Cap System, while executing on additional corporate priorities," said Bill Densel, CEO of Check-Cap. "Recently, additional clinical data related to safety, capsule transit, and capsule correlation to colonoscopic findings were presented at leading gastroenterology professional society meetings in the United States and Europe, and we remain on track to file a CE Mark submission in the first half of 2017." 

Recent Highlights:

• Preliminary data demonstrating safety, polyp identification and location in clinical studies evaluating the Company's non-invasive system for preparation-free examination of the colon were presented at the American College of Gastroenterology (ACG) Annual Scientific Meeting and the United European Gastroenterology Week (UEGW).

Financial Results for the Third Quarter Ended September 30, 2016

Research and development expenses, net were $1 million in the three months ended September 30, 2016, compared to $1.6 million in the same period in 2015. This decrease was primarily due to a $536,000 increase in participation of the Office of Chief Scientist (OCS) (pro-rated credited to R&D expenses), and a $123,000 decrease in subcontractors and materials. This decrease was partially offset by an increase of $78,000 in salary and related expenses and $28,000 increase in cost of registration of patents.

General and administrative expenses were $0.8 million in the three months ended September 30, 2016, compared to $1.4 million in the same period in 2015. This decrease was primarily due to a decrease in personnel related cost of $485,000, a decrease in share based compensation of $158,000 and a decrease in professional fees of $95,000. This decrease was partially offset by an increase of $48,000 in facility cost and an increase of $69,000 in other general and administrative expenses.

Operating loss was $1.8 million for the three months ended September 30, 2016, compared to $3 million in the same period in 2015.

Finance income, net was $61,000 in the three months ended September 30, 2016, and consisted primarily of $88,000 of finance income (comprised of $54,000 in exchange rate differences and $34,000 in interest income on short-term deposits) offset by $27,000 of finance expenses (comprised primarily of $25,000 of changes in royalties).

Finance expenses, net was $94,000 in the three months ended September 30, 2015, consisted primarily of $78,000 of exchange rate differences and $15,000 of changes in royalties.

Net loss was $1.7 million in the three months ended September 30, 2016, compared to $3.1 million in the same period in 2015.

Non-GAAP net loss was $1.4 million in the three months ended September 30, 2016, compared to $2.6 million in the same period in 2015.

Cash, cash equivalents and short-term bank deposit totaled $13.5 million at September 30, 2016, compared to $9.4 million at June 30, 2016.  Check-Cap's cash balance as of September 30, 2016 included - net proceeds from our August 2016 registered direct offering, and grants received from the OCS amounting to $845,000 (of a total $1.25 million approved grant).

Financial Results for the Nine Months Ended September 30, 2016

Research and development expenses, net were $3.9 million in the nine months ended September 30, 2016, compared to $4.3 million in the same period in 2015. This decrease was primarily due to a $1.1 million increase in participation of the OCS (pro-rated credited to R&D expenses) and a decrease of $472,000 in share-based compensation and a $103,000 decrease in materials. This decrease was partially offset by an increase of $1.2 million in salary and related expenses and a $124,000 increase in the cost of registration of patents, depreciation and other research and development expenses.

General and administrative expenses were $2.8 million in the nine months ended September 30, 2016, compared to $5.1 million in the same period in 2015. This decrease was primarily due to a decrease in share-based compensation of $1.6 million, a $619,000 decrease in personnel related expenses and a $160,000 decrease in professional fees and other general and administrative related expenses. This decrease was partially offset by an increase of $71,000 in facility cost.

Operating loss was $6.6 million for the nine months ended September 30, 2016, compared to $9.4 million in the same period in 2015.

Finance income, net was $204,000 in the nine months ended September 30, 2016, and consisted primarily of $222,000 of finance income (comprised of $117,000 in exchange rate differences and $105,000 of interest income on short-term deposits) and $18,000 of finance expenses (comprised primarily of $12,000 of changes in royalties and $5,000 bank fees).

Finance income, net was $91,000 in the nine months ended September 30, 2015, and consisted primarily of $176,000 of finance income (comprised primarily of $174,000 in revaluation of fair value of preferred shares warrants) and $85,000 of finance expenses (comprised of $42,000 of changes in royalties and $43,000 of interest expenses and bank fees).

Net loss was $6.4 million in the nine months ended September 30, 2016, compared to $9.3 million in the same period in 2015.

Non-GAAP net loss was $5.4 million in the nine months ended September 30, 2016, compared to $6.3 million in the same period in 2015.

Net cash used in operating activities was $6.2 million in the nine months ended September 30, 2016, compared to $6.3 million in the same period in 2015.

A reconciliation of GAAP results to non-GAAP results is provided below.

The number of outstanding ordinary shares as of September 30, 2016 and October 31, 2016 was 13,555,794 and 14,455,075, respectively.

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, changes in royalties provision and revaluation of warrants to purchase preferred shares. 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.

About Check-Cap

Check-Cap is a clinical-stage medical diagnostics company developing the world's first ingestible capsule system for preparation-free, minimally-invasive colorectal cancer screening.

The capsule utilizes innovative ultra-low dose X-ray and wireless communication technologies to scan the inside of the colon as it moves naturally, while the patient follows his or her normal daily routine.   After passage, the system generates a 3D map of the inner surface of the colon which enables detection of polyps and cancer.  Designed to increase the willingness of individuals to participate in recommended colorectal cancer screening, the Check-Cap system addresses many frequently-cited barriers, including laxative bowel preparation, invasiveness, and sedation. The Check-Cap system is currently not cleared for marketing in any jurisdiction.

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 "Special Note On Forward-looking Statements" and "Risk Factors" in the Company's Annual Report on Form 20-F 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.

Financial Tables to Follow

CONTACT:

Investors
David Carey
Lazar Partners Ltd.
212-867-1768
dcarey@lazarpartners.com

Vivian Cervantes
PCG Advisory
212-554-5482
vivian@pcgadvisory.com

Media
Erich Sandoval or Rob Sawyer
Lazar Partners Ltd.
213-908-6226 or 212-843-0209
esandoval@lazarpartners.com  
rsawyer@lazarpartners.com

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SOURCE Check-Cap Ltd.