UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 20212022

OR

OR

¨☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38807

Chemomab Therapeutics Ltd.

(Exact Name of Registrant as Specified in its Charter)

Israel

81-3676773

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)81-3676773

   

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

Kiryat Atidim, Building 7

Tel Aviv, Israel 6158002

(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: +972-77-331-0156

Securities registered pursuant to Section 12(b) of the Exchange Act:
 

Title of each class
 

Trading Symbol(s)
 

Name of each exchange on which registered
 

American Depositary Shares, each representing twenty (20) ordinary shares, no par value per share
 

CMMB

Nasdaq Capital Market

Ordinary shares, no par value per share
 

n/a

Nasdaq Capital Market*

*Not for trading; only in connection with the registration of American Depository Shares
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
 

Yes ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
 

Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 

Large accelerated filer

☐

 ¨

Accelerated filer

☐

Non-accelerated filer

☐

 Accelerated filer¨
Non-accelerated filerx

Smaller reporting company

☒

 x
   

Emerging growth company

☒

 x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
 

Yes ☐    No ☒

As of May 13, 2021,11, 2022, the registrant had 10,697,99711,404,515 American Depositary Shares outstanding.
 

CHEMOMAB THERAPEUTICS LTD.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2021

2022

TABLE OF CONTENTS

PART I. – FINANCIAL INFORMATION
1
  
Item 1.Financial Statements
1
  
Item 1.
Financial Statements1
Item 2.Management’s2.Management’s Discussion and Analysis of Financial Condition and Results of Operations1211
  
Item 3.
Quantitative3.Quantitative and Qualitative Disclosures About Market Risk.1720
  
Item 4.Controls and Procedures.
20
  
Item 4.Controls and Procedures.17
PART II. – OTHER INFORMATION
1821
  
Item 1.Legal Proceedings
21
  
Item 1.1A.Risk Factors
Legal Proceedings1821
  
Item 1A.
Risk Factors18
Item 2.Unregistered2.Unregistered Sales of Equity Securities and Use of Proceeds.1821
  
Item 3.Defaults Upon Senior Securities.
21
  
Item 3.4.Mine Safety Disclosures.
Defaults Upon Senior Securities.1821
  
Item 5.Other Information.
21
  
Item 4.6.Exhibits.
Mine Safety Disclosures.1822
  
Item 5.Other Information.18
Item 6.Exhibits.18
SIGNATURES
2023

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms including “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” andor the negative of these terms or other similar expressions intended to identify forward-looking statements, but these are not the only ways these statements are identified.expressions. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Actual results or events could differ materially from those set forth or implied by such forward-looking statements and related assumptions due to certain factors, including, without limitation, the risks set forth under the caption “Risk Factors” below, which are incorporated herein by reference as well as those business risks and factors described elsewhere in this report and in our other filings with the Securities and Exchange Commission (the “SEC”), specifically our most recent Annual Report on Form 10-K, most recently filedand our Quarterly Reports on Form 10-Q and ourfiled Current Reports on Form 8-K.

8-K filed subsequently to our most recent Annual Report on Form 10-K. All forward-looking statements speak only as of the date made, and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

CERTAIN TERMS USED IN THIS QUARTERLY REPORT ON FORM 10-Q
As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires:

 ·•references to “Chemomab Therapeutics Ltd.”, “Chemomab,” the “Company,” “us,” “we” and “our” refer to Chemomab Therapeutics Ltd. an Israeli company and its consolidated subsidiaries, although with respect to the presentation of financial results for historical periods that preceded the Merger (as defined below), these terms refer to the financial results of Chemomab Ltd., which was the accounting acquirer in the Merger;

·•references to “ordinary shares,” “our shares” and similar expressions refer to the Company’s ordinary shares, no nominal (par) value;

·•references to “ADS” refer to the American Depositary Shares listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “CMMB,” each representing twenty (20) ordinary shares of the Company;shares;

 ·•references to “dollars,” “U.S. dollars” and “$” are to U.S. Dollars;

 ·•references to “NIS” are to New Israeli Shekels;

 ·•references to the “SEC” are to the U.S. Securities and Exchange Commission; and

·•references to the “Merger” refer to the merger involving Anchiano Therapeutics Ltd. and Chemomab Ltd., whereby a wholly-ownedwholly owned subsidiary of Anchiano Therapeutics Ltd. merged with and into Chemomab Ltd., with Chemomab Ltd. surviving as a wholly-owned subsidiary of Anchiano Therapeutics Ltd. Upon consummation of the Merger, Anchiano Therapeutics Ltd. changed its name to “Chemomab Therapeutics Ltd.” and the business conducted by Chemomab Ltd. became primarily the business conducted by the Company;Company.

PART I. – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS
Item 1.
Chemomab Therapeutics Ltd. and
its subsidiaries
Condensed Consolidated Interim
Financial Statements
As of March 31, 2022
(Unaudited)

1

Chemomab Therapeutics Ltd.
and its subsidiaries
Unaudited Condensed Consolidated Interim Financial Statements as of March 31, 2022

Contents

Page
Condensed Consolidated Interim Balance Sheets   3
Condensed Consolidated Interim Statements of Operations    4
Condensed Consolidated Interim Statements of Changes in Equity5
Condensed Consolidated Interim Statements of Cash Flow6
Notes to the Condensed Consolidated Interim Financial Statements7-10
2

Chemomab Therapeutics Ltd.
and its subsidiaries

Condensed Consolidated Balance Sheets

In USD thousands (except share amounts)

 

     March 31,  December 31, 
     2021  2020 
   Note   Unaudited     
Assets            
             
Current assets            
Cash and cash equivalents      58,180   11,674 
Short term bank deposits      23   24 
Asset held for sale      1,000   - 
Other receivables and prepaid expenses      320   141 
             
Total current assets      59,523   11,839 
             
Non-current assets            
Long-term deposit      4   4 
Property and equipment, net      148   152 
Restricted cash      51   53 
Operating lease right-of-use assets      397   428 
Total non-current assets      600   637 
             
Total assets      60,123   12,476 
             
Current liabilities            
Trade payables      2,083   93 
Accrued expenses      1,956   715 
Employee and related expenses      523   438 
Operating lease liabilities      69   70 
             
Total current liabilities      4,631   1,316 
             
Non -current liabilities            
Operating lease liabilities - long term      328   358 
             
Total non-current liabilities      328   358 
             
Commitments and contingent liabilities            
             
Total liabilities      4,959   1,674 
             
Shareholders’ equity  1         
Ordinary shares no par value - Authorized: 650,000,000 at March 31, 2021 and authorized 500,000,000 shares as of December 31, 2020 ;      -   - 
Issued and outstanding: 213,959,940 shares at March 31, 2021 and 9,274,838 shares at December 31, 2020 *      -   - 
             
Additional paid in capital      80,563   34,497 
Accumulated deficit      (25,399)  (23,695)
             
Total shareholders’ equity      55,164   10,802 
Total liabilities and shareholders’ equity      60,123   12,476 

*Number of shares has been retroactively adjusted to reflect the share reverse split effected on March 16, 2021 (refer to Note 1)

      

March 31,

  

December 31,

 
   

Note

  

2022

  

2021

 

 

  

 

   Unaudited   Audited 

Assets

            
             

Current assets

            

Cash and cash equivalents

      13,827   15,186 

Short term bank deposits

      43,579   45,975 

Other receivables and prepaid expenses

      1,934   1,527 

 

            

Total current assets

      59,340   62,688 

 

            

Non-current assets

            

Long term prepaid expenses

      864   908 

Property and equipment, net

      358   357 

Restricted cash

      85   55 

Operating lease right-of-use assets

      309   345 

Total non-current assets

      1,616   1,665 

 

            

Total assets

      60,956   64,353 

 

            

Current liabilities

            

Trade payables

      1,487   1,336 

Accrued expenses

      1,248   555 

Employee and related expenses

      666   653 

Operating lease liabilities

      116   106 

 

            

Total current liabilities

      3,517   2,650 

 

            

Non-current liabilities

            

Operating lease liabilities - long term

      203   237 

 

            

Total non-current liabilities

      203   237 

 

            

Commitments and contingent liabilities

      0   0 

 

            

Total liabilities

      3,720   2,887 

 

            

Shareholders' equity

            

Ordinary shares 0 par value - Authorized: 650,000,000 shares as of March 31, 2022 and as of December 31, 2021;

      -   - 

Issued and outstanding: 228,090,300 ordinary shares as of March 31, 2022 and as of December 31, 2021

      0   0 

Additional paid in capital

      98,513   97,639 

Accumulated deficit

      (41,277)  (36,173)

 

            

Total shareholders’ equity

      57,236   61,466 

Total liabilities and shareholders’ equity

      60,956   64,353 

 

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

 


3

Chemomab Therapeutics Ltd.

Unaudited

and its subsidiaries
Condensed Consolidated Interim Statements of Operations

(Unaudited)

In USD thousands (except share amounts)

Three months

Three months

Ended

Ended

March 31,

March 31,

2022

2021

Operating expenses

Research and development

2,7451,157

General and administrative

2,575542

Total operating expenses

5,3201,699

Financing expenses (income), net

(216)5

Net loss for the period

5,1041,704

Basic and diluted loss per Ordinary Share*

0.0220.011

Weighted average number of Ordinary Shares outstanding, basic, and diluted*

228,090,300156,751,771

  Three months  Three months 
  Ended  ended 
  March 31,  March 31, 
  2021  2020 
Operating expenses        
         
Research and development  1,157   1,552 
         
General and administrative  542   152 
         
Total operating expenses  1,699   1,704 
         
Financing expenses (income), net  5   (9)
         
Net loss for the period  1,704   1,695 
         
Basic and diluted loss per Ordinary Share*  0.011   0.013 
         
Weighted average number of Ordinary Shares outstanding, basic and diluted*  156,751,771   129,761,778 

 
*              Number of shares has been retroactively adjusted based on the equivalent number of shares received by the accounting acquirer’s shareholders in the reverse recapitalization transaction (refer to Note 1)1B).

 

The accompanying notes are an integral part of the condensed consolidated interim financial statements.


4

 


Chemomab Therapeutics Ltd.

and its subsidiaries
Unaudited Condensed Consolidated Interim Statements of Changes in Equity

(Unaudited)

In USD thousands (except share amounts)
  

Ordinary
Shares

  

Additional
paid in
capital

  

Accumulated
Deficit

  

Total
Shareholders’
equity

 
  

Number

  

USD

  

USD

  

USD

  

USD

 

For the three-month period ended on March 31, 2022

               

Balance as of January 1, 2022 *

  228,090,300   0   97,639   (36,173)  61,466 

Share-based compensation

  -   0   874   0   874 

Net loss for the period

  -   0   0   (5,104)  (5,104)

Balance as of March 31, 2022

  228,090,300   0   98,513   (41,277)  57,236 

For the three-month period ended on March 31, 2021

                    

Balance as of January 1, 2021 (**)

  9,274,838   0   34,497   (23,695)  10,802 

Share-based compensation

  -   0   43   0   43 

Effect of reverse capitalization transaction

  

152,299,702

   -   

2,476

   -   

2,476

 

Issuance of shares and warrants, net of issuance costs

  

52,385,400

   0   

43,547

   0   

43,547

 

Net loss for the period

  -   0   0   (1,704)  (1,704)

Balance as of March 31, 2021

  213,959,940   0   80,563   (25,399)  55,164 


(*) Number and type of equity instruments reflects the capital of the legal parent (the Company).

 

  

Ordinary

Shares

  

Additional

paid in

capital

  

Accumulated

Deficit

  Total
Shareholders’ equity		 
  Number  USD  USD  USD  USD 
For the three-month period ended on March 31, 2021                    
                     
Balance as of January 1, 2021 *  9,274,838   -   34,497   (23,695)  10,802 
                     
Share-based compensation  -   -   43   -   43 
                     
Effect of reverse capitalization transaction  152,299,702   -   2,476   -   2,476 
                     
Issuance of shares and warrants, net of issuance costs  52,385,400   -   43,547   -   43,547 
Net loss for the period  -   -   -   (1,704)  (1,704)
Balance as of March 31, 2021  213,959,940   -   80,563   (25,399)  55,164 

(**) Number of shares has been retroactively adjusted to reflect the share reverse split effected on March 16, 2021 (refer to Note 1)1B).

 

The accompanying notes are an integral part of the condensed consolidated financial statements.


Chemomab Therapeutics Ltd.

Unaudited Condensed Consolidated Statements of Changes in Equity

In USD thousands (except share amounts)

  Ordinary
Shares		  Additional
paid in
capital		  Accumulated
deficit		  Total
Shareholders’ equity		 
  Number  USD  USD  USD  USD 
For the three-month period ended March 31, 2020                    
                     
Balance as of January 1, 2020*  9,274,838   -   30,117   (17,744)  12,373 
Share-based compensation  -   -   46   -   46 
Net loss for the period  -   -   -   (1,695)  (1,695)
Balance as of March 31, 2020  9,274,838   -   30,163   (19,439)  10,724 

* Number of shares has been retroactively adjusted to reflect the share reverse split effected on March 16, 2021 (refer to Note 1)

The accompanying notes are an integral part of the condensed consolidated financial statements.


Chemomab Therapeutics Ltd.

Unaudited Condensed Consolidated Statements of Cash flows

In USD thousands

  Three months  Three months 
  ended  ended 
  March 31,  March 31, 
  2021  2020 
Cash flows from operating activities        
Loss for the period  (1,704)  (1,695)
         
Adjustments for operating activities:        
Depreciation  7   5 
Change in other receivables and prepaid expenses  57   (52)
Change in trade payables  281   37 
Change in accrued expenses  (62)  (204)
Change in employees and related expenses  85   (50)
Share-based compensation  43   46 
   411   (218)
Net cash used in operating activities  (1,293)  (1,913)
         
Cash flows from investing activities        
Investment in deposits  1   - 
Purchase of property and equipment  (3)  (10)
Net cash used in investing activities  (2)  (10)
         
Cash flows from financing activities        
Cash acquired in reverse recapitalization  2,427   - 
Receivables on account of shares  -   500 
Issuance of Shares and warrants, net of issuance costs  45,372   - 
Net cash provided by financing activities  47,799   500 
         
Change in cash, cash equivalents and restricted cash  46,504   (1,423)
         
Cash, cash equivalents and restricted cash at beginning of period  11,727   12,259 
         
Cash, cash equivalents and restricted cash at end of period  58,231   10,836 
         
Supplemental disclosure of non-cash investing and financing activities:        
Liabilities assumed, net of non-cash assets received in reverse merger  49   - 
Accrued issuance expenses  1,825   - 

The accompanying notes are an integral part of the condensed consolidated interim financial statements.
 

5

 

Chemomab Therapeutics Ltd.

and its subsidiaries

Condensed Interim Statements of Cash flows (Unaudited)
In USD thousands

Three months

ended

March 31,

2022

Three months

ended

March 31,

2021

Cash flows from operating activities

Net loss for the period

(5,104)(1,704)

Adjustments for operating activities:

Depreciation

137

Change in other receivables and prepaid expenses

(363)57

Change in operating lease liability

120

Change in trade payables

151281

Change in accrued expenses

693(62)

Change in employees and related expenses

1385

Share-based compensation

87443

1,393411

Net cash used in operating activities

(3,711)(1,293)

Cash flows from investing activities

Investment in deposits

2,3961

Purchase of property and equipment

(14)(3)

Net cash provided by (used in) investing activities

2,382(2)

Cash flows from financing activities

Cash acquired in reverse recapitalization

02,427

Issuance of shares and warrants, net of issuance costs

045,372

Net cash provided by financing activities

047,799

Change in cash, cash equivalents and restricted cash

(1,329)46,504

Cash, cash equivalents and restricted cash at beginning of period

15,24111,727

Cash, cash equivalents and restricted cash at end of period

13,91258,231

Supplemental disclosure of non-cash investing and financing activities:

Liabilities assumed, net of non-cash assets received in reverse merger

049

Accrued share issuance expenses

01,825

The accompanying notes are an integral part of the condensed consolidated interim financial statements.


6

CHEMOMAB THERAPEUTICS LTD AND ITS SUBSIDIARIES

(FORMERLY ANCHIANO THERAPEUTICS LTD.)

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Note 1 - General.

 

A.

Chemomab Therapeutics Ltd. (hereinafter - the “Company”"the Company") is an Israeli based company that was incorporated onunder the laws of the State of Israel in September 2011. The Company’s registered office is located in Kiryat Atidim, Tel Aviv, Israel. The Company is a clinical-stage biotech company discovering and developing innovative therapeutics for conditions with high-unmet medical need that involve inflammation and fibrosis.

B.
B.

On March 16, 2021, the Company, then known as Anchiano Therapeutics Ltd. (“Anchiano”), completed its merger with Chemomab Ltd., a privately-held Israeli limited company (“Chemomab Ltd.”) pursuant. Pursuant to the Agreement and Plan of Mergermerger (the “Merger Agreement”) dated as of December 14, 2020, by and among Anchiano, CMB Acquisition Ltd., an Israeli limited company and wholly-owned subsidiary of Anchiano (“Merger Sub”), and Chemomab Ltd. Upon completion of the merger transaction, pursuant to which Merger Sub merged with and into Chemomab Ltd., with Chemomab Ltd. being the surviving entity and a wholly owned subsidiary of Anchiano (the “Merger”)., the Company changed its name from “Anchiano Therapeutics Ltd.” to “Chemomab Therapeutics Ltd.” and the business conducted by Chemomab Ltd. became the primarily business conducted by the Company.

For accounting purposes, Chemomab Ltd. is considered to have acquired Anchiano based upon the terms of the Merger as well as other factors including; (i) Chemomab Ltd.'s former shareholders owned approximately 90% of the combined Company’s outstanding ordinary shares immediately following the closing of the Merger, and (ii) Chemomab Ltd. management holds key management positions of the combined Company. The Merger has been accounted for as an asset acquisition (reverse recapitalization transaction) rather than a business combination, as the assets acquired and the liabilities assumed by Chemomab Ltd. do not meet the definition of a business under U.S. GAAP. The net assets acquired in connection with the Merger were recorded at their estimated acquisition date fair market value as of March 16, 2021, the date of completion of the Merger.

Immediately prior to the effective date of the Merger, all preferred shares of Chemomab Ltd. were converted into ordinary shares of Chemomab Ltd. on a one-for-one basis.

Upon completion of the Merger, pursuant to which Merger Sub merged with and into Chemomab Ltd., with Chemomab Ltd. being the surviving entity and a wholly-owned subsidiary of Anchiano , the Company changed its name from “Anchiano Therapeutics Ltd.” to “Chemomab Therapeutics Ltd.” and the business conducted by Chemomab Ltd. became primarily the business conducted by the Company.

For accounting purposes, Chemomab Ltd. is considered the acquirer of Anchiano based upon the terms of the Merger as well as other factors including; (i) Chemomab Ltd. former shareholders own approximately 90% of the combined Company’s outstanding ordinary shares immediately following the closing of the Merger, and (ii) Chemomab Ltd. management holds key management positions of the combined Company. The Merger has been accounted for as an asset acquisition (reverse recapitalization transaction) rather than business combination, as the assets acquired and the liabilities assumed by Chemomab Ltd. do not meet the definition of a business under U.S. GAAP. The net assets acquired in connection with this transaction were recorded at their estimated acquisition date fair market value as of March 16, 2021, the date of completion of the Merger.

Immediately prior to the effective date of the Merger, all preferred shares of Chemomab Ltd. were converted into ordinary shares of Chemomab Ltd. on a one-for-one basis.

 

In connection with the Merger, and following the effective time of the Merger, the Company effected a reverse share split of the Company’sits ordinary shares at a ratio of 4:1 (the “Reverse Split”) and increased the number of ordinary shares per oneunderlying each American Depositary Share (“ADS”("ADS") from 5 to 20. At the effective time of the Merger, each Chemomab Ltd. ordinary share outstanding immediately prior to the effective time of the Merger automatically converted into the right to receive approximately 12.86 ADSs, each representing 20 Anchiano ordinary shares of the Company, plus a warrant to purchase ADSs that may become exercisable only under certain circumstances.circumstances (the “exchange ratio”).

 

The exchange rateratio was calculated by a formula that was determined through arms-length negotiations between the Company and Chemomab Ltd. The combined Company assumed all of the outstanding options of Chemomab Ltd., vested and not vested,unvested, under the 2015Chemomab Share Incentive Plan (the “2015 Plan”), with such options representing the right to purchase a number of ADSs equal to approximately 12.86 multiplied by the number of shares of Chemomab Ltd. ordinary shares previously represented by such options.


7

 


CHEMOMAB THERAPEUTICS LTD AND ITS SUBSIDIARIES

(FORMERLY ANCHIANO THERAPEUTICS LTD)

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

Note 1 - General. (Cont.)

 

The accompanying unaudited condensed consolidated financial statements and notes to the unaudited condensed consolidated financial statements give retroactive effect to the exchange ratio and change in par valuethe Reverse Split for all periods presented.
 

The equity structure reflects the legal acquirer’sacquirer's equity structure. The balance issheet has been adjusted to reflect the par value of the outstanding shares of the legal acquirer, including the number of shares issued in the reverse acquisition.Merger. Any difference is recognized as an adjustment to the additional paid in capital.

 

Immediately after completion of the Merger, on March 16, 2021, the Company had 8,078,727 ADSsADS issued and outstanding (9,003,357 on a fully diluted basis). In addition, immediately after the Merger, Chemomab Ltd. former shareholders prior to the Merger owned approximately 90% of the number of issued and outstanding ordinary shares of the Company and the shareholders of the Company immediately prior to the Merger owned approximately 10% of the number of issued and outstanding ordinary shares of the Company (all on a fully diluted basis).

 

On March 16, 2021, immediately prior to the effectiveness of the Merger, Anchiano had 65,675,904 ordinary shares outstanding (prior to the effect of the reverse share split)Reverse Split) and a market capitalization of $58.7 million. The estimated fair value of the net assets of Anchiano on March 16, 2021, prior to the Merger, was approximately $2.5 million. The fair value of ordinary shares on the Merger closing date, prior to the Merger, was above the fair value of the Company’s net assets. As the Company’s net assets were predominantly comprisedcomposed of cash offset against current liabilities, the fair value of the Company’s net assets as of March 16, 2021, immediately prior to the Merger, iswas considered to be the best indicator of the fair value and, therefore, the estimated preliminary purchase consideration.

 

The following table summarizes the net assets acquired based on their estimated fair valuevalues as of March 16, 2021, immediately prior to completion of the Merger (in thousands):

    
Cash and cash equivalents $2,427 
Asset held for sale  1,000 
Prepaid and other assets  236 
Accrued liabilities  (1,187)
Net acquired tangible assets $2,476 

 

Cash and cash equivalents

 $2,427 

Asset held for sale

  1,000 

Prepaid and other assets

  236 

Accrued liabilities

  (1,187)

Net acquired assets

 

$

2,476 
C.

C.

In connection with the Merger, on March 15, 2021, Anchiano entered into Securities Purchase Agreements with certain purchasers for the offeringissuance and sale by Anchiano in a private placement (“Private Placement”) of approximately $45.5 million of its ADSs and accompanying warrants to purchase ADSs. The warrants have an exercise price of approximately $17.35 per ADS, expire five years from the date of issuance, and if exercised in full will generateprovide additional proceeds to the Company of $4.5 million. The closing of the Private Placement was completed on March 22, 2021.


8


 

CHEMOMAB THERAPEUTICS LTD AND ITS SUBSIDIARIES

(FORMERLY ANCHIANO THERAPEUTICS LTD)

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS


Note 1 - General. (Cont.)

 

D.

D.

Pursuant to an Asset Purchase and Assignment Agreement dated as of March 16, 2021, as amended on March 31, 2021, between the Company’s wholly owned subsidiary, Anchiano Therapeutics, Inc., a Delaware corporation (“Anchiano Delaware”) and Kestrel Therapeutics, Inc., a company organized under the laws of Delaware (“Kestrel”), Anchiano Delaware agreed to sell to Kestrel all of the its rights and obligations in its business to the extent related to the research, development and commercialization of the Compounds and Products (as such terms are defined in the Collaboration and License Agreement entered into as of September 13, 2019, by and between ADT Pharmaceuticals, LLC and the Anchiano Delaware), also known as the pan-RAS and PDE10/β-catenin programs. In consideration of the sale and transfer of the Compounds and Products Kestrel paid the Company a total of $1.0 million.

E.

On April 30, 2021, the Company entered into an At the Market Offering Agreement (the "ATM agreement") with Cantor Fitzgerald & Co., ("Cantor"). Pursuant to the ATM agreement, the Company may offer and sell, from time to time, its ADSs having an aggregate offering price of up to $75 million through Cantor or the ATM agreement. From April 30, 2021 through March 31, 2022, the Company issued 699,806 ADSs at an average price of $22.75 per ADS through the ATM Prospectus Supplement, resulting in gross proceeds of $15.9 million. The offer and sale of ADSs under the ATM agreement has been registered under the Company’s effective registration statement on Form S-3 (File No. 333-255658), together with a prospectus forming a part thereof, filed with the SEC under the Securities Act of 1933, as amended (the “Securities Act”). Sales, if any, of ADS pursuant to the ATM agreement may be made in any transactions that are deemed to be “at the market” offerings as defined in Rule 415(a)(4) under the Securities Act. The Company is not obligated to sell any ADSs under the ATM agreement.

On April 25, 2022, the Company filed a prospectus supplement with the SEC for the issuance and sale of up to $18,125,000 of the Company's ADSs (instead of the amount of $75 million above) in connection with the reactivation of the ATM Facility.

F.

Since January 2020, the COVID-19 outbreak has dramatically expanded into a worldwide pandemic creating macro-economic uncertainty and disruption in the business and financial markets. Many countries around the world, including Israel, have been taking measures designated to limit the continued spread of the coronavirus,Coronavirus, including the closure of workplaces, restricting travel, prohibiting assembling, closing international borders and quarantining populated areas. The Company's clinical trial sites have been affected by the COVID-19 pandemic, and as a result, commencement of the enrollment of Company’s clinical trials of CM-101 in PSC was delayed and the enrollment rate has been affected as well. As a result, the Company extended patient recruiting to additional territories with significant recruitment potential. In addition, after enrollment in these trials, patients may drop out of the Company's trials because of the COVID-19 possible implications.

Based on management’s assessment, the extent to which the coronavirus will further impact the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, and the actions that may be required to contain the coronavirus or treat its impact. The Company is carefully monitoring the restrictions due to the COVID-19 outbreak and will adjust activities accordingly.

9

 

The Company’s clinical trial sites have been affected by the COVID-19 pandemic, and as a result, commencement of the enrollment of Company’s clinical trials of CM-101 in PSC has been delayed. There might be additional delays in the enrollment for the Company’s CM-101 PSC Phase 2 trial. In addition, after enrollment in these trials, patients might drop out of the Company’s trials because of possible COVID-19 implications.CHEMOMAB THERAPEUTICS LTD AND ITS SUBSIDIARIES

(FORMERLY ANCHIANO THERAPEUTICS LTD)

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

Based on management’s assessment, the extent to which the coronavirus will further impact the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, and the actions that may be required to contain the coronavirus or treat its impact. The Company is carefully monitoring the restrictions due to the COVID-19 outbreak and will adjust activities accordingly.

Note 2 - Basis of Presentation and Significant Accounting Policies

 

A.        Basis of Preparation

 

The condensed interim condensed consolidated financial statements included in this quarterly report are unaudited. The unaudited interimThese financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for a fair statement of the Company’s financial position as of March 31, 2021,2022, and its results of operations for the three months ended March 31, 20212022, and 2020,2021, changes in shareholders’ equity for the three months ended March 31, 20212022 and 2020,2021, and cash flows for the three months ended March 31, 20212022 and 2020.2021. The results of operations for the three months ended March 31, 20212022 are not necessarily indicative of the results to be expected for the year ending December 31, 20212022 or for any other future annual or interim period. The December 31, 2020 balance sheet was derived from the Chemomab Ltd.’s audited financial statements, but does not include all disclosures required by U.S. GAAP. These financial statements should be read in conjunction with the audited financial statements included in the Company’s Form 8-K/A10-K for the year ended December 31, 2021 as filed with the SEC on March 19 , 2021.SEC. The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended December 31, 20202021 included in the Company’s Form 8-K.10-K. Since the date of such financial statements, there have been no changes to the Company’s significant accounting policies.

 

B.        Use of estimates


The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.


10


CHEMOMAB THERAPEUTICS LTD

(FORMERLY ANCHIANO THERAPEUTICS LTD)

NOTES TO CONDENSED CONSOLIDATED

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS

Note 3 – Subsequent Events

Pursuant to an Asset Purchase and Assignment Agreement dated as of March 16, 2021, as amended on March 31, 2021 ,between the Company and Kestrel Therapeutics, Inc., a company organized under the laws of Delaware (“Kestrel”), the Company has sold to Kestrel all of the Company’s rights and obligations in its business to the extent related to the research, development and commercialization of the Compounds and Products (as such terms are defined in the Collaboration and License Agreement entered into as of September 13, 2019, by and between ADT Pharmaceuticals, LLC and the Company), also known as the pan-RAS and PDE10/β-catenin programs. These Compounds and Products were included in the Company’s balance sheet as of March 31, 2021, as asset held for sale. In consideration of the sale and transfer of the Compounds and Products Kestrel paid the Company a total of USD one million, of which USD 125 thousand were received prior to March 31, 2021.

CONDITION AND RESULTS OF OPERATIONS

Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q.10-Q, as well as our audited consolidated financial statements and related notes for the year ended December 31, 2021, as filed in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”). Some of the information contained in this discussion and analysis, particularly with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should read “Risk Factors” in Item 1A of our 2021 Annual Report on Form 10-K for the year ended December 31, 2020, as well as the Current Report on Form 8-K as filed with the SEC on April 14, 2021,  for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

Chemomab

The Company is a clinical-stage biotechbiotechnology company discoveringfocused on the discovery and developingdevelopment of innovative therapeutics for conditionsfibrotic and inflammatory diseases with high unmet medical need that involveneed. Based on the unique and pivotal role of the soluble protein CCL24 in promoting fibrosis and inflammation, the Company developed CM-101, a monoclonal antibody designed to bind and fibrosis.

Chemomabblock CCL24 activity. CM-101 has demonstrated the potential to treat multiple severe and life-threatening fibrotic and inflammatory diseases.

The Company has pioneered the therapeutic targeting of CCL24, a chemokine that promotes various types of cellular processes that regulate inflammatory and fibrotic activities through the CCR3 receptor. The chemokine is expressed in various types of cells, including immune cells, endothelial cells and epithelial cells. We have developed a novel CCL24 inhibiting product candidate with dual anti-fibrotic and anti-inflammatory activity that modulates the complex interplays of both of these inflammatory and fibrotic mechanisms that drive abnormal states of fibrosis and clinical fibrotic diseases. This innovative approach is being developed for difficult to treat rare diseases, also known as orphan indications or diseases, such as primary sclerosing cholangitis, or PSC, and systemic sclerosis, or SSc, for which patients have no established disease modifying standard of care treatment options.

CM-101, the Company’s lead clinical product candidate, is a first-in-class humanized monoclonal antibody that hinders the basic function of the soluble chemokine CCL24, also known as eotaxin-2, as a regulator of major inflammatory and fibrotic pathways. We have demonstrated that CM-101 interferes with the underlying biology of inflammation and fibrosis through a novel and differentiated mechanism of action. Based on these findings, Chemomabthe Company is actively advancingdeveloping CM-101 intoin Phase 2 clinical studies directed toward threetwo distinct clinical indications including patients with liver, skin, and/or lung fibrosis. We have completed two Phase 1a clinical studies at varying doses using different administration methods, as well as a Phase 1b safety, tolerability and proof-of-mechanism clinical study of CM-101 in non-alcoholic fatty liver disease, or NAFLD, patients. Weare currently are conducting a Phase 2a2 clinical study in the United Kingdom and Israel studying PSC, a rare obstructive and cholestatic liver disease, and this yeardisease. In addition, we are planning a Phase 2biological and clinical proof of concept study in SSc a rare autoimmune rheumatic disease characterized by accumulationfocused on establishing biological and clinical proof of collagen, producing fibrosisconcept in multiple tissues.this patient population. Although our primary focus relates to these two rare indications, an additional Phase 2a2 clinical study has been initiated focused on expanding the understanding of CM-101is currently ongoing in non-alcoholic steatohepatitis, or NASH. This trial will provide important safety and PK data designed to support the development of CM-101 subcutaneous formulation.

Fibrosis is the abnormal and excessive accumulation of collagen and extracellular matrix, the non-cellular component in all tissues and organs, that provideprovides structural and biochemical support to surrounding cells. When present in excessive amounts, collagen and extracellular matrix lead to scarring and thickening of connective tissues, affecting tissue properties and potentially leading to organ failure. Fibrosis can occur in many different tissues, including lung, liver, kidney, muscle, skin, and the gastrointestinal tract, resulting in a wide array of progressive fibrotic conditions. Fibrosis and inflammation are intrinsically linked. While a healthy inflammatory response is necessary for efficient tissue repair,repair; after injury, an excessive, uncontrolled inflammatory response can lead to tissue fibrosis.

11
Recent Developments

New Executive Appointments
On February 10, 2022, our shareholders approved the appointment of Dr. Dale Pfost, our Chief Executive Officer, to the additional role of Chairman of our Board of Directors. This appointment followed the resignation of our previous Chairman of the Board, Dr. Stephen Squinto, who concurrent with his resignation effective December 19, 2021, became an ad-hoc strategic advisor and consultant to us in connection with our corporate and business strategy and corporate development.
On January 4, 2022, we announced the addition of Jack Lawler, who brings extensive experience managing global clinical trials, as Vice President of Global Clinical Development Operations.
Revisions to Chemomab’s Clinical Programs
On March 9, 2022, we announced that, following a comprehensive strategic review, we are making revisions to our current clinical programs. The changes are designed to optimize the clinical development of lead product candidate CM-101 by maximizing the clinical information obtained, generating additional important data to support future advancement to registration trials, and decreasing the overall risk in the CM-101 clinical development program in the lead indications of PSC and SSc, as well as potentially in additional indications where the scientific rationale is strong. The key top-line changes to the clinical development programs include the following:
Expanding our commitment to primary sclerosing cholangitis with an enlarged clinical trial that adds an important dose finding component. We plan to significantly expand the Phase 2 clinical trial in PSC by implementing a dose finding component to the CM-101 development program. We will be increasing the size of the study by adding additional dose cohorts, including plans to evaluate both a lower and a higher dose level of CM-101 to support future potential registrational trials. In addition, we plan to add an open-label extension to the trial to evaluate the safety, tolerability and durability of effect over longer treatment durations.
Focusing our clinical efforts in systemic sclerosis on establishing earlier biological and clinical proof of concept. We plan to focus our SSc trial towards establishing biological and clinical proof of concept in this patient population. We are revising the design of our planned SSc trial in a way that we believe should enable an expedited path to proof of concept data, as well as further elucidation of the different mechanisms of action of CM-101 in treating the skin, lung and vascular damage seen in SSc patients.
Early completion of enrollment in our safety, pharmacokinetic and biomarker liver fibrosis study, yielding a data readout targeted near the end of 2022. We will be completing enrollment in our ongoing safety, tolerability and biomarker trial that is evaluating the subcutaneous formulation of CM-101 in liver fibrosis patients. We believe the early completion of this study should be sufficient to achieve our key objectives—exploring safety and providing the pharmacokinetic data needed to assess next steps in the development of the subcutaneous formulation—while allowing us to focus our resources on our lead indications of PSC and SSc.
We expect that the proposed changes to the CM-101 development program will provide important data on the clinical dose response relationship to inform the broader development program and to identify the optimal dose to advance in later PSC trials. The modifications are also expected to generate proof of concept data on clinically relevant aspects of SSc, a complex rheumatological disorder, to best inform the development path for a novel, first-in-class therapeutic like CM-101, along with relevant safety and tolerability data to support the evaluation of higher doses and inform decisions on next steps in the development of the subcutaneous formulation.
12
Shelf Registration Statement and ATM Offering

On April 30, 2021, we filed a shelf registration statement on Form S-3 with the SEC (File No. 333-255658) for the issuance and sale by us of up to $200,000,000 of our ordinary shares, ADSs, debt securities, warrants and units comprising any combination of the foregoing securities (the “Shelf Registration Statement”). On the same date, we entered into athe sales agreement (the “Sales Agreement”) with Cantor Fitzgerald, & Co. (“Sales Agreement” and “Cantor”, respectively), pursuant to which we may offer and sell, from time to time, at our option, through or to Cantor Fitzgerald, up to an aggregate of approximately $75,000,000 of our ADSs.ADSs (the “ATM Facility”). During the period from April 30, 2021 through the date of this quarterly report on Form 10-Q, we had sold an aggregate of 699,806 ADSs pursuant to the Sales Agreement for a total gross consideration of approximately $15.9 million.
On April 25, 2022, we filed a prospectus supplement with the SEC for the issuance and sale of up to $18,125,000 of our ADSs in connection with the reactivation of the ATM Facility and pursuant to General Instruction I.B.6 of Form S-3, which, subject to certain exceptions, limits the amount of securities we are able to offer and sell under such registration statement to one-third of our unaffiliated public float. Any ADSs offered, or to be offered, and sold under the Sales Agreement were issued and sold, or will be issued and sold, pursuant to the Shelf Registration Statement and the applicable prospectus or prospectus supplement by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act, of 1933, as amended, or if specified by us, by any other method permitted by law.

Merger Transaction

Impact of COVID-19
      Since March 2020, the COVID-19 pandemic has dramatically expanded into a worldwide pandemic, creating macro-economic uncertainty and disruption in the business and financial markets. The continuing implications of the COVID-19 pandemic on us remain uncertain and will depend on future developments, including any adverse impact due to additional variants of the virus; its impact on our employees; the range of government mandated restrictions and other measures; and the success of the COVID-19 vaccines and their effectiveness against the virus and related variants. Furthermore, our clinical trial sites have been affected by the COVID-19 pandemic, and as a result, commencement of the enrollment in our clinical trials of CM-101 in PSC was delayed, and the enrollment rate has been affected as well. As a result, we expanded our patient recruiting efforts to additional territories. In addition, after enrollment in these trials, patients might still discontinue participation in these trials because of possible COVID-19 implications.
      Based on management’s assessment, the extent to which the COVID-19 pandemic will further impact our operations will depend on future developments, which are highly uncertain and cannot be predicted with Chemomab Ltd.

On March 16, 2021, we consummated a merger (the “Merger”) pursuantconfidence, including the duration and severity of the outbreak, and the actions that may be required to that certain Agreement and Plan of Merger (the “Merger Agreement”), dated December 14, 2020, by and among us (formerly known as Anchiano Therapeutics Ltd.), CMB Acquisition Ltd., an Israeli limited company and our wholly-owned subsidiary (the “Merger Sub”), and Chemomab Ltd., an Israeli limited company. Pursuantcontain the COVID-19 or treat its impact. We are carefully monitoring the restrictions due to the terms of the Merger Agreement, Merger Sub merged withCOVID-19 pandemic and into Chemomab Ltd., with Chemomab Ltd. surviving the Merger as our wholly owned subsidiary. In connection with the Merger, on March 16, 2021, we changed our name from Anchiano Therapeutics Ltd. to Chemomab Therapeutics Ltd.


In connection with the Merger, on March 15, 2021, we entered into Securities Purchase Agreements with certain purchasers, pursuant to which we agreed to sell and issue approximately $45.5 million of our ADSs in a private placement transaction, or the Private Placement. The Private Placement closed on March 22, 2021, at which time we sold and issued to the purchasers 2,619,270 ADSs (or 41,908,232 ADSs in terms of pre-reverse split that took effect immediately prior to the closing of the Merger) and 261,929. (or 4,190,820 in terms of pre-reverse split that took effect immediately prior to the closing of the Merger) accompanying warrants at a total purchase price of $17.35 (or $1.08443 in terms of pre-reverse split that took effect immediately prior to the closing of the Merger). The warrants will expire five years from the date of issuance, and if exercised in full will generate additional proceeds of approximately $4.5 million.

adjust activities accordingly.

13
Corporate Information

We were incorporated on September 22, 2011 under the laws of the State of Israel. In March 2021, in connection with the Merger, we changed our name from Anchiano Therapeutics Ltd. to Chemomab Therapeutics Ltd. Our principal executive offices are located at Kiryat Atidim, Building 7, Tel Aviv, Israel 6158002, and our phone number is +972-77-331-0156. Our website is: www.chemomab.com. The information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus.prospectus supplement. We have included our website address as an inactive textual reference only.  

Components of Operating Results

Preliminary Note:

References to “we,” “us,” “our” and “Chemomab” in this “Components of Operating Results” and in the “Results of Operations” below refer to the Company after the Merger, and, with respect to historical periods preceding the Merger, refer to Chemomab Ltd., whose business became the business of the Company upon consummation of the Merger.

Revenues

To date, we have not generated any revenue. We do not expect to receive anygenerate revenue unless and until we obtain regulatory approval and commercialize a future product candidate, or until we receive revenue from a collaboration such as a co-development or out-licensing agreement. There can be no assurance that we will receive such regulatory approvals, and if a futureany product candidate is approved, that we will be successful in commercializing it.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates. These expenses include:

·•
expenses incurred under agreements with CROs, CMOs,contract research organizations or contract manufacturing organizations, as well as investigative sites and consultants that conduct Chemomab’sour clinical trials, preclinical studies and other scientific development services;

·•
manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial materials;

·•
employee-related expenses, including salaries, related benefits, travel and share-based compensation expenses for employees engaged in research and development functions, as well as external costs, such as fees paid to outside consultants engaged in such activities;

·•
license maintenance fees and milestone fees incurred in connection with various license agreements;

·•
costs related to compliance with regulatory requirements; and

·•
depreciation and other expenses.

We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to itus by itsour service providers.

We do not allocate employee costs or facility expenses, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. It usesWe use our internal resources primarily to oversee the research, as well as for managing Chemomab’sour preclinical development, process development, manufacturing and clinical development activities. TheseOur employees work across multiple programs and, therefore, it doeswe do not track their costs by program.


Research and development activities are fundamental to our business. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will increase substantially over the next several quarters and years as it continueswe continue to advance the development of itsour product candidates. ChemomabWe also expectsexpect to incur additional expenses related to milestone and royalty payments payable to third parties with whom it haswe have entered into license agreements to acquire the rights to its product candidates.

14
General and Administrative Expenses

General and administrative expenses consist primarily of salaries, related benefits and share-based compensation expenses for personnel in executive and administrative functions. General and administrative expenses also include professional fees for legal, consulting, accounting and audit services.

We anticipate that our general and administrative expenses will increase in the future as we will increase headcount and general activities to support itsour continued research activities and development of itsour product candidates.candidates as well as expanding our presence in the United States. We also anticipate that we will incur increased headcount, accounting, audit, legal, regulatory, compliance, director and officer insurance costs, as well as investor and public relations expenses associated with being a public company. Chemomab anticipatesWe expect that the additional costs for these services will substantially increase itsour general and administrative expenses. Additionally, if and when it believes awe believe that regulatory approval of a product candidate appears likely, Chemomab anticipateswe expect to incur an increase in payroll and related expenses as a result of Chemomab’sour preparation for commercial operations, especially as it relates to the sales and marketing of any Chemomab product candidate.

Finance (Income) Expense, Net

Financial expenses, net consist primarily of income or expenses related to revaluation of foreign currencies and interest income on Chemomab’s bank deposits.

Results of Operations

Three Months Ended March 31, 20212022 Compared to the Three Months Ended March 31, 2020

2021

Below is a summary of our results of operations for the periods indicated:

  Three months ended       
  March 31,  Increase/(decrease) 
  2021  2020  $  % 
  (in thousands)       
Operating expenses:                
Research and development $1,157  $1,552  $(395)  (25)%
General and administrative  542   152   390   257%
Operating loss  (1,699)  (1,704)  (5)  0.29)%
Financing (income) expense, net  5   (9)  14   155%
Net loss $(1,704) $(1,695) $(9)  0.5%

3

  
Three months ended
       
  
March 31,
  
Increase/(decrease)
 
  
2022
  
2021
   $   
%
 
  
(in thousands)
        
Operating expenses:
             
Research and development
  
2,745
   
1,157
   
1,588
   
137
%
General and administrative
  
2,575
   
542
   
2,033
   
375
%
Operating loss
  
5,320
   
1,699
   
3,621
   
213
%
Financing expense (income) , net
  
(216
)
  
5
   
(221
)
  
(4,420
)%
Net loss
 
$
5,104
  
$
1,704
  
$
3,400
   
200
%
Our results of operations have varied in the past and can be expected to vary in the future due to numerous factors. We believe that period-to-period comparisons of our operating results are not necessarily meaningful and should not be relied upon as indications of future performance.

14

15
Research and development expenses

Research and development expense decreasedexpenses increased by approximately $0.4$1.6 million, or 25%137%, for the three months ended March 31, 2022, as compared to the same period of 2021. The increase was primarily due to increased clinical and pre-clinical activities.
General and administrative expenses
General and administrative expenses increased by approximately $2.0 million, or 375%, for the three months ended March 31, 2022, as compared to the same period of 2021. The increase was primarily due to increase in non-cash share-based expenses as well as expenses incurred as a result of becoming a public company.
Financing expenses (income), net
Financing income, net for the three months ended March 31, 2022 was $216 thousand. Financing expense, net for the three months ended March 31, 2021 from the comparable periodwas $5 thousand. This reflects an increase in fiance income of 2020. The decrease is primarily due to reductions in third-party manufacturing costs.

General and administrative expenses

General and administrative costs increased by approximately $0.4 million,$221 thousand, or 357%4420%, infor the three months ended March 31, 20212022 from the comparable period of 2020.2021. The increase iswas primarily due to expenses related to completion of the mergerinterest earned on bank deposits and fund raising.

to foreign currency exchange rate gain.

Financing (income) expense,income, net

Financing (income) expense, net increased by approximately $14 thousand in for the three months ended March 31, 2021 from the comparable period of 2020.

2022 was primarily related to interest earned on bank deposits and to foreign currency exchange rate gain.

Financing expense, net forfor the three months ended March 31, 2021 was primarily related to foreign currency exchange rate loss.

Financing income, net for the three months ended

Liquidity and Capital Resources
Since inception, we have not generated any revenue and have incurred significant operating losses and negative cash flows from our operations, resulting in an accumulated deficit at March 31, 2020 was2022 of $41.3 million. We have funded our operations to date primarily relatedwith proceeds from the sale of our ADSs, and, prior to foreign currency exchange rate gain.

the Merger, other equity securities. Cash in excess of immediate requirements is invested primarily in bank deposits with a view to liquidity and capital preservation.

During the period from April 30, 2021 through March 31, 2022, we sold an aggregate of 699,806 ADSs pursuant to the Sales Agreement for total gross consideration of approximately $15.9 million. As of March 31, 2022, we had an aggregate of approximately $57.5 million of cash, cash equivalents and short-term deposits.
Developing product candidates, conducting clinical trials and commercializing products are expensive, and we will need to raise substantial additional funds to achieve our strategic objectives. We believe that our existing cash resources, including from the ADSs sold pursuant to the Sales Agreement, will be sufficient to fund our projected cash requirements through the end of 2023. Nevertheless, we will require significant additional financing in the future to fund our operations, including if and when we progress into additional clinical trials, obtain regulatory approval for any of our product candidates and commercialize the same. We believe that we will need to raise significant additional funds before we have any cash flow from operations, if at all. Our future capital requirements will depend on many factors, including:
•          the progress and costs of our preclinical studies, clinical trials and other research and development activities;
16
•          the scope, prioritization and number of our clinical trials and other research and development programs;
•          the amount of revenues and contributions we receive under future licensing, development and commercialization arrangements with respect to our product candidates;
•          the costs of the development and expansion of our operational infrastructure;
•          the costs and timing of obtaining regulatory approval for our product candidates;
•          the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;
•          the costs and timing of securing manufacturing arrangements for clinical or commercial production;
•          the costs of contracting with third parties to provide sales and marketing capabilities for us;
•          the costs of acquiring or undertaking development and commercialization efforts for any future products, product candidates or platforms;
•          the magnitude of our general and administrative expenses; and
•          any cost that we may incur under future in- and out-licensing arrangements relating to our product candidates.
We currently do not have any commitments for future external funding. In the future, we will need to raise additional funds, and we may decide to raise additional funds even before we need such funds if the conditions for raising capital are favorable. Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through debt or equity financings, credit facilities or by out-licensing applications of our product candidates. The sale of equity or convertible debt securities may result in dilution to our existing shareholders. The incurrence of indebtedness would result in increased fixed obligations and could also subject us to covenants that restrict our operations. We cannot be certain that additional funding, whether through grants from the Israel Innovation Authority, financings, credit facilities or out-licensing arrangements, will be available to us on acceptable terms, if at all. If sufficient funds are not available, we may be required to delay, reduce the scope of or eliminate research or development plans for, or commercialization efforts with respect to, one or more applications of our product candidates, or obtain funds through arrangements with collaborators or others that may require us to relinquish rights to certain potential products that we might otherwise seek to develop or commercialize independently.
17
Cash Flows

The table below shows a summary of our cash flow activities for the periods indicated:

  Three months ended       
  March 31,  Increase/(decrease) 
  2021  2020  $  % 
   (in thousands)         
Net cash used in operating activities $(1,293) $(1,913) $620   32%
Net cash used in investing activities  (2)  (10)  8   80%
Net cash provided by financing activities  47,799   500   47,299   9,460%
Net increase (decrease) in cash, cash equivalents and restricted cash $46,504  $(1,423) $47,927   3,368%

  
Three months ended
       
  
March 31,
  
Change
 
  
2022
  
2021
   $   
%
 
  
(in thousands)
        
Net cash used in operating activities
 
$
(3,711
)
 
$
(1,293
)
 
$
(2,418
)
  
187
%
Net cash provided by (used in) investing activities
 
$
2,382
  
$
(2
)
 
$
2,384
   
(119,200
)%
Net cash used in financing activities
  
-
  
$
47,799
  
$
(47,799
)
  
(100
)%
Net increase (decrease) in cash, cash equivalents and restricted cash
 
$
(1,329
)
 
$
46,504
  
$
(47,833
)
  
(103
)%
Operating activities

Net cash used in operating activities increased by $0.6$2.4 million, or 32%187%, for the three months ended March 31, 20212022, compared to the same period of 2020. Net2021. The increase is primarily related to the increase in net loss adjusted forof $3.4 million, as well as an increase in non-cash activities was $1.7adjustment to net loss of $0.9 million, for the three months ended March 31, 2021 and for the three months ended March 31, 2020.

offset by an increase of accrued expenses of $0.7 million.

Investing activities

Investing

Net cash provided in investing activities for the three months ended March 31, 2021 and 2020 was2022 increased by approximately $2.4 million, as compared to the same period of 2021. The increase is primarily related to the purchasewithdrawal of fixed assets.

bank deposits.

Financing activities

Financing

Net cash provided by financing activities for the three months ended March 31, 2021 reflect2022 decreased by approximately $48 million, as compared to the gross proceeds from the issuancesame period of ADSs of approximately $45.4 million, net of expenses, and cash acquired in the reverse recapitalization transaction of approximately $2.4 million. Financing activities for the three months ended March 31, 2020 reflect proceeds received on account of the sale of our ADSs.

2021.

Contractual Commitments

The Company’s contractual commitments are as follows at March 31, 20212022 (in thousands):

Remainder of 2021 $2,478 
2022  129 
2023  98 
2024-2026  204 
Total $2,908 

Off-Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities as to which we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that would expose us to material continuing risks, contingent liabilities or any other obligation under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.

Remainder of 2022              
$

5,918

     
2023
     
5,928
 
2024
     
140
 
2025-2027
       
Total
$

11,986

   
 
 
18
Critical Accounting Policies

OurEstimates

The Company’s financial statements are prepared in accordance with GAAPgenerally accepted accounting principles in the United States.States (“GAAP”). The preparation of ourthe Company’s financial statements and related disclosures in accordance with GAAP requires it to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in ourthe Company’s financial statements. ChemomabThe Company bases its estimates on historical experience, known trends and events and various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. ChemomabThe Company evaluates its estimates and assumptions on an ongoing basis. Chemomab’sThe Company’s actual results may differ from these estimates under different assumptions or conditions.

While ourthe Company’s significant accounting policies are described in more detail in Note 2 to ourthe Company’s consolidated financial statements we believeincluded elsewhere in this Annual Report on Form 10-K, the Company believes that the following accounting policiesestimates are those mostthat include a higher degree of judgment or complexity and are reasonably likely to have a material impact on our financial condition or results of operations and are therefore considered critical to the judgments and estimates used in the preparation of its financial statements.

accounting estimates.

Share-Based Compensation

We apply Accounting Standard Codification (ASC) 718-10, “Share-Based Payment,” which requires the measurement and recognition of compensation expenses for all share-based payment awards made to employees and directors, including employee options under Chemomab’sthe Company’s option plans based on estimated fair values.

ASC 718-10 requires that we estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The fair value of the award is recognized as an expense over the requisite service periods in Chemomab’sthe Company’s statements of comprehensive loss. ChemomabThe Company recognizes share-based award forfeitures as they occur, rather than estimate by applying a forfeiture rate.

In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting”, which simplifies the accounting for nonemployee share-based payment transactions by aligning the measurement and classification guidance, with certain exceptions, to that for share-based payment awards to employees. The amendments expand the scope of the accounting standard for share-based payment awards to include share-based payment awards granted to non-employees in exchange for goods or services used or consumed in an entity’s own operations and supersedes the guidance related to equity-based payments to non-employees. We adopted these amendments on January 1, 2019.

We recognize compensation expenses for the fair value of non-employee awards over the requisite service period of each award.


We estimate the fair value of options granted as equity awards using a Black-Scholes options pricing model. The option-pricing model requires a number of assumptions, of which the most significant are share price, expected volatility and the expected option term (the time from the grant date until the options are exercised or expire). ChemomabThe Company determines the fair value per share of the underlying stock by taking into consideration its most recent sales of stock, as well as additional factors that Chemomabthe Company deems relevant. Chemomab’sThe Company’s board determined the fair value of ordinary shares based on valuations performed using the Option Pricing Method subject to relevant facts and circumstances. ChemomabThe Company has historically been a private company and lacks company-specific historical and implied volatility information of its stock. Expected volatility is estimated based on volatility of similar companies in the biotechnology sector. ChemomabThe Company has historically not paid dividends and has no foreseeable plans to issue dividends. The risk-free interest rate is based on the yield from governmental zero-coupon bonds with an equivalent term. The expected option term is calculated for options granted to employees and directors using the “simplified” method. Grants to non-employees are based on the contractual term. Changes in the determination of each of the inputs can affect the fair value of the options granted and the results of operations of Chemomab.

the Company.

19
Recently-Issued Accounting Pronouncements

Certain recently-issued accounting pronouncements are discussed in Note 2, Summary of Significant Accounting Policies, to the unaudited condensedaudited consolidated financial statements included in “Item 1. Financial Statements Unaudited”

Liquidity and Capital Resources

Since inception, Chemomab has not generated any revenue and has incurred significant operating losses and negative cash flows from its operations, resulting in an accumulated deficit at March 31,our 2021 of $25.4 million.We have funded its operations to date primarily with proceeds from the sale of its ADSs. Cash in excess of immediate requirements is invested primarily with a view to liquidity and capital preservation.

Annual Report.
Item 3.Quantitative and Qualitative Disclosures About Market Risk.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are an emerging growth company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are not required to provide the information under this item.

Item 4.Controls and Procedures.

Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures

As of end of the period covered by this Quarterly Report, disclosure

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, , as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.Act, as of March 31, 2022. Based on thissuch evaluation, our principal executive officer and principal financial officer have concluded that that our disclosure controls and procedures were effective as of March 31, 2021.

2022.

Changes in Internal Control over Financial Reporting

We consummated the Merger on March 16, 2021, which has been accounted for as a reverse capitalization for accounting purposes, and, upon consummation of the Merger, we reconstituted our Board of Directors and our senior management team. TheFollowing consummation of the Merger the Company’s management has beenwas in the process of strengthening the Company’s internal control over financial reporting during the fiscal year ended December 31, 2021, including adopting new policies and procedures appropriate to the Company’s current business and management team. Management intendsteam and onboarding new members to complete its assessment for inclusion in our 2021 Annual Report.finance team – including a new Chief Financial Officer, VP Finance and director of finance. The foregoing actions are beingwere taken solely in connection with the changes effected in connection with the Merger and not as the result of any material weakness or deficiency in the Company’s internal control over financial reporting.


There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
20
PART II. – OTHER INFORMATION

Item 1.Legal Proceedings

Item 1. Legal Proceedings
From time to time, we may become involved in legal proceedings relating to claims arising from the ordinary course of business. Our management believes that there are currently no claims or actions pending against us, the ultimate disposition of which could have a material adverse effect on our results of operations, financial condition or cash flows.

Item 1A.Risk Factors

Item 1A. Risk Factors
There have been no material changes from the information set forth in “Risk“Item 1A. Risk Factors” in the Current Report on Form 8-K filed with the SEC on April 14, 2021. 

our 2021 Annual Report.
Item 2.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There have been no unregistered sales of equity securities in addition to the sales provided under Form 8-K as filed with the SEC during the recent fiscal quarter ended March 31, 2021.

Equity Securities and Use of Proceeds.
None.
Item 3.Defaults Upon Senior Securities.

Item 3. Defaults Upon Senior Securities.
Not applicable.

Item 4.Mine Safety Disclosures.

Item 4. Mine Safety Disclosures.
Not applicable.

Item 5.Other Information.

Item 5. Other Information.
None.

21
Item 6.Exhibits.

Item 6. Exhibits.
(a) The following documents are filed as exhibits to this Quarterly Report or incorporated by reference herein.

Exhibit
Number
 
Description
31.1*
 
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2*
 
31.2*
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32.1**
 
32.1**
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**
 
 
32.2**
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


101. INS
 
Inline XBRL Instance Document
101. SCH
 
101. SCH
Inline XBRL Taxonomy Extension Schema Document
101. CAL
 
101. CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101. DEF
 
101. DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101. LAB
 
101. LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101. PRE
 
101. PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
 
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
 
Filed herewith.
**
 
**
Furnished herewith.


22
SIGNATURES

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.

 
CHEMOMAB THERAPEUTICS LTD.
Date: May 12, 2022
By:
/s/ Dale Pfost
Name:
Dale Pfost
Title:
Chief Executive Officer
   
Date: May 13, 202112, 2022
By:
/s/ Adi MorDonald Marvin
 
Name:
Adi Mor
Donald Marvin
 
Title:
Chief ExecutiveFinancial Officer
 
Date: May 13, 2021By:/s/ Sigal Fattal
Name:Sigal Fattal
Title:Chief Financial Officer


23