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Chemomab Therapeutics (CMMB) Risk Analysis
Risk Overview Q3, 2020
Source: the company's latest filing for the period ended Sep 30, 2020, filed Nov 16, 2020
Risk Change Over Time
No filing history is available.
- Corporate Activity and Growth - Risk 1There can be no assurance that our review of strategic alternatives will result in any additional shareholder value, and speculation and uncertainty regarding the outcome of our review of strategic alternatives may adversely impact our business, financial condition and results of operations.
In July 2020, we engaged Oppenheimer & Co. to act as our financial advisor to conduct a review of strategic alternatives focused on maximizing shareholder value. There can be no assurances that the strategic alternatives review process will result in the announcement or consummation of any strategic transaction, or that any resulting plans or transactions will yield additional value for shareholders. Any potential transaction will be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, the interest of third parties in a potential transaction and the availability of financing. If we fail to successfully complete a strategic transaction, we may not be able to otherwise source adequate liquidity to fund our operations, meet our obligations, and continue as a going concern. The process of exploring strategic alternatives could adversely impact our business, financial condition and results of operations. We expect to incur substantial expenses associated with identifying and evaluating potential strategic alternatives, and may incur substantial expenses associated with consummating a strategic alternative, if any is consummated, including those related to equity compensation, severance pay, legal, accounting and financial advisory fees, the payment of potential liabilities related to early termination of pre-existing contracts and other fees and payments that may be payable in the event of a strategic transaction. In addition, the process may be time consuming and disruptive to our business operations, could divert the attention of management and the Board of Directors from our business, could require that we make changes to our headcount, may negatively impact our ability to attract, retain and motivate key employees, and could expose us to potential litigation in connection with this process or any resulting transaction. Further, speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties related to our future could cause our stock price to fluctuate significantly. Our ADSs are listed for trading on Nasdaq. On April 15, 2020, we received a deficiency letter from Nasdaq notifying us that, for the last 30 consecutive business days, the closing bid price of the ADSs has not been maintained at the minimum required closing bid price of at least $1.00 per ADS, as required for continued listing on the Nasdaq Capital Market. We were provided an initial period of 180 calendar days, or until October 12, 2020, to regain compliance. One June 5, 2020 we received a letter from Nasdaq notifying us that we had regained compliance with the exchange's continued listing requirements. Although we have regained compliance with the Nasdaq listing requirements, Nasdaq will continue to monitor our ongoing compliance. No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continued listing standards could result in a delisting of the ADSs, which could materially reduce the liquidity of our ADSs and result in a corresponding material reduction in the price of our ADSs. In addition, delisting could harm our ability to raise capital on terms acceptable to us, or at all, inhibit our ability to engage in a strategic transaction and lead to potential loss of confidence by investors and other stakeholders.
Risk Highlights Q3, 2020
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 60
- Share Price & Shareholder Rights - Risk 1Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies or assets.
Until such time, if ever, as we can generate sufficient revenues, we expect to finance our cash needs through equity offerings, debt financings or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. We will require substantial funding to fund our developmental efforts, our operating expenses and other activities. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, certain price protection rights may be triggered and the terms of the newly issued securities may include liquidation or other preferences that adversely affect your rights. Investors in the June 2018 fundraising are entitled to certain price protection rights with respect to their ordinary shares and warrants in the event of a future share issue by us where the price per share is less than the price per share reflected in our initial public offering, which triggered these rights. Additionally, debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail one or both of our preclinical development programs, which would adversely impact our potential revenues, results of operations and financial condition.
- Share Price & Shareholder Rights - Risk 2A limited number of shareholders will have the ability to influence the outcome of director elections and other matters requiring shareholder approval.
According to a Schedule 13D filed on January 13, 2020, Clal Biotechnology Industries Ltd. ("CBI") is the beneficial owner of approximately 23.6% of our outstanding shares and Access Industries Holdings LLC ("AIH"), Access Industries Management, LLC ("AIM"), Access Industries, LLC ("LLC") and Len Blavatnik beneficially own approximately 40.1% of the Company's outstanding shares (which includes the shares beneficially owned by CBI). In addition, according to the Schedule 13G filed on January 2, 2020, the Shavit Capital Funds collectively beneficially own approximately 21.7% of the Company's outstanding shares. As a result of their significant holdings in our shares, Access, CBI and the Shavit Capital Funds have the ability to exert substantial influence over matters requiring approval by our shareholders, including electing directors and approving mergers, acquisitions or other business combination or corporate restructuring transactions. This concentration of ownership may also discourage, delay or prevent a change in control of our Company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our Company and might reduce our share price.
- Share Price & Shareholder Rights - Risk 3If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade the ADSs, the price of the ADSs could decline.
The trading market for the ADSs relies in part on the research and reports that equity research analysts publish about us and our business. The price of the ADSs could decline if one or more securities analysts downgrade the ADSs or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business. The analysts at many brokerage firms do not currently monitor the trading activity or otherwise provide coverage of lower priced stocks, such as the ADSs. As a result, many investment funds are reluctant to invest in lower priced stocks. Market prices for securities of biotechnology and other life sciences companies historically have been particularly volatile, subject even to large daily price swings, due in part to the failure to elicit meaningful stock analyst coverage and downgrades of the company's stock by analysts.
- Share Price & Shareholder Rights - Risk 4Holders of ADSs must act through the depositary to exercise their rights as our shareholders.
Holders of the ADSs do not have the same rights as our shareholders and may only exercise the voting rights with respect to the underlying ordinary shares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law and our articles of association, the minimum notice period required to convene a shareholders' meeting is no less than 35 or 14 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened, holders of the ADSs may not receive sufficient notice of a shareholders' meeting to permit them to withdraw their ordinary shares to allow them to cast their vote with respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner, but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, the depositary and its agents are not responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested. In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders' meeting.
- Share Price & Shareholder Rights - Risk 5Our U.S. shareholders may suffer adverse tax consequences if we are characterized as a passive foreign investment company, or PFIC.
Generally, if for any taxable year, 75% or more of our gross income is passive income, or at least 50% of our assets are held for the production of, or produce, passive income, we would be characterized as a PFIC for U.S. federal income tax purposes. We believe that we were a PFIC in 2017, 2018 and 2019 and, based on estimates of our gross income and gross assets and the nature of our business, we believe that we will be classified as a PFIC for the taxable year ending December 31, 2020. Because PFIC status is based on our income, assets and activities for the entire taxable year, it is not possible to determine with certainty whether we will be characterized as a PFIC for the 2020 taxable year until after the close of the year. Moreover, we must determine our PFIC status annually based on tests that are factual in nature, and our status in future years will depend on our income, assets and activities in those years. In any taxable year in which we are characterized as a PFIC for U.S. federal income tax purposes, a U.S. holder that owns ADSs could face adverse U.S. federal income tax consequences, including having gains realized on the sale of the ADSs classified as ordinary income, rather than as capital gain, the loss of the preferential rate applicable to dividends received on the ADSs by individuals who are U.S. holders, and having interest charges apply to distributions by us and the proceeds of ADS sales. Certain elections exist that may alleviate some adverse consequences of PFIC status and would result in an alternative treatment (such as mark-to-market treatment) of the ADSs. If we are a PFIC in any year, U.S. holders may be subject to additional Internal Revenue Service ("IRS") filing requirements, including the filing of IRS Form 8621, as a result of directly or indirectly owning stock of a PFIC.
- Share Price & Shareholder Rights - Risk 6As an "emerging growth company" under the JOBS Act, we are permitted to, and intend to continue to, rely on exemptions from certain disclosure requirements, which could make the ADSs less attractive to investors.
For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies, including: - an exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting required by Section 404 of the Sarbanes-Oxley Act; and - an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board (the "PCAOB") requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about our audit and our financial statements. We will be an emerging growth company until the earliest of (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more, (ii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt, (iii) December 31, 2024 or (iv) the date on which we are deemed a "large accelerated issuer" as defined in Regulation S-K of the Securities Act. We cannot predict if investors will find the ADSs less attractive because we may rely on these exemptions. If some investors find the ADSs less attractive as a result, there may be a less active trading market for the ADSs and the market price of the ADSs may be more volatile. We could now be treated as a smaller reporting company given we will report under U.S. GAAP.
- Share Price & Shareholder Rights - Risk 7We may take advantage of reduced disclosure and governance requirements applicable to smaller reporting companies, which could make the ADSs less attractive to investors.
We have a public float of less than $250 million and therefore qualify as a smaller reporting company under the rules of the SEC. As a smaller reporting company we are able to take advantage of reduced disclosure requirements, such as simplified executive compensation disclosures and reduced financial statement disclosure requirements in its SEC filings. Decreased disclosures in our SEC filings due to our status as a smaller reporting company may make it harder for investors to analyze our results of operations and financial prospects. We cannot predict if investors will find the ADSs less attractive if we rely on these exemptions. If some investors find the ADSs less attractive as a result, there may be a less active trading market for the ADSs and our share price may be more volatile. We may take advantage of the reporting exemptions applicable to a smaller reporting company until we are no longer a smaller reporting company, which status would end once we have a public float greater than $250 million. In that event, we could still be a smaller reporting company if our annual revenues were below $100 million and we have a public float of less than $700 million.
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