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 September 30, 2020

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

Anchiano 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.)
One Kendall Square Building 1400E Suite 14-105 Cambridge, MA 02139
(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (857) 259-4622

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 five ordinary shares, no par value per share	ANCN	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 ¨

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 xNo ¨

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	x	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

As of November 16, 2020, the registrant had 37,099,352 ordinary shares outstanding.

ANCHIANO THERAPEUTICS LTD.

QUARTERLY REPORT ON FORM 10-Q 

FOR THE QUARTER ENDED SEPTEMBER 30, 2020

TABLE OF CONTENTS

Page

PART I. – FINANCIAL INFORMATION		2
Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets as of September 30, 2020 and December31, 2019	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Nine Months Ended September 30, 2020 and 2019	3
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2020 and 2019	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.          MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	19
Item 4.	Controls and Procedures.	19
PART II. – OTHER INFORMATION		20
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	22
Item 3.	Defaults Upon Senior Securities.	22
Item 4.	Mine Safety Disclosures.	22
Item 5.	Other Information.	22
Item 6.	Exhibits.	22
SIGNATURES		23

-i-

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,” and similar expressions intended to identify forward-looking statements, but these are not the only ways these statements are identified. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties.

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires:

· references to “Anchiano Therapeutics Ltd.” “Anchiano,” the “Company,” “us,” “we” and “our” refer to Anchiano Therapeutics Ltd. an Israeli company and its consolidated subsidiaries;

· 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 “ANCN,” each representing five ordinary shares of the Company;

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

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

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

1

PART I. – FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

ANCHIANO THERAPEUTICS LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share and per share data)

	September 30,			December 31,
	2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	6,768		$	17,575
Prepaid expenses and other		620			636
Total current assets		7,388			18,211
Property and equipment, net		15			158
Operating lease right-of-use		234			1,199
Other non-current assets		52			187
Total assets	$	7,689		$	19,755
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade payables	$	482		$	875
Accrued expenses and other		1,620			2,855
Operating lease liability		173			391
Total current liabilities		2,275			4,121
Non-current operating lease liability		63			725
Total liabilities		2,338			4,846
Commitments and contingencies
Shareholders' equity:
Ordinary shares, no par value - authorized 500,000,000 shares as of  September 30, 2020 and 100,000,000 shares as of December 31,2019; issued and outstanding 37,099,352 shares at September 30, 2020 and December 31,2019		-			-
Paid-in capital		119,375			119,468
Currency translation differences reserve		872			872
Accumulated deficit		(114,896	)		(105,431	)
Total shareholders' equity		5,351			14,909
Total liabilities and shareholders' equity	$	7,689		$	19,755

See accompanying notes to unaudited condensed consolidated financial statements

2

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Nine Months Ended September 30, 2020 and 2019

ANCHIANO THERAPEUTICS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, in thousands, except share and per share data)

	Three months ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
Operating expenses:
Research and development	$	1,252		$	5,565		$	3,609		$	12,276
General and administrative		1,125			1,705			5,126			4,958
Restructuring expense		79			-			749			-
Total operating expenses		2,456			7,270			9,484			17,234
Finance (income) expense, net		(7	)		(102	)		(19	)		4,286
Net loss and comprehensive loss	$	(2,449	)	$	(7,168	)	$	(9,465	)	$	(21,520	)
Basic and diluted loss per share	$	(0.07	)	$	(0.19	)	$	(0.26	)	$	(0.64	)
Weighted average number of shares outstanding - basic and diluted		37,099,352			37,099,352			37,099,352			33,551,494

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2020 and 2019

ANCHIANO THERAPEUTICS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited, in thousands, except share data)

								Currency
	Ordinary shares							translation
	Number of		Amounts		Paid-in			differences		Accumulated
	shares		(*)		capital			reserve		deficit			Total
Balance at January 1, 2020		37,099,352	$	-	$	119,468		$	872	$	(105,431	)	$	14,909
Share-based compensation		-		-		264			-		-			264
Net loss		-		-		-			-		(7,016	)		(7,016	)
Balance at June 30, 2020		37,099,352		-		119,732			872		(112,447	)		8,157
Share-based compensation		-		-		(357	)		-		-			(357	)
Net loss		-		-		-			-		(2,449	)		(2,449	)
Balance at September 30, 2020	$	37,099,352	$	-	$	119,375		$	872	$	(114,896	)	$	5,351
Balance at January 1, 2019		15,575,682	$	-	$	87,240		$	872	$	(78,307	)	$	9,805
Issuance of shares, net		21,523,670		-		26,500			-		-			26,500
Reclassification of warrants due to reassessment		-		-		(3,628	)		-		-			(3,628	)
Reclassification of warrants due to modification		-		-		8,198			-		-			8,198
Share-based compensation		-		-		748			-		-			748
Net loss		-		-		-			-		(14,374	)		(14,374	)
Balance at June 30, 2019		37,099,352		-		119,058			872		(92,681	)		27,249
Share-based compensation		-		-		321			-		-			321
Net loss		-		-		-			-		(7,168	)		(7,168	)
Balance at September 30, 2019		37,099,352	$	-	$	119,379		$	872	$	(99,849	)	$	20,402
(*) No par value

(*) No par value

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

4

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019

ANCHIANO THERAPEUTICS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

	Nine months ended September 30,
	2020			2019
Operating activities:
Net loss	$	(9,465	)	$	(21,520	)
Adjustments required to reconcile net loss to net cash used in operating activities:
Financing costs, net		-			4,652
Depreciation		77			70
Gain on sale of property and equipment		(19	)		-
Share-based payments		(93	)		1,069
Write-off of right-of-use related to restructuring		85			-
Changes in operating asset and liabilities:
Prepaid and other current		16			4,823
Other non-current assets		5			70
Trade payables		(393	)		913
Accrued expenses and other		(1,235	)		(621	)
Net cash used in operating activities		(11,022	)		(10,544	)
Investing activities:
Purchase of property and equipment		(34	)		(346	)
Proceeds from sale of property and equipment		119			-
Net cash provided by (used in) investing activities		85			(346	)
Financing activities:
Proceeds from issuance of ordinary shares and warrants		-			30,500
Issuance costs		-			(3,879	)
Net cash provided by financing activities		-			26,621
Increase (decrease) in cash, cash equivalents and restricted cash		(10,937	)		15,731
Cash, cash equivalents and restricted cash at, beginning of period		17,705			7,640
Cash, cash equivalents and restricted cash at, end of period	$	6,768		$	23,371
Reconciliation in amounts on consolidated balance sheets:
Cash and cash equivalents	$	6,768		$	23,241
Restricted cash		-			130
Total cash, cash equivalents and restricted cash	$	6,768		$	23,371
Supplemental disclosure of cash flow information:
Reclassification of warrants due to reassessment	$	-		$	3,628
Reclassification of warrants due to modification	$	-		$	8,198
Taxes paid in cash	$	-		$	605
Interest paid in cash	$	-		$	4

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

5

Notes to Condensed Consolidated Financial Statements

1. The Company and Basis of Presentation

Anchiano Therapeutics Ltd. is an early-stage preclinical biopharmaceutical company committed to discovering and developing new cancer therapies designed to target the products of mutated genes that are drivers of human malignancies. The Company is developing small-molecule pan-mutant RAS inhibitors and inhibitors of PDE10 and the β-catenin pathway.

In November 2019, the Company discontinued clinical development of inodiftagene vixteplasmid. After a thorough evaluation of the available data, the Company determined there was a low probability of surpassing the pre-defined futility threshold at the planned interim analysis of its Phase 2 Codex study, which was evaluating inodiftagene vixteplasmid in patients with BCG-unresponsive non-muscle-invasive bladder cancer (“NMIBC”), and announced the discontinuation of the study.

In January 2020, the Board of Directors of the Company approved management’s recommendation to close the Company’s office and laboratories located in Israel. Following the closure of the Israeli facilities at the end of May 2020, the Company’s sole remaining office is located in Cambridge, Massachusetts (for details, see Note 4 below). The Company currently maintains the lease on this facility in good standing and is also assessing the ability of the staff to continue working remotely under the restrictions of COVID-19.

In March 2020 the World Health Organization declared the global novel coronavirus (COVID-19) outbreak a pandemic. As of October 14, 2020, the Company’s operations have not been significantly impacted by the COVID-19 outbreak. However, the Company cannot at this time predict the specific extent, duration, or full impact that the COVID-19 outbreak will have on its financial condition and operations, including ongoing and planned pre-clinical development activities.

On July 2, 2020, the Company’s Chief Executive Officer Dr. Frank Haluska sent a letter to the Company’s Chairman outlining Dr. Haluska’s belief that events had occurred that were sufficient to trigger his ability to resign for “Good Reason” under his employment agreement. The Board informed Dr. Haluska that it disagreed with the letter’s assertions regarding “Good Reason” and treated the letter as a constructive resignation effective as of July 2, 2020. On July 12, 2020, Dr. Frank Haluska tendered his written resignation from the Company’s Board of Directors, effective immediately. Dr. Haluska referenced the matters articulated in his letter of July 2, 2020, and the Company’s response and actions following receipt of the letter as the basis for his resignation from the Board. It is the Company’s position, based on its legal counsel, that the CEO resigned without Good Reason, is not entitled to severance, and the Company will contest any and all claims for severance. Prior to the appointment of Mr. Neil Cohen as CEO in October 2020 (see below) the Board handled all matters related to CEO duties.

On October 20, 2020, the Company appointed Mr. Neil Cohen as Chief Executive Officer of the Company, effective immediately. Mr. Cohen will continue to serve as a member of the Company’s board of directors. The Company also appointed Andrew Fine to serve as the Chief Financial Officer of the Company, effective immediately. Mr. Fine previously served as the Company’s Interim Chief Financial Officer pursuant to a subcontracting agreement.

In light of business circumstances, and in order to conserve cash and preserve optionality while alternatives are being identified and assessed, the Company made a decision during July 2020 to undertake reductions in headcount and other cost saving measures. These include plans to temporarily reduce its internal and external research and development work on the Company’s pan-RAS-inhibitor program until there is greater clarity regarding Anchiano’s ability to fund the program. The Company continues to undertake actions for the promotion of the program and its assets and towards strengthening the protection of all related intellectual property.

As a result of the above the Company took charges associated with severance and, discontinuation of external clinical development activities,. These charges amounted to $1.03 million for discontinuation of external clinical development activities and $0.5 million for severance (see Notes 6 and 7 below).

The Company is incorporated and registered in Israel. The Company's American Depositary Shares ("ADSs"), each representing five ordinary shares of the Company with no par value (the "ordinary shares"), began trading on the Nasdaq Capital Market (“Nasdaq”) in February 2019 under the symbol "ANCN". The Company’s ordinary shares traded on the Tel Aviv Stock Exchange (“TASE”) between August 2006 and June 2019, at which time the Company voluntarily delisted from the TASE. The Company wholly owns a subsidiary, Anchiano Therapeutics Israel Ltd., which itself wholly owns a Delaware-incorporated subsidiary, Anchiano Therapeutics, Inc.

6

Liquidity

The condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying condensed consolidated financial statements, the Company has incurred losses and cash flow deficits from operations since inception, resulting in an accumulated deficit at September 30, 2020 of $114.9 million. The Company has financed operations to date primarily through public and private placements of equity securities. The Company anticipates that it will continue to incur net losses for the foreseeable future. The Company believes that its existing cash and cash equivalents will only be sufficient to fund its projected cash needs into the first quarter of 2021. Accordingly, these factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. To meet future capital needs, the Company would need to raise additional capital through equity or debt financing or other strategic transactions. However, any such financing may not be on favorable terms or may not be available to the Company on any terms. The failure of the Company to obtain sufficient funds on commercially-acceptable terms when needed, would have a material adverse effect on the Company’s business, results of operations and financial condition. The forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of the Company’s expenses could vary materially and adversely as a result of a number of factors. The Company has based its estimates on assumptions that may prove to be wrong, and the Company’s expenses could prove to be significantly higher than it currently anticipates. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Unaudited Interim Financial Information

The interim condensed consolidated financial statements included in this quarterly report are unaudited. The unaudited interim 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 September 30, 2020, and its results of operations for the three and nine months ended September 30, 2020 and 2019, changes in shareholders’ equity for the three and nine months ended September 30, 2020 and 2019, and cash flows for the nine months ended September 30, 2020 and 2019. The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any other future annual or interim period. The December 31, 2019 balance sheet was derived from 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 10-K for the year ended December 31, 2019 as filed with the SEC. The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended December 31, 2019 included in the Company’s Form 10-K. Since the date of such financial statements, there have been no changes to the Company’s significant accounting policies.

2. Summary of Significant Accounting Policies

a. Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company evaluates its assumptions on an ongoing basis, including those related to share-based compensation, leases and derivatives. The Company's management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the condensed consolidated financial statements, and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates.

b. Reclassifications

Certain prior year amounts shown in the accompanying unaudited condensed consolidated financial statements have been reclassified to conform to the 2020 presentation. These reclassifications did not have any effect on total current assets, total assets, total current liabilities, total liabilities, total shareholders’ equity, net loss, or loss per share.

7

3. Accrued expenses and other

Accrued and other current liabilities consist of the following for the periods indicated (in thousands):

	September 30,		December 31,
	2020		2019
Accrued expenses	$	1,361	$	372
Restructuring accrual		238		2,161
Payroll and related		21		60
Liability for employee rights upon retirement		-		262
	$	1,620	$	2,855

4. Leases

In January 2018, the Company signed an agreement to rent a laboratory and offices in Jerusalem through May 2023. The Company had an option to extend the agreement by another five years. The annual rent (including management fees) is approximately $0.4 million and is linked to the Israeli Consumer Price Index. Pursuant to the agreement, bank guarantees of $0.1 million were provided to the property owner. In January 2020, pursuant to the Company’s decision to close its Israeli operations, the agreement was modified such that the Company vacated the facilities on May 30, 2020 but will continue to make scheduled lease payments through October 31, 2020. The Company recorded restructuring expense of $247,000 related to the modification of the Israeli lease agreement and settled all obligations associated with the lease.

In May 2018, the Company signed an agreement to rent space for its headquarter offices in Cambridge, Massachusetts. This agreement was amended in October 2019 to reflect relocating to a new 2,400 square foot suite within the same facility effective February 1, 2020. The annual rent is approximately $0.2 million. The amended lease term ends January 31, 2022 and there are no options to extend the lease.

The Company currently maintains the lease in good standing and is assessing the ability of the staff to continue working remotely under the restrictions of COVID-19. .

5. License Agreement

In September 2019, the Company announced that it entered into an option to license agreement with ADT Pharmaceuticals, LLC (“ADT”). Pursuant to the terms and conditions set forth in the agreement, the parties agreed to conduct research and development activities of novel small-molecule inhibitors (RAS and PDE10/β-catenin). As part of the arrangement, the Company is primarily responsible for the research, development, manufacturing and regulatory activities and ADT assists with the research activities as necessary in exchange for a quarterly fee from the Company. In connection with the agreement, ADT also granted the Company exclusive rights to research, develop, manufacture and commercialize the aforementioned compounds relating to patents owned by ADT and any products containing such compounds worldwide. In consideration for the rights granted under the agreement, the Company committed to pay ADT (i) a $3 million upfront fee; (ii) a fee upon transfer of the know-how and intellectual property rights to the Company; and then (iii) additional payments, including milestone and royalty payments. The Company has the ability to terminate the agreement at any time in its entirety or on a compound-by-compound basis after providing 90 days written notice to ADT. The upfront fee was paid in the third quarter of 2019. The Company accounted for the upfront fee and additional payments as a research and development expenses and continues to make ongoing payments to ADT in support of its maintenance of the Company’s assets.

In April 2020, the Company notified Yissum Technology Transfer Company of the Hebrew University Ltd. (“Yissum”) that as a result of the Company’s previous decision to discontinue clinical development of inodiftagene, it will cease payments to maintain intellectual property (“IP”) it licensed from Yissum that supported the development and as related to a licensing and development agreement between the parties (“License Agreement”). In August 2020 the Company agreed with Yissum on termination of the License Agreement, the Company destroyed or returned all IP documentation to Yissum and Yissum and the Company mutually waived, released and discharged the other from all claims of any type.

8

6. Restructuring

Restructuring provisions are recognized for the direct expenditures arising from restructuring initiatives, where the plans are sufficiently detailed and where appropriate communication has been made to those affected.

The Company has recorded restructuring expenses related principally to contract termination costs due to the discontinuation of the clinical trials to CROs and manufacturers and contractual involuntary termination benefits to employees which have been accounted for as ongoing benefit arrangements and associated termination costs related to the reduction of its workforce.

One-time termination benefits are expensed at the date the employees are notified, unless the employees must provide future services beyond a minimum retention period, in which case the benefits are expensed ratably over the future service periods. A provision for contract termination costs, in which a contract is terminated or the entity will continue to incur costs pursuant to contract for its remaining term without economic benefit, is recognized only when the contract is terminated or when the entity permanently ceases using the rights granted under the contract.

In November 2019, the Company decided to discontinue its Phase 2 Codex study in patients with BCG-unresponsive NMIBC. In connection with this decision, the Company is required to make certain payments under contracts with CROs and with manufactures of the drug in order to terminate the contracts and close the trials. This restructuring plan included a reduction in the workforce of seven employees.

In January 2020, the Board of Directors approved management’s recommendation to close the Company’s office and laboratories located in Israel. In connection with this restructuring, the employment of the remaining five Israeli employees was terminated in the second quarter of 2020.

As noted above, in conjunction with this decision the Company renegotiated its lease for Israeli laboratory and office space. In connection with this decision, the Company vacated the facilities on May 31, 2020 but will continue to make scheduled lease payments through October 31, 2020. In the first quarter of 2020, the Company recorded a restructuring charge to adjust its operating lease right of use asset and operating lease liability to reflect the loss on the early termination of the Israeli lease obligation.

The following table represents a roll forward of the restructuring and other activities noted above (in thousands):

	CRO, Manufacturing and other related			Severance- related			Facility and Leases			Total
Balance, January 1, 2020	$	2,572		$	336		$	-		$	2,908
Expenses		502			-			247			749
Paid or consumed		(2,835	)		(336	)		(247	)		(3,138	)
Balance, September 30, 2020	$	238		$	-		$	-		$	238

7. Research and development

As noted above, and in conjunction with the Company’s decision to reassess its strategy around research and development efforts of its scientific and assets, in the third quarter the Company took charges associated with severance and, discontinuation of clinical development activities,. These charges amounted to $1.03 million for discontinuation of clinical development activities and $0.5 million for severance of research and development personnel.

8. Shareholders’ Equity

a. 2018 Private Placement

In June 2018, the Company completed a $22.9 million fundraising round from investors in the United States and Israel. In consideration for the investment, the Company issued 5,960,787 ordinary shares at a price per share of approximately $3.842, as well as 2,713,159 warrants to acquire additional shares equal to 80% of the shares issued, at an exercise price per share of NIS 16.20 (approximately $4.32). The warrants are exercisable for five years from December 31, 2018, the closing date of the transaction, and may be exercised on a cashless basis.

9

In addition, the investors were granted price protection rights (to shares and warrants) in the event of a future share issuance by the Company wherein the price does not increase by at least approximately 42.86% over the price per share in the fundraising (or is less than the adjusted price per share, if the price has already been adjusted). For details of an allocation that took place in 2019 pursuant to these rights, see Note 7b below. The warrants and shares were recorded within equity on the issuance date.

Effective January 1, 2019, the Company changed its functional currency from NIS to USD. Due to this change, the exercise price of the warrants was no longer denominated in the Company’s functional currency and therefore not considered indexed to the Company’s own shares according to ASC 815-40.  Accordingly, the Company recorded the fair value of the warrants as a liability at January 1, 2019.

Subsequently, upon the Company’s Nasdaq initial public offering on February 14, 2019, the warrants’ term was modified such that the exercise price currency was changed to USD. As a result, the warrants were once again considered indexed to the Company’s own shares according to ASC 815-40. Accordingly, the fair value of the warrants at February 14, 2019 was reclassified from a liability to equity on that date.

The following table summarizes the activity for the warrants whose fair value measurements are estimated utilizing Level 3 inputs:

	2019
Fair value on January 1, 2019	$	3,628
Adjustments-finance expenses		4,570
Fair value on February 14, 2019	$	8,198

The Company has determined the fair value of the warrants (a Level 3 valuation) as of January 1, 2019 and February 14, 2019. The fair value of these warrants was estimated by implementing the Probability-Weighted Expected Return Method or the Black-Scholes Method. The following parameters were used:

	Derivative Financial Instrument
	February 14, 2019			January 1, 2019
Share  price	$	1.84		$	2.50
Expected term		End of 2022			End of 2022
Risk free rate		2.49	%		1.37	%
Volatility		52	%		48	%

b. Public Offering

On February 14, 2019, the Company raised gross proceeds of $30.5 million in its Nasdaq initial public offering (“IPO”), allocating 2,652,174 ADSs, each representing five ordinary shares of the Company. The ADSs are listed under the symbol “ANCN.” In accordance with price protection rights granted in 2018 and activated in the offering (see Note 7a above for details and accounting treatment), the Company issued an additional 8,262,800 ordinary shares (equivalent to 1,652,560 ADSs) to rights holders and adjusted their warrants to be exercisable for an additional 6,207,330 ordinary shares (equivalent to 1,241,466 ADSs).

c. Share-based compensation

The Company has two share-based compensation plans under which share options or other share-based awards have been granted: the 2011 Share Option Plan and the 2017 Share Option Plan (the “2017 Plan”). The 2017 Plan replaced the 2011 Share Option Plan with respect to future grants; and, therefore, no further awards may be made under 2011 Share Option Plan. The Compensation Committee of the Board of Directors and the Board of Directors administer these plans.

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The fair value of each option granted is estimated using the Black-Scholes option pricing method. The volatility is based on the Company’s historical volatility. The risk-free interest rate assumption is based on observed Treasury yields over the expected term of the options granted with USD-denominated exercise prices (options granted in the past with NIS-denominated exercise prices used the equivalent Israeli government bond yields). The Company’s management uses the mid-point between the vesting date and the contractual term for each vesting tranche or its expectations, as applicable, of each option as its expected term. The expected term of the options granted represents the period of time that granted options are expected to remain outstanding

The fair value of each option granted in the nine months ended September 30, 2019 was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions:

	Nine months ended
	September 30, 2019
Value of ordinary share	$1.03 - $1.54
Dividend yield		0%
Expected volatility		51.5% - 68.6%
Risk-free interest rate		2.2% - 2.5%
Expected term (years)		5.5 - 6.9

The fair value of each option granted in the nine months ended September 30, 2020 was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions:

	Nine months ended
	September 30, 2020
Value of ordinary share	$0.15 - $0.17
Dividend yield		0%
Expected volatility		64.9% - 67.4%
Risk-free interest rate		0.30% to 0.39%
Expected term (years)		5.5 - 6.5

The following table summarizes the number of options outstanding and exercisable as of September 30, 2020:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years
Options outstanding - January 1, 2020		3,822,374		$	2.50		8.5
Granted		885,000
Forfeited/expired/cancelled		(1,578,031	)
Options outstanding - September 30, 2020		3,129,343		$	2.44		7.9
Options exercisable - September 30, 2020		2,389,840		$	3.01		7.5

The aggregate intrinsic value of both outstanding and exercisable options at September 30, 2020 is $0.

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The following table illustrates the effect of share-based compensation on the statements of operations (in thousands):

	Three months ended					Nine months ended
	September 30,					September 30,
	2020			2019		2020			2019
Research and development	$	(290	)	$	154	$	(166	)	$	438
General and administrative		(67	)		168		70			632
	$	(357	)	$	322	$	(96	)	$	1,070

The negative amounts for both Research and development and General and administrative reflect the forfeiture of vested stock options and the reversal of accrued compensation on account of future vesting on stock options that were granted to employees who were terminated as part of the Company’s restructuring activities as mentioned above.

9. Net Loss per share

Basic loss per share is computed on the basis of the net loss for the period divided by the weighted-average number of ordinary shares outstanding during the period. Diluted loss per share is based upon the weighted-average number of ordinary shares and of ordinary shares equivalents outstanding when dilutive. Ordinary share equivalents include outstanding stock options which are included under the treasury stock method when dilutive.

The following ordinary shares underlying stock options and warrants were excluded from the calculation of diluted net loss per ordinary share, because their effect would have been anti-dilutive for the three and nine month periods presented:

	September 30
	2020		2019
Stock Options		3,129,343		3,985,858
Warrants		10,975,959		10,975,959

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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 consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. 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 Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC 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

We are a preclinical biotechnology company committed to discovering and developing new cancer therapies designed to target the products of mutated genes that are drivers of human malignancies. Throughout most of 2019, we ran a Phase 2 study, designated Codex, evaluating inodiftagene vixtepasmid in patients with BCG-unresponsive NMIBC. However, in November 2019, after a thorough evaluation of data, we determined there was a low probability of surpassing the pre-defined futility threshold at the planned interim analysis of the study, and announced the discontinuation of the study and of active clinical development of inodiftagene vixtepasmid.

On September 13, 2019, we entered into a Collaboration and License Agreement (the “License Agreement”) with ADT Pharmaceuticals, LLV (“ADT”), pursuant to which we acquired the rights to two small molecule developmental programs targeting oncogenic pathways, focused on pan-mutant RAS inhibitors (our “pan-RAS-inhibitor program”) and inhibitors of PDE10 and the β-catenin pathway, respectively. Under the License Agreement, we are primarily responsible for the research, development, manufacturing, regulatory and commercial activities with respect to the compounds conveyed and contemplated thereunder. Our operations are focused on the successful development, regulatory approval and commercialization of products derived from such compounds.

Since entering into the License Agreement, we have focused our efforts on the development of our pan-RAS-inhibitor program. In order to advance this program, our management had been working to identify additional financing sources and/or potential co-development partners. Such efforts, however, have not resulted in opportunities that are sufficiently mature to date. As a result, we decided to undertake certain cost-saving measures, including a workforce reduction and temporary reduction of our internal and external research and development activities with respect to our pan-RAS-inhibitor program, in order to conserve cash and preserve optionality while alternatives are being identified and assessed. We continue to maintain and support the development of our rights in the program including the License Agreement with ADT (see below) and intellectual property protection activities. The workforce reduction included 3 employees, which represented approximately 60% of our workforce as of June 30, 2020, and was completed in the 3^rd quarter of 2020. We incurred severance related charges of $0.5 million in the third quarter as well as $0.9 million in other costs due to events associated with or resulting from our research and development workforce reduction and refocus in relation to external development activities.

We have also engaged Oppenheimer & Co. to act as our financial advisor to review strategic alternatives focused on maximizing shareholder value. Despite undertaking this process, we may not be successful in completing a transaction, and, even if a strategic transaction is completed, it ultimately may not deliver the anticipated benefits or enhance shareholder value.

Our corporate structure consists of a parent company, Anchiano Therapeutics Ltd., incorporated in Israel, which wholly owns a subsidiary, Anchiano Therapeutics Israel Ltd, incorporated in Israel, which itself wholly owns a subsidiary, Anchiano Therapeutics, Inc. incorporated in Delaware. We currently maintain offices in Cambridge, Massachusetts.

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License Agreement

In September 2019, we publicly announced that we had entered into the License Agreement with ADT. Pursuant to the terms and conditions set forth in the License Agreement, we mutually agreed to use commercially reasonable efforts to conduct research and development activities of novel small-molecule inhibitors (RAS and PDE10/β-catenin). As part of the arrangement, we are primarily responsible for the research, development, manufacturing and regulatory activities and ADT will assist with the research activities as necessary in exchange for a quarterly fee. In connection with the License Agreement, ADT also granted us exclusive rights to research, develop, manufacture and commercialize the aforementioned compounds relating to patents owned by ADT and any products containing such compounds worldwide. In consideration for the rights granted under the License Agreement, we paid ADT a $3 million upfront fee in 2019, and agreed to pay to ADT (i) a fee upon transfer of the know-how and intellectual property rights to us; and (ii) additional payments, including milestone and royalty payments. We have the ability to terminate the License Agreement at any time in its entirety or on a compound-by-compound basis after providing 90 days written notice to ADT. Since there is no alternative future use for the upfront fee, we accounted for it as a research and development expense.

In April 2020, we notified Yissum Technology Transfer Company of the Hebrew University Ltd. (“Yissum”) that as a result of our previous decision to discontinue clinical development of inodiftagene, we will cease payments to maintain intellectual property ("IP") we licensed from Yissum under the licensing and development agreement between the parties (“License Agreement”). In August 2020 we agreed with Yissum on termination of the License Agreement, we destroyed or returned all IP documentation to Yissum and we and Yissum mutually waived, released and discharged each other from all claims of any type..

Components of Operating Results

Revenues

To date, we have not generated any revenue. We do not expect to receive any 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 future product candidate is approved, that we will be successful in commercializing it.

Research and Development Expenses

Research and development activities are our primary focus. Due to the inherently unpredictable nature of preclinical and clinical development, we are unable to estimate with certainty the costs we will incur and the timelines that will be required in the continued development and approval of our product candidates. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. In addition, we cannot forecast which product candidates may be subject to future collaborations, if and when such arrangements will be entered into, if at all, and to what degree such arrangements would affect our development plans and capital requirements. We expect our research and development expenses to increase over the next several years as our development programs progress and as we seek to initiate clinical trials. We also expect to incur increased research and development expenses as we selectively identify and develop additional product candidates.

Research and development expenses include the following:

· employee-related expenses, such as salaries and share-based compensation;

· expenses relating to outsourced and contracted services, such as CROs, external laboratories and consulting, research and advisory services;

· preclinical study expenses and related developmental costs; and

· costs associated with regulatory compliance.

We recognize research and development expenses as we incur them.

In the third quarter of 2020, we saw a shift away from research and development costs to general and administrative expenses as we executed our review of strategic alternatives focused on maximizing shareholder value. This has been undertaken while ensuring that we maintain the viability of our research and development assets and continue to maintain full and extensive protection our intellectual property.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs, including share-based compensation related to directors and employees, facility costs, patent application and maintenance expenses, and external professional service costs, including legal, accounting, audit, finance, business development, investor relations and human resource services, and other consulting fees. Beginning with the third quarter of 2020, our general and administrative expenses also include initial costs related to the engagement of advisors in connection with our review of strategic alternatives to maximize shareholder value.

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Finance (Income) Expense, Net

Finance (Income) expense, net, consisted primarily of finance expenses recorded due to revaluation of investor warrants at fair value during a period where these could not be classified within equity (for more details, see Note [7a] in “Item 1. Financial Statements Unaudited” above), offset by interest income received on the Company’s cash and cash equivalents and foreign currency exchange gains and losses.

Restructuring Expense

We have recognized restructuring provisions for the direct expenditures arising from restructuring initiatives, where the plans are sufficiently detailed and where appropriate communication to those affected has been made to this end, we have recorded restructuring expenses comprised principally of contract termination costs, employee severance and associated termination costs related to the reduction of our workforce.

One-time termination benefits are expensed at the date the employees are notified, unless the employees must provide future services beyond a minimum retention period, in which case the benefits are expensed ratably over the future service periods. A provision for contract termination costs, in which a contract is terminated or the entity will continue to incur costs under a contract for its remaining term without economic benefit (an onerous contract), is recognized only when the contract is terminated or when the entity permanently ceases using the rights granted under the contract.

Pursuant to our strategic decision to temporarily reduction development of the pan-RAS-inhibitor program and to preserve liquid resources, we decided to undertake certain cost-saving measures. These measures included severing employees and contract terminations.. . With regards to the resignation of Dr. Frank Haluska the Company has a potential maximum exposure of up to $0.4 million relating to claims of “Good Reason” resignation. It is the our position that the CEO resigned without Good Reason, is not entitled to severance, and the Company will contest any and all claims for severance.

Results of Operations

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

	September 30,						Increase/(decrease)						September 30,						Increase/(decrease)
	2020			2019			$			%			2020			2019			$			%
	(in thousands)
Operating expenses:
Research and development	$	1,252		$	5,565		$	(4,313	)		-78	%	$	3,609		$	12,276		$	(8,667	)		-71	%
General and administrative		1,125			1,705			(580	)		-34	%		5,126			4,958			168			3	%
Restructuring expense		79			-			79			-			749			-			749			-
Operating loss		(2,456	)		(7,270	)		(4,814	)		66	%		(9,484	)		(17,234	)		(7,750	)		45	%
Financing (income) expense, net		(7	)		(102	)		95			-93	%		(19	)		4,286			(4,305	)		-100	%
Net loss	$	(2,449	)	$	(7,168	)	$	(4,719	)		66	%	$	(9,465	)	$	(21,520	)	$	(12,055	)		56	%

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.

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Three and Nine Months Ended September 30, 2020 Compared to the Three and Nine Months Ended September 30, 2019

Research and development expenses

Research and development expense decreased by approximately $4.3 million, or 78%, and $8.7 million, or 71%, in the three and nine months ended September 30, 2020, respectively, from the comparable periods of 2019. The decrease is primarily due to the restructuring decisions made in July 2020and the related decision to temporarily reduction our research activities on the RAS programs and sever our research and development employees while continuing to undertake all necessary actions for the maintenance of the program, its assets and all related intellectual property and licenses. Research and development expenses include charges that amounted to $1.03 million for discontinuation of clinical development activities and $0.5 million for severance.

General and administrative expenses

General and administrative costs decreased by approximately $0.6 million, or 34%, and increased by approximately$0.2 million, or 3%, in the three and nine months ended September 30, 2020, respectively, from the comparable period of 2019. The decrease is primarily due the restructuring decisions made in July 2020 as we rationalized our general and administrative employees and other corporate activities.

Restructuring expense

In November 2019, we decided to discontinue our Phase 2 Codex study in patients with BCG-unresponsive NMIBC. In connection with this decision, we are required to make certain payments under contracts with CROs and with other manufactures of the drug in order to terminate the contracts and close the trials. Moreover, the restructuring plan included a reduction in the workforce of seven employees.

In January 2020, our Board of Directors approved management’s recommendation to close our office and laboratories located in Israel. The closure resulted in the termination of employment of the Company’s remaining five Israeli employees.

Restructuring expenses incurred during the second and third quarters of 2020 were comprised principally of contract termination costs, employee severance and associated termination costs related to the reduction of our workforce.

In July 2020, we made the strategic decision to temporarily reduction development of our RAS program and to institute various cost savings measures to preserve liquid resources. At the same time we continued to actively pursue the maintenance of our Licensing Agreement with ADT and protection of our intellectual property assets. The cost saving activities included severing employees and contract termination with outsourced contractors working on clinical activities.

Financing (income) expense, net

Financing (income) expense, net decreased by approximately $0.1 million, or 93%, and $4.3 million, or 100%, in the three and nine months ended September 30, 2020, respectively, from the comparable periods of 2019.

In the three and nine months ended September 30, 2020, finance expense was primarily interest income, foreign currency exchange rate gains and gains associated with the sale of laboratory equipment from our now closed Israeli operation.

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For the three and nine months ended September 30, 2019, finance expense of was primarily related to the revaluation of investor warrants at fair value during a period where these could not be classified within shareholders’ equity, due to the following circumstances:

On initial measurement, the warrants together with their price protections were classified as equity instruments that are not subsequently measured at fair value, and thus we allocated the proceeds according to the relative fair value of the instruments. However, we changed our functional currency from NIS to USD as of January 1, 2019. Due to this change from this date, the exercise price of the warrants was no longer denominated in our functional currency and the warrants were therefore not considered indexed to our own stock according to ASC 815-40 and no longer met all the criteria to be classified within equity. Therefore, the warrants were reclassified as a liability at their fair value as of January 1, 2019, and any difference was accounted for as an adjustment to equity. Upon our Nasdaq initial public offering of February 14, 2019, the warrants’ exercise price currency was changed to US dollars. As a result, the warrants were reclassified within equity. Consequently, the warrants were measured at fair value from January 1, 2019 until February 14, 2019, with resulting finance expenses of $4.6 million, until they were reclassified within equity.

Cash Flows

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

	Nine months ended
	September 30,						Increase/(decrease)
	2020			2019			$			%
	(in thousands)
Net cash used in operating activities	$	(11,022	)	$	(10,544	)	$	478			5	%
Net cash provided by (used in) investing activities		85			(346	)		(431	)		-125	%
Net cash provided by financing activities		-			26,621			(26,621	)		-100	%
Net increase (decrease) in cash, cash equivalents and restricted cash	$	(10,937	)	$	15,731		$	(26,668	)		-170	%

Operating activities

Net cash used in operating activities increased by $0.5 million, or 5%, for the nine months ended September 30, 2020 compared to the same period of 2019. Net loss adjusted for non-cash activities was $9.4 million for the nine months ended September 30, 2020 compared to $15.7 million for the nine months ending September 30, 2019, resulting in favorable cash flow of $6.4 million. This was more than offset by unfavorable changes in working capital of approximately $6.6 million. The unfavorable changes in working capital was primarily driven by a significant prepayment for contract manufacturing in 2018 which reversed and generated favorable cash flow in 2019 with no similar impact in 2020, and a decrease in accounts payables and accruals in 2020 reflecting the overall reduction in research and development expense in addition to payment of severance and contractual cancellation costs associated with restructuring activities accrued at December 31, 2019.

Investing activities

Investing activities in the nine months ended September 30, 2020 reflect net proceeds of $0.1 million from the sale of laboratory equipment from our now closed facility in Israel, partially offset by purchases of fixed assets. Investing activities in the nine months ended September 30, 2019 were purchases of fixed assets.

Financing activities

Financing activities in the nine months ended September 30, 2019 reflect the net proceeds from our IPO on February 14, 2019. There were no financing activities in the nine months ended September 30, 2020.

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Contractual Commitments

The Company’s contractual commitments are as follows at September 30, 2020 (in thousands):

	Operating Lease
Remainder of 2020	$	71
2021		189
2022		16
Total	$	276

Effects of Currency Fluctuation

Currency fluctuations could affect us through increased or decreased costs, mainly for goods and services acquired outside of the United States. Currency fluctuations have not had a material effect on our results of operations during the nine months ended September 30, 2020 or 2019.

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.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations is based on our financial statements, which we prepared in accordance with U.S. GAAP. Comparative figures, which were previously presented and publicly reported in accordance with IFRS as issued by the International Accounting Standards Board, have been adjusted as necessary to be compliant with our policies under U.S. GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail throughout this section. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

For a discussion of our critical accounting policies, please read Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2019 Form 10-K. There have been no material changes to these critical accounting policies since our 2019 Form 10-K.

Recently-Issued Accounting Pronouncements

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

Liquidity and Capital Resources

The condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company has incurred losses and cash flow deficits from operations since inception, resulting in an accumulated deficit at September 30, 2020 of $114.9 million. The Company has financed operations to date primarily through public and private placements of equity securities. The Company anticipates that it will continue to incur net losses for the foreseeable future, including in connection with costs associated with its strategic review process. The Company believes that its existing cash and cash equivalents will only be sufficient to fund its projected cash needs into the first quarter of 2021. Accordingly, these factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. To meet future capital needs, the Company would need to raise additional capital through equity or debt financing or other strategic transactions. However, any such financing may not be on favorable terms or even available to the Company. The failure of the Company to obtain sufficient funds on commercially-acceptable terms when needed, would have a material adverse effect on the Company’s business, results of operations and financial condition. The forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of the Company’s expenses could vary materially and adversely as a result of a number of factors. The Company has based its estimates on assumptions that may prove to be wrong, and the Company’s expenses could prove to be significantly higher than it currently anticipates.

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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.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Board of Directors (currently acting in the capacity of our principal executive officer) and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures. Based on that evaluation of our disclosure controls and procedures as of September 30, 2020, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. – OTHER INFORMATION

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

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 17, 2020, under the heading “Risk Factors” except as discussed below, and investors should review the risks provided in such Form 10-K and below, prior to making an investment in our company. Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Form 10-K for the year ended December 31, 2019 under “Risk Factors” or below, any one or more of which could, directly or indirectly, cause our actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and stock price.

There 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.

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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.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

[None.]

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

[None.]

Item 6. Exhibits.

The exhibits filed or furnished as part of this Quarterly Report on Form 10-Q are set forth below.

				Incorporate by
Exhibit Number	Description	Form	File No	Date of Filing	Exhibit No.	Filed Herewith
31.1	Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.					X
31.2	Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.					X
32.1(1)	Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
32.2(1)	Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
101.INS	XBRL Instance Document					X
101.SCH	Inline XBRL Taxonomy Extension Schema Document					X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document					X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document					X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document					X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document					X

(1) The certifications on Exhibit 32 hereto are deemed not “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: November 16, 2020

ANCHIANO THERAPEUTICS LTD.
By:	/s/ Neil Cohen
	Neil Cohen (Principal Executive Officer)

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: November 16, 2020

ANCHIANO THERAPEUTICS LTD.
By:	/s/ Andrew Fine
	Andrew Fine
	Chief Financial Officer
	(Principal Accounting Officer and Principal Financial Officer and Duly Authorized Signatory)

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