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SHARE-BASED COMPENSATION
 12 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
SHARE-BASED COMPENSATION
NOTE 10 -  SHARE-BASED COMPENSATION

A.
General
 
1.
In connection with the transfer of all of the business operations and substantially all of the assets of Check-Cap LLC to the Company in 2009, the Company assumed the Check-Cap LLC 2006 Unit Option Plan (hereafter: the "2006 Plan"). According to the 2006 Plan, the Company is authorized to grant options to purchase ordinary shares of the Company to employees, directors and consultants of the Company. The options granted according to the 2006 Plan are generally exercisable for 10 years from the grant date unless otherwise determined by the Company's Board of Directors, vest over a period to be determined by the Company's Board of Directors, and have an exercise price to be determined by the Company's Board of Directors.
 
2.
On January 15, 2015, the Board of Directors resolved to increase the number of ordinary shares by 4% of the Company's fully-diluted share capital (including the option pool) immediately following the consummation of the IPO. As a result, the number of the Company's ordinary shares reserved for issuance under the 2006 Plan increased by 80,646.
 
3.
On April 6, 2015, the Company's Board of Directors resolved to increase the number of ordinary shares of the Company's reserved for issuance under the 2006 Plan by 143,212 shares.
 
4.
On August 13, 2015, the shareholders approved and adopted the Check-Cap Ltd. 2015 Equity Incentive Plan (the "2015 Israeli Plan") and the Check-Ltd. 2015 United States Sub-Plan to Check-Cap Ltd. 2015 Equity Incentive Plan (the "2015 U.S. Sub-Plan" and together with the 2015 Israeli Plan, the "2015 Plan").  As of such date, the Company ceased to grant options under the 2006 Plan. All of the remaining shares authorized but unissued under the 2006 Plan were rolled over to the 2015 Plan.

5.
On July 30, 2018, the Company's Board of Directors resolved to increase the number of ordinary shares of the Company's reserved for issuance under the 2015 Plan by 870,261 shares to 1,205,594 shares.
 
B.
Details of share-based grants made by the Company

The following tables presents the grant dates, number of underlying shares and related exercise prices of awards granted to employees and non-employees during the years 2018, 2017 and 2016 as well as the estimated fair value of the underlying ordinary shares on the grant date:
 
Grant date
  
No. of options
  
Expiration date
  
Exercise price
    
Fair value on grant date
    
Share based expenses (1)
$ in thousands
    
Vesting terms
  
February 29, 2016
    
1,642
  
March 1, 2026
  
$
28.44
    
$
24.12
    
$
40
      
(2
)
May 4, 2016
    
7,608
  
May 4, 2026
  
$
34.68
    
$
17.40
    
$
132
      
(2
)
August 4, 2016
    
404
  
August 4, 2026
  
$
15.36
    
$
20.40
    
$
8
      
(2
)
October 31, 2016
    
202
  
October 31, 2026
  
$
23.64
    
$
15.84
    
$
3
      
(2
)
February 27, 2017
    
1,964
  
February 27, 2027
  
$
27.96
    
$
14.40
    
$
28
      
(2
)
May 9, 2017
    
1,580
  
May 9, 2027
  
$
25.86
    
$
12.96
    
$
20
      
(2
)
June 22, 2017 (4)
    
5,041
  
June 22, 2027
  
$
22.32
    
$
12.60
    
$
64
      
(3
)
August 3, 2017
    
404
  
August 3, 2027
  
$
22.36
    
$
12.36
    
$
5
      
(2
)
November 2, 2017
    
853
  
November 2, 2027
  
$
20.76
    
$
8.16
    
$
7
      
(2
)
February 13, 2018
    
4,584
  
February 13, 2028
  
$
10.44
    
$
4.95
    
$
23
      
(2
)
July 30, 2018 (6)
    
231,819
  
July 30, 2028
  
$
3.92
    
$
2.61
    
$
605
      
(5
)
September 20, 2018 (4)
    
37,039
  
September 20, 2028
  
$
3.92
    
$
2.96
    
$
110
      
(5
)
November 1, 2018
    
44,450
  
November 1, 2028
  
$
3.81
    
$
3.23
    
$
144
      
(5
)

 
Grant date
  
No. of RSUs and PSUs
  
Expiration date
  
Fair value on grant date
    
Share based expenses (1)
    
Vesting terms
  
February 27, 2017
    
7,457
  
February 27, 2027
  
$
2.20
    
$
197
      
(2
)
June 22, 2017 (7)
    
17,448
  
June 22, 2027
  
$
1.88
    
$
393
      
(7
)
August 3, 2017 (8)
    
24,951
  
August 3, 2027
  
$
1.84
    
$
551
      
(8
)
July 30, 2018 (6)
    
79,844
  
July 30, 2028
  
$
3.24
    
$
251
      
(5
)
September 20, 2018 (4)
    
15,875
  
September 20, 2028
  
$
3.65
    
$
58
      
(5
)
 
1.
Share based expenses are based on their fair value on grant date. The amount is charged to statement of operations over the vesting periods.
 
2.
The options vest over a period of four years commencing on the date of grant, such that 25% of the options vested on the first anniversary of the date of grant and thereafter, the remaining options vest in quarterly installments.
 
3.
The options vest over a period of three years commencing on the date of grant in quarterly installments.
 
4.
Options or RSUs granted to certain members of the Company's Board of Directors.
 
5.
The options vest over a period of three years commencing on the date of grant, such that one third of the options vested on the first anniversary of the date of grant and thereafter, the remaining options vest in quarterly installments.

6.
Of the 231,819 options and 79,844 RSUs, 122,232 options and 50,796 RSUs, respectively, were issued to certain of the Company’s officers. The remaining options and RSUs were issued to employees and consultants.

7.
On June 22, 2017, the Company's shareholders approved the award of 11,302 and 6,146 RSUs to the Mr. Densel, who served as the Company’s CEO at such time, and to certain members of the Company's Board of Directors, respectively. The terms of the RSUs awarded to the Company’s former CEO provided that they shall vest over a period of four years commencing on the date of grant, such that 25% of the RSUs shall vest on the first anniversary of the date of grant and thereafter, the remaining RSUs will vest in quarterly installments.  The RSUs granted to certain members of the Company's Board of Directors shall vest over a period of three years commencing on the date of grant in quarterly installments. The compensation expense was based on the fair value on the grant date, and was estimated at approximately $255 and $138 for the RSUs granted to the Company’s CEO and to certain members of the Company's Board of Directors, respectively. These amounts are charged to statement of operations over the vesting periods.

8.
On August 3, 2017, the Company's Board of Directors approved the award of 24,951 Performance Stock Units (“PSUs”) to certain of the Company's employees. The PSUs shall vest based on four pre-determined milestones, of which the first milestone (15%) in 2017, the second and third milestones in 2018 (22.5% each) and the forth milestone in 2019 (40%). The compensation expense was based on the fair value on the grant date, and was estimated at approximately $551. No expenses were recorded during the years ended December 31, 2018 and 2017 as the Company did not achieve the pre-determined milestones for these years, and estimates that it will not meet the remaining pre-determined milestone for year 2019.

9.
On February 26, 2018, upon the termination of the employment of Mr. Densel, the Company’s former CEO, options to purchase 49,965 ordinary shares and 11,302 RSUs were forfeited.
 
C.
Options Fair Value
 
The parameters which were used in applying the model are as follows:
 
 
  
For the year ended December 31,
  
 
  
2 0 1 8
    
2 0 1 7
    
2 0 1 6
  
Expected volatility (1)
    
104%-108
%
    
58%-60
%
    
59%-60
%
Risk-free rate
    
2.67-3.15
%
    
1.9%-2.2
%
    
1.2%-2.1
%
Dividend yield
    
0
%
    
0
%
    
0
%
Expected term (in years)
    
5.5-7
      
5.5-7
      
5.5-7
  
Share price
  
$
3.24 - $9.07
    
$
15.96-$26.40
    
$
26.64-$38.40
  
 
(1)
In the year ended December 31, 2018, expected volatility was calculated based upon actual historical stock price movements over the most recent periods ending on the grant date, equal to the expected term of the options. In the years ended December 31, 2017 and 2016, due to lack of history of trading, expected volatility was calculated based on certain peer companies that the Company considered to be comparable.

 
D.
Effect of share-based compensation transactions on the Company's statements of operations
 
 
  
For the year ended December 31,
  
 
  
2 0 1 8
    
2 0 1 7
    
2 0 1 6
  
 
                  
Research and development, net
    
234
      
116
      
234
  
General and administrative, net*
    
(299
)
    
610
      
975
  
Total
    
(65
)
    
726
      
1,209
  
          
                         * Amount in 2018 is negative mainly, due to the forfeiture of the former CEO unvested options and RSU. 

E.
A summary of the Company's option activity related to options granted to employees, service providers and directors, and related information under the 2006 Plan and the 2015 Plan is as follows:
 
 
        
Year ended December 31, 2018
  
 
  
Number
    
Weighted average of exercise price
(in $)
    
Weighted average remaining contractual life
(in years)
    
Aggregate
intrinsic value
($ in thousands)
  
Options outstanding at beginning of year
    
208,222
      
46.32
      
7.11
      
(2
)
Options granted
    
318,094
      
4.00
                  
Options forfeited
    
(103,532
)
    
45.88
                  
Options outstanding at end of year
    
422,784
      
15.54
      
8.60
      
(2
)
 
                                
Options exercisable at end of year
    
101,040
      
46.18
      
4.61
      
(2
)

 
        
Year ended December 31, 2017
  
 
  
Number
    
Weighted average of exercise price
(in $)
    
Weighted average remaining contractual life
(in years)
    
Aggregate
intrinsic value
($ in thousands)
  
Options outstanding at beginning of year
    
207,769
      
47.04
      
7.39
      
(2
)
Options granted
    
9,842
      
23.88
                  
Options forfeited
    
(9,389
)
    
39.24
                  
Options outstanding at end of year
    
208,222
      
46.32
      
7.11
      
(2
)
 
                                
Options exercisable at end of year
    
134,550
      
48.00
      
5.99
      
(2
)
 
     
Year ended December 31, 2016
 
 
  
Number of options
    
Weighted average of exercise price
(in $)
    
Weighted average remaining contractual life
(in years)
    
Aggregate
intrinsic value
($ in thousands)
  
Outstanding at the beginning of the year
    
230,958
      
48.12
      
7.99
      
(2
)
Granted
    
9,856
      
32.64
                  
Exercised
    
-
      
-
                  
Forfeited
    
(33,045
)
    
50.52
                  
Outstanding at the end of the year
    
207,769
      
47.04
      
7.39
      
(2
)
 
                                
Exercisable at the end of the year
    
106,725
      
46.80
      
6.34
      
(2
)

1.
The weighted average grant date fair values of options granted during the years ended December 31, 2018, 2017 and 2016 were $2.77, $12.48 and $18.60, respectively.

2.
The aforementioned options are out of the money.

3.
As of December 31, 2018, 2017, and 2016, there were $701, $346 and $766 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2006 Plan and the 2015 Plan, respectively. This cost is expected to be recognized over a period of up to 4 years.

A summary of the Company’s RSUs activity is as follows:

   
Year ended December 31
  
   
2018
    
2017
    
2016
  
   
Number of RSUs
  
Unvested at beginning of year
    
44,473
      
-
      
-
  
Granted
    
95,719
      
49,856
      
-
  
Vested
    
(4,818
)
    
(1,033
)
    
-
  
Forfeited
    
(25,905
)
    
(4,350
)
    
-
  
Unvested at end of year
    
109,469
      
44,473
      
-
  
 
1.
The weighted average grant date fair values of RSUs awarded during the years ended December 31, 2018 and 2017 were $3.31 and $1.91. There were no RSU awards in the year ended December 31, 2016.

2.
As of December 31, 2018 and 2017, there were $263 and $287 unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2015 Plan, respectively. This cost is expected to be recognized over a period of up to 4 years.