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ISFIYA, ISRAEL - Check-Cap Ltd. (NASDAQ:CHEK), a micro-cap company currently valued at $4.39 million, announced Friday it has entered into a definitive merger agreement with MBody AI, a company focused on embodied artificial intelligence for autonomous workforce solutions. According to InvestingPro data, Check-Cap has struggled with profitability, reporting negative EBITDA of $9.3 million in the last twelve months.
Under the terms of the agreement, current MBody AI shareholders will own 90% of the combined company, while Check-Cap shareholders will retain 10% ownership on a fully diluted basis. The combined entity will be renamed MBody AI Ltd. and will continue Check-Cap’s legacy research and development activities. InvestingPro analysis reveals concerning metrics about Check-Cap’s financial health, with a current ratio of 0.15 indicating significant liquidity challenges. Subscribers to InvestingPro can access 6 additional key insights about the company’s financial position.
The merger, which requires approval from Check-Cap shareholders at the October 17 meeting, aims to position the combined company in the embodied AI market, which Morgan Stanley has forecasted to reach $40 trillion by 2050, according to the press release statement.
"We believe we have found the right revenue-generating merger partner that will allow us to enter into a high-growth industry while continuing to focus on our legacy business," said David Lontini, Chairman and Interim CEO of Check-Cap.
The companies stated they will use "commercially reasonable efforts" to secure a private placement financing on mutually acceptable terms. The merger is also expected to create potential synergies with Check-Cap’s Ghost Kitchen franchise rights in New Jersey.
Check-Cap separately disclosed it received a Nasdaq non-compliance letter on September 3 regarding minimum stockholders’ equity requirements. The company must submit a compliance plan by October 20, with the merger and related financing expected to help address this deficiency. The urgency of this situation is reflected in the company’s stock performance, with InvestingPro data showing a significant year-to-date decline of 24.65% and an overall Financial Health Score of 1.95, rated as ’FAIR’.
If the merger is approved, Check-Cap will terminate its previously announced business combination agreement with Apollo Technology Capital Corporation, while remaining open to future integration possibilities.
The merger has been approved by the boards of both companies.
In other recent news, Check-Cap Ltd. disclosed that it received a compliance notice from the Nasdaq Listing Qualifications Department. The notice stated that the company is not in compliance with Nasdaq’s requirement for a minimum of $2,500,000 in stockholders’ equity. Check-Cap has been given 45 calendar days to submit a plan to regain compliance, with a deadline set for October 20, 2025. If the plan is accepted, Nasdaq may grant an extension of up to 180 days from the notice date. Should the plan not be accepted, the company will have the option to appeal the decision to a Nasdaq Hearings Panel. Additionally, Check-Cap announced an asset acquisition, though further details on this acquisition were not specified in the recent updates. These developments are part of the company’s ongoing regulatory and business activities.
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