ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion and analysis of our financial
condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and notes thereto
included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto for the year
ended December 31, 2022, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed on April 17, 2023
(the “Annual Report”) with the U.S. Securities and Exchange Commission (the “SEC”). This Quarterly Report on Form
10-Q contains forward looking statements, including without limitation, statements related to our plans, strategies, objectives, expectations,
intentions and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties including
without limitation the following: (i) our plans, strategies, objectives, expectations and intentions are subject to change at any time
at our discretion; (ii) our plans and results of operations will be affected by our ability to manage growth; and (iii) other
risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission.
In some cases, you can identify forward-looking
statements by terminology such as ‘may,’ ‘will,’ ’should,’ ‘could,’ ‘expects,’
‘plans,’ ‘intends,’ ‘anticipates,’ ‘believes,’ ‘estimates,’ ‘predicts,’
‘potential,’ or ‘continue’ or the negative of such terms or other comparable terminology. Although we believe
that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity,
performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such
statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.
We are under no duty to update any of the forward-looking statements after the date of this report.
Our Company
BiondVax Pharmaceuticals Ltd. (Nasdaq: BVXV) is
a biopharmaceutical company focused on developing, manufacturing and commercializing innovative immunotherapeutic products primarily
for the treatment of infectious and autoimmune diseases. Since its inception, the Company has executed eight clinical trials including
a seven country, 12,400 participant phase 3 trial of its prior lead drug candidate, a universal influenza vaccine candidate (“M-001”),
and has built a GMP biologics manufacturing facility for biopharmaceutical products. While M-001 did not meet its clinical endpoints and
is no longer under development, the Company has developed a highly experienced pharmaceutical industry leadership team and built its own
fully equipped biotechnology drug manufacturing site. After receiving the phase 3 trial results in Q3 2020, the Company performed a turnaround
process, raised capital, hired new talent (including a new CEO) and in-licensed new intellectual property, and is in the process of developing
a pipeline of diversified and commercially viable products built around an innovative nanosized antibody (NanoAb) platform collaboration.
NanoAbs are nanosized antibodies derived from camelid animals and are also known as VHH-antibodies or Nanobodies. “Nanobody”
is a trademark registered by ABLYNX N.V., a wholly owned subsidiary of Sanofi. BiondVax has no affiliation with and is not endorsed by
Sanofi.
As part of the abovementioned turnaround, on December
22, 2021, the Company signed a definitive exclusive, worldwide, License Agreement (“LA”) with the Max Planck Society (“MPG”),
the parent organization of the Max Planck Institute for Multidisciplinary Sciences, and the University Medical Center Göttingen (“UMG”),
both in Gottingen, Germany, for the development and commercialization of innovative NanoAbs for the treatment of COVID-19. The agreement
provides for an upfront payment, development and sales milestones and royalties based on sales and sharing of sublicense revenues. In
addition, the Company signed an accompanying Research Collaboration Agreement (“aRCA”) with MPG and UMG in support of the
abovementioned development of a COVID-19 NanoAb. The aRCA provides for monthly payments to MPG and UMG and has a term until the earlier
of two years or the date the Company enters into first in-human clinical trials with the COVID-19 NanoAb.
On March 23, 2022, we signed a five-year Research
Collaboration Agreement (“RCA”; collectively, with the LA and aRCA, the “MPG/UMG Agreements”) with MPG and UMG
covering the discovery, selection and characterization of NanoAbs for up to nine molecular targets that have the potential to be further
developed into drug candidates for the treatment of disease indications such as psoriasis, psoriatic arthritis, asthma and wet macular
degeneration. These are all large and growing markets with underserved medical needs. In each case, the molecular target has been validated
as an appropriate target for therapeutic intervention through inhibition by an antibody, thereby significantly reducing the discovery
work that typically entails many years of research, high cost and high risk of failure. We believe that we can leverage our NanoAbs’
unique and strong binding affinity, stability at high temperatures, and potential for more effective and convenient routes of administration
towards competitive commercial viability. We believe that since these are clinical validated targets, we can develop NanoAb treatments
with reduced risk and cost, and accelerate the time from NanoAb selection to initiation of clinical development. Each NanoAb candidate
is therefore positioned as a “biobetter” piggybacking on prior discoveries of others to mitigate risk but with significant
potential advantages over existing therapeutics. In addition, each NanoAb constitutes a novel molecule for which we file patent applications
thereby creating a proprietary position. BiondVax has the exclusive option for an exclusive, pre-negotiated worldwide license agreement
for the development and commercialization of each of the NanoAbs covered by the RCA with MPG and UMG.
Our Strategy
Beginning with the MPG/UMG Agreements, the Company
intends to implement a strategy that will build a diversified pipeline of assets along several axes, as follows:
| ● | a pipeline of products for prevention and/or treatment of illnesses with large market opportunities for
more effective treatments: |
| o | Each product candidate originated through the MPG/UMG Agreements would be designed to interact with a
target previously validated as an appropriate target for therapeutic intervention by an antibody already on the market. |
| o | Each therapeutic indication nevertheless is underserved by
existing antibody treatments and a large market opportunity exists for a proprietary NanoAb with improved attributes. |
| ● | a pipeline that would take advantage of the unique physicochemical attributes of our NanoAbs, including: |
| o | Nano size and physical stability – our NanoAbs are approximately
1/10th the size of regular antibodies and have a durable molecular structure. This allows them to be delivered through
routes of administration (e.g., intra-dermal, nasal, inhalation, etc.) not particularly amenable to regular antibodies, which are too
large and/or easily break down under pressure, opening new or enlarged market opportunities for our NanoAbs. |
| o | Ultra-high thermo-stability – our NanoAbs retain biological
activity even at high temperatures. This provides extended shelf life and reduces the need for cold chain shipping and storage. |
| o | Extremely high binding affinity to the target with effective
neutralization. Binding affinity is the likelihood that a drug molecule (e.g., a single NanoAb) will find, and attach to its designated
target (e.g., a single COVID-19 virus) thereby contributing to therapeutically relevant neutralization of the target. Our COVID-19 NanoAb,
for example, has demonstrated binding affinity and neutralization at doses anywhere from 100 to 1000 times lower than the publicly reported
doses of other antibodies. This could translate to faster onset of medical efficacy or in some cases it may translate to lower required
human dosage compared to other antibodies. That said, this should be demonstrated in clinical trials. |
| o | High specificity - Our NanoAbs have high specificity to their
intended target, and therefore fewer of them are expected to bind to targets other than the designated target, resulting in fewer side
effects, . Furthermore, and because of their relatively short half-life, any NanoAbs, that do not bind to a target are expected to be
quickly degraded or excreted from the body, thus also limiting future adverse effects. |
| ● | a pipeline of products that can progress through the discovery stage and enter the clinic relatively quickly
compared to traditional monoclonal antibody drug discovery. |
| o | Traditional monoclonal antibody drug discovery entails years
of research identifying and validating a target, identifying the appropriate type of molecule to interact with that target, validating
that the mechanism of action can produce a therapeutically relevant benefit with a satisfactory safety profile and that the drug can
be produced at an acceptable cost of goods. |
| o | Together with an international management consulting firm,
we have triaged through more than 800 potential molecular targets for our NanoAbs and selected those that had already been validated
as targets for commercially available monoclonal antibodies. Furthermore, we filtered for targets for disease treatments that still leave
a large unmet need or a large, underserved patient population. We then selected those targets that we believe have the highest commercial
value but lowest clinical development costs (small sized clinical trials with fastest timeline to in human proof of concept). |
| o | Our collaborators at MPG/UMG have been able to generate large
libraries of NanoAbs against most of our pre-validated targets within the first 12 months of the collaboration and in many cases have
selected from those libraries a small portfolio of candidates that meet or are close to meetinga set of pre-agreed Compound Acceptance
Criteria, which we have agreed make them potentially appropriate for further development. |
| o | As a consequence, over the next 12 to 24 months, subject to
having sufficient capital, we believe we will be in a position to execute our exclusive option for exclusive license for development
and commercialization of several of the abovementioned nanoAbs and advance them, in addition to our COVID-19 NanoAb, through remaining
pre-clinical development and , subject to available capital resources, an updated analysis of market opportunities, partner interest
and other relevant factors determined at the time, potentially initiate first in human clinical trials, all in a time frame we believe
to be much quicker, at a cost much lower, and with fewer unknowns/less risk than traditional monoclonal antibodies drug discovery at
the same stage of development. |
| ● | A pipeline of products that can be developed through the various Chemistry, Manufacturing and Controls
steps (CMC) and then be produced for clinical development and potentially initial commercial volumes required for product launch at a
low cost of goods at our existing manufacturing facility in Jerusalem, built to GMP specifications. |
| o | Our NanoAbs are produced in yeast, a relatively low cost and
rapid production system compared to the manufacture of regular antibodies. Regular antibodies are produced in mammalian cell lines that
take considerable time to establish, require a much more sophisticated production facility, have lower yields and involve more expensive
processing to harvest and purify the ultimate drug substance. |
| o | processing to harvest and purify the ultimate drug substance. |
| o | Our facility in Jerusalem is equipped to take the candidates
generated by MPG/UMG and immediately begin development of NanoAbs for pre-clinical testing and ultimately produce clinical grade NanoAbs. |
| o | By conducting these activities in-house, we will be in a position
to avoid the delays and high costs typically associated with third party contract manufacturers and have more direct control over the
process. |
If successfully implemented, this strategy would
provide BiondVax with a diverse multi-dimensional pipeline that we believe has been substantially de-risked without necessarily limiting
the upside potential. We would also expect to have considerable flexibility regarding partnering with other companies in the pharmaceutical
industry, out-licensing, joint ventures and the like. The Company is currently actively engaged in identifying and evaluating many of
these opportunities. Notwithstanding the Company’s efforts to mitigate the risk associated with the development of our NanoAbs,
there remains significant risk of failure, as described below under “Risks Related to Our Business”, associated with product
development, manufacturing, regulatory matters, capital availability, commercialization, and other factors relevant to small companies,
such as the Company, engaged in early stage pharmaceutical development activities.
Our Competitive Strengths
We believe that our people, process and technology
give us distinct advantages over our competitors, as follows:
| ● | People: Our leadership team has deep biotech and pharmaceutical
industry experience, including our Chairman of the Board Mark Germain ( former Co-Chairman of Pluri (previously Pluristem Therapeutics),
and a co-founder and former director of a number of other biotechnology companies including, without limitation, Alexion, Neurocrine,
ChromaDex Inc., Stem Cell Innovations Inc., Omnimmune Corp. and Collexis Holdings Inc.), Board director Samuel Moed (former Senior VP
Corporate Strategy at Bristol Myers Squibb), Board director Jay Green (former Senior VP Finance and CFO of GSK’s global vaccines
business) and COO Elad Mark (formerly employed by Novartis). Our CEO, Amir Reichman, has extensive vaccines R&D, supply chain, manufacturing,
and engineering experience from Novartis in the U.S. and GSK in Europe. Furthermore, our Chief Science Officer, Dr. Tamar Ben-Yedidia,
oversaw M-001 development from early research at the Weizmann Institute through the pivotal Phase 3 clinical trial. Dr. Ben-Yedidia conducted
her preliminary research in the 1990’s under the guidance of Professor Ruth Arnon. Professor Arnon continues to serve as head of
BiondVax’s Scientific Advisory Board. |
| ● | Process: After years of experience, BiondVax has developed
a mature set of business processes including pre-clinical and clinical development, regulatory, quality and GMP manufacturing processes.
These processes can help us accelerate time to market for future in-licensed assets and hence provide us with a competitive value proposition
versus other companies our size. In the past, we conducted a pivotal Phase 3 trial in over 100 clinical trial sites in seven Eastern
European countries, subject to, among others, the regulation of the European Medicines Agency (EMA). The trial was completed on time
and on budget. Our Phase 3 clinical trial was initiated after we completed two Phase 1/2 clinical trials and three Phase 2 clinical trials
in Israel pursuant to clinical trial protocols approved by the Israeli Ministry of Health, a Phase 2b clinical trial in Europe, and a
Phase 2 clinical trial sponsored and conducted by the NIH/NIAID in the USA. |
| ● | Technology: Our existing and advanced GMP manufacturing
facility in Jerusalem uses an agile and modular ’Single Use’ infrastructure that can be used for a wide variety of applications
and technologies, such as the production of recombinant proteins, nanobodies and other vaccines and treatments. In addition, we have
advanced automation, data management and IT systems necessary for regulatory compliant clinical development, clinical supplies and commercial
supplies. |
Marketing and Sales
We do not currently have any pharmaceutical product
marketing or sales capabilities. We intend to license to, or enter into strategic alliances, with third parties in the pharmaceutical
business, which are equipped to market and/or sell any products that we acquire or develop in the future. We may seek to establish such
capabilities internally in the future, if and when appropriate, in addition to any such licensing arrangements or strategic alliances.
Competition
Generally, our competitors include large, fully
integrated pharmaceutical companies as well as companies and academic research institutes in various developmental stages attempting to
develop (i) COVID-19 antibody therapeutics (such as Invivyd (formerly Adagio Therapeutics), Vir Biotechnology, and ExeVir) as well as
(ii) other products for the prevention and treatment of disease targets that are the subject of our broader agreement with MPG and UMG,
including MoonLake Immunotherapeutics AG for the development of antibodies against psoriasis
Manufacturing
We built, own, and operate a biologics manufacturing
facility in Jerusalem, which is capable of manufacturing GMP-compliant product candidates for use in either clinical trials or for small
to medium scale commercial supply. We have manufactured the COVID-19 NanoAbs for our preclinical in vivo study in our facility, and although
we currently anticipate using our facility for future manufacturing of product candidates, we may also rely on a third party CMO.
Finance Contract with European Investment Bank
We borrowed 24 million Euro under a finance contract
(the “Finance Contract”) with the European Investment Bank (the “EIB”), to finance a portion of the cost of developing
our previous leading drug candidate M-001 and our GMP biologics manufacturing facility. As part of the Finance Contract, we also entered
into a security agreement (the “Security Agreement”), whereby we created a first ranking floating charge in favor of EIB over
substantially all of our assets (other than certain licensed intellectual property related to our former M-001 program).
On August 10, 2022, we announced the successful
conclusion of negotiations and formal approval by the EIB of new terms of its outstanding €24 million loan (the “Loan”)
to BiondVax, including:
| ● | Loan extension: An extension of the maturity
dates from 2023 (€20 million) and 2024 (€4 million) until December 2027. |
| ● | Interest accrual: Although the Loan has been
outstanding since 2018, interest on the Loan will only begin to accrue starting January 1, 2022, at an annual rate of 7%. The interest
payments will be deferred until the new maturity date and will be added to the principal balance at the end of each year during the Loan
period. |
| ● | Principal repayment: $900,000 was paid by BiondVax
shortly after the execution of the relevant amendment letter with the EIB and was applied to reduce the outstanding Loan. An additional
approximately $725,000 was paid during February 2023 in connection with the financing completed in December 2022 and going forward 10%
of any capital raises until maturity will be used to further repay the Loan principal including any outstanding accrued interest. |
| ● | Variable remuneration to the EIB: Once BiondVax’s
commercial sales exceed €5 million, 3% of BiondVax’s topline revenues will be paid to the EIB as royalties until the EIB receives
(from the Loan repayment, inter alia the interest and the royalties) the higher of (i) a total of 2.8 times the original
€24 million principal (as provided in the original Loan agreement) and (ii) 20% IRR on the principal calculated from January 1,
2022. |
| ● | Prepayment indemnity: In case BiondVax decides
to discharge all liabilities under the Finance Contract, inter alia, payments of the variable remuneration, BiondVax
would need to repay to the EIB an indemnity amount in addition to the Loan principal and the accrued interest. The indemnity will be
calculated such that the EIB receives an additional payment equal to the greater of (i) the prepayment amount (i.e. twice the prepayment
amount in the aggregate) and (ii) the amount required to realize 20% IRR on the prepayment amount at the time of prepayment. |
RESULTS OF OPERATIONS
Three months ended March 31, 2023, as compared
to March 31, 2022
To date, we have funded
our operations primarily through (i) the sale of equity securities in both public and private offerings, (ii) a rights offering, (iii)
exercises of warrants issued in connection with our initial public offering in the U.S., (iv) funding received from the IIA, and (iv)
proceeds from the Finance Contract with the EIB. In February 2021, December 2021, and December 2022 we raised gross proceeds of approximately
$13.8 million, $9.8 million, and $8 million respectively, in underwritten offerings of the ADSs (and, in December 2022, two warrants to
purchase ADSs for each ADS offered). As of March 31, 2023, we had $10.9 million of cash and cash equivalents and short-term deposits.
We expect that we will
incur additional losses soon as a result of our research and development activities. Such research and development activities will require
us to obtain and expend further resources if we are to be successful. As a result, we expect to continue to incur operating losses, and
we may be required to obtain additional funds to further develop our research and development programs. As a result of our research and
development activities and our failure to generate revenues since our inception, among other things, our net loss for the three months
ended March 31, 2023, was $3.5 million.
Operating Expenses
Research and development
expenses. Our research and development expenses for the three months ended March 31, 2023, amounted to $2 million, compared
to $1.2 million for the three months ended March 31, 2022. The increase of $0.8 million was primarily due to the launch of our NanoAb
development. Our research and development expenses consist primarily of salaries and related personnel expenses, fees paid to consultants,
patent-related legal fees, costs of preclinical studies, drug and laboratory supplies, and costs for facilities and equipment. We charge
all research and development expenses to operations as they are incurred. We expect our research and development expenses to remain our
primary expense in the near future. Increases or decreases in research and development expenditures are attributable to the number and/or
duration of the clinical studies that we conduct.
We expect that a large
percentage of our research and development expenses in the future will be incurred in support of our future clinical development projects.
Due to the inherently unpredictable nature of clinical development processes, we are unable to estimate with any certainty the costs we
will incur. Clinical development timelines, the probability of success and development costs can differ materially from expectations.
Our future research and
development expenses will depend on any Company product candidate’s commercial potential. As we obtain results from clinical studies,
we may elect to discontinue or delay clinical studies for any Company product candidate in certain indications in order to focus our resources
on more promising product candidates. Completion of clinical studies may take several years or more, but the length of time generally
varies according to the type, complexity, novelty and intended use of a product candidate.
The lengthy process of
completing clinical studies and seeking regulatory approval for any Company product candidate requires the expenditure of substantial
resources. Any failure or delay in completing clinical studies, or in obtaining regulatory approvals, could cause a delay in generating
product revenue and cause our research and development expenses to increase and, in turn, have a material adverse effect on our operations.
Because of the risk factors set forth below in Item 1A, we are not able to estimate with any certainty when we would recognize any net
cash inflows from our projects.
Developing bio-pharmaceutical
vaccines and medicines, conducting clinical trials, obtaining commercial manufacturing capabilities and commercializing products is expensive
and we will need to raise substantial additional funds to achieve our strategic objectives. Although we believe that our existing cash
resources (inclusive of gross proceeds of approximately $8 million received by the Company from a public follow-on offering completed
in December 2022) will be sufficient to fund our projected cash requirements at current monthly rates for at least the next 12 months,
we will require significant additional financing in the future to fund our operations, including if and when we conduct clinical trials,
obtain regulatory approval and obtain commercial manufacturing capabilities for any Company product candidate and commercialize such product
candidates. Our future capital requirements will depend on many factors, including:
| ● | the progress and costs of our clinical trials and other research
and development activities; |
| ● | the scope, prioritization and number of our clinical trials
and other research and development programs; |
| ● | the amount of revenues and contributions we receive under
future licensing, collaboration, development and commercialization arrangements with respect to our Company product candidates; |
| ● | the costs of the development and expansion of our operational
infrastructure; |
| ● | the costs and timing of obtaining regulatory approvals for
our Company product candidates; |
| ● | the ability of us, or our collaborators, to achieve development
milestones, marketing approvals and other events or developments under our potential future licensing agreements; |
| ● | the costs of filing, prosecuting, enforcing and defending
patent claims and other intellectual property rights; |
| ● | the costs and timing of building and securing manufacturing
arrangements for clinical or commercial production; |
| ● | the costs of contracting with third parties to provide sales
and marketing capabilities for us or establishing such capabilities ourselves; |
| ● | the costs of acquiring or undertaking development and commercialization
efforts for any Company product candidate or platforms; |
| ● | the magnitude of our general and administrative expenses;
and |
| ● | any cost that we may incur under future in- and out-licensing
arrangements relating to one or more of our Company product candidates. |
Until we can generate
significant recurring revenues, we expect to satisfy our future cash needs through the net proceeds received from future private or public
equity raising, grants from governmental agencies such as the IIA, debt or equity or other non-dilutive financings such as the loan from
EIB, among other financing mechanisms. We cannot be certain that additional funding will be available to us on acceptable terms, if at
all. If funds are not available, we may be required to delay, reduce the scope of or eliminate research or development plans for, or commercialization
efforts with respect to any Company product candidate.
Since 2006, we received
$5.8 million in IIA grants and Euro 24 million ($25.6 million) in EIB loans.
Marketing, General
and Administrative Expenses:
Our general and administrative
expenses for the three months ended March 31, 2023 amounted to $1.2 million, compared to $1.4 million for the three months ended March
31, 2022. The decrease was mostly due to share based payment expenses of $0.24 million, professional services expenses of $0.1 million
offset with an increase in salary expenses of $0.17 million and marketing expenses of $0.19 million. Our general and administrative expenses
consist primarily of salaries and expenses related to employee benefits, including share-based compensation, for our general and administrative
employees, which includes employees in executive and operational roles, including finance and human resources, as well as consulting,
legal and professional services related to our general and administrative operations.
Net Loss
As a result of the foregoing
research and development, marketing general and administrative expenses, and as we have not yet generated revenues since our inception,
our net loss for the three months ended March 31, 2023 was $3.5 million, compared to our net loss for the three months ended March 31,
2022 of $2.47 million.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have funded our operations
primarily through public and private offerings of our equity securities in Israel and the U.S., grants from the OCS (today known as the
IIA), grants received by the Israeli Ministry of Economy and European grants under the UNISEC consortium and the loan from the EIB. Information
regarding the outstanding loan from the EIB is set forth above in “Finance Contract with European Investment
Bank.”
As of March 31, 2023, we had cash and cash equivalents
and short-term deposits of $10.9 million as compared to 15.5 million as of March 31, 2022. Our cash and cash equivalents are denominated
in US dollars.
Net cash used in operating activities was $3.1
million for the quarter ended March 31, 2023, compared with net cash used in operating activities of $1.1 million for the quarter ended
March 31, 2022.
Net cash used by investing activities for the
quarter ended March 31, 2023 was $0.006 million compared with net cash used by investing activities of $0.5 million for the quarter ended
March 31, 2022, and primarily reflects the purchase of fixed assets.
We had no cash provided by financing activities
for the quarters ended March 31, 2023 and 2022.
At March 31, 2023, our accumulated deficit amounted
to $119.3 million. We had working capital of $ 8.4 million as of March 31, 2023. In the future, we may raise additional capital from external
sources in order to continue the longer-term efforts contemplated under our business plan. We expect to continue incurring losses for
the foreseeable future and may need to raise additional capital to pursue our product development initiatives, to penetrate markets for
the sale of our Company product candidates and continue operations as presently maintained. We cannot provide any assurance that we will
raise additional capital. Our management believes that we have access to capital resources through possible public or private equity offerings,
debt financings, corporate collaborations or other means; however, we have not secured any commitment for new financing at this time nor
can we provide any assurance that new financing will be available on commercially acceptable terms, if at all. If the economic climate
in the U.S. deteriorates, our ability to raise additional capital could be negatively impacted. If we are unable to secure additional
capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs in order
to conserve cash in amounts sufficient to sustain operations and meet our obligations. These measures could cause significant delays in
our efforts to commercialize our products, which is critical to the realization of our business plan and our future operations.
On February 2, 2021, the Company closed an underwritten
offering in which it sold 2,434,783 ADSs at a public offering price of $4.95 per ADS. On February 10, 2021, Aegis Capital Corp., the sole
bookrunning manager for the underwritten offering, fully exercised its over-allotment option to purchase an additional 365,217 ADSs, bringing
total gross proceeds to the Company from the offering including exercise of the over-allotment option of approximately $13.8 million.
The Company received a net sum of $12.836 million and a net sum of $12.465 million after deduction of issuance expenses.
On December 29, 2021, the Company closed an underwritten
offering in which it sold 4,144,068 ADSs at a public offering price of $2.36 per ADS for total proceeds of approximately $9.780 million,
including ADSs acquired upon the full exercise by Aegis Capital Corp., the sole bookrunning manager for the underwritten offering, of
its over-allotment option to purchase additional ADSs. The Company received a net sum of $9.020 million and a net sum of $8.817 million
after deduction of issuance expenses.
On December 20, 2022, the Company closed an underwritten
offering in which it sold 1,600,000 units and pre-funded units. Each unit consisted of one ADS and two warrants, each to purchase one
ADS, and each pre-funded unit consisted of one pre-funded warrant to purchase one ADS and two warrants each to purchase one ADS. Each
ADS (or pre-funded warrant) was sold together with two warrants at a combined purchase price of $5.00 per unit (or $4.999 per pre-funded
unit after reducing $0.001 attributable to the exercise price of the pre-funded warrants). One of the warrants will expire three years
from the date of issuance, and the other warrant will expire one year from the date of issuance and may be exercised for half an ADS on
or prior to six (6) months following the original issuance for no additional consideration. The Company received a net sum of $7.3 million
and a net sum of $7.2 million after deduction of issuance expenses.
Critical Accounting
Policies
The
preparation of financial statements and the related notes thereto included elsewhere in this annual report in conformity with U.S. GAAP
requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying
notes. 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
at the dates of the financial statements, and the reported amount of expenses during the reporting periods. Actual results could differ
from those estimates.
We
believe that the following accounting policies involve a substantial degree of judgment and complexity, and accordingly, these are the
policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.
See also note 2 to our financial statements included elsewhere in this annual report.
Impairment
of long-lived assets
The
Company’s long-lived assets are reviewed for impairment in accordance with ASC No. 360 “Property, Plant and Equipment,”
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If indicators of impairment
exist and the undiscounted future cash flows that the assets are expected to generate are less than the carrying value of the assets,
the Company reduces the carrying amount of the assets through an impairment charge, to their estimated fair values. During the three months
ended March 31, 2023 and 2022, no impairment indicators have been identified.
Fair
value of financial instruments
The
accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands
disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer
a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes
a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:
| ● | Level 1: Quoted prices (unadjusted) in active markets that
are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. |
| ● | Level 2: Observable inputs that are based on inputs not quoted
on active markets but corroborated by market data. |
| ● | Level 3: Unobservable inputs are used when little or no market
data are available. |