NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per
share data)
(unaudited)
NOTE 1 – GENERAL
BiomX Inc., (individually, and together
with its subsidiaries, BiomX Ltd. and RondinX Ltd., the “Company” or “BiomX”) was incorporated as a blank check
company on November 1, 2017, under the laws of the state of Delaware, for the purpose of entering into a merger, stock exchange, asset
acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities.
On July 16, 2019, the Company entered
into a merger agreement with BiomX Ltd. (“BiomX Israel”), a company incorporated under the laws of Israel, CHAC Merger Sub
Ltd. (“Merger Sub”) and Shareholder Representative Services LLC, as amended on October 11, 2019, pursuant to which, among
other things, BiomX Israel merged with Merger Sub, with BiomX Israel being the surviving entity in accordance with the Israeli Companies
Law, 5759-1999, as a wholly owned direct subsidiary of BiomX Inc.
On October 28, 2019, the Company consummated
the acquisition of 100% of the outstanding shares of BiomX Israel (the “Recapitalization Transaction”). Pursuant to the aforementioned
merger agreement, in exchange for all of the outstanding shares of BiomX Israel, the Company issued to the shareholders of BiomX Israel
a total of 15,069,058 shares of the Company’s Common Stock representing approximately 65% of the total shares issued and outstanding
after giving effect to the Recapitalization Transaction. As a result of the Recapitalization Transaction, BiomX Israel became a wholly
owned subsidiary of the Company. As the shareholders of BiomX Israel received the largest ownership interest in the Company, BiomX Israel
was determined to be the “accounting acquirer” in the Recapitalization Transaction.
The Company’s shares of Common
Stock, units, and warrants are traded on the NYSE American under the symbols PHGE, PHGE.U, and PHGE.WS, respectively.
On February 6, 2020, the Company’s
Common Stock also began trading on the Tel-Aviv Stock Exchange. On July 6, 2022, the Company announced a voluntary delisting of its shares
of Common Stock from the Tel-Aviv Stock Exchange which became effective on October 6, 2022.
BiomX is developing both natural and
engineered phage cocktails designed to target and destroy harmful bacteria in chronic diseases. BiomX discovers and validates proprietary
bacterial targets and customizes phage compositions against these targets. The Company’s headquarters are located in Ness Ziona,
Israel.
To date, the Company has not generated
revenue from its operations. Based on the Company’s current cash and commitments, management believes that the Company’s
current cash and cash equivalents are sufficient to fund its operations for more than 12 months from the date of issuance of these condensed
consolidated financial statements and sufficient to fund its operations necessary to continue development activities.
Consistent with its continuing research
and development activities, the Company expects to continue to incur additional losses for the foreseeable future. The Company plans to
continue to fund its current operations, as well as other development activities relating to additional product candidates, through future
issuances of debt and/or equity securities, loans and possibly additional grants from the Israel Innovation Authority (“IIA”)
and other government institutions. The Company’s ability to raise additional capital in the equity and debt markets is dependent
on a number of factors including, but not limited to, the market demand for the Company’s Common Stock, which itself is subject
to a number of development and business risks and uncertainties, as well as the uncertainty that the Company would be able to raise such
additional capital at a price or on terms that are favorable to it. If the Company is unable to raise capital when needed or on attractive
terms, it may be forced to delay or reduce its research and development programs. If there are further increases in operating costs for
facilities expansion, research and development and clinical activity, the Company will need to use mitigating actions such as to seek
additional financing or postpone expenses that are not based on firm commitments. On May 24, 2022, the Company announced a corporate restructuring
(the “Corporate Restructuring”), intended to extend the Company’s capital resources, while prioritizing the Company’s
ongoing cystic fibrosis program and delaying the Company’s atopic dermatitis program. See note 7 for further information.
BIOMX
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per
share data)
(unaudited)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
| A. | Unaudited Condensed Financial Statements |
The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”)
for condensed financial information. They do not include all the information and footnotes required by GAAP for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair statement have been included (consisting only of normal
recurring adjustments except as otherwise discussed).
The financial information contained in
this report should be read in conjunction with the annual financial statements included in the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2021, that the Company filed with the U.S. Securities and Exchange Committee (the “SEC”)
on March 30, 2022. The year-end balance sheet data was derived from the audited consolidated financial statements as of December 31,
2021, but not all disclosures required by GAAP are included.
| B. | Principles of Consolidation |
The condensed consolidated financial
statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated upon
consolidation.
| C. | Use of Estimates in the Preparation of Financial Statements |
The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities in the financial statements and the amounts of expenses during the reported years.
Actual results could differ from those estimates.
The full extent to which the COVID-19 pandemic may directly or indirectly
impact the Company’s business, results of operations and financial condition will depend on future developments that are uncertain,
including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as
well as the economic impact on local, regional, national and international markets. In November 2022, the Company updated its guidance
on the timing of certain clinical milestones resulting from challenges it continues to face in clinical trial enrollment resulting from
the COVID-19 pandemic. The Company examined the impact of COVID-19 on its financial statements, and although there is currently no major
impact, there may be changes to those estimates in future periods. Actual results may differ from these estimates.
| D. | Recent Accounting Standards |
In May 2021, the Financial Accountings
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-04, “Earnings Per Share (Topic
260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40): Issuer’s Accounting for Certain Modifications or Exchanges
of Freestanding Equity-Classified Written Call Options” (“ASU 2021-04”). The guidance became effective for the Company
on January 1, 2022. The Company adopted the guidance on January 1, 2022, and has concluded the adoption did not have a material impact
on its unaudited condensed consolidated financial statements.
In June 2016, the FASB issued ASU No.
2016-13, “Financial Instruments – Credit Losses,” to improve information on credit losses for financial assets and
net investment in leases that are not accounted for at fair value through net income. ASU No. 2016-13 replaces the current incurred loss
impairment methodology with a methodology that reflects expected credit losses. This guidance is effective for the Company beginning
on January 1, 2023, with early adoption permitted. The Company does not expect that the adoption of this standard will have a significant
impact on its condensed consolidated financial statements and related disclosures.
BIOMX
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per
share data)
(unaudited)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| D. | Recent Accounting Standards (Cont.) |
In August 2020, the FASB issued ASU 2020-06,
“Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic
815-40)-Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” The ASU simplifies accounting for
convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments
will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain
settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity
contracts to qualify for it. The ASU also simplifies the diluted net income per share calculation in certain areas. The amendments in
ASU 2020-06 are effective for smaller reporting companies as defined by the SEC for fiscal years beginning after December 15, 2023, including
interim periods within those fiscal years. Effective January 1, 2022, the Company early adopted ASU 2020-06 using the modified retrospective
approach which resulted in no effect.
In October 2021, the FASB issued ASU
2021-08, “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,”
which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer
on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). The
guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree.
The guidance should be applied prospectively to acquisitions occurring on or after the effective date. The guidance is effective for
fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including
in interim periods, for any financial statements that have not yet been issued. The Company is currently evaluating this guidance to
determine the impact it may have on its consolidated financial statements.
In November 2021, the FASB issued ASU
2021-10, “Government Assistance (Topic 832),” which requires annual disclosures that increase the transparency of transactions
involving government grants, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of
those transactions on an entity’s financial statements. The amendments in this update are effective for financial statements issued
for annual periods beginning after December 15, 2021. The Company expects that this guidance will not have a significant impact on the
Company’s consolidated financial statements.
| E. | Fair Value of Financial Instruments |
The Company accounts for financial instruments
in accordance with ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 establishes a fair
value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable
inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:
Level 1 – Unadjusted quoted prices
in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 – Quoted prices in non-active
markets or in active markets for similar assets or liabilities, observable inputs other than quoted prices, and inputs that are not directly
observable but are corroborated by observable market data.
Level 3 – Prices or valuations
that require inputs that are both significant to the fair value measurement and unobservable.
There were no changes in the fair value
hierarchy levelling during the nine months ended September 30, 2022 and year ended December 31, 2021.
BIOMX
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per
share data)
(unaudited)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| E. | Fair Value of Financial
Instruments (Cont.) |
The following table summarizes the fair
value of the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis, by level within
the fair value hierarchy:
| |
September 30, 2022 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Fair Value | |
Assets: | |
| | |
| | |
| | |
| |
Cash equivalents: | |
| | |
| | |
| | |
| |
Money market funds | |
| 30,119 | | |
| - | | |
| - | | |
| 30,119 | |
| |
| 30,119 | | |
| - | | |
| - | | |
| 30,119 | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Contingent consideration | |
| - | | |
| - | | |
| 166 | | |
| 166 | |
Foreign exchange contracts payable | |
| - | | |
| 67 | | |
| - | | |
| 67 | |
| |
| - | | |
| 67 | | |
| 166 | | |
| 233 | |
| |
December 31, 2021 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Fair Value | |
Assets: | |
| | |
| | |
| | |
| |
Cash equivalents: | |
| | |
| | |
| | |
| |
Money market funds | |
| 30,007 | | |
| - | | |
| - | | |
| 30,007 | |
Foreign exchange contracts receivable | |
| - | | |
| 62 | | |
| - | | |
| 62 | |
| |
| 30,007 | | |
| 62 | | |
| - | | |
| 30,069 | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Contingent consideration | |
| - | | |
| - | | |
| 175 | | |
| 175 | |
| |
| - | | |
| - | | |
| 175 | | |
| 175 | |
Financial instruments with carrying values
approximating fair value include cash and cash equivalents, restricted cash, short-term deposits, other current assets, trade accounts
payable and other accounts payable, due to their short-term nature.
The Company determined the fair value
of the liabilities for the contingent consideration based on a probability discounted cash flow analysis. This fair value measurement
is based on significant unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy.
The fair value of the contingent consideration is based on several factors, such as: the attainment of future clinical, developmental,
regulatory, commercial and strategic milestones relating to product candidates for treatment of primary sclerosing cholangitis. The discount
rate applied ranged from 1.26% to 4.06%. The contingent consideration is evaluated quarterly, or more frequently, if circumstances dictate.
Changes in the fair value of contingent consideration are recorded in consolidated statements of operations. Significant changes in unobservable
inputs, mainly the probability of success and cash flows projected, could result in material changes to the contingent consideration
liability. For the nine months ended September 30, 2022, the Company recorded an income of $9 as a result of a revaluation of the contingent
consideration liability.
The Company uses foreign exchange contracts
(mainly option and forward contracts) to hedge cash flows from currency exposure. These foreign exchange contracts are not designated
as hedging instruments for accounting purposes. In connection with these foreign exchange contracts, the Company recognizes gains or
losses that offset the revaluation of the cash flows also recorded under financial expenses (income), net in the condensed consolidated
statements of operations. As of September 30, 2022, the Company had outstanding foreign exchange contracts for the exchange of USD to
NIS in the amount of approximately $2,540 with a fair value liability of $67. As of December 31, 2021, the Company had outstanding foreign
exchange contracts for the exchange of USD to NIS in the amount of approximately $4,180 with a fair value asset of $62.
BIOMX
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per
share data)
(unaudited)
NOTE 3 – COMMITMENTS AND CONTINGENCIES
| A. | In March 2021, the IIA approved two new applications in relation to the Company’s cystic fibrosis product candidate for an aggregate budget of NIS 10,879 (approximately $3,286) and for the Company’s product candidate for Inflammatory Bowel Disease (“IBD”) and Primary Sclerosing Cholangitis for an aggregate budget of NIS 8,565 (approximately $2,588). The IIA committed to fund 30% of the approved budgets. The programs are for the period beginning January 2021 through December 2021. Through September 30, 2022, the Company received NIS 4,284 (approximately $1,347) from the IIA with respect to these programs. |
| |
| | In August 2021, the IIA approved an application that supports upgrading the Company’s manufacturing capabilities for an aggregate budget of NIS 5,737 (approximately $1,778). The IIA committed to fund 50% of the approved budget. The program is for the period beginning July 2021 through June 2022. The program does not bear royalties. Through September 30, 2022, the Company received NIS 1,912 (approximately $577) from the IIA with respect to this program. |
| |
| | In March 2022, the IIA approved an application for a total budget of NIS 13,004 (approximately $4,094) in relation to the Company’s cystic fibrosis product candidate. The IIA committed to fund 30% of the approved budget. The program is for the period beginning January 2022 through December 2022. Through September 30, 2022, the Company received NIS 1,365 (approximately $395) from the IIA with respect to this program. |
| |
| | According to the agreement with the IIA, excluding the August 2021 program, BiomX Israel will pay royalties of 3% to 3.5% of future sales up to an amount equal to the accumulated grant received including annual interest of LIBOR linked to the dollar. BiomX Israel may be required to pay additional royalties upon the occurrence of certain events as determined by the IIA, that are within the control of BiomX Israel. No such events have occurred or were probable of occurrence as of the balance sheet date with respect to these royalties. Repayment of the grant is contingent upon the successful completion of the BiomX Israel’s R&D programs and generating sales. BiomX Israel has no obligation to repay these grants if the R&D program fails, is unsuccessful or aborted or if no sales are generated. The Company had not yet generated sales as of September 30, 2022; therefore, no liability was recorded in these condensed consolidated financial statements. Received IIA grants are recorded as a reduction of R&D expenses, net. |
| |
| | Through September 30, 2022, total grants approved from the IIA aggregated to approximately $8,403 (NIS 28,683). Through September 30, 2022, the Company had received an aggregate amount of $6,957 (NIS 23,634) in the form of grants from the IIA. Receipt of the remaining grants from approved programs depends on the actual utilization of approved budgets. Total grants subject to royalties’ payments aggregated to approximately $6,380. As of September 30, 2022, the Company had a contingent obligation to the IIA in the amount of approximately $6,557 including annual interest of LIBOR linked to the dollar. |
| |
| | The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced in July 2017 that it will no longer persuade or require banks to submit rates for LIBOR after 2021. Even though the IIA has not declared the alternative benchmark rate to replace LIBOR, the Company does not expect it will have a significant impact on its financial statements. |
| |
| B. | On June 23, 2022 (“Effective Date”), BiomX Israel entered into a new research collaboration agreement with Boehringer Ingelheim International GmbH (“BI”) for a collaboration to identify biomarkers for inflammatory bowel disease (“IBD”). Under the agreement, BiomX Israel is eligible to receive fees totaling $1,411 to cover costs to be incurred by BiomX Israel in conducting the research plan under the collaboration. The fees will be paid in instalments of $500 within 30 days of the Effective Date and three additional installments of $500, $200 and $211 upon completion of certain activities under the research plan. Unless terminated earlier, this agreement will remain in effect until (a) a period of eighteen (18) months thereafter or (b) completion of the project plan and submission and approval of the final report, whichever occurs sooner, unless otherwise extended. The consideration is recorded as a reduction of R&D expenses, net in the condensed consolidated statements of operations according to the input model method on a cost-to-cost basis. The remainder of the consideration is recorded as other accounts payable in the condensed consolidated balance sheets. During the nine months ended September 30, 2022, the Company received consideration of $500 and recorded $230 in the condensed consolidated statements of operations. |
| |
| C. | On May 24, 2022, the Company notified the Massachusetts Institute of Technology of the termination of the Patent License Agreement between the parties which became effective on August 22, 2022. |
| |
| D. | In October 2019, BiomX Israel entered into a loan agreement in the amount of $19 with a stockholder of the Company. The loan is secured by shares of Common Stock of the Company. The granting of the loan and the restrictions imposed on the related shares of Common Stock until repayment of the loan and transfer of the shares of Common Stock back to the stockholder were accounted as an acquisition of treasury stock by the Company at an amount equal to the loan. During the nine months ended September 30, 2022, the loan was repaid by the stockholder to the Company and was accounted as proceeds on account of shares in the statements of changes in stockholders’ equity as the shares of Common Stock were not transferred to the stockholder as of September 30, 2022. |
BIOMX
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per
share data)
(unaudited)
NOTE 4 – LONG-TERM DEBT
On August 16, 2021, the Company entered
into a Loan and Security Agreement (the “Loan Agreement”) with Hercules Capital, Inc. (“Hercules”), with respect
to a venture debt facility. Under the Loan Agreement, Hercules provided the Company with access to a term loan with an aggregate principal
amount of up to $30,000 (the “Term Loan Facility”), available in three tranches, subject to certain terms and conditions.
The first tranche of $15,000 was advanced to the Company on the date the Loan Agreement was executed. Upon the occurrence of specified
milestones and continuing through December 31, 2022, a loan in the aggregate principal amount of up to $10,000, or the second tranche,
and upon the occurrence of specified milestones and continuing through September 30, 2023, a loan in the aggregate principal amount of
up to $5,000, or the third tranche, may become available. The Company is required to make interest only payments through March 1, 2023,
or extended to September 1, 2023 upon satisfaction of certain milestones, and is required to then repay the principal balance and interest
in equal monthly installments through September 1, 2025.
As of September 30, 2022, the milestones
for the remaining tranches and for the extension of the period of interest only payments to September 1, 2023, have not yet been reached.
The Company may prepay advances under
the Loan Agreement, in whole or in part, at any time subject to a prepayment charge equal to: (a) 3.0 % of amounts prepaid, if such prepayment
occurs during the first 12 months following the Closing Date; (b) 2.0% after 12 months but prior to 24 months; (c) 1.0% after 24 months
but prior to 36 months, and (d) no charge after 36 months. Upon prepayment or repayment of all or any of the term loans under the Term
Loan Facility, the Company is required to pay an end of term charge (“End of Term Charge”) equal to 6.55% of the total aggregate
amount of the term loans being prepaid or repaid.
Interest on the term loan accrues at
a per annum rate equal to the greater of (i) the Prime Rate as reported in The Wall Street Journal plus 5.70% and (ii) 8.95%. On September
30, 2022, the Prime Rate was 6.25%. Interest expense is calculated using the effective interest method and is inclusive of non-cash amortization
of capitalized loan issuance costs. Debt issuance costs are recorded on the consolidated balance sheet as a reduction of liabilities.
Amounts allocated to the debt, net of issuance cost, are subsequently recognized at amortized cost using the effective interest method.
On September 30, 2022, the effective interest rate was 15.86%.
As of September 30, 2022, the carrying
value of the term loan consists of $15,000 principal outstanding less the unamortized debt discount and issuance costs of approximately
$212. The End of Term Charge of $983 is recognized over the life of the term loan as interest expense using the effective interest method.
The debt issuance costs have been recorded as a debt discount which are being accreted to interest expense through the maturity date
of the term loan.
Interest expense relating to the term
loan, which is included in interest expense in the condensed consolidated statements of operations was $555 and $1,504 for the three
and nine months ended September 30, 2022.
Under the terms of the Loan Agreement,
the Company granted first priority liens and security interests in substantially all of the Company’s intellectual property as
collateral for the obligations thereunder. The Company also granted Hercules the right, at their discretion, to participate in any closing
of any single subsequent broadly marketed financing as defined up to a maximum aggregate amount of $2,000 under the terms as afforded
to other investors in such financing. The Loan Agreement also contains representations and warranties by the Company and Hercules, indemnification
provisions in favor of Hercules and customary affirmative and negative covenants, including a liquidity covenant beginning October 1,
2022, requiring the Company to maintain a minimum aggregate compensating cash balance of $5,000, and events of default, including a material
adverse change in the Company’s business, payment defaults, breaches of covenants following any applicable cure period, and a material
impairment in the perfection or priority of Hercules’ security interest in the collateral. In the event of default by the Company
under the Loan Agreement, the Company may be required to repay all amounts then outstanding under the Loan Agreement.
Future principal payments for the long-term
debt are as follows:
| |
September 30, 2022 | |
2023 | |
$ | 4,333 | |
2024 | |
| 5,797 | |
2025 | |
| 4,870 | |
Total principal payments | |
| 15,000 | |
Unamortized discount and debt issuance costs | |
| (212 | ) |
Total future principal payments | |
$ | 14,788 | |
Current portion of long-term debt | |
| (2,989 | ) |
Long-term debt, net | |
$ | 11,799 | |
BIOMX
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per
share data)
(unaudited)
NOTE 5 – STOCKHOLDERS’ EQUITY
Authorized shares of common stock
On August 24, 2022, the Company’s
stockholders approved increasing the number of authorized shares of Common Stock from 60,000,000 shares, par value $0.0001 per share,
to 120,000,000 shares, par value $0.0001 per share.
At-the-market Sales Agreement:
In December 2020, pursuant to a registration
statement on Form S-3 declared effective by the Securities and Exchange Commission on December 11, 2020, the Company entered into an
Open Market Sales Agreement (“ATM Agreement”) with Jefferies LLC. (“Jefferies”), which provides that, upon the
terms and subject to the conditions and limitations in the ATM Agreement, the Company may elect, from time to time, to offer and sell
shares of Common Stock with an aggregate offering price of up to $50,000, with Jefferies acting as a sales agent. During the nine months
ended September 30, 2022, the Company sold 229,044 shares of Common Stock under the ATM Agreement, at an average price of $1.19 per share,
raising aggregate net proceeds of approximately $273, after deducting an aggregate commission of $8.
Maruho Agreement:
In October 2021, the Company entered
into a Stock Purchase Agreement with a subsidiary of Maruho Co. Ltd., (“Maruho”), a leading dermatology-focused pharmaceutical
company in Japan, pursuant to which the Company issued to Maruho 375,000 shares of Common Stock at a price of $8.00 per share for gross
proceeds of $3,000. The Company also granted Maruho a right of first offer to license its atopic dermatitis product candidate, BX005,
in Japan. The right of first offer will commence following the availability of results from the Phase 1/2 study. The Company applied
ASC 606 by analogy to the agreements. The agreements were combined into a single unit of account for the purpose of applying ASC 606.
Part of the consideration paid under the agreements, equal to the grant date fair value of the shares issued to Maruho of $1,024, was
attributed to the issuance of shares and accounted for as an increase in equity. The remainder of $1,976 was attributed to a contract
liability, to be recognized as other income, at a point in time, once the clinical trials related to the product candidate are completed.
Following the Company announcement on May 24, 2022, as mentioned in Note 7 below regarding the delaying of the Company’s atopic
dermatitis program, the contract liability was classified as a non-current liability.
CFF Agreement:
In December 2021, the Company entered
into a Securities Purchase Agreement with the Cystic Fibrosis Foundation (“CF Foundation”), an organization that historically
played a role in supporting the development of innovative therapies for patients suffering from cystic fibrosis (“CF”). Under
the terms of the agreement, the Company will receive up to $5,000 in two tranches. In the first tranche, which closed and fully received
on December 21, 2021, the CF Foundation invested $3,000 as an initial equity investment based on a share price of $2.57. Upon completion
of all patient dosing in Part 1 of the Company’s Phase 1b/2a study of BX004, the Company would have the right to receive the second
tranche of $2,000, also as an equity investment. In the event that the average closing price of the Common Stock for the ten trading
days prior to the second tranche completion is less than $2.57, the Company shall have the right in its sole discretion to waive the
second tranche payment and in such event the CF Foundation shall not have any right to receive additional shares. The Company concluded
that the second tranche is a freestanding financial instrument. The Company also concluded that since the instrument will be predominantly
settled in a variable number of shares at a fixed monetary amount, the second tranche is in the scope of ASC 480 and should be accounted
for at fair value with subsequent changes in fair value recognized in the statements of operations in each period. The Company further
determined that due to the settlement mechanism, the fair value of the second tranche is negligible, both at inception and on September
30, 2022.
BIOMX
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per
share data)
(unaudited)
NOTE 5 – STOCKHOLDERS’ EQUITY (Cont.)
|
A. |
Share Capital: (Cont.) |
Preferred Stock:
The Company is authorized to issue 1,000,000
shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from
time to time by the Company’s Board of Directors (the “Board”).
Warrants:
As of September 30, 2022, the Company
had the following outstanding warrants to purchase Common Stock issued to stockholders:
Warrant | |
Issuance Date | |
Expiration Date | |
Exercise Price Per Share | | |
Number of Shares of Common
Stock Underlying Warrants | |
Private Placement Warrants | |
IPO (December 13, 2018) | |
December 13, 2023 | |
| 11.50 | | |
| 2,900,000 | |
Public Warrants | |
IPO (December 13, 2018) | |
October 28, 2024 | |
| 11.50 | | |
| 3,500,000 | |
2021 Registered Direct Offering Warrants | |
SPA (July 28, 2021) | |
January 28, 2027 | |
| 5.00 | | |
| 2,812,501 | |
| |
| |
| |
| | | |
| 9,212,501 | |
|
B. |
Stock-based Compensation: |
On March 29, 2022, the Board of Directors
approved the grant of 1,153,500 options to 89 employees, three senior officers, one consultant, and five directors under the Company’s
2019 Equity Incentive Plan, without consideration. Options were granted at an exercise price of $1.41 per share with a vesting period
of four years. Directors and senior officers are entitled to full acceleration of their unvested options upon the occurrence of both
a change in control of the Company and the end of their engagement with the Company.
On June 26, 2022, the Board of Directors
approved the grant of 350,500 options to 53 employees, and one consultant under the Company’s 2019 Equity Incentive Plan,
without consideration. Options were granted at an exercise price of $0.66 per share with a vesting period of four years.
On August 22, 2022, the Board of Directors approved the grant
of 290,000 options to four senior officers under the Company’s 2019 Equity Incentive Plan, without consideration. Options were
granted at an exercise price of $0.66 per share with a vesting period of four years. Senior officers are entitled to full acceleration
of their unvested options upon the occurrence of both a change in control of the Company and the end of their engagement with the Company.
On September 30, 2022, the Board of Directors
approved the grant of 20,000 options to a consultant under the Company’s 2019 Equity Incentive Plan, without consideration. Options
were granted at an exercise price of $0.37 per share with a vesting period of one year.
BIOMX
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per
share data)
(unaudited)
NOTE 5 – STOCKHOLDERS’ EQUITY (Cont.)
|
B. |
Stock-based Compensation:
(Cont.) |
The fair value of each option was estimated
as of the date of grant or reporting period using the Black-Scholes option-pricing model, using the following assumptions:
| |
Nine Months Ended September 30, | |
| |
2022 | | |
2021 | |
Underlying value of Common Stock ($) | |
| 0.37-1.41 | | |
| 7.02 | |
Exercise price ($) | |
| 0.37-1.41 | | |
| 7.02 | |
Expected volatility (%) | |
| 85.3-88.4 | | |
| 85.0 | |
Expected terms of the option (years) | |
| 5.31-6.11 | | |
| 6.11 | |
Risk-free interest rate (%) | |
| 2.50-4.05 | | |
| 1.17 | |
The cost of the benefit embodied in the
options granted during the nine and three months ended September 30, 2022, based on their fair value as of at the grant date, is estimated
to be approximately $1,428 and $127, respectively. These amounts will be recognized in statements of operations over the vesting period.
|
(1) |
A summary of options granted
to purchase the Company’s Common Stock under the Company’s share option plans is as follows: |
| |
For the Nine Months Ended September 30, 2022 | |
| |
Number of Options | | |
Weighted Average Exercise
Price | | |
Aggregate Intrinsic Value | |
Outstanding at the beginning of period | |
| 4,084,549 | | |
| 3.95 | | |
| 671 | |
Granted | |
| 1,814,000 | | |
| 1.14 | | |
| | |
Forfeited | |
| (868,141 | ) | |
| 4.08 | | |
| | |
Exercised | |
| - | | |
| - | | |
| | |
Outstanding at the end of period | |
| 5,030,408 | | |
| 2.92 | | |
| 74 | |
Exercisable at the end of period | |
| 2,691,163 | | |
| | | |
| | |
Weighted average remaining contractual life of outstanding options – years as of September 30, 2022 | |
| 7.18 | | |
| | | |
| | |
BIOMX
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per
share data)
(unaudited)
NOTE 5 – STOCKHOLDERS’ EQUITY (Cont.)
|
B. |
Stock-based Compensation:
(Cont.) |
Warrants:
As of September 30, 2022, the Company
had the following outstanding compensation related warrants to purchase Common Stock:
Warrant | |
Issuance Date | |
Expiration Date | | |
Exercise Price Per Share | | |
Number of Shares of Common Stock Underlying Warrants | |
Private Warrants issued to scientific founders (see below) | |
November 27, 2017 | |
| | | |
| - | | |
| 2,974 | |
| |
| |
| | | |
| | | |
| | |
In November 2017, BiomX Israel issued 2,974 warrants to its scientific founders. The warrants were fully vested at their grant date and will expire immediately prior to a consummation of an M&A transaction. The warrants did not expire as a result of the Recapitalization Transaction and have no exercise price.
|
(2) |
The following table sets
forth the total stock-based payment expenses resulting from options granted, included in the statements of operations: |
| |
Nine Months Ended
September 30, | | |
Three Months Ended
September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Research and development expenses, net | |
| 352 | | |
| 1,539 | | |
| 104 | | |
| 581 | |
General and administrative | |
| 810 | | |
| 1,113 | | |
| 259 | | |
| 446 | |
| |
| 1,162 | | |
| 2,652 | | |
| 363 | | |
| 1,027 | |
NOTE 6 – BASIC AND DILUTED 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 shares of Common Stock outstanding during the period.
Diluted loss per share is based upon the weighted average number of shares of Common Stock and of potential shares of Common Stock outstanding
when dilutive. Potential shares of Common Stock equivalents include outstanding stock options and warrants, which are included under
the treasury stock method when dilutive. The calculation of diluted loss per share for the nine months ended September 30, 2022 does
not include 5,030,408, 9,215,475 and 4,000,000 of shares underlying options, shares underlying warrants and contingent shares, respectively,
because the effect would be anti-dilutive.
BIOMX
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per
share data)
(unaudited)
NOTE 7 – CORPORATE RESTRUCTURING
On May 24, 2022, the Company announced a Corporate
Restructuring, intended to extend the Company’s capital resources, while prioritizing the Company’s ongoing cystic fibrosis
program and delaying the Company’s atopic dermatitis program. The Corporate Restructuring included a reduction of 36 full-time
employees, two consultants and 9 part-time employees, or 42% of the Company’s employees as of such date. The Company incurred
a one-time employee benefits and severance cost of approximately $214 in operating expenses in the second quarter of 2022. Non-cash stock-based
compensation credits related to the forfeiture of stock options of approximately $125 and $376 are included in operating expenses in the
condensed consolidated statements of operations for the three and nine months ended September 30, 2022, respectively.
NOTE 8 – LEASES
In August 2022, BiomX Israel entered into a sublease agreement
for a portion of its office space in Ness Ziona, Israel. The agreement is for a period of two years beginning on August 15, 2022. The
monthly lease payments under the agreement are approximately $29. The monthly lease proceeds are recorded as other income in the condensed
consolidated statements of operations.