UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarter ended
For the transition period from to
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 10, 2023,
BIOMX INC.
FORM 10-Q FOR THE QUARTER ENDED September 30, 2023
TABLE OF CONTENTS
i
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This quarterly report on Form 10-Q, or the Quarterly Report, includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and other securities laws. The statements contained herein that are not purely historical, are forward-looking statements. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “will” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. For example, we are making forward-looking statements when we discuss our business strategy and plans, our clinical and pre-clinical development program, including timing, milestones and the design thereof, including acceptance of regulatory agencies of such design, the potential opportunities for and benefits of the BacteriOphage Lead to Treatment, or BOLT, platform, the potential of our product candidates and the sufficiency of financial resources and financial needs and ability to continue as a going concern. However, you should understand that these statements are not guarantees of performance or results, and there are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those expressed in the forward-looking statements, including, among others:
| ● | the ability to generate revenues, and raise sufficient financing to meet working capital requirements; |
| ● | our ability to continue as a going concern absent access to sources of liquidity; |
| ● | the unpredictable timing and cost associated with our approach to developing product candidates using phage technology; |
| ● | military, political and economic instability in the state of Israel, and in particular, the war situation in Israel that was declared by the security cabinet of the state of Israel; |
| ● | political and economic instability, including, without limitation, due to natural disasters or other catastrophic events, such as the Russian invasion of Ukraine and world sanctions on Russia, Belarus, and related parties, terrorist attacks, hurricanes, fire, floods, pollution and earthquakes; |
| ● | obtaining U.S. Food and Drug Administration, or FDA, acceptance of any non-U.S. clinical trials of product candidates; |
| ● | our ability to enroll patients in clinical trials and achieve anticipated development milestones when expected; |
| ● | the ability to pursue and effectively develop new product opportunities and acquisitions and to obtain value from such product opportunities and acquisitions; |
| ● | penalties and market withdrawal associated with any unanticipated problems with product candidates and failure to comply with labeling and other restrictions; |
| ● | expenses associated with compliance with ongoing regulatory obligations and successful continuing regulatory review; |
| ● | market acceptance of our product candidates and ability to identify or discover additional product candidates; |
| ● | our ability to obtain high titers for specific phage cocktails necessary for preclinical and clinical testing; |
| ● | the ability of our product candidates to demonstrate requisite, safety and efficacy for drug products, or safety, purity and potency for biologics without causing adverse effects; |
| ● | expected benefits from FDA fast track designation for our BX004 product candidate; |
ii
| ● | the success of expected future advanced clinical trials of our product candidates; |
| ● | our ability to obtain required regulatory approvals; |
| ● | delays in developing manufacturing processes for our product candidates; |
| ● | the continued impact of general economic conditions, our current low stock price and other factors on our operations, the continuity of our business, including our preclinical and clinical trials, and our ability to raise additional capital; |
| ● | competition from similar technologies, products that are more effective, safer or more affordable than our product candidates or products that obtain marketing approval before our product candidates; |
| ● | the impact of unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives on our ability to sell product candidates or therapies profitably; |
| ● | protection of our intellectual property rights and compliance with the terms and conditions of current and future licenses with third parties; |
| ● | infringement on the intellectual property rights of third parties and claims for remuneration or royalties for assigned service invention rights; |
| ● | our ability to acquire, in-license or use proprietary rights held by third parties necessary to our product candidates or future development candidates; |
| ● | ethical, legal and social concerns about synthetic biology and genetic engineering that may adversely affect market acceptance of our product candidates; |
| ● | reliance on third-party collaborators; |
| ● | our ability to attract and retain key employees or to enforce the terms of noncompetition agreements with employees; |
| ● | the failure to comply with applicable laws and regulations other than drug manufacturing compliance; |
| ● | potential security breaches, including cybersecurity incidents; and |
| ● | other factors discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, or, the 2022 Annual Report. |
For a detailed discussion of these and other risks, uncertainties and factors, see Part I, Item 1A “Risk Factors” of our 2022 Annual Report and Part II, Item 1A “Risk Factors” in this Quarterly Report. All forward-looking statements contained in this Quarterly Report speak only as of the date hereof. Except as required by law, we are under no duty to (and expressly disclaim any such obligation to) update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report. Comparisons of results between current and prior periods are not intended to express any future trends, or indications of future performance, and should be viewed only as historical data.
iii
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
1
BIOMX INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(USD in thousands, except share and per share data)
(unaudited)
| As of | ||||||||||
| Note | September 30, 2023 | December 31, 2022 | ||||||||
| ASSETS | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | ||||||||||
| Restricted cash | ||||||||||
| Short-term deposits | ||||||||||
| Other current assets | 4 | |||||||||
| Total current assets | ||||||||||
| Non-current assets | ||||||||||
| Operating lease right-of-use assets | ||||||||||
| Property and equipment, net | ||||||||||
| Total non-current assets | ||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-1
BIOMX INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(USD in thousands, except share and per share data)
(unaudited)
| As of | ||||||||||
| Note | September 30, 2023 | December 31, 2022 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| Current liabilities | ||||||||||
| Trade accounts payable | ||||||||||
| Current portion of lease liabilities | ||||||||||
| Other accounts payable | 5 | |||||||||
| Current portion of long-term debt | 7 | |||||||||
| Total current liabilities | ||||||||||
| Non-current liabilities | ||||||||||
| Contract liability | ||||||||||
| Long-term debt, net of current portion | 7 | |||||||||
| Operating lease liabilities, net of current portion | ||||||||||
| Other liabilities | ||||||||||
| Total non-current liabilities | ||||||||||
| Commitments and Contingencies | 6 | |||||||||
| Stockholders’ equity | 8 | |||||||||
| Preferred Stock, $ | ||||||||||
| Common Stock, $ | ||||||||||
| Additional paid in capital | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| Total stockholders’ equity | ||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
BIOMX INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(USD in thousands, except share and per share data)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
| Note | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| Research and development (“R&D”) expenses, net | ||||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||||
| General and administrative expenses | ||||||||||||||||||
| Operating loss | ||||||||||||||||||
| Other income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest expenses | ||||||||||||||||||
| Finance income, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss before tax | ||||||||||||||||||
| Tax expenses | ||||||||||||||||||
| Net loss | ||||||||||||||||||
| 9 | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
BIOMX INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(USD in thousands, except share and per share data)
(unaudited)
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance as of January 1, 2023 | ( | ) | ||||||||||||||||||
| Issuance of Common Stock and warrants under Private Investment in Public Equity (“PIPE”), net of $ | ||||||||||||||||||||
| Stock-based compensation expenses | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of March 31, 2023 | ( | ) | ||||||||||||||||||
| Issuance of Common Stock and warrants under PIPE, net of $ | ||||||||||||||||||||
| Stock-based compensation expenses | - | |||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance as of June 30, 2023 | ( | ) | ||||||||||||||||||
| Stock-based compensation expenses | - | - | ||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||
| Balance as of September 30, 2023 | ( | ) | ||||||||||||||||||
| (*) |
| (**) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
BIOMX INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(USD in thousands, except share and per share data)
(unaudited)
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance as of January 1, 2022 | ( | ) | ||||||||||||||||||
| Issuance of Common Stock under Open Market Sales Agreement, net of $ | ||||||||||||||||||||
| Stock-based compensation expenses | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of March 31, 2022 | ( | ) | ||||||||||||||||||
| Stock-based compensation expenses | - | |||||||||||||||||||
| Proceeds on account of shares | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2022 | ( | ) | ||||||||||||||||||
| Stock-based compensation expenses | - | |||||||||||||||||||
| Issuance of Common Stock under Open Market Sales Agreement net of $ | ||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance as of September 30, 2022 | ( | ) | ||||||||||||||||||
| (*) | Less than $1. |
| (**) | See Note 8A. |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
BIOMX INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(USD in thousands, except share and per share data)
(unaudited)
For the Nine Months Ended | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS – OPERATING ACTIVITIES | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments required to reconcile cash flows used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Amortization of debt issuance costs | ||||||||
| Finance income, net | ( | ) | ( | ) | ||||
| Changes in other liabilities | ( | ) | ( | ) | ||||
| Capital loss, net | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Other current assets | ||||||||
| Trade accounts payable | ( | ) | ||||||
| Other accounts payable | ( | ) | ||||||
| Net change in operating leases | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS – INVESTING ACTIVITIES | ||||||||
| Investment in short-term deposits | ( | ) | ||||||
| Proceeds from short-term deposits | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from sale of property and equipment | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS – FINANCING ACTIVITIES | ||||||||
| Issuance of Common Stock under Open Market Sales Agreement, net of issuance costs | ||||||||
| Proceeds on account of shares of Common Stock | ||||||||
| Issuance of Common Stock and warrants under PIPE | ||||||||
| Issuance costs from PIPE | ( | ) | ||||||
| Repayment of long-term debt | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Decrease in cash and cash equivalents and restricted cash | ( | ) | ( | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | ( | ) | ||||||
| Cash and cash equivalents and restricted cash at the beginning of the period | ||||||||
| Cash and cash equivalents and restricted cash at the end of the period | ||||||||
| Reconciliation of amounts on consolidated balance sheets | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Total cash and cash equivalents and restricted cash | ||||||||
| Supplemental disclosures of cash flow information | ||||||||
| Cash paid for interest | ||||||||
| Taxes paid | ||||||||
| Property and equipment purchases included in accounts payable | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-6
BIOMX INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per share data)
(unaudited)
NOTE 1 – GENERAL
General information
BiomX Inc., (individually, and together with its subsidiaries, BiomX Ltd, (“BiomX Israel”) 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 October 29, 2019, the Company merged
with BiomX Israel, who survived the merger as a wholly owned subsidiary of BiomX Inc. The Company acquired all outstanding shares of BiomX
Israel. In exchange, shareholders of BiomX Israel received
Since June 5, 2023, such registered warrants are quoted on the Over-the-Counter Market under the symbol PHGEW.
BiomX is developing both natural and engineered phage cocktails designed to target and destroy harmful bacteria in chronic diseases, focusing its efforts on cystic fibrosis and to a lesser degree on atopic dermatitis. BiomX discovers and validates proprietary bacterial targets and customizes phage compositions against these targets. The Company’s headquarters are located in Ness Ziona, Israel.
Going concern
The Company has incurred significant
losses and negative cash flows from operations and incurred an accumulated deficit of $
F-7
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, 2022, that the Company filed with the U.S. Securities and Exchange Committee (the “SEC”) on March 29, 2023. The year-end balance sheet data was derived from the audited consolidated financial statements as of December 31, 2022.
| 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.
| D. | Recent Accounting Standards |
Recently adopted accounting pronouncements
In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-13, “Financial Instruments—Credit Losses—Measurement of Credit Losses on Financial Instruments.” This guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance will be effective for smaller reporting companies (as defined by the rules under the Securities Exchange Act of 1934, as amended) for the fiscal year beginning on January 1, 2023, including interim periods within that year. The Company adopted the guidance on January 1, 2023, and has concluded that the adoption did not have a material impact on its consolidated financial statements.
NOTE 3 – 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, 2023 and year ended December 31, 2022.
F-8
BIOMX INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per share data)
(unaudited)
NOTE 3 – FAIR VALUE OF FINANCIAL INSTRUMENTS (Cont.)
| September 30, 2023 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| Assets: | ||||||||||||||||
| Cash equivalents: | ||||||||||||||||
| Money market funds | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Contingent consideration | ||||||||||||||||
| Foreign exchange contracts payable | ||||||||||||||||
| December 31, 2022 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| Assets: | ||||||||||||||||
| Cash equivalents: | ||||||||||||||||
| Money market funds | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Contingent consideration | ||||||||||||||||
| Foreign exchange contracts payable | ||||||||||||||||
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
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 Finance income, net in the condensed consolidated statements of operations.
As of September 30, 2023, the Company had outstanding foreign exchange contracts for the exchange of USD to NIS in the amount of approximately
$
F-9
BIOMX INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per share data)
(unaudited)
NOTE 4 – OTHER CURRENT ASSETS
| September 30, 2023 | December 31, 2022 | |||||||
| Government institutions | ||||||||
| Prepaid insurance | ||||||||
| Other prepaid expenses | ||||||||
| Grants receivables | ||||||||
| Other | ||||||||
| Other current assets | ||||||||
NOTE 5 – OTHER ACCOUNTS PAYABLE
| September 30, 2023 | December 31, 2022 | |||||||
| Employees and related institutions | ||||||||
| Accrued expenses | ||||||||
| Government institutions | ||||||||
| Deferred fees from collaboration agreements and prepaid sublease income | ||||||||
| Other | ||||||||
NOTE 6 – 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
In August 2021, the IIA approved an application that supports upgrading the Company’s manufacturing capabilities for an aggregate budget of NIS
In March 2022, the IIA approved an application for a total budget of NIS
In March 2023, the IIA approved an application for a total budget of NIS |
F-10
BIOMX INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per share data)
(unaudited)
NOTE 6 – COMMITMENTS AND CONTINGENCIES (Cont.)
According to the agreement with the IIA,
excluding the August 2021 program, BiomX Israel will pay royalties of
Through September 30, 2023, total grants
approved from the IIA aggregated to approximately $
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 the 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 IBD. Under the agreement, BiomX Israel is eligible to receive fees totaling $ |
F-11
BIOMX INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per share data)
(unaudited)
NOTE 7 – 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 $
The Company may prepay advances under
the Loan Agreement, in whole or in part, at any time subject to a prepayment charge equal to:
Interest on the term loan accrues at a
per annum rate equal to the greater of
As of September 30, 2023, the carrying
value of the term loan consists of $
Interest expense relating to the term
loan, which is included in Interest expenses in the condensed statements of operations, was $
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 $
| September 30, 2023 | ||||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| Total principal payments | ||||
| Unamortized discount, debt issuance costs and accretion of End of Term Charge | ||||
| Total future principal payments | $ | |||
| Current portion of long-term debt | ( | ) | ||
| Long-term debt, net | $ | |||
F-12
BIOMX INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per share data)
(unaudited)
NOTE 8 – STOCKHOLDERS EQUITY
| A. | Share Capital: |
Private Investment in Public Equity:
On February 22, 2023, the Company entered
into a Securities Purchase Agreement to issue and sell an aggregate of
The exercise of the outstanding Pre-Funded
Warrants is subject to a beneficial ownership limitation between
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 (subsequently reduced to $
F-13
BIOMX INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per share data)
(unaudited)
NOTE 8 – STOCKHOLDERS EQUITY (Cont.)
| A. | Share Capital: (Cont.) |
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 $
Preferred Stock:
The Company is authorized to issue
Warrants:
| Warrant | Issuance Date | Expiration Date | Exercise Price Per Share | Number of Shares of Common Stock Underlying Warrants | ||||||||
| Private Placement Warrants | ||||||||||||
| Public Warrants | ||||||||||||
| 2021 Registered Direct Offering Warrants | ||||||||||||
| Pre-Funded Warrants | - | |||||||||||
| Pre-Funded Warrants | - | |||||||||||
| B. | Stock-based Compensation: |
On August 21, 2023, the Board of Directors
approved the grant of
On March 1, 2023, the Board of Directors
approved the grant of
F-14
BIOMX INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per share data)
(unaudited)
NOTE 8 – STOCKHOLDERS EQUITY (Cont.)
| B. | Stock-based Compensation: (Cont.) |
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Underlying value of Common Stock ($) | ||||||||
| Exercise price ($) | ||||||||
| Expected volatility (%) | ||||||||
| Expected terms of the option (years) | ||||||||
| Risk-free interest rate (%) | ||||||||
The cost of the benefit embodied in the
options granted during the nine months ended September 30, 2023, based on their fair value as of the grant date, is estimated to be approximately
$
| (1) |
| For the Nine Months Ended September 30, 2023 | ||||||||||||
| Number of Options | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Outstanding at the beginning of period | $ | $ | ||||||||||
| Granted | $ | |||||||||||
| Forfeited | ( | ) | $ | |||||||||
| Expired | ( | ) | $ | |||||||||
| Exercised | $ | |||||||||||
| Outstanding at the end of period | $ | $ | ||||||||||
| Exercisable at the end of period | $ | |||||||||||
| Weighted average remaining contractual life of outstanding options – years as of September 30, 2023 | ||||||||||||
F-15
BIOMX INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per share data)
(unaudited)
NOTE 8 – STOCKHOLDERS EQUITY (Cont.)
| B. | Stock-based Compensation: (Cont.) |
Warrants:
| 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) | ||||||||||||||
| In November 2017, BiomX Israel issued |
| (2) |
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Research and development expenses, net | ||||||||||||||||
| General and administrative | ||||||||||||||||
F-16
BIOMX INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per share data)
(unaudited)
NOTE 9 – 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, fully
vested warrants with no exercise price for the Company’s Common Stock and fully vested Pre-Funded Warrants for the Company’s
Common Stock at an exercise price of $
NOTE 10 – SUBSEQUENT EVENTS
| A. | On October 7, 2023, an unprecedented attack was launched against Israel, following which the Israeli Government declared that the Security Cabinet of the State of Israel approved a war situation in Israel. BiomX is continuing its clinical operations in Israel and globally and, at this time, does not expect this situation to have a material impact on its ability to continue its business, including preclinical and clinical trials, and its ability to raise additional capital. BiomX cannot currently predict the intensity or duration of the war, nor can it predict how this war will ultimately affect Israel's economy in general, and BiomX continues to monitor the situation closely and examine the potential disruptions that could adversely affect its operations. | |
| B. | On October 19, 2023, the Board of Directors approved the grant of | |
| C. | On October 29, 2023, the Board of Directors approved the grant of |
| D. | On October 29, 2023, the Board of Directors approved resolutions concerning options previously granted under the Company’s incentive equity plans as follows: |
| 1. | A reduction in the exercise price of each outstanding option
to purchase shares of the Company’s Common Stock currently held by employees of BiomX with an original exercise price above $ |
| 2. | An exchange of all outstanding stock options under the 2019
Plan that have an exercise price of $ |
F-17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this Quarterly Report to “the Company”, “BiomX”, “we”, “us” or “our”, mean BiomX Inc. and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
General
We are a clinical stage product discovery company developing products using both natural and engineered phage technologies designed to target and kill specific harmful bacteria associated with chronic diseases, such as cystic fibrosis, or CF. Bacteriophage or phage are bacterial, species-specific, strain-limited viruses that infect, amplify and kill the target bacteria and are considered inert to mammalian cells. By utilizing proprietary combinations of naturally occurring phage and by creating novel phage using synthetic biology, we develop phage-based therapies intended to address both large-market and orphan diseases.
In our therapeutic programs, we focus on using phage therapy to target specific strains of pathogenic bacteria that are associated with diseases. Our phage-based product candidates are developed utilizing our proprietary research and development platform named BOLT. The BOLT platform is unique, employing cutting edge methodologies and capabilities across disciplines including computational biology, microbiology, synthetic engineering of phage and their production bacterial hosts, bioanalytical assay development, manufacturing and formulation, to allow agile and efficient development of natural or engineered phage combinations, or cocktails. The cocktail contains phage with complementary features and is optimized for multiple characteristics such as broad target host range, ability to prevent resistance, biofilm penetration, stability and ease of manufacturing.
Our goal is to develop multiple products based on the ability of phage to precisely target harmful bacteria and on our ability to screen, identify and combine different phage, both naturally occurring and created using synthetic engineering, to develop these treatments.
On May 24, 2022, we announced a corporate restructuring, or the Corporate Restructuring, whereby we announced that we plan to prioritize the CF program and delay the Company’s atopic dermatitis, or AD, program. The Corporate Restructuring was intended to extend the Company’s capital resources and included the laying off of approximately 42% of our employees.
Clinical and Pre-Clinical Developments
Ongoing Programs
Cystic Fibrosis
BX004 is our therapeutic phage product candidate under development for chronic pulmonary infections caused by Pseudomonas aeruginosa, or P. aeruginosa, a main contributor to morbidity and mortality in patients with CF. Enhanced resistance to antibiotics develops, particularly in CF patients, due to extensive drug use consisting of prolonged and repeated broad-spectrum antibiotic courses often beginning in childhood, and leading to the appearance of multidrug-resistant strains. In preclinical in vitro studies, BX004 was shown to be active against antibiotic resistant strains of P. aeruginosa and demonstrated the ability to penetrate biofilm, an assemblage of surface associated microbial cells enclosed in an extracellular polymeric substance and one of the leading causes for antibiotic resistance.
The Phase 1b/2a trial in CF patients with chronic respiratory infections caused by P. aeruginosa. is comprised of two parts. The study design is based on recommendations from the Cystic Fibrosis Therapeutic Development Network.
In February 2023, we announced positive results from Part 1 of the Phase 1b/2a trial evaluating BX004. Part 1 evaluated the safety, tolerability, pharmacokinetics and microbiologic activity of BX004 over a 7-day treatment period in nine CF patients (7 on BX004, 2 on placebo) with chronic P. aeruginosa pulmonary infection in a single ascending dose and multiple dose design. Results from Part 1 of the Phase 1b/2a trial included the following findings: No safety events related to treatment with BX004 occurred; Mean P. aeruginosa colony forming units (CFU) at Day 15 (compared to baseline): -1.42 log (BX004) vs. -0.28 log (placebo). This reduction was seen on top of standard of care inhaled antibiotics; Phage were detected in all patients treated with BX004 during the dosing period, including in several patients up to Day 15 (one week after end of therapy); no phage were detected in patients receiving placebo; there was no emerging resistance to BX004 during or after treatment with BX004; and there was no detectable effect on % predicted FEV1 (Forced Expiratory Volume in 1 second).
Part 2 of the Phase 1b/2a trial is designed to evaluate the safety and efficacy of BX004 in at least 24 CF patients randomized to a treatment or placebo cohort in a 2:1 ratio. In October 2023, we announced the completion of patient dosing in Part 2 of the Phase 1b/2a trial evaluating BX004. Results from Part 2 are expected in November 2023.
2
In August 2023, the FDA granted BX004 Fast Track designation for the treatment of chronic respiratory infections caused by P. aeruginosa bacterial strains in patients with CF. The FDA’s Fast Track designation is a process designed to facilitate the development and expedite the review of drugs to treat serious conditions and address significant unmet medical needs. The FDA defines addressing a significant unmet medical need as providing a therapy where none exists or providing a therapy which may be potentially better than available therapies. The benefits of Fast Track designation include but are not limited to early and frequent communication with the FDA throughout the entire drug development and review process. In addition, a drug with Fast Track designation is eligible for rolling submission and priority review of its Biologics License Application and/or New Drug Application. These assure that questions and issues are resolved quickly, often leading to earlier drug approval and access by patients.
Atopic Dermatitis
BX005 is our topical phage product candidate targeting Staphylococcus aureus, or S. aureus, a bacterium associated with the development and exacerbation of inflammation in AD. S. aureus is more abundant on the skin of AD patients than on the skin of healthy individuals and on lesional skin than nonlesional skin. It also increases in abundance, becoming the dominant bacteria, when patients experience flares. By reducing the load of S. aureus, BX005 is designed to shift the skin microbiome composition to its ‘pre-flare’ state and potentially provide a clinical benefit. In preclinical in vitro studies, BX005 was shown to eradicate over 90% of strains, including antibiotic resistant strains, from a panel of S. aureus strains (120 strains isolated from skin of subjects from the U.S. and Europe). On March 31, 2021, we announced the selection of the phage cocktail for BX005. On April 8, 2022, the FDA approved our investigational new drug application for BX005.
We are currently supporting a range of pre-clinical activities to move this program forward and working on evaluating timelines for a clinical trial.
Programs on hold
Inflammatory Bowel Disease and Primary Sclerosing Cholangitis
In November 2020, we combined our inflammatory bowel disease and primary sclerosing cholangitis programs to create a single product candidate called BX003, which targets K. pneumoniae to treat both diseases. Previously, we had separate candidates named BX002 and BX003. In February 2021, a Phase 1a pharmacokinetic study of BX002 demonstrated that it was safe and well-tolerated with no serious adverse events, and with high concentrations of viable phage delivered to the gastrointestinal tract.
On November 15, 2021, we announced that we paused development efforts for BX003 due to prioritizing resources towards our CF and AD programs, and we cannot currently provide guidance on resuming its development.
Colorectal Cancer
For our CRC program, we are exploring phage mediated delivery of therapeutic payloads to Fusobacterium nucleatum bacteria residing in the tumors of patients with colorectal cancer.
On November 15, 2021, we announced that we have paused development efforts for this program due to prioritizing resources toward our CF and AD programs, and we cannot provide guidance on resuming its development.
3
Consolidated Results of Operations
Comparison of the Three Months Ended September 30, 2023 and 2022
The following table summarizes our consolidated results of operations for the three months ended September 30, 2023 and 2022:
| Three Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| USD in thousands | ||||||||
| Research and development (“R&D”) expenses, net | 5,641 | 3,536 | ||||||
| Amortization of intangible assets | - | 380 | ||||||
| General and administrative expenses | 2,154 | 2,633 | ||||||
| Operating loss | 7,795 | 6,549 | ||||||
| Other income | (89 | ) | (52 | ) | ||||
| Interest expenses | 574 | 555 | ||||||
| Finance income, net | (382 | ) | (280 | ) | ||||
| Loss before tax | 7,898 | 6,772 | ||||||
| Tax expenses | 8 | 8 | ||||||
| Net loss | 7,906 | 6,780 | ||||||
| Basic and diluted loss per share of Common Stock | 0.13 | 0.23 | ||||||
| Weighted average number of shares of Common Stock outstanding, basic and diluted | 60,587,718 | 29,907,812 | ||||||
R&D expenses, net (net of grants received from the IIA, and consideration from research collaborations) were $5.6 million for the three months ended September 30, 2023, compared to $3.5 million for the three months ended September 30, 2022. The increase of $2.1 million, or 60%, is primarily due to an increase in expenses related to conducting the clinical trial of our CF product candidate, BX004. Such increase was partly offset by a decrease in salaries and stock-based compensation expenses due to a workforce reduction, as well as the appreciation of the U.S. dollar against the NIS, which led to reduced salaries and related expenses in our Israeli subsidiary. We recorded $0.2 million of IIA grants during each of the three months ended September 30, 2023 and 2022.
Amortization of intangible assets ended on December 31, 2022 as the intangible asset was fully amortized.
General and administrative expenses were $2.2 million for the three months ended September 30, 2023, compared to $2.6 million for the three months ended September 30, 2022. The decrease of $0.4 million, or 15%, is primarily due to a decrease in the Company’s directors’ and officers’ insurance premium and a decrease in professional services expenses.
Other income was $89,000 for the three months ended September 30, 2023, compared to $52,000 for the three months ended September 30, 2022. The increase of $37,000, or 71%, is due to higher proceeds from a sub-lease agreement for a portion of our office space in Ness Ziona, Israel which started in August 2022.
Interest expenses were $0.6 million for each of the three months ended September 30, 2023 and September 30, 2022 and consisted of interest payments incurred under our loan from Hercules Capital, Inc., or the Hercules Loan, entered into in August 2021.
Finance income, net was $0.4 million for the three months ended September 30, 2023, compared to $0.3 for the three months ended September 30, 2022. The increase of $0.1 million, or 33%, is due to rising interest rates, partially offset by the appreciation of the U.S. dollar against the NIS.
4
Basic and diluted loss per share of Common Stock was $0.13 for the three months ended September 30, 2023, compared to $0.23 for the three months ended September 30, 2022. The decrease in diluted loss per share of $0.1, or 43%, is due mainly to the increase in outstanding shares resulting from the first and second closings of the PIPE in February 2023 and May 2023.
Comparison of the Nine Months Ended September 30, 2023 and 2022
The following table summarizes our consolidated results of operations for the nine months ended September 30, 2023 and 2022:
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| USD in thousands | ||||||||
| R&D expenses, net | 14,023 | 13,049 | ||||||
| Amortization of intangible assets | - | 1,139 | ||||||
| General and administrative expenses | 6,053 | 7,471 | ||||||
| Operating loss | 20,076 | 21,659 | ||||||
| Other income | (270 | ) | (52 | ) | ||||
| Interest expenses | 1,884 | 1,504 | ||||||
| Finance income, net | (1,034 | ) | (706 | ) | ||||
| Loss before tax | 20,656 | 22,405 | ||||||
| Tax expenses | 22 | 26 | ||||||
| Net loss | 20,678 | 22,431 | ||||||
| Basic and diluted loss per share of Common Stock | 0.43 | 0.75 | ||||||
| Weighted average number of shares of Common Stock outstanding, basic and diluted | 48,196,566 | 29,812,542 | ||||||
R&D expenses, net (net of grants received from the IIA, and considerations from research collaborations) were $14.0 million for the nine months ended September 30, 2023, compared to $13.0 million for the nine months ended September 30, 2022. The increase of $1.0 million, or 8%, is primarily due to increased expenses related to conducting the clinical trial of our CF product candidate, BX004. Such increase was partially offset by a decrease in salaries and related expenses and stock-based compensation expenses, mainly due to a workforce reduction resulting from the Corporate Restructuring ,as well as, the appreciation of the U.S. dollar against the NIS, which led to reduced salaries and related expenses in our Israeli subsidiary, and due to the delay in pre-clinical and clinical activities related to our AD product candidate, BX005. We recorded $0.9 million of IIA grants during each of the nine months ended September 30, 2023 and 2022.
General and administrative expenses were $6.1 million for the nine months ended September 30, 2023, compared to $7.5 million for the nine months ended September 30, 2022. The decrease of $1.4 million, or 19%, is primarily due to a decrease in the Company’s directors’ and officers’ insurance premium and due to a decrease in stock-based compensation and professional services expenses.
Other income was $270,000 for the nine months ended September 30, 2023, compared to $52,000 for the nine months ended September 30, 2022. The increase of $218,000, or 419% is due to higher proceeds from a sub-lease agreement for a portion of our office space in Ness Ziona, Israel, which started in August 2022.
Interest expenses were $1.9 million for the nine months ended September 30, 2023, compared to $1.5 for the nine months ended September 30, 2022. The increase of $0.4 million, or 27%, is due to increasing interest rates under the Hercules Loan.
Finance income, net was $1.0 million for the nine months ended September 30, 2023, compared to $0.7 million for the nine months ended September 30, 2022. The increase of $0.3 million, or 43%, can be attributed primarily to the higher interest rates, leading to an increase in interest income. Such increase was partially offset by the appreciation of the U.S. dollar against the NIS.
Basic and diluted loss per share of Common Stock was $0.43 for the nine months ended September 30, 2023, compared to $0.75 for the nine months ended September 30, 2022. The decrease in diluted loss per share of $0.32, or 43%, is due mainly to the increase in outstanding shares resulting from the first and second closings of the PIPE in February 2023 and May 2023, as well as a decrease in our operating loss.
5
Liquidity and Capital Resources
We believe our cash and cash equivalents and short-term deposits on hand will be sufficient to meet our working capital and capital expenditure requirements only into the third quarter of 2024. In the past, we revised our operating plans in order to reduce expenses including the Corporate Restructuring, which significantly reduced our expenses related to employees, and, subleasing a portion of our office space in Ness Ziona, Israel. We currently plan to continue to focus primarily on BX004, our product candidate for CF and continue our efforts to advance the development plan of BX005, our product candidate for AD. In the future we expect to require or desire additional funds to support our operating expenses, capital requirements, resumption of our development plans for BX003 or our development plan in CRC or for other purposes. Accordingly, we are exploring and expect to further explore, raising such additional funds through public or private equity, debt financings, loans, governmental or other grants or collaborative agreements or from other sources, as well as under the ATM Agreement discussed below or other similar agreements. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited. If there are increases in operating costs for facilities expansion, research and development and clinical activity, we will need to use mitigating actions such as to seek additional financing or postpone expenses that are not based on firm commitments. As a result of our recurring losses from operations, negative cash flows and lack of liquidity, management is of the opinion that there is substantial doubt as to the Company’s ability to continue as a going concern. If we are unable to raise the requisite funds, we will need to curtail or cease operations.
Cash Flows
The following table summarizes our sources and uses of cash for the nine months ended September 30, 2023 and 2022:
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| USD in thousands | ||||||||
| Net cash used in operating activities | (15,044 | ) | (21,924 | ) | ||||
| Net cash provided by (used in) investing activities | 1,957 | (3,575 | ) | |||||
| Net cash provided by financing activities | 4,223 | 292 | ||||||
| Net decrease in cash and cash equivalents | (8,864 | ) | (25,207 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | (37 | ) | 139 | |||||
Operating Activities
Net cash used in operating activities for the nine months ended September 30, 2023 was $15.0 million primarily due to a net loss of $20.7 million, mostly due to our R&D and general and administrative expenses, and due to changes in our operating assets and liabilities of $4.2 million, offset by non-cash charges of $1.4 million. Non-cash charges for the nine months ended September 30, 2023 consisted primarily of depreciation and amortization expenses of $0.7 million, stock-based compensation expenses of $0.6 million and amortization of debt issuance costs of $0.4 million partly offset by finance income of $0.3 million. Net changes in our operating assets and liabilities consisted primarily of an increase in other account payables of $3.3 million, due to expenses related to conducting the clinical trial of our CF product candidate, BX004, and an increase in trade account payables of $0.2 million, partially offset by a decrease in other current assets in the amount of $0.7 million.
Net cash used in operating activities for the nine months ended September 30, 2022 was $21.9 million primarily due to a net loss of $22.4 million, mostly due to our R&D and general and administrative expenses, and due to changes in our operating assets and liabilities of $2.8 million, offset by non-cash charges of $3.3 million. Non-cash charges for the nine months ended September 30, 2022 consisted primarily of depreciation and amortization expenses of $1.9 million and stock-based compensation expenses of $1.2 million. Net changes in our operating assets and liabilities consisted primarily of a decrease in trade accounts payable of $1.0 million, other accounts payable of $3.4 million and a net change in operating leases in the amount of $0.9 million, partially offset by an increase in other current assets in the amount of $2.5 million.
6
Investing Activities
During the nine months ended September 30, 2023, net cash provided by investing activities was $2.0 million, mainly consisting of proceeds from short-term deposits of $2.0 million.
During the nine months ended September 30, 2022, net cash provided by investing activities was $3.6 million, as a result of the net change in investment in short-term deposits of $3.5 million.
We have invested, and plan to continue to invest, our existing cash in short-term investments in accordance with our investment policy. These investments may include money market funds and investment securities consisting of U.S. Treasury notes, and high quality, marketable debt instruments of corporations and government sponsored enterprises. We use foreign exchange contracts (mainly option and forward contracts) to hedge balance sheet items from currency exposure. These foreign exchange contracts are not designated as hedging instruments for accounting purposes. In connection with these foreign exchange contracts, we record gains or losses that offset the revaluation of the balance sheet items under Finance income, net in our condensed consolidated statements of operations. As of September 30, 2023, we had outstanding foreign exchange contracts for the exchange of USD to NIS in the amount of approximately $3.8 million with a fair value of $0.03 million. As of September 30, 2022, we had outstanding foreign exchange contracts for the exchange of USD to NIS in the amount of approximately $2.5 million with a fair value of $0.07 million.
Financing Activities
During the nine months ended September 30, 2023, net cash provided by financing activities was $4.2 million, mainly consisting of the issuance of Common Stock in the first and second closings of the PIPE of $7.2 million net of issuance costs, partially offset by the repayment of long-term debt of $2.9 million under the Loan Agreement.
During the nine months ended September 30, 2022, net cash provided by financing activities was $0.3 million, mainly due to issuances of Common Stock pursuant to the Open Market Sales Agreement referred to below.
In December 2020, pursuant to a registration statement on Form S-3 declared effective by the Securities and Exchange Commission on December 11, 2020, we entered into an Open Market Sales Agreement, or the ATM Agreement, with Jefferies LLC, or Jefferies, which provides that, upon the terms and subject to the conditions and limitations in the ATM Agreement, we may elect, from time to time, to offer and sell shares of Common Stock having an aggregate offering price of up to $50,000,000 (subsequently reduced to $19,950,000) through Jefferies acting as sales agent. We are not obligated to make any sales of Common Stock under the ATM Agreement. From January 1, 2023 through November 10, 2023, we did not issue any shares of Common Stock under the ATM Agreement. We may continue to sell shares under the ATM Agreement and otherwise use our effective shelf registration statement to raise additional funds from time to time.
Under the Loan Agreement, we have a Term Loan Facility, available in three tranches, subject to certain terms and conditions. The first tranche of $15.0 million was advanced to us 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 $10.0 million (“the second tranche”), would have become available, and upon the occurrence of specified milestones and continuing through September 30, 2023, a loan in the aggregate principal amount of up to $5.0 million (“the third tranche”), may have become available. The milestones for the second and third tranches were not reached and have expired. We were required to make interest only payments through March 1, 2023, and started to then repay the principal balance and interest in equal monthly installments through September 1, 2025. Interest on the Hercules 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, 2023, the Prime Rate was 8.5% and the effective interest rate was 19.39%.
7
Under the terms of the Loan Agreement, we granted first priority liens and security interests in substantially all of our intellectual property as collateral for the obligations thereunder. We 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 $2.0 million under the terms as afforded to other investors in such financing. The Loan Agreement also contains representations and warranties by us and Hercules, indemnification provisions in favor of Hercules and customary affirmative and negative covenants, including a liquidity covenant beginning October 1, 2022, requiring us to maintain a minimum aggregate compensating cash balance of $5.0 million, and events of default. In the event of default by us under the Loan Agreement, we may be required to repay all amounts then outstanding under the Loan Agreement. As of September 30, 2023, we believe we were in compliance with all covenants under the Loan Agreement.
On February 22, 2023, we entered into a Securities Purchase Agreement to issue and sell an aggregate of 15,997,448 shares of our Common Stock and 14,610,714 Pre-Funded Warrants at a price of $0.245 per share and $0.244 per Pre-Funded Warrant, through the PIPE. The gross proceeds from this offering were approximately $7.5 million, before deducting issuance costs. The financing closed in two parts. The first closing, which covered 3,199,491 shares of Common Stock and 2,776,428 Pre-Funded Warrants for gross proceeds of approximately $1.5 million, occurred on February 27, 2023. Such Pre-Funded Warrants became exercisable on February 27, 2023, at an exercise price of $0.001 per share of Common Stock and have no expiration date. In the first closing, we raised net proceeds of approximately $1.3 million, after deducting issuance costs of $0.2 million. The second closing for the remaining Securities was contingent upon approval of the issuance of the additional securities under the Securities Purchase Agreement by our stockholders in accordance with NYSE American rules, which occurred on April 24, 2023. The second closing, which covered 12,797,957 shares of Common Stock and 11,834,286 Pre-Funded Warrants occurred on May 4, 2023. In the second closing, we raised net proceeds of approximately $5.9 million, after deducting issuance costs of $0.2 million.
Outlook
We have accumulated a deficit of $157.5 million since our inception. To date, we have not generated revenue from our operations and we do not expect to generate any significant revenues from sales of products in the next twelve months. Our cash needs may increase in the foreseeable future. We expect to generate revenues, from the sale of licenses to use our technology or products, but in the short and medium terms any amounts generated are unlikely to exceed our costs of operations. According to our estimates and based on our current operating plans, our liquidity resources as of September 30, 2023, which consisted primarily of cash, cash equivalents, short-term deposits and restricted cash of approximately $23.4 million will be sufficient to fund our operations only into the third quarter of 2024.
8
Consistent with our ongoing R&D activities, we expect to continue to incur additional losses in the foreseeable future. To the extent we require funds above our existing liquidity resources in the medium and long term, we plan to fund our operations, as well as other development activities relating to additional product candidates, through future issuances of public or private equity, including under our ATM Agreement or similar agreements, issuance of debt securities, loans, and possibly additional grants from the IIA or other government or non-profit institutions. Our 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 our securities, which itself is subject to a number of development and business risks and uncertainties, as well as the uncertainty that we would be able to raise such additional capital at a price or on terms that are favorable to us.
We entered into forward and option contracts to hedge against the risk of overall changes in future cash flow from payments of salaries and related expenses, as well as other expenses denominated in NIS, for a period of less than one year.
As of September 30, 2023, we had outstanding foreign exchange contracts for the exchange of USD to NIS in the amount of approximately $3.8 million. As of September 30, 2022, we had outstanding foreign exchange contracts in the amount of approximately $2.5 million.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to make disclosures under this Item.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, conducted an evaluation, as of the end of the period covered by this Quarterly Report, of the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of September 30, 2023.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting, as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the quarter ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
9
PART II - OTHER INFORMATION
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the 2022 Annual Report, which could materially affect our business, financial condition or future results.
There have been no material changes from the risk factors previously disclosed in the 2022 Annual Report, except as noted below.
Our financial statements contain an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern, which could prevent us from obtaining new financing on reasonable terms or at all.
We have concluded that there is substantial doubt about our ability to continue as a going concern. We have accumulated a deficit of $157.5 million since our inception. To date, we have not generated revenue from our operations and we do not expect to generate any significant revenues from sales of products in the next twelve months. Our cash needs may increase in the foreseeable future. As of September 30, 2023, we had $23.4 million of cash and cash equivalents, including amounts we received as a loan from Hercules.
As discussed in Note 1 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, based on these challenges, we have concluded that there is substantial doubt about our ability to continue as a going concern for at least one year after the date of issuance of these financial statements, or November 14, 2024. Our continuation as a going concern is dependent upon many factors, including our ability to raise additional funds, the success of our clinical trial for CF, and our ability to repay our loan to Hercules and other obligations when due. We cannot be sure that we will be able to obtain any future funding, and any such funding we may obtain may not be sufficient to finance our operations and to repay our debt to Hercules. If we are unable to obtain sufficient funds, we may be unable to continue as a going concern.
We conduct our operations in Israel. Conditions in Israel, including the recent attack by Hamas and other terrorist organizations and Israel’s war against them, may affect our operations.
On October 7, 2023, an unprecedented attack was launched against Israel by terrorists from the Hamas terrorist organization that infiltrated Israel’s southern border from the Gaza Strip and in other areas within the state of Israel attacking civilians and military targets while simultaneously launching extensive rocket attacks on the Israeli population. In response, the Security Cabinet of the State of Israel declared war against Hamas. As of November 13, 2023, the State of Israel continues to be at war with Hamas. Our headquarters, most of our employees and our main operations are located in Israel. Accordingly, military, political and economic instability in Israel, and in particular, the war situation may affect our operations. To date, our operations have not been adversely affected by this situation and we are not expecting this situation to have a material impact on our ability to continue our business, including preclinical and clinical trials, and our ability to raise additional capital. However, at this time, it is not possible to predict the intensity or duration of the war, nor can we predict how this war will ultimately affect Israel's economy in general and we continue to monitor the situation closely and examine the potential disruptions that could adversely affect our operations.
Item 5. Other Information
On November 13, 2023, our Board of Directors appointed Avraham Gabay, age 39, as the Company’s interim Chief Financial Officer, effective once the expected maternity leave of Ms. Wolfson, the Company’s Chief Financial Officer, commences, and for as long as Ms. Wolfson is on such leave.
Prior to his appointment, from 2021 until 2023, Mr. Gabay served as a chief financial officer at Oravax Inc., a biotech company focusing on research and development of an oral vaccine. Prior to that, from 2019 until 2021, Mr. Gabay was the chief financial officer at Oramed Pharmaceuticals Inc. (Nasdaq: ORMP), which is developing an oral delivery platform for proteins and focusing on oral insulin. From 2015 to 2019, Mr. Gabay served as a corporate controller at Orcam Technologies Ltd., a company which develops, manufactures and sells a wearable assistive technology device for people who are blind, visually impaired or have reading or other disabilities. From 2014 to 2015, Mr. Gabay provided economic services in the advisory department of KPMG Israel, a certified public accounting firm, and from 2013 to 2014, he worked in the tax department of the law firm, Gornitzky & Co. In addition, Mr. Gabay serves as a director on the board of Nala Digital Ltd., a public company whose shares are listed for trading on the Tel Aviv Stock Exchange. Mr. Gabay holds a bachelor’s degree in law and accounting (magna cum-laude) from Tel-Aviv University and is a certified public accountant in Israel and a member of the Israeli Bar Association.
There are no reportable family relationships or related person transactions involving the Company and Mr. Gabay. There are no family relationships between Mr. Gabay and any director or executive officer.
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Item 6. Exhibits
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| BIOMX INC. | ||
| Date: November 14, 2023 | By: | /s/ Jonathan Solomon |
| Name: | Jonathan Solomon | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: November 14, 2023 | By: | /s/ Marina Wolfson |
| Name: | Marina Wolfson | |
| Title: | Chief Financial Officer | |
|
(Principal Financial Officer and Principal Accounting Officer) | ||
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