| COMMITMENTS AND CONTINGENT LIABILITIES |
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NOTE 10 - |
COMMITMENTS AND CONTINGENT LIABILITIES |
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A. |
During 2015, 2016 and 2017, BiomX Israel submitted three requests to the IIA for a R&D project for the technological incubators program. The approved budget per year was NIS 2.7 million (approximately $781 thousand) per request. According to the IIA directives, the IIA funded 85% of the approved budget and the rest of the budget was funded by certain shareholders. |
According to the agreement with
the IIA, 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 December 31, 2019, therefore, no liability was recorded in these consolidated financial statements.
Total research and development
income recorded in the consolidated statements of comprehensive loss was $299 thousand and $646 thousand for the years ended December
31, 2019 and 2018, respectively. As of December 31, 2019, BiomX Israel had a contingent obligation to the IIA in the amount of
approximately $2.3 million including annual interest of LIBOR linked to the dollar.
In December 2019, the IIA approved
a new application for a total budget of NIS 10.8 million (approximately $3.1 million). IIA will fund 30% of the approved budget.
The program is for the period beginning from July 2019 through December 2019. BiomX Israel has not yet submitted the final report
to the IIA for this program. As of December 31, 2019, no income was recorded with respect to this application.
During December 2019 BiomX Israel
submitted three additional applications to the IIA, for a total budget of NIS 41.1 million (approximately $11.9 million). These
applications are being reviewed be the IIA.
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B. |
In June 2015, BiomX Israel entered into a Research and License Agreement (the "2015 License Agreement") as amended with Yeda Research and Development Company Limited ("Yeda"), according to which Yeda undertakes to conduct research. The research includes proof-of-concept studies testing in-vivo phage eradication against a model bacteria in germ free mice, development of an IBD model in animals under germ-free conditions and establishing in-vivo method for measuring immune induction capability (Th1) of bacteria, followed by testing several candidate IBD inducing bacterial strains. During the research period, as defined in the 2015 License Agreement and subject to the terms and conditions specified in the 2015 License Agreement, the Company contributed an aggregate of approximately $1.8 million to the research budget agreed upon in the 2015 License Agreement. In addition, Yeda granted the Company with an exclusive worldwide license for the development, production and sale of the products (the "License"), as defined in the 2015 License Agreement and subject to the terms and conditions specified in the 2015 License Agreement. In return for the License, the Company will pay Yeda annual license fees of approximately $10 thousand and royalties on revenues as defined in the 2015 License Agreement. As the Company has not yet generated revenue from operations, no provision was included in the financial statements with respect to the 2015 License Agreement as of December 31, 2019 and 2018. |
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C. |
In May 2017, BiomX Israel signed an additional agreement with Yeda (the "2017 License Agreement") according to which, Yeda provided a license to BiomX Israel. As consideration for the license, the Company paid $10 thousand for the term of the 2017 License Agreement, unless earlier terminated by either party and granted Yeda 591,382 warrants to purchase Ordinary Shares of the Company at $0.0001 nominal value. Refer to Note 11 below for the terms of the warrants granted. In the event of certain mergers and acquisitions by BiomX Israel, Yeda will be entitled to an amount equivalent to 1% of the consideration received under such transaction (the "exit fee"), as adjusted per the terms of the agreement. In addition, the 2017 License Agreement includes additional consideration contingent upon future sales or sublicensing revenue. As the Company has not yet generated revenue from operations, no provision was included in the financial statements with respect to the 2017 License Agreement as of December 31, 2019 and 2018. |
In July 2019, the Company, Yeda and BiomX
Israel amended the 2015 License Agreement and the 2017 License Agreement with Yeda (the "Amendment"). Pursuant to
the Amendment, following the closing of the Recapitalization Transaction, the provisions of the 2015 License Agreement and the
2017 License Agreement related to the exit fee were amended so that, in the event of any merger or acquisition involving BiomX,
the Company is obliged to pay Yeda a one-time payment as described in the Amendment which will not exceed 1% of the consideration
received under such transaction.
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D. |
As
successor in interest to RondinX Ltd., BiomX Israel is a party to a license agreement dated March 20, 2016 with Yeda, pursuant
to which the Company has a worldwide exclusive license to Yeda's know-how, information and patents related to the Company's
meta-genomics target discovery platform. As consideration for the license, the Company will pay license fees of $10 thousand
subject to the terms and conditions of the agreement. Either party has the option to terminate the agreement at any time by
way of notice to the other party as outlined in the agreement. In addition, the Company will pay a royalty in the low single
digits on revenue of products. As the Company has not yet generated revenue from operations, no provision was recorded in
the financial statements as of December 31, 2019 and 2018 with respect to the agreement. |
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F. |
In April 2017, BiomX Israel signed an exclusive patent license agreement with the Massachusetts Institute of Technology ("MIT") covering methods to synthetically engineer phage. According to the agreement, BiomX Israel received an exclusive, royalty-bearing license to certain patents held by MIT. In return, BiomX Israel paid an initial license fee of $25 thousand during the year ended 2017 and is required to pay certain license maintenance fees of up to $250 thousand in each subsequent year and following the commercial sale of licensed products. BiomX Israel is also required to make payments to MIT upon the satisfaction of development and commercialization milestones totaling up to $2.4 million in aggregate, as well as royalty payments on future revenues. The consolidated financial statements include a liability with respect to this agreement in the amount of $108 thousand as of December 31, 2019. There was no liability recorded with respect to this agreement as of December 31, 2018. |
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G. |
In December 2017, BiomX Israel signed a patent license agreement with Keio University and JSR Corporation in Japan. According to the agreement, BiomX Israel received an exclusive patent license to certain patent rights related to the BiomX Israel inflammatory bowel disease program. In return, BiomX Israel will pay annual license fees of between $15 thousand to $25 thousand subject to the terms and conditions specified in the agreement. Additionally, the Company is obligated to pay contingent consideration based upon the achievement of clinical and regulatory milestones up to an aggregate of $3.2 million and royalty payments based on future revenue. |
In April 2019, BiomX Israel signed additional patent license
agreement with Keio University and JSR Corporation in Japan. According to the agreement, BiomX Israel received an exclusive sublicense
by JSR to certain patent rights related to the Company's Primary Sclerosing Cholangitis program. In return, BiomX Israel
is required (i) to pay a license issue fee of $20 thousand and annual license fees ranging from $15 thousand to $25 thousand; (ii)
make additional payments based upon the achievement of clinical and regulatory milestones up to an aggregate of $3.2 million ("milestone
payments"); and (iii) make tiered royalty payments, in the low single digits based on future revenue.
The consolidated financial statements
include liabilities with respect to this agreement in the amount of $217 thousand as of December 31, 2019. The amount was determined
using the expected cash flow approach. There was no liability recorded with respect to this agreement as of December 31, 2018.
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H. |
Refer to Note 7 for information regarding the Company's lease commitments. |
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I. |
Refer to Note 9B(1) for information regarding the Company's commitment to certain shareholders for taxes incurred in Israel as a result of the Recapitalization Transaction. |
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J. |
Refer to Note 5 regarding contingent liability with respect to RondinX Ltd. acquisition. |
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