| COMMITMENTS AND CONTINGENT LIABILITIES |
| NOTE
7 |
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COMMITMENTS
AND CONTINGENT LIABILITIES |
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A. |
During 2015, 2016 and 2017, BiomX Israel submitted three applications to the IIA for an R&D project for the technological incubators program. The approved annual budget per application was NIS 2.7 thousand (approximately $726). According to the IIA directives, the IIA transferred to the Company 85% of the approved budget while the remainder of the budget was funded by certain shareholders. |
In December 2019, the IIA approved
a new application for a total budget of NIS 10.8 thousand (approximately $3.1 thousand). IIA committed to funding 30% of the approved
budget. The program is for the period beginning July 2019 through December 2019. BiomX Israel has not yet submitted the final report
to the IIA for this program.
During April 2020, the IIA approved
a new application for a total budget of NIS 15.6 thousand (approximately $4.4 thousand). The IIA committed to funding 30% of the
approved budget. The program is for the period beginning January 2020 through December 2020. As of September 30, 2020, the Company
received NIS 1.6 thousand (approximately $0.5 thousand) from the IIA with respect to this program.
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 USD. 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 the Company. 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 Company's R&D programs and generating sales. The Company 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, 2020, therefore, no liability was recorded in these condensed consolidated financial statements.
As of September 30, 2020, the Company
had a contingent liability to the IIA in the amount of approximately $2.3 thousand including annual interest of LIBOR linked to
the USD.
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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 procure the performance of certain research, including proof-of-concept studies testing in-vivo phage eradication against a model bacteria in germ free mice, development of an inflammatory bowel disease ("IBD") model in animals under germ-free conditions and establishing an 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. BiomX Israel contributed an aggregate of approximately $1.8 thousand to the research budget agreed upon in the 2015 License Agreement. In addition, Yeda granted BiomX Israel an exclusive worldwide license for the development, production and sale of the products, as defined and subject to the terms and conditions specified in the 2015 License Agreement. In return, BiomX Israel will pay Yeda annual license fees of approximately $10 and royalties on revenues as defined in the 2015 License Agreement. In addition, in the event of certain mergers and acquisitions by the Company, 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 2015 License Agreement. In July 2019, the Company and Yeda amended the 2015 License Agreement and the 2017 License Agreement (as defined below) with Yeda (the "Yeda Amendment"). See Note 7H regarding the Yeda Amendment. As the Company has not yet generated revenue from operations, no provision was included in the condensed consolidated financial statements as of September 30, 2020 and December 31, 2019 with respect to the 2015 License Agreement. |
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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 the Company. As consideration for the license, the Company will pay $10 over the term of the 2017 License Agreement, unless earlier terminated by either party, and granted Yeda 591,382 warrants to purchase shares of Common Stock. Refer to Note 8 below for the terms of the warrants granted. 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 condensed consolidated financial statements with respect to the 2017 License Agreement as of September 30, 2020 and December 31, 2019. |
In July 2019, the Company and Yeda
amended the 2015 License Agreement and the 2017 License Agreement with Yeda. See Note 7H regarding the Yeda Amendment.
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D. |
In April 2017, BiomX Israel signed an exclusive
patent license agreement (the "2017 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 during the year ended December
31, 2017 and is required to pay certain license maintenance fees of up to $250 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 thousand in aggregate as well as royalty payments on future revenues. The condensed consolidated
financial statements as of September 30, 2020 and December 31, 2019 include a liability with respect to this agreement in the amount
of $240 and $108, respectively.
In October 2020, the Company and MIT amended
the 2017 Patent License Agreement (the "MIT Amendment"). See note 11B regarding the MIT Amendment.
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E. |
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 BiomX Israel 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, BiomX Israel will pay license fees of $10 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. The condensed consolidated financial statements as of September 30, 2020 and December 31, 2019 include a liability with respect to this agreement in the amount of $83 and $260, respectively. |
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F. |
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 Company's IBD program. In return, the Company will pay an annual license fee of between $15 and $25 subject to the terms and conditions specified in the agreement. Additionally, the Company is obligated to make additional payments based upon the achievement of clinical and regulatory milestones up to an aggregate of $3.2 thousand and royalty payments based on future revenue. As the Company has not yet generated revenue from operations and the achievement of certain milestones is not probable, no provision was included in the condensed consolidated financial statements as of September 30, 2020 and December 31, 2019 with respect to the agreement. |
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In April 2019, BiomX Israel signed an 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, the Company is required (i) to pay a license issue fee of $20 and annual license fees ranging from $15 to $25 and (ii) make additional payments based upon the achievement of clinical and regulatory milestones up to an aggregate of $3.2 thousand and (iii) make tiered royalty payments, in the low single digits based on future revenue. The condensed consolidated financial statements include liabilities with respect to this agreement in the amount of $378 and $217 as of September 30, 2020 and December 31, 2019, respectively. |
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G. |
BiomX Israel entered into loan agreements with certain shareholders who were subject to taxation in Israel in connection with the Recapitalization Transaction. The loans are for a period of up to two years from the time of the grant, are non-recourse, and are secured by shares of Common Stock issued to them with a value that equals three times the loan amount at the time of the grant. If any of such shareholders defaults on such loan, the Company will have the right to forfeit or sell such number of shares with a value equal to the amount of the loan not timely repaid (plus interest accrued thereon), based on their market price at the time of such forfeiture or sale. As of September 30, 2020, one loan was granted in the amount of $19, and the aggregate amount of the remaining potential commitment as of September 30, 2020 is $89. All other shareholders waived their right to the loans. The number of shares of Common Stock in respect of which the $19 loan was granted was 5,700. The granting of the loan and the restrictions imposed on the related Common Stock until repayment of the loan were accounted as an acquisition of treasury stock by the Company at an amount equal to the loan. |
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H. |
In July 2019, the Company and Yeda amended
the 2015 License Agreement and the 2017 License Agreement with Yeda. Pursuant to the Yeda Amendment, following the closing of the
Recapitalization Transaction, the provisions of the Yeda license agreements related to the exit fee were amended so that the Company
is obligated to pay Yeda a one-time payment as described in the Yeda Amendment which will not exceed 1% of the consideration received
in the event of any merger or acquisition involving the Company instead of the Exit Fee, with respect to each license agreement.
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I. |
On September 1,
2020 ("Effective Date"), BiomX Israel entered into a research collaboration agreement with Boehringer Ingelheim
International GmbH ("BI") for a collaboration on biomarker discovery for IBD. Under the agreement, BiomX Israel
is eligible to receive fees totaling $439 in installments of $50 within 60 days of the Effective date, $100 upon receipt of
the BI materials, $150 upon the completion of data processing and $139 upon delivery of the Final Report of observations and
Results of the Project (as such terms are defined within the agreement). Unless terminated earlier, this agreement will
remain in effect, until one year after the Effective Date or completion of the Project Plan (as defined in the agreement) and
submission and approval of the Final Report. The research period started during September 2020. |
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