| COMMITMENTS AND CONTINGENCIES |
| NOTE 11 - |
COMMITMENTS AND CONTINGENCIES |
| | A. | In March 2021, the IIA approved two new applications in relation to the Company’s cystic fibrosis product candidate for an aggregate budget of NIS 10,879 (approximately $3,286) and for the Company’s product candidate for Inflammatory Bowel Disease (“IBD”) and Primary Sclerosing Cholangitis for an aggregate revised budget of NIS 6,753 (approximately $2,118). The IIA committed to fund 30% of the approved budgets. The programs are for the period beginning January 2021 through December 2021. Through December 31, 2022, the Company received NIS 4,284 (approximately $1,347) from the IIA with respect to these programs. |
In August 2021, the IIA approved an
application that supports upgrading the Company’s manufacturing capabilities for an aggregate budget of NIS 5,737 (approximately
$1,778). The IIA committed to fund 50% of the approved budget. The program is for the period beginning July 2021 through June 2022. The
program does not bear royalties. Through December 31, 2022, the Company received NIS 1,912 (approximately $577) from the IIA with respect
to this program.
In March 2022, the IIA approved an
application for a total budget of NIS 13,004 (approximately $4,094) in relation to the Company’s cystic fibrosis product candidate.
The IIA committed to fund 30% of the approved budget. The program is for the period beginning January 2022 through December 2022. Through
December 31, 2022, the Company received NIS 1,365 (approximately $395) from the IIA with respect to this program.
According to the agreements 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 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, 2022; therefore, no
liability was recorded in these consolidated financial statements. IIA grants are recorded as a reduction of R&D expenses, net.
Through December 31, 2022, total grants
approved from the IIA aggregated to approximately $8,403 (NIS 28,683). Through December 31, 2022, BiomX Israel had received an aggregate
amount of $6,957 (NIS 23,634) in the form of grants from the IIA. Total grants subject to royalties’ payments aggregated to approximately
$6,380. As of December 31, 2022, BiomX Israel had a contingent obligation to the IIA in the amount of approximately $6,557 including annual
interest of LIBOR linked to the USD.
The United Kingdom’s Financial
Conduct Authority, which regulates LIBOR, announced in July 2017 that it will no longer persuade or require banks to submit rates for
LIBOR after 2021. Even though the IIA has not declared the alternative benchmark rate to replace LIBOR, the Company does not expect it
will have a significant impact on its financial statements.
| | B. | 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 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 $1,800 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 is
obligated to 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.
As the Company has not yet generated revenue from operations, no provision was included in the consolidated financial statements as of
December 31, 2022 and 2021 with respect to the 2015 License Agreement.
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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,
BiomX granted Yeda 591,382 warrants to purchase shares of Common Stock. Refer to Note 13 below for the terms of the warrants granted.
In July 2019, the Company and Yeda amended the 2015 License Agreement
and the 2017 License Agreement (the “Yeda Amendment”). 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.
The 2017 License Agreement was terminated in 2020. Refer to Note 13B
below for the terms of the warrants granted and the resulting impact due to the termination.
| | C. | 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 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 $2,350 in aggregate, as well as royalty payments on future revenues. No liability is included in the consolidated financial statements as of December 31, 2022 and 2021. In October 2020, the Company and MIT amended the 2017 Patent License Agreement. Pursuant to the MIT Amendment, BiomX Israel will continue to receive an exclusive, royalty-bearing license to certain patents held by MIT. In return, BiomX Israel 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 $4,700 in aggregate, as well as royalty payments on future revenues. On May 24, 2022, the Company notified the Massachusetts Institute of Technology of the termination of the Patent License Agreement between the parties which became effective on August 22, 2022. The termination did not involve a compensation to MIT.
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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 is obligated to pay annual 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 is obligated to pay a royalty in the low single digits based on revenue of products. The consolidated financial statements as of December 31, 2022 and 2021 include a liability with respect to this agreement in the amount of $148 and $175, respectively, recorded as other liabilities. Refer to Note 6 regarding a contingent consideration with respect to the RondinX Ltd. acquisition. |
| | E. | 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 $32,100 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 consolidated financial statements as of December 31, 2022 and 2021 with respect to the agreement. |
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 (ii) make additional payments
based upon the achievement of clinical and regulatory milestones up to an aggregate of $32,100 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 $40 and $40 as of December 31, 2022 and 2021, respectively, recorded as other liabilities.
| | F. | On September 1, 2020 (“First Agreement 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 was eligible to receive fees totaling $439 in installments of $50 within 60 days of the First Agreement 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). The Company granted BI an option to negotiate for an exclusive, worldwide, compensation-based license(s), with rights to sublicense, to use the metagenomic signature results under any patents covering such metagenomic signature results for the sole purpose of making, having made, offering for sale, selling, having sold, importing or otherwise commercializing diagnostic products, including companion diagnostics (the “Option”). The Option shall be exercisable any time until twelve months following delivery of the Final Report. BI agreed to pay to the Company fifty percent (50%) of all income that BI receives as a result of, and directly related to, the commercial exploitation of such companion diagnostic. During 2021, consideration of $150 was received. As of December 31, 2021, the total consideration of $439 had been received. The consideration is recorded as a reduction of R&D expenses, net in the consolidated statements of operations. On June 23, 2022 (“Second Agreement Effective Date”), BiomX Israel entered into a new research collaboration agreement with BI for a collaboration to identify biomarkers for IBD. Under the agreement, BiomX Israel is eligible to receive fees totaling $1,411 to cover costs to be incurred by BiomX Israel in conducting the research plan under the collaboration. The fees will be paid in instalments of $500 within 30 days of the Second Agreement Effective Date and three additional installments of $500, $200 and $211 upon completion of certain activities under the research plan. Unless terminated earlier, this agreement will remain in effect until (a) a period of eighteen (18) months thereafter or (b) completion of the project plan and submission and approval of the final report, whichever occurs sooner, unless otherwise extended. The consideration is recorded as a reduction of R&D expenses, net in the consolidated statements of operations according to the input model method on a cost-to-cost basis. The remainder of the consideration is recorded as other accounts payable in the consolidated balance sheets. As of December 31, 2022, the Company received consideration of $500 and recorded $287 in the consolidated statements of operations.
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G. |
Refer to Note 8 for information regarding the Company’s lease liabilities. |
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