| COMMITMENTS AND CONTINGENCIES |
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 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 March 31, 2023, the Company received NIS 4,284 (approximately $1,347) from the IIA with respect to these programs. See note 10B regarding funds received with respect to these programs after the balance sheet date. 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 March 31, 2023, 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 March 31, 2023, the Company received NIS 1,365 (approximately $395) from the IIA with respect to this program. In March 2023, the IIA approved an application
for a total budget of NIS 11,283 (approximately $3,164) 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 2023 through December 2023. See note 10C
regarding funds received with respect to these programs after the balance sheet date.
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According to the agreement with the IIA, excluding the August 2021 program, BiomX Israel will pay royalties of 3% to 3.5% of future sales up to an amount equal to the accumulated grant received including annual interest of LIBOR linked to the dollar. BiomX Israel may be required to pay additional royalties upon the occurrence of certain events as determined by the IIA, that are within the control of BiomX Israel. No such events have occurred or were probable of occurrence as of the balance sheet date with respect to these royalties. Repayment of the grant is contingent upon the successful completion of the BiomX Israel’s R&D programs and generating sales. BiomX Israel has no obligation to repay these grants if the R&D program fails, is unsuccessful or aborted or if no sales are generated. The Company had not yet generated sales as of March 31, 2023; therefore, no liability was recorded in these condensed consolidated financial statements. IIA grants are recorded as a reduction of R&D expenses, net. Through March 31, 2023, total grants approved from the IIA aggregated to approximately $9,353 (NIS 32,068). Through March 31, 2023, the Company had received an aggregate amount of $6,960 (NIS 23,645) in the form of grants from the IIA. Total grants subject to royalties’ payments aggregated to approximately $6,370. As of March 31, 2023, the Company had a contingent obligation to the IIA in the amount of approximately $6,640 including annual interest of LIBOR linked to the dollar. The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced in July 2017 that it will no longer persuade or require banks to submit rates for LIBOR after 2021. Even though the IIA has not declared the alternative benchmark rate to replace the LIBOR, the Company does not expect it will have significant impact on its financial statements.
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| | 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 $1,411 to cover costs to be incurred by BiomX
Israel in conducting the research plan under the collaboration. The fees will be paid in instalments of $500 within 30 days of the Effective
Date and three additional installments of $500, $200 and $211 upon completion of certain activities under the research plan. Unless terminated
earlier, this agreement will remain in effect until (a) a period of eighteen (18) months after the Effective Date or (b) completion of
the project plan and submission and approval of the final report, whichever occurs sooner, unless otherwise extended. The consideration
is recorded as a reduction of R&D expenses, net in the condensed consolidated statements of operations according to the input model
method on a cost-to-cost basis. The remainder of the consideration is recorded as other accounts payable in the condensed consolidated
balance sheets. During the three months ended March 31, 2023, the Company recorded $125 in the condensed consolidated statements of operations
as a reduction of R&D expenses. Through March 31, 2023, the Company received total funds of $500 from BI with respect to this agreement.
See note 10A regarding funds received after the balance sheet date. |
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