| 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 Israel Innovation Authority ("IIA") for a R&D project for the technological incubators program. The approved
budget per year was NIS 2,700,000 (approximately $726 thousand) per application. According to the IIA directives, the IIA transferred
to the Company 85% of the approved budget and the rest 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 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.
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).
IIA approved one, for a total budget of NIS 15.6 million (approximately $ 4.4 million). IIA will fund 30% of this budget. The program
is for the period beginning from January 2020 through December 2020. As of March 31, 2020, the company had not yet received grants
from the IIA with respect to the 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 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 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 March 31, 2020; therefore, no liability was recorded in these consolidated financial statements.
As of March 31, 2020, the
Company had a contingent obligation to the IIA in the amount of approximately 2.2 million 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 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 million 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
(the "License"), as defined and subject to the terms and conditions specified in the 2015 License Agreement 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 thousand 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 agreement. Upon the closing of the Recapitalization
Transaction, the provisions of the Yeda license agreement related to the Exit Fee were amended wherein the Company will be obligated
to pay Yeda a one-time payment as described in the amendment which will not exceed 1% of the consideration received under such
transaction (see note 7I). As the Company has not yet generated revenue from operations, no provision was included in the interim
consolidated balance sheets as of March 31, 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 $10,000 over the term of the 2017 License Agreement, unless earlier terminated by either party,
and granted Yeda 591,382 warrants to purchase common shares of the Company. 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 interim consolidated financial
statements with respect to the 2017 License Agreement as of March 31, 2020 and December 31, 2019. |
In July 2019, the Company, Yeda and BiomX Israel amended the
2015 License Agreement and the 2017 License Agreement with Yeda (the "Amendment"). See note 7I regarding the amendment.
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D. |
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,
the Company paid an initial license fee of $25,000 during the year ended December 31, 2017 and is required to pay certain license
maintenance fees of up to $250,000 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 interim consolidated financial statements as of March
31, 2020 and December 31, 2019 include a liability with respect to this agreement in the amount of $123 and $108 thousand, respectively. |
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E. |
As successor in interest to RondinX, 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 $10,000 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 included in the interim consolidated statements of operations for the three months ended March 31, 2020 and 2019in the financial statements as of as of March 31, 2020 and December 31, 2019 with respect to the agreement. |
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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 inflammatory bowel disease program. In return, the Company will pay annual license fees of between $15,000 to $25,000 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 million 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 interim consolidated statements of operations for the three months ended March 31, 2020 and 2019in the financial statements as of as of March 31, 2020 and December 31, 2019 with respect to the agreement. |
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 license 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 $20,000 and annual
license fees ranging from $15,000 to $25,000 and (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 $234 thousand and $217 as of March 31, 2020 and December 31, 2019 respectively.
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H. |
BiomX Israel committed to enter 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, are non-recourse and are secured by Company shares issued to them that have a value that equals three times
the loan amount. If any of such shareholders defaults on such loan, the Company will have the right to forfeit or sell such number
of shares as have a value equal to the amount of the loan (plus interest accrued thereon) not timely repaid, based on their market
price at the time of such forfeiture or sale. As of March 31, 2020, one loan was granted in the amount of $19 thousand. and the
aggregate amount of the remaining potential commitment is $89 thousand. All other shareholders waived their right to the loans.
The number 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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I. |
In July 2019, the Company, Yeda and BiomX Israel amended the 2015 License Agreement and to the 2017 License Agreement with Yeda (the "Amendment"). Pursuant to the 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 amendment which will not exceed 1% of the consideration received under such transaction instead of the Exit Fee, in the event of any merger or acquisition involving BiomX the Company. |
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