Item 7. Management’s Discussion and Analysis
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial
statements and the notes thereto contained elsewhere in this Annual Report. Certain information contained in the discussion and analysis
set forth below includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from
those discussed in any forward-looking statement because of various factors, including those described in the sections titled “Cautionary
Statement Regarding Forward-Looking Statements” and “Risk Factors” in this Annual Report.
Overview
We
are a clinical stage product discovery company developing products using both natural and engineered phage technologies designed to target
and kill specific harmful bacteria associated with chronic diseases, such as CF and DFO. Bacteriophage or phage are bacterial, species-specific,
strain-limited viruses that infect, amplify and kill the target bacteria and are considered inert to mammalian cells. By utilizing proprietary
combinations of naturally occurring phage and by creating novel phage using synthetic biology, we develop phage-based therapies intended
to address both large-market and orphan diseases.
Since BiomX Ltd.’s inception in 2015, we
have devoted substantially all our resources to organizing and staffing our company, raising capital, acquiring rights to or discovering
product candidates, developing our technology platforms, securing related intellectual property rights, and conducting discovery, research
and development and clinical activities for our product candidates. We do not have any products approved for sale, and we have not generated
any revenue from product sales. As we advance our product candidates, we expect our expenses to remain significant. To date, we have
funded our operations with proceeds from sales of our Common Stock, preferred shares and warrants, governmental grants, collaboration
agreements and debt. As of December 31, 2024, we received gross proceeds of approximately $204 million from sales of our securities. In
addition, as of December 31, 2024, we received $13.7 million from our collaboration agreements and grants from the IIA and MTEC.
In
addition, we have incurred significant operating losses. Our ability to generate revenue from product sales sufficient to achieve profitability
will depend on the successful development of, the receipt of regulatory approval for, and eventual commercialization of one or more of
our product candidates. Our net losses were approximately $17.7 million and $26.2 million for the years ended December 31, 2024 and 2023,
respectively. As of December 31, 2024, we had an accumulated deficit of $180.7 million and expect that for the foreseeable future we
will continue to incur significant expenses as we advance our product candidates from discovery through preclinical development and clinical
trials and seek regulatory approval of our product candidates. In addition, if we obtain regulatory approval for any of our product candidates,
we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. We may
also incur expenses in connection with in-licensing or acquiring additional product candidates.
Because
of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased
expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not
become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to
continue our operations at planned levels and be forced to reduce or terminate our operations. We may implement cost reduction strategies,
which may include amending, delaying, limiting, reducing or terminating one or more of our programs or ongoing or planned clinical trials
of our product candidates.
As
of December 31, 2024, we had cash, cash equivalents and restricted cash of $18 million. Our financial statements contain an explanatory
paragraph regarding substantial doubt about our ability to continue as a going concern, as we believe our cash and cash equivalents on
hand will be sufficient to meet our working capital and capital expenditure requirements only into the first quarter of 2026 as discussed
further below under “Liquidity and Capital Resources” .
On
March 6, 2024 we entered into a merger agreement with APT and certain other parties, as a result of which APT became our wholly-owned
subsidiary, effective as of March 15, 2024, or the Acquisition. The Acquisition was structured as a stock-for-stock transaction whereby
all outstanding equity interests of APT were exchanged in a merger for an aggregate of 916,497 shares of BiomX Common Stock, 40,470 Redeemable
Convertible Preferred Shares, convertible into 4,047,000 shares of BiomX Common Stock, and warrants, or the Merger Warrants, exercisable
for 216,650 shares of BiomX Common Stock. Upon the consummation of the Acquisition, a successor-in-interest of APT became a wholly-owned
subsidiary of BiomX. The Merger Warrants are exercisable at any time after July 9, 2024 at an exercise price of $50.00 per share and
will expire on January 28, 2027.
72
Concurrently
with the consummation of the Acquisition, BiomX consummated the March 2024 PIPE, with existing and new investors, resulting in aggregate
gross proceeds of approximately $50 million, in which the investors purchased (i) an aggregate of 216,417 shares of Redeemable Convertible
Preferred Shares, convertible into an aggregate of up to 21,641,700 shares of BiomX Common Stock, and (ii) Private Placement Warrants,
to purchase up to an aggregate of 10,820,850 shares of BiomX Common Stock, at a combined purchase price of $231.10 per share of Redeemable
Convertible Preferred Shares and an accompanying Private Placement Warrant to purchase 500 shares of BiomX Common Stock. The Private
Placement Warrants are exercisable at any time after July 9, 2024, at an exercise price of $2.31 per share, and will expire on July 9,
2026.
Immediately
following the Acquisition, and without taking into account the shares of Convertible Preferred Stock issued in the March 2024 PIPE, and
assuming conversion of all of the Convertible Preferred Stock into Common Stock, our stockholders (including holders of the Pre-Funded
Warrants, as defined below) prior to the Acquisition owned approximately 55% of the share capital of the Company and APT’s stockholders
prior to the Acquisition owned approximately 45% of the share capital of the Company.
On July 9, 2024, the Company’s stockholders
approved a reverse stock split at a ratio within a range of 1-for-5 and 1-for-10 at such time as the Board shall determine,
in its sole discretion, at any time before July 9, 2025. On August 8, 2024, the Board approved a 1-for-10 Reverse Stock Split of the Company’s
shares of Common Stock, or the Reverse Stock Split. On August 20, 2024, the Company filed the Certificate of Amendment with the Delaware
Secretary of State to effect the Reverse Split, which became effective on August 26, 2024, or the Effective Date. The Company’s
Common Stock began trading on a Reverse Stock Split-adjusted basis on the NYSE American at the open of the markets on the Effective Date.
Unless otherwise indicated, all issued and outstanding shares amounts in this Annual Report have been adjusted to reflect the Reverse
Stock Split for all periods presented. Proportional adjustments also were made to shares underlying outstanding equity awards, warrants
and Redeemable Convertible Preferred Shares, and to the number of shares issued and issuable under the Company’s stock incentive
plans and certain existing agreements.
Components
of Our Consolidated Results of Operations
Revenue
To
date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales in the near future.
If development efforts for our product candidates are successful and result in any necessary regulatory approvals or otherwise lead to
any commercialized products or additional license agreements with third parties, we may generate revenue in the future from product sales
or payments from collaboration or license agreements with third parties.
Operating
Expenses
Research
and Development Expenses, net
Research
and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates.
We expense research and development costs as incurred, offset by the IIA and MTEC grants and, to a lesser degree, income from research
and development collaboration agreements. These expenses include:
●
development and operation of our proprietary platform;
●
expenses incurred in connection with the preclinical
and clinical development of our product candidates, including under agreements with third parties, such as CROs and contract manufacturing
organizations, as well as consultants, subcontractors and key opinion leaders providing scientific development services;
●
manufacturing scale-up expenses and the cost of acquiring
and manufacturing preclinical and clinical trial materials;
●
license maintenance fees and milestone fees incurred
in connection with various license agreements;
73
●
employee-related expenses, including salaries, related
benefits, travel and stock-based compensation expenses for employees engaged in research and development functions, as well as external
costs, such as fees paid to outside consultants engaged in such activities;
●
costs related to compliance with regulatory requirements
and legal fees relating to patent matters; and
●
depreciation and other expenses.
We
recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided
to us by our service providers.
We
do not allocate employee costs or facility expenses, including depreciation or other indirect costs, to specific programs because these
costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to oversee
the research and discovery as well as for managing our preclinical development, process development, manufacturing and clinical development
activities. These employees work across multiple programs and, therefore, we do not track their costs by program.
The
table below summarizes our research and development expenses incurred by program:
Year
Ended
December 31,
2024
2023
USD In thousands
BX004
10,495
8,853
BX211
2,239
-
Salaries and related benefits (including stock-based
compensation)
8,006
6,004
Depreciation
1,488
782
Rent and related expenses
3,900
905
Infrastructure & other unallocated or R&D
expenses
1,123
2,491
Less grants from the IIA and MTEC and consideration
from collaboration agreements
( 2,588
)
(2,337
)
Total research and development expenses, net
24,663
16,698
Research
and development activities are central to our business. Product candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage
clinical trials. Our research and development expenses reflect, among other things, programs that were discontinued or put on hold as
well as new development programs. As a result, we expect that our research and development expenses will increase substantially over
the next several years, particularly as we increase personnel costs, including stock-based compensation, contractor costs and facilities
costs, as we continue to advance the development of our product candidates. We also may incur additional expenses related to milestone
and royalty payments payable to third parties with whom we have entered into license agreements to acquire the rights to our product
candidates.
General
and Administrative Expenses
General
and administrative expenses consist primarily of salaries, related benefits and stock-based compensation expenses for personnel in executive,
finance, corporate, business development and administrative functions. General and administrative expenses also include legal fees relating
to corporate and securities matters; professional fees for accounting, tax and audit services; insurance costs; travel expenses; and
facility-related expenses, including rent, as well as operating related costs.
74
We
anticipate that we will continue to incur significant accounting, audit, legal, regulatory, compliance, directors’ and officers’
insurance costs as well as investor and public relations expenses associated with being a public company. We anticipate the additional
costs for these services will increase our general and administrative expenses in the future. Additionally, if and when we believe a
regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and expenses as a result of our preparation
for commercial operations, especially as it relates to the sales and marketing of our product candidate.
Impairment
of Goodwill, Intangible Asset and long-lived assets
Goodwill
and Intangible Asset
In
connection with our acquisition of APT, we allocated a portion of the purchase price to goodwill and in-process research and development
(“IPR&D”) intangible asset. During the third and fourth quarters of 2024, we experienced a decline in our stock price
resulting in market capitalization being less than our stockholders’ equity, which we concluded as an impairment indicator. As
a result, we performed a quantitative assessment for goodwill and IPR&D impairment and recognized an impairment charge of $0.8 million
and $3.2 million, respectively.
Long-lived
assets
In
December 2024, we decided to cease the use of the property in Gaithersburg, Maryland and made it available for sublease. As a result,
we performed an impairment assessment of the right-of-use asset and related leasehold improvements and recognized an impairment charge
of $4.0 million.
Other
income
Other income consists of a reversion of the contract
liability associated with the AD program which has been paused and proceeds from sub-leasing a portion of our office space in Ness Ziona,
Israel, which sub-lease ended in September 2024.
Interest
expenses
Interest expense consists of interest incurred
under a Loan and Security Agreement with Hercules Capital, Inc., or the Hercules Loan Agreement. Under the Hercules Loan Agreement, Hercules
Capital, Inc., or Hercules, provided the Company with access to a term loan with an aggregate principal amount of up to $30 million, or
the Term Loan Facility. On March 19, 2024, we prepaid all of the remaining loan balance under the Term Loan Facility in a total amount
of $10.4 million. The prepayment included an end of term charge of $983 thousand and accrued interest of $69 thousand.
Income
from change in fair value of Private Placement Warrants
Income
from change in fair value of Private Placement Warrants reflects the revaluation that resulted from the accounting of the Private Placement
Warrants issued under the March 2024 PIPE.
Financial
expenses, net
Financial
expenses, net consist primarily of income or expenses related to revaluation of foreign currencies and interest income on our bank deposits
and money market funds.
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Results
of Operations
Comparison
of the Years Ended December 31, 2024 and 2023
The
following table summarizes our consolidated results of operations for the years ended December 31, 2024 and 2023:
Year
ended
December 31,
2024
2023
USD in thousands
R&D expenses, net
24,663
16,698
General and administrative expenses
11,776
8,650
Goodwill impairment
801
-
IPR&D impairment
3,237
-
Long-lived assets impairment
4,046
-
Operating loss
44,523
25,348
Other income
(2,143 )
(357 )
Interest expenses
873
2,404
Finance expense (income), net
919
(1,249 )
Income from change in fair value of Private
Placement Warrants
(26,458 )
-
Tax expenses
13
23
Net
Loss
17,727
26,169
R&D expenses,
net (net of grants received from the IIA and MTEC, and consideration from research collaborations) were $24.7 million for the year ended
December 31, 2024, compared to $16.7 million for the year ended December 31, 2023. The increase of $8.0 million, or 48%, in the year
ended December 31, 2024 compared to the prior year, is primarily due to the following:
●
an increase of $1.6 million primarily reflects expenses
related to preparations for Phase 2b in the clinical trial of our CF product candidate, BX004;
●
an increase of $2.2 million in expenses relating to
the clinical trial of our DFO product candidate, BX211; and
●
increased expenses of $1.9 million and $3.0 million
relating to the combined workforce and rent expenses, respectively, following the Acquisition, respectively.
We
recorded $2.6 million of MTEC grants and no IIA grants for the year ended December 31, 2024,
compared to $1.1 million of IIA grants and $1.3 million of consideration from research collaborations for the year ended December 31,
2023.
General
and administrative expenses were $11.8 million for the year ended December 31, 2024, compared to $8.7 million for the year ended December
31, 2023. The $3.1 million increase, or 36%, is primarily driven by Acquisition-related expenses, including $0.9 million in issuance
costs and $0.4 million in legal fees associated with both the Acquisition and the March 2024 PIPE. Additionally, the increase reflects
higher salary and share-based compensation expenses of $0.9 million related to the combined workforce, as well as $0.3 million in rent
expenses following the Acquisition.
Goodwill
impairment was $0.8 million for the year ended December 31, 2024, following an impairment of the Company’s goodwill resulted from
the Acquisition. We had no goodwill impairment in the year ended December 31, 2023.
IPR&D
impairment was $3.2 million for the year ended December 31, 2024, following our quantitative assessment for IPR&D impairment. We
had no IPR&D impairment in the year ended December 31, 2023.
Long-lived
assets impairment was $4.0 million for the year ended December 31, 2024, after evaluating the right-of-use asset and related leasehold
improvements following our decision to cease the use of the property in Gaithersburg, Maryland and make it available for sublease. We
had no long-lived assets impairment in the year ended December 31, 2023.
Other income was $2.1 million for the year ended
December 31, 2024, compared to $0.4 million for the year ended December 31, 2023. The increase of $1.7 million, or 425%, is primarily
due to the reversion of the contract liability associated with the Company’s AD program which has been suspended.
76
Interest expenses were $0.9 million for the year
ended December 31, 2024, compared to $2.4 million for the year ended December 31, 2023. The decrease of $1.5 million, or 63%, is due to
the full repayment of the loan under the Hercules Loan Agreement.
Finance
expense, net was $0.9 million for the year ended December 31, 2024, compared to finance income of $1.2 million for the year ended December
31, 2023. The increased expenses of $2.1 million, or 175% resulted mainly from the Private Placement Warrants transaction costs under
the March 2024 PIPE.
Income
from change in fair value of Private Placement Warrants reflects the revaluation that resulted from the accounting of the Private Placement
Warrants issued under the March 2024 PIPE.
Liquidity
and Capital Resources
Sources
of Liquidity
We have never generated any revenue from sales of our products and
have incurred significant operating losses and negative cash flows from our operations. We have funded our operations to date primarily
with proceeds from the sale of our Common Stock, preferred shares and warrants, venture debt, IIA and MTEC grants and funds from collaboration
agreements and through the business combination between Chardan Healthcare Acquisition Corp., a special purpose acquisition company, and
BiomX Ltd. (the “Business Combination”), pursuant to which Chardan Healthcare Acquisition Corp. changed its name to BiomX
Inc. Through December 31, 2024, we had received gross cash proceeds of approximately $204 million from sales of our Common Stock and preferred
shares and $13.7 million from our collaboration agreements and grants from the IIA and MTEC.
Cash
in excess of immediate requirements is invested primarily with a view to liquidity and capital preservation.
In
December 2020, we entered into an Open Market Sale Agreement SM , or the Sale Agreement, with Jefferies LLC Jefferies, pursuant
to which we could issue and sell shares of our Common Stock having an aggregate offering price of up to $50 million from time to time
through Jefferies. We were not obligated to make any sales of Common Stock under the Sale Agreement. Through December 31, 2023, we sold
an aggregate of 98,339 shares of Common Stock pursuant to the Sale Agreement for aggregate gross proceeds of $5.8 million. We terminated
the Sale Agreement on December 7, 2023.
On
August 16, 2021 we entered into the Hercules Loan Agreement with Hercules, with respect to a venture debt facility. Under the Hercules
Loan Agreement, Hercules provided us with access to a term loan with an aggregate principal amount of up to $30 million, available in
three tranches, subject to certain terms and conditions. The first tranche of $15 million was advanced to us on the date the Hercules
Loan Agreement was executed. The milestones for the second and third tranches were not reached and have expired and accordingly
we never received additional amounts under the Hercules Loan Agreement. We were required to make interest-only payments through March
1, 2023, and we were required to repay the principal balance and interest in monthly installments through September 1, 2025. On March
19, 2024, we voluntarily prepaid the outstanding amount under the Hercules Loan Agreement and such agreement expired.
On
February 22, 2023, we entered into a securities purchase agreement to issue and sell an aggregate of 1,599,746 shares of our Common Stock
and 1,461,072 pre-funded warrants, or the February 2023 Pre-Funded Warrants, and collectively, the February 2023 Securities, at a price
of $2.45 per share and $2.44 per Pre-Funded Warrant, through a private placement pursuant to an exemption from registration requirements
under the Securities Act, or the February 2023 PIPE, for net proceeds of approximately $7.2 million, after deducting issuance costs of
$0.3 million. As of December 31, 2024, 533,031 February 2023 Pre Funded Warrants were exercised into 533,031 shares of Common Stock for
a total consideration of $6 thousand at an exercise price of $0.01 per share of Common Stock, and 928,041 February 2023 Pre-Funded Warrants
were exercised into 925,607 shares of Common Stock through cashless mechanism with no consideration. As of December 31, 2024, there are
no outstanding February 2023 Pre-Funded Warrants.
77
In
December 2023, pursuant to a shelf registration statement on Form S-3 declared effective by the SEC on January 2, 2024, or the Effective
S-3, we entered into an At the Market Offering Agreement, or the ATM Agreement, with H.C. Wainwright & Co., LLC, or Wainwright, as
manager, pursuant to which we may issue and sell shares of our Common Stock having an aggregate offering price of up to $7.5 million
from time to time through Wainwright. We are not obligated to make any sales of Common Stock under the ATM Agreement. On February 24,
2025, we suspended the ATM Agreement and the related continuous offering by us under the Effective S-3. We may resume use of the ATM
Agreement in the future.
In February and May, 2023, subsequent to the approval of the Company’s stockholders, we completed the
closing of the February 2023 PIPE, as defined below, with $7.5 million in gross proceeds. Additionally, on March 15, 2024, concurrently
with the consummation of the Acquisition, we consummated a private placement, or the March 2024 PIPE, pursuant to an exemption from registration
requirements under the Securities Act, with certain investors pursuant to which such investors purchased an aggregate of 216,417 shares
of our Series X non-voting convertible preferred stock, par value $0.0001 per share, or the Convertible Preferred Stock, with each Convertible
Preferred Stock being convertible into 100 shares of our shares of Common Stock, after giving effect to the Reverse Split, and warrants,
or Private Placement Warrants, to purchase up to an aggregate of 10,820,850 shares of the Company’s Common Stock, for aggregate
gross proceeds of approximately $50 million.
On February 25, 2025, we entered into a Securities Purchase Agreement with certain investors,
or the February 2025 SPA, pursuant to which we agreed to issue and sell, (i) in a registered direct offering, or the February 2025 Registered
Direct Offering: (a) an aggregate of 2,828,283 shares of our Common Stock, and (b) pre-funded warrants, or the February 2025 Pre-Funded
Warrants, to purchase up to an aggregate of 805,231 shares of Common Stock, or the February 2025 Pre-Funded Warrant Shares, and (ii)
in a concurrent private placement, or the February 2025 PIPE, (a) unregistered pre-funded warrants, or the February 2025 Private Pre-Funded
Warrants, to purchase up to an aggregate of 2,305,869 shares of Common Stock, or the February 2025 Private Pre-Funded Warrant Shares,
and (b) unregistered warrants, or the February 2025 Common Warrants, and together with the February 2025 Private Pre-Funded Warrants,
the February 2025 Private Warrants, to purchase up to an aggregate of 5,939,383 shares of Common Stock, or the February 2025 Common Warrant
Shares, and together with the February 2025 Private Pre-Funded Warrant Shares, the February 2025 Private Warrant Shares. Each share of
Common Stock (or February 2025 Pre-Funded Warrant in lieu thereof) and each February 2025 Private Pre-Funded Warrant is sold with an
accompanying February 2025 Common Warrant. The combined effective purchase price of each share of Common Stock (or February 2025 Pre-Funded
Warrant in lieu thereof) and accompanying February 2025 Common Warrant, and of each February 2025 Private Pre-Funded Warrant and accompanying
February 2025 Common Warrant, is $0.9306. The gross proceeds to the Company from the February 2025 Registered Direct Offering and the
February 2025 PIPE were $5.5 million, before deducting placement agent fees and other offering expenses payable by the Company. In addition,
on February 25, 2025, we also entered into inducement letter agreements, or the Inducement Letter Agreements, with certain holders, or
the Holders, of certain of their existing warrants to purchase an aggregate of 6,955,528 shares of Common Stock, originally issued to
the Holders on March 15, 2024, having an original exercise price of $2.311 per share (after giving effect to the Reverse Split), or the
Existing Warrants. The shares of Common Stock issued upon the exercise of the Existing Warrants are registered pursuant to the Effective
S-3. Pursuant to the Inducement Letter Agreements, the Holders agreed to exercise for cash the Existing Warrants at a reduced exercise
price of $0.9306 per share, or the February 2025 Warrant Exercise, in consideration of our agreement to issue new unregistered warrants,
or the New Warrants, to purchase up to an aggregate of 6,955,528 shares of Common Stock at an exercise price of $0.9306 per share, or
the New Warrant Shares. In connection with the February 2025 Warrant Exercise, we agreed that, in the event that any February 2025 Warrant
Exercise would otherwise require the Company to issue a number of shares of Common Stock in excess of the number of shares of Common
Stock that the Holder may acquire without exceeding the beneficial ownership limitations, or the Beneficial Ownership Limitation, set
forth in the Existing Warrants (or, if applicable and at the Holder’s election, 9.99%) (such excess shares, the Excess Existing
Warrant Shares), (i) the Company shall issue to the Holder the maximum number of Existing Warrant Shares that the Holder is entitled
to receive without exceeding the Beneficial Ownership Limitation, as directed by the Holder, and (ii) in lieu of issuing any Excess Existing
Warrant Shares, (x) the Existing Warrant shall automatically be amended and restated in its entirety as set in the Letter Agreement,
or, following such amendment, the Amended and Restated Warrant. The gross proceeds to the Company from the February 2025 Warrant Exercise
were $6.5 million prior to deducting placement agent fees and offering expenses. We refer to the February 2025 Warrant Exercise, February
2025 Registered Direct Offering and the February 2025 PIPE, as the February 2025 Financing.
78
We are subject to restrictions pursuant to the
February 2025 Financing, including certain standstill periods preventing us from issuing any Common Stock or Common Stock equivalents
or filing any registration statement or any amendment or supplement to any existing registration statement until 30 days after the later
of (i) the date that the resale registration statement related to the February 2025 Financing is declared effective by the SEC and (ii)
the date of the stockholder approval required in connection with the February 2025 Financing. We also agreed, subject to certain exceptions,
not to effect or agree to effect any variable rate transaction until 90 days after the later of (i) the date that the resale registration
Statement is declared effective by the SEC and (ii) the stockholder approval. Following such restrictions and subject to applicable securities
law limits, we may continue to sell shares under the ATM Agreement and otherwise to use our shelf registration statement to raise additional
funds from time to time. We may also raise funds privately, as we did in February 2023, the March 2024 PIPE and the February 2025 PIPE.
We may also seek funds through arrangements with collaborators or others that may require us to relinquish rights to the product candidates
that we might otherwise seek to develop or commercialize independently.
Our
financial statements contain an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern as
we believe that our current funds will be sufficient to meet our working capital and capital expenditure requirements only into the first
quarter of 2026. In the future, we will likely require or desire additional funds to support our operating expenses and capital requirements
or for other purposes, such as acquisitions, and may seek to raise such additional funds through public or private equity or debt financings
or collaborative agreements or from other sources, as we did with the ATM Agreement and the Hercules Loan Agreement. If certain disruptions
due to, for instance, Israel’s War with Hamas and Hezbollah, or Israeli political instability persists and deepens, we could experience
an inability to access additional capital, which could in the future negatively affect our capacity to support our operating expenses
and capital requirements or to make investments for other purposes, such as acquisitions.
We
have no other commitments to obtain additional financing and cannot assure you that additional financing will be available at all or,
if available, that such financing would be obtainable on terms favorable to us and would not be dilutive. Our future liquidity and cash
requirements will depend on numerous factors, including the introduction of new products as well as the ability to continue to maintain
controls over our operating expenditures.
Cash
Flows
The
following table summarizes our cash flows for each of the periods presented:
Year
Ended
December 31,
2024
2023
USD In thousands
Net cash used in operating activities
(36,979 )
(21,286 )
Net cash provided by investing activities
715
1,951
Net cash provided by financing activities
38,374
2,899
Effect of exchange rate
changes on cash and cash equivalents and restricted cash
1
6
Net increase (decrease)
in cash and cash equivalents
2,111
(16,430 )
79
Operating
Activities
During the year ended December 31, 2024, operating
activities used $37.0 million of net cash, primarily due to a net loss of $17.7 million adjusted by non-cash charges of 16.3 million
and a net change of $3.0 million in our operating assets and liabilities. Non-cash charges mainly consisted of $26.5 million related to
income from change in fair value of the Private Placement Warrants, $2.0 million of income from change in contract liability resulting
from pausing the Company’s AD program, $1.8 million related to stock-based compensation expenses, $1.8 million of depreciation and
impairment charges of goodwill, IPR&D asset and long-lived assets of $0.8 million, $3.2 million and $4.0 million, respectively. Net
changes in our operating assets and liabilities consisted primarily of an increase in trade account payables of $3.2 million and an increase
in other account payables of $1.0 million, partially offset by a decrease in other current assets of $0.8 million and in net change in
operating leases of $0.3 million.
During
the year ended December 31, 2023, operating activities used $21.3 million of net cash, primarily due to a net loss of $26.2 million and
by net cash used by changes in our operating assets and liabilities of $2.5 million and non-cash charges of $2.4 million. Non-cash charges
for the year ended December 31, 2023, mainly consisted of stock-based compensation expenses of $1.0 million, depreciation and amortization
of $0.9 million and amortization of debt issuance costs of $0.6 million. Net changes in our operating assets and liabilities for the
year ended December 31, 2023, consisted primarily of an increase in trade account payables of $0.6 million and an increase in other account
payables of $1.2 million, partially offset by a decrease in other current assets of $0.8 million.
Investing
Activities
During
the year ended December 31, 2024, investment activities provided net cash of $0.7 million, mainly consisting of cash and restricted cash
acquired from the Acquisition.
During
the year ended December 31, 2023, investment activities provided net cash of $2.0 million, proceeds from withdrawal of short-term
deposits of $2.0 million.
We
have invested, and plan to continue to invest, our existing cash in short-term investments in accordance with our investment policy.
These investments may include money market funds and investment securities consisting of U.S. Treasury notes, and high quality, marketable
debt instruments of corporations and government sponsored enterprises. We use foreign exchange contracts (mainly option and forward contracts)
to hedge balance sheet items from currency exposure. These foreign exchange contracts are not designated as hedging instruments for accounting
purposes. In connection with these foreign exchange contracts, we recognize gains or losses that offset the revaluation of the balance
sheet items also recorded under financial expenses (income), net. As of December 31, 2024, we had outstanding foreign exchange contracts
in the amount of approximately $2.4 million with a fair value asset of $19 thousand. As of December 31, 2023, we had outstanding foreign
exchange contracts in the amount of approximately $4.1 million with a fair value asset of $0.3 million.
Financing
Activities
During
the year ended December 31, 2024, financing activities provided net cash of $38.4 million, mainly consisting of the issuance of Convertible
Preferred Shares and the Private Placement Warrants in the March 2024 PIPE in the amount of $20.4 million, net of issuance costs, and
$28.7 million, respectively. This was partially offset by the prepayment of the long-term debt in the amount of $10.7 million under the
Hercules Loan Agreement.
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During
the year ended December 31, 2023, financing activities provided net cash of $3.0 million, mainly consisting of $7.2 million due to issuances
of Common Stock under the February 2023 PIPE, net of issuance costs, partially offset by the repayment of long-term debt of $4.3 million
under the Hercules Loan Agreement.
Contractual
Obligations, Commitments and Contingencies
Our
contractual obligations and commitments relate primarily to our operating leases and non-cancelable purchase obligations under agreements
with various research and development organizations and suppliers in the ordinary course of business. I n
August 2019, we entered into a lease agreement for office and lab spaces in Gaithersburg, Maryland and in
September 2020, we entered into a lease agreement for office and laboratory space in Ness Ziona, Israel.
In
the normal course of business, we enter into contracts and agreements that contain a variety of representations and warranties and provide
for general indemnifications. Our exposure under these agreements is unknown because it involves claims that may be made against us in
the future but have not yet been made. To date, we have not paid any claims or been required to defend any action related to our indemnification
obligations. However, we may record charges in the future as a result of these indemnification obligations.
In
accordance with our certificate of incorporation and bylaws, as well as contractual indemnification agreements, we have potential indemnification
obligations to our officers and directors for specified events or occurrences, subject to some limits, while they are serving at our
request in such capacities. There have been no claims to date, and we have director and officer insurance that may enable us to recover
a portion of any amounts paid for future potential claims.
Government
Grants and Related Royalties
The
Government of Israel, through the IIA, encourages research and development projects by providing grants. We may receive grants from
the IIA at the rates that range from 20% to 50% of the research and development expenses, as prescribed by the research committee of
the IIA. Through December 31, 2024, we had received an aggregate of $8.0 million in the form of grants from the IIA. BiomX Ltd was
formed as an incubator company as part of the FutuRx incubator, and, until 2017, the majority of its funding was from IIA grants and
funding by the incubator, which is supported by the IIA. We continued to apply for and receive IIA grants after we left the incubator.
The requirements and restrictions for such grants are found in the Research Law. Under the Research Law, royalties of 3% to 3.5% on the
revenue derived from sales of products or services developed in whole or in part using these IIA grants are payable to the Israeli government.
We developed both of our platform technologies, at least in part, with funds from these grants, and, accordingly, we would be obligated
to pay these royalties on sales of any of our product candidates that achieve regulatory approval.
Below
is a description of our obligations in connection with the grants received from the IIA under the Research Law:
Local
Manufacturing Obligation
As
long as the manufacturing of our product candidates takes place in Israel and no technology funded with IIA grants is sold or out licensed
to a non-Israeli entity, the maximum aggregate royalties paid generally would not exceed 100% of the grants made to us, plus annual interest
equal to the 12-month SOFR applicable to U.S. dollar deposits, as published on the first business day of each calendar year.
Under
the terms of the Research Law, the products may be manufactured outside of Israel by us or by another entity only if prior approval is
received from the IIA (such approval is not required for the transfer of up to 10% of the manufacturing capacity in the aggregate, in
which case a notice must be provided to the IIA and not be objected to by the IIA within 30 days of such notice).
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Know-How
Transfer Limitation
The
Research Law restricts the ability to transfer know-how funded by the IIA outside of Israel. Transfer of IIA funded know-how outside
of Israel requires prior approval of the IIA and may be subject to payments to the IIA, calculated according to formulae provided under
the Research Law. The redemption fee is subject to a cap of six times the total amount of the IIA grants, plus interest accrued thereon
(i.e. the total liability to the IIA, including accrued interest, multiplied by six). If we wish to transfer IIA funded know-how, the
terms for approval will be determined according to the nature of the transaction and the consideration paid to us in connection with
such transfer.
Approval
of transfer of IIA funded know-how to another Israeli company may be granted only if the recipient abides by the provisions of the Research
Law and related regulations, including the restrictions on the transfer of know-how and manufacturing rights outside of Israel.
Change
of Control
Any
non-Israeli citizen, resident or entity that, among other things, (i) becomes a holder of 5% or more of our share capital or voting rights,
(ii) is entitled to appoint our directors or our chief executive officer or (iii) serves as one of our directors or as our chief executive
officer (including holders of 25% or more of the voting power, equity or the right to nominate directors in such direct holder, if applicable)
is required to notify the IIA and undertake to comply with the rules and regulations applicable to the grant programs of the IIA, including
the restrictions on transfer described above.
Approval
to manufacture products outside of Israel or consent to the transfer of IIA funded know-how, if requested, is within the discretion of
the IIA. Furthermore, the IIA may impose certain conditions on any arrangement under which it permits us to transfer IIA funded know-how
or manufacturing out of Israel.
The
consideration available to our shareholders in a future transaction involving the transfer outside of Israel of know-how developed with
IIA funding (such as a merger or similar transaction) may be reduced by any amounts that we are required to pay to the IIA.
As
of December 31, 2024, no sales were generated and the balance of the principal and interest in respect of our commitments for future
payments to the IIA totaled approximately $8.3 million, as compared to $7.9 million as of December 31, 2023. As part of funding our current
and planned product development activities, we may submit follow-up grant applications for new grants.
Outlook
We
expect our expenses to remain substantially in the same level in connection with our ongoing activities. Our expenses will remain substantial
and may also increase as we:
●
continue the development of
our product candidates;
●
complete IND-enabling activities
and prepare to initiate clinical trials for our product candidates;
●
initiate additional clinical
trials and preclinical studies for product candidates in our pipeline;
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●
seek to identify and develop
or in-license or acquire additional product candidates and technologies;
●
seek regulatory approvals for
our product candidates that successfully complete clinical trials, if any;
●
establish a sales, marketing and distribution infrastructure
to commercialize any product candidates for which we may obtain regulatory approval;
●
hire and retain additional personnel, such as clinical,
quality control, commercial and scientific personnel; and
●
expand our infrastructure and facilities to accommodate
our growing employee base, including adding equipment and physical infrastructure to support our research and development.
Our
financial statements contain an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern as
we believe that our current funds will only be sufficient to meet our working capital and capital expenditure requirements into the first
quarter of 2026. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital
resources sooner than we expect. If we receive regulatory approval for our product candidates, we expect to incur significant commercialization
expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize.
Until
such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through
public or private sales of our equity, loans, milestone payments, possibly additional grants from the IIA, MTEC or other government or
non-profit institutions and other outside funding sources. Our ability to raise additional capital in the equity and debt markets is
dependent on a number of factors including, but not limited to, market volatility resulting from Israel’s war with Hamas and Hezbollah,
other armed conflicts such as in Ukraine or other disruptions, and market demand for our securities, which itself is subject to a number
of development and business risks and uncertainties, as well as the uncertainty that we would be able to raise such additional capital
at a price or on terms that are favorable to the Company. To the extent that we raise additional capital through the sale of equity
or convertible debt securities, our stockholders’ ownership interests may be materially diluted, and the terms of such securities
could include liquidation or other preferences that adversely affect their rights as a common stockholder. Debt financing and preferred
equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions,
such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government
and other third-party funding, collaboration agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements,
we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant
licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when
needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant
rights to develop and market products or product candidates that we would otherwise prefer to develop and market by ourselves. For more
information regarding the risks related to our outlook, see “ Risk Factors — Risks Related to Our Business, Technology
and Industry.”
Foreign
Exchange Contracts
We
entered into forward and option contracts to hedge against the risk of overall changes in future cash flow from payments of salaries
and related expenses, as well as other expenses denominated in NIS. As of December 31, 2024 and 2023, we had outstanding foreign exchange
contracts in the nominal amount of approximately $2.4 million and $4.5 million, respectively.
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Critical
Accounting Estimates
Our
consolidated financial statements are prepared in accordance with US GAAP. The preparation of our consolidated financial statements and
related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs
and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical
experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different
assumptions or conditions.
While
our significant accounting policies are described in more detail in note 2 to our consolidated financial statements, we believe that
the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated
financial statements.
Accrued
research and development expenses
As
part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development
expenses. This process involves reviewing open contracts and purchase orders, communicating with our applicable personnel to identify
services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the
service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in
arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments.
We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances
known to us at that time. We periodically confirm the accuracy of these estimates with the service providers and make adjustments, if
necessary. Examples of estimated accrued research and development expenses include fees paid to:
●
vendors in connection with preclinical development
activities;
●
CROs and investigative sites in connection with preclinical
and clinical trials; and
●
subcontractors in connection with the manufacturing
of materials for preclinical and clinical trials.
We
measure the expense recognized based on our estimates of the services received and efforts expended pursuant to quotes and contracts
with multiple CROs and subcontractors that supply, conduct and manage preclinical studies, human clinical studies and clinical trials
on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven
payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in
a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and
the completion of certain milestones. In accruing service fees, we estimate the time period over which services will be performed and
the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies
from the estimate, we adjust the accrual or the amount of prepaid expenses accordingly. Although we do not expect our estimates to be
materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the
actual status and timing of services performed may vary and may result in changes in estimates that increase or decrease amounts recognized
in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development
expenses.
Stock-Based
Compensation
We
apply ASC 718-10, “Stock-Based Payment,” which requires the measurement and recognition of compensation expenses for all
stock-based payment awards made to employees and directors, including employee stock options under our stock plans based on estimated
fair values.
ASC
718-10 requires that we estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The
fair value of the award is recognized as an expense over the requisite service periods in our Consolidated Statements of Operations.
We recognize stock-based award forfeitures as they occur, rather than estimate by applying a forfeiture rate.
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We
recognize compensation expenses for the fair value of non-employee awards over the requisite service period of each award.
We
estimate the fair value of stock options granted as equity awards using a Black-Scholes options pricing model. The option-pricing model
requires a number of assumptions, of which the most significant are share price, expected volatility and the expected option term (the
time from the grant date until the options are exercised or expire). We determine the fair value per share of the underlying stock by
taking into consideration our most recent sales of stock. BiomX Ltd. has historically been a private company and lacks company-specific
historical and implied volatility information of its stock. We used an average historical stock price volatility based on a combined
weighted average of our historical average volatility and that of a selected peer group of comparable public companies within the biotechnology
and pharmaceutical industry that were deemed to be representative of future stock price trends as we do not have a sufficient historical
trading history of our Common Stock. We will continue to apply this process until a sufficient amount of historical information regarding
the volatility of our stock price becomes available. We have historically not paid dividends and has no foreseeable plans to issue dividends.
The risk-free interest rate is based on the yield from governmental zero-coupon bonds with an equivalent term. The expected option term
is calculated for all stock option grants using the “simplified” method. Changes in the determination of each of the inputs
can affect the fair value of the options granted and the results of our operations.
Intangible
assets
We
accounted for the acquisition of APT using the acquisition method of accounting, which required us to estimate the fair values of the
assets acquired and liabilities assumed. This included acquired in-process research and development, or IPR&D, and goodwill.
The IPR&D is considered indefinite lived until the completion or abandonment of the associated research and development efforts.
Upon successful completion of the project, IPR&D assets are reclassified to developed technology and amortized over their estimated
useful lives.
We test goodwill and IPR&D for impairment at least on an annual
basis, on the last day of the third quarter of the fiscal year and whenever events or changes in circumstances indicate the carrying value
of a reporting unit may not be recoverable. We estimate the fair value of IPR&D assets using discounted cash flow valuation models,
which require the use of significant estimates and assumptions, including, but not limited to, estimating the timing of and expected costs
to complete in-process projects, projecting regulatory approvals, estimating future cash flows from product sales and developing appropriate
discount rates.
Business
Combination
We
allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired
based on their estimated fair value. The excess of the fair value of purchase consideration over the fair values of these identifiable
assets and liabilities are recorded as goodwill and IPR&D. Such valuations require our management to make significant estimates and
assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are
not limited to, future expected cash flows from intangible assets, their useful lives and discount rates. Our management’s estimates
of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result,
actual results may differ from estimates. See Note 1D to the consolidated financial statements included in Part II, Item 8 of this
Annual Report on Form 10-K for additional information related to business combination.
Private Placement Warrants fair value revaluation
We account for the Private Placement Warrants in
accordance with the guidance contained in ASC 815 under which the Private Placement Warrants do not meet the criteria for equity treatment
and must be recorded as liabilities. Accordingly, we classify the Private Placement Warrants as liability at their fair value and adjust
the Private Placement Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet
date until exercised, and any change in fair value is recognized in our statement of operations. The Private Placement Warrants are valued
using the Black-Scholes model.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As
a smaller reporting company, we are not required to make disclosures under this Item.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our
financial statements and the notes thereto begin on page F-1 of this Annual Report.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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