Tessera Defense & Homeland Security Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer, or CEO, and our Senior Vice President of Finance and Operations (our principal executive officer and principal financial officer, respectively), performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2020. Based on the aforementioned evaluation, our management has concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2020. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that receipts and expenditures are being made only in accordance with authorization of our management and directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting on December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework, in Internal Control—Integrated Framework . Based on that assessment under those criteria, management has determined that, as of December 31, 2020, our internal control over financial reporting was effective. This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting due to an exemption for emerging growth companies provided in the JOBS Act. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of fiscal year 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. 92 part III We intend to file a definitive proxy statement for our 2021 Annual General Meeting of Stockholders, or the 2021 Proxy Statement, with the SEC, pursuant to Regulation 14A, not later than 120 days after December 31, 2020. Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K. Only those sections of the 2021 Proxy Statement that specifically address the items set forth herein are incorporated by reference. ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Code of Business Conduct and Ethics We have adopted a Code of Business Conduct and Ethics that applies to all directors, officers and employees. The Code of Business Conduct and Ethics is available on our website at www.biomx.com. If we make any substantive amendments to the Code of Business Conduct and Ethics or grants any waiver from a provision of the Code to any director or executive officer, we will promptly disclose the nature of the amendment or waiver on our website. Other Information The remaining information required by this item will be included in our 2021 Proxy Statement, and such required information is incorporated herein by reference into this Annual Report. ITEM 11. EXECUTIVE COMPENSATION The information required by this item will be included in our 2021 Proxy Statement and is hereby incorporated by reference into this Annual Report. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Securities Authorized for Issuance Under Equity Compensation Plans We have two equity incentive plans, the 2015 Employee Stock Option Plan, or the 2015 Plan, and the Chardan Healthcare Acquisition Corp. 2019 Equity Incentive Plan, or the 2019 Plan. In October 2019, in connection with the Business Combination, we assumed the 2015 Plan with respect to each outstanding equity award thereunder. Although no shares of our Common Stock are available for future issuance under the 2015 Plan, the 2015 Plan will continue to govern outstanding awards granted thereunder. As of December 31, 2020, options to purchase 2,714,066 shares of our Common Stock remained outstanding under the 2015 Plan. The 2019 Plan was adopted by the Board of Directors and approved by our stockholders in connection with the Business Combination. As of December 31, 2020, there were 60,041 shares of our Common Stock available for issuance under the 2019 Plan. The aggregate number of shares of our Common Stock available for issuance pursuant to the 2019 Plan automatically increases on January 1 of each year, for a period of not more than ten years, commencing on January 1, 2020 and ending on (and including) January 1, 2029, in an amount equal to 4% of the total number of shares of Common Stock outstanding on December 31 of the preceding calendar year. Accordingly, on January 1, 2021, 930,813 additional shares of our Common Stock were made available for issuance pursuant to the 2019 Plan. 93 For additional information regarding the 2015 Plan and the 2019 Plan, as of December 31, 2020, please see Part II – Item 8 – Financial Statements and Supplemental Data – Notes to consolidated financial statements – Note 12B – Stock-Based Compensation. Equity Compensation Plan Information December 31, 2020 Plan category Number of securities to be issued upon exercise of outstanding options and restricted stock (a) Weighted- average exercise price of outstanding options and restricted stock (b) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) Equity compensation plans approved by security holders 855,700 $ 6.16 60,041 Equity compensation plans not approved by security holders 2,714,066 2.16 — Total 3,569,766 $ 3.12 60,041 The other information required by this item will be included under the “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in our 2021 Proxy Statement and is hereby incorporated by reference into this Annual Report. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item will be included in our 2021 Proxy Statement and is hereby incorporated by reference into this Annual Report. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this item will be included in our 2021 Proxy Statement and is hereby incorporated by reference into this Annual Report. 94 part IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following are filed with this report: (1) The financial statements listed on the Financial Statements’ Table of Contents (2) Not applicable (b) Exhibits The following exhibits are filed as part of this Annual Report or are incorporated by reference. EXHIBIT INDEX Exhibit Description 2.1 Merger Agreement (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed by the Company on July 17, 2019) 2.2 Amendment Agreement to the Merger Agreement (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed by the Company on October 11, 2019) 3.1 Composite Copy of Amended and Restated Certificate of Incorporation of the Company, effective on December 11, 2018, as amended to date. (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed by the Company on August 13, 2020) 3.2 Amended and Restated Bylaws of the Company, effective as of October 28, 2019 (Incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed by the Company on November 1, 2019) 4.1 Description of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended 4.2 Specimen Unit Certificate (Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 filed by the Company on December 4, 2018) 4.3 Specimen Common Stock Certificate (Incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1 filed by the Company on December 4, 2018) 4.4 Specimen Warrant Certificate (Incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-1 filed by the Company on December 4, 2018) 4.5 Warrant Agreement, dated December 13, 2018 between Continental Stock Transfer & Trust Company and the Company (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed by the Company on December 18, 2018) 10.1 Registration Rights Agreement dated October 28, 2019 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed by the Company on November 1, 2019) 10.2 Voting Agreement dated October 28, 2019 (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed by the Company on November 1, 2019) 10.3** Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed by the Company on November 12, 2020) 10.4* Research and License Agreement, dated June 22, 2015, between BiomX Ltd. and Yeda Research and Development Company Limited, as amended (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed by the Company on November 1, 2019) 10.5* Exclusive Patent License Agreement, dated December 15, 2017, among BiomX Ltd., Keio University and JSR Corporation, as amended (Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed by the Company on November 1, 2019) 95 10.6* Exclusive Patent License Agreement, dated April 22, 2019, among BiomX Ltd., Keio University and JSR Corporation (Incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed by the Company on November 1, 2019) 10.7* Share Purchase Agreement, dated November 19, 2017, among BiomX Ltd., RondinX Ltd. and Guy Harmelin, as the Shareholders’ Representative (Incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed by the Company on November 1, 2019) 10.8** Chardan Healthcare Acquisition Corp. 2019 Equity Incentive Plan (Incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed by the Company on November 1, 2019) 10.9** 2015 Employee Stock Option Plan for Key Employees of BiomX Ltd., as amended (Incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 filed by the Company on January 2, 2020) 10.10 Registration Rights Agreement, dated December 13, 2018, among the Company and the initial stockholders and Chardan Capital Markets, LLC. (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed by the Company on December 18, 2018) 10.11** Form of Non-Qualified Stock Option Agreement (U.S. Awards to Non-Executives) (Incorporated by reference to Exhibit 10.19 to the Company’s Periodic Report on Form 10-K filed by the Company on March 26, 2020) 10.12** Form of Non-Qualified Stock Option Agreement (U.S. Awards to Executive Officers) (Incorporated by reference to Exhibit 10.20 to the Company’s Periodic Report on Form 10-K filed by the Company on March 26, 2020) 10.13** Form of Option Agreement (Israeli Awards) (Incorporated by reference to Exhibit 10.21 to the Company’s Periodic Report on Form 10-K filed by the Company on March 26, 2020) 10.14* An addendum to a lease agreement dated from May 25, 2017, dated September 7, 2020 by and among AFI Assets Ltd., AF – SHAR Ltd., WIS and BiomX Ltd. (translated from Hebrew) 10.15* A lease agreement dated September 7, 2020 by and among AFI Assets Ltd., AF – SHAR Ltd., WIS, Nova Measuring Systems Ltd. and BiomX Ltd. (translated from Hebrew) 10.16 Open Market Sale Agreement SM , dated December 4, 2020, between the Company and Jefferies LLC (incorporated by reference to Exhibit 1.2 of the Company’s Registration Statement on Form S-3 filed by the Company on December 4, 2020). 21.1 Subsidiaries of Company (Incorporated by reference to Exhibit 21.1 to the Company’s Current Report on Form 8-K filed by the Company on November 1, 2019) 23.1 Consent of Brightman Almagor Zohar & Co., independent registered public accounting firm 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a). 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a). 32*** Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350. 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document * Portions of this exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is not material and would likely cause competitive harm to the Company if publicly disclosed. ** Indicates a management contract or a compensatory plan or agreement. *** Furnished herewith Item 16. Form 10-K Summary None. 96 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BIOMX INC. Dated: March 30, 2021 By: /s/ Jonathan Solomon Name: Jonathan Solomon Title: Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated. Signature Title Date /s/ Dr. Russell Greig Chairman of the Board of Directors March 30, 2021 Dr. Russell Greig /s/ Jonathan Solomon Chief Executive Officer March 30, 2021 Jonathan Solomon (Principal Executive Officer) and Director /s/ Marina Wolfson Senior Vice President of Finance and Operations March 30, 2021 Marina Wolfson (Principal Financial Officer and Principal Accounting Officer) /s/ Dr. Gbola Amusa Director March 30, 2021 Dr. Gbola Amusa /s/ Jonas Grossman Director March 30, 2021 Jonas Grossman /s/ Dr. Alan Moses Director March 30, 2021 Dr. Alan Moses /s/ Paul Sekhri Director March 30, 2021 Paul Sekhri /s/ Lynne Sullivan Director March 30, 2021 Lynne Sullivan 97 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP.) CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP.) CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 CONTENTS Page REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM F-2 CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets F-3 - F-4 Consolidated Statements of Operations F-5 Consolidated Statements of Changes in Stockholders’ Equity F-6 Consolidated Statements of Cash Flows F-7 - F-8 Notes to the Consolidated Financial Statements F-9 - F-34 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of BiomX Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of BiomX Inc. (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019 and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note 2 to the financial statements, effective January 1, 2019, the Company adopted the Financial Accounting Standards Board’s new standard related to leases using the modified retrospective approach. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Brightman Almagor Zohar & Co. Certified Public Accountants A Firm in the Deloitte Global Network Tel Aviv, Israel March 31, 2021 We have served as the Company’s auditor since 2015. F- 2 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP.) CONSOLIDATED BALANCE SHEETS (USD in thousands, except share and per share data) As of December 31, Note 2020 2019 ASSETS Current assets Cash and cash equivalents 36,477 72,256 Restricted cash 763 154 Short-term deposits 3 19,851 10,003 Related parties 10 - 50 Other current assets 4 3,576 2,068 Total current assets 60,667 84,531 Non-current assets Lease deposit - 5 Operating lease right-of-use asset 8 4,430 1,148 Property and equipment, net 5 2,228 1,881 In-process research and development (“R&D”) 7 3,038 4,556 Total non-current assets 9,696 7,590 70,363 92,121 The accompanying Notes are an integral part of the consolidated financial statements. F- 3 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP.) CONSOLIDATED BALANCE SHEETS (USD in thousands, except share and per share data) As of December 31, Note 2020 2019 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Trade account payables 2,320 3,253 Current portion of lease liabilities 8 863 375 Other account payables 9 3,978 2,596 Total current liabilities 7,161 6,224 Non-current liabilities Lease liabilities, net of current portion 8 5,032 856 Contingent liabilities 6,11 701 585 Total non-current liabilities 5,733 1,441 Commitments and Contingent Liabilities 11 Stockholders’ equity Common stock, $0.0001 par value (“Common Stock”); Authorized - 60,000,000 shares as of December 31, 2020 and 2019. Issued - 23,270,337 and 22,862,835 as of December 31,2020 and 2019, respectively. Outstanding - 23,264,637 and 22,862,835 as of December 31, 2020 and 2019, respectively. 12 2 2 Additional paid in capital 129,725 126,626 Accumulated deficit (72,258 ) (42,172 ) Total Stockholders’ equity 57,469 84,456 70,363 92,121 The accompanying Notes are an integral part of the consolidated financial statements. F- 4 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP.) CONSOLIDATED STATEMENTS OF OPERATIONS (USD in thousands, except share and per share data) Year ended December 31, Note 2020 2019 Research and development expenses, net 13 20,935 13,489 General and administrative expenses 14 9,323 8,718 Operating loss 30,258 22,207 Finance income, net 15 (172 ) (1,644 ) Loss before income tax 30,086 20,563 Income tax 16 - - Net Loss 30,086 20,563 Basic and diluted loss per share of Common Stock 17 1.30 3.66 Weighted average number of shares of Common Stock outstanding, basic and diluted 23,062,216 5,615,856 ** Number of shares has been retroactively adjusted based on the equivalent number of shares received by the accounting acquirer in the Recapitalization Transaction (refer to Note 1). The accompanying Notes are an integral part of the consolidated financial statements. F- 5 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP.) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (USD in thousands, except share and per share data) Common stock Preferred A Shares (pre-merger - BiomX Ltd.) Preferred B Shares (pre-merger - BiomX Ltd.) Additional paid in Accumulated Total Stockholder’ Shares Amount Shares Amount Shares Amount capital deficit equity Balance as of January 1, 2019 2,307,871 (* ) 7,543,831 1 5,170,357 1 64,410 (21,609 ) 42,803 Acquisition of treasury stock (5,700 ) (* ) - - - - (19 ) - (19 ) Issuance of shares (**) - - - - 308,628 (* ) 1,800 - 1,800 Effect of Recapitalization Transaction 20,486,082 2 (7,543,831 ) (1 ) (5,478,985 ) (1 ) 59,397 - 59,397 Stock-based payment - - - - - - 938 - 938 Exercise of stock options 74,582 (* ) - - - - 100 - 100 Net loss - - - - - - - (20,563 ) (20,563 ) Balance as of December 31, 2019 22,862,835 2 - - - - 126,626 (42,172 ) 84,456 Issuance of Common Stock under Open Market Sales Agreement (***) 10,176 - - - - - (98 ) - (98 ) Stock-based payment - - - - - - 2,890 - 2,890 Exercise of stock options 391,626 - - - - - 307 - 307 Net loss - - - - - - - (30,086 ) (30,086 ) Balance as of December 31, 2020 23,264,637 2 - - - - 129,725 (72,258 ) 57,469 (*) Less than $1. (**) Net of issuance expenses of $114. (***) Net of issuance expenses of $158. **** Number of shares has been retroactively adjusted based on the equivalent number of shares received by the accounting acquirer in the Recapitalization Transaction (refer to Note 1). The accompanying Notes are an integral part of the consolidated financial statements. F- 6 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP.) CONSOLIDATED STATEMENTS OF CASH FLOWS (USD in thousands, except share and per share data) Year ended December 31, 2020 2019 CASH FLOWS – OPERATING ACTIVITIES Net loss (30,086 ) (20,563 ) Adjustments required to reconcile net loss to cash flows used in operating activities Depreciation and amortization 2,180 318 Stock-based compensation 2,890 938 Revaluation of contingent liabilities 116 (304 ) Changes in operating assets and liabilities: Other current assets (1,503 ) (1,845 ) Trade account payables (858 ) 3,060 Other account payables 1,382 836 Operating lease liabilities 1,382 83 Related parties 50 (100 ) Net cash used in operating activities (24,447 ) (17,577 ) CASH FLOWS – INVESTING ACTIVITIES Decrease (Increase) in short-term deposits (9,848 ) 21,052 Purchase of property and equipment (1,009 ) (1,312 ) Net cash provided by (used in) investing activities (10,857 ) 19,740 CASH FLOWS – FINANCING ACTIVITIES Issuance of Common Stock, net of issuance costs (98 ) 1,800 Outflows in connection with current assets and liabilities acquired in Recapitalization Transaction (75 ) 59,673 Acquisition of treasury stock - (19 ) Exercise of stock options 307 100 Net cash provided by financing activities 134 61,554 Increase (decrease) in cash and cash equivalents and restricted cash (35,170 ) 63,717 Cash and cash equivalents and restricted cash at the beginning of the year 72,410 8,693 Cash and cash equivalents and restricted cash at the end of the year 37,240 72,410 The accompanying Notes are an integral part of the consolidated financial statements. F- 7 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP.) CONSOLIDATED STATEMENTS OF CASH FLOWS (USD in thousands, except share and per share data) Year ended December 31, 2020 2019 SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: Recognition of right-of-use asset and lease liability upon adoption of ASU 2016-02 - 662 Assets acquired under operating leases 4,547 690 Assets acquired (liabilities assumed) in Recapitalization Transaction: Current assets (excluding cash and cash equivalents) - (88 ) Current liabilities - 364 Recapitalization Transaction effect on equity - 59,397 Cash acquired in connection with Recapitalization Transaction - 59,673 The accompanying Notes are an integral part of the consolidated financial statements. F- 8 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 1 - GENERAL A. General information: BiomX Inc. (formerly known as Chardan Healthcare Acquisition Corp., individually prior to the Recapitalization Transaction (as defined below), and together with its subsidiaries, BiomX Ltd. and RondinX Ltd. after the Recapitalization Transaction, the “Company” or “BiomX”) was incorporated as a blank check company on November 1, 2017, under the laws of the state of Delaware, for the purpose of entering into a merger, stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities. On July 16, 2019, the Company entered into a merger agreement with BiomX Ltd. (“BiomX Israel”), a company incorporated under the laws of Israel, CHAC Merger Sub Ltd. (“Merger Sub”) and Shareholder Representative Services LLC, as amended on October 11, 2019, pursuant to which, among other things, BiomX Israel merged with Merger Sub, with BiomX Israel being the surviving entity in accordance with the Israeli Companies Law, 5759-1999, as a wholly owned direct subsidiary of BiomX Inc. On October 28, 2019, the Company consummated the acquisition of 100% of the outstanding shares of BiomX Israel (the “Recapitalization Transaction”). Pursuant to the aforementioned merger agreement, in exchange for all of the outstanding shares of BiomX Israel, the Company issued to the shareholders of BiomX Israel a total of 15,069,058 shares of the Company’s Common Stock representing approximately 65% of the total shares issued and outstanding after giving effect to the Recapitalization Transaction. As a result of the Recapitalization Transaction, BiomX Israel became a wholly owned subsidiary of the Company. As the shareholders of BiomX Israel received the largest ownership interest in the Company, BiomX Israel was determined to be the “accounting acquirer” in the Recapitalization Transaction. As a result, the historical financial statements of the Company were replaced with the financial statement of BiomX Israel for all periods presented. Following the Recapitalization Transaction, the Company retained $60,100 held in a trust account, after redemptions of shares held by certain shareholders in connection with the initial public offering of Chardan Healthcare Acquisition Corp. (refer to Note 12A). The number of shares and instruments convertible into shares included within these financial statements have been retroactively adjusted based on the equivalent number of shares received by the accounting acquirer in the Recapitalization Transaction. On October 28, 2019, the Company was renamed BiomX Inc. and the Company’s shares of Common Stock, units, and warrants began trading on the NYSE American under the symbols PHGE, PHGE.U, and PHGE.WS, respectively. On February 6, 2020, the Company’s Common Stock also began trading on the Tel-Aviv Stock Exchange. B. Risk factors: To date, the Company has not generated revenue from its operations. As of December 31, 2020, the Company had a cash and cash equivalents and restricted cash balance of approximately $37,239 and short-term deposits of approximately $19,851, which management believes is sufficient to fund its operations for more than 12 months from the date of issuance of these condensed consolidated financial statements and sufficient to fund its operations necessary to continue development activities of its current proposed products. F- 9 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 1 - GENERAL (Cont.) B. Risk factors: (cont.) Consistent with its continuing research and development activities, the Company expects to continue to incur additional losses for the foreseeable future. The Company plans to continue to fund its current operations, as well as other development activities relating to additional product candidates, through future issuances of debt and/or equity securities and possibly additional grants from the Israel Innovation Authority (“IIA”) and other government institutions. The Company’s ability to raise additional capital in the equity and debt markets is dependent on a number of factors including, but not limited to, the market demand for the Company’s Common Stock, which itself is subject to a number of development and business risks and uncertainties, as well as the uncertainty that the Company would be able to raise such additional capital at a price or on terms that are favorable to it. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies applied in the preparation of the financial statements on a consistent basis, are as follows, except for the adoption of new accounting standards: A. Basis of presentation and principles of consolidation: The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries, BiomX Israel and RondinX Ltd. All intercompany accounts and transactions have been eliminated in consolidation. B. Use of estimates in the preparation of financial statements: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities in the financial statements and the amounts of expenses during the reported years. Actual results could differ from those estimates. C. Reclassification Certain prior year amounts have been reclassified to conform to the current year presentation. D. Functional currency and foreign currency translation: The functional currency of the Company is the U.S. dollar (“dollar”) since the dollar is the currency of the primary economic environment in which the Company has operated and expects to continue to operate in the foreseeable future. Transactions and balances denominated in dollars are presented at their original amounts. Transactions and balances denominated in foreign currencies have been re-measured to dollars in accordance with the provisions of ASC 830-10, “Foreign Currency Matters.” All transaction gains and losses from remeasurement of monetary balance sheet items denominated in foreign currencies are reflected in the statements of operations as financial income or expenses, as appropriate. E. Cash and cash equivalents: The Company considers all highly liquid investments, including unrestricted short-term bank deposits purchased with original maturities of three months or less, to be cash equivalents. F- 10 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.) F. Concentrations of credit risk: Financial instruments which potentially subject us to credit risk consist primarily of cash, cash equivalents, and short-term deposits. These amounts at times may exceed federally insured limits. We have not experienced any credit losses in such accounts and do not believe we are exposed to any significant credit risk on these funds. The Company uses foreign exchange contracts (mainly option and forward contracts) to hedge cash flows from currency exposure. These foreign exchange contracts are not designated as hedging instruments for accounting purposes. In connection with these foreign exchange contracts, the Company recognizes gains or losses that offset the revaluation of the cash flows also recorded under financial expenses (income), net in the consolidated statements of operations. As of December 31, 2020, the Company had outstanding foreign exchange contracts in the amount of approximately $1,555. As of December 31, 2019, the Company had no outstanding foreign exchange contracts. G. Property and equipment: Property and equipment are presented at cost less accumulated depreciation. Depreciation is calculated based on the straight-line method over the estimated useful lives of the related assets or terms of the related leases, as follows: Estimated Useful Lives Laboratory equipment 7 years Computers and software 3 years Equipment and furniture 15 years Leasehold improvements Shorter of lease term or useful life In accordance with ASC 360-10, “Impairment and Disposal of Long-Lived Assets”, management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable based on estimated future undiscounted cash flows. If so indicated, an impairment loss would be recognized for the difference between the carrying amount of the asset and its fair value. For the years ended December 31, 2020 and 2019, no impairment expenses were recorded. H. Intangible assets: Intangible research and development assets acquired in a business combination are recognized at fair value as of the acquisition date and subsequently accounted for as indefinite-lived intangible assets until completion or abandonment of the associated R&D efforts. Indefinite-lived intangible assets are reviewed for impairment at least annually or whenever there is an indication that the asset may be impaired. I. Income taxes: The Company provides for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all the deferred tax assets will not be realized. As of December 31, 2020 and 2019, the Company had a full valuation allowance against deferred tax assets. F- 11 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.) I. Income taxes: (cont.) The Company is subject to the provisions of ASC 740-10-25, “Income Taxes” (“ASC 740”). ASC 740 prescribes a more likely-than-not threshold for the financial statement recognition of uncertain tax positions. ASC 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. On a yearly basis, the Company undergoes a process to evaluate whether income tax accruals are in accordance with ASC 740 guidance on uncertain tax positions. The Company has not recorded any liability for uncertain tax positions for the years ended December 31, 2020 and 2019. J. Fair value of financial instruments: The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below: Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2 – Quoted prices in non-active markets or in active markets for similar assets or liabilities, observable inputs other than quoted prices, and inputs that are not directly observable but are corroborated by observable market data. Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. There were no changes in the fair value hierarchy levelling during the years ended December 31, 2020 and 2019. F- 12 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.) J. Fair value of financial instruments: (Cont.) The following table summarizes the fair value of our financial assets and liabilities that were accounted for at fair value on a recurring basis, by level within the fair value hierarchy: December 31, 2020 Level 1 Level 2 Level 3 Fair Value Assets: Cash equivalents: Money market funds 30,000 - - 30,000 30,000 - - 30,000 Liabilities: Contingent liabilities - - 701 701 - - 701 701 December 31, 2019 Level 1 Level 2 Level 3 Fair Value Assets: Cash equivalents: Money market funds - - - - - - - - Liabilities: Contingent liabilities - - 585 585 - - 585 585 Financial instruments with carrying values approximating fair value include cash and cash equivalents, restricted cash, short-term deposits, other current assets, trade accounts payable and other current liabilities, due to their short-term nature. K. Defined contribution plans: Under Israeli employment laws, employees of BiomX Israel are included under Section 14 of the Severance Compensation Act, 1963 (“Section 14”) for a portion of their salaries. Pursuant to Section 14, these employees are entitled to monthly deposits made by the Company on their behalf with insurance companies. Payments in accordance with Section 14 release the Company from any future severance payments (under the Israeli Severance Compensation Act, 1963) with respect of those employees. The aforementioned deposits are not recorded as an asset on the Company’s balance sheet, and there is no liability recorded as the Company does not have a future obligation to make any additional payments. The Company’s contributions to the defined contribution plans are charged to the consolidated statements of operations as and when the services are received from the Company’s employees. Total expenses with respect to these contributions were $567 and $381 for the years ended December 31, 2020 and 2019, respectively. For U.S. employees the Company has a defined contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers substantially all employees of BiomX Inc in the U.S. who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. The Company has not elected to match any of the employee’s deferral. During the years ended December 31, 2020 and 2019 the Company did not record any expenses for 401(k) match contributions. L. Research and development costs: Research and development costs are charged to statements of operations as incurred. Royalty-bearing grants from the IIA are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred and applied as a deduction from research and development expenses. F- 13 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.) M. Basic and diluted loss per share: Basic loss per share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the year. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the year, plus the number of shares of Common Stock that would have been outstanding if all potentially dilutive shares of Common Stock had been issued, using the treasury stock method, in accordance with ASC 260-10 “Earnings per Share.” Potentially dilutive shares of Common Stock were excluded from the calculation of diluted loss per share for all periods presented due to their anti-dilutive effect due to losses in each period. N. Stock compensation plans: The Company applies ASC 718-10, “Stock-Based Payment,” (“ASC 718-10”) 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 the Company’s stock plans based on estimated fair values. ASC 718-10 requires companies to estimate the fair value of stock-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 the Company’s statements of operations. The Company recognizes stock-based award forfeitures as they occur rather than estimate by applying a forfeiture rate. All issuances of stock options or other equity instruments to non-employees as consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued. The Company recognizes compensation expense for the fair value of non-employee awards over the requisite service period of each award. In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Stock-Based Payment Accounting,” which simplifies the accounting for nonemployee stock-based payment transactions by aligning the measurement and classification guidance, with certain exceptions, to that for stock-based payment awards to employees. The amendments expand the scope of the accounting standard for stock-based payment awards to include stock-based payment awards granted to non-employees in exchange for goods or services used or consumed in an entity’s own operations and supersedes the guidance related to equity-based payments to non-employees. The Company adopted these amendments on January 1, 2019. The adoption of these amendments did not have a material impact on the consolidated financial statements and related disclosures. F- 14 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.) N. Stock compensation plans: (cont.) The Company estimates the fair value of stock options granted as equity awards using a Black-Scholes option-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). Expected volatility is estimated based on volatility of similar companies in the technology sector. The Company has 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 options granted to employees and directors using the “simplified” method. Grants to non-employees are based on the contractual term. Changes in the determination of each of the inputs can affect the fair value of the options granted and the results of operations of the Company. O. Leases: ASU 2016-02, “Leases (Topic 842)” was issued by the FASB in February 2016. The Company adopted this ASU 2016-02 effective January 1, 2019 using the modified retrospective application, applying the new standard to leases in place as of the adoption date. Prior periods have not been adjusted. Leases existing for the reporting period beginning January 1, 2019 are presented under ASU 2016-02. Arrangements that are determined to be leases at inception are recognized as long-term operating lease assets and lease liabilities in the consolidated balance sheet at lease commencement. Operating lease liabilities are recognized based on the present value of the future lease payments over the lease term at commencement date. As the rates implicit in the Company’s leases are not reasonably determinable, the Company applies its incremental borrowing rate based on the economic environment at the commencement date in determining the present value of future lease payments. Lease terms include options to extend the lease when it is reasonably certain that the Company will exercise that option. Lease expenses for operating leases are recognized on a straight-line basis over the lease term. The Company elected to adopt a package of practical expedients under Topic 842 which removes the requirement to reassess whether expired or existing contracts contain leases and removes the requirement to reassess the lease classification for any existing leases prior to the adoption date of January 1, 2019. Additionally, the Company has made a policy election not to capitalize leases with a term of 12 months or less. In accordance with ASC 360-10, management reviews operating lease assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable based on estimated future undiscounted cash flows. If so indicated, an impairment loss would be recognized for the difference between the carrying amount of the asset and its fair value. P. Recent Accounting Standards: In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses,” to improve information on credit losses for financial assets and net investment in leases that are not accounted for at fair value through net income. ASU No. 2016-13 replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. This guidance is effective for the Company beginning on January 1, 2023, with early adoption permitted. The Company does not expect that the adoption of this standard will have a significant impact on its consolidated financial statements and related disclosures. F- 15 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.) P. Recent Accounting Standards: (Cont.) In August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements,” which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements and was effective for the Company beginning on January 1, 2020. The adoption of ASU 2018-13 had no material impact on the Company’s consolidated financial statements. In November 2018, the FASB issued ASU 2018-18 ,“Collaborative Arrangements (Topic 808),” which clarifies the interaction between Topic 808 and Topic 606, “Revenue from Contracts with Customers.” The Company adopted this standard on January 1, 2020. The adoption of ASU 2018-18 had no material impact on the Company’s consolidated financial statements. In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance was effective for the Company beginning on January 1, 2021, with early adoption permitted. The adoption of ASU 2019-12 had no material impact on the Company’s consolidated financial statements. NOTE 3 - SHORT-TERM DEPOSITS Short-term deposits represent time deposits placed with banks with original maturities of greater than three months but less than one year. Interest earned is recorded as finance income in the consolidated statements of operations during the years for which the Company held short-term deposits. As of December 31, 2020, the Company had deposits at Leumi Bank (Israel) and BHI USA that bore fixed annual interest between 0.51% and 1.58%. As of December 31, 2019, the Company has a deposit dominated in USD at BHI USA that bears fixed annual interest of 2.1%. NOTE 4 - OTHER CURRENT ASSETS As of December 31, 2020 2019 Government institutions 276 244 Prepaid insurance 2,055 1,560 Other prepaid expenses 29 264 Lease incentive 1,075 - Other 141 - 3,576 2,068 F- 16 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 5 - PROPERTY AND EQUIPMENT, NET As of December 31, 2020 2019 Cost: Computers and software 483 350 Laboratory equipment 2,357 1,729 Equipment and furniture 120 159 Leasehold improvements 587 300 3,547 2,538 Depreciation: Computers and software 310 199 Laboratory equipment 710 367 Equipment and furniture 36 5 Leasehold improvements 263 86 1,319 657 2,228 1,881 NOTE 6 - ACQUISITION OF SUBSIDIARY In November, 2017, BiomX Israel signed a share purchase agreement with the shareholders of RondinX Ltd. In accordance with the share purchase agreement, BiomX Israel acquired 100% control and ownership of RondinX Ltd. for consideration valued at $4,500. The consideration included the issuance of 250,023 Preferred A Shares, the issuance of warrants to purchase an aggregate of 4,380 Series A-1 preferred shares, and additional contingent consideration. The contingent consideration is based on the attainment of future clinical, developmental, regulatory, commercial and strategic milestones relating to product candidates for treatment of primary sclerosing cholangitis or entry into qualifying collaboration agreements with certain third parties and may require the Company to issue 567,729 shares of Common Stock upon the attainment of certain milestones, as well as make future cash payments and/or issue additional shares of the most senior class of the Company’s shares of Common Stock authorized or outstanding as of the time the payment is due, or a combination of both of up to $32,000 of the Company within ten years from the closing of the agreement and/or the entering of agreements with certain third parties or their affiliates that include a qualifying up-front fee and is entered into within three years from the closing of the agreement. The Company has the discretion of determining whether milestone payments will be made in cash or by issuance of shares of Common Stock. The contingent consideration is accounted for at fair value (level 3). There were no changes in the fair value hierarchy levelling during the years ended December 31, 2020 and December 31, 2019. The consolidated financial statements as of December 31, 2020 and 2019 include a liability with respect to this agreement in the amount of $83 and $260, respectively. F- 17 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 7 - IN-PROCESS RESEARCH AND DEVELOPMENT Intangible assets acquired in the RondinX Ltd. acquisition (see Note 6) were determined to be in-process research and development (“R&D”). In accordance with ASC 350-30-35-17A, R&D assets acquired in a business combination are considered an indefinite-lived intangible asset until completion or abandonment of the associated R&D efforts. On January 1, 2020, the in-process R&D efforts were completed. The Company had determined the useful life of the R&D assets for three years and began amortizing these assets accordingly in the financial statements. Amortization expenses recorded in the consolidated statements of operations were $1,518 for the year ended December 31, 2020. Based on management’s analysis, there was no impairment for the year ended December 31, 2020. NOTE 8 - LEASES In May 2017, BiomX Israel entered into a lease agreement for office space in Ness Ziona, Israel. The agreement is for five years beginning on June 1, 2017 with an option to extend for an additional five years. Monthly lease payments under the agreement are approximately $18. As a part of the agreement, the Company provided a bank guarantee to the landlord in the amount of approximately $95 representing four monthly lease payments. As of December 31, 2020, the bank guarantee expired and was not renewed. Lease expenses recorded in the consolidated statements of operations were $217 and $201 for the years ended December 31, 2020 and 2019, respectively. In September 2019, BiomX Israel entered into an additional lease agreement for office space in Ness Ziona, Israel. The agreement is for five years beginning on September 8, 2019 with an option to extend for an additional three years. The option was not accounted for as part of the lease, given its low probability of being exercised. Monthly lease payments under the agreement are approximately $12. As a part of the agreement, the Company provided a bank guarantee to the landlord in the amount of approximately $63 representing four monthly lease and related payments. Lease expenses recorded in the consolidated statements of operations were $141 and $18 for the years ended December 31, 2020, and 2019, respectively. In September 2020, BiomX Israel entered into a third lease agreement for office space in Ness Ziona, Israel for five years beginning on September 1, 2020, with an option to extend for an additional period until November 30, 2030. This agreement supersedes the abovementioned May 2017 and September 2019 lease agreements and sets the prior lease agreements’ end date to March 31, 2021. Monthly lease payments under the new lease agreement are approximately $50. As part of the agreement, BiomX Israel is exempt from monthly payments under the new agreement until January 15, 2021. In addition, the lessor will reimburse BiomX Israel for costs incurred for leasehold improvements by a pre-defined amount. BiomX Israel will pay back the reimbursed amount with interest during the entire contract term. As a result, the Company recognized a lease incentive asset in an amount of $1,030 that is deducted from the operating lease right-of-use asset. BiomX Israel undertook to obtain a bank guarantee in favor of the landlord in the amount of approximately $208, representing four monthly lease and related payments. Lease expenses recorded in the consolidated statements of operations were $45 for the year ended December 31, 2020. On October 1, 2020, the Company entered into a lease agreement for office space in Branford, Connecticut, U.S., for 25 months beginning on October 5, 2020. Monthly lease payments under the agreement are approximately $4. As part of the agreement, the Company is required to deposit $8 as a security, representing two monthly lease and related payments. Lease expenses recorded in the consolidated statements of operations were $13 for the year ended December 31, 2020. F- 18 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 8 - LEASES (Cont.) Supplemental cash flow information related to operating leases was as follows: Year ended December 31, 2020 Cash payments for operating leases 416 As of December 31, 2020, the Company’s operating leases had a weighted average remaining lease term of 9.9 years and a weighted average discount rate of 6%. The maturity analysis of operating leases as of December 31, 2020 were as follows: Operating Leases 2021 890 2022 806 2023 763 2024 763 2025 763 2026 763 2027 763 2028 763 2029 763 2030 699 Total operating lease payments 7,736 Less imputed interest 1,841 Total operating lease liability balance 5,895 NOTE 9 - OTHER ACCOUNT PAYABLES As of December 31, 2020 2019 Employees and related institutions 2,441 1,780 Accrued expenses 1,128 587 Government institutions 344 169 Deferred income 65 60 3,978 2,596 NOTE 10 - BALANCES AND TRANSACTION WITH RELATED PARTIES A. Balances with related parties As of December 31, 2020 2019 Additional paid in capital (treasury stock) (See 1 below) (19 ) (19 ) Related party receivable (See 2 below) - 50 F- 19 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 10 - BALANCES AND TRANSACTION WITH RELATED PARTIES (Cont.) B. Transactions with related parties Year ended December 31, 2020 2019 Research and development expenses (See 2 below) - (167 ) 1. 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 December 31, 2020, one loan was granted in the amount of $19, and the aggregate amount of the remaining potential commitment as of December 31, 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. 2. On October 31, 2018, BiomX Israel entered into a research collaboration agreement with Janssen Research & Development, LLC (“Janssen”), an affiliate of shareholder Johnson & Johnson Development Corporation, for a collaboration on biomarker discovery for inflammatory bowel disease (“IBD”). Under the agreement, BiomX Israel is eligible to receive fees totaling $167 in installments of $50 within 60 days of signing of the agreement, $17 upon completion of data processing, and two installments of $50 each, upon delivery of Signature Phase I of the Final Study Report (both terms defined within the agreement). This agreement ended in 2020, 30 days after the parties completed the research program and BiomX Israel provided Janssen with a final study report. As of December 31, 2019, consideration of $117 had been received. The remaining $50 consideration was received in January 2020. NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES A. During 2015, 2016 and 2017, BiomX Israel submitted three requests to the IIA for R&D projects for the technological incubators program. The approved budget per year was NIS 2,700 (approximately $781) per request. According to the IIA directives, the IIA funded 85% of the approved budget and the rest of the budget was funded by certain shareholders. In April 2019, the IIA approved an application for a total budget of NIS 4,221 (approximately $1,185). IIA funded 30% of the approved budget. The program was for the period beginning from July 2018 through June 2019. As of December 31, 2020, BiomX Israel has received all funds with respect to this program. In December 2019, the IIA approved an application for a total budget of NIS 10,794 (approximately $3,123). IIA funded 30% of the approved budget. The program is for the period beginning from July 2019 through December 2019. As of December 31, 2020, BiomX Israel has submitted the final report to the IIA for this program. F- 20 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES (Cont.) During April 2020, the IIA approved a new application for a total budget of NIS 15,562 (approximately $4,287). The IIA committed to funding 30% of the approved budget. The program was for the period beginning January 2020 through December 2020. As of December 31, 2020, the Company received NIS 1,634 (approximately $450) from the IIA with respect to this program. BiomX Israel has not yet submitted the final report to the IIA for this program. Refer to note 18C for more information regarding approved applications in 2021. 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 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, 2020, therefore, no liability was recorded in these consolidated financial statements. Total research and development income recorded in the consolidated statements of operations was $518 and $299 for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, BiomX Israel had a contingent obligation to the IIA in the amount of approximately $2,300 including annual interest of LIBOR linked to the dollar. B. 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. 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 11G regarding the Yeda Amendment. As the Company has not yet generated revenue from operations, no provision was included in the consolidated financial statements as of December 31, 2020 and 2019 with respect to the 2015 License Agreement. F- 21 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES (Cont.) 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 is obligated to 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 12 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 financial statements with respect to the 2017 License Agreement as of December 31, 2020 and 2019. In July 2019, the Company and Yeda amended the 2015 License Agreement and the 2017 License Agreement with Yeda. See Note 11G regarding the Yeda Amendment. 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 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. The consolidated financial statements as of December 31, 2020 and 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 11I regarding the MIT Amendment. 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 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 on revenue of products. The consolidated financial statements as of December 31, 2020 and 2019 include a liability with respect to this agreement in the amount of $83 and $260, respectively. Refer to Note 6 regarding contingent liability with respect to the RondinX Ltd. acquisition. 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 $3,210 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, 2020 and 2019 with respect to the agreement. F- 22 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES (Cont.) 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 $32,10 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 $378 and $217 as of December 31, 2020 and 2019, respectively. G. 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. The 2017 license agreement was terminated in 2020. H. 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. As of December 31, 2020, consideration of $150 had been received. I. 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. J. Refer to Note 8 for information regarding the Company’s lease commitments. K. Refer to Note 10B(1) for information regarding the Company’s commitment to certain shareholders for taxes incurred in Israel as a result of the Recapitalization Transaction. F- 23 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 12 - STOCKHOLDERS EQUITY A. Share Capital: Common Stock: The Company is authorized to issue 60,000,000 shares of Common Stock. Holders of the Company’s Common Stock are entitled to one vote for each share. As of December 31, 2020, the Company had 23,270,337 issued shares and 23,264,637 outstanding shares of Common Stock. Initial Public Offering: On December 18, 2018, the Company consummated its initial public offering (“IPO”) of 7,000,000 units (“Public Units”). The Public Units sold in the IPO were sold at an offering price of $10.00 per Public Unit, generating total gross proceeds of $70,000. The Public Units each consist of one share of Common Stock and one warrant to purchase one-half of a share of Common Stock (“Public Warrant”), with every two Public Warrants entitling the holder to purchase one share of Common Stock for $11.50 per full share. Following the Recapitalization Transaction, the Company retained approximately $60,100 balance held in a trust account, after redemptions of IPO shares held by certain shareholders. Simultaneous with the consummation of the IPO, the Company consummated the private placement of an aggregate of 2,900,000 warrants (“Private Placement Warrants”). Issuance of Share Capital: During 2018 BiomX Ltd. issued an aggregate amount of 3,028,990 Preferred A Shares (pre-merger) for a total consideration of $13,000, in connection with various share purchase agreement with investors. In November 2018, the Company entered into a share purchase agreement (the “November 2018 SPA”) with new and existing investors (the “November 2018 Investors”). In accordance with the November 2018 SPA, the Company issued to the November 2018 Investors a total of 5,478,985 Preferred B Shares at $0.0001 nominal value (the “Preferred B Shares”) for total consideration of $31,955 as follows: ● On November 28, 2018 and on December 11, 2018, the Company issued to the November 2018 Investors 4,964,607 and 205,750 Preferred B Shares, respectively, for total consideration of $30,155 in accordance with the November 2018 SPA. ● On January 8, 2019, the Company issued to the November 2018 Investors an additional 308,628 Preferred B Shares for total consideration of $1,800 in accordance with the November 2018 SPA. F- 24 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 12 - STOCKHOLDERS EQUITY (Cont.) A. Share Capital: (cont.) Stock Exchange: As detailed in Note 1, as part of the Recapitalization Transaction on October 28, 2019, the Company issued 15,069,058 shares of Common Stock in exchange for approximately 65% of the issued and outstanding ordinary shares and all the preferred shares of BiomX Israel. The number of shares prior to the Recapitalization Transaction has been retroactively adjusted based on the equivalent number of shares received by the accounting acquirer in the Recapitalization Transaction. In addition, the Company also agreed to issue the following number of additional shares of Common Stock, in the aggregate, to stockholders on a pro rata basis, subject to the Company’s achievement of the conditions specified below following the recapitalization transaction (all with respect to the Company’s Common Stock traded on the NYSE American): A. 2,000,000 additional shares of the Company’s Common Stock if the daily volume weighted average price of the Company’s Common Stock in any 20 trading days within a 30-trading day period prior to January 1, 2022 is greater than or equal to $16.50 per share. B. 2,000,000 additional shares of the Company’s Common Stock if the daily volume weighted average price of the Company’s Common Stock in any 20 trading days within a 30-trading day period prior to January 1, 2024 is greater than or equal to $22.75 per share. C. 2,000,000 additional shares of the Company’s Common Stock if the daily volume weighted average price of the Company’s Common Stock in any 20 trading days within a 30-trading day period prior to January 1, 2026 is greater than or equal to $29.00 per share. At-the-market Sales Agreement: In December 2020, pursuant to a registration statement on Form S-3 declared effective by the Securities and Exchange Commission on December 11, 2020, the Company entered into an Open Market Issuance Sales Agreement (“ATM Agreement”) with Jefferies LLC. (“Jefferies”), which provides that, upon the terms and subject to the conditions and limitations in the ATM Agreement, the Company may elect, from time to time, to offer and sell shares of Common Stock having an aggregate offering price of up to $50,000 through Jefferies acting as sales agent. During the year ended December 31, 2020, the Company sold 10,176 shares of Common Stock under the ATM Agreement, at an average price of $6.07 per share, raising aggregate net proceeds of approximately $60, after deducting an aggregate commission of 3%. The Company recorded issuance expenses of $158. Preferred Stock: The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors (the “Board”). F- 25 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 12 - STOCKHOLDERS EQUITY (Cont.) B. Stock-based compensation: Equity Incentive Plan: In 2015, the Board of Directors of BiomX Israel approved a plan for the allocation of options to employees, service providers, and officers (the “2015 Plan”). The options represented a right to purchase one Ordinary Share of the BiomX Israel in consideration of the payment of an exercise price. Also, the options were granted in accordance with the “capital gains route” under section 102 and section 3(i) of the Israeli Income Tax Ordinance and section 409A of the U.S. Internal Revenue Code. The 2015 plan was adjusted following the Recapitalization Transaction on October 28, 2019 such that each outstanding option entitles its holder to purchase one share of Common Stock of the Company. As a result, the number of options and exercise price per share were adjusted in a technical manner such that there was no change in the fair value of the awards under the adjusted 2015 Plan. The number of outstanding options and exercise prices in this Note have been restated to reflect the adjusted 2015 Plan. As of December 31, 2020, there are no shares of Common Stock remaining for issuance under the 2015 Plan. In 2019, the Company adopted a new incentive plan (the “2019 Plan”) to grant 1,000 options, exercisable for Common Stock. The aggregate number of shares of Common Stock that may be delivered pursuant to the 2019 Plan will automatically increase on January 1 of each year, commencing on January 1, 2020 and ending on (and including) January 1, 2029, in an amount equal to four percent (4%) of the total number of shares of Common Stock outstanding on December 31 of the preceding calendar year. Notwithstanding the foregoing, the Board may act prior to January 1 of a given year to provide that there will be no January 1 increase for such year or that the increase for such year will be a lesser number of shares of Common Stock than provided herein. As of December 31, 2020, there were 60,041 shares of Common Stock remaining for issuance under the 2019 plan. On January 1, 2021, the number of shares of Common Stock available to grant under the 2019 Plan was increased by 930,813. Stock Options: During 2019, the Board approved the grant of 704,669 options to 22 employees and 79,630 options to two consultants, without consideration. 527,716 of the options granted are to the executive officers of the Company. These options were granted under the 2015 Plan. During 2019, 74,581 of these options were exercised to purchase shares of Common Stock at an average exercise price of $1.34 per share. F- 26 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 12 - STOCKHOLDERS EQUITY (Cont.) B. Stock-based compensation: (cont.) Stock Options: (cont.) Certain senior employees and directors are entitled to full acceleration of their unvested options upon the occurrence of both a change in control of the Company and the end of their engagement with the Company. On March 25, 2020, the Board approved the grant of 814,700 options without consideration to 65 employees, one consultant, four senior officers (one of whom is also a consultant), and six directors under the 2019 Plan. These options were granted at an exercise price of $6.21 per share with vesting periods ranging from three to four years. Directors and senior officers are entitled to full acceleration of their unvested options upon the occurrence of both a change in control of the Company and the end of their engagement with the Company. On May 5, 2020, the Board approved the grant of 79,000 options without consideration to four employees under the 2019 Plan. These options were granted at an exercise price of $5.59 per share with a vesting period of four years. On October 2, 2020, the Board of Directors approved the grant of 32,000 options without consideration to two directors under the 2019 Plan. These options were granted at an exercise price of $6.44 per share with a vesting period of four years. Directors are entitled to full acceleration of their unvested options upon the occurrence of both a change in control of the Company and the end of their engagement with the Company. The fair value of each option was estimated as of the date of grant or reporting period using the Black-Scholes option-pricing model using the following assumptions: 2020 2019 Underlying value of Common Stock ($) 5.59-6.44 1.7-10 Exercise price ($) 5.59-6.44 1.7-10 Expected volatility (%) 85.0 93.1 Term of the option (years) 6.11 6.11 Risk-free interest rate (%) 0.39-0.68 2.23 The cost of the benefit embodied in the options granted in 2020 and 2019 based on their fair value as at the grant date, is estimated to be $3,752 and $1,395, respectively. These amounts will be recognized in statements of operations over the vesting period. F- 27 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 12 - STOCKHOLDERS EQUITY (Cont.) B. Stock-based compensation: (cont.) Stock Options: (cont.) (1) A summary of options granted to purchase the Company’s Common Stock under the Company’s stock option plans are as follows: For year ended December 31, 2020 Number of Options Weighted average exercise price Aggregate intrinsic value Outstanding at the beginning of period 3,143,802 $ 1.61 $ 25,733 Granted 925,700 6.17 Forfeited (108,110 ) 4.66 Exercised (391,626 ) $ 0.79 Outstanding at the end of period 3,569,766 $ 3.12 $ 12,338 Vested at end of period 2,334,037 Weighted average remaining contractual life – years as of December 31, 2020 7.62 For year ended December 31, 2019 Number of Options Weighted average exercise price Aggregate intrinsic value Outstanding at the beginning of period 2,571,137 $ 1.34 $ 1,793 Granted 784,329 2.03 Forfeited (137,083 ) 1.90 Exercised (74,581 ) 1.34 Outstanding at the end of period 3,143,802 $ 1.61 $ 25,733 Vested at end of period 1,482,098 Weighted average remaining contractual life – years as of December 31, 2019 7.88 F- 28 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 12 - STOCKHOLDERS EQUITY (Cont.) B. Stock-based compensation: (cont.) Warrants: As of December 31, 2020, and 2019, the Company had the following outstanding warrants to purchase Common Stock as follows: Warrant Issuance Date Expiration Date Exercise Price Per Share (USD) Number of Shares of Common Stock Underlying Warrants Private Warrants issued to Yeda (see 1 below) May 11, 2017 May 11, 2025 (* ) 354,829 Private Warrants issued to Founders (see 2 below) November 27, 2017 - 10,589 Private Placement Warrants (see 3 below) IPO (December 13, 2018) December 13, 2023 11.50 2,900,000 Public Warrants (see 4 below) IPO (December 13, 2018) October 28, 2024 11.50 3,500,000 6,765,418 (*) less than $0.001. 1. In May 2017, in accordance with the 2017 License Agreement (see also Note 11C), the Company issued to Yeda, 591,382 warrants to purchase Common Stock at $0.0001 nominal value, for nominal consideration. Yeda has the option to exercise the warrants on a cashless basis. In 2020, the 2017 License Agreement was terminated. For the year ended December 31, 2020, the Company recorded expense of $233. For the year ended December 31, 2019, the Company recorded income of $241. Expenses and income are included in R&D expenses, net in the consolidated statements of operations. See note 18B regarding the exercise of warrants. 236,552 warrants were fully vested and exercisable on the date of their issuance. The remainder of the warrants will vest and become exercisable subject to achievement of certain milestones specified in the agreement as follows: a. 177,414 upon the filing of a patent application covering any Discovered Target or a Product (both as defined in the 2017 License Agreement). In 2020 the warrants were cancelled following termination of the 2017 License Agreement, b. 118,277 upon achievement of the earlier of the following milestone by the Company: F- 29 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 12 - STOCKHOLDERS EQUITY (Cont.) B. Stock-based compensation: (cont.) Warrants: (cont.) (i) execution of an agreement with a pharmaceutical company with respect to the commercialization of any of the Company’s licensed technology or the Consulting IP or a Product (both defined in the 2017 License Agreement) or (ii) the filing of a patent application covering any Discovered Target (as defined in the 2017 License Agreement) or a Product. In the case of termination of the 2017 License Agreement after the second anniversary thereof, and provided that none of the aforementioned milestones has been attained prior to such termination, the warrants will vest upon such termination. As of December 31, 2020, 118,277 warrants were vested as the 2017 License Agreement was terminated after the second anniversary with no milestone have been attained. c. 59,139 upon completion of a Phase 1 clinical trial in respect of a Product (as defined in the 2017 License Agreement). In 2020 the warrants were cancelled following the termination of the 2017 License Agreement. 2. In November 2017, BiomX Israel issued 7,615 warrants to Yeda and 2,974 warrants to its founders. All the warrants were fully vested at their grant date and will expire immediately prior to a consummation of an M&A transaction. The warrants did not expire as a result of the Recapitalization Transaction and have no exercise price. No compensation expenses were recorded in the financial statements during 2020 and 2019. 3. The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the IPO except that the Private Placement Warrants are exercisable for cash (even if a registration statement covering the shares of Common Stock issuable upon exercise of such warrants is not effective) or on a cashless basis, at the holder’s option, and will not be redeemable by the Company, in each case, so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. The Company filed a Registration Statement on Form S-1 for the resale of shares underlying the warrants on December 13, 2019, which was declared effective on January 3, 2020. Such Registration Statement was converted to Form S-3 in December 2020. 4. The Public Warrants became exercisable upon the closing of the Recapitalization Transaction. No fractional shares will be issued upon exercise of the Public Warrants. Therefore, Public Warrants must be exercised in multiples of two warrants. The Public Warrants will expire five years after the completion of the Recapitalization Transaction or earlier upon redemption or liquidation. The Company filed a Registration Statement on Form S-1 for the resale of shares underlying the warrants on December 13, 2019, which was declared effective on January 3, 2020. Such Registration Statement was converted to Form S-3 in December 2020. F- 30 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 12 - STOCKHOLDERS EQUITY (Cont.) B. Stock-based compensation: (cont.) Warrants: (cont.) The Company may redeem the Public Warrants: ● in whole and not in part; ● at a price of $0.01 per warrant; ● at any time during the exercise period; ● upon a minimum of 30 days’ prior written notice of redemption; ● if, and only if, the last sale price of the Company’s Common Stock equals or exceeds $16.00 per share for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders; and ● if, and only if, there is a current registration statement in effect with respect to the shares of Common Stock underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Common Stock at a price below their exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. (2) The following table sets forth the total stock-based payment expenses resulting from options and warrants granted, included in the statements of operations: Year ended December 31, 2020 2019 Research and development expenses, net 1,815 450 General and administrative 1,075 488 2,890 938 The Company recognized stock-based compensation expenses in connection with options granted to executive officers of the Company in the amount of $1,384 and $732 for the years ended December 31, 2020 and 2019, respectively. The total unrecognized compensation expense was $2,657 and $2,308 as of December 31, 2020 and 2019, respectively. These expenses will be recognized over a period of approximately 2 years. F- 31 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 13 - RESEARCH AND DEVELOPMENT EXPENSES, NET Year ended December 31, 2020 2019 Professional service and subcontractors 6,576 5,787 Salaries and related expenses 9,210 6,404 Stock-based compensation 1,815 450 Depreciation 652 317 Materials and supplies 1,094 997 Amortization 1,518 - Rent and related expenses 664 - Other 84 - 21,613 13,955 Less income from collaboration agreements (see Note 11H,10B2) (160 ) (167 ) Less grants from the IIA (see Note 11A) (518 ) (299 ) 20,935 13,489 NOTE 14 - GENERAL AND ADMINISTRATIVE EXPENSES Year ended December 31, 2020 2019 Salaries and related expenses 2,757 1,746 Stock-based compensation 1,075 488 Professional services 1,648 3,434 Travel expenses 173 445 Recruitment expenses 170 333 Rent and related expenses 262 479 Insurance expenses 1,985 331 Other 1,253 1,462 9,323 8,718 NOTE 15 - FINANCE INCOME (EXPENSES), NET Year ended December 31, 2020 2019 Exchange rate differences 511 (483 ) Interest income from bank deposits (641 ) (921 ) Revaluation of contingent liabilities 116 (304 ) Bank fees and other 7 64 Income from foreign exchange contracts (165 ) - (172 ) (1,644 ) F- 32 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 16 - INCOME TAXES A. The Company files income tax returns in the U.S. federal jurisdiction and in state and local jurisdictions and is subject to examination by the various taxing authorities. The Company’s income tax returns since inception remain open and subject to examination. The statutory U.S. federal income tax rate is 21%. As of December 31, 2020, the Company had total net operating losses in the U.S of approximately $3,425, which may be carried forward and offset against taxable income in the future. B. BiomX Ltd. And RondinX Ltd. file income tax returns in Israel. Their income tax returns since inception remain open and subject to examination. The statutory Israeli income tax rate is 23%. C. As of December 31, 2020 and 2019, BiomX Israel had total net operating losses in Israel of approximately $62,927 and $25,883, respectively, which may be carried forward and offset against taxable income in the future for an indefinite period. D. The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and its lack of commercialization of any products or generation of any revenue from product sales since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2020 and 2019. Management reevaluates the positive and negative evidence at each reporting period. F. The Company’s policy is to record estimated interest and penalties related to uncertain tax positions in income tax expense. The Company has no amounts recorded for any unrecognized tax positions, accrued interest or penalties as of December 31, 2020 and 2019. As of December 31, 2020 2019 Net operating loss carryforward BiomX Inc. 719 - Net operating loss carryforward BiomX Ltd. 14,473 5,953 Total deferred tax assets 15,192 5,953 Valuation allowance (15,192 ) (5,953 ) Net deferred tax assets - - A reconciliation of the U.S. federal statutory tax rate and the effective tax rate is as follow: As of December 31, 2020 2019 Statutory U.S. federal income tax rate (21 )% (21 )% U.S. vs foreign tax rate differential (2 ) (2 ) Business Combination expenses - 3.1 Change in deferred tax asset valuation allowance 23 19.9 Effective tax rate - % - % Loss from operations, before taxes on income, consists of the following: As of December 31, 2020 2019 United States 3,273 1,589 Israel 26,813 18,974 30,086 20,563 F- 33 BIOMX INC. (FORMERLY CHARDAN HEALTHCARE ACQUISITION CORP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 17 - BASIC LOSS PER SHARE The basic and diluted net loss per share and weighted average number of shares of Common Stock used in the calculation of basic and diluted net loss per share are as follows: For the year ended December 31, 2020 2019 Net loss 30,086 20,563 Net loss per share 1.30 3.66 Weighted average number of Common Stock 23,062,216 5,615,856 As the inclusion of shares of Common Stock equivalents in the calculation would be anti-dilutive for all periods presented, diluted net loss per share is the same as basic net loss per share. NOTE 18 - SUBSEQUENT EVENTS A. On March 30, 2021, the Board of Directors approved the grant of 985,530 options to 104 employees, one consultant, five senior officers and six directors under the 2019 Incentive Plan, without consideration. Options were granted at an exercise price of $7.02 per share with a vesting period of four years. Directors and senior officers are entitled to full acceleration of their unvested options upon the occurrence of both a change in control of the Company and the end of their engagement with the Company. B. On March 10, 2021, Yeda exercised 362,444 warrants on a cashless basis, resulting in the issuance of 362,383 shares of Common Stock. C. On March 25, 2021, the IIA approved two new applications for a total budget of NIS 19,444 (approximately $5,874). The IIA committed to funding 30% of the approved budget. The programs are for the period beginning January 2021 through December 2021. D. From January 1, 2021 through March 25, 2021, we issued an aggregate of 600,644 shares of Common Stock pursuant to the ATM Agreement for aggregate net proceeds of $4,324. F-34