Tessera Defense & Homeland Security Inc. 10-Q

Item 1. Financial Statements INDEX TO FINANCIAL STATEMENTS Page Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 (unaudited) F-1-F-2 Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited) F-3 Condensed Consolidated Statements of Stockholders’ Equity for the period ended June 30, 2021 and June 30, 2020 (unaudited) F-4-F-5 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 (unaudited) F-6 Notes to Condensed Consolidated Financial Statements F-7-F-15 1 BIOMX INC. CONDENSED CONSOLIDATED BALANCE SHEETS (USD in thousands, except share and per share data) (unaudited) As of Note June 30, 2021 December 31, 2020 ASSETS Current assets Cash and cash equivalents 46,271 36,477 Restricted cash 982 763 Short-term deposits - 19,851 Other current assets 2,585 3,576 Total current assets 49,838 60,667 Property and equipment, net 5,122 2,228 Intangible assets, net 2,279 3,038 Operating lease right-of-use assets 4,410 4,430 Total non-current assets 11,811 9,696 61,649 70,363 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F- 1 BIOMX INC. CONDENSED CONSOLIDATED BALANCE SHEETS (USD in thousands, except share and per share data) (unaudited) As of Note June 30, 2021 December 31, 2020 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Trade account payables 1,769 2,320 Other account payables 5,199 3,978 Current portion of operating lease liabilities 791 863 Total current liabilities 7,759 7,161 Non-current liabilities Operating lease liabilities, net of current portion 4,879 5,032 Contingent considerations 419 701 Total non-current liabilities 5,298 5,733 Commitments and Contingent Considerations 4 Stockholders’ equity 5 Preferred stock, $ 0.0001 par value; Authorized - 1,000,000 shares as of June 30, 2021 and December 31, 2020. No shares issued and outstanding as of June 30, 2021 and December 31, 2020. - - Common stock, $ 0.0001 par value; Authorized - 60,000,000 shares as of June 30, 2021 and December 31, 2020. Issued – 24,434,776 shares as of June 30, 2021 and 23,270,337 shares as of December 31, 2020. Outstanding – 24,429,076 shares as of June 30, 2021 and 23,264,637 shares as of December 31, 2020. 2 2 Additional paid in capital 136,586 129,725 Accumulated deficit ( 87,996 ) ( 72,258 ) Total stockholders’ equity 48,592 57,469 61,649 70,363 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F- 2 BIOMX INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD in thousands, except share and per share data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, Note 2021 2020 2021 2020 Research and development (“R&D”) expenses, net 3,824 3,717 9,494 7,246 Amortization of intangible assets 380 380 759 759 General and administrative expenses 3,098 2,297 5,591 4,355 Operating loss 7,302 6,394 15,844 12,360 Financial expenses (income), net 31 ( 188 ) ( 112 ) ( 253 ) Loss before tax 7,333 6,206 15,732 12,107 Tax expenses 3 - 6 - Net Loss 7,336 6,206 15,738 12,107 Basic and diluted loss per share of Common Stock 6 0.30 0.27 0.65 0.53 Weighted average number of shares of Common Stock outstanding, basic and diluted 24,320,259 22,969,075 24,134,065 22,944,482 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F- 3 BIOMX INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (USD in thousands, except share and per share data) (unaudited) Common Stock Additional Paid-in Accumulated Total Stockholders’ Shares Amount Capital Deficit Equity Balance as of January 1, 2021 23,264,637 2 129,725 ( 72,258 ) 57,469 Exercise of stock options 12,646 * 23 23 Exercise of warrants (**) 362,383 * - - Issuance of Common Stock under Open Market Sales Agreement, net of $ 134 issuance costs 601,674 * 4,334 4,334 Stock-based compensation expenses 530 530 Net loss ( 8,402 ) ( 8,402 ) Balance as of March 31, 2021 24,241,340 2 134,612 ( 80,660 ) 53,954 Exercise of stock options 55,246 * 78 78 Issuance of Common Stock under Open Market Sales Agreement, net of $ 24 issuance costs 132,490 * 801 801 Stock-based compensation expenses 1,095 1,095 Net loss ( 7,336 ) ( 7,336 ) Balance as of June 30, 2021 24,429,076 2 136,586 ( 87,996 ) 48,592 (*) Less than $1. (**) See Note 5B. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F- 4 BIOMX INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (USD in thousands, except share and per share data) (unaudited) Common Stock Additional Paid-in Accumulated Total Stockholders’ Shares Amount Capital Deficit Equity Balance as of January 1, 2020 22,862,835 2 126,626 ( 42,172 ) 84,456 Exercise of stock options 57,325 * 106 106 Stock-based compensation expenses 337 337 Net loss ( 5,901 ) ( 5,901 ) Balance as of March 31, 2020 22,920,160 2 127,069 ( 48,073 ) 78,998 Exercise of stock options 220,104 (* ) 52 - 52 Stock-based compensation expenses - - 677 - 677 Net loss - - - ( 6,206 ) ( 6,206 ) Balance as of June 30, 2020 23,140,264 2 127,798 ( 54,279 ) 73,521 (*) Less than $1. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F- 5 BIOMX INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD in thousands, except share and per share data) (unaudited) For the Six Months Ended June 30, 2021 2020 CASH FLOWS – OPERATING ACTIVITIES Net loss ( 15,738 ) ( 12,107 ) Adjustments required to reconcile cash flows used in operating activities: Depreciation and amortization 1,121 1,016 Stock-based compensation 1,625 1,014 Finance expense, net 11 - Changes in contingent considerations ( 282 ) 58 Loss from sale of property and equipment 24 - Changes in operating assets and liabilities: Other current assets 991 1,252 Trade account payables ( 763 ) ( 1,896 ) Other account payables 417 ( 766 ) Net change in operating leases ( 205 ) ( 28 ) Related parties - 50 Net cash used in operating activities ( 12,799 ) ( 11,407 ) CASH FLOWS – INVESTING ACTIVITIES Investment in short-term deposits - ( 387 ) Proceeds from short-term deposits 19,851 - Purchases of property and equipment ( 2,268 ) ( 469 ) Proceeds from sale of property and equipment 4 - Net cash provided by (used in) investing activities 17,587 ( 856 ) CASH FLOWS – FINANCING ACTIVITIES Issuance of Common Stock under Open Market Sales Agreement, net of issuance costs 5,135 - Outflows in connection with current assets and liabilities acquired in reverse recapitalization - ( 75 ) Exercise of stock options 101 158 Net cash provided by financing activities 5,236 83 Increase (decrease) in cash and cash equivalents and restricted cash 10,024 ( 12,180 ) Effect of exchange rate changes on cash and cash equivalents and restricted cash ( 11 ) - Cash and cash equivalents and restricted cash at the beginning of the period 37,240 72,410 Cash and cash equivalents and restricted cash at the end of the period 47,253 60,230 Supplemental disclosure of non-cash investing Property and equipment purchases included in accounts payable and accrued expenses 1,016 - Recognition of operating lease ROU and liabilities 168 - The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F- 6 BIOMX INC. NOTES TO CONDENSED 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 BiomX Inc.’s acquisition of 100 % of the outstanding shares of BiomX Israel Ltd. (the “Recapitalization Transaction”, “BiomX Israel” respectively), 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, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities. 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. To date, the Company has not generated revenue from its operations. As of June 30, 2021, the Company had a cash and cash equivalents and restricted cash balance of approximately $ 47,253 , 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. 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, loans 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. See Note 7. F- 7 BIOMX INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES B. Unaudited Condensed Financial Statements The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for condensed financial information. They do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed). The financial information contained in this report should be read in conjunction with the annual financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, that the Company filed with the U.S. Securities and Exchange Committee (the “SEC”) on March 31, 2021. C. Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated upon consolidation. D. 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. E. Recent Accounting Standards In May 2021, the Financial Accountings Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). The guidance is effective for the Company on January 1, 2022. The Company is currently evaluating the impact of adopting this standard. 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 condensed consolidated financial statements and related disclosures. In August 2020, the FASB issued ASU 2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)-Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for annual and interim periods beginning after December 15, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company does not expect that the adoption of this standard will have a significant impact on its condensed consolidated financial statements and related disclosures. F- 8 BIOMX INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Cont.) F. Derivatives Activity 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 condensed consolidated statements of operations. As of June 30, 2021, the Company had outstanding foreign exchange contracts for the exchange of USD to NIS in the amount of approximately $ 3,988 with a fair value of $ 7 . As of June 30, 2020, the Company had no outstanding foreign exchange contracts. G. Fair Value of Financial Instruments The fair value of certain of the Company’s financial instruments including cash, accounts receivable, accounts payable, accrued expenses, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, “Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk. Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows: 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 period ended June 30, 2021 and year ended December 31, 2020. F- 9 BIOMX INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Cont.) The following tables present the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis: June 30, 2021 Level 1 Level 2 Level 3 Fair Value Assets: Cash equivalents: Money market funds 30,000 - - 30,000 Foreign exchange contracts receivable 7 7 30,000 7 - 30,007 Liabilities: Contingent considerations - - 180 180 - - 180 180 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 considerations - - 701 701 - - 701 701 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. NOTE 3 – 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. As part of the Recapitalization Transaction the Company issued shares of Common Stock in exchange for 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. 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 authorized or outstanding as of the time the payment is due, or a combination of both of up to $32,000 within ten years from November 2017. 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 leveling during the quarter ended June 30, 2021 and year ended December 31, 2020. The condensed consolidated financial statements as of June 30, 2021 and December 31, 2020 include a liability with respect to this agreement in the amount of $ 180 and $ 83 , respectively. The changes in the liability are recorded in the condensed consolidated statements of operations as part of general and administrative expenses. F- 10 BIOMX INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (USD and NIS in thousands, except share and per share data) NOTE 4 – COMMITMENTS AND CONTINGENT CONSIDERATIONS A. In April 2019, the IIA approved an application for a total budget of NIS 4,221 (approximately $ 1,185 ). The IIA funded 30 % of the approved budget. The program was for the period beginning from July 2018 through June 2019. As of June 30, 2021, BiomX Israel 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 ). The IIA funded 30 % of the approved budget. The program was for the period beginning from July 2019 through December 2019. As of June 30, 2021, BiomX Israel received all funds with respect to this program. In April 2020, the IIA approved an application for a total budget of NIS 15,562 (approximately $ 4,287 ). The IIA committed to fund 30 % of the approved budget. The program was for the period beginning January 2020 through December 2020. As of June 30, 2021, the Company received NIS 1,634 (approximately $ 450 ) from the IIA with respect to this program. In June 2021, BiomX Israel submitted the final report to the IIA for this program. In March 2021, the IIA approved two new applications for a total budget of NIS 19,444 (approximately $ 5,874 ). The IIA committed to fund 30 % of the approved budget. The program is for the period beginning January 2021 through December 2021. As of June 30, 2021, the Company received NIS 2,042 (approximately $ 625 ) from the IIA with respect to these programs. 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 June 30, 2021; therefore, no liability was recorded in these condensed consolidated financial statements. IIA grants are recorded as a reduction of R&D expenses, net. Through June 30, 2021, total grants approved from the IIA aggregated to approximately $ 6,268 (NIS 21,863 ). Through June 30, 2021, the Company had received an aggregate amount of $ 4,309 (NIS 15,037 ) in the form of grants from the IIA. As of June 30, 2021, the Company had a contingent obligation to the IIA in the amount of approximately $ 4,438 including annual interest of LIBOR linked to the dollar. F- 11 BIOMX INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 4 – COMMITMENTS AND CONTINGENT CONSIDERATIONS (Cont.) B. 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 inflammatory bowel disease (“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. During the six months ended June 30,2021, consideration of $150 had been received. As of June 30, 2021, consideration of $300 had been received. The consideration is recorded as a reduction of R&D expenses, net in the condensed consolidated statements of operations. NOTE 5 – STOCKHOLDERS EQUITY A. Share Capital: 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 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 with an aggregate offering price of up to $50,000, with Jefferies acting as sales agent. During the six months ended June 30, 2021, the Company sold 734,164 shares of Common Stock under the ATM Agreement, at an average price of $6.99 per share, raising aggregate net proceeds of approximately $5,135, after deducting an aggregate commission of $158. B. Stock-based Compensation: 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 (“Evergreen Amount”). 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 the Evergreen Amount. On January 1, 2020 and January 1, 2021, the number of shares of Common Stock available to grant under the 2019 Plan was increased by 914,741 and 930,813 , respectively, to an aggregate of 1,846,554 shares. On March 30, 2021, the Board of Directors approved the grant of 985,530 options to 94 employees, including five senior officers, one consultant, and six directors under the 2019 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. F- 12 BIOMX INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 5 – STOCKHOLDERS EQUITY (Cont.) B. Stock-based Compensation: (Cont.) 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: Six Months Ended June 30, 2021 2020 Underlying value of Common Stock ($) 7.02 5.59 - 6.21 Exercise price ($) 7.02 5.59 - 6.21 Expected volatility (%) 85.0 85.0 Term of the option (years) 6.11 6.25 Risk-free interest rate (%) 1.17 0.37 - 0.52 The cost of the benefit embodied in the options granted during the six months ended June 30, 2021, based on their fair value as at the grant date, is estimated to be approximately $ 5,138 . These amounts will be recognized in statements of operations over the vesting period. (1) A summary of options granted to purchase the Company’s Common Stock under the Company’s share option plans is as follows: For the Six Months Ended June 30, 2021 Number of Options Weighted Average Exercise Price Aggregate Intrinsic Value Outstanding at the beginning of period 3,569,766 3.12 12,338 Granted 985,530 7.02 Forfeited ( 89,354 ) 4.15 Exercised ( 67,892 ) 1.49 Outstanding at the end of period 4,398,050 4.00 9,424 Exercisable at the end of period 2,231,281 Weighted average remaining contractual life of outstanding options – years as of June 30, 2021 7.62 F- 13 BIOMX INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 5 – STOCKHOLDERS EQUITY (Cont.) B. Stock-based Compensation: (Cont.) Warrants: As of June 30, 2021, the Company had the following outstanding stock-based compensation warrants to purchase Common Stock: Warrant Issuance Date Expiration Date Exercise Price Per Share Number of Shares of Common Stock Underlying Warrants Private Warrants issued to Yeda (see 1 below) May 11, 2017 May 11, 2025 (* ) - Private Warrants issued to scientific founders (see 2 below) November 27, 2017 - 2,974 2,974 (*) less than $0.001. 1. In May 2017, in accordance with a license agreement, the Company issued to Yeda Research and Development Company Limited (“Yeda”), for nominal consideration, 591,382 warrants to purchase Common Stock at $ 0.0001 nominal value, for nominal consideration. Yeda had the option to exercise the warrants on a cashless basis. In 2020, the license agreement was terminated. On March 10, 2021, Yeda exercised 362,444 warrants on a cashless basis, resulting in the issuance of 362,383 shares of Common Stock. The remainder of the warrants were cancelled as part of the termination of the license agreement. Expenses and income are included in R&D expenses, net in the condensed consolidated statements of operations. For the six months ended June 30, 2021 and June 30, 2020, the Company did not record any expenses. 236,552 warrants were fully vested and exercisable on the date of their issuance. The remainder of the warrants would have vested and become exercisable subject to achievement of certain milestones. During 2020, 236,553 warrants were cancelled following termination of the license agreement. As of December 31, 2020, 118,277 warrants were vested as the license agreement was terminated after the second anniversary with no milestone having been attained. F- 14 BIOMX INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except share and per share data) NOTE 5 – STOCKHOLDERS EQUITY (Cont.) B. Stock-based Compensation: (Cont.) 2. In November 2017, BiomX Israel issued 7,615 warrants to Yeda and 2,974 warrants to its scientific 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. (2) The following table sets forth the total stock-based payment expenses resulting from options granted, included in the statements of operations: Six Months Ended June 30, 2021 2020 Research and development expenses, net 958 502 General and administrative 667 512 1,625 1,014 Three Months Ended June 30, 2021 2020 Research and development expenses, net 627 310 General and administrative 468 367 1,095 677 NOTE 6 – BASIC AND DILUTED LOSS PER SHARE Basic loss per share is computed on the basis of the net loss for the period divided by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is based upon the weighted average number of shares of common stock and of potential shares of common stock outstanding when dilutive. Potential shares of common stock equivalents include outstanding stock options and warrants, which are included under the treasury stock method when dilutive. The calculation of diluted loss per share for the six months ended June 30, 2021 does not include 4,398,050, 6,402,974 and 6,000,000 of shares underlying options, shares underlying warrants and contingent shares, respectively, because the effect would be anti-dilutive. NOTE 7 – SUBSEQUENT EVENTS A. On July 28, 2021, the Company entered into a Securities Purchase Agreement with institutional investors, all of the Company’s directors and certain executive officers for the sale of an aggregate of 3,750,000 shares of the Company’s common stock and warrants to purchase an aggregate of 2,812,501 shares of the Company’s Common Stock in a registered direct offering, for gross proceeds of $ 15,000 before deducting placement agent fees and offering expenses and assuming that none of the warrants are exercised. The securities were sold at price of $ 4.00 per share and an accompanying warrant to purchase 0.75 of a share of the Company’s Common Stock at an exercise price of $ 5.00 per share. The warrants will be exercisable six months after the date of issuance and will expire five years from the date such warrant first becomes exercisable. The securities were offered pursuant to an effective registration statement on Form S-3 (File No. 333-251151) and a related prospectus supplement. The proceeds were received. B. On August 16, 2021, the Company entered into a loan and security agreement with Hercules Capital, Inc. (“Hercules”), with respect to a venture debt facility (“Loan”) in an aggregate principal amount of up to $30,000, which is available to the Company in three tranches subject to certain terms and conditions. The first tranche of $15,000 would be funded promptly after closing of the Loan transaction (“Closing”). Upon satisfaction of certain milestones, the second tranche would be available under the Loan which allows the Company to borrow an additional amount of $10,000 through December 31, 2022. Upon satisfaction of certain milestones, the third tranche would be available under the Loan which allows the Company to borrow an additional amount of $5,000 through September 30, 2023. The Loan will be for a term of 48 months from the Closing, which term may be extended to up to 60 months upon satisfaction of certain milestones. The interest rate on the Loan will be the greater of (i) the Prime Rate minus 3.25% and (ii) 8.95%. During the first 18 months from the Closing, the Company is expected to pay only interest and not principle, which 18 months term may be extended to up to 30 months upon satisfaction of certain milestones. The Loan includes affirmative and negative covenants and events of default applicable to the Company. C. In August 2021, the IIA approved an application for an aggregate budget of NIS 5,737 (approximately $1,778). The IIA committed to fund 50% of the approved budget, i.e., NIS 2,869 (approximately $889). The program is for the period beginning July 2021 through June 2022. The program does not bear royalties. F- 15