What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-30 compared with 2021-03-31 · 18 added, 559 removed, 1 unchanged (100% of the section changed)

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

shares of Common Stock, Public Units, and Public Warrants are traded on NYSE American under the symbols PHGE, PHGE.U and PHGE.WS,

respectively.

shares of Common Stock are also traded on the Tel Aviv Stock Exchange under the symbol “PHGE”.

of March 25, 2021, there were 24,246,010 issued and outstanding shares of our Common Stock held by 75 stockholders of record.

The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of shares

of Common Stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our shares of Common Stock, Public Units, and

Public Warrants are traded on NYSE American under the symbols PHGE, PHGE.U and PHGE.WS, respectively.

Our shares of Common Stock are also traded on

the Tel Aviv Stock Exchange under the symbol “PHGE”.

Holders of Record

As of March 25, 2022, there were 29,779,249 issued

and outstanding shares of our Common Stock held by 72 stockholders of record.

The number of record holders was determined from the records

of our transfer agent and does not include beneficial owners of shares of Common Stock whose shares are held in the names of various security

brokers, dealers, and registered clearing agencies.

have not paid any cash dividends on our Common Stock to date and do not intend to pay cash dividends.

The payment of cash dividends

in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition.

The payment of any cash dividends will be within the discretion of our Board of Directors at such time.

Further, if we incur any

indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.

SELECTED FINANCIAL DATA

we are considered to be a “smaller reporting company”

under SEC rules and regulations, we are not required to provide

the information required by this item in this report.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

following discussion and analysis of our financial condition and results of operations should be read in conjunction with our

financial statements and the notes thereto contained elsewhere in this report.

Certain information contained in the discussion

and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Our actual results may

differ materially from those discussed in any forward-looking statement because of various factors, including those described

in the sections titled “Cautionary Statement Regarding Forward-Looking Statements”

and “Risk Factors”

in this Annual Report .

Business Combination was treated as a “reverse merger”

in accordance with Generally Accepted Accounting Principles

in the United States, or US GAAP.

For accounting purposes, BiomX Ltd.

was considered to have acquired Chardan Healthcare Acquisition

Corp., or CHAC.

Therefore, for accounting purposes, the Business Combination was treated as the equivalent of a capital transaction

in which BiomX Ltd.

issued stock for the net assets of CHAC.

The net assets of CHAC were stated at historical cost, with no goodwill

or other intangible assets recorded.

The post-acquisition financial statements of the Company show the consolidated balances and

transactions of the Company and BiomX Ltd.

as well as comparative financial information of BiomX Ltd.

(the acquirer for accounting

are a clinical stage microbiome product discovery company developing products using both natural and engineered phage technologies

designed to target and destroy specific harmful bacteria that affect the appearance of skin, as well as harmful bacteria in associated

with chronic diseases, such as IBD, PSC, liver disease, CF, atopic dermatitis and CRC.

Bacteriophages or phage are bacterial,

species-specific, strain-limited viruses that infect, amplify and lyse the target bacteria and are considered inert to mammalian

viruses that target bacteria and are considered inert to mammalian cells.

By utilizing proprietary combinations of naturally

occurring phage and by creating novel phage using synthetic biology, we develop phage-based therapies intended to address large-market

and orphan diseases.

Since BiomX Ltd.’s inception in 2015, and since the Business

Combination, we have devoted substantially all our resources to organizing and staffing our company, raising capital, acquiring

rights to or discovering product candidates, developing our technology platforms, securing related intellectual property rights,

and conducting discovery, research and development activities for our product candidates.

We do not have any products approved

for sale, most of our products are still in the preclinical development stage, and we have not generated any revenue from product

As we move our product candidates from preclinical to clinical stage, we expect our expenses to increase.

To date, we have

funded our operations with proceeds from sales of Common Stock and preferred shares.

Through December 31, 2020, we had received

gross proceeds of approximately $120 million from sales of our securities.

To date, we received approximately $384 thousand from

our collaboration agreements and recorded a reduction from research and development expenses of $327 thousand since 2015 through

the year ended December 31, 2020.

Since BiomX Ltd.’s inception in 2015, and since the Business

Combination, we have incurred significant operating losses.

Our ability to generate revenue from product sales sufficient to achieve

profitability will depend on the successful development of, the receipt of regulatory approval for, and eventual commercialization

of one or more of our product candidates.

Our net losses were approximately $30.1 million and $20.6 million for the years ended

December 31, 2020 and 2019, respectively.

As of December 31, 2020, we had an accumulated deficit of $72.3 million and expect that

for the foreseeable future we will continue to incur significant expenses as we advance our product candidates from discovery through

preclinical development and clinical trials and seek regulatory approval of our product candidates.

In addition, if we obtain regulatory

approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing,

marketing, sales and distribution.

may also incur expenses in connection with in-licensing or acquiring additional product candidates.

of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of

increased expenses or when or if we will be able to achieve or maintain profitability.

Even if we are able to generate product

sales, we may not become profitable.

If we fail to become profitable or are unable to sustain profitability on a continuing basis,

we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

We may implement

cost reduction strategies, which may include amending, delaying, limiting, reducing or terminating one or more of our programs

or ongoing or planned clinical trials of our product candidates.

December 31, 2020, we had cash and cash equivalents and short-term deposits of $57.1 million.

We believe that our existing cash

and cash equivalents and short-term deposits will enable us to fund our operating expenses and capital expenditure requirements

until at least mid-2022, as discussed further below under ”

Liquidity and Capital Resources”

Change in Fiscal Year End

In November 2019, after the Business Combination,

we elected to change our fiscal year end from June 30 to December 31.

Our 2019 fiscal year consists of the year ended December

31, 2019, and our 2020 fiscal year consists of the year ended December 31, 2020.

In view of this change, this Item 7, “Management’s

Discussion and Analysis of Financial Condition and Results of Operations or MD&A, includes a discussion and analysis of our

financial statements for fiscal years ended December 31, 2020 and 2019.

Components of Our Consolidated Results of Operations

To date, we have not generated any revenue

from product sales and do not expect to generate any revenue from product sales in the near future.

If development efforts for

our product candidates are successful and result in any necessary regulatory approvals or otherwise lead to any commercialized

products or additional license agreements with third parties, we may generate revenue in the future from product sales or payments

from collaboration or license agreements with third parties.

Operating Expenses

Research and Development Expenses, net

Research and development expenses consist primarily of costs

incurred in connection with the discovery and development of our product candidates.

We expense research and development costs

as incurred, offset by IIA grants and, to a lesser degree, income from research and development collaboration agreements.

expenses include:

development and operation of our proprietary platform;

expenses incurred in connection with the preclinical and clinical development of our product candidates, including under agreements with third parties, such as CROs and contract manufacturing organizations, as well as consultants, subcontractors and key opinion leaders providing scientific development services;

manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial materials;

license maintenance fees and milestone fees incurred in connection with various license agreements;

employee-related expenses, including salaries, related benefits, travel and stock-based compensation expenses for employees engaged in research and development functions, as well as external costs, such as fees paid to outside consultants engaged in such activities;

costs related to compliance with regulatory requirements and legal fees relating to patent matters;

depreciation, amortization and other expenses.

We recognize external development costs

based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers.

We do not allocate employee costs or facility

expenses, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple

programs and, as such, are not separately classified.

We use internal resources primarily to oversee the research and discovery

as well as for managing our preclinical development, process development, manufacturing and clinical development activities.

employees work across multiple programs and, therefore, we do not track their costs by program.

The table below summarizes our research

and development expenses incurred by program:

USD In thousands

Salaries and related benefits

Depreciation and amortization

Infrastructure & other unallocated research and development or R&D expenses

Less grants from the IIA & income from collaboration agreement

Total research and development expenses, net

Research and development activities are

central to our business.

Product candidates in later stages of clinical development generally have higher development costs than

those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

As a result, we expect that our research and development expenses will increase substantially over the next several years, particularly

as we increase personnel costs, including stock-based compensation, contractor costs and facilities costs, as we continue to advance

the development of our product candidates.

We also expect to incur additional expenses related to milestone and royalty payments

payable to third parties with whom we have entered into license agreements to acquire the rights to our product candidates.

General and Administrative Expenses

General and administrative expenses consist

primarily of salaries, related benefits, travel and stock-based compensation expenses for personnel in executive, finance, corporate,

business development and administrative functions.

General and administrative expenses also include legal fees relating corporate

and securities matters;

professional fees for accounting, tax and audit services;

insurance costs;

travel expenses;

and facility-related

expenses, including rent, as well as operating related costs.

anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support

our continued research activities and development of our product candidates.

We also anticipate that we will continue to

incur significant accounting, audit, legal, regulatory, compliance, directors’

and officers’

insurance costs as

well as investor and public relations expenses associated with being a public company.

We anticipate the additional costs for

these services will increase our general and administrative expenses in the future.

Additionally, if and when we believe a

regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and expenses as a result of

our preparation for commercial operations, especially as it relates to the sales and marketing of our product

Financial expenses, net

Financial expenses, net consist primarily

of income or expenses related to revaluation of foreign currencies and interest income on our bank deposits and money market funds.

Results of Operations

Comparison of the Years Ended December

31, 2020 and 2019

The following table summarizes our consolidated

results of operations for the years ended December 31, 2020 and 2019:

USD In thousands

R&D expenses, net

General and administrative expenses

Operating loss

Financial income, net

R&D expenses, net (net of grants received from the

IIA and consideration from research collaborations) were $21.0 million for the year ended December 31, 2020, compared to $13.5

million for the year ended December 31, 2019.

The increase of $7.5 million, or 55%, in the year ended December 31, 2020 compared

to the prior year, is primarily due to the following:

an increase of $4.1 million in stock-based compensation and salaries and related expenses, mainly due to the growth in the number of employees;

an increase of $1.9 million due to manufacturing of materials for clinical trials of BX001, BX002 and BX003, the Company’s product candidates for acne-prone skin, IBD and IBD/PSC, respectively;

an increase of $1.5 million in amortization expenses.

The Company received grants from the IIA

totaling $0.5 million and $0.3 million for the years ended December 31, 2020 and December 31, 2019, respectively.

General and administrative expenses were $9.3 million for the

year ended December 31, 2020, compared to $8.7 million for the year ended December 31, 2019.

The increase of $0.6 million, or 7%,

is primarily due to the following:

increase of $1.7 million in expenses associated with operating as a public company, such as directors’

and officers’

insurance, filing and legal and accounting expenses;

increase of $1.6 million in stock-based compensation and salaries and related expenses, mainly due to the growth in the number

of employees;

offset by a decrease of $2.7 million in expenses associated with the Business Combination.

Financial income, net was $0.2 million for the year ended December

31, 2020, compared to $1.6 million for the year ended December 31, 2019.

The decrease of $1.4 million, or 90%, is primarily due

to the USD/NIS exchange rate differences and the decrease in interest rates on bank deposits and money market funds.

and Capital Resources

Since BiomX Ltd.’s inception in 2015, we have not generated

any revenue from sales of our products and have incurred significant operating losses and negative cash flows from our operations.

We have funded our operations to date primarily with proceeds from the sale of our Common Stock and preferred shares, and through

the Business Combination.

Through December 31, 2020, we had received gross cash proceeds of approximately $120 million from sales

of our common stock and preferred shares.

In addition, in 2020 and 2019 we received approximately $678 thousand and $466 thousand

from our collaboration agreements and grants from the IIA, respectively.

Cash in excess of immediate requirements

is invested primarily with a view to liquidity and capital preservation.

On December 4, 2020, we filed a shelf registration

statement on Form S-3, which was declared effective by the SEC on December 11, 2020.

In addition, on December 4, 2020, we entered

into the Sale Agreement, with Jefferies, pursuant to which we may issue and sell shares of our Common Stock having an aggregate

offering price of up to $50,000,000 from time to time through Jefferies.

We are not obligated to make any sales of Common Stock

under the Sale Agreement.

From December 23, 2020 through December 31, 2020, we sold an aggregate of 10,176 shares of Common Stock

pursuant to the Sale Agreement for aggregate gross proceeds of $61,776.

From January 1, 2021 through March 25, 2021, we sold an

aggregate of 600,644 shares of Common Stock pursuant to the Sale Agreement for aggregate gross proceeds of $4,457,698.

continue to sell shares under the Sale Agreement and otherwise to use our shelf registration statement to raise additional funds

from time to time.

We believe that our existing cash resources will be sufficient

to meet our capital requirements and fund our operations for at least until mid-2022.

In the future we will likely require or desire

additional funds to support our operating expenses and capital requirements or for other purposes, such as acquisitions, and may

seek to raise such additional funds through public or private equity or debt financings or collaborative agreements or from other

sources, as we are doing now with the Sale Agreement.

However, the COVID-19 pandemic continues to rapidly evolve and has already

resulted in a significant disruption of global financial markets.

If the disruption persists and deepens, we could experience an

inability to access additional capital, which could in the future negatively affect our capacity to support our operating expenses

and capital requirements or to make investments for other purposes, such as acquisitions.

We have no commitments to obtain such additional

financing and cannot assure you that additional financing will be available at all or, if available, that such financing would

be obtainable on terms favorable to us and would not be dilutive.

Our future liquidity and cash requirements will depend on numerous

factors, including the introduction of new products as well as the ability to continue to maintain controls over our operating

expenditures.

The following table summarizes our cash

flows for each of the periods presented:

USD In thousands

Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash provided by financing

Net increase (decrease) in cash

and cash equivalents

Operating Activities

During the year ended December 31, 2020, operating activities

used $24.4 million of net cash, primarily due to a net loss of $30.1 million and by net cash used by changes in our operating assets

and liabilities of $0.5 million and non-cash charges of $5.2 million.

Non-cash charges for the year ended December 31, 2020 mainly

consisted of stock-based compensation expenses of $2.9 million and depreciation of $2.2 million, partially offset by revaluation

of contingent liabilities expenses of $0.1 million.

Net changes in our operating assets and liabilities for the year ended December

31, 2020 consisted primarily of an increase in liabilities relating to operating leases of $1.4 million, and an increase in other

account payables of $1.4 million, partially offset by an increase of $1.5 million in other receivables and a decrease in trade

account payables of $0.8 million.

During the year ended December 31, 2019, operating activities

used $17.6 million of net cash, primarily due to a net loss of $20.6 million, net cash used by changes in our operating assets

and liabilities of $2 million and non-cash charges of $0.9 million.

Non-cash charges for the year ended December 31, 2019 mainly

consisted of stock-based compensation expenses of $0.9 million and depreciation of $0.3 million, partially offset by non-cash revaluation

of contingent liabilities expenses of $0.3 million.

Net changes in our operating assets and liabilities for the year ended December

31, 2019 consisted primarily of an increase in trade account payables of $3 million, an increase in other account payables of $0.8

million and an increase in operating lease liability of $0.1 million, offset by an increase of $1.8 million in other receivables.

Investing Activities

During the year ended December 31, 2020,

investing activities used net cash of $10.9 million, mainly consisting of investment in short-term deposits of $9.9 million and

purchases of property and equipment of $1.0 million, primarily laboratory equipment and leasehold improvements.

During the year ended December 31, 2019,

investing activities provided net cash provided of $19.7 million, mainly consisting of maturities of investments in short-term

deposits of $21.0 million partially offset by purchase of property and equipment of $1.3 million, primarily laboratory equipment

and leasehold improvements.

We have invested,

and plan to continue to invest, our existing cash in short-term investments in accordance with our investment policy.

These investments

may include money market funds and investment securities consisting of U.S.

Treasury notes, and high quality, marketable debt

instruments of corporations and government sponsored enterprises.

We use foreign exchange contracts (mainly option and forward

contracts) to hedge balance sheet items from currency exposure.

These foreign exchange contracts are not designated as hedging

instruments for accounting purposes.

In connection with these foreign exchange contracts, we recognize gains or losses that offset

the revaluation of the balance sheet items also recorded under financial expenses, net.

As of December 31, 2020, we had outstanding

foreign exchange contracts in the amount of approximately $1.5 million.

As of December 31, 2019, we had no outstanding foreign

exchange contracts.

Financing Activities

During the year ended December 31, 2020, financing activities

provided net cash provided of $0.1 million, consisting of $0.075 million due to the Business Combination, $0.1 million from issuance

of Common Stock and $0.3 million from exercise of stock options.

During the year ended December 31, 2019,

financing activities provided net cash of $61.6 million, consisting of $59.7 million due to the Recapitalization Transaction,

$1.8 million from issuance of shares and $0.1 million from exercise of stock options.

Government Grants and Related Royalties

The Government of Israel,

through the IIA, encourages research and development projects by providing grants.

We may receive grants from the IIA at the

rates that range from 20% to 50% of the research and development expenses, as prescribed by the research committee of the IIA.

December 31, 2020, we had received an aggregate of $2.7 million in the form of grants from the IIA.

was formed as an

incubator company as part of the FutuRx incubator, and, until 2017, the majority of its funding was from IIA grants and funding

by the incubator, which is supported by the IIA.

We continued to apply for and receive IIA grants after we left the incubator.

The requirements and restrictions for such grants are found in the Research Law.

Under the Research Law, royalties of 3% to 3.5% on the revenue derived from sales of products or services

developed in whole or in part using these IIA grants are payable to the Israeli government.

We developed both of our platform technologies,

at least in part, with funds from these grants, and, accordingly, we would be obligated to pay these royalties on sales of any

of our product candidates that achieve regulatory approval.

Below is a description

of our obligations in connection with the grants received from the IIA under the Research Law:

Local Manufacturing

As long as the manufacturing

of our product candidates takes place in Israel and no technology funded with IIA grants is sold or out licensed to a non-Israeli

entity, the maximum aggregate royalties paid generally would not exceed 100% of the grants made to us, plus annual interest equal

to the 12-month LIBOR rate applicable to dollar deposits, as published on the first business day of each calendar year.

Under the terms of

the Research Law, the products may be manufactured outside Israel by us or by another entity only if prior approval is received

from the IIA (such approval is not required for the transfer of up to 10% of the manufacturing capacity in the aggregate, in which

case a notice must be provided to the IIA and not be objected to by the IIA within 30 days of such notice).

Know-How Transfer

The Research Law restricts

the ability to transfer know-how funded by the IIA outside of Israel.

Transfer of IIA funded know-how outside of Israel requires

prior approval of the IIA and may be subject to payments to the IIA, calculated according to formulae provided under the Research

The redemption fee is subject to a cap of six times the total amount of the IIA grants, plus interest accrued thereon (i.e.

the total liability to the IIA, including accrued interest, multiplied by six).

If we wish to transfer IIA funded know-how, the

terms for approval will be determined according to the nature of the transaction and the consideration paid to us in connection

with such transfer.

Approval of transfer

of IIA funded know-how to another Israeli company may be granted only if the recipient abides by the provisions of the Research

law and related regulations, including the restrictions on the transfer of know-how and manufacturing rights outside of Israel.

Change of Control

Any non-Israeli citizen, resident or entity

that, among other things, (i) becomes a holder of 5% or more of our share capital or voting rights, (ii) is entitled to appoint

our directors or our chief executive officer or (iii) serves as one of our directors or as our chief executive officer (including

holders of 25% or more of the voting power, equity or the right to nominate directors in such direct holder, if applicable) is

required to notify the IIA and undertake to comply with the rules and regulations applicable to the grant programs of the IIA,

including the restrictions on transfer described above.

Approval to manufacture products outside

of Israel or consent to the transfer of IIA funded know-how, if requested, is within the discretion of the IIA.

Furthermore, the

IIA may impose certain conditions on any arrangement under which it permits us to transfer IIA funded know-how or manufacturing

out of Israel.

The consideration available

to our shareholders in a future transaction involving the transfer outside of Israel of know-how developed with IIA funding (such

as a merger or similar transaction) may be reduced by any amounts that we are required to pay to the IIA.

As of December 31, 2020, no sales were generated and the balance

of the principal and interest in respect of our commitments for future payments to the IIA totaled approximately $2.3 million.

As part of funding our current and planned product development activities, we have submitted follow-up grant applications for new

We expect our expenses to increase substantially

in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product

Our expenses will also increase as we:

continue the development of our product candidates,

including our lead product candidate, BX001;

complete IND-enabling activities and prepare

to initiate clinical trials for other product candidates;

initiate additional clinical trials and preclinical

studies for product candidates in our pipeline;

seek to identify and develop or in-license or

acquire additional product candidates and technologies;

seek regulatory approvals for our product candidates

that successfully complete clinical trials, if any;

establish a sales, marketing and distribution

infrastructure to commercialize any product candidates for which we may obtain regulatory approval;

hire and retain additional personnel, such as

clinical, quality control, commercial and scientific personnel;

expand our infrastructure and facilities to

accommodate our growing employee base, including adding equipment and physical infrastructure to support our research and

We believe that our existing cash and cash

equivalents will enable us to fund our operating expenses and capital expenditure requirements until at least mid-2022.

based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than

If we receive regulatory approval for our product candidates, we expect to incur significant commercialization expenses

related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize.

Until such time, if ever, that we can generate product revenue

sufficient to achieve profitability, we expect to finance our cash needs through the sales of our securities, milestone payments,

possibly additional grants from the IIA or other government or non-profit institutions and other outside funding sources.

to raise additional capital in the equity and debt markets is dependent on a number of factors including, but not limited to, market

volatility resulting from the COVID-19 pandemic, market demand for our securities, which itself is subject to a number of development

and business risks and uncertainties, as well as the uncertainty that we would be able to raise such additional capital at a price

or on terms that are favorable to the Company.

To the extent that we raise additional capital through the sale of equity or

convertible debt securities, our stockholders’

ownership interests may be materially diluted, and the terms of such securities

could include liquidation or other preferences that adversely affect their rights as a common stockholder.

Debt financing and preferred

equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific

actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise additional funds through

government and other third-party funding, collaboration agreements, strategic alliances, licensing arrangements or marketing and

distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs

or product candidates or grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through

equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future

commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to

develop and market by ourselves.

For more information regarding the risks related to our outlook, see “

Risk Factors —

Risks Related to Our Business, Technology and Industry.”

Off-Balance Sheet Arrangements

We entered into forward and option contracts

to hedge against the risk of overall changes in future cash flow from payments of salaries and related expenses, as well as other

expenses denominated in NIS.

December 31, 2020, the Company had outstanding foreign exchange

contracts in the amount of approximately $1.6 million.

As of December 31, 2019, the Company had no outstanding foreign exchange

Critical Accounting Policies and Significant Judgments and

Our consolidated financial statements are prepared in accordance

with US GAAP.

The preparation of our consolidated financial statements and related disclosures requires us to make estimates and

judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent

assets and liabilities in our financial statements.

We base our estimates on historical experience, known trends and events and

various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments

about the carrying values of assets and liabilities that are not readily apparent from other sources.

We evaluate our estimates

and assumptions on an ongoing basis.

Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies

are described in more detail in Note 2 to our consolidated financial statements, we believe that the following accounting policies

are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

research and development expenses

As part of the process of preparing our

consolidated financial statements, we are required to estimate our accrued research and development expenses.

This process involves

reviewing open contracts and purchase orders, communicating with our applicable personnel to identify services that have been

performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we

have not yet been invoiced or otherwise notified of actual costs.

The majority of our service providers invoice us in arrears

for services performed, on a pre-determined schedule or when contractual milestones are met;

however, some require advance payments.

We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts

and circumstances known to us at that time.

We periodically confirm the accuracy of these estimates with the service providers

and make adjustments, if necessary.

Examples of estimated accrued research and development expenses include fees paid to:

● vendors in connection with preclinical

development activities;

● CROs and investigative sites in connection

with preclinical and clinical trials;

● subcontractors in connection with the manufacturing

of materials for preclinical and clinical trials.

We measure the expense recognized based

on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs and subcontractors

that supply, conduct and manage preclinical studies, human clinical studies and clinical trials on our behalf.

The financial terms

of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows.

be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the

Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion

of certain milestones.

In accruing service fees, we estimate the time period over which services will be performed and the level

of effort to be expended in each period.

If the actual timing of the performance of services or the level of effort varies from

the estimate, we adjust the accrual or the amount of prepaid expenses accordingly.

Although we do not expect our estimates to

be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative

to the actual status and timing of services performed may vary and may result in changes in estimates that increase or decrease

amounts recognized in any particular period.

To date, there have not been any material adjustments to our prior estimates of accrued

research and development expenses.

Stock-Based Compensation

We apply ASC 718-10, “Stock-Based

Payment,”

which requires the measurement and recognition of compensation expenses for all stock-based payment awards made

to employees and directors, including employee stock options under our stock plans based on estimated fair values.

ASC 718-10 requires that we estimate the

fair value of equity-based payment awards on the date of grant using an option-pricing model.

The fair value of the award is recognized

as an expense over the requisite service periods in our statements of comprehensive loss.

We recognize stock-based award forfeitures

as they occur, rather than estimate by applying a forfeiture rate.

In June 2018, the Financial Accounting

Standards Board or FASB, issued Accounting Standards Update, or 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.

We adopted these amendments on January

We recognize compensation expenses for

the fair value of non-employee awards over the requisite service period of each award.

We estimate the fair value of stock options granted as equity

awards using a Black-Scholes options pricing model.

The option-pricing model requires a number of assumptions, of which the most

significant are share price, expected volatility and the expected option term (the time from the grant date until the options are

exercised or expire).

We determine the fair value per share of the underlying stock by taking into consideration its most recent

sales of stock as well as additional factors that we deem relevant.

has historically been a private company and lacks

company-specific historical and implied volatility information of its stock.

Expected volatility is estimated based on volatility

of similar companies in the biotechnology sector.

We have historically not paid dividends and has no foreseeable plans to issue

The risk-free interest rate is based on the yield from governmental zero-coupon bonds with an equivalent term.

option term is calculated for options granted to employees and directors using the “simplified”

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 our operations.

In-process research and development

In-process research and development acquired

in a business combination were 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 research and development efforts.

We accounted for the acquisition of RondinX

using the acquisition method of accounting, which required us to estimate the fair values of the assets acquired and liabilities

This included acquired in-process research and development and contingent consideration.

Significant changes in assumptions

and estimates subsequent to completing the allocation of the purchase price to the assets and liabilities acquired, as well as

differences in actual and estimated results, could impact our financial results.

Adjustments to the fair value of contingent consideration

are recorded in earnings.

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.

We review these intangible assets at least

annually for impairment, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Emerging Growth Company Status

We are an “emerging growth company,”

in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to

other public companies that are not emerging growth companies.

We may take advantage of these exemptions until we are no longer

an emerging growth company.

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended

transition period afforded by the JOBS Act for the implementation of new or revised accounting standards.

We have irrevocably elected

not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on

the relevant dates on which adoption of such standards is required for other public companies.

We may take advantage of these exemptions

up until the last day of the fiscal year following the fifth anniversary of our first registration statement filed under the Securities

Act, or such earlier time that we are no longer an emerging growth company.

We would cease to be an emerging growth company if

we have more than $1.07 billion in annual revenue, we have more than $700.0 million in market value of our shares held by non-affiliates

or we issue more than $1.0 billion of non-convertible debt securities over a three-year period.

QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to make

disclosures under this Item.

FINANCIAL STATEMENTS AND

SUPPLEMENTARY DATA

Our financial statements and the notes

thereto begin on page F-1 of this Annual Report.

CHANGES IN AND DISAGREEMENTS

WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

The payment of cash dividends in

the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition.

of any cash dividends will be within the discretion of our Board of Directors at such time.

Further, the Hercules Loan Agreement limits

our ability to declare or pay dividends, and if we incur additional indebtedness, our ability to declare dividends may be further limited

by restrictive covenants we may agree to in connection therewith.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity