HLSQ 10-Q
Tessera Defense & Homeland Security Inc. (HLSQ)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarter ended
For the transition period from to
Commission
file number:
(Exact Name of Registrant as Specified in Its Charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one share of common stock, $0.0001 par value, and one Warrant entitling the holder to receive one half share of common stock | PHGE.U | NYSE American | ||
| Warrants, each exercisable for one-half of a share of common stock, $0.0001 par value, at an exercise price of $11.50 per share | PHGE.WS | NYSE American |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 10, 2021,
BIOMX INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
i
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This quarterly report on Form 10-Q, or the Quarterly Report, includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and other securities laws. The statements contained herein that are not purely historical, are forward-looking statements. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “will” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. For example, we are making forward-looking statements when we discuss operations, cash flows, financial position, business strategy and plans, market growth, our clinical and pre-clinical development program, including timing and milestones thereof as well as the design thereof, including acceptance of regulatory agencies of such design, the potential opportunities for and benefits of the BacteriOphage Lead to Treatment, or BOLT, platform, the potential of our product candidates, the potential effect of the coronavirus disease 2019, or COVID-19, on our business and levels of expenses, sufficiency of financial resources and financial needs and impacts of changes in our management on our business. However, you should understand that these statements are not guarantees of performance or results, and there are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those expressed in the forward-looking statements, including, among others:
| ● | the ability to generate revenues, and raise sufficient financing to meet working capital requirements; |
| ● | the unpredictable timing and cost associated with our approach to developing product candidates using phage technology; |
| ● | the continued impact of COVID-19 on general economic conditions, our operations, the continuity of our business, including our preclinical and clinical trials and our ability to raise additional capital; |
| ● | obtaining U.S. Food and Drug Administration, or FDA, acceptance of any non-U.S. clinical trials of product candidates; |
| ● | the ability to pursue and effectively develop new product opportunities and acquisitions and to obtain value from such product opportunities and acquisitions; |
| ● | penalties and market withdrawal associated with any unanticipated problems with product candidates and failure to comply with labeling and other restrictions; |
| ● | expenses associated with compliance with ongoing regulatory obligations and successful continuing regulatory review in various global markets; |
| ● | market acceptance of our product candidates and ability to identify or discover additional product candidates; |
| ● | our ability to obtain high titers for specific phage cocktails necessary for preclinical and clinical testing; |
| ● | the availability of specialty raw materials; |
| ● | the ability of our product candidates to demonstrate requisite safety and tolerability for cosmetics, safety and efficacy for drug products, or safety, purity and potency for biologics without causing adverse effects; |
| ● | the success of expected future advanced clinical trials of our product candidates; |
| ● | our ability to obtain required regulatory approvals, especially with governments undergoing changes in administration and priorities; |
| ● | our ability to enroll patients in clinical trials and achieve anticipated development milestones when expected; |
| ● | delays in developing manufacturing processes for our product candidates; |
ii
| ● | competition from similar technologies, products that are more effective, safer or more affordable than our product candidates or products that obtain marketing approval before our product candidates; |
| ● | the impact of unfavorable pricing regulations, third-party reimbursement practices or health care reform initiatives on our ability to sell product candidates or therapies profitably; |
| ● | protection of our intellectual property rights and compliance with the terms and conditions of current and future licenses with third parties; |
| ● | infringement on the intellectual property rights of third parties and claims for remuneration or royalties for assigned service invention rights; |
| ● | our ability to acquire, in-license or use proprietary rights held by third parties necessary to our product candidates or future development candidates; |
| ● | ethical, legal and social concerns about synthetic biology and genetic engineering that may adversely affect market acceptance of our product candidates; |
| ● | reliance on third-party collaborators; |
| ● | our ability to manage the growth of the business; |
| ● | our ability to attract and retain key employees or to enforce the terms of noncompetition agreements with employees; |
| ● | the failure to comply with applicable laws and regulations other than drug manufacturing compliance; |
| ● | potential security breaches, including cybersecurity incidents; |
| ● | receipt of the second and / or third tranches under the Term Loan Facility, as such term is defined below; |
| ● | political, economic and military instability in the State of Israel; and |
| ● | other factors discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, or, the 2020 Annual Report. |
For a detailed discussion of these and other risks, uncertainties and factors, see Part I, Item 1A “Risk Factors” of our 2020 Annual Report and in Part II, Item 1A of this Quarterly Report. All forward-looking statements contained in this Quarterly Report speak only as of the date hereof. Except as required by law, we are under no duty to (and expressly disclaim any such obligation to) update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report. Comparisons of results between current and prior periods are not intended to express any future trends, or indications of future performance, and should be viewed only as historical data.
iii
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
1
BIOMX INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(USD in thousands, except share and per share data)
(unaudited)
| As of | ||||||||||
| Note | September 30, 2021 | December 31, 2020 | ||||||||
| ASSETS | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | ||||||||||
| Restricted cash | ||||||||||
| Short-term deposits | ||||||||||
| Other current assets | ||||||||||
| Total current assets | ||||||||||
| Property and equipment, net | ||||||||||
| Intangible assets, net | ||||||||||
| Operating lease right-of-use assets | ||||||||||
| Total non-current assets | ||||||||||
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 | September 30, 2021 | December 31, 2020 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| Current liabilities | ||||||||||
| Trade account payables | ||||||||||
| Other account payables | ||||||||||
| Current portion of operating lease liabilities | ||||||||||
| Total current liabilities | ||||||||||
| Non-current liabilities | ||||||||||
| Long-term debt | 4 | - | ||||||||
| Operating lease liabilities, net of current portion | ||||||||||
| Other liabilities | ||||||||||
| Total non-current liabilities | ||||||||||
| Commitments and Collaborations | 3 | |||||||||
| Stockholders’ equity | 5 | |||||||||
| Preferred Stock, $ | ||||||||||
| Common Stock, $ | ||||||||||
| Additional paid in capital | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| Total stockholders’ equity | ||||||||||
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 September 30, | Nine Months Ended September 30, | |||||||||||||||||
| Note | 2021 | 2020 | 2021 | 2020 | ||||||||||||||
| Research and development (“R&D”) expenses, net | ||||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||||
| General and administrative expenses | ||||||||||||||||||
| Operating loss | ||||||||||||||||||
| Financial expenses (income), net | ( | ) | ||||||||||||||||
| Loss before tax | ||||||||||||||||||
| Tax expenses | - | |||||||||||||||||
| Net Loss | ||||||||||||||||||
| Basic and diluted loss per share of Common Stock | 6 | |||||||||||||||||
| Weighted average number of shares of Common Stock outstanding, basic and diluted | ||||||||||||||||||
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 | ( | ) | ||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||
| Exercise of warrants (**) | ||||||||||||||||||||
| Issuance of Common Stock under Open Market Sales Agreement, net of $ | ||||||||||||||||||||
| Stock-based compensation expenses | ||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance as of March 31, 2021 | ( | ) | ||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||
| Issuance of Common Stock under Open Market Sales Agreement, net of $ | ||||||||||||||||||||
| Stock-based compensation expenses | ||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance as of June 30, 2021 | ( | ) | ||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||
| Issuance of Common Stock under Open Market Sales Agreement, net of $ | ||||||||||||||||||||
| Issuance of Common Stock under securities purchase agreement (“SPA”), net of $ | ||||||||||||||||||||
| Stock-based compensation expenses | ||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance as of September 30, 2021 | ( | ) | ||||||||||||||||||
| (*) | Less than $1. |
| (**) | See Note 5B. |
| (***) | See Note 5A. |
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 | ( | ) | ||||||||||||||||||
| Exercise of stock options | ) | |||||||||||||||||||
| Stock-based compensation expenses | ||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance as of March 31, 2020 | ( | ) | ||||||||||||||||||
| Exercise of stock options | ) | |||||||||||||||||||
| Stock-based compensation expenses | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2020 | ( | ) | ||||||||||||||||||
| Exercise of stock options | ) | - | ||||||||||||||||||
| Stock-based compensation expenses | ||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance as of September 30, 2020 | ( | ) | ||||||||||||||||||
| (*) |
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 Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS – OPERATING ACTIVITIES | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments required to reconcile cash flows used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Finance expense, net | - | |||||||
| Changes in other liabilities | ( | ) | ||||||
| Loss from sale of property and equipment | - | |||||||
| Changes in operating assets and liabilities: | ||||||||
| Other current assets | ||||||||
| Trade account payables | ( | ) | ( | ) | ||||
| Other account payables | ||||||||
| Net change in operating leases | ( | ) | ||||||
| Related parties | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS – INVESTING ACTIVITIES | ||||||||
| Investment in short-term deposits | ( | ) | ||||||
| Proceeds from short-term deposits | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from sale of property and equipment | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS – FINANCING ACTIVITIES | ||||||||
| Issuance of Common Stock under Open Market Sales Agreement, net of issuance costs | ||||||||
| Issuance of Common Stock under SPA, net of issuance costs | - | |||||||
| Proceeds from long-term debt, net of issuance costs | - | |||||||
| Outflows in connection with current assets and liabilities acquired in reverse recapitalization | ( | ) | ||||||
| Exercise of stock options | ||||||||
| Net cash provided by financing activities | ||||||||
| Increase (decrease) in cash and cash equivalents and restricted cash | ( | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | ( | ) | ||||||
| Cash and cash equivalents and restricted cash at the beginning of the period | ||||||||
| Cash and cash equivalents and restricted cash at the end of the period | ||||||||
| Supplemental disclosures of cash flow information | ||||||||
| Cash paid for interest | - | |||||||
| Taxes paid | ||||||||
| Supplemental disclosure of non-cash investing | ||||||||
| Property and equipment purchases included in accounts payable and other payables | - | |||||||
| Right-of-use assets obtained in exchange for new operation lease liabilities | ||||||||
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
| General information |
BiomX Inc. (formerly known as Chardan
Healthcare Acquisition Corp., individually prior to BiomX Inc.’s acquisition of
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.
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 for further information.
F-7
BIOMX INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
| A. | 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.
| B. | 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.
| C. | 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.
The full extent to which the COVID-19 pandemic may directly or indirectly impact the Company’s business, results of operations and financial condition will depend on future developments that are uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. The Company examined the impact of COVID-19 on its financial statements, and although there is currently no major impact, there may be changes to those estimates in future periods. Actual results may differ from these estimates.
| D. | 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.)
| E. | Derivative 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 September 30, 2021, the Company had outstanding foreign exchange contracts for the exchange of USD to
NIS in the amount of approximately $
| F. | 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” (“ASC 820”), which 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 September 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:
| September 30, 2021 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| Assets: | ||||||||||||||||
| Cash equivalents: | ||||||||||||||||
| Money market funds | ||||||||||||||||
| Foreign exchange contracts receivable | - | - | ||||||||||||||
| Liabilities: | ||||||||||||||||
| Contingent consideration (*) | ||||||||||||||||
| December 31, 2020 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| Assets: | ||||||||||||||||
| Cash equivalents: | ||||||||||||||||
| Money market funds | ||||||||||||||||
| Foreign exchange contracts receivable | - | - | ||||||||||||||
| Liabilities: | ||||||||||||||||
| Contingent consideration (*) | ||||||||||||||||
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.
(*)
The Company determined the fair value of the liabilities for
the contingent consideration based on a probability discounted cash flow analysis. This fair value measurement is based on significant
unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent
consideration is based on several factors, such as: the attainment of future clinical, developmental, regulatory, commercial and strategic
milestones relating to product candidates for treatment of primary sclerosing cholangitis. The discount rate applied ranged from
F-10
BIOMX INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD and NIS in thousands, except share and per share data)
NOTE 3 – COMMITMENTS AND COLLABORATIONS
| A. | In April 2019, the IIA approved an application for a total budget of NIS
In December 2019, the IIA approved an application for a total budget of NIS
In April 2020, the IIA approved an application for a total budget of NIS
In March 2021, the IIA approved two new applications for a total budget of NIS
In August 2021, the IIA approved an application for an aggregate budget of NIS
Through September 30, 2021, total grants approved from the IIA aggregated to approximately $ |
| B. | On
September 1, 2020 (“Effective Date”), |
F-11
BIOMX INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 4 – LONG-TERM DEBT
On August 16, 2021, the Company entered
into a Loan and Security Agreement (the “Loan Agreement”) with Hercules Capital, Inc. (“Hercules”), with respect
to a venture debt facility. Under the Loan Agreement, Hercules provided the Company with access to a term loan with an aggregate principal
amount of up to $
The Company may prepay advances under
the Loan Agreement, in whole or in part, at any time subject to a prepayment charge equal to:
Interest on the term loan accrues
at a per annum rate equal to the greater of
As of September 30, 2021, the carrying
value of the term loan consists of $
Interest expense relating to the term
loan, which is included in interest expense in the condensed statements of operations was $
Under the terms of the Loan Agreement,
the Company granted first priority liens and security interests in substantially all of the Company’s intellectual property as collateral
for the obligations thereunder. The Company also granted Hercules the right, at their discretion, to participate in any closing of any
single subsequent broadly marketed financing as defined up to a maximum aggregate amount of $
Future principal payments for the long-term debt are as follows:
| September 30, 2021 | ||||
| 2021 (for the remaining 3 months) | ||||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Total principal payments | ||||
| Unamortized discount and debt issuance costs | ( | ) | ||
| Long-term debt | ||||
F-12
BIOMX INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 5 – STOCKHOLDERS EQUITY
| A. | Share Capital: |
At-the-market Sales Agreement:
In December 2020,
Securities Purchase Agreement:
On July 26, 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
Warrants:
As of September 30, 2021, the Company had the following outstanding warrants to purchase Common Stock issued to stockholders:
| Warrant | Issuance Date | Expiration Date | Exercise Price Per Share | Number of Shares of Common Stock Underlying Warrants | ||||||||
| Private Placement Warrants | ||||||||||||
| Public Warrants | ||||||||||||
| 2021 Registered Direct Offering Warrants | ||||||||||||
| B. | Stock-based Compensation: |
On March 30, 2021, the Board of Directors
approved the grant of
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.) |
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:
| Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Underlying value of Common Stock ($) | ||||||||
| Exercise price ($) | ||||||||
| Expected volatility (%) | ||||||||
| Expected terms of the option (years) | ||||||||
| Risk-free interest rate (%) | ||||||||
The cost of the benefit embodied in the
options granted during the nine months ended September 30, 2021, based on their fair value as at the grant date, is estimated to be approximately
$
| (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 Nine Months Ended September 30, 2021 | ||||||||||||
| Number of Options | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Outstanding at the beginning of period | ||||||||||||
| Granted | ||||||||||||
| Forfeited | ( | ) | ||||||||||
| Exercised | ( | ) | ||||||||||
| Outstanding at the end of period | ||||||||||||
| Exercisable at the end of period | ||||||||||||
| Weighted average remaining contractual life of outstanding options – years as of September 30, 2021 | ||||||||||||
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.) |
Warrants:
As of September 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) | | ) | ||||||||||
| Private Warrants issued to scientific founders (see 2 below) | | |||||||||||
| (*) | 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,
On March 10, 2021, Yeda exercised
Expenses and income are included in R&D expenses, net in the condensed consolidated statements of operations. For the nine months ended September 30, 2021 and 2020, the Company did not record any expenses. |
F-15
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 |
| (2) | The following table sets forth the total stock-based payment expenses resulting from options granted, included in the statements of operations: |
| Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Research and development expenses, net | ||||||||
| General and administrative | ||||||||
| Three Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Research and development expenses, net | ||||||||
| General and administrative | ||||||||
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.
NOTE 7 – SUBSEQUENT EVENTS
| A. | In October 2021 |
| B. | On October 18, 2021, the Company announced the results of a Phase 2 cosmetic clinical study of BX001. The study was a 12-week randomized, single center, double-blind, placebo-controlled trial in 140 women with mild-to-moderate acne vulgaris. No meaningful difference was demonstrated for BX001 relative to placebo. The Company has decided not to continue pursuing this program. |
F-16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this Quarterly Report to “the Company”, “BiomX”, “we”, “us” or “our”, mean BiomX Inc. and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise. References in this Quarterly Report to “BiomX Ltd.” mean BiomX Ltd., our wholly owned Israeli subsidiary.
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
General
We are a clinical company developing products using both natural and engineered phage technologies designed to target and destroy bacteria that affect the appearance of skin, as well as harmful bacteria in chronic diseases, such as Cystic Fibrosis, or CF, Atopic Dermatitis, or AD, inflammatory bowel disease, or IBD, primary sclerosing cholangitis, or PSC, and colorectal cancer, or CRC. Bacteriophage or phage are viruses that target bacteria and are considered inert to mammalian cells. By developing 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 inception in 2015, we have devoted substantially all our resources to organizing and staffing the 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, our products are still in the preclinical and clinical development stages, and we have not generated any revenue from product sales. As we move our product candidates from preclinical to clinical stage and continue with clinical trials, we expect our expenses to increase.
Our phage-based product candidates are developed utilizing our proprietary research and development platform named BOLT. The BOLT platform is unique, employing cutting edge methodologies and capabilities across disciplines including computational biology, microbiology, synthetic engineering of phage and their production bacterial hosts, bioanalytical assay development, manufacturing and formulation, to allow agile and efficient development of natural or engineered phage combinations, or cocktails.
BOLT is designed to allow parallel phage cocktail development under two optional paths:
| ● | A personalized approach aimed at conducting a rapid initial clinical proof of concept study in patients (Phase 2 results) within approximately 12-18 months of project initiation. In certain indications the time to clinical proof of concept may be longer depending on the indication, identity of target bacteria, recruitment rate, cohort size and other factors. Under this path we develop an initial phage cocktail or cocktails of naturally-occurring phage designed to target the bacterial strains isolated from each study subject participating in the clinical proof of concept study. This phage cocktail or cocktails may differ from the final optimized phage cocktail to be commercialized, if approved. The ability to move quickly into clinical development is also driven by the strong safety profile of naturally-occurring phage, which we believe will allow us to bypass GLP toxicity studies and safety studies in healthy volunteers based on feedback from the FDA in connection with our IBD development program, and to proceed directly to Phase 2 proof of concept. |
2
| ● | Development of the final optimized fixed phage cocktail to be commercialized – the optimized cocktail targets a broad patient population and may be comprised of naturally-occurring or synthetically engineered phage. The cocktail contains phage with complementary features and is further optimized for multiple characteristics such as broad target host range, ability to prevent resistance, biofilm penetration, stability and ease of manufacturing. Development of the optimized phage cocktail is anticipated to require 1-2 years and will be conducted in parallel to developing the personalized product candidates and executing the clinical proof of concept studies described above. |
On November 15, 2021, we announced that we plan to focus on CF and AD programs in 2022 and to temporarily pause the development efforts in IBD and CRC for approximately one year, as neither program was expected to yield proof-of-concept data in patients over the next twelve months. In addition, we decided not to continue to pursue the development plan of our BX001 product candidate, that was developed to treat acne.
Clinical and Pre-Clinical Developments
Cystic Fibrosis
On March 31, 2021, we announced the selection of the phage cocktail for BX004, our therapeutic phage product candidate under development for chronic respiratory infections caused by Pseudomonas aeruginosa, or P. aeruginosa, a main contributor to morbidity and mortality in patients with CF. Based on recommendations from the Cystic Fibrosis Therapeutic Development Network, we updated our Phase 2 proof-of-concept study design and timelines to a Phase 1b/2a trial in CF patients with chronic respiratory infections caused by P. aeruginosa. The Phase 1b/2a trial will be comprised of two parts. Part 1 will evaluate the safety, pharmacokinetics and microbiologic/clinical activity of BX004 in eight CF patients in a single ascending dose and multiple ascending dose design. Results from Part 1 are expected in the second quarter of 2022. Part 2 of the Phase 1b/2a trial will evaluate the safety and efficacy of BX004 in 24 CF patients randomized to a treatment or placebo cohort in a 2:1 ratio. Results from Part 2 are expected by the third quarter of 2022. In September 2021, BX004 was cleared by the FDA to initiate the Phase 1b/2a trial in CF patients with chronic respiratory infections caused by P. aeruginosa.
Atopic Dermatitis
On March 31, 2021, we announced the selection of the phage cocktail for BX005, our topical phage product candidate targeting Staphylococcus aureus, or S. aureus, a bacterium associated with the development and exacerbation of inflammation in atopic dermatitis. By reducing S. aureus burden, BX005 is designed to shift the skin microbiome composition to its “pre-flare” state to potentially result in clinical improvement. Results from a Phase 2 proof-of-concept trial evaluating the safety and efficacy of BX005 in atopic dermatitis patients are expected in the third quarter of 2022.
Acne
On October 18, 2021, we announced the results of a Phase 2 cosmetic clinical study of BX001. The study was a 12-week randomized, single center, double-blind, placebo-controlled trial in 140 women with mild-to-moderate acne vulgaris. Subjects were randomized into two cohorts: BX001 or placebo in a 1:1 ratio and self-administered BX001 or placebo twice daily. Key endpoints from the study evaluated the safety, tolerability and efficacy of BX001. BX001 was demonstrated to be safe and well-tolerated with no treatment-related adverse events. A statistically significant improvement from baseline was observed in appearance of acne-prone skin but no meaningful difference was demonstrated relative to the placebo arm of the Study. Significant improvements in the appearance of acne prone skin, as assessed by reduction in inflammatory lesion counts (48.3%, p<0.0001), non-inflammatory lesion counts (36.3%, p<0.0001), and by reduction in average Investigator’s Global Assessment, or IGA, score (-0.29, p<0.001), were observed when compared to baseline for both cohorts. No meaningful difference was demonstrated for BX001 relative to placebo. As mentioned above, we have decided not to continue pursuing this program.
3
Inflammatory Bowel Disease and Primary Sclerosing Cholangitis
On November 12, 2020, we announced consolidation of our IBD and PSC programs into a single broad host range product candidate, named BX003, under development for both indications. Prior to November 2020, we had two separate phage product candidates for IBD and for PSC, with our IBD product candidate named BX002 and PSC product candidate named BX003. After the consolidation, the current BX003 product candidate is now under development to treat both IBD and PSC, targeting bacterial strains of Klebsiella pneumoniae, or K. pneumoniae, a potential pathogen implicated in both diseases. Prior to the consolidation, our Phase 1a clinical study was conducted only on BX002, and future clinical studies are planned to be conducted on BX003 for both IBD and PSC.
On February 2, 2021, we announced positive results of a randomized, single-blind, multiple-dose, placebo-controlled Phase 1a pharmacokinetic study of BX002, our product candidate for IBD and PSC, conducted under an investigational new drug, or IND, application submitted to the FDA. The study evaluated the safety and tolerability of orally administered BX002 in 18 healthy volunteers. Subjects were randomized to receive orally either BX002 or placebo, twice daily for three days. Subjects were monitored for safety for seven days in a clinical unit, with follow-up monitoring for safety assessments conducted at 14 and 28 days after completion of dosing. BX002 was demonstrated to be safe and well-tolerated, with no serious adverse events and no adverse events leading to discontinuation. In addition, the study met its objective of delivering high concentrations of viable phage to the gastrointestinal tract of approximately 1010 PFU, or plaque forming units. This equals approximately 1,000 times more viable phage compared to the bacterial burden of K. pneumoniae in IBD and PSC patients as measured in stool.
Colorectal Cancer
For our CRC program, we are exploring phage mediated delivery of therapeutic payloads to Fusobacterium nucleatum bacteria residing in the tumors of patients with colorectal cancer.
For more information regarding our product candidates, see Part I, Item 1 “Business” of our 2020 Annual Report.
COVID-19
On March 12, 2020, the World Health Organization declared COVID-19 a global pandemic. In an effort to contain and mitigate the spread of COVID-19, many countries have imposed unprecedented restrictions on travel, mandatory business closures and other measures designed to mitigate the spread, leading to a substantial reduction in economic activities in countries around the world, resulting in certain disruptions to our business throughout 2020 and in 2021.
In response to the pandemic, we have implemented the mandatory as well as recommended measures to safeguard the health and safety of our employees and clinical trial participants, and the continuity of our business operations, including social distancing in our offices, a work from home policy for all employees who are able to perform their duties remotely and restricting all nonessential travel, and we expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees, clinical trial participants and others in light of COVID-19. As of November 10, 2021, COVID-19 has not had a material impact on our results of operations. However, uncertainty remains as to the potential impact of COVID-19 on our future research and development activities and the potential for a material impact on the Company increases the longer the virus impacts certain aspects of economic activity around the world. The full extent to which COVID-19 will directly or indirectly impact our business, results of operations and financial condition, including our ability to fulfill our clinical trial enrollment needs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international markets, the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the ultimate impact on financial markets and the global economy, the effectiveness of vaccines and vaccine distribution efforts and the effectiveness of other actions taken in the United States and other countries to contain and treat the disease. During the second quarter of 2020, we updated our guidance on the timing of certain clinical milestones partly due to the health and safety precautions we had taken and challenges we continue to face in clinical trial enrollment due to COVID-19. It is not currently possible to predict how long the pandemic will last, what the long-term global effects will be, or the time that it will take for economic activity to return to pre-pandemic levels, and we do not yet know the full impact on our business and operations. We will continue to monitor COVID-19 closely and follow health and safety guidelines as they evolve.
4
Consolidated Results of Operations
Comparison of the Three Months Ended September 30, 2021 and 2020
The following table summarizes our consolidated results of operations for the three months ended September 30, 2021 and 2020:
| Three Months ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| USD in thousands | ||||||||
| Research and development (“R&D”) expenses, net | 6,608 | 6,056 | ||||||
| Amortization of intangible assets | 380 | 380 | ||||||
| General and administrative expenses | 2,845 | 2,394 | ||||||
| Operating loss | 9,833 | 8,830 | ||||||
| Financial expense, net | 188 | 5 | ||||||
| Loss before tax | 10,021 | 8,835 | ||||||
| Tax expenses | 10 | - | ||||||
| Net loss | 10,031 | 8,835 | ||||||
| Basic and diluted loss per share of Common Stock | 0.37 | 0.38 | ||||||
| Weighted average number of shares of Common Stock outstanding, basic and diluted | 27,077,903 | 23,150,253 | ||||||
R&D expenses, net (net of grants received from the Israel Innovation Authority, or the IIA, and considerations from research collaborations) were $6.6 million for the three months ended September 30, 2021, compared to $6.1 million for the three months ended September 30, 2020. The increase of $0.5 million, or 8%, is primarily due to increased expenses related to conducting pre-clinical and clinical trials of our product candidates, partially offset by an increase in IIA grants that were recorded during the period. The Company recorded $0.6 million of IIA grants and grants receivables during the three months ended September 30, 2021. The Company did not record any grants and grants receivables during the three months ended September 30, 2020.
General and administrative expenses were $2.8 million for the three months ended September 30, 2021, compared to $2.4 million for the three months ended September 30, 2020. The increase of $0.4 million, or 17%, is primarily due to an increase in stock-based compensation and salaries and related expenses, mainly due to the growth in the number of employees and due to an increase in expenses associated with operating as a public company, such as directors’ and officers’ insurance.
Financial expense, net was $188,000 for the three months ended September 30, 2021, compared to $5,000 for the three months ended September 30, 2020. The increase in financial expense, net of $183,000, or 3900%, is primarily due to interest expense resulting from receipt of the first tranche of the Term Loan Facility, and due to the decrease in interest rates on bank deposits and money market funds.
Basic and diluted loss per share of Common Stock was $0.37 for the three months ended September 30, 2021, compared to $0.38 for the three months ended September 30, 2020. The decrease in diluted loss per shares of $0.01, or 3%, is primarily due to the increase in outstanding shares as part of the registered direct offering described below and other issuances of our Common Stock, offset by an increase in our operating loss.
5
Comparison of the Nine Months Ended September 30, 2021 and 2020
The following table summarizes our consolidated results of operations for the nine months ended September 30, 2021 and 2020:
| Nine Months ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| USD in thousands | ||||||||
| R&D expenses, net | 16,102 | 13,302 | ||||||
| Amortization of intangible assets | 1,139 | 1,139 | ||||||
| General and administrative expenses | 8,436 | 6,749 | ||||||
| Operating loss | 25,677 | 21,190 | ||||||
| Financial expense (income), net | 76 | (248 | ) | |||||
| Loss before tax | 25,753 | 20,942 | ||||||
| Tax expenses | 16 | - | ||||||
| Net loss | 25,769 | 20,942 | ||||||
| Basic and diluted loss per share of Common Stock | 1.03 | 0.91 | ||||||
| Weighted average number of shares of Common Stock outstanding, basic and diluted | 25,120,037 | 23,013,790 | ||||||
Research and development expenses, net (net of IIA grants and consideration from research collaborations) were $16.1 million for the nine months ended September 30, 2021, compared to $13.3 million for the nine months ended September 30, 2020. The increase of $2.8 million, or 21%, is primarily due to expenses related to conducting pre-clinical and clinical trials of our product candidates and due to an increase in stock-based compensation and salaries and related expenses, mainly due to the growth in the number of employees in R&D and clinical activities, partially offset by an increase in IIA grants. The Company recorded $3.3 million and $0.5 million of IIA grants and grants receivables during the nine months ended September 30, 2021 and September 30, 2020, respectively.
General and administrative expenses were $8.4 million for the nine months ended September 30, 2021, compared to $6.7 million for the nine months ended September 30, 2020. The increase of $1.7 million, or 25%, is primarily due to an increase in stock-based compensation and salaries and related expenses, mainly due to the growth in the number of employees, as well as an increase in expenses associated with operating as a public company, such as directors’ and officers’ insurance and due to expenses of moving into new premises.
Financial expense, net was $0.1 million for the nine months ended September 30, 2021, compared to financial income, net of $0.2 million for the nine months ended September 30, 2020. The increase in financial expense, net of $0.3 million, or 150%, is primarily due to interest expense that resulted from the Term Loan Facility and to the decrease in interest rates on bank deposits and money market funds, partially offset by the USD/NIS exchange rate differences.
Basic and diluted loss per share of Common Stock was $1.03 for the nine months ended September 30, 2021, compared to $0.91 for the nine months ended September 30, 2020. The increase of $0.12, or 13%, is primarily due to the increase in our net loss, partially offset by the increase in outstanding shares as part of the registered direct offering described below and other issuances of our Common Stock.
Liquidity and Capital Resources
We believe our cash and cash equivalents on hand will be sufficient to meet our working capital and capital expenditure requirements until at least the end of 2023. We have revised our operating plans in order to reduce expenses and, until we are able to obtain further funding, we currently plan to focus primarily on BX004 and BX005, our product candidates for CF and AD, respectively. In the future we will likely require or desire additional funds to support our operating expenses and capital requirements or for other purposes, and may seek to raise such additional funds through public or private equity, such as the registered direct offering discussed below or debt financings, loans such as the venture debt discussed below or collaborative agreements or from other sources, as well as under the ATM Agreement discussed below. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited. If we are unable to raise additional funds when or on the terms desired, our business, financial condition and results of operations could be adversely affected.
6
Cash Flows
The following table summarizes our sources and uses of cash for the nine months ended September 30, 2021 and 2020:
| Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| USD in thousands | ||||||||
| Net cash used in operating activities | (18,483 | ) | (17,325 | ) | ||||
| Net cash provided by (used in) investing activities | 16,276 | (1,049 | ) | |||||
| Net cash provided by financing activities | 33,300 | 121 | ||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | (2 | ) | - | |||||
| Net increase (decrease) in cash and cash equivalents | 31,091 | (18,253 | ) | |||||
Operating Activities
Net cash used in operating activities for the nine months ended September 30, 2021 was $18.5 million primarily due to a net loss of $25.8 million, mostly due to our R&D and general and administrative expenses, offset by non-cash charges of $4.1 million and changes in our operating assets and liabilities of $3.1 million. Non-cash charges for the nine months ended September 30, 2021 consisted primarily of depreciation and amortization expenses of $1.7 million and stock-based compensation expenses in the amount of $2.7 million, offset by changes in contingent consideration of $0.3 million. Net changes in our operating assets and liabilities consisted primarily due to change in other current assets in the amount of $2.1 million and in other account payables in the amount of $1.8 million, partially offset by a decrease in accounts payable of $0.5 million and a decrease in net change in operating leases of $0.2 million.
Net cash used in operating activities for the nine months ended September 30, 2020 was $17.3 million and included our net loss of $20.9 million, mostly due to our R&D and general and administrative expenses. Net changes in our operating activities for the nine months ended September 30, 2020 consisted primarily of depreciation and amortization in the amount of $1.6 million and stock-based compensation in the amount of $2.1 million, partially offset by a decrease in accounts payable in the amount of $1.9 million.
Investing Activities
During the nine months ended September 30, 2021, net cash provided by investing activities was $16.3 million, primarily as a result of liquidation of short-term deposits of $19.9 million, partially offset by purchases of property and equipment of $3.6 million which consisted primarily of leasehold improvements and lab equipment as part of construction work on our new in-house manufacturing facility, laboratories and offices.
During the nine months ended September 30, 2020, net cash used in investing activities was $1.0 million, mainly as a result of an increase in bank deposits and purchases of property and equipment.
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 record gains or losses that offset the revaluation of the balance sheet items under financial expenses, net in our condensed consolidated statements of operations. As of September 30, 2021, we had outstanding foreign exchange contracts for the exchange of USD to NIS in the amount of approximately $2.8 million with a fair value of $0.02 million. As of September 30, 2020, we had outstanding foreign exchange contracts for the exchange of USD to NIS in the amount of approximately $3.5 million with a fair value of $0.01 million.
Financing Activities
During the nine months ended September 30, 2021, net cash provided by financing activities was $33.3 million, from a loan and security agreement, from the issuance of Common Stock in a registered direct offering and from the issuance of Common Stock pursuant to the Open Market Sales Agreement referred to below.
In December 2020, pursuant to a registration statement on Form S-3 declared effective by the Securities and Exchange Commission on December 11, 2020, we entered into an Open Market Sales Agreement, or the ATM Agreement, with Jefferies LLC, or Jefferies, which provides that, upon the terms and subject to the conditions and limitations in the ATM Agreement, we may elect, from time to time, to offer and sell shares of Common Stock having an aggregate offering price of up to $50,000,000 through Jefferies acting as sales agent. We are not obligated to make any sales of Common Stock under the ATM Agreement. From January 1, 2021 through September 30, 2021, we issued an aggregate of 743,964 shares of Common Stock under the ATM Agreement for aggregate gross proceeds of $5,351,120. From October 1, 2021 through November 10, 2021, we did not issue any shares of Common Stock pursuant to the ATM Agreement. We may continue to sell shares under the ATM Agreement and otherwise to use our effective shelf registration statement to raise additional funds from time to time.
7
On July 28, 2021, we completed a transaction under a securities purchase agreement, or the Securities Purchase Agreement, with certain institutional investors and all of our directors and certain of our executive officers, or, collectively, the Investors, pursuant to which we issued and sold, in a registered direct offering, or the Offering, directly to the Investors an aggregate of 3,750,000 units, at a purchase price of $4.00 per unit, with each unit consisting of one share of our Common Stock, and one warrant to purchase 0.75 of a share of our Common Stock, at an exercise price of $5.00 per share. The net proceeds from the Offering amounted to $13.8 million, after the deduction of fees and Offering expenses and assuming no exercise of the warrants. The warrants will be exercisable six months after the date of issuance and will expire five years from the date such warrants first become exercisable. The warrants will not be listed on the NYSE American Stock Market or any other exchange and no trading market for the warrants is expected to develop. The Securities Purchase Agreement contains customary representations, warranties and agreements by us.
Additionally, in August 2021, we entered into a loan and security agreement, or the Term Loan Facility, with Hercules Capital, Inc., or Hercules, pursuant to which a term loan in an aggregate principal amount up to $30.0 million, or the Term Loan, is available to us in three tranches. We received $14.2 million, net of $0.8 million of closing charges and other transaction costs, promptly after signing the agreement on August 16, 2021 and, two additional tranches of $10 million and $5 million may become available to us to borrow upon the occurrence of certain milestone events.
In October 2021 we entered into a binding agreement with a subsidiary of Maruho Co. Ltd., or Maruho, a leading dermatology-focused pharmaceutical company in Japan, for an equity investment of $3.0 million. On October 14, 2021, pursuant to such agreement, we issued to Maruho 375,000 shares of our Common Stock at a premium to the market share price. The proceeds from this sale are intended primarily to support the Phase 1/2 study of BX005 expected in 2022. We also entered into an agreement granting Maruho a right of first offer to license our atopic dermatitis product candidate, BX005, in Japan. The right of first offer will commence following the availability of results from the Phase 1/2 study.
During the nine months ended September 30, 2020 net cash provided by financing activities was $0.1 million, mainly as a result of exercise of stock options of $0.2 million, partially offset by outflows in connection with the Recapitalization Transaction of $0.1 million.
Outlook
We have accumulated a deficit of $98.0 million since our inception. To date, we have not generated revenue from our operations and we do not expect to generate any significant revenues from sales of products in the next twelve months. Our cash needs may increase in the foreseeable future. We expect to generate revenues, from the sale of licenses to use our technology or products, but in the short and medium terms any amounts generated are unlikely to exceed our costs of operations. According to our estimates and based on our current operating plans, our liquidity resources as of September 30, 2021, which consisted primarily of cash, cash equivalents and restricted cash of approximately $68.3 million and will be sufficient to fund our operations into at least the end of 2023.
Consistent with our continuing R&D activities, we expect to continue to incur additional losses in the foreseeable future. To the extent we require funds above our existing liquidity resources in the medium and long term, we plan to fund our operations, as well as other development activities relating to additional product candidates, through future issuances of public or private equity or debt securities, including under our ATM Agreement, loans, including the Loan and possibly additional grants from the IIA or other government or non-profit institutions. Our 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 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 us.
8
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, for a period of less than one year.
As of September 30, 2021, we had outstanding foreign exchange contracts for the exchange of USD to NIS in the amount of approximately $2.8 million. As of September 30, 2020, we had outstanding foreign exchange contracts for the exchange of USD to NIS in the amount of approximately $3.5 million.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to make disclosures under this Item.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, conducted an evaluation, as of the end of the period covered by this Quarterly Report, of the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of September 30, 2021.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting, as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the quarter ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
9
PART II - OTHER INFORMATION
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, which could materially affect our business, financial condition or future results.
There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 31, 2021, except as noted below.
Risks related to the Hercules Loan Agreement
The terms of the Hercules Loan Agreement place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.
In August 2021, we entered into Hercules Loan Agreement, providing for the Term Loan in an aggregate principal amount of up to $30.0 million, subject to funding in three tranches and subject to certain terms and conditions. We received the first tranche of $15.0 million promptly after signing the agreement in August 2021. Two additional tranches in the amounts of $10 million and $5 million may become available to us to borrow upon the occurrence of certain milestone events. Our obligations under the Hercules Loan Agreement are secured by a lien on substantially all of our assets, other than intellectual property. We also agreed not to pledge or secure our intellectual property to others.
The Hercules Loan Agreement includes affirmative and negative covenants and events of default applicable to us. The affirmative covenants include, among others, covenants requiring us to maintain our legal existence and governmental approvals, deliver certain financial reports and maintain insurance coverage. The negative covenants include, among others, restrictions on our transferring collateral, making changes to the nature of our business, incurring additional indebtedness, engaging in mergers or acquisitions, paying dividends or making other distributions, making investments, engaging in transactions with affiliates. Events of default include, among other things and subject to customary exceptions: (i) insolvency, liquidation, bankruptcy or similar events; (ii) failure to pay any debts due under the Hercules Loan Agreement or other loan documents on a timely basis; (iii) failure to observe certain covenants under the loan and security agreement with Hercules; (v) occurrence of a material adverse effect; (vi) material misrepresentation by us; (vii) occurrence of any default under any other agreement involving material indebtedness; and (viii) certain material money judgments. If we default under the Hercules Loan Agreement, Hercules may accelerate all of our repayment obligations and take control of our pledged assets, potentially requiring us to renegotiate our agreement on terms less favorable to us or to immediately cease operations. Further, if we are liquidated, the lenders’ right to repayment would be senior to the rights of the holders of our Common Stock to receive any proceeds from the liquidation. Any declaration by Hercules of an event of default could significantly harm our business and prospects and could cause the price of our Common Stock to decline. If we raise any additional debt financing, the terms of such additional debt could further restrict our operating and financial flexibility.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On October 14, 2021, we issued to Maruho Deutschland GmbH 375,000 shares of our Common Stock in consideration for $3,000,000, at a purchase price of $8.00 per share. We issued the shares pursuant to an exemption from registration under Rule 506 and Rule 903 under the Securities Act 1933, as amended.
Item 5. Other Information
On November 10, 2021, Dr. Sailaja Puttagunta, our Chief Medical Officer, or CMO, notified us that she will be stepping down as CMO on December 31, 2021. Dr. Puttagunta will be transitioning into a consulting role starting at the beginning of 2022.
Item 6. Exhibits
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| BIOMX INC. | ||
| Date: November 15, 2021 | By: | /s/ Jonathan Solomon |
| Name: | Jonathan Solomon | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: November 15, 2021 | By: | /s/ Marina Wolfson |
| Name: | Marina Wolfson | |
| Title: | Senior Vice President of Finance and Operations | |
(Principal Financial Officer and Principal Accounting Officer) | ||
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