The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

BIOMX INC.

(formerly known as Chardan Healthcare Acquisition Corp.)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’STOCKHOLDERS’ EQUITY (unaudited)

(USD in thousands, except share and per share data data)

(unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.  

BIOMX INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(USD in thousands, except share and per share data)

(unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

BIOMX INC.

(formerly known as Chardan Healthcare Acquisition Corp.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

USD in thousands

The accompanying notes are an integral part of these condensed consolidated financial statements.

BIOMX INC.

(formerly known as Chardan Healthcare Acquisition Corp.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

BiomX Inc. (together(formerly known as Chardan Healthcare Acquisition Corp., individually prior to BiomX Inc.’s acquisition of 100% of the outstanding shares of BiomX Israel Ltd. (the “Recapitalization Transaction”, “BiomX Israel” respectively), and together with its subsidiaries, BiomX Ltd. and RondinX Ltd., after the Recapitalization Transaction, the “Company” or “BiomX”, formerly known as Chardan Healthcare Acquisition Corp.) was incorporated as a blank check company on November 1, 2017, under the laws of the state of Delaware, for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities.

On July 16, 2019, the Company entered into a merger agreement with BiomX Ltd. (“BiomX Israel”), a company incorporated under the laws of Israel, CHAC Merger Sub Ltd. (“Merger Sub”) and Shareholder Representative Services LLC (“SRS”), as amended on October 11, 2019, pursuant to which, among other things, BiomX Israel merged with Merger Sub, with BiomX Israel being the surviving entity in accordance with the Israeli Companies Law, 5759-1999, as a wholly owned direct subsidiary of BiomX Inc.

On October 28, 2019, the Company acquired 100% of the outstanding shares of BiomX Israel (the “Recapitalization Transaction”). Pursuant to the aforementioned merger agreement, in exchange for all of the outstanding shares of BiomX Israel, the Company issued to the shareholders of BiomX Israel a total of 15,069,058 shares of the Company’s Common Stock representing approximately 65% of the total shares issued and outstanding after giving effect to the Recapitalization Transaction. As a result of the Recapitalization Transaction, BiomX Israel became a wholly owned subsidiary of the Company. As the shareholders of BiomX Israel received the largest ownership interest in the Company, BiomX Israel was determined to be the “accounting acquirer” in the Recapitalization Transaction. As a result, the historical financial statements of the Company were replaced with the financial statements of BiomX Israel for all periods presented.

Following the Recapitalization Transaction, the Company retained $60.1 million held in a trust account, after redemptions of a portion of shares of Common Stock issued in the initial public offering of the Company and held by certain shareholders.

The numbers of shares and instruments convertible into shares included within these financial statements have been retroactively adjusted based on the equivalent number of shares received by the accounting acquirer in the Recapitalization Transaction.

On October 28, 2019, the Company was renamed BiomX Inc. and the Company’s shares of Common Stock, units, and warrants began trading inon 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 AvivTel-Aviv Stock Exchange.

To date, the Company has not generated revenue from its operations. As of June 30, 2020,March 31, 2021, the Company had a cash and cash equivalentequivalents and restricted cash balance of approximately $60 million$40,387 and short-term deposits of approximately $10 million,$13,205, which management believes is sufficient to fund its operations for more than 12 months from the date of issuance of these condensed consolidated financial statements and sufficient to fund its operations necessary to continue development activities of its current proposed products.

Consistent with its continuing R&Dresearch and development activities, the Company expects to continue to incur additional losses for the foreseeable future. The Company plans to continue to fund its current operations, as well as other development activities relating to additional product candidates, through future issuances of debt and/or equity securities and possibly additional grants from the Israel Innovation Authority (“IIA”) orand other government or non-for-profit 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 favourablefavorable to us.

it.

BIOMX INC.

(formerly known as Chardan Healthcare Acquisition Corp.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for condensed financial information and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission (“SEC”) regulations. Accordingly, theyinformation. 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, 2019,2020, that the Company filed with the SECU.S. Securities and Exchange Committee (the “SEC”) on March 26, 2020.31, 2021.

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated upon consolidation.

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.

Certain prior year amounts have been reclassified to conform to the current year presentation.

The significant accounting policies followed in the preparation of these unaudited condensed consolidated financial statements are identical to those applied in the preparation of the latest annual audited financial statements with the exception of the following:

In August 2018, the FASB issued ASU No. 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements,” which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements and is effective for the Company beginning on January 1, 2020. This standard did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

In November 2018, the FASB issued ASU No. 2018-18, “Collaborative Arrangements (Topic 808),” which clarifies the interaction between Topic 808 and Topic 606, “Revenue from Contracts with Customers”. The Company adopted this standard in the first quarter of fiscal year 2020. This standard did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

BIOMX INC.

(formerly known as Chardan Healthcare Acquisition Corp.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In June 2016, the Financial AccountingAccountings Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments – Credit Losses”,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. The 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 December 2019,August 2020, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)-Accounting for Income Taxes” (“Convertible Instruments and Contracts in an Entity’s Own Equity.” The ASU 2019-12”), which is intended to simplify various aspects related tosimplifies accounting for income taxes.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 2019-12 removes certain exceptionssettlement conditions that are required for equity contracts to qualify for the general principlesderivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted net income per share calculation in Topic 740 and also clarifies and amends existing guidance to improve consistent application. Thiscertain areas. The new guidance is effective for the Companyannual and interim periods beginning on January 1,after December 15, 2021, withand early adoption permitted.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.

BIOMX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

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 March 31, 2021, the Company had outstanding foreign exchange contracts in the amount of approximately $5,219. As of March 31, 2020, the Company had no outstanding foreign exchange contracts.

The fair value of certain of the Company’s financial instruments including cash, accounts receivable, accounts payable, accrued expenses, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC  820, “Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.

Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.

Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 – Quoted prices in non-active markets or in active markets for similar assets or liabilities, observable inputs other than quoted prices, and inputs that are not directly observable but are corroborated by observable market data.

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

There were no changes in the fair value hierarchy levelling during the period ended March 31, 2021 and year ended December 31, 2020.

BIOMX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

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:

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.

Short-term deposits represent time deposits placed with banks with original maturities of greater than three months but less than one year. Interest earned is recorded as financial income in the consolidated statements of operations during the periods for which the Company held short-term deposits.

As of June 30, 2020, the Company had deposits dominated in New Israeli Shekels (“NIS”) and in USD at Leumi Bank (Israel) and BHI USA with fixed annual interest of 0.5% - 1.58% per year. As of June 30, 2019, the Company had deposits at Leumi Bank (Israel) and BHI USA with fixed annual interest of 2.4% - 3.6% per year.

On January 1, 2019, the Company adopted ASU No. 2016-02, “Leases (Topic 842)” using the modified retrospective approach for all lease arrangements at the beginning period of adoption. The Company leases office space under operating leases. As of June 30, 2020, the Company’s right-of-use assets and lease liabilities for operating leases totalled $979 thousand and $1,034 thousand, respectively.

In May 2017, BiomX Israel entered into a lease agreement for office space in Ness Ziona, Israel for five years, beginning on June 1, 2017, with an option to extend for an additional five years. Monthly lease payments under the agreement are approximately $18 thousand. As part of the agreement, the Company has obtained a bank guarantee in favor of the property owner in the amount of approximately $95 thousand, representing four monthly lease and related payments. Lease expenses recorded in the condensed consolidated statements of operations were $56 thousand and $108 thousand for the three and six months ended June 30, 2020, respectively. Lease expenses recorded in the condensed consolidated statements of operations were $48 thousand and $96 thousand for the three and six months ended June 30, 2019, respectively.

In September 2019, BiomX Israel entered into a lease agreement for office space in Ness Ziona, Israel for five years beginning on September 8, 2019, with an option to extend for an additional period until July 14, 2027. Monthly lease payments under the agreement are approximately $12 thousand. As part of the agreement, BiomX Israel obtained a bank guarantee in favor of the property owner in the amount of approximately $59 thousand, representing four monthly lease and related payments. Lease expenses recorded in the condensed consolidated statements of operations were $34 thousand and $70 thousand for the three and six months ended June 30, 2020, respectively.

BIOMX INC.

(formerly known as Chardan Healthcare Acquisition Corp.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental cash flow information related to operating leases was as follows (USD in thousands):

As of June 30, 2020, the Company's operating leases had a weighted average remaining lease term of 3.75 years and a weighted average discount rate of 3%. Future lease payments under operating leases as of June 30, 2020 were as follows (USD in thousands):

BIOMX INC.

(formerly known as Chardan Healthcare Acquisition Corp.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In November 2017, BiomX Israel signed a share purchase agreement with the shareholders of RondinX Ltd. In accordance with the share purchase agreement, BiomX Israel acquired 100% control and ownership of RondinX Ltd. for consideration valued at $4.5 million.$4,500. The consideration included the issuance of 250,023 Preferred A Shares, the issuance of warrants to purchase an aggregate of 4,380 Series A-1 preferred shares, and additional contingent consideration. As part of the Recapitalization Transaction the Company issued shares of Common Stock in exchange for outstanding ordinary shares and all the preferred shares of BiomX Israel. The number of shares prior to the Recapitalization Transaction has been retroactively adjusted based on the equivalent number of shares received by the accounting acquirer in the Recapitalization Transaction. The contingent consideration is based on the attainment of future clinical, developmental, regulatory, commercial and strategic milestones relating to product candidates for the treatment of primary sclerosing cholangitis or entry into qualifying collaboration agreements with certain third parties. The contingent considerationparties and may require the Company to issue 567,729 shares of Common Stock upon the attainment of certain milestones, as well as make future cash payments and/or issue additional shares of the most senior class of the Company’s shares authorized or outstanding as of the time the payment is due, or a combination of both of up to $32 million$32,000 within ten years from November 2017, the closing of the share purchase agreement. The contingent consideration may also requireagreement, and/or the Company to pay a qualifying up-front fee upon entering of agreements with certain third parties or their affiliates that include a qualifying up-front fee and is entered into within three years from the closing of the share purchase agreement. No such agreement was entered into within three years from the closing. The Company has the discretion of determining whether milestone payments will be made in cash or by issuance of shares.shares of Common Stock.

The contingent consideration is accounted for at fair value (level(Level 3). There were no changes in the fair value hierarchy leveling during the six monthsquarter ended June 30, 2020 or 2019.March 31, 2021 and year ended December 31, 2020.

The changecondensed consolidated financial statements as of March 31, 2021 and December 31, 2020 include a liability with respect to this agreement in the fair valueamount of the contingent consideration as of June 30, 2020$79 and June 30, 2019 was as follows (USD in thousands):$83, respectively.

Intangible assets acquired in the RondinX Ltd. acquisition (see Note 5) were determined to be in-process R&D. In accordance with ASC 350-30-35-17A (“Intangible assets with indefinite lives”), R&D assets acquired in a business combination are considered an indefinite-lived intangible asset until completion or abandonment of the associated R&D efforts. On January 1, 2020, the in-process R&D efforts were completed. The Company had determined the useful life of the R&D assets for three years and began amortizing these assets accordingly in the financial statements. Amortization expenses recorded in the condensed consolidated statements of operations were $379 thousand and $758 thousand for the three and six months ended June 30, 2020, respectively. Based on management’s analysis, there was no impairment for the three and six months ended June 30, 2020 or 2019.

BIOMX INC.

(formerly known as Chardan Healthcare Acquisition Corp.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(USD and NIS in thousands, except share and per share data)

In December 2019, the IIA approved a new application for a total budget of NIS 10.8 million (approximately $3.1 million). IIA committed to funding 30% of the approved budget. The program is for the period beginning July 2019 through December 2019. BiomX Israel has not yet submitted the final report to the IIA for this program.

During December 2019, BiomX Israel submitted three additional applications to the IIA, for a total budget of NIS 41.1 million (approximately $11.9 million). The IIA approved one, for a total budget of NIS 15.6 million (approximately $4.4 million). The IIA will fund 30% of this budget. The program is for the period beginning January 2020 through December 2020. As of June 30, 2020, the Company received NIS 1.6 million (approximately $0.5 million) from the IIA with respect to the program.

According to the agreement with the IIA, BiomX Israel will pay royalties of 3% to 3.5% of future sales up to an amount equal to the accumulated grant received, including annual interest of LIBOR linked to the USD. BiomX Israel may be required to pay additional royalties upon the occurrence of certain events as determined by the IIA, that are within the control of the Company. No such events have occurred or were probable of occurrence as of the balance sheet date with respect to these royalties. Repayment of the grant is contingent upon the successful completion of the Company’s R&D programs and generating sales. The Company has no obligation to repay these grants if the R&D program fails, is unsuccessful or aborted or if no sales are generated. The Company had not yet generated sales as of June 30, 2020; therefore, no liability was recorded in these condensed consolidated financial statements. 

As of June 30, 2020, the Company had a contingent obligation to the IIA in the amount of approximately $2.3 million including annual interest of LIBOR linked to the USD.

BIOMX INC.

(formerly known as Chardan Healthcare Acquisition Corp.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

In July 2019, the Company and Yeda amended the 2015 License Agreement and the 2017 License Agreement with Yeda (the “Amendment”). See note 7H regarding the amendment.

BIOMX INC.

(formerly known as Chardan Healthcare Acquisition Corp.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Common Stock:At-the-market Sales Agreement:

The Company is authorizedIn December 2020, pursuant to issue 60,000,000 shares of Common Stock. Holders ofa registration statement on Form S-3 declared effective by the Company’s Common Stock are entitled to one vote for each share. As of June 30,Securities and Exchange Commission on December 11, 2020, the Company had 23,145,964 issued sharesentered into an Open Market Sales Agreement (“ATM Agreement”) with Jefferies LLC. (“Jefferies”), which provides that, upon the terms and 23,140,264 outstanding shares of Common Stock.

Share Exchange:

As detailedsubject to the conditions and limitations in Note 1, as part of the Recapitalization Transaction on October 28, 2019,ATM Agreement, the Company issued 15,069,058may elect, from time to time, to offer and sell shares of Common Stock in exchange for approximately 65%with an aggregate offering price of up to $50,000, with Jefferies acting as sales agent. During the issued and outstanding ordinary shares and all the preferred shares of BiomX Israel. The number of shares prior to the Recapitalization Transaction have been retroactively adjusted based on the equivalent numbers of shares received by the accounting acquirer in the Recapitalization Transaction.

In addition,three months ended March 31, 2021, the Company also agreed to issue the following number of additionalsold 601,674 shares of Common Stock inunder the ATM Agreement, at an average price of $7.20 per share, raising aggregate to Chardan Healthcare Acquisition Corp. shareholders on a pro rata basis, subject to the Company’s achievementnet proceeds of the conditions specified below following the Recapitalization Transaction (all with respect to the Company’s sharesapproximately $4,334, after deducting an aggregate commission of Common Stock traded on NYSE American):

$134.

Preferred Stock:

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors.

BIOMX INC.

(formerly known as Chardan Healthcare Acquisition Corp.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In 2015, the Board of Directors of BiomX Israel approved a plan for the allocation of options to employees, service providers, and officers (the “2015 Plan”). The options represented a right to purchase one ordinary share of BiomX Israel in consideration of the payment of an exercise price. Also, the options were granted in accordance with the “capital gains route” under section 102 and section 3(i) of the Israeli Income Tax Ordinance and section 409A of the Israeli Internal Revenue Code.

The original 2015 Plan was adjusted following the Recapitalization Transaction on October 28, 2019 such that each outstanding option entitles its holder to purchase one share of Common Stock of the Company. As a result, the number of options and exercise price per share were adjusted in a technical manner such that there was no change in the fair value of the awards under the adjusted 2015 Plan. The number of outstanding options and exercise prices in this Note have been restated to reflect the adjusted 2015 Plan. As of June 30, 2020, there are no shares remaining for issuance under the 2015 Plan.

During 2019, the Board approved the grant of 704,669 options without consideration to 22 employees and 79,630 options without consideration to two consultants. 527,716 of the options granted are to the executive officers of the Company. These options were granted under the 2015 Plan.

During 2019, 74,581 options were exercised to purchase shares of Common Stock at an average exercise price of $1.34 per share.

Certain senior employees are entitled to full acceleration of their unvested options upon the occurrence of a cumulative two certain events.

In 2019, the Company adopted a new incentive plan (the “2019 Plan”) to grant 1,000 options, exercisable for Common Stock.

The aggregate number of shares of Common Stock that may be delivered pursuant to the 2019 Plan will automatically increase on January 1 of each year, commencing on January 1, 2020 and ending on (and including) January 1, 2029, in an amount equal to four percent (4%) of the total number of shares of Common Stock outstanding on December 31 of the preceding calendar year.year (“Evergreen Amount”). Notwithstanding the foregoing, the Board of Directors may act prior to January 1 of a given year to provide that there will be no January 1 increase for such year or that the increase for such year will be a lesser number of shares of Common Stock than provided herein.the Evergreen Amount. On January 1, 2020 and January 1, 2021, the number of shares of Common Stock available to grant under the 2019 Plan was increased by 914,741.914,741 and 930,813, respectively, to an aggregate of 1,846,554 shares.

On March 25, 2020,30, 2021, the Board of Directors approved the grant of 814,700985,530 options without consideration to 6594 employees, one consultant, fourincluding five senior officers, (one of whom is a consultant),one consultant, and six directors under the 2019 Plan. These optionsPlan, without consideration. Options were granted at an exercise price of $6.21$7.02 per share with a vesting periods ranging from three toperiod of four years. Directors and senior officers are entitled to full acceleration of their unvested options upon the occurrence of cumulative two certain events.both a change in control of the Company and the end of their engagement with the Company.

On May 5, 2020, the Board of Directors approved the grant of 79,000 options without consideration to four employees, under the 2019 Plan. These options were granted at an exercise price of $5.59 per share with a vesting period of four years.

As of June 30, 2020, there are 28,041 shares available for issuance under the 2019 Plan.

BIOMX INC.

(formerly known as Chardan Healthcare Acquisition Corp.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

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:

The cost of the benefit embodied in the options granted during the sixthree months ended June 30, 2020,March 31, 2021, based on their fair value as at the grant date, is estimated to be $3.9 million.approximately $5,138. These amounts will be recognized in the consolidated statements of operations over the vesting period.

BIOMX INC.

(formerly known as Chardan Healthcare Acquisition Corp.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

Warrants:

As of June 30, 2020, and DecemberMarch 31, 2019,2021, the Company had the following outstanding warrants to purchase Common Stock as follows:Stock:

236,552 warrants were fully vested and exercisable on the date of their issuance. The remainder of the warrants will vest and become exercisable subject to achievement of certain milestones specified in the agreement as follows:

BIOMX INC.

(formerly known as Chardan Healthcare Acquisition Corp.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

The Company may redeem the Public Warrants:

If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Common Stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants.

BIOMX INC.

(formerly known as Chardan Healthcare Acquisition Corp.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On October 31, 2018, BiomX Israel entered into a research collaboration agreement with Janssen Research & Development, LLC (“Janssen”), an affiliate of shareholder Johnson & Johnson Development Corporation, for a collaboration on biomarker discovery for IBD. Under the agreement, BiomX Israel was eligible to receive fees totaling $167 thousand in installments of $50 thousand within 60 days of signing of the agreement, $17 thousand upon completion of data processing, and two installments of $50 thousand each, upon delivery of Signature Phase I of the Final Study Report (both terms defined within the agreement). Unless terminated earlier, this agreement was in effect, until 30 days after the parties complete the research program and BiomX Israel provide Janssen with a final study report. The research period started during March 2019 and ended in September 2019. The final report was provided to Janssen in December 2019.

The basic and diluted net loss per share and weighted average number of shares of Common Stock used in the calculation of basic and diluted net loss per share are as follows (USD in thousands, except share and per share data):follows:  

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

References in this Quarterly Report to “we,” “us,” the “Company”“the Company”, “BiomX”, “we”, “us” or similar words refer to the combined company,“our”, mean BiomX Inc. Whenand its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise. References in this Quarterly Report references “BiomX”to “BiomX Ltd.” mean BiomX Ltd., our wholly owned Israeli subsidiary. As further described in our 2020 Annual Report, on October 28, 2019, Chardan Healthcare Acquisition Corp., a special purpose acquisition company, combined with BiomX Ltd. pursuant to a merger agreement dated as of July 16, 2019 and describes the businessamended as of BiomX, it refers to the business of BiomXOctober 11, 2019, among CHAC Merger Sub Ltd., an Israeli company and wholly-ownedwholly owned subsidiary of the Company, and RondinX Ltd., an Israeli company and wholly-owned subsidiary ofwith BiomX Ltd. The financial statements included in this Quarterly Report showcontinuing as the consolidated balancessurviving entity and transactionsa wholly owned subsidiary of the Company, or the Business Combination, and changed its name to BiomX and may also show comparative financial information of BiomX (the acquirerInc. The Business Combination was treated as a “reverse merger” in a reverse merger for accounting purposes). accordance with GAAP.

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.

Pursuant to a merger agreement dated as of July 16, 2019 and amended as of October 11, 2019, among other things, CHAC Merger Sub Ltd., an Israeli company and wholly owned subsidiary of the Company, merged with and into BiomX, with BiomX continuing as the surviving entity and a wholly-owned subsidiary of the Company (the “Business Combination”). The Business Combination was treated as a “reverse merger” in accordance with GAAP. For accounting purposes, BiomX was considered to have acquired the Company. Therefore, for accounting purposes, the Business Combination was treated as the equivalent of a capital transaction in which BiomX issued stock for the net assets of the Company. The net assets of the Company were stated at historical cost, with no goodwill or other intangible assets recorded. The post-acquisition financial statements of the Company had shown the consolidated balances and transactions of the Company and BiomX as well as comparative financial information of BiomX (the acquirer for accounting purposes).

General

We are a clinical stage microbiome product discovery 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 inflammatory bowel disease, (“IBD”),or IBD, Cystic Fibrosis, or CF, Atopic Dermatitis, or AD, primary sclerosing cholangitis, (“PSC”)or PSC, and colorectal cancer, (“CRC”).or CRC. Bacteriophage or phage are viruses that infect, amplify and kill the 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 itsthe company, raising capital, acquiring rights to or discovering product candidates, developing itsour technology platforms, securing related intellectual property rights, and conducting discovery, research and development activities for itsour product candidates. We do not have any products approved for sale, itsour products are still in the preclinical and clinical development stages, and it haswe have not generated any revenue from product sales. As we move our product candidates from preclinical to clinical stage and continuescontinue 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:

Clinical and Pre-Clinical Developments

On March 24, 2021, we announced that we have completed enrollment of 140 patients under our Phase 2 cosmetic clinical study of BX001, a topical gel comprised of a cocktail of naturally-occurring phage targeting Cutibacterium acnes, or C. acnes, to improve the appearance of acne-prone skin in subjects with acne-prone skin. C. acnes are bacteria implicated in the pathophysiology of acne vulgaris. The study is a 12-week randomized, single center, double-blind, placebo-controlled trial with 140 individuals with mild-to-moderate acne vulgaris. Subjects enrolled are randomized into two cohorts: BX001 or placebo (vehicle) in a 1:1 ratio and will self-administer BX001 or placebo twice daily. The key endpoints will evaluate the safety, tolerability and efficacy of BX001. Results from the 8-week time point are expected to be available in the third quarter of 2021 and the full analysis including the 12-week time point is expected to be available in the fourth quarter of 2021.

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. Based on the Phase 1a study results, we plan to advance to a Phase 1b/2a study evaluating the efficacy of BX003 for the reduction of K. pneumoniae in individuals that carry the target bacteria. Results from the Phase 1b/2a study are expected in the second quarter of 2022.

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 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, BiomX is updating its 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 first quarter of 2022. Part 2 of the Phase 1b/2a trial will evaluate the safety and efficacy of BX004 in 21 CF patients randomized to a treatment or placebo cohort in a 2:1 ratio. Results from Part 2 are expected by the second quarter of 2022.

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 first half of 2022.

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. Preclinical results from animal studies evaluating use of phage therapy in combination with checkpoint inhibitors are expected in the second and third quarters of 2021. 

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 May 20, 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 havehad taken and challenges we continue to face in clinical trial enrollment due to the coronavirus disease 2019 (“COVID-19”) pandemic.

On March 31, 2020 we announced positive topline results from a randomized, double-blind, dose-finding, placebo-controlled single center Phase 1 cosmetic clinical study of BX001, a topical gel comprised of a cocktail of naturally-occurring phage targeting Cutibacterium acnes (“C. acnes”) to improve the appearance of acne-prone skin in subjects with acne-prone skin. C. acnes are bacteria implicated in the pathophysiology of acne vulgaris. The 75 enrolled individuals with mild-to-moderate acne were randomized into one of three cohorts: a high dose cohort, a low dose cohort, and a placebo cohort (vehicle). The study met its primary endpoint of safety and tolerability for both doses of BX001, as well as a statistically significant (p=0.036) reduction of C. acnes levels for the high dose of BX001 compared to placebo.

The Phase 2 cosmetic clinical study of BX001 is planned to be a 12-week randomized, double-blind, placebo-controlled trial in 100 individuals with mild-to-moderate acne. Enrolled individuals will be randomized into one of two cohorts: BX001 or placebo (vehicle). Results from the Phase 2 cosmetic clinical study of BX001 are expected in the second quarter of 2021.

Results from the first-in-human Phase 1a study of BX002 in IBD are expected in the fourth quarter of 2020. The study is designed to provide pharmacokinetic measurements and safety data, including an assessment of delivery of viable phage to the gastrointestinal system as a key exploratory endpoint. Results from the Phase 1b/Phase 2a study of BX002 in IBD aimed at evaluating the efficacy of BX002 in reduction of the target bacteria are expected in the second half of 2021.

As the PSC program for BX003 shares the same bacterial target (Klebsiella pneumoniae) as the IBD program for BX002, we plan to apply the Phase 1 study results of BX002 in IBD to inform the PSC program, with the intention of progressing into Phase 2 development of BX003 in PSC in 2022.

For our CRC program, proof of concept in animal models is expected by the second quarter of 2021.

For more information regarding our product candidates, see Part I, Item 1 “Business—Overview of BiomX” of our 2019 Annual Report.

COVID-19

In December 2019, COVID-19 was reported to have surfaced in Wuhan, China and has since spread rapidly throughout many countries, and, on March 12, 2020, the World Health Organization declared COVID-19 to be a pandemic. In an effort to contain and mitigate the spread of COVID-19, many countries have imposed unprecedented restrictions on travel, and there have been business closures and a substantial reduction in economic activity in countries that have had significant outbreaks of COVID-19.

The Company has implemented recommended measures to safeguard the health and safety of its employees and clinical trial participants, and the continuity of its business operations. As of August 11, 2020, the COVID-19 pandemic has not had a material impact on our results of operation. However, uncertainty remains as to the potential impact of the COVID-19 pandemic on our future research and development activities and we have revised the timing of our clinical milestones accordingly, see “—Clinical Updates.” 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 priorpre-pandemic levels, and we do not yet know the full impact on our business and operations. We will continue to monitor the COVID-19 pandemic closely and follow health and safety guidelines as they evolve.

Consolidated Results of Operations

Comparison of the Three Months Ended June 30,March 31, 2021 and 2020 and 2019

The following table summarizes our consolidated results of operations for the three months ended June 30, 2020March 31, 2021 and 2019:2020:

R&D expenses, net (net of grants received from the Israel Innovation Authority, (“IIA”)or the IIA, and considerationconsiderations from research collaborations) were $4.1$5.8 million for the three months ended June 30, 2020,March 31, 2021, compared to $2.9$3.6 million for the three months ended June 30, 2019.March 31, 2020. The increase of $1.2$2.2 million, or 43%61%, is primarily due to an increase in stock-based compensation and salaries and related expenses, mainly due to the manufacturinggrowth in the number of BX001employees in R&D and BX002, the Company’sclinical activities and expenses related to conducting pre-clinical and clinical trials of our product candidates for acne-prone skin and IBD, respectively, for clinical trial and testing purposes. The Company received $0.5 million and $0.3 million incandidates. We did not receive grants from the IIA during the three months ended June 30, 2020 and June 30, 2019, respectively.March 31, 2021 or March 31, 2020.

General and administrative expenses were $2.3$2.5 million for the three months ended June 30, 2020,March 31, 2021, compared to $1.2$2.1 million for the three months ended June 30, 2019.March 31, 2020. The increase of $1.1$0.4 million, or 91%19%, 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 an increase in expenses associated with operating as a public company, such as directorsdirectors’ and officers insurance, filing and legal and accounting expenses.officers’ insurance.

Financial income, net was $0.2 million for the three months ended June 30, 2020, compared to $0.3 million for the three months ended June 30, 2019.March 31, 2021, compared to financial income, net of $0.07 million for the three months ended March 31, 2020. The increase of $0.2 million, or 328%, is primarily due to the USD/NIS exchange rate differences and the revaluation of contingent considerations, which were partially offset by the decrease in interest rates on bank deposits and money market funds.

Basic and diluted loss per share of Common Stock was $0.27$0.35 for the three months ended June 30, 2020,March 31, 2021, compared to $2.50$0.26 for the three months ended June 30, 2019.March 31, 2020. The decreaseincrease in diluted loss per shares of $2.23,$0.09, or 89%35%, is primarily due to the significant increase in the number of our shares of Common Stock as compared to the number of ordinary shares of BiomX Ltd. before the Recapitalization TransactionR&D expense which does not take into account BiomX Ltd. preferred shares.resulted in a higher net loss.

Comparison of the Six Months Ended June 30, 2020Liquidity and 2019Capital Resources

The following table summarizesWe believe our consolidatedcash and cash equivalents on hand will be sufficient to meet our working capital and capital expenditure requirements until at least 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 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 for the six months ended June 30, 2020 and 2019: