Scinai Immunotherapeutics Ltd. - Quarter Report: 2023 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 001-37353

BIONDVAX PHARMACEUTICALS LTD.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (+972) 8-930-2529

Securities registered pursuant to Section 12(b) of the Act: None

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.

Yes ☒ No ☐

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).

Yes ☒ No ☐

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 filer. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 May 10, 2023, there were 1,313,623,184 ordinary shares issued and outstanding.

General and Where You Can Find Other Information

Unless otherwise indicated, all references to the “Company,” “we,” “our,” “BiondVax” and “BiondVax Pharmaceuticals” refer to BiondVax Pharmaceuticals Ltd., a company limited by shares organized under the laws of Israel. References to “revenues” refer to net revenues. References to “U.S. dollars,” “dollars,” “U.S. $” and “$” are to the lawful currency of the United States of America, and references to “NIS” are to new Israeli shekels.

BIONDVAX PHARMACEUTICALS LTD.

BIONDVAX PHARMACEUTICALS LTD.

FORM 10-Q

INDEX

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

BIONDVAX PHARMACEUTICALS LTD.

CONDENSED BALANCE SHEETS (Unaudited)

U.S. dollars in thousands (except share and per share data)

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

BIONDVAX PHARMACEUTICALS LTD.

CONDENSED BALANCE SHEETS (Unaudited)

U.S. dollars in thousands (except share and per share data)

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

BIONDVAX PHARMACEUTICALS LTD.

CONDENSED STATEMENTS OF OPERATIONS (Unaudited)

U.S. dollars in thousands (except share and per share data)

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

BIONDVAX PHARMACEUTICALS LTD.

CONDENSED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

U.S. dollars in thousands (except share and per share data)

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

BIONDVAX PHARMACEUTICALS LTD.

CONDENSED STATEMENTS OF CHANGES I N SHAREHOLDERS’ EQUITY (Unaudited)

U.S. dollars in thousands (except share and per share data)

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

BIONDVAX PHARMACEUTICALS LTD.

CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

U.S. dollars in thousands (except share and per share data)

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

BIONDVAX PHARMACEUTICALS LTD.

CONDENSED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands (except share and per share data)

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

BIONDVAX PHARMACEUTICALS LTD.

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

NOTE 1:- GENERAL

BIONDVAX PHARMACEUTICALS LTD.

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

NOTE 1:- GENERAL (Cont.)

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated by the U.S Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K as of December 31, 2022 filed with the SEC on April 17, 2023. The interim period results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company’s management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities at the dates of the financial statements, and the reported amount of expenses during the reporting periods. Actual results could differ from those estimates.

Cash equivalents are short-term highly liquid deposits that are readily convertible to cash with original maturities of three months or less, at the date acquired.

Restricted cash are deposits with original maturities of three months or less and are used as security for the Company’s credit cards and rent. Restricted cash amounted to $127 and $140 as of March 31, 2023 and December 31, 2022 respectively.

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance. The assessment considers whether the warrants are freestanding financial instruments, meet the definition of a liability under ASC 480, and meet all of the requirements for equity classification, including whether the warrants are indexed to the Company’s own common stock. Warrants that determined to be classified as equity, are recorded as a component of additional paid-in capital. Warrants that determined to be classified as liabilities are recorded at their initial fair value on the date of issuance and remeasured to fair value at each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized in financial expenses, net in the statements of operations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 requires enhanced qualitative and quantitative disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The adoption of this ASU did not have a significant impact on the Company’s financial statements and disclosures.

BIONDVAX PHARMACEUTICALS LTD.

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

NOTE 2:- FAIR VALUE MEASUREMENTS

In accordance with ASC No. 820, the Company measures warrants liability at fair value classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments.

The following table presents assets measured at fair value on a recurring basis as of March 31, 2023:

The carrying amounts of cash and cash equivalents, restricted cash, prepaid expenses and other receivables, trade payables and other current payables approximate their fair value due to the short-term maturity of such instruments.

NOTE 3:- LOAN FROM OTHERS

During 2018, the Company received approximately $23,599 (€ 20,000) in two tranches of approximately $7,080 (€ 6,000) and the third tranche of approximately $9,439 (€ 8,000).
On October 7, 2019, the Company received the remaining approximately $4,390 (€ 4,000).

In the event the Company elects to prepay the EIB financing, or in the event the EIB shall demand prepayment following certain events, including a change of control, senior management changes or merger events, the Company shall be required to pay EIB the principal amount of the tranches already paid, or the Prepayment Amount, plus the greater of:

The Finance Contract also stipulates that in the event the EIB demands prepayment of the loan due to any prepayment event to non-EIB lenders, the Company shall be obligated to pay the Prepayment Amount plus an additional reduced amount. In addition, and as consideration for the EIB financing, the EIB shall be entitled to 3% of any annual M-001 sales revenues.

According to the Amendment, as repayment features, EIB is entitled to receive the higher between 3% of any M-001 sales revenues for a period of twelve years or realizing a cash-on-cash multiple of 2.8 times

BIONDVAX PHARMACEUTICALS LTD.

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

NOTE 3:- LOAN FROM OTHERS (Cont.)

As a result of the Phase 3 clinical trial failure, Company’s management estimates that there will be no future revenues from the M-001 product. Therefore, most likely, there will be no future royalty payments to EIB.

Under the Finance Contract, the EIB may accelerate all loans extended thereunder if an event of default has occurred, which includes, amongst other things, an event of default arising from the occurrence of a material adverse change, defined as any event or change of condition, which in the opinion of the EIB, has a material adverse effect on: our ability to perform our obligations under the Finance Documents; our business, operations, property, condition (financial or otherwise) or prospects; or the rights or remedies of the EIB under the Finance Contract, amongst other things. If the EIB determines that an event of default has occurred, it could accelerate the amounts outstanding under the Finance Contract, making those amounts immediately due and payable.

In accordance with the EIB loan agreement, and due to the above, the Company was required to pay EIB the principal amount of the tranches already loaned by the EIB to the Company, within five years of the date of each tranche of the loan. On December 31, 2020, the Company re-evaluated the loan in the sum of $ 29,443. As a result, the Company recorded an amount of $ 6,162 as revaluation income of the EIB loan.

On January 26, 2021, the EIB notified the Company that they welcome the Company’s efforts to secure future equity financing in an amount not less than $ 2,000 in order to enable the Company to pursue new business opportunities, strengthen the Company balance sheet and invest in growth. Thus, within that context, the EIB wrote in their letter that they will not consider the failure of the Company’s pivotal phase 3 trial for M-001 to meet the primary and secondary efficacy endpoints as a trigger for prepayment of a loan extended under the Finance Contract. However, EIB cautioned the Company that their letter is not a consent, agreement, amendment or waiver in respect of the terms of the Finance Contract, reserving any other right or remedy the EIB may have now or subsequently.

BIONDVAX PHARMACEUTICALS LTD.

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

NOTE 3:- LOAN FROM OTHERS (Cont.)

The Company recorded the cash received in each tranche and a corresponding liability to repay the cash. The Company evaluates the estimated cash flows from the EIB loan at each reporting period. When the estimated cash flows change from the estimates used as of the date on which the EIB loan was issued, the EIB loan’s carrying amount is adjusted to an amount equal to the present value of the estimated remaining future payments, discounted by using the original effective interest rate. The adjustment to the carrying amount is recognized in earnings as an adjustment to interest expenses, in the period in which the change in estimate occurred.

On December 31, 2022 as a result of the loan restructure, the Company recorded an amount of $ 7,168 under finance income. Interest expense related to the EIB loan were to $87

On February 16, 2023, $725 was paid to the EIB as part of the loan restructure agreement.

For the three month ended at March 31, 2023 the company recorded $1,769 under finance expenses due to the loan revaluation.

As of March 31, 2022, the outstanding principal amount related to the EIB loan in nominal terms is $ 26,105.

NOTE 4:- CONTINGENT LIABILITIES AND COMMITMENTS

Since 2006, the Company received approximately $5,830 in grants from the Israeli Innovation Authority (IIA), formerly known as the Office of the Chief Scientist. The grants were for research and development of M-001.

In return to those grants, the Company undertook to pay royalties amounting to 3%-5% on the revenues derived from sales of products or services developed in whole or in part using these grants. The maximum aggregate royalties paid generally cannot exceed 100% of the grants received by the Company, plus annual interest generally equal to the 12-month LIBOR applicable to dollar deposits, as published on the first business day of each calendar year. The maximum royalty amounts payable by the Company as of March 31, 2023 is approximately $ 5,830 which represents the total gross amount of grants actually received by the Company from the IIA including accrued interest. As of March 31, 2023, the Company had not paid any royalties to the IIA.

In light of the Phase 3 clinical trial results (see also Note 3.c above), the Company does not currently expect any future revenues from M-001 and therefore do not currently expect to make any royalty payments to the IIA and the Company does not record a liability for amounts received from IIA until the related revenues are recognized. In the event of failure of a project that was partly financed by the IIA, the Company will not be obligated to pay any royalties or repay the amounts received.

The Company also subject to various other restrictions pursuant to the grant, including limitations on transferring IP developed with grant funds. In light of the Company’s new strategy, it does not expect these restrictions to be material to its ongoing operations.

BIONDVAX PHARMACEUTICALS LTD.

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

NOTE 5:- SHAREHOLDERS’ EQUITY

An Ordinary share confers upon its holder(s) a right to vote at the general meeting, a right to participate in distribution of dividends, and a right to participate in the distribution of surplus assets upon liquidation of the Company.

In accordance with the agreement the company issued 150,000 restricted ADS share at no cost to Max planck as an upfront payment for the license, the shares are blocked for a period of three years. The company evaluate the fair value of the license at $153. The fair value was calculated by an independent valuation, at a discount rate of 31% under the following principles:

BIONDVAX PHARMACEUTICALS LTD.

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

NOTE 5:- SHAREHOLDERS’ EQUITY (Cont.)

NOTE 6:- SHARE-BASED COMPENSATION

Options granted under the Company’s 2005 Israeli Share Option Plan (“Plan”) were exercisable in accordance with the terms of the Plan, within 10 years from the date of grant, against payment of an exercise price. The options generally vest over a period of three or four years.

In March 2018, the Company’s Board of Directors approved the adoption of the Company’s 2018 Israeli Share Option Plan (“2018 Plan”) for the grant of options and restricted shares (“RSU”) to employees, directors and service providers. The options are exercisable within 10 years from the date of grant, against payment of the exercise price, in accordance with the terms of the 2018 Plan. The options generally vest over a period of three or four years.

There were no grants during the three-month ended March 31, 2023.

BIONDVAX PHARMACEUTICALS LTD.

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

NOTE 6:- SHARE-BASED COMPENSATION (Cont.)

During the three-month ended March 31, 2023, the company granted 125,607 RSU’s ADS to employees and officers, the RSU’s shall be vested in three years and the fair value of the said grant was $278.

As of March 31, 2023, there are $514 of total unrecognized costs related to share-based compensation that is expected to be recognized over a period of up to four years.

The fair value of the granted RSUs was determent according to the market stock price at the day of grant.

NOTE 7:- BASIC AND DILUTED NET LOSS PER SHARE 

The following table sets forth the computation of basic and diluted net loss per share:

All outstanding employees options, employees restricted shares and warrants for the three months ended March 31, 2023 and 2022 have been excluded from the calculation of the diluted net loss per share, because all such securities are anti-dilutive for all periods presented. The total number of potential shares excluded from the calculation of diluted net loss per share are as follows:

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto for the year ended December 31, 2022, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed on April 17, 2023 (the “Annual Report”) with the U.S. Securities and Exchange Commission (the “SEC”). This Quarterly Report on Form 10-Q contains forward looking statements, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; (ii) our plans and results of operations will be affected by our ability to manage growth; and (iii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission.

In some cases, you can identify forward-looking statements by terminology such as ‘may,’ ‘will,’ ’should,’ ‘could,’ ‘expects,’ ‘plans,’ ‘intends,’ ‘anticipates,’ ‘believes,’ ‘estimates,’ ‘predicts,’ ‘potential,’ or ‘continue’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We are under no duty to update any of the forward-looking statements after the date of this report.

Our Company

BiondVax Pharmaceuticals Ltd. (Nasdaq: BVXV) is a biopharmaceutical company focused on developing, manufacturing and commercializing innovative immunotherapeutic products primarily for the treatment of infectious and autoimmune diseases. Since its inception, the Company has executed eight clinical trials including a seven country, 12,400 participant phase 3 trial of its prior lead drug candidate, a universal influenza vaccine candidate (“M-001”), and has built a GMP biologics manufacturing facility for biopharmaceutical products. While M-001 did not meet its clinical endpoints and is no longer under development, the Company has developed a highly experienced pharmaceutical industry leadership team and built its own fully equipped biotechnology drug manufacturing site. After receiving the phase 3 trial results in Q3 2020, the Company performed a turnaround process, raised capital, hired new talent (including a new CEO) and in-licensed new intellectual property, and is in the process of developing a pipeline of diversified and commercially viable products built around an innovative nanosized antibody (NanoAb) platform collaboration. NanoAbs are nanosized antibodies derived from camelid animals and are also known as VHH-antibodies or Nanobodies. “Nanobody” is a trademark registered by ABLYNX N.V., a wholly owned subsidiary of Sanofi. BiondVax has no affiliation with and is not endorsed by Sanofi.

As part of the abovementioned turnaround, on December 22, 2021, the Company signed a definitive exclusive, worldwide, License Agreement (“LA”) with the Max Planck Society (“MPG”), the parent organization of the Max Planck Institute for Multidisciplinary Sciences, and the University Medical Center Göttingen (“UMG”), both in Gottingen, Germany, for the development and commercialization of innovative NanoAbs for the treatment of COVID-19. The agreement provides for an upfront payment, development and sales milestones and royalties based on sales and sharing of sublicense revenues. In addition, the Company signed an accompanying Research Collaboration Agreement (“aRCA”) with MPG and UMG in support of the abovementioned development of a COVID-19 NanoAb. The aRCA provides for monthly payments to MPG and UMG and has a term until the earlier of two years or the date the Company enters into first in-human clinical trials with the COVID-19 NanoAb.

On March 23, 2022, we signed a five-year Research Collaboration Agreement (“RCA” collectively, with the LA and aRCA, the “MPG/UMG Agreements”) with MPG and UMG covering the discovery, selection and characterization of NanoAbs for up to nine molecular targets that have the potential to be further developed into drug candidates for the treatment of disease indications such as psoriasis, psoriatic arthritis, asthma and wet macular degeneration. These are all large and growing markets with underserved medical needs. In each case, the molecular target has been validated as an appropriate target for therapeutic intervention through inhibition by an antibody, thereby significantly reducing the discovery work that typically entails many years of research, high cost and high risk of failure. We believe that we can leverage our NanoAbs’ unique and strong binding affinity, stability at high temperatures, and potential for more effective and convenient routes of administration towards competitive commercial viability. We believe that since these are clinical validated targets, we can develop NanoAb treatments with reduced risk and cost, and accelerate the time from NanoAb selection to initiation of clinical development. Each NanoAb candidate is therefore positioned as a “biobetter” piggybacking on prior discoveries of others to mitigate risk but with significant potential advantages over existing therapeutics. In addition, each NanoAb constitutes a novel molecule for which we file patent applications thereby creating a proprietary position. BiondVax has the exclusive option for an exclusive, pre-negotiated worldwide license agreement for the development and commercialization of each of the NanoAbs covered by the RCA with MPG and UMG.

Our Strategy

Beginning with the MPG/UMG Agreements, the Company intends to implement a strategy that will build a diversified pipeline of assets along several axes, as follows:

If successfully implemented, this strategy would provide BiondVax with a diverse multi-dimensional pipeline that we believe has been substantially de-risked without necessarily limiting the upside potential. We would also expect to have considerable flexibility regarding partnering with other companies in the pharmaceutical industry, out-licensing, joint ventures and the like. The Company is currently actively engaged in identifying and evaluating many of these opportunities. Notwithstanding the Company’s efforts to mitigate the risk associated with the development of our NanoAbs, there remains significant risk of failure, as described below under “Risks Related to Our Business”, associated with product development, manufacturing, regulatory matters, capital availability, commercialization, and other factors relevant to small companies, such as the Company, engaged in early stage pharmaceutical development activities. 

Our Competitive Strengths

We believe that our people, process and technology give us distinct advantages over our competitors, as follows:

Marketing and Sales

We do not currently have any pharmaceutical product marketing or sales capabilities. We intend to license to, or enter into strategic alliances, with third parties in the pharmaceutical business, which are equipped to market and/or sell any products that we acquire or develop in the future. We may seek to establish such capabilities internally in the future, if and when appropriate, in addition to any such licensing arrangements or strategic alliances.

Competition

Generally, our competitors include large, fully integrated pharmaceutical companies as well as companies and academic research institutes in various developmental stages attempting to develop (i) COVID-19 antibody therapeutics (such as Invivyd (formerly Adagio Therapeutics), Vir Biotechnology, and ExeVir) as well as (ii) other products for the prevention and treatment of disease targets that are the subject of our broader agreement with MPG and UMG, including MoonLake Immunotherapeutics AG for the development of antibodies against psoriasis

Manufacturing

We built, own, and operate a biologics manufacturing facility in Jerusalem, which is capable of manufacturing GMP-compliant product candidates for use in either clinical trials or for small to medium scale commercial supply. We have manufactured the COVID-19 NanoAbs for our preclinical in vivo study in our facility, and although we currently anticipate using our facility for future manufacturing of product candidates, we may also rely on a third party CMO.

Finance Contract with European Investment Bank

We borrowed 24 million Euro under a finance contract (the “Finance Contract”) with the European Investment Bank (the “EIB”), to finance a portion of the cost of developing our previous leading drug candidate M-001 and our GMP biologics manufacturing facility. As part of the Finance Contract, we also entered into a security agreement (the “Security Agreement”), whereby we created a first ranking floating charge in favor of EIB over substantially all of our assets (other than certain licensed intellectual property related to our former M-001 program).

On August 10, 2022, we announced the successful conclusion of negotiations and formal approval by the EIB of new terms of its outstanding €24 million loan (the “Loan”) to BiondVax, including:

RESULTS OF OPERATIONS

Three months ended March 31, 2023, as compared to March 31, 2022

To date, we have funded our operations primarily through (i) the sale of equity securities in both public and private offerings, (ii) a rights offering, (iii) exercises of warrants issued in connection with our initial public offering in the U.S., (iv) funding received from the IIA, and (iv) proceeds from the Finance Contract with the EIB. In February 2021, December 2021, and December 2022 we raised gross proceeds of approximately $13.8 million, $9.8 million, and $8 million respectively, in underwritten offerings of the ADSs (and, in December 2022, two warrants to purchase ADSs for each ADS offered). As of March 31, 2023, we had $10.9 million of cash and cash equivalents and short-term deposits.

We expect that we will incur additional losses soon as a result of our research and development activities. Such research and development activities will require us to obtain and expend further resources if we are to be successful. As a result, we expect to continue to incur operating losses, and we may be required to obtain additional funds to further develop our research and development programs. As a result of our research and development activities and our failure to generate revenues since our inception, among other things, our net loss for the three months ended March 31, 2023, was $3.5 million.

Operating Expenses

Research and development expenses. Our research and development expenses for the three months ended March 31, 2023, amounted to $2 million, compared to $1.2 million for the three months ended March 31, 2022. The increase of $0.8 million was primarily due to the launch of our NanoAb development. Our research and development expenses consist primarily of salaries and related personnel expenses, fees paid to consultants, patent-related legal fees, costs of preclinical studies, drug and laboratory supplies, and costs for facilities and equipment. We charge all research and development expenses to operations as they are incurred. We expect our research and development expenses to remain our primary expense in the near future. Increases or decreases in research and development expenditures are attributable to the number and/or duration of the clinical studies that we conduct.

We expect that a large percentage of our research and development expenses in the future will be incurred in support of our future clinical development projects. Due to the inherently unpredictable nature of clinical development processes, we are unable to estimate with any certainty the costs we will incur. Clinical development timelines, the probability of success and development costs can differ materially from expectations.

Our future research and development expenses will depend on any Company product candidate’s commercial potential. As we obtain results from clinical studies, we may elect to discontinue or delay clinical studies for any Company product candidate in certain indications in order to focus our resources on more promising product candidates. Completion of clinical studies may take several years or more, but the length of time generally varies according to the type, complexity, novelty and intended use of a product candidate.

The lengthy process of completing clinical studies and seeking regulatory approval for any Company product candidate requires the expenditure of substantial resources. Any failure or delay in completing clinical studies, or in obtaining regulatory approvals, could cause a delay in generating product revenue and cause our research and development expenses to increase and, in turn, have a material adverse effect on our operations. Because of the risk factors set forth below in Item 1A, we are not able to estimate with any certainty when we would recognize any net cash inflows from our projects.

Developing bio-pharmaceutical vaccines and medicines, conducting clinical trials, obtaining commercial manufacturing capabilities and commercializing products is expensive and we will need to raise substantial additional funds to achieve our strategic objectives. Although we believe that our existing cash resources (inclusive of gross proceeds of approximately $8 million received by the Company from a public follow-on offering completed in December 2022) will be sufficient to fund our projected cash requirements at current monthly rates for at least the next 12 months, we will require significant additional financing in the future to fund our operations, including if and when we conduct clinical trials, obtain regulatory approval and obtain commercial manufacturing capabilities for any Company product candidate and commercialize such product candidates. Our future capital requirements will depend on many factors, including:

Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through the net proceeds received from future private or public equity raising, grants from governmental agencies such as the IIA, debt or equity or other non-dilutive financings such as the loan from EIB, among other financing mechanisms. We cannot be certain that additional funding will be available to us on acceptable terms, if at all. If funds are not available, we may be required to delay, reduce the scope of or eliminate research or development plans for, or commercialization efforts with respect to any Company product candidate.

Since 2006, we received $5.8 million in IIA grants and Euro 24 million ($25.6 million) in EIB loans.

Marketing, General and Administrative Expenses:

Our general and administrative expenses for the three months ended March 31, 2023 amounted to $1.2 million, compared to $1.4 million for the three months ended March 31, 2022. The decrease was mostly due to share based payment expenses of $0.24 million, professional services expenses of $0.1 million offset with an increase in salary expenses of $0.17 million and marketing expenses of $0.19 million. Our general and administrative expenses consist primarily of salaries and expenses related to employee benefits, including share-based compensation, for our general and administrative employees, which includes employees in executive and operational roles, including finance and human resources, as well as consulting, legal and professional services related to our general and administrative operations.

Net Loss

As a result of the foregoing research and development, marketing general and administrative expenses, and as we have not yet generated revenues since our inception, our net loss for the three months ended March 31, 2023 was $3.5 million, compared to our net loss for the three months ended March 31, 2022 of $2.47 million.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception, we have funded our operations primarily through public and private offerings of our equity securities in Israel and the U.S., grants from the OCS (today known as the IIA), grants received by the Israeli Ministry of Economy and European grants under the UNISEC consortium and the loan from the EIB. Information regarding the outstanding loan from the EIB is set forth above in “Finance Contract with European Investment Bank.”

As of March 31, 2023, we had cash and cash equivalents and short-term deposits of $10.9 million as compared to 15.5 million as of March 31, 2022. Our cash and cash equivalents are denominated in US dollars.

Net cash used in operating activities was $3.1 million for the quarter ended March 31, 2023, compared with net cash used in operating activities of $1.1 million for the quarter ended March 31, 2022.

Net cash used by investing activities for the quarter ended March 31, 2023 was $0.006 million compared with net cash used by investing activities of $0.5 million for the quarter ended March 31, 2022, and primarily reflects the purchase of fixed assets.

We had no cash provided by financing activities for the quarters ended March 31, 2023 and 2022.

At March 31, 2023, our accumulated deficit amounted to $119.3 million. We had working capital of $ 8.4 million as of March 31, 2023. In the future, we may raise additional capital from external sources in order to continue the longer-term efforts contemplated under our business plan. We expect to continue incurring losses for the foreseeable future and may need to raise additional capital to pursue our product development initiatives, to penetrate markets for the sale of our Company product candidates and continue operations as presently maintained. We cannot provide any assurance that we will raise additional capital. Our management believes that we have access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means; however, we have not secured any commitment for new financing at this time nor can we provide any assurance that new financing will be available on commercially acceptable terms, if at all. If the economic climate in the U.S. deteriorates, our ability to raise additional capital could be negatively impacted. If we are unable to secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve cash in amounts sufficient to sustain operations and meet our obligations. These measures could cause significant delays in our efforts to commercialize our products, which is critical to the realization of our business plan and our future operations.

On February 2, 2021, the Company closed an underwritten offering in which it sold 2,434,783 ADSs at a public offering price of $4.95 per ADS. On February 10, 2021, Aegis Capital Corp., the sole bookrunning manager for the underwritten offering, fully exercised its over-allotment option to purchase an additional 365,217 ADSs, bringing total gross proceeds to the Company from the offering including exercise of the over-allotment option of approximately $13.8 million. The Company received a net sum of $12.836 million and a net sum of $12.465 million after deduction of issuance expenses.

On December 29, 2021, the Company closed an underwritten offering in which it sold 4,144,068 ADSs at a public offering price of $2.36 per ADS for total proceeds of approximately $9.780 million, including ADSs acquired upon the full exercise by Aegis Capital Corp., the sole bookrunning manager for the underwritten offering, of its over-allotment option to purchase additional ADSs. The Company received a net sum of $9.020 million and a net sum of $8.817 million after deduction of issuance expenses.

On December 20, 2022, the Company closed an underwritten offering in which it sold 1,600,000 units and pre-funded units. Each unit consisted of one ADS and two warrants, each to purchase one ADS, and each pre-funded unit consisted of one pre-funded warrant to purchase one ADS and two warrants each to purchase one ADS. Each ADS (or pre-funded warrant) was sold together with two warrants at a combined purchase price of $5.00 per unit (or $4.999 per pre-funded unit after reducing $0.001 attributable to the exercise price of the pre-funded warrants). One of the warrants will expire three years from the date of issuance, and the other warrant will expire one year from the date of issuance and may be exercised for half an ADS on or prior to six (6) months following the original issuance for no additional consideration. The Company received a net sum of $7.3 million and a net sum of $7.2 million after deduction of issuance expenses.

Critical Accounting Policies

The preparation of financial statements and the related notes thereto included elsewhere in this annual report in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company’s management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities at the dates of the financial statements, and the reported amount of expenses during the reporting periods. Actual results could differ from those estimates.

We believe that the following accounting policies involve a substantial degree of judgment and complexity, and accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations. See also note 2 to our financial statements included elsewhere in this annual report.

Impairment of long-lived assets

The Company’s long-lived assets are reviewed for impairment in accordance with ASC No. 360 “Property, Plant and Equipment,” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If indicators of impairment exist and the undiscounted future cash flows that the assets are expected to generate are less than the carrying value of the assets, the Company reduces the carrying amount of the assets through an impairment charge, to their estimated fair values. During the three months ended March 31, 2023 and 2022, no impairment indicators have been identified.

Fair value of financial instruments

The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company this item is not required.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 filings are 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 Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management was necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated 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) as of March 31, 2023 (the “Evaluation Date”). Based on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting.

There have been no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business. The Company is not presently a party to any legal proceedings that, if determined adversely to it, would individually or taken together have a material adverse effect on its business, operating results, financial condition, or cash flows. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors.

Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our most recent Annual Report on Form 10-K for the year ended December 31, 2022, the occurrence of any one of which could have a material adverse effect on our actual results.

There have been no material changes to the Risk Factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered sales of the Company’s equity securities during the period ended March 31, 2023 that were not previously reported in a Current Report on Form 8-K.

Item 3. Defaults Upon Senior Securities.

There were no defaults upon senior securities during the period ended March 31, 2023.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information.

There is no other information required to be disclosed under this item that was not previously disclosed.

Item 6. Exhibits.

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.

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