0001213900-22-048046 | 10-Q | XBRL Viewer | Ayala Pharmaceuticals INC

Document And Entity Information - shares	6 Months Ended
Document And Entity Information - shares	Jun. 30, 2022	Aug. 12, 2022
Document Information Line Items
Entity Registrant Name	AYALA PHARMACEUTICALS, INC.
Trading Symbol	AYLA
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		14,767,618
Amendment Flag	false
Entity Central Index Key	0001797336
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Jun. 30, 2022
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Shell Company	false
Entity Ex Transition Period	false
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-39279
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	82-3578375
Entity Address, Address Line One	Oppenheimer 4
Entity Address, City or Town	Rehovot
Entity Address, Country	IL
Entity Address, Postal Zip Code	7670104
City Area Code	(857)
Local Phone Number	444-0553
Title of 12(b) Security	Common Stock, $0.01 par value per share
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
CURRENT ASSETS:
Cash and Cash Equivalents	$ 20,059	$ 36,982
Short-term Restricted Bank Deposits	111	122
Trade Receivables	262
Prepaid Expenses and other Current Assets	2,322	2,636
Total Current Assets	22,754	39,740
LONG-TERM ASSETS:
Other Assets	231	267
Property and Equipment, Net	1,039	1,120
Total Long-Term Assets	1,270	1,387
Total Assets	24,024	41,127
CURRENT LIABILITIES:
Trade Payables	3,254	3,214
Other Accounts Payables	2,993	3,258
Total Current Liabilities	6,247	6,472
LONG TERM LIABILITIES:
Long-term Rent Liability	414	497
Total Long-Term Liabilities	414	497
STOCKHOLDERS’ STOCKHOLDERS’ EQUITY:
Common Stock of $0.01 par value per share; 200,000,000 shares authorized at December 31, 2021 and June 30, 2022; 14,503,743 and 14,080,383 shares issued at June 30, 2022 and December 31, 2021, respectively; 13,984,622 and 13,956,035 shares outstanding at June 30, 2022 and December 31, 2021, respectively	139	139
Additional Paid-in Capital	146,602	145,160
Accumulated Deficit	(129,378)	(111,141)
Total Stockholders’ Equity	17,363	34,158
Total Liabilities and Stockholders’ Equity	$ 24,024	$ 41,127

Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares	Jun. 30, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Common stock, par value (in Dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	14,503,743	14,080,383
Common stock, shares outstanding	13,984,622	13,956,035

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Income Statement [Abstract]
Revenues from licensing agreement and others	$ 38	$ 761	$ 496	$ 1,735
Cost of services	(38)	(761)	(406)	(1,735)
Gross profit			90
Operating expenses:
Research and development	5,580	8,121	13,083	15,046
General and administrative	2,260	2,536	4,701	4,839
Operating loss	(7,840)	(10,657)	(17,694)	(19,885)
Financial Income (Loss), net	(156)	(22)	(140)	(114)
Loss before income tax	(7,996)	(10,679)	(17,834)	(19,999)
Taxes on income	(214)	(162)	(403)	(410)
Net loss	$ (8,210)	$ (10,841)	$ (18,237)	$ (20,409)
Net Loss per share attributable to common stockholders, basic and diluted (in Dollars per share)	$ (0.54)	$ (0.75)	$ (1.19)	$ (1.46)
Weighted average common shares outstanding, basic and diluted (in Shares)	15,312,766	14,417,423	15,306,823	13,954,676

Condensed Consolidated Statements of Operations (Unaudited) (Parentheticals) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Income Statement [Abstract]
Net Loss per share attributable to common stockholders, basic and diluted	$ (0.54)	$ (0.75)	$ (1.19)	$ (1.46)
Weighted average common shares outstanding, basic and diluted	15,312,766	14,417,423	15,306,823	13,954,676

- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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+ Details

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Total
Balance at Dec. 31, 2020	$ 128	$ 109,157	$ (70,887)	$ 38,398
Balance (in Shares) at Dec. 31, 2020	12,728,446
Share based compensation		1,419		1,419
Share based compensation (in Shares)	25,146
Exercise of stock options		30		30
Exercise of stock options (in Shares)	6,000
Proceeds from Issuance of common stocks and warrants	$ 3	23,319		23,322
Proceeds from Issuance of common stocks and warrants (in Shares)	333,333
Net Loss			(20,409)	(20,409)
Balance at Jun. 30, 2021	$ 131	133,925	(91,296)	42,760
Balance (in Shares) at Jun. 30, 2021	13,092,925
Balance at Mar. 31, 2021	$ 131	133,358	(80,455)	53,034
Balance (in Shares) at Mar. 31, 2021	13,072,213
Share based compensation		567		567
Share based compensation (in Shares)	20,712
Net Loss			(10,841)	(10,841)
Balance at Jun. 30, 2021	$ 131	133,925	(91,296)	42,760
Balance (in Shares) at Jun. 30, 2021	13,092,925
Balance at Dec. 31, 2021	$ 139	145,160	(111,141)	34,158
Balance (in Shares) at Dec. 31, 2021	13,956,035
Share based compensation		1,398		1,398
Share based compensation (in Shares)	23,687
Proceeds from Issuance of common stocks and warrants		44		44
Proceeds from Issuance of common stocks and warrants (in Shares)	4,900
Net Loss			(18,237)	(18,237)
Balance at Jun. 30, 2022	$ 139	146,602	(129,378)	17,363
Balance (in Shares) at Jun. 30, 2022	13,984,622
Balance at Mar. 31, 2022	$ 139	145,847	(121,168)	24,818
Balance (in Shares) at Mar. 31, 2022	13,972,778
Share based compensation		755		755
Share based compensation (in Shares)	11,844
Net Loss			(8,210)	(8,210)
Balance at Jun. 30, 2022	$ 139	$ 146,602	$ (129,378)	$ 17,363
Balance (in Shares) at Jun. 30, 2022	13,984,622

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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- Definition

Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.

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+ Details

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) (Parentheticals) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Statement of Stockholders' Equity [Abstract]
Net of Issuance Cost	$ 3	$ 1,665

Condensed Consolidated Statement of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$ (18,237)	$ (20,409)
Adjustments to Reconcile Net Loss to Net Cash used in Operating Activities:
Shared Based Compensation	1,398	1,419
Depreciation	81	94
(Increase) decrease in Prepaid Expenses and Other Assets	321	(106)
Increase in Trade Receivables	(262)	(248)
Increase (decrease) in Trade Payables	40	(1,124)
Decrease in other Accounts Payable	(348)	(823)
Net Cash used in Operating Activities	(17,007)	(21,197)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment		(3)
Net Cash provided by (used in) Investing Activities		(3)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Shares, net	44
Issuance of shares and warrants, Net		23,553
Exercise of Stock Options		30
Net Cash provided by Financing Activities	44	23,583
Increase (Decrease) in Cash and Cash Equivalents and Restricted Bank Deposits	(16,963)	2,383
Cash and Cash Equivalents and Restricted Bank Deposits at Beginning of the period	37,339	42,370
Cash and Cash Equivalents and Restricted Bank Deposits at End of the period	20,376	44,753
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
Non-cash deferred issuance costs		231
Amortization of deferred rent liability		51
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Received for Interest	16	7
Tax Paid in Cash	182	80
Reconciliation of cash, cash equivalents and restricted bank deposits
Cash and Cash Equivalents	20,059	44,412
Restricted Bank Deposits	111	119
Restricted Bank Deposits in Other Assets	206	222
Cash and Cash Equivalents and Restricted Bank Deposits at End of the Period	$ 20,376	$ 44,753

Significant Accounting Policies

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

NOTE 1—SIGNIFICANT ACCOUNTING POLICIES

General

Ayala Pharmaceuticals, Inc. (the “Company”) was incorporated in November 2017. The Company is a clinical stage oncology company dedicated to developing and commercializing small molecule therapeutics for patients suffering from rare and aggressive cancers, primarily in genetically defined patient populations. The Company’s current portfolio of product candidates, AL101 and AL102, target the aberrant activation of the Notch pathway with gamma secretase inhibitors.

In 2017, the Company entered into an exclusive worldwide license agreement with respect to AL101 and AL102. See note 4.

The Company’s lead product candidates, AL101 and AL102, have completed preclinical and Phase 1 studies. AL102 is currently being evaluated in a pivotal Phase 2/3 trial (RINGSIDE) in patients with Desmoids tumors and was evaluated in a Phase 1 clinical trial in combination with Novartis’ BMCA targeting agent, WVT078, in Patients with relapsed/refractory Multiple Myeloma. AL101 is currently being evaluated in a Phase 2 trial (ACCURACY) in patients with recurrent/metastatic adenoid cystic carcinoma (“R/M ACC”) bearing Notch-activating mutations is ongoing.

The Company has a wholly-owned Israeli subsidiary, Ayala-Oncology Israel Ltd. (the “Subsidiary”), which was incorporated in November 2017.

Initial Public Offering and Other Transactions

On February 19, 2021, the Company entered into a Securities Purchase Agreement (the “2021 Purchase Agreement”) with the purchasers named therein (the “Investors”). Pursuant to the 2021 Purchase Agreement, the company agreed to sell (i) an aggregate of 333,333 shares of the Company’s common stock (the “Common Stock”), par value $0.01 per share (the “Private Placement Shares”), \together with warrants to purchase an aggregate of 116,666 shares of its Common Stock with an exercise price of $18.10 per share (the “Common Warrants”), for an aggregate purchase price of $4,999,995.00 and (ii) pre-funded warrants to purchase an aggregate of 1,333,333 shares of its Common Stock with an exercise price of $0.01 per share (the “Pre-Funded Warrants” and collectively with the Common Warrants, the “Private Placement Warrants”), together with an aggregate of 466,666 Common Warrants, for an aggregate purchase price of $19,986,661.67 (collectively, the “Private Placement”). The Private Placement closed on February 23, 2021.

In June 2021, the Company entered into an Open Market Sales Agreement, or the Sales Agreement, with Jefferies LLC, or Jefferies, as sales agent, pursuant to which the Company may, from time to time, issue and sell Common Stock with an aggregate value of up to $200.0 million in “at-the-market” offerings (the “ATM”), under its registration statement on Form S-3 (File No. 333-256792) filed with the SEC on June 4, 2021 (the “ATM Registration Statement”). Sales of Common Stock, if any, pursuant to the Sales Agreement, may be made in sales deemed to be an “at the market offering” as defined in Rule 415(a) of the Securities Act, including sales made directly through The Nasdaq Global Market or on any other existing trading market for its Common Stock. Pursuant to the Sales Agreement, during the year ended December 31, 2021, the Company sold a total of 827,094 shares of Common Stock for total gross proceeds of approximately $10.4 million. During the six months ended June 30, 2022, the Company sold a total of 4,900 shares of Common Stock for total gross proceeds of approximately $44 thousand.

Going Concern

The Company has incurred recurring losses since inception as a research and development organization and has an accumulated deficit of $129.4 million as of June 30, 2022. For the six months ended June 30, 2022, the Company used approximately $17.0 million of cash in operations. The Company has relied on its ability to fund its operations through public and private equity financings. The Company expects operating losses and negative cash flows to continue at significant levels in the future as it continues its clinical trials. As of June 30, 2022, the Company had approximately $20.4 million in cash and cash equivalents and restricted bank deposits, which, without additional funding, the Company believes will not be sufficient to meet its obligations within the next twelve months from the date of issuance of these consolidated financial statements. The Company plans to continue to fund its operations through public or private debt and equity financings, but there can be no assurances that such financing will continue to be available to the Company on satisfactory terms, or at all. If the Company is unable to obtain funding, the Company would be forced to delay, reduce or eliminate its research and development programs, which could adversely affect its business prospects, or the Company may be unable to continue operations. As such, those factors raise substantial doubt about the Company’s ability to continue as a going concern.

The condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. Therefore, the condensed consolidated financial statements for the six months ended June 30, 2022 do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments (of a normal recurring nature) considered necessary for a fair statement of the results for the interim periods presented have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full year.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K filed for the year ended December 31, 2021 (the “Annual Report”) with the Securities and Exchange Commission (the “SEC”). The Company’s significant accounting policies have not changed materially from those included in Note 2 of the Company’s audited consolidated financial statements for the year ended December 31, 2021 included in the Company’s Annual Report, unless otherwise stated.

Use of estimates

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 consolidated 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 and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements. Actual results could differ from those estimates.

Net Loss per Share

Basic loss per share is computed by dividing the net loss by the weighted average number of shares of Common Stock outstanding during the period. Diluted loss per share is computed by dividing the net loss by the weighted average number of shares of Common Stock outstanding together with the number of additional shares of Common Stock that would have been outstanding if all potentially dilutive shares of Common Stock had been issued. Diluted net loss per share is the same as basic net loss per share in periods when the effects of potentially dilutive shares of Common Stock are anti-dilutive.

The calculation of basic and diluted loss per share includes 1,333,333 weighted average warrants with an exercise price of $0.01 for the three and six month ended June 30, 2022 and 2021.

The calculation of diluted loss per share does not include 583,332 Warrants and 1,159,169 options outstanding to purchase common stock with anti-dilutive effect for the six months ended June 30, 2022.

The calculation of diluted loss per share does not include 583,332 Warrants and 901,067 options outstanding to purchase common stock with anti-dilutive effect for the three and six month ended June 30, 2021.

Newly Issued Accounting Pronouncements

As an “emerging growth company,” the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below reflects this election.

In February 2016, the FASB issued ASU 2016-02—Leases, requiring the recognition of lease assets and liabilities on the balance sheet. The standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than 12 months. The standard is effective for the Company for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. This adoption approach will result in a balance sheet presentation that will not be comparable to the prior period in the first year of adoption. The adoption of this ASU will result in the recognition of operating lease assets and liabilities of approximately $4.8 million. The Company is still in the process of finalizing the calculation. The standard is not expected to have a material impact on the Company's results of operations or cash flows.

In June 2016, the FASB issued ASU No. 2016-13 (Topic 326), Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments, which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. The guidance will be effective for the Company for fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the effect that ASU 2016-13 will have on its consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing a variety of exceptions within the framework of ASC 740. These exceptions include the exception to the incremental approach for intra-period tax allocation in the event of a loss from continuing operations and income or a gain from other items (such as other comprehensive income), and the exception to using general methodology for the interim period tax accounting for year-to-date losses that exceed anticipated losses. The guidance will be effective for the Company beginning January 1, 2023, and interim periods in fiscal years beginning January 1, 2023. Early adoption is permitted. The Company has evaluated the effect that ASU 2019-12 will have on its condensed consolidated financial statements and related disclosures and has determined that there is no material impact on the Company’s consolidated financial statements.

Recently issued and adopted pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2020. The Company elected to early adopt ASU 2020-06 on January 1, 2022. Adoption of the standard did not have a material impact on the financial statements.

Revenues

6 Months Ended

Jun. 30, 2022

Revenues [Abstract]

REVENUES

NOTE 2—REVENUES

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which applies to all contracts with customers. Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps:

(i)

identify the contract(s) with a customer;

(ii)

identify the performance obligations in the contract;

(iii)

determine the transaction price;

(iv)

allocate the transaction price to the performance obligations in the contract; and

(v)

recognize revenue when (or as) the entity satisfies a performance obligation.

At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within the contract and determines those that are performance obligations and assesses whether each promised good or service is distinct.

Customer option to acquire additional goods or services gives rise to a performance obligation in the contract only if the option provides a material right to the customer that it would not receive without entering into that contract.

In a contract with multiple performance obligations, the Company must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation, which determines how the transaction price is allocated among the performance obligations.

The Company evaluates each performance obligation to determine if it can be satisfied at a point in time or over time.

Revenue is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services.

In December 2018, the Company entered into an evaluation, option and license agreement (the “Novartis Agreement”) with Novartis International Pharmaceutical Limited (“Novartis”) for which the Company was paid for its research and development costs.

The Company concluded that there is one distinct performance obligation under the Novartis Agreement: Research and development services, an obligation which is satisfied over time.

Revenue associated with the research and development services in the amounts of approximately $0.5 million and $1.7 were recognized in the six months ended June 30, 2022 and 2021, respectively.

The Company concluded that progress towards completion of the research and development performance obligation related to the Novartis Agreement is best measured in an amount proportional to the expenses relative to the total estimated expenses. The Company periodically reviews and updates its estimates, when appropriate, which may adjust revenue recognized for the period. Most of the company's revenues derive from the Novartis Agreement, for which revenues consist of reimbursable research and development costs. On June 2, 2022, Novartis informed the Company that Novartis does not intend to exercise its option to obtain an exclusive license for AL102, thereby terminating the agreement.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Tax

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

TAX

NOTE 3—TAX

The Company has reviewed the tax positions taken, or to be taken, in its tax returns for all tax years currently open to examination by a taxing authority. As of June 30, 2022 and 2021, the Company has recorded an uncertain tax position liability exclusive of interest and penalties of $1.2 million and $0.7 million, respectively, which were classified as other long-term liabilities. As of June 30, 2022 and 2021, the Company accrued interest related to uncertain tax positions of $63 thousand and $30 thousand, respectively. The interest is recorded as part of financial expenses. These uncertain tax positions would impact the Company’s effective tax rate, if recognized. A reconciliation of the Company’s unrecognized tax benefits is below:

	Six months		Year
	ended		ended
	June 30,		December 31,
	2022		2021
	(in thousands)
Uncertain tax position at the beginning of the period	$	858	$	581
Additions for uncertain tax position of prior years (foreign exchange and interest)		20		17
Additions for tax positions of current period		367		260
Uncertain tax position at the end of the period	$	1,245	$	858

The Company files U.S. federal, various U.S. state and Israeli income tax returns. The associated tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate. In the United States and Israel, the 2017 and subsequent tax years remain subject to examination by the applicable taxing authorities as of June 30, 2022.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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+ Details

Commitments and Contingent

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENT

NOTE 4—COMMITMENTS AND CONTINGENT

Liabilities Lease

In January 2019, the Subsidiary signed a new lease agreement. The term of the lease is for 63 months and includes an option to extend the lease for an additional 60 months. As part of the agreement, the lessor also provided the Company with finance in the amount of approximately $0.5 million paid in arrears for of leasehold improvements. The financing was recorded as a Long-Term Rent Liability. In June 2020, the Company signed a new lease agreement. The term of the lease is for 30 months. The minimum rental payments under operating leases as of June 30, 2022, are as follows (in thousands):

Year ended December 31,
2022		205
2023		409
2024		145
	$	759

The Subsidiary obtained a bank guarantee in the amount of approximately $0.2 million for its new office lease agreement.

Asset Transfer and License Agreement with Bristol-Myers Squibb Company.

In November 2017, the Company entered into a license agreement, or the BMS License Agreement, with Bristol-Myers Squibb Company, or BMS, under which BMS granted the Company a worldwide, non-transferable, exclusive, sublicensable license under certain patent rights and know-how controlled by BMS to research, discover, develop, make, have made, use, sell, offer to sell, export, import and commercialize AL101 and AL102, or the BMS Licensed Compounds, and products containing AL101 or AL102, or the BMS Licensed Products, for all uses including the prevention, treatment or control of any human or animal disease, disorder or condition.

Under the BMS License Agreement, the Company is obligated to use commercially reasonable efforts to develop at least one BMS Licensed Product. The Company has sole responsibility for, and bear the cost of, conducting research and development and preparing all regulatory filings and related submissions with respect to the BMS Licensed Compounds and/or BMS Licensed Products. BMS has assigned and transferred all INDs for the BMS Licensed Compounds to the Company. The Company is also required to use commercially reasonable efforts to obtain regulatory approvals in certain major market countries for at least one BMS Licensed Product, as well as to effect the first commercial sale of and commercialize each BMS Licensed Product after obtaining such regulatory approval. The Company has sole responsibility for, and bear the cost of, commercializing BMS Licensed Products. For a limited period of time, the Company may not, engage directly or indirectly in the clinical development or commercialization of a Notch inhibitor molecule that is not a BMS Licensed Compound.

The Company is required to pay BMS payments upon the achievement of certain development or regulatory milestone events of up to $95 million in the aggregate with respect to the first BMS Licensed Compound to achieve each such event and up to $47 million in the aggregate with respect to each additional BMS Licensed Compound to achieve each such event. The Company is also obligated to pay BMS payments of up to $50 million in the aggregate for each BMS Licensed Product that achieves certain sales-based milestone events and tiered royalties on net sales of each BMS Licensed Product by the Company or its affiliates or sublicensees at rates ranging from a high single-digit to low teen percentage, depending on the total annual worldwide net sales of each such Licensed Product. If the Company sublicenses or assigns any rights to the licensed patents, the BMS Licensed Compounds and/or the BMS Licensed Products, the Company is required to share with BMS a portion of all consideration received from such sublicense or assignment, ranging from a mid-teen to mid-double-digit percentage, depending on the development stage of the most advanced BMS Licensed Compound or BMS Licensed Product that is subject to the applicable sublicense or assignment, but such portion may be reduced based on the milestone or royalty payments that are payable by the Company to BMS under the BMS License Agreement.

The Company accounted for the acquisition of the rights granted by BMS as an asset acquisition because it did not meet the definition of a business. The Company recorded the total consideration transferred and value of shares issued to BMS as research and development expense in the consolidated statement of operations as incurred since the acquired the rights granted by BMS represented in-process research and development and had no alternative future use.

The Company accounts for contingent consideration payable upon achievement of sales milestones in such asset acquisitions when the underlying contingency is resolved.

The BMS License Agreement remains in effect, on a country-by-country and BMS Licensed Product-by-BMS Licensed Product basis, until the expiration of royalty obligations with respect to a given BMS Licensed Product in the applicable country. Royalties are paid on a country-by-country and BMS Licensed Product-by-BMS Licensed Product basis from the first commercial sale of a particular BMS Licensed Product in a country until the latest of 10 years after the first commercial sale of such BMS Licensed Product in such country, (b) when such BMS Licensed Product is no longer covered by a valid claim in the licensed patent rights in such country, or (c) the expiration of any regulatory or marketing exclusivity for such BMS Licensed Product in such country. Any inventions, and related patent rights, invented solely by either party pursuant to activities conducted under the BMS License Agreement shall be solely owned by such party, and any inventions, and related patent rights, conceived of jointly by the Company and BMS pursuant to activities conducted under the BMS License Agreement shall be jointly owned by the Company and BMS, with BMS’s rights thereto included in the Company’s exclusive license. The Company has the first right—with reasonable consultation with, or participation by, BMS—to prepare, prosecute, maintain and enforce the licensed patents, at the Company’s expense.

BMS has the right to terminate the BMS License Agreement in its entirety upon written notice to the Company (a) for insolvency-related events involving the Company, (b) for the Company’s material breach of the BMS License Agreement if such breach remains uncured for a defined period of time, for the Company’s failure to fulfill its obligations to develop or commercialize the BMS Licensed Compounds and/or BMS Licensed Products not remedied within a defined period of time following written notice by BMS, or (d) if the Company or its affiliates commence any action challenging the validity, scope, enforceability or patentability of any of the licensed patent rights. The Company has the right to terminate the BMS License Agreement (a) for convenience upon prior written notice to BMS, the length of notice dependent on whether a BMS Licensed Project has received regulatory approval, (b) upon immediate written notice to BMS for insolvency-related events involving BMS, (c) for BMS’s material breach of the BMS License Agreement if such breach remains uncured for a defined period of time, or (d) on a BMS Licensed Compound-by-BMS Licensed Compound and/or BMS Licensed Product-by-BMS Licensed Product basis upon immediate written notice to BMS if the Company reasonably determine that there are unexpected safety and public health issues relating to the applicable BMS Licensed Compounds and/or BMS Licensed Products.

Upon termination of the BMS License Agreement in its entirety by the Company for convenience or by BMS, the Company grants an exclusive, non-transferable, sublicensable, worldwide license to BMS under certain of its patent rights that are necessary to develop, manufacture or commercialize BMS Licensed Compounds or BMS Licensed Products. In exchange for such license, BMS must pay the Company a low single-digit percentage royalty on net sales of the BMS Licensed Compounds and/or BMS Licensed Products by it or its affiliates, licensees or sublicensees, provided that the termination occurred after a specified developmental milestone for such BMS Licensed Compounds and/ or BMS Licensed Products.

Option and License Agreement with Novartis International Pharmaceutical Ltd.

In December 2018, the Company entered into an evaluation, option and license agreement, or the Novartis Option Agreement, with Novartis, pursuant to which Novartis agreed to conduct certain studies to evaluate AL102 in combination with its B-cell maturation antigen, or BCMA, therapies in multiple myeloma, and the Company agreed to supply AL102 for such studies. All supply and development costs associated with such evaluation studies were fully borne by Novartis.

Under the Novartis Option Agreement, the Company granted Novartis an exclusive option to obtain an exclusive (including as to the Company and its affiliates), sublicensable (subject to certain terms and conditions), worldwide license and sublicense (as applicable) under certain patent rights and know-how controlled by the Company (including applicable patent rights and know-how that are licensed from BMS pursuant to the BMS License Agreement) to research, develop, manufacture (subject to the Company’s non-exclusive right to manufacture and supply AL102 or the Novartis Licensed Product for Novartis) and commercialize AL102 or any pharmaceutical product containing AL102 as the sole active ingredient, or the Novartis Licensed Product, for the diagnosis, prophylaxis, treatment, or prevention of multiple myeloma in humans. The Company also granted Novartis the right of first negotiation for the license rights to conduct development or commercialization activities with respect to the use of AL102 for indications other than multiple myeloma. Additionally, from the exercise by Novartis of its option until the termination of the Novartis Option Agreement, the Company was not able to, either itself or through its affiliates or any other third parties, directly or indirectly research, develop or commercialize certain BCMA-related compounds for the treatment of multiple myeloma.

According to the agreement, Novartis was obligated to pay the Company a low eight figure option exercise fee in order to exercise its option and activate its license, upon which the Company would have been eligible to receive development, regulatory and commercial milestone payments of up to $245 million in the aggregate and tiered royalties on net sales of Novartis Licensed Products by Novartis or its affiliates or sublicensees at rates ranging from a mid-single-digit to low double-digit percentage, depending on the total annual worldwide net sales of Novartis Licensed Products. Royalties were to be paid on a country-by-country and Novartis Licensed Product-by-Novartis Licensed Product basis from the first commercial sale of a particular Novartis Licensed Product in a country until the latest of (a) 10 years after the first commercial sale of such Novartis Licensed Product in such country, (b) when such Novartis Licensed Product is no longer covered by a valid claim in the licensed patent rights in such country, or (c) the expiration of any regulatory or marketing exclusivity for such Novartis Licensed Product in such country. Contemporaneously with the Novartis Option Agreement, the Company entered into a stock purchase agreement and associated investment agreements, or the SPA, with Novartis’ affiliate, Novartis Institutes for BioMedical Research, Inc., or NIBRI, pursuant to which NIBRI acquired a $10 million equity stake in the Company.

Novartis owned any inventions, and related patent rights, invented solely by it or jointly with the Company in connection with activities conducted pursuant to the Novartis Option Agreement. The Company maintained first right to prosecute and maintain any patents licensed to Novartis, both before and after its exercise of its option. The Company maintained the first right to defend and enforce its patents prior to Novartis’s exercise of its option, upon which Novartis gains such right with respect to patents included in the license.

On June 2, 2022, Novartis informed the Company that Novartis does not intend to exercise its option to obtain an exclusive license for AL102, thereby terminating the agreement.

Subsequent Events

6 Months Ended

Jun. 30, 2022

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 5—SUBSEQUENT EVENTS

Pursuant to the Sales Agreement, in August 2022, the Company sold a total of 263,875 shares of common stock for total gross proceeds of approximately $419 thousand, or $406 thousand net of issuance costs.

Accounting Policies, by Policy (Policies)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

General

General

In 2017, the Company entered into an exclusive worldwide license agreement with respect to AL101 and AL102. See note 4.

The Company has a wholly-owned Israeli subsidiary, Ayala-Oncology Israel Ltd. (the “Subsidiary”), which was incorporated in November 2017.

Initial Public Offering and Other Transactions

Initial Public Offering and Other Transactions

Going Concern

Going Concern

Basis of Presentation

Basis of Presentation

Use of estimates

Use of estimates

Net Loss per Share

Net Loss per Share

The calculation of basic and diluted loss per share includes 1,333,333 weighted average warrants with an exercise price of $0.01 for the three and six month ended June 30, 2022 and 2021.

Newly Issued Accounting Pronouncements

Newly Issued Accounting Pronouncements

Recently issued and adopted pronouncements

Recently issued and adopted pronouncements

Tax (Tables)

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Schedule of unrecognized tax benefits

	Six months		Year
	ended		ended
	June 30,		December 31,
	2022		2021
	(in thousands)
Uncertain tax position at the beginning of the period	$	858	$	581
Additions for uncertain tax position of prior years (foreign exchange and interest)		20		17
Additions for tax positions of current period		367		260
Uncertain tax position at the end of the period	$	1,245	$	858

Commitments and Contingent (Tables)

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Schedule of minimum rental payments under operating leases

Year ended December 31,
2022		205
2023		409
2024		145
	$	759

Significant Accounting Policies (Details) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
Significant Accounting Policies (Details) - USD ($)	Feb. 19, 2021	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Significant Accounting Policies (Details) [Line Items]
Common stock sold shares				4,900		827,094
Common stock par value (in Dollars per share)		$ 0.01		$ 0.01		$ 0.01
Aggregate offering value (in Dollars)			$ 200,000,000		$ 200,000,000
Gross proceeds from common stock (in Dollars)				$ 44,000
Accumulated deficit (in Dollars)		$ (129,378,000)		(129,378,000)		$ (111,141,000)
Cash in operations (in Dollars)				(17,007,000)	$ (21,197,000)
Cash and cash equivalents (in Dollars)		$ 20,400,000		$ 20,400,000
Weighted average of warrants		15,312,766	14,417,423	15,306,823	13,954,676
Basic and diluted loss per share (in Dollars per share)		$ (0.54)	$ (0.75)	$ (1.19)	$ (1.46)
Operating lease assets and liabilities (in Dollars)				$ 4,800,000
Options Outstanding [Member]
Significant Accounting Policies (Details) [Line Items]
Purchase common stock with anti-dilutive effect				1,159,169	901,067
Warrant [Member]
Significant Accounting Policies (Details) [Line Items]
Weighted average of warrants			1,333,333
Basic and diluted loss per share (in Dollars per share)			$ 0.01
Purchase common stock with anti-dilutive effect				583,332	583,332
2021 Purchase Agreement [Member]
Significant Accounting Policies (Details) [Line Items]
Warrants to purchase common stock purchase price (in Dollars per share)	$ 18.1
2021 Purchase Agreement [Member] \| Private Placement [Member]
Significant Accounting Policies (Details) [Line Items]
Common stock sold shares	333,333
Common stock par value (in Dollars per share)	$ 0.01
Aggregate purchase shares	116,666
Aggregate purchase price (in Dollars)	$ 19,986,661.67
2021 Purchase Agreement [Member] \| Common Warrants [Member]
Significant Accounting Policies (Details) [Line Items]
Aggregate purchase price (in Dollars)	$ 4,999,995
2021 Purchase Agreement [Member] \| Prefunded Warrants [Member]
Significant Accounting Policies (Details) [Line Items]
Aggregate purchase shares	1,333,333
Warrants to purchase common stock purchase price (in Dollars per share)	$ 0.01
2021 Purchase Agreement [Member] \| Private Placement [Member]
Significant Accounting Policies (Details) [Line Items]
Aggregate purchase shares	466,666
Sales Agreement [Member]
Significant Accounting Policies (Details) [Line Items]
Gross proceeds from common stock (in Dollars)						$ 10,400,000

Revenues (Details) - USD ($) $ in Millions	6 Months Ended
Revenues (Details) - USD ($) $ in Millions	Jun. 30, 2022	Jun. 30, 2021
Novartis Agreement [Member] \| Novartis International Pharmaceutical Agreement [Member]
Revenues (Details) [Line Items]
Research and development services	$ 0.5	$ 1.7

Tax (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Jun. 30, 2021
Income Tax Disclosure [Abstract]
Interest and penalties	$ 1,200	$ 700
Accrued interest	$ 63	$ 30

Tax (Details) - Schedule of unrecognized tax benefits - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Schedule of unrecognized tax benefits [Abstract]
Uncertain tax position at the beginning of the period	$ 858	$ 581
Additions for uncertain tax position of prior years (foreign exchange and interest)	20	17
Additions for tax positions of current period	367	260
Uncertain tax position at the end of the period	$ 1,245	$ 858

Commitments and Contingent (Details) - USD ($) $ in Millions	1 Months Ended	6 Months Ended
	Jan. 31, 2019	Jun. 30, 2022
Commitments and Contingent (Details) [Line Items]
Lease term	63 months
Lease for additional	60 months
Leasehold improvements	$ 0.5
New office lease agreement		$ 0.2
Equity stake		$ 10.0
New Lease Agreement [Member]
Commitments and Contingent (Details) [Line Items]
Lease term		30 months
BMS License Agreement [Member]
Commitments and Contingent (Details) [Line Items]
Term of license agreement		10 years
BMS License Agreement [Member] \| BMS [Member]
Commitments and Contingent (Details) [Line Items]
Collaborative arrangement, milestone payments liability		$ 95.0
Collaborative arrangement, additional milestone payments		47.0
Collaborative arrangements sales based milestone amount payable		$ 50.0
Option And License Agreement [Member] \| Novartis International Pharmaceutical Ltd. [Member]
Commitments and Contingent (Details) [Line Items]
Term of license agreement		10 years
Milestone payment receivable		$ 245.0

Commitments and Contingent (Details) - Schedule of minimum rental payments under operating leases $ in Thousands	Jun. 30, 2022 USD ($)
Schedule of minimum rental payments under operating leases [Abstract]
2022	$ 205
2023	409
2024	145
Total	$ 759

Subsequent Events (Details)	1 Months Ended
Subsequent Events (Details)	Aug. 31, 2022
Subsequent Event [Member]
Subsequent Events (Details) [Line Items]
Pursuant to sales agreement	Pursuant to the Sales Agreement, in August 2022, the Company sold a total of 263,875 shares of common stock for total gross proceeds of approximately $419 thousand, or $406 thousand net of issuance costs.