NOTE 4 - COMMITMENTS AND CONTINGENCIES
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a.
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Commitment to pay royalties to the government of Israel
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The Company is committed to pay royalties to the Israel Innovation Authority (the “IIA”) on proceeds from sales of products for which the government provided grants with respect to the research and development of the PTH for osteoporosis. At the time the grants were received, successful development of the related project was not assumed. In the case of failure of the project that was partly financed by the IIA, the Company is not obligated to pay any such royalties.
Under the terms of the Company’s funding from the IIA, royalties are payable on sales of products developed from IIA funded projects in the amount of 3% of sales during the first three years following commencement of revenues, 4% during the subsequent three years and 5% commencing the seventh year up to 100% of the amount of the grant received by the Company (dollar linked) plus annual interest based on SOFR. The amount that must be repaid may be increased to three times the amount of the grant received, and the rate of royalties may be accelerated, if manufacturing of the products developed with the grant money is transferred outside of the State of Israel. In addition, if the Company undergoes a change of control or otherwise transfers the technology “know-how” (as defined under the Research Law) in or outside of Israel, the amount that must be repaid will be increased up to six times.
As of December 31, 2025, the total royalty amount that would be payable by the Company to the IIA, before interest and potential increases as described above, was approximately $460. These grants were allocated to research and development in prior periods.
Following the signing of a former collaboration agreement in 2018, the IIA determined that the Company was required to pay 5.38% of each payment received by the Company from the counterparty under such agreement in an amount up to six times the grant received. As of December 31, 2025, the Company had paid a total of $96 to the IIA.
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On June 1, 2010, D.N.A. Biomedical Solutions Ltd. ("D.N.A.") and Oramed Ltd., ("Oramed") entered into a joint venture agreement for the establishment of Entera Bio Ltd. According to such agreement, each of D.N.A. and Oramed acquired 50% of the Company's ordinary shares. D.N.A invested $600 in the Company, and Oramed and the Company entered into a patent license agreement pursuant to which Oramed licensed to the Company one of Oramed’s patents.
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On February 22, 2011, Oramed and the Company entered into a patent transfer agreement, which superseded the patent license agreement, whereby Oramed assigned to the Company all of its rights, title and interest to its patent that Oramed licensed to the Company in 2010, under certain conditions. Under this agreement, the Company is obligated to pay Oramed royalties equal to 3% of its net revenues (as defined in the patent transfer agreement).
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.