Entera Bio Ltd.

NOTE 1 - DESCRIPTION OF BUSINESS

The Company’s most advanced product candidate, EB613, oral PTH (1-34), is being developed as the first oral, osteoanabolic (bone building) once-daily tablet treatment for post-menopausal women with low bone mineral density (“BMD”) and high-risk osteoporosis with no prior fracture. The Company is preparing to initiate a Phase 3 registrational study for EB613 pursuant to the FDA’s qualification of a quantitative BMD endpoint.

The Company’s product candidate, EB612, is being developed as the first oral PTH(1-34) tablet peptide replacement therapy for hypoparathyroidism. Additionally, the Company intends to license its N-Tab™ technology to biopharmaceutical companies for use with their proprietary compounds.

NOTE 1 - DESCRIPTION OF BUSINESS (continued)

Currently, such activities in Israel remain largely unaffected. During the years ended December 31, 2024 and December 31, 2023, the impact of this war on the Company’s results of operations and financial condition was immaterial.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates (the “functional currency”). The U.S. dollar is the currency of the primary economic environment in which the operations of the Company are conducted. The consolidated financial statements are presented in U.S. dollars.

The functional currency of the subsidiary is the U.S. dollar.

Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Balances in non-U.S. dollar currencies are translated into U.S. dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. For non-U.S. dollar transactions and other items in the statements of income (indicated below), the following exchange rates are used: (i) for transactions – exchange rates at transaction dates or average exchange rates; and (ii) for other items (derived from non-monetary balance sheet items such as depreciation and amortization) – historical exchange rates. Currency transaction gains and losses are presented in financial income, net, as appropriate.

The consolidated financial statements include the accounts of the Company and its subsidiary Entera Bio Inc. All inter-company transactions and balances have been eliminated in consolidation.

The Company considers as cash equivalents all short-term, highly liquid investments, which include short-term bank deposits with original maturities of three months or less from the date of purchase that are not restricted as to withdrawal or use and are readily convertible to known amounts of cash.

Bank deposits with original maturity dates of more than three months but less than one year are included in short-term deposits. Such short-term deposits bore interest at an average annual rate of approximately 5% for the year ended December 31, 2024.

Bank deposits with maturity of more than one year are considered long-term.

Restricted cash deposited in an interest-bearing saving account which is used as a security for the Company's office rent and credit card.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains cash held in checking accounts and deposits at financial institutions in major Israeli and U.S. banks. Management believes the Company is not exposed to significant credit risk with respect to its cash and cash equivalent deposits at its current financial institutions, but will continue to monitor regularly and adjust, if needed, to mitigate risk. The Company has established guidelines regarding diversification of its investments and their maturities, which are designed to maintain principal and maximize liquidity. To date, the Company has not experienced any losses associated with this credit risk and continues to believe that this exposure is not significant.

The Company measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable inputs that are based on inputs not quoted on active markets but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

The Company determines if an arrangement is a lease at inception. Balances related to operating leases are included in operating lease right-of-use (“ROU”) assets and current and non-current operating lease liabilities in the consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized as of the commencement date based on the present value of lease payments over the lease term. Lease terms will include options to extend or terminate the lease when it is reasonably certain that the Company will either exercise or not exercise the option to renew or terminate the lease.

The discount rate for the lease is the rate implicit in the lease unless that rate cannot be readily determined. As the Company’s leases do not provide an implicit rate, the Company’s uses its estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Sublease income is recognized on a straight-line basis over the expected lease term and is included in other income in our consolidated statements of operations.

Leasehold improvements are amortized by the straight-line method over the shorter of (i) the expected lease term and (ii) the estimated useful life of the improvements.

The Company grants share options and restricted share units (“RSUs”) (together “Share-Based Compensation”) to its employees, directors and non-employees in consideration for services rendered.

The Company accounts for Share-Based Compensation awards classified as equity awards, including share-based option awards and RSUs, using grant-date fair value. The Company recognizes the value of the award as an expense over the requisite service period.

The Company calculates the fair value of stock-based option awards on the date of grant using the Black-Scholes option pricing model. The option-pricing model requires a number of assumptions, of which the most significant are the expected share price volatility and the expected option term. The computation of expected volatility is based on the historical volatility of the Company’s ordinary shares. The expected option term is calculated using the simplified method, as the Company has concluded that its historical share option exercise experience does not provide a reasonable basis to estimate expected option terms. The interest rate for periods within the expected term of an award is based on the U.S. Treasury yield curve in effect at the time of grant. The Company’s expected dividend rate is zero because the Company does not currently pay cash dividends on its shares and does not anticipate doing so in the foreseeable future.

The Company elected to recognize compensation costs for awards granted to employees and directors conditioned only on continued service that have a graded vesting schedule using the accelerated method based on the multiple-option award approach. The Company has elected to account for forfeitures as they occur.

Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of salaries, share-based compensation expenses, payroll taxes and other employee benefits, lab expenses, consumable equipment and consulting fees. All costs associated with research and development are expensed as incurred.

The Company recognizes revenues according to ASC 606, "Revenues from Contracts with Customers”.

ASC 606 Revenue from Contracts with Customer introduces a five-step model for recognizing revenue from contracts with customers, as follows:

1. Identify the contract with a customer.

2. Identify the performance obligations in the contract.

3. Determine the transaction price.

4. Allocate the transaction price to the performance obligations in the contract.

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

Revenues attributed to the research services agreement are recognized over the duration of the research services agreement.

Basic loss per share is computed on the basis of the net loss for the period, divided by the weighted average number of outstanding ordinary shares and pre-funded warrants during the period.

Diluted loss per share is based upon the weighted average number of ordinary shares and ordinary share equivalents outstanding when dilutive. Ordinary share equivalents include outstanding stock options, warrants and RSUs, which are included under the treasury stock method when dilutive. The calculation of diluted loss per share does not include options and warrants exercisable into 16,790,842 ordinary shares and 7,458,542 ordinary shares for the years ended December 31, 2024 and 2023, respectively, because the effect would have been anti-dilutive.

Management applies the guidance in ASC 450-20, “Loss Contingencies” when assessing losses resulting from contingencies. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability is recorded as accrued expenses in the Company’s consolidated financial statements.

Legal costs incurred in connection with loss contingencies are expensed as incurred.

When the Company issues freestanding instruments, it first analyzes the provisions of ASC 480, “Distinguishing Liabilities From Equity” (“ASC 480”) in order to determine whether the instrument should be classified as a liability, with subsequent changes in fair value recognized in the consolidated statements of operations in each period. If the instrument is not within the scope of ASC 480, the Company further analyzes the provisions of ASC 815-10 in order to determine whether the instrument is considered indexed to the entity’s own stock and qualifies for classification within equity. All warrants issued by the Company have been classified within stockholders’ equity as “Additional paid-in capital”.

Operating segments are components of an enterprise for which separate financial information is available and is provided regularly by the Company’s chief operating decision maker ("CODM") in deciding how to allocate resources and assessing performance. The Company’s CODM is its Chief Executive Officer. The Company’s Chief Executive Officer views the Company’s operations and manages its business in one operating segment, which is the business of development of products related to pharmaceuticals. Accordingly, the consolidated financial statements and accompanying notes contained herein include the measure of profit or loss, categories of expenses and other financial information that is evaluated by the Company’s Chief Executive Officer.

Recently adopted accounting pronouncements

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting: Improvements to Reportable Segment Disclosures”. This guidance expands public entities’ segment disclosures primarily by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable. The Company adopted this standard in the current period. The adoption of this ASU did not have a material impact on the Company’s financial statements.

Recently issued accounting pronouncements, not yet adopted

NOTE 3 - OPERATING LEASES

NOTE 3 - OPERATING LEASES (continued)

The lease cost was as follows:

Supplemental cash flow information related to leases was as follows:

Supplemental balance sheet information related to operating leases was as follows:

As of December 31, 2024, the maturity of lease liabilities under our non-cancelable operating leases were $272 to be paid in 2025- 2027.

As of December 31, 2024, the maturity of lease liabilities under our non-cancelable operating leases were as follows:

NOTE 4 - COMMITMENTS AND CONTINGENCIES

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 underlying such products. 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, 2024, 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, 2024, the Company had paid a total of $96 to the IIA.

On February 22, 2011, Oramed and the Company entered into a patent transfer agreement, that 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).

NOTE 5 - REVENUE RECOGNITION

In April 2024, the Company entered into a material transfer and research project agreement (the “research services agreement”) with a third party. Pursuant to the agreement, the third party has agreed to pay the Company a monthly payment for research services, as well as reimbursement for external expenses based on an agreed budget.

The Company concluded that, because the research services provided under the research services agreement have no alternative use (because, in nature, these services are unique to each customer), and the Company has the right to receive payment for performance completed to date, the Company recognizes revenue over the contract term using the input model method, which is labor hours expended and time lapsed.

For the year ended December 31, 2024, the Company recognized total revenues of $181 from this agreement.

NOTE 6 - SHARE CAPITAL

Each ordinary share is entitled toone vote. The holder of an ordinary shares is also entitled to receive dividends whenever funds are legally available, when and if declared by the Board of Directors.

A holder of an ordinary share also has the right to receive upon liquidation of the Company, a sum equal to the nominal value of such share, and if a surplus per share remains, to receive such surplus, subject to the rights conferred on any class of shares which may be issued in the future. Since its inception, the Company has not declared any dividends.

During the year ended December 31, 2023, the Company issued 4,030 ordinary shares pursuant to the Leerink ATM Program for net proceeds of $5 at a weighted average price of $1.16 per ordinary share. During the year ended December 31, 2024, the Company issued an aggregate of 2,236,126 ordinary shares pursuant to the Leerink ATM Program for net proceeds of $3,840 at a weighted average price of $1.77 per ordinary share. See additional information in note 10(a).

NOTE 6 - SHARE CAPITAL (continued)

The 2023 PIPE closed on December 22, 2023, and the Company issued 6,662,389 ordinary shares,1,254,490 Pre-Funded Warrants and 7,916,879 Investors Warrants.

Each Pre-Funded Warrant has an exercise price of NIS 0.0000769 per ordinary share, is immediately exercisable and may be exercised at any time and has no expiration date and is subject to customary adjustments.

Each Investor Warrant has an exercise price of $1.00 per share, is immediately exercisable, and expires five years from the date of issuance, and is subject to customary adjustments. The Company accounted for the Investors Warrant as a component of permanent equity, as part of Additional Paid in Capital. The Investor Warrants are considered a separate instrument and they are indexed to the entity’s own stock based on the provision of ASC 815.

The Chairman of the Board and the Chief Executive Officer participated in the 2023 PIPE on the same terms and subject to the same conditions as all other Investors.

In connection therewith, the Company entered into a placement agency agreement with a registered U.S. broker-dealer (the “Broker”), pursuant to which the Broker was entitled to the following consideration:

In addition, the Company entered into a finder agreement with a private non-U.S. finder (the “Finder”), pursuant to which the Finder was entitled to a cash fee equal to 5% of total proceeds paid by subscribers introduced by the Finder, as well asfive-year warrants to purchase 179,640 ordinary shares, representing 10% of the ordinary shares issued to the subscribers introduced by the Finder, at a per share exercise price of $0.71 (the “Finder Warrants”).

NOTE 6 - SHARE CAPITAL (continued)

The Pre-Funded Warrants and Investors Warrants (collectively, the “Warrants”) were classified as a component of permanent equity and recorded as part of the Additional Paid in Capital based on the provision of ASC 815. The Warrants are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the Investor to receive a fixed number of shares of common stock upon exercise.

The Company had transaction costs of approximately $1,000, of which $267 were stock-based compensation deducted from equity due to issuance of Broker Warrants and Finder Warrants.

During the year ended December 31, 2024, warrants were exercised for an aggregate of 89,820 ordinary shares for a total consideration of $90. For additional information see note 10(e).

NOTE 7 - SHARE-BASED COMPENSATION

On March 17, 2013, the Company's Board of Directors approved a Share Incentive Plan (the “2013 Plan”). Under the 2013 Plan, the Company reserves specified number of ordinary shares for allocation to stock options (each, an “Option”), RSUs, restricted share awards and performance-based awards, that are awarded to employees and non-employees under the 2013 Plan. Each Option is exercisable for one ordinary share.

Any Option granted under the 2013 Plan that is not exercised within six years from the date upon which it becomes exercisable will expire. Since adopting the 2018 Plan (as defined below), the Company has not granted any awards under the 2013 Plan.

On July 2, 2018, the Company's Board of Directors and shareholders of the Company approved a new Share Incentive Plan (the “2018 Plan”) and reserved 1,371,398 ordinary shares for allocation to stock options (each, a "2018 Plan Option"), RSUs, restricted share awards and performance-based awards, to employees and non-employees for issuance under the 2018 Plan. Each 2018 Plan Option is exercisable for one ordinary share.

Any 2018 Plan Option that is not exercised within 10 years from the date of grant will expire.

The 2018 Plan Options granted to employees are subject to the terms stipulated by section 102(b)(2) of the Israeli Income Tax Ordinance (the “Ordinance”). According to these provisions, the Company will not be allowed to claim as an expense for tax purposes the amounts credited to the employees as a capital gain benefit in respect of the options granted.

2018 Plan Options granted to related parties or non-employees of the Company are governed by Section 3(i) of the Ordinance or Non-Qualified Share Options ("NSO"). The Company will be allowed to claim as an expense for tax purposes in the year in which the related parties or non-employees exercised the options into shares.

As of December 31, 2024,2,068,226 ordinary shares remained available for future grants under the 2018 Plan.

On January 1, 2025, the Company’s Board of Directors approved an increase of 1,941,859 ordinary shares that may be issued under the Company’s 2018 Plan pursuant of the terms of the 2018 Plan.

NOTE 7 - SHARE-BASED COMPENSATION (continued)

"Triggering Event" means the earlier of the following events: (i) the execution by the Company of a binding strategic or partnership agreement with a strategic partner to fund the Company's Phase III FDA Trial; and (b) raising sufficient funding to complete the Company's Phase III FDA Trial, in each case as such event is approved by the Board of Directors. As of December 31, 2024, neither of these events had occurred.

NOTE 7 - SHARE-BASED COMPENSATION (continued)

The fair value of each option granted is estimated at the date of grant using the Black-Scholes option-pricing model, with the following weighted average assumptions:

The aggregate intrinsic value of the total of the outstanding and exercisable options as of December 31, 2024 was $3,632 and $2,255, respectively.

NOTE 7 - SHARE-BASED COMPENSATION (continued)

On August 27, 2024, the Company entered into an amendment to the consulting agreement and granted an additional 25,000 RSUs to the foregoing investor relations consulting firm. The RSUs vested in four installments as follows: 10,000 on August 31,2024, 5,000 on September 30, 2024, 5,000 on October 31, 2024, and 5,000 on November 30, 2024. As of December 31, 2024, all 50,000 RSUs granted to this investor relations consulting firm had vested. The total fair value of the RSUs on the date of grants was $65.

The following table illustrates the effect of share-based compensation on the statements of operations:

NOTE 8 - INCOME TAX

The balance of carryforward losses of Entera Bio Ltd. as of December 31, 2024 and 2023 are approximately $83.5 million and $75.8 million , respectively.

Under Israeli tax law, tax loss carry-forwards have no expiration date.

The Company and its subsidiary have tax assessments that are considered to be final through tax year 2019.

NOTE 8 - INCOME TAX (continued)

In assessing the likelihood of realizing deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences and carry forward losses become deductible. Based on the taxable loss in the Israel and in the United States, management believes it was more likely than not that the deferred tax assets will not be realized.

The primary difference between the statutory tax rate of the Company and the effective rate results virtually from the changes in valuation allowance in respect of carry forward tax losses and research and development expenses due to the uncertainty of the realization of such tax benefits.

As of December 31, 2024 and 2023, the Company did not have a provision for uncertain tax positions as existing uncertain tax positions as, based on the technical merits, given the existing tax positions are not more likely than not to be sustained.

NOTE 9 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION:

Balance sheets:

NOTE 10 - SUBSEQUENT EVENTS

Under the 2025 Collaboration Agreement, the Company granted to OPKO an exclusive, sublicensable and non-transferable, worldwide license to certain of the company's intellectual property and technology solely to develop, manufacture, and commercialize any GLP-1/glucagon dual agonist as an oral treatment form for the treatment of obesity, metabolic, cardiovascular, and fibrotic disorders in humans, and OPKO has granted to the Company a non-exclusive, non-sublicensable and non-transferable license to certain of OPKO’s intellectual property and technology to the extent necessary for the Company to perform its obligations in relation to the Program, in each case subject to the exceptions contained therein.

Under the terms of the 2025 Collaboration Agreement, the Company and OPKO will retain 40% and 60%, respectively, of all proceeds deriving from the Program, and will be responsible for 40% and 60% of the Program’s development costs, respectively. Following the completion of the Phase 1 stage, the Company may continue to fund its 40% share of the Program to maintain its right to proceeds or to opt-out (the “Opt-Out”). If the Company exercises the Opt-Out, then the Company and OPKO will retain 15% and 85%, respectively, of all proceeds deriving from the Program, while OPKO will be solely responsible for ongoing development and commercialization funding of the Program.

In connection with the execution of the 2025 Collaboration Agreement, the Company issued and sold to OPKO an aggregate of 3,685,226 ordinary shares for a total purchase price of $8.0 million, representing a purchase price per share equal to approximately $2.17, which was the volume weighted average price per share for the 30 trading days immediately preceding the date of the 2025 Collaboration Agreement. OPKO has agreed to a customary lockup with respect to such shares, and may not sell or otherwise transfer them for a period of 12 months following the date of the 2025 Collaboration Agreement, and OPKO has additionally agreed to a customary “standstill” provision, pursuant to which, for a 24-month period following the date of the 2025 Collaboration Agreement, OPKO may not acquire additional equity in the Company or otherwise take certain other actions, in each case without our consent.

The Company has agreed to use the proceeds from the sale of the foregoing ordinary shares solely to fund its development cost obligations under the 2025 Collaboration Agreement, and has agreed to enter into an escrow arrangement, together with OPKO and an escrow agent, into which such proceeds will be deposited and subsequently disbursed to fund such development costs. If the 2025 Collaboration Agreement expires or is terminated for any reason, any funds remaining in such escrow will be disbursed to the Company.