SCHEDULE: BiomX Acquires ZorroNet AI Tech for Stock and Note

BiomX Inc. has acquired Zorro Net Ltd., a visual AI and computer vision technology firm, from Water IO Ltd. for 1.3 million shares of BiomX common stock and a $1.25 million promissory note.

Summary

• BiomX Inc. (Buyer) has entered into a Stock Purchase Agreement with Water IO Ltd. (Seller) to acquire 100% of the shares of Zorro Net Ltd. (Company).
• Zorro Net Ltd. specializes in visual artificial intelligence and computer vision technology platforms for defense, homeland security, and critical infrastructure protection.
• The acquisition was effective as of April 10, 2026, with the closing occurring simultaneously with the agreement's execution.
• As consideration, BiomX Inc. will issue 1,300,000 shares of its common stock and a non-convertible promissory note of $1,250,000 to Water IO Ltd.
• BiomX Inc. will also assume certain obligations of Water IO Ltd. to the founders and former shareholders of Zorro Net Ltd., including an earnout payment and key employee retention.
• The earnout payment is contingent on Zorro Net Ltd.'s financial performance in fiscal year 2026, being the greater of 125% of its consolidated revenue or 8 times its consolidated EBITDA, payable by March 31, 2027.
• BiomX Inc. must also ensure key employees of Zorro Net Ltd. are retained for at least three years on terms no less favorable than their current employment.
• Water IO Ltd., along with Star 26 Capital Inc., T3 Defense Inc., and Menachem Shalom, collectively hold approximately 19.87% of BiomX Inc.'s outstanding common stock as a result of this transaction.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive development, as BiomX Inc. is acquiring valuable AI technology, but the significant portion of the consideration being a promissory note and the contingent earnout introduce financial uncertainties.

Positives

• Acquisition of advanced visual AI and computer vision technology platforms by BiomX Inc.
• Expansion of BiomX Inc.'s capabilities into defense, homeland security, and critical infrastructure protection.
• Water IO Ltd. receives a combination of stock and a promissory note, providing potential upside and immediate value.
• Commitment to retaining key employees of Zorro Net Ltd. to ensure continuity and leverage expertise.
• Potential for a significant earnout payment to founders and former shareholders based on Zorro Net Ltd.'s 2026 financial performance.

Negatives

• The earnout payment is contingent on Zorro Net Ltd.'s future financial performance, introducing uncertainty.
• BiomX Inc. assumes obligations to Zorro Net Ltd.'s founders and former shareholders, adding potential liabilities.
• The promissory note is non-convertible, meaning it does not contribute to BiomX Inc.'s equity base.
• Water IO Ltd. and associated entities now hold a significant stake (19.87%) in BiomX Inc., which could lead to future influence or strategic shifts.

Risks

• The success of the earnout payment is dependent on Zorro Net Ltd.'s revenue and EBITDA in fiscal year 2026.
• Failure to retain key employees of Zorro Net Ltd. could lead to specific performance claims against BiomX Inc.
• BiomX Inc.'s stock price performance will impact the value of the Share Consideration received by Water IO Ltd.
• The ability of Water IO Ltd. to sell the Share Consideration is subject to registration requirements and Rule 144.
• If BiomX Inc.'s common stock is not listed on the NYSE for 90 trading days after the registration statement is effective or shares are freely tradable under Rule 144, Water IO Ltd. has the option to terminate the agreement and reclaim the shares.

Future Outlook

BiomX Inc. is expected to file a registration statement on Form S-3 within 45 days of the closing date to cover the resale of the Share Consideration. The company must use commercially reasonable efforts to make this registration statement effective and maintain its effectiveness. The earnout payment is contingent on Zorro Net Ltd.'s 2026 financial performance, with payment due by March 31, 2027. Key employees of Zorro Net Ltd. are to be retained for at least three years.

Management Comments

• "Buyer has conducted its own investigation, is not relying on any representations beyond Article IV, and Seller shall have no liability regarding the Company's condition, value or prospects."
• "The Parties acknowledge that the Founder Beneficiaries and Key Employees are express intended third-party beneficiaries of Section 2.4 and shall have the right to enforce its provisions directly against Buyer."

Industry Context

StockSavvy.ai notes that this acquisition aligns with a broader trend in the defense and security sectors of integrating advanced AI and computer vision capabilities to enhance threat detection and operational efficiency. Companies are increasingly seeking to leverage these technologies for applications ranging from autonomous systems to critical infrastructure monitoring.

Comparison to Industry Standards

• The structure of the deal, involving a mix of stock and a promissory note, is a common approach in M&A, particularly for technology acquisitions where future performance is a key valuation driver.
• The earnout structure, tied to revenue and EBITDA multiples, is a standard mechanism to bridge valuation gaps between buyers and sellers, aligning incentives for post-acquisition performance.
• The assumption of founder/former shareholder obligations is typical in acquisitions to ensure smooth transitions and address existing commitments, though it adds complexity and potential liability for the acquirer.
• The requirement for BiomX Inc. to file a resale registration statement for the issued shares is a standard practice to facilitate liquidity for the seller, often seen in transactions involving public company stock as consideration.

Related Party Transactions

• Water IO Ltd. is selling Zorro Net Ltd. to BiomX Inc. Water IO Ltd. is controlled by Star 26 Capital Inc., which is owned by T3 Defense Inc., and Menachem Shalom is the controlling shareholder of T3 Defense Inc. and CEO of Water IO Ltd. This represents a series of related entities involved in the transaction.

Stakeholder Impact

• Shareholders of BiomX Inc.: May benefit from the acquisition of new technology, but the issuance of new shares dilutes existing ownership. The value of the promissory note and potential earnout payments represent future financial obligations.
• Founders and Former Shareholders of Zorro Net Ltd.: Will receive a portion of the purchase price in BiomX Inc. stock and a promissory note, with the potential for a significant earnout payment based on future performance.
• Key Employees of Zorro Net Ltd.: Are to be retained for at least three years with comparable employment terms, providing job security and continuity.
• Creditors of BiomX Inc.: The assumption of obligations and the promissory note represent potential future liabilities for BiomX Inc.

Next Steps

• BiomX Inc. to file a registration statement on Form S-3 within 45 days of the Closing Date for the resale of the Share Consideration.
• BiomX Inc. to use commercially reasonable efforts to cause the Registration Statement to become effective and maintain its effectiveness.
• Zorro Net Ltd.'s financial performance in FY2026 will determine the Earnout Payment.
• Earnout Payment to be made to Founder Beneficiaries by March 31, 2027.
• Key employees of Zorro Net Ltd. to be retained for at least three years from the Closing Date.

Key Dates

Recommendation

The acquisition brings valuable AI technology to BiomX Inc., which could drive future growth. However, the significant portion of the consideration being a promissory note and the contingent earnout payment introduce financial risks and uncertainties. The substantial stake acquired by Water IO Ltd. and its affiliates also warrants monitoring. A 'hold' recommendation reflects a balanced view of the potential upside and the inherent risks associated with the deal structure and future performance dependencies.

Keywords

BiomX Inc., Water IO Ltd., Zorro Net Ltd., Stock Purchase Agreement, Acquisition, Visual AI, Computer Vision, Defense Technology, Homeland Security, Critical Infrastructure Protection, Promissory Note, Earnout Payment, Share Consideration, SEC Filing, Schedule 13D