| SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 SIGNIFICANT ACCOUNTING POLICIES: The accompanying Financial Statements have been
prepared in conformity with the U.S. GAAP. The significant accounting policies followed in the preparation of the Financial Statements
are as follows: A.
Conversion from IFRS to U.S. GAAP- The Company has retroactively converted its historical
Financial Statements that were prepared in accordance with International Financial Reporting Standards (“IFRS”) to present
such Financial Statements in accordance with U.S. GAAP. This is the first Financial Statement presented according to U.S. GAAP. The Company is an Israeli company, and its business
operates in the medical technology industry in the field of respiratory support technology and intends to focus its commercial efforts
mainly in the USA. The Company’s both long and short-term intentions are to conduct clinical trials in the U.S. with the goal to
receive FDA approval as a first and major milestone. The significant differences between IFRS and U.S.
GAAP as they relate to these Financial Statements are as follows: (a) Leases Under IFRS, prior to the adoption of U.S. GAAP,
the Company, as lessee, applied the single lease model that is similar to the accounting for a finance lease under U.S. GAAP. The expense
recognition presented a higher portion of the total expense earlier in the lease term as a combination of straight-line depreciation of
the right-of-use asset and the effective interest rate method applied to the lease liability results in a decreasing rate of interest
expense recognition throughout the lease term. In addition, the presentation of the lease expenses in the statements of comprehensive
loss is different. Under U.S. GAAP it is presented as lease expenses, while under IFRS it is presented as depreciation and interest expense. Under U.S. GAAP, there is dual classification
lease accounting model for lessees: finance leases and operating leases. The Company, as lessee, classified all its leases as operating
leases and recognizes a single lease expense, including both a right-of-use asset depreciation component and an interest expense component,
on a straight-line basis throughout the lease term. (b) Financial Liabilities The Company issued tradable warrants to investors
in its initial public offering (the “IPO”) and warrants to its pre-IPO investors. Under IFRS, warrants issued by the Company
were classified as financial liabilities and measured at fair value with changes recognized in profit or loss. However, under U.S. GAAP,
those warrants are classified as equity instruments due to the change in its functional currency. Upon transitioning to U.S. GAAP, the Company has
re-evaluated the classification of its warrants and determined that they meet the criteria for classification as equity instruments. Therefore,
the warrants have been reclassified from financial liabilities to equity in the Financial Statements. This reclassification has been applied retroactively
to all periods presented in accordance with the requirements of U.S. GAAP. Consequently, the Financial Statements for prior periods have
been adjusted to reflect the reclassification of warrants from financial liabilities to equity. Following the change in determining the warrants
classification, the Company had changed its IPO expenses allocation between equity and issuance expenses. ( c) Change in Functional Currency Reporting Under IFRS, the functional currency is determined
based on the currency of the primary economic environment in which the entity operates. However, under U.S. GAAP, the functional currency
is determined based on the currency of the primary economic environment in which the entity generates and expends cash. As a result of this change, the Company has reassessed
its functional currency and determined that it now aligns with the currency of the primary economic environment in which cash receipts
and payments occur, in accordance with U.S. GAAP requirements. This change in functional currency reporting has
been applied retroactively. Management believes that this change in functional
currency reporting better reflects the economic substance of the Company’s operation. (d) Government Grants Under International Accounting Standards (“IAS
20”) (under IFRS), the Company capitalized government grants according to revenue forecast and recognized financial expenses over
time. However, under U.S. GAAP, the Company will recognize
royalties only when it starts to generate revenues. This differs from IFRS, where the Company recognized capitalized liability, financial
expenses and lower grant in the research and development expenses. The conversion from IFRS to U.S.
GAAP based USD as our operational currency and following other U.S. GAAP differences, resulted in change of our financial results. U.S. GAAP differences as of December
31, 2022:
Note IFRS U.S. GAAP
Other current assets 2A(c) 591 589
Right of use assets, net 2A(a) 1,107 1,263
Trade accounts payables 2A(c) 150 152
Other accounts payables 2A(c) 1,217 1,216
Current lease liabilities 2A(a) 329 268
Financial liabilities at fair value 2A(b) 368 26
Long term lease liabilities 2A(a) 728 873
Loan from the Israeli Innovation Authority (“IIA”) 2A(g) 398 -
Foreign exchange reserve 2A(c) (1,928 ) -
Share capital and additional paid in capital 2A(b) 53,814 57,866
Accumulated losses 2A (39,064 ) (44,235 )
Total Shareholders’ Equity 2A 12,822 13,631 U.S. GAAP differences for the year
ended December 31, 2021:
IFRS U.S. GAAP
Research and development expenses 3,909 4,070
Sales and marketing expenses 1,951 1,980
General and administrative expenses 7,572 6,937
Other expenses (income) - (23 )
Operating loss 13,432 12,964
Interest income from deposit - (1 )
Finance expenses (income), net 3,523 4,230
Loss before tax 16,955 17,193
Taxes on income - -
Total net loss 16,955 17,193
Exchange (losses) profits arising on translation to presentation currency (845 ) -
Total comprehensive loss 16,110 17,193 U.S. GAAP differences for the year
ended December 31, 2022:
IFRS U.S.
GAAP
Research and development expenses 8,054 8,183
Sales and marketing expenses 1,325 1,328
General and administrative expenses 5,391 5,375
Other expenses (income) - 7
Operating loss 14,770 14,893
Interest income from deposits - (192 )
Finance expenses (income), net (4,497 ) 275
Loss before tax 10,273 14,976
Taxes on income - -
Total net loss 10,273 14,976
Exchange (losses)profits arising on translation to presentation currency 2,138 -
Total comprehensive loss 12,411 14,976 B.
Use of estimates: The preparation of Financial Statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the Financial Statements, and the reported amounts of expenses during the reporting period. Items subject to such estimates and assumptions include:
● stock-based compensation expense;
● fair value financial liabilities;
● recognition, measurement, and disclosure of contingent liabilities;
● Interest rate used for lease liability measurement. As of the date of issuance of the Financial Statements,
the Company is not aware of any material specific events or circumstances that would require it to update its estimates, judgments, or
to revise the carrying values of its assets or liabilities. These estimates may change, as new events occur and additional information
is obtained, and are recognized in the Financial Statements as soon as they become known. Actual results could differ from those estimates
and any such differences may be material to the Company’s Financial Statements. C.
Foreign Currency The currency of the primary economic environment
in which the operations of the Company are conducted is the U.S. dollar (“USD”). The Company’s funding and expected
revenues are mostly in USD. Thus, the functional currency of the Company is in USD. Transactions and balances originally denominated
in USD are presented at their original amounts. Balances in non-USD currencies are translated into USD using historical and current exchange
rates for non-monetary and monetary balances, respectively. For non-USD 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 expenses (income), net as appropriate. The functional currency
of the Company is USD. D.
Property, Plant, and Equipment Property and equipment are stated at cost. Depreciation
is computed based on the straight-line method, over the estimated useful life of the assets. Annual rates of depreciation are as follows:
%
Computers 33
Development equipment 20
Furniture and office equipment 6-15
Leasehold Improvements 10 E.
Leases The Company implemented Accounting Standards Update
(“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”) using the modified retrospective approach for all lease arrangements
as of such date. The Company leases office space and vehicles under operating leases. Arrangements meeting the definition of a
lease are classified as operating or financing leases and are recorded on the balance sheet as both a right of use asset and lease
liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the
Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the
right of use asset is amortized over the lease term. The lease liability was measured at the present
value of the remaining lease payments, discounted using the Company’s incremental borrowing rate. The weighted-average rate
applied was 9.60%. Right-of-use assets were measured at an amount equal to the lease liability. For operating leases, interest on the lease liability
and the amortization of the right of use asset result in straight-line rent expense over the lease term. Variable lease expenses
are recorded when incurred. F.
Research and Development Costs. Research and development
expenses consist primarily of payroll, payroll related expenses, subcontractors, and materials. Costs are expensed as incurred. G.
Government Grants The Company receives royalty-bearing grants from
the IIA for approved research and development projects. Under Israeli law, royalties on the revenues derived from products and services
developed using such grants, are payable to the Israeli Government. Royalties payable with respect to grants received
under programs approved after January 1, 1999, are subject to interest on the dollar-linked value of the total grants received at an annual
rate of London Interbank Offered Rate (“LIBOR”) applicable to dollar deposits. In September 2021, the Bank of Israel, which
determines annual interest rates, published a directive which stated that annual interest at a variable rate linked to the LIBOR rate
for loans in USD will be replaced by the Secured Overnight Financing Rate, (“SOFR”), in January 2024. The amounts of grants
received and recorded into income should be disclosed for each period presented. The research and development grants are presented in
the statement of operations as an offset to related research and development expenses. Companies are required to pay royalties in connection
with such grants at specified rates, up to the total dollar-linked amount of such grants. H.
Finance Income and Expenses. Finance income is composed of interest on deposits,
while finance expenses are composed of interest on senior secured credit facility, bank charges and net currency exchange rates differences. I.
Current Taxes The current tax liability
is measured using the tax rates and tax laws that have been enacted or substantively enacted by the reporting date as well as adjustments
required in connection with the tax liability in respect of previous years. The Company has no tax liability due to its carry forward
losses. J.
Share-Based Compensation. Share-based compensation
expenses related to employees, directors and subcontractors’ options or restricted share units, (“RSU”) which recognized based
on their fair value, which is based on the fair value of the underlying Ordinary Shares as to the de-minimis exercise price using the
graded vesting method. The Company recognizes compensation expense for
grants of share-based awards to its employees based on the estimated fair value on the grant date. Compensation cost for awards is recognized
over the requisite service period, which approximates the vesting period. Share-based compensation is included in research and development,
selling and marketing and general and administrative expenses. Forfeitures of equity grants are recognized as incurred. All issuances of stock options or other equity
instruments to non-employees as consideration for goods or services received by the Company are accounted for based on the fair value
of the equity instruments issued. K.
Warrants The Company issues warrants as part of its financing
activities or compensation arrangements. Warrants are derivative financial instruments that entitle the holder to purchase a specified
number of the Company’s ordinary shares at a predetermined exercise price. Warrants issued by the Company may have various terms, including
expiration dates, exercise prices, and conditions. The Company classifies warrants as either equity
or liabilities upon issuance, based on specific terms and conditions and in accordance with Accounting Standard Codification (“ASC”)
815, Derivatives and Hedging. Warrants are classified as equity if they meet the criteria for equity classification outlined in ASC 815-40.
Otherwise, warrants are classified as liabilities. L.
Severance Israeli labor law generally requires payment of
severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances. The Company’s pension
and severance pay liabilities are covered mainly by insurance policies. Pursuant to section 14 of the Israeli Severance Compensation Act,
1963 (“Section 14”), the Company’s employees are entitled to monthly deposits, at a rate of 8.33% of their monthly salary,
made in their name with insurance companies. Payments in accordance with Section 14 relieve the Company from any future severance payments
in respect of those employees and, as such, the Company may only utilize the insurance policies for the purpose of paying severance pay. M.
Basic and Diluted Loss Per Share Basic and diluted loss per share is calculated
by dividing the loss attributable to equity holders of the Company by the weighted average number of Ordinary Shares outstanding during
the financial year, adjusted for Ordinary Shares issued during the year, if applicable. N.
Fair Value Measurements The Company measures and discloses fair value
in accordance with the Financial Accounting Standards Board (“FASB”), ASC 820, Fair Value Measurements and Disclosures (“ASC
820”). ASC 820 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value,
and expands disclosures about fair value measurements. Fair value is an exit price, representing the amount 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. As such,
fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing
an asset or liability. As a basis for considering such assumptions, there exists a three-tier fair-value hierarchy, which prioritizes
the inputs used in measuring fair value as follows: Level 1 – unadjusted quoted prices are available
in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date. Level 2 – pricing inputs are other than
quoted prices in active markets that are directly observable for the asset or liability or indirectly observable through corroboration
with observable market data. Level 3 – pricing inputs are
unobservable for the non-financial asset or liability and only used when there is little, if any, market activity for the
non-financial asset or liability at the measurement date. The inputs into the determination of fair value require significant
management judgment or estimation. Level 3 inputs are considered as the lowest priority within the fair value hierarchy. This hierarchy requires the Company to use observable
market data, when available, and to minimize the use of unobservable inputs when determining fair value. The fair value of cash is based on its demand
value, which is equal to its carrying value. Additionally, the carrying value of all other short-term monetary assets and liabilities
are estimated to be equal to their fair value due to the short-term nature of these instruments. O.
Concentration of Credit Risk The Company maintains certain cash balances in
a well-known Israeli banks and U.S based banks. The Company’s operating expenses are denominated
mainly in New Israeli Shekel (“NIS”), and therefore, subject to foreign currency risk. P.
Cash and Cash Equivalent Cash equivalents are highly liquid investments
that are readily convertible into cash, typically with an original maturity 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. Restricted
cash consists of funds that are contractually restricted to bank guarantee due to rental agreements. The Company has presented
restricted cash separately from cash and cash equivalents in the balance sheets. Q.
Segment Information The Company
has a single operating and reportable segment. The Company’s chief operating decision maker (“CODM”), who is the Chief
Executive Officer, evaluates the performance of its business based on financial data consistent with the presentation in the accompanying
Financial Statements for the purposes of making operating decisions, assessing financial performance, and allocating resources. R.
New accounting Pronouncements Accounting
Standards Adopted in 2023 ASU 2023-03
In July
2023, the FASB issued ASU 2023-03 to amend various U.S. Securities and Exchange Commission (the “SEC”) paragraphs in the
ASC to primarily reflect the issuance of SEC Staff Accounting Bulletin No. 120. ASU No. 2023-03, “Presentation of Financial Statements
(Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity
(Topic 505), and Compensation—Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin
No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release
280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock.” ASU 2023-03 amends the ASC for SEC updates
pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement In June
2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820), “Fair Value Measurement of Equity Securities Subject to Contractual
Sale Restrictions” which clarifies that contractual restrictions on equity security sales are not considered part of the security
unit of account and, therefore, are not considered in measuring fair value. In addition, the restrictions cannot be recognized and measured
as separate units of account. Disclosures on such restrictions are also required. The amendments are effective for Fiscal years beginning
after December 15, 2023, and interim periods within those fiscal years on a prospectively basis. The Company expects that ASU 2022-03
will not have a material impact on its Financial Statements and related disclosures. Accounting
Pronouncements Issued but Not Yet Adopted In November
2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU expands public
entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the CODM 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 segment’s profit or loss and assets. All disclosure requirements under ASU 2023-07 are also
required for public entities with a single reportable segment. The ASU’s amendments are effective for all public entities for fiscal
years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption
permitted. We are currently evaluating the impact of this pronouncement on our Financial Statements. In December
2023, the FASB issued ASU 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure
of Crypto Assets, which addresses the accounting and disclosure requirements for certain crypto assets. This ASU requires entities to
subsequently measure certain crypto assets at fair value, with changes in fair value recorded in net income in each reporting period.
In addition, entities are required to provide additional disclosures about the holdings of certain crypto assets. The ASU’s amendments
are effective for all entities holding assets that meet certain scope criteria for fiscal years beginning after December 15, 2024, including
interim periods within those years. Early adoption is permitted for both interim and annual periods. If an entity adopts the amendments
in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. We do not expect this
pronouncement to have a material impact on our Financial Statements. In December
2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Under this ASU, public entities must
annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that
meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than five percent of the amount computed
by multiplying pretax income or loss by the applicable statutory income tax rate). This ASU’s amendments are effective for all entities
that are subject to Topic 740, Income Taxes, for annual periods beginning after December 15, 2024, with early adoption permitted. We are
currently evaluating the impact of this pronouncement on our disclosures. |
