| SIGNIFICANT ACCOUNTING POLICIES | NOTE 2:
- SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements
are prepared according to United States generally accepted accounting principles (“U.S. GAAP”). The significant accounting policies
are applied in the preparation of the financial statements on a consistent basis, as follows:
a. Use of estimates for the preparation of financial statements: The preparation
of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and accompanying notes. On an ongoing basis, the Company’s management
evaluates estimates, including those related to fair values of warrants, fair values of share-based awards, deferred taxes, and contingent
liabilities. Such estimates are based on historical experience and on various other assumptions that are believed to be reasonable, the
results of which form the basis for making judgments about the carrying values of assets and liabilities. These estimates,
judgments and assumptions can affect the reported amounts of assets and liabilities at the dates of the consolidated financial statements,
and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
b. Consolidated financial statements in U.S. dollars: The accompanying
consolidated financial statements have been prepared in U.S. dollars. A substantial portion
of the Company’s expenses are incurred in New Israeli Shekels. However, the Company finances its operations mainly in U.S. dollars,
a substantial portion of its expenses are incurred in U.S. dollars and revenues from its primary markets are anticipated to be generated
in U.S. dollars. As such, the Company’s management believes that the U.S. dollar is the currency of the primary economic environment
in which the Company operates. Thus, the functional and reporting currency of the Company is the U.S. dollar. A subsidiary’s
functional currency is the currency of the primary economic environment in which the subsidiary operates; normally, that is the currency
of the environment in which a subsidiary primarily generates and expends cash. In making the determination of the appropriate functional
currency for a subsidiary, the Company considers cash flow indicators, local market indicators, financing indicators and the subsidiary’s
relationship with both the parent company and other subsidiaries. For subsidiaries that are primarily a direct and integral component
or extension of the parent entity’s operations, the U.S. dollar is the functional currency. The Company has
determined the functional currency of its foreign subsidiaries is the U.S. dollar. The foreign operations are considered a direct
and integral part or extension of the Company’s operations. The day-to-day operations of the foreign subsidiaries are
dependent on the economic environment of the U.S. dollar. Transactions and
balances denominated in U.S. dollars are presented at their original amounts. Monetary accounts maintained in currencies other than the
dollar are re-measured into dollars in accordance with Accounting Standards Codification No. 830, “Foreign Currency
Matters” (“ASC 830”). All transaction gains and losses of the re-measurement of monetary balance sheet items
are reflected in the statements of operations as financial income or expenses, as appropriate.
c. Principles of consolidation: The consolidated
financial statements include the accounts of the Company and its subsidiaries. Intercompany balances have been eliminated upon consolidation.
d. Cash equivalents: Cash equivalents
are short-term, highly liquid investments that are readily convertible into cash with an original maturity of three months or less, at
the date acquired.
e. Restricted cash: Restricted cash is primarily invested
in bank deposits and is used as security for the Company’s lease commitments. The following table provides a reconciliation of the
cash and cash equivalents balances reported on the balance sheets and the cash, cash equivalents and restricted cash balances reported
in the statements of cash flows:
December 31,
2022 2023
Cash and cash equivalents, as reported on the balance sheets $ 5,836 $ 12,657
Restricted cash, as reported on the balance sheets 850 -
Cash, cash equivalents, and restricted cash, as reported in the statements of cash flows $ 6,686 $ 12,657
f. Short-term bank deposits: Short-term bank deposits consist of
bank deposits with original maturities of more than three months and up to twelve months.
g. Restricted deposits: Restricted
deposits are deposits with maturities of up to one year and are used as security for the Company’s lease commitments. Restricted deposits
are presented at their cost, including accrued interest.
h. Property and equipment, net: Property and equipment
are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful
lives of the assets at the following rates:
%
Manufacturing equipment 10
Computers and software 33
Laboratory equipment 10 - 15
Furniture and office equipment 7 - 15
Cars 20
i. Impairment of long-lived assets: The Company’s long-lived
assets are reviewed for impairment in accordance with ASC 360, “Property, Plant and Equipment” (“ASC 360”), whenever
events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to
be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated
by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying
amount of the asset exceeds its fair value. For the years ended
December 31, 2021, 2022 and 2023 there were no impairment losses identified.
j. Leases: On January 1, 2022,
the Company adopted ASU No. 2016-02, Leases (ASC 842). The Company determines if an arrangement meets the definition of a lease at the
inception of the lease. Right-of-use (“ROU”)
assets represent the 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 agreement. ROU assets are initially measured at amounts, which represent the discounted
present value of the lease payments over the lease, plus any initial direct costs incurred. The lease liability is initially measured
at lease commencement date based on the discounted present value of minimum lease payments over the lease term. The implicit rate within
the operating leases is generally not determinable, therefore the Company uses the Incremental Borrowing Rate (“IBR”) based
on the information available at commencement date in determining the present value of lease payments. The Company’s IBR was estimated
to approximate the interest rate for collateralized borrowing with similar terms and payments and in economic environments where the leased
asset was located. Lease term may include
options to extend or terminate the lease when it is reasonably certain that the Company would exercise that option. The Company elected
to not recognize a lease liability ROU asset for leases with a term of twelve months or less. The Company also elected the practical expedient
to not separate lease and non-lease components for its leases. Payments under the
Company’s lease agreements are primarily fixed; however, certain lease agreements contain variable payments, which are expensed
as incurred and not included in the operating lease ROU assets and liabilities. Lease expenses for
lease payments are recognized on a straight-line basis over the lease term.
k. Research and development expenses, net: Research and development
expenses consist of personnel costs (including salaries, benefits and share-based compensation), materials, consulting fees and payments
to subcontractors, costs associated with obtaining regulatory approvals, executing pre-clinical and clinical studies and maintenance and
prosecution of the Company’s intellectual property rights. In addition, research and development expenses include overhead allocations
consisting of various administrative and facilities related costs. The Company charges research and development expenses as expenses when
incurred. Grants from the
Israeli Innovation Authority (IIA) are recognized at the time the Company is entitled to such grants on the basis of the related costs
incurred and recorded as a deduction from research and development expenses.
l. Grants and participations: Royalty-bearing
grants from the Israeli Innovation Authority (“IIA”) (previously known as Office of the Chief Scientist) of the Ministry of
Economy and Industry in Israel for funding of approved research and development projects are recognized at the time the Company is entitled
to such grants, on the basis of the costs incurred, and are presented as a deduction from research and development expenses. Since the payment
of royalties is not probable when the grants are received, the Company does not record a liability for amounts received from IIA until
the related revenues are recognized. In the event of failure of a project that was partly financed by IIA, the Company will not be
obligated to pay any royalties or repay the amounts received. The Company recognized
participations in research and development as a reduction from research and development expenses in the amount of $2,459, $1,343 and $841
for the years ended December 31, 2021, 2022 and 2023, respectively.
m. Accounting for share-based payments: The Company accounts
for share based compensation in accordance with ASC No. 718, “Compensation - Stock Compensation” that requires companies
to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The Company recognizes compensation
expenses for the value of its awards granted based on the straight-line attribution method over the requisite service period of each of
the awards. The Company recognizes forfeitures of awards as they occur. For graded vesting
awards with no market or performance conditions, the Company recognizes the related share-based compensation expense on a straight-line
basis over the requisite service period of the awards. For awards with performance conditions the share-based compensation expense is
recognized if and when the Company concludes that it is probable that the performance condition will be achieved and where the performance
condition awards include graded vesting, the share-based compensation expense is recognized based on the accelerated method. The Company
reassesses the probability of vesting at each reporting period for awards with performance conditions and adjust compensation cost based
on its probability assessment. The Company selected
the Black-Scholes option-pricing model as the most appropriate fair value method for its option awards. The option-pricing model requires
a number of assumptions, of which the most significant are the share price, volatility and the expected option term. The Company measures
the grant date fair value of its Restricted Share Units (“RSUs”) based on the closing market price of the ordinary share on
or immediately before the date of grant. The Company used
the following assumptions for options granted to employees and non-employees:
Year ended December 31,
2021 2022 2023
Expected term (years) 1 5.0-6.3 5.5-6.1 2.5-6.1
Expected volatility 2 85.5%-89.2% 43.5%-87.8% 50.6%-58.0%
Risk-free interest rate 3 0.8%-1.4% 1.6%-3.8% 3.8%-4.5%
Expected dividend yield 4 0% 0% 0%
Fair value of Ordinary share 5 $5.90-$7.64 $4.20-$11.41 $3.01-$4.60
Exercise price $4.00-$11.50 $4.66-$11.50 $3.01-$4.60 These
assumptions and estimates were determined as follows:
1) Expected term
2) Expected volatility
3) Risk-free interest rate
4) Expected dividend yield
5) Fair value of Ordinary shares —
n. Convertible Preferred shares and Convertible Preferred shares warrant liability: The Company’s
Preferred shares were considered a “freestanding financial instrument” pursuant to ASC 480 “Distinguishing Liabilities
from Equity” and were redeemable in a deemed liquidation event, which is not under the control of the Company; thus, the Company
classified the shares outside permanent equity pursuant to ASC 480-10-S99. The Company’s
Warrants to purchase the Company’s Convertible Preferred shares were considered a “freestanding financial instrument”
pursuant to ASC 480. The Warrants were classified as a liability on the balance sheet, initially and subsequently measured at fair value
through earnings, as the underlying shares are contingently redeemable (upon a deemed liquidation event, which is not under the Company’s
control) and, therefore, embody an obligation that is indexed to an obligation to repurchase the Company’s shares by transferring
assets. The change in fair value of the Warrants was recognized as a component of financial expenses, net, in the statements of operation
(see note 9). On the Closing Date,
all Convertible Preferred shares were converted into Ordinary shares of the Company, and all Warrants to purchase Convertible Preferred
shares were converted into Warrants to purchase Ordinary shares of the Company.
o. Ordinary share warrants classification and measurement: The Company accounts
for warrants as either equity-classified or liability-classified instruments based on an assessment of the Warrant’s specific terms
and applicable authoritative guidance. The assessment considers whether the Warrants are freestanding financial instruments, meet the
definition of a liability under ASC 480, are indexed to the Company’s own stock and whether the Warrants are eligible for equity
classification under ASC 815-40. This assessment is conducted at the time of Warrant issuance and as of each subsequent reporting period
end date while the Warrants are outstanding. Warrants that meet
all the criteria for equity classification, are required to be recorded as a component of additional paid-in capital. Warrants that do
not meet all the criteria for equity classification, are required to be recorded as liabilities at their initial fair value on the date
of issuance and remeasured to fair value through earnings at each balance sheet date thereafter. The Company has
classified the SPAC warrants assumed during the Merger (both public and private) as a liability pursuant to ASC 815-40 since the warrants
do not meet the equity classification conditions. Accordingly, the Company measured the warrants at their fair value. The warrants liability
is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of
comprehensive loss. As of December 31,
2022 and 2023, the Company has 2,391,857 and 2,313,976 warrants classified as equity, respectively. In addition, as of December 31, 2022 and 2023, the Company has 2,142,000
and 13,605,561 Public and Private Warrants, respectively, which are classified as a liability (see also notes 8 and 9).
p. Fair value of financial instruments: Fair value is defined
as the exchange price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company measures
financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires the Company to maximize
the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s
classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Three levels of inputs may be used to measure fair value: Level 1 —
quoted prices in active markets for identical assets or liabilities. Level 2 —
inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities. Level 3 —
unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Financial instruments
consist among others of cash equivalents, restricted cash, short-term deposits, restricted deposits, other accounts receivable, trade
payables and other accounts payable and accrued expenses. The estimated fair values of these financial instruments approximate their carrying
value as presented, due to their short-term maturities. We consider public warrant liabilities to be Level 1 and private warrants are
measured at fair value using Level 3 inputs.
q. Income taxes: The Company accounts
for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). ASC 740 prescribes the use of the liability
method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. The Company provides a valuation allowance, to reduce deferred tax assets to their estimated realizable value,
if needed. ASC 740 contains
a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate the tax position
taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than
not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals
or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized
upon ultimate settlement. As of December 31,
2022, and 2023 no liability for unrecognized tax benefits was recorded.
r. Concentration of credit risks: Financial instruments
that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents, restricted cash
and short-term deposits and restricted deposits. Cash, cash equivalents,
restricted cash, short-term deposits and restricted deposits are deposited in major banks in Israel, United States and Japan. Such investments
in Israel and abroad may be in excess of insured limits and are not insured in other jurisdictions. Generally, cash and cash equivalents
may be redeemed upon demand and, therefore, bear minimal risk.
s. Severance pay: All the Company’s
employees who are Israeli citizens have subscribed to Section 14 of Israel’s Severance Pay Law, 5723-1963 (“Section 14”).
Pursuant to Section 14, employees covered by this section are entitled to monthly deposits at a rate of 8.33% of their monthly salary,
made on their behalf by the Company. Payments in accordance with Section 14 release the Company from any future severance liabilities
in respect of those employees. Neither severance
pay liability nor severance pay fund under Section 14 for such employees is recorded on the Company’s consolidated balance
sheets. Severance pay expense
for the years ended December 31, 2021, 2022 and 2023 amounted to $318, $418 and $466, respectively.
u. Contingent liabilities: The Company accounts
for its contingent liabilities in accordance with ASC 450, “Contingencies” (“ASC 450”). A provision is recorded when
it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With respect to legal matters,
provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel
and other information and events pertaining to a particular matter. As of December 31,
2022 and 2023, no provision was recorded.
v. Basic and diluted net loss per share: Prior to the consummation
of the Merger Agreement, the Company computed net loss per share using the two-class method required for participating securities. The
two-class method requires income available to ordinary shareholders for the period to be allocated between Ordinary shares and participating
securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The Company considered
its Convertible Preferred shares to be participating securities as the holders of the Convertible Preferred shares would have been entitled
to dividends that would be distributed to the holders of Ordinary shares, on a pro-rata basis, on an as-converted basis. These participating
securities did not contractually require the holders of such shares to participate in the Company’s losses. As such, net loss for
the periods presented was not allocated to the Company’s participating securities. Following the consummation
of the Merger Agreement, the Company’s basic net loss per share is calculated by dividing net loss attributable to ordinary shareholders
by the weighted-average number of shares of Ordinary shares outstanding for the period, without consideration of potentially dilutive
securities. The diluted net loss per share is calculated by giving effect to all potentially dilutive securities outstanding for the period
using the treasury share method or the if-converted method based on the nature of such securities. Diluted net loss per share is the same
as basic net loss per share in periods when the effects of potentially dilutive shares of Ordinary shares are anti-dilutive.
w. Recently adopted Accounting Standards: In February 2016,
the FASB issued ASU No. 2016-02, Leases (ASC 842). The standard requires the recognition of ROU assets and lease liabilities for all leases.
The standard requires a modified retrospective transition approach to recognize and measure leases at the initial application. The Company adopted
the standard as of January 1, 2022, using a modified retrospective transition approach and elected to use the effective date as the date
of initial application. The Company adopted the “package of practical expedients”, which permits it not to reassess under
the new standard its prior conclusions about lease identification, lease classification and initial direct costs. As a result, the consolidated
balance sheets as of December 31, 2021 were not restated, continue to be reported under ASC 840, which did not require recognition of
operating lease assets and liabilities on the balance sheets, and are not comparative. The Company recognized
in its consolidated balance sheet ROU assets and lease liabilities of $6,089 on January 1, 2022, which included reclassifying deferred
rent and rent prepayments as components of the ROU assets.
x. Recently issued accounting pronouncements not yet adopted: 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 reflect this election. In November 2023,
the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment
Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their
reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single
reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation
requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and
for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating
the impact of adopting ASU 2023-07. In December 2023,
the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual
basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated
by jurisdiction. For the Company, ASU 2023-09 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted.
The Company is currently evaluating the impact of adopting ASU 2023-09. |
