SIGNIFICANT ACCOUNTING POLICIES |
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| Significant Accounting Policies [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SIGNIFICANT ACCOUNTING POLICIES |
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES:
The
Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the
United States ("U.S. GAAP").
The
preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. As applicable to these financial statements, the most significant
estimates and assumptions relate to fair value of financial instruments and share-based compensation (see Notes 12 and 11, respectively).
These estimates and assumptions are based on current facts, future expectations, and various other factors believed to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the
recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these
estimates.
The
Company's operations are currently conducted in Israel and some of the Company's expenses are currently paid in new Israeli shekels ("NIS");
however, the markets for the Company's future products are located outside of Israel. Financing activities are conducted in U.S. dollar
(“dollar” or "$"). The Company's management believes that the US 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 dollar. The functional currency of Silexion
is the U.S. dollar, inter alia, in light of the composition of expenses and expected volume of intercompany transactions with the Company.
Transactions
and balances originally denominated in dollars are presented at their original amounts. Balances in non- U.S. dollar currencies are translated
into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. For non-dollar transactions
and other items in the statements of operations (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 or expenses, as appropriate.
The
accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and
transactions have been eliminated in consolidation.
The
financial statements of the Company and its subsidiaries are prepared as of the same dates and periods. The consolidated financial statements
are prepared using uniform accounting policies by all companies in the Group.
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
balances for which use by the Company is subject to third party contractual restrictions are included as part of cash unless the restrictions
result in a bank balance no longer meeting the definition of cash. If the contractual restrictions to use the cash extend beyond 12 months
after the end of the reporting period, the related amounts are classified as non-current in Balance sheets.
As
of December 31, 2024 and 2023, the Company pledged an amount of $57
and $25,
respectively in favor of a bank as collateral for guarantees provided to secure the lease payments.
The
Company is required to hold a minimum amount of NIS 95
in its bank account in order to maintain availability of a credit line from its credit card company.
The
Company includes its restricted cash in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts
shown on the combined statement of cash flows.
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 annual rates:
*
Leasehold improvements are amortized by the straight-line method over the expected lease term, which is shorter than the estimated useful
life of the improvements.
The
Company is required to make severance payments upon dismissal of an employee or upon termination of employment in certain circumstances.
In
accordance with the current employment terms with all of its employees located in Israel, and pursuant to Section 14 of the Israeli Severance
Pay Law, 1963, the Company makes and has been continuously making, since the beginning of employment of each of its current employees,
regular deposits, at a rate of 8.33%
of their monthly salary, with certain insurance companies for accounts controlled by each applicable employee in order to secure the employee’s
full severance pay obligation.
Under
these circumstances, the Company is currently relieved from any severance pay liability with respect to each such employee. Neither the
liability in respect of these employees nor the credit for the amounts funded are reflected on the Company’s consolidated balance
sheets, as the amounts funded are not under the control or management of the Company and the severance pay risks have been irrevocably
transferred to the applicable insurance companies.
The
amounts of severance payment expenses were $122
and $74
for the years ended December 31, 2024 and 2023, respectively.
Fair
value is based on the price that would be received from the sale of an asset or that would be paid to transfer a liability in an orderly
transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements,
the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three
broad levels, which are described as follows:
In
determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable
inputs to the extent possible and considers counterparty credit risk in its assessment of fair value.
When the Company issued preferred shares, it first considered the provisions of ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) in order to determine whether the preferred share should be classified as a liability. If the instrument is not within the scope of ASC 480, the Company further analyzed the instrument’s characteristics in order to determine whether it should be classified within temporary equity (mezzanine) or within permanent equity in accordance with the provisions of ASC 480-10-S99. The Company’s redeemable convertible preferred shares were not mandatorily or currently redeemable. However, they included clauses that could constitute as in-substance redemption clauses that were outside of the Company’s control. As such, all shares of redeemable convertible preferred shares had been presented outside of permanent equity. The Redeemable Convertible Preferred Shares were converted into ordinary shares in the framework of the recapitalization transaction as described in Note 1(d). When
the Company issued other freestanding instruments, the Company first analyzed the provisions of ASC 480 in order to determine whether
the instrument should be classified as a liability, with subsequent changes in fair value recognized in the statements of operations in
each period. If the instrument was not within the scope of ASC 480, the Company further analyzed the provisions of ASC 815-40 in order
to determine whether the instrument should be classified within equity or classified as an asset or liability, with subsequent changes
in fair value recognized in the statements of operations in each period.
The
Company’s issued financial instruments convertible to preferred shares were in the scope of ASC 480. For further details see Note
8.
When
the Company becomes party to freestanding financial instruments, the Company first analyzes the provisions of ASC 480 in order to
determine whether the instrument should be classified as a liability, with subsequent changes in fair value recognized in the statements
of operations in each period. Warrants to purchase ordinary shares are not within the scope of ASC 480, and as such the Company further
analyzes the provisions of ASC 815-40 in order to determine whether the contract should be classified within equity or classified
as a liability, with subsequent changes in fair value recognized in the statements of operations in each period.
Under ASC
815-40, contracts that are not indexed to the Company’s own stock are classified as liabilities recorded at fair value, As such,
the Company classifies private warrants (see Note 3(e)) as liabilities and measures them at their fair value at each reporting period.
This liability is subject to re-measurement at each balance sheet date until the private warrants are exercised or expire, or upon reassessment
of classification. Similarly, the Company classifies the ELOC Agreement entered into (see Note 3(d)) as a derivative instrument measured
at fair value at each reporting period, as settlement provisions under this agreement are not indexed to the Company’s own stock.
The
Company reassesses the classification of a contract over its own equity under the guidance above at each balance sheet date. If classification
changes as a result of events during the reporting period, the Company reclassifies the contract as of the date of the event that caused
the reclassification. When a contract over own equity is reclassified from a liability to equity, gains or losses recorded to account
for the contract at fair value during the period that the contract was classified as a liability are not reversed, and the contract is
marked to fair value immediately before the reclassification.
Under
the Fair Value Option Subsection of ASC Subtopic 825-10, the Company has an irrevocable option to designate certain financial liabilities
at fair value on an instrument-by-instrument basis, with changes in fair value reported in the statement of operations. The Company designated
the Promissory Notes issued as part of the Transactions under the fair value option. See Note 3(a) and (b). Fair value gains and losses
include interest expenses.
Non-controlling
interests with embedded redemption features, whose settlement is not at the Company’s discretion, are considered redeemable non-controlling
interests. Redeemable non-controlling interests are considered to be temporary equity and are therefore presented as a mezzanine section
between liabilities and equity on the Company's consolidated balance sheets. Redeemable non-controlling interests are measured at the
greater of the initial carrying amount adjusted for the non-controlling interest’s share of comprehensive income or loss or its
redemption value. Subsequent adjustment of the amount presented in temporary equity is currently not required because the Company's management
estimates that it was not probable that the instrument will become redeemable. Adjustments of redeemable non-controlling interest to its
redemption value are recorded through additional paid-in capital.
As
indicated in Note 1 above, following the Transaction, the redeemable non-controlling interests held by GIBF were converted into ordinary
shares of the Company and are no longer outstanding.
The
Company’s employees and non-employees share-based payment awards are classified as equity awards. The Company accounts for these
awards using the grant-date fair value method. The fair value of share-based payment transactions is recognized as an expense over the
requisite service period using the straight-line method.
The
Company elected to recognize compensation costs for awards conditioned only on continued service that have a graded vesting schedule using
the straight-line method based on the multiple-option award approach. Forfeitures are recognized as they occur.
The
Company accounts for its non-employees’ equity-classified share-based payment in a similar manner.
Research
and development costs are charged to the statements of operations as incurred. Research and development expenses include costs directly
attributable to the conduct of research and development programs, including the cost of payroll and subcontractors, as well as share-based
payments. Advance payments for goods or services that will be used or rendered for future research and development activities are
deferred. Such amounts are recognized as an expense as the related goods are used or the services are rendered.
Grants
received from the Israeli Innovation Authority (“IIA”) for 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 included as a deduction from research and development
expenses, see Note 7. The Company did not receive any grants during 2023 and 2024.
The
Company recognizes operating lease payments in the consolidated statements of operations on a straight-line basis over the lease term.
Right-of-use (“ROU”) assets represent the right to use an underlying asset for the lease term and lease liabilities represent
the obligation to make minimum lease payments arising from the lease. ROU assets are initially measured at amounts representing
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 discount
rate for the lease is the rate in the lease unless that rate cannot readily determined. As the Company's leases do not provide an implicit
rate, the Company uses an estimated incremental borrowing rate (“IBR”) based on the information available at commencement
date in determining the present value of lease payments. The Company’s IBR is estimated to approximate the interest rate for collateralized
borrowing with similar terms and payments and in economic environments where the leased asset is located. During the reporting periods,
the Company has only operating leases.
Payments
under the Company’s lease arrangements are primarily fixed, however, certain lease agreements contain variable payments, which are
expensed as incurred and not included in the operating lease right-of-use assets and liabilities. The Company elected the practical expedient
not to separate lease and non-lease components. The Company has made a policy election not
to capitalize leases with a term of 12 months or less.
The
Company computes basic loss per share in accordance with ASC Topic 260, Earnings per Share, by dividing the net loss attributable to ordinary
shareholders by the weighted average number of ordinary shares outstanding during the year, and fully vested pre-funded options for the
Company's ordinary shares at an exercise price of $0.0226
or 0.0226
NIS per share. The Company considers these shares to be exercised for little to no additional consideration.
Diluted
loss per share is computed by considering the potential dilution that could occur upon the exercise of awards granted under share-based
compensation plans and equity-classified instruments using the treasury stock method. Impact of liability-classified instruments on diluted
loss per share is considered using the if-converted method. Diluted loss per share excludes all dilutive potential ordinary shares if
their effect is anti-dilutive.
Prior
to the Transactions, the Company calculated loss per share using the two-class method required for participating securities. This method
entails allocating income available to ordinary shareholders for the period between ordinary shares and participating securities based
on their respective rights to receive dividends as if all income for the period had been distributed. The Company considered its redeemable
convertible preferred shares to be participating securities, as the holders of the redeemable convertible preferred shares were entitled
to dividends that would be distributed to the holders of ordinary shares, on a pro-rata basis assuming conversion of all redeemable convertible
preferred shares into ordinary shares. However, these participating securities did not contractually require the holders to participate
in the Company's losses. Consequently, net loss for the applicable periods presented was not allocated to the Company's participating
securities.
Income
taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities
are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using
the currently enacted tax rates and laws. A valuation allowance is recognized to the extent that it is more likely than not that the deferred
taxes will not be realized in the foreseeable future. Given the Company’s losses, the Company has provided a full valuation allowance
with respect to its deferred tax assets.
The
Company follows a two-step approach in recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position
for recognition by determining if the available evidence indicates that it is more likely than not that the tax position will be sustained
upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position.
If this threshold is met, the second step is to measure the tax position as the largest amount that has more than a 50% likelihood of
being realized upon ultimate settlement.
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. The Company deposits cash and cash equivalents mostly with four low risk financial institutions. The Company
has not experienced any material credit losses in these accounts and does not believe it is exposed to significant credit risk on these
instruments.
The
Company tests long-lived assets for impairment whenever events or circumstances indicate the carrying amount may not be recoverable. If
the sum of expected future cash flows (undiscounted and without interest charges) of the assets is less than the carrying amount of such
assets, an impairment loss would be recognized. The assets would be written down to their estimated fair values, calculated based on the
present value of expected future cash flows (discounted cash flows), or some other fair value measure.
For
the years ended December 31, 2024 and 2023, the Company did not recognize an impairment loss for its long-lived assets
Certain
conditions may exist as of the date of the financial statements, which may result in a loss to the Company, but which will only be resolved
when one or more future events occur or fail to occur. The Company’s management assesses such contingent liabilities, and such assessment
inherently involves an exercise of judgment.
Management
applies the guidance in ASC 450-20-25 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 financial statements. If the assessment indicates that a potential material loss
contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability,
together with an estimate of the range of possible loss if determinable and material are disclosed. As of December 31, 2024,
and December 31, 2023, no contingent liabilities have been recognized.
The
Company qualifies as an emerging growth company (“EGC”) as defined under the Jumpstart Our Business Startups Act (the “JOBS
Act”). Using exemptions provided under the JOBS Act for EGCs, the Company has elected to defer compliance with new or revised ASUs
until it is required to comply with such updates, which is generally consistent with the adoption dates of private companies.
Recently
Adopted accounting pronouncements:
Recently
issued accounting standards not yet adopted:
As
an Emerging Growth Company, the ASU is effective for fiscal years beginning after December 15, 2024, and interim periods within those
fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available
for issuance. The Company is currently evaluating the effect that ASU 2022-03 will have on its consolidated financial statements and related
disclosures. |