Nuvectis Pharma Inc

NOTE 1 – GENERAL:

The Company is a biopharmaceutical company, which operates asone segment, focused on the development of novel targeted small molecule therapeutics for the treatment of cancer in genetically defined patient populations. The Company’s precision medicine approach translates key scientific insights relating to the oncogenic drivers and pathway addiction of cancer into potential potent and highly selective anticancer drugs.

On February 8, 2022, the Company’s shares began trading on the NASDAQ under symbol “NVCT” (see note 6b)

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred net operating losses since its inception and had an accumulated deficit of $54.2 million as of December 31, 2023. The Company had cash and cash equivalents of $19.1 million as of December 31, 2023 and has not generated positive cash flows from operations. To date, the Company has been able to fund its operations primarily through the issuance and sale of common shares and redeemable convertible preferred shares.

During the year ended December 31, 2023, the Company sold a total of 371,743 shares of common stock under the ATM for aggregate total gross proceeds of approximately $5.3 million at an average selling price of $14.23 per share, resulting in net proceeds of approximately $5.1 million after deducting commissions and other transaction costs. See note 11.e for at-the-market activity subsequent to December 31, 2023.

Based on management’s cash flow projections, the Company believes that the Company’s currently available cash and cash equivalents as of December 31, 2023 is sufficient to fund the Company’s planned operations for a period greater than 12 months from the issuance of these financial statements. The Company will need to raise additional capital in order to complete the clinical trials aimed at developing the product candidates until obtaining its regulation and marketing approvals. There can be no assurances that the Company will be able to secure such additional financing if at all, or at terms that are satisfactory to the Company, and that it will be sufficient to meet its needs. In the event the Company is not successful in obtaining sufficient funding, this could force the Company to delay, limit, or reduce our products’ development, clinical trials, commercialization efforts or other operations, or even close down or liquidate.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES:

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and stated in U.S. dollars. The significant accounting policies used in the preparation of the financial statements are as follows:

The Company hasone operating segment. An operating segment is defined as a component that engages in business activities whose operating results are reviewed by the chief operating decision maker for the purpose of assessing performance and allocating resources and for which discrete financial information is available.

The preparation of the Company’s financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses in the Company’s financial statements and accompanying notes. The most significant estimates in the Company’s financial statements relate to accruals for research and development expenses, valuation of share based compensation awards, and valuation allowances for deferred tax assets. 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 U.S. dollar (“dollar”) is the currency of the primary economic environment in which the operations of the Company are conducted and expects to continue to operate in the foreseeable future. Accordingly, the functional currency of the Company is the dollar.

Adjustments arising from foreign currency transactions between the purchase and the settlement dates are reflected in the statements of operations as a component of financial income (expense). 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 rates; and (ii) for other items (derived from non-monetary balance sheet items such as depreciation) — historical exchange rates.

The Company did not recognize foreign currency transaction gains or losses in the years ended December 31, 2023 and December 31, 2022.

The Company considers as cash equivalents all highly liquid investments, which include short-term bank deposits that are not restricted as to withdrawal or use, with maturities of three months or less at the date acquired.

The Company is subject to credit risk from holding its cash and cash equivalents at one commercial bank. The Company limits its exposure to credit losses by investing in money market accounts which are included in cash and cash equivalents through a U.S. bank with high credit ratings. Cash may consist of deposits held with banks that may at times exceed federally insured limits, however, exposure to credit risk in the event of default by the financial institution is limited to the extent of amounts recorded on the balance sheets. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

In accordance with Accounting Standards Codification (“ASC”) 842, Leases, the Company defines a short-term lease if a lease has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. At the inception of the lease and as of December 31, 2023, the Company determined all leases were classified as short-term. Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term in general and administrative. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The operating lease costs for 2023 and 2022 were $14 thousand and $13 thousand, respectively.

Research and development expenses include costs directly attributable to the conduct of research and development programs, including licensing fees, cost of salaries, share-based compensation expenses, payroll taxes and other employee benefits, subcontractors, materials used for research and development activities, and professional services. All costs associated with research and development are expensed as incurred.

General and administrative expenses consist primarily of personnel-related expenses, including employee salaries, bonuses, benefits, and share-based compensation, and recruiting costs for personnel in executive, finance, and other administrative functions. Other significant general and administrative expenses include legal fees relating to intellectual property and corporate matters, professional fees for accounting, tax and consulting services, insurance costs, and travel expenses. General and administrative costs are expensed as incurred.

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, 2023, and December 31, 2022, no contingent liabilities have been recognized.

The Company accounts for employees’, directors’ and service providers’ share-based payment awards classified as equity 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. The equity awards could come in the form of options, warrants and RSAs.

The Company elected to recognize compensation costs for awards using the accelerated method based on the multiple-option award approach. Performance based awards are expensed over the vesting period only if the achievement of performance criteria is probable.

The Company has elected to recognize forfeitures as they occur.

For options containing a market condition, the market conditions are required to be considered when calculating the grant date fair value. ASC 718 requires selection of a valuation technique that best fits the circumstances of an award. (see note 7). In order to reflect the substantive characteristics of the market condition option award, a Monte Carlo simulation valuation model was used to calculate the grant date fair value of such options. Expense for the market condition options is recognized over the derived service period as determined through the Monte Carlo simulation model.

Comprehensive loss includes no items other than net loss.

The Company accounts for income taxes in accordance with ASC 740, “Income Taxes” (hereafter – “ASC 740”). ASC 740 prescribes that 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 concluded it is more likely than not the deferred tax assets will not be realized and has provided a full valuation allowance with respect to its deferred tax assets.

The Company accounts for uncertain tax positions in accordance with ASC 740-10. 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 position will be sustained based on technical merits. 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. The Company does not have any provision for uncertain tax positions.

The Company’s basic net loss per share is calculated by dividing net loss attributable to ordinary shareholders by the weighted-average number of ordinary shares and vested ordinary shares issuable for little or no further consideration outstanding during 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.

The Company computes 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 redeemable convertible preferred shares to be participating securities as the holders of the redeemable convertible preferred shares would be 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. These participating securities do 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 preferred shares.

The Company follows authoritative accounting guidance, which among other things, defines fair value, establishes a consistent framework for measuring fair value, and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (at exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The three levels of inputs that may be used to measure fair value include:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. The Company’s Level 1 assets consist of money market funds.

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets 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. The fair value hierarchy gives the lowest priority to Level 3 inputs.

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.

The money market accounts totaling $17.1 million are included in cash and cash equivalents and are considered Level 1.

During the years ended December 31, 2023 and 2022, respectively, there were no transfers between fair value measure levels. The Company had no financial assets and liabilities measured at fair value as of December 31, 2023 and 2022, respectively. Other financial instruments consist mainly of cash and cash equivalents, other current assets, accounts payable and accrued liabilities. The fair value of these financial instruments approximates their carrying values.

Deferred offering costs consist of legal and other costs incurred in connection with the formation and preparation for the Initial Public Offering (“IPO”) or the Private Investment in Public Entity (“PIPE”). These costs, along with underwriting fees were charged to additional paid-in capital upon the completion of the IPO or PIPE. The deferred offering costs were offset against the proceeds received upon the completion of the IPO or PIPE.

When the Company issues convertible preferred shares, it considers 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 analyzes 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 are not mandatorily or currently redeemable. However, they include a liquidation or deemed liquidation events that would constitute a redemption event that is outside of the Company’s control. As such, all shares of redeemable preferred shares have been presented outside of permanent equity. Upon the consummation of the IPO, all of the Company's preferred shares were converted into common shares and reclassified from temporary equity, into permanent equity.

The Company determines the accounting classification of warrants that are issued, as either liability or equity, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, (“ASC 480-10”), and then in accordance with ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity (“ASC 815-40”). Under ASC 480-10, warrants are considered liability-classified if the warrants are mandatorily redeemable, obligate the issuer to settle the warrants or the underlying shares by paying cash or other assets, or must or may require settlement by issuing variable number of shares.

If the warrants do not meet liability classification under ASC 480-10, the Company assesses the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability

classification under ASC 815-40, in order to conclude equity classification, the Company assesses whether the warrants are indexed to its common shares and whether the warrants are classified as equity under ASC 815-40 or other applicable GAAP. After all relevant assessments are made, the Company concludes whether the warrants are classified as liability or equity. Liability-classified warrants are required to be accounted for at fair value both on the date of issuance and on subsequent accounting period ending dates, with all changes in fair value after the issuance date recorded as a component of other income (expense), net in the statements of operations. Equity-classified warrants are accounted for at consideration received on the issuance date with no changes in fair value recognized after the issuance date. As of December 31, 2023 and 2022, respectively, all of the Company’s outstanding warrants are equity-classified warrants. See Note 6d.

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments—Credit Losses—Measurement of Credit Losses on Financial Instruments.” This guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company adopted ASU 2016-13 on January 1, 2023 and such adoption did not impact the Company’s financial position, results of operations, cash flows or net loss per share.

In December 2023, FASB issued an Accounting Standard Update No. 2023-09 “Income Taxes (Topic 740)” to enhance the transparency and decision usefulness of income tax disclosure. The amendments in this Update mandate public entities to disclose specific categories in the rate reconciliation and additional information for reconciling items that meet quantitative threshold in the annual tax rate reconciliations. Update requires to present a table showing percentages and currency amounts, outlining tax related aspects such as state/local income tax, foreign tax effect, changes in tax law, credits, valuation allowances, nontaxable and nondeductible items, unrecognized tax benefits. Items that impact tax calculations by 5% and more are required to be disclosed separately, with certain categories required to be disaggregated by jurisdiction or nature. Reconciling items are categorized based on state/local, foreign, or federal/national tax levels. Some items can be presented on a net basis, while others need gross presentation. Entities must provide explanations of the major state/local jurisdictions affecting taxes and explain individual reconciling items. Additionally, the amendments in this Update require that all entities must disclose amount of income taxes paid disaggregated by federal(national) state and by individual jurisdictions in which income taxes paid if equal to or greater than 5% of total income taxes paid. The amendments also require entities to disclose income from continuing operations before income tax expense, and income tax expenses categorized by federal/national, state, and foreign levels. Moreover, certain previous disclosure requirements, like estimating changes in unrecognized tax benefits and cumulative temporary differences in deferred tax liabilities, are eliminated. The amendment in this Update also replaces the term "public entity" with "public business entity" in Topic 740 definitions.

The amendments in this Updated are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued. Retrospective application is permitted. The Company is currently evaluating the impact that ASU No. 2023-09 will have on its consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU No. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU improves reportable segments disclosure requirements,

primarily through enhanced disclosures about significant segment expenses. The ASU also require that a public entity that has a single reportable segment to provide all the disclosures required by the amendments and all existing segment disclosures in Topic 280. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

NOTE 3 – RESEARCH AND DEVELOPMENT EXPENSES:

Research and development expenses consisted of the following (in thousands):

NOTE 4 – GENERAL AND ADMINISTRATIVE EXPENSES:

General and administrative expenses consisted of the following (in thousands):

NOTE 5 – COMMITMENTS AND CONTINGENCIES:

CRT Pioneer Fund License Agreement

In May 2021, the Company entered into a worldwide, exclusive license agreement with the CRT Pioneer Fund for CP800 and any of its derivatives, (collectively, the “CP800 Program”). CP800 is a small molecule drug candidate that the Company believes can be applied to a broad range of cancers. Prior to licensing by the Company, CRT was the commercial owner of the CP800 Program, which it acquired from the Institute of Cancer Research in London, UK (“ICR”). The ICR is a world-renowned research institute focused on the discovery and preclinical development of cancer therapeutics pursuant to the

license agreement, the Company has an obligation to pay success-based milestones and royalties to CRT, as follows: 1) pre-approval milestone payments of up to approximately $26.5 million including an upfront nonrefundable payment of $3.5 million and $1.0 million in patient recruitment milestones which has already been paid; 2) regulatory approval and commercial sales milestones of up $178 million (in addition to the above $26.5 million); and 3) mid-single digit to 10% royalties on a tiered basis on net sales.

On March 31, 2022, the Company and ICR revised the license agreement for research and development support to a total of $865,000 (to allow for additional research activities). $0.6 million and $0.3 million of expense of the research and development support was recognized during the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, all the expense has been recognized.

The license will remain in effect in each territory subject to the license and will continue until the Company’s obligation to pay royalties in such territory has expired. The royalty term for each licensed product in each country commences with the first commercial sale of the applicable licensed product in the applicable country and ends on the expiration of the last to expire of any patent specified by the license (with the key composition of matters patent expiring October 2034) or the expiration of any extended exclusivity period in the relevant country. CRT may earlier terminate the license if the Company, or any of our affiliates or sub-licensees, challenge or seek to challenge the validity of any of the licensed patents or upon a change of control in which the Company becomes controlled by a Tobacco Party, as such term is defined in the license. Either party may terminate the license upon material breach by the other party, and upon the appointment of a receiver or upon a winding-up order or similar or equivalent action.

For the years ended December 31, 2023 and 2022, the Company paid zero and $1.0 million in license fees associated with the achievement of certain milestones, respectively. These expenses were recorded as research and development expenses. Any potential future research support, milestone or royalty payment amounts have not been accrued at December 31, 2023 and 2022 due to the uncertainty related to the achievement of these events, milestones or commitments to additional research.

University of Edinburgh License Agreement

In August 2021, the Company entered into a worldwide, exclusive license agreement with the University Court of the University of Edinburgh (“Edinburgh” or “University” or “Parties” or “UoE”) for the second drug candidate.

The Company is obligated to pay success-based milestones and royalties to the UoE, as follows: (1) pre-approval milestone payments of up to approximately $49.5 million including an upfront nonrefundable payment of $3.5 million which has already been paid and $0.5 million on the first anniversary of the effective date of this agreement. (2) regulatory approval and commercial sales milestones of up $279.5 million. (3) mid- single digit to 8% royalties on a tiered basis on net sales; and 2.5% of the gross amount of each of the Company’s future fund raisings up to a cumulative total of $3.0 million.

In collaboration with Edinburgh, the Company wishes to generate preclinical data to support Investigational New Drug (IND) submission and inform patient selection/enrichment strategies. The aim of the development collaboration formed between the Parties under this Agreement is to progress the

development of the Licensed Technology, which is licensed under the License Agreement) according to the Work Plan. The Company has agreed to provide funding to Edinburgh to support such collaboration.

The Parties wish to enter into this Agreement to set out the terms for the provision of such funding by the company and the terms of the development collaboration formed between the Parties. In consideration of the obligations of Edinburgh, the Company shall pay the Project Costs in the amount of $772,000, payable over 18 months. As of December 31, 2023, UoE’s research and development as described above has not yet begun and therefore no expenses were recorded in the financial statements.

The royalty term for each licensed product in each country is the period commencing with the first commercial sale of the applicable licensed product in the applicable country and ending on the expiration of the last to expire of any patent specified by the license (statutory expiration for the NXP900 patent family is April 2036), or the expiration of any extended exclusivity period in the relevant country. The Company may terminate the license if the Company determines that it is not scientifically or commercially viable to research, develop, or commercialize the licensed products which are the subject of the license agreement. UoE may terminate the agreement if the Company: (i) ceases to carry on the business regarding the treatment, prevention and/or diagnosis of human diseases; (ii) discontinues the development of the licensed products which are the subject of the license; (iii) disposes of our assets or business in whole or in material part; (iv) challenges the validity, ownership, or enforceability of the exclusively licensed technology; (v) contests the secret or substantial nature of certain know-how subject to the license; or (vi) breaches certain diligence obligations or fails to pay any amount due under the license within a specified time frame.

For the year ended December 31, 2023, the Company paid $1.0 million related to the achievement of certain milestones and $0.4 million associated with the private placement which was recorded as a liability and recorded as a research and development expense as of December 31, 2022. For the year ended December 31, 2022, the Company paid$0.5 million related to the one-year anniversary milestone and $0.4 million associated with the IPO. During the years ended December 31, 2023 and 2022, respectively, these expenses were recorded as research and development expenses. As of December 31, 2023, the Company has paid UoE $0.8 million of the total $3.0 million related to the fund raising commitment. Any potential future research support, milestone or royalty payment amounts have not been accrued at December 31, 2023 and 2022 due to the uncertainty related to the achievement of these events, milestones or commitments to additional research.

As of December 31, 2023, and 2022, no contingent liabilities have been recognized.

NOTE 6 – REDEEMABLE CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS’ DEFICIT:

On February 3, 2022, the Company amended its certificate of incorporation such that the total number of shares of all classes of capital shares authorized to be issued was increased to 65,000,000, with 5,000,000 shares designated as preferred share with a par value of $0.00001, and 60,000,000 shares designated as common share with a par value of $0.00001.

On February 8, 2022, the Company completed an IPO in which it sold 3,200,000 common shares at $5.00 per share and received net proceeds of $13.6 million, after underwriting discounts and commissions, of $1.1 million and expenses of $1.8 million.

Additionally, on February 8, 2022, in connection with the closing of the IPO,5,012,280 shares of Series A redeemable convertible preferred shares, respectively, automatically converted into an equal number of shares of common share. Beginning on the IPO date, there wereno shares of convertible preferred shares outstanding as of December 31, 2023 and 2022.

During June and July 2021, the Company entered into an investment agreement with its founders and certain new investors to issue 128,520 redeemable convertible preferred shares (“Preferred Shares”) in a total amount of approximately $15.3 million in which $1.73 million were invested by related parties on the same terms as all investors in the Preferred Shares.

Conversion Rights —

Trigger Events — Upon either (a) the closing of a Deemed Liquidation Event, (b) an initial public offering the Corporation’s securities on a major public stock exchange (including, without limitation and for illustration purposes, the Nasdaq Stock Market’s National Market or the New York Stock Exchange) resulting in at least $15,000,000 of proceeds to the Corporation, or (c) the vote or written consent of the majority of the Preferred Shareholders (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “Mandatory Conversion Time”), then (i) all outstanding shares of Preferred Shares shall automatically be converted into shares of Common Shares, at the then effective conversion rate as calculated as follows — each share of Preferred Shares shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Shares as is determined by dividing the Original Issue Price ($119.0476) by the Conversion Price ($3.05 per share, subject to appropriate adjustment in the event of any share dividend, share split, combination or other similar recapitalization or event with respect to the applicable Preferred Shares). Such initial Conversion Price, and the rate at which shares of Preferred Shares may be converted into shares of Common Shares, shall be subject to adjustment as detailed in the Company’s Certified of Incorporation in effect at the time of conversion (as of December 31, 2021 the conversion is $3.05 per share) (ii) such shares may not be reissued by the Corporation.

During February 2022 the company completed the IPO and the convertible preferred shares were converted to common shares.

Each ordinary share confers upon its holder the right toone vote and to receive dividends as declared by the Board of Directors of the Company. Since its inception, the Company has not declared any dividends.

In the event of our liquidation, dissolution or winding up, holders of the Company common shares will be entitled to share ratably in all assets remaining after payment of all debts and other liabilities.

As of December 31, 2023, no dividends have been declared.

On July 29, 2022, the Company closed a private placement offering (the “July Private Placement”), pursuant to the terms and conditions of a Securities Purchase Agreement (the “Agreement”), dated July 27, 2022. In connection with the July Private Placement, the Company issued 1,015,598 shares of common shares (the “Shares”), pre-funded warrants (the “Pre-Funded Warrants”) to purchase an aggregate of 909,091 shares of common shares and preferred investment options (the “Preferred Investment Options”) to purchase up to an aggregate of 1,924,689 shares of common shares. The purchase price of each Share and each Pre-Funded Warrant was the $8.25. The purchaser received one Preferred Investment Option for no consideration, with each Share or Pre-Funded Warrant purchased. The aggregate net cash proceeds to the Company from the July Private Placement were approximately $14.3 million, after deducting placement agent fees and other offering expenses. The Pre-Funded Warrants had an exercise price of $0.001 per share, were exercisable on or after August 24, 2022, and are exercisable until the Pre-Funded Warrants were exercised in full. The Preferred Investment Options became exercisable on January 23, 2023 and are exercisable at any time on or after January 23, 2023 through January 29, 2026, at an exercise price of $9.65 per share, subject to certain adjustments as defined in the Agreement. As of December 31, 2023,1,001,091 Preferred Investment Options were exercised for $8.9 million, net of fees. The Company agreed to pay the placement agent a fee and management fee equal to 7.0% and 1.0%, respectively, of the aggregate gross proceeds from the July Private Placement. In addition, the Company issued warrants to the placement agent to purchase up to 115,481 shares of common shares. The placement agent warrants are in substantially the same form as the Preferred Investment Options, except that the exercise price is $10.31. The Preferred Investment Options, the Pre-Funded Warrants, and the placement agent warrants are collectively referred to as the “Private Placement Warrants”. As of December 31, 202379,104 placement agent warrants were exercised for which the Company has received $0.8 million.

The Company evaluated the terms of the Private Placement Warrants and determined that they should be classified as equity instruments based upon accounting guidance provided in ASC 480 and ASC 815-40. Since the Company determined that the Private Placement Warrants were equity-classified, the Company recorded the proceeds from the July Private Placement, net of issuance costs, within common shares at par value and the balance of the net proceeds to additional paid in capital. As of December 31, 2023, the outstanding Preferred Investment Options, and the placement agent warrants were not exercisable.

On March 17, 2023, the Company filed a shelf registration statement on Form S-3 (the “S-3”), which was declared effective on March 29, 2023. Under the S-3, the Company may sell up to a total of$150 million of its securities. In connection with the S-3, the Company entered into an At-the-Market agreement (“ATM”) with H.C. Wainwright & Co., LLC (“Agent”) relating to the sale of shares of common shares. Under the ATM, the Company pays the Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any common shares.

During the year ended December 31, 2023, the Company sold a total of 371,743 shares of common shares under the ATM for aggregate total gross proceeds of approximately$5.3 million at an average selling price of$14.23 per share, resulting in net proceeds of approximately$5.1 million after deducting commissions and other transaction costs.

NOTE 7 – SHARE BASED PAYMENTS

In January 2023, the Company granted 43,500 options with an exercise price of $7.51 per share, to a service provider, which will become exercisable between January 19, 2023, and January 18, 2025, into common shares based on the achievement of service condition, market condition or performance condition. As of December 31, 2023,21,000 options were exercisable. Service condition options totaled 22,500, had an estimated value based on Black-Scholes of approximately $74,000 and were exercisable as of December 31, 2023. Performance condition options totaled 12,000, had an estimated value based on Black-Scholes of approximately $39,000 and were exercisable as of December 31, 2023. Market condition options totaling 9,000 options have a market condition which was achieved by December 31, 2023, and an estimated value of $20,000 based on a Monte Carlo model.2,792 options have been exercised as of December 31, 2023. The fair value of options was evaluated at the grant date using a Black-Scholes Option Pricing Model for various possible scenarios.

In February 2022, the Company granted to the underwriter of the IPO 128,000 fully vested warrants upon the IPO, exercisable into common shares with an exercise price of $6.25 per share for 5 years after the grant date. The 128,000 fully vested warrants have an estimated value (based on Black-Scholes model) of approximately $458,000 and were recognized as a reduction from gross proceeds of the IPO. As of December 31, 2023, IPO warrants totaling 105,920 were exercised for $0.7 million.

In July 2022, the Company granted to the private placement agent of July Private Placement,115,481 warrants which become exercisable any time between January 23, 2023 and January 29, 2026, exercisable into common share with an exercise price of $10.31 per share. The 115,481 warrants have an estimated value (based on Black-Scholes model) of approximately $618,000. As of December 31, 202379,104 placement agent warrants were exercised for which the Company has received $0.8 million.

Volatility was estimated based on the historic volatility of comparable public companies.

In May 2021, the Company’s board of directors approved an equity incentive plan (hereafter — “2021 Plan”), in which the Company has reserved a total amount of 408,486 common shares for issuance in connection with the Option Agreement. In February 2022, the Company’s board of directors approved an increase to total shares under the incentive plan to 1,500,000. An amendment to the 2021 Plan was approved by holders of a majority of the voting power of the common shares of the Company in June 2023 to increase the total shares under the incentive plan to 2,500,000. In addition, the amendment provides that on January 1 of each calendar year beginning in 2024 and ending in and including 2033, this authorization limit will automatically increase to the extent necessary so that the number of shares available for issuance pursuant to future awards granted after such date under the 2021 Plan is not less than (i) six percent (6%) of the number of shares outstanding as of the last day of the immediately preceding calendar year or (ii) such lesser number of shares as may be determined by the Board.

The 2021 Plan provides for a variety of share-based compensation awards, including options, restricted share unit awards, or other shares. Under the 2021 Plan, the Company generally grants share-based awards with service-based vesting conditions only. Options and restricted share unit awards granted typically vest over a three-year period, but may be granted with different vesting terms.

Mr. Ron Bentsur, Dr. Enrique Poradosu and Mr. Shay Shemesh will be eligible for fully vested common shares equal to 1%,0.5% and 0.5%, respectively, of the then fully diluted share count when the Company reaches an average capitalization over a 30-day period of $350 million or higher. As of December 31, 2023, the market capitalization has not been achieved.

The following table summarizes the Company’s option activity for the year ended December 31, 2023, for the 2021 Incentive Plan:

As of December 31, 2023, there was $0.2 million of unrecognized share-based compensation expense related to unvested options that is expected to be recognized over a weighted-average period of 0.65 years.

The fair value of each option granted is estimated using the Black-Scholes option pricing method. The volatility is based on a combination of historical volatilities of companies in comparable stages as well as companies in the industry by statistical analysis of daily share pricing model. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the options granted in dollar terms. The expected term of the options granted represents the period of time that the granted options are expected to remain outstanding based on common practice in the industry.

Restricted Share Awards

Restricted stock awards (RSAs) have been granted to employees and directors. The value of an RSA award is based on the Company’s stock price on the date of grant using hybrid pricing model with a combination of the Black-Scholes Option Pricing Model (OPM) and the P-WERM model for various possible scenarios. The shares underlying the RSA awards are not issued until the RSAs vest. Upon vesting, each RSA converts intoone share of the Company’s common shares. The Company has granted RSAs pursuant to the 2021 plan.

On April 1, 2022, the Company issued 120,000 RSAs to Mr. Ron Bentsur and 60,000 RSAs each to Dr. Enrique Poradosu and Mr. Shay Shemesh. All RSAs granted to these founders of the Company vest over three years with 1/3 vesting on each anniversary of the date of the grant. The fair value of these RSAs was determined to be $1.7 million. On March 29, 2023, the vesting of the first 1/3 of the grant was extended to January 11, 2024, the second vesting extended to April 2, 2024 and the third vesting extended to April 2, 2025.

On January 12, 2023, the Company issued 210,000 RSAs to Mr. Ron Bentsur and 115,000 RSAs each to Dr. Enrique Poradosu and Mr. Shay Shemesh. All RSAs granted to these founders of the Company vest over three years with 1/3 vesting on each anniversary of the date of the grant. The fair value of these RSAs was determined to be $3.3 million.

The following table summarizes the Company’s RSA activity for the year ended December 31, 2023, as described above from the 2021 Incentive Plan:

As of December 31, 2023, there was $2.5 million of total unrecognized compensation cost related to RSAs that is expected to be recognized over a weighted average period of 1.8 years.

The total fair value of RSAs vested for the year ended December 31, 2023, was $0.3 million.

On July 27, 2021, Mr. Ron Bentsur, Dr. Enrique Poradosu, and Mr. Shay Shemesh were granted 96,759 RSAs,48,399 RSAs and 48,399 RSAs, respectively, which were not part of the Incentive Plan and excluded from the table above. On March 29, 2023, January 1, 2023, July 1, 2022 and December 13, 2022, the vesting of these grants was extended to July 15, 2024, April 1, 2023, January 1, 2023 and June 30, 2022, respectively. Also see note 11 for subsequent vesting extensions.

For the period ended December 31, 2023, the Company recognized expenses of $2.1 million as part of the general and administrative expenses and $2.6 million as part of the research and development expenses.

For the period ended December 31, 2022, the Company recognized expenses of $0.8 million as part of the general and administrative expenses and $0.9 million as part of the research and development expenses.

NOTE 8 – NET LOSS PER SHARE:

Basic net loss per share is calculated by dividing the net loss attributable to the Company’s shareholders by the weighted average number of common shares outstanding.

Basic loss per share is calculated by dividing the result attributable to equity holders of the Company by the weighted average number of Ordinary Shares in issue during the year.

As of December 31, 2023 and 2022, respectively, the Company excluded potentially dilutive securities from the calculation of diluted net loss per Ordinary Share because their effects would have been anti-dilutive.

The following potentially dilutive securities were excluded from the calculation of diluted net loss per Ordinary Share because their effect would have been anti-dilutive for the years presented:

NOTE 9 – INCOME TAXES:

Income of the Company is taxed according to the federal tax laws in the US and the relevant state laws. The U.S tax rate in 2023 and 2022 is 26.9% comprising U.S statutory tax rates of 21% and state tax rate of 5.9%. For the years ended years ended December 31, 2023 and 2022, the Company’s effective tax rate is below the federal statutory income tax rate of 21% primarily due to state income taxes, net of federal benefit and the Company’s position to establish a full valuation allowance on its deferred tax assets.

The applicable corporate tax rate for the Company is 21%.

As of December 31, 2023, the Company has an accumulated tax loss carryforward of approximately $35.0 million (as of December 31, 2022, $23.0 million). Under U.S. tax laws, subject to certain limitations, carryforward tax losses originating in tax year have no expiration date, but they are limited to 80% of the company’s taxable income in any given tax year.

A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate is as follows:

The Company has not been taxed since its inception.

The tax effect of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets and liabilities are presented below:

As the achievement of required future taxable income is not likely, the Company recorded a full valuation allowance. The following table presents a reconciliation of the beginning and ending valuation allowance:

NOTE 10 – RELATED PARTY TRANSACTIONS:

NOTE 11 – SUBSEQUENT EVENTS:

(b)Exhibits.