Silexion Therapeutics Corp 10-K

Item 7 . Management’s Discussion and Analysis of Financial Condition and Results of Operations. Introductory Note The following discussion and analysis of our financial condition and results of operations (this “ MD&A ”) should be read in conjunction with the financial statements and the related notes included elsewhere in this annual report. Some of the information contained in this discussion and analysis or set forth in this annual report, including information with respect to our plans, objectives, expectations, projections, and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set out in “Item 1.A. Risk Factors” in this annual report, our actual results could differ materially from the results described in or implied by these forward-looking statements. See also the section entitled “Cautionary Note Regarding Forward-Looking Statements” in this annual report. On August 15, 2024, the Closing of the Business Combination by and among Silexion Therapeutics Corp (formerly known as Biomotion Sciences), a Cayman Islands exempted company (also referred to herein as “New Silexion”), Silexion Therapeutics Ltd., an Israeli company (“Silexion”), and Moringa occurred pursuant to the Business Combination Agreement. Unless the context otherwise requires, references to the “Company,” “we,” “us” and “our” in this MD&A generally refer to: (i) for all periods preceding, and through the Closing of, the Business Combination, Silexion, and, (ii) for all periods following the Closing, New Silexion. Overview We are a Cayman Islands exempted company that was originally formed for the purpose of effectuating the Business Combination and that now serves as a publicly-traded holding company for each of Silexion (through which our operations are carried out) and Moringa (which has no operations). Our ordinary shares and warrants are listed on the Nasdaq Global Market under the trading symbols “SLXN” and “SLXNW”, respectively. We conduct operations primarily through our principal subsidiary— Silexion— which is a clinical-stage, oncology-focused biotechnology company engaged in the discovery and development of proprietary treatments for cancers driven by Kirsten rat sarcoma viral oncogene homolog (”KRAS”). The KRAS gene is an oncogene that is involved in the regulation of cell division as a result of its ability to relay external signals to the cell nucleus. Based on its research of refractory solid tumor cancers, Silexion is actively developing a platform focused on the silencing of the KRAS oncogene using RNA-interference therapeutics. Silexion’s lead product candidate, SIL204, consists of locally administered small interfering RNAs, or siRNA, in an extended-release formulation or solution, as a first-line treatment of locally advanced pancreatic cancer patients, in combination with standard-of-care chemotherapy. Prior to the Business Combination, Silexion financed its operations primarily with the net proceeds from private offerings of its ordinary shares and convertible preferred shares, convertible financing agreements and Simple Agreement for Future Equity (SAFE) financings, and royalty-bearing grants from the Israeli Innovation Authority (the “ IIA ”) (which grants totaled $5.8 million through December 31, 2024). 71 Upon the Closing of the Business Combination, we raised $2.0 million via a private investment in public entity (PIPE) financing, whereby Moringa sold to Greenstar, LP, an affiliate of the Moringa sponsor, 22,223 newly issued Moringa ordinary shares, at a price of $90.00 per share, which shares converted into an equivalent number of New Silexion ordinary shares at the Closing, Also in connection with the Closing, we entered into the ELOC Agreement with White Lion, which provided us with an equity line of credit of up to $15.0 million (the “ ELOC ”).We have utilized the ELOC for financings from time to time since the Closing of the Business Combination, having raised an aggregate of $3.1 million from the ELOC through December 31, 2024. In addition to ongoing financings via the ELOC, as a public company, we have raised capital via the public offering of ordinary shares and/or pre-funded warrants, together with ordinary warrants, having completed our first public offering following the Closing in January 2025, which raised gross proceeds of approximately $5.0 million. As a follow-up to that public offering, later in January 2025, we completed an induced exercise of ordinary warrants, which raised gross proceeds of approximately $3.3 million, before deducting placement agent fees and other offering expenses. Since our inception, we have incurred significant operating losses. Our net losses (consisting of Silexion’s net losses for all periods through the Business Combination, and the combined company's net losses for all periods after) were $16.5 million and $5.1 million for the years ended December 31, 2024 and December 31, 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $43.3 million (reflecting Silexion’s accumulated deficit for all periods through August 15, 2024 and the combined company's accumulated deficit from August 16, 2024 through December 31, 2024). We have not recognized any revenue to date. We expect to continue to incur significant expenses and operating losses for the foreseeable future. The net losses it incurs may fluctuate significantly from quarter to quarter. Our expenses will depend on many factors, including the timing and extent of spending to further develop SIL204 and initiate pre-clinical and clinical trials, support research and development efforts, investments in potential additional pipe-line products, and increased overall compensation as we continue to hire additional personnel. We anticipate that our expenses will increase if and as we: ● apply for Orphan Drug Designation in both the U.S. and EU for its SIL204 product; ● initiate toxicological studies with respect to SIL204; ● initiate a clinical trial powered for statistical significance with respect to SIL204; ● seek marketing approvals for SIL204 in various territories; ● maintain, expand and protect our intellectual property portfolio; ● hire additional operational, clinical, quality control and scientific personnel; ● add additional product candidates to our pipeline; ● add operational, financial and management information systems and personnel, including personnel to support our product development, any future commercialization efforts and our prospective transition to a public company; and ● invest in research and development and regulatory approval efforts in order to utilize our technology as a platform focused on the silencing of the KRAS oncogene using RNA-interference therapeutics. Reverse Share Split On November 27, 2024, we effected a 1-for-9 reverse share split of our authorized ordinary shares, including our issued and outstanding ordinary shares, with a market effective date of November 29, 2024. Unless specifically provided otherwise herein, all share, per share and related option and warrant information for New Silexion (but not Moringa) presented in this annual report has been retroactively adjusted to reflect the reduced number of shares and the increase in the share price which resulted from the reverse share split. 72 Components of our Results of Operations Operating Expenses Research and Development Expenses Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of payroll and related expenses, payroll taxes and other employee benefits including share-based compensation related to employees, subcontractors, lab expenses, preclinical and clinical trials cost, material costs and consulting fees. We expect to continue to invest in research and development to develop SIL204, including hiring additional employees and continuing the research and development of that product candidate. As a result, we expect that our research and development expenses will continue to increase in the future. General and Administrative Expenses General and administrative expenses consist primarily of personnel costs, including share-based compensation related to directors and employees, patent application fees, office space rental costs, and maintenance expenses, external professional service costs, including legal, accounting, audit, finance, insurance, human resource services, travel expenses and other consulting fees. We expect that our general and administrative expenses will increase in the future to fund our continued research and development activities, primarily due to increased headcount to support anticipated growth in the business and due to incremental costs associated with operating as a public company, including costs to comply with the rules and regulations applicable to public companies such as costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC and stock exchange listing standards, public relations, insurance and professional services. Financial expenses (income), net The finance expenses consisted primarily of changes in fair value of financial liabilities measured at fair value, non-cash loss upon entering into the Business Combination transaction, and exchange rate differences expenses. Results of Operations We are providing within this section a discussion and analysis of our historical statement of operations data in accordance with accounting principles generally accepted in the United States of America, or GAAP. Because we are a smaller reporting company (as defined under Rule 12b-2 under the Exchange Act), our financial statements and related financial data in this annual report only cover each of the two years ended December 31, 2024 and 2023. Similarly, the discussion and analysis contained in this Item 7 is limited to a comparison of our results of operations for the years ended December 31, 2024 and 2023. For our financial statements for the year ended December 31, 2022, and for a discussion and analysis of our results for that year, and a comparison of those results with those of the year ended December 31, 2023, please see our consolidated statements of operations on page F-70 and the related notes in our final prospectus dated January 15, 2025, which we filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act on January 17, 2025, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Results of Operations— Comparison of Years ended December 31, 2023 and 2022” in that final prospectus. 73 Comparison of years ended December 31, 2024 and 2023 The following table summarizes our results of operations for the years ended December 31, 2024 and 2023: Year ended December 31, 2024 2023 (U.S. dollars, in thousands) Operating expenses: Research and development $ 5,815 $ 3,708 General and administrative 6,756 973 Total operating expenses 12,571 4,681 Operating loss 12,571 4,681 Financial expenses, net 3,938 395 Loss before income tax 16,509 5,076 Income tax 10 32 Net loss for the year $ 16,519 $ 5,108 Research and Development Expenses The following table summarizes our research and development expenses for the years ended December 31, 2024 and 2023: Year ended December 31, 2024 2023 (U.S. dollars, in thousands) Payroll and related expenses $ 1,231 $ 895 Share-based compensation expenses 2,424 78 Subcontractors and consultants 1,890 2,467 Materials 3 13 Rent and maintenance 205 160 Travel expenses 13 37 Other 49 58 Total research and development expenses $ 5,815 $ 3,708 Research and development expenses increased by approximately $2.1 million, or 56.8%, to $5.8 million for the year ended December 31, 2024, compared to $3.7 million for the year ended December 31, 2023. The increase resulted mainly from an increase in payroll and payroll-related expenses of $0.3 million due to additional headcount and increases in salaries as of the Closing of the Business Combination in August 2024, and from non-cash share-based compensation expenses in an amount of $2.3 million, related to employee grants issued around the time of the Closing. The increase was partly offset, by a decrease in subcontractors and consultants expenses, in an amount of $0.6 million. Research and development expenses for the years ended December 31, 2024 and December 31, 2023 included approximately $0.2 million and $0.8 million, respectively, related to the development of Loder, and $5.6 million and $2.9 million, respectively, related to the development of SIL204. Aggregate research and development expenses since inception for our Loder program, as of December 31, 2024 and as of December 31, 2023, were approximately $18.4 million and $18.2 million, respectively. Aggregate research and development expenses since inception for the SIL204 program, as of December 31, 2024 and as of December 31, 2023, were approximately $9.1 million and $3.6 million, respectively. 74 General and Administrative Expenses The following table summarizes our general and administrative expenses for the years ended December 31, 2024 and 2023: Years ended December 31, 2024 2023 (U.S. dollars, in thousands) Payroll and related expenses $ 1,154 $ 304 Share-based compensation expenses 3,438 52 Professional services 1,632 386 Depreciation 25 45 Rent and maintenance 89 86 Patent registration 43 22 Travel expenses 106 31 Other 269 47 Total general and administrative expenses $ 6,756 $ 973 General and administrative expenses increased by approximately $5.8 million, or 580.0%, to $6.8 million for the year ended December 31, 2024, compared to $1.0 million for the year ended December 31, 2023. The increase resulted mainly from an increase of $0.9 million in payroll and payroll-related expenses due to headcount growth and an increase in salaries following the Closing of the Business Combination in August 2024 and an increase in non-cash share-based compensation expenses in an amount of $3.4 million, related to directors and employee grants issued around the time of the Closing of the Business Combination. Additionally, there was an increase in professional services costs in an amount of $1.2 million primarily related to one-time legal, accounting, and other expenses associated with the costs of becoming a public company and the Closing of the Business Combination. Financial expenses, net Financial expenses, net increased by approximately $3.5 million, or 875.0%, to $3.9 million for the year ended December 31, 2024 compared to $0.4 million for the year ended December 31, 2023. This increase was mainly due to an increase in an amount of $4.8 million in one-time non-cash loss upon entering into the Business Combination transaction in August 2024, offset in part by an increase in revaluation income of financial instruments (warrants, promissory notes and ELOC) in an amount of $1.2 million. Net loss Net loss increased by approximately $11.4 million, or 223.5%, to $16.5 million for the year ended December 31, 2024, compared to $5.1 million for the year ended December 31, 2023. The increase was mainly due to an increase in our research and development expenses, general and administrative expenses, and financial expenses including significant non-cash items related to share-based compensation, transaction costs related to the Closing of the Business Combination transaction in August 2024, and costs related to becoming a public company. Liquidity and Capital Resources Overview Our capital requirements will depend on many factors, including the timing and extent of spending to further develop SIL204 and initiate pre-clinical and clinical trials, support research and development efforts, investments in potential additional pipe-line products, and increased overall compensation as we continue to hire additional personnel. For the years ended December 31, 2024 and 2023, we had net losses of $16.5 million and $5.1 million, respectively. As of December 31, 2024, our cash and cash equivalents totaled $1.2 million. To date, our principal sources of liquidity have evolved together with our progression as a company. As a private company, we raised proceeds from private offerings of our ordinary shares and convertible preferred shares, grants from the Israeli Innovation Authority, issuance of convertible financing agreements (CFA), and Simple Agreement for Future Equity (SAFE) financings. Upon the Closing of the Business Combination, we raised funds from a PIPE in which Greenstar, LP, an affiliate of the Moringa sponsor, purchased Moringa ordinary shares that converted automatically into New Silexion ordinary shares (as described below under “ PIPE Financing ”). Following the Closing, as a public company with ordinary shares and warrants registered under the Exchange Act and trading on Nasdaq, we have obtained financing in an ongoing manner, from time to time, under the ELOC, pursuant to which we have issued ordinary shares to the ELOC Investor which has resold those shares into the open market (as described below under “ ELOC Financing ”). We have furthermore completed a registered public offering of ordinary shares and/or pre-funded warrants, along with ordinary warrants, in January 2025 (as described below under “ Public Offering via H.C. Wainwright ”) , and have raised additional funds from the induced exercise of ordinary warrants issued in that offering, which was completed later in January 2025 (please see “ Induced Warrant Exercise Transaction ” below for further information). 75 Based on our current business plan, we believe our current cash and cash equivalents, and anticipated cash flow from operations, will not be sufficient to meet our anticipated cash requirements for the next 12 months from the date of this annual report. We will need to raise additional capital to finance our operations, expand our business and pipeline, or for other reasons. Our audited consolidated financial statements for the years ended December 31, 2024 and 2023 included in this annual report note that there is substantial doubt about our ability to continue as a going concern as of such date; and in its report accompanying our audited consolidated financial statements included herein, our independent registered public accounting firm included an explanatory paragraph stating that our recurring losses from operations and our cash outflows from operating activities raise substantial doubt as to our ability to continue as a going concern. This means that our management and our independent registered public accounting firm have expressed substantial doubt about our ability to continue our operations without an additional infusion of capital from external sources. Our audited consolidated financial statements have been prepared on a going concern basis and do not include any adjustments that may be necessary should we be unable to continue as a going concern. If we are unable to finance our operations, our business would be in jeopardy and we might not be able to continue operations and might have to liquidate our assets. In that case, investors might receive less than the value at which those assets are carried on our consolidated financial statements for the years ended December 31, 2024 and 2023, and it is likely that investors would lose all or a part of their investment. We have lease obligations and other contractual obligations and commitments as part of our ordinary course of business. See “ Note 5: Operating Leases ” and “ Note 7: Commitments and Contingent Liabilities” to our consolidated financial statements for the year ended December 31, 2024 for information about our lease obligations. We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements involving commitments or obligations, including contingent obligations, arising from arrangements with unconsolidated entities or persons that have or are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, cash requirements or capital resources. ELOC Financing In connection with the Closing of the Business Combination, we entered into the ELOC Agreement, dated August 13, 2024, but effective as of the Closing, with the ELOC Investor, which agreement was amended as of January 14, 2025. Under the ELOC Agreement, we have the right to request to sell to the ELOC Investor, and the ELOC Investor is required to purchase, via private placement transactions, up to $15.0 million of our ordinary shares from time to time after the Closing, up until December 31, 2025 (unless the agreement is terminated sooner), subject to certain limitations and conditions as described therein. The number of ordinary shares that we may require the ELOC Investor to purchase in any single sales notice depends on a number of factors, including the type of purchase notice that we deliver. Similarly, the purchase price to be paid by the ELOC Investor for any shares that we require it to purchase depends on the type of sales notice that we deliver, and is derived from the market price of the our ordinary shares for a certain period of time following our purchase request or as of the date of our purchase request. We also granted registration rights to the ELOC Investor pursuant to an accompanying registration rights agreement, also dated August 15, 2024, by and between New Silexion and the ELOC Investor (the “ ELOC Registration Rights Agreement ”), for which we filed a registration statement on Form S-1 (SEC file number 333-282017), which was declared effective by the SEC on September 17, 2024. 76 Pursuant to the ELOC Agreement, we agreed, among other things, that if our sales to the ELOC Investor under the ELOC exceed 19.99% of our total number of ordinary shares outstanding, we will seek the approval of our shareholders for the issuance of any ordinary shares under the ELOC in excess of that amount, in accordance with the Nasdaq Listing Rules, subject to certain exceptions based on the price of our ordinary shares to be sold in excess of that limit. In consideration for the commitments of the ELOC Investor, we agreed to issue to the ELOC Investor an aggregate of $337,500 of our ordinary shares (the “ ELOC Commitment Shares ”) based on the closing price of the ordinary shares on the day that is the earlier of (i) the business day prior to effectiveness of the registration statement registering the resale of the shares issuable under the ELOC ordinary share purchase agreement and (ii) the business day prior to the 180th day following the date of Closing of the Business Combination. Based on the closing price of the ordinary shares on September 16, 2024, we issued to the ELOC Investor, on September 18, 2024, 40,602 ordinary shares in respect of the ELOC Investor’s commitments under the ELOC Agreement. Through the date hereof, we have issued and sold an aggregate of 763,713 ordinary shares (which includes the foregoing 40,602 ordinary shares issued as a commitment fee) to the ELOC Investor under the ELOC Agreement for aggregate proceeds to us of approximately $3.1 million. Settlement of Amounts Due Under Marketing Agreement with EarlyBirdCapital Prior to the Closing of the Business Combination, Moringa reached agreement with EarlyBirdCapital, or EBC, on the reduction, to $1.6 million, in the aggregate, of the fee payable to EBC under the Marketing Agreement. Pursuant to the final invoice provided by EBC under the Marketing Agreement at the Closing, Moringa paid $350,000 of cash to EBC from the trust account at the Closing, and we issued to EBC the EarlyBird Convertible Note, which is a convertible promissory note, due December 31, 2025, in an amount of $1.25 million to be paid by us to EBC in cash and/or via conversion of outstanding amounts into ordinary shares. The EarlyBird Convertible Note bears interest at a rate of 6% per annum and by its terms was to mature on December 31, 2025. If not repaid on or prior to that maturity date or such earlier date as to which the repayment obligation may be accelerated under the note, or not converted in accordance with the terms thereof, the rate of interest applicable to the unpaid principal amount would be adjusted to (15%) per annum. We were required to make mandatory prepayments on the note (which were first to be applied to accrued interest and then to principal) from time to time in amounts equal to ten percent (10%) of the gross proceeds received by us from any equity financing consummated by us prior to the maturity date. We were entitled to voluntarily prepay any additional part of, or all of, the principal and accrued interest, in one or more installments without penalty, prior to the maturity date. EBC, in turn, was permitted to elect, at its sole discretion, on the maturity date, to convert all or part of the then outstanding principal and/or accrued interest under the EarlyBird Convertible Note into ordinary shares, at a per share conversion price equal to 95% of the volume weighted average price of an ordinary share for the five trading days immediately prior to the date of our receipt of a conversion notice, provided, however, that we were not required to issue, and EBC was not permitted to elect to convert the principal and/or accrued interest into, an aggregate number of ordinary shares that would exceed the maximum number of ordinary shares permitted by Section 5635 of the Nasdaq Listing Rules to be issued without the approval of our shareholders, unless such approval is obtained. Through January 31, 2025, we made aggregate payments of $407,556 to EBC in respect of some of the amounts due from us under the EarlyBird Convertible Note as a result of amounts raised by us under the ELOC and the HCW Offering (as described below). On March 13, 2025, we entered into a letter agreement with EBC, pursuant to which we paid to EBC an additional amount of $400,000 (plus $15,000 for EBC’s legal expenses) (the “Settlement Prepayment Amount”) and EBC agreed to the partial conversion and retirement of all remaining amounts due under the EarlyBird Convertible Note. Under that letter agreement, EBC agreed that the $880,202 principal and interest amount outstanding under the note as of the date of the letter agreement (the “Outstanding Amount”) would be retired in consideration of: (i) our payment in cash of the Settlement Prepayment Amount; (ii) EBC’s conversion of a certain amount of the principal and interest due under the EarlyBird Convertible Note (the “Conversion Amount”) via the issuance by us to EBC of 277,777 ordinary shares (the “EBC Settlement Shares”), which Conversion Amount would equal the net proceeds to be received by EBC from the sale of the EBC Settlement Shares; and (iii) the payment in cash by us to EBC of any remaining amount due under the EarlyBird Convertible Note after deducting the Settlement Prepayment Amount and the Conversion Amount from the Outstanding Amount (the “Remaining Amount”). The resale by EBC of the EBC Settlement Shares was registered under our effective registration statement on Form S-1 (SEC file number 333-282556) as required by the EarlyBird Convertible Note. On March 17, 2025, EarlyBird sold all 277,777 EBC Settlement Shares under the foregoing Form S-1 registration statement for a Conversion Amount of $344,204, and on March 18, 2025, we paid the Remaining Amount of $135,998 that was due to EarlyBird, resulting in the retirement of the EarlyBird Convertible Note on March 18, 2025. 77 PIPE Financing In connection with, and immediately prior to the Closing of, the Business Combination, Moringa raised $2.0 million via a PIPE financing, whereby Moringa sold to Greenstar, LP, an affiliate of the Moringa sponsor (the “ PIPE Investor ”), 200,000 newly issued Moringa ordinary shares (which does not reflect the reverse share split) at a price of $10.00 per share, pursuant to a subscription agreement, dated as of August 15, 2024, by and among Moringa, New Silexion and the PIPE Investor. Those 200,000 shares automatically converted upon the Closing of the Business Combination 22,223 New Silexion ordinary shares. The funds raised from the PIPE financing, together with remaining funds in the trust account after payments to redeeming public shareholders, were used for financing support for Moringa and New Silexion, as well as for payment to service providers to whom outstanding amounts were owed by Moringa, including parties that had provided financial advisory services and capital markets advisory services to Moringa during the period leading up to the Closing. Issuance of Amended and Restated Sponsor Promissory Note Effective as of the Closing, we issued to the sponsor, and the sponsor accepted, in amendment and restatement, and replacement, in their entirety, of all existing promissory notes issued by Moringa to the sponsor from the IPO until the Closing (and as to which the obligations of Moringa were assigned to New Silexion upon the Closing), the A&R Sponsor Promissory Note in an amount of $3,433,000, which reflected the total amount owed by Moringa to the sponsor through the Closing Date. The maturity date of the A&R Sponsor Promissory Note is the 30-month anniversary of the Closing Date (i.e., February 15, 2027). Amounts outstanding under the A&R Sponsor Promissory Note may be repaid (unless otherwise decided by us) only by way of conversion into ordinary shares (“ Note Shares ”) in accordance with the terms set forth in the form of A&R Sponsor Promissory Note. New Silexion and the Sponsor may also convert amounts outstanding under the A&R Sponsor Promissory Note at the price per share at which we conduct an equity financing following the Closing, subject to a minimum conversion amount of $100,000, in an amount of Note Shares constituting up to thirty percent (30%) of the number of ordinary shares issued and sold by us in such equity financing. The sponsor may also elect to convert amounts of principal outstanding under the note into ordinary shares at any time following the 24-month anniversary of the date of the Closing, subject to a minimum conversion of $10,000, at a price per share equal to the volume weighted average price of the ordinary shares on the principal market on which they are traded during the 20 consecutive trading days prior to the conversion date. Through the date hereof, there have been no conversions of amounts due under the A&R Sponsor Promissory Note into our ordinary shares, and no election by us to repay any amounts under the note in cash. Public Offering via H.C. Wainwright On January 15, 2025 and January 17, 2025, we priced and closed, respectively, a registered public offering in which we offered and sold, on a best efforts basis, with H.C. Wainwright & Co., LLC (“ HCW ”) as the sole placement agent (the “ HCW Offering ”), (i) 2,145,998 ordinary shares, (ii) 1,557,705 pre-funded warrants to purchase up to 1,557,705 ordinary shares and (iii) 3,703,703 ordinary warrants to purchase up to 3,703,703 ordinary shares, at a purchase price of $1.35 per share and accompanying ordinary warrant, and $1.3499 per pre-funded warrant and accompanying ordinary warrant. Aggregate gross proceeds from the HCW Offering (without taking into account any proceeds from any future exercises of warrants) were approximately $5.0 million. The pre-funded warrants were immediately exercisable at an exercise price of $0.0001 per ordinary share and did not expire until exercised in full. The ordinary warrants have an exercise price of $1.35 per ordinary share, were immediately exercisable, and could be exercised for five years from issuance. Holders of the pre-funded and ordinary warrants do not have the right to exercise any portion of the warrants if the holder (together with parties whose beneficial ownership of ordinary shares would be aggregated with the holder’s) would beneficially own ordinary shares in excess of 4.99% (or, at the election of the holder, 9.99%) of the outstanding ordinary shares following exercise. 78 Certain investors in the HCW Offering entered into a definitive securities purchase agreement with us, under which we agreed to abide by certain customary standstill restrictions for a period of 60 days following the closing of the HCW Offering. In addition, subject to limited exceptions, the agreement provides that for a period of one year following the closing of the HCW Offering, we will not effect or enter into an agreement to effect a “variable rate transaction” as defined in the agreement. In accordance with our engagement agreement with HCW, we paid to HCW an aggregate cash placement agent fee equal to 7.0% of the gross proceeds received by us in the HCW Offering, as well as a management fee equal to 1.0% of the gross proceeds raised in the HCW Offering. We also reimbursed HCW for certain of its expenses in connection with the offering. Pursuant to the engagement agreement, we also issued to HCW (or its designees) 259,259 placement agent warrants to purchase up to 259,259 ordinary shares, representing 7.0% of the sum of the shares and pre-funded warrants sold in the HCW Offering. Those placement agent warrants have an exercise price of $1.6875 per ordinary share (representing 125% of the public offering price per share and accompanying ordinary warrant), are exercisable for five years from the date of the commencement of sales in the HCW Offering, and otherwise reflect substantially the same terms as the ordinary warrants sold in the HCW Offering. The net proceeds to us from the HCW Offering were approximately $4.26 million after deducting estimated offering expenses payable by us. We are using the proceeds from the HCW Offering to advance our pre-clinical clinical studies, and for general corporate purposes. Induced Warrant Exercise Transaction On January 29, 2025, we entered into an inducement offer letter agreement with holders of 2,221,523 of our existing ordinary warrants that had been issued in the HCW Offering, under which, on January 30, 2025, those holders exercised those warrants for cash and purchased 2,221,523 ordinary shares at a cash exercise price of $1.35 per share and in consideration of our issuance to them of new ordinary warrants to purchase up to an aggregate of 2,221,523 ordinary shares at an exercise price of $1.50 per share. The exercising holders also paid us an additional $0.125 per new ordinary warrant issued to them. We received aggregate gross proceeds of approximately $3.3 million from the exercise of the existing warrants by the holders, before deducting placement agent fees and other offering expenses payable by us. We engaged HCW to act as our exclusive placement agent in connection with the transactions contemplated by the inducement letter and paid HCW a cash fee equal to 7.0% of the aggregate gross proceeds received from the holders’ exercise of their existing ordinary warrants, as well as a management fee equal to 1.0% of the gross proceeds from the exercise of those warrants. We also issued to HCW or its designees placement agent warrants to purchase up to 155,507 ordinary shares (representing 7.0% of the existing ordinary warrants that were exercised), which have the same terms as the new warrants issued in the transactions, except that the placement agent warrants have an exercise price equal to $1.8438 per share (125% of the sum of the exercise price of the existing warrants exercised in the transactions and the additional $0.125 paid per new ordinary warrant in the transactions). Similar to the new ordinary warrants issued to investors in the transactions, the placement agent warrants are immediately exercisable from the date of issuance until the 24-month anniversary of the effective date of the resale registration statement to be filed to cover the resale of shares underlying the new warrants (as described below). We also paid certain fees and expenses in connection with the induced warrant exercise transactions. Upon exercise for cash of any new warrants issued to investors in the transactions, in certain circumstances, we will (i) pay to HCW a cash fee of 7.0% of the aggregate gross exercise price, and a cash management fee of 1.0% of the aggregate gross exercise price, and (ii) issue to HCW warrants representing 7.0% of the ordinary shares issued to the investors upon such cash exercise of the new warrants. We are using the net proceeds from these transactions for general corporate purposes. 79 Government Grants Our research and development efforts have been financed, in part, through royalty-bearing grants from the Israeli Innovation Authority, or the IIA. As of December 31, 2024, we had received IIA royalty-bearing grants totaling approximately $5.8 million. We are committed to pay royalties to the IIA at a rate of approximately 3.0% to 5.0% of the sales of all of our product candidates and other related revenues generated from such projects, that were developed, in whole or in part, using the IIA royalty-bearing grants we received under IIA programs up to the total amount of royalty-bearing grants received, linked to the U.S. dollar and bearing annual interest at rates prescribed by the IIA’s rules and guidelines. We may in the future apply to receive additional grants from the IIA. However, we cannot predict whether we will be entitled to any future grants, or the amounts of any such grants. Under the Israeli Innovation Law, research and development programs that meet specified criteria and are approved by a committee of the IIA are eligible for grants. A company that receives a royalty-bearing grant from the IIA is typically required to pay royalties to the IIA on income generated from products incorporating IIA-funded know-how (including income derived from services associated with such products and from IIA-funded know-how), up to 100% of the U.S. dollar-linked royalty-bearing grant amount plus interest. The obligation to pay royalties is contingent on actual income generated from such products and services. In the absence of such income, no payment of royalties is required. As of December 31, 2024, the total royalty amount that may be payable by the Company is approximately $5.8 million ($6.5 million including interest). Cash Flows Cash flows for the years ended December 31, 2024 and 2023 The following table summarizes our cash flows for the periods indicated: Year ended December 31, 2024 2023 (U.S. dollars, in thousands) Cash and cash equivalents and restricted cash at beginning of the period $ 4,645 $ 8,309 Net cash used in operating activities (8,396 ) (4,529 ) Net cash provided by (used in) investing activities (22 ) 573 Net cash provided by financing activities 5,104 522 Net decrease in cash and cash equivalents and restricted cash $ (3,314 ) $ (3,434 ) Translation adjustments on cash and cash equivalents and restricted cash (61 ) (230 ) Cash and cash equivalents and restricted cash at end of the period $ 1,270 $ 4,645 80 Cash Flows from Operating Activities Net cash used in operating activities increased by approximately $3.9 million, or 86.7%, to $8.4 million for the year ended December 31, 2024, compared to $4.5 million for the year ended December 31, 2023. This increase was mainly due to an increase of $11.4 million in the net loss for the year ended December 31, 2024, as well as increases of $1.4 million in other non-cash financial income and $1.6 million in net working capital in the year ended December 31, 2024, offset in part by an increase in certain other non-cash expenses such as a $5.7 million increase in share-based compensation expenses and a $4.8 million one-time loss upon entering the Business Combination transaction in August 2024. Cash Flows from Investing Activities Net cash used in investing activities decreased by $0.6 million, or 100.0%, to $0 million for the year ended December 31, 2024, compared to $0.6 million of cash provided by investing activities in the year ended December 31, 2023. This decrease was mainly due to a reduction in short-term deposits in the amount of $0.5 million in 2023, as cash was used for operating activities. Cash Flows from Financing Activities Net cash provided by financing activities increased by $4.6 million, or 920.0%, to approximately $5.1 million for the year ended December 31, 2024, compared to $0.5 million for the year ended December 31, 2023. This increase was mainly due to an increase in cash received from transactions upon the Closing of the Business Combination in an amount of $2.3 million and from an increase in proceeds from issuance of ordinary shares under the ELOC in an amount of $3.1 million, offset in part by (i) $0.3 million of payments under the EarlyBird Convertible Note in the year ended December 31, 2024 and (ii) $0.5 million in proceeds from the issuance of preferred shares and warrants in the year ended December 31, 2023, which did not recur in the year ended December 31, 2024. Funding Requirements We expect to devote substantial financial resources to our ongoing and planned activities, particularly further development of SIL204 and as we conduct our planned pre-clinical and clinical trials. Identifying potential product candidates and conducting pre-clinical testing and clinical trials is a time-consuming, expensive, and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. For additional information please refer to the “ Risk Factors ” section of this annual report, including “ Risks Related to Our Financial Condition and Capital Requirements — we have never generated any revenue from product sales and may never be profitable” and “Risks Related to the Research and Development of our Product Candidates — Silexion is heavily dependent on the success of its product candidates ...”. We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance our pre-clinical studies and clinical trials. In addition, if we obtain marketing approval for SIL204 in any indication or for any other product candidate we are developing or may develop in the future, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing, and distribution. Furthermore, upon the closing of the Business Combination, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding. Our future capital requirements will depend on many factors, including: ● Material cost. ● Regulatory pathway; and ● Human clinical trial costs. As of December 31, 2024, we had cash and cash equivalents of $1.2 million. Based on our current cash balance, as well as its history of operating losses and negative cash flows from operation, combined with its anticipated use of cash to, among other things, (i) fund the preclinical and clinical development of our products, (ii) identify and develop new product candidates, and (iii) seek approval for SIL204 and any other product candidates we may develop, our management has concluded that we do not have sufficient cash to fund our operations for 12 months from the date of its consolidated financial statements for the year ended December 31, 2024 included in this annual report without additional financing, and as a result, there is substantial doubt about our ability to continue as a going concern. In making this determination, applicable accounting standards prohibited us from considering the potential mitigating effect of plans that have not been fully implemented as of the date of our consolidated financial statements for the year ended December 31, 2024, including, without limitation, discussed below and to raise additional capital. Our financial information throughout this annual report, and our financial statements for the year ended December 31, 2024 contained herein have been prepared on a basis that assumes that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. This financial information and our consolidated financial statements for the year ended December 31, 2024 do not include any adjustments that might result from the outcome of this uncertainty. 81 We currently estimate that our existing cash and cash equivalents are sufficient to fund business operations into the fourth quarter of 2025. We have based these estimates and expectations on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. We could not, as of the December 31, 2024 balance sheet date of the audited financial statements for the two years ended December 31, 2024, determine the exact level of funds that will be available to us upon potential equity financings. Our expected use of funds represents our intentions based upon our current plans and business condition, which could change in the future as our plans and business condition evolve and the level of funding available to us becomes clear. In addition, changing circumstances could cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more than currently expected because of circumstances beyond our control. As a result, we could deplete our capital resources sooner than we currently expect. In addition, because the successful development of SIL204 and any studies or other product candidates that we pursue is highly uncertain, at this time we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the development of any product candidate. Until such time, if ever, as we can generate substantial revenues from product sales, we expect to finance our cash needs through a combination of public and private equity offerings and debt financings, including the private placement of ordinary shares pursuant to the ELOC Agreement, strategic alliances, collaborations, and marketing, distribution, or licensing arrangements. However, adequate additional financing may not be available to us on acceptable terms, or at all, and the availability of such financing may be impacted by the economic climate and market conditions. Reliance on the ELOC or other similar types of equity financings as a source of ongoing funding for our operations following the Business Combination could involve significant issuances of ordinary shares by us that could cause the following impacts (among others): ● significant dilution to the equity interests of our current shareholders; ● a deemed change of control of our company due to the issuance of a substantial number of ordinary shares, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in a change in the officers and directors of our company relative to our current officers and directors, to the extent any shareholders build up significant beneficial ownership from ordinary shares issued pursuant to the ELOC; ● may have the effect of delaying or preventing a change of control of our company by diluting the share ownership or voting rights of a person seeking to obtain control; and ● may adversely affect prevailing market prices for our ordinary shares or warrants. Critical Accounting Policies and Estimates For a description of our significant accounting policies, see Note 2 to our consolidated financial statements for the year ended December 31, 2024 included in this annual report. The preparation of our consolidated financial statements for the year ended December 31, 2024 in conformity with U.S. GAAP requires management to make estimates and assumptions in certain circumstances that affect the amounts reported in the accompanying consolidated financial statements for the year ended December 31, 2024 and related footnotes. Actual results may differ from these estimates. We base our judgments on our experience and on various assumptions that we believe to be reasonable under the circumstances. Of our policies, the following are considered critical to an understanding of our consolidated financial statements for the year ended December 31, 2024 as they require the application of subjective and complex judgment, involving critical accounting estimates and assumptions impacting our consolidated financial statements for the year ended December 31, 2024. The critical accounting estimates relate to the following: 82 Share-Based Compensation Share-based compensation expense related to share awards is recognized based on the fair value of the awards granted. The fair value of each option award is estimated on the grant date using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the input of highly subjective assumptions, including, before the Business Combination - the fair value of the underlying ordinary shares, the expected term of the option, and the expected volatility of the price of our ordinary shares. These estimates involve inherent uncertainties and the application of management’s judgment. The related share-based compensation expense is recognized on a straight-line basis over the requisite service period of the awards, including awards with graded vesting and no additional conditions for vesting other than service conditions. Forfeitures are accounted for as they occur instead of estimating the number of awards expected to be forfeited. Our use of the Black-Scholes option-pricing model requires the input of highly subjective assumptions. If factors change and different assumptions are used, our share-based compensation expense could be materially different in the future. We will continue to use judgment in evaluating the assumptions related to our share-based compensation on a prospective basis, when future awards are granted. As we continue to accumulate additional data related to our ordinary shares, we may refine our estimation process, which could materially impact our future share-based compensation expense. Valuation of Promissory Notes As part of the Business Combination, we issued to Moringa’s sponsor, as well as EarlyBirdCapital, promissory notes, which we irrevocably designated to be measured at fair value. The fair value Promissory Notes is measured using a discount rate based on a B rated US dollar zero-coupon discount curve, plus a credit spread of 6.67%. The discount rate was determined with reference to benchmark interest rates of secured loans reported by venture capitals, which were then used to extract our entity-specific credit spread. Since the Notes are not senior secured, one notch downgrade was applied. The expected timing of conversion or redemption of the notes was determined using our management’s forecasts. Valuation of Private Warrants As part of the Business Combination, we assumed a derivative warrant liability related to previously issued private warrants in connection with Moringa’s initial public offering. The private warrants were classified as a liability. We utilize a Black-Scholes model option pricing model to estimate the fair value of the private warrants. The volatility of the private warrants is based on implied volatility of the publicly traded warrants and the historical volatility of selected peer companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve as of the valuation date for a maturity similar to the expiration of the warrants. The dividend yield is based on the historical rate, which we anticipate will remain at zero. Recent Accounting Pronouncements See Note 2 on page F-75 to our financial statements for the year ended December 31, 2024 included in this annual report for a description of recent accounting pronouncements applicable to our financial statements for the year ended December 31, 2024. 83 Smaller Reporting Company Status We are a “smaller reporting company,” meaning that the market value of our ordinary shares held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We will continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million. As a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements and we have reduced disclosure obligations regarding executive compensation. Emerging Growth Company Status Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. We are an “emerging growth company” as defined in Section 2(a) of the Securities Act, and has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of ordinary shares that is held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter, (ii) the last day of the fiscal year in which we have total annual gross revenue of $1.235 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1.0 billion in non-convertible debt in the prior three-year, or (iv) December 31, 2029. We expect to continue to take advantage of the benefits of the extended transition period, although it may decide to early adopt such new or revised accounting standards to the extent permitted by such standards. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used. Item 7A . Quantitative and Qualitative Disclosures About Market Risk. The Company is a smaller reporting company, as defined under paragraph (f) of Item 10 of Regulation S-K promulgated by the SEC, and is not required to provide the information under this Item.