Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Silexion Therapeutics Corp and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, changes in redeemable convertible preferred shares and capital deficiency and cash flows for the each of the two years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1j to the consolidated financial statements, the Company has suffered recurring losses from operations and has cash outflows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1j. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Kesselman & Kesselman, 146 Derech Menachem Begin St. Tel-Aviv 6492103, Israel, P.O Box 7187 Tel-Aviv 6107120, Telephone: +972 -3- 7954555, Fax:+972 -3- 7954556, www.pwc.com/il

F-2

 

F-7

NOTE 1  - GENERAL:

 

 

 

From its formation on April 2, 2024 until the Closing of the Transactions on August 15, 2024, the Company had no operations and had been formed for the sole purpose of entering into the Transactions and serving as the publicly-traded company following the Transactions. Silexion, on the other hand, as the accounting acquirer in the Transactions and the predecessor entity to the Company from an accounting perspective, had active operations during earlier periods of time, prior to the Transactions. Consequently, these financial statements reflect the financial information of Silexion (as the predecessor entity to the Company) through August 15, 2024 and the financial information of New Silexion (as the combined company following the Transactions) from August 16, 2024 forward.

 

 

The Company has three subsidiaries as of December 31, 2024:

 

 

 

 

 

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On August 15, 2024, the parties completed the Transactions pursuant to which Merger Sub 2 merged with and into the SPAC, with the SPAC continuing as the surviving company of such merger and a wholly-owned subsidiary of New Silexion (the “SPAC Merger”), and Merger Sub 1 merged with and into Silexion, with Silexion continuing as the surviving company of such merger and a wholly-owned subsidiary of New Silexion (the “Acquisition Merger”).

 

Upon the effectiveness of the SPAC Merger, each outstanding SPAC Class A ordinary share and the sole outstanding SPAC Class B ordinary share was converted into an ordinary share of New Silexion on a one-for-one basis. Each outstanding warrant to purchase one SPAC Class A ordinary share was converted into a warrant to purchase one New Silexion ordinary share, at the same exercise price. Upon the effectiveness of the Acquisition Merger, each outstanding ordinary share and each outstanding preferred share of Silexion was converted into 3.9829 ordinary shares of New Silexion, before adjustment for two subsequent reverse share splits (the “Silexion Equity Exchange Ratio”). See Note 1h for post-reverse share split figures. Each outstanding Silexion warrant and Silexion option to purchase one Silexion share, and Silexion restricted share unit (RSU) that may be potentially settled for one Silexion share, was to become exercisable for, or became subject to settlement for (as applicable), such number of New Silexion ordinary shares as were equal to the Silexion Equity Exchange Ratio. The exercise price per New Silexion ordinary share of each such converted Silexion option and Silexion warrant was to be adjusted based on dividing the existing per share exercise price by the Silexion Equity Exchange Ratio. The terms of vesting, exercise and/or settlement, as applicable, of such converted options, warrants and RSUs were to remain the same following such conversion, except that the vesting of each Silexion option was to accelerate immediately prior to the Acquisition Merger, such that the New Silexion option into which it was to be converted was to be fully vested, and all Silexion warrants were to be exercised (on a cashless basis) immediately prior to the Acquisition Merger.

 

Immediately prior to the Closing seven directors were elected to New Silexion’s board of directors, of whom five were designated by Silexion and two were designated by the SPAC’s sponsor (the “Sponsor”).

 

The A&R BCA also required, as a closing condition, the transfer of the remaining outstanding shares of the Chinese Subsidiary held by GIBF to Silexion prior to the closing of the Business Combination in exchange for the issuance to GIBF of shares of Silexion, which were converted into ordinary shares of New Silexion in accordance with the Silexion Equity Exchange Ratio upon the closing.

 

 

 

 

•       Silexion’s shareholders hold approximately 61.55% of the outstanding voting interests in New Silexion upon the closing of the Transactions;

•       Silexion’s senior management comprise the senior management of New Silexion;

•       the directors nominated by Silexion constitute a majority of the board of directors of New Silexion (five out of seven of the initial directors);

•       Silexion’s operations comprise the ongoing operations of New Silexion; and

 

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•       Silexion’s name is the name used by New Silexion (in replacement of Biomotion Sciences).

 

Under the reverse recapitalization accounting method, the Transactions were deemed to be the equivalent of a capital transaction in which Silexion issued shares for the net assets of the SPAC. The net assets of the SPAC were stated at fair value, with no goodwill or other intangible assets recorded. Operations prior to the Transactions are those of Silexion.

 

In accordance with the applicable guidance to reverse recapitalization, the equity structure has been retroactively adjusted in all comparative periods up to the date of the Closing (the “Closing Date”), to reflect the number of New Silexion’s ordinary shares, $0.0001 par value per share (before adjustment for subsequent reverse share splits, which reverse share splits are described in Note 1h) issued to legacy Silexion shareholders in connection with the reverse recapitalization transaction. As such, the shares and corresponding capital amounts and earnings per share related to legacy Silexion shareholders prior to the reverse recapitalization have been retroactively restated as shares reflecting the exchange ratio established pursuant to the Transactions. In conjunction with the reverse recapitalization, Silexion’s ordinary shares underwent a 1-for-3.9829 conversion (before adjustment for subsequent reverse share splits).

 

Reconciliation of the SPAC Merger to the Company's Consolidated Financial Statements

 

The following table reconciles the elements of the Transactions to the consolidated statements of cash flows:

		Recapitalization
Accrued expenses assumed			1,329
Warrants to ordinary shares assumed			1,130
Related Party Promissory Note issued			3,288
Underwriters Promissory Note issued			1,336
Less: Loss upon entering Transactions			(4,783	)
Effect of reverse recapitalization, net of transaction costs			2,300

 

h.

On November 22, 2024 and July 16, 2025, the Company announced prospective 1-for-9 and 1-for-15 (respectively) reverse share splits of all of its issued and outstanding, and authorized but unissued, ordinary shares. The reverse share splits resulted in corresponding increases in the par value of the Company’s ordinary shares, from $0.0001 per share to $0.0009 per share, and from $0.0009 per share to $0.0135 per share, respectively. No fractional shares were issued as a result of the reverse share splits, as any fractional share totals to which shareholders became entitled were rounded up to the nearest whole number of shares. The reverse share splits became effective after market close on November 27, 2024 and July 28,2025, and the Company’s ordinary shares began trading on a reverse split-adjusted basis on the Nasdaq Global Market and the Nasdaq Capital Market (with respect to the first and second such reverse share splits, respectively) on November 29, 2024 and July 29, 2025, respectively.

 

 

 

In addition, since the commencement of these events, there have been continued hostilities along Israel’s northern border with Lebanon (with the Hezbollah terror organization), Israel’s southern border with the Gaza Strip (with the Hamas terrorist organization) and on other fronts from various extremist groups in region, such as the Houthis in Yemen and various rebel militia groups in Syria and Iraq. Further, on April 13, 2024, and on October 1, 2024, Iran launched a series of drone and missile strikes against Israel. As of December 31, 2024 a ceasefire agreement has been reached between Israel and Lebanon.

 

The Company’s headquarters are located in the central region of Israel. As of the issuance date of these consolidated financial statements, these conflicts have not had a material impact on the Company’s results of operations or financial position, if at all. The Company cannot currently predict the intensity or duration of Israel’s war, however, as most of the Company’s trials are not executed in Israel, the Company does not believe that the war will have any material impact on its ongoing operations. The Company continues to monitor its ongoing activities and will make any needed adjustments to ensure continuity of its business, while supporting the safety and well-being of its employees.

 

Any additional hostilities involving Israel, or the interruption or curtailment of trade between Israel and its trading partners, could adversely affect the Company’s operations and results of operations and could make it more difficult for the Company to raise capital.

 

 

Since its inception, the Company (and, prior to the Transactions, its predecessor, Silexion) has devoted substantially all its efforts to research and development, clinical trials, and capital raising activities. The Company is still in its development and clinical stage and has not yet generated revenues.

 

The Company (or, for those periods prior to the Transactions, its predecessor, Silexion) has incurred losses of $16,519 and $5,108 for the years ended on December 31, 2024 and December 31, 2023, respectively. During the year ended on December 31, 2024, the Company (including Silexion, for periods prior to the Transactions) had negative operating cash flows of $8,396. As of December 31, 2024, the Company had cash and cash equivalents of $1,187.

 

On January 15, 2025, the Company raised financing of $5,000 by public offering of ordinary shares, pre-funded warrants, and ordinary warrants. Additionally, a total of $864 was received from the exercise of warrants and pre-funded warrants. On January 29, 2025, the Company raised financing of $3,267 by induced warrant exercise transaction

(see Note 16).

 

The Company expects to continue incurring losses, and negative cash flows from operations. Management is in the process of evaluating various financing alternatives, as the Company will need to finance future research and development activities, general and administrative expenses and working capital through fund raising. However, there is no assurance that the Company will be successful in obtaining such funding.

 

Under these circumstances, in accordance with the requirements of ASC 205-40, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern for at least 12 months from the date these financial statements are issued. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:

 

a.

Basis of presentation

b.

Use of estimates

 

c.

Functional currency

d.

Principles of consolidation

e.

Cash and cash equivalents

 

f.

Restricted cash

 

g.

Property and equipment:

 

h.

Employee rights upon retirement

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i.

Fair value measurement

Level 1:

Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2:

Observable prices that are based on inputs not quoted on active markets, but corroborated by market data or active market data of similar or identical assets or liabilities.

Level 3

Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

 

j.

Financial instruments issued

 

k.

Contracts over Ordinary Shares

 

l.

Promissory Notes

 

m.

Redeemable Non-controlling Interest

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n.

Share-based compensation

 

o.

Research and development expenses

 

p.

Leases

 

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q.

Loss per share

 

r.

Income taxes:

1)

Deferred taxes

2)

Uncertainty in income tax

 

s.

Concentration of credit risks

 

t.

Impairment of long-lived assets

 

u.

Comprehensive Loss

 

v.

Loss Contingencies

 

w.

New accounting pronouncements:

1)

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 requires that a public entity that has a single reportable segment must provide all the disclosures required by the amendments and all existing segment disclosures in Topic 280. The Company adopted the ASU on January 1, 2024 - see Note 15.

1)

In November 2024, the FASB issued ASU No. 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The ASU improves the disclosures about a public business entity’s expenses and provides more detailed information about the types of expenses in commonly presented expense captions. The amendments require that at each interim and annual reporting period an entity will, inter alia, disclose amounts of purchases of inventory, employee compensation, depreciation and amortization included in each relevant expense caption (such as cost of sales, SG&A and research and development). The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating this ASU to determine its impact on the Company's disclosures.

2)

In December, 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. The ASU will be effective for fiscal years beginning after December 15, 2025, and allows adoption on a prospective basis, with a retrospective option. The Company is in the process of assessing the impacts and method of adoption.

3)

In June 2022, the FASB issued ASU 2022-03 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The ASU clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring its fair value. The ASU also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The ASU also introduces new disclosure requirements for equity securities subject to contractual sale restrictions.

NOTE 4  - PROPERTY AND EQUIPMENT, NET:

NOTE 6  - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION:

 

Statement of operations:

 

 

		Year ended December 31,
		2024				2023
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
		$	5,815			$	3,708

 

 

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
		$	6,756			$	973

 

 

Change in fair value of financial liabilities measured at fair value (including ELOC)		$	(1,150	)		$	86
Issuance costs			52				3
Loss upon entering Transactions			4,783				-
Interest income, net			(1	)			(153	)
Foreign currency exchange loss, net			247				453
Other			7				6
Total financial expense, net		$	3,938			$	395

NOTE 7  - COMMITMENTS AND CONTINGENT LIABILITIES:

 

From 2009 to 2020, Silexion received several approvals from the IIA for participation in research and development activities performed by Silexion (“Support Grants”) in a total amount of $5.8 million.

 

The Company is obligated to pay royalties to the IIA amounting to 3%-5% of the sales of the core products and other related revenues generated from such projects, up to 100% of the Support Grants received, linked to the U.S. dollar and bearing interest at the rate of LIBOR. The obligation to pay these royalties is contingent upon actual sales of the products and, in the absence of such sales, no payment is required. In October 2023, it was published that the interest rate on the Support Grants will be replaced with the 12-month term Secured Overnight Financing Rate (SOFR) published on the first trading day of each calendar year.

 

As of January 1, 2024, due to the cancellation of the LIBOR interest rate, the amount of the obligation is bearing 12-month term SOFR interest rate.

 

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).

NOTE 8  - WARRANTS TO PURCHASE PREFERRED SHARES:

a)

Regarding the Series A-4 Preferred Shares of Silexion, Silexion issued warrants to acquire 161 Series A-4 Preferred Shares to various investors, with an exercise price of $3,343.80 per share and an expiration date of May 30, 2025. Issuance expenses amounted to $3. On August 6, 2024, all of these warrants were exercised in a ‘cashless’ manner for 62 Preferred A4 shares of Silexion.

NOTE 9 - REDEEMABLE CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS’ EQUITY:

1)

On May 30, 2023, Silexion entered into an agreement to receive an investment in a total amount of $538. In exchange for this investment, Silexion issued 161 Series A-4 Preferred Shares with a par value of NIS 1.35. Issuance expenses amounted to $16.

2)

See Note 1(d) for shares issued as part of Transactions.

3)

See Note 3(d) for ELOC Financing.

NOTE 10  - INCOME TAXES:

 

 

Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.

 

 

Silexion is taxed according to the regular corporate income tax rate in Israel.  The corporate tax rate was 23% in 2024 and 2023.

 

 

The Chinese Subsidiary is taxed under the tax laws of China and the corporate tax rate is  25%.

 

 

As of December 31, 2024, the expected tax loss carryforwards of Silexion were approximately $25,216, which may be carried forward and offset against taxable income in the future for an indefinite period. The Company has recognized valuation allowance for the full amount in respect of these tax loss carryforwards since their utilization is not expected in the foreseeable future.

 

The tax loss carryforwards generated in the Cayman Islands have no value, as the Cayman Islands do not impose an income tax on corporations.

 

Local and foreign components of loss from continuing operations, before income taxes consisted of the results of Silexion as the local entity, and the results of New Silexion, Moringa, and the Chinese Subsidiary as foreign entities.

 

 

 

As of December 31, 2024 and 2023, the Company’s uncertain tax positions were immaterial.

 

 

The Group consists of a Cayman Islands parent holding company with various international subsidiaries (see Note 1(c)). The applicable statutory rate in the Cayman Islands is 0% for the Company for the year ended December 31, 2024. For purposes of the reconciliation between the provision for income taxes at the statutory rate and the effective tax rate, an Israeli statutory tax rate of 23% for the years ended December 31, 2024, and December 31, 2023 was applied, which is the rate that is applicable to the substantially all of the Group’s operations.

 

Income tax expense attributable to income from continuing operations was $10 and $32 for the years ended December 31, 2024 and 2023, respectively, and differed from the amounts computed by applying an Israeli statutory income tax rate of 23% to pretax income from continuing operations, mainly as a result of changes in valuation allowance of $1,392 and $922 respectively, as well as nondeductible expenses.

 

The reconciliation of the theoretical tax benefit (expense) under the Israeli statutory tax rate to the Company's effective benefit (expense) taxes is as follows for the years ended December 31, 2024 and 2023, respectively:

 

 

 

Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:

 

 

 

The following table presents a reconciliation of the beginning and ending valuation allowance:

 

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and net operating losses are utilized. Based on these factors, the Company recorded a full valuation allowance as of December 31, 2024 and 2023.

 

 

Silexion has tax assessments that are considered to be final through tax year 2019.

 

The Chinese Subsidiary does not have final tax assessments.

NOTE 11  - SHARE-BASED COMPENSATION:

1)

Warrants to service provider

2)

Employee Stock Option Plan