NeuroSense Therapeutics Ltd 6-K, filed Jun 17, 2024
NeuroSense Therapeutics Ltd. (NRSN)
About this 6-K
NeuroSense Therapeutics Ltd filed this 6-K on June 17, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16
Under the Securities Exchange Act of 1934
For the Month of June 2024
Commission File Number:
(Translation of registrant’s name into English)
NeuroSense Therapeutics Ltd.
11 HaMenofim Street, Building B
Herzliya 4672562 Israel
+972-9-7996183
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
This Form 6-K and exhibits 99.1, 99.2 and 99.3 are hereby incorporated by reference into the registrant’s Registration Statements on Form S-8 (File No. 333-262480) and Form F-3 (File Nos. 333-269306 and 333-260338), to be a part thereof from the date on which this report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.
On June 17, 2024, NeuroSense Therapeutics Ltd. (the “Company”) changed its accounting method from International Financial Reporting Standards, as issued by the International Accounting Standards Board, to generally accepted accounting principles in the United States of America (“U.S. GAAP”) as of January 1, 2024. As a result, the Company re-issued its consolidated financial statements for the year ended December 31, 2023 prepared in accordance with U.S. GAAP.
Such financial statements and accompanying Operating and Financial Review and Prospects attached hereto replace the consolidated financial statements and the Operating and Financial Review and Prospects included in the Company’s Annual Report on Form 20-F filed with the SEC on April 4, 2024.
Attached hereto and incorporated by reference herein are the following exhibits:
| 99.1 | Consolidated Financial Statements as of December 31, 2023. | |
| 99.2 | Operating and Financial Review and Prospects as of December 31, 2023. | |
| 99.3 | Consent of Independent Registered Accounting Firm. |
1
Exhibit Index
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NeuroSense Therapeutics Ltd. | ||
| Date: June 17, 2024 | By: | /s/ Alon Ben-Noon |
| Alon Ben-Noon | ||
| Chief Executive Officer | ||
3
Exhibit 99.1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
NeuroSense Therapeutics Ltd.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of NeuroSense Therapeutics Ltd. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1B to the consolidated financial statements, the Company’s recurring losses and its expectation to incur significant additional losses 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 1B. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Change in Basis of Accounting
The Company’s annual consolidated financial statements for 2023 were previously prepared in conformity with International Financial Reporting Standards as issued by the IASB. As described in Note 1E to the consolidated financial statements, the Company elected to change the basis of accounting used in preparing its financial statements for it to be in conformity with U.S. generally accepted accounting principles. Consequently, the Company’s 2023 financial statements including prior years financial statements for 2022 and 2021, referred to above, are now being presented in accordance with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
| /s/ Somekh Chaikin | |
| Somekh Chaikin | |
| Member Firm of KPMG International |
We have served as the Company’s auditor since 2020.
Tel-Aviv, Israel
June 17, 2024
F-2
NeuroSense Therapeutics Ltd.
Consolidated Balance Sheets
(U.S. dollars in thousands, except share and per share data)
| As of December 31, | ||||||||||
| Note | 2023 | 2022 | ||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalent | 3 | $ | $ | |||||||
| Short term deposits | 2F | |||||||||
| Other receivables | 4 | |||||||||
| Restricted deposits | ||||||||||
| Total current assets | ||||||||||
| Non-current assets: | ||||||||||
| Property and equipment, net | 5 | |||||||||
| Operating right of use assets | 6 | |||||||||
| Restricted deposit | ||||||||||
| Total non-current assets | ||||||||||
| Total assets | $ | $ | ||||||||
| Liabilities and shareholders’ equity | ||||||||||
| Current liabilities: | ||||||||||
| Trade payables | $ | $ | ||||||||
| Other payables | 7 | |||||||||
| Total current liabilities | ||||||||||
| Non-current liabilities: | ||||||||||
| Operating long-term lease liability | 6 | |||||||||
| Liability in respect of warrants | 8 | |||||||||
| Total liabilities | ||||||||||
| Shareholders’ equity: | 9,10 | |||||||||
| Authorized: | ||||||||||
| Share premium and capital reserve | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| Total shareholders’ equity (deficit) | ( | ) | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
NeuroSense Therapeutics Ltd.
Consolidated Statements of Operations and Comprehensive Loss
(U.S. dollars in thousands, except share and per share data)
| For the year ended December 31 | ||||||||||||||
| Note | 2023 | 2022 | 2021 | |||||||||||
| Research and development expenses | 11 | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| General and administrative expenses | 12 | ( | ) | ( | ) | ( | ) | |||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ||||||||
| Financing income (expenses), net | 13 | ( | ) | |||||||||||
| Net loss and comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Weighted average number of ordinary shares used in computing basic net loss per share | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
NeuroSense Therapeutics Ltd.
Consolidated Statements of Changes in Shareholders’ Equity
(U.S. dollars in thousands, except share and per share data)
| Ordinary Shares | Share Premium and Capital | Accumulated | Total Shareholders’ Equity | |||||||||||||||||
| Number | Amount | Reserve | Deficit | (Deficit) | ||||||||||||||||
| Balance as of January 1, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of shares in respect of SAFE instruments | ||||||||||||||||||||
| Exercise of warrants and options | ||||||||||||||||||||
| Issuance of shares and tradable warrants, net | ||||||||||||||||||||
| Share based compensation | - | |||||||||||||||||||
| Net loss and comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Repurchase of options | - | ( | ) | ( | ) | |||||||||||||||
| Exercise of warrants and vested RSUs | ||||||||||||||||||||
| Share based compensation | - | |||||||||||||||||||
| Net loss and comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of shares and pre-funded warrants, net | ||||||||||||||||||||
| Exercise of pre-funded warrants, options and vested RSUs | ||||||||||||||||||||
| Share based compensation | - | |||||||||||||||||||
| Net loss and comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
NeuroSense Therapeutics Ltd.
Consolidated Statements of Cash Flows
(U.S. dollars in thousands, except share and per share data)
| For the year ended December 31 | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Cash flows from operating activities | ||||||||||||
| Net loss for the year | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation | ||||||||||||
| Share based compensation | ||||||||||||
| Revaluation of liability in respect to warrants | ( | ) | ||||||||||
| Revaluation of SAFE instruments | ||||||||||||
| Loss from disposal of property and equipment | ||||||||||||
| Financing expenses (income), net | ( | ) | ||||||||||
| Changes in assets and liabilities: | ||||||||||||
| Decrease in operating right of use asset | ||||||||||||
| Decrease in operating lease liability | ( | ) | ( | ) | ||||||||
| Decrease (increase) in other current assets | ( | ) | ||||||||||
| Increase (decrease) in trade payables | ( | ) | ||||||||||
| Increase (decrease) in other payables | ||||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ( | ) | ||||||
| Cash flows from investing activities | ||||||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ( | ) | ||||||
| Redemption of (investment in) short-term deposits | ( | ) | ||||||||||
| Investment in restricted deposit, net | ( | ) | ( | ) | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ( | ) | ||||||||
| Cash flows from financing activities | ||||||||||||
| Issuance of SAFE instruments | ||||||||||||
| Payment in respect of cancellation of options | ( | ) | ||||||||||
| Exercise of warrants and options | ||||||||||||
| Issuance of shares, warrants and pre-funded warrants, net | ||||||||||||
| Net cash provided by financing activities | ||||||||||||
| Effects of exchange rate changes on cash and cash equivalents | ( | ) | ||||||||||
| Increase (decrease) in cash and cash equivalents | ( | ) | ( | ) | ||||||||
| Cash and cash equivalents as at the beginning of the year | ||||||||||||
| Cash and cash equivalents as of the end of the year | $ | $ | $ | |||||||||
| Non-cash investing and financing activities: | ||||||||||||
| Recognition of right of use assets | $ | $ | $ | |||||||||
| Conversion of SAFE instruments | $ | $ | $ | |||||||||
| Supplemental disclosure of cash flow information: | ||||||||||||
| Interest received | $ | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 1 - General
| A. | NeuroSense Therapeutics Ltd. (“NeuroSense” or the “Company”) was incorporated in Israel on February 13, 2017. NeuroSense is a clinical-stage pharmaceutical company focused on discovering and developing treatments for patients suffering from debilitating neurodegenerative diseases. The Company’s lead product candidate, PrimeC, is a novel oral formulation of a fixed dose combination composed of a specific ratio and doses of two FDA-approved drugs. |
In addition to PrimeC, the Company has initiated research and development efforts in Alzheimer’s disease and Parkinson’s disease, with a similar strategy of combined products.
The Company’s ordinary shares and warrants began trading on the Nasdaq Capital Market on December 9, 2021 under the ticker symbols “NRSN” and “NRSNW,” respectively.
| B. | The Company currently has no products approved for sale and the Company’s operations have been funded primarily by its shareholders. To date, the Company has generated no sales or revenues, has incurred losses and expects to incur significant additional losses due to the continuing focus on the research, development, clinical activities of its product candidates, preclinical programs, business development, organizational structure and to advance the programs within the Company’s pipeline. Consequently, its operations are subject to all the risks inherent in the establishment of a pre-revenue business enterprise as well as those risks associated with a company engaged in the research and development of pharmaceutical compounds. |
Based on current expected level of operating expenditures, the Company’s cash resources as at December 31, 2023 and the cash received after the reporting period (see also Note 16) shall not be sufficient to fund the Company’s operations for a period of at least 12 months from the approval of these consolidated financial statements, assuming that the Company will continue its development plan in accordance with the original pipeline and without delaying or slowing down the progress of its plans. The Company will require additional cash to fund the execution of its mid and long-term development program. The Company anticipates raising additional funds through public or private sales of debt or equity securities, collaborative arrangements, or some combination thereof. Whilst management is progressing with its plans to secure external financing, these still require approval by third parties, and accordingly, there is no assurance that any such arrangement will be entered into or that financing will be available when needed in order to allow it to continue its operations, or if available, on terms favorable or acceptable to it.
In the event financing is not obtained, the Company may pursue cost cutting measures or may be required to delay, reduce the scope of, or eliminate any of its development programs or clinical trials, these events could have a material adverse effect on its business. These factors raise significant doubt about the Company ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
| C. | On October 3, 2022, the Company established a US based subsidiary, NeuroSense US Inc. (“US Subsidiary”). From establishment through December 31, 2023, the US Subsidiary had no activity. The subsidiary will perform research and development activity and engage in possible collaboration agreements. On July, 2023, the Company established a German based subsidiary, NeuroSense GmbH (“NeuroSense GmbH “). NeuroSense GmbH will perform research and development activity and engage in possible collaboration agreements. From establishment through December 31, 2023, NeuroSense GmbH had no activity. |
F-7
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 1 - General (cont.)
| D. | In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets, launched extensive rocket attacks and kidnapped many Israeli civilians and soldiers. Following the attack, Israel declared war against Hamas. In parallel, border clashes between Israel and the Hezbollah terrorist group on Israel’s northern border with Lebanon intensified and may escalate into a greater regional conflict. |
All of the Company’s clinical and pre-clinical research and development is currently being conducted outside of Israel, other than its 12-month open label-extension (“OLE”) study of the PARADIGM trial, partially conducted in Tel Aviv, and a Phase 2 trial for Alzheimer’s disease that we conduct in Haifa, Israel. The OLE has not been affected by the war, although the quality of the study may be adversely affected if as a result of the war patients are unable to visit the study center or the study coordinator is not able to conduct home visits and monitor the patients. In addition, in the event of a significant escalation of hostilities in northern Israel, there may be a delay in the planned Alzheimer trial. The Company may also elect to set up a site in Israel for a Phase 3 pivotal ALS trial of PrimeC, but this would be in addition to numerous other sites in Europe and the U.S., and as a result it does not expect the timeline or quality of this trial to be adversely affected by the war.
The Israel Defence Force (the “IDF”), the national military of Israel, is a conscripted military service, subject to certain exceptions. Since October 7, 2023, the IDF has called up several hundred thousand of its reserve forces to serve. Fourteen out of the Company’s current 16 employees are resident in Israel. Two of its non-management employees in Israel who do not perform critical functions have been called, and additional employees may be called, for service in the current or future wars or other armed conflicts with Hamas or other terrorist groups, and such persons may be absent for an extended period of time. As a result, its operations in Israel may be disrupted by such absences, which disruption may materially and adversely affect its business, prospects, financial condition and results of operations.
Although until approval of these financial statements, the impact of the war on the Company was negligible, it is currently not possible to predict the duration or severity of the ongoing conflict or its effects on the Company’s business, operations and financial conditions. The ongoing conflict is rapidly evolving and developing, and could disrupt its business and operations, and hamper its ability to raise additional funds or sell its securities, among others.
| E. |
After the Company issued its annual financial statements for 2023 in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board, the Company elected to change the basis of accounting used in preparing its financial statements from IFRS to United States generally accepted accounting principles (“U.S. GAAP”). Consequently, the Company’s 2023 financial statements including prior years financial statements for 2022 and 2021 have been re-presented in accordance with U.S. GAAP.
In these financial statements, the Company has applied U.S. GAAP as issued by the Financial Accounting Standards Board, or FASB, on a fully retrospective basis. |
F-8
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 2 - Significant Accounting Policy
| A. | Basis of presentation |
The consolidated financial statements have been prepared in accordance accounting principles generally accepted in the United States of America (“US GAAP”).
| B. | Use of estimates in preparation of consolidated financial statements |
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company evaluates on an ongoing basis its assumptions, including those related to fair value of financial instruments and share based compensation. The Company’s management believes that the estimates, judgment, and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of liabilities at the dates of the consolidated financial statements, and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates.
| C. | Functional currency |
The functional currency of the Company and its subsidiaries, all of which are primarily direct and integral component of the Company’s
operation, is the U.S. dollar (“$” or “dollar”), as the dollar is primary currency of the economic environment
in which the Company and its subsidiaries have operated and expects to continue to operate in foreseeable future.
In accordance with ASC 830, “Foreign Currency Matters”, balances denominated in or linked to foreign currency are stated on the basis of the exchange rates prevailing at the applicable balance sheet date. For foreign currency transactions included in the consolidated statement of operations and comprehensive loss, the exchange rates applicable on the relevant transaction dates are used. Gains or losses arising from changes in the exchange rates used in the translation of such transactions are presented within financing income or expenses.
| D. | Principles of Consolidation |
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation.
| E. | Cash and cash equivalents |
Cash and cash equivalents include highly liquid investments, including short-term bank deposits (with original maturity dates of up to three months from date of deposit) that are not restricted as to withdrawal or use.
| F. | Short-term deposits |
Short-term deposits in banking institutions for periods in excess of three months following the date of deposit. The deposits are presented in accordance with the terms of their deposit.
| G. | Restricted deposits |
Restricted deposits consist of deposits held in restricted deposit bank accounts including deposits held as collateral for guarantees to third parties, classified as current or non-current based on expected timing of the disbursement.
F-9
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 2 - Significant Accounting Policy (cont.)
| H. | Property and equipment |
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. When an asset is disposed of, the related cost and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition is reflected in the consolidated statements of operations and comprehensive loss.
The Company’s long-lived assets are reviewed for impairment in accordance with ASC 360, “Property, Plant and Equipment”, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. To date, the Company has not incurred any impairment losses.
| % | ||
| Computers and peripherals and equipment | ||
| Office furniture and equipment | ||
| Leasehold improvements |
| I. | Research and Development |
Research and development costs are expensed as incurred.
| J. | Fair Value Measurements |
The Company measures and discloses fair value in accordance with the ASC 820, “Fair Value Measurements and Disclosures” which defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions there exists a three-tier fair-value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 - unadjusted quoted prices are available in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.
Level 2 - pricing inputs are other than quoted prices in active markets that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
Level 3 - pricing inputs are unobservable for the non-financial asset or liability and only used when there is little, if any, market activity for the non-financial asset or liability at the measurement date. The inputs into the determination of fair value require significant management judgment or estimation. Level 3 inputs are considered as the lowest priority within the fair value hierarchy. The valuation of certain financial instruments classified under fair value through profit or loss category falls under this category.
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.
As of the reported periods, the fair values of the Company’s cash, cash equivalents, short-term bank deposits, current and non-current restricted deposits, other current assets, trade payables and other current liabilities approximated the carrying values of these instruments presented in the Company’s consolidated balance sheets because of their nature.
F-10
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 2 - Significant Accounting Policy (cont.)
| K. | Concentrations of credit risk |
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents as well as certain other current assets that do not amount to a significant amount. Cash and cash equivalents, which are primarily held in dollar and New Israeli Shekels (NIS), are deposited with major bank in Israel. Management believes that such financial institutions are financially sound and, accordingly, minimal credit risk exists with respect to these financial instruments. The Company does not have any significant off-balance-sheet concentration of credit risk, such as foreign exchange contracts, option contracts or other foreign hedging arrangements.
| L. | Leases |
The Company entered into non-cancelable lease agreements for offices for use in its operations, which are classified as operating leases (see below).
The Company applies ASC 842, “Leases” under which the Company determines if an arrangement is a lease at inception. The Company’s assessment is based on: (i) whether the contract involves the use of an identified asset, (ii) whether the Company obtains the right to substantially all of the economic benefits from the use of the asset throughout the period of use, and (iii) whether the Company has the right to direct the use of the asset.
Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: (i) the lease transfers ownership of the asset by the end of the lease term, (ii) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (iii) the lease term is for a major part of the remaining useful life of the asset, (iv) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset, or (v) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of lease term. A lease is classified as an operating lease if it does not meet any one of these criteria. Since all the Company’s lease contracts for premises do not meet any of the criteria above, the Company concluded that all its lease contracts should be classified as operating leases.
Right of Use (“ROU”) assets and liabilities are recognized on the commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company’s leases do not provide an implicit rate, the Company uses its Incremental Borrowing Rate (“IBR”) based on the information available on the commencement date in determining the present value of lease payments. The Company’s IBR is estimated to approximate the interest rate for collateralized borrowing with similar terms and payments and in economic environments where the leased asset is located. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. Moreover, the ROU asset may also include initial direct costs, which are incremental costs of a lease that would not have been incurred if the lease had not been obtained. The Company uses the long-lived assets impairment guidance in ASC 360-10, “Property, Plant, and Equipment - Overall”, to determine whether a ROU asset is impaired, and if so, the amount of the impairment loss to recognize. Certain leases include options to extend or terminate the lease. An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain that the Company will exercise that option. An option to terminate is considered unless it is reasonably certain that the Company will not exercise the option.
| M. | Commitment and contingencies |
The Company accounts for its contingent liabilities in accordance with ASC 450, Contingencies under which a provision is recorded when it is both probable that liability has been incurred and the amount of the loss can be reasonably estimated. With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter.
F-11
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 2 - Significant Accounting Policy (cont.)
| N. | Employee benefit plans |
The Company’s liability for severance
pay to its Israeli employees is subject to Section 14 of the Israeli Severance Compensation Act, 1963 (“Section 14”), pursuant
to which all of the Company’s employees are entitled to monthly deposits by the Company, at a rate of
| O. | Deferred income taxes |
The Company accounts for income taxes in accordance with ASC 740, “Income Taxes”. Accordingly, deferred income taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between the financial accounting and the tax bases of assets and liabilities under the applicable tax law. Deferred tax balances are computed using the enacted tax rates expected to be in effect when these differences reverse. Valuation allowance in respect of deferred tax assets is provided for, if necessary, to reduce deferred tax assets is amounts more likely than not to be realized.
The Company implements a two-step approach
to recognize and measure uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax
return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical
merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step
is to measure the tax benefit as the largest amount that is more than
Taxes which would apply in the event of disposal of investment in foreign subsidiaries have not been considered in computing the deferred taxes, since the intention of the Company is to hold and not to realize the investment.
| P. | Stock-based compensation |
The Company’s employees’ and directors’ share-based payment awards are classified as equity awards. The Company accounts for these awards using the grant-date fair value method. For employees, the fair value of share-based payment transactions is recognized as an expense over the requisite service period for each separately vesting tranche of the award as if the award is, in-substance, multiple awards. Forfeitures are recognized as they occur.
For nonemployees, compensation costs are recognized in the same period and in the same manner the Company would if it had paid cash for those goods or services.
| Q. | Basic and diluted net loss per share |
Basic net loss per share is computed
using the weighted average number of ordinary shares, pre-funded warrants to purchase ordinary shares for an exercise price of $
Diluted loss per share gives effect to all potentially dilutive common shares outstanding during the year using the treasury stock method with respect to options and non-vested RSUs granted under employee stock compensation plan and certain warrants granted through its Initial Public Offering (IPO) and using the if-converted method with respect to certain warrants granted through registered direct offering and accounted for as derivative liability. In computing diluted loss per share, the average share price for the period is used in determining the number of shares assumed to be purchased from the exercise of share options or warrants.
During the reported periods, all outstanding share options, warrants and non-vested RSUs have been excluded from the calculation of the diluted net loss per share as all such securities are anti-dilutive for all years presented.
F-12
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 2 - Significant Accounting Policy (cont.)
| R. | Share capital |
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of the shares are recognized as a deduction from equity.
| S. | Recently adopted accounting pronouncements |
| 1. | In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (“ASC 326”): Measurement of Credit Losses on Financial Instruments” to introduce a new model for recognizing credit losses on financial instruments based on estimated current expected credit losses, or CECL. Under the new standard, an entity is required to estimate CECL on trade receivables at inception, based on historical information, current conditions, and reasonable and supportable forecasts. The guidance is effective for the Company for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Early application is permitted. The Company adopted this guidance on January 1, 2023, and there was no material impact on the Company’s consolidated balance sheet and the consolidated statements of operations and comprehensive loss upon adoption. |
| 2. | In August 2020, the FASB issued ASU 2020-06 “Debt- Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”. This guidance simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. Furthermore, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share. ASU 2020-06 is effective for the Company for annual periods beginning after December 15, 2023, and interim periods within those fiscal years. The Company plan to adopt this guidance on January 1, 2024, and there was no material impact on the Company’s consolidated balance sheet and the consolidated statements of operations and comprehensive loss upon adoption. |
| T. | Recently issued accounting pronouncements, not yet adopted |
As an emerging growth company, the Jumpstart Our Business Startup Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below reflect this election.
| 1. | In December 2023, the FASB issued ASU 2023-09 “Improvements to Income Tax Disclosures” which improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain amendments to improve income tax disclosures effectiveness. The guidance is effective for the Company’s annual periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on the consolidated financial statement disclosures. |
| 2. | In November 2023, the FASB issued ASU 2023-07 “Segment Reporting: Improvements to Reportable Segment Disclosures” which expands public entities’ segment disclosures primarily by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures required under ASC 280. The guidance is effective for the Company’s annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements and related disclosures. |
F-13
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 3 - Cash and cash equivalent
| December 31, 2023 | December 31, 2022 | |||||||
| U.S. dollars in thousands | ||||||||
| Denominated in NIS | $ | $ | ||||||
| Denominated in USD | * | |||||||
| Denominated in EUR | ||||||||
| Denominated in GBP | ||||||||
| $ | $ | |||||||
| (*) |
Note 4 - Other receivables
| December 31, 2023 | December 31, 2022 | |||||||
| U.S. dollars in thousands | ||||||||
| Government agencies | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Other | ||||||||
| $ | $ | |||||||
F-14
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 5 - Property and equipment, net
| Computers and peripherals and equipment | Office furniture and equipment | Leasehold improvements | Total | |||||||||||||
| U.S. dollars in thousands | ||||||||||||||||
| Cost: | ||||||||||||||||
| Balance at January 1, 2023 | $ | | $ | | $ | | $ | | ||||||||
| Purchases during the year | ||||||||||||||||
| Balance at December 31, 2023 | ||||||||||||||||
| Accumulated depreciation: | ||||||||||||||||
| Balance at January 1, 2023 | ||||||||||||||||
| Depreciation during the year | ||||||||||||||||
| Balance at December 31, 2023 | ||||||||||||||||
| Depreciated cost at December 31, 2023 | $ | $ | $ | $ | ||||||||||||
Balance as of December 31, 2022:
| Computers and peripherals and equipment | Office furniture and equipment | Leasehold improvements | Total | |||||||||||||
| U.S. dollars in thousands | ||||||||||||||||
| Cost: | ||||||||||||||||
| Balance at January 1, 2022 | $ | | $ | | $ | $ | ||||||||||
| Purchases during the year | ||||||||||||||||
| Balance at December 31, 2022 | ||||||||||||||||
| Accumulated depreciation: | ||||||||||||||||
| Balance at January 1, 2022 | ||||||||||||||||
| Depreciation during the year | ||||||||||||||||
| Balance at December 31, 2022 | ||||||||||||||||
| Depreciated cost at December 31, 2022 | $ | $ | $ | $ | ||||||||||||
| * |
F-15
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 6 - Operating lease
The Company has lease agreements with respect
to offices. In December 2021, the Company entered into an office space lease agreement (which commenced on January 1, 2022). Monthly rent
payments including utilities amount to approximately $
| December 31, 2023 | ||||
| U.S. dollars in thousands | ||||
| Operating right of use asset | $ | |||
| Current operating lease liability | $ | |||
| Non-Current operating lease liability | $ | |||
| Total operating lease liability | $ | |||
| December 31, 2023 | ||||
| U.S. dollars in thousands | ||||
| Less than one year | $ | |||
| Two years | ||||
| Total operating lease payments | $ | |||
| Less: imputed interest | $ | ( | ) | |
| Present value of lease liabilities | $ | |||
Additional information on lease
| December 31, 2023 | ||||
| Lease term (years) | ||||
| Weighted average discount rate | % | |||
| For the year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| U.S. dollars in thousands | ||||||||||||
| Lease payments | ||||||||||||
| $ | $ | $ | ||||||||||
F-16
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 7 - Other payables
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| U.S. dollars in thousands | ||||||||
| Employees and payroll accruals | $ | $ | ||||||
| Short term lease liability | ||||||||
| Accrued expenses | ||||||||
| $ | $ | |||||||
Note 8 - Liability in respect of warrants
As noted in Note 9Ah below, on June 22, 2023,
the Company entered into a registered direct offering under which, inter alia, the Company issued to institutional purchaser
| December 31, 2023 | ||||||||||||||||
| U.S. dollars in thousands | ||||||||||||||||
| Description | Fair value | Level 1 | Level 2 | Level 3 | ||||||||||||
| Liability in respect of warrants | $ | $ | $ | (*) | $ | |||||||||||
| (*) |
| December 31, 2023 | ||||
| Financial liabilities: | ||||
| Expected volatility (%) | ||||
| Share price (in $) | ||||
| Risk-free interest rate (%) | ||||
| Expected life (years) | ||||
| Dividend yield (%) | ||||
| 2023 | ||||
| U.S. dollars in thousands | ||||
| Balance as at January 1, 2023 | $ | |||
| Recognition of liability in respect to warrants at the initial date | ||||
| Revaluation of liability in respect to warrants | ( | ) | ||
| Balance as at December 31, 2023 | $ | |||
F-17
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 9 - Shareholders’ Equity
| A. |
| Number of shares December 31 | ||||||||||||||||
| Authorized 2023 | Issued and outstanding 2023 | Authorized 2022 | Issued and outstanding 2022 | |||||||||||||
| Ordinary shares of no par value | ||||||||||||||||
| a. | In February, May, June and July 2021, the Company entered into Simple Agreements for Future Equity (each, a “SAFE”) with four separate investors for aggregate proceeds of $
The Company accounted for the SAFE instrument as financial liability in accordance with ASC 480-10.
The Company recorded financial expenses in the amount of $ |
| b. | During 2018 and 2019, the Company entered into several Share Purchase Agreements (“SPAs”) with multiple investors pursuant to which the Company issued shares and warrants. Pursuant to the SPAs, the warrants had an exercise price of $ |
In August and September 2021 after
the said assignments, the Company received warrant exercise notices of
| c. | In May and October 2021, several option holders exercised their outstanding options to purchase |
| d. | In October 2021, several option holders, holding an aggregate amount of |
| e. | In December 2021, the Company closed its IPO in the United States and issued
In addition, the net proceeds from the exercise of underwriter’s option were $ |
| f. | In March 2022, the Company received an amount of $ |
F-18
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 9 - Shareholders’ Equity (cont.)
| A. | Share capital (cont.) |
| g. | On April 14, 2023, the Company entered into a sales agreement with Alliance Global Partners, pursuant to which the Company may offer and sell, from time to time, to or through the Alliance Global Partners as agent or principal, ordinary shares an at-the-market offering, having an aggregate offering price of up to $ |
| h. | On June 22, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) pursuant to which the Company agreed to issue and sell, in a registered direct offering: (i) an aggregate of
| |
| i. | On June 23, 2023, one of the Company’s employees exercised |
| j. | During October 2023, |
| B. | Ordinary Shares Right |
Each ordinary share is entitled to
F-19
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 10 - Share Based Payment
On December 16, 2018, the Company’s board
of directors approved an employee share option plan (“ESOP”). According to the provisions of the ESOP, the exercise period,
exercise price and vesting conditions for each option grant will be determined by the board of directors. The number of shares reserved
for issuance is subject to an annual increase to be added as of the first day of the Company’s fiscal year, equal to
The expiration date of the options granted to
employees and directors is after
On October 31, 2021, the Company’s board of directors approved an amendment to the Company’s 2018 Employee Share Option Plan. The amendment determines that the total number of underlying shares reserved for future issuance under the plan and any modification thereof, shall be:
| ● |
| ● | An annual increase to be added as of the first day of the Company’s fiscal year, beginning in 2022 and occurring each year thereafter through 2032, equal to |
Following this amendment, the number of shares
reserved under this plan was
| 1. | In March 2021, the Company’s board of directors approved the grant of |
| ● |
| ● |
| ● |
The options are exercisable if the Company receives services from the service provider during the mentioned period.
The Company accounted the new grant as a modification to the existing grant.
| 2. | In July 2021, the Company granted |
| 3. | In August 2021, the Company’s board of directors approved the grant of |
F-20
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 10 - Share Based Payment (cont.)
| 4. | On October 31, 2021, the Company’s board of directors recommended that the shareholders approve, and on November 7, 2021 the Company’s shareholders approved the following awards to the Company’s current management and directors subject to an IPO: |
| ● |
| ● | ||
| ● |
| 5. | On October 31, 2021, the Company’s board of directors approved the grant of |
| 6. | On November 9, 2021, the Company’s board of directors approved the extension of the exercise period of options of two employees, which, pursuant to their original terms would have been expire if not exercised before the completion of the IPO. According to the grant letter, at the event of an IPO, all unvested options were fully vested, and accordingly, the remaining unrecognized expenses were recorded immediately upon such vesting. |
| 7. | On December 9, 2021, the underwriter (see Note 9Ae), partially exercised its right to purchase an additional
Furthermore, as part of the offering, the Company issued |
| 8. | On December 13, 2021, upon the completion of the Company’s IPO, |
| 9. | On January 10 and January 11, 2022, the Company’s entered into option settlement agreement (“Agreements”) with certain consultants of the Company. According to the Agreements, the Company exchanged |
| 10. | On January 25, 2022 and March 10, 2022, the Company’s board of directors and shareholders, respectively, approved the compensation of each of the Company’s external directors and a newly appointed director. Such compensation included the grant of |
| 11. | On January 25, 2022, the Company’s board of directors approved the grant of aggregate amount of |
F-21
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 10 - Share Based Payment (cont.)
| 12. | In March 2022, the Company’s board of directors approved the grant of aggregate amount of |
| 13. | In July and August 2022, the Company’s board of directors approved the grant of aggregate amount of |
| 14. | During 2022 the Company issued |
| 15. | On March 20, 2023, the Company’s board of directors, approved the following awards: |
| ● | Grant of |
| ● | A bonus for certain employees in the form of |
| ● | In addition to the grants in accordance with the 2022 bonus plan mentioned above, a raise of additional |
| ● | The grant of |
| 16. | On May 30, 2023, the Company granted |
| 17. | On August 15, 2023, the Company’s board of directors approved the grant of aggregate amount of |
The weighted average grant date fair value of
options granted during the years ended December 31, 2023, 2022 and 2021 was $
Stock-based compensation expenses recognized in profit and loss as an operating expense based on fair value of the option at the grant date by using Binominal option pricing model for employees and directors and Black and scholes pricing model for non-employees. The inputs for the valuation analysis of the share options include several assumptions of which the most significant are the fair market value of the underlying ordinary share, the expected share price volatility and the expected option term. Expected volatility was calculated based upon historical volatility of peer companies in the same industry on weekly basis. Expected option term represents the period that the Company’s share options are expected to be outstanding and is set as an exercise coefficient based on academic empirical papers. Risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. Expected dividend yield assumption is based on the Company’s historical experience and expectation of no future dividend payouts. The Company has historically not paid cash dividends and has no foreseeable plans to pay cash dividends in the future. Forfeitures are recognized as they occur.
F-22
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 10 - Share Based Payment (cont.)
| 2023 | 2022 | 2021 | ||||
| Expected volatility | ||||||
| Exercise price | ||||||
| Share price (1) | ||||||
| Risk-free interest rate | ||||||
| Dividend yield | ||||||
| Expected life (years) |
| 2023 | 2022 | 2021 | ||||
| Expected volatility | ||||||
| Exercise price | ||||||
| Share price (1) | ||||||
| Risk-free interest rate | ||||||
| Dividend yield | ||||||
| Expected life (years) |
| (1) |
| Expected volatility | % | |||
| Exercise price | $ | |||
| Share price | $ | |||
| Risk-free interest rate | % | |||
| Dividend yield | ||||
| Expected life |
F-23
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 10 - Share Based Payment (cont.)
| Number of | Weighted Average | Weighted average remaining | Intrinsic value | |||||||||||||
| Share Options | Exercise Price | contractual life (years) | U.S. dollars in thousands | |||||||||||||
| Options outstanding at January 1, 2023 | $ | $ | ||||||||||||||
| Granted | $ | |||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Forfeited | ( | ) | $ | |||||||||||||
| Options outstanding at December 31, 2023 | $ | $ | ||||||||||||||
| Exercisable at December 31, 2023 | $ | $ | ||||||||||||||
| Weighted average grant date fair value | ||||||||
| Number of RSUs | U.S. dollars in thousands | |||||||
| Outstanding at January 1, 2023 | $ | |||||||
| Granted | ||||||||
| Exercised | ( | ) | ||||||
| Outstanding at December 31, 2023 | $ | |||||||
| For the year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| U.S. dollars in thousands | ||||||||||||
| Share-based compensation expense - Research and development | $ | $ | $ | |||||||||
| Share-based compensation expense - General and administrative | ||||||||||||
| $ | $ | $ | ||||||||||
During 2021, in addition to the share-based compensation
expenses that have been recorded in profit and loss, share-based compensation in the amount of $
As of December 31, 2023, there was $
F-24
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 11 - Research and development expenses
| For the year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| U.S. dollars in thousands | ||||||||||||
| Subcontractors and consultants | $ | $ | $ | |||||||||
| Share-based compensation | ||||||||||||
| Salaries and social benefits (*) | ||||||||||||
| Others | - | |||||||||||
| $ | $ | $ | ||||||||||
Note 12 - General and Administrative Expenses
| For the year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| U.S. dollars in thousands | ||||||||||||
| Professional services | $ | $ | $ | |||||||||
| Share-based compensation | ||||||||||||
| Salaries and social benefits (*) | ||||||||||||
| Insurance | ||||||||||||
| Traveling abroad | ||||||||||||
| Others | ||||||||||||
| $ | $ | $ | ||||||||||
| (*) |
Note 13 - Financing Income (expenses), net
| For the year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| U.S. dollars in thousands | ||||||||||||
| Finance Income: | ||||||||||||
| Revaluation of warrants | $ | $ | $ | |||||||||
| Deposit interest | ||||||||||||
| Exchange rates | ||||||||||||
| $ | $ | $ | ||||||||||
| Finance Expenses: | ||||||||||||
| Revaluation of SAFE instruments | $ | $ | $ | ( | ) | |||||||
| Issuance costs | ( | ) | ||||||||||
| Exchange rates | ( | ) | ( | ) | ||||||||
| Bank fees | ( | ) | ( | ) | ( | ) | ||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Total financing income, net | $ | $ | $ | ( | ) | |||||||
F-25
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 14 - Related Parties Balances and Transactions
| As of December 31, | ||||||||
| 2023 | 2022 | |||||||
| U.S. dollars in thousands | ||||||||
| Other payables – Officers and Directors | $ | $ | ||||||
| $ | $ | |||||||
| For the year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| U.S. dollars in thousands | ||||||||||||
| Salary fees(1) | $ | $ | $ | |||||||||
| Directors consultancy fees(2) | ||||||||||||
| Share based payment expense (refer to Note 10) | ||||||||||||
| $ | $ | $ | ||||||||||
| (1) Number of related parties | ||||||||||||
| (2) Number of directors | ||||||||||||
| 1. |
| 2. |
| ● | Compensation packages for the Company’s executive officers, consisting of (i) an annual base salary payable in cash and (ii) a target annual bonus based on a combination of Company performance and personal goals and (iii) share based compensation (refer to Note 10(4)). |
| ● | Compensation package for the chairman and other independent and external directors, consisting of (i) an annual retainer payable in cash, (ii) additional cash retainers for committee chairmanship and committee service, and (iii) share based compensation (refer to Note 10(4)). |
| ● | On May 10 and June 21, 2022, the Company’s board of directors and shareholders, respectively, approved a bonus plan for 2022 for the Company’s officers. The bonus plan defined specified millstones (in fields of clinic trail progress, business developments and raise of money) which their achievements entitled the officers with different percentages out of fix amount of bonus. As detailed in the plan, such bonuses (if entitled) will be paid in cash or, if the Company has less than $ |
| 3. | During March and May 2023, certain officers and directors were granted with options and RSUs, see also Note 10. |
F-26
NeuroSense Therapeutics Ltd.
Notes to the Consolidated Financial Statements
Note 15 - Income Taxes
| A. | Israeli taxation: |
The tax rate relevant to the Company
in the years 2023, 2022 and 2021 was
As of December 31, 2023, the Company
has net operating losses carryforward for Israeli income tax purposes of approximately $
The Company has final (considered final) tax assessments through the 2018 tax year.
| B. |
| For the year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| U.S. dollars in thousands | ||||||||||||
| Net operating loss carryforward | $ | $ | $ | |||||||||
| Research and development credits | ||||||||||||
| Operating right of use asset | ( | ) | ( | ) | ||||||||
| Operating lease liability | ||||||||||||
| Vacation and convalescence accrual | ||||||||||||
| Net deferred tax asset before valuation allowance | ||||||||||||
| 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 consideration of these factors, the Company recorded a full valuation allowance as of December 31, 2023 and 2022.
| C. | During the years ended December 31, 2023, 2022 and 2021, the main reconciling item between the statutory tax rate of the Company (as noted in Note 15A1) and the effective tax rate is mainly the recognition of valuation allowance in respect of deferred taxes relating to accumulated net operating losses carryforward and other temporary differences due to the uncertainty of the realization of such deferred taxes. |
Note 16 - Subsequent Events
Purchase Agreement
On April 10, 2024, the Company entered
into a Securities Purchase Agreement (the “Purchase Agreement”) with the institutional purchaser (the “Purchaser”),
pursuant to which the Company agreed to issue and sell, in a registered direct offering by the Company directly to the Purchaser (i) an
aggregate of
F-27
Exhibit 99.2
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following selected financial data and discussion of our operating and financial condition and prospects in conjunction with the financial statements and the notes thereto included elsewhere in this 6-K. Our financial statements are prepared in in accordance with generally accepted accounting principles of the United States of America, or U.S. GAAP. Unless otherwise indicated or the context otherwise requires, all references herein to the terms “NeuroSense,” “NeuroSense Therapeutics,” the “Company,” “we,” “us” and “our” refer to NeuroSense Therapeutics Ltd. The term “NIS” refers to New Israeli Shekels, the lawful currency of the State of Israel, and the terms “dollar” or “$” refer to U.S. dollars, the lawful currency of the United States. Unless derived from our financial statements or otherwise indicated, U.S. dollar translations of NIS amounts presented in this exhibit are translated using the rate of NIS 3.7230 to $1.00, based on the representative exchange rate reported by the Bank of Israel on June 14, 2024.
Forward Looking Statements
This exhibit contains forward-looking statements concerning among other things, our ongoing and planned product development and clinical trials; the timing of, and our ability to make, regulatory filings and obtain and maintain regulatory approvals for our product candidates; our ability to enter into and maintain strategic collaborations, our intellectual property position; our results of operations, cash needs; financial condition, liquidity, prospects, growth and strategies; the industry in which we operate; and the trends that may affect the industry or us. Many of the forward-looking statements contained in this exhibit can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “should,” “target,” “would” and other similar expressions that are predictions of or indicate future events and future trends, although not all forward-looking statements contain these identifying words.
Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to substantial risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors, including, but not limited to, those identified under the section titled “Risk Factors” in our Annual Report on Form 20-F, filed with the SEC on April 4, 2024, or the Annual Report, and our other filings with the SEC from time to time. These risks and uncertainties include factors relating to:
| ● | the going concern reference in our financial statements and our need for substantial additional financing to achieve our goals; |
| ● | our limited operating history and history of incurring significant losses and negative cash flows since our inception, which we anticipate will continue for the foreseeable future; |
| ● | our dependence on the success of our lead product candidate, PrimeC, including our obtaining of regulatory approval to market PrimeC in the United States; |
| ● | our limited experience in conducting clinical trials and reliance on clinical research organizations and others to conduct them; |
| ● | our ability to advance our preclinical product candidates into clinical development and through regulatory approval; |
| ● | the results of our clinical trials, which may fail to adequately demonstrate the safety and efficacy of our product candidates; |
| ● | our ability to achieve the broad degree of physician adoption and use and market acceptance necessary for commercial success; |
| ● | our reliance on third parties in marketing, producing or distributing products and research materials for certain raw materials, compounds and components necessary to produce PrimeC for clinical trials and to support commercial scale production of PrimeC, if approved; |
| ● | our receipt of regulatory clarity and approvals for our therapeutic candidates and the timing of such regulatory clarity and approvals and of other regulatory filings and approvals; |
| ● | estimates of our expenses, revenues, capital requirements and our needs for additional financing; |
| ● | our efforts to obtain, protect or enforce our patents and other intellectual property rights related to our product candidates and technologies; |
| ● | our ability to maintain the listing of our ordinary shares on Nasdaq; |
| ● | the impact of the public health, political and security situation in Israel, the U.S. and other countries in which we may obtain approvals for our products or our business; and |
| ● | the impacts on our ongoing and planned trials and manufacturing as a result of the war in Israel. |
The preceding list is not intended to be an exhaustive list of all of our risks and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this exhibit will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of the 6-K that accompanies this exhibit, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information.
The forward-looking statements and opinions contained in this exhibit are based upon information available to us as of the date of the 6-K that accompanies this exhibit and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. The forward-looking statements contained in this exhibit speak only as of the date of the 6-K that accompanies this exhibit, and unless otherwise required by law, we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.
You should read this exhibit, and the documents that we reference herein, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Overview
We are a clinical-stage biotechnology company focused on discovering and developing treatments for patients suffering from neurodegenerative diseases, including ALS, AD and PD. We believe these diseases represent some of the most significant unmet medical needs of our time, with limited effective therapeutic options available. The burden of these diseases on both patients and society is substantial. For example, the average annual cost of ALS alone is $180,000 per patient, and its estimated annual burden on the U.S. healthcare system is greater than $1 billion. Due to the complexity of neurodegenerative diseases, our strategy is utilizing a combined therapeutic approach to target multiple disease-related pathways.
Our lead therapeutic candidate, PrimeC, is a novel extended-release oral formulation, fixed-dose combination of two FDA-approved drugs, ciprofloxacin and celecoxib. PrimeC is designed to treat ALS by modulating microRNA synthesis, iron accumulation, and neuroinflammation, all of which are hallmarks of ALS pathology. The FDA and the EMA have granted PrimeC orphan drug designation for the treatment of ALS. In addition, the EMA has granted PrimeC the SME status, which offers significant potential benefits leading up to and following drug regulatory approval. We believe PrimeC’s multifactorial mechanism of action has the potential to significantly prolong lifespan and improve ALS patients’ quality of life, thereby reducing the burden of this debilitating disease on both patients and healthcare systems.
2
We have incurred operating losses in each year since our inception. We incurred net losses of $10.1 million and $10.5 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $26.1 million. We expect to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates from formulation development through preclinical development and clinical trials, seek regulatory approval and pursue commercialization of any approved product candidate. In addition, we expect that our expenses will increase substantially in connection with our ongoing activities as we:
| ● | continue the clinical development of PrimeC; |
| ● | continue the preclinical development of our other product candidates; |
| ● | file an NDA seeking regulatory approval for any product candidates; |
| ● | establish a sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any products for which we obtain manufacturing approval; |
| ● | maintain, expand and protect our intellectual property portfolio; |
| ● | add equipment and physical infrastructure to support our research and development; |
| ● | hire additional clinical development, quality control and manufacturing personnel; |
| ● | incur additional expenses associated with operating as a U.S. public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company; and |
| ● | add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization. |
A. Operating Results
Revenue
We have not recognized any revenue to date and we do not expect to generate revenue from the sale of products in the near future.
Operating Expenses
Our current operating expenses consist primarily of research and development as well as general and administrative expenses.
Research and Development Expenses
Research and development expenses consist primarily of:
| ● | salaries for research and development staff and related expenses, including employee benefits and share-based compensation expenses; |
| ● | expenses for production of our product candidates by contract manufacturers; |
| ● | expenses paid to contract research organizations and other third parties in connection with the performance of preclinical studies, clinical trials and related expenses; |
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| ● | expenses incurred under agreements with other third parties, including subcontractors, suppliers and consultants that conduct formulation development, regulatory activities and preclinical studies; |
| ● | expenses incurred to acquire, develop and manufacture preclinical study and clinical trial materials. |
Expenses on research activities is recognized in profit or loss when incurred. Development expenditures, including patent registration costs, are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and we intend to and have sufficient resources to complete development and to use or sell the asset. As of December 31, 2023, no development expenditures have met the recognition criteria and thus we have expensed all of our development expenditures as incurred.
We are currently focused on advancing our product candidates, and our future research and development expenses will depend on their clinical success. Research and development expenses will continue to be significant and will increase over at least the next several years as we continue to develop our product candidates and conduct preclinical studies and clinical trials of our product candidates.
We do not believe that it is possible at this time to accurately project total expenses required for us to reach commercialization of our product candidates. Due to the inherently unpredictable nature of preclinical and clinical development, we are unable to estimate with certainty the costs we will incur and the timelines that will be required in the continued development and approval of our product candidates. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. See “Risk Factors—Risks Related to Our Business and Strategy” in our Annual Report. In addition, we cannot forecast which product candidates may be subject to future collaborations, if and when such arrangements will be entered into, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs, including share-based compensation, related to directors, executive, finance, and human resource functions, insurance costs, facility costs and external professional service costs, including legal, accounting, marketing and audit services and other consulting fees.
We anticipate that our general and administrative expenses will increase in the future as we increase our administrative headcount and infrastructure to support our continued research and development programs and the potential approval and commercialization of our product candidates. We also anticipate that we will incur increased expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq and SEC requirements, director and officer insurance premiums, director compensation, and other costs associated with being a public company.
In addition, if any of our product candidates receives regulatory approval and if we determine to invest in building a commercial infrastructure to support the marketing of our products, we expect to incur greater expenses.
Financing Income (Expenses), net
Our net financing expenses (income), net consist primarily of fair value revaluation of warrants, issuance costs, interest income on deposits, interest expenses on lease liability and differences in the exchange rate between NIS and the U.S. Dollar.
Income Taxes
We have yet to generate taxable income in Israel, as we have historically incurred operating losses resulting in carry forward tax losses totaling approximately $14.4 million as of December 31, 2023. We anticipate that we will continue to generate tax losses for the foreseeable future and that we will be able to carry forward these tax losses indefinitely to future taxable years. Accordingly, we do not expect to pay taxes in Israel until we have taxable income after the full utilization of our carry forward tax losses.
4
Results of Operations
Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022
Our results of operations for the years ended December 31, 2023 and 2023 were as follows:
| For the Years Ended December 31, | ||||||||
| (U.S. dollars in thousands except share and per share data) | 2023 | 2022 | ||||||
| Statement of Operations: | ||||||||
| Research and Development Expenses | 7,274 | 5,587 | ||||||
| General and Administrative Expenses | 4,775 | 4,967 | ||||||
| Operating Loss | 12,049 | 10,554 | ||||||
| Financing Income, net | (1,942 | ) | (62 | ) | ||||
| Net Loss and Comprehensive Loss | 10,107 | 10,492 | ||||||
| Basic and Diluted Net Loss per Share | 0.74 | 0.91 | ||||||
| Weighted average number of shares outstanding used in computing basic and diluted net loss per share | 13,640,168 | 11,504,521 | ||||||
Research and Development Expenses
The following table describes the breakdown of our research and development expenses for the indicated periods:
| For the Years Ended December 31, | ||||||||
| (U.S. dollars in thousands except share and per share data) | 2023 | 2022 | ||||||
| Subcontractors and consultants | $ | 4,793 | 3,612 | |||||
| Share-based compensation | 575 | 570 | ||||||
| Salaries and social benefits | 1,905 | 1,405 | ||||||
| Others | 1 | - | ||||||
| Total research and development expenses | $ | 7,274 | 5,587 | |||||
Our research and development expenses for the years ended December 31, 2023 and 2022 were $7,274 thousand and $5,587 thousand, respectively. The increase of $1,687 thousand, or 30.2%, was mainly attributed to (i) an increase of $500 thousand in salaries and social benefits, mainly due to an increase in the number of employees, and (ii) an increase of $1,181 thousand, or 32.7% in subcontractor and consulting expenses relating to clinical programs.
General and Administrative Expenses
The following table describes the breakdown of our general and administrative expenses for the indicated periods:
| For the year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| U.S. dollars in thousands | ||||||||
| Professional services | $ | 1,486 | 1,085 | |||||
| Share-based compensation | 962 | 1,158 | ||||||
| Salaries and social benefits | 1,011 | 1,014 | ||||||
| Insurance | 511 | 1,174 | ||||||
| Traveling abroad | 164 | 165 | ||||||
| Others | 641 | 371 | ||||||
| $ | 4,775 | 4,967 | ||||||
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Our general and administrative expenses for the years ended December 31, 2023 and 2022 were $4,775 thousand and $4,967 thousand, respectively. The decrease of $192 thousand, or 3.9%, was primarily attributable to (i) a $196 thousand, or 16.9%, decrease in share-based compensation expenses due to less grants of options and RSUs to our employees, directors and service providers, (ii) a decrease of $663 thousand, or 56.5%, in insurance costs as a public company, and (iii) a $401 thousand, or 37%, increase in professional services expenses.
Financing Income, net
Our financing income, net for the years ended December 31, 2023 and 2022 was $1,942 thousand and $62 thousand, respectively. The change in financing income was primarily attributable to $2,191 thousand of revaluation of the warrants and deposit interest of $87 thousand, offset by $439 thousand of issuance costs.
B. Liquidity and Capital Resources
Overview
Since our inception, we have incurred losses and negative cash flows from our operations. For the year ended December 31, 2023, we incurred a net loss of approximately $10.1 million, while net cash of approximately $8.4 million was used in our operating activities. As of December 31, 2023, we had a negative working capital of approximately $0.5 million and an accumulated deficit of approximately $26.1 million. As of December 31, 2023, our cash and cash equivalents totaled approximately $2.6 million.
Our financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the ordinary course of business, and our financial status creates a doubt whether we will continue as a going concern. Our future operations are dependent upon the identification and successful completion of equity or debt financing and the achievement of profitable operations at an indeterminate time in the future. There can be no assurances that we will be successful in completing an equity or debt financing or in achieving or maintaining profitability. The financial statements do not give effect to any adjustments relating to the carrying values and classification of assets and liabilities that would be necessary should we be unable to continue as a going concern.
Through December 31, 2023, we have financed our operations primarily through our initial public offering, public and private offerings of our equity securities, proceeds from the exercise of warrants and options, and crowd funding of equity securities. Total gross invested capital as of December 31, 2023 was approximately $25.0 million, which included ordinary shares, SAFE agreements, options and warrants to purchase ordinary shares.
In May, June and July 2021, we received $0.80 million from SAFE agreements, in September 2021, we received an additional $1.23 million from previous investors as a result of their exercise of outstanding warrants, in December 2021, we received gross proceeds of approximately $12.0 million from our initial public offering, and during 2022 we received approximately $3.87 million following exercise of warrants.
In April 2023, we entered into a sales agreement, or ATM, with A.G.P./Alliance Global Partners, or AGP, pursuant to which we may offer and sell, at our option, up to $5,743,677 of our ordinary shares through an at-the-market equity program under which AGP agreed to act as sales agent. In June 2023, we and AGP reduced the maximum aggregate offering amount under the ATM program to $502.30, and in October 2023, we terminated the ATM program with having sold 3,600 ordinary shares for aggregate gross proceeds of $7.2 thousand.
In June 2023, we received additional gross proceeds of approximately $4.5 million before deducting placement agent fee and related offering expenses million from a registered direct offering. Total issuance expenses in connection with the offering were $0.45 million.
6
Cash flows
The following table summarizes our statement of cash flows for the years ended December 31, 2023 and 2022:
| For the Years Ended December 31, | ||||||||
| (U.S. dollars in thousands except share and per share data) | 2023 | 2022 | ||||||
| Net cash used in operating activities | $ | (8,354 | ) | (7,616 | ) | |||
| Net cash provided by (used in) investing activities | 3,468 | (3,590 | ) | |||||
| Net cash provided by financing activities | 3,975 | 3,774 | ||||||
| Effects of exchange rate changes on cash and cash equivalents | 8 | (88 | ) | |||||
| Decrease in cash and cash equivalents | $ | (903 | ) | (7,520 | ) | |||
Net cash used in operating activities
Net cash used in operating activities was $8,354 thousand and $7,616 thousand for the years ended December 31, 2023 and 2022, respectively. The $738 thousand increase was attributable primarily to the increase in our increase in (i) our research and development expenses relating to our clinical study and (ii) general and administrative expenses mainly due to an increase in professional services and salary and related benefits.
Net cash provided by (used in) investing activities
Net cash provided by (used in) investing activities was $3,468 thousand and ($3,590) thousand for the years ended December 31, 2023 and 2022, respectively. The $7,058 thousand increase was attributable primarily to changes in the investment in short-term and restricted deposits.
Net cash provided by financing activities
Net cash provided by financing activities was $3,975 thousand and $3,774 thousand for the years ended December 31, 2023 and 2023, respectively. The increase was primarily due to the higher proceeds from issuance of shares, warrants and pre-funded warrants in 2023 compared to the proceeds from exercise of warrants in 2022.
Funding Requirements
Since our inception, almost all of our resources have been dedicated to the preclinical and clinical development of our lead product candidate, PrimeC. As of December 31, 2023, we had cash and cash equivalents of $2.6 million. We believe that our existing cash and cash equivalents will not be sufficient to fund the Company’s operations for a period of at least 12 months from the date of approval of our consolidated financial statements.
Our present and future funding requirements will depend on many factors, including, among other things:
| ● | the progress, timing and completion of clinical trials for PrimeC; |
| ● | preclinical studies and clinical trials for our other product candidates; |
| ● | the costs related to obtaining regulatory approval for PrimeC and any of our other product candidates, and any delays we may encounter as a result of regulatory requirements or adverse clinical trial results with respect to any of these product candidates; |
| ● | selling, marketing and patent-related activities undertaken in connection with the commercialization of PrimeC and any of our other product candidates, and costs involved in the development of an effective sales and marketing organization; |
7
| ● | the costs involved in filing and prosecuting patent applications and obtaining, maintaining and enforcing patents or defending against claims or infringements raised by third parties, and license royalties or other amounts we may be required to pay to obtain rights to third party intellectual property rights; |
| ● | potential new product candidates we identify and attempt to develop; and |
| ● | revenues we may derive either directly or in the form of royalty payments from future sales of PrimeC and any other product candidates. |
For more information as to the risks associated with our future funding needs, see “Risk Factors — We will require substantial additional financing to achieve our goals, and a failure to obtain this capital when needed and on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, commercialization efforts or other operations” in our Annual Report.
Contractual Obligations and Commitments
As of December 31, 2023, we did not have any material contractual obligation and commitments, except for lease agreements with respect to offices. In December 2021, we entered into an office space lease agreement in Herzilya, Israel (which commenced on January 1, 2022). Monthly rent payments including utilities amount to approximately $7 thousand and indexed to CPI. The lease period was for 24 months with an option to extend the lease period for additional two periods of 24 months each. We exercised the first period option, and we expect to exercise the second option for an additional lease period.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Recent Offerings
On June 22, 2023, we sold to health-care focused institutional purchaser (i) an aggregate of 1,330,000 of our ordinary shares at an offering price of $1.50 per share and (ii) pre-funded warrants to purchase up to an aggregate of 1,670,000 ordinary shares at an offering price of $5.499 per pre-funded warrant, in a registered direct offering. Each pre-funded warrant represented the right to purchase one ordinary shares at an exercise price of $0.0001 per share. The pre-funded warrants were exercisable immediately and at any time until the pre-funded warrants were exercised in full (subject to a beneficial ownership limitation set forth therein). In a concurrent private placement, we also issued an aggregate of 3,000,000 ordinary warrants, each representing the right to acquire one ordinary share, at the same purchase price in the registered direct offering. The ordinary warrants are exercisable immediately upon issuance at an exercise price of $1.50 per share, and will expire on the fifth anniversary of the original issuance date. Aggregate gross proceeds from the registered direct offering and concurrent private placement were approximately $4.5 million, before deducting the placement agent fee and related offering expenses. The offerings closed on June 26, 2023. As of the date of this 6-K, the pre-funded warrants have been exercised in full.
Reconciliation of IFRS to U.S. GAAP
Our audited consolidated financial statements included in this Form 6-K are our first consolidated financial statements prepared in accordance with U.S. GAAP. The financial statements were presented in US GAAP from date of inception.
For all periods up to and including the year ended December 31, 2023, the Company prepared its financial statements in accordance with United States generally accepted accounting principles. An explanation of the principal adjustments made in representing its IFRS financial statements, in order to comply with U.S. GAAP, is provided below.
8
The following tables present a reconciliation of the consolidated balance sheet as of December 31, 2023 and 2022 of IFRS compared to U.S. GAAP:
| December 31, 2023 | ||||||||||||||
| IFRS | GAAP Adjustments and reclassifications | U.S. GAAP | ||||||||||||
| Note | USD | |||||||||||||
| ASSETS | ||||||||||||||
| CURRENT ASSETS: | ||||||||||||||
| Cash and cash equivalents | 2,640 | - | 2,640 | |||||||||||
| Other receivables | 236 | - | 236 | |||||||||||
| Restricted deposits | 64 | - | 64 | |||||||||||
| Total current assets | 2,916 | - | 2,916 | |||||||||||
| NON-CURRENT ASSETS: | ||||||||||||||
| Operating lease right of use assets | i | 153 | 9 | 162 | ||||||||||
| Property and equipment, net | 85 | - | 85 | |||||||||||
| Restricted deposit | 22 | - | 22 | |||||||||||
| Total non-current assets | 260 | 9 | 269 | |||||||||||
| Total assets | 3,176 | 9 | 3,185 | |||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||
| CURRENT LIABILITIES: | ||||||||||||||
| Trade payables | 1,459 | - | 1,459 | |||||||||||
| Other payables | 2,000 | - | 2,000 | |||||||||||
| Total current liabilities | 3,459 | - | 3,459 | |||||||||||
| NON-CURRENT LIABILITIES: | ||||||||||||||
| Long-term operating lease liability | 73 | - | 73 | |||||||||||
| Liability in respect of warrants | ii | 1,518 | (106 | ) | 1,412 | |||||||||
| Total non-current liabilities | 1,591 | (106 | ) | 1,485 | ||||||||||
| SHAREHOLDERS’ EQUITY: | iii, v | |||||||||||||
| Authorized: 60,000,000 shares at December 31, 2023 and 2022; Issued and outstanding: 15,379,042 and 11,781,963 shares at December 31, 2023 and 2022, respectively | - | - | - | |||||||||||
| Share premium and capital reserve | 30,192 | (5,830 | ) | 24,362 | ||||||||||
| Accumulated deficit | (32,066 | ) | 5,945 | (26,121 | ) | |||||||||
| Total shareholders’ equity | (1,874 | ) | 115 | (1,759 | ) | |||||||||
| Total liabilities and shareholders’ equity | $ | 3,176 | 9 | $ | 3,185 | |||||||||
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| December 31, 2022 | ||||||||||||||
| IFRS | GAAP Adjustments and reclassifications |
U.S. GAAP |
||||||||||||
| Note | USD | |||||||||||||
| ASSETS | ||||||||||||||
| CURRENT ASSETS: | ||||||||||||||
| Cash and cash equivalents | 3,543 | - | 3,543 | |||||||||||
| Short term deposits | 3,547 | - | 3,547 | |||||||||||
| Other receivables | 255 | - | 255 | |||||||||||
| Restricted deposits | 36 | - | 36 | |||||||||||
| Total current assets | 7,381 | - | 7,381 | |||||||||||
| NON-CURRENT ASSETS: | ||||||||||||||
| Property and equipment, net | 77 | - | 77 | |||||||||||
| Operating lease right of use assets | 229 | 7 | 236 | |||||||||||
| Restricted deposit | 23 | 23 | ||||||||||||
| Total non-current assets | 329 | 7 | 336 | |||||||||||
| Total assets | 7,710 | 7 | 7,717 | |||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||
| CURRENT LIABILITIES: | ||||||||||||||
| Trade payables | 498 | - | 498 | |||||||||||
| Other payables | 1,228 | - | 1,228 | |||||||||||
| Total current liabilities | 1,726 | - | 1,726 | |||||||||||
| NON-CURRENT LIABILITIES: | ||||||||||||||
| Long-term operating lease liability | 147 | - | 147 | |||||||||||
| Liability in respect of warrants | 218 | (218 | ) | - | ||||||||||
| Total Long-term liabilities | 365 | (218 | ) | 147 | ||||||||||
| CONTINGENT LIABILITIES AND COMMITMENTS | ||||||||||||||
| SHAREHOLDERS’ EQUITY: | iii, v | |||||||||||||
| Authorized: 60,000,000 shares at December 31, 2023 and 2022; Issued and outstanding: 15,379,042 and 11,781,963 shares at December 31, 2023 and 2022, respectively | - | - | - | |||||||||||
| Share premium and capital reserve | 26,405 | (4,547 | ) | 21,858 | ||||||||||
| Accumulated deficit | (20,786 | ) | 4,772 | (16,014 | ) | |||||||||
| Total shareholders’ equity | 5,619 | 225 | 5,844 | |||||||||||
| Total liabilities and shareholders’ equity | $ | 7,710 | 7 | $ | 7,717 | |||||||||
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The following table presents a reconciliation of the consolidated statement of profit or loss for the years ended December 31, 2023, 2022 and 2021 of IFRS compared to U.S. GAAP:
| Year ended December 31, 2023 | ||||||||||||||
| IFRS | GAAP Adjustments and reclassifications |
U.S. GAAP |
||||||||||||
| Note | USD | |||||||||||||
| Research and development expenses | iii | $ | (7,588 | ) | $ | 314 | $ | (7,274 | ) | |||||
| General and administrative expenses | i, iii | (5,714 | ) | 939 | (4,775 | ) | ||||||||
| Operating loss | (13,302 | ) | 1,253 | (12,049 | ) | |||||||||
| Financing income, net | i, ii, v | 2,022 | (80 | ) | 1,942 | |||||||||
| Net loss | $ | (11,280 | ) | $ | 1,173 | $ | (10,107 | ) | ||||||
| Basic and diluted net loss per share | $ | (0.83 | ) | $ | 0.09 | $ | (0.74 | ) | ||||||
| Weighted average number of ordinary shares used in computing basic and diluted net loss per share | 13,640,168 | - | 13,640,168 | |||||||||||
| Year ended December 31, 2022 | ||||||||||||||
| IFRS | GAAP Adjustments and reclassifications |
U.S. GAAP |
||||||||||||
| Note | USD | |||||||||||||
| Research and development expenses | iii | $ | (6,416 | ) | $ | 829 | $ | (5,587 | ) | |||||
| General and administrative expenses | i, iii | (7,136 | ) | 2,169 | (4,967 | ) | ||||||||
| Operating loss | (13,552 | ) | 2,998 | (10,554 | ) | |||||||||
| Financing income, net | i, ii, v | 1,212 | (1,150 | ) | 62 | |||||||||
| Net loss | $ | (12,340 | ) | $ | 1,848 | $ | (10,492 | ) | ||||||
| Basic and diluted net loss per share | $ | (1.07 | ) | $ | 0.16 | $ | (0.91 | ) | ||||||
| Weighted average number of ordinary shares used in computing basic and diluted net loss per share | 11,504,521 | - | 11,504,521 | |||||||||||
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| Year ended December 31, 2021 | ||||||||||||||
| IFRS | GAAP Adjustments and reclassifications | U.S. GAAP | ||||||||||||
| Note | USD | |||||||||||||
| Research and development expenses | iii | $ | (3,082 | ) | $ | 1,688 | $ | (1,394 | ) | |||||
| General and administrative expenses | i, iii | (2,505 | ) | 914 | (1,591 | ) | ||||||||
| Operating loss | (5,587 | ) | 2,602 | (2,985 | ) | |||||||||
| Financing income (expense), net | i, ii, iv, v | 1,546 | (1,781 | ) | (235 | ) | ||||||||
| Net loss | $ | (4,041 | ) | $ | 821 | $ | (3,220 | ) | ||||||
| Basic and diluted net loss per share | $ | (0.65 | ) | $ | 0.13 | $ | (0.52 | ) | ||||||
| Weighted average number of ordinary shares used in computing basic and diluted net loss per share | 6,243,411 | - | 6,243,411 | |||||||||||
Notes to the main adjustments and reclassifications made in order to comply with U.S. GAAP:
| i. | Operating lease right of use assets: |
Under IFRS, we have recognized depreciation expense of operating lease right of use assets and interest expense on lease liabilities. Under U.S. GAAP we recognized a single lease cost, calculated so that the remaining cost of the lease is allocated over the remaining lease term on a straight-line basis. As a result, as of December 31, 2023, operating lease right of use assets has increased by approximately $9 thousand, finance expenses decreased by approximately $11 thousand and general and administrative expense increased by approximately $9 thousand for the year ended December 31, 2023. In addition, as of December 31, 2022, operating lease right of use assets has increased by approximately $7 thousand, finance expenses decreased by approximately $15 thousand and general and administrative expense increased by approximately $9 thousand for the year ended December 31, 2022.
| ii. | Warrants exercisable into shares: |
Under IFRS, we recognized certain warrants and pre-funded warrants as a liability due to cashless exercise mechanism and certain adjustments out the control of the Company. Changes in fair value of warrants which were classified as liability from commitment date to each reporting date were recorded as financial income (expense) in our statement of operations and comprehensive loss. Under U.S. GAAP, we recognized certain warrants and pre-funded warrants as part of the shareholders equity. As a result, as of December 31, 2023, warrants exercisable into shares were classified under equity, finance income decreased by approximately $95 thousand in the year ended December 31, 2023, finance income decreased by approximately $1,166 thousand in the year ended December 31, 2022 and finance income increased by approximately $1,580 thousand in the year ended December 31, 2021.
| iii. | Options exercisable into shares: |
Under IFRS, we measured the fair value of certain options granted to consultants at each reporting period whereby cumulative catch up was recognized as stock-based compensation expenses in our statement of operations and comprehensive loss. In addition, the determination of grant date used for measuring the fair value of options which their vesting is subject to existence of IPO was the board of directors grant approval date. Under U.S. GAAP, the fair value of options granted to consultants is determined at the applicable grant date with no further remeasurement at subsequent periods. In addition, the determination of grant date used for measuring the fair value of options which their vesting is subject to existence of IPO was the IPO date. As a result, in the year ended December 31, 2023, the research and development expenses and general and administrative expenses decreased by $314 and $947 thousand, respectively, in the year ended December 31, 2022, the research and development expenses and general and administrative expenses decreased by $1,022 and $2,357 thousand, respectively and in the year ended December 31, 2021, the research and development expenses and general and administrative expenses decreased by $1,688 and $913 thousand, respectively.
| iv. | Simple Agreements for Future Equity (SAFE): |
Under IFRS, we classified the SAFE instrument as part of the Company's equity at issuance date. Under U.S. GAAP, the SAFE instrument was accounted for as financial liability. As a result, in the year ended December 31, 2021, the finance expenses increased by $200 thousand.
| v. | Certain reclassifications have been made to the consolidated balance sheets. Such reclassifications affect the presentation of certain items in the consolidated balance sheets, and have no impact on net loss or shareholders’ equity of the Company: Finance expenses and income - In accordance with U.S. GAAP, financial income and expense were presented net in our consolidated statements of profit or loss (although presented separately in a note). Under the IFRS, the Company has separately classified financial income and expense in its consolidated financial statements. |
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C. Research and Development, Patents and Licenses
For a description of our research and development programs and the amounts that we have incurred over the last three years pursuant to those programs, please see “Item 5. Operating and Financial Review and Prospects — A. Operating Results — Research and Development Expenses.”
D. Trend Information
Other than as disclosed elsewhere in this 6-K, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2023 to December 31, 2023 that are reasonably likely to have a material adverse effect on our revenue, income, profitability, liquidity or capital resources, or that caused that disclosed financial information to be not necessarily indicative of future operating results or financial condition.
E. Critical Accounting Policies and Use of Estimates
We describe our material accounting policies and estimates in Note 2 to our annual consolidated financial statements contained elsewhere in this annual report. We believe that these accounting policies and estimates are critical in order to fully understand and evaluate our financial condition and results of operations.
We prepare our consolidated financial statements in accordance with U.S. GAAP.
In preparing these consolidated financial statements, management has made judgments, estimates and assumptions that affect the application of our accounting policies and the reported amounts recognized in the financial statements. On a periodic basis, we evaluate our estimates, including those related to share-based compensation. We base our estimates on historical experience, authoritative pronouncements and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. For more information, please see Note 2 to our annual consolidated financial statements contained elsewhere in this annual report.
Emerging Growth Company Status
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:
| ● | to the extent that we no longer qualify as a foreign private issuer, (i) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (ii) exemptions from the requirement to hold a non-binding advisory vote on executive compensation, including golden parachute compensation; |
| ● | an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; and |
| ● | an exemption from compliance with the requirement that the Public Company Accounting Oversight Board has adopted regarding a supplement to the auditor’s report providing additional information about the audit and the financial statements. |
We may take advantage of these exemptions for up to five years or until such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest to occur of: (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; (iii) the date on which we are deemed to be a large accelerated filer under the rules of the SEC; or (iv) the last day of the fiscal year following the fifth anniversary of our initial public offering. We may choose to take advantage of some but not all of these exemptions. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This means that an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
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Exhibit 99.3
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statements (No. 333-262480) on Form S-8 and (Nos. 333-269306 and 333-260338) on Form F-3 of our report dated June 17, 2024, with respect to the consolidated financial statements of NeuroSense Therapeutics Ltd.
Somekh Chaikin
Member Firm of KPMG International
Tel Aviv, Israel
June 17, 2024