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SIGNIFICANT TRANSACTIONS | 12 Months Ended
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Dec. 31, 2024
Significant Transactions |
SIGNIFICANT TRANSACTIONS | NOTE 4 – SIGNIFICANT TRANSACTIONS
A. | Exercise of pre-funded warrants
| On January 3, 2024, 19,765 pre-funded warrants granted through underwritten public offering in April 2023 have been fully exercised into the same number of shares of Common Stock of the Company.
B. | Exchange Agreement
| On February 13, 2024, the Company entered into an Exchange Agreement with certain warrant holders (the “Holders”), pursuant to which the Company and the Holders agreed to exchange (the “Exchange”) warrants with down round protection feature exercisable to common shares (the “Warrants”) owned by the Holders for shares of Common Stock to be issued by the Company. On February 15, 2024, 35,932 shares of Common Stock have been issued in exchange for 43,820 Warrants (the “Shares”).
| It was also agreed that the Holders will not, during the period (“Lock-Up Period”) (i) offer, pledge, announce the intention to sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Shares, (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Shares of, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Shares or such other securities, in cash or otherwise, (iii) make any demand for or exercise any right with respect to, the registration of any Shares or any security convertible into or exercisable or exchangeable for shares of common stock, or (iv) publicly announce an intention to effect any transaction specific in clause (i), (ii) or (iii) above, provided that the Holder, during the Lock-Up Period, may (a) sell or contract to sell Shares at a price higher than $0.5 per Share on any trading day up to 10% of the daily volume of Shares or (b) sell or contract to sell Shares at a price higher than $0.8 per Share on any trading day with no volume limitation. The Lock-Up Period shall expire at the earliest of (i) 365 days after the date hereof or (ii) until the Shares traded above $100.00 per Share for five consecutive trading days. The Company accounted for the Exchange of the aforesaid warrants with shares in a similar manner of a modification of shares-based payment as a deemed dividend which was calculated at the closing date by the management using the assistance of external appraiser as the excess of fair value of the shares to be issued after taking into consideration a discount for lack of marketability at a rate of 16.81% over the Lock-Up Period over the fair value of the original equity instrument (i.e. warrants which included down round protection feature). However, since the fair value of the shares was estimated as less than the fair value of the replaced equity instrument, deemed dividend was not recorded.
C. | Private Placement Agreement
| On April 22, 2024, the Company entered into a private placement agreement under which the Company issued 3,968 shares of its common stock at a price of $126 per share for aggregate gross proceeds of $500 (the “Offering”). The Offering included participation of certain members of the Company’s executive management, Board of Directors and existing shareholders.
D. | Adoption of 2024 Equity Incentive Plan and Reverse Share Split
| On April 26, 2024, the Company held its Annual Meeting of Shareholders (the “Annual Meeting”) under which the Company’s stockholders approved, inter alia, the following proposals: (i) adoption of the Company’s 2024 Equity Incentive Plan and (ii) an amendment to Article IV of the Company’s Certificate of Incorporation, to effect a reverse stock split of the Company’s Common Stock at a ratio of between one-for-five and one-for-thirty, with such ratio to be determined at the sole discretion of the Board of Directors. Following the Annual Meeting, on April 30, 2024, the Company’s Board of Directors approved a one-for-five reverse stock split of the Company’s issued and outstanding shares of common stock. On May 17, 2024, the Company filed a Certificate of Amendment to the Company’s Certificate of Incorporation with the Secretary of State of the State of Delaware which effected the reverse stock split. On February 3, 2025, subsequent to the balance sheet date on December 31, 2024, the Company approved to effect an additional reverse stock split of twenty-for-one (20 to 1). The reverse split did not impact the total number of authorized shares of common stock or the par value per share. For accounting purposes, all shares, options and warrants to purchase shares of common stock and loss per share amounts have been adjusted to give retroactive effect to both of the reverse splits for all periods presented in these consolidated financial statements. Any fractional shares resulting from the reverse splits were rounded up to the nearest whole share.
E. | Note and Warrant Purchase Agreements
| On June 27, 2024, the Company entered into note and warrant purchase agreements (the “Purchase Agreement”) with certain investors (the “June 27 Investors”), providing for the private placement of unsecured promissory notes in the aggregate principal amount of $100 (the “June 27 Notes” and each a “June 27 Note”) and warrants to purchase up to an aggregate of 15,000 shares of the Company’s Common Stock (the “June 27 Warrants”). The June 27 Notes bear simple interest at a rate of 3% per annum and are due and payable in cash on the earlier of: (a) 12 months from the date of the June 27 Note; or (b) the date the Company raises third-party equity capital in an amount equal to or in excess of $1,000 (the “Maturity Date”). The Company may prepay the June 27 Notes at any time prior to the Maturity Date without penalty. If an event of default occurs, the then-outstanding principal amount of the June 27 Notes plus any unpaid accrued interest will accelerate and become immediately payable in cash. Each of June 27 Warrants has a fixed exercise price of $99 per share. The June 27 Warrants are immediately exercisable and have a 5-year term. Upon initial recognition, the management allocated the gross cash proceeds received based on the relative fair value of the June 27 Notes and the detachable June 27 Warrants in total amount of $15 and $85, respectively. The fair value of the June 27 Note was determined based on a rating model using a debt discount rate of 28.65% which represented the Company’s applicable rate of risk. The fair value of the June 27 Warrants was determined by using Black-Scholes pricing model taking into account, inter alia, expected stock price volatility of 245% and risk-free interest rate of 4.52%. The amount allocated to June 27 Warrants was classified as a component of equity (as their terms permit the holders to receive a fixed number of shares of common stock upon exercise for a fixed exercise price). The June 27 Notes were accounted for as a financial liability measured at amortized cost. In subsequent periods, the Company recognized a discount and interest expense over the economic life of the June 27 Notes based on the effective interest rate method.
The following tabular presentation reflects the reconciliation of the carrying amount of the June 27 Notes during the period of years ended December 31, 2024: SCHEDULE OF RECONCILIATION OF THE CARRYING AMOUNT OF JUNE 27 NOTES
|  | Year ended December 31, 2024 |
Opening balance |  | $ | - |
Total proceeds received |  |  | 100 |
Total proceeds allocated to June 27 Warrants at initial recognition |  |  | (85 | )
Discount amortization and interest expenses related to June 27 Notes (Note 7 below) |  |  | 16 |
Partial conversion June 27 Notes and accrued Interest (Note 4H and Note 4I below) |  |  | (26 | )
Balance December |  | $ | 5 |
During the period commencing the issuance date through December 31, 2024, none of the June 27 Warrants have been exercised.
F. | Convertible Promissory Notes
| On July 18, 2024, the Company entered into a series of convertible promissory notes with three directors, and one member of the Company’s executive management (the “July 18 Investors”), providing for the private placement of unsecured convertible promissory notes in the aggregate principal amount of $360 (the “July 18 Notes” and each a “July 18 Note”). The July 18 Notes bore simple interest at a rate of 8% per annum. Upon initial date, the management measured the fair value of the embedded conversion feature which is accounted for as embedded derivative liability. The difference between the total gross cash proceeds received and the fair value of the embedded conversion feature is allocated to the host component of the July 18 Notes that are measured at amortized cost under which in subsequent periods the Company recognizes a discount expense over the economic life of the July 18 Notes based on the effective interest rate method. However, the fair value of the embedded derivative liability related to the conversion feature was determined by the management at an insignificant amount since upon closing of a Qualified Financing, the loan will convert based on market conditions (i.e. conversion price will be equal to the fair value of the share upon conversion) and thus all proceeds received of $360 were allocated to the July 18 Notes. On September 5, 2024, the Company and one of July 18 noteholders entered into a conversion agreement, under which the Company agreed to convert his portion of the outstanding principal nominal amount plus any accrued but unpaid interest pursuant to the July 18 Note, totaling $101 into 4,955 shares of Common Stock at a conversion price of $20.4 per share. Please see note 4I. In November 2024, the Company and the remaining July 18 noteholders entered into a conversion agreement under which the Company agreed to convert their portion of the outstanding principal nominal amount plus any accrued but unpaid interest pursuant to the July 18 Note, totaling $305 to Common Stock and warrants at a conversion price of $31.2 per share. The July 18 noteholders received 9,760 shares of Common Stock, 9,760 Series A Warrants and 9,760 Series B Warrants. The fair value of the shares of Common Stock received was $60. The Series A and Series B Warrants are treated as derivative liabilities and at grant date were valued at $43 and $279, respectively. As a result, the Company recorded a loss on the settlement of debt in the amount of $79 in the Statement of Operations. Please see Note 4J for the terms and valuation methodology of the Series A and Series B Warrants.
G. | Convertible Promissory Note and Warrant Agreements
| On July 30, 2024, the Company entered into a convertible promissory note and three warrant agreements (the “July 30 Warrants”) with an existing investor (the “July 30 Holder”), providing for the private placement of a secured convertible promissory note in the aggregate principal amount of $4,000 (the “July 30 Note”). The July 30 Note bore simple interest at a rate of 8% per annum and is due and payable in cash on earlier of: (i) 12 months anniversary of July 30 Note, or (ii) closing date of a Sale Transaction (defined below) (the “Maturity Date”). The July 30 Note is secured by a first-priority security interest on all Company’s assets.
Each July 30 Warrant becomes exercisable 12 months after its issuance and has term of 10 years. The July 30 Warrants are exercisable for cash only and have no price-based antidilution. The first July 30 Warrant is for 106,667 shares at $37.50 per share. The second July 30 Warrant is for 76,191 shares at $52.50 per share. The third July 30 Warrant is for 59,259 shares at $67.50 per share. Management has determined that the warrants are eligible to be classified as a component of equity as their terms permit the holders to receive a fixed number of shares of common stock upon exercise for a fixed exercise price. At the initial date, the Company has issued four freestanding instruments that include (i) a financial instrument that is considered as “host” which comprised of July 30 Note and two embedded derivative financial instruments (i.e. an embedded conversion feature and an embedded redemption feature to receive cash equals to 200% of July 30 Note balance upon the occurrence of a Sale Transaction) and (ii) three series of detachable warrants. At the initial date, the Company is required to estimate the fair value of the freestanding instruments and allocate the total gross proceeds received between them based on that relative fair value identified. The fair value of the embedded derivative financial instruments (i.e. the conversion right and the redemption right) should be bifurcated from the host instrument and remeasured on recurring basis at each reporting period under marked to market approach, the July 30 Note was accounted for at amortized cost whereby discount and interest expenses are recorded over the economic life of the July 30 Note based on the effective interest rate method and the July 30 Warrants are classified into equity without any further subsequent measurement.
| Upon initial recognition, the management by using the assistance of an external appraiser allocated the gross cash proceeds received based on the relative fair value of the July 30 Note and the detachable July 30 Warrants in total amount of $1,450 and $2,550, respectively. The fair value of the convertible note was determined by using hybrid method that includes conversion scenario and liquidation scenario taking into account, inter alia, a debt discount rate of 28.65%. The fair value of the July 30 Warrants was determined by using Black-Scholes pricing model taking into account, inter alia, expected stock price volatility of 122.8% and risk-free interest rate of 4.78%. The amount allocated to July 30 Warrants was classified as a component of equity. Furthermore, it was determined that the embedded conversion feature and embedded redemption feature are required to be bifurcated from the host loan instrument. The fair value of the bifurcated derivatives was determined by the management using the assistance of an external appraiser in a total amount of $35 upon initial recognition and in subsequent periods as derivative liability at fair value through profit and loss. The remaining amount of $1,415 was allocated to the host loan instrument which in subsequent periods was accounted for using the effective interest method over the term of the loan, until its stated maturity.
On September 24, 2024, the Company held a special meeting of its stockholders under which shares of common stock issuable by the Company upon conversion of the July 30 Note and exercise of the July 30 Warrants was approved. The July 30 Holder has not elected to trigger the exercise of the July 30 Warrants into shares of common stock. On November 12, 2024, the Company and the July 30 Holder entered into an agreement for the settlement of the July 30 Note plus any accrued but unpaid interest totaling $4,093 to Common Stock and warrants at a conversion price of $31.0 per share. The July 30 Holder received 132,036 shares of Common Stock, 132,036 Series A Warrants and 132,036 Series B Warrants. The fair value of the shares of Common Stock received was $813. The Series A and Series B Warrants are treated as derivative liabilities and at grant date were valued at $609 and $3,768, respectively. As of the settlement date, the carrying amount of the July 30 Note under the effective interest method was $1,978 and the fair value of the derivative liability relating to the conversion feature was $37. Upon settlement, the total fair value of the warrant related derivatives of $4,377 and the equity received of $813 exceeded the net book value of the July 30 Note of $1,978 and the value of the debt conversion derivative that was settled of $37. As a result, the Company recorded a loss on extinguishment of debt in the amount of $3,175 in the Statement of Operations. Please see Note 4J for the terms and valuation methodology of the Series A and Series B Warrants.
H. | August 23 Conversion
| On August 23, 2024 (the “Commitment Date”), the Company and two of June 27 Investors entered into conversion agreement, under which the Company agreed to convert the principal nominal amount plus any accrued but unpaid interest pursuant to each of June 27 Notes, with a face value of $20 each (the “Debt”), held by the Investors to Common Stock at a conversion price of $20.4 per share. On October 15, 2024, the Company issued 985 shares of common stock for each of the two of the June 27 Investors in respect of each respective Debt converted.
| In satisfaction of the Debt, the Company also issued to each of the two June 27 Investors three warrants (each an “August 23 Warrant”). Each August 23 Warrant becomes exercisable on August 16, 2025 and has term of 10 years. The August 23 Warrants are exercisable for cash only and have no price-based antidilution. The first August 23 Warrant is for 535 shares of Common Stock and is exercisable at $37.5 per share. The second August 23 Warrant is for 382 shares of Common Stock, exercisable at $52.5 per share. The third August 23 Warrant is for 297 shares of Common Stock, exercisable at $67.5 per share. The above transaction was accounted for as a settlement of financial liabilities under which the instruments issued or to be issued to the June 27 Investors (i.e. shares of common stock and August 23 Warrants) are eligible for equity classification and thus both have been recorded as part of equity based on the total fair value of $238 at the Commitment Date. The difference between the fair value of these equity instruments and the carrying amount of each of the respective Debt at the Commitment Date amounted to $11 was charged immediately to the finance expenses (see also Note 7 below). Due to the above settlement, the Company recorded a loss on the settlement on the amount of $216. During the period commencing the issuance date through December 31, 2024, none of the August 23 Warrants have been exercised.
I. | September 5 Conversion
| On September 5, 2024 (the “Commitment Date”), the Company and one of June 27 Investors and July 18 Investors entered into a conversion agreement, under which the Company agreed to convert outstanding board fees amounted $113 and the principal nominal amount plus any accrued but unpaid interest pursuant to June 27 Note and July 18 Note, totaling $146 (referring together as a “Debt”), held by the Investor to Common Stock at a conversion price of $20.4 per share. On October 15, 2024, the Company issued 12,712 shares of common stock for the June 27 Investor in respect of the Debt converted. In satisfaction of the Debt, the Company also issued to June 27 Investor and July 18 Investor three warrants (each an “September 5 Warrant”). Each September 5 Warrant becomes exercisable on August 16, 2025 and has term of 10 years. The September 5 Warrants are exercisable for cash only and have no price-based antidilution. The first September 5 Warrant is for 6,915 shares of Common Stock and is exercisable at $37.5 per share. The second September 5 Warrant is for 4,940 shares of Common Stock, exercisable at $52.5 per share. The third September 5 Warrant is for 3,842 shares of Common Stock, exercisable at $67.5 per share. The above transaction was accounted for as settlements of financial liabilities under which the instruments issued or to be issued to the July 18 Investor (i.e. shares of common stock and September 5 Warrants) are eligible for equity classification and thus both have been recorded as part of equity based on the total fair value of $1,505 at the Commitment Date. The carrying amount of the Debt at the Commitment Date amounted to $227 and the difference was recorded as loss on settlement of debt in the Statement of Operations in the amount of $1,278 (see also Note 7 below). During the period commencing the issuance date through December 31, 2024, none of the September 5 Warrants have been exercised.
J. | November 12 Issuance
| On November 12, 2024, the Company completed a public offering (the “Offering”) under which the Company received gross proceeds of $10,000 in exchange for issuance of an aggregate of (i) 121,867 shares (the “Shares”) of its Common Stock, (ii) 237,845 pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to an aggregate of 237,845 shares of Common Stock (the “Pre-Funded Warrant Shares”) in lieu of Shares, (iii) Series A Warrants (the “Series A Warrants”) to purchase up to 359,712 shares of Common Stock (the “Series A Warrant Shares”) and (iv) Series B Warrants (the “Series B Warrants” and, together with the Series A Warrants, the “Common Warrants”) to purchase up to 359,712 shares of Common Stock (“the “Series B Warrant Shares” together with the Series A Warrant Shares, the “Warrant Shares”). Each Share or Pre-Funded Warrant, as applicable, was sold together with one Series A Warrant to purchase one share of Common Stock and one Series B Warrant to purchase one Common Share. The public offering price for each Share and accompanying Common Warrants was $27.80, and the public offering price for each Pre-Funded Warrant and accompanying Common Warrants was $27.78 (the “Offering Price”). The Pre-Funded Warrants have an exercise price of $0.02 per share, are exercisable immediately and expire when exercised in full. Each Series A Common Warrant will have an exercise price per share of $36.2 and will be exercisable beginning on the date on which Stockholder Approval (as defined below) is received and deemed effective (the “Initial Exercise Date” or the “Stockholder Approval Date”). The Series A Warrants will expire on the five-year anniversary of the Initial Exercise Date. The Series B Warrants will have an exercise price per share of $36.2 and will be exercisable beginning on the Initial Exercise Date. The Series B Warrants will expire on the two and one-half year anniversary of the Initial Exercise Date. The issuance of Common Warrant Shares upon exercise of the Common Warrants is subject to stockholder approval under applicable rules and regulations of The Nasdaq Stock Market LLC (“Nasdaq”) (“Stockholder Approval” and the date on which Stockholder Approval is received and deemed effective, the “Stockholder Approval Date”). The exercise price of Series A Warrants and Series B Warrants is subject to certain adjustments. If at the time of exercise there is no effective registration statement registering, or the prospectus is not available for the issuance of the Series A Warrants Shares and Series B Warrant Shares to the holders, then the Series A Warrants and Series B Warrants may also be exercised, in whole or in part, at such time by means of a “cashless exercise”. In addition, the holders are entitled to an option to require the Company to purchase the Series A Warrants and Series B Warrants for cash in an amount equal to their Black-Scholes Option Pricing Model value, in the event that certain fundamental transactions (which some of them are not considered solely within the control of the Company) as defined in the Series B Warrants agreement, occur. Additionally, holders of Series B Warrants may also effect an “alternative cashless exercise” at any time while the Series B Warrants are outstanding following the Initial Exercise Date. Under the alternate cashless exercise option, the holder of the Series B Warrant has the right to receive an aggregate number of shares equal to the product of (i) the aggregate number of shares of Common Stock that would be issuable upon a cashless exercise of the Series B Warrant and (ii) 3.0. The Company analyzed the terms of the warrants in accordance with Accounting Standards Codification No. 480, Distinguishing Liabilities from Equity (“ASC 480”) and determined that the Series A and Series B Warrants are not eligible for equity classification and thus would be classified as derivative liabilities and recorded at fair value, with changes in fair value recorded through profit or loss. The Company used the Monte Carlo Simulation method for determining the fair value of the warrants. The Series A Warrant assumptions used in the Monte Carlo simulations are an expected term of 5 years, exercise price of $36.2, comparable company volatility of 96.3%, risk-free interest rate of 4.32% and share price of $6.17. The Series B Warrant assumptions used in the Monte Carlo simulations are an expected term of 2.5 years, exercise price of $36.2, company historical volatility of 378.6%, risk-free interest rate of 4.30% and share price of $6.17. Upon initial recognition, the management allocated the gross cash proceeds to the detachable instruments included in the issuance, firstly to Series A Warrants and Series B Warrants which were classified as financial instruments that are required to be subsequently measured at fair value. The fair value at the issuance date of the Series A and Series B Warrants received was $1,659 and 10,266, respectively. Accordingly, there were no remaining proceeds to allocate to the equity instruments (the Shares and the Pre-Funded Warrants). Issuance costs in the amount of $1,217 were recorded as expenses in the Statement of Operations. In addition, as the total fair value of the derivative liabilities amounting to $11,925 exceeded the $10,000 of cash raised in the issuance, the Company recorded an immediate loss from the issuance of equity in the amount of $1,925 in the Statement of Operations. See Note 14 regarding a significant issuance of shares as a settlement of Series B Warrants subsequent to the balance sheet date.
The following tabular presentation reflects the reconciliation of the fair value of the Warrants during the period from their issuance through December 31, 2024: SCHEDULE OF RECONCILIATION OF THE FAIR VALUE OF THE WARRANTS
|  | Common Warrants |  |  | Series A Warrants |  |  | Series B Warrants |  |  | Total |
Opening balance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
July issuance |  | $ | 34 |  |  |  | - |  |  |  | - |  |  | $ | - |
Settlement of July warrants |  |  | (37 | ) |  |  | - |  |  |  | - |  |  |  | - |
November issuance |  |  | - |  |  |  | 1,659 |  |  |  | 10,266 |  |  |  | 11,925 |
Settlement of July 30 Convertible Promissory Note |  |  | - |  |  |  | 609 |  |  |  | 3,768 |  |  |  | 4,377 |
Settlement of July 18 Convertible Promissory Note |  |  | - |  |  |  | 45 |  |  |  | 279 |  |  |  | 324 |
Change in fair value |  |  | 3 |  |  |  | 230 |  |  |  | 565 |  |  |  | 798 |
Balance as of December 31, 2024 |  | $ | - |  |  |  | 2,544 |  |  |  | 14,877 |  |  | $ | 17,421 |

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