What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-26 compared with 2023-03-23 · 235 added, 249 removed, 610 unchanged (44% of the section changed)

12 unchanged sentences

We have audited the accompanying consolidated balance sheets of Gain Therapeutics, Inc.

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

(the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

The Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations since inception and has stated that substantial doubt exists about the Company’s ability to continue as a going concern.

Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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Other current liabilities

Deferred income

Deferred income - current

Loans - current

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Operating lease liability - non-current

Deferred income - non-current

Loans - non-current

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50,000,000 shares authorized;

11,883,368 issued and outstanding as of December 31, 2022 and December 31, 2021

16,206,680 shares issued and outstanding as of December 31, 2023 and 11,883,368 shares issued and outstanding as of December 31, 2022

Additional paid-in capital

Accumulated other comprehensive income / (loss)

Accumulated other comprehensive income

Accumulated deficit

40 unchanged sentences

( 17,590,738 )

Unrealized loss on available-for-sale marketable securities

Unrealized gain / (loss) on available-for-sale marketable securities

Defined benefit pension plan

Foreign currency translation

Other comprehensive gain:

Other comprehensive income

Comprehensive loss

3 unchanged sentences

Consolidated Statement of Changes in Stockholders’ Equity

Series A Preferred Stock

Series B Preferred Stock

Balance as of December 31, 2022

( 38,516,197 )

Stock-based compensation expense

Defined benefit pension plan

Stock-based compensation (Note 15)

Defined benefit pension plan (Note 11)

Foreign currency translation

Net unrealized gain on available for sale securities

Net unrealized gain on available for sale securities (Note 5)

Issuance of shares in at-the-market (ATM) offering (Note 14)

Issuance of shares and warrants in public offering and private placement (Note 14)

( 22,267,520 )

2 unchanged sentences

( 60,783,717 )

Series A Preferred Stock

Series B Preferred Stock

Balance as of December 31, 2021

( 20,925,459 )

Conversion of Series A Preferred Stock into Common Stock

( 1,185,879 )

Conversion of Series B Preferred Stock into Common Stock

( 2,965,600 )

Issuance of Common Stock in IPO, net of issuance costs

Issuance of Common Stock due to warrants cashless exercise

Issuance of Common Stock due to stock option exercise

Stock-based compensation expense

Issuance of warrants

Defined benefit pension plan

Stock-based compensation (Note 15)

Defined benefit pension plan (Note 11)

Foreign currency translation

Net unrealized gain on available for sale securities (Note 5)

( 17,590,738 )

12 unchanged sentences

Other non cash items

Issuance of warrants

Internal-use software

Changes in operating assets and liabilities:

Account receivables

Prepaid expenses and other currents assets

12 unchanged sentences

( 1,956,350 )

( 17,735,355 )

Maturities of marketable securities

Net cash used in investing activities

Net cash provided/(used) by/in investing activities

( 14,774,813 )

Cash flow from financing activities:

Proceeds from issuance of common shares upon completion of initial public offering, net of underwriter discounts

Payments of deferred offering costs

Net proceeds from issuance of shares in at-the-market (ATM) offering

Net proceeds from issuance of shares and warrants in public offering and private placement

Payments of current portion of long-term debt

Proceeds from stock option exercise

Net cash (used) / provided by financing activities

Net cash provided/(used) by/in financing activities

Effect of exchange rate changes

Net (decrease) / increase in cash, cash equivalents and restricted cash

Net increase / (decrease) in cash, cash equivalents and restricted cash

( 29,569,523 )

12 unchanged sentences

On March 17, 2021, the Company’s registration statement on Form S-1 related to its Initial Public Offering (“IPO”) was declared effective by the Securities and Exchange Commission (“SEC”).

In conjunction with the IPO the Company completed a reverse stock split of the Company’s outstanding equity instruments.

The reverse stock split was approved by the stockholders on March 4, 2021 and became effective on March 17, 2021.

Upon closing of the IPO, the Series A and the Series B Preferred Stock, as resulting from the reverse stock split, were converted to common stock at a ratio of 1 -for-1.

The Company is a biotechnology company developing novel small molecule therapeutics to treat diseases across several therapeutic areas, including central nervous system (“CNS”) disorders, lysosomal storage disorders (“LSDs”), metabolic disorders, and other diseases that can be targeted through protein degradation, such as oncology.

The Company uses its exclusively in-licensed computational target and drug discovery platform, Site-Directed Enzyme Enhancement Therapy (“SEE-Tx®”), to discover novel allosteric binding sites on proteins implicated in a disease and to identify proprietary small molecules that bind these sites to modulate protein function and treat the underlying cause of the disease.

The Company uses its computational target and drug discovery platform Magellan™ to discover novel allosteric binding sites on proteins implicated in a disease and to identify proprietary small molecules that bind these sites to modulate protein function and treat the underlying cause of the disease.

Risks and uncertainties

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Going concern

The Company has incurred recurring losses and negative cash flows from operations since its inception and has primarily funded these losses through proceeds from capital contributions and from its initial public offering.

At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

The Company has incurred recurring losses and negative cash flows from operations since its inception and has primarily funded these losses through the completion of its IPO in March 2021, other equity financings and research grants.

The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its product candidates currently in development.

Substantial additional capital will be needed by the Company to fund its operations and to develop its product candidates.

In March 2021, the Company closed its initial public offering, or IPO, in which the Company issued and sold 4,181,818 shares of its common stock, which included shares sold pursuant to an option granted to the underwriters to purchase additional shares, at a public offering price of $ 11.00 per share for net proceeds of $ 40.5 million after deducting underwriting discounts, commissions and other offering expenses.

The Company’s operations have consisted primarily of organizing the Company, securing financing, developing licensed technology, performing research and conducting preclinical studies.

The Company’s activities have consisted primarily of organizing and staffing the Company, expanding its operations, securing financing, developing and securing its in-licensed technology, performing research and conducting preclinical studies.

The Company faces risks associated with early-stage biotechnology companies whose product candidates are in development.

candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing, establishing manufacturing capacity and regulatory approval prior to commercialization.

These efforts require significant amounts of additional capital for the Company to complete its research and development objectives, defend its intellectual property rights, and recruit and retain skilled personnel, and key members of management.

Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing, establishing manufacturing capacity and obtaining regulatory approval prior to commercialization.

These efforts require significant amounts of additional capital for the Company to complete its research and development activities, achieve its research and development objectives, defend its intellectual property rights, and recruit and retain skilled personnel, and key

members of management.

Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

The Company plans to seek additional funding through public or private equity offerings, debt financings, other collaborations, strategic alliances and licensing arrangements.

The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into strategic alliances or other arrangements on favorable terms, or at all.

The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders.

If the Company is unable to obtain funding, the Company could be required to delay, reduce or eliminate research and development programs, product portfolio expansion or future commercialization efforts, which could adversely affect its business prospects.

In accordance with Accounting Standards Update, or “ASU”, No.

In accordance with Accounting Standard Update (“ASU”) No.

2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, the Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

As of the issuance date of these financial statements, the Company expects that its cash and cash equivalents will be sufficient to fund its forecasted operating expenses and capital expenditure requirements for at least the next twelve months.

Accordingly, the consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

The Company assessed that its existing cash, cash equivalents and marketable securities of $ 16.8 million will not be sufficient to fund its estimated operating and capital expenditures for a period of at least 12 months from the date these financial statements are issued.

Because of the current liquidity situation and lack of expected revenues in the foreseeable future substantial doubt exists about its ability to continue as going concern.

The Company will need to obtain additional capital and/or other funding in order to continue operations beyond the first quarter of 2025.

Management plans to raise additional capital primarily through private and/or public equity financings and/or convertible debt financings.

As an additional action, management is currently reviewing the cost structure throughout the organization, looking for opportunities to optimize expenditures and create efficiencies with the objective of improving the Company’s overall cash burn rate and reducing the research and development expenses and general and administrative expenses.

Furthermore, management is actively seeking opportunities for strategic collaborations, licensing agreements and grant fundings, among other strategic opportunities.

The Company may not be successful in its efforts to raise additional funds or achieve profitable operations.

The Company continues to explore potential opportunities and alternatives to obtain the additional resources that will be necessary to support its ongoing operations beyond the first quarter of 2025, including raising additional capital through either private or public equity or debt financing, or additional program collaborations or non-dilutive funding.

If the Company is unable to obtain additional funding to support its current or proposed activities and operations, it may not be able to continue its operations as currently anticipated, which may require it to suspend or terminate any ongoing development activities, modify its business plan, curtail various aspects of its operations, cease operations, or seek relief under applicable bankruptcy laws.

In such event, the Company’s stockholders may lose a substantial portion or even all of their investment.

Because of the actions that Management is taking to secure future financial resources the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as going concern.

Basis of presentation

The consolidated financial statements reflect the accounts of the Gain Therapeutics, Inc., GT Gain Therapeutics SA and its wholly owned branch, Gain Therapeutics Sucursal en España.

The consolidated financial statements reflect the accounts of the Gain Therapeutics, Inc., Gain Therapeutics Australia PTY LTD, GT Gain Therapeutics SA and its wholly owned branch, Gain Therapeutics Sucursal en España.

All intercompany transactions and balances have been eliminated in the preparation of the consolidated financial statements.

The consolidated financial statements as of December 31, 2023, represented by the Consolidated Balance Sheet, the Consolidated Statement of Operations, the Consolidated Statements of Changes in Shareholders’ Equity, the Consolidated Statement of Comprehensive Loss, the Consolidated Statements of Cash Flows and the accompanying Notes, have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The financial statements as of December 31, 2022 reflect, for all periods presented, the retroactive application of the reverse stock split that occurred on March 17, 2021.

All amounts in the consolidated financial statements are expressed in United States Dollars (USD/$) and disclosed within these explanatory notes in United States Dollars (USD/$) or Swiss Franc (CHF), which are the functional currencies of the Company and its operating subsidiary, GT Gain Therapeutics SA, respectively.

Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update of the Financial Accounting Standards Board (“FASB”).

All amounts in the consolidated financial statements are expressed in United States Dollars (USD/$) and disclosed within these explanatory notes in United States Dollars (USD/$).

The consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements as of and for the year ended December 31, 2022, and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of December 31, 2023 and 2022, and the results of its operations, its statements of stockholders’ equity and its statements of cash flows for the years then ended.

Reverse Stock Split

On March 3, 2021, the Board approved a 1-for- 0.880784 reverse stock split of the Company’s outstanding equity instruments.

The reverse stock split was approved by the stockholders on March 4, 2021 and became effective in conjunction with the IPO on March 17, 2021.

Stockholders were not entitled to fractional shares as a result of the reverse stock split.

All share and per share data shown in the accompanying consolidated financial statements and related notes have been retroactively revised to reflect the reverse stock split.

Shares of common stock underlying outstanding stock options and other equity instruments were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities.

Initial Public Offering

On March 17, 2021, the Company’s registration statement on Form S-1 relating to its IPO was declared effective by the Securities and Exchange Commission (“SEC”).

The IPO closed on March 17, 2021 and the Company issued and sold 3,636,364 common shares at a public offering price of $ 11.00 per share for net proceeds of $ 34,978 thousand after deducting underwriting discounts and commissions of $ 2,950 thousand and other offering expenses of $ 2,071 thousand.

Also on March 22, 2021, the Company issued and sold 545,454 additional common shares, pursuant to the full exercise of the underwriters’ option to purchase additional shares, for net proceeds of $ 5,580 thousand after deducting underwriting discounts and commissions of $ 420 thousand.

Thus, the aggregate net proceeds to the Company from the IPO, after deducting underwriting discounts commissions, were $ 42,630 thousand.

After deducting other IPO offering expenses amounting to $ 2,071 thousand, the net cash proceeds resulting from the IPO were $ 40,558 thousand, which are reflected in the statement of stockholders’ equity as Issuance of Common Stock in IPO, net of issuance costs.

Upon the closing of the IPO, series A convertible preferred stock (the “Series A Preferred Stock”) and series B convertible preferred stock (the “Series B Preferred Stock”, and together with the Series A Preferred Stock, are collectively referred to as the “Preferred Stock”) were converted into shares of common stock at ratio of 1 -for-1.

Segment information

1 unchanged sentence

The Company’s chief operating decision-maker, the Chief Executive Officer, oversees the Company’s operations and manages the business as a single operating segment, which is research and development in the pharmaceutical sector with a focus on developing novel therapeutics to treat diseases caused by protein misfolding, such as rare genetic diseases and neurological disorders.

Geographically, the research and development activities are mainly performed in Switzerland and Spain.

Geographically, the research and development activities are mainly performed in Australia, Switzerland and Spain.

The Company does not consider these geographies to be separate segments.

1 unchanged sentence

Foreign currency translation

The Company is incorporated in the United States of America and has operations in Switzerland and Spain.

The Company’s functional currency is USD.

The functional currencies of the Company’s foreign operations are the local currencies (Swiss Franc in Switzerland and Euro in Spain).

The holding company is incorporated in the United States of America and has operations in Switzerland, Spain and Australia.

The Company’s reporting currency is USD and the functional currencies of the Company’s operations are the local currencies (US Dollars in the United States, Swiss Franc in Switzerland, Euro in Spain and Australian Dollar in Australia).

Assets and liabilities reported in the consolidated balance sheets are translated into U.S.

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The preparation of our consolidated financial statements in conformity with US GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods.

On an ongoing basis, we evaluate our estimates judgments and, assumptions including those related to recognition of accrued expenses, defined benefit pension liability, share-based compensation, and recognition of research grants.

On an ongoing basis, we evaluate our estimates judgments and, assumptions including those related to the assessment of going concern, recognition of accrued expenses, defined benefit pension liability, share-based compensation, recognition of research grants.

These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources.

6 unchanged sentences

The Company classifies marketable securities as held-to-maturity or available-for-sale at the time these instruments are purchased, based on the requirements of ASC 320.

Marketable securities are classified as held-to-maturity when the Company has the positive intent and the capacity to hold the marketable securities until the maturity date.

Held-to-maturity marketable securities are carried out at amortized cost, with the accretion of discount (or amortization of premiums) included within the calculation of the effective interest method.

The effective interest of the period is accounted for in the Company’s statements of operations as financial income (or expense).

Marketable securities are classified as available-for-sale when the Company does not have the positive intent and the capacity to hold the marketable securities until the maturity date.

Available-for-sale marketable securities are carried out at fair value with the “unrealized gains/loss” excluded from the computation of the earnings of the period and accounted for in other comprehensive income.

Marketable securities are classified as available-for-sale since the Company does not have the positive intent and the capacity to hold the marketable securities until the maturity date.

The accretion of discounts (or amortization of premiums) are accounted for in the Company’s statements of operations as financial income (or expense).

Marketable securities are classified in the Company’s balance sheet based on their maturities and the Company’s reasonable expectation with regard to those securities.

Marketable securities are classified in the Company’s balance sheet based on their maturities and the Company’s reasonable expectations with regard to those securities.

Marketable securities with a maturity date within 12 months from reporting date are classified as “current assets”.

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The Company deposits its cash and cash equivalents in financial institutions that it believes have high credit quality and has not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

Deferred Issuance Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred issuance costs until such equity issuances are consummated.

After consummation of the equity issuance, these costs are recorded as a reduction of the proceeds generated as a result of the offering.

Should the planned equity financing be abandoned, the deferred issuance costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations.

Property and equipment

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The Company capitalizes the costs of software obtained for internal use in accordance with ASC 350-40, Internal-Use Software.

Capitalized software development costs consist of costs incurred during the development stage and include purchased software licenses, implementation costs, consulting costs, and payroll-related costs for projects that qualify for capitalization.

Capitalized software development costs consist of costs incurred during the development stage

and include purchased software licenses, implementation costs, consulting costs, and payroll-related costs for projects that qualify for capitalization.

All other costs, primarily related to maintenance and minor software fixes, are expensed as incurred.

As of December 31, 2023 and 2022, internal-use software amount to $ 193,375 and $ 213,967 , respectively, and refer to the external and internal labor costs incurred in the development of the Company’s enterprise resource planning system.

The additions of capitalized software for the current year amount to $ 46,382 .

The Company amortizes the capitalized software development costs on a straight-line basis over the estimated useful life of the software, which is generally six years , beginning when the asset is substantially ready for use.

The amortization of capitalized software development costs is reflected in general and administrative expenses.

Amortization expense for the years ended December 31, 2022 and 2021 was $ 37,536 and nil , respectively.

The amortization of capitalized software development costs is reflected in general and administrative expenses and for the years ended December 31, 2023 and 2022 was $ 45,507 and $ 37,536 , respectively.

The accumulated amortization as of December 31, 2023 and 2022 was $ 91,262 and $ 39,021 , respectively.

Impairment of long-lived assets

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As part of the process of preparing the Company’s consolidated financial statements, the Company is required to estimate its accrued expenses as of each balance sheet date.

This process involves reviewing open contracts and purchase orders, communicating with the Company personnel to identify services that have been performed on its

behalf and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of the actual cost.

The Company makes estimates of its accrued expenses as of each balance sheet date based on facts and circumstances known at the time of the preparation of its consolidated financial statements.

This process involves reviewing open contracts and purchase orders, communicating with the Company personnel to identify services that have been performed on its behalf and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of the actual cost.

The Company makes estimates of its accrued expenses as of each balance sheet date based on facts and circumstances known at the time of the preparation of its

consolidated financial statements.

There may be instances in which payments made to the Company’s vendors exceed the level of services provided, and result in a prepayment reported under other current assets, which is subsequently expensed in the consolidated statement of operations when the related activity has been performed.

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Estimates are used in determining the assumptions incorporated in the calculation of the pension obligations, which is supported by input from independent actuaries.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the consolidated statements of equity under accumulated other comprehensive income (loss), and are charged or credited to income over the employees’ expected average remaining working lives.

The measurement date used for the Company’s employees defined benefit plan is December 31.

2 unchanged sentences

The contributions are recognized as employee benefit expense when they are due.

Equity-based Compensation and Warrants

Stock-based Compensation and Warrants

The Company issues stock-based compensation with service-based, performance-based and market-based vesting conditions.

The Company applies the fair value method of measuring equity-based compensation and warrants, which requires an entity to measure the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award.

The Company issues equity-based compensation with service-based vesting conditions and records the expense for these awards using the straight-line method.

The Company recognizes the related costs in the consolidated statement of operations and as additional paid-in capital in the consolidated statement of shareholders’ equity, in accordance with the vesting period during which the award recipients are required to provide services in exchange for the award.

The Company accounts for forfeitures as they occur.

Before becoming a public company, given the absence of an active market for the Company’s common stock, the Company and its Board of Directors estimated the fair value of the Company’s common stock at the grant date for determining the estimated fair value of the Company’s equity instruments based on a number of factors, including prices paid for the Company’s convertible preferred stock sold to outside investors in arm’s-length transactions, the Company’s stage of development and the fact that the grants of stock-based awards involved illiquid securities in a private company.

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model.

Given the absence of an active public market for the Company’s common stock prior to March 18, 2021, which was the first day the Company’s common stock began trading on the Nasdaq Global Market (“Nasdaq”), the Company determined the volatility and the expected term for awards granted based on an analysis of reported data for a peer group of similar biopharmaceutical companies that issued options with substantially similar terms.

After the IPO, the Company continues to determine its volatility in the same manner, and it expects not to change its methodology until such time as the Company has reliable historical data regarding the volatility of the Company’s traded stock price and expected term of exercise patterns.

The Company recognizes the corresponding expense in the statement of operations over the period the participants are required to render service.

Forfeitures are recognized as they occur.

The fair value of each stock option award is estimated on the grant date using the Black-Scholes option pricing model.

The Company determines the volatility and the expected term for awards granted based on an analysis of reported data for a peer group of similar biopharmaceutical companies.

The risk-free interest rate is determined by reference to the U.S.

1 unchanged sentence

The Company has not paid, and does not anticipate paying, cash dividends on its common stock;

therefore, the expected dividend yield is assumed to be zero .

therefore, the expected dividend yield is assumed to be nil .

The Company recognizes expenses related to Restricted Stock Units (or RSUs) based on their fair market value, determined as the closing price on Nasdaq of the Company’s common stock as of the grant date, on a straight-line basis over the requisite service period.

For Restricted Stock Units with market or performance -based vesting conditions (or PRSUs), the fair value at grant date is calculated using an option-pricing model (Monte Carlo Simulation) or based on management’s assessment of the likelihood of concurrence of the underlying performance, respectively.

The Black-Scholes option pricing model is also used for the warrants issued, using consistent inputs and methodology to quantify such inputs, as described above in relation to equity-based compensation.

The assumptions used in calculating the fair value of share-based awards and warrants represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

The fair market value for RSUs is based on the closing price of our stock on the grant date.

We recognize expenses related to RSUs based on the fair market value, as determined on the grant date, on a straight line basis over the requisite service period for the entire award.

Forfeitures are recognized as they occur.

Revenue Recognition

1 unchanged sentence

The Company recognizes revenue related to these agreements in accordance with ASC 606, “Revenues from Contracts with Customers” and ASC 808, “Collaborative Arrangements”.

The terms of these arrangements typically include payment from third-party customers of one or more of the following:

The terms of these arrangements typically include payment

from third-party customers of one or more of the following:

non-refundable initiation fee, reimbursement of development costs, future development and regulatory milestone payments and royalties on net sales of the licensed product.

4 unchanged sentences

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when (or as) it satisfies a performance obligation.

and (v) recognize revenue when (or as) we satisfy a performance obligation.

The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods and services it transfers to the customer.

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General and administrative expenses

General and administrative expenses consist primarily of salaries, benefits and other related costs, for personnel and consultants in the Company’s executive and finance functions.

General and administrative expenses consist primarily of salaries, benefits and other related costs, for personnel and consultants in the Company’s executive, administrative and finance functions.

General and administrative expenses also include professional fees for legal, finance, accounting, intellectual property, auditing, tax and consulting services, travel expenses and facility-related expenses, which include allocated expenses for rent and maintenance of facilities and other operating costs not otherwise included in research and development expenses.

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Net loss per share

Basic net loss per share is computed by dividing the reported net loss by the weighted average number of shares of common stock outstanding during the period.

Basic net loss per share is computed by dividing the reported net loss by the weighted average number of shares of common stock outstanding during the period and shares issuable for little or no cash consideration upon resolution of any applicable contingency.

The Company gives consideration to all potentially dilutive impacts, except where the effect of including such securities would be antidilutive.

As of December 31, 2022, common stock equivalents consisted of stock options, RSUs, PRSUs and warrants, while as of December 31, 2021, common stock equivalents consisted of stock options and warrants.

As of December 31, 2023 and 2022, common stock equivalents consisted of stock options, RSUs, PRSUs and warrants.

Because the Company has reported net losses since inception, these potential impacts would be anti-dilutive, and therefore common stock equivalents have been excluded from the computation, resulting in basic and diluted net loss per share being the same for all periods presented.

COVID-19 Pandemic

In regard to the ongoing COVID-19 global pandemic, the Company has taken measures to secure its research and development activities, while work in its laboratories and facilities has been re-organized to reduce risks of COVID-19 transmission.

Given the global impact and the other risks and uncertainties associated with the COVID-19 pandemic, the Company’s business, financial condition and results of operations could be materially adversely

The Company continues to closely monitor the COVID-19 pandemic and evolve its business continuity plans, clinical development plans and response strategy to mitigate any potential impact.

As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities.

Actual results could differ from those estimates, and any such differences may be material to the Company’s financial statements.

Recently issued accounting pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date.

There were no new material accounting pronouncements issued in fiscal year 2022 with a material impact on the Company’s consolidated financial statements.

There were no new accounting pronouncements effective in 2023 with a material impact on the Company’s consolidated financial statements.

Research Grants

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In July 2019, the Company’s wholly owned subsidiary, GT Gain Therapeutics SA, announced that, in a consortium with the Institute for Research in Biomedicine, Bellinzone (Switzerland) and Neuro-Sys SAS in Gardanne (France), it obtained a three-years research grant to support the development of the drugs portfolio for the treatment of Gaucher Disease, GM1 Gangliosidosis, Mucopolysaccharidosis type 1 and Krabbe.The grant was approved by the Eurostars-2 joint programme, with co-funding from the European Union Horizon 2020 research and Innosuisse – Swiss Innovation Agency.

As of December 31, 2022 and 2021, the Company recorded as reductions to research and development expenses USD 82,133 and USD 184,748 , respectively and receivables of USD 87,430 and USD 81,862 , respectively.

In connection with this grant, during the year ended December 31, 2022, the Company recorded a reduction to research and development expenses of $ 82 thousand.

The research grant is concluded and no reduction to research and development expenses has been recorded for the year ended December 31, 2023.

In March 2023, the Company’s wholly owned subsidiary, GT Gain Therapeutics SA, announced that Eurostars and Innosuisse awarded a grant in the aggregated amount of $ 1.3 million to a consortium led by Gain Therapeutics that also includes the Institute for Research in Biomedicine, Newcells Biotech and the University of Helsinki.

The grant is intended to support the development of our alpha-1 antitrypsin deficiency program.

The portion of the grant that was allocated to the Company was $ 0.45 million.

In May 2023, the Company’s wholly owned subsidiary, GT Gain Therapetuics SA, announced that Innosuisse awarded the Company a grant, under the Swiss Accelerator program, in the amount of $ 2.8 million to support the further development activities of Gain Therapeutics’ lead program GBA1 Parkinson’s disease.

In connection with the grants announced in March 2023 and May 2023 the Company recorded, during the year ended December 31, 2023, a reduction to research and development expenses of $ 0.6 million and reports deferred income of $ 1.2 million.

Cash, cash equivalents and restricted cash

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Restricted cash

Restricted cash refers to an amount required under our Lugano new office lease agreement and deposited into a restricted bank account as a guarantee for expenses to be incurred in case of damage to the premises noted at the termination of the lease.

Details of the cash and cash equivalents balances as of December 31, 2022 and 2021, broken down by currency in which the funds are denominated, are reported in the following table:

Restricted cash refers to an amount required under the Company’s office lease agreement in Lugano and deposited into a restricted bank account as a guarantee.

Marketable Securities

As of December 31, 2022 the Company reports $ 14,768 thousand of marketable securities, related to United States Treasury Securities (“USTS”), within current and non-current assets.

The USTS purchased have maturity dates going from January 2023 to February 2024, on a monthly basis, in tranches of USD 1,000 thousand each month.

As of December 31, 2023 the Company reports $ 5 million of marketable securities, related to United States Treasury Securities (“USTS”), within current assets.

The USTS purchased have maturity dates going from January 2024 to April 2024, on a monthly basis, in tranches of USD 1,000 thousand each month.

The Company classifies the USTS, which are accounted for as available-for-sale, within the Level 1 fair value hierarchy category as the fair value is based on quoted market prices in active markets with a high level of daily trading volume.

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government treasury securities, current

Debt Securities - U.S.

government treasury securities, non current

The Company regularly reviews the securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such historical experience, market data, the financial condition and near term prospects of the investee, the extent of the loss related to credit of the issuer, the expected cash flows from the security, the Company’s intent to sell the security, and whether or not the Company will be required to sell the security before the recovery of its amortized cost.

As of December 31, 2022 the Company did not intend to sell any of the debt securities included in the table above, and it is not “more likely than not” that the Company will be required to sell any of these securities before the recovery of the unrealized losses, which will be at maturity.

Unrealized losses on available-for-sale debt securities as of December 31, 2022 were primarily due to changes in interest rates, and not due to increased credit risks associated with specific securities.

As of December 31, 2023, the Company did not intend to sell any of the debt securities included in the table above, and it is not more likely than not that the Company will be required to sell any of these securities before recovery of the unrealized losses, which will be at maturity.

Unrealized losses on available-for-sale debt securities as of December 31, 2023 were primarily due to changes in interest rates.

Accordingly, as of December 31, 2023, the Company has not recorded an allowance for credit losses related to its available-for-sale debt securities.

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Total Prepaid expenses and other current assets

Tax credit consist of a value added tax credit (“VAT”).

It is an indirect tax receivables from Switzerland and Spain tax authorities on purchases of goods and services executed in those countries.

Tax credit consist of a value added tax (“VAT”) receivable from Swiss and Spanish tax authorities on purchases of goods and services executed in those countries.

Prepaid expenses refers to pre-payments made to the Company’s vendors for future services.

Deferred expenses mainly refer to research agreements entered into with third parties for research projects that will be recognized as expenses throughout the research period.

Other receivables refers to the Eurostars-2 grant, with co-funding from the European Union Horizon 2020 and Innosuisse – Swiss Innovation Agency, that contractually will be collected in March 2023.

Prepaid D&O insurance costs relate to an annual insurance premium which will be recognized in the statement of operations on a monthly basis throughout the one-year insurance period.

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Property and equipment, net

Property and equipment consist of computers, furniture and fixtures, lab instruments.

No disposals, nor impairments occurred during the periods.

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The Company’s leased assets include offices in Bethesda, Maryland, Lugano, Switzerland and Barcelona, Spain and a lab in Barcelona, Spain.

Its current lease portfolio consists of leases with remaining terms ranging from three to five years .

Renewal options are excluded from the calculation of lease liabilities since the Company is not reasonably certain that we will exercise the renewal option.

The current lease portfolio consists of leases with remaining terms ranging from one to three years .

Renewal options are excluded from the calculation of lease liabilities since the Company is not reasonably certain that will exercise the renewal option.

The Company’s lease agreements do not contain residual value guarantees or material restrictive covenants.

On December 24, 2020, the Company renewed a five-year operating lease term in Cluster II Building with Parc Scientific de Barcelona to lease lab and office space of 1,042 square feet.

In connection with the lease, the Company paid a security deposit of EUR 6,469 classified as deposit in non-current assets.

The Company is required to pay for operating costs, which are billed monthly based on the Company’s share of the total rentable square footage.

These additional charges are considered variable lease costs and are recognized in the period in which the costs are incurred.

The Company accounted for the renewal as a modification of the original agreement and recorded an additional right-of-use asset and corresponding lease liability based on the incremental borrowing rate determined as of the effective date of the modified lease.

On June 1, 2021, the Company entered into a five-year operating lease agreement to lease office space in Via Soave, n.6 in Lugano, Switzerland.

The lease agreement is renewable for additional five years .

The Company is required to pay for operating costs, which are considered variable lease costs and are recognized in the period in which the costs are incurred.

In connection with the lease, as guarantee for any damages claimed by the lessor, the Company deposited CHF 28,500 into a restricted bank account, which is classified in the financial statements as restricted cash.

On October 1, 2021, the Company entered into a three-year operating lease agreement to lease office space in Bethesda, Maryland.

In connection with the lease, the Company paid a security deposit of USD 5,227 , classified as

deposit in non-current assets, for the performance of all obligations, covenants and conditions and agreements under the lease.

On November 1, 2021, the Company entered into a five-year operating lease agreement in Torre D Building with Parc Scientific de Barcelona for larger office space of 1,417 square feet to accommodate the Company’s continued growth and contemporaneously terminated a lease, entered in October 2020, in Torre I Building for 830 square feet.

In connection with the Torre D Building lease, the Company paid a security deposit of EUR 4,325 classified as deposit in non-current assets.

The Company is required to pay for operating costs, which are billed monthly based on the Company's share of the total rentable square footage.

These additional charges are considered variable lease costs and are recognized in the period in which the costs are incurred.

On July 10, 2022, the Company entered into a new three-year operating lease agreement in Cluster II Building with Parc Scientific de Barcelona for a warehouse space of 245 square feet.

In connection with the lease, the Company paid a security deposit of EUR 685 classified as deposit in non-current assets.

The Company is required to pay for operating costs, which are billed monthly based on the Company's share of the total rentable square footage.

These additional charges are considered variable lease costs and are recognized in the period in which the costs are incurred.

Operating leases are reflected on our balance sheet as operating lease ROU assets and the related current and non-current operating lease liabilities.

ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease agreement.

Operating lease ROU assets and liabilities are recognized at the commencement date, or the date on which the lessor makes the underlying asset available for use, based upon the present value of the lease payments over the respective lease term.

Lease expense is recognized on a straight-line basis over the lease term.

Variable lease costs such as common area maintenance, property taxes and insurance are expensed as incurred.

The breakdown of the significant components of ROU assets, lease liabilities and operating lease expense is reported in the table below, together with the discount rate used in order to calculate the net present value of the lease liabilities as of those periods.

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The amounts related to lease costs included in the consolidated statements of operations were as follows:

Operating lease costs

Year Ended December 31

Research and development

General and administrative

Total operating lease costs

The future minimum lease payments for the Company’s operating leases as of December 31, 2023, are as follows:

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Accounts payable refer to amounts due to third parties on outstanding invoices received for services already provided.

As of December 31, 2022 and December 31, 2021, accounts payable amounted to $ 1,626,100 and $ 560,479 , respectively.

As of December 31, 2023 and December 31, 2022, accounts payable amounted to $ 1.3 million and $ 1.6 million, respectively.

All accounts payable are due in less than 12 months.

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Total Other Current Liabilities and Deferred Income

Payables for social security refer to amounts due to social security and employees withholding tax.

Accrued payroll refers to accruals for year-end bonuses, accrued vacations and extra-hours including social security charges, to be paid to employees.

Deferred income refers to the portion of grants cashed in and not yet recognized as a reduction of R&D expenses in the statement of operations.

Accrued payroll refers to accruals for year-end bonuses, accrued vacations and overtime to be paid to employees.

Accrued expenses refer to invoices to be received from vendors for services performed and not yet billed.

Tax provision refers to a tax payable due to the Spanish Tax Authorities related to taxable income generated in Spain.

Increase versus prior year is attributable to the allocation of stock based compensation expenses on stock options granted to our Spanish employees whose costs, for tax purposes, will be deductible at the time of the exercise.

Deferred income refers to income from the Company’s collaboration agreement with Zentalis Pharmaceuticals, Inc.

It will be recognized in the statement of operations in accordance with the costs sustained.

Pension obligations

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Next year's expected employer contribution

The actuarial gains in 2022 were primarily due to an increase in discount rates applied against future expected benefit payments and resulted in a decrease of the benefit obligation.

The actuarial losses in 2023 were primarily due to a decrease in discount and interest rates applied against future expected benefit payments and resulted in a increase of the benefit obligation.

The increase of the plan assets recorded during the year was mainly related to employer’s and employees’ contributions to the plan.

The Company’s investment strategy for its pension plans is to optimize the long-term investment return on plan assets in relation to the liability structure to maintain an acceptable level of risk while minimizing the cost of providing pension benefits and maintaining adequate funding levels in accordance with applicable rules in each jurisdiction.

The Company does not manage any assets internally.

The plan asset relates to mandatory and discretionary contributions made in accordance with Swiss Law to a leading pension provider.

The insurance contract plan asset relates to mandatory and discretionary contributions made in accordance with Swiss Law to a leading pension provider.

The capital is insured and provides for a minimum rate of return.

The fair value is based on the value of the assets held by the provider and as such has been classified within Level 3 of the fair value hierarchy.

The fair value is equal to the employees’ accrued savings and is calculated using total employer and employee contributions plus any accumulated interest credited (which is substantially equivalent to the related cash surrender value).

The plan asset has been classified within Level 3 of the fair value hierarchy and the approach is consistent with prior years.

We maintain a 401(k) saving Plan, which is available to all U.S.

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The employees and the Company will make such contributions in line with the rules of the Pension Scheme in force.

The expense related to our pension scheme consist of our matching contributions and totaled GBP 4,283 and nil for the years ended December 31, 2022 and 2021.

In March 2020, the Company obtained a CHF 14,600 five-year loan.

The loan had zero interest and original maturity on June 30, 2025.

The loan was guaranteed through joint and several sureties by the Swiss government.

The loan is part of the infrastructure put in place by the Federal Council and Swiss Parliament in view of the economic consequences of the COVID-19 pandemic.

In February 2022, the Company early extinguished the loan.

No expenses or charges were incurred for the early extinguishment of the loan.

In August 2020, the Company obtained a CHF 638,000 (USD 700,221 at the historical foreign exchange rate) nine-year loan.

The expense related to our pension scheme consist of our matching contributions and totaled $ 16,753 and $ 5,165 for the years ended December 31, 2023 and 2022.

In August 2020, the Company obtained a CHF 638,000 (USD 700,221 at the historical exchange rate) nine-year loan.

The loan has zero interest and is due in quarterly installments of CHF 20,000 , with payments commencing on December 31, 2021 and ending on September 30, 2029.

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Total marketable securities available for sale

Defined Benefit Pension Plan:

Pension Plan Asset

Total Defined Benefit Pension Plan

Cash and cash equivalents:

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December 31, 2022:

Marketable securities available for sale:

Debt securities - U.S.

government treasury securities, current

Debt securities - U.S.

government treasury securities, non current

Total marketable securities available for sale

Defined Benefit Pension Plan:

Pension Plan Asset

Total Defined Benefit Pension Plan

Cash and cash equivalents:

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The carrying amounts of prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair value due to their short-term maturities.

Please refer to the Note 11 “Pension obligations” for additional details on the valuation of Pension Plan Assets.

Common Stock, Preferred Stock and Warrants

As of December 31, 2022 and 2021, the authorized capital stock of the Company included 50,000,000 shares of common stock, $ 0.0001 par value and 10,000,000 shares of preferred stock, $ 0.0001 par value.

As of December 31, 2022 and 2021, 11,883,368 shares of common stock, $ 0.0001 par value, were issued and outstanding .

No preferred stocks were outstanding as of December 31, 2022 and 2021.

In July 2020, in connection with the issuance of the Series B Preferred Stock through a private placement, the Company issued equity-classified warrants to designees of the placement agent to purchase an aggregate of

269,360 shares of our common stock at an exercise price of $ 4.46 per share, valued in the aggregate at USD 413,887 and included in the issuance costs of the Series B Preferred Stock.

The warrants vested immediately upon issuance, provide for a cashless exercise right and are exercisable for a period of five years from July 20, 2020.

On March 3, 2021, the Board approved a 1-for- 0.880784 reverse stock split of the Company’s outstanding equity instruments.

The reverse stock split was approved by the Company’s stockholders on March 4, 2021 and became effective on March 17, 2021.

Shares of common stock underlying outstanding warrants were proportionately reduced from 269,360 to 237,249 and the respective exercise prices, were proportionately increased from $ 4.46 to $ 5.07 in accordance with the terms of the agreements governing such securities.

As of December 31, 2021 and 2022, 11,862 and nil warrants, respectively, were exercised resulting in 3,283 shares having been issued following the cashless mechanism as per the respective warrant agreement.

On May 6, 2021, the Company entered into an investment banking services and financial advisory agreement and issued equity-classified warrants to designees of the investment bank to purchase an aggregate of 200,000 shares of the Company common stock at an exercise price of $ 13.75 per share, valued in the aggregate at USD 1,034 thousand.

The warrants vested immediately upon issuance, do not provide for a cashless exercise right and are exercisable for a period of four years from May 6, 2021.

The fair value of the warrants was fully recognized on a straight-line basis over the nine months service period as general and administrative expense.

As of December 31, 2022, no warrants were exercised or exchanged.

As of December 31, 2023 and December 31, 2022, the authorized capital stock of the Company included 50,000,000 shares of common stock, $ 0.0001 par value and 10,000,000 shares of preferred stock, $ 0.0001 par value.

As of December 31, 2023 and December 31, 2022, there were 16,206,680 and 11,883,368 shares of common stock respectively, $ 0.0001 par value, issued and outstanding .

In July 2020, in connection with a private placement, the Company issued equity-classified warrants to placement agent designees.

After a reverse stock split in March 2021, the aggregate number of outstanding warrants totaled 237,249 shares with an exercise price of $ 5.07 per share, valued in the aggregate at $ 413,887 .

The warrants vested immediately upon issuance, provide for a cashless exercise right and are exercisable for a period of five years until July 20, 2025.

As of December 31, 2023, 225,387 warrants were outstanding.

On May 6, 2021, the Company entered into an investment banking services and financial advisory agreement and issued equity-classified warrants to investment bank designees to purchase an aggregate of 200,000 shares of the Company common stock at an exercise price of $ 13.75 per share, valued in the aggregate at $ 1.0 million.

The warrants vested immediately upon issuance, do not provide cashless exercise right and are exercisable for a period of four years from May 6, 2021.

The fair value of the warrants was fully recognized on a straight-line basis over the service period as general and administrative expense.

As of December 31, 2023, no warrants have been exercised.

At the market offering

In May 2022, the Company entered into a Controlled Equity OfferingSM Sales Agreement with Cantor Fitzgerald, Inc.

(“Cantor”), pursuant to which the Company was able to sell from time to time, through the Agent, shares of common stock, having an aggregate offering price of up to $ 16.0 million (the “ATM Program”).

Sales under the ATM Program are made by any method permitted by law that is deemed to be an “at the market” offering as defined in Rule 415 issued under the Securities Act, including, without limitation, sales made directly on the Nasdaq Capital Market, on any other existing trading market for the Company’s common stock, through a market maker or as otherwise agreed by the Company and Cantor.

During the year ended December 31, 2023, we sold an aggregate of 862,535 shares of common stock at an average price of $ 4.60 per share, raising gross proceeds of $ 3.9 million, which includes $ 0.4 million in sales and commissions and other offering expenses.

The Sales Agreement was terminated in conjunction with the public offering and concurrent private placement of shares of the Company’s common stock in November 2023 described below.

Public Offering

In November 2023, we completed the public offering of 2,545,000 shares of our common stock and warrants to purchase 1,272,500 shares of our common stock (the “Public Warrants”).

The warrants have been offered and sold at the rate of one warrant for every two shares of common stock purchased.

The public offering price for each set of two shares of common stock and accompanying warrant to purchase one share of common stock was $ 4.01 , yielding an effective price of $ 2.00 per share and $ 0.01 per warrant.

Each warrant has an exercise price of $ 2.75 per share of common stock and immediately vested upon the finalization of the public offering.

The “Public Offering Warrants” are equity-classified and are exercisable for a period of five years starting from November 2023.

In connection with the public offering we also issued 178,150 warrants to purchase an equal amount of our common stock at an exercise price of $ 2.75 per share to the Underwriter as a consideration for the services provided (the “Underwriter Warrants”), the warrants vested immediately upon the finalization of the public offering.

The “Underwriter Warrants” are equity-classified and are exercisable for a period that goes from May 2024 to November 2028 and provide for cash-less exercise.

Private Placement

In a private placement that was completed concurrently with the public offering we also issued to accredited investors 744,026 shares of our common stock, 1,756,062 pre-funded warrants to purchase an equal amount of our

common stock at the nominal exercise price of $ 0.0001 and private warrants to purchase 2,500,088 shares of our common stock (the “Private Warrants”).

The “Private Warrants” have been offered and sold at the rate of one warrant for every share of common stock (or pre-funded warrant in lieu thereof) purchased in the private placement.

The private placement price per share (or pre-funded warrant in lieu thereof) and accompanying private warrant to purchase one share of common stock was $ 2.00 per set of securities sold privately.

The “Private Warrants” immediately vested upon the finalization of the private placement, are equity-classified, have an exercise price of $ 2.75 per share of common stock and are exercisable for a period that goes from May 2024 to November 2028.

The pre-funded warrants immediately vested upon the finalization of the private placement, are equity-classified and are exercisable for a period of five years starting from November 2023.

In connection with the private placement we also issued 175,006 warrants to purchase an equal amount of our common stock at an exercise price of $ 2.75 to the Placement Agent as a consideration for the services provided (the “Placement Agent Warrants”), the warrants vested immediately upon the finalization of the private placement.

The “Placement Agent Warrants” are equity-classified, are exercisable for a period that goes from May 2024 to November 2028 and provide for cash-less exercise.

The public offering and the concurrent private placement resulted in combined gross proceeds of $ 10.1 million, which includes $ 1.2 million of underwriting commissions, placement agent’s fees and other expenses connected with the financing round.

As of December 31, 2023 $ 0.9 million of the costs associated with the financing round had already been paid or deducted from the gross proceeds, while the reminder of the amount has been paid in the first quarter of 2024.

The fair market value of the “Public Warrants”, “Private Warrants”, and of the “Underwriter Warrants”, “Placement Agent Warrants” (together referred to as “Agent Warrants”) has been calculated using the Black-Scholes option pricing model, while the fair market value of the pre-funded warrants has been determined as the spread between the price paid by the private investors and the share price of our stock at grant date.

Below a table that summarizes the assumptions that have been used in the calculation:

Year Ended December 31, 2023

Market Price at Grant Date

Expected term (years)

Risk-free interest rate

Expected dividend yield

Grant date fair value per share

The fair values of the shares, public, private and pre funded warrants to purchase shares of our common stock have been recorded in APIC and allocated to the gross proceeds as follows:

$ 6.25 million for the shares issued in the public offering and the private placement (based on the stock price as of transaction date), $ 0.82 million for the public warrants, $ 2.69 million for the private warrants and $ 0.34 million for the pre funded warrants.

The agent warrants were recorded within APIC as they represent compensation associated with the financing round, for $ 0.3 million.

As of December 31, 2023 no warrant has expired or has been exercised.

Equity Incentive Plans

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The 2020 Omnibus Plan provided for the granting of equity-based awards to our named executive officers, other employees, consultants and non-employee directors at a price to be determined by the Company’s Board.

The maximum number of shares to be issued under the 2020 Omnibus Plan was 1,153,827 , as adjusted after a stock split of 1-for- 0.880784 approved by stockholders on March 4, 2021.

The 2020 Omnibus Plan has been succeeded by the 2022 Equity Incentive Plan (as described below), and no additional awards will be granted under the 2020 Omnibus Plan although all outstanding awards granted under the 2020 Omnibus Plan will continue to be subject to the terms and conditions as set forth in the agreements evidencing such awards and the terms of the 2020 Omnibus Plan.

On December 23, 2021, the Board determined it advisable and in the best interests of the Company to adopt an Inducement Equity Incentive Plan (the “2021 Inducement Equity Incentive Plan”) intended to induce new employees to join the Company for the benefit of individuals who satisfy the standards for inducement grants under Rule 5635(c)(4) of the Nasdaq Listing Rules and the related guidance issued thereunder with respect to the Company and its affiliates.

The maximum number of shares to be issued under the 2020 Omnibus Plan was 1,153,827 .

On December 23, 2021, the Board adopted the Inducement Equity Incentive Plan (the “2021 Inducement Equity Incentive Plan”) intended to induce new employees to join the Company for the benefit of individuals who satisfy the standards for inducement grants under Rule 5635(c)(4) of the Nasdaq Listing Rules.

The maximum number of shares reserved for issuance pursuant to awards granted under the 2021 Inducement Equity Incentive Plan is 1,000,000 .

On June 16, 2022, at the Company’s annual meeting of stockholders, the Company’s stockholders approved the Company’s 2022 Equity Incentive Plan (the “2022 Plan”).

The 2022 Plan is the successor to and continuation of the 2020 Omnibus Plan, in order to allow the Company to continue to utilize a broad array of equity incentives in order to secure and retain the services of its employees, directors, and consultants, and that are intended to align the interests of employees, directors, and consultants with the interests of the Company’s stockholders.

The number of newly authorized shares that can be issued under the 2022 Equity Incentive Plan is 646,173 , and the total number of shares reserved for issuance under the 2022 Plan (which amount includes shares remaining available for issuance under the 2020 Omnibus Plan as well as certain shares underlying awards then outstanding under the 2020 Omnibus Plan that will become available for issuance under the 2022 Plan if certain conditions are met) is 1,800,000 .

In addition, beginning on January 1, 2023 and ending on (and including) January 1, 2032, the maximum number of shares of common stock that may be issued under the 2022 Plan will cumulatively be increased by 6 % of the number of shares of common stock issued and outstanding on the immediately preceding December 31st, or such lesser number of shares as determined by the Board.

The Company’s 2022 Equity Incentive Plan (the “2022 Plan”) was approved by the Board on May 12, 2022.

On June 16, 2022, at the Company’s annual meeting of stockholders, the Company’s stockholders approved the 2022 Plan.

The 2022 Plan is the successor to and continuation of the 2020 Omnibus Plan.

The number of newly authorized shares reserved for issuance under the 2022 Equity Incentive Plan was 646,173 , and the total number of shares initially reserved for issuance under the 2022 Plan (including shares remaining available under the 2020 Omnibus Plan) is 1,800,000 .

On January 1, 2023, the number of shares of common stock issued under the 2022 Plan, increased automatically by 6 % or 713,002 , based on the number of shares of common stock issued and outstanding as of December 31, 2022.

Following such increase, the number of shares of common stock that may be issued under the 2022 Plan totaled 2,513,002 .

No incentive stock options may be granted under the 2022 Plan after May 12, 2032 and the Board may suspend or terminate the 2022 Plan at any time.

The Board is responsible for administering the 2022 Plan, including determining the individuals to be granted options and other awards, the number of shares of common stock subject to each award that an individual will receive, the exercise price per share (if any) subject to an award, and the exercise period of each option, subject to the terms of the 2022 Plan.

No option will have a term in excess of 10 years .

The exercise price of a stock option generally cannot be less than 100 % of the fair market value of our common stock on the date of grant for non-statutory stock options.

The Board is responsible for administering the equity incentive plans.

Stock Option Grants

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Weighted Average

Exercise Price

Terms (Years)

Life (in years)

Options outstanding as of December 31, 2022

Options granted

Options exercised

Options cancelled/forfeited

Canceled and forfeited

Options outstanding as of December 31, 2023

Options Outstanding

Options Exercisable

Weighted Average

Weighted- Average Years

Remaining on Contractual

On March 3, 2021, the Board approved a 1-for- 0.880784 reverse stock split of the Company’s outstanding equity instruments.

The reverse stock split was approved by the Company’s stockholders on March 4, 2021, and became effective on March 17, 2021.

Shares of common stock underlying outstanding stock options were proportionately reduced from 588,000 to 517,902 and the respective exercise prices were proportionately increased from $ 2.97 to $ 3.38 in accordance with the terms of the agreements governing such securities.

The reverse stock split did not impact the fair value of the stock option awards previously recorded because all the three following conditions were met:

(i) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified;

(ii) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and (iii) the classification of the modified award as an equity instrument is the same as the classification of the original award immediately before modification.

Vested as of December 31, 2023

Options exercisable as of December 31, 2023

The aggregate intrinsic value of stock options is calculated as the difference between the weighted average exercise price of the underlying stock options and the market price of the Company’s common stock on December 31, 2023.

Based on this calculation the intrinsic value of the outstanding stock options as of December 31, 2022 is nil .

Based on this calculation the intrinsic value of the outstanding stock options as of December 31, 2023 was nil .

The assumptions that the Company used to determine the grant-date fair value of stock options granted were as follows, presented on a weighted-average basis:

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Each of these inputs is subjective and generally requires significant judgment to determine.

The weighted average grant-date fair value of the Company’s stock options granted as of December 31, 2022 and 2021 was $ 2.49 and $ 4.27 , respectively.

Restricted Stock Units and Performance Stock Units

The following table lists the RSUs awarded under the 2022 Plan for year ended December 31, 2022 and 2021:

Year Ended December 31

RSUs granted and outstanding

Grant date fair value

In 2022 the Company granted a total of 103,050 RSUs covering an equal number of shares of the Company’s common stock to employees and consultants with a weighted-average grant date fair value of $ 3.48 .

Restricted Stock Units and Performance Restricted Stock Units

The following table summarizes the Company’s RSUs and PRSUs activity for the year ended December 31, 2023:

Weighted Average

Grant Date Fair

Numbers of Shares

Value per Share

Outstanding as of December 31, 2022

Cancelled/forfeited

Outstanding as of December 31, 2023

The fair value of the RSUs is based on the closing price of the Company’s stock on the grant date.

The fair value of the RSUs is recognized as an expense over the duration of the vesting period.

The weighted average duration of the vesting period for the RSUs granted is two years .

The weighted average vesting period for the RSUs granted in 2023 is four years ( two years for the RSU granted in 2022).

In December 2021, the Compensation Committee of the Board approved 200,000 awards of performance-based restricted stock units (“PRSUs”) to an executive officer of the Company, subject to vesting on the achievement of certain services, business development and clinical development performance criteria.

The grant date fair value for this PRSUs award was determined to be nil under ASC 718 based upon a determination that as of the grant date, it was not probable that the performance conditions will be achieved.

The grant date fair value for these PRSUs award was determined to be nil under ASC 718 based upon a determination that as of the grant date, it was not probable that the performance conditions will be achieved.

The Company evaluates the performance targets in the context of its business development plan and product candidates’ development pipeline and recognized compensation expense based on the probable number of PRSUs that will ultimately vest.

The maximum potential fair value for the PRSU award, based on achieving the maximum level of performance under the award as of the grant date, was calculated to be $ 1,139 thousand, using the closing price of the Company’s common stock on the grant date.

RSUs and PRSUs do not have the voting rights of shares of common stock, and the shares underlying the RSUs and PRSUs are not considered issued and outstanding.

Under the 2022 Plan, each RSU/PRSU represents a contingent right to receive one share of the Company’s common stock.

Total stock-based compensation expense is recognized for stock options and RSUs granted to employees and non-employees has been reported in the Company’s consolidated statements of operations as follows:

The potential fair value for the PRSU award, based on achieving the maximum level of performance under the award as of the grant date, was calculated to be $ 1.1 million, using the closing price of the Company’s common stock at grant date.

In April 2023, the Compensation Committee of the Board approved 100,000 awards of performance-based restricted stock units (“PRSUs”) to an executive officer of the Company, subject to vesting on the achievement of certain services, financing and business development performance and market criteria.

The grant date fair value for the PRSUs with financing and business development performance was determined based on the closing price of the Company’s common stock at grant date and for the PRSUs with market condition, through an option-pricing model (Monte Carlo Simulation).

Options, RSUs and PRSUs do not have voting rights and the underlying shares are not considered issued and outstanding.

The total stock-based compensation expense for stock options, RSUs and PRSUs, granted to employees and non-employees, has been reported in the Company’s consolidated statements of operations as follows:

Year Ended December 31

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Total stock-based compensation

As of December 31, 2022, the total unrecognized compensation cost related to non-vested stock options and RSUs granted was USD 3,503 thousand and is expected to be recognized over 4 years .

Collaboration Agreement

On April 20, 2021, we entered into a multi-target collaboration agreement with Zentalis Pharmaceuticals, Inc.

(“Zentalis”) to discover new product candidates for the treatment of cancer.

Under the terms of the agreement, the Company used its licensed SEE-Tx® computational platform technology to identify binding site on target proteins

and determine the potential suitability of these sites as drug targets, as well as their prospective therapeutic use in oncology.

Pursuant the terms of the agreement, Zentalis agreed to pay the Company, on a program-by-program basis, a non-creditable, non-refundable, program initiation fee and reimbursement of expenses incurred by the Company in accordance with the agreed-upon research budget for each target in a multi-target agreement with a maximum of five mutually agreed to targets at the option of Zentalis.

The Company analyzed the Zentalis Collaboration Agreement and concluded that it represents a contract with a customer within the scope of ASC 606 and ASC 808.

Based on that evaluation, (i) the program initiation fee was recognized as revenue in full as of June 30, 2021 at a point in time, at program inception as there is no unsatisfied performance obligation;

(ii) the performance obligation to provide development services, is satisfied over a period of time as services are performed and Zentalis receives the benefit for the services.

The Company will recognize revenue associated with the performance obligation as the research and development services are provided using an input method, according to the costs incurred.

During the course of 2022, Zentalis informed us of its desire to wind down the collaboration.

As of December 31, 2022, the Company recognized $ 133 thousand of revenues and reported current portion of deferred revenues for $ 55 thousand.

The Company is subject to taxation in the U.S., Switzerland and in Spain.

As of December 31, 2023, the total unrecognized compensation cost related to non-vested stock options, RSUs and PRSUs granted was $ 3.48 million and is expected to be recognized over 3 years .

The Company is subject to taxation in the U.S, Switzerland, Spain and Australia.

Taxes are recorded on an accrual basis and represent the allowances for taxes paid or to be paid for the year, calculated according to the current enacted rates and applicable laws.

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The Company report a provision for income taxes due to the Spanish tax authorities pertaining to our branch Gain Therapeutics Sucursal en España.

For financial reporting purposes, loss before income taxes provision includes the following components:

( 17,341,701 )

For financial reporting purposes, income/(loss) before income taxes provision includes the following components:

( 22,477,695 )

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The breakdown of domestic and foreign NOLs and related DTAs are reported in the following table:

NOLs (foreign)

NOLs (domestic)

( 27,850,813 )

( 22,833,222 )

NOLs (domestic)

NOLs (foreign)

( 10,932,386 )

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Deferred tax assets related to:

Net operating loss (foreign)

Net operating loss (domestic)

Stock based compensation (foreign)

Net operating loss (foreign)

Stock based compensation (domestic)

Stock based compensation (foreign)

Section 174 - Capitalized R&D

Warrant expense

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Provision to return

Foreign taxes rate differential

Valuation allowance

Effective income tax rate

For the year ended December 31, 2023, permanent differences are mainly attributable to tax on global intangible low-tax income (“GILTI”) which was enacted as part of Tax Cuts and Jobs Act (the “Tax Act”) on December 22, 2017.

GILTI, in general, is determined annually based on the Company’s aggregate foreign subsidiaries’ income in excess of certain qualified business asset investment return.

The Company accounts for taxes on GILTI in the period that it is subject to such taxes.

As of December 31, 2023 and 2022, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statement of operations.

There are no changes expected to occur in the next 12 months with respect to the status of the Company’s uncertain tax positions.

The Company files income tax returns in Switzerland, Spain and in the United States.

Tax years from 2018 and after remain subject to examination by the taxing jurisdictions.

The Company files income tax returns in the U.S, Switzerland, Spain and Australia.

Tax returns from fiscal year 2017 and onwards remain subject to examination by the taxing jurisdictions.

The NOL and tax carryforwards remain subject to review until utilized.

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Diluted net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock and potentially dilutive securities outstanding during the period.

For purposes of the diluted net loss per share calculation, preferred stock, warrants, stock options and RSUs are considered to be potentially dilutive securities, but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive and therefore basic and diluted net loss per share are the same for all periods presented.

For purposes of the diluted net loss per share calculation, preferred stock, warrants, stock options, RSUs and PRSUs are considered to be

potentially dilutive securities, but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive and therefore basic and diluted net loss per share are the same for all periods presented.

The following table sets forth the outstanding weighted-average potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to do so would have resulted in anti-dilutive impacts:

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Warrants to purchase common stock

In addition 200,000 PRSUs, granted in December 2021, contingently issuable upon meeting certain performance conditions are outstanding and will be included in the computation upon not resulting in anti-dilutive impacts and when the related performance conditions will be met.

The weighted average number of warrants to purchase common stock as per the table above does not include the weighted average effect of 1,756,062 pre funded warrants for which the exercise price is less than or equal to $ 0.0001 per share.

The weighted average effect of the pre funded warrants has been included in the computation of the net loss per share attributable to common stockholders – basic and diluted in the Consolidated Statement of Operations.

Related Parties

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In December 2017, the Company entered into an exclusive worldwide, royalty-bearing, assignable, transferable license agreement with Minoryx to use and exploit Minoryx’s intellectual property and into an exclusive worldwide, royalty-bearing, assignable, transferable sublicense agreement with Universitat de Barcelona and Institucio Catalana Recerca Estudis Avancats in order to be able to develop its business, directly or indirectly, through sub-licensing to third parties or any other way of operation.

According to the terms and

conditions of the Minoryx License Agreement, the Company shall pay to Minoryx as royalties:

According to the terms and conditions of the Minoryx License Agreement, the Company shall pay to Minoryx as royalties:

● an amount equal to 8 % of (i) net revenues with regard to products that would infringe (a) at least one composition of matter claim or (b) Minoryx molecules and (ii) sublicensing revenues;

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As of December 31, 2023 and 2022, there were no receivables and payables, revenues or expenses with Minoryx.

On September 20, 2022 the Company entered into a consulting agreement with Mr.

Eric Richman, who previously served as the Company’s CEO and is currently a member of the Board of Directors of the Company.

As per the consulting agreement Mr Richman agreed to provide consulting services as a special advisor to the Company and its Board of Directors at the request of the Chairman of the Board or another member of the Board of the Company.

The consulting agreement terminated on September 20, 2023.

In connection with this consulting agreement during the year ended December 31, 2023 the Company incurred in expenses for $ 236 thousand.

As of December 31, 2023 there were no receivables or payables connected with the consulting agreement with Mr.

Other Information

The Company does not hold, either directly or indirectly, its own shares and in these periods has not purchased or alienated its own shares.

As of December 31, 2022 and 2021, the Company had research commitments with one year contractual maturity date for $ 1,461 thousand and $ 453 thousand, respectively.

As of December 31, 2023 and 2022, the Company had research commitments with one year contractual maturity date for $ 4 million and $ 1.5 million, respectively.

Subsequent Events

On February 19, 2024, the Company received notice of the resignation of C.

Evan Ballantyne as the Company’s Chief Financial Officer, effective March 1, 2024.

The Company has initiated a search to identify its next Chief Financial Officer.

In the first quarter of 2024, n.

1,756,062 pre funded warrants have been exercised and converted into common stock.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data