Nuvectis Pharma, Inc. 10-Q

Item 1. Financial Statements NUVECTIS PHARMA, INC. CONDENSED BALANCE SHEETS (USD in thousands, except per share and share amounts) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ ​ 2022 ​ 2021 Assets ​ ​ ​ CURRENT ASSETS: ​ ​ Cash and cash equivalents $ 23,640 $ 5,742 Other current assets ​ 1,226 ​ 91 TOTAL CURRENT ASSETS ​ 24,866 ​ 5,833 ​ ​ ​ ​ ​ ​ ​ ​ Deferred offering costs ​ — ​ 824 TOTAL ASSETS $ 24,866 $ 6,657 ​ ​ ​ ​ ​ ​ ​ ​ Liabilities, Redeemable Convertible Preferred Shares and Stockholders’ Equity (Deficit) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CURRENT LIABILITIES ​ ​ ​ ​ ​ ​ ​ Accounts payables $ 2,251 $ 1,058 Payable offering costs ​ 640 ​ 824 Accrued liabilities ​ 738 ​ 395 Employee compensation and benefits ​ 863 ​ 142 TOTAL CURRENT LIABILITIES ​ 4,492 ​ 2,419 TOTAL LIABILITIES ​ 4,492 ​ 2,419 ​ ​ ​ ​ ​ ​ ​ ​ COMMITMENTS AND CONTINGENCIES, see Note 3 ​ ​ REDEEMABLE CONVERTIBLE PREFERRED SHARES: ​ ​ Convertible preferred A stock, $ 0.00001 par value – Zero and 6,630,000 shares authorized as of September 30, 2022 and December 31, 2021, respectively. As of September 30, 2022 all issued and outstanding preferred A stock was converted to common stock. As of December 31, 2021, 5,012,280 preferred A stock shares were issued and outstanding. ​ ​ — ​ 15,246 ​ ​ ​ ​ ​ ​ ​ ​ ​ STOCKHOLDERS’ EQUITY (DEFICIT), see Note 4 : ​ ​ Common Stock, $ 0.00001 par value – 60,000,000 and 12,870,000 shares authorized as of September 30, 2022 and December 31, 2021, respectively 14,642,483 and 4,505,514 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively ​ ​ * ​ * ​ Additional paid in capital ​ 45,663 ​ 1,892 Notes received for common shares ​ — ​ * Accumulated deficit ​ ( 25,289 ) ​ ( 12,900 ) TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) ​ 20,374 ​ ( 11,008 ) TOTAL LIABILITIES, REDEEMABLE COVERTIBLE PREFERRED SHARES AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 24,866 $ 6,657 ​ * Represents an amount lower than $1,000 USD. ​ The accompanying notes are an integral part of these unaudited condensed financial statements. ​ 3 ​ NUVECTIS PHARMA, INC. CONDENSED STATEMENTS OF OPERATIONS (USD in thousands, except per share and share amounts) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30 ​ Nine Months Ended September 30 ​ ​ 2022 2021 2022 2021 ​ OPERATING EXPENSES: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and Development $ 4,520 $ 4,156 $ 8,830 $ 8,401 General and Administrative ​ ​ 1,418 ​ 512 ​ ​ 3,626 ​ 2,228 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ OPERATING LOSS ​ ( 5,938 ) ​ ( 4,668 ) ​ ( 12,456 ) ​ ( 10,629 ) Finance Income ​ ​ 61 ​ — ​ ​ 67 ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NET LOSS $ ( 5,877 ) $ ( 4,668 ) $ ( 12,389 ) $ ( 10,629 ) NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS ​ $ ( 5,877 ) $ ( 4,668 ) ​ $ ( 12,389 ) $ ( 10,629 ) BASIC AND DILUTED NET LOSS PER COMMON SHARE OUTSTANDING, see Note 6 ​ $ ( 0.42 ) $ ( 1.04 ) ​ $ ( 1.03 ) $ ( 2.54 ) Basic and Diluted Weighted Average Number of Common Shares Outstanding ​ ​ 14,050,271 ​ 4,505,514 ​ ​ 11,988,770 ​ 4,188,340 ​ ​ The accompanying notes are an integral part of these unaudited condensed financial statements. ​ 4 ​ NUVECTIS PHARMA, INC. CONDENSED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY/(DEFICIT) (USD in thousands, except share amounts) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Notes ​ ​ ​ ​ ​ ​ ​ Redeemable Convertible ​ ​ ​ ​ ​ received ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Preferred Stock ​ Common Stock ​ from ​ Additional ​ ​ ​ ​ ​ Total ​ ​ $0.00001 Par Value ​ $0.00001 Par Value ​ Common ​ Paid-In ​ Accumulated ​ ​ Stockholders’ ​ Shares Amount Shares Amount shares Capital Deficit ​ Deficit BALANCES AT DECEMBER 31, 2020 — — 3,900,000 * * — $ ( 10 ) $ ( 10 ) Net loss for the period ​ ​ ​ ( 23 ) ​ ( 23 ) BALANCES AT MARCH 31, 2021 — — 3,900,000 * * — $ ( 33 ) $ ( 33 ) Issuance of Series A Preferred shares ​ 3,695,328 ​ ​ 11,225 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share-based payments ​ — ​ ​ — ​ 605,514 ​ * ​ — ​ 1,571 ​ ​ - ​ 1,571 Net loss for the period ​ ​ ​ ​ ( 5,938 ) ​ ( 5,938 ) BALANCES AT JUNE 30, 2021 3,695,328 $ 11,225 4,505,514 * * $ 1,571 $ ( 5,971 ) $ ( 4,400 ) Issuance of Series A Preferred shares ​ 1,316,952 ​ ​ 4,021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share-based payments ​ — ​ ​ — ​ — ​ — ​ — ​ 136 ​ ​ — ​ 136 Net loss for the period ​ ​ ​ ​ ( 4,668 ) ​ ( 4,668 ) BALANCES AT SEPTEMBER 30, 2021 5,012,280 $ 15,246 4,505,514 * * $ 1,707 $ ( 10,639 ) $ ( 8,932 ) ​ 5 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Notes ​ ​ ​ ​ ​ ​ ​ ​ Redeemable Convertible ​ ​ ​ ​ ​ received ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Preferred Stock ​ Common Stock ​ from ​ Additional ​ ​ ​ ​ Total ​ ​ $0.00001 Par Value ​ $0.00001 Par Value ​ Common ​ Paid-In ​ Accumulated ​ Stockholders’ ​ Shares Amount Shares Amount shares Capital Deficit Equity/(Deficit) BALANCES AT DECEMBER 31, 2021 5,012,280 $ 15,246 4,505,514 * * $ 1,892 $ ( 12,900 ) $ ( 11,008 ) Conversion of Series A redeemable convertible preferred shares ( 5,012,280 ) ​ ( 15,246 ) 5,012,280 * — ​ 15,246 ​ — ​ 15,246 Issuance of common stock upon initial public offering, net of offering costs of $ 2,892 ​ ​ ​ 3,200,000 * * ​ 13,108 ​ — ​ 13,108 Share based payments ​ ​ ​ ​ 156 ​ ​ 156 Net loss for the period ​ ​ ​ — — — ​ — ​ ( 2,943 ) ​ ( 2,943 ) BALANCES AT MARCH 31, 2022 — ​ — 12,717,794 * — $ 30,402 $ ( 15,843 ) $ 14,559 Share based payments ​ ​ ​ ​ 510 ​ ​ 510 Net loss for the period ​ ​ ​ — — — ​ — ​ ( 3,569 ) ​ ( 3,569 ) BALANCES AT JUNE 30, 2022 — ​ — 12,717,794 * — $ 30,912 $ ( 19,412 ) $ 11,500 Issuance of common stock, unexercised prefunded warrants and warrants in private placement, net of offering costs of $ 1,687 ​ ​ ​ 1,214,689 * ​ 14,192 ​ ​ 14,192 Exercise of prefunded warrants ​ ​ ​ ​ ​ ​ 710,000 ​ * ​ ​ ​ ​ — ​ ​ ​ ​ ​ — Share based payments ​ ​ ​ ​ 559 ​ ​ 559 Net loss for the period ​ ​ ​ — — — ​ — ​ ( 5,877 ) ​ ( 5,877 ) BALANCES AT SEPTEMBER 30, 2022 — ​ — 14,642,483 * — $ 45,663 $ ( 25,289 ) $ 20,374 ​ * Represents an amount lower than $1,000 USD. The accompanying notes are an integral part of these unaudited condensed financial statements. ​ 6 ​ NUVECTIS PHARMA, INC. CONDENSED STATEMENTS OF CASH FLOWS (USD in thousands, except per share and share amounts) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ 2022 2021 ​ CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ Net loss $ ( 12,389 ) $ ( 10,629 ) Adjustments to reconcile loss to net cash used in operating activities: Cost of share-based payments ​ 1,225 ​ 1,707 Changes in operating assets and liabilities: ​ ​ Increase in other current assets ​ ( 1,135 ) ​ — Increase in accounts payable and accrued liabilities ​ 2,256 ​ 485 Net cash used in operating activities $ ( 10,043 ) $ ( 8,437 ) CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ Net cash provided by (used in) investing activities ​ — ​ — CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ Proceeds from issuance of redeemable convertible preferred shares $ — $ 15,246 Proceeds from issuance of common stock upon initial public offering ​ ​ 16,000 ​ ​ — ​ Issuance costs related to initial public offering ​ ​ ( 2,551 ) ​ ​ — ​ Proceeds from issuance of common stock and pre-funded warrants in private placement ​ ​ 15,879 ​ ​ — ​ Issuance costs related to private placement ​ ​ ( 1,387 ) ​ ​ — ​ Net cash provided by financing activities $ 27,941 $ 15,246 INCREASE IN CASH AND CASH EQUIVALENTS $ 17,898 $ 6,809 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $ 5,742 $ — CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 23,640 $ 6,809 ​ ​ ​ ​ ​ ​ ​ ​ Supplemental noncash disclosure of investing and financing activities: ​ ​ Unpaid deferred offering costs ​ 300 ​ — ​ Issuance of common shares in return for note receivable ​ — ​ * ​ * Represents an amount lower than $1,000 USD. The accompanying notes are an integral part of these unaudited condensed financial statements. ​ 7 ​ NUVECTIS PHARMA, INC. Notes to the Unaudited Condensed Financial Statements NOTE 1 – GENERAL: a. Nuvectis Pharma, Inc. (formerly Centry Pharma Inc.) (hereafter – the “Company”) was incorporated under the laws of the State of Delaware on July 27, 2020 and commenced its principal operations in May 2021. The Company’s principal executive offices are located at Fort Lee in the state of New Jersey. The Company is a biopharmaceutical company focused on the development of novel targeted small molecule therapeutics for the treatment of cancer in genetically defined patient populations. The Company’s precision medicine approach translates key scientific insights relating to the oncogenic drivers and pathway addiction of cancer into potent and highly selective anticancer drugs. b. In May 2021, the Company entered into a worldwide, exclusive license agreement with the CRT Pioneer Fund (“CRT”) (see Note 3a). c. In May 2021, the Company’s board of directors approved and declared a 100 :1 stock split of common and preferred shares. In addition, in October 2021 the Company’s board of directors approved a 39 :1 stock split of common stock. All share and per share amounts reflected in these unaudited condensed financial statements and the notes thereto have been adjusted, on a retroactive basis, to reflect these share splits. d. In August 2021, the Company entered into a worldwide, exclusive license agreement with the University of Edinburgh, Scotland for the Company’s second drug candidate (see Note 3a). e. In February 2022, the Company’s shares began trading on the NASDAQ under the symbol “NVCT”. f. Liquidity and Capital Resources The Company has incurred net operating losses since its inception and had an accumulated deficit of $ 25.3 million as of September 30, 2022. The Company had cash and cash equivalents of $ 23.6 million as of September 30, 2022 and has not generated positive cash flows from operations. To date, the Company has been able to fund its operations primarily through the issuance and sale of common stock and redeemable convertible preferred shares. On July 29, 2022, the Company completed a private placement in which it received approximately $ 14.2 million in net proceeds, after deducting placement agent fees and other offering expenses (see Note 4c). Management believes that its existing cash, and cash equivalents as of September 30, 2022 enable the Company to fund planned operations for at least 12 months following the issuance date of these condensed financial statements. The Company will need to raise additional capital in order to complete the clinical trials aimed at developing the product candidates until obtaining its regulatory and marketing approvals. There can be no assurances that the Company will be able to secure such additional financing if at all, or at terms that are satisfactory to the Company, and that it will be sufficient to meet its needs. In the event the Company is not successful in obtaining sufficient funding, this could force the Company to delay, limit, or reduce its products’ development, clinical trials, commercialization efforts or other operations, or even close down or liquidate. g. Initial Public Offering On February 8, 2022, the Company completed an initial public offering (“IPO”) in which it sold 3,200,000 shares of common stock at $ 5.00 per share and received net proceeds of $ 12.6 million, after underwriting discounts and commissions of $ 1.1 million, and expenses of $ 1.8 million. The IPO also included $ 0.5 million in stock-based expense in relation to warrants issued to the underwriter. Additionally, upon the IPO, the convertible preferred stock were converted on a 1 :1 basis into 5,012,280 shares of the Company’s common stock. ​ ​ 8 NUVECTIS PHARMA, INC. Notes to the Unaudited Condensed Financial Statements (continued) h. Coronavirus Pandemic In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic. The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. During 2021, there was a wide distribution of several vaccinations and medicines to overcome the pandemic. The Company has shifted its operations to co-exist along with the pandemic, including encouragement of vaccinations to all of its employees worldwide. The uncertainty to which the COVID-19 pandemic impacts the Company’s business, affects management’s judgment and assumptions relating to accounting estimates in a variety of areas that depend on these estimates and assumptions. COVID-19 did not have a material influence on these estimates and judgements since the Company began operations in 2021. The Company continues to face relative uncertainty as to the remaining intensity and duration of and the nature and timeline for recovery from the COVID-19 pandemic going forward and how all of that impacts the Company, including the extent to which potentially permanent changes clinical trial operations have been caused by the pandemic. The Company has taken the approach of managing the pandemic (to the extent that it continues to remain a significant factor) via strengthening its balance sheet and cash assets and avoiding debt while focusing on cost controls. NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES : a. Basis of Presentation The accompanying condensed financial statements are unaudited. The unaudited condensed financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), are stated in U.S. dollars and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements as certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. The unaudited condensed financial statements have been prepared on the same basis as the audited financial statements. The unaudited condensed financial statements include the accounts of the Company. Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). In the opinion of management, the unaudited condensed financial statements include all normal and recurring adjustments that are considered necessary for the fair statement of results for the interim periods. The results for the period ended September 30, 2022 are not necessarily indicative of those expected for the year ending December 31, 2022 or for any future period. The condensed balance sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date but does not include all disclosures required by U.S. GAAP. These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and the related notes thereto for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 23, 2022. The significant accounting policies used in the preparation of the financial statements are as follows: b. Use of Estimates in the Preparation of Financial Statements The preparation of the Company’s financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses in the Company’s financial statements and accompanying notes. The most significant estimates in the Company’s financial statements relate to accruals for research and development expenses, valuation of equity awards, and valuation allowances for deferred tax assets. These estimates and assumptions are based on current facts, future expectations, and various other factors believed to 9 NUVECTIS PHARMA, INC. Notes to the Unaudited Condensed Financial Statements (continued) 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. Actual results may differ materially and adversely from these estimates. c. Fair Value Measurement The Company follows authoritative accounting guidance, which among other things, defines fair value, establishes a consistent framework for measuring fair value, and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (at exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The three levels of inputs that may be used to measure fair value include: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. The Company’s Level 1 assets consist of money market funds. Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3: Unobservable inputs that are supported by little or no market activity. The fair value hierarchy gives the lowest priority to Level 3 inputs. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value. The money market accounts included in cash and cash equivalents are considered Level 1. During the three and nine months ended September 30, 2022 and 2021, there were no transfers between fair value measure levels. Other financial instruments consist mainly of cash and cash equivalents, other current assets, accounts payable and accrued liabilities. The fair value of these financial instruments approximates their carrying values. d. Warrants The Company determines the accounting classification of warrants that are issued, as either liability or equity, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, (“ASC 480-10”), and then in accordance with ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity (“ASC 815-40”). Under ASC 480-10, warrants are considered liability-classified if the warrants are mandatorily redeemable, obligate the issuer to settle the warrants or the underlying shares by paying cash or other assets, or must or may require settlement by issuing variable number of shares. If the warrants do not meet liability classification under ASC 480-10, the Company assesses the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815-40, in order to conclude equity classification, the Company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or other applicable GAAP. After all relevant assessments are made, the Company concludes whether the warrants are classified as liability or equity. Liability-classified warrants are required to be accounted for at fair value both on the date of issuance and on subsequent accounting period ending dates, with all changes in fair value after the issuance date recorded as a component of other income (expense), net in the 10 NUVECTIS PHARMA, INC. Notes to the Unaudited Condensed Financial Statements (continued) statements of operations. Equity-classified warrants are accounted for at consideration received on the issuance date with no changes in fair value recognized after the issuance date. As of September 30, 2022, all of the Company’s outstanding warrants are equity-classified warrants. See Note 4b. e. Recently Adopted Accounting Pronouncements In August 2020, the FASB issued Accounting Standard Update No. 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This guidance is effective for public business entities except for smaller reporting companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. For all other entities, the standard will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2020-06 on January 1, 2022, using the modified retrospective method, and such adoption did not impact the Company’s financial position, results of operations, cash flows or net loss per share. f. Recently Issued Accounting Pronouncements Not Yet Adopted Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements. No new accounting standards were adopted during the period. ​ NOTE 3 – COMMITMENTS AND CONTINGENCIES: a. License Agreements CRT Pioneer Fund License Agreement There have been no material changes to the CRT Pioneer Fund License Agreement (the “License Agreement”) as previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission on March 23, 2022 (see Note 5a in the Notes to the Financial Statements) except noted below. In connection with the License Agreement, the Company agreed to provide Institute of Cancer Research in London, UK (“ICR”) with up to an additional $ 500,000 in research and development support over the next 18 months to conduct additional scientific research and preclinical testing for certain indications that the Company selects in connection with the NXP800 Program. According to the License Agreement, the Company also has an exclusive license to intellectual property rights developed in the collaboration, to research, develop and commercialize products resulting from the collaboration. On March 31, 2022, the Company and ICR revised the agreement for research and development support to a total of $ 865,000 (to allow for additional research activities). $ 0.1 million and $ 0.2 million of expense of the research and development support was recognized during the three months and nine months ended September 30, 2022, respectively. The expense from the revised agreement will be recognized over eighteen months beginning at the date of the revised agreement. As of September 30, 2022, there are twelve months remaining for this expense to be recognized. Any potential milestone or royalty payment amounts have not been accrued as of September 30, 2022 and December 31, 2021 due to the uncertainty related to the achievement of these events or milestones except for the research and development support discussed above. During the three months ended September 30, 2022, the Company paid CRT $ 1.0 million associated with a patient enrollment milestone. 11 NUVECTIS PHARMA, INC. Notes to the Unaudited Condensed Financial Statements (continued) University of Edinburgh License Agreement There have been no material changes to the University of Edinburgh (“UoE”) License Agreement as previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission on March 23, 2022 (see Note 5a in the Notes to the Financial Statements) except noted below. As of September 30, 2022, the Company recorded an accrued liability of $ 0.5 million related to the one year anniversary milestone and $ 0.4 million associated with the July 2022 private placement. Those expenses were recorded as research and development expenses during the quarter ended September 30, 2022. Any potential future research support, milestone or royalty payment amounts have not been accrued as of September 30, 2022 and December 31, 2021 due to the uncertainty related to the achievement of these events, milestones or commitments to additional research. b. Related Party Transactions As for related party transactions, see Note 7 and Note 8. c. Contingencies As of September 30, 2022, and as of December 31, 2021, there are no contingent liabilities, therefore, no provision was made. NOTE 4 – SHAREHOLDERS’ EQUITY/(DEFICIT): a. In May 2021, the Company’s board of directors approved and declared a 100 :1 stock split of common stock with a par value of $ 0.00001 and preferred shares, with a par value of $ 0.00001 . In addition, the Company increased the number of authorized common stock from 3,900,000 to 12,870,000 and preferred shares from 40,000 to 170,000 . In addition, in October 2021, the Company’s board of directors approved a 39 :1 stock split. As a result of the above splits, all shares, options and warrants exercisable into common stock and restricted stock units, exercise prices and income or loss per share amounts have been adjusted on a retroactive basis for all periods presented to reflect such stock splits. Upon the completion of the Company’s IPO, all outstanding shares of the Company’s preferred A stock was converted into shares of the Company’s common stock on a 1 :1 basis. ​ b. Private Placement in Public Entity On July 29, 2022, the Company closed a private placement offering (the “July Private Placement”), pursuant to the terms and conditions of a Securities Purchase Agreement (the “Agreement”), dated July 27, 2022. In connection with the July Private Placement, the Company issued 1,015,598 shares of common stock (the “Shares”), pre-funded warrants (the “Pre-Funded Warrants”) to purchase an aggregate of 909,091 shares of common stock and preferred investment options (the “Preferred Investment Options”) to purchase up to an aggregate of 1,924,689 shares of common stock. The purchase price of each Share and each Pre-Funded Warrant was the $ 8.25 . The purchaser received one Preferred Investment Option for no consideration, with each Share or Pre-Funded Warrant purchased. The aggregate net cash proceeds to the Company from the July Private Placement were approximately $ 14.2 million, after deducting placement agent fees and other offering expenses. H.C. Wainwright & Co., LLC (“Wainwright”) acted as the exclusive placement agent for the July Private Placement. The Pre-Funded Warrants had an exercise price of $ 0.001 per share, were exercisable on or after August 24, 2022, and are exercisable until the Pre-Funded Warrants were exercised in full. Pre-Funded Warrants totaling 710,000 were exercised on August 25, 2022, and as such the Company issued 710,000 shares of common stock on that date. The Preferred Investment Options are exercisable at any time on or after January 23, 2023 through January 29, 2026, at an exercise price of $ 9.65 per share, subject to certain adjustments as defined in the Agreement. The Company agreed to pay Wainwright a placement agent fee and 12 NUVECTIS PHARMA, INC. Notes to the Unaudited Condensed Financial Statements (continued) management fee equal to 7.0 % and 1.0 %, respectively, of the aggregate gross proceeds from the July Private Placement. In addition, the Company issued warrants to Wainwright (the “Wainwright Warrants”) to purchase up to 115,481 shares of common stock. The Wainwright Warrants are in substantially the same form as the Preferred Investment Options, except that the exercise price is $ 10.31 . The Preferred Investment Options, the Pre-Funded Warrants, and the Wainwright Warrants are collectively referred to as the “Private Placement Warrants”. The Company evaluated the terms of the Private Placement Warrants and determined that they should be classified as equity instruments based upon accounting guidance provided in ASC 480 and ASC 815-40. Since the Company determined that the Private Placement Warrants were equity-classified, the Company recorded the proceeds from the July Private Placement, net of issuance costs, within common stock at par value and the balance of the net proceeds to additional paid in capital. As of September 30, 2022, the outstanding Preferred Investment Options, and the Wainwright Warrants were not exercisable on that day. ​ In connection with the July Private Placement, the Company entered into a Registration Rights Agreement with the certain purchasers defined therein, dated July 27, 2022 (the “July Registration Rights Agreement”). The July Registration Rights Agreement required the Company to file a registration statement covering the resale of all of the securities with the Securities and Exchange Commission (the “SEC”). The Company filed a registration statement on Form S-1 with the SEC on August 15, 2022. The registration statement on Form S-1 was declared effective on August 24, 2022. ​ ​ NOTE 5 – SHARE BASED PAYMENTS: a. Share Based Payments In February 2022, the Company granted to H.C. Wainwright & Co. the underwriter of the IPO, 128,000 fully vested warrants upon the IPO, exercisable into common stock with an exercise price of $ 6.25 per share for 5 years after the grant date. The 128,000 fully vested warrants have an estimated value (based on Black-Scholes model) of approximately $ 458,000 and were recognized as a reduction from gross proceeds of the IPO. No warrants have been exercised as of September 30, 2022. The following table summarizes assumptions used for the Black-Scholes model at the grant date: ​ ​ ​ ​ ​ ​ Risk-free interest rate ​ 1.78 % Common share price ​ $ 5.00 ​ Expected dividend yield ​ — ​ Expected term (in years) ​ 5 ​ Expected volatility ​ 99 % ​ In July 2022, the Company granted to H.C. Wainwright & Co. the private placement agent of July Private Placement, 115,481 warrants which become exercisable any time between January 23, 2023 and January 29, 2026, exercisable into common stock with an exercise price of $ 10.31 per share. The 115,481 warrants have an estimated value (based on Black-Scholes model) of approximately $ 618,000 . No warrants have been exercised as of September 30, 2022. The following table summarizes assumptions used for the Black-Scholes model at the grant date: ​ ​ ​ ​ ​ ​ Risk-free interest rate ​ 2.86 % Common share price ​ $ 9.26 ​ Expected dividend yield ​ 0 ​ Expected term (in years) ​ 3.5 ​ Expected volatility ​ 86.06 % ​ 13 NUVECTIS PHARMA, INC. Notes to the Unaudited Condensed Financial Statements (continued) Volatility was estimated based on the historic volatility of comparable public companies. b. 2021 Global Equity Incentive Plan In May 2021, the Company’s board of directors approved a global equity incentive plan (hereafter — “Incentive Plan”), in which the Company has reserved a total amount of 408,486 common stock for issuance in connection with the Incentive Plan. In February 2022, the Company’s board of directors approved an increase to total shares under the incentive plan to 1,500,000 . On April 1, 2022, the Company granted Directors Hoberman, Oliviero and Kaplan 15,000 options each , to purchase common stock at the closing price on the day of the grant. The options to the directors vest over three years with 1/3 vesting on each anniversary of the date of the grant. The fair value of these options was determined to be $ 0.3 million. The following table summarizes assumptions used for the Black-Scholes model at the grant date: ​ ​ ​ ​ ​ ​ Risk-free interest rate ​ 2.39 % Common share price ​ $ 7.02 ​ Expected dividend yield ​ — ​ Expected term (in years) ​ 10 ​ Expected volatility ​ 89 % ​ ​ ​ ​ ​ ​ The following table summarizes the Company’s stock option activity in the Incentive Plan for the nine months ended September 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ Number of ​ Weighted average ​ average ​ Aggregated ​ ​ shares under ​ Exercise price per ​ remaining ​ Intrinsic value ​ ​ option ​ Option ​ life ​ (in thousands) Balance, December 31, 2021 ​ 226,590 ​ 3.05 ​ 9.07 ​ 492 Granted 85,000 7.25 Exercised — — Forfeited — — Outstanding – September 30, 2022 311,590 4.20 9.04 920 Exercisable – September 30, 2022 75,530 3.05 8.85 Expected to vest – September 30, 2022 311,590 4.20 9.04 920 ​ As of September 30, 2022, there was $ 0.7 million of unrecognized stock-based compensation expense related to unvested stock options that is expected to be recognized over a weighted-average period of 2.07 years. Restricted Stock Units Restricted stock units (“RSUs”) have been granted to employees. The value of an RSU award is based on the Company’s stock price on the date of grant. The shares underlying the RSU awards are not issued until the RSUs vest. 14 NUVECTIS PHARMA, INC. Notes to the Unaudited Condensed Financial Statements (continued) Upon vesting, each RSU converts into one share of the Company’s common stock. The Company granted RSUs pursuant to the Incentive Plan. On April 1, 2022, the Company issued 120,000 RSUs to Mr. Ron Bentsur and 60,000 RSUs each to Dr. Enrique Poradosu and Mr. Shay Shemesh. All RSUs granted to these founders of the Company vest over three years with 1/3 vesting on each anniversary of the date of the grant. The fair value of these RSUs was determined to be $ 1.7 million. The following table summarizes the Company’s RSU activity for the nine months ended September 30, 2022, as described above from the Incentive Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Weighted Weighted average Aggregated ​ ​ shares under ​ average grant ​ contractual term ​ Intrinsic value ​ ​ option ​ date fair value ​ (in years) ​ (in thousands) Balance, December 31, 2021 ​ 47,580 ​ 2.49 ​ 2.72 ​ 114 Granted 307,100 7.63 Vested 5,200 3.05 Outstanding – September 30, 2022 349,480 7.00 2.45 2,761 Expected to vest – September 30, 2022 344,280 7.00 2.45 2,761 ​ As of September 30, 2022, there was $ 1.8 million of total unrecognized compensation cost related to RSUs expected to be recognized over a weighted average period of 2.45 years. The RSUs granted during the quarter vest over three years with 1/3 vesting on each anniversary date of the grant. On July 27, 2021, Mr. Ron Bentsur, Dr. Enrique Poradosu, and Mr. Shay Shemesh were granted 96,759 RSUs, 48,399 RSUs and 48,399 RSUs, respectively, which were not part of the Incentive Plan and excluded from the table above. On July 1, 2022 the vesting of these grants was extended to January 1, 2023. Share Compensation Expense For the three months ended September 30, 2022, the Company recognized expenses of $ 0.2 million as part of general and administrative expenses and $ 0.3 million as part of research and development expenses. For the three months ended September 30, 2021, the Company recognized expenses of $ 0.9 million as part of general and administrative expenses and $ 0.7 million as part of research and development expenses. For the nine months ended September 30, 2022, the Company recognized expenses of $ 0.6 million as part of general and administrative expenses and $ 0.6 million as part of research and development expenses. For the nine months ended September 30, 2021, the Company recognized expenses of $ 0.9 million as part of general and administrative expenses and $ 0.7 million as part of research and development expenses. 15 NUVECTIS PHARMA, INC. Notes to the Unaudited Condensed Financial Statements (continued) NOTE 6 – NET LOSS PER SHARE: a. Basic Basic net loss per share is calculated by dividing the net loss attributable to the Company’s stockholders by the weighted average number of common stock outstanding. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ​ For the three months ​ For the nine months ​ For the nine months ​ ​ ​ ended September 30, 2022 ended September 30, 2021 ​ ended September 30, 2022 ended September 30, 2021 ​ ​ ​ ​ in thousand U.S. dollars except per share and share amounts ​ Loss attributable to common stockholders ​ $ ( 5,877 ) $ ( 4,668 ) ​ $ ( 12,389 ) $ ( 10,629 ) Basic and diluted net loss per common share ​ ​ ( 0.42 ) ​ ( 1.04 ) ​ ​ ( 1.03 ) ​ ( 2.54 ) Weighted average of common share outstanding ​ ​ 14,050,271 ​ 4,505,514 ​ ​ 11,988,770 ​ 4,188,340 ​ Basic loss per share is calculated by dividing the result attributable to equity holders of the Company by the weighted average number of shares of common stock in issue during the year. b. Diluted The following potentially dilutive securities were excluded from the calculation of diluted net loss per common share because their effect would have been anti-dilutive for the years presented: ​ ​ ​ ​ ​ ​ ​ ​ For the nine months ending ​ ​ September 30, ​ 2022 2021 Common stock issuable in relation to: Warrants 344,374 89,193 Options 311,590 29,250 Redeemable convertible preferred shares ​ — 5,012,280 RSUs 548,237 209,157 ​ ​ 16 NUVECTIS PHARMA, INC. Notes to the Unaudited Condensed Financial Statements (continued) NOTE 7 – RELATED PARTY TRANSACTIONS: a. Indemnification The Company currently has directors’ and officers’ insurance coverage that reduces its exposure and enables the Company to recover a portion of any future amounts paid. The Company believes the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal. ​ ​ ​ ​ ​ ​ 17 ​