UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2023

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to .

Commission File Number 001-41264

NUVECTIS PHARMA, INC.

(Exact name of registrant as specified in its charter)


Delaware		86-2405608
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1 Bridge Plaza, Suite 275
Fort Lee, NJ 07024		07024
(Address of Principal Executive Offices)		(Zip Code)

(201) 614-3150

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.00001 per share	NVCT	NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.



Class of Common Stock		Outstanding Shares as of May 01, 2023
Common Stock, $0.00001 par value		16,007,425

NUVECTIS PHARMA, INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2023

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION	3
Item 1	Financial Statements	3
	Unaudited Condensed Balance Sheets as of March 31, 2023 and December 31, 2022	3
	Unaudited Condensed Statements of Operations for the Three Months Ended March 31, 2023 and 2022	4
	Unaudited Condensed Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022	5
	Unaudited Condensed Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022	6
	Notes to Unaudited Condensed Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4	Controls and Procedures	21

PART II	OTHER INFORMATION	22
Item 1	Legal Proceedings	22
Item 1A	Risk Factors	22
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3	Defaults Upon Senior Securities	22
Item 4	Mine Safety Disclosures	22
Item 5	Other Information	22
Item 6	Exhibits	23
	Signatures	24

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

NUVECTIS PHARMA, INC.

CONDENSED BALANCE SHEETS

(USD in thousands, except per share and share amounts)

(unaudited)


	March 31,		December 31,
	2023		2022
Assets
CURRENT ASSETS:
Cash and cash equivalents	$	15,468	$	19,993
Other current assets		740		412
TOTAL CURRENT ASSETS		16,208		20,405

TOTAL ASSETS	$	16,208	$	20,405

Liabilities and Stockholders’ Equity

CURRENT LIABILITIES
Accounts payables	$	2,096	$	2,910
Payable offering costs		—		450
Accrued liabilities		156		445
Employee compensation and benefits		1,682		2,381
TOTAL CURRENT LIABILITIES		3,934		6,186
TOTAL LIABILITIES		3,934		6,186

COMMITMENTS AND CONTINGENCIES, see Note 3

STOCKHOLDERS’ EQUITY: see Note 4
Common Stock, $0.00001 par value – 60,000,000 shares authorized as of March 31, 2023, and December 31, 2022, 15,886,139, and 15,190,720 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		*		*
Additional paid in capital		48,308		46,204
Accumulated deficit		(36,034)		(31,985)
TOTAL STOCKHOLDERS’ EQUITY		12,274		14,219
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	16,208	$	20,405

*	Represents an amount lower than $1,000 USD.

The accompanying notes are an integral part of these unaudited condensed financial statements.

NUVECTIS PHARMA, INC.

CONDENSED STATEMENTS OF OPERATIONS

(USD in thousands, except per share and share amounts)

(unaudited)



	Three Months Ended March 31
	2023		2022
OPERATING EXPENSES:
Research and development	$	2,367	$	1,805
General and administrative		1,734		1,140

OPERATING LOSS		(4,101)		(2,945)
Finance income		52		2

NET LOSS	$	(4,049)	$	(2,943)
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(4,049)	$	(2,943)
BASIC AND DILUTED NET LOSS PER COMMON STOCK OUTSTANDING, see Note 6	$	(0.27)	$	(0.32)
Basic and diluted weighted average number of common stock outstanding		14,724,249		9,159,139

The accompanying notes are an integral part of these unaudited condensed financial statements.

NUVECTIS PHARMA, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(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	stock	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
Net loss for the period									(2,943)		(2,943)
BALANCES AT MARCH 31, 2022	—	—		12,717,794	*	*	30,402	$	(15,843)	$	14,559


						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	stock	Capital		Deficit		Equity
BALANCES AT DECEMBER 31, 2022	—	$	-	15,190,720	*	—	$	46,204	$	(31,985)	$	14,219
Share based payments								1,402				1,402
Issuance of restricted stock awards				585,499	—							—
Exercise of preferred investment options				4,000	*			39				39
Exercise of warrants				105,920	*			663				663
Net loss for the period				—	—	—		—		(4,049)		(4,049)
BALANCES AT MARCH 31, 2023	—		—	15,886,139	*	—	$	48,308	$	(36,034)	$	12,274

*	Represents an amount lower than $1,000 USD.

The accompanying notes are an integral part of these unaudited condensed financial statements.

NUVECTIS PHARMA, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(USD in thousands, except per share and share amounts)

(unaudited)


	Three Months Ended March 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(4,049)	$	(2,943)
Adjustments to reconcile loss to net cash used in operating activities: Cost of stock-based payments		1,402		156
Changes in operating assets and liabilities:
Increase in other current assets		(328)		(831)
(Decrease)/increase in accounts payable, accrued compensation and benefits, and accrued liabilities		(1,802)		542
Net cash used in operating activities	$	(4,777)	$	(3,076)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by (used in) investing activities		—		—
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock upon initial public offering	$	—	$	16,000
Issuance costs related to initial public offering		(341)		(1,973)
Proceeds from exercise of warrants/preferred investment option		702		—
Issuance costs related to private placement		(109)		—
Net cash provided by financing activities	$	252	$	14,027
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS	$	(4,525)	$	10,951
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	$	19,993	$	5,742
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	15,468	$	16,693

Supplemental noncash disclosure of investing and financing activities:
Unpaid deferred offering costs		—		97

The accompanying notes are an integral part of these unaudited condensed financial statements.

NUVECTIS PHARMA, INC.

Notes to the Unaudited Condensed Financial Statements

NOTE 1 – GENERAL:

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 innovative precision medicines for the treatment of serious conditions of unmet medical need in oncology.

In May 2021, the Company entered into a worldwide, exclusive license agreement with the CRT Pioneer Fund (“CRT”) (see Note 3a).

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).

In February 2022, the Company’s shares began trading on the NASDAQ under the symbol “NVCT”.

Liquidity and Capital Resources

The Company has incurred net operating losses since its inception and had an accumulated deficit of $36 million as of March 31, 2023. The Company had cash and cash equivalents of $15.5 million as of March 31, 2023 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.

Management believes that its existing cash, and cash equivalents as of March 31, 2023 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, 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.

NUVECTIS PHARMA, INC.

Notes to the Unaudited Condensed Financial Statements (continued)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES:

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 March 31, 2023 are not necessarily indicative of those expected for the year ending December 31, 2023 or for any future period. The condensed balance sheet as of December 31, 2022 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, 2022, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 8, 2023.

The significant accounting policies used in the preparation of the financial statements are as follows:

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 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.

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.

NUVECTIS PHARMA, INC.

Notes to the Unaudited Condensed Financial Statements (continued)

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 months ended March 31, 2023 and 2022, 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.

Stock Compensation

The Company accounts for employees’, directors’ and service providers’ share-based payment awards classified as equity awards using the grant-date fair value method. The fair value of share-based payment transactions is recognized as an expense over the requisite service period. The equity awards could come in the form of options, warrants, and RSAs.

The Company elected to recognize compensation costs for awards using the accelerated method based on the multiple-option award approach. Performance based awards are expensed over the vesting period only if the achievement of performance criteria is probable.

The Company has elected to recognize forfeitures as they occur.

For stock options containing a market condition, the market conditions are required to be considered when calculating the grant date fair value. ASC 718 requires selection of a valuation technique that best fits the circumstances of an award. (see note 5). In order to reflect the substantive characteristics of the market condition option award, a Monte Carlo simulation valuation model was used to calculate the grant date fair value of such stock options. Expense for the market condition stock options is recognized over the derived service period as determined through the Monte Carlo simulation model.

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:

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, 2022 filed with the Securities and Exchange Commission on March 8, 2023 (see Note 5a in the Notes to the Financial Statements).

Any potential milestone or royalty payment amounts have not been accrued as of March 31, 2023 and December 31, 2022 due to the uncertainty related to the achievement of these events or milestones.

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, 2022 filed with the Securities and Exchange Commission on March 8, 2023 (see Note 5a in the Notes to the Financial Statements).

Any potential future research support, milestone or royalty payment amounts have not been accrued as of March 31, 2023 and December 31, 2022 due to the uncertainty related to the achievement of these events, milestones or commitments to additional research.

Related Party Transactions

As for related party transactions, see Note 5.

Contingencies

As of March 31, 2023, and as of December 31, 2022, there are no contingent liabilities, therefore, no provision was made.

NOTE 4 – STOCKHOLDERS’ EQUITY:

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 Preferred Investment Options became exercisable on January 23, 2023 and are exercisable through January 29, 2026, at an exercise price of $9.65 per share, subject to certain adjustments as defined in the Agreement. 4,000 Preferred Investment Options were exercised and $39,000 was received as of March 31, 2023.

NOTE 5 – SHARE BASED PAYMENTS:

Share Based Payments

In January 2023, the Company granted to a service provider 43,500 options which become exercisable between January 19, 2023, and January 18, 2025, into common stock with an exercise price of $7.51 per share based on the achievement of service condition, market condition or performance condition. As of March 31, 2023, 12,000 options were exercisable. Service condition options totaled 22,500, had an estimated value based on Black-Scholes of approximately $74,000 and were not exercisable as of March 31, 2023. Performance condition options totaled 12,000, had an estimated value based on Black-Scholes of approximately $39,000 and were exercisable as of March 31, 2023. Market condition options totaling 9,000 options have a market condition which was not achieved by March 31, 2023, and an estimated value of $20,000 based on a Monte Carlo model. No options have been exercised as of March 31, 2023. The fair value of options was evaluated at the grant date using a Black-Scholes Option Pricing Model for various possible scenarios.

The following table summarizes assumptions used for the Black-Scholes model at the grant date:


Risk-free interest rate		4.09	%
Common stock price	$	7.51
Expected dividend yield		—
Expected term (in years)		2

NUVECTIS PHARMA, INC.

Notes to the Unaudited Condensed Financial Statements (continued)

Expected volatility			75	%

In February 2022, the Company granted to 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. IPO warrants totaling 105,920 were exercised and the Company received $0.7 million as of March 31, 2023.

2021 Global Equity Incentive Plan (“Incentive Plan”)

The following table summarizes the Company’s stock option activity in the Incentive Plan for the three months ended March 31, 2023:


			Weighted
	Number of	Weighted average	average	Aggregated
	shares under	Exercise price per	remaining	Intrinsic value
	option	Option	Life	(in thousands)
Balance, December 31, 2022	311,590	4.20	8.79	1,042
Granted	34,500	7.51
Exercised	—	—
Forfeited	—	—
Outstanding – March 31, 2023	346,090	4.53	8.67	2,969
Exercisable – March 31, 2023	87,582	3.66	8.55
Expected to vest – March 31, 2023	346,090	4.53	8.67	2,969

As of March 31, 2023, 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 1.92 years.

Restricted Stock Awards

Restricted stock awards (“RSAs”) have been granted to employees. The value of an RSA award is based on the Company’s stock price on the date of grant. The Company granted RSAs pursuant to the Incentive Plan.

The following table summarizes the Company’s RSA activity for the three months ended March 31, 2023, as described above from the Incentive Plan:


		Weighted	Weighted average	Aggregated
	Number of	average grant	contractual term	Intrinsic value
	shares	date fair value	(in years)	(in thousands)
Balance, December 31, 2022	338,807	7.15	2.22	2,541
Granted	585,499	7.56
Vested	(24,250)	8.98
Outstanding – March 31, 2023	900,056	7.44	2.51	11,800
Expected to vest – March 31, 2023	900,056	7.44	2.51	11,800

As of March 31, 2023, there was $4.6 million of total unrecognized compensation cost related to RSAs expected to be recognized over a weighted average period of 2.51 years.

NUVECTIS PHARMA, INC.

Notes to the Unaudited Condensed Financial Statements (continued)

On January 3, 2023, the Company issued 145,499 RSAs to employees and other service providers with a determined fair value of $1.1 million. These RSAs vest over three years with 1/3 vesting on each anniversary of the date of the grant.

On January 12, 2023, the Company issued 210,000 RSAs to Mr. Ron Bentsur and 115,000 RSAs to each of Dr. Enrique Poradosu and Mr. Shay Shemesh. These RSAs vest over three years with 1/3 vesting on each anniversary of the date of the grant. The fair value of these RSAs was determined to be $3.3 million.

On April 1, 2022, the Company issued 120,000 RSAs to Mr. Ron Bentsur and 60,000 RSAs to each of Dr. Enrique Poradosu and Mr. Shay Shemesh. These RSAs vest over three years with 1/3 vesting on each anniversary of the date of the grant. On March 29, 2023, the vesting of the first 1/3 of the grant was extended to January 11, 2024, the second vesting extended to April 2, 2024 and the third vesting extended to April 2, 2025.

On July 27, 2021, Mr. Ron Bentsur, Dr. Enrique Poradosu, and Mr. Shay Shemesh were granted 96,759 RSAs, 48,399 RSAs and 48,399 RSAs, respectively, which were not part of the Company’s Incentive Plan and excluded from the table above. On March 29, 2023, the vesting of these grants was extended to January 11, 2024.

Share Compensation Expense

For the three months ended March 31, 2023, the Company recognized expenses of $0.7 million as part of general and administrative expenses and $0.7 million as part of research and development expenses. For the three months ended March 31, 2022, the Company recognized expenses of $0.1 million as part of general and administrative expenses and $0.1 million as part of research and development expenses.

NOTE 6 – NET LOSS PER SHARE:

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
	ended March 31, 2023		ended March 31, 2022

Loss attributable to common stockholders	$	(4,049)	$	(2,943)
Basic and diluted net loss per common share		(0.27)		(0.32)
Weighted average of common share outstanding		14,724,249		9,159,139

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.

The calculation of the loss per share includes 1,924,689 pre-funded warrants/shares issued as part of the private placement, as the Company considers these shares to be exercised for no additional consideration. As of March 31, 2023 the amount of pre-funded warrants/shares issued were 1,924,689, and as of March 31, 2022, zero.

NUVECTIS PHARMA, INC.

Notes to the Unaudited Condensed Financial Statements (continued)

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:



	March 31,
	2023	2022
Common stock issuable in relation to:
Warrants	238,974	228,893
Options	346,090	226,590
Unvested RSAs *	1,093,613	270,137

includes 193,557 of RSAs granted outside of the Incentive Plan

NOTE 7 – RELATED PARTY TRANSACTIONS:

See note 5

NOTE 8 – SUBSEQUENT EVENTS:

During April and May 2023, a certain investor exercised 34,000 Preferred Investment Options granted in July 2022 in association with the Securities Purchase Agreement. Gross proceeds from the exercise of these options were approximately $0.3 million.

Item 2.Management’s Discussion and Analysis of the Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this report. The following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect,” “anticipate,” “intend,” “believe,” “may,” “plan,” “seek” or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof and we assume no obligation to update any such forward-looking statements. For such forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Our business and financial performance are subject to substantial risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. In evaluating our business, you should carefully consider the information set forth under the heading “Risk Factors” herein and in our Annual Report on Form 10-K for the year ended December 31, 2022. As used below, the words “we,” “us” and “our” may refer to Nuvectis Pharma, Inc.

Overview

We are a biopharmaceutical company focused on the development of innovative precision medicines for the treatment of serious conditions of unmet medical need in oncology. We seek to develop drug candidates in the precision medicine space, and our processes for selection and clinical development of drug candidates is based on scientific insights into cancer-promoting factors, as well as on our understanding of the clinical landscape and regulatory requirements.

NXP800 (HSF1-Pathway Inhibitor)

We have licensed exclusive world-wide development and commercial rights to NXP800, a novel Heat Shock Factor 1 (“HSF1”) pathway inhibitor, which was discovered at the Institute of Cancer Research (“ICR”) in London, England.

In preclinical studies, treatment with NXP800 inhibited tumor growth in xenografts models of human ovarian and gastric cancers, in which, a genetic mutation in the AT-rich interactive domain-containing protein 1A (“ARID1a”) gene was present, potentially rendering ARID1a a biomarker for treatment sensitivity. Based on this work, we have begun to clinically investigate NXP800 in ARID1a-mutated ovarian carcinoma, a type of cancer which is primarily comprised of two histologies, Ovarian Clear Cell Carcinoma (“OCCC”) and ovarian endometrioid carcinoma (“OEC”), and to investigate the utility of ARID1a deficiency as a patient selection marker in additional tumor types. The genetic screening for the ARID1a mutation is performed using commercially available next generation sequencing-based in vitro diagnostic test, which is routinely utilized in the clinic for cancer patients.

The Phase 1 study was initiated in December 2021 and is comprised of two parts: dose-escalation (Phase 1a), followed by an expansion phase (Phase 1b). In Phase 1a, the safety and tolerability of NXP800 is being evaluated in patients with advanced solid tumors to identify a dose and dosing schedule for Phase 1b. The Phase 1b portion of the study, which was initiated in April 2023, will evaluate the safety and preliminary anti-tumor activity of NXP800 in patients with platinum-resistant, ARID1a-mutated ovarian carcinoma.

In June 2022, the Investigational New Drug Application (“IND”) for NXP800, which was previously submitted to the U.S. Food and Drug Administration (the “FDA”), was cleared, which included the Phase 1 clinical trial protocol. Additional preclinical studies are being conducted to identify development opportunities for NXP800 in additional solid tumor types. In December 2022, we announced that the FDA granted Fast Track Designation status to the development program of NXP800 for the treatment of platinum-resistant, ARID1a-mutated ovarian carcinoma.

NXP900 (SRC/YES1 Kinase Inhibitor)

NXP900 is a SRC Family Kinase (“SFK”) inhibitor that potently inhibits the proto-oncogenes c-Src (“SRC”) and YES1 kinases. NXP900 was discovered at the University of Edinburgh, Scotland. SRC is aberrantly activated in many cancer types, including solid tumors such as breast, colon, prostate, pancreatic and ovarian, while remaining predominantly inactive in non-cancerous cells. Increased SRC activity is generally associated with late-stage cancers, metastatic potential and resistance to therapy, and correlates with poor clinical prognosis. YES1 gene amplification has been reported to be implicated in several tumors including lung, head and neck, bladder and esophageal cancers. In addition, YES1 directly phosphorylates and activates the Yes-associated protein, the main effector of the

Hippo pathway, which has been identified as a promoter of drug resistance, cancer progression, and metastasis in several cancer types, including squamous cell, mesothelioma and papillary kidney cancers.

In vivo, treatment with NXP900 inhibited primary and metastatic tumor growth in xenograft models of breast, cervical, esophageal, head and neck and medulloblastoma cancers, and demonstrated on-target pharmacodynamic effects. Furthermore, it has been found that YES1 gene amplification is a key mechanism of resistance to Epidermal Growth Factor Receptor (“EGFR”) or (Human Epidermal Growth Factor Receptor 2 and anaplastic lymphoma kinase inhibitors. A recent, peer reviewed study published in Nature Communication (not sponsored by the Company) demonstrated that NXP900 is able to re-sensitize resistant non-small cell lung cancer (“NSCLC”) cells to osimertinib (Tagrisso®), the leading EFGR inhibitor used for the treatment of EGFR mutation-positive NSCLC, when used in combination with Tagrisso®.

We have completed the IND enabling preclinical studies and the IND for NXP900 is currently pending.

Since our inception in 2020, we have devoted all of our efforts and financial resources to organizing and staffing our company, business planning, raising capital, acquiring product candidates and securing related intellectual property rights and conducting research and development activities. We do not have any products approved for sale and have not generated any revenue from product sales. We may never be able to develop or commercialize a marketable product. We have not yet successfully completed any pivotal clinical trials, obtained any regulatory approvals, manufactured a commercial-scale drug, or conducted sales and marketing activities.

Results of Operations

From our inception on July 27, 2020, through March 31, 2023, we did not generate any revenue. Our main activities through March 31, 2023 have been organizational and capital raising activities, the completion of the in-license agreements for our two drug candidates, NXP800 and NXP900, our Clinical Trial Application by the Medicines and Healthcare Regulatory Agency, preparation for the Phase 1a and Phase 1b clinical trials for NXP800, which commenced in December 2021 and April 2023, respectively, and beginning our IND-enabling studies for NXP900, which commenced in late 2021. Additionally, we completed our initial public offering in February 2022 and a private placement offering in July 2022.

Research and Development Expenses

Research and development expenses include costs directly attributable to the conduct of research and development programs, including licensing fees, cost of salaries, share-based compensation expenses, payroll taxes, and other employee benefits, subcontractors, and materials and service used for research and development activities, including clinical trials, manufacturing costs, and professional services. All costs associated with research and development are expensed as incurred.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase substantially in connection with our ongoing and planned preclinical and clinical development activities in the near term and in the future. The successful development of our product candidates is highly uncertain. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates and we may never succeed in obtaining regulatory approval for any of our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and personnel-related costs, including stock-based compensation, for our personnel in executive, finance and accounting, and other administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees paid for accounting, auditing, consulting, and tax services; insurance costs; travel expenses; and facility costs not otherwise included in research and development expenses.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development activities.

The following table summarizes our results of operations expenses for the three months ended March 31, 2023 and 2022: (in thousands)


	Three Months Ended March 31
	2023		2022			Change
OPERATING EXPENSES:
Research and Development	$	2,367	$	1,805	$	562
General and Administrative		1,734		1,140		594

OPERATING LOSS		(4,101)		(2,945)		(1,156)
Finance Income		52		2		50

NET LOSS	$	(4,049)	$	(2,943)	$	(1,106)

Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended March 31, 2023 and 2022: (in thousands)


	For the three months ended March 31					Increase/
	2023		2022			(Decrease)
Employee Compensation and Benefits	$	1,343	$	467		876
Clinical Expense		627		444		183
Manufacturing		354		304		50
License Fee		—		400		(400)
Professional services and other		43		190		(147)
Total research and development expenses	$	2,367	$	1,805	$	562

Research and development expenses increased by $0.6 million, during the three months ended March 31, 2023 compared to the same period in 2022. The increase in research and development expense during the three months ended March 31, 2023 was primarily driven by a $0.9 million increase in employee compensation and benefits including $0.4 million in stock based compensation, $0.2 million in clinical expenses paid out in connection with our product candidates NXP800 and NXP900, $0.1 million in manufacturing expenses including $0.2 million associated with one-time expenses associated with our process development of NXP900, partially offset by a $0.4 million decrease in license fees paid during 2022 to UoE for NXP900 net of fees owed to the UoE associated with our 2022 IPO and $0.1 million in professional services and other expenses associated with our drug product programs.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the three months ended March 31, 2023 and 2022: (in thousands)

SEC Form 10-Q filed by Nuvectis Pharma Inc.