Nuvectis Pharma, Inc. - Quarter Report: 2022 September (Form 10-Q)

Table of Contents

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 September 30, 2022

☐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 November 07, 2022
Common Stock, $0.00001 par value		14,642,483

NUVECTIS PHARMA, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION	3
Item 1	Financial Statements	3
	Unaudited Condensed Balance Sheets as of September 30, 2022 and December 31, 2021	3
	Unaudited Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021	4
	Unaudited Condensed Statements of Changes in Stockholders’ Equity/(Deficit) for the Three and Nine Months Ended September 30, 2022 and 2021	5
	Unaudited Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021	7
	Notes to Unaudited Condensed Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4	Controls and Procedures	26

PART II	OTHER INFORMATION	26
Item 1	Legal Proceedings	26
Item 1A	Risk Factors	26
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3	Defaults Upon Senior Securities	27
Item 4	Mine Safety Disclosures	27
Item 5	Other Information	27
Item 6	Exhibits	28
	Signatures	29

PART I – FINANCIAL INFORMATION

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.

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.

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)


						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.

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.

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 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.

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

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.

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 $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.

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.

NUVECTIS PHARMA, INC.

Notes to the Unaudited Condensed Financial Statements (continued)

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:

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:

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

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.

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.

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

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.

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.

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, 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.

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.

Related Party Transactions

As for related party transactions, see Note 7 and Note 8.

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):

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.

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

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:

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	%

NUVECTIS PHARMA, INC.

Notes to the Unaudited Condensed Financial Statements (continued)

Volatility was estimated based on the historic volatility of comparable public companies.

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.

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.

NUVECTIS PHARMA, INC.

Notes to the Unaudited Condensed Financial Statements (continued)

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		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.

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

NUVECTIS PHARMA, INC.

Notes to the Unaudited Condensed Financial Statements (continued)

NOTE 7 – RELATED PARTY TRANSACTIONS:

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.

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, 2021. 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 novel targeted therapies for the treatment of cancer. Our approach translates key scientific insights relating to oncogenic drivers and cancer addiction pathways into a clinical development strategy of potent and selective anticancer drug candidates.

NXP800 (HSF1-Pathway Inhibitor)

We have licensed exclusive world-wide 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. Cancer cells actively exploit HSF1 to overcome diverse stresses and promote biological activities crucial for their survival, progression, immune evasion, and metastasis.

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 plan to clinically investigate NXP800 in Ovarian Clear Cell Carcinoma (“OCCC”) and endometrioid carcinoma, and to investigate the utility of ARID1a deficiency as a patient selection marker. The genetic screening for the ARID1a mutation is a standard part of the commercially available screening panels being 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) to be followed by an expansion phase (Phase 1b). In the 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 the Phase 1b. In the Phase 1b, the safety and preliminary anti-tumor activity of NXP800 will be evaluated, initially in patients with OCCC and endometrioid carcinoma and possibly in patients with other types of solid tumors such as gastric cancer. In June 2022, the U.S. Food and Drug Administration (the “FDA”) cleared the Company's Investigational New Drug Application (“IND”) for NXP800, which includes the Phase 1 clinical trial protocol. Additional preclinical studies are being conducted to identify development opportunities for NXP800 in additional solid tumor types.

NXP900 (SRC/YES1 Kinase Inhibitor)

NXP900 is a preclinical-stage drug candidate designed to preferentially inhibit the Proto-oncogene 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. 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 (“HER2”) and A1k 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®.

Preclinically, NXP900 demonstrated potent inhibition of SRC and YES1 kinases and substantial growth inhibition of primary tumors and bone metastases in triple negative breast cancer (“TNBC”), and group IV Medulloblastoma animal models. Of note, in the animal models tested tumor growth inhibition was associated with substantial improvement of median survival.

We plan to initially develop NXP900 in solid tumors where SRC and/or YES1 are implicated. We anticipate submitting an IND or an equivalent submission with a foreign agency in early 2023.

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 September 30, 2022, we did not generate any revenue. Our main activities through September 30, 2022 have been organizational and capital raising activities and 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, and preparation for the Phase 1a clinical trial for NXP800, which commenced in December 2021, 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 September 30, 2022: (in thousands)


	Three Months Ended September 30
	2022		2021			Change
OPERATING EXPENSES:
Research and Development	$	4,520	$	4,156	$	364
General and Administrative		1,418		512		906

OPERATING LOSS		(5,938)		(4,668)		(1,270)
Finance Income		61		—		61

NET LOSS	$	(5,877)	$	(4,668)	$	(1,209)

Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended September 30, 2022: (in thousands)


	For the three months ended September 30					Increase/
	2022		2021			(Decrease)
Clinical Expense	$	590	$	146	$	444
Employee Compensation and Benefits		1,452		93		1,359
Manufacturing		482		290		192
License Fee		1,897		3,611		(1,714)
Professional services and other		99		16		83
Total research and development expenses	$	4,520	$	4,156	$	364

Research and development expenses increased by $0.4 million or 9% during the three months ended September 30, 2022 compared to the same period in 2021. The increase in research and development expense was primarily driven by $1.4 million in employee compensation which included a one-time bonus to the three founders totaling $0.6 million which became payable on July 29, 2022 and $0.3 million in non-cash employee stock compensation, $0.4 million increase in clinical trial expenses, $0.2 million in manufacturing expenses associated with the NXP800 and NXP900 programs partially offset by $1.7 million decrease in licensing expenses associated with the one-time payment to UoE in 2021 for NXP900.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the three months ended September 30, 2022: (in thousands)


	For the three months ended September 30					Increase/
	2022		2021			(Decrease)
Professional and consulting services	$	411	$	415	$	(4)
Employee Compensation and Benefits		566		97		469
Insurance and Other		441		—		441
Total general and administrative expenses	$	1,418	$	512	$	906

General and administrative expenses increased by $0.9 million or 177% during the three months ended September 30, 2022 compared to the same period in 2021. This increase was primarily driven by the $0.5 million increase in employee compensation which included a one-time bonus to the three founders totaling $0.2 million which became payable on July 29, 2022, $0.2 in employee stock compensation, $0.4 million increase in D&O insurance and other expenses associated with the IPO.

As a result of the foregoing, our loss from operations for the three months ended September 30, 2022 increased $1.2 million or 26%, compared to the same period in 2021, primarily driven by one-time clinical trial expenses, milestone and license fee payments.

The following table summarizes our results of operations expenses for the nine months ended September 30, 2022: (in thousands)


	Nine Months Ended September 30
	2022		2021			Change
OPERATING EXPENSES:
Research and Development	$	8,830	$	8,401	$	429
General and Administrative		3,626		2,228		1,398

OPERATING LOSS		(12,456)		(10,629)		(1,827)
Finance Income		67		—		67

NET LOSS	$	(12,389)	$	(10,629)	$	(1,760)

Research and Development Expenses

The following table summarizes our research and development expenses for the nine months ended September 30, 2022: (in thousands)


	For the nine months ended September 30					Increase/
	2022		2021			(Decrease)
Clinical Expense	$	2,178	$	177	$	2,001
Employee Compensation and Benefits		2,763		760		2,003
Manufacturing		1,239		329		910
License Fee		2,297		7,111		(4,814)
Professional services and other		353		24		329
Total research and development expenses	$	8,830	$	8,401	$	429

Research and development expenses increased by $0.4 million, or 5%, during the nine months ended September 30, 2022 compared to the same period in 2021. The increase in research and development expense during the nine months ended September 30, 2022 was primarily driven by, $2.0 million increase in clinical expenses paid out in connection with our product candidates NXP800 and NXP900, $2.0 million in employee compensation and benefits including $0.6 million in stock based compensation, $0.9 million in manufacturing expenses mostly associated with our product NXP800 and $0.3 million in professional services and other expenses associated with the company’s drug product programs, partially offset by a $4.8 million decrease in license fees paid during 2021 to CRT for NXP800 and UoE for NXP900 net of fees owed to the UoE associated with the company’s 2022 IPO, 2022 private placement, and the UoE License agreement and payments to CRT for patient enrollment milestones.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the nine months ended September 30, 2022: (in thousands)


	For the nine months ended September 30					Increase/
	2022		2021			(Decrease)
Professional and consulting services	$	1,413	$	1,759	$	(346)
Employee Compensation and Benefits		1,026		319		707
Insurance and Other		1,187		150		1,037
Total general and administrative expenses	$	3,626	$	2,228	$	1,398

General and administrative expenses increased by $1.4 million, or 63%, during the nine months ended September 30, 2022 compared to the same period in 2021. The increase in general and administrative expenses for the nine months ended September 30, 2022, was primarily driven by $1.0 million increase in D&O insurance associated with the IPO, $0.7 million in employee compensation including $0.3 million in stock compensation expense offset by a decrease of $0.3 million in professional and consulting fees paid to third-party providers.

As a result of the foregoing, our loss from operations for the nine months ended September 30, 2022, increased $1.8 million or 17%, compared to the same period in 2021 primarily driven by one time clinical trial expenses, milestone and license fee payments.

Liquidity and Capital Resources

As of September 30, 2022, we had $23.6 million of cash and cash equivalents. For the three months ended September 30, 2022, and 2021, we had net losses of $5.9 million and $4.7 million, respectively. For the nine months ended September 30, 2022, and 2021, we had net losses of $12.4 million and $10.6 million, respectively. As of September 30, 2022, we had an accumulated deficit of $25.3 million.

On February 4, 2022, we entered into an underwriting agreement with H.C. Wainwright & Co. (the “Underwriter”), as sole book-running manager, in connection with our initial public offering of common stock (the “IPO”). On February 4, 2022, we announced the pricing of our IPO of 3,200,000 shares of common stock for a price of $5.00 per share, less certain underwriting discounts and commissions. As part of the UoE license agreement, we are required to pay UoE 2.5% of the gross amount of each of the Company’s future fund raisings up to a cumulative total of $3.0 million. Pursuant to the IPO, the Company paid UoE $0.4 million associated with this fundraising.

The IPO closed on February 8, 2022, with gross proceeds of $16.0 million, before deducting underwriting discounts and expenses (for net proceeds of $12.6 million).

In addition, on July 29, 2022, we completed a private placement in which we received gross proceeds of $15.9 million before deducting fees and expenses (for net proceeds of $14.2 million) excluding payments required by the Company’s license agreements. We believe that the proceeds from our IPO and private placement will enable us to fund our operating expenses and capital expenditures through at least the next 12 months from the issuance of our financial statements. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. Our future viability in the long term is dependent on our ability to raise additional capital to finance our operations.

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our current or future product candidates, including payments of milestones and sponsored research commitments associated with our license agreements for NXP800 and NXP900. In addition, now that we have closed our IPO, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations, and other expenses that we did not incur as a private company. The timing and amount of our operating expenditures will depend largely on our ability to:

➢advance development of our clinical and preclinical programs;

➢	manufacture, or procure the manufacturing of, our preclinical and clinical drug material and develop processes for late stage and commercial manufacturing;

➢seek regulatory approvals for any current or future product candidates that successfully complete clinical trials;

➢achieve milestones in accordance with our license agreements;

➢	establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any current or future product candidates for which we may obtain marketing approval;

➢hire additional clinical, quality control and scientific personnel;

➢	expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company;

➢obtain, maintain, expand and protect our intellectual property portfolio; and

➢acquire additional product candidates.

We anticipate that we will require additional capital as we seek regulatory approval of our product candidates and if we choose to pursue in-licenses or acquisitions of other product candidates. If we receive regulatory approval for our other future product candidates, we

expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize.

Because of the numerous risks and uncertainties associated with research, development and commercialization of our product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including:

➢	the scope, progress, results and costs of researching and developing our current or future product candidates, and conducting preclinical and clinical trials;

➢the costs, timing and outcome of regulatory review of our current or future product candidates;

➢	the costs, timing and ability to manufacture our current or future product candidates to supply our clinical and preclinical development efforts and our clinical trials;

➢	the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our current or future product candidates for which we receive marketing approval;

➢the costs of manufacturing commercial-grade products and necessary inventory to support commercial launch;

➢the ability to receive additional non-dilutive funding, including grants from organizations and foundations;

➢	the revenue, if any, received from commercial sale of our products, should any of our current or future product candidates receive marketing approval;

➢	the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining, expanding and enforcing our intellectual property rights and defending intellectual property-related claims;

➢our ability to establish and maintain collaborations on favorable terms, if at all; and

➢the extent to which we acquire or in-license other product candidates and technologies.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of public or private equity offerings, debt financings, governmental funding, collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. In addition, debt financing would result in fixed payment obligations.

If we raise additional funds through governmental funding, collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Cash Flows

The following table provides information regarding our cash flows for the periods presented: (in thousands)


	For the nine months ended September 30
	2022		2021
Net cash used in operating activities	$	(10,043)	$	(8,437)
Net cash used in investing activities		—		—
Net cash provided by financing activities		27,941		15,246

Operating Activities

During the nine months ended September 30, 2022, $10.0 million of cash was used in operating activities. This was primarily attributable to our net loss of $12.4 million, partially offset by non-cash charges of $1.2 million. The change in our operating assets and liabilities was primarily due to an increase of $1.0 million in prepaid and other assets, which was primarily due to $1.1 million payment for our director and officer insurance, partially offset by $2.3 million increase in accounts payable and accrued expense, due to growth in our business, the advancement of our research programs, and the timing of vendor invoicing and payments.

During the nine months ended September 30, 2021, $8.4 million of cash was used in operating activities. This was primarily attributable to our net loss of $10.6 million, partially offset by non-cash charges of $1.7 million. The change in our operating assets and liabilities was primarily due to an increase of $0.5 million in accounts payable and accrued expense, due to growth in our business, the advancement of our research programs, and the timing of vendor invoicing and payments.

Financing activities

During the nine months ended September 30, 2022, net cash provided by financing activities was $27.9 million, consisting primarily of proceeds from the sale of our common stock and private placement, offset by $2.6 million of commission and deferred offering costs paid and $1.4 million in private placement costs.

During the nine months ended September 30, 2021, net cash provided by financing activities was $15.2 million, consisting of proceeds from the sale of our redeemable convertible preferred shares.

Contractual Obligations and Other Commitments

We enter into contracts in the normal course of business with clinical research organizations, contract manufacturing organizations, and other third parties for clinical trials, preclinical research studies, and testing and manufacturing services. These contracts are cancelable by us upon prior written notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation. The amount and timing of such payments are not known.

We have also entered into license and collaboration agreements with third parties, which are in the normal course of business. We have not included future payments under these agreements since obligations under these agreements are contingent upon future events such as our achievement of specified development, regulatory, and commercial milestones, or royalties on net product sales.

Pursuant to the NXP800 License Agreement, we are required to make payments to the ICR for certain development and regulatory milestones. As of September 30, 2022, we were obligated to pay up to $23.0 million in milestone payments to the ICR related to pre-approval milestones, up to $178 million (in addition to the $23.0 million) in regulatory and commercial sales milestones, and mid-single digit to 10% royalties on a tiered basis on net sales, unless development ceases. Additionally, the Company originally agreed to provide the ICR with up to an additional $0.5 million in research and development. On March 31, 2022, the Company and ICR agreed to research and development support of an additional $0.4 million ($0.9 million total).

Pursuant to the NXP900 License Agreement, we are required to make payments to the UoE for certain development and regulatory milestones. As of September 30, 2022, we were obligated to make up to $46.0 million in milestone payments to the UoE related to pre-approval milestones, including $0.5 million on the first anniversary of the agreement which the Company accrued for as of September 30, 2022, up to $279.50 million in regulatory and commercial sales milestones, mid-single digit to 8% royalties on a tiered basis on net sales and 2.5% of the gross amount of each of the Company’s future fund raising up to a cumulative total of $3.0 million, unless

development ceases. Additionally, the Company will provide UoE with up to an additional $754,000 in research and development support.

We do not currently have any long-term leases. We rent our office space in Fort Lee, New Jersey, based on a one-year agreement signed on May 1, 2022.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

Critical Accounting Policies and Significant Judgments and Estimates

Our condensed financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). The preparation of condensed financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.

There have been no significant changes to our critical accounting policies and estimates as compared to those described in “Note 2 – Summary of Significant Accounting Policies” to our audited financial statements set forth in our Annual Report on Form 10-K filed with the SEC on March 23, 2022.

Recently Issued Accounting Pronouncements

See Note 2 to our condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.

Emerging Growth Company and Smaller Reporting Company Status

The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to not “opt out” of this provision and, as a result, we will adopt new or revised accounting standards at the time private companies adopt the new or revised accounting standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.

We are also a “smaller reporting company” meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of our initial public offering is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We will continue to be a smaller reporting company for as long as either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

Under SEC rules and regulations, because we are considered to be a “smaller reporting company”, we are not required to provide the information required by this item in this report.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of September 30, 2022, management carried out, under the supervision and with the participation of our principal executive officer and principal financial officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2022, our disclosure controls and procedures were effective.

Changes in and Management’s Report on Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the nine months ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer and Vice President of Finance, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II – OTHER INFORMATION

Item 1.Legal Proceedings.

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business, the resolution of which we do not anticipate would have a material adverse impact on our financial position, results of operations or cash flows. However, there is no certainty that any such future litigation that may arise would not have a material financial impact on our business. As of the date of this report, we were not a party to any material legal matters or claims.

Item 1A. Risk Factors.

There have been no material changes to the risk factors previously disclosed on our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

During the period covered by this report, we have not issued any unregistered securities.

Use of Proceeds from Sales of Registered Securities

On February 4, 2022, our registration statement on Form S-1 (File No. 333-260099) and our registration statement on Form S-1MEF (File No. 333-262512) (collectively, the “Registration Statements”) were declared effective by the SEC. Pursuant to such Registration Statements, we sold an aggregate of 3,200,000 shares of our common stock at a price of $5.00 per share for aggregate net cash proceeds of approximately $13.1 million, which amount is net of $1.12 million in underwriter’s discounts, and commissions, and $1.8 million of

other expenses incurred in connection with the offering. We closed the offering on February 8, 2022. H.C. Wainwright & Co. acted as sole book-running manager for the offering.

On August 24, 2022, our registration statement on Form S-1 (File No. 333-266857), which was filed on August 15, 2022, was declared effective by the SEC. Pursuant to such registration statement, we sold an aggregate of 1,015,598 shares of our common stock at a price of $8.25, and 909,091 of pre-funded warrants to purchase one share of common stock at $8.25 per share for aggregate net cash proceeds of approximately $14.2 million, which amount is net of $1.4 million in placement agent fees, and $0.3 million of other expenses incurred in connection with the offering. We closed the private placement on July 29, 2022. H.C. Wainwright & Co. acted as sole private placement agent for the offering.

We intend to use the net proceeds of this offering to fund the Phase 1/2 development of NXP800, to continue development and sponsored research related to our current product candidates or any future product candidate, hiring of additional personnel, capital expenditures, costs of operating as a public company and other general corporate purposes.

There has been no material change in the expected use of the net proceeds from our initial public offering as described in our final prospectus filed with the SEC on February 8, 2022 pursuant to Rule 424(b) under the Securities Act and in our registration statement filed with the SEC on August 15, 2022. We invested the funds received in an interest-bearing money market account.

Item 3.Defaults Upon Senior Securities.

None.

Item 4.Mine Safety Disclosures.

Not applicable.

Item 5.Other Information.

None.

Item 6. Exhibits


Exhibit No.		Description
31.1		Certification of Chief Executive Officer of Nuvectis Pharma, Inc. pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 8, 2022.
31.2		Certification of Principal Financial Officer of Nuvectis Pharma, Inc. pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 8, 2022.
32.1		Certification of Chief Executive Officer of Nuvectis Pharma, Inc. pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated November 8, 2022.
32.2		Certification of Principal Financial Officer of Nuvectis Pharma, Inc. pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated November 8, 2022.
101		The following financial information from the Company’s quarterly report on Form 10-Q for the period ended September 30, 2022, formatted in Inline Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statement of Stockholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements (filed herewith).
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Signatures

Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fort Lee, State of New Jersey, on this 8^th day of November 2022.


Nuvectis Pharma, Inc.

By:	/s/ Ron Bentsur
	Name:	Ron Bentsur
	Title:	Chairman, Chief Executive Officer and President

By:	/s/ Michael J Carson
	Name:	Michael J Carson
	Title:	Vice President of Finance (Principal Financial and Accounting Officer)