10-Q 1 ganx-20240331x10q.htm 10-Q
0001819411--12-312024Q1falseGain Therapeutics, Inc.000000001804123116206680http://fasb.org/us-gaap/2023#InterestIncomeExpenseNethttp://fasb.org/us-gaap/2023#InterestIncomeExpenseNethttp://fasb.org/us-gaap/2023#InterestIncomeExpenseNethttp://fasb.org/us-gaap/2023#InterestIncomeExpenseNethttp://fasb.org/us-gaap/2023#InterestIncomeExpenseNethttp://fasb.org/us-gaap/2023#InterestIncomeExpenseNethttp://fasb.org/us-gaap/2023#InterestIncomeExpenseNethttp://fasb.org/us-gaap/2023#InterestIncomeExpenseNet001804123116206680P1Y0001819411us-gaap:CommonStockMemberus-gaap:CommonStockMember2023-01-012023-03-310001819411us-gaap:RetainedEarningsMember2024-03-310001819411us-gaap:AdditionalPaidInCapitalMember2024-03-310001819411us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001819411us-gaap:RetainedEarningsMember2023-12-310001819411us-gaap:AdditionalPaidInCapitalMember2023-12-310001819411us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001819411us-gaap:RetainedEarningsMember2023-03-310001819411us-gaap:AdditionalPaidInCapitalMember2023-03-310001819411us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001819411us-gaap:RetainedEarningsMember2022-12-310001819411us-gaap:AdditionalPaidInCapitalMember2022-12-310001819411us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001819411us-gaap:CommonStockMemberus-gaap:CommonStockMember2024-03-310001819411us-gaap:CommonStockMemberus-gaap:CommonStockMember2023-12-310001819411us-gaap:CommonStockMemberus-gaap:CommonStockMember2023-03-310001819411us-gaap:CommonStockMemberus-gaap:CommonStockMember2022-12-310001819411ganx:AtMarketOfferingMay2022Member2023-12-310001819411us-gaap:EmployeeStockOptionMember2023-12-310001819411ganx:TwentyTwentyoneInducementEquityIncentivePlanMember2021-12-230001819411us-gaap:EmployeeStockOptionMember2023-01-012023-03-310001819411us-gaap:RestrictedStockUnitsRSUMember2023-12-310001819411srt:ExecutiveOfficerMemberganx:PerformanceBasedRestrictedStockUnitsMember2021-12-012021-12-310001819411us-gaap:LeaseholdImprovementsMember2024-03-310001819411us-gaap:FurnitureAndFixturesMember2024-03-310001819411us-gaap:ComputerEquipmentMember2024-03-310001819411ganx:LaboratoryInstrumentsMember2024-03-310001819411us-gaap:LeaseholdImprovementsMember2023-12-310001819411us-gaap:FurnitureAndFixturesMember2023-12-310001819411us-gaap:ComputerEquipmentMember2023-12-310001819411ganx:LaboratoryInstrumentsMember2023-12-310001819411ganx:AtMarketOfferingMay2022Member2023-01-012023-12-310001819411us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310001819411us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001819411ganx:MinoryxTherapeuticsSlMemberganx:LicenseAgreementWithMinoryxTherapeuticsSlMemberus-gaap:RelatedPartyMember2024-01-012024-03-310001819411ganx:MinoryxTherapeuticsSlMemberganx:LicenseAgreementWithMinoryxTherapeuticsSlMemberus-gaap:RelatedPartyMember2023-01-012023-12-310001819411us-gaap:RetainedEarningsMember2024-01-012024-03-310001819411us-gaap:RetainedEarningsMember2023-01-012023-03-310001819411srt:MinimumMember2024-03-310001819411srt:MaximumMember2024-03-310001819411us-gaap:ComputerSoftwareIntangibleAssetMember2024-03-310001819411us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310001819411us-gaap:RestrictedStockUnitsRSUMember2024-03-310001819411us-gaap:EmployeeStockOptionMember2024-03-3100018194112023-01-012023-12-310001819411us-gaap:PensionPlansDefinedBenefitMember2024-03-310001819411us-gaap:PensionPlansDefinedBenefitMember2023-12-310001819411us-gaap:PensionPlansDefinedBenefitMember2022-12-310001819411ganx:August2020ChfLoanMember2024-03-310001819411ganx:August2020ChfLoanMember2020-08-012020-08-310001819411ganx:August2020ChfLoanMember2020-08-310001819411us-gaap:ResearchAndDevelopmentArrangementMember2024-03-310001819411ganx:PublicWarrantsMember2023-11-300001819411ganx:PrivateWarrantsMemberus-gaap:PrivatePlacementMember2023-11-300001819411ganx:PublicWarrantsMemberus-gaap:OverAllotmentOptionMember2023-11-300001819411ganx:PreFundedWarrantsMemberus-gaap:PrivatePlacementMember2023-11-300001819411ganx:PlacementAgentWarrantsMemberus-gaap:PrivatePlacementMember2023-11-3000018194112023-03-3100018194112022-12-310001819411us-gaap:MoneyMarketFundsMember2024-03-310001819411us-gaap:CashMember2024-03-310001819411us-gaap:MoneyMarketFundsMember2023-12-310001819411us-gaap:CashMember2023-12-310001819411us-gaap:USTreasurySecuritiesMember2024-03-310001819411us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2024-03-310001819411us-gaap:DebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2024-03-310001819411us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueInputsLevel1Member2024-03-310001819411ganx:U.s.GovernmentTreasurySecuritiesShortTermMemberus-gaap:FairValueInputsLevel1Member2024-03-310001819411us-gaap:FairValueInputsLevel1Member2024-03-310001819411us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2023-12-310001819411us-gaap:DebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2023-12-310001819411us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueInputsLevel1Member2023-12-310001819411ganx:U.s.GovernmentTreasurySecuritiesShortTermMemberus-gaap:FairValueInputsLevel1Member2023-12-310001819411us-gaap:FairValueInputsLevel1Member2023-12-310001819411us-gaap:WarrantMember2024-01-012024-03-310001819411us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310001819411us-gaap:EmployeeStockOptionMember2024-01-012024-03-310001819411us-gaap:WarrantMember2023-01-012023-03-310001819411us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-03-310001819411us-gaap:EmployeeStockOptionMember2023-01-012023-03-310001819411us-gaap:ResearchAndDevelopmentExpenseMember2024-01-012024-03-310001819411us-gaap:GeneralAndAdministrativeExpenseMember2024-01-012024-03-310001819411us-gaap:ResearchAndDevelopmentExpenseMember2023-01-012023-03-310001819411us-gaap:GeneralAndAdministrativeExpenseMember2023-01-012023-03-3100018194112023-11-012023-11-300001819411us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001819411ganx:MinoryxTherapeuticsSlMemberganx:LicenseAgreementWithMinoryxTherapeuticsSlMemberus-gaap:RelatedPartyMember2024-03-310001819411ganx:MinoryxTherapeuticsSlMemberganx:LicenseAgreementWithMinoryxTherapeuticsSlMemberus-gaap:RelatedPartyMember2023-12-310001819411ganx:PublicWarrantsMember2024-01-012024-03-310001819411ganx:PreFundedWarrantsMember2024-01-012024-03-310001819411ganx:WarrantsExpiringOnNovember242028Memberus-gaap:WarrantMember2024-03-310001819411ganx:WarrantsExpiringOnMay62025Memberus-gaap:WarrantMember2024-03-310001819411ganx:WarrantsExpiringOnJuly202025Memberus-gaap:WarrantMember2024-03-310001819411us-gaap:WarrantMember2024-03-310001819411us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001819411us-gaap:CommonStockMemberus-gaap:CommonStockMember2024-01-012024-03-310001819411us-gaap:EmployeeStockOptionMember2024-01-012024-03-310001819411srt:MaximumMemberganx:LicenseAgreementWithMinoryxTherapeuticsSlMember2017-12-012017-12-310001819411us-gaap:OfficeEquipmentMember2024-01-012024-03-310001819411ganx:LaboratoryInstrumentsMember2024-01-012024-03-310001819411ganx:EquipmentAndFurnitureMember2024-01-012024-03-310001819411srt:MaximumMembersrt:ExecutiveOfficerMemberganx:PerformanceBasedRestrictedStockUnitsMember2021-12-310001819411us-gaap:PrivatePlacementMember2023-11-012023-11-300001819411ganx:PublicWarrantsMemberus-gaap:OverAllotmentOptionMember2023-11-012023-11-300001819411ganx:PrivateWarrantsMemberus-gaap:PrivatePlacementMember2023-11-012023-11-300001819411ganx:PreFundedWarrantsMemberus-gaap:PrivatePlacementMember2023-11-012023-11-300001819411ganx:PlacementAgentWarrantsMemberus-gaap:PrivatePlacementMember2023-11-012023-11-300001819411ganx:IncentivePlans2020And2022Member2022-06-1600018194112023-01-012023-03-310001819411ganx:PublicWarrantsMemberganx:PublicOfferingMember2023-11-012023-11-300001819411ganx:PublicOfferingMember2023-11-012023-11-300001819411us-gaap:PensionPlansDefinedBenefitMember2024-01-012024-03-310001819411us-gaap:PensionPlansDefinedBenefitMember2023-01-012023-12-310001819411ganx:IncentivePlans2020And2022Member2022-06-162022-06-160001819411srt:MaximumMemberganx:AtMarketOfferingMay2022Member2022-05-3100018194112024-03-3100018194112023-12-3100018194112024-04-3000018194112024-01-012024-03-31xbrli:sharesiso4217:USDxbrli:pureiso4217:USDxbrli:sharesganx:itemiso4217:CHF

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended March 31, 2024

or

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: 001-40237

GAIN THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

    

85-1726310

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

4800 Montgomery Lane, Suite 220

Bethesda, Maryland

20814

(Address of principal executive offices)

(Zip Code)

(301) 500-1556

(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 $0.0001 per share

GANX

Nasdaq Stock Market LLC

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 and post such files).      Yes      No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 Exchange Act). Yes  No

As of April 30, 2024, the registrant had 18,051,979 shares of common stock outstanding.

TABLE OF CONTENTS

PART I

    

FINANCIAL INFORMATION

    

5

Item 1

 

Condensed Consolidated Financial Statements

5

 

Condensed Consolidated Balance Sheets (Unaudited)

5

 

Condensed Consolidated Statements of Operations (Unaudited)

6

Condensed Consolidated Statements of Comprehensive (Loss) (Unaudited)

7

Condensed Consolidated Statement of Stockholders’ Equity (Unaudited)

8

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

10

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

11

Item 2

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3

 

Quantitative and Qualitative Disclosures About Market Risk

38

Item 4

 

Controls and Procedures

38

PART II

 

OTHER INFORMATION

39

Item 1

 

Legal Proceedings

39

Item 1A

Risk Factors

39

Item 2

 

Unregistered Sales of Equity Securities and Use of Proceeds

81

Item 3

 

Defaults Upon Senior Securities.

81

Item 4

 

Mine Safety Disclosures

81

Item 5

Other Information

81

Item 6

Exhibits

82

Signatures

83

2

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and are often characterized by the use of words such as “aim”, “believe,” “can,” “could,” “potential,” “plan,” “predict,” “goals,” “seek,” “should,” “may,” “may have,” “would,” “estimate,” “continue,” “anticipate,” “intend,” “expect” or the negative of these terms, other comparable terminology or by discussions of strategy, plans or intentions. These include, but are not limited to, statements about:

our ability to continue as a going concern and our needs for additional financing;
our ability to accurately estimate anticipated operating losses, expenses, future revenues, capital requirements, including our anticipated cash runway;
the success of our efforts, and those of our advisors, in exploring, and possibly executing on, our strategic alternatives, while preserving our cash balance to the extent practicable;
the initiation, timing, progress and results of our current and future preclinical studies and clinical trials and our research and development programs;
the success of our efforts to expand our pipeline of product candidates and develop marketable products through the use of our Magellan™ platform;
our ability to develop, obtain regulatory approval for and commercialize our current and future product candidates;
our expectations regarding collaborations and other agreements with third parties and their potential benefits;
the timing of investigational new drug, or IND, submissions, initiation of preclinical studies and clinical trials, and timing of expected clinical results for our product candidates;
our success in early preclinical studies, which may not be indicative of results obtained in later studies or clinical trials;
the potential benefits of our product candidates;
our ability to identify patients with the diseases treated by our product candidates, and to enroll healthy volunteers and patients in clinical trials;
our ability to obtain, maintain and protect our intellectual property;
our reliance upon intellectual property licensed from third parties, including the license to use certain components of the Magellan™ platform;
our ability to identify, recruit and retain key personnel;
developments or projections relating to our competitors or our industry;
the impact of laws and regulations;
our expectations regarding government and third-party payor coverage and reimbursement;
our expectations regarding the time during which we will be an emerging growth company under the JOBS Act;

3

the impact of liquidity concerns at and failures of banks and other financial institutions, capital market instability, exchange rate fluctuations, supply chain disruptions and increases in commodity, energy and fuel prices;
the impacts of pandemics or endemics on our operations, access to capital, research and development and clinical trials and potential disruption in the operations and business of third-party manufacturers, contract research organizations, other service providers, and collaborators with whom we conduct business;
the impact of other global events, including political instability, natural disaster, events of terrorism and wars, including the war between Ukraine and Russia, and the corresponding tensions created from such conflict between Russia, the United States and countries in Europe as well as other countries such as China; and the conflict between Hamas and Israel; and
other factors and assumptions described in this Quarterly Report.

You should read this Quarterly Report with the understanding that such forward-looking statements involve known and unknown risks, expectations, uncertainties, assumptions, estimates and projections about our company and other important factors that could cause our actual results, performance or achievements, actual industry results, or other actual results or events to differ materially from historical results, from any plans, intentions, or expectations disclosed in such forward-looking statements or from any future results, performance, achievements or other events expressed, suggested or implied by such forward-looking statements. Therefore, you should not rely on any forward-looking information or statements as predictors of future results or events. Factors that could cause or contribute to such differences in results and events include, without limitation, those specifically addressed under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (“Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 26, 2024. The effect of these factors is difficult to predict. In addition, factors other than these could also adversely affect our results, and the reader should not consider these factors to be a complete set of all potential risks or uncertainties. New factors emerge from time to time, and management cannot assess the impact of any such factor on our business or the extent to which any factor, or combination of factors, may cause results or events to differ materially from those contained in any forward-looking statement.

Any forward-looking statements included herein speak only as of the date of this Quarterly Report, and we undertake no obligation to update any forward-looking information or statements for any reason after the date of this Quarterly Report to conform these statements to actual results or changes in expectations, except as required by law. All forward-looking statements attributable to us are expressly qualified by the foregoing cautionary statements.

4

Item 1. Financial Statements.

PART I—FINANCIAL INFORMATION

GAIN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

    

    

March 31, 

    

December 31, 

2024

2023

Assets

 

 

  

 

  

Current assets:

 

 

  

 

  

Cash and cash equivalents

 

$

10,641,087

$

11,794,949

Marketable securities - current

2,019,414

4,999,704

Tax credits

249,133

242,577

Prepaid expenses and other current assets

 

 

952,889

 

741,638

Total current assets

 

$

13,862,523

$

17,778,868

Non-current assets:

 

 

  

  

Property and equipment, net

 

$

111,909

$

125,962

Internal-use software

169,249

193,375

Operating lease - right of use assets

 

 

384,146

 

459,215

Restricted cash

 

 

31,744

 

34,021

Long-term deposits and other non-current assets

 

 

17,613

 

17,890

Total non-current assets

 

714,661

830,463

Total assets

 

$

14,577,184

$

18,609,331

Liabilities and stockholders' equity

Current liabilities:

 

 

  

 

  

Accounts payable

 

$

1,405,154

$

1,318,965

Operating lease liability - current

 

 

204,569

 

229,693

Other current liabilities

 

 

2,368,806

 

2,160,366

Deferred income - current

 

 

914,759

 

1,122,138

Loans - current

 

110,848

118,797

Total current liabilities

 

$

5,004,136

$

4,949,959

Non-current liabilities:

 

 

  

 

  

Defined benefit pension plan

 

$

292,486

$

307,454

Operating lease liability - non-current

 

 

177,365

 

229,855

Deferred income - non-current

64,300

94,786

Loans - non-current

 

396,836

449,053

Total non-current liabilities

930,987

1,081,148

Total liabilities

 

$

5,935,123

$

6,031,107

Stockholders’ equity

 

 

  

 

  

Preferred stock, $0.0001 par value; 10,000,000 shares authorized; nil shares issued and outstanding as of March 31, 2024 and December 31, 2023.

Common stock, $0.0001 par value: 50,000,000 shares authorized; 18,041,231 issued and outstanding as of March 31, 2024; 16,206,680 issued and outstanding as of December 31, 2023.

 

 

1,805

 

1,621

Additional paid-in capital

 

 

73,416,304

 

73,113,079

Accumulated other comprehensive income

 

 

21,863

 

247,241

Accumulated deficit

 

 

(60,783,717)

 

(38,516,197)

Loss for the period

 

 

(4,014,194)

 

(22,267,520)

Total stockholders’ equity

 

8,642,061

12,578,224

Total liabilities and stockholders’ equity

 

$

14,577,184

$

18,609,331

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

5

GAIN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

Three Months Ended March 31, 

    

2024

    

2023

 

Revenues:

 

  

 

  

Collaboration revenues

$

$

55,180

Other income

 

 

Total revenues

$

$

55,180

Operating expenses:

  

  

Research and development

(2,506,906)

(2,791,205)

General and administrative

(1,870,794)

(2,493,759)

Total operating expenses

(4,377,700)

(5,284,964)

Loss from operations

$

(4,377,700)

$

(5,229,784)

Other income/(expense):

 

  

 

  

Interest income, net

 

115,303

 

152,035

Foreign exchange gain/(loss), net

 

268,077

 

(42,842)

Loss before income tax

$

(3,994,320)

$

(5,120,591)

Income tax

 

(19,874)

 

(16,728)

Net loss

$

(4,014,194)

$

(5,137,319)

Net loss per shares:

 

  

 

  

Net loss per share attributable to common stockholders - basic and diluted

$

(0.22)

$

(0.43)

Weighted average common shares - basic and diluted

 

17,978,951

 

11,935,081

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

6

GAIN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

Three Months Ended March 31, 

    

2024

    

2023

    

Net loss

$

(4,014,194)

$

(5,137,319)

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

4,328

43,262

Defined benefit pension plan

1,086

(670)

Foreign currency translation

 

(230,792)

 

18,091

Other comprehensive income/(loss)

(225,378)

60,683

Comprehensive loss

$

(4,239,572)

$

(5,076,636)

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

7

GAIN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

Common Stock

APIC

  

AOCI

Accumulated

Total

Three Months Ended March 31, 2024

Shares

  

Amounts

  

  

  

Deficit

  

Balance as of December 31, 2023

16,206,680

$

1,621

$

73,113,079

$

247,241

$

(60,783,717)

$

12,578,224

Stock-based compensation (Note 14)

31,125

3

145,470

145,473

Exercise of stock options (Note 14)

15,983

2

57,709

57,711

Exercise of warrants (Note 13)

1,787,443

179

100,046

100,225

Defined benefit pension plan (Note 10)

1,086

1,086

Foreign currency translation

(230,792)

(230,792)

Net unrealized gain on available for sale securities (Note 4)

4,328

4,328

Net loss

(4,014,194)

(4,014,194)

Balance as of March 31, 2024

18,041,231

 

1,805

 

73,416,304

 

21,863

 

(64,797,911)

 

8,642,061

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

8

GAIN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

Common Stock

APIC

AOCI

Accumulated

Total

Three Months Ended March 31, 2023

  

Shares

  

Amounts

  

  

  

Deficit

  

Balance as of December 31, 2022

11,883,368

$

1,189

$

57,358,895

$

35,627

$

(38,516,197)

$

18,879,514

Stock-based compensation

565,432

565,432

Issuance of shares in at-the-market (ATM) offering (Note 13)

203,774

20

770,500

770,520

Defined benefit pension plan

(670)

(670)

Foreign currency translation

18,091

18,091

Net unrealized loss on available for sale securities

43,262

43,262

Net loss

(5,137,319)

(5,137,319)

Balance as of March 31, 2023

12,087,142

1,209

58,694,827

96,310

(43,653,516)

15,138,830

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

9

GAIN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

Three Months Ended March 31, 

    

2024

    

2023

Operating activities:

 

  

 

  

Net loss

$

(4,014,194)

$

(5,137,319)

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

  

Depreciation and amortization

 

20,528

 

19,242

Stock-based compensation expense

 

190,424

 

565,432

Other non-cash items

(200,146)

(122,237)

Changes in operating assets and liabilities:

 

 

  

Prepaid expenses and other assets

(298,468)

(549,635)

Accounts payable and other liabilities

 

703,593

 

1,057,567

Defined benefit pension plan

(30,118)

4,715

Deferred income

 

41,798

 

(55,180)

Total changes in operating assets and liabilities

 

416,805

 

457,467

Cash used in operating activities

(3,586,583)

(4,217,415)

Cash flows from investing activities:

 

 

  

Purchase of property and equipment and internal use of software

 

 

(11,045)

Purchases of marketable securities

(1,956,350)

Maturity of marketable securities

3,018,750

4,074,375

Cash provided by/(used in) investing activities

3,018,750

2,106,980

Cash flows from financing activities:

 

 

  

Net proceeds from issuance of shares in at-the-market (ATM) offering (Note 13)

770,520

Net proceeds from the exercise of Warrants (Note 13)

100,225

Net proceeds from the exercise of Stock Options (Note 14)

57,711

Payments of offering costs (Note 13)

(280,867)

Payments of current portion of long-term debt (Note 11)

(22,872)

(21,612)

Cash provided by/(used in) financing activities

$

(145,803)

$

748,908

Effect of exchange rate changes

 

(442,503)

 

38,422

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

$

(1,156,139)

$

(1,323,105)

Cash, cash equivalents and restricted cash at beginning of period

 

11,828,970

 

7,342,429

Cash, cash equivalents and restricted cash at end of period

$

10,672,831

$

6,019,324

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

10

GAIN THERAPEUTICS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.Nature of the Business and Basis of Presentation

Operations and Business

Gain Therapeutics, Inc. (and together with its subsidiary, the “Company”), was incorporated under the laws of the state of Delaware (U.S.) on June 26, 2020. Gain Therapeutics has been publicly traded company since the Initial Public Offering (“IPO”) completed in March of 2021. The shares trade on the Nasdaq national market under the ticker symbol “GANX”.

The Company is a biotechnology company developing novel small molecule therapeutics to treat diseases across several therapeutic areas, including, central nervous system (“CNS”) disorders, lysosomal storage disorders (“LSDs”), metabolic disorders, and other diseases that can be targeted through protein degradation, such as oncology. We use our computational target and drug discovery platform, Magellan™, to discover novel allosteric binding sites on proteins implicated in a disease and to identify proprietary small molecules that bind these sites to modulate protein function and treat the underlying cause of the disease. We believe that Magellan™ is uniquely suited to identify allosteric binding sites on the protein surface, which are different from the active binding site where the natural ligand of the protein binds.

The Company uses the Magellan™ drug discovery platform to identify novel allosteric sites and small molecules for all our pipeline programs. We plan to continue to advance our existing research programs and initiate additional programs targeting allosteric binding sites identified with the Magellan™ platform in various therapeutic areas through academic partnerships, co-development, and licensing arrangements.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, risks associated with completion and success of preclinical studies and clinical testing, dependence on key personnel, protection of proprietary technology, compliance with applicable governmental regulations, development by competitors of new technological innovations, protection of proprietary technology and the ability to secure additional capital to fund operations. Drug candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and prior to regulatory approval and commercialization. These efforts require significant amounts of additional capital, adequate personnel, and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

Basis of Presentation

The accompanying unaudited interim condensed financial statements (the “interim financial statements”) reflect the accounts of Gain Therapeutics, Inc., Gain Therapeutics Australia PTY LTD, GT Gain Therapeutics SA and its wholly owned branch, Gain Therapeutics Sucursal en España. All intercompany transactions and balances have been eliminated in the preparation of the interim financial statements. The interim financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The interim financial statements have been prepared on the same basis as applied for the audited annual consolidated financial statements as of and for the year ended December 31, 2023, and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of March 31, 2024, the results of its operations and its statements of stockholders’ equity and its statements of cash flows for the periods ended March 31, 2024 and 2023.

11

The results for the periods ended March 31, 2024 and 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period. These interim financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2023, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”).

The accompanying interim financial statements reflect the application of significant accounting policies as described below and elsewhere in these notes to the unaudited condensed consolidated financial statements. As of March 31, 2024, the Company’s significant accounting policies and estimates, which are detailed in the Annual Report, have not changed.

Going Concern

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

The Company has incurred recurring losses and negative cash flows from operations since its inception and has primarily funded these losses through the completion of its IPO in March 2021, other equity financings and research grants. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its product candidates currently in development. Substantial additional capital will be needed by the Company to fund its operations and to develop its product candidates.

The Company’s activities have consisted primarily of performing research and conducting preclinical and clinical studies, organizing and staffing the Company, expanding its operations, securing financing, developing and securing its in-licensed technology. The Company faces risks associated with early-stage biotechnology companies whose product candidates are in development. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing, establishing manufacturing capacity and obtaining regulatory approval prior to commercialization. These efforts require significant amounts of additional capital for the Company to complete its research and development activities, achieve its research and development objectives, defend its intellectual property rights, and recruit and retain skilled personnel, and key members of management. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

In accordance with Accounting Standard Update (“ASU”) No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, the Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company assessed that its existing cash, cash equivalents and marketable securities of $12.7 million will not be sufficient to fund its estimated operating and capital expenditures for a period of at least 12 months from the date these financial statements are issued. Because of the current liquidity situation and lack of expected revenues in the foreseeable future substantial doubt exists about its ability to continue as a going concern. The Company will need to obtain additional capital and/or other funding in order to continue operations beyond the first quarter of 2025.

Management plans to raise additional capital primarily through private and/or public equity financings and/or convertible debt financings. As an additional action, management is currently reviewing the cost structure throughout the organization, looking for opportunities to optimize expenditures and create efficiencies with the objective of improving the Company’s overall cash burn rate, optimizing the research and development expenses and reducing general and administrative expenses. Furthermore, management is actively seeking opportunities for strategic collaborations, licensing agreements and grant fundings, among other strategic opportunities.

The Company may not be successful in its efforts to raise additional funds or achieve profitable operations. The Company continues to explore potential opportunities and alternatives to obtain the additional resources that will be

12

necessary to support its ongoing operations beyond the first quarter of 2025, including raising additional capital through either private or public equity or debt financing, or additional program collaborations or non-dilutive funding.

If the Company is unable to obtain additional funding to support its current or proposed activities and operations, it may not be able to continue its operations as currently anticipated, which may require it to suspend or terminate any ongoing development activities, modify its business plan, curtail various aspects of its operations, cease operations, or seek relief under applicable bankruptcy laws. In such event, the Company’s stockholders may lose a substantial portion or even all of their investment.

Because of the actions that Management is taking to secure future financial resources the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.  

Segment information

Operating segments are defined as components of an enterprise for which separate discrete information is available for evaluation by the chief operating decision-maker in deciding how to allocate resources and assess performance. The Company’s chief operating decision-maker, the Chief Executive Officer, oversees the Company’s operations and manages the business as a single operating segment, which is research and development in the pharmaceutical sector with a focus on developing novel therapeutics to treat diseases caused by protein misfolding, such as rare genetic diseases and neurological disorders. Geographically, the research and development activities are mainly performed in Australia, Switzerland and Spain. The Company does not consider these geographies to be separate segments.

2. Summary of Significant Accounting Policies

Foreign Currency Transactions

The Company is incorporated in the United States of America and has operations in Switzerland, Spain and Australia. The Company’s functional currency is U.S dollars (USD). The functional currencies of the Company’s foreign operations are the local currencies (Swiss Franc in Switzerland, Euro in Spain and Australian Dollar in Australia). Assets and liabilities reported in the consolidated balance sheets are translated into USD (the currency in which these financial statements are presented) at the exchange rates applicable at the balance sheet dates and for the consolidated statement of operations at the average exchange rates for the periods presented. Items representing the share capital and additional paid-in capital are presented at the historical exchange rates. Adjustments resulting from the translation of the financial statements of the Company’s foreign operations into U.S. dollars are excluded from the determination of net income and are recorded in accumulated other comprehensive income/(loss), a separate component of shareholders’ equity. The Company has not utilized any foreign currency hedging strategies to mitigate the effect of its foreign currency exposure. As of March 31, 2024 and December 31, 2023, accumulated currency translation adjustment recorded in accumulated other comprehensive income/(loss) amounted to a gain of $177,696 and $408,487, respectively.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with US GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. On an ongoing basis, the Company evaluates its estimates, judgments and assumptions including those related to going concern assessment, recognition of accrued expenses, defined benefit pension liability, share-based compensation, and recognition of research grants. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable by management 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. Changes in estimates are recorded in the period in which they become

13

known. To the extent that material differences arise between the estimates and actual results, the Company’s future results of operations will be affected.

Cash and Cash Equivalents

The Company classifies cash on hand and held at banks, and all highly liquid investments in money market, certificates of deposit, time deposit, and other short-term liquid securities with original maturities of less than 90 days, as cash and cash equivalents.

Marketable Securities

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

Marketable securities are classified as available-for-sale since the Company does not have the positive intent and the capacity to hold the marketable securities until the maturity date. Available-for-sale marketable securities are carried out at fair value with the “unrealized gains/loss” excluded from the computation of the earnings of the period and accounted for in other comprehensive loss. The accretion of discounts (or amortization of premiums) is accounted for in the Company’s statements of operations as financial income (or expense).

Marketable securities are classified in the Company’s balance sheet based on their maturities and the Company’s reasonable expectations with regard to those securities. Marketable securities with a maturity date within 12 months from reporting date are classified as “current assets”. Marketable securities with a maturity date over 12 months from reporting date are classified as “non-current assets”.

Concentrations of Credit Risk

The Company has no significant off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments that may expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents which are deposited in accredited financial institutions in excess of federally insured limits. The Company deposits its cash and cash equivalents in financial institutions that it believes have high credit quality and has not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

Deferred Issuance Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred issuance costs until such equity transactions are consummated. Subsequently, these costs are recorded as a reduction of the proceeds generated as a result of the offering. Should the planned equity financing be abandoned, the deferred issuance costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations.

14

Property and Equipment

Property and equipment are stated at cost, including any accessory and direct costs that are necessary to make the assets fit for use, and adjusted by the corresponding accumulated depreciation. The depreciation expenses are recorded using the straight-line method in the consolidated statements of operations and have been calculated by taking into consideration the use, purpose and financial-technical duration of the assets, on the basis of their estimated useful economic lives. The Company believes the above criteria to be represented by the following depreciation rates:

- Equipment & Furniture

12.5%

- Electronic office equipment:

20%

- Leasehold Improvements:

based on the terms of the lease

- Laboratory equipment:

15%

Ordinary maintenance costs are entirely attributed to the consolidated statements of operations in the year in which they are incurred. Extraordinary maintenance costs, the purpose of which is to extend the useful economic life of the asset, to technologically upgrade it and/or to increase its productivity or safety for the purposes of the economic productivity of the Company, are attributed to the asset to which they refer and depreciated on the basis of its estimated useful economic lives. Amortization of leasehold improvements is computed using the straight-line method based upon the terms of the applicable lease or estimated useful life of the improvements, whichever is lower.

Capitalized Software Development Costs

The Company capitalizes the costs of software obtained for internal use in accordance with ASC 350-40, Internal-Use Software. Capitalized software development costs consist of costs incurred during the development stage and include purchased software licenses, implementation costs, consulting costs, and payroll-related costs for projects that qualify for capitalization. All other costs, primarily related to maintenance and minor software fixes, are expensed as incurred. As of March 31, 2024 and December 31, 2023, internal-use software amount to $169 thousand and $193 thousand, respectively, and refer to the external and internal costs incurred in the development of the Company’s enterprise resource planning system.  

The Company amortizes the capitalized software development costs on a straight-line basis over the estimated useful life of the software, which is generally six years, beginning when the asset is substantially ready for use. The amortization of capitalized software development costs is reflected in general and administrative expenses. Amortization expense for the periods ended March 31, 2024 and 2023 was $12 thousand and $11 thousand, respectively.

Impairment of Long-lived Assets

In accordance with ASC Topic 360-10-20, “Property, Plant and Equipment,” the Company performs an impairment test whenever events or circumstances indicate that the carrying value of long-lived assets with finite lives may be impaired. Impairment is measured by comparing the carrying value of the long-lived assets to the estimated undiscounted pre-tax cash flows expected to result from the use of such assets and their ultimate disposition. In circumstances where impairment is determined to exist, the Company will write down the asset to its fair value based on the present value of estimated cash flows. No impairments have been identified by management as of and for any periods presented.

Patents

Patent-related costs refer to legal fees incurred in connection with filing and prosecuting patent applications and are expensed as incurred due to uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.

15

Leases

The Company determines if an arrangement contains a lease at inception based on whether or not the Company has the right to control the asset during the contract period and other facts and circumstances, as per ASC 842. Operating lease right of use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a term of 12 months or less at inception are expensed on a straight-line basis over the lease term in the consolidated statement of operations. The Company determines the lease term by assuming the exercise of renewal options that are reasonably certain.

Accounts Payable

Accounts payable are reported at their nominal amounts due to their short-term maturities. Trade accounts payable are recorded net of trade discounts; cash discounts are recorded at the time of payment.

Payables for Social Security Charges

Social security charges are reported in compliance with rules and laws applicable in the countries where the Company’s employees work. Charges are accrued in accordance with the policies stipulated and in connection with salaries due for the period.

Accrued Expenses

As part of the process of preparing the Company’s consolidated financial statements, the Company is required to estimate its accrued expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with the Company personnel to identify services that have been performed on its behalf and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of the actual cost. The Company makes estimates of its accrued expenses as of each balance sheet date based on facts and circumstances known at the time of the preparation of its consolidated financial statements. There may be instances in which payments made to the Company’s vendors exceed the level of services provided, and result in a prepayment reported under other current assets, which is subsequently expensed in the consolidated statement of operations when the related activity has been performed. To date, there have been no material differences between the Company’s estimates of accrued expenses reported at each balance sheet date and the amounts actually incurred.

Pension Obligations

The Company operates defined benefit pension plan and defined contribution pension plans in accordance with local regulations and practices in the countries in which the Company operates. These plans are funded by regular contributions made by the Company and its employees. For the defined benefit pension plan, the liability recognized in the consolidated balance sheets is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The overfunded or underfunded status of the defined benefit plan is calculated as the difference between plan assets and the projected benefit obligations. Estimates are used in determining the assumptions incorporated in the calculation of the pension obligations, which is supported by input from independent actuaries. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the consolidated statements of equity under accumulated other comprehensive income (loss) and are charged or credited to income over the employees’ expected average remaining service period using the corridor amortization method. The measurement date used for the Company’s employees defined benefit plan is December 31.

For defined contribution pension plans, the Company pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Company has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due.

16

Stock-based Compensation and Warrants

The Company issues stock-based compensation with service-based, performance-based and market-based vesting conditions. The Company applies the fair value method of measuring equity-based compensation and warrants, which requires an entity to measure the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The Company recognizes the corresponding expense in the statement of operations  over the period the participants are required to render service. Forfeitures are recognized as they occur.

The fair value of each stock option award is estimated as of the grant date using the Black-Scholes option pricing model. The Company determines the volatility and the expected term of exercise for awards granted based on the actual volatility of its share price traded at Nasdaq and the best estimate of the timing of the exercise by the beneficiaries as of grant date. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The Company has not paid, and does not anticipate paying, cash dividends on its common stock; therefore, the expected dividend yield is assumed to be nil.

The Company recognizes expenses related to Restricted Stock Units (or RSUs) based on their fair market value, determined as the closing price on Nasdaq of the Company’s common stock as of the grant date, on a straight-line basis over the requisite service period. For Restricted Stock Units with performance-based vesting conditions (or PRSUs), the fair value at grant date is calculated based on management’s assessment of the likelihood of concurrence of the underlying performance.

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

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

Revenue Recognition

The Company derives limited revenue from its collaboration and licensing agreements. The Company recognizes revenue related to these agreements in accordance with ASC 606, “Revenues from Contracts with Customers” and ASC 808, “Collaborative Arrangements”. The terms of these arrangements typically include payment from third-party customers of one or more of the following: non-refundable initiation fee, reimbursement of development costs, future development and regulatory milestone payments and royalties on net sales of the licensed product.

In determining the appropriate amount of revenue to be recognized as we fulfill our obligations, the Company applies the five-step model of ASC606: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) it satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods and services it transfers to the customer. If a contract is determined to be within the scope of ASC 606 at inception, the Company assesses the goods or services promised within such contract, determines which of those goods and services are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.  

Costs and revenues associated with collaborative arrangements are reported in the consolidated statements of operations on a gross basis when the counterpart is identified as being a customer, when the performance obligations incurred and rendered to fulfil the agreements are deemed to be in the ordinary course of the Company’s business, or when there is an expectation that the collaborative arrangement will result in a future constant flow of revenues in the form of sales of products, royalties or licenses.

17

Research Grants

Under the terms of the research and development grants awarded, the Company is entitled to receive reimbursement of its allowable direct expenses and payroll costs. Contributions from research and development activities under the grants are recorded based on management’s best estimate of the periods in which the related expenditures are incurred and activities performed and are classified in the consolidated statement of operations as a reduction to research and development expenses. The reduction of research and development expenses related to research grants was $0.2 million and nil for the three months ended March 31, 2024, and 2023, respectively.

Research and Development Expenses

The Company expenses all costs incurred in performing research and development activities. Research and development expenses include salaries and other related costs, materials and supplies, preclinical expenses, manufacturing expenses, contract services and other third-party expenses.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, benefits and other related costs, for personnel and consultants in the Company’s executive, administrative and finance functions. General and administrative expenses also include professional fees for legal, finance, accounting, intellectual property, auditing, tax and consulting services, travel expenses and facility-related expenses, which include allocated expenses for rent and maintenance of facilities and other operating costs not otherwise included in research and development expenses.

Income taxes

The Company accounts for income taxes under the liability method. Under this method deferred income tax liabilities and assets are determined based on the difference between the financial statements carrying amounts of assets and liabilities and the related tax basis using enacted tax rates in effect in the years in which the associated deferred taxes are expected to reverse. A valuation allowance is recorded if it is “more likely than not” that a portion or all of a deferred tax asset will not be realized.

As of each reporting date, the Company considers existing evidence, both positive and negative, that could impact its view with regard to future realization of deferred tax assets. In consideration of the start-up status of the Company, a full valuation allowance has been established to offset the deferred tax assets, as the related realization is currently uncertain. In the future, should management conclude that it is more likely than not that the deferred tax assets are partially or fully realizable, the valuation allowance will be reduced to the extent of such expected realization, and the corresponding amount will be recognized as income tax benefit in the Company’s consolidated statement of operations.

Fair value measurement

The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels based on their observability in the market and degree of judgment involved:

Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive 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 – Inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

18

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 consider counterparty credit risk in their assessment of fair value.

Comprehensive income/(loss)

Comprehensive income/(loss) is composed of net income/(loss) and certain changes in stockholder’s equity that are excluded from the net income/(loss), primarily foreign currency translation adjustments, defined benefit obligation adjustments and unrealized income/(loss) on available for sale securities.

Net Loss per Share

Basic net loss per share is computed by dividing the reported net loss by the weighted average number of shares of common stock outstanding during the period and shares issuable for little or no cash consideration upon resolution of any applicable contingency. The Company gives consideration to all potentially dilutive impacts, except where the effect of including such securities would be antidilutive. As of March 31, 2024 and December 31, 2023, common stock equivalents consisted of stock options, RSUs, PRSUs and warrants. Because the Company has reported net losses since inception, these potential impacts would be anti-dilutive, and therefore common stock equivalents have been excluded from the computation, resulting in basic and diluted net loss per share being the same for all periods presented.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. There were no new accounting pronouncements effective in 2024 with a material impact on the Company’s consolidated financial statements.

3. Cash, cash equivalents and restricted cash

The Company considers all short-term and highly liquid investments, with an original maturity of three months or less, to be cash equivalents. The Company’s cash and cash equivalents include short-term highly liquid investments which are readily convertible into cash and relate to money market securities. The Company’s institutional money market accounts permit daily redemption, and the fair values of these investments are based upon the quoted prices in active markets provided by the holding financial institutions, which are considered Level 1 inputs in the fair value hierarchy. Given their short-term maturities and the underlying value being mainly represented by cash equivalents, their face value amount approximates the related fair market value.

The Company has not experienced any losses in these accounts and does not believe it is exposed to any significant credit risk on cash and cash equivalents.

Cash, cash equivalents and restricted cash are broken down as follows:

March 31, 

December 31, 

    

2024

    

2023

Cash

5,484,132

5,027,658

Money market

5,156,955

6,767,291

Total cash and cash equivalents

$

10,641,087

$

11,794,949

Restricted cash

$

31,744

$

34,021

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

19

4. Marketable Securities

As of March 31, 2024, the Company reports $2.0 million of marketable securities within current assets, related to United States Treasury Securities (“USTS”). The USTS in the portfolio will reach their final maturity in April 2024. The Company classifies the USTS, which are accounted for as available-for-sale, within the Level 1 fair value hierarchy as the fair value is based on quoted market prices in active markets with a high level of daily trading volume.

The following table summarizes the Company’s investment in available-for-sale marketable securities with the detail of the unrealized gains /losses and the estimated fair value as of March 31, 2024:

March 31, 2024

Gross

Gross

Allowance for

Unrealized

Unrealized

Estimated Fair

    

Amortized Cost

    

Credit Losses

    

Gains

    

Losses

    

Value

Marketable securities available for sale

Debt Securities - U.S. government treasury securities, current

2,020,060

(646)

2,019,414

Totals

$

2,020,060

$

$

$

(646)

$

2,019,414

As of March 31, 2024, the Company did not intend to sell any of the debt securities included in the table above, and it is not more likely than not that the Company will be required to sell any of these securities before recovery of the unrealized losses, which will be at maturity.

5. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

March 31, 

December 31, 

    

2024

    

2023

Tax credits

249,133

242,577

Prepaid and deferred expenses

 

952,889

 

608,638

Prepaid D&O insurance costs

133,000

Total prepaid expenses and other current assets

$

952,889

$

741,638

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

Prepaid expenses refers to pre-payments made to the Company’s vendors for future services. Deferred expenses mainly refer to research agreements entered with third parties for research projects that will be recognized as expenses throughout the research period.

20

6. Property and Equipment, net

Property and equipment, net consisted of the following:

    

March 31, 

    

December 31, 

2024

2023

Computer

$

81,261

$

83,894

Furniture and fixtures

 

58,932

 

62,825

Leasehold improvements

 

32,093

 

33,992

Laboratory instruments

 

37,215

 

38,048

Total property and equipment

$

209,501

$

218,759

Less: accumulated depreciation

 

(97,592)

 

(92,797)

Property and equipment, net

$

111,909

$

125,962

Property and equipment consist of computers, furniture and fixtures, lab instruments. No disposals, nor impairments occurred during the periods. Depreciation has been calculated by taking into consideration the use, purpose and financial-technical duration of the assets, based on their estimated economic lives. Depreciation expense for the three months ended March 31, 2024 and 2023 was $8 thousand.

7. Operating Lease

The Company’s leased assets include offices in Bethesda (Maryland, US), Lugano (Switzerland) and Barcelona (Spain). The current lease portfolio consists of leases with remaining terms ranging from one to three years. Renewal options are excluded from the calculation of lease liabilities since the Company is not reasonably certain that will exercise the renewal option. The Company’s lease agreements do not contain residual value guarantees or material restrictive covenants.

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

    

March 31, 

    

December 31, 

 

2024

2023

 

Operating Lease

 

  

 

  

Operating lease- right of use assets

$

384,146

$

459,215

Operating lease liability - current

$

204,569

$

229,693

Operating lease liability - non-current

$

177,365

$

229,855

Weighted average remaining lease term - years

 

2.04

 

2.25

Weighted average discount rate

 

1.51

 

1.51

The operating lease expenses are reported as follows:

    

March 31, 

    

March 31, 

2024

2023

Research and development

35,764

34,905

General and administrative

26,893

25,696

Total operating lease costs

$

62,657

$

60,601

21

The future minimum lease payments for the Company’s operating leases as of March 31, 2024, are as follows:

Fiscal Year

Operating Leases

March 31, 2025

208,510

March 31, 2026

148,669

March 31, 2027

30,477

Total future minimum lease payments

387,656

Less amount representing interest or imputed interest

5,722

Present value of lease liabilities

$

381,934

8. Accounts Payable

Accounts payable refer to amounts due to third parties on outstanding invoices received for services already provided. As of March 31, 2024 and December 31, 2023, accounts payable amounted to $1.4 million and $1.3 million, respectively. All accounts payable are due in less than 12 months.

9. Other Current Liabilities and Deferred Income

Other current liabilities and deferred income consist of the following as of March 31, 2024 and December 31, 2023:

March 31, 

December 31, 

    

2024

    

2023

Payable for social security and withholding taxes

$

179,496

$

368,345

Accrued payroll

 

1,012,434

 

726,474

Accrued expenses

 

1,102,196

 

1,016,582

Tax provision

74,680

48,965

Total other current liabilities

$

2,368,806

$

2,160,366

Deferred income

 

979,059

 

1,216,924

Total other current liabilities and deferred income

$

3,347,865

$

3,377,290

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

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

Deferred income refers to the upfront payment that the Company has received in the second quarter of 2023 after the successful application regarding research and development grants with Innosuisse.

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

22

10. Pension Obligations

Net pension obligation related to the Company’s defined benefit pension plan refers only to Swiss employees and as of March 31, 2024 and December 31, 2023, can be summarized as follows:

March 31, 

December 31, 

    

2024

    

2023

Reconciliation of funded status:

Funded status beginning of period

$

(307,454)

$

(157,580)

Expense

(37,976)

(149,309)

Employer contribution

30,118

143,599

Translation differences

21,740

(16,563)

Change in accumulated other comprehensive income

1,086

(127,601)

Funded status at end of period

$

(292,486)

$

(307,454)

Component of net periodic pension costs:

Service cost

$

35,923

$

144,565

Interest cost

3,734

19,264

Expected return on plan assets

(2,802)

(11,786)

Amortization of (gain)/losses

2,077

Amortization of prior service cost

(956)

(2,734)

Total

$

37,976

$

149,309

Service cost is reported in general and administrative expenses. All other components of net period costs are reported in interest income, net in the consolidated statement of operations.

11. Loans

In August 2020, the Company obtained a CHF 638,000 ($700,221 at the historical foreign exchange rate) nine-year loan. The loan has zero interest and is due in quarterly installments of CHF 20,000, with payments commencing on December 31, 2021 and ending on September 30, 2029. The loan is part of the infrastructure put in place by the Federal Council and Swiss Parliament in view of the economic consequences of the COVID-19 pandemic, and the loan issued under the program does not bear interest and there are no applicable issuance costs. The Company accounts for this loan at face value, which is deemed to approximate the related fair value.

The future payments under the loan are reported in the table below:

March, 31

    

Total

    

2024

    

2025

    

2026

    

2027

    

2028

    

Thereafter

Loan

$

507,684

110,848

88,678

88,678

88,678

88,678

42,124

12. Fair Value Measurement

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an 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 Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The carrying amounts of the Company’s cash and cash equivalents, including money market funds, restricted cash and financial liabilities are considered to be representative of their respective fair values because of the short-term nature and the contractual terms of those instruments. The fair values of money market funds are based upon the quoted prices in active markets provided by the holding financial institution, which are considered Level 1 inputs in the fair value hierarchy

23

according to ASC 820. There have been no changes to the valuation methods utilized by the Company, nor were there transfers between levels of the fair value hierarchy.

Fair value measurement at reporting date

Quoted prices in active market for identical assets

Significant other observable inputs

Significant unobservable inputs

    

(level 1)

    

(level 2)

    

(level 3)

March 31, 2024:

Assets

Marketable securities available for sale

Debt securities - U.S. government treasury securities, current

2,019,414

Total marketable securities available for sale

$

2,019,414

$

$

Cash equivalents:

Money market funds

5,156,955

Total cash equivalents

$

5,156,955

$

$

Total financial assets

$

7,176,369

$

$

December 31, 2023:

Assets

Marketable securities available for sale

Debt securities - U.S. government treasury securities, current

4,999,704

Total marketable securities available for sale

$

4,999,704

$

$

Cash equivalents:

Money market funds

6,767,291

Total cash equivalents

$

6,767,291

$

$

Total financial assets

$

11,766,995

$

$

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

13. Common, Preferred Stock and Warrants

As of March 31, 2024 and December 31, 2023, the authorized capital stock of the Company included 50,000,000 shares of common stock, $0.0001 par value and 10,000,000 shares of preferred stock, $0.0001 par value. As of March 31, 2024 and December 31, 2023, there were 18,041,231 and 16,206,680 shares of common stock respectively, $0.0001 par value, issued and outstanding.

At the market offering

In May 2022, the Company entered into a Controlled Equity OfferingSM Sales Agreement with Cantor Fitzgerald, Inc. (“Cantor”), pursuant to which the Company was able to sell from time to time, through the Agent, shares of common stock, having an aggregate offering price of up to $16.0 million (the “ATM Program”). Sales under the ATM Program are made by any method permitted by law that is deemed to be an “at the market” offering as defined in Rule 415 issued under the Securities Act, including, without limitation, sales made directly on the Nasdaq Capital Market, on any other existing trading market for the Company’s common stock, through a market maker or as otherwise agreed by the Company and Cantor. For the year ended December 31, 2023 the Company sold an aggregate of 862,535 shares of common stock under

24

the ATM Program at an average selling price of $4.60 per share for aggregate gross proceeds of $3.9 million (of which $0.4 million reflect sales commissions and other offering expenses). The Sales Agreement was terminated in conjunction with the public offering and concurrent private placement of shares of the Company’s common stock in November 2023 as described below.

Public Offering

In November 2023, we completed the public offering of 2,545,000 shares of our common stock and warrants to purchase 1,272,500 shares of our common stock (the “Public Warrants”). The warrants have been offered and sold at the rate of one warrant for every two shares of common stock purchased. The public offering price for each set of two shares of common stock and accompanying warrant to purchase one share of common stock was $4.01, yielding an effective price of $2.00 per share and $0.01 per warrant.

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

Private Placement

In a private placement completed concurrently with the public offering described above we also issued to accredited investors 744,026 shares of our common stock, 1,756,062 pre-funded warrants (the “Pre-Funded Warrants”) to purchase an equal amount of our common stock at the nominal exercise price of $0.0001 and private warrants to purchase 2,500,088 shares of our common stock (the “Private Warrants”). The “Private Warrants” have been offered and sold at the rate of one warrant for every share of common stock (or pre-funded warrant in lieu thereof) purchased in the private placement. The private placement price per share (or pre-funded warrant in lieu thereof) and accompanying private warrant to purchase one share of common stock was $2.00 per set of securities sold privately.

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

The public offering and the concurrent private placement that were finalized in the fourth quarter of the year ended December 31, 2023, resulted in combined gross proceeds of $10.1 million, which includes $1.2 million of underwriting commissions, placement agent’s fees and other expenses connected with the financing round.

Below is a summary of the Company’s issued and outstanding warrants as of March 31, 2024:

Warrants

Weighted Average

Warrants

Exercisable

Expiration Date

Exercise Price

  

Outstanding

  

as of March 31, 2024

July 20, 2025

$

5.07

225,387

225,387

May 6, 2025

$

13.75

200,000

200,000

November 24, 2028

$

2.75

4,094,363

1,241,119

Outstanding as of March 31, 2024

$

3.35

4,519,750

1,666,506

The following table summarizes the Company’s warrants activity for the three months ended March 31, 2024:

Weighted Average

   

Warrants

Exercise Price

Outstanding as of December 31, 2023

6,307,193

2.42

Exercised:

Pre-funded Warrants

(1,756,062)

Public Warrants

(31,381)

2.75

Outstanding as of March 31, 2024

4,519,750

3.35

25

14. Equity Incentive Plans

On September 24, 2020, the Board adopted the 2020 Omnibus Incentive Plan (the “2020 Omnibus Plan”). The 2020 Omnibus Plan provided for the granting of equity-based awards to our named executive officers, other employees, consultants and non-employee directors at a price to be determined by the Company’s Board. On May 12, 2022, the Board approved the Company’s 2022 Equity Incentive Plan (the “2022 Plan”), which was approved at the Company’s annual meeting of stockholders on June 16, 2022. The 2022 Plan is the successor to and continuation of the 2020 Omnibus Plan. The total number of shares reserved for issuance under the 2022 Plan (including shares remaining available under the 2020 Omnibus Plan) is 1,800,000, which increases automatically by 6% every year on January 1, based on the number of shares of common stock issued and outstanding as of the previous year-end. No incentive stock options may be granted under the 2022 Plan after May 12, 2032 and the Board may suspend or terminate the 2022 Plan at any time. The Board is responsible for administering the 2022 Plan.

In addition to the above, on December 23, 2021, the Board adopted the Inducement Equity Incentive Plan (the “2021 Inducement Equity Incentive Plan”), intended to induce new employees to join the Company for the benefit of individuals who satisfy the standards for inducement grants under Rule 5635(c)(4) of the Nasdaq Listing Rules. The maximum number of shares reserved for issuance pursuant to awards granted under the 2021 Inducement Equity Incentive Plan is 1,000,000.

Stock Option Grants

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2024: