Gain Therapeutics(GANX) - 2023 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Presents Gain Therapeutics' unaudited condensed consolidated financial statements and detailed notes for Q1 2023 and 2022 Item 1. Condensed Consolidated Financial Statements Presents unaudited consolidated financial statements and notes for Q1 2023 and 2022 Condensed Consolidated Balance Sheets (Unaudited) Details the company's financial position (assets, liabilities, equity) as of March 31, 2023, and December 31, 2022 Condensed Consolidated Balance Sheets (Unaudited) Table | Metric | Dec 31, 2022 ($) | Mar 31, 2023 ($) | | :--------------------------------- | :--------------- | :--------------- | | Cash and cash equivalents | 7,311,611 | 5,988,202 | | Marketable securities - current | 12,826,954 | 11,827,528 | | Total current assets | 21,091,296 | 19,321,984 | | Total assets | 24,099,387 | 21,322,575 | | Accounts payable | 1,626,100 | 2,213,489 | | Total current liabilities | 4,125,251 | 5,154,959 | | Total liabilities | 5,219,873 | 6,183,745 | | Total stockholders' equity | 18,879,514 | 15,138,830 | Condensed Consolidated Statements of Operations (Unaudited) Details the company's revenues, expenses, and net loss for the three months ended March 31, 2023, and 2022 Condensed Consolidated Statements of Operations (Unaudited) Table | Metric | 3 Months Ended Mar 31, 2023 ($) | 3 Months Ended Mar 31, 2022 ($) | | :--------------------------------------- | :------------------------------ | :------------------------------ | | Total revenues | 55,180 | 45,006 | | Research and development expenses | (2,791,205) | (1,556,440) | | General and administrative expenses | (2,493,759) | (1,777,043) | | Total operating expenses | (5,284,964) | (3,333,483) | | Loss from operations | (5,229,784) | (3,288,477) | | Net loss | (5,137,319) | (3,272,643) | | Net loss per share - basic and diluted | (0.43) | (0.28) | Condensed Consolidated Statements of Comprehensive (Loss) (Unaudited) Reports net loss and other comprehensive income/loss for Q1 2023 and 2022 Condensed Consolidated Statements of Comprehensive (Loss) (Unaudited) Table | Metric | 3 Months Ended Mar 31, 2023 ($) | 3 Months Ended Mar 31, 2022 ($) | | :---------------------------------- | :------------------------------ | :------------------------------ | | Net loss | (5,137,319) | (3,272,643) | | Unrealized gain on available-for-sale securities | 43,262 | — | | Foreign currency translation | 18,091 | (27,806) | | Other comprehensive income/(loss) | 60,683 | (23,657) | | Comprehensive loss | (5,076,636) | (3,296,300) | Condensed Consolidated Statement of Stockholders' Equity (Unaudited) Outlines changes in stockholders' equity, including net loss and stock-based compensation Condensed Consolidated Statement of Stockholders' Equity (Unaudited) Table | Metric | Dec 31, 2022 ($) | Mar 31, 2023 ($) | | :--------------------------------- | :--------------- | :--------------- | | Balance as of period end | 18,879,514 | 15,138,830 | | Stock-based compensation | — | 565,432 | | Issuance of shares in ATM offering | — | 770,520 | | Net loss | (5,137,319) | (5,137,319) | Condensed Consolidated Statements of Cash Flows (Unaudited) Summarizes cash flows from operating, investing, and financing activities for Q1 2023 and 2022 Condensed Consolidated Statements of Cash Flows (Unaudited) Table | Metric | 3 Months Ended Mar 31, 2023 ($) | 3 Months Ended Mar 31, 2022 ($) | | :--------------------------------------- | :------------------------------ | :------------------------------ | | Cash used in operating activities | (4,217,415) | (2,447,391) | | Cash provided by/(used in) investing activities | 2,106,980 | (7,825) | | Cash provided by/(used in) financing activities | 748,908 | (37,974) | | Net (decrease)/increase in cash, cash equivalents and restricted cash | (1,323,105) | (2,542,507) | | Cash, cash equivalents and restricted cash at end of period | 6,019,324 | 34,369,445 | Notes to Condensed Consolidated Financial Statements (Unaudited) Provides detailed explanations of financial statement figures, business nature, and significant accounting policies 1. Nature of the Business and Basis of Presentation Describes Gain Therapeutics' biotechnology focus, drug discovery platform, and ongoing financial challenges - Gain Therapeutics is a biotechnology company developing novel small molecule therapeutics for CNS disorders, LSDs, metabolic disorders, and oncology36 - The company uses its exclusively in-licensed computational target and drug discovery platform, Site-Directed Enzyme Enhancement Therapy ("SEE-Tx®"), to discover novel allosteric binding sites and identify proprietary small molecules36 - The company has incurred recurring losses and negative cash flows from operations since inception and anticipates needing additional capital to fund operations into the third quarter of 202443 46 2. Summary of Significant Accounting Policies Outlines the key accounting principles and methods used in preparing the financial statements - The company's functional currency is USD, with foreign operations in Switzerland (Swiss Franc) and Spain (Euro), and translation adjustments are recorded in accumulated other comprehensive income/(loss)51 - Marketable securities are classified as available-for-sale and carried at fair value, with unrealized gains/losses excluded from net income and accounted for in other comprehensive loss55 - All costs incurred in performing research and development activities are expensed as incurred88 3. Cash, cash equivalents and restricted cash Details the composition of cash, cash equivalents, and restricted cash balances 3. Cash, cash equivalents and restricted cash Table | Category | March 31, 2023 ($) | December 31, 2022 ($) | | :----------------------------- | :------------------- | :-------------------- | | Cash | 2,911,404 | 2,910,446 | | Money market | 3,076,798 | 4,401,165 | | Total cash and cash equivalents | 5,988,202 | 7,311,611 | | Restricted cash | 31,122 | 30,818 | - Restricted cash is held as a guarantee for expenses under the company's office lease agreement in Lugano98 4. Marketable Securities Provides a breakdown of marketable securities, primarily U.S. Treasury Securities, and their fair values 4. Marketable Securities Table | Category | Amortized Cost ($) | Estimated Fair Value ($) | Gross Unrealized Gains ($) | Gross Unrealized Losses ($) | | :--------------------------------------- | :----------------- | :----------------------- | :----------------------- | :------------------------ | | Debt Securities - U.S. government treasury securities, current | 11,879,563 | 11,827,528 | — | (52,035) | | Debt Securities - U.S. government treasury securities, non-current | 987,370 | 988,388 | 1,018 | — | | Totals | 12,866,933 | 12,815,916 | 1,018 | (52,035) | - Marketable securities are primarily U.S. Treasury Securities with maturities from April 2023 to April 2024, classified as available-for-sale99 5. Prepaid Expenses and Other Current Assets Itemizes the company's prepaid expenses and other current assets 5. Prepaid Expenses and Other Current Assets Table | Category | March 31, 2023 ($) | December 31, 2022 ($) | | :----------------------------- | :------------------- | :-------------------- | | Tax credits | 137,383 | 103,877 | | Prepaid and deferred expenses | 730,108 | 552,882 | | Other receivables | 33,261 | 87,430 | | Prepaid D&O insurance costs | 605,502 | 208,542 | | Total | 1,368,871 | 848,854 | 6. Property and Equipment, net Presents the net value of property and equipment after accumulated depreciation 6. Property and Equipment, net Table | Category | March 31, 2023 ($) | December 31, 2022 ($) | | :----------------------- | :------------------- | :-------------------- | | Total property and equipment | 206,899 | 197,708 | | Less: accumulated depreciation | (62,263) | (53,329) | | Property and equipment, net | 144,636 | 144,379 | - Depreciation expense for the three months ended March 31, 2023, was $8,300, up from $5,300 in the same period of 2022103 7. Operating Lease; Right of Use ("ROU") Assets Details the company's operating lease assets and liabilities, including lease terms and discount rates 7. Operating Lease; Right of Use ("ROU") Assets Table | Category | March 31, 2023 ($) | December 31, 2022 ($) | | :------------------------------ | :------------------- | :-------------------- | | Operating lease- right of use assets | 609,877 | 659,933 | | Operating lease liability - current | 232,507 | 229,080 | | Operating lease liability - non-current | 385,922 | 441,784 | | Weighted average remaining lease term - years | 2.90 | 3.05 | | Weighted average discount rate | 1.52 | 1.53 | - Operating lease costs for the three months ended March 31, 2023, were $60,601, compared to $58,170 in the prior year106 8. Accounts Payable Reports the company's accounts payable balance as of the reporting dates - Accounts payable increased to $2.2 million as of March 31, 2023, from $1.6 million as of December 31, 2022108 9. Other Current Liabilities and Deferred Income Itemizes other current liabilities and deferred income balances 9. Other Current Liabilities and Deferred Income Table | Category | March 31, 2023 ($) | December 31, 2022 ($) | | :------------------------------------ | :------------------- | :-------------------- | | Payable for social security and withholding taxes | 225,772 | 256,798 | | Accrued payroll | 990,025 | 660,556 | | Accrued expenses | 1,263,183 | 1,082,091 | | Tax provision | 120,783 | 107,311 | | Total other current liabilities | 2,599,763 | 2,106,756 | | Deferred income | — | 55,180 | 10. Pension Obligations Details the company's funded status and costs related to pension obligations 10. Pension Obligations Table | Metric | March 31, 2023 ($) | December 31, 2022 ($) | | :--------------------------------- | :------------------- | :-------------------- | | Funded status at end of period | (164,568) | (157,580) | | Service cost (3 months ended Mar 31) | 35,078 | 169,709 | | Interest cost (3 months ended Mar 31) | 4,675 | 3,376 | 11. Loans Describes the company's zero-interest loan and its future payment schedule - The company has a CHF 638,000 ($700,221 historical FX rate) nine-year, zero-interest loan obtained in August 2020, with quarterly payments of CHF 20,000 starting December 31, 2021, and ending September 30, 2029113 11. Loans Table | Year | Loan Payments ($) | | :--------- | :---------------- | | Total | 587,496 | | 2024 | 109,200 | | 2025 | 87,360 | | 2026 | 87,360 | | 2027 | 87,360 | | 2028 | 87,360 | | Thereafter | 128,856 | 12. Fair Value Measurement Presents financial assets measured at fair value, categorized by input levels 12. Fair Value Measurement Table | Category | March 31, 2023 ($) | December 31, 2022 ($) | | :--------------------------------------- | :------------------- | :-------------------- | | Marketable securities available for sale | 12,815,916 | 14,768,442 | | Cash equivalents: Money market funds | 3,076,798 | 4,401,165 | | Total financial assets | 15,892,714 | 19,169,607 | - All financial assets measured at fair value are classified as Level 1 inputs, based on quoted prices in active markets116 119 13. Common and Preferred Stock Details the number of common shares issued and outstanding, and recent ATM program activities - As of March 31, 2023, 12,087,142 shares of common stock were issued and outstanding, compared to 11,883,368 shares as of December 31, 2022120 - During the three months ended March 31, 2023, the company sold 203,774 shares of common stock under its ATM Program at an average price of $4.48 per share, generating aggregate net proceeds of $0.8 million121 122 14. Equity Incentive Plans Outlines stock option, restricted stock unit, and performance restricted stock unit plans Stock Option Grants Provides details on stock options outstanding, their fair value, and exercise prices Stock Option Grants Table | Metric | Dec 31, 2022 | Mar 31, 2023 | | :--------------------------------- | :----------- | :----------- | | Options outstanding | 1,879,662 | 2,438,512 | | Weighted Average Grant Date Fair Value | $2.94 | $3.05 | | Weighted Average Exercise Price | $4.42 | $4.50 | - 558,850 options were granted during the three months ended March 31, 2023, with a weighted average grant date fair value of $3.46128 131 Restricted Stock Units and Performance Restricted Stock Units Details outstanding restricted stock units, their fair value, and vesting periods Restricted Stock Units and Performance Restricted Stock Units Table | Metric | Dec 31, 2022 | Mar 31, 2023 | | :--------------------------------- | :----------- | :----------- | | RSUs outstanding | 103,050 | 295,550 | | Weighted average Grant Date Fair Value | $3.48 | $3.97 | | Weighted average Duration of Vesting Period (years) | 2.40 | 3.44 | - 192,500 RSUs were granted during the three months ended March 31, 2023, with a weighted-average grant date fair value of $4.24133 - Total unrecognized compensation cost related to non-vested stock options and RSUs was $5.7 million as of March 31, 2023, expected to be recognized over 4 years135 15. Warrants Describes the outstanding equity-classified warrants, including exercise prices and expiration dates - 237,249 equity-classified warrants are outstanding with an exercise price of $5.07 per share, exercisable until July 20, 2025136 - An additional 200,000 equity-classified warrants are outstanding with an exercise price of $13.75 per share, exercisable for four years from May 6, 2021137 16. Collaboration Agreement Discusses the concluded multi-target collaboration agreement with Zentalis for cancer treatment - The multi-target collaboration agreement with Zentalis to discover new product candidates for cancer treatment has concluded138 141 17. Net loss per common share Presents basic and diluted net loss per common share and weighted-average shares outstanding 17. Net loss per common share Table | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Net loss per share - basic and diluted | (0.43) | (0.28) | | Weighted-average common shares - basic and diluted | 11,935,081 | 11,883,368 | - Potentially dilutive securities (stock options, RSUs, PRSUs, and warrants) were excluded from diluted EPS calculation as their effect would be anti-dilutive due to the company's net losses94 142 143 18. Related Parties Identifies related parties and outlines the exclusive license agreement with Minoryx Therapeutics SL - Minoryx Therapeutics SL is a related party due to shared board chairmanship144 - The company has an exclusive worldwide license agreement with Minoryx for intellectual property, with royalty payments of 8% on net revenues from products infringing composition of matter claims or Minoryx molecules, and 3% on net revenues from products infringing method claims or Minoryx know-how144 147 19. Commitments Details the company's research commitments for the current fiscal year - As of March 31, 2023, the company had $3.2 million in research commitments for activities to be performed in fiscal year 2023146 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Analyzes Gain Therapeutics' business, financial condition, and operating results for Q1 2023 vs Q1 2022 Overview Provides a high-level description of Gain Therapeutics' biotechnology focus and strategic operational plans - Gain Therapeutics is a biotechnology company developing novel small molecule therapeutics for CNS disorders, lysosomal storage disorders (LSDs), metabolic disorders, and oncology using its SEE-Tx® platform150 - The lead product candidate, GT-02287 for GBA1 Parkinson's disease, has completed IND-enabling toxicology studies, with a Phase 1 clinical trial expected to begin in Australia in the second half of 2023151 - The company is streamlining operational plans to become more capital efficient, focusing on Parkinson's and Gaucher disease programs, and seeking non-dilutive funding for other research programs, including Krabbe disease and alpha-1 antitrypsin deficiency, and new oncology programs153 154 Recent Developments Highlights recent grants awarded and key personnel appointments - Awarded a €1.2 million (approx. $1.3 million) Eurostars and Innosuisse grant for the alpha-1 antitrypsin deficiency program, with research starting in Q2 2023156 - Awarded a CHF 2.5 million (approx. $2.8 million) Innosuisse grant for the GBA1 Parkinson's disease program, with research starting in Q2 2023157 - Appointed C. Evan Ballantyne as Chief Financial Officer on May 3, 2023157 Financial Condition Assesses the company's financial health, including accumulated deficit and capital runway - The company has incurred recurring losses and negative cash flows from operations since inception, with an accumulated deficit of $43.6 million as of March 31, 2023 (vs. $38.5 million at Dec 31, 2022)160 - As of March 31, 2023, cash, cash equivalents, and marketable securities totaled $18.8 million160 - Management believes existing capital will fund operating expenses and capital expenditure requirements into the third quarter of 2024, but substantial additional financing is needed for product development and potential commercialization161 Financing Requirements; Current Financing Environment Discusses future capital needs and macroeconomic impacts on financing - Future cash needs are expected to be financed through public/private equity offerings (including ATM Program), debt financings, government/private grants, collaborations, strategic alliances, and licensing arrangements162 - Worsening global macroeconomic conditions (war in Ukraine, geopolitical tension, inflation, rising interest rates, bank liquidity concerns, capital market volatility) may impact the ability to obtain additional financing on favorable terms163 Strategic Transactions; Collaboration and Licensing Agreement Explains the company's approach to collaborations and licensing for its SEE-Tx® platform - The company enters into collaboration and licensing arrangements to use its SEE-Tx® computational platform technology to discover novel allosteric sites and identify proprietary small molecules164 Components of Our Consolidated Results of Operations Details primary components of consolidated results: limited revenue and significant R&D and G&A expenses Revenue Discusses the company's historical and expected revenue sources - The company has not generated any revenue from product sales and does not expect to in the foreseeable future165 - Historically, limited collaboration revenue was derived from the Zentalis collaboration agreement165 Total Operating Expenses Explains the composition of the company's operating expenses - Operating expenses since inception have consisted solely of research and development and general and administrative costs166 Research and Development Expenses Analyzes the trends and drivers of research and development expenditures Research and Development Expenses Table | Category | 3 Months Ended Mar 31, 2023 ($) | 3 Months Ended Mar 31, 2022 ($) | | :--------------------------------- | :------------------------------ | :------------------------------ | | Preclinical activities and outside services | 1,676,704 | 794,296 | | Personnel expenses | 980,576 | 726,954 | | Other | 133,925 | 69,899 | | Research grants | — | (34,709) | | Total research and development expenses | 2,791,205 | 1,556,440 | - The increase in R&D expenses was primarily due to increased third-party services related to Parkinson's and Gaucher disease programs179 - R&D expenses are anticipated to increase substantially in future periods due to increased headcount, expanded infrastructure, increased insurance costs, and the commencement of clinical trials169 171 General and Administrative Expenses Examines the changes and factors influencing general and administrative costs - General and administrative expenses increased by $0.7 million to $2.5 million for the three months ended March 31, 2023, compared to $1.8 million for the same period in 2022180 - The increase was primarily due to higher legal fees (intellectual property and corporate matters), directors and officers insurance, professional accounting fees, and increased personnel-related costs (headcount and stock-based compensation)180 Other Financial Income (Expense) Presents non-operating financial income and expenses, including interest and foreign exchange Other Financial Income (Expense) Table | Metric | 3 Months Ended Mar 31, 2023 ($) | 3 Months Ended Mar 31, 2022 ($) | | :--------------------------------- | :------------------------------ | :------------------------------ | | Interest income, net | 152,035 | (1,651) | | Foreign exchange gain/(loss), net | (42,842) | 19,162 | Consolidated Results of Operations Summarizes net loss and key drivers for Q1 2023 compared to 2022 Comparison of the Three Months ended March 31, 2023 and 2022 Provides a detailed comparative analysis of financial performance between the two periods Revenues Compares total revenues for the three months ended March 31, 2023, and 2022 Revenues Table | Metric | 3 Months Ended Mar 31, 2023 ($) | 3 Months Ended Mar 31, 2022 ($) | | :----------------------- | :------------------------------ | :------------------------------ | | Total revenues | 55,180 | 45,006 | Research and Development Expenses Compares research and development expenses for the three months ended March 31, 2023, and 2022 Research and Development Expenses Table | Metric | 3 Months Ended Mar 31, 2023 ($) | 3 Months Ended Mar 31, 2022 ($) | | :--------------------------------- | :------------------------------ | :------------------------------ | | Research and development expenses | 2,791,205 | 1,556,440 | General and Administrative Expenses Compares general and administrative expenses for the three months ended March 31, 2023, and 2022 General and Administrative Expenses Table | Metric | 3 Months Ended Mar 31, 2023 ($) | 3 Months Ended Mar 31, 2022 ($) | | :--------------------------------- | :------------------------------ | :------------------------------ | | General and administrative expenses | 2,493,759 | 1,777,043 | Liquidity and Capital Resources Assesses the company's ability to meet short-term and long-term financial obligations - As of March 31, 2023, cash, cash equivalents, and marketable securities totaled $18.8 million (down from $22.1 million at Dec 31, 2022)182 - The company had an accumulated deficit of $43.6 million as of March 31, 2023182 - Management believes existing capital will fund operating expenses and capital expenditure requirements into the third quarter of 2024182 - The company has approximately $15 million of remaining capacity under its ATM Program as of March 31, 2023184 Cash Flows Analyzes cash flows from operating, investing, and financing activities for Q1 2023 and 2022 Cash Flows from Operating Activities Details cash used in operating activities for the three months ended March 31, 2023, and 2022 Cash Flows from Operating Activities Table | Metric | 3 Months Ended Mar 31, 2023 ($) | 3 Months Ended Mar 31, 2022 ($) | | :--------------------------------- | :------------------------------ | :------------------------------ | | Cash used in operating activities | (4,217,415) | (2,447,391) | Cash Flows from Investing Activities Details cash from investing activities for Q1 2023 and 2022 Cash Flows from Investing Activities Table | Metric | 3 Months Ended Mar 31, 2023 ($) | 3 Months Ended Mar 31, 2022 ($) | | :--------------------------------------- | :------------------------------ | :------------------------------ | | Cash provided by/(used in) investing activities | 2,106,980 | (7,825) | - Investing activities were positively impacted by $4.1 million from marketable securities maturities, partially offset by $2.0 million in purchases190 Cash Flows from Financing Activities Details cash from financing activities for Q1 2023 and 2022 Cash Flows from Financing Activities Table | Metric | 3 Months Ended Mar 31, 2023 ($) | 3 Months Ended Mar 31, 2022 ($) | | :--------------------------------------- | :------------------------------ | :------------------------------ | | Cash provided by/(used in) financing activities | 748,908 | (37,974) | | Net (decrease)/increase in cash, cash equivalents and restricted cash | (1,323,105) | (2,542,507) | | Cash, cash equivalents and restricted cash at end of period | 6,019,324 | 34,369,445 | - Cash provided by financing activities was mainly related to the ATM Program191 Funding Requirements Discusses the factors influencing future funding needs and potential financing strategies - Future funding requirements depend on the scope, timing, progress, and results of R&D, preclinical studies, and clinical trials for product candidates193 194 - The company expects to finance operations through equity offerings, debt financings, government/private grants, collaborations, strategic alliances, and licensing arrangements194 - Inability to obtain additional funds on acceptable terms could lead to delays, reductions, or elimination of R&D programs, commercialization efforts, or curtailment of operations194 Critical Accounting Policies and Use of Estimates Highlights key accounting policies and estimates requiring significant management judgment - The preparation of financial statements requires estimates and judgments related to accrued expenses, defined benefit pension liability, share-based compensation, and research grants195 - No material changes to critical accounting policies occurred during the three months ended March 31, 2023195 JOBS Act Explains the company's status as an "emerging growth company" and associated reporting exemptions - The company qualifies as an "emerging growth company" under the JOBS Act, allowing reliance on reduced reporting requirements196 419 - Exemptions include reporting only two years of audited financial statements, exemption from auditor attestation for internal control over financial reporting, and reduced executive compensation disclosures196 419 - The "emerging growth company" status will continue until the earliest of December 31, 2026, or if annual gross revenue exceeds $1.07 billion, or if $1.0 billion in non-convertible debt is issued, or if market value of non-affiliate held common stock exceeds $700 million197 420 Item 3. Quantitative and Qualitative Disclosures About Market Risk States that as a "smaller reporting company," Gain Therapeutics is exempt from market risk disclosures - As a "smaller reporting company," Gain Therapeutics is not required to provide quantitative and qualitative disclosures about market risk198 Item 4. Controls and Procedures Management concluded disclosure controls were effective, with no material changes in internal control Evaluation of Disclosure Controls and Procedures Management's assessment of the effectiveness of disclosure controls and procedures - Disclosure controls and procedures were evaluated by management, including the CEO and CFO, and concluded to be effective at the reasonable assurance level as of March 31, 2023201 Changes in Internal Control over Financial Reporting Reports on any material changes in internal control over financial reporting during the period - No material changes in internal control over financial reporting occurred during the period covered by this Quarterly Report202 Inherent Limitations on Effectiveness of Controls Acknowledges the inherent limitations of control systems in providing absolute assurance - Control systems provide reasonable assurance but cannot guarantee absolute assurance that objectives will be met or that all misstatements/fraud will be detected203 PART II—OTHER INFORMATION Presents additional information not covered in financial statements, including legal, risk, and equity details Item 1. Legal Proceedings. The company is not involved in material legal proceedings, nor aware of any threatened actions - The company is not currently a party to any material legal proceedings205 - No pending or threatened legal proceedings are known that could adversely affect the business, operating results, or financial condition205 Item 1A. Risk Factors. Details significant risks impacting operations, financial condition, and stock price Risk Factor Summary Provides a concise overview of the company's most significant operational and financial risks - The company has a history of operating losses and expects to incur losses for the foreseeable future, with no guarantee of generating revenues or achieving profitability208 211 - Significant risks include the inability to initiate or complete preclinical/clinical trials, challenges in patient enrollment for low-prevalence disorders, and the uncertainty of developing novel product candidates213 - The company will need to raise additional capital, which may dilute stockholders, restrict operations, or require relinquishing rights to technologies/product candidates213 - Other key risks include extensive government regulation, potential lack of market acceptance for approved products, reliance on licensed intellectual property (SEE-Tx® platform), and the adverse effects of global macroeconomic conditions and data privacy/security laws213 Risks Related to Our Business Discusses risks inherent to the business model, including operating losses and future success uncertainty - The company has a history of operating losses and expects to incur losses for the foreseeable future, with no significant revenues generated to date211 - Future success is uncertain due to dependence on product candidate development, ability to scale operations, establish brand, expand to meet commercial demand, and minimize security risks212 - Operating results are expected to fluctuate due to factors such as funding, preclinical/clinical trial progress, regulatory approvals, market acceptance, competition, and global macroeconomic conditions217 222 Risks Related to Product Development, Regulatory Approval, Manufacturing and Commercialization Outlines risks in developing, approving, manufacturing, and commercializing product candidates - Conducting clinical trials outside the U.S. (e.g., Australia for Parkinson's program) carries risks, as the FDA may not accept foreign data, potentially delaying or halting development221 224 - Low prevalence of target disorders may lead to difficulties and delays in patient identification and enrollment for clinical trials, increasing development costs233 234 - Product candidates are novel and in early development, requiring extensive testing; success in early preclinical studies is not indicative of later clinical trial results, and there's a high failure rate in late-stage trials239 241 243 - Product candidates may cause serious adverse events (SAEs) or undesirable side effects, which could delay or prevent marketing approval, or lead to market withdrawal or sales limitations269 270 Risks Related to Our Financial Condition and Capital Requirements; Competition Addresses risks concerning financial stability, capital needs, and industry competition - Substantial additional capital is required for R&D, preclinical/clinical trials, and marketing, which may dilute stockholders, restrict operations, or require relinquishing rights to technologies/product candidates278 280 - The company faces intense competition from existing and future drugs marketed by large companies with substantially greater resources283 286 - Competition and technological change may render product candidates and technologies less attractive or obsolete, as other companies may develop products earlier, obtain approval faster, or develop more effective treatments289 290 Risks Related to Our Intellectual Property Details risks concerning intellectual property, including licensing, patents, and trade secrets - The company is significantly dependent on its exclusive license with Minoryx Therapeutics S.L. for the SEE-Tx® platform; termination of this license would materially adversely affect the business298 299 - Ability to obtain and enforce patents is uncertain; patents may be challenged, invalidated, or circumvented, and may not provide significant protection against competitors300 304 - Reliance on trade secrets, confidentiality, and security measures may not adequately protect proprietary information, and others may independently develop similar technologies308 - Involvement in intellectual property lawsuits (infringement, validity challenges) could be expensive, time-consuming, divert management attention, and result in significant liabilities or restrictions on product sales310 311 316 Risks Related to Third Parties and Collaborators Explains risks associated with reliance on third-party contractors and collaboration agreements - Reliance on third parties (CROs, consultants) for preclinical studies and clinical trials means less control over timing and execution, with potential for delays, increased costs, or denial of regulatory approval if performance is unsatisfactory or non-compliant with GCPs226 321 322 - Dependence on third-party CMOs for manufacturing product candidates for clinical trials and commercial sale poses risks of insufficient quantities, unacceptable costs, supply chain disruptions (e.g., COVID-19, geopolitical conflicts), and non-compliance with cGMPs, which could delay or prevent development and commercialization327 329 332 334 - Collaborations are crucial but carry risks of termination, partners changing focus, insufficient resources, or disputes over proprietary rights, potentially delaying or terminating development and commercialization programs336 343 346 - Failure to establish internal marketing, sales, and distribution capabilities or successful third-party arrangements could limit market creation and product sales, impacting revenues338 341 342 General Risk Factors Covers broad risks such as internal controls, macroeconomic conditions, personnel, and regulatory compliance - The company previously identified and remediated material weaknesses in internal control over financial reporting, but future failures could lead to misstatements and harm business347 348 349 - Global and macroeconomic conditions (credit market volatility, bank failures, inflation, geopolitical conflicts) could adversely affect revenue, financial condition, and operating goals, potentially delaying or abandoning development plans351 352 - Future growth requires expanding operations, increasing headcount, and improving controls, which may be difficult to manage effectively353 354 - Dependence on key personnel and the ability to attract/retain qualified employees is critical; loss of senior management or inability to hire specialized staff could harm business355 356 357 - Relationships with healthcare providers and payors are subject to federal and state healthcare fraud and abuse laws, false claims laws, and privacy laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA), with potential for substantial penalties for non-compliance362 364 367 - Market acceptance and sales depend on adequate reimbursement from third-party payors; cost containment measures and healthcare legislative reforms (e.g., ACA, IRA) could limit coverage and reduce drug prices369 370 371 375 - International operations expose the company to risks like different regulatory requirements, reduced intellectual property protection, economic/political instability, and compliance with anti-corruption laws (e.g., FCPA)379 380 384 - Product liability lawsuits related to clinical trials or commercialized products could result in substantial liabilities, even with insurance, and harm the business385 386 - Stringent and evolving data privacy and security laws (e.g., HIPAA, CCPA, GDPR) and cyber threats (ransomware, supply-chain attacks) pose risks of regulatory actions, litigation, fines, business disruptions, and reputational harm387 390 391 392 397 398 399 400 405 Risks Related to Ownership of Our Common Stock Discusses risks pertinent to common stock ownership, including price volatility and dilution - The market price for common stock has been and is likely to remain highly volatile, influenced by R&D results, financial estimates, competition, regulatory actions, and macroeconomic conditions410 413 415 - Securities class action litigation is a risk for volatile stocks, potentially leading to substantial costs and diversion of management attention413 - Failure to meet Nasdaq listing requirements could result in delisting, leading to limited market quotations, reduced trading activity, and decreased ability to raise future financing414 416 - Operating as a public company incurs increased costs and requires substantial management time for compliance initiatives and corporate governance414 - The company does not anticipate paying dividends, so stockholders must rely on stock appreciation for returns, which is uncertain424 - Sales of a substantial number of shares by existing stockholders or future equity raises could cause the stock price to fall and dilute existing ownership425 426 - Anti-takeover provisions in organizational documents and Delaware law might discourage or delay acquisition attempts429 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports no unregistered equity sales and details the use of proceeds from the March 2021 IPO Sales of Unregistered Securities Confirms that no unregistered sales of equity securities occurred during the period - No unregistered sales of equity securities occurred435 Use of Proceeds from Initial Public Offering of Common Stock Details the net proceeds from the IPO and confirms no material change in their planned use - The IPO, closed on March 22, 2021, generated net proceeds of $40.5 million from 4,181,818 common shares at $11.00 per share436 - There has been no material change in the planned use of proceeds from the IPO437 Item 3. Defaults Upon Senior Securities. States that this item is not applicable to the company - Not applicable438 Item 4. Mine Safety Disclosures States that this item is not applicable to the company - Not applicable439 Item 5. Other Information States that this item is not applicable to the company - Not applicable440 Item 6. Exhibits Lists all exhibits filed with the Form 10-Q, including certifications and XBRL documents - The report includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1)442 443 - Inline XBRL Instance Document and Taxonomy Extension Documents are filed as **Exhibits 101