Item 7. Management’s Discussion and Analysis of the Results of Operations
You should read the following discussion and
analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere
in this report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information
with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks
and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this report,
our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the
following discussion and analysis.
Overview
We are a biopharmaceutical company focused on
the development of novel targeted small molecule therapeutics for the treatment of cancer in genetically defined patient populations.
Our precision medicine approach translates key scientific insights relating to the oncogenic drivers and pathway addiction of cancer
into potent and highly selective anticancer drugs. In addition, we will investigate the relevance of specific mutations and other DNA
alterations as a potential patient selection marker and to identify synthetic lethality targets. This work could support our use of a
tumor agnostic development strategy wherein we enroll patients based on the cancer’s genetic and molecular features without regard
to the type or location of the cancer. Since our inception in 2020, we have devoted substantially all of our efforts and financial resources
to organizing and staffing our company, business planning, raising capital, acquiring, discovering product candidates and securing related
intellectual property rights and conducting research and development activities for our programs. We do not have any products approved
for sale and have not generated any revenue from product sales. We may never be able to develop or commercialize a marketable product.
We have not yet successfully completed any pivotal clinical trials, obtained any regulatory approvals, manufactured a commercial-scale
drug, or conducted sales and marketing activities.
Results of Operations
From our inception on July 27, 2020, through
December 31, 2021, we did not generate any revenue. Our main activities through December 31, 2021 have been organizational
and capital raising activities and the completion of the in-license agreements for our two drug candidates, NXP800 and NXP900, CTA filing
with the MHRA and preparation for the Phase 1a clinical trial for NXP800, which commenced in December 2021, and preparing for our
initial public offering.
For the year ended December 31, 2021, we
incurred research and development expenses of $9.6 million, primarily related to the one-time upfront payments totaling $7.0 million
paid out in connection with the exclusive license agreements for our product candidates, NXP800 and NXP900, and $0.9 million of non-cash
equity-based expenses. During the period from our inception to December 31, 2020, we did not incur any research and development
expenses.
For the year ended December 31, 2021, our
general and administrative expenses were $3.3 million, primarily attributable to $1.0 million of non-cash equity-based expenses and $2.0
paid to certain third-party service providers and consultants. During the period from our inception to December 31, 2020, we did
not incur any material general and administrative expenses.
As a result of the foregoing, our loss from operations
for the year ended December 31, 2021 was $12.9 million, compared to a loss from operations of $10,000 for the period from our inception
to December 31, 2020.
We expect our research and development and general and administrative
expenses to increase substantially in the future as we begin the execution of our business plan for our two pipeline product candidates,
NXP800 and NXP900 and continue to build-out our infrastructure to support such research and development activities.
Liquidity and Capital Resources
As of December 31, 2021, we had $5.7 million
of cash and cash equivalents.
47
In June and July 2021, we completed
a $15.3 million capital raise through the issuance of preferred stock which was paid out in connection with an exclusive licensing agreement
related to our lead product candidate, NXP800. In June 2021 we paid an upfront payment of $3.5 million in connection with the NXP800
license agreement. In August 2021 we closed the exclusive license agreement related to our second product candidate, NXP900. In
September 2021 we paid the upfront payment in connection with this license agreement, also in the amount of $3.5 million.
On February 4, 2022, we entered into an
underwriting agreement with H.C. Wainwright & Co. (the “Underwriter”), as sole book-running manager, in connection
with our initial public offering of common stock (the “IPO”). On February 4, 2022, we announced the pricing of our IPO
of 3,200,000 shares of common stock for a price of $5.00 per share, less certain underwriting discounts and commissions. Upon closing
of the IPO, we issued 128,000 representative warrants, with an exercise price of $6.25, to purchase common stock to the Underwriter,
equaling 4% of the total shares sold in the IPO. We also granted the Underwriter a 30-day option to purchase up to 480,000 additional
shares of common stock to cover any over-allotments (the “Over-Allotment Option"), and the right to receive, upon exercise
of the Over-allotment Option, a number of additional warrants to purchase common stock totaling 4% of the shares sold in the IPO (including
the 128,000 previously issued), on the same terms and conditions for the purpose of covering any over-allotments in connection with the
IPO. No overallotment shares were purchased by the Underwriter and no Over-Allotment Options were granted to the Underwriter. As part
of the UoE license agreement, the Company owes UoE $0.4 million associated with this fund raising. We will pay UoE 2.5% of the gross
amount of each of the Company’s future fund raisings up to a cumulative total of $3.0 million, including this $0.4 million.
The IPO closed on February 8, 2022, with
a result of gross proceeds of $16.0 million, before deducting underwriting discounts and expenses (for net proceeds of $13.6 million).
The sole book-running manager did not exercise the over-allotment option which has already expired. We believe that the proceeds from
our IPO will enable us to fund our operating expenses and capital expenditures through at least the next 12 months from the issuance
of our financial statements. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available
capital resources sooner than we expect. Our future viability in the long term is dependent on our ability to raise additional capital
to finance our operations.
We expect our expenses to increase substantially
in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our current or
future product candidates, including payments of milestones and sponsored research commitments associated with our license agreements
for NXP800 and NXP900. In addition, now that we have closed our initial public offering, we expect to incur additional costs associated
with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur
as a private company. The timing and amount of our operating expenditures will depend largely on our ability to:
➢ advance development of our clinical and preclinical programs;
➢ acquire additional product candidates;
➢ achieve milestones in accordance with our license agreements;
➢ hire additional clinical, quality control and scientific personnel;
48
➢ obtain, maintain, expand and protect our intellectual property portfolio.
We anticipate that we will require additional
capital as we seek regulatory approval of our product candidates and if we choose to pursue in-licenses or acquisitions of other product
candidates. If we receive regulatory approval for our other future product candidates, we expect to incur significant commercialization
expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize.
Because of the numerous risks and uncertainties
associated with research, development and commercialization of our product candidates, we are unable to estimate the exact amount of
our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many
factors, including:
Until such time, if ever, as we can generate
substantial product revenue, we expect to finance our operations through a combination of public or private equity offerings, debt financings,
governmental funding, collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements with
third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership
interest may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect
your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include
restrictive covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital
expenditures or declaring dividends. In addition, debt financing would result in fixed payment obligations.
If we raise additional funds through governmental
funding, collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements with third parties,
we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant
licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other
arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization
efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
49
Contractual obligations and other commitments
We do not have any material principal contractual
obligations and commitments as of December 31, 2021.
We enter into contracts in the normal course
of business with CROs, CMOs and other third parties for clinical trials, preclinical research studies and testing and manufacturing services.
These contracts are cancelable by us upon prior written notice. Payments due upon cancellation consist only of payments for services
provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation. The amount
and timing of such payments are not known.
We have also entered into license and collaboration
agreements with third parties, which are in the normal course of business. We have not included future payments under these agreements
since obligations under these agreements are contingent upon future events such as our achievement of specified development, regulatory,
and commercial milestones, or royalties on net product sales.
Pursuant to the NXP800 License Agreement, we
are required to make payments to the ICR for certain development and regulatory milestones. As of December 31, 2021, we were obligated
to pay up to $23.0 million in milestone payments to the ICR related to pre-approval milestones, up to $178 million (in addition to the
$23.0 million) in regulatory and commercial sales milestones and mid-single digit to 10% royalties on a tiered basis on net sales. Additionally,
the Company will provide the ICR with up to an additional $0.5 million in research and development support.
Pursuant to the NXP900 License Agreement, we
are required to make payments to the UoE for certain development and regulatory milestones. At December 31, 2021, we were obligated
to make up to $46.0 million in milestone payments to the UoE related to pre-approval milestones including $0.5 million on the first anniversary
of the agreement, up to $279.5 million in regulatory and commercial sales milestones, mid-single digit to 8% royalties on a tiered basis
on net sales and 2.5% of the gross amount of each of the Company’s future fund raising up to a cumulative total of $3.0 million.
Additionally, the Company will provide UoE with up to an additional £580,000 in research and development support.
We do not currently have any long-term leases.
We rent our office space in Fort Lee, New Jersey based on a one-year agreement signed on May 3, 2021.
Critical Accounting Policies and Significant Judgments and Estimates
Our financial statements are prepared in accordance
with generally accepted accounting principles in the United States. The preparation of our financial statements and related disclosures
requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses. We base our
estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates
under different assumptions or conditions.
Stock-based compensation
We maintain an equity incentive plan as a long-term
incentive for employees, consultants and members of our board of directors. The plan allows for the issuance of non-statutory options,
or NSOs, and incentive stock options to employees and NSOs to nonemployees.
50
Stock-based compensation is measured using estimated
grant date fair value and recognized as compensation expense over the service period in which the awards are expected to vest. We estimate
the grant date fair value, and the resulting stock-based compensation, using the Black-Scholes option-pricing model, and we use the straight-line
method for expense attribution. The fair-value-based measurements of options granted to nonemployees are remeasured at each period end
until the options vest and are amortized to expense as earned. The valuation model used for calculating the estimated fair value of stock
awards is the Black-Scholes option-pricing model. The Black-Scholes model requires us to make assumptions and judgments about the variables
used in the calculations, including the expected term (weighted-average period of time that the options granted are expected to be outstanding),
the expected volatility of our common stock, the related risk-free interest rate and the expected dividend. We have elected to recognize
forfeitures of stock-based awards as they occur.
The Black-Scholes option-pricing model requires
the use of highly subjective assumptions to determine the fair value of stock-based awards. These assumptions include:
Income Taxes
In evaluating our valuation allowance, we consider
all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income,
tax planning strategies, and recent financial performance. Due to our lack of earnings history and uncertainties surrounding our ability
to generate future taxable income, the net deferred tax assets have been fully offset by a valuation allowance.
As of December 31, 2021, we had net operating
loss carryforwards for income tax purposes of approximately $9.3 million and all of the NOL does not expire.
Utilization of the net operating loss and credit
carryforwards may be subject to an annual limitation due to the ownership change limitations provided by Section 382 of the Internal
Revenue Code of 1986, as amended and similar state provisions.
While our significant accounting policies are
described in more detail in Note 2 to our financial statements appearing elsewhere in this report, we commenced our principal operations
in May 2021 and we believe that the accounting policies discussed are critical to understanding our historical and future performance
as these policies relate to the more significant areas involving management’s judgement and estimates.
51
Emerging Growth Company and Smaller Reporting Company Status
The Jumpstart Our Business Startups Act of 2012
permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or
revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have
elected to not “opt out” of this provision and, as a result, we will adopt new or revised accounting standards at the time
private companies adopt the new or revised accounting standard and will do so until such time that we either (i) irrevocably elect
to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.
We are also a “smaller reporting company”
meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result
of our initial public offering is less than $700 million and our annual revenue was less than $100 million during the most recently completed
fiscal year. We will continue to be a smaller reporting company for as long as either (i) the market value of our stock held by
non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed
fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company
at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that
are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most
recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies,
smaller reporting companies have reduced disclosure obligations regarding executive compensation.
52
Item 7A. Quantitative
and Qualitative Disclosures About Market Risks
This disclosure is not applicable as we are a smaller reporting company.
Item 8. Financial
Statements and Supplementary Data
The information required by this Item is set forth in the financial
statements and notes thereto beginning at page F-1 of this Annual Report on Form 10-K.
Item 9. Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls
and Procedures
Evaluation of Disclosure Controls and Procedures
As of December 31,
2021, management carried out, under the supervision and with the participation of our principal executive officer and principal financial
officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance that information
we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in applicable rules and forms. Based upon that evaluation, our principal executive officer and
principal financial officer concluded that, as of December 31, 2021, our disclosure controls and procedures were effective.
Changes
in and Management’s Report on Internal Control over Financial Reporting.
This annual report does not include a report
of management's assessment regarding internal control over financial reporting or an attestation report of the company's registered public
accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.
We are not currently required to maintain an
effective system of internal controls over financial reporting as defined by Section 404 of SOX. We will be required to comply with
the internal control requirements of SOX as of the end of the first full fiscal year after becoming a public company. Only in the event
that we are deemed to be a large accelerated filer or an accelerated filer would we be required to comply with the independent registered
public accounting firm attestation requirement. Further, for as long as we remain an emerging growth company as defined in the JOBS Act,
we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that
are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public
accounting firm attestation requirement. Prior to this report, we have not completed a full assessment, nor has our independent registered
public accounting firm tested our systems, of internal controls. This annual report does not include
a report of management's assessment regarding internal control over financial reporting or an attestation report of the company's registered
public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public
companies.
Item
9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions
that Prevent Inspections
Not applicable.
53
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The following biographies set forth the names
of our current directors and executive officers, their ages, their positions with us, their principal occupations and employers, any
other directorships held by them during the past five years in companies that are subject to the reporting requirements of the Securities
Exchange Act of 1934 (the “Exchange Act”), or any company registered as an investment company under the Investment Company
Act of 1940, as well as additional information, all of which we believe sets forth each director nominee’s qualifications to serve
on the Board. There is no family relationship between and among any of our executive officers or directors.
The following table sets forth certain information about our directors
and executive officers.
Name Age Position
Ron Bentsur 56 Chairman, Chief Executive Officer and President
Michael Carson 46 Vice President of Finance
Kenneth Hoberman 57 Director
Matthew Kaplan 54 Director
James F. Oliviero 46 Director
Executive Officers and Senior Management
Ron
Bentsur (56), Co-Founder, Chairman, Chief Executive Officer and President, has 20 years of senior leadership experience in
the biotechnology industry and has served as our Chief Executive Officer since our inception. He served as CEO of UroGen Pharma, Inc.
(NASDAQ: URGN) from August 2015 until January 2019, and as CEO of Keryx Biopharmaceuticals, Inc. (NASDAQ: KERX, acquired
by Akebia Therapeutics) from May 2009 until May 2015. At UroGen and Keryx, Mr. Bentsur led the clinical development, regulatory
approvals and the commercial infrastructure buildouts for the US commercial launches of Jelmyto and Auryxia, respectively. Mr. Bentsur
also led the establishment of a successful worldwide partnership for an earlier-stage program at UroGen and an ex-US development partnership
for Auryxia at Keryx. Mr. Bentsur served as CEO of XTL Biopharmaceuticals, Inc. (NASDAQ: XTLB) from January 2006 until
April 2009 and as Investor Relations and CFO of Keryx from October 2000 until January 2006. Mr. Bentsur worked as
an investment banker in NYC and Tel Aviv, Israel, from 1994 until 2000. Mr. Bentsur served as a member of the Board of Directors
of Stemline Therapeutics, Inc. from 2009 through the approval and launch of Elzonris® and through the subsequent acquisition
of the company by Menarini in June 2020, and serves on the Board of Directors of Beyond Air, Inc. (NASDAQ: XAIR). Mr. Bentsur
holds a BA in Economics and Business Administration with distinction from the Hebrew University of Jerusalem, Israel and an MBA
(Magna Cum Laude), from New York University’s Stern School of Business. Mr. Bentsur has been selected to serve on our
Board of Directors based on his years of experience in the biotechnology industry and extensive management experience.
Enrique
Poradosu, PhD (56), Co-Founder, Executive Vice President, Chief Scientific and Business Officer, has 20 years of senior scientific
leadership experience in the biotechnology industry and has served as our Executive Vice President, Chief Scientific and Business Officer
since our inception. From January 2016 until December 2020, he served as SVP, Business and Scientific Strategy at Stemline
Therapeutics, Inc. (NASDAQ: STML, acquired by Menarini in June 2020). At Stemline Dr. Poradosu led the licensing and scientific
strategy of the company’s pipeline, as well as directly leading strategic planning and operational execution of the early-stage
drug development programs. Prior to that, Dr. Poradosu served as VP Business and Scientific Strategy at Keryx Biopharmaceuticals, Inc.
(NASDAQ: KERX), acquired by Akebia Therapeutics (NASDAQ: AKBA)), from 2003 until 2016. From 1998 until 2003, Dr. Poradosu served
as a project manager at a private biomedical incubator. Dr. Poradosu holds a BSc in Chemistry and Biology with distinction from
the Hebrew University of Jerusalem, Israel and a PhD in Biochemistry, from the Hebrew University of Jerusalem.
54
Shay
Shemesh (39), Co-Founder, Executive Vice President, Chief Development and Operations Officer, has 14 years of multi-disciplinary
experience in drug development and has served as our Executive Vice President and Chief Development Officer since our inception. From
2015 until 2020, he served as SVP, Clinical and Regulatory Affairs at Stemline Therapeutics, Inc. (NASDAQ: STML, acquired by Menarini
in June 2020) where he led multi-disciplinary development teams in early and late-stage projects. In this role, Mr. Shemesh
held responsibilities for the strategic planning and operational execution of the Elzonris®
Biologics License Application, with the FDA and Marketing Authorization Application with EMA, resulting in the approval of ElzonrisTM
in both regions for the treatment of blastic plasmacytoid dendritic cell neoplasm, an orphan hematologic malignancy. Prior to that, Mr. Shemesh
was a clinical operations lead at Keryx Biopharmaceuticals (NASDAQ: KERX, acquired by Akebia Therapeutics (NASDAQ: AKBA)), where he managed
the late-stage clinical trials for AuryxiaTM for the treatment of anemia in patients with non-dialysis CKD, which led to the approval
of Auryxia in this indication in the US and the EU. Mr. Shemesh holds a BSc and MSc in Biotechnology from Bar Ilan University in
Israel.
Michael
Carson (46), Vice President of Finance, has over 20 years of broad experience in corporate finance, accounting, and operations.
He specializes in clinical stage biopharmaceutical and biotechnology companies. From late 2019 until 2021, he served as Vice President
of Finance at XyloCor Theraputics, Inc. where he led the accounting, treasury and finance functions. During 2019, Mr. Carson
consulted for Smiths Medical, Inc., a division of Smiths Group, as Global Controller along with serving as Vice President of Finance
in a consulting role for several other biopharmaceutical and medical device companies. At Smiths Medical, he led a team responsible for
accounting, treasury and foreign currency exposure. From 2015 to 2019 he served as Director of Financial Planning and Analysis at Neuronetics
(NASDAQ: STIM). In this role, Mr. Carson served as the second in command to the Chief Financial Officer and held responsibilities
for strategic planning, financial execution, investor relations, and controllership. In the past, he has held several finance and accounting
positions at Abbott Laboratories (NYSE: ABT) and served as an auditor at Crowe LLP and Deloitte. Mr. Carson holds a Bachelor of
Arts in Business and Economics along with a Bachelor of Science in Mechanical Engineering from Lafayette College in Pennsylvania. He
is a licensed Certified Public Accountant in the Commonwealth of Pennsylvania.
Non-Employee Directors
Kenneth
Hoberman (57), Director, joined our Board of Directors in July 2021. Mr. Hoberman has extensive financial, investor
relations, corporate governance, operational, and business development experience including M&A, strategic alliances and partnerships
both domestic and international. Mr. Hoberman has served as the Chief Operating Officer of Stemline Therapeutics, Inc. (“Stemline”)
since 2013, where he negotiated and closed several licensing agreements and was responsible for multiple vendor contracts. While at Stemline,
he helped lead the company from an early-stage drug development company to a fully integrated commercial entity, including through Stemline’s
successful initial public offering. Mr. Hoberman directed all Stemline’s functional groups, including manufacturing, commercial,
regulatory, R&D, medical affairs, public and investor relations, HR and finance. Mr. Hoberman also led the M&A transaction
which resulted in the sale of Stemline to the Menarini Group in June 2020 for approximately $750 million. He was previously Vice
President of Corporate and Business Development of Keryx Biopharmaceuticals, Inc., where he initiated and executed a Japanese partnership
valued at up to $100 million, and originated, negotiated and closed dozens of licensing and operational contracts, including the licensing
of AuryxiaTM, which was approved by the FDA in September 2014. He is on the Board of Directors of TG Therapeutics, Inc.
(Nasdaq: TGTX). He received a B.S.B.A. in Finance from Boston University and completed post-baccalaureate studies at Columbia University.
Mr. Hoberman has been selected to serve on our Board of Directors based on his extensive experience in the biopharmaceutical industry
and in-depth understanding of our business.
55
Matthew
L. Kaplan (54), Director, joined our Board of Directors in September 2021. Mr. Kaplan is an experienced Equity Analyst
with deep knowledge in biotechnology, particularly for analysis and advisement of early-stage companies. With 24 years of experience
as an Equity Analyst, since 2008, he has been a Managing Director and the Head of Healthcare Equity Research at Ladenburg Thalmann &
Co. Prior to joining Ladenburg Thalmann & Co., he was a Partner and the Director of Healthcare Research with Punk, Ziegel &
Company, a Senior Biotechnology Analyst at Evolution Capital, and a Director of The Life Sciences Group at The Carson Group. Mr. Kaplan
has received numerous citations as a top ranked Biotechnology Stock Picker by Thomson Reuters, The Financial Times, and Forbes. Mr. Kaplan
also spent six years as a Research Associate with the Albert Einstein College of Medicine / Montefiore Hospital Department of Cardiology,
where he co-authored numerous articles on gene regulation in the heart. Mr. Kaplan received his BS in Biology from the University
of Michigan.
James
F. Oliviero, III (46), Director, joined our Board of Directors in July 2021. Mr. Oliviero has over twenty years
of operational experience in the biotechnology industry. Since 2015, Mr. Oliviero has served as the President and Chief Executive
Officer of Checkpoint Therapeutics, Inc. (NASDAQ: CKPT), where he has completed over $100 million in private and public financings
for the company to date, while designing and overseeing the company’s development programs for its novel immuno-oncology and targeted
therapy product candidates being evaluated for the treatment of several solid tumor cancer indications. Prior to Checkpoint, from May 2003
to September 2015, Mr. Oliviero served in a variety of leadership capacities at Keryx Biopharmaceuticals, Inc., which
was subsequently acquired by Akebia. His most recent position at Keryx, beginning in April 2009, was as Chief Financial Officer,
responsible for all of the finance, accounting, investor relations, corporate governance and legal matters and was also involved in the
clinical and regulatory development of Auryxia®, which successfully obtained FDA approval in
2014. From August 1999 to May 2003, Mr. Oliviero was Director of Finance for ACCESS Oncology, Inc., a privately held
biotechnology company. Mr. Oliviero began his professional career as an investment banker at Furman Selz LLC in New York City. Mr. Oliviero
is a CFA charterholder and holds a B.B.A. in Finance with Highest Distinction from Emory University’s Goizueta Business School.
Mr. Oliviero has been selected to serve on our Board of Directors based on his extensive experience in the biotechnology industry
and in-depth understanding of our business.
Election of Officers and Family Relationships
Our executive officers are appointed by, and
serve at the discretion of, our board of directors. There are no family relationships among any of our directors or executive officers.
Board Composition
Our bylaws provide that our board of directors
shall consist of between one and nine directors, which number shall be fixed from time to time by resolution of our board of directors.
Currently our board of directors consists of Ron Bentsur, Kenneth Hoberman, James Oliviero, and Matthew Kaplan.
Our bylaws also provide that our directors may
be removed with or without cause by the affirmative vote of the holders of at least two-thirds of the votes that all our stockholders
would be entitled to cast in an annual election of directors.
Our current and future executive officers and
significant employees serve at the discretion of our Board. Our Board may also choose to form certain committees, such as a compensation
committee and an audit committee.
Director Independence
Our board of directors has determined that Kenneth
Hoberman, Matthew Kaplan and James Oliviero are independent directors. In making this determination, our board of directors applied the
standards set forth in the rules of Nasdaq and in Rule 10A-3 under the Exchange Act. Our board of directors considered all
relevant facts and circumstances known to it in evaluating the independence of these directors, including their current and historical
employment, any compensation we have given to them, any transactions we have with them, their beneficial ownership of our capital stock,
their ability to exert control over us, all other material relationships they have had with us and the same facts with respect to their
immediate families.
Although there is no specific policy regarding
diversity in identifying director nominees, the board of directors seek the talents and backgrounds that would be most helpful to us
in selecting director nominees.
56
Board Leadership Structure
Mr. Ron Bentsur, our Chief Executive Officer,
is also the Chairman of our board of directors. Our corporate governance guidelines provide our board of directors with flexibility to
select the appropriate leadership structure at a particular time based on what our board of directors determines to be in the best interests
of the Company. Our board of directors determined that, at the present time, having our Chief Executive Officer also serve as the Chairman
of our board of directors provides us with optimally effective leadership and is in our best interests and those of our stockholders.
Twenty years of management experience in our industry as well as his extensive understanding of our business, operations, and strategy
make him well qualified to serve as chairman of our board.
Board Oversight of Risk
Risk assessment and oversight are an integral
part of our governance and management processes. Our board of directors encourages management to promote a culture that incorporates
risk management into our corporate strategy and day-to-day business operations. Management discusses strategic and operational risks
at regular management meetings and conducts specific strategic planning and review sessions during the year that include a focused discussion
and analysis of the risks facing us. Throughout the year, senior management reviews these risks with the board of directors at regular
board meetings as part of management presentations that focus on particular business functions, operations or strategies, and presents
the steps taken by management to mitigate or eliminate such risks.
Our board of directors does not have a standing
risk management committee, but rather administers this oversight function directly through our board of directors as a whole, as well
as through various standing committees of our board of directors that address risks inherent in their respective areas of oversight.
In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure. Our audit committee is responsible
for coordinating the board of director’s oversight of our internal control over financial reporting, disclosure controls and procedures,
related-party transactions and code of conduct and corporate governance guidelines. Our compensation committee is responsible for assessing
and monitoring whether any of our compensation policies and programs has the potential to encourage excessive risk-taking as well as
succession planning as it relates to our Chief Executive Officer. While each committee is responsible for evaluating certain risks and
overseeing the management of such risks, our entire board of directors will be regularly informed through committee reports about such
risks.
Board Committees
Our board of directors has established an audit
committee and compensation committee, each of which operates pursuant to a charter adopted by our board of directors. Our board of directors
may also establish other committees from time to time to assist the management of our business. The composition and functions of each
committee are described below. Members serve on these committees until their resignation or until otherwise determined by our board of
directors. Each committee already established has adopted a written charter that will satisfy the applicable rules and regulations
of the Sarbanes-Oxley Act, the SEC and Nasdaq Listing Rules, which is available on our website at www.nuvectis.com.
Audit Committee
Our audit committee consists of Kenneth Hoberman,
Matthew Kaplan and James Oliviero, with James Oliviero serving as chair. Our board of directors has determined that each member of the
audit committee has sufficient knowledge in financial and auditing matters to serve on the Audit Committee. Our board of directors has
determined James Oliviero qualifies as an “audit committee financial expert,” as defined under the applicable rules of
the SEC. In making this determination, our board has considered prior experience, business acumen and independence. The audit committee’s
responsibilities include:
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➢ preparing the report that the SEC requires in our annual proxy statement;
➢ reviewing on a periodic basis our investment policy; and
Compensation Committee
Our compensation committee consists of Kenneth
Hoberman, Matthew Kaplan and James Oliviero, with Kenneth Hoberman serving as chair. Our board of directors has determined that each
of the members of our compensation committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange
Act, and satisfies the Nasdaq independence requirements. The functions of this committee include, among other things:
➢ reviewing and assessing the independence of compensation advisors;
➢ overseeing and administering our equity incentive plans;
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We believe that the composition and functioning
of our compensation committee complies with all applicable requirements of the Sarbanes-Oxley Act, and all applicable SEC and Nasdaq
rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.
Nominating and Corporate Governance Matters
Our board of directors does not currently have
a nominating and corporate governance committee or other committee performing a similar function, nor do we have any formal written policies
outlining the factors and process relating to the selection of nominees for consideration for membership on our board of directors by
our directors or our stockholders. Our board of directors has adopted resolutions in accordance with the rules of The Nasdaq Stock
Market authorizing a majority of our independent members to recommend qualified director nominees for consideration by the board of directors.
Our board of directors believes that it is appropriate for us to not have a standing nominating and corporate governance committee because
of a number of factors, including the number of independent members who want to participate in consideration of candidates for membership
on our board of directors and in matters that relate to the corporate governance of our company. Our board of directors consists of four
members, three of whom are independent. Our board of directors considered forming a nominating and corporate governance committee consisting
of several of the independent members of our board of directors. Forming a committee consisting of less than all of the independent members
was unattractive because it would have omitted the other independent members of our board of directors who wanted to participate in considering
qualified candidates for board membership and to have input on corporate governance matters related to our company. Since our board of
directors desired the participation in the nominations process of all of its independent directors, it therefore decided not to form
a nominating and corporate governance committee and instead authorized a majority of the independent members of our board of directors
to make and consider nominations for membership to our board of directors. The independent members of our board of directors do not have
a nominating and corporate governance committee charter, but act pursuant to board of director resolutions as described above. Each of
the members of our board of directors authorized to recommend director nominees is independent within the meaning of the current “independent
director” standards established by The Nasdaq Stock Market rules. Our board of directors intends to review this matter periodically,
and may in the future elect to designate a formal nominating and corporate governance committee.
Code of Business Conduct and Ethics
We
have adopted a written code of business conduct, that applies to our directors, officers and employees, including our principal executive
officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of
the code is available on our website at www.nuvectis.com.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires
our directors, executive officers and persons who own more than 10% of the shares of our common stock to file an initial report of ownership
on Form 3 and changes in ownership on Form 4 or Form 5 with the SEC. Such officers, directors and 10% stockholders are
also required by SEC rules to furnish us with copies of any Forms 3, 4 or 5 that they file. The SEC rules require us to disclose
late filings of initial reports of stock ownership and changes in stock ownership by our directors, executive officers and 10% stockholders.
Based solely on a review of copies of the Forms 3, 4 and 5 furnished to us by reporting persons and any written representations furnished
by certain reporting persons, we believe that during the fiscal year ended December 31, 2021, all Section 16(a) filing
requirements applicable to our directors, executive officers and 10% stockholders were completed in a timely manner.
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Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth information concerning compensation
paid by us to the executive officers named below, collectively referred to as “Named Executive Officers” elsewhere in this
report, for their services rendered to us in all capacities during the year ended December 31, 2021.
(1) Reflects
the aggregate grant date fair value of restricted stock granted during the fiscal year calculated in accordance with FASB ASC
Topic 718. The grant date fair value of the stock awards is based on the fair market value of the underlying shares on the date of grant
and does not take into account any estimated forfeitures. The grant date fair value of the stock awards also does not take into account
any stock awards which vest upon certain corporate milestones when the “measurement date” for accounting purposes for such
awards has not yet occurred and the fair value is uncertain. For such awards, stock-based compensation is measured and recorded if and
when a milestone occurs, and the compensation for such awards are reflected in the table in such year the compensation is recorded.
(2) Reflects value of restricted stock awards
vesting on July 27, 2022 and value of fully vested stock awarded in May 2021.
(3) Reflects value of shares of fully vested
stock awarded in May 2021. Mr. Ben-Or's engagement with Nuvectis was mutually terminated on March 21, 2022.
Narrative to Summary Compensation Table
Overview
The following are our employment arrangements with our executive officers:
Ron Bentsur
Annual Base Salary
As of February 4, 2022 (the “Effective
Date”), Mr. Bentsur’s annual base salary is $575,000 per annum, paid monthly in equal installments. On an annual basis,
the amount of Mr. Bentsur’s salary shall be increased by no less than the greater of (1) the amount determined by the
Company’s Compensation Committee, or (2) the relevant consumer price index (“CPI”). Mr. Bentsur did not receive
any cash compensation in 2021.
Annual Bonus
Mr. Bentsur’s annual bonus target
will be 75% of his annual base salary, based on the achievement of corporate goals & objectives, paid no later than March 15
following such bonus performance calendar year period. The Board or Compensation Committee shall have the discretion to pay Mr. Bentsur
an annual performance bonus in excess of the target for performance exceeding goals, which bonus may be awarded without proration in
the event of a partial contract year.
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Equity Awards
Mr. Bentsur will be eligible for grants
of equity awards under the Company’s long-term equity incentive plan. On the Effective Date, the Company shall award the following
to the Mr. Bentsur:
Termination Provisions
In the event that Mr. Bentsur is terminated
without Cause, for Good Reason, Change of Control, Death or Disability, as each such term is defined in Mr. Bentsur’s employment
agreement, all unvested shares of restricted stock and options shall be immediately accelerated and become fully vested and unrestricted/exercisable.
Upon termination for Cause, all unvested shares of restricted shock shall expire and terminate.
If Mr. Bentsur resigns for Good Reason or
is terminated due to Death or Disability, Change of Control, or otherwise terminated without Cause, then Mr. Bentsur or his estate
or beneficiaries, in the case of Death or Disability, will receive a one-time payment equal to two years of Mr. Bentsur’s
then annual base salary, plus a bonus payment equal to the annual bonus earned in the preceding year (if not already paid), the pro rata
portion of the target bonus earned in the current year, benefits and expense reimbursement due to Mr. Bentsur, payment in lieu of
any accrued but unused vacation time, payment of any unreimbursed expenses, and continued coverage through the longest applicable limitations
period under the Company’s directors and officers insurance policies, all such payments to be made within 60 (sixty) days of the
date of termination.
Notwithstanding the above the Company may terminate
Mr. Bentsur’s employment hereunder at any time, immediately, for Cause, upon written notice to Mr. Bentsur. If Mr. Bentsur’s
employment is terminated for Cause, he shall be entitled to receive (i) the unpaid portion of his base salary then in effect accrued
through the effective date of the termination of his employment hereunder, and (ii) payment for any unused vacation days which have
accrued through the effective date of the termination of Mr. Bentsur’s employment, in each case to be paid within 30 (thirty)
days after such effective date.
In the event that a “Transaction”
(as such term is defined in the Company’s Global Equity Incentive Plan, as amended from time to time, or a successor plan)
occurs during Mr. Bentsur’s employment, regardless of whether Mr. Bentsur’s employment is terminated, Mr. Bentsur
shall receive payment of the termination benefits described above as if his employment had been terminated on the effective date of the
Transaction. Following the Transaction, Mr. Bentsur shall not be entitled to receive such termination benefits upon a future termination
of his employment; provided that he shall remain eligible to receive (i) any accrued benefits upon any such subsequent termination,
and (ii) cash payments, paid in periodic installments in accordance with the Company’s usual payroll practices, for a period
of 18 months, equal to the cost the Company would have incurred had Mr. Bentsur continued group medical, dental, vision and/or prescription
drug benefit coverage for himself and/or his eligible dependents under any Company sponsored group health plan covering Mr. Bentsur
and his eligible dependents at the time of the termination of employment.
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Enrique Poradosu
Annual Base Salary
As of February 4, 2022, Mr. Poradosu’s
annual base salary is $400,000 per annum, paid monthly in equal installments. On an annual basis, the amount of Mr. Poradosu’s
salary shall be increased by no less than the greater of (1) the amount determined by the Company’s Compensation Committee,
or (2) the relevant CPI.
In 2021, Mr. Poradosu received cash compensation
of $27,083.
Annual Bonus
Mr. Poradosu’s annual bonus target
shall be 50% of the annual base salary, based on the achievement of corporate goals & objectives, paid no later than March 15
following such bonus performance calendar year period. The Board or Compensation Committee shall have the discretion to pay Mr. Poradosu
an annual performance bonus in excess of the target for performance exceeding goals, which bonus may be awarded without proration in
the event of a partial contract year.
Equity Awards
Mr. Poradosu will be eligible for grants
of equity awards under the Company’s long-term equity incentive plan. On the Effective Date, the Company shall award the following
to the Mr. Poradosu:
Termination Provisions
In the event that Mr. Poradosu’s is
terminated without Cause, for Good Reason, Change of Control, Death or Disability (as such terms are defined in Mr. Poradosu’s
employment agreement) all unvested shares of restricted stock and options shall be immediately accelerated and become fully vested and
unrestricted/exercisable. Upon termination for Cause, all unvested shares of restricted shock shall expire and terminate.
If Mr. Poradosu resigns for Good Reason
or is terminated due to Death or Disability, Change of Control, or otherwise terminated without Cause, Mr. Poradosu or his estate
or beneficiaries, in the case of Death or Disability, will receive a one-time payment equal to two years of Mr. Poradosu’s
then annual Base Salary, plus a bonus payment equal to Mr. Poradosu’s annual bonus earned in the preceding year if not already
paid, the pro rata portion of the target bonus earned in the current year, benefits and expense reimbursement due to Mr. Poradosu,
payment in lieu of any accrued but unused vacation time, payment of any unreimbursed expenses, and continued coverage through the longest
applicable limitations period under the Company’s directors and officers insurance policies, all such payments to be made within
60 (sixty) days of the date of termination.
Notwithstanding the above the Company may terminate
Mr. Poradosu’s employment hereunder at any time, immediately, for Cause, upon written notice to Mr. Poradosu. If Mr. Poradosu’s
employment is terminated for Cause, he shall be entitled to receive (i) the unpaid portion of his base salary then in effect accrued
through the effective date of the termination of his employment hereunder, and (ii) payment for any unused vacation days which have
accrued through the effective date of the termination of his employment, in each case to be paid within 30 (thirty) days after such effective
date.
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In the event that a “Transaction”
(as such term is defined in the Company’s Global Equity Incentive Plan, as amended from time to time, or a successor plan)
occurs during Mr. Poradosu’s employment, regardless of whether Mr. Poradosu’s employment is terminated, Mr. Poradosu
shall receive payment of the termination benefits described above as if his employment had been terminated on the effective date of the
Transaction. Following the Transaction, Mr. Poradosu shall not be entitled to receive such termination benefits upon a future termination
of his employment; provided that he shall remain eligible to receive (i) any accrued benefits upon any such subsequent termination,
and (ii) cash payments, paid in periodic installments in accordance with the Company’s usual payroll practices for a period
of 18 months, equal to the cost the Company would have incurred had Mr. Poradosu continued group medical, dental, vision and/or
prescription drug benefit coverage for himself and/or his eligible dependents under any Company sponsored group health plan covering
Mr. Poradosu and his eligible dependents at the time of the termination of employment.
Shay Shemesh
Annual Base Salary
As of February 4, 2022, Mr. Shemesh’s
annual base salary is $400,000 per annum, paid monthly in equal installments. On an annual basis, the amount of the Mr. Shemesh’s
Salary shall be increased by no less than the greater of (1) the amount determined by the Company’s Compensation Committee,
or (2) the relevant CPI.
In 2021, Mr. Shemesh received cash compensation
of $27,083.
Annual Bonus
Mr. Shemesh’s annual bonus target
will be 50% of his annual base salary, based on the achievement of corporate goals & objectives, paid no later than March 15
following such bonus performance calendar year period. The Board or Compensation Committee shall have the discretion to pay the Mr. Shemesh
an annual performance bonus in excess of the target for performance exceeding goals, which bonus may be awarded without proration in
the event of a partial contract year.
Equity Awards
Mr. Shemesh will be eligible for grants
of equity awards under the Company’s long-term equity incentive plan. On the Effective Date, the Company shall award the following
to the Mr. Shemesh:
Termination Provisions
In the event that Mr. Shemesh is terminated
without Cause, for Good Reason, Change of Control, Death or Disability (as such terms are defined in the employment agreement) all unvested
shares of restricted stock and options shall be immediately accelerated and become fully vested and unrestricted/exercisable. Upon termination
for Cause, all unvested shares of restricted shock shall expire and terminate.
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If Mr. Shemesh resigns for Good Reason or
is terminated due to Death or Disability, Change of Control, or otherwise terminated without Cause, then Mr. Shemesh or his estate
or beneficiaries, in the case of Death or Disability, will receive a one-time payment equal to two years of Mr. Shemesh’s
then annual Base Salary, plus a bonus payment equal to the annual bonus earned in the preceding year if not already paid, the pro rata
portion of the target bonus earned in the current year, plus benefits and expense reimbursement due to Mr. Shemesh, payment in lieu
of any accrued but unused vacation time, payment of any unreimbursed expenses, and continued coverage through the longest applicable
limitations period under the Company’s directors and officers insurance policies, all such payments to be made within 60 (sixty)