Gain Therapeutics Inc

Previous wording

Our clinical stage product candidate, GT-02287, is being developed for the treatment of Parkinson’s disease with and without GBA1 mutations. We have generated an extensive preclinical data package providing evidence of the mechanism of action, in vivo pharmacology, and safety of GT-02287. In preclinical models of GBA1 Parkinson’s disease, GT-02287 has been shown to restore glucocerebrosidase, or GCase, function in the lysosome, reduce toxic lipid substrates and toxic forms of alpha-synuclein, improve survival of dopaminergic neurons, increase dopamine levels, restore locomotor and cognitive function, and reduce plasma-based neurodegeneration maker, neurofilament light chain (NfL), back to the level of control animals. In a Phase 1 first-in-human study, GT-02287 was safe and generally well tolerated up to and including the highest planned dose level, enabling further development in GBA1 Parkinson’s patients. The good safety and tolerability profile and the observed range of plasma exposure levels achieved after oral administration further bolster GT-02287’s best in-class potential.

Current wording

survival of dopaminergic neurons, increasing dopamine levels, restoring locomotor and cognitive function, and reducing plasma-based neurodegeneration maker, neurofilament light chain (NfL), back to the level of control animals. In a Phase 1 first-in-human study (n = 72), GT-02287 was safe and generally well tolerated up to and including the highest planned dose level, enabling further development in GBA1 Parkinson’s patients. Additionally, administration of GT-02287 was associated with a mean increase in GCase activity of 53% among healthy volunteers at doses that were predicted to be in the therapeutic range based on preclinical models and will be carried forward in later stage trials of GT-02287. The good safety and tolerability profile and the observed range of plasma exposure levels achieved after oral administration further bolster GT-02287’s best in-class potential.

Previous wording

We continue to monitor the impacts on our operations and access to financing of global and worsening macroeconomic conditions, such as the war in Ukraine, the Hamas-Israel conflict, global geopolitical tension, heightened inflation, exchange rate fluctuations, supply chain disruptions, liquidity concerns and increases in commodity, energy and fuel prices.

Current wording

We continue to monitor the impacts on our operations and access to financing of global and worsening macroeconomic conditions, such as the war in Ukraine, the Hamas-Israel conflict, global geopolitical tension, exchange rate fluctuations, supply chain disruptions, liquidity concerns and increases in commodity, energy and fuel prices.

Previous wording

In May 2022, we filed a shelf registration statement on Form S-3, which covers the offering, issuance and sale of up to a maximum aggregate offering of $100.0 million of any combination of our common stock, preferred stock, debt securities and/or warrants from time to time in one or more offerings. In connection with the ATM Program, we entered into a Controlled Equity Offering SM Sales Agreement, or Sales Agreement, with Cantor Fitzgerald & Co., or Cantor, pursuant to which we were able to offer and sell shares of our common stock having an aggregate offering of up to $16.0 million from time to time through or to Cantor, acting as our agent or principal, in a series of one or more at-the-market equity offerings, which we refer to as our ATM Program. During the year ended December 31, 2023, we sold an aggregate of 862,535 shares of common stock at a weighted average price of $4.60 per share, raising gross proceeds of $3.9 million, which includes $0.4 million in sales and commissions and other offering expenses. The Sales Agreement and the ATM Program were terminated in conjunction with the public offering and concurrent private placement of shares of the Company’s common stock in November 2023, as described below.

Current wording

In the second quarter of fiscal year 2022, we entered into a Controlled Equity Offering Sales Agreement, or Sales Agreement, with Cantor Fitzgerald & Co., or Cantor, pursuant to which we were able to offer and sell shares of our common stock having an aggregate offering of up to $16.0 million from time to time through or to Cantor, acting as our agent or principal, in a series of one or more at-the-market equity offerings. During the year ended December 31, 2023, we sold an aggregate of 862,535 shares of common stock at a weighted average price of $4.60 per share, raising gross proceeds of $3.9 million, which includes $0.4 million in sales and commissions and other offering expenses. The Sales Agreement was terminated in conjunction with the public offering and concurrent private placement of shares of the Company’s common stock in November 2023, as described below.

Previous wording

In November 2023, we completed the public offering of 2.5 million shares of our common stock and warrants to purchase 1.3 million shares of our common stock. The warrants have an exercise price of $2.75 per share and were sold at the rate of one warrant for every two shares of common stock purchased in the public offering. The public offering price for each set of two shares of common stock and accompanying warrant to purchase one share of commons stock was $4.01 (with an effective price of $2.00 per share and $0.01 per warrant). In a private placement that was completed concurrently with the public offering we also issued to accredited investors 2.5 million of shares of our common stock (or pre-funded warrants in lieu thereof) and private warrants to purchase 2.5 million shares of our common stock with an exercise price of $2.75 per share. The private offering price per share and accompanying warrant in the private placement was $2.00 per set of securities sold privately. The public offering and the concurrent private placement resulted in combined gross proceeds of $10.1 million, which includes $1.2 million of underwriting commissions, placement agent’s fees and other expenses connected with the financing round. As of December 31, 2023, $0.9 million of the costs associated with the financing round had already been paid or deducted from the gross proceeds, while the remaining amount has been paid in the first quarter of 2024. Additionally, a total of 353,156 warrants to purchase an equal amount of our common stock at an exercise price of $2.75 per share were granted to the Underwriter and the Placement Agent as consideration for the services provided, which provide for cash-less exercise.

Current wording

In November 2023, we completed the public offering of 2.5 million shares of our common stock and warrants to purchase 1.3 million shares of our common stock. The warrants have an exercise price of $2.75 per share and were sold at the rate of one warrant for every two shares of common stock purchased in the public offering. The public offering price for each set of two shares of common stock and accompanying warrant to purchase one share of commons stock was $4.01 (with an effective price of $2.00 per share and $0.01 per warrant). In a private placement that was completed concurrently with the public offering we also issued to accredited investors 2.5 million of shares of our common stock (or pre-funded warrants in lieu thereof) and private warrants to purchase 2.5 million shares of our common stock with an exercise price of $2.75 per share. The private offering price per share and accompanying warrant in the private placement was $2.00 per set of securities sold privately. The public offering and the concurrent private placement resulted in combined gross proceeds of $10.1 million, which includes $1.2 million of underwriting commissions, placement agent’s fees and other expenses connected with the financing round. As of December 31, 2023, $0.9 million of the costs associated with the financing round had already been paid or deducted from the gross proceeds, while the remaining amount has been paid in the first quarter of 2024. Additionally, a total of 353,156 warrants to purchase an equal amount of our common stock at an exercise price of $2.75 per share were granted to the underwriter and the placement agent associated with the offerings as consideration for the services provided, which provide for cash-less exercise.

Previous wording

In June 2024, we completed the public offering of 7.1 million shares of our common stock and 1.0 million pre-funded warrants (the “Pre-Funded Warrants”) to purchase an equal amount of our common stock at the nominal exercise price of $0.0001. The public offering price is $1.35 per share while the purchase price of each pre-funded warrant was equal to the public offering price at which a share of common stock was sold to the public in this offering, minus $0.0001. The public offering resulted in gross proceeds of $11.0 million, which includes $1.2 million of underwriting commissions and other expenses connected with the financing round. In connection with the public offering that occurred in June 2024, we also issued 570,370 warrants to purchase an equal amount of our common stock at an exercise price of $1.6875 per share to the Underwriter as a consideration for the services provided (the “Underwriter Warrants” or the “Agent Warrants”). The Underwriter Warrants provide for cash-less exercise.

Current wording

In June 2024, we completed the public offering of 7.1 million shares of our common stock and 1.0 million pre-funded warrants (the “Pre-Funded Warrants”) to purchase an equal amount of our common stock at the nominal exercise price of $0.0001. The public offering price is $1.35 per share while the purchase price of each pre-funded warrant was equal to the public offering price at which a share of common stock was sold to the public in this offering, minus $0.0001. The public offering resulted in gross proceeds of $11.0 million, which includes $1.2 million of underwriting commissions and other expenses connected with the financing round.

Previous wording

As part of the public offering, we have granted the underwriter an over-allotment option to purchase up to an additional 1,222,222 shares of our common stock, at the public offering price of $1.35 set forth above, less underwriting discounts and commissions. The over-allotment option will be exercisable for a period of 30 days from the date of the public offering and will expire in July 2024. In July 2024, the underwriter exercised the option to purchase an additional amount of 337,076 shares of our common stock resulting in additional $0.46 million of gross proceeds

Current wording

As part of the public offering in June 2024, we granted the underwriter an over-allotment option to purchase up to an additional 1,222,222 shares of our common stock, at the public offering price of $1.35, less underwriting discounts and commissions. In July 2024, the underwriter partially exercised the over-allotment option and purchased an additional 337,076 shares of our common stock at the offering price mentioned above. The exercise of the over-allotment option resulted in gross proceeds of $0.46 million, which includes $42 thousand of underwriting commissions and other expenses connected with the exercise of the option. We also issued 593,965 warrants to purchase an equal amount of our common stock at an exercise price of $1.6875 per share to the underwriter as a consideration for the services provided, which provide for cash-less exercise.

Previous wording

From inception through June 30, 2024, we have raised an aggregate of $85 million of gross proceeds through equity financings, including the issuance of convertible preferred stock, our IPO and previous sales under our ATM Program.

Current wording

From inception through September 30, 2024, we have raised an aggregate of $86 million of gross proceeds through equity financing, including the issuance of convertible preferred stock, our initial public offering and previous sales under our ATM Programs.

Previous wording

As of June 30, 2024, we had cash and cash equivalents of $16.9 million. We have incurred recurring losses and negative cash flows from operations since inception and as of June 30, 2024 and December 31, 2023, had an accumulated deficit of $72.9 million and $60.8 million, respectively. We anticipate incurring additional losses until such time, if ever, that we can generate sales of our product candidates currently in development. We have not generated any product revenues and have not achieved profitable operations. There is no assurance that profitable operations will ever be achieved, and, if achieved, could be sustained on a continuing basis. In addition, we will need significant additional financing to fund our operations and to develop our product candidates. Our ability to continue operations after our current cash resources are exhausted depends on our ability to obtain additional financing or to achieve profitable operations, as to which no assurances can be given. Cash requirements may vary materially from those now planned because of changes in direction of our research and development programs, competitive and technical advances, patent developments, regulatory changes or other developments. If adequate additional funds are not available when required, or if we are unsuccessful in entering into partnership agreements for further development of our pipeline, management may need to curtail our development efforts and planned operations to conserve cash.

Current wording

As of September 30, 2024, we had cash and cash equivalents of $12 million. We have incurred recurring losses and negative cash flows from operations since inception and as of September 30, 2024 and December 31, 2023, had an accumulated deficit of $77.4 million and $60.8 million, respectively. We anticipate incurring additional losses until such time, if ever, that we can generate sales of our product candidates currently in development. We have not generated any product revenues and have not achieved profitable operations. There is no assurance that profitable operations will ever be achieved, and, if achieved, could be sustained on a continuing basis. In addition, we will need significant additional financing to fund our operations and to develop our product candidates. Our ability to continue operations after our current cash resources are exhausted depends on our ability to obtain additional financing or to achieve profitable operations, as to which no assurances can be given. Cash requirements may vary materially from those now planned because of changes in direction of our research and development programs, competitive and technical advances, patent developments, regulatory changes or other developments. If adequate additional funds are not available when required, or if we are unsuccessful in entering into partnership agreements for further development of our pipeline, management may need to curtail our development efforts and planned operations to conserve cash.

Previous wording

June 30, 2024, we incurred net losses of $12.2 million and generated negative cash flows from operations of $9.3 million. Our current operating plan indicates that we will continue to incur losses from operations and generate negative cash flows from operating activities. Our projected cash outflows for the upcoming periods raise substantial doubt about our ability to continue as a going concern for at least 12 months from the issuance of the financial statements included elsewhere in this Quarterly Report on Form 10-Q. We will need to raise additional capital to fund continued operations beyond the second quarter of 2025. We plan to address our liquidity needs by taking steps to improve our operations and cash position, including identifying access to future capital and potential cost-reduction measures.

Current wording

As of September 30, 2024, and December 31, 2023, we had an accumulated deficit of $77.4 million and $60.8 million, respectively, and as of September 30, 2024, we had cash and cash equivalents of $12 million. During the nine months ended September 30, 2024, we incurred net losses of $16.6 million and generated negative cash flows from operations of $15.4 million. Our current operating plan indicates that we will continue to incur losses from operations and generate negative cash flows from operating activities. Our projected cash outflows for the upcoming periods raise substantial doubt about our ability to continue as a going concern for at least 12 months from the issuance of the financial statements included elsewhere in this Quarterly Report. We will need to raise additional capital to fund continued operations beyond the second quarter of 2025. We plan to address our liquidity needs by taking steps to improve our operations and cash position, including identifying access to future capital and potential cost-reduction measures.

Previous wording

We recognize research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses. We anticipate that our research and development expenses will increase substantially in future periods to support progress in our research and development activities, including the progressing of the clinical trials for product candidates we are developing. These increases will likely also result from expanded infrastructure and increased insurance costs. Such expenses are offset by contributions from research grants, which are recorded as a reduction to research and development expenses based on our best estimate of the periods in which the related expenditures are incurred.

Current wording

We recognize research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses. We anticipate that our research and development expenses will increase substantially in future periods to support progress in our research and development activities, including the progressing of the clinical trials for product candidates we are developing. These

Previous wording

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will continue to increase in the foreseeable future as we (i) increase personnel costs, including stock-based compensation, (ii) continue preclinical development of our lead compounds, (iii) progress our clinical trials

Current wording

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will continue to increase in the foreseeable future as we (i) increase personnel costs, including stock-based compensation, (ii) continue preclinical development of our lead compounds, (iii) progress our clinical trials for certain product candidates, (iv) continue to discover and develop additional product candidates, and (v) pursue later stages of clinical development of product candidates.

Previous wording

The following table summarizes our results of operations for the three and six months ended June 30, 2024 and 2023.

Current wording

The following table summarizes our results of operations for the three and nine months ended September 30, 2024 and 2023.

Previous wording

Research and development expenses increased by $0.4 million to $4.4 million for the three months ended June 30, 2024, as compared to $4.0 million for the three months ended June 30, 2023. The increase in research and development expenses was primarily related to costs associated with the ongoing Clinical Phase 1 trial of our lead program GT-02287 for the treatment of Parkinson’s Disease.

Current wording

Research and development expenses increased by $0.3 million to $2.6 million for the three months ended September 30, 2024, as compared to $2.3 million for the three months ended September 30, 2023. The increase in research and development expenses was primarily related to costs associated with the Clinical Phase 1 trial of our lead program GT-02287 for the treatment of Parkinson’s Disease. The increase in research and development expenses was partially offset by the higher recognition of research grant income for the three months period.

Previous wording

General and administrative expenses decreased by $0.6 million to $5.6 million for the six months ended June 30, 2024, as compared to $6.2 million for the six months ended June 30, 2023. The decrease in general and administrative expenses for the period was primarily attributable to a decrease in legal and professional fees relating to general corporate matters and a decrease in share-based compensation expenses.

Current wording

General and administrative expenses decreased by $0.7 million to $1.8 million for the three months ended September 30, 2024, as compared to $2.5 million for the three months ended September 30, 2023. The decrease in general and administrative expenses for the period was primarily attributable to a decrease in legal and professional fees relating to general corporate matters and a decrease in stock-based compensation expenses.

Previous wording

Foreign exchange gain, net increased by $0.3 million to $0.2 million for the six months period ended June 30, 2024, from negative $0.1 million for the six months period ended June 30, 2023. The increase is mainly attributable to the forex exchange dynamics between the Swiss Franc and the US dollar.

Current wording

Foreign exchange loss, net increased by negative $0.2 million to negative $0.1 million for the three months ended September 30, 2024, as compared to positive $0.1 million for the three months ended September 30, 2023. The decrease was mainly attributable to the forex exchange dynamics between the Swiss Franc and the US dollar.

Previous wording

Research and development expenses increased by $0.2 million to $6.9 million for the six months ended June 30, 2024, as compared to $6.7 million for the six months ended June 30, 2023. The increase in research and development expenses was primarily related to costs associated with the ongoing Clinical Phase 1 of our lead program GT-02287 for the treatment of Parkinson’s Disease.

Current wording

Research and development expenses increased by $0.4 million to $9.6 million for the nine months ended September 30, 2024, as compared to $9.2 million for the nine months ended September 30, 2023. The increase in research and development expenses was primarily related to costs associated with the Clinical Phase 1 of our lead program GT-02287 for the treatment of Parkinson’s Disease. The increase in research and development expenses was partially offset by the higher recognition of research grant income for the nine months period.

Previous wording

As of June 30, 2024, and December 31, 2023, we had $16.9 million and $16.8 million in cash and cash equivalents and marketable securities, respectively, and an accumulated deficit of $72.9 million and $60.8 million, respectively. We had indebtedness of $0.5 million and $0.6 million as of June 30, 2024, and December 31, 2023, respectively. Our cash and cash equivalents available as of June 30, 2024, are expected to be sufficient to fund our anticipated operating and capital requirements into the second quarter of 2025 and will not be sufficient to finance the Company’s operations for one year from the issuance of the financial statements included in this Quarterly Report Form 10-Q. Therefore, we have reported

Current wording

As of September 30, 2024, and December 31, 2023, we had $12 million and $16.8 million in cash and cash equivalents and marketable securities, respectively, and an accumulated deficit of $77.4 million and $60.8 million, respectively. We had indebtedness of $0.5 million and $0.6 million as of September 30, 2024, and December 31, 2023, respectively. Our cash and cash equivalents available as of September 30, 2024, are expected to be sufficient to fund our anticipated operating and capital requirements until the end of second quarter of 2025 and will not be sufficient to finance our operations for one year from the issuance of the financial statements included in this Quarterly Report. Therefore, we have reported that there is substantial doubt about our ability to continue as a going concern. Please refer to the discussion above titled “Going Concern”.

Previous wording

Until such time, if ever, as we can generate substantial product revenues to support our business and corporate strategy, we expect to finance our cash needs through a combination of public and private equity offerings, debt financings, at-the-market offerings, government or private party grants, collaborations, strategic alliances, and licensing arrangements. As of June 30, 2024, we did not maintain any lines of credit or equity capital committed for funding.

Current wording

Until such time, if ever, as we can generate substantial product revenues to support our business and corporate strategy, we expect to finance our cash needs through a combination of public and private equity offerings, debt financings, at-the-market offerings, government or private party grants, collaborations, strategic alliances, and licensing arrangements. As of September 30, 2024, we did not maintain any lines of credit or equity capital committed for funding with the exception of the 2024 ATM Program.

Previous wording

During the six months ended June 30, 2024 and 2023, we used $9.3 million and $9.2 million of cash, respectively, in operating activities, primarily to fund our operations related to the development of our pipeline and product candidates as well as related general and administrative support activities.

Current wording

During the nine months ended September 30, 2024 and 2023, we used $15.4 million and $13.2 million of cash, respectively, in operating activities, primarily to fund our operations related to the development of our pipeline and product candidates as well as related general and administrative support activities.

Previous wording

During the six months ended June 30, 2024, net cash provided by investing activities was $5.0 million, primarily due to maturity of marketable securities.

Current wording

During the nine months ended September 30, 2024, net cash provided by investing activities was $5.0 million, primarily due to maturity of marketable securities.

Previous wording

During the six months ended June 30, 2023, net cash provided by investing activities was $5.1 million, primarily due to maturity of marketable securities for $7.1 million partially offset by the purchase of marketable securities for $2.0 million.

Current wording

During the nine months ended September 30, 2023, net cash provided by investing activities was $7.1 million, primarily due to maturity of marketable securities for $9.1 million partially offset by the purchase of marketable securities for $2.0 million.

Previous wording

During the six months ended June 30, 2024, cash provided by financing activities was $9.9 million mainly related to the following: $10.0 million provided by net proceeds from issuance of shares and warrants in public offering, $0.1 million provided by the exercise of public warrants, partially offset by negative $0.2 million of deferred offering costs that have been paid in the first quarter of 2024.

Current wording

During the nine months ended September 30, 2024, cash provided by financing activities was $10.7 million mainly related to the following: $10.3 million provided by net proceeds from issuance of shares and warrants in public offering, $0.6 million provided by net proceeds from issuance of shares in at-the-market offering, $0.1 million provided by the exercise of public warrants, partially offset by negative $0.3 million of deferred offering costs that have been paid in the first quarter of 2024.

Previous wording

During the six months ended June 30, 2023, cash provided by financing activities was $2.9 million, mainly related to the ATM Program.

Current wording

During the nine months ended September 30, 2023, cash provided by financing activities was $3.1 million, mainly related to the issuance of shares in at-the-market offering.

Previous wording

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. 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. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, defined benefit pension liability, share-based compensation and recognition of research grants. Our actual results may differ from these estimates under different assumptions or conditions. During the six months ended June 30, 2024, there were no material changes to our critical accounting policies. For additional information, see Item 8 of Part II, “Financial Statements and Supplementary Data — Note 2 — Summary of Significant Accounting Policies” of our Annual Report and Item 1 of Part I, “Financial Statements — Note 2 — Summary of Significant Accounting Policies,” of this Quarterly Report. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.

Current wording

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. 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. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, defined benefit pension liability, share-based compensation and recognition of research grants. Our actual results may differ from these estimates under different assumptions or conditions. During the nine months ended September 30, 2024, there were no material changes to our critical accounting policies. For additional information, see Item 8 of Part II, “Financial Statements and Supplementary Data — Note 2 — Summary of Significant Accounting Policies” of our Annual Report and Item 1 of Part I, “Financial Statements — Note 2 — Summary of Significant Accounting Policies,” of this Quarterly Report. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.

Previous wording

We will remain an emerging growth company until the earliest of (i) the last day of our first fiscal year in which we have total annual gross revenue of $1.07 billion or more, (ii) December 31, 2026, (iii) the date on which we have issued more than $1.0 billion of non-convertible debt instruments during the previous three fiscal years or (iv) the date on which

Current wording

We will remain an emerging growth company until the earliest of (i) the last day of our first fiscal year in which we have total annual gross revenue of $1.07 billion or more, (ii) December 31, 2026, (iii) the date on which we have issued more than $1.0 billion of non-convertible debt instruments during the previous three fiscal years or (iv) the date on which we are deemed a “large accelerated filer” under the rules of the SEC with at least $700 million of outstanding equity securities held by non-affiliates.