The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
Notes to Unaudited Condensed Consolidated Financial
Statements
NOTE 1 – BUSINESS
Relmada Therapeutics, Inc. (Relmada or the Company)
(a Nevada corporation), is a clinical-stage, publicly traded biotechnology company focused on the development of esmethadone (d-methadone,
dextromethadone, REL-1017), an N-methyl-D-aspartate (NMDA) receptor antagonist. Esmethadone is a New Chemical Entity (NCE) that potentially
addresses areas of high unmet medical need in the treatment of central nervous system (CNS) diseases and other disorders.
In addition to the normal risks associated with
a new business venture, there can be no assurance that the Company’s research and development will be successfully completed or
that any product will be approved or commercially viable. The Company is subject to risks common to companies in the biotechnology industry
including, but not limited to, dependence on collaborative arrangements, development by the Company or its competitors of new technological
innovations, dependence on key personnel, protection of proprietary technology, and compliance with the Food and Drug Administration (FDA)
and other governmental regulations and approval requirements.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States
of America (U.S. GAAP) for interim unaudited condensed consolidated financial information. Accordingly, they do not include all of the
information and footnotes required by U.S. GAAP for complete consolidated financial statements. The unaudited condensed consolidated financial
statements reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for
a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the
full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial
statements of the Company for the year ended December 31, 2021 and notes thereto contained in the Company’s Annual Report on Form
10-K.
Liquidity
As shown in the accompanying unaudited condensed
consolidated financial statements, the Company incurred negative operating cash flows of $67,918,717 for the nine months ended September
30, 2022 and has an accumulated deficit of $424,166,570 from inception through September 30, 2022.
Relmada has funded its past operations through
equity raises, and most recently in the nine months ended September 30, 2022, the Company raised net proceeds of $42,728,599 from the
sale of common stock, through our at-the-market (ATM) equity offering, $703,720 through the exercise of options and $1,228,272 through
the exercise of warrants.
On April 8, 2022, we raised net proceeds of $13,145,057
from the sale of common stock through our ATM equity offering. On April 6, 2022, we entered into a new Open Market Sale Agreement with
Jefferies, as sales agent, pursuant to which we may offer and sell, from time to time, through Jefferies, shares of our common stock,
having an aggregate offering price of up to $100,000,000. We are not obligated to sell any shares under the agreement. As of September
30, 2022, no shares have been issued under this agreement.
Relmada Therapeutics, Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Management believes that the Company’s existing
cash and cash equivalents and short-term investments will enable it to fund operating expenses and capital expenditure requirements for
at least 12 months from the issuance of these unaudited condensed consolidated quarterly financial statements. Beyond that point management
will evaluate the size and scope of any subsequent trials that will affect the timing of additional financings through public or private
sales of equity or debt securities or from bank or other loans or through strategic collaboration and/or licensing agreements. Any such
expenditures related to any subsequent clinical trials will not be incurred until such additional financing is raised. Further, additional
financing related to subsequent clinical trials does not affect the Company’s conclusion that based on the cash on hand and the
budgeted cash flow requirements, the Company has sufficient funds to maintain operations for at least 12 months from the issuance of these
unaudited condensed consolidated financial statements.
Principles of Consolidation
The unaudited condensed consolidated financial
statements include the Company’s accounts and those of the Company’s wholly-owned subsidiary. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Risks and Uncertainties
The ongoing pandemic may adversely affect our
business. Based on the Company’s current assessment, the Company does not expect any material impact on its long-term development
timeline and its liquidity due to the worldwide spread of the coronavirus (COVID-19). However, the Company is actively monitoring this
situation and the possible effects on its financial condition, liquidity, operations, suppliers, industry, and workforce.
Use of Estimates
The preparation of financial statements in conformity
with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ from those estimates. The significant estimates are stock-based compensation expenses and
recorded amounts related to income taxes.
Relmada Therapeutics, Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements
NOTE 2
– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash and Cash Equivalents
The Company considers cash deposits and all highly
liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company’s cash deposits are
held at two high-credit-quality financial institutions. The Company’s cash balance of $42,524,369 at September 30, 2022 at these
institutions exceed the federally insured limits.
Short-term Investments
The Company’s investments consist entirely
of mutual funds. The securities are measured at fair value based on the net asset value (NAV). insubstantially all equity investments
are nonconsolidated entities to be measured at fair value with recurring changes recognized in earnings, except for those accounted for
using equity method accounting. Changes in fair value of the securities are recorded as part of other income on the unaudited condensed
consolidated statement of operations. Short-term investment activity is presented in the investing activities section on the unaudited
condensed consolidated statement of cash flows.
Short-term investments at September 30, 2022 consisted
of mutual funds with a fair value of $141,627,805.
Patents
Costs related to filing and pursuing patent applications
are recorded as general and administrative expense and expensed as incurred since recoverability of such expenditures is uncertain.
Leases
The Company recognizes its leases with a term
of greater than a year on the balance sheet by recording right-of-use assets and lease liabilities. Leases can be classified as either
operating leases or finance leases. Operating leases will result in straight-line lease expense, while finance leases will result in front-loaded
expense. The Company’s lease consists of an operating lease for office space. The Company does not recognize a lease liability or
right-of-use asset on the balance sheet for short-term leases. Instead, the Company recognizes short-term lease payments as an expense
on a straight-line basis over the lease term. A short-term lease is defined as a lease that, at the commencement date, has a lease term
of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
Relmada Therapeutics, Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements
NOTE 2
– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments
The Company’s financial instruments primarily
include cash, short-term investments, and accounts payable. Due to the short-term nature of cash and accounts payable the carrying amounts
of these assets and liabilities approximate their fair value.
Fair value is defined as the price that would
be received to sell an asset, or paid to transfer a liability (an exit price), in an orderly transaction between market participants at
the reporting date. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices
in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
|
Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. |
|
|
|
Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means. |
|
|
|
Level 3 Inputs – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
As required by Accounting Standard Codification
(ASC) Topic No. 820 – 10 Fair Value Measurement, financial assets and liabilities are classified based on the lowest level
of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to
the fair value measurement requires judgement and may affect the valuation of the fair value of assets and liabilities and their placement
within the fair value hierarchy levels.
The Company’s short-term investment instruments
of $141,627,805 at September 30, 2022 consist of mutual funds, bank deposits and money market funds and are classified using Level 1
inputs within the fair value hierarchy because the value is based on quoted prices in active markets. Unrealized gains and losses are
recorded in the condensed consolidated statement of operations under other income. The Company recorded unrealized losses of $947,512
and $3,897,135 included in other income for the three and nine months ended September 30, 2022, respectively. The Company recorded an
unrealized gain of $86,745 and an unrealized loss of $379,699 included in other income for the three and nine months ended September 30,
2021, respectively.
Income Taxes
The Company accounts for income taxes using the
asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rate is
recognized in income or expense in the period that the change is effective. Tax benefits are recognized when it is probable that the deduction
will be sustained. A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset
will either expire before the Company is able to realize the benefit, or that future deductibility is uncertain. As of September 30, 2022
and December 31, 2021, the Company had recognized a valuation allowance to the full extent of the Company’s net deferred tax assets
since the likelihood of realization of the benefit does not meet the more likely than not threshold.
The Company files a U.S. Federal income tax return
and various state returns. Uncertain tax positions taken on the Company’s tax returns will be accounted for as liabilities for unrecognized
tax benefits. The Company will recognize interest and penalties, if any, related to unrecognized tax benefits in general and administrative
expenses in the statements of operations. There were no liabilities recorded for uncertain tax positions at September 30, 2022 and December
31, 2021. The open tax years, subject to potential examination by the applicable taxing authority, for the Company are from June 30, 2018
forward.
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR
Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases
of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations
occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which
shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of
the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value
of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions
apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations
and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Relmada Therapeutics, Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements
NOTE 2
– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Research and Development
Research and development costs primarily consist
of research contracts for the advancement of product development, salaries and benefits, stock-based compensation, and consultants. The
Company expenses all research and development costs in the period incurred. The Company makes an estimate of costs in relation to clinical
study contracts. The Company analyzes the progress of studies, including the progress of clinical studies and phases, invoices received
and contracted costs when evaluating the adequacy of the amount expensed and the related prepaid asset and accrued liability.
Stock-Based Compensation
The Company measures the cost of employee and non-employee services
received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over
the period during which an employee is required to provide service in exchange for the award – the requisite service period. The
grant-date fair value of employee share options is estimated using the Black-Scholes option pricing model adjusted for the unique characteristics
of those instruments.
Net Loss per Common Share
Basic loss per common share attributable to common
stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares
outstanding for the period, without consideration for common stock equivalents. Diluted loss per common share attributable to common
stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common share
equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of
options and warrants to purchase common stock. For all periods presented, there is no difference in the number of shares used to calculate
basic and diluted shares outstanding due to the Company’s net loss position.
For the nine months ended September 30, 2022
and 2021, the potentially dilutive securities that would be anti-dilutive due to the Company’s net loss are not included in the
calculation of diluted net loss per share attributable to common stockholders. The anti-dilutive securities are as follows (in common
stock equivalent shares):
| | Nine months ended | |
| | September 30, 2022 | | | September 30, 2021 | |
Stock options | | | 10,719,424 | | | | 5,043,931 | |
Common stock warrants | | | 4,484,874 | | | | 3,244,248 | |
Total | | | 15,204,298 | | | | 8,288,179 | |
Relmada Therapeutics, Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements
In November 2021, the FASB issued ASU 2021-10,
“Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance”. The amendments
in this ASU require annual disclosures to increase the transparency of government assistance received by a business entity including
information about the nature of the government transactions, related accounting policy, the line items on the balance sheet and income
statement that are affected, amounts applicable to each financial statement line item, and significant terms and conditions of the transactions,
including commitments and contingencies. The amendments in this ASU are effective for annual periods beginning after December 15, 2021.
The Company adopted this standard effective January 1, 2022 and the standard did not have a significant impact on our condensed consolidated
financial statements.
In October 2021, the FASB issued ASU 2021-08, “Business Combinations
(Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”. The amendments in this
ASU require that an entity (acquirer) recognize, and measure contract assets and contract liabilities acquired in a business combination,
including contract assets and contract liabilities arising from revenue contracts with customers, as if it had originated the contracts
as of the acquisition date. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2022.
Early adoption is permitted. The Company does not expect this standard to have a material impact on the consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to
accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends
existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2020. The Company adopted this standard effective January 1, 2021 and the standard did not have a
significant impact on our condensed consolidated financial statements.
In May 2021, the FASB issued ASU No. 2021-04, Earnings
Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718),
and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). ASU 2021-04 outlines how an entity should
account for modifications made to equity-classified written call options, including stock options and warrants to purchase the entity’s
own common stock. The guidance in the ASU requires an entity to treat a modification of an equity-classified written call options that
does not cause the option to become liability-classified as an exchange of the original option for a new option. This guidance applies
whether the modification is structured as an amendment to the terms and conditions of the equity-classified written call option or as
termination of the original option and issuance of a new option. The guidance is effective prospectively for fiscal years beginning after
December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, including in an interim period as
of the beginning of the fiscal year that includes that interim period. The Company adopted this standard effective January 1, 2022 and
the standard did not have a significant impact on our condensed consolidated financial statements.
Relmada Therapeutics, Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements
NOTE 2
– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Subsequent Events
The Company’s management reviewed all material
events through the date the financial statements were issued for subsequent event disclosure consideration.
NOTE
3 – PREPAID EXPENSES
Prepaid expenses consisted of the following (rounded to nearest $00):
|
|
September 30,
2022 |
|
|
December 31,
2021 |
|
Insurance |
|
$ |
478,500 |
|
|
$ |
353,300 |
|
Research and Development |
|
|
2,415,500 |
|
|
|
10,708,800 |
|
Legal |
|
|
11,000 |
|
|
|
11,000 |
|
Other |
|
|
48,700 |
|
|
|
228,400 |
|
Total |
|
$ |
2,953,700 |
|
|
$ |
11,301,500 |
|
NOTE 4 – ACCRUED EXPENSES
Accrued expenses consisted of the following (rounded to nearest $00):
| |
September 30, 2022 | | |
December 31, 2021 | |
Research and development | |
$ | 8,058,900 | | |
$ | 1,928,000 | |
Professional fees | |
| 172,000 | | |
| 168,000 | |
Accrued bonus | |
| 1,182,900 | | |
| 1,191,000 | |
Accrued vacation | |
| 648,300 | | |
| 450,400 | |
Other | |
| 289,200 | | |
| 131,000 | |
Total | |
$ | 10,351,300 | | |
$ | 3,868,400 | |
Relmada Therapeutics, Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements
NOTE
5 – STOCKHOLDERS’ EQUITY
Common Stock
During the nine months ended September 30, 2022,
the Company issued 175,919 shares of common stock for cash exercises of warrants for proceeds of $1,228,272.
During the nine months ended September 30, 2022,
the Company issued 83,698 shares of common stock for the exercise of options for proceeds of $703,720.
On May 15, 2020, the Company entered into an Open
Market Sale Agreement with Jefferies LLC, as sales agent (“Jefferies”), pursuant to which the Company could offer and
sell, from time to time, through Jefferies, shares of the Company’s common stock, having an aggregate offering price of up to $75,000,000.
The Company was not obligated to sell any shares under the agreement. During the nine months ended September 30, 2022, the Company issued
2,094,243 shares of common stock for net cash proceeds of $42,728,599 under the agreement.
On April 6, 2022, we entered into a new Open Market
Sale Agreement with Jefferies, as sales agent, pursuant to which we may offer and sell, from time to time, through Jefferies, shares of
our common stock, having an aggregate offering price of up to $100,000,000. We are not obligated to sell any shares under the agreement.
As of September 30, 2022, no shares have been issued under this agreement.
Options and Warrants
In December 2014, the Company’s Board of
Directors adopted, and shareholders approved Relmada’s 2014 Stock Option and Equity Incentive Plan, as amended, which allows for
the granting of 5,152,942 common stock awards, stock appreciation rights, and incentive and nonqualified stock options to purchase shares
of the Company’s common stock to designated employees, non-employee directors, and consultants and advisors. In May 2021, the
Company’s Board of Directors adopted, and shareholders approved Relmada’s 2021 Equity Incentive Plan (the “2021 Plan”)
which allows for the granting of 1,500,000 options or stock awards. In May 2022, the Company’s Board of Directors adopted,
and shareholders approved an amendment to the 2021 Plan to increase the shares of the Company’s common stock available for issuance
thereunder by 3,900,000 shares.
Stock options are exercisable generally for a
period of 10 years from the date of grant and generally vest over four years. The shareholders will vote at their annual meeting in 2023
on a management proposal to increase the shares available to be issued under the 2021 Plan. There can be no assurance such amendment will
be approved. As of September 30, 2022, options for 166,482 shares of common stock had been issued subject to approval by the
shareholders of this amendment. If the amendment is not approved, such options will be forfeited.
As of September 30, 2022, no stock appreciation
rights have been issued.
The Company utilizes the Black-Scholes option pricing model to estimate
the fair value of stock options and warrants. The risk-free interest rate assumptions were based upon the observed interest rates appropriate
for the expected term of the equity instruments. The expected dividend yield was assumed to be zero as the Company has not paid any dividends
since its inception and does not anticipate paying dividends in the foreseeable future. The expected volatility was based on historical
volatility. The Company routinely reviews its calculation of volatility changes in future volatility, the Company’s life cycle,
its peer group, and other factors.
The Company uses the simplified method for share-based
compensation to estimate the expected term for equity awards for share-based compensation in its option-pricing model.
On January 1, 2022, 50,000 options
were issued to a consultant with an exercise price of $22.53 and a 10-year term, vesting over a 1-year period. The options
granted include performance vesting based on the Company’s achievement of performance metrics. The options have an aggregate fair
value of $847,583, calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model
include: (1) discount rate of 1.53% (2) expected life of 5.5 years, (3) expected volatility of 96%, and (4) zero expected
dividends.
From January 1, 2022 through March 14,
2022, 110,000 options were issued to various consultants with an exercise price ranging from $18.00 to $21.46 and
a 10-year term, vesting over a 4-year period. The options granted include time-based vesting grants. The options have an aggregate
fair value of approximately $1.6 million, calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes
option-pricing model include: (1) discount rate of 1.53 – 2.00% (2) expected life of 6.25 years, (3) expected
volatility of 98%, and (4) zero expected dividends.
Relmada Therapeutics, Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements
NOTE 5
– STOCKHOLDERS’ EQUITY (continued)
On March 28, 2022, the
Company awarded a total of 15,000 options to an employee with an exercise price of $25.76 and a 10-year term vesting
over a 4-year period. The options granted include time-based vesting grants. The options have an aggregate fair value of $307,845 calculated
using the Black Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate
of 2.55% (2) expected life of 6.25 years, (3) expected volatility of 98%, and (4) zero expected dividends.
From April 25, 2022 through May 5, 2022, 260,000 options
were issued to various consultants with an exercise price ranging from $22.40 to $25.52 and a 10-year term, vesting over
a 4-year period. The options granted include time-based vesting grants. The options have an aggregate fair value of approximately
$4.6 million, calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model
include: (1) discount rate of 2.85 – 3.04% (2) expected life of 6.25 years, (3) expected volatility of 95%,
and (4) zero expected dividends.
From July 1, 2022 through September 29, 2022,
260,000 options were issued to various consultants with an exercise price ranging from $18.30 to $36.19 and a 10-year term, vesting over
a 4 year period. The options granted include time-based vesting grants. The options have an aggregate fair value of approximately $5.0
million calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1)
discount rate of 2.9 – 3.94% (2) expected life of 6.25 years, (3) expected volatility of 93-94%, and
(4) zero expected dividends.
On March 30, 2021, 50,000 options
were issued to a consultant with an exercise price of $34.93 and a 10-year term, vesting over a 10-year period. The options
granted include performance vesting based on the Company’s achievement of performance metrics. The options have an aggregate fair
value of $1.6 million, calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model
include: (1) discount rate of 1.73% (2) expected life of 10 years, (3) expected volatility of 102%, and (4) zero expected
dividends.
At September 30, 2022, the Company has unrecognized
stock-based compensation expense of approximately $121.7 million related to unvested stock options over the weighted average remaining
service period of 2.43 years.
Options
A summary of the changes in options during the
nine months ended September 30, 2022 is as follows:
| |
Number of Options | | |
Weighted Average Exercise Price Per Share | | |
Weighted Average Remaining Contractual Term (Years) | | |
Aggregate Intrinsic Value | |
Outstanding and expected to vest at December 31, 2021 | |
| 10,330,622 | | |
$ | 22.52 | | |
| 9.00 | | |
$ | 46,088,534 | |
Granted | |
| 745,000 | | |
$ | 23.61 | | |
| 9.55 | | |
$ | - | |
Exercised | |
| (83,698 | ) | |
$ | 8.41 | | |
| - | | |
$ | - | |
Forfeited | |
| (272,500 | ) | |
$ | 29.28 | | |
| - | | |
$ | - | |
Outstanding at September 30, 2022 | |
| 10,719,424 | | |
$ | 22.53 | | |
| 8.40 | | |
$ | 163,311,188 | |
Options exercisable at September 30, 2022 | |
| 3,706,254 | | |
$ | 21.64 | | |
| 7.27 | | |
$ | 62,486,845 | |
Warrants
A summary of the changes in outstanding warrants during the nine months
ended September 30, 2022 is as follows:
| |
Number of Shares | | |
Weighted Average Exercise Price Per Share | |
Outstanding and vested at December 31, 2021 | |
| 3,208,777 | | |
$ | 16.45 | |
Granted | |
| 1,452,016 | | |
$ | 0.001 | |
Exercised | |
| (175,919 | ) | |
$ | 6.98 | |
Outstanding at September 30, 2022 | |
| 4,484,874 | | |
$ | 11.50 | |
Warrants Vested at September 30, 2022 | |
| 4,190,999 | | |
$ | 10.04 | |
Relmada Therapeutics, Inc.
Notes
to Unaudited Condensed Consolidated Financial Statements
NOTE 5
– STOCKHOLDERS’ EQUITY (continued)
On September 20, 2022, the Company entered into
an agreement with an investor to exchange 1,452,016 shares of outstanding common stock for 1,452,016 prefunded warrants. The 1,452,016
shares of common stock were returned to treasury. These warrants have an exercise price of $0.001 and a 9.99% beneficial ownership limitation.
At September 30, 2022, the Company had approximately
$6.7 million of unrecognized compensation expense related to outstanding warrants.
At September 30, 2022, the aggregate intrinsic
value of warrants vested and outstanding was approximately $113.1 million and $113.1 million, respectively.
Stock-based compensation by class of expense
The following summarizes the components of stock-based
compensation expense which includes stock options and warrants in the unaudited consolidated statements of operations for the nine months
ended September 30, 2022 and 2021 (rounded to nearest $00):
| |
Nine Months Ended September 30, 2022 | | |
Nine Months Ended September 30, 2021 | |
Research and development | |
$ | 5,674,600 | | |
$ | 14,341,700 | |
General and administrative | |
| 26,894,200 | | |
| 18,033,500 | |
Total | |
$ | 32,568,800 | | |
$ | 32,375,200 | |
Relmada Therapeutics, Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements
NOTE 6 – RELATED PARTY TRANSACTIONS
Effective March 6, 2020, Dr. Ottavio Vitolo,
the Company’s Chief Medical Officer and Head of Research and Development, entered into a Separation and Severance Agreement with
the Company. Pursuant to the terms of the agreement, the Company agreed to pay Dr. Vitolo severance of $200,000 in accordance with his
employment contract. In addition, Dr. Vitolo’s options granted under the Company’s 2014 Stock Option and Equity Incentive
Plan continued to vest until September 6, 2020. Dr. Vitolo had until March 6, 2021 to exercise his vested options and he was allowed
to use a cashless exercise provision to exercise his vested options. Dr. Vitolo exercised 126,562 options during 2020 and the remaining
options expired on March 6, 2021. The agreement also contains customary confidentiality, release, and non-disparagement provisions, and
the Company paid accrued and unpaid salary, vacation time and attorney’s fees totaling approximately $45,000.
Effective December 31, 2020, Dr. Thomas Wessel,
the Company’s Executive Vice President, Head of Research and Development, entered into a Separation and Severance Agreement with
the Company. Pursuant to the terms of the agreement, the Company agreed to pay Dr. Wessel severance of $237,500 in accordance with his
employment contract. In addition, Dr. Wessel’s options granted under the Company’s 2014 Stock Option and Equity Incentive
Plan continue to vest until June 30, 2021. Dr. Wessel had until December 31, 2021 to exercise his vested options and he shall be allowed
to use a cashless exercise provision to exercise his vested options. All of Dr. Wessel’s options expired on December 31, 2021.
The agreement also contains customary confidentiality, release, and non-disparagement provisions, and the Company paid accrued vacation
time totaling approximately $28,940.
NOTE 7 – COMMITMENTS AND CONTINGENCIES
License Agreements
Wonpung
On August 20, 2007, the Company entered into
a License Development and Commercialization Agreement with Wonpung Mulsan Co, a shareholder of the Company. Wonpung has exclusive territorial
rights in countries it selects in Asia to market up to two drugs the Company was developing at the time of the signing of the agreement
and a right of first refusal (“ROFR”) for up to an additional five drugs that the Company may develop in the future as defined
in more detail in the license agreement. If the parties cannot agree to terms of a license agreement then the Company shall be able to
engage in discussions with other potential licensors. As of September 30, 2022, no discussions are active between the Company and Wonpung.
The Company received an upfront license fee of
$1,500,000 and will earn royalties of up to 12% of net sales for up to two licensed products was developing at the time of the signing
of the agreement. The licensing terms for the ROFR products are subject to future negotiations and binding arbitration. The terms of
each licensing agreement will expire on the earlier of any time from 15 years to 20 years after licensing or on the date of commercial
availability of a generic product to such licensed product in the licensed territory.
Relmada Therapeutics, Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements
NOTE 7 – COMMITMENTS AND CONTINGENCIES (continued)
Third Party Licensor
Based upon a prior acquisition, the Company assumed
an obligation to pay third parties (Dr. Charles E. Inturrisi and Dr. Paolo Manfredi – see below): (A) royalty payments up to 2%
on net sales of licensed products that are not sold by sublicensee and (B) on each and every sublicense earned royalty payment received
by licensee from its sublicensee on sales of license product by sublicensee, the higher of (i) 20% of the royalties received by licensee;
or (ii) up to 2% of net sales of sublicensee. The Company will also make milestone payments of up to $4 or $2 million, for the first
commercial sale of product in the field that has a single active pharmaceutical ingredient, and for the first commercial sale of product
in the field of product that has more than one active pharmaceutical ingredient, respectively. As of September 30, 2022, the Company
has not generated any revenue related to this license agreement.
Inturrisi / Manfredi
In January 2018, we entered into an Intellectual
Property Assignment Agreement (the Assignment Agreement) and License Agreement (the License Agreement and together with the Assignment
Agreement, the Agreements) with Dr. Charles E. Inturrisi and Dr. Paolo Manfredi (collectively, the Licensor). Pursuant to the Agreements,
Relmada assigned its existing rights, including patents and patent applications, to esmethadone in the context of psychiatric use (the
Existing Invention) to Licensor. Licensor then granted Relmada under the License Agreement a perpetual, worldwide, and exclusive license
to commercialize the Existing Invention and certain further inventions regarding esmethadone, in the context of other indications such
as those contemplated above. In consideration of the rights granted to Relmada under the License Agreement, Relmada paid the Licensor
an upfront, non-refundable license fee of $180,000. Additionally, Relmada will pay Licensor $45,000 every three months until the earliest
to occur of the following events: (i) the first commercial sale of a licensed product anywhere in the world, (ii) the expiration or invalidation
of the last to expire or be invalidated of the patent rights anywhere in the world, or (iii) the termination of the License Agreement.
Relmada will also pay Licensor tiered royalties with a maximum rate of 2%, decreasing to 1.75%, and 1.5% in certain circumstances, on
net sales of licensed products covered under the License Agreement. Relmada will also pay Licensor tiered payments up to a maximum of
20%, and decreasing to 17.5%, and 15% in certain circumstances, of all consideration received by Relmada for sublicenses granted under
the License Agreement. As of September 30, 2022, no events have occurred, and the Company continues to pay Licensor $45,000 every three
months.
Arbormentis, LLC
On July 16, 2021, the Company entered into a
License Agreement with Arbormentis, LLC, a privately held Delaware limited liability company, by which the Company acquired development
and commercial rights to a novel psilocybin and derivate program from Arbormentis, LLC, worldwide excluding the countries of Asia.
The Company will collaborate with Arbormentis, LLC on the development of new therapies targeting neurological and psychiatric disorders,
leveraging its understanding of neuroplasticity, and focusing on this emerging new class of drugs targeting the neuroplastogen mechanism
of action. Under the terms of the License Agreement, the Company paid Arbormentis, LLC an upfront fee of $12.7 million, consisting of
a mix of cash and warrants to purchase the Company’s common stock, in addition to potential milestone payments totaling up to approximately
$160 million related to pre-specified development and commercialization milestones. Arbormentis, LLC is also eligible to receive
a low single digit royalty on net sales of any commercialized therapy resulting from this agreement. The license agreement is terminable
by the Company but is perpetual and not terminable by the licensor absent material breach of its terms by the Company.
The new licensed program stems from an international
collaboration among U.S., European and Swiss scientists that has focused on the discovery and development of compounds that may promote
neural plasticity. Dr. Paolo Manfredi, Relmada’s Acting Chief Scientific Officer and co-inventor of REL-1017, and Dr. Marco
Pappagallo, Relmada’ s Acting Chief Medical Officer, are among the scientists affiliated with Arbormentis, LLC.
Legal
From time to time, the Company may become involved
in lawsuits and other legal proceedings that arise in the course of business. Litigation is subject to inherent uncertainties, and it
is not possible to predict the outcome of litigation with total confidence. The Company is currently not aware of any legal proceedings
or potential claims against it whose outcome would be likely, individually or in the aggregate, to have a material adverse effect on
the Company’s business, financial condition, operating results, or cash flows.
Relmada Therapeutics, Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements
NOTE 7 – COMMITMENTS AND CONTINGENCIES
(continued)
Leases and Sublease
On August 1, 2021, the Company relocated its corporate
headquarters to 2222 Ponce de Leon, Floor 3, Coral Gables, FL 33134, pursuant to a lease agreement with a monthly rent of approximately
$11,000. The lease period was for five months. The lease agreement expired on December 31, 2021 and was renewed for the calendar year
2022 with monthly rent of approximately $9,000. The Company’s previous lease at 880 Third Avenue, 12th Floor, New York,
NY 10022 was terminated as of July 31, 2021. In accordance with ASC 842, Leases, the Company has elected the practical expedient
and recognizes rent expense evenly over the 12 months. For the nine months ended September 30, 2022 and 2021, the Company recognized lease
expense of approximately $75,700 and $87,100, respectively.
On June 8, 2017, the Company entered into an Amended
and Restated License Agreement with Actinium Pharmaceuticals, Inc. Pursuant to the terms of the agreement, Actinium licensed the furniture,
fixtures, equipment and tenant improvements located in its office (FFE) for a license fee of $7,529 per month until December 8, 2022.
Actinium had at any time during the term of this agreement the right to purchase the FFE for $496,914, less any previously paid license
fees. On July 7, 2022, Actinium exercised its right to purchase the FFE for $52,698. The license of FFE qualified as a sales-type lease.
At inception, the Company derecognized the underlying assets of $493,452, recognized discounted lease payments receivable of $397,049
using the discount rate of 8.38% and recognized loss on sales-type lease of fixed assets of $96,403. For the nine months ended September
30, 2022 and 2021, the Company recognized lease income of approximately $2,500 and $8,800, respectively. As of September 30, 2022, there
were no future payments to be received as a result of the exercised right to purchase.
NOTE 8 – OTHER POST-RETIREMENT BENEFIT PLAN
Relmada participates in a multiemployer 401(k)
plan that permits eligible employees to contribute funds on a pretax basis subject to maximum allowed under federal tax provisions. The
Company matches 100% of the first 3% of employee contributions, plus 50% of employee contributions that exceed 3% but do not exceed 5%.
The employees choose an amount from various investment
options for both their contributions and the Company’s matching contribution. The Company’s contribution expense was approximately
$87,900 and $101,100 for the nine months ended September 30, 2022 and 2021, respectively.
NOTE 9 – SUBSEQUENT EVENTS
On October 19, 2022, a cashless exercise of the
1,452,016 prefunded warrants was transacted with 1,451,795 shares of common shares issued and the remaining 221 warrants being cancelled.
Subsequent to September 30, 2022, 5,417 outstanding
warrants were exercised for total cash proceeds of $36,252.