The accompanying notes are an integral part of these
unaudited consolidated financial statements.
The accompanying notes are an integral part of
these unaudited consolidated financial statements.
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
Notes to Unaudited Consolidated Financial Statements
NOTE 1 - BUSINESS
Relmada Therapeutics, Inc. (“Relmada” or the “Company”)
(a Nevada corporation), is a clinical-stage, publicly traded biotechnology company developing new chemical entities (NCEs) together
with novel versions of proven drug products that potentially address areas of high unmet medical need in the treatment of central
nervous system (CNS) diseases - primarily depression and chronic pain. The Company has a diversified portfolio of four products
at various stages of development, including d-Methadone (dextromethadone, REL-1017), an N-methyl-D-aspartate (NMDA) receptor antagonist
for treating depression and neuropathic pain; LevoCap ER (REL-1015), an abuse resistant, sustained release dosage form of the opioid
analgesic levorphanol; BuTab (oral buprenorphine, REL-1028), an oral dosage form of the opioid analgesic buprenorphine; and MepiGel
(topical mepivacaine, REL-1021), an orphan drug designated topical formulation of the local anesthetic mepivacaine.
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 FDA and other governmental
regulations and approval requirements.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited 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 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 consolidated financial statements
furnished 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 consolidated financial statements should be read in conjunction with the audited consolidated
financial statements of the Company for the year ended June 30, 2016 and notes thereto contained in the Company’s Annual
Report on Form 10-K.
Principles of Consolidation
The unaudited 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.
Use of Estimates
The preparation of these financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the unaudited consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Relmada Therapeutics, Inc.
Notes to Unaudited 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 deposits at these institutions exceed federally insured
limits.
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.
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation. Fixed assets
are comprised of Computers and Software, Leasehold Improvements and Furniture and Fixtures. Depreciation is calculated using the
straight-line method over the estimated useful life of the assets. Computers and software have an estimated useful life of three
years. Furniture and Fixtures have an estimated useful life of approximately seven years. Leasehold improvements are amortized
over the lesser of the estimated life of the asset and the lease term (approximately seven years).
Fair Value of Financial Instruments
The Company’s financial instruments primarily include cash, accounts
payable, derivative liabilities and note payable. Due to the short-term nature of cash, accounts payable, derivative liabilities
and note payable, the carrying amounts of these assets and liabilities approximate their fair value. Derivatives are recorded at
fair value at each period end. 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 accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies
in measuring fair value:
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).
Fair Value on a Recurring Basis
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 judgment, and may affect the valuation of the fair value of assets and liabilities and their
placement within the fair value hierarchy levels. The estimated fair value of the derivative instruments which include warrants
with down-round protection provisions is calculated with the Black Scholes option pricing model. Sensitivity Analysis for the Black-Scholes
has many inputs and is subject to judgement which includes volatility. Volatility and the expected term is based upon the Company’s
peer group and the expected term is based upon expiration date of the warrants.
Relmada Therapeutics, Inc.
Notes to Unaudited Consolidated Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments (continued)
The following table sets forth, by level within the fair value hierarchy,
the Company’s financial liabilities that were accounted for at fair value on a recurring basis as of December 31, 2016 and
June 30, 2016:
|
|
Markets for
Identical
Assets
|
|
|
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
Carrying
Value as of
December 31,
|
|
Description
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
2016
|
|
Derivative liabilities - warrant instruments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
523,505
|
|
|
$
|
523,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets for
Identical
Assets
|
|
|
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
Carrying
Value as of
June 30,
|
|
Description
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
2016
|
|
Derivative liabilities - warrant instruments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
892,503
|
|
|
$
|
892,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth a reconciliation of changes in the fair value
of financial liabilities classified as level 3 in the fair value hierarchy:
|
|
Significant Unobservable
Inputs (Level 3)
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Beginning balance
|
|
$
|
892,503
|
|
|
$
|
14,001,369
|
|
Change in fair value of derivative liabilities
|
|
|
(368,998)
|
|
|
|
(12,555,319
|
)
|
Ending balance
|
|
$
|
523,505
|
|
|
$
|
1,446,050
|
|
Derivatives
All derivatives are recorded at fair value on the balance sheet date. Fair
values for securities traded in the open market and derivatives are based on quoted market prices. Where market prices are not
readily available, fair values are determined using market based pricing models incorporating readily observable market data and
requiring judgment and estimates.
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 December 31, 2016 and June 30, 2016, 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, various states and a local
income tax 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 December 31, 2016 and
June 30, 2016. The open tax years, subject to potential examination by the applicable taxing authority, for the Company are for
the year ended June 30, 2012 and all subsequent years.
Relmada Therapeutics, Inc.
Notes to Unaudited 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 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 over 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. Compensation expense for warrants granted to non-employees is determined by the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more reliably measured, and is recognized over the service
period. The expense is subsequently adjusted to fair value at the end of each reporting period until such warrants vest, and the
fair value of such instruments, as adjusted, is expensed over the related vesting period. Adjustments to fair value at each reporting
date may result in income or expense, depending upon the estimate of fair value and the amount of expense recorded prior to the
adjustment. The Company reviews its agreements and the future performance obligation with respect to the unvested warrants for
its vendors or consultants. When appropriate, the Company will expense the unvested warrants at the time when management deems
the service obligation for future services has ceased.
Net Income (Loss) per Common Share
Basic net income or loss per common share attributable to common stockholders
is calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares
outstanding for the period, without consideration for common stock equivalents. Diluted net income per common share attributable
to common stockholders is computed by dividing the net income 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 Class A convertible preferred stock, restricted stock, warrants for the purchase of common stock and stock options.
For the three months ended December 31, 2016 and 2015, potentially dilutive
securities were not included in the calculation of diluted net loss per share because to do so would be anti-dilutive. For the
six months ended December 31, 2016 potentially dilutive securities were not included in the calculation of dilutive net loss per
share because they would be antidilutive. Following is a reconciliation of basic earnings per common share (“EPS”)
and diluted EPS for the six months ended December 31, 2015:
|
|
Six months ended
December 31, 2015
|
|
|
|
Net
|
|
|
|
|
|
Per Share
|
|
|
|
Income
|
|
|
Shares
|
|
|
Amount
|
|
Basic EPS
|
|
$
|
2,202,480
|
|
|
|
11,184,064
|
|
|
$
|
0.20
|
|
Dilutive effect of
warrants
|
|
|
-
|
|
|
|
669,546
|
|
|
|
(0.01
|
)
|
Restricted common stock
|
|
|
-
|
|
|
|
3,375
|
|
|
|
-
|
|
Diluted EPS
|
|
$
|
2,202,480
|
|
|
|
11,856,985
|
|
|
$
|
0.19
|
|
Relmada Therapeutics, Inc.
Notes to Unaudited Consolidated Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
For the three and six months ended December 31, 2016, the
following potentially dilutive securities were excluded from the computation of diluted net loss per share, as the inclusion of
such shares would be anti-dilutive:
|
|
|
|
|
|
Three and Six Months ended December 31,
2016
|
|
Stock options
|
|
|
559,969
|
|
Restricted common stock
|
|
|
42,625
|
|
Common stock warrants
|
|
|
4,224,573
|
|
Total
|
|
|
4,827,167
|
|
Recent Accounting Pronouncements
In August 2014, the Financial Accounting Standards Board issued Accounting
Standards Update 2014-15, Presentation of Financial Statements- Going Concern. The Update provides U.S. GAAP guidance on management’s
responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern
and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions
or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the
date the financial statements are issued. The amendments in this update are effective for the annual period ending after December
15, 2016, and for annual periods and interim periods thereafter. The Company is currently evaluating the effects of this pronouncement
on the consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic
842), whereby lessees will be required to recognize for all leases at the commencement date a lease liability, which is a lessee‘s
obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset
that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. A modified retrospective
transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in
the financial statements must be applied. The modified retrospective approach would not require any transition accounting for leases
that expired before the earliest comparative period presented. Companies may not apply a full retrospective transition approach.
ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018. Early application is permitted. The
Company is currently evaluating the effects of this pronouncement on the consolidated financial statements.
Relmada Therapeutics, Inc.
Notes to Unaudited Consolidated Financial Statements
NOTE 3 - PREPAID EXPENSES
Prepaid expenses consisted of the following (rounded to nearest $00):
|
|
December 31,
2016
|
|
|
June 30,
2016
|
|
Research and development
|
|
$
|
14,700
|
|
|
$
|
17,600
|
|
Insurance
|
|
|
155,100
|
|
|
|
346,100
|
|
Biotechnology tax credit receivable
|
|
|
232,000
|
|
|
|
231,900
|
|
Legal
|
|
|
166,400
|
|
|
|
171,100
|
|
Other
|
|
|
10,800
|
|
|
|
31,400
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
579,000
|
|
|
$
|
798,100
|
|
New York City allows investors and owners of merging
technology companies focused on biotechnology to claim a tax credit against the General Corporation Tax and Unincorporated
Business Tax for amounts paid or incurred for certain facilities, operations, and employee training in New York City. During
the years ended June 30, 2016 and 2015, the Company obtained certificates of biotechnology tax credit from New York City of
approximately $149,000 and $82,000, respectively.
NOTE 4 - FIXED ASSETS
Fixed assets, net of accumulated depreciation, consist of
the following (rounded to nearest $00):
|
|
Useful lives
|
|
December 31,
2016
|
|
|
June 30,
2016
|
|
Computer and Software
|
|
3 years
|
|
$
|
47,400
|
|
|
$
|
48,200
|
|
Furniture and Fixtures
|
|
7 years
|
|
|
187,200
|
|
|
|
160,000
|
|
Leasehold Improvements
|
|
7 years
|
|
|
386,900
|
|
|
|
386,900
|
|
Total
|
|
|
|
$
|
621,500
|
|
|
$
|
595,100
|
|
Less accumulated depreciation
|
|
|
|
|
(106,600
|
)
|
|
|
(63,700
|
)
|
Fixed Assets, Net
|
|
|
|
$
|
514,900
|
|
|
$
|
531,400
|
|
NOTE 5 - ACCRUED EXPENSES
Accrued expenses consisted of the following (rounded to nearest $00):
|
|
December 31,
2016
|
|
|
June 30,
2016
|
|
Research and development
|
|
$
|
49,300
|
|
|
$
|
49,300
|
|
Professional fees
|
|
|
112,700
|
|
|
|
310,000
|
|
Accrued vacation
|
|
|
65,000
|
|
|
|
66,700
|
|
Board fees
|
|
|
225,000
|
|
|
|
150,000
|
|
Other
|
|
|
20,500
|
|
|
|
58,900
|
|
Total
|
|
$
|
472,500
|
|
|
$
|
634,900
|
|
Relmada Therapeutics, Inc.
Notes to Unaudited Consolidated Financial Statements
NOTE 6 - NOTES PAYABLE
In June 2016, the Company entered into a note for approximately $273,700
in conjunction with a renewal of its director and officer insurance policy. The interest rate was 2.1% per annum.
In June 2015, the Company entered into a note for approximately $263,800
in conjunction with a renewal of its director and officer insurance policy. The interest rate was 2.8% per annum. This note has been paid in full.
At December 31, 2016 and June 30, 2016, the note payable
outstanding balances were approximately $110,000 and $273,700, respectively.
NOTE 7 - DERIVATIVE LIABILITIES
The estimated fair value of the derivative liabilities included
B warrants and agent warrants that have a down-round protection provision was calculated with the Black-Scholes Option pricing
model. The following is a summary of the assumptions used in the valuation model of the derivative liabilities at December 31,
2016 and June 30, 2016:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2016
|
|
Common stock issuable upon exercise of warrants
|
|
|
2,574,570
|
|
|
|
2,574,570
|
|
Market value of common stock on measurement date (1)
|
|
$
|
1.09
|
|
|
$
|
2.28
|
|
Exercise price
|
|
$
|
7.50 and 11.25
|
|
|
$
|
7.50 and 11.25
|
|
Risk free interest rate (2)
|
|
|
1.47
|
%
|
|
|
0.71
|
%
|
Expected life in years
|
|
|
2.44
|
|
|
|
2.95
|
|
Expected volatility (3)
|
|
|
108
|
%
|
|
|
75
|
%
|
Expected dividend yields (4)
|
|
|
None
|
|
|
|
None
|
|
(1)
|
Quoted market value of the common stock, reflects a one-for-five reverse stock split
.
|
(2)
|
The risk-free interest rate was determined by management using the applicable Treasury Bill as of the measurement date.
|
(3)
|
The historical trading volatility was determined by calculating the volatility of the Company’s stock at
December 31, 2016 and the Company’s peer group at June 30, 2016.
|
(4)
|
The Company does not expect to pay a dividend in the foreseeable future.
|
NOTE 8 – STOCKHOLDERS’ EQUITY
Exercise of warrants for non-cash
During the six months ended December 31, 2015, the Company issued approximately
1,094,000, shares of common stock resulting from the exercise on a non-cash basis of approximately 1,138,000 warrants.
Common stock issued for services
During the six months ended December 31, 2016 and 2015, the Company issued
zero and 46,664 shares of common stock for consulting services, respectively, that had a fair market of approximately zero and
approximately $180,800 , respectively, based upon the stock price at the date of issuances. The Company recorded stock-based compensation
to general and administrative expense.
Relmada Therapeutics, Inc.
Notes to Unaudited Consolidated Financial Statements
NOTE 8 – STOCKHOLDERS EQUITY (continued)
Options
In December 2014, the Board of Directors adopted and the shareholders approved
Relmada’s 2014 Stock Option and Equity Incentive Plan, as amended (the “Plan”), which allows for the granting
of 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. The Plan allows for the granting of
1,611,769 options or stock awards. In August 2015, the board approved an amendment to the Plan. Among other things, the Plan Amendment
updates the definition of “change of control” and provides for accelerated vesting of all awards granted under the
plan in the event of a change of control of the Company. At December 31, 2016, no stock appreciation rights have been issued. Stock
options are exercisable generally for a period of 10 years from the date of grant and generally vest over four years. As of December
31, 2016, 963,162 shares were available for future grants under the Plan.
The Company utilizes the Black-Scholes option pricing model to estimate
the fair value of stock options and warrants. The price of common stock prior to the Company being public was determined from a
third party valuation. 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 upon
its peer group. 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 employee option awards for stock-based compensation in its option-pricing model. The Company uses the contractual
term for non-employee options to estimate the expected term, for share-based compensation in its option-pricing model.
The company did not grant any options during the six months ended December
31, 2016.
At December 31, 2016, the Company has unrecognized stock-based compensation
expense of approximately $862,700 related to unvested stock options over the weighted average remaining service period of 2.1 years.
A summary of the changes in options during the six months ended December
31, 2016 is as follows:
|
|
Number
of
Options
|
|
|
Weighted Average Exercise Price For Share
|
|
|
Weighted Average Remaining Contractual Term (Years)
|
|
|
Aggregate Intrinsic
Value
|
|
Outstanding at June 30, 2016
|
|
|
642,204
|
|
|
$
|
6.41
|
|
|
|
7.7
|
|
|
$
|
21,500
|
|
Forfeited
|
|
|
(82,232
|
)
|
|
|
6.41
|
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding and expected to vest at December 31, 2016
|
|
|
559,972
|
|
|
$
|
6.41
|
|
|
|
7.2
|
|
|
$
|
-
|
|
Options exercisable at December 31, 2016
|
|
|
383,202
|
|
|
$
|
5.79
|
|
|
|
8.04
|
|
|
$
|
-
|
|
For the six-month period ended December 31, 2016, the Company
did not grant any stock options. For the six-month period ended December 31, 2015 the Company granted 77,295 options to purchase
common stock. The options have a ten year term and an excise price ranging between $3.45 and $8.45 per share. 25% of options vest
on the one year anniversary of the grant date and the remaining options vest quarterly over the following three years. Following
is the Black-Scholes option pricing model assumptions used to determine the fair value of options granted during the six months
ended December 31, 2015:
|
|
For the Six Months Ended
December 31,
|
|
|
|
2015
|
|
Risk free interest rate
|
|
|
1.7
|
%
|
Dividend yield
|
|
|
0
|
%
|
Volatility
|
|
|
74
|
%
|
Expected term (in years)
|
|
|
6.25
|
|
Relmada Therapeutics, Inc.
Notes to Unaudited Consolidated Financial Statements
NOTE 8 – STOCKHOLDERS EQUITY (continued)
Restricted stock
A summary of the changes in restricted stock awards during the six months
ended December 31, 2016, is as follows:
|
|
Number of Shares
|
|
|
Weighted Average Price Per Share
|
|
Unvested restricted stock awards at June 30, 2016
|
|
|
49,625
|
|
|
|
14.10
|
|
Forfeited
|
|
|
(7,000
|
)
|
|
|
13.45
|
|
Outstanding and expected to issue at December 31, 2016
|
|
|
42,625
|
|
|
|
14.21
|
|
There were no restricted stock awards granted during the six months ended
December 31, 2016. Restricted stock grants vest over four years. The Company has an unrecognized expense of approximately $140,000
related to unvested restricted stock grants which will be recognized over the remaining weighted average service period of 1.8
years. During the six months ended December 31, 2016, the Company issued 875 shares in relation to vested restricted stock and
4,000 were vested and are to be issued.
Warrants
There are no changes to outstanding warrants
during the six months ended December 31, 2016. There were no common stock warrants granted by the Company during the six months
ended December 31, 2016 and 2015.
At December 31, 2016, the Company does not have any unrecognized
stock-based compensation expense related to outstanding warrants. At December 31, 2016, the aggregate intrinsic value of warrants
that have vested and outstanding is approximately $729,000.
The following summarizes the components of stock-based compensation expense
which includes stock options, warrants and restricted stock in the consolidated statements of operations for the three and six
months ended December 31, 2016 and 2015 (rounded to nearest $00):
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Research and development
|
|
$
|
21,500
|
|
|
|
52,200
|
|
|
$
|
64,100
|
|
|
|
104,500
|
|
General and administrative
|
|
|
110,500
|
|
|
|
235,500
|
|
|
|
240,000
|
|
|
|
466,700
|
|
Total
|
|
$
|
132,000
|
|
|
|
287,700
|
|
|
$
|
304,100
|
|
|
|
571,200
|
|
Relmada Therapeutics, Inc.
Notes to Unaudited Consolidated Financial Statements
NOTE 9 - RELATED PARTY TRANSACTIONS
Placement Agent
On February 18, 2014 and May 19, 2014, the Company entered into two
engagement agreements with the Placement Agent for the May 2014 offering. The Company agreed to pay Placement Agent: (a) a
cash commission in the amount of ten percent (10%) of the gross proceeds of the Offering received from investors at a Closing
as well as a non-accountable expense reimbursement equal to two percent; and (b) (2%) of the gross proceeds of the Offering
received from investors at a Closing and an activation fee of $25,000. The Placement Agent or its designees also received
five-year warrants to purchase 858,190 shares of Relmada’s common stock at a price of $7.50 per share. The Placement
Agent shall also be entitled to the compensation set forth above as well for any cash exercise of Warrants within six (6)
months of the final closing of the Offering as well as a five percent (5%) solicitation fee for any Warrants exercised as a
result of any redemption of any Warrants. If the Company elects to call the warrants, the Placement Agent shall receive a
warrant solicitation fee equal to 5% of the funds solicited by the Placement Agent upon exercise of the warrants. The Company
shall pay the Placement Agent a nonrefundable financial advisory fee to be paid monthly, at the rate of $25,000 per month for
a period of six months commencing after the May offerings. The Company extended the monthly $25,000 financial advisory fee to
May 2015 and the Company did not renew the agreement.
Sublease
On March 10, 2016 and effective as of January 1, 2016, the
Company entered into an Office Space License Agreement (the “License”) with Actinium Pharmaceuticals, Inc. (“Actinium”),
with whom we share two common board members, for office space located at 275 Madison Avenue, 7th Floor, New York, NY 10016. The
term of the License is three years from the effective date, with an automatic renewal provision. The cost of the License is approximately
$16,620 per month for Actinium, subject to customary escalations and adjustments. The Company records the license fees as other
income in the consolidated income statements. During the year ended June 30, 2016, the Company received and recorded a lease deposit
of approximately $40,000 in long-term liabilities.
Advisory Firm
On August 4, 2015, the Company entered into an Advisory and Consulting Agreement
(the “Consulting Agreement”) with Sandesh Seth, the Company’s Chairman of the Board. The effective date of the
Consulting Agreement is June 30, 2015. Mr. Seth has substantial experience in, among other matters, business development, corporate
planning, corporate finance, strategic planning, investor relations and public relations, and an expansive network of connections
spanning the biopharmaceutical industry, accounting, legal and corporate communications professions. Mr. Seth will provide advisory
and consulting services to assist the Company with strategic advisory services, assist in prioritizing product development programs
per strategic objectives, assist in recruiting of key personnel and directors, corporate planning, business development activities,
corporate finance advice, and assist in investor and public relations services. In consideration for the services to be provided,
the Company agrees to pay Mr. Seth $12,500 per month on an ongoing basis.
Relmada Therapeutics, Inc.
Notes to Unaudited Consolidated Financial Statements
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Legal
From time to time, the Company may become involved in various lawsuits and
legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an
adverse result in these or other matters may arise from time to time that may harm business. Except as disclosed below, the
Company is currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material
adverse effect on its business, financial condition, operating results, or cash flows.
Lawsuit Brought by a Former Officer
: In 2014, Relmada dismissed with
prejudice its lawsuit against Najib Babul, which had sought to compel Mr. Babul, Relmada’s former President, to account for
questionable expenditures of Relmada funds made while Babul controlled the Company. Relmada’s decision to surrender its claims
was informed by the fact that Babul came forward with plausible explanations for some of the expenditures, and the fact that, because
Babul was a former officer and director of Relmada being sued for his conduct in office, the Company was required to advance his
expenses of the litigation; hence, Relmada was paying all the lawyers and consultants on both sides of the dispute. Relmada also
agreed to reinstate certain stock purchase warrants in Babul’s name, which had been cancelled during the pendency of the
litigation, and offered Babul the right to exchange his shares in RTI for shares in the Company.
Babul has brought a second lawsuit against Relmada. Ruling on
Relmada’s motion, the United States District Court for the Eastern District of Pennsylvania dismissed Babul’s
claims for breach of contract and intentional infliction of emotional distress, and left intact his claims for defamation,
and wrongful use of civil process. Management believes that the Company has good defenses to all of Babul’s claims, and
that the outcome of the Babul litigation, even if unfavorable, would not materially affect the Company’s operations or
financial position or cash flows. However, litigation is an inherently uncertain process, and there can be no assurances with
respect to either the outcome or the consequences of this litigation.
Proceeding with Laidlaw
:
On December 9, 2015, Relmada filed a lawsuit in the U.S.
District Court for the District of Nevada (the “Court”) against Laidlaw & Company (UK) Ltd. and its two principals,
Matthew Eitner and James Ahern (collectively, the “Defendants”), Relmada Therapeutics, Inc. v. Laidlaw & Company
(UK) Ltd., et al. (Case No. 15-cv-2338) (the “Lawsuit”). The Lawsuit alleges that the press release issued by the Defendants
on December 4, 2015, which was subsequently filed with the Securities and Exchange Commission (“SEC”) on Schedule 14A,
contained materially misleading proxy statements regarding, among other things, Defendants’ ability to nominate directors
at Relmada’s December 30, 2015 annual stockholders’ meeting (the “Meeting”), in violation of Section 14(a)
of the Securities Exchange Act of 1934 and SEC Rule 14a-9. Relmada sought a temporary restraining order and preliminary injunction
to enjoin the Defendants from continuing to disseminate false and misleading proxy statements.
On December 10, 2015, the Court issued a temporary restraining
order and associated injunction to enjoin the Defendants from “continuing to disseminate false and misleading proxy materials”
and require that Defendants, among other things, “immediately must retract or correct its false and misleading proxy materials”
(the “Temporary Restraining Order”). The Temporary Restraining Order was set to expire on December 22, 2015, when the
parties were scheduled to appear for a hearing before the Court.
On December 16, 2015, the Defendants filed an answer in response
to the Lawsuit as well as a counterclaim against Relmada and its Board of Directors (the “Counterclaim”). The Counterclaim
alleges that (i) Relmada has disseminated materially false and misleading proxy statements concerning Defendants’ previous
actions and conduct, in violation of Section 14(a) of the Securities Exchange Act of 1934 and SEC Rule 14a-9, and (ii) members
of Relmada’s Board of Directors breached their fiduciary duties by, among other things, approving certain changes to Relmada’s
stockholder election procedures. The Counterclaim sought the dissolution of the Temporary Restraining Order and injunctive relief
that would postpone the Meeting.
On December 22, 2015, after a hearing before the Court, the
Court entered the Company’s requested preliminary injunction, ordering the Defendants to continue to comply with similar
terms to the Temporary Restraining Order (the “Preliminary Injunction Order”). The Preliminary Injunction Order will
remain in place pending a full trial on the merits.
On February 18, 2016, Relmada filed an amended complaint
in connection with the Lawsuit. The amended complaint includes an additional legal claim based on the Defendants’ breach
of the fiduciary duty that they owed to Relmada when the Defendants disclosed and mischaracterized confidential information that
they acquired in their capacity as Relmada’s investment banker. Relmada is also seeking monetary damages arising from fees
and costs that it incurred responding to the Defendants’ false and misleading proxy materials in December 2015.
On April 4, 2016, Laidlaw filed a motion to dismiss Relmada’s
amended complaint. On April 15, 2016, Relmada filed a partial motion to dismiss the Counterclaim and Laidlaw filed a motion to
transfer venue to the U.S. District Court for the Southern District of New York. Relmada’s motion to dismiss was mooted by
stipulation.
On September 6, 2016, Relmada moved for leave to amend the
complaint for a second time to allege additional claims against Defendants, including defamation/business disparagement, defamation
per se, tortious interference with prospective economic advantage, violations of sections 1962(c) and 1692(d) of the Racketeer
Influenced and Corrupt Organizations Act, and violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
thereunder. The Court granted Relmada’s motion to amend on September 27, 2016, which mooted the pending motion to dismiss
the amended complaint. Shortly thereafter, on September 29, 2016, the Court granted Defendants’ motion to transfer venue
to the U.S. District Court for the Southern District of New York (the “SDNY Court”). Relmada filed its second amended
complaint on or about October 5, 2016, the same date on which the Lawsuit was officially transferred to the SDNY Court.
The SDNY Court held an initial pretrial conference on October
21, 2016 during which it set a briefing schedule for Defendants’ contemplated motion to dismiss. During the conference,
Defendants’ counsel represented that Defendants have no pending counterclaims against Relmada as of that time. As of January
6, 2017, Defendants’ motion to dismiss was fully briefed and submitted to the SDNY Court for decision.
Relmada Therapeutics, Inc.
Notes to Unaudited Consolidated Financial Statements
NOTE 10 - COMMITMENTS AND CONTINGENCIES (continued)
On April 4, 2016, Laidlaw filed a motion to dismiss Relmada’s
amended complaint. On April 15, 2016, Relmada filed a partial motion to dismiss the Counterclaim and Laidlaw filed a motion to
transfer venue to the U.S. District Court for the Southern District of New York. Relmada’s motion to dismiss was mooted by
stipulation.
On September 6, 2016, Relmada moved for leave to amend the
complaint for a second time to allege additional claims against Defendants, including defamation/business disparagement, defamation
per se, tortious interference with prospective economic advantage, violations of sections 1962(c) and 1692(d) of the Racketeer
Influenced and Corrupt Organizations Act, and violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
thereunder. The Court granted Relmada’s motion to amend on September 27, 2016, which mooted the pending motion to dismiss
the amended complaint. Shortly thereafter, on September 29, 2016, the Court granted Defendants’ motion to transfer venue
to the U.S. District Court for the Southern District of New York (the “SDNY Court”). Relmada filed its second amended
complaint on or about October 5, 2016, the same date on which the Lawsuit was officially transferred to the SDNY Court.
The SDNY Court held an initial pretrial conference on October
21, 2016 during which it set a briefing schedule for Defendants’ contemplated motion to dismiss. During the conference,
Defendants’ counsel represented that Defendants have no pending counterclaims against Relmada as of that time. As of January
6, 2017, Defendants’ motion to dismiss was fully briefed and submitted to the SDNY Court for decision.
Leases and Sublease
On October 1, 2015, the Company commenced a lease with a term of seven years and three months for office space
in a building in New York City. Rent expense is recognized on a straight-line basis over the term of the lease. Accordingly, rent
expense recognized in excess of rent paid is reflected as a liability in the accompanying consolidated balance sheets. Rent expense
for the three and six months ended December 31, 2016 was $82,461 and $164,923, respectively.
Contractual Obligations
The following tables sets forth our contractual obligations
for the next five years and thereafter:
|
|
Total
|
|
|
Less than
1 year
|
|
|
1 – 2 years
|
|
|
3 – 5 years
|
|
|
More than
5 years
|
|
Office lease
|
|
$
|
2,108,785
|
|
|
$
|
352,172
|
|
|
$
|
671,543
|
|
|
$
|
1,085,070
|
|
|
$
|
-
|
|
Note payable
|
|
|
110,033
|
|
|
|
110,033
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total obligations
|
|
$
|
2,218,818
|
|
|
$
|
462,205
|
|
|
$
|
671,543
|
|
|
$
|
1085,070
|
|
|
$
|
-
|
|
On March 10, 2016 and effective as of January 1, 2016, Relmada entered
into an Office Space License Agreement (the “License”) with Actinium Pharmaceuticals, Inc. (“Actinium”),
with whom we share two common board members, for office space located at 275 Madison Avenue, 7
th
Floor, New York, NY
10016
.
The term of the License is three years from the effective date, with an automatic renewal provision.
The cost of the License is approximately $16,620 per month for Actinium, subject to customary escalations and adjustments.
Letter Of Credit
The Company has an outstanding letter of credit of approximately
$392,600 in connection with the Company’s New York City corporate office lease. The letter of credit is secured by a restricted
certificate of deposit in the same amount which is included in other assets at December 31, 2016 and June 30, 2016. On the
second anniversary of the lease commencement date, the letter of credit will be reduced to approximately $234,400. In October 2022,
the letter of credit will be reduced to approximately $156,000.