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.
Going Concern
The accompanying unaudited consolidated
financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the issuance
of these consolidated financial statements. As shown in the accompanying financial statements, the Company incurred negative operating
cash flows of $5,450,024 for the nine months ended March 31, 2017 and accumulated losses of $83,749,838 from inception through
March 31, 2017. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. These
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
We will need to raise additional funds in order to continue
our clinical trials. Insufficient funds may cause us to delay, reduce the scope of or eliminate one or more of our development
programs. Our future capital needs and the adequacy of our available funds will depend on many factors, including the cost of
clinical studies and other actions needed to obtain regulatory approval of our products in development. Management plans to raise
additional funds through public or private sales of equity or debt securities or from bank or other loans or through strategic
collaboration and/or licensing agreements, to fund operations until the Company is able to generate enough revenues to cover operating
costs. Financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could materially
adversely impact our growth plans and our financial condition or results of operations. Additional equity financing, if available,
may be dilutive to our shareholders. In addition, the Company may never be able to generate sufficient revenue if any from its
potential products.
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 March 31, 2017 and June 30, 2016:
|
|
Markets for
Identical
Assets
|
|
|
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
Carrying
Value as of
March 31,
|
|
Description
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
2017
|
|
Derivative liabilities - warrant instruments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
279,430
|
|
|
$
|
279,430
|
|
|
|
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)
|
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Beginning balance
|
|
$
|
892,503
|
|
|
$
|
14,001,369
|
|
Change in fair value of derivative liabilities
|
|
|
(613,073
|
)
|
|
|
(13,387,290
|
)
|
Ending balance
|
|
$
|
279,430
|
|
|
$
|
614,079
|
|
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 March 31, 2017 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 March 31, 2017 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 March 31, 2017 and 2016 and
for the nine months ended March 31, 2017, potentially dilutive securities were not included in the calculation of diluted net loss
per share because to do so would be anti-dilutive. Following is a reconciliation of basic earnings per common share (“EPS”)
and diluted EPS for the nine months ended March 31, 2016:
|
|
Nine months ended
March 31, 2016
|
|
|
|
Net
|
|
|
|
|
|
Per Share
|
|
|
|
Income
|
|
|
Shares
|
|
|
Amount
|
|
Basic EPS
|
|
$
|
342,700
|
|
|
|
11,457,789
|
|
|
$
|
0.03
|
|
Dilutive effect of exercise of options
|
|
|
|
|
|
|
2,530
|
|
|
|
(0.00
|
)
|
Dilutive effect of warrants
|
|
|
-
|
|
|
|
669,449
|
|
|
|
(0.00
|
)
|
Restricted common stock
|
|
|
-
|
|
|
|
7,750
|
|
|
|
-
|
|
Diluted EPS
|
|
$
|
342,700
|
|
|
|
12,137,518
|
|
|
$
|
0.03
|
|
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
For
the three and nine months ended March 31, 2017, 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 Nine Months ended March 31,
2017
|
|
Stock options
|
|
|
559,972
|
|
Restricted common stock
|
|
|
42,625
|
|
Common stock warrants
|
|
|
4,224,573
|
|
Total
|
|
|
4,827,170
|
|
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):
|
|
March 31,
2017
|
|
|
June 30,
2016
|
|
Research and development
|
|
$
|
18,600
|
|
|
$
|
17,600
|
|
Insurance
|
|
|
73,100
|
|
|
|
346,100
|
|
Biotechnology tax credit receivable
|
|
|
231,900
|
|
|
|
231,900
|
|
Legal
|
|
|
120,700
|
|
|
|
171,100
|
|
Other
|
|
|
42,600
|
|
|
|
31,400
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
486,900
|
|
|
$
|
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
|
|
March 31,
2017
|
|
|
June 30,
2016
|
|
Computer and Software
|
|
3 years
|
|
$
|
48,100
|
|
|
$
|
48,200
|
|
Furniture and Fixtures
|
|
7 years
|
|
|
206,800
|
|
|
|
160,000
|
|
Leasehold Improvements
|
|
7 years
|
|
|
386,900
|
|
|
|
386,900
|
|
Total
|
|
|
|
$
|
641,800
|
|
|
$
|
595,100
|
|
Less accumulated depreciation
|
|
|
|
|
(130,000
|
)
|
|
|
(63,700
|
)
|
Fixed Assets, Net
|
|
|
|
$
|
511,800
|
|
|
$
|
531,400
|
|
NOTE
5 - ACCRUED EXPENSES
Accrued expenses consist of the following (rounded to nearest $00):
|
|
March 31,
2017
|
|
|
June 30,
2016
|
|
Research and development
|
|
$
|
49,300
|
|
|
$
|
49,300
|
|
Professional fees
|
|
|
99,300
|
|
|
|
310,000
|
|
Accrued vacation
|
|
|
68,200
|
|
|
|
66,700
|
|
Legal expense
|
|
|
326,600
|
|
|
|
-
|
|
Board fees
|
|
|
24,600
|
|
|
|
150,000
|
|
Other
|
|
|
18,400
|
|
|
|
58,900
|
|
Total
|
|
$
|
586,400
|
|
|
$
|
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
March 31, 2017 and June 30, 2016, the note payable outstanding balances were approximately $27,600 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 March 31, 2017 and June 30, 2016:
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Common stock issuable upon exercise of warrants
|
|
|
2,574,570
|
|
|
|
2,574,570
|
|
Market value of common stock on measurement date (1)
|
|
$
|
0.90
|
|
|
$
|
2.28
|
|
Exercise price
|
|
$
|
7.50 and 11.25
|
|
|
$
|
7.50 and 11.25
|
|
Risk free interest rate (2)
|
|
|
1.27
|
%
|
|
|
0.71
|
%
|
Expected life in years
|
|
|
2.19
|
|
|
|
2.95
|
|
Expected volatility (3)
|
|
|
106
|
%
|
|
|
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 March 31, 2017
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 nine months ended March 31, 2016, 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 nine months ended March 31, 2017 and 2016,
the Company issued zero and 63,329 shares of common stock for consulting services, respectively, that had a fair market of $0 and
approximately $204,500, respectively, based upon the stock price at the date of issuances. The Company recorded stock-based compensation
to general and administrative expense.
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. In January 2017, the stockholders
approved an increase of 2,500,000 shares authorized to be issued under the Plan, raising the total shares allowed under the Plan
to 4,111,769. At March 31, 2017, 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 March 31, 2017, 3,509,172 shares were available
for future grants under the Plan.
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
8 - STOCKHOLDERS EQUITY (continued)
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 through June 30, 2016. Effective July 1, 2016, the Company began utilizing its own historical volatility on
a prospective basis. 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.
On February 13, 2017, Mr. Becker, the Company’s Chief Financial Officer, resigned and entered into a consulting agreement
with the Company to provide financial, investor, digital media, and public relations services for the Company. As a result of
Mr. Becker’s change from an employee to a consultant, his options and shares of restricted stock outstanding on such date
continue to vest pursuant to the awards’ original terms and were reclassified as non-employee awards. The fair value of
the awards will be re-measured at each reporting date until the earlier of (a) the performance commitment date or (b) the date
the services required under the arrangement have been completed.
The
company did not grant any options during the nine months ended March 31, 2017.
At
March 31, 2017, the Company has unrecognized stock-based compensation expense of approximately $546,600 related to unvested stock
options over the weighted average remaining service period of 1.9 years.
A
summary of the changes in options during the nine months ended March 31, 2017 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 at March 31, 2017
|
|
|
559,972
|
|
|
$
|
6.41
|
|
|
|
6.9
|
|
|
$
|
-
|
|
Options exercisable at March 31, 2017
|
|
|
407,645
|
|
|
$
|
5.89
|
|
|
|
6.6
|
|
|
$
|
-
|
|
For the nine-month period ended March 31, 2017,
the Company did not grant any stock options. For the nine-month period ended March 31, 2016, the Company granted three
directors 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. The fair value of the options at the grant date was $2.28 to $5.59 per share using
the Black-Scholes Option pricing model. During the nine months ended March 31, 2016, the Company also granted employees
options to purchase 29,500 shares of common stock in aggregate. The options have a ten-year term and exercise prices of $1.55
per share. 6.25% of the options vest quarterly over the following 4 years. The fair value of the options at the grant date
was approximately $1.08 per share using the Black-Scholes Option pricing model. Following is the Black-Scholes option pricing
model assumptions used to determine the fair value of options granted during the nine months ended March 31, 2016:
|
|
For the Nine Months Ended
March 31,
|
|
|
|
2016
|
|
Risk free interest rate
|
|
|
1.4 to 1.7
|
%
|
Dividend yield
|
|
|
0
|
%
|
Volatility
|
|
|
74 to 80
|
%
|
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 nine months ended March 31, 2017, 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 at March 31, 2017
|
|
|
42,625
|
|
|
|
14.21
|
|
There
were no restricted stock awards granted during the nine months ended March 31, 2017. Restricted stock grants vest over four years.
The Company has an unrecognized expense of approximately $7,170 related to unvested restricted stock grants which will be recognized
over the remaining weighted average service period of 1.6 years. During the nine months ended March 31, 2017, the Company issued
4,875 shares in relation to vested restricted stock and 1,250 were vested and are to be issued.
Warrants
There
are no changes to outstanding warrants during the nine months ended March 31, 2017. There were no common stock warrants granted
by the Company during the nine months ended March 31, 2017 and 2016.
At
March 31, 2017, the Company does not have any unrecognized stock-based compensation expense related to outstanding warrants. At
March 31, 2017, the aggregate intrinsic value of warrants that have vested and outstanding is approximately $602,000.
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 nine months ended March 31, 2017 and 2016 (rounded to nearest
$00):
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Research and development
|
|
$
|
21,200
|
|
|
|
51,800
|
|
|
$
|
85,300
|
|
|
|
156,300
|
|
General and administrative
|
|
|
87,300
|
|
|
|
224,700
|
|
|
|
327,300
|
|
|
|
691,400
|
|
Total
|
|
$
|
108,500
|
|
|
|
276,500
|
|
|
$
|
412,600
|
|
|
|
847,700
|
|
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.
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
10 - COMMITMENTS AND CONTINGENCIES (continued)
Legal (continued)
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.
In connection with the above matters, the Company recorded
a litigation reserve of approximately $275,000 during the quarter ended March 31, 2017.
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 nine months ended March 31, 2017 was $82,461 and $247,384, respectively.
Contractual
Obligations
The
following table 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
|
|
$
|
2,018,808
|
|
|
$
|
344,434
|
|
|
$
|
676,959
|
|
|
$
|
997,415
|
|
|
$
|
-
|
|
Note payable
|
|
|
27,585
|
|
|
|
27,585
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total obligations
|
|
$
|
2,046,393
|
|
|
$
|
372,019
|
|
|
$
|
676,959
|
|
|
$
|
997,415
|
|
|
$
|
-
|
|
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 March 31, 2017 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.