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
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, 2017 and notes thereto contained in the Company’s Annual Report on
Form 10-K.
Liquidity
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. As of November 8, 2017, we have cash on hand of approximately $6.0 million. We believe that we have enough cash on hand
to fund our operations until the end of calendar year 2018.
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 and are comprised of Computers and Software. 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.
Fair
Value of Financial Instruments
The
Company’s financial instruments primarily include cash, accounts payable and derivative liabilities. Due to the short-term
nature of cash and accounts 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 resulting from equity offerings in May 2014 and June 2014 have a down-round protection provisions
was 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. The estimated fair value of the derivative instruments from
the convertible promissory notes issued in September 2017 which have a redemption feature was estimated using the Monte Carlo
pricing model. The assumptions used in the valuation model at September 30, 2017 considers the probability of redemption, the
length of time to maturity and the value of the redemption feature.
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 September 30, 2017:
|
|
Markets for
Identical
Assets
|
|
|
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
Carrying
Value as of
September 30,
|
|
Description
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
2017
|
|
Derivative liabilities - warrant instruments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
181,555
|
|
|
$
|
181,555
|
|
Derivative liability – embedded redemption feature
|
|
|
-
|
|
|
|
-
|
|
|
|
2,336,456
|
|
|
|
2,336,456
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,518,011
|
|
|
|
2,518,011
|
|
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 June 30, 2017:
|
|
Markets for
Identical
Assets
|
|
|
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
Carrying
Value as of
June 30,
|
|
Description
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
2017
|
|
Derivative liabilities - warrant instruments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
175,853
|
|
|
$
|
175,853
|
|
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)
|
|
|
|
|
September 30,
|
|
|
|
September 30,
|
|
|
|
|
2017
|
|
|
|
2016
|
|
Beginning balance
|
|
$
|
175,853
|
|
|
$
|
892,503
|
|
Fair value of derivative liabilities for redemption feature of notes payable
|
|
|
2,336,456
|
|
|
|
-
|
|
Change in fair value of derivative liabilities
|
|
|
5,702
|
|
|
|
80,043
|
|
Ending balance
|
|
$
|
2,518,011
|
|
|
$
|
972,546
|
|
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, 2017 and June 30, 2017, 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, 2017 and June 30, 2017. The open tax years, subject to potential
examination by the applicable taxing authority, for the Company are from 2014 through June 30, 2017.
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
Loss per Common Share
Basic
net 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 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 restricted stock, warrants for the purchase of common
stock and stock options.
For
the three months ended September 30, 2017 and 2016, 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 three months ended September 30, 2017 and 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 months ended
|
|
|
|
September 30,
2017
|
|
|
September 30,
2016
|
|
Stock options
|
|
|
503,972
|
|
|
|
605,982
|
|
Restricted common stock
|
|
|
42,625
|
|
|
|
42,625
|
|
Common stock warrants
|
|
|
7,254,762
|
|
|
|
4,224,573
|
|
Total
|
|
|
7,801,359
|
|
|
|
4,873,180
|
|
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent
Accounting Pronouncements
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.
The
Company does not expect that any other recently issued accounting pronouncements will have a significant impact on the
results of consolidated operations, consolidated financial position, or cash flows of the Company.
NOTE 3 - OTHER RECEIVABLE AND PREPAID EXPENSES
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. As of September 30, 2017 and
June 30, 2017, the Company had other receivables of biotechnology tax credits from New York City of approximately $151,000 and
$232,000 respectively.
Prepaid
expenses consisted of the following (rounded to nearest $00):
|
|
September 30,
2017
|
|
|
June 30,
2017
|
|
Rent
|
|
$
|
10,000
|
|
|
$
|
3,300
|
|
Research and development
|
|
|
7,200
|
|
|
|
9,600
|
|
Insurance
|
|
|
250,000
|
|
|
|
344,000
|
|
Legal
|
|
|
38,700
|
|
|
|
64,800
|
|
Other
|
|
|
63,500
|
|
|
|
50,800
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
369,400
|
|
|
$
|
472,500
|
|
NOTE
4 - FIXED ASSETS
Fixed
assets, net of accumulated depreciation, consisted of the following (rounded to nearest $00):
|
|
Useful lives
|
|
September 30,
2017
|
|
|
June 30,
2017
|
|
Computer and Software
|
|
3 years
|
|
$
|
6,900
|
|
|
$
|
4,300
|
|
Less: accumulated depreciation
|
|
|
|
|
(2,500
|
)
|
|
|
(2,000
|
)
|
Fixed Assets
|
|
|
|
$
|
4,400
|
|
|
$
|
2,300
|
|
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
5 - ACCRUED EXPENSES
Accrued
expenses consisted of the following (rounded to nearest $00):
|
|
September 30,
2017
|
|
|
June 30,
2017
|
|
Accrued vacation
|
|
$
|
55,800
|
|
|
$
|
56,900
|
|
Professional fees
|
|
|
266,300
|
|
|
|
293,400
|
|
Other
|
|
|
85,200
|
|
|
|
44,300
|
|
Total
|
|
$
|
407,300
|
|
|
$
|
394,600
|
|
NOTE
6 - NOTES PAYABLE
In June 2017, the Company entered into a note for approximately $276,700 in conjunction with a renewal of its director and officer
insurance policy. The interest rate was 2.05% per annum. The note matures on April 9, 2018. At September 30, 2017 and June 30,
2017, the note payable outstanding balances were approximately $194,200 and $276,700, respectively.
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. The note matured on April 9, 2017 and was repaid during the year ended
June 30, 2017.
NOTE
7 - DERIVATIVE LIABILITIES
ASC
Topic No. 815 -
Derivatives and Hedging
provides guidance on determining what types of instruments or embedded features
in an instrument issued by a reporting entity can be considered indexed to its own stock for the purpose of evaluating the first
criteria of the scope exception in the pronouncement on accounting for derivatives. These requirements can affect the accounting
for warrants and convertible preferred instruments issued by the Company. At September 30, 2017 and June 30, 2017, the Company
had warrants resulting from equity offerings in May 2014 and June 2014 that do not have fixed settlement provisions because their
conversion and exercise prices may be lowered if the Company issues securities at lower prices in the future, the Company concluded
that the instruments are not indexed to the Company’s stock and are to be treated as derivative liabilities. In determining
the fair value of the derivative liabilities, the Company used the Black-Scholes option pricing model at September 30, 2017 and
June 30, 2017.
The
following is a summary of the assumptions used in the valuation model at September 30, 2017 and June 30, 2017:
|
|
September
30,
|
|
|
June
30,
|
|
|
|
2017
|
|
|
2017
|
|
Common
stock issuable upon exercise of warrants
|
|
2,574,570
|
|
|
2,574,570
|
|
Market
value of common stock on measurement date
|
|
$0.95
|
|
|
$0.82
|
|
Exercise
price
|
|
$7.50 and 11.25
|
|
|
$7.50 and 11.25
|
|
Risk
free interest rate (1)
|
|
1.47%
|
|
|
1.38%
|
|
Expected
life in years
|
|
1.70
|
|
|
1.95
|
|
Expected
volatility (2)
|
|
106%
|
|
|
106%
|
|
Expected
dividend yields (3)
|
|
None
|
|
|
None
|
|
(1)
|
The
risk-free interest rate was determined by management using the applicable Treasury Bill as of the measurement date.
|
(2)
|
The
historical trading volatility was determined by calculating the volatility of the Company’s stock at September 30, 2017
and June 30, 2017.
|
(3)
|
The
Company does not expect to pay a dividend in the foreseeable future.
|
At September 30, 2017, the Company had convertible promissory
notes payable with a redemption feature which is not clearly and closely related to the host instrument and therefore is
considered an embedded derivative which was bifurcated and recorded as a derivative liability. In determining the fair value
of the derivative liabilities, the Company used the Monte-Carlo pricing model at September 30, 2017.
The assumptions used in the valuation model at September 30, 2017
considers the probability of redemption, the length of time to maturity and value of the redemption feature.
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
8 – PROMISSORY NOTES PAYABLE
In September 2017, the Company issued two-year
Convertible Promissory Notes and warrants, for aggregate gross proceeds of $4,480,000. The notes have an interest rate of 7%
per annum. The notes are convertible at the option of the holder at any time prior to maturity into shares of the Company’s
common stock at $0.75 per share. In addition, the notes automatically convert at a discount upon the Company attaining an
Equity Financing, as defined in the note agreements. The warrants have a 7-year term and are exercisable at $1.50 per share
for 2,986,666 common shares. The redemption features in the notes is an embedded derivative which has been bifurcated and
will be adjusted to fair value at each reporting period.
In connection with the notes, the Company incurred fees to the
placement agent and other professionals of approximately $550,000. In addition, the placement agent received 398,000 warrants
convertible into the Company’s common stock at $1.65 per share. The warrants were valued at $75,600 using the Black Scholes
option pricing model. The fees were recorded as a reduction to the notes payable amount and will be recognized over the term of
the notes as additional interest using the effective interest method.
In October 2017, the Company issued additional two year convertible
promissory notes and warrants with the identical terms as the notes for aggregate proceeds of $2,610,000.
NOTE
9 - STOCKHOLDERS’ EQUITY
Exercise
of warrants for non-cash
During
the three months ended September 30, 2017, the Company issued approximately 16,700, shares of common stock resulting from the
exercise on a non-cash basis of approximately 16,800 warrants.
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 September 30, 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 September 30, 2017, 3,565,172 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 the Company’s historical volatility. The Company routinely
reviews its calculation of volatility changes in future volatility, the Company’s life cycle, 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.
During
the three months ended September 30, 2017, there were no options granted.
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
9 - STOCKHOLDERS’ EQUITY (continued)
At
September 30, 2017, the Company has unrecognized stock-based compensation expense of approximately $323,700 related to unvested
stock options over the weighted average remaining service period of 1.6 years.
A
summary of the changes in options during the three months ended September 30, 2017 is as follows:
|
|
Number
of
Options
|
|
|
Weighted Average Exercise Price For Share
|
|
|
Weighted Average Remaining Contractual Term (Years)
|
|
|
Aggregate Intrinsic
Value
|
|
Outstanding and expected to vest at June 30,
2017
|
|
|
559,972
|
|
|
$
|
6.41
|
|
|
|
6.7
|
|
|
$
|
-
|
|
Forfeited
|
|
|
(56,000
|
)
|
|
$
|
8.15
|
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding and expected to vest at
September 30, 2017
|
|
|
503,972
|
|
|
$
|
6.22
|
|
|
|
6.4
|
|
|
$
|
-
|
|
Options exercisable at September 30, 2017
|
|
|
412,404
|
|
|
$
|
5.86
|
|
|
|
6.1
|
|
|
$
|
-
|
|
Restricted
stock
A
summary of the changes in restricted stock awards during the three months ended September 30, 2017, is as follows:
|
|
Number of Shares
|
|
|
Weighted Average Price Per Share
|
|
Outstanding restricted stock awards at June
30, 2017
|
|
|
42,625
|
|
|
$
|
14.21
|
|
Forfeited
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding restricted stock awards
at September 30, 2017
|
|
|
42,625
|
|
|
$
|
14.21
|
|
There
were no restricted stock awards granted during the three months ended September 30, 2017. Restricted stock grants vest over four
years. The Company has an unrecognized expense of approximately $5,900 related to unvested restricted stock grants which will
be recognized over the remaining weighted average service period of 1.09 years. During the three months ended September 30, 2017,
the Company did not issue any shares of common stock and 2,500 were vested and are to be issued.
Warrants
A
summary of the changes in outstanding warrants during the three months ended September 30, 2017 is as follows:
|
|
Number of Shares
|
|
|
Weighted Average Exercise Price Per Share
|
|
|
Weighted Average Remaining Contractual Term (Years)
|
|
Outstanding and vested at June 30, 2017
|
|
|
3,886,866
|
|
|
$
|
7.71
|
|
|
|
2.4
|
|
Granted
|
|
|
3,384,666
|
|
|
$
|
1.52
|
|
|
|
6.9
|
|
Exercised
|
|
|
(16,770
|
)
|
|
$
|
-
|
|
|
|
-
|
|
Outstanding and vested at September
30, 2017
|
|
|
7,254,762
|
|
|
$
|
4.81
|
|
|
|
4.4
|
|
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
9 - STOCKHOLDERS’ EQUITY (continued)
During the quarter ended September 30, 2017, the Company issued
an aggregate of 2,986,666 warrants to the noteholders of the Convertible Promissory Notes and 398,000 warrants to the placement
agent in connection with the notes with an exercise price of $1.50 and $1.65 respectively. The warrants are non-cancellable, vest
upon issuance and expire on the seventh anniversary of the warrant date of issuance. The aggregate fair value of these warrants
using the Black-Scholes option pricing model was approximately $917,200 in total based on the following assumption:
Risk free interest rate
|
|
|
2.13
|
%
|
Dividend yield
|
|
|
0
|
%
|
Volatility
|
|
|
85
|
%
|
Expected term (in years) (1)
|
|
|
7.00
|
|
(1) call option value is calculated as the sum of intrinsic value
plus 40% of time value
At September 30, 2017, and June 30, 2017, the Company does not have
any unrecognized stock-based compensation expense related to outstanding warrants. At September 30, 2017 and June 30, 2017, the
aggregate intrinsic value of warrants vested and outstanding was approximately $157,000 and $149,000, respectively. As the warrants
granted during the quarter ended September 30, 2017 were in connection with the notes, the fair value of the warrants was recorded
as a reduction to the carrying amount of the notes.
The
following summarizes the components of stock-based compensation expense which includes stock options and restricted
stock in the consolidated statements of operations for the three months ended September 30, 2017 and 2016 (rounded to nearest
$00):
|
|
Three Months Ended September 30,
2017
|
|
|
Three Months Ended September 30,
2016
|
|
Research and development
|
|
$
|
7,100
|
|
|
$
|
42,600
|
|
General and administrative
|
|
|
61,800
|
|
|
|
129,500
|
|
Total
|
|
$
|
68,900
|
|
|
$
|
172,100
|
|
NOTE
10 - RELATED PARTY TRANSACTIONS
Placement
Agent
On August 4, 2015, the Company entered into an Advisory and 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 agreed to pay
Mr. Seth $12,500 per month on an ongoing basis. On June 6, 2017, Mr. Seth resigned from the Company to focus his attention on matters
external to Relmada. The Company agreed to continue its advisory and consulting arrangement with Mr. Seth until December 31, 2017.
Consulting
Agreement
On June 12, 2017, the Company and Maged Shenouda, a director
of the Company, entered into a Consulting Agreement. Pursuant to the terms of the agreement, Mr. Shenouda will assist the Company
with matters that may be requested by the Company. Mr. Shenouda will be paid a consulting fee of $10,000 per month. The term of
the agreement is for one year. On November 13, 2017, Mr. Shenouda and the Company agreed to terminate the Consulting Agreement
effective December 31, 2017.
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
11 - COMMITMENTS AND CONTINGENCIES
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. Except
as disclosed below, 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.
Lawsuit
Brought by 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 Relmada Therapeutics, Inc. (a Delaware corporation and subsidiary of the Company) for shares in the Company.
Babul
has brought a second lawsuit against Relmada. Ruling on Relmada’s Motion to Dismiss, 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. 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.
All
litigation is an inherently uncertain process, and there can be no assurances with respect to either the outcome or the consequences
of this litigation. However, Management believes that the determination of the Counterclaim, even if unfavorable, would not materially
affect the Company’s operations or financial position. The Company recorded no contingent liability or expense associated
with litigation during the three months ended September 30, 2017.
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
11 - COMMITMENTS AND CONTINGENCIES (continued)
Leases
and Sublease
As
of June 30, 2017, the Company changed its corporate headquarters to 750 Third Avenue, 9 th Floor, New York, New York 10017 pursuant
to a lease agreement. The monthly rental fee for is $8,294 per month. The lease expires on January 31, 2018.
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 the Company shared two common board members until June
6, 2017, for the office space. 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 recorded the license fees as other income in the consolidated statements of operations.
On
June 6, 2017, the landlord and the Company agreed to assign the Lease for all of the office space to Actinium, pursuant to an
Assignment and Consent Agreement. As of such date all rights, titles, and interest to the Lease, including related duties, liabilities,
and obligations, were transferred from the Company to Actinium for a gain of approximately $100,000.
On
June 8, 2017, the Company entered into an Amended and Restated License Agreement with Actinium. Pursuant to the terms of the agreement,
Actinium will continue to license the furniture, fixtures, equipment and tenant improvements located in the office (“FFE”)
for a license fee of $7,529 per month until December 8, 2022. Actinium shall have at any time during the term of this agreement
the right to purchase the FFE for $496,914, less any previously paid license fees. The license of FFE qualifies 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. As of September
30, 2017, the balance of unearned interest income was approximately $91,600.
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
|
|
$
|
33,176
|
|
|
$
|
33,176
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Note payable
|
|
|
194,164
|
|
|
|
194,164
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Convertible promissory notes payable
|
|
|
4,480,000
|
|
|
|
-
|
|
|
|
4,480,000
|
|
|
|
|
|
|
|
|
|
Total obligations
|
|
$
|
4,707,340
|
|
|
$
|
227,340
|
|
|
$
|
4,480,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE 12 – SUBSEQUENT EVENTS
In October 2017 2,150,000 options were granted to the directors
of the Company. The options vest 6.25% per quarter from grant date and the exercise price shall be the closing of the Company’s
common stock on October 20, 2017.