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 February 12, 2018, we have cash on hand of approximately $5.2 million. We believe that we have enough cash on hand to fund
our operations for the next twelve months.
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
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).
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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, June 2014, September 2017, October 2017, and November
2017 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 during the six month period ended December
31, 2107, which have a redemption feature was estimated using the Monte Carlo pricing model. The assumptions used in the valuation
model at December 31, 2017 considers the probability of redemption, the length of time to maturity and the value of the redemption
feature.
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, 2017:
|
|
Markets for
Identical
Assets
|
|
|
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
Carrying
Value as of
December 31,
|
|
Description
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
2017
|
|
Derivative liabilities - warrant instruments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
43,695
|
|
|
$
|
43,695
|
|
Derivative liability – embedded redemption feature
|
|
|
|
|
|
|
|
|
|
|
3,639,773
|
|
|
|
3,639,773
|
|
|
|
|
|
|
|
|
|
|
|
|
3,683,468
|
|
|
|
3,683,468
|
|
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 for the six months ended December 31, 2017 and 2016
|
|
Significant Unobservable
Inputs (Level 3)
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Beginning balance
|
|
$
|
175,853
|
|
|
$
|
892,503
|
|
Fair value of derivative liabilities for redemption feature of promissory notes payable
|
|
|
3,843,019
|
|
|
|
-
|
|
Change in fair value of derivative liabilities
|
|
|
(335,404
|
)
|
|
|
(368,998
|
)
|
Ending balance
|
|
$
|
3,683,468
|
|
|
$
|
523,505
|
|
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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, 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.
On
December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA”) was signed into law, which among other changes reduces the
federal corporate tax rate to 21%. We have conducted a preliminary review of the impact of the TCJA and do not anticipate it to
have a material impact on our consolidated condensed financial statements primarily due to the valuation allowance recorded against
our net deferred tax assets.
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 December 31, 2017
and June 30, 2017. The open tax years, subject to potential examination by the applicable taxing authority, for the Company are
from June 30, 2014 through June 30, 2017.
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.
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Loss per Common Share
Basic loss per common share attributable to common stockholders is calculated by dividing the net loss
attributable to common stockholders by the weighted-average number of common shares outstanding for the period, without consideration
for common stock equivalents. Diluted loss per common share attributable to common stockholders is computed by dividing the net
loss attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period
determined using the treasury-stock method. Dilutive common stock equivalents are comprised of restricted stock, warrants for the
purchase of common stock and stock options.
For the six months ended December 31, 2017 and 2016, potentially dilutive securities were not included
in the calculation of diluted loss per share because to do so would be anti-dilutive.
|
|
Six months ended
|
|
|
|
December 31,
2017
|
|
|
December 31,
2016
|
|
Stock options
|
|
|
2,619,240
|
|
|
|
559,969
|
|
Restricted common stock
|
|
|
37,625
|
|
|
|
42,625
|
|
Common stock warrants
|
|
|
9,627,426
|
|
|
|
4,224,573
|
|
Total
|
|
|
12,284,291
|
|
|
|
4,827,167
|
|
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.
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,
2017
|
|
|
June 30,
2017
|
|
Rent
|
|
$
|
10,000
|
|
|
$
|
3,300
|
|
Research and development
|
|
|
-
|
|
|
|
9,600
|
|
Insurance
|
|
|
173,500
|
|
|
|
344,000
|
|
Legal
|
|
|
17,300
|
|
|
|
64,800
|
|
Other
|
|
|
39,700
|
|
|
|
50,800
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
240,500
|
|
|
$
|
472,500
|
|
NOTE
4 - FIXED ASSETS
Fixed
assets, net of accumulated depreciation, consisted of the following (rounded to nearest $00):
|
|
Useful lives
|
|
December 31,
2017
|
|
|
June 30,
2017
|
|
Computer and Software
|
|
3 years
|
|
$
|
6,900
|
|
|
$
|
4,300
|
|
Less: accumulated depreciation
|
|
|
|
|
(3,100
|
)
|
|
|
(2,000
|
)
|
Fixed Assets
|
|
|
|
$
|
3,800
|
|
|
$
|
2,300
|
|
NOTE
5 - ACCRUED EXPENSES
Accrued
expenses consisted of the following (rounded to nearest $00):
|
|
December 31,
2017
|
|
|
June 30,
2017
|
|
Accrued vacation
|
|
$
|
64,900
|
|
|
$
|
56,900
|
|
Professional fees
|
|
|
233,700
|
|
|
|
293,400
|
|
Accrued Offering Costs
|
|
|
122,000
|
|
|
|
-
|
|
Other
|
|
|
73,500
|
|
|
|
44,300
|
|
Total
|
|
$
|
494,100
|
|
|
$
|
394,600
|
|
NOTE
6 - NOTE 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 December 31, 2017 and June 30,
2017, the note payable outstanding balances were approximately $111,200 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.
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
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 December 31, 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 December 31, 2017 and
June 30, 2017.
The
following is a summary of the assumptions used in the valuation model at December 31, 2017 and June 30, 2017:
|
|
December 31,
|
|
|
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
|
|
$
|
0.75
|
|
|
$
|
0.82
|
|
Exercise price
|
|
$
|
7.50 and 11.25
|
|
|
$
|
7.50 and 11.25
|
|
Risk free interest rate (1)
|
|
|
1.83
|
%
|
|
|
1.38
|
%
|
Expected life in years
|
|
|
1.44
|
|
|
|
1.95
|
|
Expected volatility (2)
|
|
|
99.18
|
%
|
|
|
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.
|
(3)
|
The
Company does not expect to pay a dividend in the foreseeable future.
|
At
December 31, 2017, the Company had Notes 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 December 31, 2017.
The
assumptions used in the valuation model at December 31, 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, October and November 2017 the Company issued two year Convertible Promissory Notes, (the “Notes”) and warrants,
for aggregate gross proceeds of $4,480,000, $2,110,000 and $585,000 respectively. 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 seven year term and are exercisable at $1.50 per share. 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. In addition, the placement
agent received 804,000 warrants exercisable into the Company’s common stock at $1.65 per share. The warrants had an aggregate
fair value of approximately $200,700 using the Black Scholes option pricing model. The fees were recorded as a reduction to the
Notes and will be amortized over the term of the Notes as additional interest using the effective interest method.
NOTE
9 - STOCKHOLDERS’ EQUITY
Exercise
of warrants for non-cash
During
the six months ended December 31, 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 December 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 December 31, 2017, 1,454,904 shares were available for future grants under the Plan. In February 2018, 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 6,611,769.
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.
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
9 - STOCKHOLDERS’ EQUITY (continued)
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. On December 15, 2017 the consulting agreement with Mr. Becker lapsed. On December
1, 2017 he was granted 50,000 warrants.
On
October 20, 2017, the Company awarded a total of 2,150,000 options to its chief executive officers and board members with exercise
price of $0.81 and a 10-year term vesting over 4-year period. The options have an aggregated fair value of $1.4 million calculated
using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate
of 2.14% (2) expected life of 6.25 years, (3) expected volatility of 99.93%, and (4) zero expected dividends.
At
December 31, 2017, the Company had unrecognized stock-based compensation expense of approximately $1,588,000 related to unvested
stock options over the weighted average remaining service period of 9.1 years.
A
summary of the changes in options during the six months ended December 31, 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, 2016
|
|
|
559,972
|
|
|
$
|
6.41
|
|
|
|
6.7
|
|
|
$
|
-
|
|
Forfeited
|
|
|
(90,732
|
)
|
|
$
|
8.34
|
|
|
|
-
|
|
|
$
|
-
|
|
Issued
|
|
|
2,150,000
|
|
|
$
|
0.81
|
|
|
|
9.8
|
|
|
$
|
-
|
|
Outstanding and expected to vest at December 31, 2017
|
|
|
2,619,240
|
|
|
$
|
1.75
|
|
|
|
9.1
|
|
|
$
|
-
|
|
Options exercisable at December 31, 2017
|
|
|
414,890
|
|
|
$
|
5.89
|
|
|
|
5.9
|
|
|
$
|
-
|
|
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
9 - STOCKHOLDERS’ EQUITY (continued)
Restricted
stock
A
summary of the changes in restricted stock awards during the six months ended December 31, 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
|
|
|
(5,000
|
)
|
|
$
|
15.25
|
|
Outstanding restricted stock awards at December 31, 2017
|
|
|
37,625
|
|
|
$
|
14.07
|
|
There
were no restricted stock awards granted during the six months ended December 31, 2017. Restricted stock grants vest over four
years. During the six months ended December 31, 2017, 2,500 shares of restricted stock were vested and are to be issued. As of
December 31, 2017, the Company had no unrecognized expense related to restricted stock grants as the outstanding restricted shares
are fully vested.
Warrants
A
summary of the changes in outstanding warrants during the six months ended December 31, 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
|
|
Issued
|
|
|
5,757,330
|
|
|
$
|
1.50
|
|
|
|
6.9
|
|
Exercised
|
|
|
(16,770
|
)
|
|
$
|
-
|
|
|
|
3.4
|
|
Outstanding and vested at December 31, 2017
|
|
|
9,627,426
|
|
|
$
|
4.01
|
|
|
|
4.9
|
|
During
the six months ended December 31, 2017, the Company issued an aggregate of 4,783,330 warrants to the Noteholders and 804,000 warrants
to the placement agent in connection with the issuance of 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 $1,467,000 based on the following
assumption:
Risk
free interest rate
|
|
|
2.13-2.27
|
%
|
Dividend
yield
|
|
|
0
|
%
|
Volatility
|
|
|
83-85
|
%
|
Expected
term (in years) (A)
|
|
|
7.00
|
|
(A) call option value is calculated as the sum of intrinsic
value plus 40% of time value
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
9 - STOCKHOLDERS’ EQUITY (continued)
On December 1, 2017, the Company granted 50,000 warrants to
a contractor with exercise price of $0.80, a 10-year term and vested immediately. The warrants have an aggregated fair value of
$14,000 that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model
include: (1) discount rate of 2.37% (2) expected life of 10 years, (3) expected volatility of 98.87%, and (4) zero expected dividends.
On December 28, 2017, the Company granted 120,000 warrants to
a contractor with exercise price of $0.75 and a 10-year term vesting over 4-year period. The warrants have an aggregated fair value
of $71,769 that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing
model include: (1) discount rate of 2.30% (2) expected life of 10 years, (3) expected volatility of 98.6%, and (4) zero expected
dividends.
At
December 31, 2017, and June 30, 2017, the Company had any unrecognized stock-based compensation expense of approximately $71,000
related to outstanding warrants. At December 31, 2017 and June 30, 2017, the aggregate intrinsic value of warrants vested
and outstanding was approximately $124,000 and $149,000, respectively. For the warrants granted during the six months ended December
31, 2017 in connection with the issuance of 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, restricted stock, and warrants
in the consolidated statements of operations for the six months ended December 31, 2017 and 2016 (rounded to nearest $00):
|
|
Six Months Ended December 31,
2017
|
|
|
Six Months Ended December 31,
2016
|
|
Research and development
|
|
$
|
14,100
|
|
|
$
|
64,100
|
|
General and administrative
|
|
|
188,800
|
|
|
|
240,000
|
|
Total
|
|
$
|
202,900
|
|
|
$
|
304,100
|
|
NOTE
10 - RELATED PARTY TRANSACTIONS
Placement
Agent
On
August 4, 2015, the Company entered into an Advisory and Consulting Agreement (the “Consulting Agreement”) with Sandesh
Seth, the Company’s former Chairman of the Board. The effective date of the Consulting Agreement was June 30, 2015. Mr.
Seth provided advisory and consulting services to assist the Company. In consideration for these services, the Company paid 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 continued 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, financial position or cash flows.
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, financial position or cash flows. The Company recorded no contingent liability or expense
associated with litigation during the six months ended December 31, 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, 9th Floor, New York, New York 10017 pursuant
to a lease agreement. The monthly rental fee is $9,454 per month. The lease expires on July 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 December
31, 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
|
|
$
|
65,018
|
|
|
$
|
65,018
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Note payable
|
|
|
111,235
|
|
|
|
111,235
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Convertible promissory notes payable
|
|
|
7,175,000
|
|
|
|
-
|
|
|
|
7,175,000
|
|
|
|
-
|
|
|
|
-
|
|
Total obligations
|
|
$
|
7,351,253
|
|
|
$
|
176,253
|
|
|
$
|
7,175,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE 12 – SUBSEQUENT EVENTS
On January 16, 2018, the Company entered into an Intellectual
Property Assignment Agreement (the “Assignment Agreement”) and License Agreement (the “License Agreement”)
with
Dr. Charles E. Inturrisi and Dr. Paolo Manfredi (collectively,
the “Licensor”).
Pursuant to the agreements, Relmada assigned its existing rights, including patents and patent applications, to d-Methadone in
the context of psychiatric use to Licensor which then granted the Company under the License Agreement a perpetual, worldwide, and
exclusive license to commercialize the existing rights and certain further inventions regarding d-Methadone in the context of neurological
and other uses.
In consideration of the rights granted
to Relmada under the License Agreement, Relmada paid Licensor an upfront, non-refundable license fee of $180,000. Additionally,
Relmada will pay Licensor $45,000 every three months until the earliest to occur of the following events: (i) the first commercial
sale of a licensed product anywhere in the world, (ii) the expiration or invalidation of the last to expire or be invalidated of
the patent rights anywhere in the world, or (iii) the termination of the License Agreement. Relmada will also pay Licensor tiered
royalties with a maximum rate of 2%, decreasing to 1.75%, and 1.5% in certain circumstances, on net sales of licensed products
covered under the License Agreement. Relmada will also pay Licensor tiered payments up to a maximum of 20%, and decreasing to 17.5%,
and 15% in certain circumstances, of all consideration received by Relmada for sublicenses granted under the License Agreement.
The parties agree that to collaborate and
cooperate in good faith in any further intellectual property development. The License Agreement may terminate under certain circumstances,
including bankruptcy, failure to perform certain covenants (including, but not limited, to payment obligations and certain key
man provisions), and invalidation or unenforceability of patent rights.
Relmada
Therapeutics, Inc.