The
accompanying notes are an integral part of these unaudited consolidated financial statements.
Notes
to Unaudited Consolidated Financial Statements
NOTE
1 - BUSINESS
Relmada
Therapeutics, Inc. (Relmada or the Company) (a Nevada corporation), is a clinical-stage, publicly traded biotechnology company
focused on the development of d-methadone (dextromethadone, REL-1017), an N-methyl-D-aspartate (NMDA) receptor antagonist. d-methadone
is a New Chemical Entity (NCE) that potentially addresses areas of high unmet medical need in the treatment of central nervous
system (CNS) diseases and other disorders.
On October 7, 2019, our application to list
our common stock on the NASDAQ Capital Market was approved. On October 10, 2019, our common stock began trading on Nasdaq under
our existing symbol, “RLMD.” On July 14, 2020, our common stock was uplisted to The Nasdaq Global Select Market and
continues to trade under the symbol “RLMD”.
On
December 19, 2019, the Board of Directors of the Company approved a change to its end of fiscal year from June 30 to December
31. The change in fiscal year became effective for the Company’s 2020 fiscal year, which began on January 1, 2020 and will
end December 31, 2020.
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 six months ended December 31, 2019 and
notes thereto contained in the Company’s Transition Report on Form 10-KT.
On September 26, 2019, the Company’s
Board of Directors approved a 1-for-4 reverse split of the Common Stock, which was effective on the OTC Markets on September 30,
2019. As a result of the reverse stock split, every 4 shares of issued and outstanding common stock were converted into 1 share
of issued and outstanding common stock, with all fractional shares rounded up to the nearest whole share, and the Company’s
authorized share of common stock were reduced from 200,000,000 to 50,000,000 shares. All share and per share amounts have been
retroactively restated to reflect this reverse stock split.
Liquidity
As shown in the accompanying financial
statements, the Company incurred negative operating cash flows of $8,378,419 for the six months ended June 30, 2020 and has an
accumulated deficit of $141,650,666 from inception through June 30, 2020. At June 30, 2020 the Company had cash and short term
investments of approximately $134,087,800.
Relmada has funded its past operations
through equity raises and most recently in 2020 raised net proceeds from the sale of common stock of $19,855,018 through our ATM
offering and $5,619,276 through the exercise of warrants. The Company also raised an additional $530,643 during the six months
ended June 30, 2020 from the exercises of options.
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Management believes that due to the recent equity raises completed
and exercises of outstanding warrants and the current cash position on its balance sheet, it has obtained sufficient funding to
continue ongoing operations for at least 12 months from the issuance of these unaudited consolidated quarterly financial statements.
Since June 30, 2020 and to date, the Company has received approximately $1,230,000 in warrant exercises, which resulted in the
Company having approximately $131,549,600 million in cash, cash equivalents, and short term investments at August 5, 2020. Based
on its budgeted cash flow requirements, the Company believes these funds are sufficient to fund its ongoing operations for at least
12 months after the issuance of these unaudited consolidated quarterly financial statements. Regardless of the results of any ongoing
clinical trial, the Company has control over its expenditures and has the ability to adjust spending accordingly based on the budgeted
cash flow requirements developed and the excess cash on hand.
Management
believes that their existing cash and cash equivalents will enable them to fund operating expenses and capital expenditure requirement
for at least the next 12 months. Beyond that point management will evaluate the size and scope of any subsequent trials that will
affect the timing of additional financings through public or private sales of equity or debt securities or from bank or other
loans or through strategic collaboration and/or licensing agreements. Any such expenditures related to any subsequent trials will
not be incurred until such additional financing is raised. Further, additional financing related to subsequent trials does not
affect the Company’s conclusion that based on the cash on hand and the budgeted cash flow requirements, the Company has
sufficient funds to maintain operations for at least 12 months from the issuance of these consolidated financial statements.
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.
Risks
and Uncertainties
The
pandemic caused by an outbreak of a new strain of coronavirus (COVID-19) has resulted, and is likely to continue to result, in
significant national and global economic disruption and may adversely affect our business. Based on the Company’s current
assessment, the Company does not expect any material impact on its long-term development timeline and its liquidity due to the
worldwide spread of the COVID-19 virus. However, the Company is actively monitoring this situation and the possible effects on
its financial condition, liquidity, operations, suppliers, industry, and workforce.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those
estimates. The significant estimates are the valuation of stock-based compensation expenses and recorded amounts related to income
taxes.
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.
Short-term
Investments
The
Company’s investments consist entirely of mutual funds. The securities are measured at fair value based on the net asset
value (NAV). The Company adopted Financial Accounting Standards Board (FASB) Accounting Standard Update (ASU) 2016-01, Financial
Instruments, for the six months ended December 31, 2019 which requires substantially all equity investments in nonconsolidated
entities to be measured at fair value with recurring changes recognized in earnings, except for those accounted for using equity
method accounting. Changes in fair value of the securities are recorded as part of other income on the consolidated statement
of operations. Short term investment activity is presented in the investing activities section on the consolidated statement of
cash flows.
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.
Leases
The
Company recognizes its leases with a term of greater than a year on the balance sheet by recording right-of-use assets and lease
liabilities. Leases can be classified as either operating leases or finance leases. Operating leases will result in straight-line
lease expense, while finance leases will result in front-loaded expense. The Company’s lease consists of an operating leases
for office space. The Company does not recognize a lease liability or right-of-use asset on the balance sheet for short-term leases.
Instead, the Company recognizes short-term lease payments as an expense on a straight-line basis over the lease term. A short-term
lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option
to purchase the underlying asset that the lessee is reasonably certain to exercise.
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair
Value of Financial Instruments
The
Company’s financial instruments primarily include cash, short term investments, and accounts payable. Due to the short-term
nature of cash and accounts payable the carrying amounts of these assets and liabilities approximate their fair value.
Fair
value is defined as the price that would be received to sell an asset, or paid to transfer a liability (an exit price), in an
orderly transaction between market participants at the reporting date. A fair value hierarchy has been established for valuation
inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority
to unobservable inputs. The fair value hierarchy is as follows:
Level
1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability
to access at the measurement date.
Level
2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical
or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset
or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally
from or corroborated by market data by correlation or other means.
Level
3 Inputs - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable
(supported by little or no market activity).
The Company’s short-term investment
instruments of $120,263,581 at June 30, 2020 are classified using Level 1 inputs within the fair value hierarchy because they
are valued using NAV. Unrealized gains and losses are recorded in the consolidated statement of operations under other income.
The Company recorded an unrealized gain of $287,027 included in other income for the six months ended June 30, 2020.
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 June 30, 2020 and December 31, 2019, 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 June 30, 2020 and December 31, 2019. The open tax years, subject to potential
examination by the applicable taxing authority, for the Company are from June 30, 2017 forward.
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 - 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.
Loss
per Common Share
Basic loss per common share attributable to
common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of
common shares outstanding for the period, without consideration for common stock equivalents. Diluted loss per common share attributable
to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number
of common share equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents
are comprised of options and warrants to purchase common stock. For all periods presented, there is no difference in the number
of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.
For
the six months ended June 30, 2020 and 2019, the potentially dilutive securities that would be anti-dilutive due to the Company’s
net loss are not included in the calculation of diluted net loss per share attributable to common stockholders. The anti-dilutive
securities are as follows (in common stock equivalent shares):
|
|
Six months ended
|
|
|
|
June 30,
2020
|
|
|
June 30,
2019
|
|
Stock options
|
|
|
4,134,575
|
|
|
|
1,473,314
|
|
Common stock warrants
|
|
|
2,905,369
|
|
|
|
4,429,982
|
|
Total
|
|
|
7,039,944
|
|
|
|
5,903,296
|
|
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent
Accounting Pronouncements
In
December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which
is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the
general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance
is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption
permitted. We do not expect the adoption of ASU 2019-12 to have a material impact on our consolidated financial statements.
In August 2018, FASB issued ASU 2018-13, Fair
Value Measurement – Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements on fair
value measurements, primarily associated with Level 3 fair value measurements and is effective for fiscal years, and interim periods
within those fiscal years, beginning December 15, 2019. Early adoption is permitted upon issuance of the standard disclosures
modified or removed with a delay of adoption of the additional disclosures until their effective date. The Company adopted this
standard effective January 1, 2020 and the standard did not have a significant impact on the Company’s financial statements.
In November 2018, FASB issued ASU 2018-18 – Collaborative
Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which, among other things, provides guidance
on how to assess whether certain collaborative arrangement transactions should be accounted for under Topic 606. The amendments
in the ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with
early adoption permitted. The Company adopted this standard on January 1, 2020 and the standard did not have a significant impact
on the Company’s financial statements.
Subsequent
Events
The
Company’s management reviewed all material events through the date the financial statements were issued for subsequent event
disclosure consideration.
NOTE
3 - PREPAID EXPENSES
Prepaid
expenses consisted of the following (rounded to nearest $00):
|
|
June 30,
2020
|
|
|
December 31,
2019
|
|
Insurance
|
|
$
|
20,600
|
|
|
$
|
223,600
|
|
Research and Development
|
|
|
163,700
|
|
|
|
139,200
|
|
Legal
|
|
|
11,000
|
|
|
|
11,000
|
|
Other
|
|
|
45,200
|
|
|
|
50,100
|
|
Total
|
|
$
|
240,500
|
|
|
$
|
423,900
|
|
NOTE
4 - FIXED ASSETS
Fixed
assets, net of accumulated depreciation, consisted of the following (rounded to nearest $00):
|
|
Useful lives
|
|
June 30,
2020
|
|
|
December 31,
2019
|
|
Computer and Software
|
|
3 years
|
|
$
|
16,700
|
|
|
$
|
16,700
|
|
Less: accumulated depreciation
|
|
|
|
|
(13,800
|
)
|
|
|
(11,700
|
)
|
Fixed Assets
|
|
|
|
$
|
2,900
|
|
|
$
|
5,000
|
|
NOTE
5 - ACCRUED EXPENSES
Accrued
expenses consisted of the following (rounded to nearest $00):
|
|
June 30,
2020
|
|
|
December 31,
2019
|
|
Research and development
|
|
$
|
329,900
|
|
|
$
|
134,500
|
|
Professional fees
|
|
|
139,100
|
|
|
|
172,900
|
|
Accrued bonus
|
|
|
593,400
|
|
|
|
50,000
|
|
Accrued vacation
|
|
|
232,600
|
|
|
|
124,600
|
|
Legal settlement
|
|
|
-
|
|
|
|
250,000
|
|
Other
|
|
|
65,900
|
|
|
|
92,900
|
|
Total
|
|
$
|
1,360,900
|
|
|
$
|
824,900
|
|
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
6 - NOTES PAYABLE
In
June 2019, the Company entered into a note for approximately $364,200 in conjunction with a renewal of its director and officer
insurance policy. The interest rate was 3.09% per annum. The note matured on April 9, 2020.
At
June 30, 2020 and December 31, 2019, the note payable outstanding balances were approximately $0 and $110,200, respectively.
NOTE
7 - STOCKHOLDERS’ EQUITY
On September 26, 2019, the Company’s
Board of Directors approved a 1-for-4 reverse split of the Common Stock, which was effective on the OTC Markets on September 30,
2019. As a result of the reverse stock split, every 4 shares of issued and outstanding common stock were converted into 1 share
of issued and outstanding common stock, with all fractional shares rounded up to the nearest whole share, and the Company’s
authorized share of common stock were reduced from 200,000,000 to 50,000,000 shares. All share and per share amounts have been
retroactively restated to reflect this reverse stock split.
Common
Stock
During the six months ended June 30,
2020, the Company issued 35,954 shares of common stock for cashless exercise of 49,196 warrants. The Company also issued
815,471 shares of common stock for cash exercises of warrants for proceeds of $5,619,276.
During the six months ended June 30, 2020,
the Company issued 115,715 shares of common stock for the exercise of options for proceeds of $530,643.
On May 15, 2020, the Company entered into an
Open Market Sale Agreement with Jefferies LLC, as sales agent (“Jefferies”), pursuant to which the Company may
offer and sell, from time to time, through Jefferies, shares of the Company’s common stock, having an aggregate offering
price of up to $75,000,000 . The Company is not obligated to sell any shares under the agreement. During the six months ended June
30, 2020 the Company issued 427,700 shares of common stock for net cash proceeds of $19,900,000 million under the agreement.
Options
and Warrants
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 allowed for the granting of 5,152,942 options or stock awards.
Stock options are exercisable generally for a period of 10 years
from the date of grant and generally vest over four years. As of June 30, 2020, 1,018,367 shares were available for future grants
under the Plan.
As
of June 30, 2020, no stock appreciation rights have been issued.
The Company utilizes the Black-Scholes option pricing model
to estimate the fair value of stock options and warrants. The risk-free interest rate assumptions were based upon the observed
interest rates appropriate for the expected term of the equity instruments. The expected dividend yield was assumed to be zero
as the Company has not paid any dividends since its inception and does not anticipate paying dividends in the foreseeable future.
The expected volatility was based on historical volatility. The Company routinely reviews its calculation of volatility changes
in future volatility, the Company’s life cycle, its peer group, and other factors.
The
Company uses the simplified method for share-based compensation to estimate the expected term for employee option awards for share-based
compensation in its option-pricing model.
On
March 9, 2020, the Company awarded a total of 350,000 options to an employee with exercise price of $45.61 and a 10-year term
vesting over 4-year period. The options have an aggregate fair value of $13.1 million calculated using the Black-Scholes option-pricing
model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 0.51% (2) expected life of 6.25
years, (3) expected volatility of 107%, and (4) zero expected dividends.
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
7 - STOCKHOLDERS’ EQUITY (continued)
On
March 19, 2020, the Company awarded a total of 100,000 options to an employee with exercise price of $28.00 and a 10-year term
vesting over a 4-year period. The options have an aggregate fair value of $2.3 million calculated using the Black-Scholes option-pricing
model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 0.83% (2) expected life of 6.25
years, (3) expected volatility of 108%, and (4) zero expected dividends.
On
March 25, 2020, the Company awarded a total of 150,000 options to an employee with exercise price of $31.88 and a 10-year term
vesting over a 4-year period. The options have an aggregate fair value of $4.0 million calculated using the Black-Scholes option-pricing
model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 0.67% (2) expected life of 6.25
years, (3) expected volatility of 108%, and (4) zero expected dividends.
On April 21, 2020, the Company awarded
a total of 100,000 options to an employee with exercise price of $33.29 and a 10-year term vesting over a 4-year period. The options
have an aggregate fair value of $2.7 million calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes
option-pricing model include: (1) discount rate of 0.41% (2) expected life of 6.25 years, (3) expected volatility of 108%, and
(4) zero expected dividends.
On May 20, 2020, the Company awarded a
total of 150,000 options to an employee with exercise price of $45.25 and a 10-year term vesting over a 4-year period. The options
have an aggregate fair value of $5.6 million calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes
option-pricing model include: (1) discount rate of 0.44% (2) expected life of 6.25 years, (3) expected volatility of 107%, and
(4) zero expected dividends
At June 30, 2020, the Company has unrecognized
stock-based compensation expense of approximately $69,788,000 related to unvested stock options over the weighted average remaining
service period of 3.5 years.
During the six months
ended June 30, 2020, the Company recognized additional compensation expense of approximately $1.5 million related to acceleration
of vesting and a nominal amount related to the modification of certain options in connection with the separation and settlement
agreement with Dr. Ottavio Vitolo (see note 8).
Options
A
summary of the changes in options during the six months ended June 30, 2020 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 December 31, 2019
|
|
|
3,615,602
|
|
|
$
|
19.96
|
|
|
|
9.2
|
|
|
$
|
74,837,043
|
|
Granted
|
|
|
850,000
|
|
|
$
|
39.60
|
|
|
|
9.76
|
|
|
$
|
4,751,500
|
|
Exercised
|
|
|
(115,715
|
)
|
|
$
|
4.59
|
|
|
|
-
|
|
|
$
|
-
|
|
Forfeited
|
|
|
(215,312
|
)
|
|
$
|
21.58
|
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding and expected to vest at June 30, 2020
|
|
|
4,134,575
|
|
|
$
|
24.35
|
|
|
|
8.9
|
|
|
$
|
84,841,303
|
|
Options exercisable at June 30, 2020
|
|
|
914,103
|
|
|
$
|
11.82
|
|
|
|
7.78
|
|
|
$
|
30,202,021
|
|
Warrants
A summary of the changes in outstanding warrants during the
six months ended June 30, 2020 is as follows:
|
|
Number of
Shares
|
|
|
Weighted
Average
Exercise
Price Per
Share
|
|
Outstanding and vested at December 31, 2019
|
|
|
3,646,872
|
|
|
$
|
6.83
|
|
Granted
|
|
|
122,000
|
|
|
|
31.69
|
|
Exercised
|
|
|
(855,365
|
)
|
|
|
7.23
|
|
Forfeited
|
|
|
(8,138
|
)
|
|
|
16.00
|
|
Outstanding and vested at June 30, 2020
|
|
|
2,905,369
|
|
|
$
|
7.79
|
|
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
7 - STOCKHOLDERS’ EQUITY (continued)
On April 1, 2020, the Company granted 120,000
warrants to consultants with exercise price of $31.59, a 5-year term and immediate vesting. The warrants have an aggregated fair
value of $2.5 million that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing
model include: (1) discount rate of 0.26% (2) expected life of 2.5 years, (3) expected volatility of 118%, and (4) zero expected
dividends.
On April 27, 2020, the Company granted
2,000 warrants to a consultant with exercise price of $37.67, a 5-year term and immediate vesting. The warrants have an aggregated
fair value of $48 thousand that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes
option-pricing model include: (1) discount rate of 0.27% (2) expected life of 2.5 years, (3) expected volatility of 116%, and (4)
zero expected dividends.
At June 30, 2020 the Company had approximately
$103,000 of unrecognized compensation expense related to outstanding warrants.
At June 30, 2020 and December 31,
2019, the aggregate intrinsic value of warrants vested and outstanding was approximately $106,423,000 and $115,731,000,
respectively.
The following summarizes the components
of stock-based compensation expense which includes stock options and warrants in the unaudited consolidated statements of operations
for the six months ended June 30, 2020 and 2019 (rounded to nearest $00):
|
|
Six
Months
Ended
June 30,
2020
|
|
|
Six
Months
Ended
June 30,
2019
|
|
Research and development
|
|
$
|
3,122,500
|
|
|
$
|
186,400
|
|
General and administrative
|
|
|
9,219,400
|
|
|
|
611,800
|
|
Total
|
|
$
|
12,341,900
|
|
|
$
|
798,200
|
|
NOTE
8 - RELATED PARTY TRANSACTIONS
Effective
March 6, 2020, Dr. Vitolo entered into a Separation and Severance Agreement with the Company. Pursuant to the terms of the agreement,
the Company agreed to pay Dr. Vitolo severance of $200,000 in accordance with his employment contract. In addition, Dr. Vitolo’s
options granted under the Company’s 2014 Stock Option and Equity Incentive Plan will continue to vest until September 6,
2020. Dr. Vitolo shall have until March 6, 2021 to exercise his vested options and he shall be allowed to use a cashless exercise
provision to exercise his vested options. The agreement also contains customary confidentiality, release, and non-disparagement
provisions, and the Company agreed to pay accrued and unpaid salary, vacation time and attorney’s fees totaling approximately $45,000.
On
March 9, 2020, the Company appointed Dr. Thomas Wessel as the Company’s Executive Vice President, Head of Research and Development.
NOTE
9 - COMMITMENTS AND CONTINGENCIES
License
Agreements
Wonpung
On August 20, 2007, the Company
entered into a License Development and Commercialization Agreement with Wonpung Mulsan Co, a shareholder of the Company.
Wonpung has exclusive territorial rights in countries it selects in Asia to market up to two drugs the Company is currently
developing and a right of first refusal (“ROFR”) for up to an additional five drugs that the Company may develop
in the future as defined in more detail in the license agreement. If the parties cannot agree to terms of a license agreement
then the Company shall be able to engage in discussions with other potential licensors. As of July 2020, no discussions are
active between the Company and Wonpung.
The
Company received an upfront license fee of $1,500,000 and will earn royalties of up to 12% of net sales for up to two licensed
products it is currently developing. The licensing terms for the ROFR products are subject to future negotiations and binding
arbitration. The terms of each licensing agreement will expire on the earlier of any time from 15 years to 20 years after licensing
or on the date of commercial availability of a generic product to such licensed product in the licensed territory.
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
9 - COMMITMENTS AND CONTINGENCIES (continued)
Third
Party Licensor
Based upon a prior acquisition, the Company
assumed an obligation to pay third parties (Dr. Charles E. Inturrisi and Dr. Paolo Manfredi – see below): (A) royalty payments
up to 2% on net sales of licensed products that are not sold by sublicensee and (B) on each and every sublicense earned royalty
payment received by licensee from its sublicensee on sales of license product by sublicensee, the higher of (i) 20% of the royalties
received by licensee; or (ii) up to 2% of net sales of sublicensee. The Company will also make milestone payments of up to $4 or
$2 million, for the first commercial sale of product in the field that has a single active pharmaceutical ingredient, and for the
first commercial sale of product in the field of product that has more than one active pharmaceutical ingredient, respectively.
As of June 30, 2020, the Company has not generated any revenue related to this license agreement.
Inturrisi
/ Manfredi
In January 2018, we entered into an Intellectual
Property Assignment Agreement (the Assignment Agreement) and License Agreement (the License Agreement and together with the Assignment
Agreement, the Agreements) with Dr. Charles E. Inturrisi and Dr. Paolo Manfredi (collectively, the Licensor). Pursuant to
the Agreements, Relmada assigned its existing rights, including patents and patent applications, to d-methadone in the context
of psychiatric use (the Existing Invention) to Licensor. Licensor then granted Relmada under the License Agreement a perpetual,
worldwide, and exclusive license to commercialize the Existing Invention and certain further inventions regarding d-methadone. In
consideration of the rights granted to Relmada under the License Agreement, Relmada paid the Licensor an upfront, non-refundable
license fee of $180,000. Additionally, Relmada will pay Licensor $45,000 every three months until the earliest to occur of the
following events: (i) the first commercial sale of a licensed product anywhere in the world, (ii) the expiration or invalidation
of the last to expire or be invalidated of the patent rights anywhere in the world, or (iii) the termination of the License Agreement.
Relmada will also pay Licensor tiered royalties with a maximum rate of 2%, decreasing to 1.75%, and 1.5% in certain circumstances,
on net sales of licensed products covered under the License Agreement. Relmada will also pay Licensor tiered payments up to a maximum
of 20%, and decreasing to 17.5%, and 15% in certain circumstances, of all consideration received by Relmada for sublicenses granted
under the License Agreement.
Legal
From
time to time, the Company may become involved in lawsuits and other legal proceedings that arise in the course of business. Litigation
is subject to inherent uncertainties, and it is not possible to predict the outcome of litigation with total confidence. The Company
is currently not aware of any legal proceedings or potential claims against it whose outcome would be likely, individually or
in the aggregate, to have a material adverse effect on the Company’s business, financial condition, operating results, or
cash flows.
Lawsuit
Brought by Former Officer
On
February 6, 2019, the Company entered into a settlement agreement in its previous dispute with Najib Babul, Relmada’s former
President. Babul relinquished his 303,392 shares in Relmada, signed a consulting contract and Relmada committed to a $500,000
initial payment and four subsequent payments of $250,000 on March 31, 2019, June 30, 2019, September 30, 2019 and December 31,
2019. The Company recorded a loss on the settlement of $1.1 million in the first quarter of 2019.
Relmada
Therapeutics, Inc.
Notes
to Unaudited Consolidated Financial Statements
NOTE
9 - COMMITMENTS AND CONTINGENCIES (continued)
Leases
and Sublease
The Company’s corporate headquarters
are located at 880 Third Avenue, 12th Floor, New York, New York 10022 pursuant to a lease agreement for a period of one year. As
the Company’s leases consist of one lease for their corporate headquarters, which is for a period of 12 months or less. In
accordance with ASC 842, Leases, the Company has elected the practical expedient and recognizes rent expense evenly over the 12
months. The monthly rent is approximately $13,800. For the six months ended June 30, 2020 and 2019, the Company recognized lease
expense of approximately $83,000 and $46,800, respectively.
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 its 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. For the six months ended June 30, 2020 and 2019,
the Company recognized lease income of approximately $9,400 and $12,300, respectively. As of June 30, 2020, the balance of unearned
interest income was approximately $22,700.
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
|
|
$
|
82,800
|
|
|
$
|
82,800
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total obligations
|
|
$
|
82,800
|
|
|
$
|
82,800
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE
10 - SUBSEQUENT EVENTS
Subsequent to June 30,
2020, 172,093 outstanding warrants were exercised for total cash proceeds of approximately $1,230,000. These warrant exercises
include 481 shares issued with a cashless exercise.
On July
15, 2020, an employee of the Company filed a Complaint alleging unequal pay based on gender and other employment based claims.
The Company intends to defend the lawsuit vigorously and does not expect that the lawsuit will have a material effect on its financial
position.
On July 22, 2020, the Company awarded a
total of 100,000 options to two new employees with an exercise price of $41.70 and a 10-year term vesting over a 4-year period.