ITEM 7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information and financial data discussed
below is derived from the consolidated financial statements of Relmada for the years ended December 31, 2023 and 2022. The consolidated
financial statements of Relmada were prepared and presented in accordance with generally accepted accounting principles in the United
States. The information and financial data discussed below is only a summary and should be read in conjunction with the historical financial
statements and related notes of Relmada contained elsewhere in this Report. The consolidated financial statements contained elsewhere
in this Report fully represent Relmada’s financial condition and operations; however, they are not indicative of the Company’s
future performance. See “Cautionary Note Regarding Forward Looking Statements” above for a discussion of forward-looking
statements and the significance of such statements in the context of this Annual Report.
This discussion contains forward-looking statements
reflecting our current expectations that involve risks and uncertainties. Actual results may differ materially from those discussed in
these forward-looking statements due to a number of factors, including those set forth in the section entitled “Risk Factors”
and elsewhere herein. The information and financial data discussed below is only a summary and should be read in conjunction with the
historical financial statements and related notes of Relmada Therapeutics, Inc. contained elsewhere in this document. Relmada’s
current consolidated financial position and consolidated results of operations; are not necessarily indicative of the Company’s
future performance. See “Cautionary Note Regarding Forward Looking Statements” above for a discussion of forward-looking
statements and the significance of such statements in the context of this document.
Our Corporate History and Background
Relmada Therapeutics, Inc. is a clinical-stage,
publicly traded biotechnology company developing NCEs that potentially address areas of high unmet medical need in the treatment of depression
and other CNS diseases.
The Company’s lead product candidate, esmethadone,
is being developed as a rapidly acting, oral agent for the treatment of depression and other potential indications.
On October 15, 2019, we reported top-line data
from study REL-1017-202. This was a double-blind, placebo-controlled Phase 2 clinical trial evaluating the safety, tolerability and efficacy
of two doses of REL-1017, 25 mg once a day and 50 mg once a day, as an adjunctive treatment in patients with MDD, who experienced an
inadequate response to 1 to 3 treatments with an antidepressant medication.
On December 20, 2020, the Company announced that
the first patient had been enrolled in the first Phase 3 clinical trial (RELIANCE I) of REL-1017, as an adjunctive treatment for MDD.
On April 1, 2021, Relmada announced the initiation of RELIANCE II,
the second of two sister pivotal Phase 3 clinical trials (RELIANCE I and RELIANCE II) of REL-1017, as an adjunctive treatment for MDD.
On October 4, 2021, Relmada announced the initiation
of the RELIANCE III study, the monotherapy trial for the Company’s lead product candidate, REL-1017.
In addition, on October 4, 2021, Relmada announced
that in order to support potential regulatory submissions seeking approval for REL-1017 as adjunctive and monotherapy treatment, the FDA
confirmed that, based on what was known at the time, Relmada would not be required to conduct a two-year carcinogenicity study of REL-1017,
as sufficient clinical data had been generated to date. The FDA also confirmed that Relmada would not need to conduct a TQT cardiac study
in humans to support cardiac safety in potential regulatory submissions for REL-1017, as the data already provided and the data to be
generated by the Phase 3 program would be adequate to evaluate the cardiac safety profile of REL-1017.
On October 13, 2022, Relmada announced that the
RELIANCE III study, evaluating REL-1017 in the monotherapy setting for MDD, did not achieve its primary endpoint, which was a statistically
significant improvement in depression symptoms compared to placebo as measured by the Montgomery-Asberg Depression Rating Scale (MADRS)
on Day 28.
On December 7, 2022, Relmada announced that the
RELIANCE I, evaluating REL-1017 as an adjunctive treatment for MDD, did not achieve its primary endpoint, which was a statistically significant
improvement in depression symptoms compared to placebo as measured by the Montgomery-Asberg Depression Rating Scale (MADRS) on Day 28
Patients who completed the RELIANCE trials were eligible to rollover
into a long-term, open-label study (Study 310), which also included subjects who had not previously participated in a REL-1017 clinical
trial. This rollover study completed subject visits on July 11, 2023.
On August 23, 2023, Relmada announced the dosing
of the first patient in RELIGHT, a Phase 3 clinical trial for REL-1017, as an adjunctive treatment for MDD.
On September 20, 2023, Relmada announced efficacy
results for the de novo (or new to treatment) patients (204 patients) and safety results for all subjects (627 patients) from the Phase
3, long-term, open-label, safety trial (Study 310) of REL-1017 in patients with Major Depressive Disorder (MDD). Patients treated daily
with REL-1017 for up to one year experienced rapid, clinically meaningful, and sustained improvements in depressive symptoms and associated
functional impairment. REL-1017 was well-tolerated with long-term dosing, showing low rates of adverse events and discontinuations due
to adverse events. No new safety signals were detected.
We have not generated revenues and do not anticipate
generating revenues for the foreseeable future. We had a net loss of approximately $98,791,700 and $157,043,800 for the years ended December
31, 2023 and 2022, respectively. At December 31, 2023, we have an accumulated deficit of approximately $560,902,700.
36
Results of Operations
For the Year Ended December 31, 2023 vs the Year Ended December
31, 2022
Research and Development Expense
Total research and development expense for the
year ended December 31, 2023 was approximately $54,807,400, as compared to $113,323,000 for the same period of 2022, a decrease of $58,515,600.
The decrease in research and development expense was primarily due to:
● Decrease in stock-based compensation expense of $658,700;
● Decrease in pre-clinical and toxicology expenses of $131,000; and
General and Administrative Expense
Total general and administrative expense for the year ended December
31, 2023 was approximately $48,894,900, as compared to $47,926,100 for the same period of 2022, an increase of $968,800. The increase
in general and administrative expenses was primarily due to:
Other Income, Net
Gain on settlement fees was approximately $6,351,600
received from a settlement during 2022. There was no gain on settlement of fees during 2023.
Interest/investment income was approximately $5,151,700
for the year ended December 31, 2023 compared to approximately $2,659,400 for the same period of 2022, an increase of $2,492,300. The
increase was primarily related to higher returns from higher interest rates, offset by lower average investment balance during 2023 as
compared to 2022.
Realized loss on short-term investments was approximately
$4,064,400 compared to approximately $585,500 for the same period of 2022, an increase of $3,478,900. The increase was related to the
timing of the sales of short-term investments along with market conditions.
Unrealized gain on short-term investments was
approximately $3,823,200 compared to an unrealized loss of approximately $4,220,300 for the same period of 2022, an increase of $8,043,500.
The increase was related to the market conditions.
Income Taxes
The Company did not provide for income taxes
for the years ended December 31, 2023 and 2022, since there was a loss and a full valuation allowance against all deferred tax assets.
Net Loss
The Company recorded a net loss of approximately
$98,791,700 and $157,043,800 or $3.28 and $5.30 per common share, basic and diluted, during the years ended December 31, 2023 and 2022,
respectively, based on the factors described above.
37
Liquidity
As shown in the accompanying financial statements, the Company incurred
negative operating cash flows of $51,659,206 for the year ended December 31, 2023 and has an accumulated deficit of $560,902,681 from
inception through December 31, 2023.
Relmada has funded its past operations through
equity raises and warrant and stock option exercises.
Management
believes that due to previous equity raises completed and exercises of options and warrants and the resulting cash position on its balance
sheet, it has sufficient funding, based on its budgeted cash flow requirements, to continue ongoing operations for at least 12 months
from the filing of this annual report.
The following table sets forth selected cash flow information for
the periods indicated below:
For the Year Ended For the Year Ended
December 31, December 31,
Cash provided by (used in) financing activities (98,463 ) 45,020,474
For the year ended December 31, 2023, cash used in operating activities
was $51,659,206 primarily due to the net loss of $98,791,746. This was offset by non-cash expenses which primarily consisted of stock-based
compensation of $43,811,149. There were realized losses and unrealized gains on short term investments of $4,064,391 and $3,823,234, respectively.
In addition, there were increases in operating assets and liabilities for the year ended December 31, 2023 of $3,080,234.
For the year ended December 31, 2022, cash used
in operating activities was $103,801,617 primarily due to the net loss of $157,043,823. This was offset by non-cash expenses which primarily
consisted of stock-based compensation of $44,194,765 and a gain on settlement of $6,351,606. There were realized and unrealized losses
on short term investments of $585,522 and $4,220,255, respectively. In addition, there were increases in operating assets and liabilities
for the year ended December 31, 2022 of $10,593,270.
For the year ended December 31, 2023, cash provided by investing activities
was $50,453,332, due to $90,463,532 of purchases of short term investments offset by $140,916,864 of sales of short term investments.
For the year ended December 31, 2022, cash provided
by investing activities was $19,733,609, due to $47,293,763 of purchases of short term investments offset by $67,027,372 of sales of
short term investments.
Net cash used in financing activities for the
year ended December 31, 2023, was $98,463 due to ATM reactivation fees.
Net cash provided by financing activities for
the year ended December 31, 2022, was $45,020,474 due to proceeds from issuance of common stock of $42,728,599, proceeds from warrants
exercised for common stock of $1,264,523, proceeds from options exercised for common stock of $703,720, proceeds from Section 16b short
swing profit of $373,632 offset by the payment of fees for warrants issued for common stock of $50,000.
38
Effects of Inflation
Our assets are primarily monetary, consisting
of cash and cash equivalents. Because of their liquidity, these assets are not directly affected by inflation. Because we intend to retain
and continue to use our equipment, we believe that the incremental inflation related to replacement costs of such items will not materially
affect our operations. However, the rate of inflation affects our expenses, such as those for employee compensation and contract services,
which could increase our level of expenses and the rate at which we use our resources.
Lease Obligations
The Company is obligated to pay approximately
$171,800 under 2 leases for office space over the next year.
Seasonality
We do not have a seasonal business cycle.
Critical Accounting Policies and Use of Estimates
The preparation of 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 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. Management bases its estimates on historical experience
and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. On a continual basis,
management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience,
and reasonable assumptions. After such reviews, and if deemed appropriate, managements estimates are adjusted accordingly. Actual results
could differ from those estimates and assumptions under different and/or future circumstances. Management considers an accounting estimate
to be critical if:
We evaluate our estimates and assumptions on
an ongoing basis and none of the Company’s estimates and assumptions used within the consolidated financial statements involve
a high level of estimation uncertainty. For additional discussion regarding the application of the significant accounting policies, see
Note 2 to the Company’s consolidated financial statements included in this report.
Recent Accounting Pronouncements
The Company lists material recent accounting
pronouncements in Note 2 of the consolidated financial statements.
39
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Interest rate risk
Our cash and cash equivalents include all highly
liquid investments with an original maturity of three months or less. Our cash equivalents are in a money market account. Because of
the short-term maturities of our cash and cash equivalents, we do not believe that an increase in market rates would have a significant
impact on the realized value of our investments. We place our cash and cash equivalents on deposit with financial institutions in the
United States. The Federal Deposit Insurance Corporation limits coverage for all depository accounts. Our cash and cash equivalents at
times may exceed covered limits.
Foreign currency exchange risk
We currently have limited, but may in the future
have increased, clinical and commercial manufacturing agreements which are denominated in Euros or other foreign currencies. As a result,
our financial results could be affected by factors such as a change in the foreign currency exchange rate between the U.S. dollar and
the Euro or other applicable currencies, or by weak economic conditions in Europe or elsewhere in the world. We are not currently engaged
in any foreign currency hedging activities.
Market indexed security risk
We have issued warrants to various holders underlying
shares of our common stock. These warrants are re-measured to their fair value at each reporting period with changes in their fair value
recorded as derivative gain (loss) in the accompanying consolidated statement of operations. We use the Black-Scholes model for valuation
of the warrants.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
Our audited consolidated financial statements
as of December 31, 2023 and 2022 for the years then ended are included beginning on Page F-1 immediately following the signature page
to this report. See Item 15 for a list of the financial statements included herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness
of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, at December 31, 2023, such
disclosure controls and procedures were effective.
Disclosure controls and procedures are controls
and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed
or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial
Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
This Annual Report on Form 10-K does not include
an attestation report from our registered public accounting firm regarding internal control over financial reporting. Our internal control
over financial reporting was not subject to such attestation as we are a non-accelerated filer.
Limitations on the Effectiveness of Controls
Our disclosure controls and procedures are designed
to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations
in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have
been detected. Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the
period covered by this Report that our disclosure controls and procedures were effective to provide reasonable assurance that the objectives
of our disclosure control system were met.
Changes in Internal Control Over Financial
Reporting
There were no changes in the Company’s
internal controls over financial reporting that occurred during the fourth quarter of the fiscal year covered by this Annual Report on
Form 10-K that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial
reporting.
40
Management’s Report on Internal Control
Over Financial Reporting
As required by the SEC rules and regulations
for the implementation of Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting
purposes in accordance with United States Generally Accepted Accounting Principles (GAAP). Our internal control over financial reporting
includes those policies and procedures that:
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect errors or misstatements in our consolidated financial statements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of
our internal control over financial reporting at December 31, 2023. In making these assessments, management used the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission COSO (2013 framework). Based on our assessments and those criteria,
management determined that we did maintain effective internal control over financial reporting at December 31, 2023.
ITEM 9B. OTHER INFORMATION
On March 14, 2024, our Board of Directors unanimously
approved, subject to stockholder approval, an amendment to the Company’s 2021 Equity Incentive Plan (the “2021 Plan”),
increasing by 4,500,000 shares the number of shares of our common stock that will be available for issuance of awards under the 2021 Plan.
The 2021 Plan as adopted and approved by our shareholders originally authorized awards for up to 1,500,000 shares of our common stock.
On May 25, 2022, shareholders approved an amendment to the 2021 Plan to increase the shares of the Company’s common stock available
for issuance thereunder by 3,900,000 shares. On May 25, 2023, shareholders approved an amendment to the 2021 Plan to increase the shares
of the Company’s common stock available for issuance thereunder by 2,500,000.
The purpose of the 2021 Plan is to (a) enable
the Company and its affiliates to attract and retain the types of employees, directors and consultants who will contribute to the Company’s
long range success; (b) provide incentives that align the interests of employees, consultants and directors with those of the stockholders
of the Company; and (c) promote the success of the Company’s business, thus enhancing the value of the Company for the benefit
of its stockholders.
41
Administration. The 2021 Plan will be
administered by a committee (the “Committee”), or in the Board’s sole discretion by the Board. In case no Committee
has been appointed, the Board may appoint one or more members of the Board appointed by the Board to administer the 2021 Plan in accordance
with the terms of the 2021 Plan. The Board has appointed the Compensation Committee of the Board to administer the 2021 Plan.
Shares Available for Awards. Subject to
shareholder approval of the most recent amendment to the 2021 Plan, and to adjustment in certain circumstances in accordance with the
terms of the 2021 Plan, we will reserve for issuance under the 2021 Plan no more than 12,400,000 shares of common stock (subject to adjustment
in certain circumstances as provided in the 2021 Plan). Shares of Common Stock available for distribution under the 2021 Plan may consist,
in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner. Shares of Common
Stock subject to an award that expires or is canceled, forfeited, or terminated without issuance of the full number of shares of Common
Stock to which the award related, as well as any shares of common stock subject to an award that are (a) tendered in payment of an option,
(b) delivered or withheld by the company to satisfy any tax withholding obligation, or (c) covered by a stock-settled stock appreciation
right or other awards that were not issued upon the settlement of the award, shall be added back to the shares of common stock available
for issuance of awards or delivery under the 2021 Plan.
Available Awards. Awards that may be granted
under the 2021 plan include: (a) incentive stock options, (b) non-qualified stock options, (c) stock appreciation rights, (d) restricted
awards, (e) performance share awards, (f) cash awards, and (g) other equity-based awards.
Recipients of Grants. Incentive stock
options may be granted only to employees. Awards other than incentive stock options may be granted to employees, consultants and directors
and those individuals whom the Committee or the Board determines are reasonably expected to become employees, consultants and directors
following the grant date. Our principal executive officer, principal financial officer and other named executive officers are eligible
to participate in and receive awards under the 2021 Plan.
Term.
The 2021 Plan has a term of ten years.
This summary of the 2021 Plan is qualified in
its entirety by the full text of the 2021 Plan, which is filed as Exhibit 10.33 to this Report and is incorporated by reference herein.
The proposed amendment to the 2021 Plan will be
submitted for the approval of our shareholders at our 2024 Annual Meeting of Stockholders. If the proposed amendment is not approved by
the shareholders, the 2021 Plan will remain effective with respect to the number of shares of common stock originally authorized. Options
for 4,363,250 shares of commons stock were issued in December 2023 subject to approval by the shareholders of this amendment. If the amendment
is not approved, such options will be void, but the recipients thereof will receive identical options for a pro-rata share of any shares
available for issuance of awards under the 2021 Plan immediately after the shareholder meeting.
Insider Trading Arrangements
On November 15, 2023, Charles Ence, our Chief
Accounting and Compliance Officer, adopted a Rule 10b5-1 trading arrangement that was intended to satisfy the affirmative defense of Rule
10b5-1(c) under the Exchange Act for the sale of up to 137,110 shares of the Company’s common stock, with such transactions to occur
during sale periods beginning on or after April 23, 2024 and ending on the earlier of December 20, 2024, or the date on which all shares
authorized for sale have been sold in conformance with the terms of the arrangement. On November 22, 2023, Mr. Ence terminated this trading
arrangement.
No other officers, as defined in Rule 16a-1(f),
or directors adopted and/or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,”
as defined in Item 408 of Regulation S-K, during the fourth fiscal quarter of 2023.
ITEM 9C. DISCLOSURE REGARDING FOREIGN
JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
42
PART III
The information required for the Items contained
in Part III is incorporated herein by reference from our definitive proxy statement for our 2024 Annual Meeting of Stockholders
(the “Proxy Statement”), which will be filed with the SEC no later than 120 days after December 31, 2023.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS,
AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
43
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedules
Our consolidated financial statements are listed
on the Index to Financial Statements on this annual report on Form 10-K beginning on page F-1.
All financial statement schedules are omitted
because they are not applicable or the required information is shown in the financial statements or notes thereto.
Our independent registered public accounting firm is Marcum LLP (PCAOB
ID #688) of Houston, Texas.
44
RELMADA THERAPEUTICS, INC.
(INDEX TO FINANCIAL STATEMENTS)
Page
Report of Independent Registered Public Accounting Firm F-2
Consolidated Balance Sheets as of December 31, 2023 and 2022 F-3
Notes to Consolidated Financial Statements F-7
F-1
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Relmada Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of Relmada Therapeutics, Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements
of operations, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023,
and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of
its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles
generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were
we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
Critical audit matters are matters arising from
the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and
that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Marcum llp
Marcum llp
We have served as the Company’s auditor since 2014.
Houston, Texas
March 19, 2024
F-2
Relmada Therapeutics, Inc.
Consolidated Balance Sheets
As of As of
December 31, December 31,
Assets
Current assets:
Liabilities and Stockholders’ Equity
Current liabilities:
Commitments and Contingencies (Note 7)
Stockholders’ Equity:
The accompanying notes are an integral part of
these consolidated financial statements.
F-3
Relmada Therapeutics, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2023 and 2022
Operating expenses:
Other income (expenses):
Gain on settlement of fees - 6,351,606
Unrealized gain (loss) on short-term investments 3,823,234 (4,220,255 )
Net loss per common share – basic and diluted $ (3.28 ) $ (5.30 )
The accompanying notes are an integral part of
these consolidated financial statements.
F-4
Relmada Therapeutics, Inc.
Consolidated Statements of Changes in Stockholders’
Equity
For the Years Ended December 31, 2023 and 2022
Common Stock Additional Paid-in Accumulated
Shares Par Value Capital Deficit Total
The accompanying notes are an integral part of
these consolidated financial statements.
F-5
Relmada Therapeutics, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2023 and 2022
Cash flows from operating activities
Adjustments to reconcile net loss to net cash used in operating activities:
Unrealized (gain) loss on short-term investments (3,823,234 ) 4,220,255
Change in operating assets and liabilities:
Lease payment receivable - 86,377
Cash flows from investing activities
Cash flows from financing activities
Payment of ATM fees (98,463 ) -
Payment of fees for warrants issued for common stock - (50,000 )
Proceeds from issuance of common stock - 42,728,599
Proceeds from options exercised for common stock - 703,720
Proceeds from warrants exercised for common stock - 1,264,523
Proceeds from short swing profit, net - 373,632
Net cash (used in) provided by financing activities (98,463 ) 45,020,474
Supplemental disclosure of cash flow information:
Non-cash operating transactions:
Forgiveness of accounts payable related to gain $ - $ 3,212,583
Non-cash investing and financing transactions:
Share exchange for Pre-funded warrants $ - $ 1,452
Net exercise of Pre-funded warrants $ - $ (1,452 )
The accompanying notes are an integral part of
these consolidated financial statements.
F-6
Relmada Therapeutics, Inc.
Notes to 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 esmethadone (d-methadone,
dextromethadone, REL-1017), an N-methyl-D-aspartate (NMDA) receptor antagonist. Esmethadone 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. The Company
is also developing a novel psilocybin (REL-P11) in doses that we believe are lower than those associated with psychedelic effects for
the treatment of metabolic indications.
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 Food and Drug Administration
(FDA) and other governmental regulations and approval requirements.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying 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). The 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.
Liquidity
As shown in the accompanying consolidated financial statements, the
Company incurred negative operating cash flows of $51,659,206 for the year ended December 31, 2023 and has an accumulated deficit of $560,902,681
from inception through December 31, 2023.
Relmada has funded its past operations through
equity raises. There were no equity raises in the year ended December 31, 2023.
Management believes that the Company’s
existing cash and cash equivalents will enable them to fund operating expenses and capital expenditure requirements for at least 12 months
from the issuance of these consolidated financial statements. Beyond that point management will evaluate the size and scope of any subsequent
operations and clinical 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 clinical 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.
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 stock-based compensation expenses,
and recorded amounts related to income taxes.
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 and cash equivalents. The Company’s cash and
cash equivalents are held at two high-credit-quality financial institutions. The Company’s cash and cash equivalents of $4,091,568
at December 31, 2023 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 FASB ASU 2016-01, Financial
Instruments, 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.
Short-term investments at December 31, 2023
consisted of mutual funds with a fair value of $92,232,292.
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.
F-7
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
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.
Gain on Settlement
The Company recognizes a gain when cash (or other
assets, such as claims to cash) has been received without the expectation of repayment. A gain is recorded when the assets are readily
convertible to know amounts of cash or claims to cash. Gains are reported as part of other income (expense) on the consolidated statement
of operations. The Company recorded a gain on settlement of $0 and $6,351,606 included in other income (expense) for the years ended
December 31, 2023 and 2022, respectively.
Fair Value of Financial Instruments
The Company’s financial instruments primarily
include cash, short term investments derivative liabilities 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. 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 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 $92,232,292 at December 31, 2023 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 as unrealized gain on short-term investments.
The Company recorded an unrealized gain of $3,823,234 and an unrealized loss of $4,220,255, included in other income (expense) for the
years ended December 31, 2023 and 2022, respectively.
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.
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. At December
31, 2023 and 2022, the Company had recorded 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.
F-8
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
The Company files a U.S. Federal income tax return
and various state returns. Uncertain tax positions taken on our 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, 2023 and 2022.
The open tax years, subject to potential examination by the applicable taxing authority, for the Company are from June 30, 2018 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.
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 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 Class A convertible preferred stock, Series A preferred stock, 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
losses in each period.
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):
Year ended December 31, Year ended December 31,
F-9
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
Recent Accounting Pronouncements
In October 2021, the FASB issued ASU 2021-08, “Business Combinations
(Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”. The amendments in this
ASU require that an entity (acquirer) recognize, and measure contract assets and contract liabilities acquired in a business combination,
including contract assets and contract liabilities arising from revenue contracts with customers, as if it had originated the contracts
as of the acquisition date. The amendments in this ASU were effective for annual and interim periods beginning after December 15, 2022.
The Company adopted this standard effective January 1, 2023 and the standard did not have a significant impact on our consolidated financial
statements.
In November 2023, The FASB issued ASU 2023-07,
“Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” which expands annual and interim disclosures
for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for our annual
periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. The Company is currently
evaluating the potential effect that the updated standard will have on our financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09,
“Income Taxes (Topic 740): Improvements to Income Tax Disclosures” to expand the disclosure requirements for income
taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning
January 1, 2025, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will
have on our financial statement disclosures.
F-10
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
NOTE 3 - PREPAID EXPENSES
Prepaid expenses consisted of the following (rounded to nearest $00):
NOTE 4 - ACCRUED EXPENSES