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RELMADA THERAPEUTICS,
Audited Financial Statements
As of June 30, 2019 and 2018
and for the years then ended
RELMADA THERAPEUTICS,
(INDEX TO FINANCIAL STATEMENTS)
| Page | |
| Report of Independent Registered Public Accounting Firm | 3 |
| Consolidated Balance Sheets as of June 30, 2019 and 2018 | 4 |
| Consolidated Statements of Operations for the Years Ended June 30, 2019 and 2018 | 5 |
| Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended June 30, 2019 and 2018 | 6 |
| Consolidated Statements of Cash Flows for the Years Ended June 30, 2019 and 2018 | 7 |
| Notes to Consolidated Financial Statements | 9 |
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 June 30, 2019 and 2018, the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for each of the two years in the period ended June
30, 2019 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 June 30, 2019 and 2018, and the
results of its operations and its cash flows for the years ended June 30, 2019 and 2018, in conformity with accounting principles
generally accepted in the United States of America.
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.
We have served as the Company's auditor since 2014.
September 24, 2019, except for the effects of the
reverse stock split discussed in Note 14, to which the date is October 11, 2019
Relmada Therapeutics,
Consolidated Balance Sheets
| As of June 30, 2019 | As of June 30, 2018 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 9,216,554 | $ | 2,238,943 | ||||
| Other receivable | 176,980 | 7,617 | ||||||
| Lease payments receivable - short term | 70,102 | 64,486 | ||||||
| Prepaid expenses | 520,745 | 426,921 | ||||||
| Total current assets | 9,984,381 | 2,737,967 | ||||||
| Fixed assets, net of accumulated depreciation | 7,210 | 12,080 | ||||||
| Other assets | 25,000 | 24,788 | ||||||
| Lease payments receivable - long term | 203,142 | 273,244 | ||||||
| Total assets | $ | 10,219,733 | $ | 3,048,079 | ||||
| Liabilities and Stockholders' Equity (Deficit) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 924,359 | $ | 765,439 | ||||
| Accrued expenses | 1,317,855 | 659,455 | ||||||
| Notes payable | 364,204 | 285,170 | ||||||
| Derivative liabilities | - | 4,194,634 | ||||||
| Total current liabilities | 2,606,418 | 5,904,698 | ||||||
| Promissory notes payable, net of discount of $0 and $4,548,543 | - | 2,656,457 | ||||||
| Total liabilities | 2,606,418 | 8,561,155 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' Equity (Deficit) : | ||||||||
| Preferred stock, $0.001 par value, 200,000,000 shares authorized, none issued and outstanding | ||||||||
| Class A Convertible stock, $0.001 par value, 3,500,000 shares authorized, none issued and outstanding | - | - | ||||||
| Common stock, $0.001 par value, 50,000,000 shares authorized, 9,744,643 and 3,137,468 shares issued and outstanding, respectively | 9,744 | 3,137 | ||||||
| Additional paid-in capital | 119,265,938 | 88,828,094 | ||||||
| Accumulated deficit | (111,662,367 | ) | (94,344,307 | ) | ||||
| Total stockholders' equity (deficit) | 7,613,315 | (5,513,076 | ) | |||||
| Total liabilities and stockholders' equity (deficit) | $ | 10,219,733 | $ | 3,048,079 |
The accompanying notes are an integral
part of these consolidated financial statements.
Relmada Therapeutics,
Consolidated Statements of Operations
For the Years Ended June 30, 2019
| 2019 | 2018 | |||||||
| Operating expenses: | ||||||||
| Research and development | $ | 7,024,747 | $ | 2,942,625 | ||||
| General and administrative | 5,703,173 | 3,974,850 | ||||||
| Total operating expenses | 12,727,920 | 6,917,475 | ||||||
| Loss from operations | (12,727,920 | ) | (6,917,475 | ) | ||||
| Other income (expenses): | ||||||||
| Change in fair value of derivative liabilities | (54,634 | ) | (708,901 | ) | ||||
| Interest expense, net | (761,038 | ) | (1,336,826 | ) | ||||
| Other | - | 2,350 | ||||||
| Loss on Extinguishment of debt | (3,774,468 | ) | - | |||||
| Total other income (expenses) | (4,590,140 | ) | (2,043,377 | ) | ||||
| Net loss | $ | (17,318,060 | ) | $ | (8,960,852 | ) | ||
| Net loss per common share - basic and diluted | $ | (2.74 | ) | $ | (2.86 | ) | ||
| Weighted average number of common shares outstanding - basic and diluted | 6,311,769 | 3,136,336 |
The accompanying notes are an integral
part of these consolidated financial statements.
Relmada Therapeutics,
Consolidated Statements of Stockholders'
For the Years Ended June 30, 2019
| Common Stock | Additional Paid-in | Accumulated | ||||||||||||||||||
| Shares | Par Value | Capital | Deficit | Total | ||||||||||||||||
| Balance - June 30, 2017 | 3,132,093 | $ | 3,131 | $ | 86,840,608 | $ | (85,383,455 | ) | $ | 1,460,284 | ||||||||||
| Issuance of restricted common stock | 938 | 1 | 3 | - | 4 | |||||||||||||||
| Issuance of common stock for cashless exercises of warrants from consultants and Series A Preferred Stock warrant holder | 4,437 | 4 | (4 | ) | - | - | ||||||||||||||
| Stock-based compensation expense | - | - | 517,999 | - | 517,999 | |||||||||||||||
| Issuance of warrants to promissory notes payable placement agent | 200,658 | 200,658 | ||||||||||||||||||
| Issuance of warrants to holders of promissory notes payable | 1,268,831 | 1,268,831 | ||||||||||||||||||
| Net loss | - | - | - | (8,960,852 | ) | (8,960,852 | ) | |||||||||||||
| Balance - June 30, 2018 | 3,137,468 | $ | 3,137 | $ | 88,828,094 | $ | (94,344,307 | ) | $ | (5,513,076 | ) | |||||||||
| Cumulative effect of Write-off of Derivative Liabilities under ASU 2017-11 | 59,397 | 59,397 | ||||||||||||||||||
| Adjusted Balance as at June 30, 2018 | 3,137,468 | $ | 3,137 | $ | 88,887,491 | $ | (94,344,307 | ) | $ | (5,453,679 | ) | |||||||||
| Stock-based compensation expense | - | 1,213,996 | - | 1,213,996 | ||||||||||||||||
| Conversion of notes and accrued interest | 2,682,917 | 2,683 | 11,802,150 | 11,804,833 | ||||||||||||||||
| Equity Units issued for cash, net | 3,975,115 | 3,975 | 17,756,660 | - | 17,760,635 | |||||||||||||||
| Shares relinquished by former officer | (75,848 | ) | (76 | ) | (394,334 | ) | - | (394,410 | ) | |||||||||||
| Issuance of common stock for cashless exercises of warrants from consultants and Series A Preferred Stock warrant holder | 24,991 | 25 | (25 | ) | - | - | ||||||||||||||
| Net loss | - | - | - | (17,318,060 | ) | (17,318,060 | ) | |||||||||||||
| Balance - June 30, 2019 | 9,744,643 | $ | 9,744 | $ | 119,265,938 | $ | (111,662,367 | ) | $ | 7,613,315 |
The accompanying notes are an integral
part of these consolidated financial statements.
Relmada Therapeutics,
Consolidated Statements of Cash Flows
For the Years Ended June 30, 2019
| 2019 | 2018 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (17,318,060 | ) | $ | (8,960,852 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expense | 4,870 | 2,627 | ||||||
| Stock-based compensation | 1,213,996 | 517,999 | ||||||
| Amortization of deferred financing costs | 661,168 | 1,029,183 | ||||||
| Change in fair value of derivative liabilities | 54,634 | 708,901 | ||||||
| Fair value of shares relinquished | (394,410 | ) | ||||||
| Loss on promissory note extinguishment | 3,774,468 | |||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other assets | 270,167 | 42,741 | ||||||
| Other receivable | (169,363 | ) | 224,980 | ) | ||||
| Lease payment receivable | 64,486 | 59,319 | ||||||
| Accounts payable | 158,920 | 157,392 | ||||||
| Accrued expenses | 1,181,270 | 215,632 | ||||||
| Net cash used in operating activities | (10,497,854 | ) | (6,002,078 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of fixed assets | - | (12,391 | ) | |||||
| Net cash used in investing activities | - | (12,391 | ) | |||||
| Cash flows from financing activities | ||||||||
| Proceeds from promissory notes and warrants, net of fees | - | 6,534,400 | ||||||
| Proceeds from sale of equity units, net of fees | 17,760,635 | |||||||
| Payment on notes payable | (285,170 | ) | 8,500 | |||||
| Net cash provided by financing activities | 17,475,465 | 6,542,900 | ||||||
| Net Increase in cash and cash equivalents | 6,977,611 | 528,431 | ||||||
| Cash and cash equivalents at beginning of the year | 2,238,943 | 1,710,512 | ||||||
| Cash and cash equivalents at end of the year | $ | 9,216,554 | $ | 2,238,943 |
Relmada Therapeutics,
Consolidated Statements of Cash Flows
For the Years Ended June 30, 2019
| 2019 | 2018 | |||||||
| Supplemental disclosure of cash flows information: | ||||||||
| Cash paid during the period for: | ||||||||
| Income taxes | $ | - | $ | - | ||||
| Interest | $ | 5,933 | $ | 2,559 | ||||
| Non-cash investing and financing transactions: | ||||||||
| Notes payable issued in connection with director and officer insurance policies | $ | 364,204 | $ | 285,170 | ||||
| Derivative liabilities associated with issuance of promissory notes | $ | - | $ | 3,309,880 | ||||
| Issuance of warrants to promissory notes payable placement agent | $ | - | $ | 200,658 | ||||
| Issuance of warrants to holders of promissory notes payable | $ | - | $ | 1,268,832 | ||||
| Cashless exercise of warrants for common stock | $ | 100 | $ | 18 | ||||
| Issuance of restricted stock for service | $ | - | $ | 4 | ||||
| Write off for derivative liability due to adoption of ASU 2017-11 | $ | 59,397 | $ | - | ||||
| Conversion of promissory notes and accrued interest to common stock | $ | 8,030,365 | $ | - |
The accompanying notes are an integral
part of these consolidated financial statements.
Relmada Therapeutics,
Notes to Consolidated Financial Statements
Relmada 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 that potentially addresses areas of high unmet medical need in the treatment
of central nervous system (CNS) diseases and other disorders.
Our lead product candidate, d-methadone,
is a New Chemical Entity (NCE) being developed as a rapidly acting, oral agent for the treatment of depression and other potential
indications. We have completed Phase 1 single and multiple ascending dose studies. A Phase 2 study in major depressive disorder
is ongoing, with first patient dosed in June 2018 and last patient dosed in July 2019. We expect to have top line results in the
second half of 2019.
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.
As shown in the accompanying financial
statements, the Company incurred negative operating cash flows of $10,497,854 for the year ended June 30, 2019 and has an accumulated
deficit of $111,662,367 from inception through June 30, 2019. During the year ended June 30, 2019, the Company incurred non-recurring
expenses of approximately $1,600,000 related to the settlement with Najib Babul (see Note 12) and related legal fees.
Relmada has funded its past operations
through equity raises and most recently in the year ended June 30, 2019 Relmada raised net proceeds from the sale of common stock
and warrants of $17,760,635. Further, the Company was able to reduce its debt obligations by converting $8,030,365 of promissory
notes and accrued interest into common stock.
In Note 2 of the notes to the Company's
audited consolidated financial statements as of and for the year ended June 30, 2018, and subsequently in each of the Company's
quarterly unaudited condensed consolidated financial statements, management stated that the Company had incurred significant losses,