What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-15 compared with 2022-05-16 · 40 added, 23 removed, 186 unchanged (25% of the section changed)

38 unchanged sentences

While a majority of these indications are first treated with topical products, many patients frequently switch treatments or discontinue treatment altogether due to patient dissatisfaction with slow and modest response rates, early onset of negative side effects, onerous application schedules and typically long duration of therapy.

For diseases like psoriasis, a small percentage of patients may be candidates for biologic or systemic therapies, but these patients are typically required to try topical or oral treatment options prior to qualifying for these expensive systemic therapies.

Given the limitations with current topical therapies and the restricted usability of systemic therapies, we believe there is a significant opportunity to address the needs of frustrated patients searching for effective topical products that satisfy their dermatological and lifestyle needs.

6 unchanged sentences

However, due to the multiple mechanisms of action and anti-inflammatory effect seen with DMT310, we have moved into clinical trials of two additional indications, psoriasis and rosacea.

In October 2021, we completed a Phase 1b proof of concept, or POC, trial in psoriasis and in November 2021 we initiated a Phase 2 clinical trial of DMT310 for the treatment of rosacea.

In October 2021, we completed a Phase 1b proof of concept, or POC, trial in psoriasis and in November 2021 we initiated a Phase 2 clinical trial of DMT310 for the treatment of rosacea with results expected in the second half of 2022.

Our second product candidate utilizing our Spongilla technology is our combination treatment, DMT410.

15 unchanged sentences

We have not generated any revenue to date and have incurred significant operating losses.

Our net losses were $2.8 million and $2.3 million for the three months ended March 31, 2022 and 2021, respectively, and as of March 31, 2022, we had an accumulated deficit of $38.8 million.

Our net losses were $2.7 million and $5.5 million for the three and six months ended June 30, 2022, respectively, and as of June 30, 2022, we had an accumulated deficit of $41.5 million.

We expect to continue to incur significant expenses and operating losses for the foreseeable future.

42 unchanged sentences

As a result, if factors change and management uses different assumptions, share-based compensation expense could be materially different for future awards.

Results of Operations

Fluctuations in Operating Results

3 unchanged sentences

Due to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a good indication of our future performance.

Three Months Ended March 31, 2022 and 2021

The following table summarizes our results of operations for the periods presented:

Three Months Ended March 31,

Results of Operations

Three Months Ended June 30, 2022 and 2021

The following table summarizes our results of operations for the three months ended June 30, 2022 and 2021:

Three Months Ended June 30,

Operating expenses:

7 unchanged sentences

$ (1,331,792 )

$ (1,398,781 )

Research and Development Expenses

Research and development expenses increased by $0.9 million from $0.7 million for the three months ended March 31, 2021 to $1.6 million for the three months ended March 31, 2022.

The increase in research and development expense from the first quarter of 2022 as compared the same period in 2021 resulted from $0.8 million of increased clinical expenses from the ongoing DMT310 rosacea study as well as increased employee and consulting costs of $0.3 million, offset by decreased stock-based compensation of $0.2 million.

Research and development expenses increased by $0.7 million from $0.9 million for the three months ended June 30, 2021, compared $1.6 million for the three months ended June 30, 2022.

The increase in research and development expense was the result of $0.4 million of increased clinical trial expenses from the ongoing DMT310 rosacea study, an increase of $0.1 million related to non-clinical activities, as well as increased employee and personnel expenses and stock-based compensation of $0.2 million.

General and Administrative Expenses

General and administrative expenses decreased by $0.4 million from $1.6 million for the three months ended March 31, 2021 to $1.2 million for the three months ended March 31, 2022.

This decrease was the result of decreased stock-based compensation expense of $0.8 million and decreased legal fees of $0.3 million, offset by increased insurance costs of $0.3 million, increased employee costs of $0.1 million and increased public company costs of $0.3 million.

General and administrative expenses increased by approximately $0.7 million from $0.5 million for the three months ended June 30, 2021, compared to $1.1 million for the three months ended June 30, 2022.

The increase in general and administrative expenses was the result of increased insurance and public company costs of $0.5 million as well as increased employee and personnel and stock-based compensation expenses of $0.2 million.

Six Months Ended June 30, 2022, and 2021

The following table summarizes our results of operations for the six months ended June 30, 2022, and 2021:

Six Months Ended June 30,

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income and expenses:

Other income and expenses decreased by $43,135 from the three months ended March 31, 2021 to the current period since we have no more outstanding debt or related discount amortization or interest expense.

Interest expense, net

$ (5,516,725 )

$ (3,636,700 )

$ (1,880,025 )

Research and Development Expenses

Research and development expenses increased by $1.7 million from $1.5 million for the six months ended June 30, 2021, compared to $3.2 million for the six months ended June 30, 2022.

The increase in research and development expense was the result of $1.1 million of increased clinical trial expenses from the ongoing DMT310 rosacea study, $0.2 million in increased non-clinical expenses, $0.1 million in increased chemistry, manufacturing, and controls, or CMC, expenses, as well as increased employee and personnel and stock-based compensation expense of $0.3 million.

General and Administrative Expenses

General and administrative expenses increased by $0.3 million from $2.0 million for the six months ended June 30, 2021, compared to $2.3 million for the six months ended June 30, 2022.

The increase in general and administrative expenses was the result of increased insurance and public company costs of $1.0 million as well as increased employee and personnel expenses of $0.2 million, offset by decreased stock-based compensation expense of $0.6 million and decreased legal costs of $0.3 million.

The following table summarizes our cash flows from operating and financing activities:

Three Months Ended

Six Months Ended

Statements of cash flows data:

2 unchanged sentences

$ (4,447,363 )

Financing activities

Increase (decrease) in cash

$ (1,679,433 )

Financing activities

Decrease in cash

Operating activities

Cash used in operations of $2.6 million for the three months ended March 31, 2022 was the result of the net loss of $2.8 million, offset by non-cash stock-based compensation of $0.2 million.

Cash used in operations of $0.8 million for the three months ended March 31, 2021 was the result of the net loss of $2.3 million, offset by non-cash stock-based compensation of $1.2 million, as well as an increase in accounts payable and accrued and other current liabilities of $0.6 million.

Cash used in operations of $4.4 million for the six months ended June 30, 2022, was the result of the net loss of $5.5 million, offset by non-cash stock-based compensation of $0.5 million, as well as an increase in accounts payable and accrued and other current liabilities of $0.2 million and a decrease in prepaid expenses and other current assets of $0.4 million.

Cash used in operations of $1.7 million for the six months ended June 30, 2021, was the result of the net loss of $3.6 million and an increase in prepaid expenses and other current assets of $0.6 million, offset by non-cash stock-based compensation of $1.3 million, as well as an increase in accounts payable and accrued and other current liabilities of $1.3 million.

Financing activities

The Company did not experience any financing activities during the three months ended March 31, 2022.

Cash provided by financing activities of $1.6 million for the three months ended March 31, 2021 was the $1.6 million from the issuance of convertible subordinated promissory notes and proceeds of $0.6 million from the issuance of Series 1d Preferred Units, offset by $0.6 million of principal and final payments on debt.

Cash provided by financing activities of $4.3 million for the six months ended June 30, 2022, was the result of the net proceeds received from the issuance of common stock and warrants issued in April 2022 from a private placement of the Company’s securities.

Cash provided by financing activities of $1.6 million for the six months ended June 30, 2021, was the result of proceeds of $1.6 million from the issuance of convertible subordinated promissory notes and proceeds of $0.6 million from the issuance of Series 1d Preferred Units, offset by $0.6 million of principal and final payments on debt.

Liquidity and Capital Resources

Since our inception, we have not generated any revenue or commercialized any products.

As of March 31, 2022, our cash totaled $8.2 million and we had an accumulated deficit of $38.8 million.

For the three months ended March 31, 2022 and the year ended December 31, 2021, we used cash of $2.6 million and $5.7 million, respectively, in operations.

As a result of our initial public offering of common stock and warrants to purchase common stock in August 2021 for net proceeds of $15.4 million, as well as our private placement of common stock and warrants to purchase common stock in April 2022 for gross proceeds of $5.0 million (See Note 12 – Subsequent Event), our cash balances are expected to fund operations into the second quarter of 2023.

As of June 30, 2022, our cash totaled $10.6 million, and we had an accumulated deficit of $41.5 million.

For the six months ended June 30, 2022, and the year ended December 31, 2021, we used cash of $4.4 million and $5.7 million, respectively, in operations.

As a result of our initial public offering of common stock and warrants to purchase common stock in August 2021 for net proceeds of $15.4 million, as well as our private placement of common stock and warrants to purchase common stock in April 2022 for net proceeds of $4.3 million, our cash balances are expected to fund operations into the third quarter of 2023.

We anticipate that we will continue to incur net losses for the foreseeable future.

13 unchanged sentences

We expect these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

We believe that our existing cash, along with the proceeds from a private placement of our securities which closed in April 2022 (the “Private Placement”) (See Note 12 – Subsequent Event), will be sufficient to fund our operating expenses and capital expenditure requirements into the second quarter of 2023.

We believe that our existing cash, along with the proceeds from a private placement of our securities which closed in April 2022 (the “Private Placement”), will be sufficient to fund our operating expenses and capital expenditure requirements into the third quarter of 2023.

We have based this estimate of cash runway on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

35 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis