What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-10 compared with 2023-05-11 · 54 added, 20 removed, 199 unchanged (27% of the section changed)

26 unchanged sentences

our ability to adequately support organizational and business growth.

the continued spread of COVID-19 and the resulting global pandemic and its impact on our preclinical studies and clinical studies.

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipate in our forward-looking statements.

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We have shown DMT310’s ability to treat the multiple causes of acne in a Phase 2b study where we initially saw a 45% reduction in inflammatory lesions after four treatments, with statistically significant improvements at all time points for all three primary endpoints throughout the study (reduction in inflammatory lesions, reduction in non-inflammatory lesions, and improvement in Investigator Global Assessment).

Based on this Phase 2b data we recently submitted an end of phase 2 meeting package to the FDA to agree on clinical development requirements for the Phase 3 acne program.

We expect to receive feedback from the FDA by the end of June 2023 and, if acceptable to the FDA, we plan to initiate a Phase 3 program in the second half of 2023.

Based on this Phase 2b data we submitted an end of phase 2 meeting package to the FDA to agree on clinical development requirements for the Phase 3 acne program.

We received feedback from the FDA in the end of June 2023 and based on FDA recommendations we have amended the Phase 3 protocols to include the FDA’s recommended additions.

In July 2023, we submitted the amended protocols to the FDA and we plan to initiate a Phase 3 program in the second half of 2023, assuming the receipt of final approval from the FDA.

In addition, based on the multiple mechanisms of action and anti-inflammatory effect seen with DMT310 acne trial, we completed a Phase 1b proof of concept, or POC, trial in psoriasis where we saw encouraging results warranting further investigation.

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

Our net losses were $2.2 million and $2.8 million for the three months ended March 31, 2023, and 2022, respectively, and as of March 31, 2023, we had an accumulated deficit of $47.8 million.

Our net losses were $1.7 million and $2.7 million for the three months ended June 30, 2023, and 2022, respectively, and as of June 30, 2023, we had an accumulated deficit of $49.5 million.

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

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We will need to generate significant revenues to achieve profitability, and we may never do so.

Recent Developments

Equity Offerings

On March 20, 2023, we closed a public offering (the “March 2023 Offering”) of (i) 85,000 shares of Common Stock, $0.0001 par value per share (“Common Stock”), (ii) pre-funded warrants to purchase up to an aggregate of 1,533,123 shares of Common Stock with an exercise price of $0.0001 per share, (iii) Series A warrants to purchase up to an aggregate of 1,618,123 shares of Common Stock, and (iv) Series B warrants to purchase up to an aggregate of 1,618,123 shares of Common Stock.

Both the Series A and Series B warrants have an exercise price of $2.82 per share.

The net proceeds of the March 2023 Offering, after deducting the placement agent’s fees and expenses and other offering expenses payable by the Company was approximately $4.2 million.

In connection with the March 2023 Offering, we also issued warrants to purchase an aggregate of 113,269 shares of Common Stock to certain affiliated designees of the placement agent as part of the placement agent’s compensation.

The placement agent warrants are exercisable at an exercise price of $3.8625 per share, and will expire on the five year anniversary of the date of issuance.

On May 26, 2023, we closed a private placement (the “2023 PIPE”), priced at the market under Nasdaq rules, in which we sold 458,555 shares of its Common Stock together with 342,322 pre-funded warrants to purchase up to an aggregate of 342,322 shares of Common Stock with an exercise price of $0.0001 per share, (the “May 2023 Pre-Funded Warrants”).

We received net proceeds of approximately $1.5 million, after deducting fees to the placement agent and other offering expenses.

The Common Stock purchase warrants were immediately exercisable at an exercise price of $2.16 per share and will expire five and one-half years from the date of issuance.

The pre-funded warrants were immediately exercisable at an exercise price of $0.0001 per share and do not expire.

In connection with the offering, we also issued warrants to purchase an aggregate of 56,061 shares of Common Stock to certain affiliated designees of the placement agent as part of the placement agent’s compensation.

The placement agent warrants are exercisable at an exercise price of $2.8563 per share and will expire on the five year anniversary of the date of issuance.

The net proceeds will be used for general corporate purposes, which includes, without limitation, ongoing research and pre-clinical studies, clinical trials, and the development of new biological and pharmaceutical technologies.

Critical Accounting Policies and Use of Estimates

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Results of Operations

Three Months Ended March 31, 2023, and 2022

Three Months Ended June 30, 2023, and 2022

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

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Research and Development Expenses

Research and development expenses decreased by $0.4 million from $1.6 million for the three months ended March 31, 2022, to $1.2 million for the three months ended March 31, 2023.

The decrease in research and development expense from the first quarter of 2023 as compared the same period in 2022 resulted from $0.8 million of decreased clinical expenses from the DMT310 rosacea study completed in late 2022, offset by increased non-clinical and chemistry, manufacturing, and controls, or CMC, expenses of $0.4 million.

Research and development expenses decreased by $0.8 million from $1.6 million for the three months ended June 30, 2022, to $0.8 million for the three months ended June 30, 2023.

The decrease in research and development expense from the second quarter of 2023 as compared the same period in 2022 resulted from $0.7 million of decreased clinical expenses from the DMT310 rosacea study completed in late 2022 and $0.2 million of decreased non-clinical expenses, offset by $0.1 million of increased chemistry, manufacturing, and controls, or CMC, expenses in preparation for the DMT310 Phase 3 program which is expected to start in the second half of 2023.

General and Administrative Expenses

General and administrative expenses decreased by $0.1 million from $1.2 million for the three months ended March 31, 2022, to $1.1 million for the three months ended March 31, 2023.

This decrease resulted from decreased insurance costs of $0.1 million.

General and administrative expenses decreased by $0.2 million from $1.1 million for the three months ended June 30, 2022, to $0.9 million for the three months ended June 30, 2023.

This decrease resulted from decreased insurance costs of $0.1 million, as well as decreased stock-based compensation expense of $0.1 million.

Other Income and Expenses

Other income and expenses increased by $37,540 from the three months ended March 31, 2023, as result of interest income earned from cash sweep accounts, which were opened during the third quarter of 2022.

Other income and expenses increased by $31,050 from the three months ended June 30, 2023, as result of interest income earned from cash sweep accounts, which were opened during the third quarter of 2022.

Six Months Ended June 30, 2023, and 2022

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

Six Months Ended June 30,

Operating expenses:

Research and development

$ (1,176,827 )

General and administrative

Total operating expenses

Loss from operations

Other income and expenses:

Interest expense, net

$ (3,941,506 )

$ (5,516,725 )

Research and Development Expenses

Research and development expenses decreased by $1.2 million from $3.2 million for the six months ended June 30, 2022, to $2.0 million for the six months ended June 30, 2023.

The decrease in research and development expense resulted from $1.5 million of decreased clinical expenses from the DMT310 rosacea study completed in late 2022, offset by $0.3 million of increased CMC expenses in preparation for the DMT310 Phase 3 program which is expected to start in the second half of 2023.

General and Administrative Expenses

General and administrative expenses decreased by $0.3 million from $2.3 million for the six months ended June 30, 2022, to $2.0 million for the six months ended June 30, 2023.

This decrease resulted from decreased insurance costs of $0.2 million, as well as decreased stock-based compensation expense of $0.2 million, offset by an increase in employee costs of $0.1 million.

Other Income and Expenses

Other income and expenses increased by $68,590 from the six months ended June 30, 2023, as result of interest income earned from cash sweep accounts, which were opened during the third quarter of 2022.

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

Three Months Ended

Six Months Ended

Statements of cash flows data:

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Increase (decrease) in cash and cash equivalents

$ (2,607,848 )

Operating activities

Cash and cash equivalents used in operations of $1.6 million for the three months ended March 31, 2023, was the result of the net loss of $2.2 million, offset by non-cash stock-based compensation of $0.1 million, a decrease in prepaid expenses and other current assets of $0.2 million, and an increase in accrued and other current liabilities of $0.3 million.

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 $3.5 million for the six months ended June 30, 2023, was the result of the net loss of $3.9 million, offset by non-cash stock-based compensation of $0.3 million, as well as a decrease 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 $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.

Financing activities

The Company raised net proceeds of $4.2 million during the quarter ended March 31, 2023, resulting from the issuance of Common Stock and warrants from the March 2023 public offering.

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

Cash provided by financing activities of $5.7 million for the six months ended June 30, 2023, was the result of $4.2 million of net proceeds received from the issuance of Common Stock and warrants issued in the March 2023 Offering, as well as $1.5 million of net proceeds received from the May 2023 Offering.

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.

Liquidity and Capital Resources

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

As of March 31, 2023, our cash and cash equivalents totaled $8.8 million, and we had an accumulated deficit of $47.8 million.

For the three months ended March 31, 2023, and the year ended December 31, 2022, we used cash of $1.6 million and $8.8 million, respectively, in operations.

As a result of our public offering of Common Stock and warrants to purchase Common Stock in March 2023 for net proceeds of $4.2 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 first quarter of 2024.

As of June 30, 2023, our cash and cash equivalents totaled $8.4 million, and we had an accumulated deficit of $49.5 million.

For the six months ended June 30, 2023, and the year ended December 31, 2022, we used cash of $3.5 million and $8.8 million, respectively, in operations.

As a result of the sales of our Common Stock and warrants to purchase Common Stock in the March 2023 Offering and the May 2023 Offering for net proceeds of $4.2 million and $1.5 million, respectively, our cash balances are expected to fund operations into the second quarter of 2024.

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

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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 and cash equivalents, along with the proceeds from the offering in March 2023, will be sufficient to fund our operating expenses and capital expenditure requirements into the first quarter of 2024.

We believe that our existing cash and cash equivalents, along with the proceeds from the private placement in May 2023, will be sufficient to fund our operating expenses and capital expenditure requirements into the second quarter of 2024.

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.

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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