What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-15 · 54 added, 22 removed, 201 unchanged (27% of the section changed)

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our ability to adequately support organizational and business growth;

other factors discussed in our most recent Annual Report on Form 10-K.

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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market size of approximately 30 million diagnosed patients.

We recently initiated a Phase 3 program of DMT310 in moderate-to-severe acne and began enrolling patients in the first of two identical Phase 3 studies in December of 2023.

We recently initiated a Phase 3 program of DMT310 in moderate-to-severe acne.

Both studies will be double-blinded, randomized, placebo-controlled, and enroll about 550 patients, age 9 years or older across sites in the United States and Latin America.

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The second Phase 3 study will be followed by a long-term extension study.

We expect to have top-line results from the first Phase 3 study in the first quarter of 2025.

We recently announced enrollment of 50% of the total expected patients in the STAR-1 study and we expect to have top-line results from the first Phase 3 study in the first quarter of 2025.

Previously, DMT310 has shown its 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 DMT310 achieving 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 IGA).

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

Our net losses were $3.1 million and $2.2 million for the three months ended March 31, 2024, and 2023, respectively, and as of March 31, 2024, we had an accumulated deficit of $56.5 million.

Our net losses were $2.8 million and $1.7 million for the three months ended June 30, 2024, and 2023, respectively, and our net losses were $6.0 million and $3.9 million for the six months ended June 30, 2024, and 2023, respectively.

As of June 30, 2024, we had an accumulated deficit of $59.4 million.

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

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Recent Developments

In December 2023, we began enrolling patients in the first of two Phase 3 clinical trials of DMT310 in moderate-to-severe acne.

We are currently on track to complete enrollment of the first Phase 3, referred to as STAR-1, by the end of 2024 with top-line results from the first Phase 3 trial in Q1 2025.

In July 2024, we reached the 50% patient enrollment milestone in the first of two Phase 3 clinical trials of DMT310 in moderate-to-severe acne.

We expect to receive top-line results from the first Phase 3 trial, referred to as STAR-1, in the first quarter of 2025.

Both Phase 3 studies will be double-blinded, randomized, placebo-controlled, and enroll about 550 patients, age 9 years or older across sites in the United States and Latin America.

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Results of Operations

Three Months Ended March 31, 2024, and 2023

Three Months Ended June 30, 2024, and 2023

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

Three Months Ended March 31,

Three Months Ended June 30,

Operating expenses:

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$ (1,701,364 )

$ (1,127,742 )

Research and Development Expenses

Research and development expenses increased by $0.4 million from $1.2 million for the three months ended March 31, 2023, to $1.6 million for the three months ended March 31, 2024.

The increase in research and development expenses from the first quarter of 2024 as compared the same period in 2023 resulted from $0.7 million of increased clinical expenses from the DMT310 STAR-1 acne study initiated in late 2023, and $0.2 million of increased stock-based compensation expense, offset by $0.3 million of decreased non-clinical expenses and $0.2 million of decreased chemistry, manufacturing, and controls, or CMC, expenses.

Research and development expenses increased by $1.2 million from $0.8 million for the three months ended June 30, 2023, to $2.0 million for the three months ended June 30, 2024.

The increase in research and development expenses from the second quarter of 2024 as compared the same period in 2023 resulted from $1.5 million of increased clinical expenses from the DMT310 STAR-1 acne study initiated in late 2023, offset by $0.3 million of decreased chemistry, manufacturing, and controls, or CMC, expenses.

General and Administrative Expenses

General and administrative expenses increased by $0.5 million from $1.1 million for the three months ended March 31, 2023, to $1.6 million for the three months ended March 31, 2024.

The increase in general and administrative costs resulted from $0.3 million of increased stock-based compensation expense and $0.2 million of increased public company costs, related primarily to audit fees.

General and administrative expenses were $0.9 million for the three months ended June 30, 2024, and 2023.

Decreases in stock-based compensation expense and insurance expenses were offset by increases in public company costs for the three months ended June 30, 2024, as compared to the same period in 2023.

Other Income and Expenses

Other income and expenses increased by $31,758 from $37,540 for the three months ended March 31, 2023, to $69,298 for the three months ended March 31, 2024.

Other income and expenses increased by $23,586 from $31,050 for the three months ended June 30, 2023, to $54,634 for the three months ended June 30, 2024.

The increase in interest income resulted from interest rate increases.

Six Months Ended June 30, 2024, and 2023

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

Six Months Ended June 30,

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income and expenses:

Interest expense, net

$ (5,963,368 )

$ (3,941,506 )

$ (2,021,862 )

Research and Development Expenses

Research and development expenses increased by $1.6 million from $2.0 million for the six months ended June 30, 2023, to $3.6 million for the six months ended June 30, 2024.

The increase in research and development expenses from the second quarter of 2024 as compared the same period in 2023 resulted from $2.2 million of increased clinical expenses from the DMT310 STAR-1 acne study initiated in late 2023 as well as $0.2 million of increased employee costs, including stock-based compensation, primarily offset by $0.5 million of decreased chemistry, manufacturing, and controls, or CMC, expenses and $0.3 million of decreased non-clinical expenses.

General and Administrative Expenses

General and administrative expenses increased by $0.5 million from $2.0 million for the six months ended June 30, 2023, to $2.5 million for the six months ended June 30, 2024.

This increase resulted from $0.4 million of increased audit fees as well as $0.2 million of increased stock-based compensation, offset by $0.1 million of decreased insurance costs.

Other Income and Expenses

Other income and expenses increased by $55,344 from $68,590 for the six months ended June 30, 2023, to $123,934 for the six months ended June 30, 2024.

The increase in interest income resulted from interest rate increases.

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

Three Months Ended

Six Months Ended June 30,

Statements of cash flows data:

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Operating activities

Cash and cash equivalents used in operations of $2.7 million for the three months ended March 31, 2024, was the result of the net loss of $3.1 million, offset by $0.6 million in non-cash stock-based compensation expense, a decrease in prepaid expenses and other current assets of $0.1 million, and decreases in accounts payable and accrued and other current liabilities of $0.3 million.

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 $4.8 million for the six months ended June 30, 2024, was the result of the net loss of $6.0 million and a decrease in accrued and other current liabilities of $0.2 million, offset by increases in non-cash stock-based compensation of $0.6 million, increases in accounts payable of $0.4 million, and a decrease in prepaid expenses and other current assets of $0.4 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 and a decrease in accounts payable and other accrued liabilities of $0.2 million, offset by non-cash stock-based compensation of $0.3 million, as well as 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 have any financing activities during the three months ended March 31, 2024.

Cash provided by financing activities of $2.3 million for the six months ended June 30, 2024, was the result of the May 2024 Warrant Inducement financing which raised gross process of $2.7 million offset by approximately $0.4 million of financing-related expenses.

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.

Liquidity and Capital Resources

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

As of March 31, 2024, our cash and cash equivalents totaled $4.7 million, and we had an accumulated deficit of $56.5 million.

For the three months ended March 31, 2024, and the year ended December 31, 2023, we used cash of $2.7 million and $6.4 million, respectively, in operations.

We expect our cash resources to fund operations into the third quarter of 2024.

As of June 30, 2024, our cash and cash equivalents totaled $4.9 million, and we had an accumulated deficit of $59.4 million.

For the six months ended June 30, 2024, and the year ended December 31, 2023, we used cash of $4.8 million and $6.4 million, respectively, in operations.

We expect our cash resources to fund operations into the fourth quarter of 2024.

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

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As a publicly traded company, we will incur significant legal, accounting, and other expenses that we were not required to incur as a private company.

In addition, the Sarbanes-Oxley Act of 2002, as well as rules adopted by the Securities and Exchange Commission, or SEC, and Nasdaq, requires public companies to implement specified corporate governance practices that were not applicable to us as a private company.

In addition, the Sarbanes-Oxley Act of 2002, as well as rules adopted by the Securities and Exchange Commission (the “SEC”), and Nasdaq, requires public companies to implement specified corporate governance practices that were not applicable to us as a private company.

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 will be sufficient to fund our operating expenses and capital expenditure requirements into the third quarter of 2024.

We believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the fourth 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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In such an event, the terms of these securities may include liquidation or other preferences that adversely affect the rights of the holders of our Common Stock.

On June 7, 2024, we entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C.

Wainwright & Co., LLC (the “Sales Agent”) providing for the sale of up to $1,157,761 of our shares of common stock as set forth in the ATM Agreement.

The Sales Agent will be entitled to compensation at a fixed commission rate of 3.0% of the gross sales price of the shares of common stock sold pursuant to the ATM Agreement, as well as other transactional fees.

During the quarter ended June 30, 2024, we did not sell any shares under the ATM Agreement.

From July 1, 2024, through the date of this report, we issued 355,806 shares of common stock under the ATM Agreement resulting in net proceeds of $1,120,181 after deducting issuance costs of $37,067.

After issuance of the 355,806 shares during July 2024, $513 remained registered under the ATM Agreement.

On August 2, 2024, we increased the maximum aggregate offering price of the shares of our common stock issuable under the ATM Agreement by $505,000, from $1,157,761 to $1,662,761.

Because of the numerous risks and uncertainties associated with research, development, and commercialization of pharmaceutical drugs, we are unable to estimate the exact amount of our working capital requirements.

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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