What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-12 compared with 2021-08-10 · 42 added, 36 removed, 141 unchanged (36% of the section changed)

13 unchanged sentences

We recently completed a 13-week preclinical toxicology study on the final formulation of ADAIR that showed no safety findings of concern.

We are currently conducting a pivotal intranasal abuse study which we expect to complete by the end of 2021.

We are currently conducting the SEAL Study, a pivotal intranasal abuse study;

we expect the final patient visit and completion of treatment to occur in the first quarter of 2022.

In January 2020, we entered into a license agreement with Medice, which grants Medice an exclusive license to develop, use, manufacture, market and sell ADAIR throughout Europe.

1 unchanged sentence

We are also entitled to low-double digit tiered royalties on net sales of ADAIR.

In addition to ADAIR, we have begun formulation development work on our second product candidate, ADMIR, an abuse deterrent formulation of methylphenidate (Ritalin®), for the treatment of ADHD.

In addition to ADAIR, we have completed formulation development work and selected the final formulation of our second product candidate, ADMIR, an abuse deterrent formulation of methylphenidate (Ritalin®), for the treatment of ADHD.

We also plan to utilize the Section 505(b)(2) regulatory pathway for registration of ADMIR .

1 unchanged sentence

The global COVID-19 pandemic continues to present uncertainty and unforeseeable new risks to our operations and business plan.

We have closely monitored recent COVID-19 developments, including states’ lifting COVID-19 safety measures, drop in vaccination rates, and spread of various coronavirus strains such as the Delta variant.

We have closely monitored recent COVID-19 developments, including the lifting of COVID-19 safety measures, the drop in vaccination rates, the implementation of, and reaction to, vaccine mandates, the spread of various coronavirus strains such as the Delta variant, and supply chain and labor shortages.

In light of these developments, the full impact of the COVID-19 pandemic on our business, operations and clinical development plans remains uncertain and will vary depending on the pandemic’s future impact on our clinical trial enrollment, clinical trial sites, CROs, third-party manufacturers, and other third parties with whom we do business, as well as any legal or regulatory consequences resulting therefrom.

To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel and with most of our employees and consultants working remotely.

We will continue to actively monitor the COVID-19 outbreak and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business.

We will continue to actively monitor the COVID-19 pandemic and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business.

Financial Operations Overview

1 unchanged sentence

To date, we have not generated any revenue from the sale of any products, and we do not expect to generate significant revenues unless or until we obtain regulatory approval of and commercialize ADAIR.

Substantially all of our revenue to date has been generated by the Medice license agreement from which we received a $0.1 million license fee during the six months ended June 30, 2020.

Substantially all of our revenue to date has been generated by the Medice license agreement from which we received a $0.1 million license fee during the nine months ended September 30, 2020.

We do not expect to generate any additional revenue from the Medice license agreement in the near future.

29 unchanged sentences

Upon the conversion of the 2021 Convertible Notes to common stock at the closing of the IPO, the embedded derivative liability was remeasured and removed from the balance sheet.

Interest (Income) Expense, net

Interest (income) expense consists of interest earned on our cash and cash equivalents held with institutional banks and interest expense is primarily related to our finance lease of equipment utilized in the commercial scale manufacturing of ADAIR.

Interest Expense, net

Interest expense, net, consists of interest earned on our cash, cash equivalents and marketable securities held with institutional banks, the amortization of discounts and accretion of premiums on marketable securities and interest expense on our finance lease of equipment utilized in the commercial scale manufacturing of ADAIR.

Results of Operations

Comparison of the Three Months Ended June 30, 2021 and 2020

Comparison of the Three Months Ended September 30, 2021 and 2020

The following table summarizes the results of our operations for the periods indicated (in thousands):

Three Months Ended June 30,

Three Months Ended

September 30,

License revenue-from related party $ — $ —

7 unchanged sentences

Research and Development Expenses

Research and development expenses were $1.2 million and $0.8 million for the three months ended June 30, 2021 and 2020, respectively.

The $0.4 million increase in research and development expenses was primarily due to an increase of $0.5 million in expenses related to the registration development program of ADAIR offset by a decrease of $0.1 million in expenses related to the formulation work for ADMIR.

Research and development expenses were $0.2 million and $0.7 million for the three months ended September 30, 2021 and 2020, respectively.

The $0.5 million decrease in research and development expenses was primarily due to a decrease of $0.5 million in expenses related to the registration development program of ADAIR.

General and Administrative Expenses

General and administrative expenses were $1.1 million and $0.3 million for the three months ended June 30, 2021 and 2020, respectively.

General and administrative expenses were $1.0 million and $0.3 million for the three months ended September 30, 2021 and 2020, respectively.

The $0.7 million increase was primarily related to increased costs for directors and officers insurance of $0.4 million, personnel expenses, including stock compensation, of $0.2 million, and public company expenses of $0.1 million.

Interest Expense, net

Interest expense, net was $2,000 and $12,000 for the three months ended June 30, 2021 and 2020, respectively.

Comparison of the Six Months Ended June 30, 2021 and 2020

Interest expense, net, was $4,000 and $12,000 for the three months ended September 30, 2021 and 2020, respectively.

Comparison of the Nine Months Ended September 30, 2021 and 2020

The following table summarizes the results of our operations for the periods indicated (in thousands):

Six Months Ended June 30,

Nine Months Ended

September 30,

License revenue-from related party $ — $ 100

9 unchanged sentences

License Revenue – From Related Party

Licensing revenues were $0.1 million for the six months ended June 30, 2020 as a result of the upfront payment received under the terms of the Medice license agreement.

No licensing revenues were recognized during the six months ended June 30, 2021.

Licensing revenues were $0.1 million for the nine months ended September 30, 2020 as a result of the upfront payment received under the terms of the Medice license agreement.

No licensing revenues were recognized during the nine months ended September 30, 2021.

Research and Development Expenses

Research and development expenses were $3.0 million and $1.7 million for the six months ended June 30, 2021 and 2020, respectively.

Research and development expenses were $3.2 million and $2.4 million for the nine months ended September 30, 2021 and 2020, respectively.

The $0.8 million increase in research and development expenses was primarily due to increases of $0.9 million in expenses related to the registration development program of ADAIR offset by a decrease of $0.1 million in expenses related to the formulation work for ADMIR.

General and Administrative Expenses

General and administrative expenses were $1.9 million and $0.7 million for the six months ended June 30, 2021 and 2020, respectively.

General and administrative expenses were $3.0 million and $1.0 million for the nine months ended September 30, 2021 and 2020, respectively.

The $2.0 million increase was primarily related to increased costs for directors and officers insurance of $1.0 million, personnel expense, including non-cash stock compensation, of $0.6 million, and public company expenses of $0.3 million.

3 unchanged sentences

Revaluation of Derivative Liability

During the six months ended June 30, 2021, pursuant to ASC-815, we revalued the embedded derivative liability associated with the 2021 Convertible Notes, resulting in $89,000 in the fair value of the derivative liability associated with the 2021 Convertible Notes.

During the nine months ended September 30, 2021, pursuant to ASC-815, we revalued the embedded derivative liability associated with the 2021 Convertible Notes, resulting in an $89,000 decrease in the fair value of the derivative liability associated with the 2021 Convertible Notes.

Interest Expense, net

Interest expense, net was $10,000 and $13,000 for the six months ended June 30, 2021 and 2020, respectively.

Interest expense, net, was $14,000 and $25,000 for the nine months ended September 30, 2021 and 2020, respectively.

Liquidity and Capital Resources

Since inception, we have incurred losses and expect to continue to incur losses for the foreseeable future.

We incurred net losses of $4.9 million and $2.3 million for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, we had an accumulated deficit of $17.5 million.

We incurred net losses of $6.2 million and $3.4 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, we had an accumulated deficit of $18.8 million.

We have financed our working capital requirements to date through the issuance of common stock, convertible notes, short-term promissory notes, and a PPP promissory note.

As of June 30, 2021, we had $10.5 million in cash and cash equivalents.

As of September 30, 2021, we had $5.9 million in cash and cash equivalents.

The following table summarizes our cash flows for the periods indicated (in thousands):

Six Months Ended June 30,

Nine Months Ended

September 30,

Net cash provided by (used in):

4 unchanged sentences

Cash Flows from Operating Activities

For the six months ended June 30, 2021 and 2020, $5.4 million and $1.8 million were used in operating activities, respectively.

The $3.6 million increase was primarily due to a $2.6 million increase in our net loss as well as increases in prepaid expenses, accounts payable and accrued expenses of $1.3 million, offset by $0.2 million increase in non-cash stock compensation expense.

For the nine months ended September 30, 2021 and 2020, $6.7 million and $2.9 million were used in operating activities, respectively.

The $3.8 million increase was primarily due to a $2.8 million increase in our net loss as well as increases in accounts payable and accrued expenses of $1.4 million, offset by a $0.1 million decrease in prepaid expenses and a $0.3 million increase in non-cash stock compensation expense.

Cash Flows from Investing Activities

Net cash used in investing activities was $2,000 for the six months ended June 30, 2020, which was related to the purchase of computer equipment.

Net cash used in investing activities was $3.2 million for the nine months ended September 30, 2021, which was related to the purchase of marketable securities.

Net cash used in investing activities was $2,000 for the nine months ended September 30, 2020, which was related to the purchase of computer equipment.

Cash Flows from Financing Activities

Net cash provided by financing activities was $14,000 during the six-month period ended June 30, 2020, which was related to proceeds received from a PPP note of $61,000 offset by payments related to our finance lease of $47,000.

Net cash provided by financing activities was $15.8 million for the six months ended June 30, 2021 and was primarily related to the net proceeds from our IPO and 2021 Convertible Notes financings.

Net cash provided by financing activities was $3,000 during the nine-month period ended September 30, 2020, which was related to proceeds received from a PPP note of $61,000, offset by payments related to our finance lease of $58,000.

Net cash provided by financing activities was $15.8 million for the nine months ended September 30, 2021 and was primarily related to the net proceeds from our IPO and 2021 Convertible Notes financings.

2021 Convertible Note Financing

6 unchanged sentences

Although it is difficult to predict future liquidity requirements, we expect that our existing cash and cash equivalents will provide funding for our ongoing business activities into the third quarter of 2022.

however, we have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect therefore there is substantial doubt about our ability to continue as a going concern.

We expect to continue to incur significant and increasing operating losses at least for the

foreseeable future.

Substantial additional financing will be required by the Company to fund its research and development activities.

No assurance can be given that any such financing will be available when needed or that the Company’s research and development efforts will be successful.

If the we are not able to obtain additional financing on acceptable terms and in the amounts necessary to fully fund our future operating requirements, we may be forced to reduce or discontinue our operations entirely.

Therefore, there is substantial doubt about our ability to continue as a going concern.

We expect to continue to incur significant and increasing operating losses at least for the foreseeable future.

We do not expect to generate product revenue unless and until we successfully complete development, obtain regulatory approval for, and successfully commercialize ADAIR, or any other future products, including ADMIR.

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The Company’s critical accounting policies are described in Note B, “Summary of Significant Accounting Policies,” in the Company’s Annual Report on Form 10-K filed with the SEC on March 29, 2021.

There have been no material changes to the significant accounting policies during the six months ended June 30, 2021, except for items mentioned in Note 3 of the unaudited interim financial statements in this Quarterly Report on Form 10-Q.

There have been no material changes to the significant accounting policies during the nine months ended September 30, 2021, except for items mentioned in Note 3 of the unaudited interim financial statements in this Quarterly Report on Form 10-Q.

Emerging Growth Company Status

6 unchanged sentences

We have taken advantage of reduced reporting requirements in this report and may continue to do so until such time that we are no longer an emerging growth company.

following the fifth anniversary of the completion of the our IPO, (c) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (d) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

We will remain an “emerging growth company” until the earliest of (a) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more, (b) December 31, 2026, the last day of the fiscal year following the fifth anniversary of the completion of the our IPO, (c) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (d) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards.

3 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