RELMADA THERAPEUTICS, INC. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________________ to ___________________________ Commission File Number: 000- 55347 RELMADA THERAPEUTICS, INC. (Exact name of registrant as specified in its charter) Nevada 45-5401931 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 2222 Ponce de Leon , Floor 3 Coral Gables , FL 33134 (Address of Principal Executive Offices) (Zip Code) (786) 629-1376 (Registrant’s Telephone Number, Including Area Code) N/A (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common stock, $0.001 par value per share RLMD The NASDAQ Global Select Market Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No As of November 10, 2021, there were 17,530,830 shares of common stock, $0.001 par value per share, outstanding. Relmada Therapeutics, Inc. Index Page Number PART I - FINANCIAL INFORMATION Item 1. Unaudited Condensed Consolidated Financial Statements 1 Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020 1 Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 2 Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2021 and 2020 3 Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 4 Notes to Unaudited Condensed Consolidated Financial Statements 5 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation 17 Item 3. Quantitative and Qualitative Disclosures About Market Risk 26 Item 4. Controls and Procedures 26 PART II - OTHER INFORMATION Item 1. Legal Proceedings 27 Item 1A. Risk Factors 27 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27 Item 3. Defaults Upon Senior Securities 27 Item 4. Mine Safety Disclosures 27 Item 5. Other Information 27 Item 6. Exhibits 28 SIGNATURES 29 i PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Relmada Therapeutics, Inc. Condensed Consolidated Balance Sheets As of September 30, As of 2021 (Unaudited) December 31, 2020 Assets Current assets: Cash and cash equivalents $ 11,449,294 $ 2,495,397 Short-term investments 76,637,802 114,595,525 Lease payments receivable – short term 84,592 79,457 Prepaid expenses 2,715,478 903,190 Total current assets 90,887,166 118,073,569 Fixed assets, net of accumulated depreciation - 1,258 Other assets 25,000 25,000 Lease payments receivable – long term 22,275 86,377 Total assets $ 90,934,441 $ 118,186,204 Commitments and Contingencies (See Note 8) Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 12,708,546 $ 8,346,475 Accrued expenses 5,538,804 4,256,983 Total current liabilities 18,247,350 12,603,458 Stockholders’ Equity: Preferred stock, $ 0.001 par value, 200,000,000 shares authorized, none issued and outstanding - - Class A convertible preferred 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, 17,501,554 and 16,332,939 shares issued and outstanding, respectively 17,502 16,333 Additional paid-in capital 343,358,208 284,881,716 Accumulated deficit ( 270,688,619 ) ( 179,315,303 ) Total stockholders’ equity 72,687,091 105,582,746 Total liabilities and stockholders’ equity $ 90,934,441 $ 118,186,204 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 1 Relmada Therapeutics, Inc. Condensed Consolidated Statements of Operations (Unaudited) Three months ended Nine months ended September 30, September 30, 2021 2020 2021 2020 Operating expenses: Research and development $ 33,993,974 $ 11,237,186 $ 65,347,708 $ 21,068,923 General and administrative 8,659,661 5,946,396 26,173,010 18,846,299 Total operating expenses 42,653,635 17,183,582 91,520,718 39,915,222 Loss from operations ( 42,653,635 ) ( 17,183,582 ) ( 91,520,718 ) ( 39,915,222 ) Other (expenses) income: Interest/investment income, net 297,648 363,300 1,040,429 1,174,957 Realized loss on short-term investments ( 336,949 ) ( 86,171 ) ( 513,328 ) ( 244,972 ) Unrealized gain (loss) on short-term investments 86,745 3,946 ( 379,699 ) 290,973 Total other income - net 47,444 281,075 147,402 1,220,958 Net loss $ ( 42,606,191 ) $ ( 16,902,507 ) $ ( 91,373,316 ) $ ( 38,694,264 ) Loss per common share – basic and diluted $ ( 2.44 ) $ ( 1.05 ) $ ( 5.36 ) $ ( 2.52 ) Weighted average number of common shares outstanding – basic and diluted 17,478,477 16,044,670 17,038,583 15,371,118 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 Relmada Therapeutics, Inc. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) Nine months ended September 30, 2021 Common Stock Additional Paid-in Accumulated Shares Par Value Capital Deficit Total Balance - December 31, 2020 16,332,939 $ 16,333 $ 284,881,716 $ ( 179,315,303 ) $ 105,582,746 Stock based compensation - - 5,851,284 - 5,851,284 Warrant exercised for cash 273,491 273 1,460,233 - 1,460,506 Options exercised for cash 141,625 142 467,631 - 467,773 Net loss - - - ( 22,215,181 ) ( 22,215,181 ) Balance - March 31, 2021 16,748,055 $ 16,748 $ 292,660,864 $ ( 201,530,484 ) $ 91,147,128 Stock based compensation - - 8,268,376 - 8,268,376 Warrant exercised for cash 62,059 62 481,387 - 481,449 Options exercised for cash 7,031 7 49,491 - 49,498 ATM offering, net of offering costs 651,674 652 23,457,398 - 23,458,050 Net loss - - - ( 26,551,944 ) ( 26,551,944 ) Balance - June 30, 2021 17,468,819 $ 17,469 $ 324,917,516 $ ( 228,082,428 ) $ 96,852,557 Warrants issued for license agreement - - 10,241,599 - 10,241,599 Stock based compensation - - 8,013,970 - 8,013,970 Warrant exercised for cash 20,835 21 174,993 - 175,014 Options exercised for cash 11,900 12 52,144 - 52,156 Equity offering costs - - ( 42,014 ) - ( 42,014 ) Net loss - - - ( 42,606,191 ) ( 42,606,191 ) Balance - September 30, 2021 17,501,554 $ 17,502 $ 343,358,208 $ ( 270,688,619 ) $ 72,687,091 Nine months ended September 30, 2020 Common Stock Additional Paid-in Accumulated Shares Par Value Capital Deficit Total Balance - December 31, 2019 14,457,013 $ 14,457 $ 235,522,746 $ ( 119,858,909 ) $ 115,678,294 Stock based compensation - - 5,039,362 - 5,039,362 Warrant exercised for cash 447,107 447 3,041,726 - 3,042,173 Cashless warrant exercise 34,114 34 ( 34 ) - - Options exercised 2,434 3 73,017 - 73,020 Net loss - - - ( 10,673,316 ) ( 10,673,316 ) Balance - March 31, 2020 14,940,668 $ 14,941 $ 243,676,817 $ ( 130,532,225 ) $ 113,159,533 Stock based compensation - - 7,302,513 - 7,302,513 Warrant exercised for cash 368,364 368 2,576,735 - 2,577,103 Cashless warrant exercise 1,840 2 ( 2 ) - - Options exercised 113,281 113 457,510 - 457,623 Equity offering, net 427,700 428 19,854,590 - 19,855,018 Net loss - - - ( 11,118,441 ) ( 11,118,441 ) Balance - June 30, 2020 15,851,853 $ 15,852 $ 273,868,163 $ ( 141,650,666 ) $ 132,233,349 Stock based compensation - - 5,244,658 - 5,244,658 Warrant exercised for cash 214,899 215 1,566,815 - 1,567,030 Cashless warrant exercise 6,521 7 ( 7 ) - - Options exercised 25,781 25 105,850 - 105,875 Cashless option exercised 90,204 90 ( 90 ) - - Equity offering costs - - ( 38,421 ) - ( 38,421 ) Net loss - - - ( 16,902,507 ) ( 16,902,507 ) Balance - September 30, 2020 16,189,258 $ 16,189 $ 280,746,968 $ ( 158,553,173 ) $ 122,209,984 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 Relmada Therapeutics, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) Nine months ended September 30, 2021 2020 Cash flows from operating activities Net loss $ ( 91,373,316 ) $ ( 38,694,264 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 1,258 2,929 Warrants issued for license agreement 10,241,599 - Stock-based compensation 22,133,630 17,586,533 Realized loss on short-term investments 513,328 244,972 Unrealized loss/(gain) on short-term investments 379,699 ( 290,973 ) Change in operating assets and liabilities: Lease payment receivable 58,967 54,242 Prepaid expenses ( 1,812,288 ) ( 1,825,336 ) Accounts payable 4,362,071 205,970 Accrued expenses 1,281,821 1,835,888 Net cash used in operating activities ( 54,213,231 ) ( 20,880,039 ) Cash flows from investing activities Purchase of short-term investments ( 82,476,539 ) ( 88,763,192 ) Sale of short-term investments 119,541,235 53,380,266 Net cash provided by (used in) investing activities 37,064,696 ( 35,382,926 ) Cash flows from financing activities Principal payments of notes payable - ( 110,247 ) Proceeds from issuance of common stock – net 23,416,036 19,816,597 Proceeds from options exercised for common stock 569,427 636,518 Proceeds from warrants exercised for common stock 2,116,969 7,186,306 Net cash provided by financing activities 26,102,432 27,529,174 Net increase /(decrease) in cash and cash equivalents 8,953,897 ( 28,733,791 ) Cash and cash equivalents at beginning of the period 2,495,397 36,278,519 Cash and cash equivalents at end of the period $ 11,449,294 7,544,728 Supplemental disclosure of cash flow information: Cash paid during the period for: Income taxes $ - $ - Interest $ - $ 2,415 Non-cash investing and financing activities: Cashless exercise of warrants for common stock $ - $ 43 Cashless exercise of options for common stock $ - $ 90 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 Relmada Therapeutics, Inc. Notes to Unaudited Consolidated Financial Statements NOTE 1 - BUSINESS Relmada Therapeutics, Inc. (Relmada or the Company) (a Nevada corporation), is a clinical-stage, publicly traded biotechnology company focused on the development of esmethadone (d-methadone, dextromethadone, REL-1017), an N-methyl-D-aspartate (NMDA) receptor antagonist. Esmethadone is a New Chemical Entity (NCE) that potentially addresses areas of high unmet medical need in the treatment of central nervous system (CNS) diseases and other disorders. 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 The accompanying unaudited condensed 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) for interim unaudited condensed consolidated financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. The unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited condensed consolidated financial statements of the Company for the year ended December 31, 2020 and notes thereto contained in the Company’s Annual Report on Form 10-K. Liquidity As shown in the accompanying financial statements, the Company incurred negative operating cash flows of $ 54,213,231 for the nine months ended September 30, 2021 and has an accumulated deficit of $ 270,688,619 from inception through September 30, 2021. At September 30, 2021, the Company had cash and short term investments of $ 88,087,096 . Relmada has funded its past operations through equity raises and most recently in 2021 raised net proceeds from the sale of common stock of $ 23,416,036 through our ATM offering and $ 2,116,969 through the exercise of warrants. The Company also raised an additional $ 569,427 during the nine months ended September 30, 2021 from the exercises of options. 5 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Management believes that the Company’s existing cash and cash equivalents will enable it to fund operating expenses and capital expenditure requirements for at least 12 months from the issuance of these unaudited condensed consolidated quarterly financial statements. Beyond that point management will evaluate the size and scope of any subsequent trials that will affect the timing of additional financings through public or private sales of equity or debt securities or from bank or other loans or through strategic collaboration and/or licensing agreements. Any such expenditures related to any subsequent trials will not be incurred until such additional financing is raised. Further, additional financing related to subsequent trials does not affect the Company’s conclusion that based on the cash on hand and the budgeted cash flow requirements, the Company has sufficient funds to maintain operations for at least 12 months from the issuance of these consolidated financial statements. Principles of Consolidation The unaudited condensed 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. Risks and Uncertainties The ongoing pandemic may adversely affect our business. Based on the Company’s current assessment, the Company does not expect any material impact on its long-term development timeline and its liquidity due to the worldwide spread of the coronavirus (COVID-19). However, the Company is actively monitoring this situation and the possible effects on its financial condition, liquidity, operations, suppliers, industry, and workforce. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates. The significant estimates are the valuation of research and development expenses, stock-based compensation expenses and deferred tax assets and the related valuation allowance. 6 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Cash and Cash Equivalents The Company considers cash deposits and all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company’s cash deposits are held at two high-credit-quality financial institutions. The Company’s cash deposits at these institutions exceed federally insured limits. Short-term Investments The Company’s investments consist entirely of mutual funds. The securities are measured at fair value based on the net asset value (NAV). The Company adopted Financial Accounting Standards Board (FASB) Accounting Standard Update (ASU) 2016-01, Financial Instruments , which requires substantially all equity investments in nonconsolidated entities to be measured at fair value with recurring changes recognized in earnings, except for those accounted for using equity method accounting. Changes in fair value of the securities are recorded as part of other income on the consolidated statement of operations. Short term investment activity is presented in the investing activities section on the consolidated statement of cash flows. Patents Costs related to filing and pursuing patent applications are recorded as general and administrative expense and expensed as incurred since recoverability of such expenditures is uncertain. Fixed Assets Fixed assets are stated at cost less accumulated depreciation. Fixed assets are comprised of computers and software. Depreciation is calculated using the straight-line method over the estimated useful life of the assets. Computers and software have an estimated useful life of three years . Leases The Company recognizes its leases with a term of greater than a year on the balance sheet by recording right-of-use assets and lease liabilities. Leases can be classified as either operating leases or finance leases. Operating leases will result in straight-line lease expense, while finance leases will result in front-loaded expense. The Company’s lease consists of an operating lease for office space. The Company does not recognize a lease liability or right-of-use asset on the balance sheet for short-term leases. Instead, the Company recognizes short-term lease payments as an expense on a straight-line basis over the lease term. A short-term lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. 7 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fair Value of Financial Instruments The Company’s financial instruments primarily include cash, short term investments, and accounts payable. Due to the short-term nature of cash and accounts payable the carrying amounts of these assets and liabilities approximate their fair value. Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability (an exit price), in an orderly transaction between market participants at the reporting date. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows: Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means. Level 3 Inputs - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). The Company’s short-term investment instruments of $ 76,637,802 at September 30, 2021 consist of mutual funds, bank deposits and money market funds and are classified using Level 1 inputs within the fair value hierarchy because the value is based on quoted prices in active markets. Unrealized gains and losses are recorded in the condensed consolidated statement of operations under other income. The Company recorded an unrealized gain/(loss) of $ 86,745 and $( 379,699 ) included in other income for the three and nine months ended September 30, 2021, respectively. The Company recorded an unrealized gain of $ 3,946 and $ 290,973 included in other income for the three and nine months ended September 30, 2020, respectively. Income Taxes The Company accounts for income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rate is recognized in income or expense in the period that the change is effective. Tax benefits are recognized when it is probable that the deduction will be sustained. A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will either expire before the Company is able to realize the benefit, or that future deductibility is uncertain. As of September 30, 2021 and December 31, 2020, the Company had recognized a valuation allowance to the full extent of the Company’s net deferred tax assets since the likelihood of realization of the benefit does not meet the more likely than not threshold. The Company files a U.S. Federal income tax return and various state returns. Uncertain tax positions taken on the Company’s tax returns will be accounted for as liabilities for unrecognized tax benefits. The Company will recognize interest and penalties, if any, related to unrecognized tax benefits in general and administrative expenses in the statements of operations. There were no liabilities recorded for uncertain tax positions at September 30, 2021 and December 31, 2020. The open tax years, subject to potential examination by the applicable taxing authority, for the Company are from June 30, 2018 forward. 8 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Research and Development Research and development costs primarily consist of research contracts for the advancement of product development, salaries and benefits, stock-based compensation, and consultants. The Company expenses all research and development costs in the period incurred. The Company makes an estimate of costs in relation to clinical study contracts. The Company analyzes the progress of studies, including the progress of clinical studies, invoices received and contracted costs when evaluating the adequacy of the amount expensed and the related prepaid asset and accrued liability. Stock-Based Compensation The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award - the requisite service period. The grant-date fair value of employee share options is estimated using the Black-Scholes option pricing model adjusted for the unique characteristics of those instruments. Net Loss per Common Share Basic loss per common share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted loss per common share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of options and warrants to purchase common stock. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position. For the nine months ended September 30, 2021 and 2020, the potentially dilutive securities that would be anti-dilutive due to the Company’s net loss are not included in the calculation of diluted net loss per share attributable to common stockholders. The anti-dilutive securities are as follows (in common stock equivalent shares): Nine months ended September 30, 2021 September 30, 2020 Stock options 5,043,931 4,110,425 Common stock warrants 3,244,248 2,674,265 Total 8,288,179 6,784,690 Recent Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes , which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this standard effective January 1, 2021 and the standard did not have a significant impact on our condensed consolidated financial statements. In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) . ASU 2021-04 outlines how an entity should account for modifications made to equity-classified written call options, including stock options and warrants to purchase the entity’s own common stock. The guidance in the ASU requires an entity to treat a modification of an equity-classified written call options that does not cause the option to become liability-classified as an exchange of the original option for a new option. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the equity-classified written call option or as termination of the original option and issuance of a new option. The guidance is effective prospectively for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, including in an interim period as of the beginning of the fiscal year that includes that interim period. The Company is currently in the process of evaluating the impact of this new guidance on the condensed consolidated financial statements and the related disclosures. 9 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Subsequent Events The Company’s management reviewed all material events through the date the financial statements were issued for subsequent event disclosure consideration. NOTE 3 - PREPAID EXPENSES Prepaid expenses consisted of the following (rounded to nearest $00): September 30, 2021 December 31, 2020 Insurance $ 542,000 $ 527,600 Research and Development 2,025,600 291,800 Legal 11,000 11,000 Other 136,900 72,800 Total $ 2,715,500 $ 903,200 NOTE 4 - FIXED ASSETS Fixed assets, net of accumulated depreciation, consisted of the following (rounded to nearest $00): Useful lives September 30, 2021 December 31, 2020 Computer and Software 3 years $ 16,700 $ 16,700 Less: accumulated depreciation ( 16,700 ) ( 15,400 ) Fixed Assets $ - $ 1,300 For the nine months ended September 30, 2021 and 2020, the Company recognized depreciation expense of approximately $ 1,258 and $ 2,929 , respectively. NOTE 5 - ACCRUED EXPENSES Accrued expenses consisted of the following (rounded to nearest $ 00 ): September 30, 2021 December 31, 2020 Research and development $ 3,977,500 $ 2,183,800 Professional fees 174,200 150,900 Accrued bonus 867,000 1,444,900 Accrued vacation 413,500 351,200 Other 106,600 126,200 Total $ 5,538,800 $ 4,257,000 10 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 6 - STOCKHOLDERS’ EQUITY Common Stock During the nine months ended September 30, 2021, the Company issued 356,385 shares of common stock for cash exercises of warrants for proceeds of $ 2,116,969 . During the nine months ended September 30, 2021, the Company issued 160,556 shares of common stock for the exercise of options for proceeds of $ 569,427 . On May 15, 2020, the Company entered into an Open Market Sale Agreement with Jefferies LLC, as sales agent (“Jefferies”), pursuant to which the Company may offer and sell, from time to time, through Jefferies, shares of the Company’s common stock, having an aggregate offering price of up to $ 75,000,000 . The Company is not obligated to sell any shares under the agreement. During the nine months ended September 30, 2021, the Company issued 651,674 shares of common stock for net cash proceeds of $ 23,416,036 under the agreement. During the nine months ended September 30, 2020, the Company issued shares of common stock for net cash proceeds of $ 19,816,597 . Options and Warrants In December 2014, the Board of Directors adopted and the Company’s shareholders approved Relmada’s 2014 Stock Option and Equity Incentive Plan, as amended (the “Plan”), which allows for the granting of common stock awards, stock appreciation rights, and incentive and nonqualified stock options to purchase shares of the Company’s common stock to designated employees, non-employee directors, and consultants and advisors. In May 2021, the Company’s shareholders approved Relmada’s Board of Director approved 2021 Equity Incentive Plan which allows for the granting of 1,500,000 options or stock awards. These combined plans allow for the granting of up to 6,652,942 options or stock awards. Stock options are exercisable generally for a period of 10 years from the date of grant and generally vest over four years . As of September 30, 2021, 1,609,011 shares were available for future grants under the Plan. As of September 30, 2021, no stock appreciation rights have been issued. The Company utilizes the Black-Scholes option pricing model to estimate the fair value of stock options and warrants. The risk-free interest rate assumptions were based upon the observed interest rates appropriate for the expected term of the equity instruments. The expected dividend yield was assumed to be zero as the Company has not paid any dividends since its inception and does not anticipate paying dividends in the foreseeable future. The expected volatility was based on historical volatility. The Company routinely reviews its calculation of volatility changes in future volatility, the Company’s life cycle, its peer group, and other factors. The Company uses the simplified method for share-based compensation to estimate the expected term for equity awards for share-based compensation in its option-pricing model. On January 6, 2021, the Company awarded a total of 1,490,000 options to employees and directors with an exercise price of $ 33.43 and a 10 -year term vesting over a 4 -year period. The options granted include time based vesting grants and performance vesting based on the Company’s achievement of performance metrics. The options have an aggregate fair value of $ 39.7 million calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 0.59 % (2) expected life of 6.25 years, (3) expected volatility of 101 %, and (4) zero expected dividends. As of September 30, 2021, five performance metrics for 468,000 options were met. Vesting of such options is subject to the passage of time. At September 30, 2021, the Company incurred expense of $ 2,268,562 related to these options. On February 18, 2021, the Company awarded a total of 25,000 options to an employee with an exercise price of $ 35.15 and a 10 -year term, vesting over a 4 -year period. The options have an aggregate fair value of $ 701,000 calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 0.75 % (2) expected life of 6.25 years, (3) expected volatility of 101 %, and (4) zero expected dividends. At September 30, 2021, the Company has unrecognized stock-based compensation expense of approximately $ 67.6 million related to unvested stock options over the weighted average remaining service period of 2.76 years. 11 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 6 - STOCKHOLDERS’ EQUITY (continued) Options A summary of the changes in options during the nine months ended September 30, 2021 is as follows: Number of Options Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding and expected to vest at December 31, 2020 3,905,737 $ 24.32 8.40 $ 48,952,339 Granted 1,515,000 $ 33.46 9.28 $ - Exercised ( 160,556 ) $ 3.56 - $ - Forfeited ( 216,250 ) $ 39.61 - $ - Outstanding at September 30, 2021 5,043,931 $ 27.07 8.18 $ 33,664,009 Options exercisable at September 30, 2021 2,079,396 $ 22.59 7.54 $ 21,827,709 Warrants A summary of the changes in outstanding warrants during the nine months ended September 30, 2021 is as follows: Number of Shares Weighted Average Exercise Price Per Share Outstanding and vested at December 31, 2020 2,670,633 $ 9.11 Granted 930,000 $ 32.21 Exercised ( 356,385 ) $ 5.94 Outstanding at September 30, 2021 3,244,248 $ 16.08 Warrants Vested at September 30, 2021 2,829,873 $ 8.13 12 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 6 - STOCKHOLDERS’ EQUITY (continued) At September 30, 2021, the Company had approximately $ 12.5 million of unrecognized compensation expense related to outstanding warrants. On January 6, 2021, the Company awarded a total of 400,000 warrants to consultants with an exercise price of $ 33.43 and a 10 -year term, vesting over 4 -year period. The warrants granted include time based vesting grants and performance vesting based on the Company’s achievement of performance metrics. The warrants have an aggregate fair value of $ 10.6 million calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 0.59 % (2) expected life of 6.25 years, (3) expected volatility of 101 %, and (4) zero expected dividends. As of September 30, 2021, five performance metrics for 180,000 warrants were met. Vesting of such options is subject to the passage of time. At September 30, 2021, the Company incurred expense of $ 872,524 related to these warrants. On June 18, 2021, the Company awarded a total of 10,000 warrants to a consultant with an exercise price of $ 30.90 and a 5 -year term, vesting over a 1 -year period. The warrants granted are time based vesting. The warrants have an aggregate fair value of $ 190,401 calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 0.47 % (2) expected life of 3.00 years, (3) expected volatility of 100 %, and (4) zero expected dividends. On June 25, 2021, the Company awarded a total of 10,000 warrants to a consultant with an exercise price of $ 34.35 and a 5 -year term, vesting over a 1 -year period. The warrants granted are time based vesting. The warrants have an aggregate fair value of $ 211,653 calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 0.43 % (2) expected life of 3.00 years, (3) expected volatility of 100 %, and (4) zero expected dividends. On July 12, 2021, the Company awarded a total of 10,000 warrants to a consultant with an exercise price of $ 34.77 and a 5 -year term, vesting over a 1 -year period. The warrants granted are time based vesting. The warrants have an aggregate fair value of $ 212,219 calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 0.43 % (2) expected life of 3.00 years, (3) expected volatility of 99 %, and (4) zero expected dividends. On July 16, 2021, the Company awarded a total of 500,000 warrants to Arbormentis, LLC with an exercise price of $ 31.17 and a 7 -year term, vesting immediately. The warrants have an aggregate fair value of $ 10,241,599 calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 0.48 % (2) expected life of 3.50 years, (3) expected volatility of 101 %, and (4) zero expected dividends. At September 30, 2021, the aggregate intrinsic value of warrants vested and outstanding was approximately $ 40.0 million and $ 40.1 million, respectively. At December 31, 2020, the aggregate intrinsic value of warrants vested and outstanding was approximately $ 61.0 million and $ 61.2 million, respectively. The following table summarizes the components of stock-based compensation expense which includes stock options and warrants in the unaudited consolidated statements of operations for the nine months ended September 30, 2021 and 2020 (rounded to nearest $00): Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020 Research and development $ 14,341,700 $ 4,635,300 General and administrative 18,033,500 12,951,200 Total $ 32,375,200 $ 17,586,500 13 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 7 - RELATED PARTY TRANSACTIONS Effective March 6, 2020, Dr. Ottavio Vitolo, the Company’s Chief Medical Officer and Head of Research and Development, entered into a Separation and Severance Agreement with the Company. Pursuant to the terms of the agreement, the Company agreed to pay Dr. Vitolo severance of $ 200,000 in accordance with his employment contract. In addition, Dr. Vitolo’s options granted under the Company’s 2014 Stock Option and Equity Incentive Plan continued to vest until September 6, 2020. Dr. Vitolo had until March 6, 2021 to exercise his vested options and he was allowed to use a cashless exercise provision to exercise his vested options. On March 6, 2021, the remaining vested options were forfeited. The agreement also contains customary confidentiality, release, and non-disparagement provisions, and the Company agreed to pay accrued and unpaid salary, vacation time and attorney’s fees totaling approximately $ 45,000 . Effective December 31, 2020, Dr. Thomas Wessel, the Company’s Executive Vice President, Head of Research and Development, entered into a Separation and Severance Agreement with the Company. Pursuant to the terms of the agreement, the Company agreed to pay Dr. Wessel severance of $ 237,500 in accordance with his employment contract. In addition, Dr. Wessel’s options granted under the Company’s 2014 Stock Option and Equity Incentive Plan continue to vest until June 30, 2021. Dr. Wessel shall have until December 31, 2021 to exercise his vested options and he shall be allowed to use a cashless exercise provision to exercise his vested options. The agreement also contains customary confidentiality, release, and non-disparagement provisions, and the Company agreed to pay accrued vacation time totaling approximately $ 28,940 . NOTE 8 - COMMITMENTS AND CONTINGENCIES License Agreements Wonpung On August 20, 2007, the Company entered into a License Development and Commercialization Agreement with Wonpung Mulsan Co, a shareholder of the Company. Wonpung has exclusive territorial rights in countries it selects in Asia to market up to two drugs the Company is currently developing and a right of first refusal (“ROFR”) for up to an additional five drugs that the Company may develop in the future as defined in more detail in the license agreement. If the parties cannot agree to terms of a license agreement then the Company shall be able to engage in discussions with other potential licensors. As of November 12, 2021, no discussions are active between the Company and Wonpung. The Company received an upfront license fee of $ 1,500,000 and will earn royalties of up to 12 % of net sales for up to two licensed products it is currently developing. The licensing terms for the ROFR products are subject to future negotiations and binding arbitration. The terms of each licensing agreement will expire on the earlier of any time from 15 years to 20 years after licensing or on the date of commercial availability of a generic product to such licensed product in the licensed territory. 14 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 8 - COMMITMENTS AND CONTINGENCIES (continued) Third Party Licensor Based upon a prior acquisition, the Company assumed an obligation to pay third parties (Dr. Charles E. Inturrisi and Dr. Paolo Manfredi – see below): (A) royalty payments up to 2% on net sales of licensed products that are not sold by sublicensee and (B) on each and every sublicense earned royalty payment received by licensee from its sublicensee on sales of license product by sublicensee, the higher of (i) 20% of the royalties received by licensee; or (ii) up to 2% of net sales of sublicensee. The Company will also make milestone payments of up to $4 or $2 million, for the first commercial sale of product in the field that has a single active pharmaceutical ingredient, and for the first commercial sale of product in the field of product that has more than one active pharmaceutical ingredient, respectively. As of September 30, 2021, the Company has not generated any revenue related to this license agreement. Inturrisi / Manfredi In January 2018, we entered into an Intellectual Property Assignment Agreement (the Assignment Agreement) and License Agreement (the License Agreement and together with the Assignment Agreement, the Agreements) with Dr. Charles E. Inturrisi and Dr. Paolo Manfredi (collectively, the Licensor). Pursuant to the Agreements, Relmada assigned its existing rights, including patents and patent applications, to d-methadone in the context of psychiatric use (the Existing Invention) to Licensor. Licensor then granted Relmada under the License Agreement a perpetual, worldwide, and exclusive license to commercialize the Existing Invention and certain further inventions regarding d-methadone. In consideration of the rights granted to Relmada under the License Agreement, Relmada paid the Licensor an upfront, non-refundable license fee of $180,000. Additionally, Relmada will pay Licensor $45,000 every three months until the earliest to occur of the following events: (i) the first commercial sale of a licensed product anywhere in the world, (ii) the expiration or invalidation of the last to expire or be invalidated of the patent rights anywhere in the world, or (iii) the termination of the License Agreement. Relmada will also pay Licensor tiered royalties with a maximum rate of 2%, decreasing to 1.75%, and 1.5% in certain circumstances, on net sales of licensed products covered under the License Agreement. Relmada will also pay Licensor tiered payments up to a maximum of 20%, and decreasing to 17.5%, and 15% in certain circumstances, of all consideration received by Relmada for sublicenses granted under the License Agreement. As of September 30, 2021, no events have occurred, and the Company continues to pay Licensor $ 45,000 every three months. Arbormentis, LLC On July 16, 2021, the Company entered into a License Agreement with Arbormentis, LLC, a privately held Delaware limited liability company, by which the Company acquired development and commercial rights to a novel psilocybin and derivate program from Arbormentis, LLC, worldwide excluding the countries of Asia. The Company will collaborate with Arbormentis, LLC on the development of new therapies targeting neurological and psychiatric disorders, leveraging its understanding of neuroplasticity, and focusing on this emerging new class of drugs targeting the neuroplastogen mechanism of action. Under the terms of the License Agreement, the Company paid Arbormentis, LLC an upfront fee of $12.7 million, consisting of a mix of cash and warrants to purchase the Company’s common stock, in addition to potential milestone payments totaling up to approximately $160 million related to pre-specified development and commercialization milestones . Arbormentis, LLC is also eligible to receive a low single digit royalty on net sales of any commercialized therapy resulting from this agreement. The license agreement is terminable by the Company but is perpetual and not terminable by the licensor absent material breach of its terms by the Company. The new licensed program stems from an international collaboration among U.S., European and Swiss scientists that has focused on the discovery and development of compounds that may promote neural plasticity. Dr. Paolo Manfredi, Relmada’s Acting Chief Scientific Officer and co-inventor of REL-1017, and Dr. Marco Pappagallo, Relmada’ s Acting Chief Medical Officer, are among the scientists affiliated with Arbormentis, LLC. Legal From time to time, the Company may become involved in lawsuits and other legal proceedings that arise in the course of business. Litigation is subject to inherent uncertainties, and it is not possible to predict the outcome of litigation with total confidence. The Company is currently not aware of any legal proceedings or potential claims against it whose outcome would be likely, individually or in the aggregate, to have a material adverse effect on the Company’s business, financial condition, operating results, or cash flows. Lawsuit Brought by Previous Employee On July 15, 2020, an employee of the Company filed a Complaint alleging unequal pay based on gender and other employment-based claims. On April 9, 2021, the Company settled this Complaint for an amount immaterial to the consolidated financial statements. 15 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 8 - COMMITMENTS AND CONTINGENCIES (continued) Leases and Sublease On August 1, 2021, the Company relocated its corporate headquarters to 2222 Ponce de Leon, Floor 3, Coral Gables, FL 33134, pursuant to a lease agreement for a period of 4 months. The Company’s previous lease at 880 Third Avenue, 12 th Floor, New York, NY 10022 was terminated as of July 31, 2021. In accordance with ASC 842, Leases , the Company has elected the practical expedient and recognizes rent expense evenly over the 5 months. The monthly rent is approximately $ 11,000 . For the nine months ended September 30, 2021 and 2020, the Company recognized lease expense of approximately $ 87,100 and $ 124,400 , respectively. On June 8, 2017, the Company entered into an Amended and Restated License Agreement with Actinium Pharmaceuticals, Inc. Pursuant to the terms of the agreement, Actinium will continue to license the furniture, fixtures, equipment and tenant improvements located in its office (“FFE”) for a license fee of $7,529 per month until December 8, 2022. Actinium shall have at any time during the term of this agreement the right to purchase the FFE for $496,914, less any previously paid license fees. The license of FFE qualifies as a sales-type lease. At inception, the Company derecognized the underlying assets of $493,452, recognized discounted lease payments receivable of $397,049 using the discount rate of 8.38% and recognized loss on sales-type lease of fixed assets of $96,403. For the nine months ended September 30, 2021 and 2020, the Company recognized lease income of approximately $ 8,800 and $ 13,500 , respectively. As of September 30, 2021, the balance of unearned interest income was approximately $ 6,100 . Contractual Obligations The following tables sets forth our contractual obligations for the next five years and thereafter: Total Less than 1 year 1 - 2 years 3 - 5 years More than 5 years Office lease $ 33,000 $ 33,000 $ - $ - $ - Total obligations $ 33,000 $ 33,000 $ - $ - $ - NOTE 9 - OTHER POST-RETIREMENT BENEFIT PLAN Relmada participates in a multiemployer 401(k) plan that permits eligible employees to contribute funds on a pretax basis subject to maximum allowed under federal tax provisions. The Company matches 100% of the first 3% of employee contributions, plus 50% of employee contributions that exceed 3% but do not exceed 5%. The employees choose an amount from various investment options for both their contributions and the Company’s matching contribution. The Company’s contribution expense was approximately $ 101,100 and $ 58,500 for the nine months ended September 30, 2021 and 2020, respectively. NOTE 10 - SUBSEQUENT EVENTS Subsequent to September 30, 2021, 29,276 outstanding warrants were exercised for total cash proceeds of approximately $ 178,170 . On October 1, 2021, the Company awarded a total of 42,000 warrants to a consultant with an exercise price of $ 26.74 and a 10 -year term, vesting over a 4 -year period. 16 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION FORWARD-LOOKING STATEMENT NOTICE This Quarterly Report on Form 10-Q (this Report) contains forward looking statements that involve risks and uncertainties, principally in the sections entitled “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All statements other than statements of historical fact contained in this Quarterly Report, including statements regarding future events, our future financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk Factors” or elsewhere in this Quarterly Report, which may cause our or our industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this Quarterly Report on Form-10-Q. Before you invest in our securities, you should be aware that the occurrence of the events described in the section entitled “Risk Factors” and elsewhere in this Quarterly Report could negatively affect our business, operating results, financial condition and stock price. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this Quarterly Report on Form-10-Q to conform our statements to actual results or changed expectations. Business Overview Relmada Therapeutics, Inc. (Relmada or the Company, we or us) (a Nevada corporation), is a clinical-stage biotechnology company focused on the development of esmethadone (d-methadone, dextromethadone, REL-1017), an N-methyl-D-aspartate (NMDA) receptor antagonist. Esmethadone is a new chemical entity (NCE) 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, esmethadone, is being developed as a rapidly acting, oral agent for the treatment of depression and other potential indications. On October 15, 2019 we reported top-line data from study REL-1017-202. This was a double-blind, placebo-controlled Phase 2 clinical trial evaluating the safety, tolerability and efficacy of two oral doses of REL-1017, 25 mg once a day and 50 mg once a day, as an adjunctive treatment in patients with major depressive disorder (MDD), who experienced an inadequate response to 1 to 3 treatments with an antidepressant medication. In the REL-1017-202 study, 62 subjects, average age 49.2 years, with an average Hamilton Depression Rating Scale score of 25.3 and an average Montgomery-Asberg Depression Rating Scale (MADRS) score of 34.0 (severe depression), were randomized. Other demographic characteristics were balanced across all arms. After an initial screening period, subjects were randomized to one of three arms: placebo, REL-1017 25 mg or REL-1017 50 mg, in addition to stable background antidepressant therapy. Subjects in the REL-1017 treatment arms received one loading dose of either 75 mg (25 mg arm) or 100 mg (50 mg arm) of REL-1017. Subjects were treated inpatient for 7 days and discharged home at Day 9. They returned for follow-up visits at Day 14 and Day 21. Efficacy was measured on Days 2, 4 and 7 in the dosing period and on Day 14, one week after treatment discontinuation. 61 subjects received all treatment doses and were included in the per-protocol population (PPP) treatment analysis; 57 subjects completed all visits. All 62 randomized subjects were part of the intention-to-treat (ITT) analysis. No differences were observed between the ITT and PPP analyses and results. 17 Key findings: We observed that subjects in both the REL-1017 25 mg and 50 mg treatment groups experienced statistically significant improvement on efficacy measures tested as compared to subjects in the placebo group, including: the Montgomery-Asberg Depression Rating Scale (MADRS); the Clinical Global Impression – Severity (CGI-S) scale; the Clinical Global Impression – Improvement (CGI-I) scale; and the Symptoms of Depression Questionnaire (SDQ). Improvements on the MADRS endpoint appeared on Day 4 in both REL-1017 dose groups and continued through Day 7 and Day 14, seven days after treatment discontinuation, with P values< 0.03 and large effect sizes (a measure of quantifying the difference between two groups), ranging from 0.7 to 1.0. Similar findings emerged from the CGI-S and CGI-I scales. MADRS: Analysis of Change from Baseline to Day 7 and to Day 14 ITT Population Day 2 Day 4 Day 7 Day 14 LS Means Difference P-value d LS Means Difference P-value d LS Means Difference P-value d LS Means Difference P-value d REL-1017 25mg vs Placebo -1.9 0.4340 0.3 -7.9 0.0087 0.9 -8.7 0.0122 0.8 -9.4 0.0103 0.9 REL-1017 50mg vs Placebo -0.3 0.9092 0.0 -7.6 0.0096 0.8 -7.2 0.0308 0.7 -10.4 0.0039 1.0 LS = Least Squares; d = Cohen’s effect size The study also confirmed the tolerability profile of REL-1017, which was observed in the Phase 1 studies. Subjects experienced only mild and moderate adverse events (AEs), and no serious adverse events, without significant differences between placebo and treatment groups. The AEs observed in the Phase 2a clinical study were of the same nature as those observed in the Phase 1 clinical studies of d-Methadone, and there was no evidence of either treatment induced psychotomimetic and dissociative AEs or withdrawal signs and symptoms upon treatment discontinuation. Phase 3 Program On December 20, 2020, Relmada announced that the first patient had been enrolled in the first Phase 3 clinical trial (RELIANCE I) for the Company’s lead product candidate, REL-1017, as an adjunctive treatment for MDD. Following discussions with the Food and Drug Administration (FDA), Relmada’s adjunctive MDD Phase 3 program includes the following key attributes: ● The Phase 3 program consists of two sister, two-arm, placebo-controlled clinical trials. Each trial will be conducted in 55 clinical sites in the United States and will include planned enrollment of 364 MDD patients with inadequate response to standard antidepressants in their current depression episode. Patients will add either a 25 mg oral dose of REL-1017 once per day or placebo to their ongoing antidepressant treatment. ● The primary endpoint to be evaluated will be the change from baseline on the MADRS score at day-28 for REL-1017 compared to placebo. Success on this endpoint with the collection of sufficient safety data could support the use of REL-1017 for chronic treatment, if approved. ● The change from baseline and the 7-day MADRS score will serve as a key secondary endpoint and will provide information on the time to treatment effect. 18 On April 1, 2021, Relmada announced the initiation of RELIANCE II, the second of two sister pivotal Phase 3 clinical trials (RELIANCE I and RELIANCE II) for the Company’s lead product candidate, REL-1017, as an adjunctive treatment for MDD. Patients who complete RELIANCE I and RELIANCE II are eligible to rollover into the long-term, open-label study, which also includes subjects who had not previously participated in a REL-1017 clinical trial. On October 4, 2021, Relmada announced RELIANCE III, the ongoing monotherapy trial for the Company’s lead product candidate, REL-1017, aims to randomize 364 patients and it is expected to be completed in second quarter of 2022. In addition, in order to support potential regulatory submissions seeking approval for REL-1017 as monotherapy and adjunctive treatment, the FDA confirmed that, based on what is known at this time, Relmada will not be required to conduct a two-year carcinogenicity study of REL-1017, as sufficient clinical data have been generated to date. The FDA also confirmed that Relmada does not need to conduct a TQT cardiac study in humans to support cardiac safety in potential regulatory submissions for REL-1017, as the data provided so far and the data generated by the Phase 3 program will be adequate to evaluate the cardiac safety profile of REL-1017. Psilocybin License Agreement In July 2021, we executed a License Agreement with Arbomentis, LLC which gives us the development and commercial rights to a novel psilocybin and derivate program. Under the terms of the agreement, we paid Arbormentis, LLC an up-front fee of $12.7 million consisting of a mix of cash and warrants to purchase the Company’s common stock, in addition to potential milestone payments totaling up to approximately $160 million related to pre-specified development and commercialization milestones. Arbormentis, LLC is also eligible to receive a low single digit royalty on net sales of any commercialized therapy resulting from this agreement. The license agreement is terminable by us but is perpetual and not terminable by the licensor absent material breach of its terms by us. We will collaborate with Arbormentis, LLC on the development of new therapies targeting neurological and psychiatric disorders, leveraging its understanding of neuroplasticity, and focusing on this emerging new class of drugs targeting the neuroplastogen mechanism of action. Importantly, neuroplasticity plays a key role in the activity of REL-1017, Relmada’ s lead program. Dr. Paolo Manfredi, our Acting Chief Scientific Officer and co-inventor of REL-1017, and Dr. Marco Pappagallo, our Acting Chief Medical Officer, are among the scientists affiliated with Arbormentis, LLC. Human Abuse Potential (HAP) Study top-line results: On July 27, 2021, we announced top-line results that showed that all three doses of REL-1017 (25 mg, 75 mg and 150 mg, the therapeutic, supratherapeutic and maximum tolerated doses, respectively) tested in recreational opioid users, demonstrated a highly statistically significant difference vs. the active control drug, oxycodone 40 mg. The study’s primary endpoint was a measure of “likability” with the subjects rating the maximum effect (or Emax) for Drug Liking “at the moment”, using a 1=100 bipolar rating scale (known as a visual analog scale or VAS), with 100 as the highest likability, 50 as neutral (placebo-like), and 0 the highest dislike. In summary, all tested doses of REL-1017, including the maximum tolerated dose, showed a highly statistically significant difference in abuse potential versus oxycodone with p-values less than 0.001. Results are detailed in the table below. Placebo REL-1017 25 mg REL-1017 75 mg REL-1017 150 mg Oxycodone 40 mg Mean Emax for Drug Liking 51.7 53.0 58.2 64.9 85.0 P-value for Difference vs. oxycodone 40 mg <0.001 <0.001 <0.001 <0.001 - These statistically significant data clearly demonstrate a very meaningful difference between REL-1017 and oxycodone at all three tested doses. These results, along with previously published literature, support the lack of opioid effects of REL-1017. Key Upcoming Anticipated Milestones We expect multiple key milestones over the next 12-18 months. These include: ● Results of IV ketamine human abuse potential study in the first quarter of 2022. ● Results of RELIANCE III monotherapy MDD rial in the second quarter of 2022. ● Results of RELIANCE I and RELIANCE II adjunctive MDD trials in the second half of 2022. ● Results of RELIANCE – OLS (Long-term, Open-label) study in MDD in the second half of 2022. 19 Our Development Program Esmethadone (d-Methadone, dextromethadone, REL-1017) as a treatment for MDD Background In 2014, the National Institute of Mental Health (NIMH) estimated that 15.7 million adults aged 18 or older in the United States had at least one major depressive episode in the past year. According to data from nationally representative surveys supported by NIMH, only about half of Americans diagnosed with major depression in a given year receive treatment. Of those receiving treatment with as many as four different standard antidepressants, 33% of drug-treated depression patients do not achieve adequate therapeutic benefits according to the Sequenced Treatment Alternatives to Relieve Depression (STAR*D) trial published in the American Journal of Psychiatry. In addition to the high failure rate, only one of the marketed products for depression, esketamine (marketed by Johnson and Johnson as Spravato), an in-clinic nasal spray treatment can demonstrate rapid antidepressant effects, while the other currently approved products can take two to four weeks to show activity. The urgent need for improved, faster acting antidepressant treatments is underscored by the fact that severe depression can be life-threatening, due to heightened risk of suicide. Esmethadone Overview and Mechanism of Action Esmethadone’s mechanism of action, as a low affinity, non-competitive NMDA channel blocker or antagonist, is fundamentally differentiated from most currently FDA-approved antidepressants, as well as all atypical antipsychotics used adjunctively with standard, FDA-approved antidepressants. Working through the same brain mechanisms as ketamine and esketamine but potentially lacking their adverse side effects, esmethadone is being developed as a rapidly acting, oral agent for the treatment of depression and potentially other CNS conditions. In chemistry an enantiomer, also known as an optical isomer, is one of two stereoisomers that are mirror images of each other that are non-superimposable (not identical), much as one’s left and right hands are the same except for being reversed along one axis. A racemic compound, or racemate, is one that has equal amounts of left- and right-handed enantiomers of a chiral molecule. For racemic drugs, often only one of a drug’s enantiomers is responsible for the desired physiologic effects, while the other enantiomer is less active or inactive. As a single isomer of racemic methadone, esmethadone has been shown to possess NMDA antagonist properties with virtually no traditional opioid or ketamine-like adverse events at the expected therapeutic doses. In contrast, racemic methadone is associated with common opioid side effects that include anxiety, nervousness, restlessness, sleep problems (insomnia), nausea, vomiting, constipation, diarrhea, drowsiness, and others. It has been shown that the left (levo) isomer, l-methadone, is largely responsible for methadone’s opioid activity, while the right (dextro) isomer, esmethadone, at the currently therapeutic doses used in development is virtually inactive as an opioid while maintaining affinity for the NMDA receptor. NMDA receptors are present in many parts of the CNS and play important roles in regulating neuronal activity and promoting synaptic plasticity in brain areas important for cognitive functions such as executive function, learning and memory. Based on these premises, esmethadone could show benefits in several different CNS indications. Esmethadone (d-methadone, dextromethadone, REL-1017) in other indications In addition to developing esmethadone as an adjunctive treatment of MDD, we are evaluating the utility of esmethadone as a front line monotherapy treatment for MDD. Additionally, other indications that Relmada may explore in the future, include, restless leg syndrome and other glutamatergic system activation related diseases. 20 Our Corporate History and Background We are a clinical-stage, publicly traded biotechnology company developing NCEs that potentially address areas of high unmet medical need in the treatment of depression and other CNS diseases. Currently, none of our product candidates have been approved for sale in the United States or elsewhere. We have no commercial products nor do we have a sales or marketing infrastructure. In order to market and sell our products we must conduct clinical trials on patients and obtain regulatory approvals from appropriate regulatory agencies, like the FDA in the United States, and similar organizations elsewhere in the world. We have not generated revenues and do not anticipate generating revenues for the foreseeable future. We had net loss of $91,373,316 for the nine months ended September 30, 2021. At September 30, 2021, we have an accumulated deficit of $270,688,619. Business Strategy Our strategy is to leverage our considerable industry experience, understanding of CNS markets and development expertise to identify, develop and commercialize product candidates with significant market potential that can fulfill unmet medical needs in the treatment of CNS diseases. We have assembled a management team along with both scientific and business advisors, including recognized experts in the fields of depression, with significant industry and regulatory experience to lead and execute the development and commercialization of esmethadone. We plan to further develop esmethadone as our priority program. As the drug esmethadone is an NCE, the regulatory pathway required to support an NDA submission involves a full clinical development program. We plan to continue to generate intellectual property (IP) that will further protect our products from competition. We will also continue to prioritize our product development activities after taking into account the resources we have available, market dynamics and potential for adding value. Market Opportunity We believe that the market for addressing areas of high unmet medical need in the treatment of CNS diseases will continue to be large for the foreseeable future and that it will represent a sizable revenue opportunity for us. For example, the World Health Organization (WHO) has estimated that CNS diseases affect nearly 2 billion people globally, making up approximately 40% of total disease burden (based on disability adjusted life years), compared with 13% for cancer and 12% for cardiovascular disease. The depression treatment market is segmented on the basis of antidepressants drugs, devices, and therapies. Antidepressants are the largest and most popular market segment. The antidepressants segment consists of large pharmaceutical and generic companies, such as Eli Lilly, Pfizer, GlaxoSmithKline, Allergan, Sage Therapeutics and Johnson & Johnson. Some of the notable drugs produced by these companies are Cymbalta® (Eli Lilly), Effexor® (Pfizer), Pristiq® (Pfizer), Zulresso® (Sage) and Spravato® (Johnson & Johnson). Intellectual Property Portfolio and Market Exclusivity We have over 50 issued patents and pending patent applications related to REL-1017 for multiple uses, including psychological and neurological conditions. We have also secured an Orphan Drug Designation from the FDA for d-methadone for “the treatment of postherpetic neuralgia”, which, upon NDA approval, carries 7-year FDA Orphan Drug marketing exclusivity. In the European Union, some of our products may be eligible up to 10 years of market exclusivity, which includes 8 years data exclusivity and 2 years market exclusivity. In addition to any granted patents, REL-1017 will be eligible for market exclusivity to run concurrently with the term of the patent for 5 years in the U.S. (Hatch Waxman Act) plus additional 6 months of pediatric exclusivity and up to 10 years of in the E.U. We believe an extensive intellectual property estate of US and foreign patents and applications, once approved, will protect our technology and products. 21 Key Strengths We believe that the key elements for our market success include: ● Compelling lead product opportunity, REL-1017 currently in Phase 3 trials for the adjunctive treatment of MDD. ● Robust and statistically significant, efficacy seen with esmethadone in a randomized Phase 2 trial, with the primary endpoint at 7 days, and onset of action seen at 4 days, with the effect carrying through to 14 days (7 days post-treatment). ● Completed Phase 1 safety studies of esmethadone and strong clinical activity signal in depression established in three independent animal models in preclinical studies. ● Potential in additional multiple indications in underserved markets with large patient population, such as MDD monotheraphy, other affective disorders, and cognitive disorders. ● Scientific support of leading experts including clinicians and scientists who are affiliated with a number of highly regarded medical institutions such as Harvard, Cornell, Yale, and University of Pennsylvania. ● Substantial IP portfolio and market protection with approved and filed patent applications provide coverage beyond 2033. A vailable Information Reports we file with the Securities and Exchange Commission (SEC) pursuant to the Exchange Act of 1934, as amended (the Exchange Act), including annual and quarterly reports, and other reports we file, can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street NE, Washington, D.C. 20549. Results of Operations For the Three Months Ended September 30, 2021 versus September 30, 2020 Three Months Ended Three Months Ended September 30, 2021 September 30, 2020 Increase (Decrease) Operating Expenses Research and development $ 33,993,974 $ 11,237,186 $ 22,756,788 General and administrative 8,659,661 5,946,396 2,713,265 Total $ 42,653,635 $ 17,183,582 $ 25,470,053 Research and Development Expense Research and development expense for the three months ended September 30, 2021 was approximately $33,994,000 compared to $11,237,200 for the three months ended September 30, 2020, an increase of approximately $22,756,800. The increase was primarily driven by: ● Upfront payment to Arbormentis, LLC for $12,741,600 consisting of a cash and warrants; ● Increase in study costs of $8,385,800 associated with the execution of our four Phase 3 trials; ● Increase in manufacturing and drug storage costs of $237,700; ● Decrease in compensation expense of $194,800 due to lower employee-related costs; ● Increase in stock-based compensation expense of $80,600; and ● Increase in other research expenses of $1,505,900 primarily associated with the addition of consultants contracted to assist in the execution of our Phase 3 trials. General and Administrative Expense General and administrative expense for the three months ended September 30, 2021 was approximately $8,659,700 compared to $5,946,400 for the three months ended September 30, 2020, an increase of approximately $2,713,300. The increase was primarily due to: ● Decrease in compensation expense of $86,800 due to lower employee-related costs; ● Increase in stock-based compensation expense of $2,688,700 primarily related to options granted to employees; and ● Increase in other general and administrative expenses of $111,400 primarily due to an increase in consulting services. 22 Other Income (Expense) Interest / investment income was approximately $297,600 and $363,300 for the three months ended September 30, 2021 and 2020, respectively. Realized loss on short-term investments was approximately $336,900 and $86,200 for the three months ended September 30, 2021 and 2020, respectively. Unrealized gain on short-term investments was approximately $86,700 and $3,900 for the three months ended September 30, 2021 and 2020, respectively. Income Taxes The Company did not provide for income taxes for the three months ended September 30, 2021 and 2020, since there was a loss and a full valuation allowance against all deferred tax assets. Net Loss The net loss for the Company for the three months ended September 30, 2021 and 2020 was approximately $42,606,200 and $16,902,500 respectively. The Company had loss per share, basic and diluted of $2.44 and $1.05 for the three months ended September 30, 2021 and 2020, respectively. For the Nine Months Ended September 30, 2021 versus September 30, 2020 Nine Months Ended Nine Months Ended September 30, 2021 September 30, 2020 Increase (Decrease) Operating Expenses Research and development $ 65,347,708 $ 21,068,923 $ 44,278,785 General and administrative 26,173,010 18,846,299 7,326,711 Total $ 91,520,718 $ 39,915,222 $ 51,605,496 Research and Development Expense Research and development expense for the nine months ended September 30, 2021 was approximately $65,347,700 compared to $21,068,900 for the nine months ended September 30, 2020, an increase of approximately $44,278,800. The increase was primarily driven by: ● Upfront payment to Arbormentis, LLC for $12,741,600 consisting of a cash and warrants; ● Increase in study costs of $26,449,100 associated with the execution of our four Phase 3 trials; ● Increase in manufacturing and drug storage costs of $904,600; ● Decrease in compensation expense of $418,600 due to lower employee-related costs; ● Decrease in stock-based compensation expense of $535,200; and ● Increase in other research expenses of $5,137,300 primarily associated with the addition of consultants contracted to assist in the execution of our Phase 3 trials. General and Administrative Expe nse General and administrative expense for the nine months ended September 30, 2021 was approximately $26,173,000 compared to $18,846,300 for the nine months ended September 30, 2020, an increase of approximately $7,326,700. The increase was primarily due to: ● Increase in compensation expense of $430,000 related to the hiring of two additional employees; ● Increase in stock-based compensation expense of $5,082,300 primarily related to options granted to employees, as well as the hiring of two additional employees; and ● Increase in other general and administrative expenses of $1,814,400 primarily due to an increase in consulting services. 23 Other Income (Expense) Interest / investment income was approximately $1,040,400 and $1,175,000 for the nine months ended September 30, 2021 and 2020, respectively. Realized loss on short-term investments was approximately $513,300 and $245,000 for the nine months ended September 30, 2021 and 2020, respectively. Unrealized (loss)/gain on short-term investments was approximately $(379,700) and $291,000 for the nine months ended September 30, 2021 and 2020, respectively. Income Taxes The Company did not provide for income taxes for the nine months ended September 30, 2021 and 2020, since there was a loss and a full valuation allowance against all deferred tax assets. Net Loss The net loss for the Company for the nine months ended September 30, 2021 and 2020 was approximately $91,373,300 and $38,694,300 respectively. The Company had loss per share, basic and diluted of $5.36 and $2.52 for the nine months ended September 30, 2021 and 2020, respectively. Liquidity As shown in the accompanying financial statements, the Company incurred negative operating cash flows of $54,213,231 for the nine months ended September 30, 2021 and has an accumulated deficit of $270,688,619 from inception through September 30, 2021. At September 30, 2021 the Company had cash and short term investments of $88,087,096. Relmada has funded its past operations through equity raises and most recently in 2021 raised net proceeds from the sale of common stock of $23,416,036 through our ATM offering, and $2,116,969 through the exercise of warrants. The Company also raised an additional $569,427 during the nine months ended September 30, 2021 from the exercises of options. Management believes that it has sufficient funding to continue ongoing operations for at least 12 months from the issuance of the accompanying condensed consolidated quarterly financial statements. The following table sets forth selected cash flow information for the periods indicated below: Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020 Cash used in operating activities $ (54,213,231 ) $ (20,880,039 ) Cash provided by (used in) investing activities 37,064,696 (35,382,926 ) Cash provided by financing activities 26,102,432 27,529,174 Net increase (decrease) in cash and cash equivalents $ 8,953,897 (28,733,791 ) For the nine months ended September 30, 2021, cash used in operating activities was $54,213,231 primarily due to the net loss of $91,373,316, prepaid expense of $1,812,288, offset by non-cash stock compensation charges of $32,375,229, realized and unrealized losses on investments of $893,027, an increase in accounts payable of $4,362,071, and an increase in accrued expenses of $1,281,821. 24 For the nine months ended September 30, 2020, cash used in operating activities was $20,880,039 primarily due to the net loss of $38,694,264, an unrealized gain of $290,973, an increase in prepaid expense of $1,825,336, offset by non-cash stock compensation charges of $17,586,533, a realized loss of $244,972, an increase in accounts payable of $205,970, and an increase in accrued expenses of $1,835,888. For the nine months ended September 30, 2021, cash provided by investing activities was $37,064,696 related to the net purchase of short-term investments. For the nine months ended September 30, 2020, cash used in investing activities was $35,382,926 related to the net purchase of short-term investments. Net cash provided by financing activities for the nine months ended September 30, 2021 was $26,102,432 due to sales of common stock of $23,416,036, proceeds from warrants exercised for common stock of $2,116,969, and proceeds from options exercised for common stock of $569,427. Net cash provided by financing activities for the nine months ended September 30, 2020 was $27,529,174 due to sales of common stock of $19,816,597, proceeds from warrants exercised for common stock of $7,186,306, and proceeds from options exercised for common stock of $636,518, partially offset by payments of notes payable of $110,247. Effects of Inflation Our assets are primarily monetary, consisting of cash and cash equivalents. Because of their liquidity, these assets are not directly affected by inflation. Because we intend to retain and continue to use our equipment, we believe that the incremental inflation related to replacement costs of such items will not materially affect our operations. However, the rate of inflation affects our expenses, such as those for employee compensation and contract services, which could increase our level of expenses and the rate at which we use our resources. Off-Balance Sheet Arrangements As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (SPEs), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually limited purposes. As of September 30, 2021 and December 31, 2020, we were not involved in any SPE transactions. Commitments and Contingencies Please refer to Note 10 in our Annual Report on Form 10-K for the year ended December 31, 2020 under the heading Commitments and Contingencies. To our knowledge there have been no material changes to the risk factors that were previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. Critical Accounting Policies and Estimates A critical accounting policy is one that is both important to the portrayal of a company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our unaudited consolidated financial statements are presented in accordance with U.S. GAAP, and all applicable U.S. GAAP accounting standards effective as of September 30, 2021 have been taken into consideration in preparing the unaudited consolidated financial statements. The preparation of unaudited consolidated financial statements requires estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosures. Some of those estimates are subjective and complex, and, consequently, actual results could differ from those estimates. The following accounting policies and estimates have been highlighted as significant because changes to certain judgments and assumptions inherent in these policies could affect our consolidated financial statements: ● Valuation of research and development expenses, and ● Valuation of stock-based compensation expenses We base our estimates, to the extent possible, on historical experience. Historical information is modified as appropriate based on current business factors and various assumptions that we believe are necessary to form a basis for making judgments about the carrying value of assets and liabilities. We evaluate our estimates on an on-going basis and make changes when necessary. Actual results could differ from our estimates. 25 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. There have been no material changes to our exposures to market risks as disclosed under the heading “Quantitative and Qualitative Disclosures About Market Risks” in the annual MD&A contained in our Form 10-K for the year ended December 31, 2020. ITEM 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of September 30, 2021, in ensuring that material information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the three months ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 26 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS From time to time, the Company may become involved in lawsuits and other legal proceedings that arise in the course of business. Litigation is subject to inherent uncertainties, and it is not possible to predict the outcome of litigation with total confidence. The Company is currently not aware of any legal proceedings or potential claims against it whose outcome would be likely, individually or in the aggregate, to have a material adverse effect on the Company’s business, financial condition, operating results, or cash flows. Lawsuit Brought by Previous Employee On July 15, 2020, an employee of the Company filed a Complaint alleging unequal pay based on gender and other employment-based claims. On April 9, 2021, the Company settled this Complaint for an amount immaterial to the consolidated financial statements. ITEM 1A. RISK FACTORS Effects of COVID-19 The pandemic caused by an outbreak of COVID-19 has resulted, and is likely to continue to result, in significant national and global economic disruption and may adversely affect our business. Based on the Company’s current assessment, the Company does not expect any material impact on its long-term development timeline and its liquidity due to the worldwide spread of the COVID-19 virus. However, the Company is actively monitoring this situation and the possible effects on its financial condition, liquidity, operations, suppliers, industry, and workforce. There have been no material changes to the risk factors under Part I, Item 1A of our Form 10-K for the year ended December 31, 2020, which include more detailed risk factors related to COVID-19. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. On July 12, 2021, the Company awarded a total of 10,000 warrants to a consultant with an exercise price of $34.77 and a 5-year term, vesting over a 1-year period. The warrants granted are time based vesting. The issuance of these warrants was exempt from registration under the Securities Act pursuant to Section 4(1)(2) thereof and/or Rule 506 thereunder, as not involving any public offering. On July 16, 2021, the Company awarded a total of 500,000 warrants to Arbormentis, LLC with an exercise price of $31.17 and a 7-year term, vesting immediately. The issuance of these warrants was exempt from registration under the Securities Act pursuant to Section 4(1)(2) thereof and/or Rule 506 thereunder, as not involving any public offering. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ITEM 5. OTHER INFORMATION None. 27 ITEM 6. EXHIBITS Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K Exhibit No. Title of Document Location 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Attached 31.2 Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Attached 32.1 Certification of the Chief Executive Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* Attached 32.2 Certification of the Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* Attached 101.INS Inline XBRL Instance Document. Attached 101.SCH Inline XBRL Taxonomy Extension Schema Document. Attached 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. Attached 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. Attached 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. Attached 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. Attached 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). Attached * The Exhibit attached to this Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing. 28 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 12, 2021 By: /s/ Sergio Traversa Sergio Traversa Chief Executive Officer (Duly Authorized Officer and Principal Executive Officer) /s/ Maged Shenouda Maged Shenouda Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer) 29