RELMADA THERAPEUTICS, INC. 10-Q

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