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Item 7. Management’s Discussion and Analysis

2023-03-23 compared with 2022-03-25 · 123 added, 127 removed, 79 unchanged (76% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information and financial data discussed below is derived from

the consolidated financial statements of Relmada for the years ended December 31, 2021 and 2020.

The consolidated financial statements

of Relmada were prepared and presented in accordance with generally accepted accounting principles in the United States.

The information

and financial data discussed below is only a summary and should be read in conjunction with the historical financial statements and related

notes of Relmada contained elsewhere in this Report.

The consolidated financial statements contained elsewhere in this Report fully represent

Relmada’s financial condition and operations;

however, they are not indicative of the Company’s future performance.

See “Cautionary

Note Regarding Forward Looking Statements” above for a discussion of forward-looking statements and the significance of such statements

in the context of this Annual Report.

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information and financial data discussed

below is derived from the consolidated financial statements of Relmada for the years ended December 31, 2022 and 2021.

The consolidated

financial statements of Relmada were prepared and presented in accordance with generally accepted accounting principles in the United

The information and financial data discussed below is only a summary and should be read in conjunction with the historical financial

statements and related notes of Relmada contained elsewhere in this Report.

The consolidated financial statements contained elsewhere

in this Report fully represent Relmada’s financial condition and operations;

however, they are not indicative of the Company’s

future performance.

See “Cautionary Note Regarding Forward Looking Statements” above for a discussion of forward-looking

statements and the significance of such statements in the context of this Annual Report.

This discussion contains forward-looking statements

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future performance.

See “Cautionary Note Regarding Forward Looking Statements” above for a discussion of forward-looking statements

and the significance of such statements in the context of this document.

See “Cautionary Note Regarding Forward Looking Statements” above for a discussion of forward-looking

statements and the significance of such statements in the context of this document.

Our Corporate History and Background

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from study REL-1017-202.

This was a a double-blind, placebo-controlled Phase 2 clinical trial evaluating the safety, tolerability and

efficacy of two doses of REL-1017, 25 mg once a day and 50 mg once a day, as an adjunctive treatment in patients with MDD, who experienced

an inadequate response to 1 to 3 treatments with an antidepressant medication.

This was a double-blind, placebo-controlled Phase 2 clinical trial evaluating the safety, tolerability and efficacy

of two doses of REL-1017, 25 mg once a day and 50 mg once a day, as an adjunctive treatment in patients with MDD, who experienced an inadequate

response to 1 to 3 treatments with an antidepressant medication.

On December 20, 2020, the Company announced that

the first patient had been enrolled in the first Phase 3 clinical trial (RELIANCE I) of REL-1017, as an adjunctive treatment for MDD.

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) of 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 the

initiation of RELIANCE III, the ongoing monotherapy trial for REL-1017, which aims to randomize 364 patients and it is expected to

be completed in mid-2022.

Following discussion with the FDA, Relmada’s

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.

In the studies, 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 is the change from baseline on

the Montgomery and Asberg Depression Rating Scale (MADRS) score at day-28 for REL-1017 compared to placebo.

Success on this endpoint with

the collection of sufficient safety data would support the use of REL-1017 for chronic treatment, if approved.

The change from baseline and the 7-day MADRS score serves as a key secondary

endpoint and will provide data on the rapid onset of treatment effect.

In addition, in order

to support potential regulatory submissions seeking approval for REL-1017 as adjunctive and monotherapy 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 already provided and the data to be generated

by the Phase 3 program will be adequate to evaluate the cardiac safety profile of REL-1017.

We have not generated revenues and do not anticipate generating revenues

for the foreseeable future.

We had a net loss of approximately $125,751,800 and $59,456,400 for the years ended December 31, 2021 and

2020, respectively.

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) of REL-1017, as an adjunctive treatment

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 the initiation

of the RELIANCE III study, the monotherapy trial for the Company’s lead product candidate, REL-1017.

On August 9, 2022, Relmada announced that the

FDA granted Fast Track designation to REL-1017 as a monotherapy for the treatment of MDD.

On October 13, 2022, Relmada announced that its

RELIANCE III study, evaluating REL-1017 in the monotherapy setting for MDD, did not achieve its primary endpoint, which was a statistically

significant improvement in depression symptoms compared to placebo as measured by MADRS on Day 28.

In the study, the REL-1017 treatment

arm showed a MADRS reduction of 14.8 points at Day 28 versus 13.9 points for the placebo arm, a higher than expected placebo response.

On December 7, 2022, Relmada announced that its RELIANCE I study, evaluating

REL-1017 as an adjunctive treatment for MDD, did not achieve its primary endpoint, which was a statistically significant improvement in

depression symptoms compared to placebo as measured by MADRS on Day 28.

In the study, the REL-1017 treatment arm (n= 113) showed a MADRS

reduction of 15.1 points at Day 28 versus 12.9 points for the placebo arm (n=114), which is a clinically meaningful difference of 2.2

points on the MADRS, as well as a statistically significant difference in the response rate, with a response rate of 27.2% on placebo

vs 39.8% in the REL1017 arm (p<0.05).

In addition, in order to support potential regulatory

submissions seeking approval for REL-1017 as adjunctive and monotherapy 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 already provided and the data to be generated by the Phase 3 program will

be adequate to evaluate the cardiac safety profile of REL-1017.

We have not generated revenues and do not anticipate

generating revenues for the foreseeable future.

We had a net loss of approximately $157,043,800 and $125,751,800 for the years ended December

31, 2022 and 2021, respectively.

At December 31, 2022, we have an accumulated deficit of approximately $462,110,900.

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Research and Development Expense

Total research and development expense for the year ended December

31, 2021 was approximately $90,621,600, as compared to $35,972,700 for the same period of 2020, an increase of $54,648,900.

in research and development expense was primarily due to:

Increase in study costs of $31,673,300 associated with the execution

of three Phase 3 trials and open label extension safety study;

Increase in manufacturing and drug storage costs of $3,823,100 related

to materials needed to complete the Phase 3 program;

Decrease in pre-clinical and toxicology expenses of $2,501,900;

Total research and development expense for the

year ended December 31, 2022 was approximately $113,323,000, as compared to $90,621,600 for the same period of 2021, an increase of $22,701,400.

The increase in research and development expense was primarily due to:

Increase in other research expenses of $19,073,100 primarily associated with additional consultants contracted to assist in the execution of our Phase 3 trials;

Increase in study costs of $14,689,700 associated with the execution of three Phase 3 trials and one open label extension safety study;

Increase in pre-clinical and toxicology expenses of $225,500;

Decrease in stock-based compensation expense of $7,953,200 primarily related to warrants issued for a license agreement to Arbormentis, LLC in 2021 for $10,241,600;

Decrease in manufacturing and drug storage costs of $3,213,900 related to materials needed to complete the Phase 3 program;

Decrease in compensation expense of $119,800 due to lower employee-related costs.

Increase in stock-based compensation expense of $11,787,400 of stock-based compensation expense related to the options granted to employees and the issuance of warrants to consultants during 2021;

Increase in other research expenses of $10,822,500 primarily associated

with additional consultants contracted to assist in the execution of our Phase 3 trials.

General and Administrative Expense

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The increase in general and administrative expenses was primarily due to:

Increase in compensation expense of $439,000 due

to higher employee-related costs;

Increase in stock-based compensation expense of

$7,919,800 primarily related to options granted to employees and the board of directors during 2021;

Increase in other G&A expenses of $1,857,200 due to increases in

professional fees and consulting expenses during 2021.

Increase in stock-based compensation expense of $11,653,600 primarily related to options granted to employees and the board of directors during 2021;

Increase in other general and administrative expenses of $1,762,100 due to increases in professional fees and consulting expenses during 2022;

Decrease in compensation expense of $571,500 due to lower employee-related costs.

Other Income, Net

Interest income was approximately $1,199,100 for

the year ended December 31, 2021 compared to approximately $1,399,200 for the same period of 2020, a decrease of $200,100.

was primarily related to a lower average investment balance during 2021 as compared to 2020.

Gain on settlement fees was approximately $6,351,600 received from

a settlement during 2022.

Interest/investment income was approximately $2,659,400

for the year ended December 31, 2022 compared to approximately $1,199,100 for the same period of 2021, an increase of $1,460,300.

increase was primarily related to a lower average investment balance during 2021 as compared to 2022.

Realized loss on short-term investments was approximately

$636,000 compared to approximately $156,200 for the same period of 2020, an increase of $479,800.

The increase was related to the timing

$585,500 compared to approximately $636,000 for the same period of 2021, a decrease of $50,500.

The decrease was related to the timing

of the sales of short-term investments along with market conditions.

Unrealized loss on short-term investments was

approximately $611,400 compared to an unrealized gain on short-term investments of approximately $139,300 for the same period of 2020,

an increase of $750,700.

The increase was related to the timing of the sales of short-term investments along with market conditions.

The Company did not provide for income taxes for

the years ended December 31, 2021 and 2020, since there was a loss and a full valuation allowance against all deferred tax assets.

The Company recorded a net loss of approximately $125,751,800 and 59,456,400

or $7.16 and $3.81 per common share, basic and diluted, during the years ended December 31, 2021 and 2020, respectively, based on the

factors described above.

As shown in the accompanying financial statements, the Company incurred

negative operating cash flows of $91,873,395 for the year ended December 31, 2021 and has an accumulated deficit of $305,067,112 from

inception through December 31, 2021.

approximately $4,220,300 compared to approximately $611,400 for the same period of 2021, an increase of $3,608,900.

The increase was related

to the market conditions.

The Company did not provide for income taxes

for the years ended December 31, 2022 and 2021, since there was a loss and a full valuation allowance against all deferred tax assets.

The Company recorded a net loss of approximately

$157,043,800 and $125,751,800 or $5.30 and $7.16 per common share, basic and diluted, during the years ended December 31, 2022 and 2021,

respectively, based on the factors described above.

As shown in the accompanying financial statements,

the Company incurred negative operating cash flows of $103,801,617 for the year ended December 31, 2022 and has an accumulated deficit

of $462,110,935 from inception through December 31, 2022.

Relmada has funded its past operations through

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raises completed and exercises of options and warrants and the resulting cash position on its balance sheet, it has obtained sufficient

funding, based on its budgeted cash flow requirements, to continue ongoing operations for at least 12 months from the filing of this annual

The following table sets forth selected cash flow information for the

periods indicated below:

funding, based on its budgeted cash flow requirements, to continue ongoing operations for at least 12 months from the filing of this

annual report.

The following table sets forth selected cash flow information for

the periods indicated below:

Cash used in operating activities

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$ (91,873,395 )

Cash used in investing activities

(54,118,036 )

Cash provided by (used in) investing activities

(54,118,036 )

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$ (39,047,534 )

For the year ended December 31, 2021, cash used in

operating activities was $91,873,395 primarily due to the net loss of $125,751,809.

For the year ended December 31, 2022, cash used in operating activities

was $103,801,617 primarily due to the net loss of $157,043,823.

This was offset by non-cash expenses which primarily consisted of stock-based

compensation of $44,194,765 and a gain on settlement of $6,351,606.

There were realized and unrealized losses on short term investments

of $585,522 and $4,220,255, respectively.

In addition, there were increases in operating assets and liabilities for the year ended December

31, 2022 of $10,593,270.

For the year ended December 31, 2021, cash used

in operating activities was $91,873,395 primarily due to the net loss of $125,751,809.

This was offset by non-cash expenses which primarily

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short term investments of $636,012 and $611,382, respectively.

In addition, there were increases in operating assets and liabilities for

the year ended December 31, 2021 of $7,864,714.

For the year ended December 31, 2020, cash used

in operating activities was $27,808,801 primarily due to the net loss of $59,456,394.

This was offset by non-cash expenses which primarily

consisted of stock-based compensation of $20,777,272.

There were realized losses and unrealized gains on short term investments of $156,213

and $139,267, respectively.

In addition, there were decreases in operating assets and liabilities for the year ended December 31,

2020 of $10,849,623.

For the year ended December 31, 2021, cash used

in investing activities was $54,118,036, due to $222,981,675 of purchases of short term investments offset by $168,863,639 of sales of

short term investments.

In addition, there were increases in operating assets and liabilities

for the year ended December 31, 2021 of $7,864,714.

For the year ended December 31, 2022, cash provided

by investing activities was $19,733,609, due to $47,293,763 of purchases of short term investments offset by $67,027,372 of sales of short

term investments.

For the year ended December 31, 2021, cash used

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the year ended December 31, 2022, was $45,020,474 due to proceeds from issuance of common stock of $42,728,599, proceeds from warrants

exercised for common stock of $2,628,061, proceeds from options exercised for common stock of $668,431.

exercised for common stock of $1,264,523, proceeds from options exercised for common stock of $703,720, proceeds from 16b short swing

profit of $373,632 offset by the payment of fees for warrants issued for common stock of $50,000.

Net cash provided by financing activities for

the year ended December 31, 2021, was $187,939,473 due to proceeds from issuance of common stock of $184,642,981, proceeds from warrants

exercised for common stock of $8,056,416, proceeds from options exercised for common stock of $735,514 partially offset by payments of

notes payable of $110,247.

exercised for common stock of $2,628,061, proceeds from options exercised for common stock of $668,431.

Effects of Inflation

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Lease Obligations

The Company is obligated to pay approximately $78,550 under an office

operative lease over the next year.

The Company is obligated to pay approximately

$274,000 under 2 office operative leases over the next year.

We do not have a seasonal business cycle.

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judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

On a continual basis, management

reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience, and reasonable

On a continual basis,

management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience,

and reasonable assumptions.

After such reviews, and if deemed appropriate, managements estimates are adjusted accordingly.

Actual results could differ

from those estimates and assumptions under different and/or future circumstances.

Management considers an accounting estimate to be critical

● it requires assumptions to be made that were

uncertain at the time the estimate was made;

● changes in the estimate, or the use of different

estimating methods that could have been selected, could have a material impact on results of operations or financial condition.

We evaluate our estimates and assumptions on an ongoing

basis and none of the Company’s estimates and assumptions used within the consolidated financial statements involve a high level

of estimation uncertainty.

For additional discussion regarding the application of the significant accounting policies, see Note 2 to the

Company’s consolidated financial statements included in this report.

Actual results

could differ from those estimates and assumptions under different and/or future circumstances.

Management considers an accounting estimate

to be critical if:

it requires assumptions

to be made that were uncertain at the time the estimate was made;

changes in the estimate,

or the use of different estimating methods that could have been selected, could have a material impact on results of operations or

financial condition.

We evaluate our estimates and assumptions on

an ongoing basis and none of the Company’s estimates and assumptions used within the consolidated financial statements involve

a high level of estimation uncertainty.

For additional discussion regarding the application of the significant accounting policies, see

Note 2 to the Company’s consolidated financial statements included in this report.

Recent Accounting Pronouncements

The Company lists material recent accounting pronouncements

in Note 2 of the consolidated financial statements.

The Company lists material recent accounting

pronouncements in Note 2 of the consolidated financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis