Item 2. Management’s Discussion and Analysis
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 “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, 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, an isomer of methadone, 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. During late 2022, we announced RELIANCE I and III, both Phase 3 trials, did not achieve their
primary endpoints. Relmada has completed its long term, open label study and plans to complete two additional ongoing adjunctive Phase
3 trials (RELIANCE II and RELIGHT).
Relmada also intends, in 2024, to enter human
studies of its proprietary, modified-release formulation of psilocybin (REL-P11) in doses that we believe are lower than those associated
with psychedelic effects for metabolic indications.
Esmethadone (d-Methadone, dextromethadone,
REL-1017)
Phase 2 Clinical Trial
In the REL-1017-202 study, 62 subjects, with
an average age of 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.
12
We observed that subjects in both the REL-1017
25 mg and 50 mg treatment groups experienced statistically significant improvement on all efficacy measures tested as compared to subjects
in the placebo group, including: 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.
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.
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 Major Depressive Disorder (MDD).
On October 4, 2021, Relmada announced the initiation
of RELIANCE III study, a monotherapy trial for the Company’s lead product candidate, REL-1017.
In addition, on October 4, 2021, Relmada announced
that in order to support potential regulatory submissions seeking approval for REL-1017 as adjunctive and monotherapy treatment, the
Food and Drug Administration (FDA) confirmed that, based on what was known at the time, Relmada would not be required to conduct a two-year
carcinogenicity study of REL-1017, as sufficient clinical data had been generated to date. The FDA also confirmed that Relmada would
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 would be adequate to evaluate the cardiac safety profile of
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 2.3 points on the MADRS. The study also showed a nominally statistically significant difference in the response
rate, with a response rate of 39.8% in the REL-1017 arm vs 27.2% in the placebo arm (p<0.05). Additionally, in a prespecified per
protocol population analysis, the REL-1017 treatment arm (n=101) showed a MADRS reduction of 15.6 points at Day 28 versus 12.5 points
for the placebo arm (n=97), a difference of 3.1 points, with nominal p=0.051.
Patients who completed the RELIANCE trials were
eligible to rollover into the long-term, open-label study, Study 310, which also included subjects who had not previously participated
in a REL-1017 clinical trial. This rollover study completed subject visits on July 11, 2023.
13
On September 20, 2023, Relmada announced efficacy
results for the de novo (or new to treatment) patients (204 patients) and safety results for all subjects (627 patients) from Study 310
of REL-1017 in patients with MDD. Patients treated daily with REL-1017 for up to one year experienced rapid, clinically meaningful, and
sustained improvements in depressive symptoms and associated functional impairment. REL-1017 was well-tolerated with long-term dosing,
showing low rates of adverse events and discontinuations due to adverse events. The most commonly reported adverse events deemed to be
treatment-related all occurred included headache, nausea and dizziness. No new safety signals were detected.
On August 23, 2023, Relmada announced the dosing
of the first patient in RELIGHT, a Phase 3 clinical trial for REL-1017, as an adjunctive treatment for MDD.
Human Abuse Potential (HAP) Studies
Top-line Results - Oxycodone:
On July 27, 2021, Relmada 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 (MTD), 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 150 mg MTD, showed a highly statistically significant difference in abuse potential versus oxycodone with
p-values less than 0.05. Consistent results were seen for the secondary endpoints. Additionally, all REL-1017 doses including 150 mg
(6 times the therapeutic dose and MTD) were statistically equivalent to placebo (p<0.05). These results support the lack of opioid
effects of REL-1017.
Top-line Results - Ketamine:
On February 23, 2022, Relmada announced top-line
results that showed that all three doses of REL-1017 (25 mg, 75 mg, and 150 mg, the therapeutic, supratherapeutic and MTD, respectively)
tested in recreational drug users, demonstrated a substantial (30+ points) and statistically significant difference vs. the active control
drug, intravenous ketamine 0.5 mg/kg over 40 minutes, and, importantly, were statistically equivalent to placebo. The study’s primary
endpoint was a measure of “likability” with the subjects rating the maximum effect (or Emax) for Drug Liking “at this
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. Consistent results are seen for the secondary endpoints.
Psilocybin Program (REL-P11):
On October 11, 2023, Relmada announced that it
intends to enter human studies of its proprietary, modified-release formulation of psilocybin (REL-P11) for metabolic indications in
doses that we believe are lower than those associates with psychedelic effects. The Company plans to commence a single-ascending dose
Phase 1 trial in obese patients in the first half of 2024 to define the pharmacokinetic, safety and tolerability profile of Relmada's
modified-release psilocybin formulation (REL-P11) in this population, followed by a Phase 2a trial to establish clinical proof-of-concept.
Pre-clinical data in a rodent model of metabolic
dysfunction-associated steatotic liver disease (MASLD) demonstrated beneficial effects of psilocybin on multiple metabolic parameters,
including reduced hepatic steatosis, reduced body weight gain, and fasting blood glucose levels.
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Key Upcoming Anticipated Milestones
We expect multiple key milestones over the next
12 months. These include:
●
Complete enrollment in the ongoing RELIANCE II study,
which is planned to enroll approximately 300 patients, with top-line data in the second half of 2024.
●
Initiate Phase 1 trial in obese patients with the
modified-release formulation of psilocybin (REL-P11) in the first half of 2024.
Our Development Program
Esmethadone (d-Methadone, dextromethadone,
REL-1017) as a treatment for MDD
Background
In 2021, the National Institute of Mental Health
(NIMH) estimated that 21.0 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, about 61% of adult Americans diagnosed with major depression
received treatment in 2021. 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 two
of the marketed products for depression, esketamine (marketed by Johnson and Johnson as Spravato®), an in-clinic nasal spray treatment,
and dextromethorphan-bupropion (marketed by Axsome as Auvelity ä ), can demonstrate rapid
antidepressant effects, while the other currently approved products can take two to eight 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
While our current strategy is currently to focus
on the further development of esmethadone as an adjunctive treatment for MDD, we are evaluating other indications that Relmada may explore
in the future, including restless leg syndrome and other glutamatergic system activation related diseases.
Psilocybin Program
Relmada acquired the development and commercial
rights to a novel psilocybin and derivative program from Arbormentis LLC in July of 2021. The original focus of the program was limited
to neurodegenerative diseases. Psilocybin has neuroplastogen™ effects that have the potential to ameliorate the consequences of
multiple neurodegenerative conditions. The pleiotropic metabolic effects of low-dose psilocybin were discovered while studying its neuroplastogen™
potential in a rodent model deficient in neurogenesis – obese rodents maintained on a high fructose, high fat diet (HFHFD). Specifically,
in a rodent model of metabolic dysfunction-associated steatotic liver disease (MASLD), beneficial effects of psilocybin were observed
on multiple metabolic parameters, including reduced hepatic steatosis, reduced body weight gain, and fasting blood glucose levels.
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Our Corporate History and Background
We are a clinical-stage, publicly traded biotechnology
company developing NCEs and novel versions of drug products that potentially address areas of high unmet medical need in the treatment
of depression and other CNS diseases. We are also developing a novel modified release formulation of psilocybin for the treatment of
metabolic indications.
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 a net loss of $21,828,126 for the three months ended March 31, 2024. At March 31,
2024, we had an accumulated deficit of $582,730,807.
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 advisors, including recognized experts in the fields of depression, and business advisors 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 a new drug application (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), ZURZUVANE TM (Sage), Spravato® (Johnson & Johnson) and (Auvelity ä (Axsome).
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, potentially provide coverage
beyond 2033. We have also secured an Orphan Drug Designation from the FDA for d-methadone for “the treatment of postherpetic neuralgia"
(postherpetic neuralgia is lasting pain in areas of skin affected by previous outbreaks of shingles, caused by the varicella zoster, or
herpes zoster, virus) which, upon potential NDA approval, carries 7-year FDA Orphan Drug marketing exclusivity. In the European Union,
some of our prospective 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) and may be eligible for an additional 6 months of pediatric exclusivity
and up to 10 years of exclusivity in the European Union. We believe an extensive intellectual property estate of US and foreign patents
and applications, once approved, will protect our technology and products.
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Key Strengths
We believe that the key elements for our market success include:
● Compelling lead product opportunity,
REL-1017 currently in two Phase 3 trials for the adjunctive treatment of MDD (RELIANCE II and RELIGHT) that build on the knowledge obtained
from RELIANCE I, which did not meet its primary endpoint.
● Robust
and highly statistically significant,
efficacy seen with esmethadone in a randomized Phase 2 trial with the primary endpoint at
7 days, with onset of action seen at 4 days, and the effect carrying through to 14 days (7
days post-treatment).
● Successful
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 in
other affective disorders, and cognitive disorders.
● Substantial
esmethadone IP portfolio and market protection: approved and filed patent applications provide
coverage beyond 2033.
●
Portfolio diversification
with the development of a novel psilocybin (REL-P11) for the treatment of metabolic indicati ons.
This program is expected to enter human studies, to define its pharmacokinetic, safety and tolerability profile, in first half of
2024.
●
Scientific support of leading experts: Our scientific advisors include
clinicians and scientists who are affiliated with a number of highly regarded medical institutions such as Harvard, Cornell, Yale,
and University of Pennsylvania.
Available 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 March 31, 2024 versus March 31, 2023
Three Months
Ended
Three Months
Ended
March 31,
2024
March 31,
2023
Increase
(Decrease)
Operating Expenses
Research and development
$ 13,305,306
$ 15,861,010
$ (2,555,704 )
General and administrative
9,682,554
12,292,599
(2,610,045 )
Total
$ 22,987,860
$ 28,153,609
$ (5,165,749 )
Research and Development Expense
Research and development expense for the three
months ended March 31, 2024 was approximately $13,305,300 compared to $15,861,000 for the three months ended March 31, 2023, a decrease
of approximately $2,555,700. The change was primarily driven by:
● Decrease in study costs of $3,658,900 associated with the completion
of the long-term, open-label study, Study 310 in 3rd Quarter 2023, as well as RELIANCE I and III in late 2022;
● Decrease in stock-based compensation expense of $294,800;
● Increase in other research expenses of $1,330,800 primarily associated
with the ramp-up of the 302 and 304 studies in 2024;
●
Increase in compensation expense of $61,300 due to an increase in research and development employees and their related bonus; and
● Increase in manufacturing and drug storage costs of $5,900.
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General and Administrative Expense
General and administrative expense for the three
months ended March 31, 2024 was approximately $9,682,600 compared to $12,292,600 for the three months ended March 31, 2023, a decrease
of approximately $2,610,000. The change was primarily due to:
● Decrease in stock-based compensation expense of $2,764,100;
● Increase in other general and administrative expenses of $92,100 primarily
due to an increase in consulting services; and
● Increase in compensation expense of $62,000 related to an increase
of general and administrative employees and their related bonuses.
Other Income (Expense)
Interest/investment income was approximately
$1,055,900 and $1,207,600 for the three months ended March 31, 2024 and 2023, respectively. The decrease was due to higher interest rates
and investment yields. Realized gain on short-term investments was approximately $53,100 and realized loss was $666,700 for the three
months ended March 31, 2024 and 2023, respectively. Unrealized gain on short-term investments for the three months ended March 31, 2024
was approximately $50,700 compared to approximately $1,291,100 for the three months ended March 31, 2023.
Net Loss
The net loss for the Company for the three months
ended March 31, 2024 and 2023 was approximately $21,828,100 and $26,351,600 respectively. The Company had loss per share, basic and diluted
of $0.72 and $0.87 for the three months ended March 31, 2024 and 2023, respectively.
Income Taxes
The Company did not provide for income taxes
for the three months ended March 31, 2024 and 2023, since there was a loss and a full valuation allowance against all deferred tax assets.
Liquidity
As shown in the accompanying financial statements,
the Company incurred negative operating cash flows of $13,036,748 for the three months ended March 31, 2024 and has an accumulated deficit
of $582,730,807 from inception through March 31, 2024. At March 31, 2024 the Company had cash and cash equivalents, and short-term investments
of $83,612,705.
Management believes that the Company’s
existing cash and cash equivalents, and short-term investments will enable it to fund operating expenses and capital expenditure requirements
for at least 12 months from the issuance of these unaudited condensed consolidated financial statements. Beyond that point management
will evaluate the size and scope of any subsequent operations and clinical 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. Further, additional financing 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 unaudited
condensed consolidated financial statements.
The following table sets forth selected cash flow information for
the periods indicated below:
Three Months Ended
March 31,
2024
Three Months Ended
March 31,
2023
Cash used in operating activities
$ (13,036,748 )
$ (16,505,094 )
Cash provided by investing activities
10,058,451
40,003,549
Cash provided by financing activities
221,747
-
Net increase/(decrease) in cash and cash equivalents
$ (2,756,550 )
23,498,455 )
For the three months ended March 31, 2024, cash
used in operating activities was $13,036,748 primarily due to the net loss of $21,828,126 offset by non-cash stock-based compensation
charges of $8,295,468. There were realized gains and unrealized gains on short-term investments of $53,133 and $50,713, respectively.
In addition, there was a decrease in operating assets and liabilities of $599,756.
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For the three months ended March 31, 2023, cash
used in operating activities was $16,505,094 primarily due to the net loss of $26,321,576 offset by non-cash stock-based compensation
charges of $11,354,466. There were realized losses and unrealized gains on short-term investments of $666,708 and $1,291,110, respectively.
In addition, there was a decrease in operating assets and liabilities of $913,582.
For the three months ended March 31, 2024, cash provided by investing activities was $10,058,451 due to $7,013,933 of purchases of short-term
investments offset by $17,072,384 of sales of short-term investments.
For the three months ended March 31, 2023, cash
provided by investing activities was $40,003,549 related to the purchase of $34,767,288 and the sale of $74,770,836 short-term investments.
Net cash provided by financing activities for
the three months ended March 31, 2024 was $221,747 due to proceeds from options exercised for common stock of $246,747 offset by ATM fees
of $25,000.
There was no cash provided by financing activities
for the three months ended March 31, 2023.
Effects of Inflation
Our assets are primarily monetary, consisting
of cash and cash equivalents and short-term investments. Because of their liquidity, these assets are not directly affected by inflation.
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.
Commitments and Contingencies
Please refer to Note 7 in our Annual Report on
Form 10-K for the year ended December 31, 2023 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, 2023. 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 condensed consolidated financial
statements are presented in accordance with U.S. GAAP, and all applicable U.S. GAAP accounting standards effective as of March 31, 2024
have been taken into consideration in preparing the unaudited consolidated financial statements. The preparation of unaudited condensed
consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, 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. Management bases its estimates on historical experience and on various assumptions that are believed
to be reasonable under the circumstances, the results of which form the basis for making 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 assumptions. After such reviews, and
if deemed appropriate, management’s 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 if:
●
it requires assumptions to be made that were uncertain at the time the estimate was made; and
●
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 unaudited condensed 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 unaudited condensed consolidated financial statements included in this report.
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