RELMADA THERAPEUTICS, INC. 10-Q

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 or the Company, we or us) (a Nevada corporation), is a clinical-stage biotechnology company focused on the development of esmethadone (d-methadone, dextromethadone, REL-1017), an N-methyl-D-aspartate (NMDA) receptor antagonist. Esmethadone, 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. 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. 14 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 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. 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. 15 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 subjects in 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. Key Upcoming Anticipated Milestones We expect multiple key milestones over the next 12 months. These include: ● Conduct a formal interim analysis, with futility and sample size re-estimation analyses, of RELIANCE II study by year-end 2024. ● Complete enrollment in the ongoing RELIANCE II study by year-end 2024. ● Initiate Phase 1 trial in obese subjects with the modified-release formulation of psilocybin (REL-P11) in 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. 16 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. 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 $39,596,248 for the six months ended June 30, 2024. At June 30, 2024, we had an accumulated deficit of $600,498,929. 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. 17 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 psilocybine (REL-P11) for the treatment of metabolic indications. This program is expected to enter human studies, to define its pharmacokinetic, safety and tolerability profile, in 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 June 30, 2024 versus June 30, 2023: Three Months Ended Three Months Ended June 30, 2024 June 30, 2023 Increase (Decrease) Operating Expenses Research and development $ 10,721,089 $ 13,740,205 $ (3,019,116 ) General and administrative 8,097,695 12,286,521 (4,188,826 ) Total $ 18,818,784 $ 26,026,726 $ (7,207,942 ) Research and Development Expense Research and development expense for the three months ended June 30, 2024, was approximately $10,721,100 compared to $13,740,200 for the three months ended June 30, 2023, a decrease of approximately $3,019,100. The decrease was primarily due to: ● Decrease in study costs of $3,423,900 associated with the completion of the long-term, open-label study, Study 310 in the 3 rd Quarter 2023, as well as RELIANCE I and III in late 2022; ● Decrease in compensation expense of $208,200 due to an decrease in research and development employees and their related bonuses; ● Decrease in stock-based compensation expense of $142,700 related to options granted to employees; ● Increase in manufacturing and drug storage costs of $380,700; and ● Increase in other research expenses of $375,000 primarily associated with the ramp-up of the 302 and 304 studies in 2024. 18 General and Administrative Expense General and administrative expense for the three months ended June 30, 2024, was approximately $8,097,700 compared to $12,286,500 for the three months ended June 30, 2023, a decrease of approximately $4,188,800. The decrease was primarily due to: ● Decrease in stock-based compensation expense of 3,813,500 related to option grants to employees and key consultants; ● Decrease in other general and administrative expenses of $288,100 primarily due to a decrease in consulting services; and ● Decrease in compensation expense of $87,200 related to a decrease of general and administrative employees. Other Income (Expense) Interest / investment income was approximately $963,000 and $1,363,400 for the three months ended June 30, 2024 and 2023, respectively. The decrease was due to lower interest rates and investment yields. Realized gain on short-term investments was approximately $133,100 and $0 for the three months ended June 30, 2024 and 2023, respectively. Unrealized loss on short-term investments was approximately $45,500 and $639,600 for the three months ended June 30, 2024 and 2023, respectively. Net Loss The net loss for the Company for the three months ended June 30, 2024 and 2023 was approximately $17,768,100 and $25,303,000, respectively. The Company had loss per share basic and diluted of $0.59 and $0.84 for the three months ended June 30, 2024 and 2023, respectively. Income Taxes The Company did not provide for income taxes for the three months ended June 30, 2024 and 2023, since there was a loss and a full valuation allowance against all deferred tax assets. Results of Operations For the Six Months Ended June 30, 2024 versus June 30, 2023 Six Months Ended Six Months Ended June 30, 2024 June 30, 2023 Increase (Decrease) Operating Expenses Research and development $ 24,026,395 $ 29,601,215 $ (5,574,820 ) General and administrative 17,780,249 24,579,120 (6,798,871 ) Total $ 41,806,644 $ 54,180,335 $ (12,373,691 ) Research and Development Expense Research and development expense for the six months ended June 30, 2024 was approximately $ 24,026,400 compared to $29,601,200 for the six months ended June 30, 2023, a decrease of approximately $5,574,800. The decrease was primarily due to: ● Decrease in study costs of $7,082,800 associated with the completion of the long-term, open-label study, Study 310 in the 3 rd Quarter 2023, as well as RELIANCE I and III in late 2022 ● Decrease in stock-based compensation expense of $437,500; ● Decrease in compensation expense of $146,800 due to a decrease in research and development employees and their related bonuses; ● Increase in other research expenses of $1,672,000 primarily associated with the ramp-up of the 302 and 304 studies in 2024; ● Increase in manufacturing and drug storage costs of $386,600; and ● Increase in pre-clinical and toxicology expenses of $33,700. 19 General and Administrative Expense General and administrative expense for the six months ended June 30, 2024 was approximately $17,780,200 compared to $24,579,100 for the six months ended June 30, 2023, a decrease of approximately $6,798,900. The decrease was primarily due to: ● Decrease in stock-based compensation expense of $6,577,500 related to option grants to employees and key consultants; ● Decrease in other general and administrative expenses of $196,000 primarily due to a decrease in consulting services; and ● Decrease in compensation expense of $25,400 primarily related an decrease of general and administrative employees and their related bonuses. Other Income (Expense) Interest / investment income was approximately $2,018,900 and $2,571,000 for the six months ended June 30, 2024 and 2023, respectively. The decrease was due to lower interest rates and investment yields. Realized gain on short-term investments was approximately $186,200 for the six months ended June 30, 2024 compared to a realized loss of approximately $666,700 for the six months ended June 30, 2023. Unrealized gain on short-term investments was approximately $5,200 and $651,500 for the six months ended June 30, 2024 and 2023, respectively. Net Loss The net loss for the Company for the six months ended June 30, 2024 and 2023 was approximately $39,596,200 and $51,624,500, respectively. The Company had loss per share basic and diluted of $1.31 and $1.72 for the six months ended June 30, 2024 and 2023, respectively. Income Taxes The Company did not provide for income taxes for the six months ended June 30, 2024 and 2023, since there was a loss and a full valuation allowance against all deferred tax assets. Liquidity As shown in the accompanying unaudited condensed consolidated financial statements, the Company incurred negative operating cash flows of $26,299,773 for the six months ended June 30, 2024 and has an accumulated deficit of $600,498,929 from inception through June 30, 2024. At June 30, 2024, the Company had cash and cash equivalents and short term investments of $70,437,329. 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: Six Months Ended June 30, 2024 Six Months Ended June 30, 2023 Cash used in operating activities $ (26,299,773 ) $ (29,778,363 ) Cash provided by investing activities 24,072,718 38,851,812 Cash provided by financing activities 221,747 - Net (decrease) increase in cash and cash equivalents $ (2,005,308 ) $ 9,073,449 For the six months ended June 30, 2024, cash used in operating activities was $26,299,773 primarily due to the net loss of $39,596,248 offset by non-cash stock-based compensation charges of $15,508,887. There were realized and unrealized gains on short-term investments of $186,247 and $5,248, respectively. In addition, there was a decrease in operating assets and liabilities of $2,020,917. 20 For the six months ended June 30, 2023, cash used in operating activities was $29,778,363 primarily due to the net loss of $51,624,530 offset by non-cash stock-based compensation charges of $22,523,983. There were realized losses and unrealized gains on short-term investments of $666,708 and $651,476, respectively. In addition, there was a decrease in operating assets and liabilities of $693,048. For the six months ended June 30, 2024, cash provided by investing activities was $24,072,718, due to $8,313,312 of purchases of short-term investments offset by $32,386,030 of sales of short-term investments. For the six months ended June 30, 2023, cash provided by investing activities was $38,851,812, due to $45,577,832 of purchases of short-term investments offset by $84,429,644 of sales of short-term investments. For the six months ended June 30, 2024, cash provided by financing activities 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 six months ended June 30, 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 June 30, 2024 have been taken into consideration in preparing the unaudited condensed 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 unaudited condensed consolidated 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. 21