RELMADA THERAPEUTICS, INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS Relmada Therapeutics, Inc. Condensed Consolidated Balance Sheets As of September 30, As of 2024 (Unaudited) December 31, 2023 Assets Current assets: Cash and cash equivalents $ 1,483,789 $ 4,091,568 Short-term investments 52,633,938 92,232,292 Prepaid expenses 1,584,803 1,185,057 Total current assets 55,702,530 97,508,917 Other assets 21,975 43,125 Total assets $ 55,724,505 $ 97,552,042 Commitments and Contingencies (See Note 8) Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 2,345,541 $ 3,506,009 Accrued expenses 5,741,220 8,688,791 Total current liabilities 8,086,761 12,194,800 Stock appreciation rights 12,562 - Total liabilities 8,099,323 12,194,800 Stockholders’ Equity: Class A convertible preferred stock, $ 0.001 par value, 3,500,000 shares authorized, none issued and outstanding - - Common stock, $ 0.001 par value, 150,000,000 shares authorized, 30,174,202 and 30,099,203 shares issued and outstanding, respectively 30,174 30,099 Additional paid-in capital 669,819,907 646,229,824 Accumulated deficit ( 622,224,899 ) ( 560,902,681 ) Total stockholders’ equity 47,625,182 85,357,242 Total liabilities and stockholders’ equity $ 55,724,505 $ 97,552,042 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 1 Relmada Therapeutics, Inc. Condensed Consolidated Statements of Operations (Unaudited) Three months ended Nine months ended September 30, September 30, 2024 2023 2024 2023 Operating expenses: Research and development $ 11,149,136 $ 10,454,072 $ 35,175,531 $ 40,055,287 General and administrative 11,859,702 12,238,566 29,639,951 36,817,686 Total operating expenses 23,008,838 22,692,638 64,815,482 76,872,973 Loss from operations ( 23,008,838 ) ( 22,692,638 ) ( 64,815,482 ) ( 76,872,973 ) Other (expenses) income: Interest/investment income, net 856,478 1,321,441 2,875,379 3,892,478 Realized (loss) gain on short-term investments 147,835 ( 51,714 ) 334,082 ( 718,422 ) Unrealized (loss) gain on short-term investments 278,555 ( 579,147 ) 283,803 72,329 Total other (expense) income – net 1,282,868 690,580 3,493,264 3,246,385 Net loss $ ( 21,725,970 ) $ ( 22,002,058 ) $ ( 61,322,218 ) $ ( 73,626,588 ) Loss per common share – basic and diluted $ ( 0.72 ) $ ( 0.73 ) $ ( 2.03 ) $ ( 2.45 ) Weighted average number of common shares outstanding – basic and diluted 30,174,202 30,099,203 30,160,242 30,099,203 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 Relmada Therapeutics, Inc. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) Three and Nine months ended September 30, 2024 Common Stock Additional Paid-in Accumulated Shares Par Value Capital Deficit Total Balance – December 31, 2023 30,099,203 $ 30,099 $ 646,229,824 $ ( 560,902,681 ) $ 85,357,242 Stock-based compensation - - 8,295,468 - 8,295,468 Options exercises for common stock 74,999 75 246,672 - 246,747 ATM Fees - - ( 25,000 ) - ( 25,000 ) Net loss - - - ( 21,828,126 ) ( 21,828,126 ) Balance – March 31, 2024 30,174,202 30,174 654,746,964 ( 582,730,807 ) 72,046,331 Stock-based compensation - - 7,213,419 - 7,213,419 Net loss - - - ( 17,768,122 ) ( 17,768,122 ) Balance – June 30, 2024 30,174,202 30,174 661,960,383 ( 600,498,929 ) 61,491,628 Stock-based compensation - - 7,949,125 - 7,949,125 ATM Fees - - ( 89,601 ) - ( 89,601 ) Net loss - - - ( 21,725,970 ) ( 21,725,970 ) Balance – September 30, 2024 30,174,202 $ 30,174 $ 669,819,907 $ ( 622,224,899 ) $ 47,625,182 Three and Nine months ended September 30, 2023 Common Stock Additional Paid-in Accumulated Shares Par Value Capital Deficit Total Balance – December 31, 2022 30,099,203 $ 30,099 $ 602,517,138 $ ( 462,110,935 ) $ 140,436,302 Stock-based compensation - - 11,354,466 - 11,354,466 Net loss - - - ( 26,321,576 ) ( 26,321,576 ) Balance – March 31, 2023 30,099,203 30,099 613,871,604 ( 488,432,511 ) 125,469,192 Stock-based compensation - - 11,169,517 - 11,169,517 Net loss - - - ( 25,302,954 ) ( 25,302,954 ) Balance – June 30, 2023 30,099,203 30,099 625,041,121 ( 513,735,465 ) 111,335,755 Stock-based compensation - - 11,392,938 - 11,392,938 Net loss - - - ( 22,002,058 ) ( 22,002,058 ) Balance – September 30, 2023 30,099,203 $ 30,099 $ 636,434,059 $ ( 535,737,523 ) $ 100,726,635 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 Relmada Therapeutics, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) Nine months ended September 30, 2024 2023 Cash flows from operating activities Net loss $ ( 61,322,218 ) $ ( 73,626,588 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation 23,458,012 33,916,921 Realized (gain) loss on short-term investments ( 334,082 ) 718,422 Unrealized (gain) loss on short-term investments ( 283,803 ) ( 72,329 ) Change in operating assets and liabilities: Other receivable - 512,432 Prepaid expenses and other assets ( 378,596 ) 1,188,309 Accounts payable ( 1,160,468 ) ( 2,405,184 ) Accrued expenses ( 2,947,571 ) ( 1,641,475 ) Stock appreciation rights compensation 12,562 - Net cash used in operating activities ( 42,956,164 ) ( 41,409,492 ) Cash flows from investing activities Purchase of short-term investments ( 11,424,986 ) ( 57,151,963 ) Sale of short-term investments 51,641,225 99,864,149 Net cash provided by investing activities 40,216,239 42,712,186 Cash flows from financing activities Proceeds from options exercised for common stock 246,747 - ATM Fees ( 114,601 ) - Net cash provided by financing activities 132,146 - Net increase /(decrease) in cash and cash equivalents ( 2,607,779 ) 1,302,694 Cash and cash equivalents at beginning of the period 4,091,568 5,395,905 Cash and cash equivalents at end of the period $ 1,483,789 6,698,599 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ - $ - Income Tax $ - $ - The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 1 - BUSINESS Relmada Therapeutics, Inc. (Relmada or the Company) (a Nevada corporation), is a clinical-stage, publicly traded biotechnology company focused on the development of esmethadone (d-methadone, dextromethadone, REL-1017), an N-methyl-D-aspartate (NMDA) receptor antagonist. Esmethadone is a new chemical entity (NCE) that potentially addresses areas of high unmet medical need in the treatment of central nervous system (CNS) diseases and other disorders. Relmada is also developing a proprietary, modified-release formulation of psilocybin (REL-P11) for metabolic indications. In addition to the normal risks associated with a new business venture, there can be no assurance that the Company’s research and development will be successfully completed or that any product will be approved or commercially viable. The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, dependence on collaborative arrangements, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, and compliance with the Food and Drug Administration (FDA) and other governmental regulations and approval requirements. NOTE 2 – GOING CONCERN These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying unaudited condensed consolidated financial statements, the Company has incurred losses and negative cash flows from operations since inception and expects to incur additional losses until such time that it can generate significant revenue from the commercialization of its product candidates. During the nine months ended September 30, 2024, the Company incurred a net loss of $ 61,322,218 and had negative operating cash flows of $ 42,956,164 . Given the Company’s projected operating requirements and its existing cash and cash equivalents and short-term investments, the Company is projecting insufficient liquidity to sustain its operations through one year following the date that the financial statements are issued. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern. In response to these conditions, management is currently evaluating the size and scope of any subsequent operations and clinical trials that will affect the timing to obtain the required funding of future operations. Financing strategies may include, but are not limited to, the public or private sale of equity or debt securities or from bank or other loans or through strategic collaboration and/or licensing agreements. There can be no assurances that the Company will be able to secure additional financing, or if available, that it will be sufficient to meet its needs or on favorable terms. Because management’s plans have not yet been finalized and are not within the Company’s control, the implementation of such plans cannot be considered probable. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim unaudited condensed consolidated financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. The unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2023 and notes thereto contained in the Company’s Annual Report on Form 10-K. Principles of Consolidation The unaudited condensed consolidated financial statements include the Company’s accounts and those of the Company’s wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates. The significant estimates are stock-based compensation expenses and recorded amounts related to income taxes. 5 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Cash and Cash Equivalents The Company considers cash deposits and all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company’s cash deposits are held at two high-credit-quality financial institutions. The Company’s cash and cash equivalents balance of $ 1,483,789 at September 30, 2024 at these institutions exceed the federally insured limits. Short-term Investments The Company’s investments consist entirely of mutual funds. The securities are measured at fair value based on the net asset value (NAV). Substantially all equity investments in nonconsolidated entities are measured at fair value with recurring changes recognized in earnings, except for those accounted for using equity method accounting. Changes in fair value of the securities are recorded as part of other income on the unaudited condensed consolidated statements of operations. Short-term investment activity is presented in the investing activities section on the unaudited condensed consolidated statements of cash flows. Short-term investments at September 30, 2024 and December 31, 2023, consisted of mutual funds with a fair value of $ 52,633,938 and $ 92,232,292 , respectively. Patents Costs related to filing and pursuing patent applications are recorded as general and administrative expense and expensed as incurred since recoverability of such expenditures is uncertain. Leases The Company recognizes its leases with a term of greater than a year on the balance sheet by recording right-of-use assets and lease liabilities. Leases can be classified as either operating leases or finance leases. Operating leases will result in straight-line lease expense, while finance leases will result in front-loaded expense. The Company’s lease consists of an operating lease for office space. The Company does not recognize a lease liability or right-of-use asset on the balance sheet for short-term leases. Instead, the Company recognizes short-term lease payments as an expense on a straight-line basis over the lease term. A short-term lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. Fair Value of Financial Instruments The Company’s financial instruments primarily include cash, short-term investments, and accounts payable. Due to the short-term nature of cash and accounts payable the carrying amounts of these assets and liabilities approximate their fair value. Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows: Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means. Level 3 Inputs – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). 6 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) As required by Accounting Standard Codification (ASC) Topic No. 820 – 10 Fair Value Measurement , financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The Company’s short-term investment instruments of $ 52,633,938 at September 30, 2024 consist of mutual funds and are classified using Level 1 inputs within the fair value hierarchy because the value is based on quoted prices in active markets. Unrealized gains and losses are recorded in the unaudited condensed consolidated statements of operations under other income. The Company recorded realized gains of $ 147,835 and $ 334,082 included in other income for the three and nine months ended September 30, 2024, respectively. The Company recorded unrealized gains of $ 278,555 and $ 283,803 included in other income for the three and nine months ended September 30, 2024, respectively. Income Taxes The Company accounts for income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rate is recognized in income or expense in the period that the change is effective. Tax benefits are recognized when it is probable that the deduction will be sustained. A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will either expire before the Company is able to realize the benefit, or that future deductibility is uncertain. As of September 30, 2024, and December 31, 2023, the Company had recognized a valuation allowance to the full extent of the Company’s net deferred tax assets since the likelihood of realization of the benefit does not meet the more likely than not threshold. The Company files a U.S. Federal income tax return and various state returns. Uncertain tax positions taken on the Company’s tax returns will be accounted for as liabilities for unrecognized tax benefits. The Company will recognize interest and penalties, if any, related to unrecognized tax benefits in general and administrative expenses in the statements of operations. There were no liabilities recorded for uncertain tax positions at September 30, 2024 and December 31, 2023. The open tax years, subject to potential examination by the applicable taxing authority, for the Company are from September 30, 2018 forward. Research and Development Research and development costs primarily consist of research contracts for the advancement of product development, salaries and benefits, stock-based compensation, and consultants. The Company expenses all research and development costs in the period incurred. The Company makes an estimate of costs in relation to clinical study contracts. The Company analyzes the progress of studies, including the progress of clinical studies and phases, invoices received and contracted costs when evaluating the adequacy of the amount expensed and the related prepaid asset and accrued liability. Stock-Based Compensation The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award - the requisite service period. The grant-date fair value of employee share options is estimated using the Black-Scholes option pricing model adjusted for the unique characteristics of those instruments. Stock Appreciation Rights Pursuant to the terms of the Company’s 2021 Equity Incentive Plan, the Company grants cash-settled Stock Appreciation Rights (“SARs”) that are classified as liabilities under ASC 718 ( Compensation—Stock Compensation ). These SARs allow employees to receive cash payments based on the appreciation of the Company’s stock price over a specified period. The initial fair value of SARs is determined on the grant date using the Black-Scholes option pricing model. SARs are remeasured at fair value at each reporting date using the Black-Scholes pricing model until they are exercised or expire. Changes in fair value are recognized in the income statement as a compensation expense. Compensation expense is recognized over the service period, which is the period during which employees are required to provide service in exchange for the award. Upon exercise, the Company will settle SARs in cash based on the difference between the fair value of the underlying shares at the exercise date and the exercise price. 7 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Net Loss per Common Share Basic loss per common share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted loss per common share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of options and warrants to purchase common stock. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net losses in each period. For the nine months ended September 30, 2024 and 2023, the potentially dilutive securities that would be anti-dilutive due to the Company’s net loss are not included in the calculation of diluted net loss per share attributable to common stockholders. The anti-dilutive securities are as follows (in common stock equivalent shares): Nine months ended September 30, 2024 September 30, 2023 Stock options 13,052,592 12,455,568 Common stock warrants 1,663,451 3,027,441 Total 14,716,043 15,483,009 Recent Accounting Pronouncements In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”. The amendments in this ASU require that an entity (acquirer) recognize, and measure contract assets and contract liabilities acquired in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, as if it had originated the contracts as of the acquisition date. The amendments in this ASU were effective for annual and interim periods beginning after December 15, 2022. The Company adopted this standard effective January 1, 2023 and the standard did not have a significant impact on our consolidated financial statements. In November 2023, The FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” which expands annual and interim disclosures for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on our financial statement disclosures. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on our financial statement disclosures. Subsequent Events The Company’s management reviewed all material events through the date the unaudited condensed consolidated financial statements were issued for subsequent event disclosure consideration. 8 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 4 - PREPAID EXPENSES Prepaid expenses consisted of the following (rounded to nearest $00): September 30, 2024 December 31, 2023 Insurance $ 611,200 $ 365,100 Research and Development 730,300 695,000 Other 243,300 125,000 Total $ 1,584,800 $ 1,185,100 NOTE 5 - ACCRUED EXPENSES Accrued expenses consisted of the following (rounded to nearest $00): September 30, 2024 December 31, 2023 Research and development $ 4,042,700 $ 5,394,700 Professional fees 252,300 174,000 Accrued bonus 970,500 2,632,400 Accrued vacation 395,400 372,200 Other 80,300 115,500 Total $ 5,741,200 $ 8,688,800 9 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 6 - STOCK APPRECIATION RIGHTS During the nine months ended September 30, 2024, 110,000 stock appreciation rights have been issued to employees with an exercise price of $ 3.84 - $ 3.69 respectively with a 10 -year term, and vesting over a 4 -year period. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 3.87 – 4.15 %, (2) expected life of 6.25 years, (3) expected volatility of 113 %, and (4) zero expected dividends. At September 30, 2024, the Company revalued the stock appreciation rights using a stock price of $ 3.24 and an exercise price of $ 3.84 - $ 3.69 . Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 3.63 %, (2) expected life of 6 years, (3) expected volatility of 112 %, and (4) zero expected dividends. As of September 30, 2024, the total liability related to SARs is $ 12,562 , reflecting the fair value as of the reporting date. During the quarter ended September 30, 2024, the Company recorded compensation related to the SARs in the amount of $ 12,562 , included in research and development expenses in the accompanying consolidated statements of operations. A summary of the changes in SARs during the nine months ended September 30, 2024 is as follows. Number of SARS Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at December 31, 2023 - $ - - $ - Granted 110,000 $ 3.70 9.84 $ - Outstanding at September 30, 2024 110,000 $ 3.70 9.84 $ - SARs vested at September 30, 2024 - $ - - $ - At September 30, 2024, the Company has unrecognized compensation expense of approximately $ 0.3 million related to unvested stock appreciation rights which will be recognized over the weighted average remaining service period of 3.83 years. NOTE 7 - STOCKHOLDERS’ EQUITY Common Stock During the nine months ended September 30, 2024, the Company issued 74,999 shares of common stock for the exercise of options for proceeds of $ 246,747 . On April 6, 2022, the Company entered into a new Open Market Sale Agreement with Jefferies LLC, as sales agent, pursuant to which we may offer and sell, from time to time, through Jefferies LLC, shares of our common stock, having an aggregate offering price of up to $ 100,000,000 . We are not obligated to sell any shares under the agreement. As of September 30, 2024, no shares have been issued under this agreement. Options and Warrants In December 2014, the Board of Directors adopted and the Company’s shareholders approved Relmada’s 2014 Stock Option and Equity Incentive Plan, as amended (the “ 2014 Plan”), which allows for the granting of 5,152,942 common stock awards, stock appreciation rights, and incentive and nonqualified stock options to purchase shares of the Company’s common stock to designated employees, non-employee directors, and consultants and advisors. In May 2021, the Company’s Board of Directors adopted and shareholders approved Relmada’s 2021 Equity Incentive Plan (the “2021 Plan”) which allows for the granting of 1,500,000 options or other stock awards. In May 2022, the Company’s Board of Directors adopted and shareholders approved an amendment to the 2021 Plan to increase the shares of the Company’s common stock available for issuance thereunder by 3,900,000 shares. In May 2023, the Company’s Board of Directors adopted and shareholders approved an amendment to the 2021 Plan to increase the shares of the Company’s common stock available for issuance thereunder by 2,500,000 shares. These combined plans allowed for the granting of up to 13,052,942 options or other stock awards. Stock options are exercisable generally for a period of 10 years from the date of grant and generally vest over four years . As of September 30, 2024, 350 shares were available for future grants under the 2014 or 2021 Plan. The Company utilizes the Black-Scholes option pricing model to estimate the fair value of stock options and warrants. The risk-free interest rate assumptions were based upon the observed interest rates appropriate for the expected term of the equity instruments. The expected dividend yield was assumed to be zero as the Company has not paid any dividends since its inception and does not anticipate paying dividends in the foreseeable future. The expected volatility was based on historical volatility. The Company uses the simplified method for share-based compensation to estimate the expected term for equity awards for share-based compensation in its option-pricing model. 10 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 7 - STOCKHOLDERS’ EQUITY (continued) From January 1, 2024 through September 30, 2024, 487,434 options were issued to various consultants and employees with an exercise price ranging from $ 3.05 to $ 3.44 and a 10 -year term, vesting over a 3.56 - 4 year period. The options granted include time-based vesting grants. The options have an aggregate fair value of approximately $ 1.3 million calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 4.10 – 4.51 % - (2) expected life of 5.92 - 6.25 years, (3) expected volatility of 113.5 % - 114.1 %, and (4) zero expected dividends. At September 30, 2024, the Company has unrecognized stock-based compensation expense of approximately $ 32 million related to unvested stock options which will be recognized over the weighted average remaining service period of 1.78 years. Options A summary of the changes in options during the nine months ended September 30, 2024 is as follows: Number of Options Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding and expected to vest at December 31, 2023 17,416,192 $ 12.99 8.3 $ 11,183,370 Granted 487,434 $ 3.10 9.63 $ - Exercised ( 74,999 ) $ - - - Forfeited ( 18,407 ) $ - - $ - Cancelled ( 4,757,628 ) $ - - $ - Outstanding at September 30, 2024 13,052,592 $ 16.47 7.02 $ 599,973 Options exercisable at September 30, 2024 8,888,189 $ 19.28 6.52 $ 111,698 Warrants A summary of the changes in outstanding warrants during the nine months ended September 30, 2024 is as follows: Number of Shares Weighted Average Exercise Price Per Share Outstanding at December 31, 2023 2,381,366 $ 20.02 Forfeited ( 717,915 ) $ - Exercised - $ - Outstanding at September 30, 2024 1,663,451 $ 25.31 Warrants vested at September 30, 2024 1,600,326 $ 25.05 At September 30, 2024, the Company had approximately $ 0.9 million of unrecognized compensation expense related to outstanding warrants. At September 30, 2024, the aggregate intrinsic value of warrants vested and outstanding was $ 3,240 . Stock -based compensation for options and warrants by class of expense The following table summarizes the components of stock-based compensation expense which includes stock options and warrants in the unaudited consolidated statements of operations for the nine months ended September 30, 2024 and 2023 (rounded to nearest $00): Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023 Research and development $ 5,007,300 $ 5,463,100 General and administrative 18,450,700 28,453,800 Total $ 23,458,000 $ 33,916,900 11 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 8 - COMMITMENTS AND CONTINGENCIES License Agreements Wonpung On August 20, 2007, the Company entered into a License Development and Commercialization Agreement with Wonpung Mulsan Co, a shareholder of the Company. Wonpung has exclusive territorial rights in countries it selects in Asia to market up to two drugs the Company was developing at the time of the signing of the agreement and a right of first refusal (“ROFR”) for up to an additional five drugs that the Company may develop in the future as defined in more detail in the license agreement. If the parties cannot agree to terms of a license agreement then the Company shall be able to engage in discussions with other potential licensors. As of September 30, 2024, no discussions are active between the Company and Wonpung. The Company received an upfront license fee of $ 1,500,000 and will earn royalties of up to 12 % of net sales for up to two licensed products it is currently developing. The licensing terms for the ROFR products are subject to future negotiations and binding arbitration. The terms of each licensing agreement will expire on the earlier of any time from 15 years to 20 years after licensing or on the date of commercial availability of a generic product to such licensed product in the licensed territory. Third Party Licensor Based upon a prior acquisition, the Company assumed an obligation to pay third parties (Dr. Charles E. Inturrisi and Dr. Paolo Manfredi – see below): (A) royalty payments up to 2 % on net sales of licensed products that are not sold by sublicensee and (B) on each and every sublicense earned royalty payment received by licensee from its sublicensee on sales of license product by sublicensee, the higher of (i) 20 % of the royalties received by licensee; or (ii) up to 2 % of net sales of sublicensee. The Company will also make milestone payments of up to $ 4 million or $ 2 million, for the first commercial sale of product in the field that has a single active pharmaceutical ingredient, and for the first commercial sale of product in the field of product that has more than one active pharmaceutical ingredient, respectively. As of September 30, 2024, the Company has not generated any revenue related to this license agreement. Inturrisi / Manfredi In January 2018, the Company entered into an Intellectual Property Assignment Agreement (the Assignment Agreement) and License Agreement (the License Agreement and together with the Assignment Agreement, the Agreements) with Dr. Charles E. Inturrisi and Dr. Paolo Manfredi (collectively, the Licensor). Pursuant to the Agreements, Relmada assigned its existing rights, including patents and patent applications, to esmethadone in the context of psychiatric use (the Existing Invention) to Licensor. Licensor then granted Relmada under the License Agreement a perpetual, worldwide, and exclusive license to commercialize the Existing Invention and certain further inventions regarding esmethadone, in the context of other indications such as those contemplated above. In consideration of the rights granted to Relmada under the License Agreement, Relmada paid the Licensor an upfront, non-refundable license fee of $ 180,000 . Additionally, Relmada will pay Licensor $ 45,000 every three months until the earliest to occur of the following events: (i) the first commercial sale of a licensed product anywhere in the world, (ii) the expiration or invalidation of the last to expire or be invalidated of the patent rights anywhere in the world, or (iii) the termination of the License Agreement. Relmada will also pay Licensor tiered royalties with a maximum rate of 2 %, decreasing to 1.75 %, and 1.5 % in certain circumstances, on net sales of licensed products covered under the License Agreement. Relmada will also pay Licensor tiered payments up to a maximum of 20 %, and decreasing to 17.5 %, and 15 % in certain circumstances, of all consideration received by Relmada for sublicenses granted under the License Agreement. As of September 30, 2024, no events have occurred, and the Company continues to pay Licensor $ 45,000 every three months. Arbormentis, LLC On July 16, 2021, the Company entered into a License Agreement with Arbormentis, LLC, a privately held Delaware limited liability company, by which the Company acquired development and commercial rights to a novel psilocybin and derivate program from Arbormentis, LLC, worldwide excluding the countries of Asia. The Company will collaborate with Arbormentis, LLC on the development of new therapies targeting neurological and psychiatric disorders, leveraging its understanding of neuroplasticity, and focusing on this emerging new class of drugs targeting the neuroplastogen mechanism of action. Under the terms of the License Agreement, the Company paid Arbormentis, LLC an upfront fee of $ 12.7 million, consisting of a mix of cash and warrants to purchase the Company’s common stock, in addition to potential milestone payments totaling up to approximately $ 160 million related to pre-specified development and commercialization milestones. Arbormentis, LLC is also eligible to receive a low single digit royalty on net sales of any commercialized therapy resulting from this agreement. The license agreement is terminable by the Company but is perpetual and not terminable by the licensor absent material breach of its terms by the Company. The new licensed program stems from an international collaboration among U.S., European and Swiss scientists that has focused on the discovery and development of compounds that may promote neural plasticity. Dr. Paolo Manfredi, Relmada’s co-inventor of REL-1017 and Relmada’s scientific advisor, and Dr. Marco Pappagallo, Relmada’s scientific advisor, are among the scientists affiliated with Arbormentis, LLC. 12 Relmada Therapeutics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements NOTE 8 - COMMITMENTS AND CONTINGENCIES (continued) Leases and Sublease On August 1, 2021, the Company relocated its corporate headquarters to 2222 Ponce de Leon, Floor 3, Coral Gables, FL 33134, pursuant to a lease agreement with monthly rent of approximately $ 11,000 . The lease period was for five months . The lease agreement expired on December 31, 2021 and was renewed for the calendar years 2022, 2023, and 2024, with monthly rent of approximately $ 9,000 , $ 7,000 , and $ 7,000 , respectively. Beginning on January 1, 2023, we also leased office space at 880 Third Avenue, 12 th Floor, New York, NY 10022 with monthly rent of approximately $ 14,500 ; that lease was terminated on November 30, 2023 . Beginning on December 1, 2023, we leased office space at 12 E 49 th Street, New York, NY 10022 with monthly rent of approximately $ 12,000 ; that lease was terminated on May 31, 2024 . Beginning on May 29, 2024, we leased office space at 12 E 49 th Street, New York, NY 10022 with monthly rent of approximately $ 10,500 ; that lease expires on May 30, 2025 . In accordance with ASC 842, Leases , the Company has elected the practical expedient and recognizes rent expense evenly over the 12 months. For the nine months ended September 30, 2024 and 2023, the Company recognized lease expense of approximately $ 179,700 and $ 213,500 , respectively. Legal From time to time, the Company may become involved in lawsuits and other legal proceedings that arise in the course of business. Litigation is subject to inherent uncertainties, and it is not possible to predict the outcome of litigation with total confidence. The Company is currently not aware of any legal proceedings or potential claims against it whose outcome would be likely, individually or in the aggregate, to have a material adverse effect on the Company’s business, financial condition, operating results, or cash flows. NOTE 9 - OTHER POST-RETIREMENT BENEFIT PLAN Relmada participates in a multiemployer 401(k) plan that permits eligible employees to contribute funds on a pretax basis subject to maximum allowed under federal tax provisions. The Company matches 100 % of the first 3 % of employee contributions, plus 50 % of employee contributions that exceed 3 % but do not exceed 5 %. The employees choose an amount from various investment options for both their contributions and the Company’s matching contribution. The Company’s contribution expense was approximately $ 107,300 and $ 118,800 for the nine months ended September 30, 2024 and 2023, respectively. NOTE 10 - SUBSEQUENT EVENTS None. 13