RELMADA THERAPEUTICS, INC. 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 "Description of Business," "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 OverviewRelmada Therapeutics, Inc. (Relmada or the Company, we or us) (aNevada 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 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 an NCE being developed as a rapidly acting, oral agent for the treatment of depression and other potential indications. OnOctober 15, 2019 we reported top-line data from study REL-1017-202. This was a double-blind, placebo-controlled Phase 2 clinical trial evaluating the safety, tolerability and efficacy of two oral doses of REL-1017, 25 mg once a day and 50 mg once a day, as an adjunctive treatment in patients with major depressive disorder (MDD),who experienced an inadequate response to 1 to 3 adequate antidepressant treatments with an antidepressant medication. In the REL-1017-202 study, 62 subjects, average age 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.
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Key findings:
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: the Montgomery-Asberg Depression Rating Scale (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.
MADRS: Analysis of Change from Baseline to Day 7 and to Day 14 ITT Population
Day 2 Day 4 Day 7 Day 14
LS LS LS
Means LS Means Means Means
Difference P-value d Difference P-value d Difference P-value d Difference P-value d
REL-1017 25mg vs Placebo -1.9 0.4340 0.3 -7.9 0.0087 0.9 -8.7 0.0122 0.8 -9.4 0.0103 0.9
REL-1017 50mg vs Placebo -0.3 0.9092 0.0 -7.6 0.0096 0.8 -7.2 0.0308 0.7 -10.4 0.0039 1.0
LS = Least Squares; d = Cohen's effect size
The study also confirmed the tolerability profile of REL-1017, which was also observed in the Phase 1 studies. Subjects experienced 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 in 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
OnDecember 20, 2020 , we 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 major depressive disorder (MDD).
Following discussions with the
? The Phase 3 program consists of two sister, two-arm, placebo-controlled
clinical trials. Each trial will be conducted in 55 clinical sites in the
United States and will include approximately 400 MDD patients with
inadequate response to standard antidepressants in their currentdepression episode. Patients will add either a 25 mg oral dose of REL-1017
once per day or placebo to their ongoing antidepressant treatment.
? The primary endpoint to be evaluated will be the change from baseline on
the Montgomery and Asberg Depression Rating Scale (MADRS) score at day-28
for REL-1017 compared to placebo. Success on this endpoint with the
collection of sufficient safety data could support the use of REL-1017 for
chronic treatment, if approved.
? The change from baseline and the 7-day MADRS score will serve as a keysecondary endpoint and will provide information on the time to treatment
effect.
On April 1st, 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
MDD. Patients who complete RELIANCE I and RELIANCE II will be eligible to
rollover into the long-term, open-label study, which is also expected to include
subjects who had not previously participated in a REL-1017 clinical trial.Psilocybin License Agreement InJuly 2021 , we executed a License Agreement withArbomentis, LLC which gives us the development and commercial rights to a novel psilocybin and derivate program. Under the terms of the agreement, we will pay Arbormentis an up-front fee of$15 million consisting of a mix of cash and warrants to purchase the Company's common stock, in addition to potential milestone payments totaling in excess of$150 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 us but is perpetual and not terminable by the licensor absent material breach of its terms by us. We will collaborate with Arbormentis 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. Importantly, neuroplasticity plays a key role in the activity of REL-1017, Relmada' s lead program. Dr.Paolo Manfredi , our Acting Chief Scientific Officer and co-inventor of REL-1017, and Dr.Marco Pappagallo , our Acting Chief Medical Officer, are among the scientists affiliated with Arbormentis.
Human Abuse Potential (HAP) Study top-line results:
OnJuly 27, 2021 , we 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, 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 maximum tolerated dose, showed a highly statistically significant difference in abuse potential versus oxycodone with p-values less than 0.001. 15
Results are detailed in the table below.
REL-1017 REL-1017 REL-1017 Oxycodone
Placebo 25 mg 75 mg 150 mg 40 mg
Mean Emax for Drug Liking 51.7 53.0 58.2 64.9 85.0
P-value for Difference vs.
oxycodone 40 mg <0.001 <0.001 <0.001 <0.001 -
These highly statistically significant data clearly demonstrate a very
meaningful difference between REL-1017 and oxycodone at all three tested doses.
These results, along with previously published literature, confirm the lackof opioid effects of REL-1017.
Key Upcoming Anticipated Milestones
We expect multiple key milestones over the next 12-18 months. These include:
? Results of IV ketamine human abuse potential study in the fourth quarter
of 2021.
? Results of RELIANCE I and RELIANCE II adjunctive MDD trials in the first
half of 2022.
Our Development Program
Esmethadone (d-Methadone, dextromethadone, REL-1017) as a treatment for MDD
Background
In 2014, theNational Institute of Mental Health (NIMH) estimated that 15.7 million adults aged 18 or older inthe United States had at least one major depressive episode in the past year. According to data from nationally representative surveys supported by NIMH, only about half of Americans diagnosed with major depression in a given year receive treatment. 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 theAmerican Journal of Psychiatry . In addition to the high failure rate, only one of the marketed products for depression, esketamine (marketed by Johnson and Johnson as Spravato), an in-clinic nasal spray treatment can demonstrate rapid antidepressant effects, while the other currently approved products can take two to four 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
In addition to developing esmethadone as an adjunctive treatment of MDD, we are planning to evaluate the utility of esmethadone as a front line monotherapy treatment for MDD.
Additionally, other indications that Relmada may explore in the future, include, restless leg syndrome and other glutamatergic system activation related diseases.
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Our Corporate History and Background
We are a clinical-stage, publicly traded biotechnology company developing NCEs and novel versions of proven drug products that potentially address areas of high unmet medical need in the treatment of depression and other CNS diseases. Currently, none of our product candidates have been approved for sale inthe 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 inthe 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 net loss of$48,767,125 for the six months endedJune 30, 2021 . AtJune 30, 2021 , we have an accumulated deficit of$228,082,428 .
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 and business advisors, including recognized experts in the fields of depression, 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 an NDA submission will consist of conducting a full clinical development program. We plan to also generate intellectual property (IP) that will further protect our products from competition. We will 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, theWorld 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), Zulresso® (Sage) and Spravato® (Johnson & Johnson).
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. We have also secured an Orphan Drug Designation from the FDA for d-methadone for "the treatment of postherpetic neuralgia", which, upon NDA approval, carry 7-year FDA Orphan Drug marketing exclusivity. In theEuropean Union , some of our 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 theU.S. (Hatch Waxman Act) plus additional 6 months of pediatric exclusivity and up to 10 years of in the E.U. We believe an extensive intellectual property estate of US and foreign patents and applications will protect our technology and products once our patent applications for our products are approved. Key Strengths
We believe that the key elements for our market success include:
? Compelling lead product opportunity, esmethadone currently in Phase 3 trials
for the adjunctive treatment of MDD.
? Robust, and highly statistically significant, efficacy seen with esmethadone in
a randomized Phase 2 trial, 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).
? Active on-going Phase 3 program, with two mirror-sister Phase 3 registration
studies currently enrolling for the treatment of Major Depressive Disorder
(MDD), with open-label safety extension study also currently on-going.
? Successful Phase 1 safety studies of esmethadone and strong clinical activity
signal in depression established in three independent animal models.
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? Potential in additional multiple indications in underserved markets with large
patient population, such as MDD, other affective disorders, and cognitive
disorders
? Scientific support of leading experts: Our scientific advisors include
clinicians and scientists
medical institutions such as Harvard, Cornell, Yale, and University of
Pennsylvania .
? Substantial IP portfolio and market protection: approved and filed patent
applications provide coverage beyond 2033. In addition, some of our drugs,
including esmethadone have also been designated as Orphan Drugs by the FDA,
thereby providing seven years of market exclusivity at launch. Available Information Reports we file with theSecurities 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 theSEC at100 F Street NE ,Washington, D.C. 20549. Results of Operations
For the Three Months Ended
Three Months Three Months
Ended Ended
June 30, June 30, Increase
2021 2020 (Decrease)
Operating Expenses
Research and development $ 17,331,507 $ 5,323,953 $ 12,007,554
General and administrative 9,130,373 7,433,249 1,697,124
Total $ 26,461,880 $ 12,757,202 $ 13,704,678 Research and Development Expense
Research and development expense for the three months endedJune 30, 2021 was approximately$17,331,500 compared to$5,324,000 for the three months endedJune 30, 2020 , an increase of approximately$12,007,500 . The increase was primarily due to:
? Increase in study costs of
our Phase 2 and 3 studies;
? Decrease in manufacturing and drug storage costs of $161,900 ;
? Decrease in compensation expense of
and development employees and their related bonuses;
? An increase in stock-based compensation expense of $584,800 ;
? Increase in other research expenses of
with the addition of consultants contracted to assist in the execution of
our Phase 3 trials.
General and Administrative Expense
General and administrative expense for the three months endedJune 30, 2021 was approximately$9,130,400 compared to$7,433,200 for the three months endedJune 30, 2020 , an increase of approximately$1,697,200 . The increase was primarily due to:
? Increase in compensation expense of
additional employees;
? Increase in stock-based compensation expense of
to options granted to employees, as well as the hiring of two additional
employees;
? Increase in other general and administrative expenses of $818,900
primarily due to an increase in consulting services.
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Other Income (Expense)
Interest / investment income was approximately $322,800 and $404,000 for the
three months ended June 30, 2021 and 2020, respectively. Realized loss on
short-term investments was approximately $123,600 for the three months ended
June 30, 2021 compared to a realized gain of approximately $12,800 for the three
months ended June 30, 2020 . Unrealized loss on short-term investments was
approximately $289,300 for the three months ended June 30, 2021 compared to an
unrealized gain of approximately $1,221,900 for the three months ended June30, 2020. Net Loss The net loss for the Company for the three months endedJune 30, 2021 and 2020 was approximately$26,551,900 and$11,118,400 , respectively. The Company had loss per share of basic and diluted$1.56 and 0.73 for the three months endedJune 30, 2021 and 2020, respectively. Income Taxes The Company did not provide for income taxes for the three months endedJune 30, 2021 and 2020, since there was a loss and a full valuation allowance against all deferred tax assets. Results of Operations
For the Six Months Ended
Six Months Six Months
Ended Ended
June 30, June 30, Increase
2021 2020 (Decrease)
Operating Expenses
Research and development $ 31,353,734 $ 9,831,737 $ 21,521,997
General and administrative 17,513,349 12,899,903 4,613,446
Total $ 48,867,083 $ 22,731,640 $ 26,135,443 Research and Development Expense
Research and development expense for the six months endedJune 30, 2021 was approximately$31,353,700 compared to$9,831,700 for the six months endedJune 30, 2020 , an increase of approximately$21,522,000 . The increase was primarily due to:
? Increase in study costs of
our Phase 2 and 3 studies;
? Increase in manufacturing and drug storage costs of $666,900 ;
? Decrease in pre-clinical and toxicology expenses of $212,300 ;
? Decrease in compensation expense of
and development employees and their related bonuses;
? A decrease in stock-based compensation expense of
related the separation agreement with Ottavio Vitolo through which we
incurred expenses of approximately $1,500,000 in 2020;
? Increase in other research expenses of
with the addition of consultants contracted to assist in the execution of
our Phase 3 trials.
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General and Administrative Expense
General and administrative expense for the six months endedJune 30, 2021 was approximately$17,513,300 compared to$12,899,900 for the six months endedJune 30, 2020 , an increase of approximately$4,613,400 . The increase was primarily due to:
? Increase in compensation expense of
additional employees;
? Increase in stock-based compensation expense of
hiring of two additional employees;
? Increase in other general and administrative expenses of $1,702,900
primarily due to an increase in consulting services.
Other Income (Expense)
Interest / investment income was approximately $742,800 and $811,700 for the six
months ended June 30, 2021 and 2020, respectively. Realized loss on short-term
investments was approximately $176,400 and $158,800 for the six months ended
June 30, 2021 and 2020, respectively. Unrealized loss on short-term investments
was approximately $466,400 for the six months ended June 30, 2021 compared to an
unrealized gain of approximately $287,000 for the six months ended June 30 ,2020. Net Loss The net loss for the Company for the six months endedJune 30, 2021 and 2020 was approximately$48,767,100 and$21,791,800 respectively. The Company had loss per share of basic and diluted$2.90 and$1.45 for the six months endedJune 30, 2021 and 2020, respectively. Income Taxes
The Company did not provide for income taxes for the six months endedJune 30, 2021 and 2020, 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$33,296,890 for the six months endedJune 30, 2021 and has an accumulated deficit of$228,082,428 from inception throughJune 30, 2021 . AtJune 30, 2021 , the Company had cash and short term investments of$109,068,485 . Relmada has funded its past operations through equity raises and most recently in 2021 raised net proceeds from the sale of common stock of$23,458,050 through our ATM offering and$1,941,955 through the exercise of warrants. The Company also raised an additional$517,271 during the six months endedJune 30, 2021 from the exercises of options. Management believes that it has sufficient funding to continue ongoing operations for at least 12 months from the issuance of the accompanying condensed consolidated quarterly financial statements. SinceJune 30, 2021 and to date, the Company has received approximately$25,000 in warrant exercises, which resulted in the Company having approximately$97.7 million in cash, cash equivalents and short term investments atAugust 10, 2021 . Based on its budgeted cash flow requirements, the Company believes these funds are sufficient to fund its ongoing operations for at least 12 months after the filing of these condensed consolidated quarterly financial statements. The Company expects that the burn rate for that time frame, will range between$75 and$85 million .
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The following table sets forth selected cash flow information for the periods
indicated below:
Six Months Six Months
Ended Ended
June 30, June 30,
2021 2020
Cash used in operating activities $ (33,296,890 ) $ (8,378,419 )
Cash provided by/(used in) investing activities 9,553,562 (39,970,532 )
Cash provided by financing activities 25,917,276 25,894,690
Net increase/(decrease) in cash and cash equivalents $ 2,173,948 $ (22,454,261 )
For the six months ended June 30, 2021 , cash used in operating activities was
$33,296,890 primarily due to the net loss of $48,767,125 , prepaid expense of
$645,690 , accrued expenses of $796,162 offset by non-cash stock compensation
charges of $14,119,660 , accounts payable of $2,109,447 , unrealized loss of
$466,444 , and realized loss of $176,379 .
For the six months ended June 30, 2020 , cash used in operating activities was
$8,378,419 primarily due to the net loss of $21,791,757 , offset by non-cash
stock compensation charges of $12,341,875 , prepaid expense of $183,329 , accounts
payable of $442,506 , unrealized gain of $287,027 , realized loss of $158,801 , and
accrued expenses of $535,997 .
For the six months ended
For the six months ended
Net cash provided by financing activities for the six months endedJune 30, 2021 was$25,917,276 due to proceeds from options exercised for common stock of$517,271 , proceeds from warrants exercised for common stock of$1,941,955 , and sales of common stock of$23,458,050 . Net cash provided by financing activities for the six months endedJune 30, 2020 was$25,894,690 due to proceeds from options exercised for common stock of$530,643 , proceeds from warrants exercised for common stock of$5,619,276 , and sales of common stock of$19,855,018 , partially offset by payments of notes
payable of$110,247 . Effects of Inflation
Our assets are primarily monetary, consisting of cash and cash equivalents. Because of their liquidity, these assets are not directly affected by inflation. Because we intend to retain and continue to use our equipment, we believe that the incremental inflation related to replacement costs of such items will not materially affect our operations. 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.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changed in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources or capital resources that is material
to investors.
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Commitments and Contingencies
Please refer to Note 10 in our Annual Report on Form 10-K for the year endedDecember 31, 2020 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 endedDecember 31, 2020 . 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 consolidated financial statements are presented in accordance withU.S. GAAP, and all applicableU.S. GAAP accounting standards effective as ofJune 30, 2021 have been taken into consideration in preparing the unaudited consolidated financial statements. The preparation of unaudited consolidated financial statements requires estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosures. Some of those estimates are subjective and complex, and, consequently, actual results could differ from those estimates. The following accounting policies and estimates have been highlighted as significant because changes to certain judgments and assumptions inherent in these policies could affect our consolidated financial statements:
? Research and development expenses, and
? Stock-based compensation expenses
We base our estimates, to the extent possible, on historical experience. Historical information is modified as appropriate based on current business factors and various assumptions that we believe are necessary to form a basis for making judgments about the carrying value of assets and liabilities. We evaluate our estimates on an on-going basis and make changes when necessary. Actual results could differ from our estimates.
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