美國
證券交易委員會
華盛頓特區 20549
表格
根據1934年證券交易法第13或15(d)條款的季度報告。 |
截止至本季度結束
根據1934年證券交易法第13或15(d)條款的過渡報告 |
針對過渡期從 ___________ 到 ___________
委員會檔案編號：
（註冊憑證中指明的準確名稱） |
（國家或其他管轄區的 | （IRS僱主 | |
公司成立或組織） | （標識號碼） |
(總部辦公地址) | (郵遞區號) |
公司電話，包括區號：
根據法案第12(b)條規定註冊的證券：
每個班級的標題 |
| 交易符號 |
| 每個註冊的交易所的名稱 |
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| | ||
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| |
請勾選此項，以指示註冊人是否在過去12個月（或者對於註冊人需要提交此類文件的期間更短）提交了每個互動數據文件的電子提交文件，該文件根據Regulation S-T的規則405（本章節的§232.405）（或者相當的市場季報表單規則）提交。 ☒
請標示✓，表明在過去的12個月內（或者要求提交此類文件的較短期間），登記公司是否已根據Regulation S-t（本章節的§232.405）的第405條規定，電子提交了每一份互動數據文件。 ☒
請勾選指示登記者是否為大型快速提交人、快速提交人、非快速提交人、較小的報告公司或新興成長型公司。請參閱交易所法規120億2條，了解「大型快速提交人」、「快速提交人」、「較小的報告公司」和「新興成長型公司」的定義。
大型加速報告人 | ☐ | 加速文件提交人 | ☐ |
☒ | 較小的報告公司 | ||
|
| 新興成長公司 |
若為新興成長企業，則請勾選該項，以表示發行人已選擇不使用《交易所法》第13條(a)條文規定的延長過渡期，以符合任何新訂訂或修訂的財務會計準則。
請勾選表示，是否申報人屬於外殼公司（根據交易所法案第120億2條定義）。
截至2023年7月31日，續借貸款協議下未償還的借款額爲
DERMATA THERAPEUTICS, INC.
10-Q表格
目錄
指数
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| 2 |
| 目錄 |
第I部分
第1項：基本報表
德瑪達治療股份有限公司
資產負債表
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| 九月三十日， 2024 |
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| 2023年12月31日, 2023 |
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| (未經審計) |
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資產: |
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現金及現金等價物 |
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預付費用及其他流動資產 |
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總資產 |
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負債和股東權益： |
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負債： |
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應付賬款 |
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應計及其他流動負債 |
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總負債 |
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承諾和事項（見注6） |
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股東權益： |
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普通股，每股面值 $ |
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追加實收資本 |
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累積赤字 |
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股東權益總額 |
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總負債和股東權益 |
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| $ |
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所附附附註是這些財務報表的組成部分。
| 3 |
| 目錄 |
德瑪達治療股份有限公司
損益表
(未經審計)
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| 截至三個月結束 9月30日, |
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| 截至九個月的日期 9月30日, |
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| 2024 |
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| 2023 |
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| 2024 |
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| 2023 |
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運營費用： |
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研發 |
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| $ |
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| $ |
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一般和行政 |
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總營業費用 |
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營業損失 |
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其他收入和支出： |
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利息收入，淨額 |
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淨虧損 |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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每股普通股基本和稀釋後的淨損失 |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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加權平均基本和稀釋普通股 |
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附註是這些財務報表的重要組成部分。
| 4 |
| 目錄 |
德瑪達治療股份有限公司
股東權益報表
(未經審計)
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| 附加 |
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| 總計 |
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| 普通股 |
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| 實收資本 |
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| 累積赤字 |
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| 股東的 |
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| 股份 |
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| 面值 |
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| 資本 |
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| 股權 |
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2023年12月31日餘額 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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基於股票的補償 |
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| - |
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暫停股份發行 |
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淨虧損 |
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| - |
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2024年3月31日結存餘額 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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行使認股權證後發行普通股，扣除發行成本淨額 |
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基於股票的補償 |
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| - |
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以現金支付的碎股結算 |
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淨虧損 |
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| - |
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2024年6月30日餘額 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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發行預先資金化權證和認股權證，扣除發行成本淨額 |
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| - |
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行使預先資金化認股權證後發行普通股 |
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來自ATM銷售的普通股發行，扣除發行成本淨額 |
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發行中止股份 |
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基於股票的補償 |
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| - |
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淨虧損 |
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| - |
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2024年9月30日的結餘 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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附註是這些財務報表的重要組成部分。
| 5 |
| 目錄 |
DERMATA THERAPEUTICS, INC.
股東權益變動表
（未經審核）
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| 額外 |
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| 總計 |
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| 普通股 |
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| 實收資本 |
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| 累積 |
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| 股東權益 |
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| 股份 |
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| 面值 |
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| 資本 |
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| 赤字 |
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| 權益 |
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2022年12月31日結餘 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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基於股票的薪酬 |
|
| - |
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普通股及warrants的發行，扣除發行費用 |
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在預先資助的warrants行使期間發行普通股 |
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以現金支付的碎股結算 |
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淨虧損 |
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| - |
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| ( | ) |
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2023年3月31日結束餘額 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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基於股票的薪酬 |
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| - |
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普通股及warrants的發行，扣除發行費用後 |
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根據預先資助的warrants行使而發行的普通股 |
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淨虧損 |
|
| - |
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| ( | ) |
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| ( | ) | ||
2023年6月30日結餘 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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基於股票的薪酬 |
|
| - |
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發行成本 |
|
| - |
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| ( | ) |
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| ( | ) | ||
淨虧損 |
|
| - |
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| ( | ) |
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| ( | ) | ||
2023年9月30日的結餘 |
|
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| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| ||||
附註是此基本報表的一個重要部分。
| 6 |
| 目錄 |
DERMATA THERAPEUTICS, INC.
現金流量表
（未經審核）
|
| 截至九個月結束時 九月三十日， |
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| 2024 |
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| 2023 |
| ||
經營活動現金流量： |
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淨虧損 |
| $ | ( | ) |
| $ | ( | ) |
調整為使淨虧損轉化為經營活動所使用現金： |
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基於股票的薪酬 |
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由於以下變動，現金的增加（減少）： |
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預付費用及其他流動資產 |
|
| ( | ) |
|
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| |
應付賬款 |
|
| ( | ) |
|
| ( | ) |
應計負債及其他流動負債 |
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用以調解淨損失與營運使用現金的總調整 |
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經營活動所用的淨現金 |
|
| ( | ) |
|
| ( | ) |
來自籌資活動的現金流量: |
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普通股、預付warrants和warrants的發行收益，扣除發行成本 |
|
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行使預先配售認股權所得款項 |
|
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反向股票拆分中的碎股付款 |
|
| ( | ) |
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| ( | ) |
籌資活動提供的淨現金 |
|
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現金及現金等價物的淨增加（減少） |
|
| ( | ) |
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期初現金及現金等價物餘額 |
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期末現金及現金等價物 |
| $ |
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| $ |
| ||
非現金籌資活動: |
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暫緩股份的發行 |
| $ | ( | ) |
| $ |
| |
2024年5月warrant誘導的增量公允價值 |
| $ |
|
| $ |
| ||
應付賬款或應計費用中的發行成本 |
| $ |
|
| $ |
| ||
2023年3月warrants修改的增量公允價值 |
| $ | - |
|
| $ | 144,765 |
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補充披露: |
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支付的稅金現金 |
| $ |
|
| $ |
| ||
附註是此基本報表的一個重要部分。
| 7 |
| 目錄 |
DERMATA THERAPEUTICS, INC.
基本報表注釋
（未經審核）
1. 組織和報告基礎
Dermata Therapeutics, Inc.（以下簡稱“公司”）於2014年12月成立，註冊爲特拉華州的有限責任公司（“LLC”），名爲Dermata Therapeutics, LLC。2021年3月24日，公司由有限責任公司轉爲特拉華州C型公司，並更名爲Dermata Therapeutics, Inc.。該公司是一家處於臨床階段的生物技術公司，專注於醫療和美容皮膚疾病的治療。
反向拆股並股
2023年3月13日，本公司按照董事會和股東批准的公司章程修正案，以1對16的比例實施了股票反向拆分。由於反向拆分，面值沒有進行調整。所有已發行和在外流通的普通股以及基本報表中包含的每股金額均已追溯調整，以反映所有呈現期的此項反向拆分。
2024年5月7日，公司舉行了股東年會，股東批准了對其已經修訂和重述的公司章程的修正案的通過，以實施對其已發行和流通普通股的股票進行反向拆股，比例範圍爲五分之一至三十分之一，具體比例由公司董事會確定，無需進一步獲得股東的批准或授權。
2024年5月16日，公司實施了每15股普通股進行1股的逆向拆分，經公司董事會批准。由於2024年5月逆向股票拆分，面值未經調整。所有已發行和未流通的普通股和財務報表中包含的每股金額已得到追溯調整，以反映所有報告期的逆向股票拆分。
流動性和持續經營的不確定性
Since its inception, the Company has devoted substantially all of its resources to research and development activities and has not generated any revenue or commercialized any product candidates. As of September 30, 2024, cash and cash equivalents totaled $
Historically, the Company’s principal sources of cash have included proceeds from the issuance of equity securities and debt. The Company’s principal uses of cash have included cash used in operations and payments for license rights. The Company expects that the principal uses of cash in the future will be for continuing operations, funding of research and development, conducting preclinical studies and clinical trials, and general working capital requirements. The Company expects that as research and development expenses continue to grow, it will need to raise additional capital to sustain operations and research and development. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
| 8 |
| Table of Contents |
Management’s Plan to Continue as a Going Concern
To continue as a going concern, the Company will need, among other things, to raise additional capital resources. Until the Company can generate significant cash from operations, management’s plans to obtain such resources for the Company include proceeds from offerings of the Company’s equity securities or debt, or transactions involving product development, technology licensing or collaboration. Management can provide no assurance that any sources of a sufficient amount of financing or collaboration agreements will be available to the Company on favorable terms, if at all. The Company’s ability to raise additional capital may be adversely impacted by potential worsening of global economic conditions, potential future global pandemics or health crises, and the disruptions to, and volatility in, the credit and financial markets in the United States. Because of historical and expected operating losses and net operating cash flow deficits, there is substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements, which is not alleviated by management’s plans. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the accompanying financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair statement of the financial position, results of operations, cash flows, and stockholders’ equity for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ materially from those estimates. The unaudited financial statements included in this Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with Securities and Exchange Commission (the “SEC”) on March 21, 2024, which includes a broader discussion of the Company’s business and the risks inherent therein.
2. Summary of Significant Accounting Policies
Use of Estimates
The Company’s financial statements are prepared in accordance with GAAP. The preparation of the Company’s financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, and expenses and disclosure of contingent assets and liabilities in the financial statements and accompanying notes. On an ongoing basis, management evaluates these estimates and judgments, including those related to accrued research and development expenses. The Company bases its estimates on various assumptions that it believes are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company and the Company’s chief operating decision maker view the Company’s operations and manage its business in one operating segment, which is the business of developing and commercializing pharmaceuticals.
Cash and Cash Equivalents
The Company deposits its cash and cash equivalents with accredited financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”), which are held in checking and cash sweep accounts. At times, deposits held may exceed the amount of insurance provided by the FDIC. The Company maintains an insured cash sweep account in which cash from its main operating checking account is invested overnight in highly liquid, short-term investments. The Company considers all highly liquid investments with a maturity date of 90 days or less at the date of purchase to be cash equivalents.
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Concentrations of Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents. The Company is exposed to credit risk in the event of a default by the financial institutions holding the Company’s cash and cash equivalents to the extent of the amounts held in excess of FDIC limits. The Company limits its credit risk by placing its cash and cash equivalents with financial institutions it believes are of high quality. To date, the Company has not experienced any losses on its deposits of cash and cash equivalents.
Deferred Financing Costs
The Company capitalizes certain legal, accounting, and other fees and costs that are directly attributable to in-process equity financings as deferred offering costs until such financings are completed. Upon the completion of an equity financing, these costs are recorded as a reduction of additional paid-in capital of the related financing.
Fair Value Measurement
The Company uses a three-tier fair value hierarchy to prioritize the inputs used in the Company’s fair value measurements. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company believes the carrying amount of cash and cash equivalents, accounts payable and accrued expenses approximate their estimated fair values due to the short-term nature of these assets and liabilities.
Interest Income
Interest income consists of interest income earned on cash and cash equivalents from interest bearing demand accounts.
Patent Costs
Patent costs related to obtaining and maintaining patent protection in both the United States and other countries are expensed as incurred. Patents costs are classified as general and administrative expenses.
Research and Development
Research and development costs consist of expenses incurred in connection with the development of the Company’s product candidates. Such expenses include expenses incurred under agreements with contract research organizations, manufacturing and supply scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial supply, outsourced laboratory services, including materials and supplies used to support the Company’s research and development activities, and payments made for license fees and milestones that have not been demonstrated to have commercial value. Such costs are expensed in the periods in which they are incurred. Upfront payments and milestone payments for licensed technology are expensed as research and development as incurred or when the milestone is achieved or is determined to be probable of being achieved. Advanced payments for goods or services to be received in the future for research and development activities are recorded as prepaid expenses and expensed as the related goods are received or services are performed.
Income Taxes
The Company is a C-Corporation and accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
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The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If management determines that the Company would be able to realize its deferred tax assets in the future in excess of their net recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
The Company records uncertain tax positions on the basis of a two-step process whereby (1) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense. Any accrued interest and penalties are included within the related tax liability.
Stock-Based Compensation
The Company measures and recognizes compensation expense for all stock-based awards made to employees, directors, and non-employees, based on estimated fair values recognized using the straight-line method over the requisite service period. The fair value of options to purchase Common Stock granted to employees is estimated on the grant date using the Black-Scholes valuation model. The calculation of stock-based compensation expense requires that the Company make certain assumptions and judgments about variables used in the Black-Scholes model, including the expected term of the stock-based award, expected volatility of the underlying Common Stock, dividend yield, and the risk-free interest rate. Forfeitures are accounted for in the period they occur. Restricted stock units granted under the Company’s 2021 Omnibus Equity Incentive Plan (the “2021 Plan”) are measured at the grant date fair value of the Common Stock, with corresponding compensation expense recognized ratably over the requisite service period. Refer to Note 5 - Equity Incentive Plan for further discussion.
Warrants
The Company performs an assessment of warrants upon issuance to determine their proper classification in the financial statements based upon the warrant’s specific terms, in accordance with the authoritative guidance provided in Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”), and ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815-40”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480-40 and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed in the Company’s own Common Stock and whether the warrant holders could potentially require cash settlement of the warrants.
For issued or modified warrants that meet all the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be liability-classified and recorded at their initial fair value on the date of issuance and remeasured at fair value at each balance sheet date thereafter. The Company has performed an assessment of all warrants issued and modified and determined that the Company’s warrants are equity-classified.
Comprehensive Loss
Comprehensive loss includes net loss and other comprehensive income (loss) for the periods presented. The Company did not have other comprehensive income (loss) items such as unrealized gains and losses and so for the periods presented, comprehensive loss was equal to the net loss.
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Net Loss Per Share of Common Stock
Basic net loss per share is calculated by dividing net loss attributable to common shareholders by the weighted-average number of shares outstanding during the period. The weighted-average number of shares of Common Stock outstanding includes (i) pre-funded warrants because their exercise requires only nominal consideration for the delivery of shares, and (ii) shares held in abeyance because there is no consideration required for delivery of the shares, (collectively, “basic shares”), without consideration of common stock equivalents. Diluted net loss per share is calculated by adjusting basic shares outstanding for the dilutive effect of common stock equivalents outstanding for the period. For purposes of the diluted net loss per share calculation, stock options and warrants are considered to be common stock equivalents but are excluded from the calculation of diluted net loss per common stock if their effect would be anti-dilutive.
The common share equivalents that are not included in the calculation of diluted net loss per share of Common Stock but could potentially dilute basic earnings per share in the future are as follows:
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| As of September 30, |
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| 2023 |
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Common Stock options |
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Common Stock warrants |
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Total potentially dilutive securities |
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Recent Accounting Pronouncements
For the nine months ended September 30, 2024, the Company has reviewed recent accounting standards and identified the following as relevant to the Company.
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU No 2023-07 is effective for annual reporting periods beginning after December 15, 2023, and for interim reporting periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its financial statement disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its financial statements and income tax footnote.
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires additional disclosures and disaggregation of certain costs and expenses presented on the face of the income statement. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its financial statements.
3. Balance Sheet Details
The following provides certain balance sheet details:
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| September 30, |
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| December 31, |
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| 2024 |
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| 2023 |
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Prepaid expenses and other current assets: |
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Prepaid insurance |
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Prepaid research and development costs |
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Prepaid other and other current assets |
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Total prepaid expenses and other current assets |
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Accrued and other current liabilities: |
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Accrued research and development costs |
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Accrued compensation and benefits |
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Accrued other |
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Total accrued and other current liabilities |
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4. Equity Securities
A summary of the Company’s equity securities as of September 30, 2024, is as follows:
Description |
| Authorized |
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| Issued |
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| Pre-funded Warrants |
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| Reserved |
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| Outstanding |
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Common Stock, par value $0.0001 |
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| - |
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Preferred Stock |
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| - |
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| - |
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| - |
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Warrants (excluding pre-funded warrants) |
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| - |
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| - |
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| - |
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2021 Omnibus Equity Incentive Plan |
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| - |
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| - |
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Total equity securities |
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Common Stock
On September 17, 2024, the Company closed a private placement (the “September 2024 PIPE”) priced at the market under Nasdaq rules, in which it sold
In June 2024, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with a sales agent (the “Sales Agent”), providing for the sale of up to $
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On May 21, 2024, the Company closed on inducement agreements (the “May 2024 Inducement”) with certain holders (the “Holders”) of certain of the Company’s existing warrants to purchase up to an aggregate of
Related to the May 2024 Inducement, during July 2024,
On November 20, 2023, the Company closed on an inducement agreement (the “November 2023 Inducement”) with a holder (the “Holder”) of certain of its existing warrants to purchase up to
Related to the November 2023 Inducement, as of December 31, 2023,
On May 26, 2023, the Company closed a private placement (the “May 2023 PIPE”) priced at the market under Nasdaq rules, in which it sold
On March 20, 2023, the Company closed a public offering (the “March 2023 Offering”) priced at the market under Nasdaq rules, in which it sold an aggregate of (i)
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Preferred Stock
While the Company has
Warrants
Summary of Warrants Outstanding
The table below lists outstanding warrants for the dates presented, excluding
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| Quantity of Warrants Outstanding as of |
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Description |
| September 30, 2024 |
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| December 31, 2023 |
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Pre-IPO Series 1a Warrants |
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Pre-IPO Class B Common Warrants |
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IPO Warrants |
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IPO Underwriter Warrants |
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March 2023 Offering Series A Common Warrants |
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March 2023 Offering Series B Common Warrants |
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March 2023 Offering Placement Agent Warrants |
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May 2023 PIPE Common Warrants |
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May 2023 PIPE Placement Agent Warrants |
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November 2023 Series A Common Warrants |
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November 2023 Series B Common Warrants |
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November 2023 Placement Agent Warrants |
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May 2024 Series A Common Warrants |
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May 2024 Series B Common Warrants |
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May 2024 Placement Agent Warrants |
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| - |
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September 2024 PIPE Series A Common Warrants |
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September 2024 PIPE Series B Common Warrants |
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September 2024 PIPE Placement Agent Warrants |
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Total warrants outstanding |
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| 15 |
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Warrant Inducements
In May 2024, the Company completed the May 2024 Inducement with the Holders who agreed to exercise
In November 2023, the Company completed the November 2023 Inducement, in which a Holder agreed to exercise 231,472 common warrants to purchase Common Stock at a reduced exercise price of $
Warrant Modification
In connection with the March 2023 Offering, the Company agreed to amend the terms of the April 2022 PIPE Common Warrants, which were held by the purchaser in the March 2023 Offering. The exercise price of the April 2022 PIPE Common Warrants was reduced
5. Equity Incentive Plan
Under the Company’s 2021 Plan as amended, the Company may grant options to purchase shares of Common Stock, restricted stock awards, performance stock awards, incentive bonus awards, other cash-based awards or directly issue shares of Common Stock to employees, directors, and consultants of the Company. At the Company’s 2024 Annual Meeting of Stockholders held on May 7, 2024, the Company’s stockholders approved an amendment to the Company’s 2021 Plan to increase the number of shares of Common Stock authorized for issuance thereunder from
Stock awards may be granted at an exercise price per share of not less than 100% of the fair market value at the date of grant. Stock awards granted are exercisable over a maximum term of
As of September 30, 2024, there remain
| 16 |
| Table of Contents |
Fair Value Measurement
The Company uses the Black-Scholes option valuation model, which requires the use of highly subjective assumptions, to determine the fair value of stock-based awards. The fair value of each employee stock option is estimated on the grant date under the fair value method using the Black-Scholes model. The estimated fair value of each stock option is then expensed over the requisite service period, which is generally the vesting period. The assumptions and estimates that the Company uses in the Black-Scholes model are as follows:
| · | Fair Value of Common Stock. The fair value of Common Stock is measured as the Company’s closing price of Common Stock on the date of grant. |
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| · | Risk-Free Interest Rate. The Company bases the risk-free interest rate used in the Black-Scholes valuation model on the implied yield available on U.S. Treasury zero-coupon issues with a term equivalent to that of the expected term of the options. |
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| · | Expected Term. The expected term represents the period that the Company’s stock-based awards are expected to be outstanding, which is calculated using the simplified method for stock-based awards granted to employees, as the Company has insufficient historical information to provide a basis for an estimate. The simplified method calculates the expected term as the average of the vesting term plus the contractual life of the options. As permitted under ASC 718, the Company has elected to use the contractual term as the expected term for certain non-employee awards, on an award-by-award basis. |
| · | Volatility. The Company determines the price volatility based on the historical volatilities of industry peers as it has limited trading history for its Common Stock price. Industry peers consist of several public companies in the biotechnology industry with comparable characteristics, including clinical trials progress and therapeutic indications. |
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| · | Dividend Yield. The expected dividend assumption is based on the Company’s current expectations about its anticipated dividend policy. To date, the Company has not declared any dividends to common shareholders and, therefore, the Company has used an expected dividend yield of zero. |
The following table presents the weighted-average assumptions used for stock options granted during the following periods:
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| Three Months Ended September 30, |
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| Nine Months Ended September 30, |
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| 2023 |
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| 2023 |
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Grant date fair value |
| $ |
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| $ |
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Risk-free interest rate |
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Dividend yield |
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Expected life in years |
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Expected volatility |
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Stock-based Compensation Expense
In general, stock-based compensation is allocated to research and development expense or general and administrative expense according to the classification of cash compensation paid to the employee, director, or consultant to whom the stock award was granted.
| 17 |
| Table of Contents |
The following table summarizes the total stock-based compensation expense related to stock options included in the Company’s statements of operations:
|
| Three Months Ended September 30, |
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| Nine Months Ended September 30, |
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| 2024 |
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| 2023 |
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| 2024 |
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| 2023 |
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Research and development |
| $ |
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| $ |
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| $ |
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| $ |
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General and administrative |
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Total |
| $ |
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| $ |
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| $ |
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| $ |
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Stock Option Award Activity
A summary of the Company’s 2021 Plan stock option activity is as follows:
|
| Number of Options Outstanding |
|
| Weighted- Average Exercise Price |
|
| Weighted- Average Remaining Contractual Term (in Years) |
| |||
Balance at December 31, 2023 |
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| $ |
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Options granted |
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| - |
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Options exercised |
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| - |
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| - |
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Options cancelled |
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| ( | ) |
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| - |
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Balance at September 30, 2024 |
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| $ |
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Options exercisable at September 30, 2024 |
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| $ |
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In January 2024, the Board unanimously approved to provide employees and directors of the Company the opportunity to cancel outstanding, out-of-the-money, stock options without consideration,
In accordance with accounting guidance provided in ASC 718, since the stock option cancellations were not accompanied by a concurrent grant, or offer to grant, a replacement award, any unrecognized compensation cost was recognized at the cancellation date. Accordingly, the Company recognized stock-based compensation expense of $
The aggregate intrinsic value of options outstanding and exercisable as of September 30, 2024, is calculated as the difference between the exercise price of the underlying options and the closing market price of the Company’s Common Stock on September 30, 2024, the last trading day prior to September 30, 2024, which was $
As of September 30, 2024, total unrecognized compensation cost related to stock options was approximately $
6. Commitments and Contingencies
Clinical Trials
During the fourth quarter of 2023, the Company initiated a Phase 3 clinical trial, STAR-1, which is expected to report top-line data in 2025. The total contract amount with the clinical research organization is approximately $
| 18 |
| Table of Contents |
Supplier Agreement
As a result of Russia’s invasion of Ukraine, the United States, the United Kingdom, and the European Union governments, among others, have developed coordinated sanctions and export-control measure packages against Russian individuals and entities. The Company is currently a party to an exclusive supply agreement for the supply of the Spongilla raw material used in DMT310 and DMT410. The counterparty to this supply agreement is a Russian entity. The imposition of enhanced export controls and economic sanctions on transactions with Russia and Russian entities by the United States, the United Kingdom, and/or the European Union could prevent the Company from performing under this existing contract or any future contract it may enter or may prevent the Company from remitting payment for raw material purchased from the Company’s supplier. The Company has received multiple shipments of raw material from its supplier subsequent to the implementation of export controls and sanctions, containing additional quantities of Spongilla raw material, which will provide the Company with sufficient quantities of Spongilla to initiate and complete two Phase 3 studies in moderate-to-severe acne and support filing a new drug application for DMT310 in acne upon the successful completion of two Phase 3 studies. Depending on the extent and breadth of new sanctions or export controls that may be imposed against Russia, otherwise or as a result of the impact of the war in Ukraine, it is possible that the Company’s ability to obtain additional supply of the Spongilla raw material used in DMT310 and DMT410 could be negatively impacted, which could adversely affect its business, results of operations, and financial condition.
License Agreements
On March 31, 2017, the Company entered into a license agreement, as amended (the “License Agreement”) with Villani, Inc. whereby Villani has granted the Company an exclusive, sub-licensable, royalty-bearing license (the “License”) under the Licensed Patents (as defined in the License Agreement), to formulate, develop, seek regulatory approval for, make or sell products that contain Spongilla lacustris (alone or in combination with other active or inactive ingredients) for the treatment of diseases, disorders and conditions of the skin, including but not limited to acne, rosacea, psoriasis, atopic dermatitis, seborrheic dermatitis, actinic keratosis and eczema that were developed using certain licensed know-how (“Licensed Products”). The Company is responsible for the development (including manufacturing, packaging, non-clinical studies, clinical trials and obtaining regulatory approval and commercialization (including marketing, promotion, distribution, etc.)) for all Licensed Products. The original License Agreement was amended in 2019, and pursuant to the amended License Agreement, the Company was required to make future milestone payments to Villani in an aggregate amount of up to $
Legal Proceedings
In the normal course of business, the Company may be involved in legal proceedings or threatened legal proceedings. The Company is not a party to any legal proceedings or aware of any threatened legal proceedings which are expected to have a material adverse effect on its financial condition, results of operations or liquidity.
7. Subsequent Events
Subsequent to September 30, 2024, the Company has issued
| 19 |
| Table of Contents |
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes and the other financial information included elsewhere in this Quarterly Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report, particularly those under “Risk Factors.”
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties, and other factors, which may be beyond our control, and which may cause our actual results, performance, or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future.
There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:
| · | our lack of operating history; |
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| · | the expectation that we will incur significant operating losses for the foreseeable future and will need significant additional capital; |
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| · | our current and future capital requirements to support our development and commercialization efforts for our product candidates and our ability to satisfy our capital needs; |
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| · | our dependence on our product candidates, which are still in various stages of clinical development; |
| · | our ability to acquire sufficient quantities of raw material needed to manufacture our drug product; |
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| · | our, or that of our third-party manufacturers, ability to manufacture cGMP quantities of our product candidates as required for pre-clinical and clinical trials and, subsequently, our ability to manufacture commercial quantities of our product candidates; |
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| · | our ability to complete required clinical trials for our product candidates and obtain approval from the FDA or other regulatory agencies in different jurisdictions; |
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| · | our lack of a sales and marketing organization and our ability to commercialize our product candidates if we obtain regulatory approval; |
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| · | our dependence on third parties to manufacture our product candidates; |
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| · | our reliance on third-party CROs to conduct our clinical trials; |
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| · | our ability to maintain or protect the validity of our intellectual property; |
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| · | our ability to internally develop new inventions and intellectual property; |
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| · | interpretations of current laws and the passages of future laws; |
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| · | acceptance of our business model by investors; |
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| · | the accuracy of our estimates regarding expenses and capital requirements; |
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| · | our ability to adequately support organizational and business growth; and |
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| · | other factors discussed in our most recent Annual Report on Form 10-K. |
The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipate in our forward-looking statements. Please see “Risk Factors” for additional risks which could adversely impact our business and financial performance.
All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report, or the date of the document incorporated by reference into this report. We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith, and we believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs, or projections will result or be achieved or accomplished.
Overview
We are a late-stage medical dermatology company focused on identifying, developing, and commercializing innovative pharmaceutical product candidates for the treatment of medical and aesthetic skin conditions and diseases we believe represent significant market opportunities.
Dermatological diseases such as acne vulgaris (or acne), psoriasis vulgaris (or psoriasis), hyperhidrosis, and various aesthetic indications, affect millions of people worldwide each year which may negatively impact their quality of life and emotional well-being. While there are multiple current treatment options for these indications on the market, we believe that most have significant drawbacks, including underwhelming efficacy, cumbersome application regimens and varying negative side effects, all of which we believe lead to decreased patient compliance. A majority of these indications are first treated with topical therapy; however, many patients frequently switch treatments or discontinue treatment altogether due to patient dissatisfaction. This is primarily due to slow and modest response rates, early onset of negative side effects, daily application schedules and long duration of therapy. Given the limitations with current topical therapies, we believe there is a significant opportunity to address the needs of frustrated patients searching for topical products that satisfy their dermatological and lifestyle needs.
Our two product candidates, DMT310 and DMT410, both incorporate our proprietary, multifaceted, Spongilla technology to topically treat a variety of dermatological conditions. Our Spongilla technology is derived from a naturally grown freshwater sponge, Spongilla lacustris or Spongilla, which is processed into a powder that is mixed with a fluidizing agent immediately prior to application to form an easily applicable paste. Spongilla is a unique freshwater sponge that only grows in commercial quantities in select regions of the world and under specific environmental conditions, all of which give it its distinctive anti-microbial, anti-inflammatory, and mechanical properties. The combination of these environmental conditions, the proprietary harvesting protocols developed with our exclusive supplier, and our post-harvest processing procedures produce a pharmaceutical product candidate that optimizes the mechanical components as well as the chemical components of the sponge to create a product candidate with multiple mechanisms of action for the treatment of medical and aesthetic skin diseases and conditions.
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We believe our Spongilla technology platform will enable us to develop and formulate singular and combination products that are able to target the topical delivery of chemical compounds into the dermis for a variety of dermatology indications. We believe the combination of Spongilla’s mechanical and chemical components (which we believe have demonstrated, in-vitro, anti-microbial and anti-inflammatory properties), add to the versatility of our Spongilla technology platform’s effectiveness as a singular product, in the treatment of a wide variety of medical skin diseases like acne and psoriasis. We also believe the mechanical properties of our Spongilla technology allows for the intradermal delivery of a variety of large molecules, like botulinum toxins, monoclonal antibodies, or dermal fillers, to target treatment sites, through topical application without the need for needles.
Our lead product candidate, DMT310, is intended to utilize our Spongilla technology for the once weekly treatment of a variety of skin diseases, with our initial focus being the treatment of acne vulgaris, which has a U.S. market size of approximately 30 million diagnosed patients. We recently initiated a Phase 3 program of DMT310 in moderate-to-severe acne. Both studies will be double-blinded, randomized, placebo-controlled, and enroll up to 550 patients, age 9 years or older across sites in the United States and Latin America. The primary endpoints include absolute reduction in inflammatory and noninflammatory lesions and the improvement in investigators global assessment (“IGA”) of acne, which are the same endpoints used in our Phase 2b study of DMT310 for moderate-to-severe acne. Patients will be treated once a week for 12 weeks with either DMT310 or placebo and will be evaluated monthly. The second Phase 3 study will be followed by a long-term extension study. We recently announced enrollment of 50% of the total expected patients in the STAR-1 study and we expect to have top-line results from the first Phase 3 study in the first quarter of 2025. Previously, DMT310 has shown its ability to treat the multiple causes of acne in a Phase 2b study where we initially saw a 45% reduction in inflammatory lesions after four treatments, with DMT310 achieving statistically significant improvements at all time points for all three primary endpoints throughout the study (reduction in inflammatory lesions, reduction in non-inflammatory lesions, and improvement in IGA). In addition, based on the multiple mechanisms of action and anti-inflammatory effect seen with the DMT310 acne trial, we completed a Phase 1b proof of concept, or POC, trial in psoriasis where we saw encouraging results warranting further investigation.
DMT310 consists of two grams of powder processed from the naturally grown freshwater sponge, Spongilla lacustris. The patient mixes the powder with a fluidizing agent (3% hydrogen peroxide) immediately prior to application by the patient to form an easy-to-apply paste. The paste is applied like a mud mask and is left on the skin for approximately ten to fifteen minutes, after which time it is washed off with water. Due to the unique combination of DMT310’s mechanical components and chemical components, and based on our Phase 2 acne data, we believe patients will only need to apply DMT310 once weekly to produce the desired treatment effect. The mechanical components of the Spongilla powder consist of many microscopic siliceous, needle-like spicules that, when massaged into the skin, penetrate the stratum corneum (the skin’s outermost protective layer) and create microchannels into the dermis where pro-inflammatory cytokines and bacteria reside. We believe that the penetration of the spicules also leads to the opening of microchannels, which allow oxygen to enter pilosebaceous glands, helping to kill C. acnes, which grow in an anaerobic (without oxygen) environment (C. acnes is the bacteria that cause inflammatory lesions in acne patients). The spicules also cause rejuvenation of the top layer of dead skin, thereby increasing collagen production. Additionally, we believe the newly created microchannels provide a conduit for DMT310’s naturally occurring chemical compounds to be delivered to the dermis and pilosebaceous glands, helping to kill the C. acnes and fight inflammation. In addition to these anti-microbial compounds, DMT310 also appears to have anti-inflammatory chemical compounds, as demonstrated in in vitro experiments, that inhibit inflammation through the reduction of C.acnes stimulated IL-8 production and by inhibiting IL-17A and IL-17F expression in human cell lines. Also, during in vitro studies of DMT310’s organic compounds, we observed the inhibition of the lipogenesis of sebocytes, which may translate to a reduction in sebum (an oily and waxy substance produced by the human body’s sebaceous glands) production and the oiliness of the skin in patients, which was observed by a number of clinical investigators in our Phase 2 acne studies. We believe the combination of these biological and mechanical effects could be important factors in treating multiple inflammatory skin diseases, as seen in our clinical trials.
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Our second product candidate utilizing our Spongilla technology is DMT410, our combination treatment. DMT410 is intended to consist of one treatment of our proprietary sponge powder followed by one topical application of botulinum toxin for delivery into the dermis. Currently, BOTOX®, is the only approved botulinum toxin to be delivered to the dermis by intradermal injections, which can be painful for the patient and time-consuming for the physician. However, we believe DMT410’s ability to topically deliver a botulinum toxin into the dermis could have similar levels of efficacy to intradermal injections of botulinum toxin, with fewer tolerability issues, and a quicker application time, possibly replacing the need for intradermal injections. We first tested DMT410 with BOTOX® in a Phase 1 POC trial of axillary hyperhidrosis patients, which saw 80% of patients achieve a reduction in gravimetric sweat production greater than 50% four weeks after a single treatment. With almost 40% of the hyperhidrosis market currently being treated with intradermal injections of BOTOX®, we believe there could be significant opportunity for DMT410 to break into this market and replace intradermal injections of botulinum toxin with a topical delivery option. Based on DMT410’s ability to effectively deliver botulinum toxin to the dermis as observed in the Phase 1 axillary hyperhidrosis trial, we also conducted a Phase 1 POC trial of DMT410 with BOTOX® for the treatment of multiple aesthetic skin conditions, including reduction of pore size, sebum production, and fine lines, among others. In November 2021, we announced top-line results from this trial, where we saw promising data that we believe warrants further investigation of DMT410. Given that BOTOX® is a Type A toxin, and acts through a similar pathway as other Type A botulinum toxins, we are discussing partnering opportunities with multiple companies that have a botulinum toxin type A to move our DMT410 program into additional clinical studies.
We have a limited operating history. Since our inception, our operations have focused on developing DMT310 and DMT410, organizing and staffing our company, raising capital, establishing our supply chain and manufacturing processes, further characterizing the multiple mechanisms of action of our Spongilla technology, building an intellectual property portfolio, and conducting non-clinical and clinical trials. We do not have any product candidates approved for marketing and have not generated any revenue from product sales. We have funded our operations primarily through the sale of our equity securities and debt securities. Since inception, we have raised an aggregate of approximately $68.8 million of gross proceeds from the sale of our debt and equity securities.
We have not generated any revenue to date and have incurred significant operating losses. Our net losses were $3.2 million and $1.7 million for the three months ended September 30, 2024, and 2023, respectively, and our net losses were $9.1 million and $5.7 million for the nine months ended September 30, 2024, and 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $62.5 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:
| · | complete development of DMT310 for the treatment of acne, including non-clinical studies and Phase 3 clinical trials; |
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| · | prepare and file for regulatory approval of DMT310 for the treatment of moderate-to-severe acne; |
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| · | identify a botulinum toxin partner for DMT410 for the treatment of medical and aesthetic skin conditions and diseases; |
| · | continue development of DMT410 for the treatment of treatment of aesthetic and medical skin conditions, including Phase 1 and Phase 2 clinical trials; |
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| · | prepare for commercialization of DMT310, if approved, including the hiring of sales and marketing personnel; |
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| · | manufacture our product candidates for additional Phase 2 and Phase 3 trials and commercial sale; |
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| · | hire additional research and development and selling, general and administrative personnel; |
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| · | maintain, expand, and protect our intellectual property portfolio; and |
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| · | incur additional costs associated with operating as a public company. |
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We will need additional financing to support our operations. We may seek to fund our operations through public or private equity or debt financings or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital when needed or on favorable terms would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenues to achieve profitability, and we may never do so.
Recent Developments
In July 2024, we reached the 50% patient enrollment milestone in the first of two Phase 3 clinical trials of DMT310 in moderate-to-severe acne. We expect to receive top-line results from the first Phase 3 trial, referred to as STAR-1, in the first quarter of 2025. Both Phase 3 studies will be double-blinded, randomized, placebo-controlled, and enroll up to 550 patients, age 9 years or older across sites in the United States and Latin America. The primary endpoints include absolute reduction in inflammatory and noninflammatory lesions and the improvement in investigators global assessment (IGA) of acne. Patients will be treated once a week for 12 weeks with either DMT310 or placebo and will be evaluated monthly.
ATM Agreement
In June 2024, we entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright &Co., LLC (“HCW”), as sales agent, pursuant to which we may offer and sell, from time to time through HCW, shares of our common stock for aggregate proceeds of up to $1,662,761 (upon the terms and subject to the conditions and limitations set forth in the ATM Agreement). In the nine months ended September 30, 2024, we sold 550,024 shares of common stock under the ATM Agreement, for net proceeds of $1.5 million, after deducting $0.1 million of compensation to HCW and other administration fees.
Critical Accounting Policies and Use of Estimates
We have based our management’s discussion and analysis of financial condition and results of operations on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those related to clinical development expenses. We base our estimates on historical experience and on various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully discussed in Note 2 - Summary of Significant Accounting Policies to our unaudited financial statements contained within this Form 10-Q, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements.
Research and Development Expenses
We rely on third parties to conduct our clinical studies and to provide services, including data management, statistical analysis, and electronic compilation. Once our clinical trials begin, at the end of each reporting period, we will compare the payments made to each service provider to the estimated progress towards completion of the related project. Factors that we will consider in preparing these estimates include the number of patients enrolled in studies, milestones achieved, and other criteria related to the efforts of our vendors. These estimates will be subject to change as additional information becomes available. Depending on the timing of payments to vendors and estimated services provided, we will record net prepaid or accrued expenses related to these costs.
Fluctuations in Operating Results
Our results of operations have fluctuated significantly from period to period in the past and are likely to continue to do so in the future. We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including the progress and timing of expenditures related to the development of our product candidates. Due to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a good indication of our future performance.
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Results of Operations
Three Months Ended September 30, 2024, and 2023
The following table summarizes our results of operations for the periods presented:
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| Three Months Ended September 30, |
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| 2024 |
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| 2023 |
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| Difference |
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Operating expenses: |
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Research and development |
| $ | 2,401,359 |
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| $ | 902,977 |
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| $ | 1,498,382 |
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General and administrative |
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| 824,294 |
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| 909,001 |
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| (84,707 | ) |
Total operating expenses |
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| 3,225,653 |
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| 1,811,978 |
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| 1,413,675 |
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Losses from operations |
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| (3,225,653 | ) |
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| (1,811,978 | ) |
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| (1,413,675 | ) |
Other income and expenses: |
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Interest income, net |
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| 52,497 |
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| 92,767 |
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| 40,270 |
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Net loss |
| $ | (3,173,156 | ) |
| $ | (1,719,211 | ) |
| $ | (1,453,945 | ) |
Research and Development Expenses
Research and development expenses increased by $1.5 million from $0.9 million for the three months ended September 30, 2023, to $2.4 million for the three months ended September 30, 2024. The increase in research and development expenses in the third quarter of 2024 as compared to the same period in 2023 resulted from $1.8 million of increased clinical expenses from the DMT310 STAR-1 acne study initiated in late 2023, offset by $0.3 million of decreased chemistry, manufacturing, and controls, or CMC, expenses.
General and Administrative Expenses
General and administrative expenses decreased by $0.1 million from $0.9 million for the three months ended September 30, 2023, to $0.8 million for the three months ended September 30, 2024. The decrease in general and administrative expenses in the third quarter of 2024 as compared to the same period of 2023 resulted from $0.1 million in decreased insurance costs.
Other Income and Expenses
Other income and expenses decreased by $40,270 from $92,767 for the three months ended September 30, 2023, to $52,497 for the three months ended September 30, 2024. The decrease in interest income resulted from less cash and cash equivalents available for earning interest income.
Nine Months Ended September 30, 2024, and 2023
The following table summarizes our results of operations for the periods presented:
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| Nine Months Ended September 30, |
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| 2024 |
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| 2023 |
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| Difference |
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Operating expenses: |
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Research and development |
| $ | 6,011,201 |
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| $ | 2,934,541 |
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| $ | 3,076,660 |
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General and administrative |
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| 3,301,753 |
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| 2,887,533 |
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| 414,220 |
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Total operating expenses |
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| 9,312,954 |
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| 5,822,074 |
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| 3,490,880 |
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Loss from operations |
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| (9,312,954 | ) |
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| (5,822,074 | ) |
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| (3,490,880 | ) |
Other income and expenses: |
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Interest expense, net |
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| 176,431 |
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| 161,357 |
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| 15,074 |
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Net loss |
| $ | (9,136,523 | ) |
| $ | (5,660,717 | ) |
| $ | (3,475,806 | ) |
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Research and Development Expenses
Research and development expenses increased by $3.1 million from $2.9 million for the nine months ended September 30, 2023, to $6.0 million for the nine months ended September 30, 2024. The increase in research and development expenses resulted from $4.0 million of increased clinical expenses from the DMT310 STAR-1 acne study initiated in late 2023, offset by $0.7 million of decreased chemistry, manufacturing, and controls, or CMC, expenses and $0.2 million of decreased non-clinical expenses.
General and Administrative Expenses
General and administrative expenses increased by $0.4 million from $2.9 million for the nine months ended September 30, 2023, to $3.3 million for the nine months ended September 30, 2024. This increase resulted from $0.5 million of increased audit fees as well as $0.1 million of increased stock-based compensation, offset by $0.2 million of decreased insurance costs.
Other Income and Expenses
Other income and expenses increased by $15,074 from $161,357 for the nine months ended September 30, 2023, to $176,431 for the nine months ended September 30, 2024. The increase in interest income resulted from interest rate increases.
Cash Flows
The following table summarizes our cash flows from operating and financing activities:
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| Nine Months Ended September 30, |
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| 2024 |
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| 2023 |
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Statements of cash flows data: |
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Total net cash provided by (used in): |
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Operating activities |
| $ | (8,249,332 | ) |
| $ | (5,261,626 | ) |
Financing activities |
| $ | 6,954,949 |
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| $ | 5,651,815 |
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Increase (decrease) in cash and cash equivalents |
| $ | (1,294,383 | ) |
| $ | 390,189 |
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Operating activities
Cash used in operations of $8.2 million for the nine months ended September 30, 2024, was the result of the net loss of $9.1 million, offset by increases in non-cash stock-based compensation of $0.6 million and increases in accrued expenses of $0.3 million.
Cash used in operations of $5.3 million for the nine months ended September 30, 2023, was the result of the net loss of $5.7 million, offset by non-cash stock-based compensation of $0.4 million.
Financing activities
Cash provided by financing activities of $7.0 million for the nine months ended September 30, 2024, was the result of the September 2024 PIPE financing which raised net proceeds of $3.1 million, sales of the Company’s shares through the ATM Agreement which raised net proceeds of $1.5 million during the third quarter of 2024, and the May 2024 warrant inducement financing which raised net proceeds of $2.3 million.
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Cash provided by financing activities of $5.7 million for the nine months ended September 30, 2023, was the result of $4.2 million of net proceeds received from the issuance of Common Stock and warrants issued in the March 2023 Offering, as well as $1.5 million of net proceeds received from the May 2023 Offering.
Liquidity and Capital Resources
Since our inception, we have not generated any revenue or commercialized any products. As of September 30, 2024, our cash and cash equivalents totaled $6.1 million, and we had an accumulated deficit of $62.5 million. For the nine months ended September 30, 2024, and the year ended December 31, 2023, we used cash of $8.2 million and $6.4 million, respectively, in operations. We expect our cash resources to fund operations into the second quarter of 2025. We anticipate that we will continue to incur net losses for the foreseeable future.
Historically, our principal sources of cash have included proceeds from the issuance of common and preferred equity and proceeds from the issuance of debt. Our principal uses of cash have included cash used in operations (including clinical development of our product candidates and general and administrative expenses) and payments for license rights. We expect that the principal uses of cash in the future will be for continuing operations, funding of research and development, and general working capital requirements. We expect that as research and development expenses continue to grow, we will need to raise additional capital to sustain operations and research and development activities.
Funding Requirements
We plan to focus in the near term on the development, regulatory approval, and potential commercialization of DMT310 for the treatment of acne. We anticipate we will incur net losses for the next several years as we complete clinical development of DMT310 for the treatment of acne and psoriasis and continue research and development of DMT410 for the treatment of aesthetic and medical skin conditions. In addition, we plan to seek opportunities to identify, acquire or in license and develop additional drug candidates, potentially build commercial capabilities, and expand our corporate infrastructure. We may not be able to complete the development and initiate commercialization of these programs if, among other things, our clinical trials are not successful or if the FDA does not approve our drug candidate arising out of our current clinical trials when we expect, or at all.
Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, clinical costs, external research and development services, legal and other regulatory expenses, and administrative and overhead costs. Our future funding requirements will be heavily determined by the resources needed to support the development of our drug candidates.
As a publicly traded company, we will incur significant legal, accounting, and other expenses that we were not required to incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as rules adopted by the Securities and Exchange Commission (the “SEC”), and Nasdaq, requires public companies to implement specified corporate governance practices that were not applicable to us as a private company. We expect these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.
We believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the second quarter of 2025. We have based this estimate of cash runway on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. We anticipate that we will continue to incur net losses for the foreseeable future. These factors raise substantial doubt about our ability to continue as a going concern for the one-year period following the date that these financial statements were issued. We will require additional capital to complete the Phase 3 studies for DMT310 for the treatment of acne, continue development of DMT310, and to pursue in-licenses or acquisitions of other drug candidates. Therefore, based on our recurring losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future, and the need to raise additional capital to finance future operations, we are developing plans to mitigate this risk, which may consist of raising additional capital through some combination of equity or debt financings, and/or potentially new collaborations, business transactions, and reducing cash expenditures. If we are not able to secure adequate additional funding, we may be forced to make significant reductions in our operations and the pursuit of our growth strategy. In that event, we may have to delay, scale back, or eliminate some or all of our research and development programs and activities which could adversely affect our business prospects, or we may be unable to continue operations.
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We may raise additional capital through the sale of equity or convertible debt securities. In such an event, the terms of these securities may include liquidation or other preferences that adversely affect the rights of the holders of our Common Stock.
Because of the numerous risks and uncertainties associated with research, development, and commercialization of pharmaceutical drugs, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on many factors, including:
| · | the number and characteristics of the drug candidates we pursue; |
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| · | the scope, progress, results, and costs of researching and developing our drug candidates, and conducting preclinical studies and clinical trials; |
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| · | the timing of, and the costs involved in, obtaining regulatory approvals for our drug candidates; |
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| · | the cost of manufacturing our drug candidates and any drugs we successfully commercialize; |
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| · | our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such agreements; |
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| · | the costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing patent claims, including litigation costs and the outcome of such litigation; and |
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| · | the timing, receipt and amount of sales of, or milestone payments related to or royalties on, our current or future drug candidates, if any. |
To continue to grow our business over the longer term, we plan to commit substantial resources to research and development, clinical trials of our product candidates, and other operations and potential product acquisitions and in licensing. We have evaluated and expect to continue to evaluate a wide array of strategic transactions as part of our plan to acquire or in license and develop additional products and product candidates to augment our internal development pipeline. Strategic transaction opportunities that we may pursue could materially affect our liquidity and capital resources and may require us to incur additional indebtedness, seek equity capital or both. In addition, we may pursue development, acquisition or in licensing of approved or development products in new or existing therapeutic areas or continue the expansion of our existing operations. Accordingly, we expect to continue to opportunistically seek access to additional capital to license or acquire additional products, product candidates or companies to expand our operations, or for general corporate purposes. Strategic transactions may require us to raise additional capital through one or more public or private debt or equity financings or could be structured as a collaboration or partnering arrangement. We have no arrangements, agreements, or understandings in place at the present time to enter into any acquisition, in licensing or similar strategic business transaction.
Contractual Obligations and Commitments
We do not currently own or lease any office space.
We enter into contracts in the normal course of business with contract research organizations for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts generally provide for termination upon notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.
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JOBS Act Accounting Election
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Recent Accounting Pronouncements
See Item 1 of Part I, “Notes to Financial Statements — Note 2 — Summary of Significant Accounting Policies” for a discussion of recent accounting pronouncements.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the evaluation of our disclosure controls and procedures as of September 30, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Evaluation of Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the period to which this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. From time to time, we make changes to our internal control over financial reporting that are intended to enhance its effectiveness and which do not have a material effect on our overall internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
None.
ITEM 1A: RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 21, 2024. No material changes to such risk factors have occurred during the quarter ended September 30, 2024.
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4: MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5: OTHER INFORMATION
(a) None.
(b) None.
(c) During the fiscal quarter ended September 30, 2024, no director or “officer” (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(c) of Regulation S-K.
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ITEM 6: EXHIBITS
Exhibit No. |
| Description |
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| Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a). | |
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| Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a). | |
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101.INS* |
| XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101) |
* Filed herewith.
** Furnished, not filed.
† Indicates a management contract or compensation plan, contract or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dermata Therapeutics, Inc. |
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Date: November 13, 2024 | By: | /s/ Gerald T. Proehl |
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| Gerald T. Proehl |
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| President and Chief Executive Officer |
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| (Principal Executive Officer) |
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| By: | /s/ Kyri K. Van Hoose |
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| Kyri K. Van Hoose |
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| Senior Vice President, Chief Financial Officer |
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| (Principal Financial Officer and Principal Accounting Officer) |
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