UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from___ to___.

Commission File Number 001-35963

NEUBASE THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware		46-5622433
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

350 Technology Drive, Pittsburgh, PA 15219

(Address of principal executive offices and zip code)

(412) 763-3350

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.0001 par value per share		NBSE		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of August 5, 2022, 32,258,657 shares of the common stock, par value $0.0001, of the registrant were outstanding.

Table of Contents

Table of Contents


PART I.		1

ITEM 1.	FINANCIAL STATEMENTS	1

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	19

ITEM 4.	CONTROLS AND PROCEDURES	19

PART II.		20

ITEM 1.	LEGAL PROCEEDINGS	20

ITEM 1A.	RISK FACTORS	21

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	27

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	27

ITEM 4.	MINE SAFETY DISCLOSURES	27

ITEM 5.	OTHER INFORMATION	27

ITEM 6.	EXHIBITS	28

SIGNATURES		29

-i-

Table of Contents

PART I.

ITEM 1. FINANCIAL STATEMENTS

NeuBase Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)


	June 30,		September 30,
	2022		2021
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	29,846,825	$	52,893,387
Prepaid insurance		460,804		499,061
Other prepaid expenses and current assets		1,314,057		1,536,186
Total current assets		31,621,686		54,928,634

EQUIPMENT, net		2,351,286		2,463,882

OTHER ASSETS
Investment		—		415,744
Right-of-use asset, operating lease asset		5,750,602		5,945,295
Security deposit		273,215		253,615
Other long-term assets		—		160,423
Total other assets		6,023,817		6,775,077

TOTAL ASSETS	$	39,996,789	$	64,167,593

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	1,655,789	$	1,807,885
Accrued expenses and other current liabilities		1,868,860		1,747,746
Insurance note payable		—		148,385
Operating lease liabilities		560,252		382,576
Finance lease liabilities		115,652		107,632
Total current liabilities		4,200,553		4,194,224

Long-term operating lease liability		5,463,797		5,794,096
Long-term finance lease liability		20,108		109,500
TOTAL LIABILITIES		9,684,458		10,097,820

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding as of June 30, 2022 and September 30, 2021		—		—
Common stock, $0.0001 par value; 250,000,000 shares authorized; 32,258,657 and 32,721,493 shares issued and outstanding as of June 30, 2022 and September 30, 2021, respectively		3,225		3,272
Additional paid-in capital		125,421,571		123,034,404
Accumulated deficit		(95,112,465)		(68,967,903)
Total stockholders’ equity		30,312,331		54,069,773

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	39,996,789	$	64,167,593

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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NeuBase Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months ended June 30,				Nine Months Ended June 30,
	2022		2021		2022		2021
OPERATING EXPENSES
General and administrative	$	3,603,999	$	3,470,104	$	9,633,422	$	8,833,214
Research and development		4,756,609		2,480,961		15,961,536		7,675,014
Research and development, Vera acquisition		—		2,888,029		—		2,888,029
TOTAL OPERATING EXPENSES		8,360,608		8,839,094		25,594,958		19,396,257

LOSS FROM OPERATIONS		(8,360,608)		(8,839,094)		(25,594,958)		(19,396,257)

OTHER INCOME (EXPENSE)
Interest expense		(2,819)		(3,074)		(21,354)		(19,271)
Interest income		37,147		2,054		41,846		11,520
Change in fair value of warrant liabilities		—		215,547		—		936,256
Equity in losses on equity method investment		—		(37,215)		(415,744)		(98,754)
Other (expense) income, net		(165,437)		(1,087)		(154,352)		315,637
Total other income (expense), net		(131,109)		176,225		(549,604)		1,145,388

NET LOSS	$	(8,491,717)	$	(8,662,869)	$	(26,144,562)	$	(18,250,869)

BASIC AND DILUTED LOSS PER SHARE	$	(0.26)	$	(0.29)	$	(0.80)	$	(0.72)

WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC AND DILUTED		32,258,657		30,092,493		32,556,035		25,482,082

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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NeuBase Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended June 30, 2022 and 2021

(Unaudited)


				Additional				Total
	Common Stock			Paid-In				Stockholders’
	Shares	Amount		Capital		Accumulated Deficit		Equity
Balance as of September 30, 2021	32,721,493	$	3,272	$	123,034,404	$	(68,967,903)	$	54,069,773
Stock-based compensation expense	—		—		793,204		—		793,204
Issuance of restricted stock for services	4,441		—		—		—		—
Exercise of stock options	42,250		4		38		—		42
Net loss	—		—		—		(7,728,816)		(7,728,816)
Balance as of December 31, 2021	32,768,184	$	3,276	$	123,827,646	$	(76,696,719)	$	47,134,203
Stock-based compensation expense	—		—		952,828		—		952,828
Forfeiture of common stock	(509,527)		(51)		51		—		—
Net loss	—		—		—		(9,924,029)		(9,924,029)
Balance as of March 31, 2022	32,258,657	$	3,225	$	124,780,525	$	(86,620,748)	$	38,163,002
Stock-based compensation expense	—		—		641,046		—		641,046
Net loss	—		—		—		(8,491,717)		(8,491,717)
Balance as of June 30, 2022	32,258,657	$	3,225	$	125,421,571	$	(95,112,465)	$	30,312,331


				Additional				Total
	Common Stock			Paid-In				Stockholders’
	Shares	Amount		Capital		Accumulated Deficit		Equity
Balance as of September 30, 2020	23,154,084	$	2,315	$	74,850,935	$	(43,558,602)	$	31,294,648
Stock-based compensation expense	—		—		1,176,585		—		1,176,585
Issuance of restricted stock for services	1,931		—		—		—		—
Exercise of stock options	21,576		2		112,444		—		112,446
Net loss	—		—		—		(4,066,431)		(4,066,431)
Balance as of December 31, 2020	23,177,591	$	2,317	$	76,139,964	$	(47,625,033)	$	28,517,248
Stock-based compensation expense	—		—		942,108		—		942,108
Issuance of restricted stock for services	2,433		—		—		—		—
Net loss	—		—		—		(5,521,569)		(5,521,569)
Balance as of March 31, 2021	23,180,024	$	2,317	$	77,082,072	$	(53,146,602)	$	23,937,787
Stock-based compensation expense	—		—		625,182		—		625,182
Issuance of common stock, net of issuance costs	9,200,000		920		42,615,456		—		42,616,376
Issuance of common stock, Vera acquisition	308,635		31		1,759,189		—		1,759,220
Issuance of restricted stock for services	2,692		—		—		—		—
Exercise of stock options	25,476		3		(3)		—		—
Net loss	—		—		—		(8,662,869)		(8,662,869)
Balance as of June 30, 2021	32,716,827	$	3,271	$	122,081,896	$	(61,809,471)	$	60,275,696

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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NeuBase Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended June 30,
	2022		2021
Cash flows from operating activities
Net loss	$	(26,144,562)	$	(18,250,869)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation		2,387,078		2,743,875
Research and development expense, Vera acquisition		—		2,888,029
Change in fair value of warrant liabilities		—		(936,256)
Depreciation and amortization		567,744		251,701
Loss on marketable securities		30		15,024
Loss on disposal of fixed assets		—		1,087
Equity in losses on equity method investment		415,744		98,754
Gain on sale of intellectual property		—		(316,724)
Amortization of right-of-use assets		359,306		69,423
Changes in operating assets and liabilities
Prepaid insurance, other prepaid expenses and current assets		260,386		(166,420)
Long-term prepaid insurance		—		145,250
Security deposit		(19,600)		(253,565)
Other long-term assets		160,423		—
Accounts payable		(164,339)		(173,913)
Accrued expenses and other current liabilities		121,114		394,258
Operating lease liability		(317,236)		58,809
Net cash used in operating activities		(22,373,912)		(13,431,537)
Cash flows from investing activities
Purchase of laboratory and office equipment		(442,905)		(1,096,781)
Purchase of marketable securities		(14,986,818)		(44,992,196)
Sale of marketable securities		14,986,788		44,977,172
Cash paid for Vera acquisition		—		(1,100,040)
Net cash used in investing activities		(442,935)		(2,211,845)
Cash flows from financing activities
Principal payment of financed insurance		(148,385)		(235,248)
Principal payment of finance lease liability		(81,372)		—
Proceeds from issuance of stock, net of issuance costs		—		42,616,376
Proceeds from exercise of stock options		42		112,446
Net cash (used in) provided by financing activities		(229,715)		42,493,574
Net (decrease) increase in cash and cash equivalents		(23,046,562)		26,850,192
Cash and cash equivalents, beginning of period		52,893,387		31,992,283
Cash and cash equivalents, end of period	$	29,846,825	$	58,842,475

Supplemental disclosure of cash flow information:
Cash paid for interest	$	—	$	10,400
Cash paid for income taxes	$	—	$	—
Non-cash investing and financing activities:
Issuance of common stock, Vera acquisition	$	—	$	1,759,220
Purchases of laboratory and office equipment in accounts payable	$	12,243	$	188,452
Preferred shares in DepYmed received as consideration for sale of intellectual property	$	—	$	316,724
Insurance financed through note payable	$	—	$	391,625
Right-of-use asset obtained in exchange for operating lease liabilities	$	164,613	$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Description of Business

NeuBase Therapeutics, Inc. and subsidiaries (the “Company” or “NeuBase”) is developing a modular peptide-nucleic acid (“PNA”) antisense oligo (“PATrOL™”) platform to address genetic diseases, with a single, cohesive approach. The PATrOL™-enabled anti-gene therapies are designed to improve upon current genetic medicine strategies by combining the advantages of synthetic approaches with the precision of antisense technologies. NeuBase plans to use its platform to address diseases which have a genetic source, with an initial focus on Myotonic Dystrophy Type 1 (“DM1”), Huntington’s disease (“HD”) and oncology applications.

NeuBase is a preclinical-stage biopharmaceutical company and continues to develop its clinical and regulatory strategy with its internal research and development team with a view toward prioritizing market introduction as quickly as possible. NeuBase’s programs are NT-0100 in HD, NT-0200 in DM1 and NT-0300 in KRAS-driven cancers:

●

The NT-0100 program is a PATrOL™-enabled therapeutic program being developed to target the mutant expansion in the HD messenger ribonucleic acid (“mRNA”). The NT-0100 program includes proprietary PNAs which have the potential to be highly selective for the mutant transcript versus the wild-type transcribed allele and the expectation to be applicable for all HD patients as it directly targets the expansion itself and has the potential to be delivered systemically. PATrOL™-enabled drugs also have the unique ability to open RNA secondary structures and bind to either the primary nucleotide sequences or the secondary and/or tertiary structures.

●

The NT-0200 program is a PATrOL™-enabled therapeutic program being developed to target the mutant expansion in the DM1 disease mRNA. The NT-0200 program has the potential to be highly selective for the mutant transcript versus the wild-type transcribed allele and the expectation to be effective for nearly all DM1 patients as it directly targets the expansion itself.

●

The NT-0300 program is a PATrOL™-enabled therapeutic program being developed to target the mutated KRAS gene. The program is comprised of candidate compounds that target two activating mutations in the KRAS gene: G12D and G12V. NeuBase believes these candidate compounds, and subsequent further optimized compounds, have the potential to inhibit transcription and/or translation of the oncogenic mutations and slow or stop tumor growth.

NeuBase believes its three aforementioned programs address unmet needs for diseases that currently have no effective therapeutics that target the etiologies of these conditions. NeuBase further believes there is a large opportunity in the U.S. and European markets for drugs in these areas.

Liquidity and Going Concern

The Company has had no revenues from product sales and has incurred operating losses since inception. As of June 30, 2022, the Company had $29.8 million in cash and cash equivalents, and during the nine months ended June 30, 2022, incurred a loss from operations of $25.6 million and used $22.4 million of cash in operating activities.

The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to its ability to continue as a going concern.

The Company’s future liquidity and capital funding requirements will depend on numerous factors, including:

●

its ability to raise additional funds to finance its operations;

●

its ability to maintain compliance with the listing requirements of The Nasdaq Capital Market (“Nasdaq”)

●

the outcome, costs and timing of preclinical and clinical trial results for the Company’s current or future product candidates;

●

the extent and amount of any indemnification claims;

●

litigation expenses and the extent and amount of any indemnification claims;

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

●

the emergence and effect of competing or complementary products;

●

its ability to maintain, expand and defend the scope of its intellectual property portfolio, including the amount and timing of any payments the Company may be required to make, or that it may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;

●

its ability to retain its current employees and the need and ability to hire additional management and scientific and medical personnel;

●

the trading price of its common stock; and

●

its ability to increase the number of authorized shares outstanding to facilitate future financing events.

The Company will likely need to raise substantial additional funds through issuance of equity or debt or completion of a licensing transaction for one or more of the Company’s pipeline assets. If the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations will be materially and adversely affected. This could affect future development and business activities and potential future clinical studies and/or other future ventures. Failure to obtain additional equity or debt financing will have a material, adverse impact on the Company’s business operations. There can be no assurance that the Company will be able to obtain the needed financing on acceptable terms or at all. Additionally, any equity financings will likely have a dilutive effect on the holdings of the Company’s existing stockholders.

2. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended September 30, 2021 included in the Company’s Annual Report on Form 10-K (the “Annual Report”) filed with the U.S. Securities and Exchange Commission (“SEC”) on December 23, 2021. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated during the consolidation process. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The accompanying unaudited condensed consolidated financial statements have been prepared by the Company 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 8 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, the accompanying unaudited condensed consolidated financial statements for the periods presented reflect all adjustments, consisting of only normal, recurring adjustments, necessary to fairly state the Company’s financial position, results of operations and cash flows. The unaudited condensed consolidated financial statements for the interim periods are not necessarily indicative of results for the full year. The preparation of these unaudited condensed consolidated financial statements requires the Company to make estimates and judgments that affect the amounts reported in the financial statements and the accompanying notes. The Company’s actual results may differ from these estimates under different assumptions or conditions.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’s unaudited condensed consolidated financial statements relate to the valuation of stock-based compensation, the valuation of licenses, the fair value of warrant liabilities and the valuation allowance of deferred tax assets resulting from net operating losses. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources.

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company assesses and updates estimates each period to reflect current information, such as the economic considerations related to the impact that the novel coronavirus disease (“COVID-19”) could have on its significant accounting estimates. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Fair Value Measurements

Fair value measurements are based on the premise that fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the following three-tier fair value hierarchy has been used in determining the inputs used in measuring fair value:

Level 1 – Quoted prices in active markets for identical assets or liabilities on the reporting date.

Level 2 – Pricing inputs are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Pricing inputs are generally unobservable and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require management’s judgment or estimation of assumptions that market participants would use in pricing the assets or liabilities. The fair values are therefore determined using factors that involve considerable judgment and interpretations, including but not limited to private and public comparables, third-party appraisals, discounted cash flow models, and fund manager estimates.

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Management’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts recorded may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted net loss per share includes the dilutive effect, if any, from the potential exercise or conversion of securities, such as convertible debt, warrants and stock options that would result in the issuance of incremental shares of common stock. In computing the basic and diluted net loss per share applicable to common stockholders, the weighted average number of shares remains the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation as the impact is anti-dilutive.

The following potentially dilutive securities outstanding as of June 30, 2022 and 2021 have been excluded from the computation of diluted weighted average shares outstanding, as they would be anti-dilutive:


	As of June 30,
	2022	2021
Common stock purchase options	8,212,778	7,002,421
Restricted stock units	—	10,000
Common stock purchase warrants	180,000	820,939
	8,392,778	7,833,360

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The adoption of this standard as of October 1, 2021, did not impact the Company’s consolidated financial statements and related disclosures.

In November 2021, the FASB issued ASU No. 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance”, which amends disclosures to increase transparency of government assistance, including (i) the types of assistance, (ii) accounting for the assistance and (iii) the effect of the assistance on an entity’s financial statements. The standard is effective for all business entities for annual periods beginning after December 15, 2021. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In June 2022, the FASB issued ASU 2022-03, “ASC Subtopic 820 Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASU 2022-03”). ASU 2022-03 amends ASC 820 to clarify that a contractual sales restriction is not considered in measuring an equity security at fair value and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. ASU 2022-03 applies to both holders and issuers of equity and equity-linked securities measured at fair value. The amendments in this ASU are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the impact of this pronouncement on its consolidated financial statements and related disclosures.

3. Other Prepaid Expenses and Other Current Assets

The Company’s prepaid expenses and other current assets consisted of the following:


	As of June 30,		As of September 30,
	2022		2021
Prepaid research and development expense	$	670,420	$	583,267
Prepaid rent		—		172,518
Other prepaid expenses and other current assets		643,637		780,401
Total	$	1,314,057	$	1,536,186

4. Equipment

The Company’s equipment consisted of the following:


	As of June 30,		As of September 30,
	2022		2021
Laboratory equipment	$	3,182,369	$	2,737,390
Office equipment		259,978		259,978
Leasehold improvements		10,128		—
Total		3,452,475		2,997,368
Accumulated depreciation		(1,101,189)		(533,486)
Property, plant and equipment, net	$	2,351,286	$	2,463,882

Depreciation expense for the three months ended June 30, 2022 and 2021 was approximately $0.2 million and $0.1 million, respectively. Depreciation expense for the nine months ended June 30, 2022 and 2021 was approximately $0.6 million and $0.3 million, respectively.

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

5. Accrued Expenses and Other Current Liabilities

The Company’s accrued expenses and other current liabilities consisted of the following:


	As of June 30,		As of September 30,
	2022		2021
Accrued compensation and benefits	$	959,405	$	880,707
Accrued consulting settlement		75,000		200,000
Accrued professional fees		441,116		299,557
Accrued research and development		182,410		297,047
Accrued franchise tax		123,546		30,720
Other accrued expenses		87,383		39,715
Total	$	1,868,860	$	1,747,746

6. Notes Payable

Insurance Note Payable

As of September 30, 2021, the Company had the following insurance note payable outstanding:

Stated

Balance at

Maturity

Interest

Original

June 30,

September 30,

Date

Rate

Principal

2022

2021

Insurance Note Payable

2021 Insurance Note

January 2022

4.99

391,625

—

148,385

7. Stockholders’ Equity

Warrants

Below is a summary of the Company’s issued and outstanding warrants as of June 30, 2022:


			Warrants
Expiration date	Exercise Price		Outstanding
July 6, 2023		8.73	105,000
September 20, 2024		6.50	75,000
			180,000


				Weighted
		Weighted		Average
		Average		Remaining
		Exercise		Contractual Life
	Warrants	Price		(in years)
Outstanding as of September 30, 2021	895,939	$	18.35
Expired	(715,939)		21.01
Outstanding as of June 30, 2022	180,000		7.80	1.5
Exercisable as of June 30, 2022	180,000	$	7.80	1.5

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

8. Stock-Based Compensation

As of June 30, 2022, an aggregate of 6,018,136 shares of common stock were authorized under the Company’s 2019 Stock Incentive Plan (the “2019 Plan”), subject to an “evergreen” provision that will automatically increase the maximum number of shares of common stock that may be issued under the term of the 2019 Plan. As of June 30, 2022, 864,396 common shares were available for future grants under the 2019 Plan. As of June 30, 2022, 291,667 shares of common stock were authorized under the Company’s 2016 Consolidated Stock Incentive Plan (the “2016 Plan”) and 147,041 common shares were available for future grants under the 2016 Plan.

The Company recorded stock-based compensation expense in the following expense categories of its unaudited condensed consolidated statements of operations for the three and nine months ended June 30, 2022 and 2021:


	Three Months ended June 30,				Nine Months Ended June 30,
	2022		2021		2022		2021
General and administrative	$	507,435	$	574,353	$	1,389,227	$	1,865,512
Research and development		133,611		50,829		997,851		878,363
Total	$	641,046	$	625,182	$	2,387,078	$	2,743,875

Stock Options

Below is a table summarizing the options issued and outstanding as of and for the nine months ended June 30, 2022:


				Weighted
		Weighted		Average	Total
		Average		Remaining	Aggregate
		Exercise		Contractual Life	Intrinsic
	Stock Options	Price		(in years)	Value
Outstanding at September 30, 2021	7,397,154	$	3.13
Granted	1,510,366		2.14
Exercised	(42,250)		0.00
Forfeited	(652,492)		4.67
Outstanding at June 30, 2022	8,212,778		2.84	6.9	$	3,430,544
Exercisable as of June 30, 2022	5,628,339	$	2.49	6.0	$	3,429,894

As of June 30, 2022, unrecognized compensation costs associated with the stock options of $3.1 million will be recognized over an estimated weighted-average amortization period of 1.4 years.

The intrinsic value of options exercised during the nine months ended June 30, 2022 and 2021 was $0.1 million and $0.06 million, respectively.

The weighted average grant date fair value of options granted during the nine months ended June 30, 2022 and 2021 was $1.40 and $4.29, respectively.

Key assumptions used to estimate the fair value of the stock options granted during the nine months ended June 30, 2022 and 2021 included:


	Nine Months Ended June 30,
	2022	2021
Expected term of options (years)	5.1 - 6.1	5.5 - 7.0
Expected common stock price volatility	73.8% - 77.2%	83% - 83.7%
Risk-free interest rate	1.1% - 3.1%	0.6% - 1.3%
Expected dividend yield	0%	0%

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Restricted Stock

A summary of the changes in the unvested restricted stock during the nine months ended June 30, 2022 is as follows:


			Weighted Average
			Grant Date
	Unvested Restricted		Fair Value
	Stock		Price
Unvested as of September 30, 2021		—	$	—
Granted		4,441		3.94
Vested		(4,441)		3.94
Unvested as of June 30, 2022		—		—
Total unrecognized expense remaining	$	—
Weighted-average years expected to be recognized over		—

Restricted Stock Units

Below is a table summarizing the restricted stock units granted and outstanding as of and for the nine months ended June 30, 2022:


			Weighted Average
			Grant Date
	Restricted Stock		Fair Value
	Units		Price
Unvested as of September 30, 2021		10,000	$	5.09
Forfeited		(10,000)		5.09
Unvested as of June 30, 2022		—		—
Total unrecognized expense remaining	$	—
Weighted-average years expected to be recognized over		—

9. Commitments and Contingencies

Litigation

The Company has become involved in certain legal proceedings and claims which arise in the normal course of business. The Company believes that an adverse outcome is unlikely, and it cannot reasonably estimate the potential loss at this point. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the Company’s results of operations, prospects, cash flows, financial position and brand. Costs associated with the Company’s involvement in legal proceedings are expensed as incurred.

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Securities Litigation

On February 14, 2018, plaintiff Jeevesh Khanna, commenced an action in the Southern District of New York, against Ohr Pharmaceutical, Inc. (“Ohr”), which entered into a merger agreement with NeuBase Therapeutics, Inc. on January 2, 2019 and which merger closed on July 12, 2019, and several of its current and former officers and directors, alleging that they violated federal securities laws between June 24, 2014 and January 4, 2018. On August 7, 2018, the lead plaintiffs, now George Lehman and Insured Benefit Plans, Inc. filed an amended complaint, alleging a putative class period of April 8, 2014 through January 4, 2018. The plaintiffs did not quantify any alleged damages in their complaint, but, in addition to attorneys’ fees and costs, they seek to maintain the action as a class action and to recover damages on behalf of themselves and other persons who purchased or otherwise acquired Ohr common stock during the putative class period and purportedly suffered financial harm as a result. Ohr and the individuals dispute these claims and are defending the matter vigorously. On September 17, 2018, Ohr filed a motion to dismiss the complaint. On September 20, 2019, the district court issued an opinion and order granting the motion to dismiss. On October 23, 2019, the plaintiffs filed a notice of appeal of that order dismissing the action. After full briefing and oral argument, on October 9, 2020, the U.S. Court of Appeals for the Second Circuit issued a summary order affirming the district court’s order granting the motion to dismiss and remanding the action to the district court to make a determination on the record related to plaintiffs’ request for leave to file an amended complaint. On remand, the district court denied plaintiffs’ subsequent request to amend and dismissed with prejudice plaintiffs’ claims. On December 16, 2020, plaintiffs filed a notice of appeal of that order denying plaintiffs leave to amend. On December 16, 2021, the Second Circuit affirmed the decision and order of the district court denying plaintiffs’ motion for leave to amend, thereby dismissing the appeal and action in its entirety. Plaintiffs have neither sought reconsideration of the Second Circuit’s decision nor filed a writ of certiorari for review by the Supreme Court. This matter is now considered closed.

Derivative Lawsuit

On May 3, 2018, plaintiff Adele J. Barke, derivatively on behalf of Ohr, commenced an action against Michael Ferguson, Orin Hirschman, Thomas M. Riedhammer, June Almenoff and Jason Slakter in the Supreme Court, State of New York, alleging that the action was brought in the right and for the benefit of Ohr seeking to remedy their “breach of fiduciary duties, corporate waste and unjust enrichment that occurred between June 24, 2014 and the present.” It does not quantify any alleged damages. On March 30, 2022, plaintiff filed a notice of voluntary dismissal of the complaint in this action. This matter is now considered closed.

Joint Proxy Statement Lawsuit

Following the issuance of the preliminary joint proxy statement/prospectus related to the merger of the Company and Ohr, on March 18, 2019, the Gomez Action was filed by an individual shareholder in the United States District Court for the Southern District of New York against Ohr and its board of directors. The plaintiff in the Gomez Action alleges that the preliminary joint proxy/prospectus statement filed by Ohr with the SEC on March 8, 2019 contained false and misleading statements and omitted material information in violation of Section 14(a) of the Exchange Act and SEC Rule 14a-9 promulgated thereunder, and further that the individual defendants are liable for those alleged misstatements and omissions under Section 20(a) of the Exchange Act. On March 19, 2019, the Barke Action was filed in the United States District Court for the Southern District of New York asserting similar Section 14(a) and Section 20(a) claims against Ohr’s board of directors and additionally naming NeuBase and Ohr Acquisition Corp., but not Ohr, as defendants. On March 20, 2019, the Wheby Action was filed in the United States District Court for District of Delaware asserting similar claims under Section 14(a) and Section 20(a) and naming as defendants Ohr and its board of directors, NeuBase, and Ohr Acquisition Corp. On March 20, 2019, the Lowinger Action was filed in the Court of Chancery of the State of Delaware asserting a breach of fiduciary duty claim against Ohr’s board of directors arising out of the same facts and circumstances regarding certain alleged omissions in the preliminary joint proxy/prospectus statement. On April 4, 2019, the Garaygordobil Action was filed in the United States District Court for the Southern District of New York asserting similar Section 14(a) and Section 20(a) claims against Ohr and its board of directors. Each of the Gomez, Barke, Garaygordobil, and Lowinger Actions have been dismissed, and on July 12, 2019, the Company and Ohr consummated the Merger. On March 23, 2022, plaintiffs in the Wheby Action filed a notice of voluntary dismissal of the complaint and this case was closed.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Disclosures Regarding Forward-Looking Statements

The following should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes that appear elsewhere in this report as well as in conjunction with the Risk Factors section in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021, as filed with the United States Securities and Exchange Commission (“SEC”) on December 23, 2021. This report and our Form 10-K include forward-looking statements made based on current management expectations pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended.

This report includes “forward-looking statements” within the meaning of Section 21E of the Exchange Act. Those statements include statements regarding the intent, belief or current expectations of the Company and its subsidiaries and our management team. Any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those projected in the forward-looking statements. These risks and uncertainties include but are not limited to those risks and uncertainties set forth in Part II, Item 1A – Risk Factors of this Quarterly Report and in Part I, Item 1A – Risk Factors of our Annual Report on Form 10-K. In light of the significant risks and uncertainties inherent in the forward-looking statements included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K, the inclusion of such statements should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Further, these forward-looking statements reflect our view only as of the date of this report. Except as required by law, we undertake no obligations to update any forward-looking statements and we disclaim any intent to update forward-looking statements after the date of this report to reflect subsequent developments. Accordingly, you should also carefully consider the factors set forth in other reports or documents that we file from time to time with the SEC.

Overview

We have designed, built, and validated a new technology platform (a peptide-nucleic acid antisense oligonucleobase platform, which we call PATrOL™) that can uniquely Drug the Genome™ to address the three disease-causing mechanisms (i.e., gain-of-function, change-of-function, or loss-of-function of a gene), without the limitations of early precision genetic medicines. The technology is predicated on synthetic peptide-nucleic acid (“PNA”) chemistry and can directly engage the genome in a sequence-specific manner and address root causality of diseases. These compounds operate by temporarily engaging the genome (or single and double-stranded RNA targets, if desired) and interfering with cellular machinery that processes mutant genes to halt their ability to manifest a disease. We have repeatedly demonstrated in proof-of-concept preclinical animal studies the ability to address multiple disease-causing genes, and different causal mechanisms, to resolve the disease state without the limitations of early genetic medicine technologies. As further validation of our PATrOL™ platform’s capabilities, in FY2021, we described data illustrating that our first-in-class platform technology can address various types of causal insults by Drugging the Genome™ in animal models of a variety of human diseases after patient-friendly routes of administration and does so in a well-tolerated manner.

We are developing precision genetic medicines targeting rare, monogenic diseases for which there are no approved therapies, as well as more common genetic disorders, including cancers that are resistant to current therapeutic approaches. Our pipeline includes therapeutic candidates for the treatment of DM1, HD, as well as cancer-driving point mutations in KRAS, G12V and G12D, which are involved in many tumor types and have historically been “undruggable”.

Based on compelling results from in vitro and in vivo preclinical studies, we plan to file an IND application for our DM1 investigational therapy in the middle of calendar year 2023. The HD program is currently in preclinical development, and in CY2022 we expect to present new preclinical data describing the pharmacology of a candidate compound in the brain after systemic administration and nominate a development candidate. Both are devastating systemic diseases with no effective therapies. Our oncology program was announced in FY2021, together with in vivo activity illustrating allele-selective engagement of mutant KRAS at the DNA and RNA levels, with abrogation of downstream hyperactive signaling through multiple RAS pathway members, resulting in anti-tumor activity. We continue to improve upon our platform while concurrently developing programs, resulting in next-generation compounds that continue to make their way through preclinical development in a parallel manner. We have recently finalized an analysis of the entire known mutational database and selected several additional high-value indications for screening and development.

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We were incorporated under the laws of the State of Delaware on August 4, 2009, as successor to BBM Holdings, Inc. (formerly known as Prime Resource, Inc., which was organized March 29, 2002 as a Utah corporation) pursuant to a reincorporation merger. On August 4, 2009, we reincorporated in Delaware as “Ohr Pharmaceutical, Inc.” On July 12, 2019, we completed the merger with NeuBase Corporation (formerly known as NeuBase Therapeutics, Inc.), a Delaware corporation (the “Merger”), and, upon completion of the Merger, we changed our name to “NeuBase Therapeutics, Inc.” Since the Merger, we have focused primarily on the development of our proprietary peptide-nucleic acid antisense oligo platform and preclinical-stage therapeutic candidates. Our platform technology and all of our therapeutic candidates are in the preclinical development stage. We have not initiated clinical trials for any of our product candidates, nor have any products been approved for commercial sale, and we have not generated any revenue. To date, we have not completed a clinical trial (including a pivotal clinical trial), obtained marketing approval for any product candidates, manufactured a commercial scale product or arranged for a third party to do so on our behalf, or conducted sales and marketing activities necessary for successful product commercialization. Drug development is also a highly uncertain undertaking and involves a substantial degree of risk. As a result, we have no meaningful historical operations upon which to evaluate our business and prospects and have not yet demonstrated an ability to obtain marketing approval for any of our product candidates or successfully overcome the risks and uncertainties frequently encountered by companies in the pharmaceutical industry. We also have not generated any revenues from collaboration and licensing agreements or product sales to date and continue to incur research and development and other expenses. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital, and our future success is subject to significant uncertainty.

For the foreseeable future, we expect to continue to incur losses, which we expect will increase significantly from recent historical levels as we expand our drug development activities, seek regulatory approvals for our product candidates and begin to commercialize them if they are approved by the U.S. Food and Drug Administration (the “FDA”), the European Medicines Agency (the “EMA”) or comparable foreign authorities. Even if we succeed in developing and commercializing one or more product candidates, we may never become profitable.

We expect to expend substantial funds in research and development, including preclinical studies and clinical trials for our platform technology and product candidates, and to manufacture and market any product candidates in the event they are approved for commercial sale. We will likely need additional funding to develop or acquire complementary companies, technologies and assets, as well as for working capital requirements and other operating and general corporate purposes. Moreover, an increase in our headcount would dramatically increase our costs in the near and long-term.

Such spending may not yield any commercially viable products. Due to our limited financial and managerial resources, we must focus on a limited number of research programs and product candidates and on specific indications. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.

Because the successful development of our product candidates is uncertain, we are unable to precisely estimate the actual funds we will require to develop and potentially commercialize them. In addition, we may not be able to generate sufficient revenue, even if we are able to commercialize any of our product candidates, to become profitable

The Company expects to incur substantial operating losses and negative cash flows from operations for the foreseeable future. Accordingly, there are material risks and uncertainties that raise substantial doubt about the Company’s ability to continue as a going concern. We will need to seek additional equity or debt financing to provide the capital required to maintain or expand our operations.

In particular, we expect that we will need to obtain additional funding to obtain clinical data from our current pipeline programs. We have based these estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Our operating plans and other demands on our cash resources may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.

There can be no assurance that we will be able to raise sufficient additional capital on acceptable terms or at all. If such additional financing is not available on satisfactory terms, or is not available in sufficient amounts, we may be required to delay, limit or eliminate the development of business opportunities, and our ability to achieve our business objectives, our competitiveness, and our business, financial condition and results of operations may be materially adversely affected. In addition, we may be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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Critical Accounting Estimates and Policies

The preparation of financial statements in accordance with United States generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our unaudited condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience, market and other conditions, and various other assumptions it believes to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact us in the future, the estimation process is, by its nature, uncertain given that estimates depend on events over which we may not have control. If market and other conditions change from those that we anticipate, our unaudited condensed consolidated financial statements may be materially affected. In addition, if our assumptions change, we may need to revise our estimates, or take other corrective actions, either of which may also have a material effect in our unaudited condensed consolidated financial statements. We review our estimates, judgments, and assumptions used in our accounting practices periodically and reflect the effects of revisions in the period in which they are deemed to be necessary. We believe that these estimates are reasonable; however, our actual results may differ from these estimates.

Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021, and there have been no material changes to such policies or estimates during the nine months ended June 30, 2022.

Recent Accounting Pronouncements

Please refer to Note 2, Significant Accounting Policies—Recent Accounting Pronouncements, in Item 1, Financial Statements, for a discussion of recent accounting pronouncements.

Results of Operations

Results of operations for the three months ended June 30, 2022, reflect the following changes from the three months ended June 30, 2021:


	Three Months ended June 30,
	2022		2021		Change
OPERATING EXPENSES
General and administrative	$	3,603,999	$	3,470,104	$	133,895
Research and development		4,756,609		2,480,961		2,275,648
Research and development, Vera acquisition		—		2,888,029		(2,888,029)
TOTAL OPERATING EXPENSES		8,360,608		8,839,094		(478,486)
LOSS FROM OPERATIONS		(8,360,608)		(8,839,094)		478,486
OTHER INCOME (EXPENSE)
Interest expense		(2,819)		(3,074)		255
Interest income		37,147		2,054		35,093
Change in fair value of warrant liabilities		—		215,547		(215,547)
Equity in losses on equity method investment		—		(37,215)		37,215
Other expense		(165,437)		(1,087)		(164,350)
Total other (expense) income, net		(131,109)		176,225		(307,334)
NET LOSS	$	(8,491,717)	$	(8,662,869)	$	171,152

During the three months ended June 30, 2022, our operating loss decreased by $0.5 million compared to the three months ended June 30, 2021. Our net loss decreased by $0.2 million for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. Until we are able to generate revenue from product sales, our management expects to continue to incur net losses.

General and Administrative Expenses

General and administrative expenses consist primarily of legal and professional fees, wages and stock-based compensation. General and administrative expenses increased by $0.1 million for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, primarily due to increases in professional fees, settlement costs, and wage expenses.

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Research and Development Expenses

Research and development expenses consist primarily of professional fees, research, development, manufacturing expenses, wages and stock-based compensation. Research and development expenses increased by $2.3 million for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, primarily due to preclinical research activities, professional fees, research, development, and manufacturing expenses, and wages and stock-based compensation.

Research and Development Expenses, Vera Acquisition

Research and development expenses, Vera Acquisition consists of the fair value of acquired Vera assets that were determined to represent in-process research and development assets with no future alternative use. The in-process research and development assets were expensed under the guidance of ASC 730, Research and Development, upon the asset acquisition. No such expenses were incurred during the three months ended June 30, 2022.

Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities reflects the changes in the fair value of outstanding warrants measured at fair value on a recurring basis, which is primarily driven by changes in our stock price. We recognized a gain of $0.2 million from the change in fair value of warrant liabilities for the three months ended June 30, 2021. Warrants measured at fair value expired unexercised during the nine months ended June 30, 2022.

Equity in Losses on Equity Method Investment

We account for our investment in DepYmed common shares using the equity method of accounting and record our proportionate share of DepYmed’s net income and losses. As of June 30, 2022 and March 31, 2022, the carrying value of DepYmed common shares was $0 and, as such, the Company did not record its proportionate share of losses during the three months ended June 30, 2022. Equity in losses during the three months ended June 31, 2021 was $0.04 million.

Other (Expense) Income, net

We recognized other expense of $0.2 million during the three months ended June 30, 2022 related to the correction of a payroll tax expense credit received in a prior period. Other expense recognized during the three months ended June 30, 2021 was not material.

Results of operations for the nine months ended June 30, 2022, reflect the following changes from the nine months ended June 30, 2021:


	Nine Months Ended June 30,
	2022		2021		Change
OPERATING EXPENSES
General and administrative	$	9,633,422	$	8,833,214	$	800,208
Research and development		15,961,536		7,675,014		8,286,522
Research and development, Vera acquisition		—		2,888,029		(2,888,029)
TOTAL OPERATING EXPENSES		25,594,958		19,396,257		6,198,701
LOSS FROM OPERATIONS		(25,594,958)		(19,396,257)		(6,198,701)
OTHER INCOME (EXPENSE)
Interest expense		(21,354)		(19,271)		(2,083)
Interest income		41,846		11,520		30,326
Change in fair value of warrant liabilities		—		936,256		(936,256)
Equity in losses on equity method investment		(415,744)		(98,754)		(316,990)
Other (expense) income, net		(154,352)		315,637		(469,989)
Total other (expense) income, net		(549,604)		1,145,388		(1,694,992)
NET LOSS	$	(26,144,562)	$	(18,250,869)	$	(7,893,693)

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During the nine months ended June 30, 2022, our operating loss increased by $6.2 million compared to the nine months ended June 30, 2021. Our net loss increased by $7.9 million for the nine months ended June 30, 2022, as compared to the nine months ended June 30, 2021. Until we are able to generate revenue from product sales, our management expects to continue to incur net losses.

General and Administrative Expenses

General and administrative expenses consist primarily of legal and professional fees, wages and stock-based compensation. General and administrative expenses increased by $0.8 million for the nine months ended June 30, 2022, as compared to the nine months ended June 30, 2021, primarily due to increases in professional fees, settlement costs, and wage expenses, partially offset by a decrease in stock-based compensation expense.

Research and Development Expenses

Research and development expenses consist primarily of professional fees, research, development, manufacturing expenses, wages and stock-based compensation. Research and development expenses increased by $8.3 million for the nine months ended June 30, 2022, as compared to the nine months ended June 30, 2021, primarily due to increases in manufacturing expenses, professional fees, employee headcount, and the ramp up of research and development activities in support of our preclinical programs.

Research and Development Expenses, Vera Acquisition

Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities reflects the changes in the fair value of outstanding warrants measured at fair value on a reoccurring basis, which is primarily driven by changes in our stock price. The fair value of warrant liabilities was $0 at June 30, 2022 and September 30, 2021, therefore, no change in fair value was recognized during the nine months ended June 30, 2022. During the nine months ended June 30, 2022, warrants measured at fair value expired unexercised. We recognized a gain of $0.9 million from the change in fair value of warrant liabilities for the nine months ended June 30, 2021.

Equity in Losses on Equity Method Investment

We account for our investment in DepYmed common shares using the equity method of accounting and record our proportionate share of DepYmed’s net income and losses. As of June 30, 2022 and September 30, 2021, the carrying value of our investment in DepYmed common shares was reduced to zero, therefore, during the nine months ended June 30, 2022, we recorded our share of equity losses to the extent of our investment in preferred shares of DepYmed. We will continue to monitor the operating results of DepYmed and will record equity in earnings when the equity in earnings exceeds our previously unrecognized losses. Equity in losses was $0.4 million for the nine months ended June 30, 2022, and $0.1 million for the nine months ended June 30, 2021.

Other (Expense)Income, net

We recognized other expense of $0.2 million during the nine months ended June 30, 2022 related to the correction of a payroll tax expense credit received in a prior period. We recognized other income of $0.3 million during the nine months ended June 30, 2021 related to the sale of certain intellectual property to DepYmed in exchange for shares of Series A-4 preferred stock.

Liquidity, Capital Resources and Financial Condition

We have had no revenues from product sales and have incurred operating losses since inception. As of June 30, 2022, we had cash and cash equivalents of $29.8 million. We have historically funded our operations through the sale of common stock and the issuance of convertible notes and warrants.

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We expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. As a result, we will likely need to raise additional capital through one or more of the following: the issuance of additional debt or equity or the completion of a licensing transaction for one or more of our pipeline assets.

Net working capital decreased from September 30, 2021 to June 30, 2022 by $23.3 million (to $27.4 million from $50.7 million). Our quarterly cash burn has increased compared to prior periods due to increased research and development and corporate activities, and we expect it to continue to increase in future periods.

At present, we have no bank line of credit or other fixed source of capital reserves. Should we need additional capital in the future, we will be primarily reliant upon a private or public placement of our equity or debt securities, or a strategic transaction, for which there can be no warranty or assurance that we may be successful in such efforts. If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations will be materially and adversely affected. This could affect future development and business activities and potential future clinical studies and/or other future ventures. Failure to obtain additional equity or debt financing will have a material adverse impact on our business operations. There can be no assurance that we will be able to obtain the financing needed to achieve our goals on acceptable terms or at all. Additionally, any equity financings will likely have a dilutive effect on the holdings of the Company’s existing stockholders.

Cash Flow Summary

The following table summarizes selected items in our unaudited condensed consolidated statements of cash flows:


	Nine Months Ended June 30,
	2022		2021
Net cash used in operating activities	$	(22,373,912)	$	(13,431,537)
Net cash used in investing activities		(442,935)		(2,211,845)
Net cash (used in) provided by financing activities		(229,715)		42,493,574
Net (decrease) increase in cash and cash equivalents	$	(23,046,562)	$	26,850,192

Operating Activities

Net cash used in operating activities was approximately $22.4 million for the nine months ended June 30, 2022, as compared to approximately $13.4 million for the nine months ended June 30, 2021. Net cash used in operating activities in the nine months ended June 30, 2022, was primarily the result of our net loss, a decrease in accounts payable and operating lease liability, partially offset by stock-based compensation expense, depreciation and amortization expenses, loss on equity method investment and a decrease in prepaid expenses and current assets. Net cash used in operating activities in the nine months ended June 30, 2021, was primarily the result of our net loss, as well as the change in the fair value of warrant liabilities, gain on sale of intellectual property and cash used for the security deposit and prepayment of rent under our new operating lease for office and laboratory space, offset by the research and development costs for the Vera acquisition, stock-based compensation expense, increased accrued expenses and depreciation and amortization expenses.

Investing Activities

Net cash used in investing activities was approximately $0.4 million for the nine months ended June 30, 2022, as compared to $2.2 million for the nine months ended June 30, 2021. Net cash used in investing activities for the nine months ended June 30, 2022 was primarily due to the purchase of laboratory and office equipment, whereas for the nine months ended June 30, 2021, net cash used in investing activities was due to cash paid for the Vera acquisition and the purchase of laboratory and office equipment.

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Financing Activities

Net cash used in financing activities was approximately $0.2 million for the nine months ended June 30, 2022, as compared to net cash provided by financing activities of $42.5 million for the nine months ended June 30, 2021. Net cash used in financing activities for the nine months ended June 30, 2022 primarily reflects the principal payments of financed insurance and a finance lease liability, partially offset by the proceeds received from the exercise of stock options. Net cash provided by financing activities for the nine months ended June 30, 2021 primarily reflects the proceeds from the issuance of common stock of $42.6 million, net of issuance costs, partially offset by the principal payments of financed insurance.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information required under this item.

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, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2022. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely dec