# Definium Therapeutics, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Definium Therapeutics, Inc.](/companies/dftx.md) (CIK 1813814)
- Form: 10-Q
- Filed: 2023-11-02
- Accepted by EDGAR: Nov 2, 2023, 16:20 ET
- Period: 2023-09-30
- Accession: 0000950170-23-058248
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1813814/000095017023058248/mnmd-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1813814/000095017023058248/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $13.2m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $40.6m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$21.6m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$71.7m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$17.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$71.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.45 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.85 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.45 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.85 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 39,720,007 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 38,798,374 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$43.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2023-09-30 | $117.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $120.1m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $141.6m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $31.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $45.6m | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $14.1m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2023-09-30 | $96.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 31,123 characters.

*The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report. This Quarterly Report, including the following sections, contains forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed or implied by such forward-looking statements. For a detailed discussion of these risks and uncertainties, see Item 1A “Risk Factors” in our 2022 Annual Report and this Quarterly Report. See also “Special Note Regarding Forward-Looking Statements.” We caution the reader not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this Quarterly Report. We undertake no obligation to update forward-looking statements, which reflect events or circumstances occurring after the date of this Quarterly Report.*

Our accounting policies in accordance with generally accepted accounting principles in the United States (U.S. GAAP”) are referred to in Note 2 of the Condensed Consolidated Financial Statements in this Quarterly Report as well as the Consolidated Financial Statements included in our 2022 Annual Report. All amounts are in United States dollars, unless otherwise indicated. References to “CAD$” are to Canadian dollars.

### Overview

We are a clinical stage biopharmaceutical company developing novel product candidates to treat brain health disorders. Our mission is to be the global leader in the development and delivery of treatments for brain health disorders that unlock new opportunities to improve patient outcomes. We are developing a pipeline of innovative product candidates, with and without acute perceptual effects, targeting neurotransmitter pathways that play key roles in brain health disorders. This specifically includes pharmaceutically optimized product candidates derived from the psychedelic and empathogen drug classes, including MM-120 and MM-402, our lead product candidates.

We were incorporated under the laws of the Province of British Columbia. Our wholly owned subsidiary, Mind Medicine, Inc. (“MindMed US”) was incorporated in Delaware. Prior to February 27, 2020, our operations were conducted through MindMed US.

On February 26, 2021, we acquired 100% of the issued and outstanding shares of HealthMode Inc. (“HealthMode”), a digital medicine and therapeutics company that used artificial intelligence enabled digital measurement to increase the precision and speed of clinical research and patient monitoring. The acquisition enabled us to build our digital medicine division. We plan to utilize these technologies in our clinical trials to enhance the quality of the data that is collected during our clinical trials.

Since inception, we have incurred losses while advancing the research and development of our product candidates and processes. Our net losses were $17.9 million and $16.5 million for the three months ended September 30, 2023 and 2022, respectively, and $71.9 million and $51.9 million for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, we had an accumulated deficit of $266.3 million and cash and cash equivalents of $117.7 million.

During the nine months ended September 30, 2023, we continued to enhance the resources it requires to build our pipeline of opportunities. This included adding personnel and contract resources and ramping up the nonclinical aspects of our activities. In addition, considerable effort was directed towards employing a successful financing strategy.

### Research & Development Program Update

In April 2023, our collaborators at the University Hospital Basel released positive topline data from a double-blind, investigator-initiated trial evaluating lysergide in the treatment of major depressive disorder (“MDD”). The topline data demonstrated significant, rapid, durable and beneficial effects of lysergide and its potential to mitigate symptoms of MDD. The high dose lysergide regimen in which patients received 100 µg at their first dosing day and 200 µg at their second dosing day (separated by four weeks) resulted in statistically and clinically significant improvements on the primary endpoint, which was the change in clinician-rated Inventory of Depressive Symptomatology (IDS-C) scores 6 weeks after the first administration as compared to control (whether or not the patient received a second administration). The control group in this study received a lower dose regimen of 25 µg on both treatment days. Patients in the high dose arm (n=28) demonstrated a least square mean change from baseline in IDS-C scores of -12.9 points compared to -3.6 points in the lower dose arm (n=27, p=0.02). The statistically significant benefit as measured by IDS-C was maintained up to 16 weeks after the first administration compared to placebo (p=0.008). Data from the secondary endpoints were also encouraging. The investigational drug was generally well-tolerated, as indicated by reported adverse events, changes in vital signs and laboratory values.

On August 3, 2023. we announced that, based on a review of the Company’s statistical assumptions, the target patient enrollment for our Phase 2b study evaluating MM-120 (lysergide D-tartrate) for generalized anxiety disorder (“GAD”) has been lowered from 200 to 180 participants while maintaining the statistical power (approximately 90%) to achieve the study’s objectives. However, on September 12, 2023, we announced that we had completed patient enrollment, with 198 patients having been enrolled in the study who received a single administration of 25 µg, 50 µg, 100 µg or 200 µg of MM-120 or placebo. Four-week primary endpoint topline results for the Phase 2b study are expected to be announced in the fourth quarter of 2023, with twelve-week topline results expected to be announced by the end of the first quarter of 2024.

In October 2023, we announced that the enrollment for our Phase 2a study evaluating MM-120 for attention deficit hyperactivity disorder (“ADHD”) is completed. This proof-of-concept trial for the treatment of ADHD is designed to assess the safety and efficacy of repeated low-dose MM-120 administration in 53 patients. Topline results for the Phase 2a study are expected to be released by the end of the first quarter of 2024.

### Components of Operating Results

### Operating Expenses

#### Research and Development

To date, our resources have focused primarily on the research and development of our product candidates MM-120, MM-402 and MM-110 (prior to when we paused development of MM-110 in the third quarter of 2022) and the commencement of related clinical activities, including funding data and study acquisitions and acquiring the materials required to supply our studies. We completed a Phase 1 trial of MM-110 in late 2021; however, in the third quarter of 2022, we determined that any further clinical development of our MM-110 program will be subject to the pursuit of non-dilutive sources of capital and collaborations with third parties.

Research and development expenses account for a significant portion of our operating expenses. Research and development expenses consist primarily of direct and indirect costs incurred for the development of our product candidates, including:

- payroll, consulting and benefits expenses;
- licensing fees;
- manufacturing costs to produce clinical trial materials;
- clinical research costs associated with discovery, preclinical and clinical testing of our product candidates;
- data and study acquisition cost; and
- allocated operational expenses, which include direct or allocated expenses for information technologies and human resources.

We may also incur in-process research and development expense as we acquire or in-license assets from other parties. Technology acquisitions are expensed or capitalized based upon the asset achieving technological feasibility in accordance with management’s assessment regarding the ultimate recoverability of the amounts paid and the potential for alternative future use. Acquired in-process research and development costs that have no alternative future use are immediately expensed.

We expect our research and development expenses to increase for the foreseeable future as we continue the clinical development of our product candidates and other preclinical programs in GAD, ADHD, autism spectrum disorder (“ASD”) and other potential or future indications, including initiating additional and larger clinical trials.

#### General and Administrative

General and administrative expenses consist primarily of compensation costs, including stock-based compensation, for executive management and administrative employees, including finance and accounting, legal, human resources and other administrative functions, professional services fees, advisory and professional service fees in connection with financing transactions, insurance expenses and allocated expenses. We also incurred additional costs related to public relations, printing and professional services fees in connection with the proxy contest in connection with our 2023 annual general meeting of shareholders.

We expect our general and administrative expenses to continue to increase for the foreseeable future as we continue to advance our research and development programs, grow our business and, if any of our product candidates receive marketing approval, commence commercialization activities.

### Results of Operations

### Comparison of the Three and Nine Months Ended September 30, 2023 and 2022

The following tables summarize our results of operations for the periods presented (in thousands):

| Operating expenses: | For the Three Months Ended September 30, 2023 | 2022 | $ Change | % Change | For the Nine Months Ended September 30, 2023 | 2022 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Research and development | $13,203 | $7,772 | $5,431 | 70% | $40,578 | $27,339 | $13,239 | 48% |
| General and administrative | 8,413 | 9,211 | (798) | (9)% | 31,083 | 25,092 | 5,991 | 24% |
| Total operating expenses | 21,616 | 16,983 | 4,633 | 27% | 71,661 | 52,431 | 19,230 | 37% |
| Loss from operations | (21,616) | (16,983) | (4,633) | 27% | (71,661) | (52,431) | (19,230) | 37% |
| Other income/(expense): |  |  |  |  |  |  |  |  |
| Interest income, net | 1,163 | 360 | 803 | 223% | 3,759 | 443 | 3,316 | \* |
| Foreign exchange (loss)/gain, net | (439) | 138 | (577) | \* | (244) | 94 | (338) | \* |
| Change in fair value of 2022 USD Financing Warrants | 3,020 | — | 3,020 | 100% | (3,671) | — | (3,671) | 100% |
| Other (expense)/income | (51) | — | (51) | 100% | (51) | 1 | (52) | \* |
| Total other income/(expense), net | 3,693 | 498 | 3,195 | \* | (207) | 538 | (745) | (138)% |
| Net loss | (17,923) | (16,485) | (1,438) | 9% | (71,868) | (51,893) | (19,975) | 38% |
| Other comprehensive loss: |  |  |  |  |  |  |  |  |
| Gain/(loss) on foreign currency translation | 415 | (107) | 522 | \* | 150 | (303) | 453 | 150% |
| Comprehensive loss | $(17,508) | $(16,592) | $(916) | 6% | $(71,718) | $(52,196) | $(19,522) | 37% |

#### \* Represents a change greater than 300%

### Operating Expenses

#### Research and Development (in thousands):

| External Costs | For the Three Months Ended September 30, 2023 | 2022 | $ Change | % Change | For the Nine Months Ended September 30, 2023 | 2022 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| MM-120 program | $7,558 | $1,175 | $6,383 | \* | $18,903 | $5,249 | $13,654 | 260% |
| MM-402 program | 327 | 775 | (448) | (58)% | $1,719 | 1,332 | 387 | 29% |
| MM-110 program | 8 | 208 | (200) | (96)% | $38 | 1,393 | (1,355) | (97)% |
| External R&D collaborations | 108 | 328 | (220) | (67)% | $693 | 1,607 | (914) | (57)% |
| Preclinical and other programs | 27 | 494 | (467) | (95)% | 3,610 | 3,307 | 303 | 9% |
| Total external costs | 8,028 | 2,980 | 5,048 | 169% | 24,963 | 12,888 | 12,075 | 94% |
| Internal Costs | 5,175 | 4,792 | 383 | 8% | 15,615 | 14,451 | 1,164 | 8% |
| Total research and development expenses | $13,203 | $7,772 | $5,431 | 70% | $40,578 | $27,339 | $13,239 | 48% |

#### \* Represents a change greater than 300%

Research and development expenses increased by $5.4 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. The increase was primarily due to increases of $6.4 million in expenses related to clinical research and product development for the MM-120 GAD study and $0.4 million in internal personnel costs as a result of increasing research and development capacities, partially offset by a decrease of $0.4 million in expenses related to our MM-402 program, a decrease of $0.2 million related to our paused MM-110 program, a decrease of $0.5 million in preclinical activities, and $0.2 million in connection with various external research and development collaborations.

Research and development expenses increased by $13.2 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase was primarily due to increases of $13.7 million in expenses related to clinical research and product development for the MM-120 GAD study, $0.4 million in expenses related to our MM-402 program, $1.2 million in internal personnel costs as a result of increasing research and development capacities, and $0.3 million in preclinical activities, offset by a decrease of $1.4 million in expenses related to our paused MM-110 program and a decrease of $0.9 million of expenses in connection with various external research and development collaborations.

#### General and Administrative

General and administrative expenses decreased by $0.8 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. The decrease was primarily related to issuance costs related to the 2022 USD Financing Warrants that were issued as part of the Company's public equity offering which closed on September 30, 2022.

General and administrative expenses increased by $6.0 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase was attributable to professional services fees and expenses related to the proxy contest in connection with our 2023 annual general meeting of shareholders and additional costs to support the growth of our business.

### Other Income (Expense)

#### Interest Income, Net

Interest income, net increased by $0.8 million and $3.3 million for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022, respectively. This was primarily due to interest earned on our cash and cash equivalents as a result of higher interest rates during the three and nine months ended September 30, 2023.

#### Foreign Exchange Gain/(Loss), Net

Foreign exchange loss increased by $0.6 million and $0.3 million for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022, respectively. The increase was primarily due to unfavorable changes in foreign exchange rates during the three and nine months ended September 30, 2023.

#### Other Income/(Expense)

Other income for the three and nine months ended September 30, 2023 was consistent with the amount compared to the three and nine months ended September 30, 2022, respectively.

#### Change in fair value of 2022 USD Financing Warrants

Revaluation gain on the 2022 USD Financing Warrants liability was $3.0 million for the three months ended September 30, 2023, and revaluation loss on the 2022 USD Financing Warrants liability was $3.7 million for the nine months ended September 30, 2023. Gain/loss on revaluation of the 2022 USD Financing Warrants liability consists of the change in the fair value of our 2022 USD Financing Warrants that were issued as part of our public equity offering which closed on September 30, 2022.

### Liquidity and Capital Resources

### Sources of Liquidity

Since inception, we have financed our operations primarily from the issuance of equity and our Loan Agreement (as defined below). Our primary capital needs are for funds to support our scientific research and development activities including staffing, manufacturing, preclinical studies, clinical trials, administrative costs and for working capital.

We have experienced operating losses and cash outflows from operations since inception and will require ongoing financing in order to continue our research and development activities. We have not earned any revenue or reached successful commercialization of our product candidates. Our future operations are dependent upon our ability to finance our cash requirements which will allow us to continue our research and development activities and the commercialization of our product candidates. There can be no assurance that we will be successful in continuing to finance our operations.

Our cash and cash equivalents and our working capital as of September 30, 2023 were $117.7 million and $88.9 million, respectively.

On August 11, 2023 (the “Closing Date”), we entered into a Loan and Security Agreement (the “Loan Agreement”) with K2 HealthVentures LLC (“K2HV”), as administrative agent and Canadian collateral agent for lenders thereunder (K2HV, and any other lender from time to time, the “Lenders”), and Ankura Trust Company, LLC, as collateral trustee for the Lenders. The Loan Agreement provides for up to an aggregate principal amount of $50.0 million in term loans consisting of a first tranche term loan of $15.0 million funded on the Closing Date, subsequent tranches of term loans totaling $20.0 million to be funded upon the achievement of certain time-based, clinical and regulatory milestones, and an additional tranche term loan of up to $15.0 million upon our request, subject to review by the Lenders of certain information from us and discretionary approval by the Lenders.

On September 30, 2022, we closed an underwritten public offering of 7,058,823 common shares and accompanying 2022 USD Financing Warrants to purchase 7,058,823 common shares at a combined offering price of $4.25 per common share, for net proceeds of $27.5 million. Each 2022 USD Financing Warrant is immediately exercisable for one common share at an exercise price of $4.25 per common share, subject to certain adjustments, and will expire on September 30, 2027.

On May 4, 2022, we filed a shelf registration statement on Form S-3 (the “Registration Statement”). Pursuant to the Registration Statement, we may offer and sell securities having an aggregate public offering price of up to $200.0 million. In connection with the filing of the Registration Statement, we also entered into a sales agreement with Cantor Fitzgerald & Co. and Oppenheimer & Co. Inc. as sales agents (together, the “Sales Agents”), pursuant to which we may issue and sell common shares for an aggregate offering price of up to $100.0 million under an at-the-market offering program (the “ATM”). Pursuant to the ATM, we will pay the Sales Agents a commission rate equal to 3.0% of the gross proceeds from the sale of any common shares. We are not obligated to make any sales of its common shares under the ATM. During the three and nine months ended September 30, 2023, we sold 787,500 and 1,389,398 common shares for net proceeds of $3.1 million and $5.0 million, respectively, under the ATM. As of September 30, 2023, we had raised an aggregate of $37.2 million under the ATM and may issue and sell common shares for an aggregate offering price of up to an additional $62.8 million.

### Future Funding Requirements

To date, we have not generated any revenue. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if at all, that will occur. We will continue to require substantial additional capital to develop our product candidates and fund operations for the foreseeable future. Moreover, we expect our expenses to increase in connection with our ongoing activities, particularly as we continue the development of and seek regulatory approvals for our product candidates. Further, we are subject to all the risks incident in the development of new pharmaceutical products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm our business. Our expenses will increase if, and as, we:

- advance our product candidates through preclinical and clinical development;
- seek regulatory approvals for any product candidates that successfully complete clinical trials;
- seek to discover and develop additional product candidates;
- establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval and intend to commercialize on our own or jointly; and
- expand our operational, financial and management systems and increase personnel, including personnel to support our development, manufacturing and commercialization efforts and our operations as a public company;

We expect our current cash and cash equivalents will be sufficient to fund our current operating plans into 2026. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. In order to complete the development of our product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we will require substantial additional funding. Until we can generate a sufficient amount of revenue from the commercialization of our product candidates, we may seek to raise any necessary additional capital through the sale of equity, debt financings or other capital sources, which could include income from collaborations, strategic partnerships or marketing, distribution or licensing arrangements with third parties or from grants. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common shareholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, including restricting our operations and limiting our ability to incur liens, issue additional debt, pay dividends, repurchase our Common Shares, make certain investments or engage in merger, consolidation, licensing or asset sale transactions. If we raise funds through collaborations, strategic partnerships and other similar arrangements with third parties, we may be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. We may be unable to raise additional funds or to enter into such agreements or arrangements on favorable terms, or at all. If we are unable to raise additional funds when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts. We have based our projections of operating capital requirements on our current operating plan, which is based on several assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount and timing of our working capital requirements. Our future funding requirements will depend on many factors, including:

- the scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical studies and clinical trials;
- the costs, timing and outcome of regulatory review of our product candidates;
- the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;
- the costs of manufacturing commercial-grade products and sufficient inventory to support commercial launch;
- the revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval;
- the cost and timing of hiring new employees to support our continued growth;
- the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
- the ability to establish and maintain collaborations on favorable terms, if at all;
- the extent to which we acquire or in-license other product candidates and technologies; and
- the timing, receipt and amount of sales of, or milestone payments related to or royalties on, our current or future product candidates, if any.

### Cash Flows

|  | For the Nine Months Ended September 30, 2023 | For the Nine Months Ended September 30, 2022 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(43,802) | $(37,290) |
| Net cash provided by financing activities | 19,255 | 58,635 |
| Foreign exchange impact on cash | 104 | (365) |
| Net (decrease)/increase in cash | $(24,443) | $20,980 |

#### Cash flows from operating activities

Cash used in operating activities for the nine months ended September 30, 2023 was $43.8 million, which consisted of a net loss of $71.9 million, partially offset by $18.0 million in non-cash charges and a net change of $10.1 million in our net operating assets and liabilities. The non-cash charges primarily consisted of a change in fair value on the 2022 USD Financing Warrants liability of $3.7 million, share-based payments of $11.8 million, and amortization of intangible assets of $2.4 million.

Cash used in operating activities for the nine months ended September 30, 2022 was $37.3 million, which consisted of a net loss of $51.9 million and a net change of $1.6 million in our net operating assets and liabilities, partially offset by $16.3 million in non-cash charges. The non-cash charges consisted of share-based payments of $12.3 million, amortization of intangible assets of $2.4 million, and issuance costs on liability classified warrants of $1.5 million.

#### Cash flows from financing activities

Cash provided by financing activities for the nine months ended September 30, 2023 was $19.3 million, which consisted of proceeds of $15.0 million from the credit facility partially offset by $0.8 million payment of credit facility issuance costs, $5.0 million of net proceeds from the issuance of common shares under our ATM, net of issuance costs, and $0.1 million of proceeds from the exercise of the 2022 USD Financing Warrants.

Cash provided by financing activities for the nine months ended September 30, 2022 was $58.6 million, which consisted of the net proceeds of $41.6 million from the issuance of common shares, net of issuance costs, proceeds of $17.7 million from the issuance of the 2022 USD Financing Warrants, the proceeds of $0.7 million from exercise of warrants, and proceeds of $0.2 million from exercise of options, partially offset by $1.2 million payment of 2022 USD Financing Warrants issuance costs and $0.4 million of withholding taxes paid on vested RSUs.

### Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited interim condensed consolidated financial statements as of September 30, 2023, which have been prepared in accordance with U.S. GAAP, and on a basis consistent with those accounting principles followed by us and disclosed in Note 2 to our most recent annual audited consolidated financial statements in the 2022 Annual Report. The preparation of these unaudited interim condensed consolidated financial statements requires our management to make judgments and 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 the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material.

Other than as described under Note 2 of our unaudited interim condensed consolidated financial statements, there have been no material changes to our critical accounting policies from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2022 Annual Report.

### Recent Accounting Pronouncements

See Note 2 to our unaudited financial statements located in “Part I – Financial Information, Item 1. Financial Statements” in this Quarterly Report for a description of recent accounting pronouncements applicable to our financial statements.

### Emerging Growth Company Status

We are an “emerging growth company,” as defined in 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 elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

### Fully Diluted Share Capital

The number of issued and outstanding common shares on a fully converted basis at September 30, 2023 was as follows:

|  | Number of Common Share Equivalents |
| --- | ---: |
| Common Shares | 40,094,708 |
| Stock Options | 2,234,288 |
| Restricted Share Units | 2,524,721 |
| Compensation Warrants | 125,890 |
| Financing Warrants | 1,286,282 |
| 2022 USD Financing Warrants | 7,031,823 |
| **Total - September 30, 2023** | 53,297,712 |

21

## Market risk

As filed, 133 characters.

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, we are permitted to omit information required by this item.

## Controls and procedures

As filed, 2,494 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time period specified in the SEC's rules and forms, and that such information is accumulated and communicated to management including our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure. As of September 30, 2023, our Chief Executive Officer and Chief Financial Officer carried out an evaluation with the participation of management of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2023.

### Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Securities Exchange Act of 1934 that occurred during the quarter ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

### Inherent Limitations on Effectiveness of Internal Controls

A control system, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. In addition, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

## Risk factors

As filed, 21,536 characters.

*We operate in a rapidly changing environment that involves a number of risks which could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this Quarterly Report, the risks and uncertainties that we believe are most important for you to consider are discussed in Part I-Item 1A under the heading “Risk Factors” in our 2022 Annual Report. The risk factors set forth below are risk factors containing changes, which may be material, from the risk factors previously disclosed in Item 1A of our 2022 Annual Report.*

***The terms of our loan agreement place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our operating and financial flexibility.***

In August 2023, we entered into the Loan Agreement. At closing we borrowed $15.0 million in the first tranche under the Loan Agreement and may borrow an additional $20.0 million based upon the achievement of certain time-based, clinical and regulatory milestones, and an additional $15.0 million upon our request, subject to review by the Lenders of certain information from us and discretionary approval by the Lenders. Our obligations under the Loan Agreement are secured by a security interest in substantially all of our assets, other than certain intellectual property assets. The Loan Agreement includes customary affirmative and negative covenants, as well as standard events of default, including an event of default based on the occurrence of a material adverse event. The negative covenants include, among others, restrictions on us transferring collateral, incurring additional indebtedness, engaging in mergers or acquisitions, paying cash dividends or making other distributions, making investments, creating liens, selling assets and making any payment on subordinated debt, in each case subject to certain exceptions. These restrictive covenants could limit our flexibility in operating our business and our ability to pursue business opportunities that we or our stockholders may consider beneficial. In addition, the Lenders could declare a default upon the occurrence of any event that it interprets could have material adverse effect, subject to the limitations specified in the Loan Agreement. Upon the occurrence and continuance of an event of default, the Lenders may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Loan Agreement. Any declaration of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline. If we are liquidated, the rights of the Lenders to repayment would be senior to the rights of the holders of our common shares to receive any proceeds from the liquidation. We may not have enough available cash or be able to raise additional funds through equity or debt financings to repay these outstanding obligations at the time any event of default occurs. Further, if we raise any additional capital through debt financing, the terms of such additional debt could further restrict our operating and financial flexibility.

***Actions of activist shareholders against us have been and could be disruptive and costly, may cause uncertainty about the strategic direction of our business, result in litigation, divert management’s and the board’s attention and resources, and may have an adverse effect on our business and stock price.***

From time to time, we may be subject to proposals by activist shareholders urging us to take certain corporate actions or to nominate certain individuals to our board of directors. For example, a group of Company shareholders nominated four director candidates for election to our six-member board of directors at the Company’s 2023 annual general meeting of shareholders, and waged a proxy contest in support of their candidates and in opposition to four of our director nominees. Future activist shareholder matters, including a proxy contest and potential related litigation, could have a material adverse effect on us for the following reasons:

- Such shareholders may attempt to effect changes in our governance and strategic direction or to acquire control over the board of directors or the Company.
- While we welcome the opinions of all shareholders, responding to proxy contests and related litigation by shareholders has been, and could be, costly and time-consuming, and could disrupt our operations, and divert the attention of our board of directors, management team and other employees away from their regular duties and the pursuit of business opportunities to enhance shareholder value.
- Perceived uncertainties as to our future direction and control, our ability to execute on our strategy, or changes to the composition of our board of directors or senior management team arising from a proxy contest could lead to the perception of a change in the direction of our business, instability or lack of continuity, which may cause concern to our existing or potential collaboration partners, make it more difficult to pursue our strategic initiatives, or limit our ability to attract and retain qualified personnel and business partners any of which could adversely affect our business and operating results.
- Perceived uncertainties as to our future direction, strategy or leadership created as a consequence of activist shareholder initiatives may harm our ability to attract new investors, and could cause our stock price to experience periods of volatility or stagnation based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

***If we fail to comply with our obligations under our existing and any future intellectual property licenses with third parties, we could lose license rights that are important to our business.***

We are party to a license agreement with Catalent, pursuant to which we were granted an exclusive license to use their Zydis technology in the development of MM-120. We may enter into additional license agreements in the future. Our license agreement with Catalent imposes, and we expect that future license agreements will impose, various diligence, milestone payment, royalty, insurance and other obligations on us. Any uncured, material breach under these license agreements could result in our loss of rights to practice the patent rights and other intellectual property licensed to us under these agreements, and could compromise our development and commercialization efforts for our product candidates.

***We are a clinical-stage brain health care company and have incurred significant net losses since our inception, and we expect to continue to incur significant net losses for the foreseeable future.***

We incurred net losses of $17.9 million and $16.5 million for the three months ended September 30, 2023 and 2022, respectively, and $71.9 million and $51.9 million for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, we had an accumulated deficit of $266.3 million. Our historical losses resulted principally from costs incurred in connection with research and development activities and general and administrative costs associated with our operations. In the future, we intend to continue to conduct research and development, preclinical testing, clinical trials, regulatory compliance, market access, commercialization and business development activities that, together with anticipated general and administrative expenses, will result in incurring further significant losses for at least the next several years. Our product candidates are in various clinical, preclinical discovery and research stages. As a result, we expect that it will be several years, if ever, before we have a commercialized product and generate revenue from product sales. Even if we succeed in receiving marketing approval for and commercializing one or more of our product candidates, we expect that we will continue to incur substantial research and development and other expenses in order to discover, develop and market additional potential products.

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. Our expected losses, among other things, may continue to cause our working capital and shareholders’ equity to decrease. We anticipate that our expenses will increase substantially if and as we, among other things:

- continue the clinical development of our product candidate(s) and other preclinical programs for the treatment of GAD, including initiating additional and larger clinical trials;
- continue the training of therapists who are qualified to deliver our investigational therapies in our clinical trials;
- establish a sales, marketing and distribution infrastructure and scale-up manufacturing capabilities to commercialize any product candidates for which we may obtain regulatory approval, including our product candidates MM-120 and MM-402;
- seek additional indications for our investigational therapies and discover and develop any future product candidates;
- seek regulatory approvals for any future product candidates that successfully complete clinical trials;
- experience heightened regulatory scrutiny;
- pursue necessary scheduling-related decisions to enable us to commercialize any future product candidates containing controlled substances for which we may obtain regulatory approval, including our LSD and MDMA candidates;
- explore external business development opportunities through acquisitions, partnerships, licensing deals to add future product candidates and technologies to our portfolio;
- obtain, maintain, expand and protect our intellectual property portfolio, including litigation costs associated with defending against alleged patent or other intellectual property infringement claims;
- add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support our product development and potential future commercialization efforts;
- experience any delays or encounter any issues with respect to any of the above, including failed studies, ambiguous trial results, safety issues or other regulatory challenges, including delays and other impacts as a result of the spread of COVID-19, which we refer to as the COVID-19 pandemic;
- expand our operations in the United States, Switzerland, the European Union and potential other geographies in the future; and
- incur additional legal, accounting and other expenses associated with operating as a public company listed in the U.S. and Canada.

To become and remain profitable, we will need to continue developing and eventually commercialize therapies that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing clinical trials of our product candidates or any future product candidates, training a sufficient number of qualified therapists to deliver our investigational product candidates, obtaining regulatory approval for any future product candidates that successfully complete clinical trials, and establishing marketing capabilities. Even if any of the future product candidates that we may develop are approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved future product candidate. We are only in the preliminary stages of most of these activities. We may never succeed in these activities and, even if we do, may never generate revenue that is significant enough to achieve profitability.

Because of the numerous risks and uncertainties associated with product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If we are required by the U.S. Food and Drug Administration, or the FDA, the European Medicines Agency, or the EMA, the UK’s medicines regulator, the Medicines and Healthcare products Regulatory Agency, or the MHRA, or other comparable foreign authorities to perform studies in addition to those we currently anticipate, or if there are any delays in completing our clinical trials or the development of our investigational product candidates or any future candidates, our expenses could increase beyond our current expectations and revenue could be further delayed.

Even if we or any future collaborators do generate sales, we may never achieve, sustain or increase profitability on a quarterly or annual basis. Our failure to sustain profitability would depress the market price of our Common Shares and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. If we continue to suffer losses, investors may not receive any return on their investment and may lose their entire investment.

The net losses we incur may fluctuate significantly from quarter to quarter such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our working capital, our ability to fund the development of our product candidates and our ability to achieve and maintain profitability and the performance of our common shares.

***We will require substantial additional capital to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and drug development programs or future commercialization efforts.***

Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a very time-consuming, expensive and uncertain process that takes years to complete. Our operations have consumed substantial amounts of cash since inception, and we expect our expenses to increase in connection with our ongoing activities, particularly as we conduct clinical trials of, and seek marketing approval for our current product candidates and advance our other programs. Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated with sales, marketing, manufacturing and distribution activities. Our expenses could increase beyond expectations if we are required by the FDA, the EMA, the MHRA or other regulatory agencies to perform clinical trials or preclinical studies in addition to those that we currently anticipate. Other unanticipated costs may also arise. Because the design and outcome of our planned and anticipated clinical trials are highly uncertain, we cannot reasonably estimate the actual amount of resources and funding that will be necessary to successfully complete the development and commercialization of any product candidate we develop. We are not permitted to market or promote MM-120, MM-402 or any other product candidate before we receive marketing approval from the FDA. Accordingly, we will need to obtain substantial additional funding in order to continue our operations.

As of September 30, 2023, we had $117.7 million in cash and cash equivalents. Based on our current operating plan, we believe that our existing cash will be sufficient to fund our operations into 2026. Our estimate as to how long we expect our existing cash to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances, some of which may be beyond our control, including if the U.S. government shuts down and the impacts of a shut down on the FDA or SEC, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.

We will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources, which may dilute our shareholders or restrict our operating activities. Adequate additional financing may not be available to us on acceptable terms, or at all. Our future funding requirements, both short-term and long-term, will depend on many factors, including:

- the progress, timing and completion of preclinical testing and clinical trials for our current and future product candidates;
- the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA, the European Commission, the MHRA and comparable foreign regulatory authorities, including the potential for such authorities to require that we perform more preclinical studies or clinical trials than those that we currently expect or change their requirements on studies that had previously been agreed to, including any delays as a result of animal toxicology issues or the need to conduct bioequivalence studies;
- the outcome and timing of any scheduling-related decisions by the DEA, individual states, and comparable foreign authorities;
- the number of potential future product candidates we identify and decide to develop, either internally through our research and development efforts or externally through acquisitions, licensing or other collaboration agreements;
- the costs involved in growing our organization to the size needed to allow for the research, development and potential commercialization of our product candidates;
- the costs of developing sales and marketing capabilities to target public and private HCPs and clinic networks in major markets;
- the costs of training and certifying HCPs who are supporting or will support our clinical trials;
- generating and collecting data and obtaining intellectual property;
- the costs involved in filing patent applications and maintaining and enforcing patents or defending against claims of infringements raised by third parties;
- the time and costs involved in obtaining regulatory approval for our product candidates, and any delays we may encounter as a result of evolving regulatory requirements or adverse results with respect to our product candidates (such as MM-120 and MM-402) or any other current or future product candidates;
- selling and marketing activities undertaken in connection with the potential commercialization of our product candidates, if approved, and costs involved in the creation of an effective sales and marketing organization;
- the amount of revenue, if any, we may derive either directly or in the form of royalty payments from future sales of our current product candidates and any future product candidates, if approved; and
- the costs of operating as a public company.

Our ability to raise additional funds will depend on financial, economic and market conditions and other factors, over which we may have no or limited control. For example, a shut down of the U.S. government could impact our ability to raise funds due to either delays or shutdown of the SEC or regulatory delays due to impacts on the FDA. If adequate funds are not available on commercially acceptable terms when needed, we may be forced to delay, reduce or terminate the development or commercialization of all or part of our research programs or our investigational product candidates or any future product candidate, or we may be unable to take advantage of future business opportunities. For example, in the third quarter of 2022, we paused the development of MM-110 subject to our receipt of non-dilutive sources of capital or collaborations with third parties. Changes in general market, economic, and political conditions could also adversely impact our ability to access capital as and when needed.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt financing may result in imposition of debt covenants, increased fixed payment obligations or other restrictions that may affect our business. For example, in August 2023, we entered into the Loan Agreement, which contains affirmative and negative covenants, including covenants that limit or restrict the Company's ability to, among other things: dispose of assets; make changes to the Company's business, management, ownership or business locations; merge or consolidate; incur additional indebtedness, encumbrances or liens; pay dividends or other distributions or repurchase equity; make investments; and enter into certain transactions with affiliates, in each case subject to certain exceptions. If we raise additional funds through upfront payments or milestone payments pursuant to strategic collaborations with third parties, we may have to relinquish valuable rights to our product candidates, or grant licenses on terms that are not favorable to us. 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.

Filed Nov 2, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-058248. Last ingested by Listed: Oct 24, 2026, 15:06 ET. No prices; not investment advice.