Cover
Cover | 9 Months Ended |
Sep. 30, 2021 | |
Cover [Abstract] | |
Entity Registrant Name | Dermata Therapeutics, Inc. |
Entity Central Index Key | 0001853816 |
Document Type | S-1 |
Amendment Flag | false |
Entity Small Business | true |
Entity Emerging Growth Company | true |
Entity Filer Category | Non-accelerated Filer |
Entity Ex Transition Period | true |
Entity Incorporation State Country Code | DE |
Entity Tax Identification Number | 86-3218736 |
Entity Address Address Line 1 | 3525 Del Mar Heights Rd |
Entity Address Address Line 2 | 322 |
Entity Address City Or Town | San Diego |
Entity Address State Or Province | CA |
Entity Address Postal Zip Code | 92130 |
City Area Code | 858 |
Local Phone Number | 800-2543 |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Current assets: | |||
Cash | $ 12,603,341 | $ 530,400 | $ 1,991,802 |
Prepaid expenses and other current assets | 1,082,446 | 75,053 | 73,679 |
Total current assets | 13,685,787 | 605,453 | 2,065,481 |
Fixed assets, net | 0 | 0 | 322 |
Total assets | 13,685,787 | 605,453 | 2,065,803 |
Current liabilities: | |||
Accounts payable | 769,863 | 104,276 | 337,184 |
Accrued and other current liabilities | 425,369 | 133,477 | 155,040 |
License and settlement liability | 500,000 | ||
Convertible subordinated promissory notes, net of discount | 0 | 1,848,495 | |
Related party convertible subordinated promissory notes, net of discount | 0 | 1,140,984 | |
Current portion of long-term debt, net of debt discount | 0 | 556,160 | 730,547 |
Total current liabilities | 1,195,232 | 3,783,392 | 1,722,771 |
Long-term debt, net of debt discount | 553,191 | ||
Total liabilities | 1,195,232 | 3,783,392 | 2,275,962 |
Stockholders' and Members' Deficit | |||
Common stock value | 833 | 0 | |
Additional paid-in capital | 45,919,140 | 0 | |
Accumulated deficit | (33,429,418) | (28,079,798) | (24,843,268) |
Total stockholders' and members' equity (deficit) | 12,490,555 | (3,177,939) | (210,159) |
Total liabilities and stockholders' and members' equity (deficit) | 13,685,787 | 605,453 | 2,065,803 |
Series 1 Preferred Units | |||
Stockholders' and Members' Deficit | |||
Preferred stock value | 0 | 6,833,877 | 6,833,877 |
Series 1a Preferred Units | |||
Stockholders' and Members' Deficit | |||
Preferred stock value | 0 | 4,380,081 | 4,361,331 |
Series 1a Preferred Warrant Units | |||
Stockholders' and Members' Deficit | |||
Preferred stock value | 0 | 723,431 | 723,431 |
Series 1b Preferred Units | |||
Stockholders' and Members' Deficit | |||
Preferred stock value | 0 | 4,119,595 | 4,119,595 |
Series 1c Preferred Units | |||
Stockholders' and Members' Deficit | |||
Preferred stock value | 0 | 6,491,592 | 6,241,592 |
Class B Common Stock [Member] | |||
Stockholders' and Members' Deficit | |||
Common stock value | 0 | 2,342,853 | 2,342,853 |
Class A Common Stock [Member] | |||
Stockholders' and Members' Deficit | |||
Common stock value | $ 0 | $ 10,430 | 10,430 |
Series A Preferred Unit [Member] | |||
Stockholders' and Members' Deficit | |||
Preferred stock value | $ 0 |
Condensed Balance Sheets (Paren
Condensed Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Common stock, shares issued | 8,328,629 | ||
Common stock shares, authorized | 90,000,000 | ||
Common stock shares, par value | $ 0.0001 | ||
Common stock shares, outstanding | 8,328,629 | ||
Series 1 Preferred Units | |||
Common stock shares, outstanding | 6,906,244 | 6,906,244 | |
Preferred stock shares, issued | 6,906,244 | 6,906,244 | |
Preferred stock shares, authorized | 6,906,244 | 6,906,244 | |
Series 1a Preferred Units | |||
Common stock shares, outstanding | 5,018,750 | 5,000,000 | |
Preferred stock shares, issued | 5,018,750 | 5,000,000 | |
Preferred stock shares, authorized | 5,018,750 | 5,000,000 | |
Series 1a Preferred Warrant Units | |||
Common stock shares, outstanding | 1,419,228 | 1,437,978 | |
Preferred stock shares, issued | 1,419,228 | 1,437,978 | |
Series 1b Preferred Units | |||
Common stock shares, outstanding | 6,500,000 | 6,500,000 | |
Preferred stock shares, issued | 6,500,000 | 6,500,000 | |
Preferred stock shares, authorized | 6,500,000 | 6,500,000 | |
Series 1c Preferred Units | |||
Common stock shares, outstanding | 46,553,188 | 44,767,474 | |
Preferred stock shares, issued | 46,553,188 | 44,767,474 | |
Preferred stock shares, authorized | 46,553,188 | 44,767,474 | |
Class A Common Units | |||
Common stock, shares issued | 508,777 | 508,777 | |
Common stock shares, authorized | 508,777 | 508,777 | |
Common stock shares, outstanding | 508,777 | 508,777 | |
Class B Common Units | |||
Common stock, shares issued | 1,767,477 | 1,761,908 | |
Common stock shares, authorized | 1,761,908 | 1,761,908 | |
Common stock shares, outstanding | 1,767,477 | 1,761,908 |
Condensed Statements of Operati
Condensed Statements of Operations (unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Operating expenses: | ||||||
Research and development | $ 799,779 | $ 120,466 | $ 2,347,564 | $ 1,493,520 | $ 1,607,819 | $ 2,623,280 |
General and administrative | 912,490 | 419,596 | 2,956,444 | 1,187,906 | 1,565,034 | 1,847,328 |
Total operating expenses | 1,712,269 | 540,062 | 5,304,008 | 2,681,426 | 3,172,853 | 4,470,608 |
Loss from operations | (1,712,269) | (540,062) | (5,304,008) | (2,681,426) | (3,172,853) | (4,470,608) |
Other income and expenses: | ||||||
Gain from forgiveness of Payroll Protection Plan loan | (133,592) | 0 | ||||
Interest expense, net | 651 | 57,333 | 45,613 | 158,791 | 197,269 | 250,748 |
Net loss | (1,712,920) | (597,395) | (5,349,621) | (2,840,217) | $ (3,236,530) | $ (4,721,356) |
Deemed dividend upon the redemption of 5,221,156 shares of Series 1c preferred stock (see Note 6) | 269,038 | 0 | 269,038 | 0 | ||
Deemed dividend upon the amendment of terms of the Series 1d convertible preferred stock (see Note 6) | 2,293,199 | 0 | 2,293,199 | 0 | ||
Net loss attributable to common stockholders | $ (4,275,157) | $ (597,395) | $ (7,911,858) | $ (2,840,217) | ||
Net loss per share of common stock, basic and diluted | $ (0.86) | $ (0.31) | $ (2.69) | $ (1.49) | $ (1.69) | $ (2.47) |
Weighted-average basic and diluted common units/shares | 4,980,306 | 1,911,009 | 2,945,351 | 1,911,009 | 1,911,009 | 1,911,009 |
Statements of Stockholders and
Statements of Stockholders and Members Equity (Deficit) (unaudited) - USD ($) | Total | Class A Common | Class B Common shares | Series 1 Preferred | Series 1a Preferred | Series 1a Warrants | Series 1b Preferred | Series 1c Preferred | Accumulated Deficit | Series 1d Preferred | Preferred Stock | Preferred Stock Warrants | Additional Paid-In Capital | Common Stock |
Balance, shares at Dec. 31, 2018 | 508,777 | 1,600,766 | 6,906,244 | 5,000,000 | 1,437,978 | 6,500,000 | ||||||||
Balance, amount at Dec. 31, 2018 | $ (1,730,395) | $ 10,430 | $ 2,342,853 | $ 6,833,877 | $ 4,361,331 | $ 723,431 | $ 4,119,595 | $ 0 | $ (20,121,912) | |||||
Series 1c Preferred Units issued, net of issuance costs, shares | 44,767,474 | |||||||||||||
Series 1c Preferred Units issued, net of issuance costs, amount | 6,241,592 | $ 6,241,592 | ||||||||||||
Class B Common Units issued, net of forfeitures, shares | 161,142 | |||||||||||||
Class B Common Units issued, net of forfeitures, amount | 0 | |||||||||||||
Net loss | (4,721,356) | (4,721,356) | ||||||||||||
Balance, shares at Dec. 31, 2019 | 508,777 | 1,761,908 | 6,906,244 | 5,000,000 | 1,437,978 | 6,500,000 | 44,767,474 | |||||||
Balance, amount at Dec. 31, 2019 | (210,159) | $ 10,430 | $ 2,342,853 | $ 6,833,877 | $ 4,361,331 | $ 723,431 | $ 4,119,595 | $ 6,241,592 | (24,843,268) | $ 0 | $ 0 | $ 0 | $ 0 | |
Net loss | (1,421,173) | (1,421,173) | 0 | |||||||||||
Class B Common Units issued (unaudited), amount | 0 | |||||||||||||
Class B Common Units issued (unaudited), shares | 2,439 | |||||||||||||
Balance, shares at Mar. 31, 2020 | 508,777 | 1,764,347 | 6,906,244 | 5,000,000 | 1,437,978 | 6,500,000 | 44,767,474 | |||||||
Balance, amount at Mar. 31, 2020 | (1,631,332) | $ 10,430 | $ 2,342,853 | $ 6,833,877 | $ 4,361,331 | $ 723,431 | $ 4,119,595 | $ 6,241,592 | (26,264,441) | 0 | 0 | 0 | 0 | |
Balance, shares at Dec. 31, 2019 | 508,777 | 1,761,908 | 6,906,244 | 5,000,000 | 1,437,978 | 6,500,000 | 44,767,474 | |||||||
Balance, amount at Dec. 31, 2019 | (210,159) | $ 10,430 | $ 2,342,853 | $ 6,833,877 | $ 4,361,331 | $ 723,431 | $ 4,119,595 | $ 6,241,592 | (24,843,268) | 0 | 0 | 0 | 0 | |
Net loss | (2,840,217) | |||||||||||||
Balance, shares at Sep. 30, 2020 | 508,777 | 1,764,347 | 6,906,244 | 5,018,750 | 1,419,228 | 6,500,000 | 46,553,188 | |||||||
Balance, amount at Sep. 30, 2020 | (2,781,626) | $ 10,430 | $ 2,342,853 | $ 6,833,877 | $ 4,380,081 | $ 723,431 | $ 4,119,595 | $ 6,491,592 | (27,683,485) | |||||
Balance, shares at Dec. 31, 2019 | 508,777 | 1,761,908 | 6,906,244 | 5,000,000 | 1,437,978 | 6,500,000 | 44,767,474 | |||||||
Balance, amount at Dec. 31, 2019 | (210,159) | $ 10,430 | $ 2,342,853 | $ 6,833,877 | $ 4,361,331 | $ 723,431 | $ 4,119,595 | $ 6,241,592 | (24,843,268) | 0 | 0 | 0 | 0 | |
Net loss | (3,236,530) | (3,236,530) | ||||||||||||
Exercise of Series 1a Preferred Warrant Units, shares | 18,750 | (18,750) | ||||||||||||
Exercise of Series 1a Preferred Warrant Units, amount | 18,750 | $ 18,750 | ||||||||||||
Series 1c Preferred Units issued, shares | 1,785,714 | |||||||||||||
Series 1c Preferred Units issued, amount | 250,000 | $ 250,000 | ||||||||||||
Class B Common Units issued, shares | 5,569 | |||||||||||||
Class B Common Units issued, amount | 0 | |||||||||||||
Balance, shares at Dec. 31, 2020 | 508,777 | 1,767,477 | 6,906,244 | 5,018,750 | 1,419,228 | 6,500,000 | 46,553,188 | |||||||
Balance, amount at Dec. 31, 2020 | (3,177,939) | $ 10,430 | $ 2,342,853 | $ 6,833,877 | $ 4,380,081 | $ 723,431 | $ 4,119,595 | $ 6,491,592 | (28,079,798) | 0 | 0 | 0 | 0 | |
Balance, shares at Mar. 31, 2020 | 508,777 | 1,764,347 | 6,906,244 | 5,000,000 | 1,437,978 | 6,500,000 | 44,767,474 | |||||||
Balance, amount at Mar. 31, 2020 | (1,631,332) | $ 10,430 | $ 2,342,853 | $ 6,833,877 | $ 4,361,331 | $ 723,431 | $ 4,119,595 | $ 6,241,592 | (26,264,441) | 0 | 0 | 0 | 0 | |
Net loss | (821,649) | (821,649) | ||||||||||||
Series 1c Preferred Units issued (unaudited), amount | 250,000 | $ 250,000 | ||||||||||||
Series 1c Preferred Units issued (unaudited), shares | 1,785,714 | |||||||||||||
Balance, shares at Jun. 30, 2020 | 508,777 | 1,764,347 | 6,906,244 | 5,000,000 | 1,437,978 | 6,500,000 | 46,553,188 | |||||||
Balance, amount at Jun. 30, 2020 | (2,202,981) | $ 10,430 | $ 2,342,853 | $ 6,833,877 | $ 4,361,331 | $ 723,431 | $ 4,119,595 | $ 6,491,592 | (27,086,090) | 0 | 0 | 0 | 0 | |
Net loss | (597,395) | (597,395) | ||||||||||||
Exercise of Series 1a Preferred Warrant Units, amounts | 18,750 | $ 18,750 | $ (18,750) | |||||||||||
Exercise of Series 1a Preferred Warrant Units, shares | 18,750 | |||||||||||||
Balance, shares at Sep. 30, 2020 | 508,777 | 1,764,347 | 6,906,244 | 5,018,750 | 1,419,228 | 6,500,000 | 46,553,188 | |||||||
Balance, amount at Sep. 30, 2020 | (2,781,626) | $ 10,430 | $ 2,342,853 | $ 6,833,877 | $ 4,380,081 | $ 723,431 | $ 4,119,595 | $ 6,491,592 | (27,683,485) | |||||
Net loss | (396,313) | (396,313) | ||||||||||||
Balance, shares at Dec. 31, 2020 | 508,777 | 1,767,477 | 6,906,244 | 5,018,750 | 1,419,228 | 6,500,000 | 46,553,188 | |||||||
Balance, amount at Dec. 31, 2020 | (3,177,939) | $ 10,430 | $ 2,342,853 | $ 6,833,877 | $ 4,380,081 | $ 723,431 | $ 4,119,595 | $ 6,491,592 | (28,079,798) | 0 | 0 | 0 | 0 | |
Net loss | (2,304,908) | (2,304,908) | ||||||||||||
Stock-based compensation | 1,160,049 | 1,160,049 | ||||||||||||
Conversion of Warrant Units to Preferred Stock, amount | $ (723,431) | $ 142 | 723,289 | |||||||||||
Conversion of Warrant Units to Preferred Stock, shares | (1,419,228) | 1,419,228 | ||||||||||||
Conversion of Preferred Units to Preferred Stock, amount | 0 | $ (6,833,877) | $ (4,380,081) | $ (4,119,595) | $ 6,491,592 | $ (5,034,801) | $ 7,104 | 26,852,842 | ||||||
Conversion of Preferred Units to Preferred Stock, shares | (6,906,244) | (5,018,750) | (6,500,000) | (46,553,188) | (6,065,989) | 71,044,171 | ||||||||
Conversion of Common Units to Common Stock, amount | $ (10,430) | $ (2,342,853) | 2,353,092 | $ 191 | ||||||||||
Conversion of Common Units to Common Stock, shares | (508,777) | (1,744,983) | 1,911,009 | |||||||||||
Series 1d Preferred Units issued, amount | 5,034,801 | $ 5,034,801 | ||||||||||||
Class B Common Units forfeited, amount | $ 0 | |||||||||||||
Class B Common Units forfeited, shares | (22,494) | |||||||||||||
Series 1d Preferred Units issued, shares | 6,065,989 | |||||||||||||
Balance, shares at Mar. 31, 2021 | 0 | 71,044,171 | 1,419,228 | 1,911,009 | ||||||||||
Balance, amount at Mar. 31, 2021 | 712,003 | $ 0 | $ 0 | $ 0 | (30,384,706) | $ 7,104 | $ 142 | 31,089,272 | $ 191 | |||||
Balance, shares at Dec. 31, 2020 | 508,777 | 1,767,477 | 6,906,244 | 5,018,750 | 1,419,228 | 6,500,000 | 46,553,188 | |||||||
Balance, amount at Dec. 31, 2020 | (3,177,939) | $ 10,430 | $ 2,342,853 | $ 6,833,877 | $ 4,380,081 | $ 723,431 | $ 4,119,595 | $ 6,491,592 | (28,079,798) | $ 0 | $ 0 | $ 0 | 0 | |
Net loss | (5,349,621) | |||||||||||||
Balance, shares at Sep. 30, 2021 | 0 | 8,328,629 | ||||||||||||
Balance, amount at Sep. 30, 2021 | 12,490,555 | $ 0 | 0 | 0 | 0 | (33,429,418) | 45,919,140 | $ 833 | ||||||
Balance, shares at Mar. 31, 2021 | 0 | 71,044,171 | 1,419,228 | 1,911,009 | ||||||||||
Balance, amount at Mar. 31, 2021 | 712,003 | $ 0 | $ 0 | 0 | (30,384,706) | $ 7,104 | $ 142 | 31,089,272 | $ 191 | |||||
Net loss | (1,331,792) | (1,331,792) | ||||||||||||
Stock-based compensation | 113,987 | 113,987 | ||||||||||||
Balance, shares at Jun. 30, 2021 | 0 | 71,044,171 | 1,419,228 | 1,911,009 | ||||||||||
Balance, amount at Jun. 30, 2021 | (505,802) | $ 0 | 0 | (31,716,498) | $ 7,104 | $ 142 | 31,203,259 | $ 191 | ||||||
Net loss | (1,712,920) | (1,712,920) | ||||||||||||
Stock-based compensation | 142,655 | 142,655 | ||||||||||||
Issuance of Common Stock and warrants, net issuance costs, amount | 15,386,189 | 15,385,932 | $ 257 | |||||||||||
Issuance of Common Stock and warrants, net issuance costs, shares | 2,571,428 | |||||||||||||
Conversion of Convertible Debt to Common Stock, amount | 180,434 | 180,430 | $ 3 | |||||||||||
Conversion of Convertible Debt to Common Stock, shares | 32,219 | |||||||||||||
Conversion of Preferred Stock Warrants to Common Stock Warrants, amount | 0 | $ (142) | 142 | |||||||||||
Conversion of Preferred Stock Warrants to Common Stock Warrants, shares | (1,419,228) | |||||||||||||
Conversion of Preferred Stock to Common Stock, amount | 0 | $ (6,582) | 6,200 | $ 381 | ||||||||||
Conversion of Preferred Stock to Common Stock, shares | (65,823,015) | 3,813,973 | ||||||||||||
Redemption of Series 1c preferred shares, amount | (1,000,000) | $ (522) | (999,478) | |||||||||||
Redemption of Series 1c preferred shares, shares | (5,221,156) | |||||||||||||
Balance, shares at Sep. 30, 2021 | 0 | 8,328,629 | ||||||||||||
Balance, amount at Sep. 30, 2021 | $ 12,490,555 | $ 0 | $ 0 | $ 0 | $ 0 | $ (33,429,418) | $ 45,919,140 | $ 833 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (unaudited) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Cash flows from operating activities: | ||||
Net loss | $ (5,349,621) | $ (2,840,217) | $ (3,236,530) | $ (4,721,356) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||||
Stock-based compensation | 1,416,691 | 0 | ||
Amortization of debt discount costs | 14,126 | 88,293 | 97,104 | 141,753 |
Depreciation of fixed assets | 0 | 322 | 322 | 1,355 |
Series 1c Preferred Units issued in connection with license settlement | 730,962 | |||
Gain from forgiveness of Payroll Protection Plan loan | (133,592) | 0 | ||
Increase/(decrease) in cash resulting from changes in: | ||||
Prepaid expenses and other current assets | (1,007,393) | (5,300) | (1,374) | 50,058 |
Other assets | 0 | |||
Accounts payable | 665,587 | (256,601) | (232,908) | 122,423 |
Accrued and other current liabilities | $ 371,127 | $ 20,936 | $ (21,563) | $ 2,533 |
License and settlement agreement | 0 | 500,000 | 500,000 | 250,000 |
Total adjustments to reconcile net loss to net cash used in operations | $ 1,460,138 | $ (652,350) | $ (792,011) | $ 799,084 |
Net cash used in operating activities | (3,889,483) | (3,492,567) | (4,028,541) | (3,922,272) |
Cash flows from financing activities: | ||||
Proceeds from issuance of common stock and warrants, net of issuance costs | 15,386,189 | 0 | ||
Costs associated with debt amendment | 0 | (12,280) | ||
Redemption of Series 1c preferred stock | (1,000,000) | 0 | ||
Payments on debt | (556,482) | (462,963) | (810,185) | (763,889) |
Proceeds from Paycheck Protection Plan loan | 0 | 133,592 | 133,592 | |
Proceeds from issuance of convertible note | 1,562,717 | 2,314,432 | 0 | 150,000 |
Net proceeds from issuance of convertible subordinated promissory notes | 2,974,982 | |||
Proceeds from issuance of Series 1d preferred units | 570,000 | 0 | ||
Proceeds from issuance of Series 1c preferred units | 0 | 250,000 | 250,000 | 5,360,630 |
Proceeds from exercise of Series 1a preferred warrant units | 0 | 18,750 | 18,750 | 0 |
Net cash provided by financing activities | 15,962,424 | 2,253,811 | 2,567,139 | 4,734,461 |
Net increase (decrease) in cash | 12,072,941 | (1,238,756) | (1,461,402) | 812,189 |
Cash at beginning of period | 530,400 | 1,991,802 | 1,991,802 | 1,179,613 |
Cash at end of period | 12,603,341 | 753,046 | 530,400 | 1,991,802 |
Supplemental disclosures: | ||||
Cash paid for interest | 1,420 | 51,149 | 56,707 | 99,014 |
Cash paid for taxes | 1,400 | 1,400 | 3,272 | 1,138 |
Non-cash financing activities: | ||||
Conversion of common and preferred units and warrants to common and preferred stock and warrants | 29,936,660 | 0 | ||
Final loan fee related to debt amendment | 0 | 100,000 | ||
Series 1c Preferred Units issued for convertible debt and interest | $ 0 | $ 151,487 | ||
Conversion of convertible subordinated promissory notes to Series 1d preferred units | 4,464,801 | 0 | ||
Deemed dividend upon amendment to the terms to the Series 1d convertible preferred stock | 2,293,199 | 0 | ||
Conversion of convertible subordinated promissory notes and accrued interest to common shares at IPO | 180,434 | 0 | ||
Conversion of preferred stock to common stock at IPO | $ 6,582 | $ 0 |
Organization and Basis of Prese
Organization and Basis of Presentation | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Organization and Basis of Presentation | ||
1. Organization and Basis of Presentation | 1. Organization and Basis of Presentation Dermata Therapeutics, Inc., (the “Company”), was formed in December 2014 as a Delaware limited liability company (“LLC”) under the name Dermata Therapeutics, LLC. On March 24, 2021, the Company converted from an LLC to a Delaware C-corporation and changed its name to Dermata Therapeutics, Inc. Any references in these Notes to Financial Statements to equity securities as “units” refer to pre-conversion equity securities and any references to “shares” or “stock” in these Notes to Financial Statements refer to post-conversion equity securities. The Company is a clinical-stage biotechnology company focused on the treatment of medical and aesthetic skin conditions. Initial Public Offering On August 17, 2021, the Company completed its initial public offering (“IPO”), in which it sold 2,571,428 shares of its common stock together with 2,571,428 warrants to purchase one share of common stock with an exercise price of $7.00 per share at a combined offering price of $7.00. Additionally, the underwriters exercised their option to purchase an additional 385,714 warrants to purchase common stock with an exercise price of $7.00 per share. The Company received net cash proceeds of approximately $15.4 million from the IPO after deducting underwriters’ discounts and offering expenses of approximately $2.6 million. Each of the following occurred in connection with the completion of the IPO in August 2021: - The sale of 2,571,428 shares of common stock along with 2,957,142 warrants to purchase common stock. - The conversion of 65,823,015 shares of convertible preferred stock into an aggregate of 3,813,973 shares of common stock. - The conversion of $175,000 principal amount of outstanding convertible promissory notes and accrued interest of $5,434 into 32,219 shares of common stock. - The conversion of 1,419,228 Series 1a preferred warrants into 69,212 warrants exercisable into common stock. Each purchaser in the IPO received one share of common stock and one warrant to purchase one share of common stock at a combined offering price of $7.00. Each warrant to purchase common stock entitles the holder to purchase one share of common stock at an exercise price of $7.00 per share, are immediately exercisable, and expire five years from the date of issuance. The Company evaluated the terms of the warrants issued and determined that they should be classified as equity instruments. The Company’s shares of common stock and warrants are listed on the Nasdaq Stock Market LLC under the symbols “DRMA,” and “DRMAW,” respectively, and both began trading in August 2021. After the IPO, there were no shares of preferred stock or preferred stock warrants outstanding. Prior to the IPO, the Company had 1,911,009 shares of common stock outstanding after the Company’s reverse stock split in July 2021. The Company’s total common stock issued and outstanding was 8,328,629 as of September 30, 2021. Reverse Stock Split On July 1, 2021, the Company effected a reverse split of shares of the Company’s common stock at a ratio of 1-for-20.5 pursuant to an amendment to the Company’s certificate of incorporation approved by the Company’s board of directors and stockholders. The par value was not adjusted as a result of the reverse split. All issued and outstanding common stock shares and per share amounts contained in the financial statements have been retroactively adjusted to reflect this reverse stock split for all periods presented, and the conversion ratios for the Company’s outstanding preferred stock was adjusted accordingly. See Note 6 - Equity Securities for additional information. Liquidity and Going Concern Uncertainty Since its inception, the Company has devoted substantially all of its resources to research and development activities and has not generated any revenue or commercialized any product candidates. As of September 30, 2021, cash totaled $12.6 million and the Company had an accumulated deficit of $33.4 million. For the year ended December 31, 2020 and the nine months ended September 30, 2021, the Company used cash of $4.0 million and $3.9 million, respectively, in operations. The Company’s cash balances are expected to fund operations into October 2022. The Company anticipates that it will continue to incur net losses for the foreseeable future. These factors raise substantial doubt about the Company’s ability to continue as a going concern for the one-year period following the date that these financial statements were issued. Historically, the Company’s principal sources of cash have included proceeds from the issuance of common and preferred equity units and proceeds from the issuance of debt. The Company’s principal uses of cash have included cash used in operations and payments for license rights. The Company expects that the principal uses of cash in the future will be for continuing operations, funding of research and development, conducting preclinical studies and clinical trials, and general working capital requirements. The Company expects that as research and development expenses continue to grow, it will need to raise additional capital to sustain operations and research and development. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. Management’s Plan to Continue as a Going Concern To continue as a going concern, the Company will need, among other things, to raise additional capital resources. Until the Company can generate significant cash from operations, management’s plans to obtain such resources for the Company include proceeds from offerings of the Company’s equity securities or debt, or transactions involving product development, technology licensing or collaboration. Management can provide no assurance that any sources of a sufficient amount of financing or collaboration agreements will be available to the Company on favorable terms, if at all. Additionally, the COVID-19 pandemic continues to evolve and has already disrupted global financial markets. The Company’s ability to raise additional capital may be adversely impacted by potential worsening of global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the pandemic. If the disruption persists or deepens, the Company could experience an inability to access additional capital. The Company has raised additional capital through the initial public offering of its common stock and warrants; however, management’s current plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern. Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the accompanying financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair statement of the financial position, results of operations, cash flows, and stockholders’ equity for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ materially from those estimates. | 1. The Company and Business Activities Dermata Therapeutics, Inc., (the “Company”), was formed as a Delaware limited liability company (“LLC”) under the name Dermata Therapeutics, LLC in December 2014. On March 24, 2021 the Company converted from an LLC to a Delaware C-corporation and changed its name to Dermata Therapeutics, Inc. The Company is a clinical-stage biotechnology company focused on the treatment of medical and aesthetic skin conditions. |
Liquidity and Going Concern Unc
Liquidity and Going Concern Uncertainty | 12 Months Ended |
Dec. 31, 2020 | |
Liquidity and Going Concern Uncertainty | |
2. Liquidity and Going Concern Uncertainty | 2. Liquidity and Going Concern Uncertainty Since its inception, the Company has not generated any revenue or commercialized any products. As of December 31, 2020, cash totaled $530,400 and the Company had an accumulated deficit of $28,079,798. For the years ended December 31, 2019 and 2020, the Company used $3,922,272 and $4,028,541, respectively, in operations. In January, February and March, 2021, the Company received proceeds from the issuance of subordinated convertible promissory notes of $1,566,000 from the Managing Members of the Company and other investors. In addition, in March, 2021 the Company received proceeds of $570,000 from the issuance of a Series 1d Preferred Unit offering, which is expected to fund operations through mid-June, 2021 (See Note 13) The Company has not commercialized any products or generated any revenues, and anticipates that it will continue to incur net losses for the foreseeable future. These factors raise substantial doubt about the Company’s ability to continue as a going concern for the one-year period following the date that these financial statements were issued. Historically, the Company’s principal sources of cash have included proceeds from the issuance of common and preferred equity units and proceeds from the issuance of debt. The Company’s principal uses of cash have included cash used in operations, payments for license rights and payments relating to purchases of property and equipment. The Company expects that the principal uses of cash in the future will be for continuing operations, funding of research and development and general working capital requirements. The Company expects that as research and development expenses continue to grow, it will need to raise additional capital to sustain operations and research and development. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. Management’s Plan to Continue as a Going Concern In order to continue as a going concern, the Company will need, among other things, additional capital resources. Until the Company can generate significant cash from operations, management’s plans to obtain such resources for the Company include proceeds from offerings of the Company’s equity securities or debt, or transactions involving product development, technology licensing or collaboration. Management can provide no assurance that any sources of a sufficient amount of financing will be available to the Company on favorable terms, if at all. Management is currently in the process of seeking additional equity financing, however management’s current plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Summary of Significant Accounting Policies | ||
3. Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Use of Estimates The Company’s financial statements are prepared in accordance with GAAP. The preparation of the Company’s financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, and expenses and disclosure of contingent assets and liabilities in the financial statements and accompanying notes. On an ongoing basis, management evaluates these estimates and judgments, including those related to accrued research and development expenses, stock-based compensation, and the estimated fair values of equity instruments. Management evaluates its estimates on an ongoing basis. The Company bases its estimates on various assumptions that it believes are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Segment Information Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company and the Company’s chief operating decision maker view the Company’s operations and manage its business in one operating segment, which is the business of developing and commercializing pharmaceuticals. The Company operates in only one segment. Deferred Financing Costs The Company capitalizes certain legal, accounting, and other fees and costs that are directly attributable to in-process equity financings as deferred offering costs until such financings are completed. Upon the completion of an equity financing, these costs are recorded as a reduction of additional paid-in capital of the related offering. Upon the completion of the IPO in August 2021, approximately $2.6 million of offering costs related to the IPO were reclassified to additional paid-in capital. The Company had no deferred financing costs as of September 30, 2021. Cash The Company deposits its cash with reputable financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”). This cash is held in checking and savings accounts. At times, deposits held may exceed the amount of insurance provided by the FDIC. The Company has not experienced any losses in its cash and believes they are not exposed to any significant credit risk. Fair Value Measurement The Company uses a three-tier fair value hierarchy to prioritize the inputs used in the Company’s fair value measurements. These tiers include Level 1, defined as observable inputs such as quoted prices in active markets for identical assets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company believes the carrying amount of cash, accounts payable, accrued expenses and debt approximate their estimated fair values due to the short-term maturities of these financial instruments. Fixed Assets Fixed assets consist of furniture and fixtures and computer equipment. Fixed assets are stated at cost less accumulated depreciation and amortization. Additions, improvements, and major renewals are capitalized. Maintenance, repairs, and minor renewals are expensed as incurred. Depreciation is determined using the straight-line method over the estimated useful lives of the assets, which is primarily three years. Depreciation and amortization expense for the nine months ended September 30, 2021 and 2020 were $0 and $322, respectively. Patent Costs Patent costs related to obtaining and maintaining patent protection in both the United States and other countries are expensed as incurred. Patents costs are classified as general and administrative expenses. Research and Development Research and development costs consist of expenses incurred in connection with the development of the Company’s product candidates. Such expenses include expenses incurred under agreements with contract research organizations, manufacturing and supply scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial supply, outsourced laboratory services, including materials and supplies used to support the Company’s research and development activities, and payments made for license fees and milestones that have not been demonstrated to have commercial value. Such costs are expensed in the periods in which they are incurred. Upfront payments and milestone payments for licensed technology are expensed as research and development as incurred or when the milestone is achieved or is determined to be probable of being achieved. Advanced payments for goods or services to be received in the future for research and development activities are recorded as prepaid expenses and expensed as the related goods are received or services are performed. Income Taxes From inception until March 24, 2021, the Company operated as a limited liability company taxed as a partnership. Therefore, any income tax liability or benefit through that date accrued to the Company’s members. Since March 24, 2021, the Company has operated as a C-Corporation and accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence. The Company records the difference between the benefit recognized and measured pursuant to the accounting guidance on accounting for uncertain tax positions taken or expected to be taken on the Company’s tax return. The Company records uncertain tax positions on the basis of a two-step process whereby (1) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. The liabilities are adjusted in light of changing facts and circumstances, such as the outcome of tax audits. To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. There are no uncertain tax positions. Stock-Based Compensation In March 2021, the Company’s board of directors and shareholders approved the 2021 Omnibus Equity Incentive Plan (“the 2021 Plan”). For stock options granted under the 2021 Plan, the Company measures and recognizes compensation expense for all stock-based awards made to employees, directors, and non-employees, based on estimated fair values recognized using the straight-line method over the requisite service period. The fair value of options to purchase common stock granted to employees is estimated on the grant date using the Black-Scholes valuation model. The calculation of stock-based compensation expense requires that the Company make certain assumptions and judgments about variables used in the Black-Scholes model, including the expected term of the stock-based award, expected volatility of the underlying common stock, dividend yield, and the risk-free interest rate. Forfeitures are accounted for in the period they occur. Refer to Note 7- Equity Incentive Plan for further discussion. Net Loss Per Common Unit/Share On March 24, 2021, the Company converted from an LLC to a C-corporation. Upon the conversion, each outstanding common unit and preferred unit was converted into one share of common stock and preferred stock, respectively. Common units had similar rights and characteristics of common stock issued upon the conversion. In calculating net loss per share, the Company retrospectively applied the effects of the conversion to the number of common units outstanding prior to the conversion. Net loss per share for periods prior to the conversion to a C-corporation refers to net loss per common unit. Basic net loss per unit/share is calculated by dividing net loss attributable to common unitholders or shareholders by the weighted-average number of units or shares outstanding during the period, without consideration of common unit or share equivalents. Diluted net loss per unit or share is calculated by adjusting weighted-average shares outstanding for the dilutive effect of common unit or share equivalents outstanding for the period. For purposes of the diluted net loss per unit or share calculation, preferred units or shares, profit interests, and warrants to purchase preferred units or shares are considered to be common unit or share equivalents but are excluded from the calculation of diluted net loss per common unit or share if their effect would be anti-dilutive. As the Company has reported a net loss for the periods presented, diluted net loss per common unit or share is the same as the basic net loss per common unit or share for the periods presented. Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net loss $ (1,712,920 ) $ (597,395 ) $ (5,349,621 ) $ (2,840,217 ) Deemed dividend upon redemption of 5,221,156 shares of Series 1c convertible preferred stock $ 269,038 $ - $ 269,038 $ - Deemed dividend upon amendment of the terms to the Series 1d convertible preferred stock $ 2,293,199 $ - $ 2,293,199 $ - Net loss attributable to common stockholders $ (4,275,157 ) $ (597,395 ) $ (7,911,858 ) $ (2,840,217 ) Basic and diluted net loss per common unit/share $ (0.86 ) $ (0.31 ) $ (2.69 ) $ (1.49 ) Weighted-average basic and diluted common units/shares 4,980,306 1,911,009 2,945,351 1,911,009 The common unit or share equivalents that are not included in the calculation of diluted net loss per common unit or share but could potentially dilute basic earnings per share in the future are as follows: As of September 30, 2021 September 30, 2020 Series 1 Preferred Units/Shares - 336,882 Series 1a Preferred Units/Shares - 244,811 Series 1a Preferred Warrant - 69,212 Series 1b Preferred Units/Shares - 317,058 Series 1c Preferred Units/Shares - 2,270,866 Series 1d Preferred Units/Shares - - Class B Common Units Profits Interests - 365,245 Common Stock Options 523,199 - Common Stock Warrants 3,091,657 - Total potentially dilutive securities 3,614,856 3,604,074 Recently Adopted Accounting Pronouncements In December 2019, the Financial Accounting Standards Board (“FASB”) issued Account Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. ASU 2019-12 also improves the consistent application, and the simplification, of other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Adoption of this new guidance on January 1, 2021 did not have an impact on the Company’s financial position and results of operations. In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in an Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, ASU 2020-06 modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share computation. The amendments in ASU 2020-06 are effective for smaller reporting companies as defined by the U.S. Securities and Exchange Commission (“SEC”) for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but not earlier than fiscal years beginning after December 15, 2020. Adoption of this new guidance on January 1, 2021 did not have an impact on the Company’s financial position and results of operations. | 3. Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as found in the Accounting Standards Codification (“ASC”), the Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Reverse Stock Split On July 1, 2021, the Company effected a reverse split of shares of the Company’s common stock at a ratio of 1-for-20.5 pursuant to an amendment to the amended and restated certificate of incorporation approved by the Company’s board of directors and stockholders. The par value was not adjusted as a result of the reverse split. All issued and outstanding common stock share and per share amounts contained in the financial statements have been retroactively adjusted to reflect this reverse split for all periods presented, and the conversion ratio of the preferred stock was adjusted accordingly. Use of Estimates The preparation of financial statements 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. On an ongoing basis, management evaluates these estimates and judgments, including those related to useful lives of long-lived assets, accrued research and development expenses and estimated fair values of equity instruments. The Company bases its estimates on various assumptions that it believes are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Segment Information Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company and the Company’s chief operating decision maker view the Company’s operations and manage its business in one operating segment, which is the business of developing and commercializing pharmaceuticals. The Company operates in only one segment. Cash The Company places its cash with reputable financial institutions that are insured by the Federal Deposit Insurance Corporation, or FDIC. At times, deposits held may exceed the amount of insurance provided by the FDIC. The Company has not experienced any losses in its cash and believes they are not exposed to any significant credit risk. Fair Value Measurement The Company uses a three-tier fair value hierarchy to prioritize the inputs used in the Company’s fair value measurements. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company believes the carrying amount of cash, accounts payable, accrued expenses and debt approximate their estimated fair values due to the short-term maturities of these financial instruments. Fixed Assets Fixed assets consist of furniture and fixtures and computer equipment. Fixed assets are stated at cost less accumulated depreciation and amortization. Additions, improvements, and major renewals are capitalized. Maintenance, repairs, and minor renewals are expensed as incurred. Depreciation is determined using the straight-line method over the estimated useful lives of the assets, which is primarily three years. Depreciation and amortization expense for the years ended December 31, 2019 and 2020 was $1,355 and $322, respectively Patent Costs Patent costs related to obtaining and maintaining patent protection in both the United States and other countries are expensed as incurred. The amounts expensed in the years ended December 31, 2019 and 2020 were $74,920 and $32,411, respectively. Research and Development Research and development costs consist of expenses incurred in connection with the development of the Company’s product candidates. Such expenses include expenses incurred under agreements with contract research organizations, manufacturing and supply scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial supply, outsourced laboratory services, including materials and supplies used to support the Company’s research and development activities, and payments made for license fees and milestones that have not been demonstrated to have commercial value. Such expenses are expensed as incurred. The amounts expensed in the years ended December 31, 2019 and 2020 were $2,623,280 and $1,607,819, respectively. Income Taxes Through March 24, 2021, the Company operated as a limited liability company taxed as a partnership. Therefore, any income tax liability or benefit through that date accrued to the members. Net Loss Per Common Unit Basic net loss per unit is calculated by dividing net loss attributable to common unitholders by the weighted-average units outstanding during the period, without consideration of common unit equivalents. Diluted net loss per unit is calculated by adjusting weighted-average shares outstanding for the dilutive effect of common unit equivalents outstanding for the period. For purposes of the diluted net loss per unit calculation, preferred units, profit interests, and warrants to purchase preferred units are considered to be common unit equivalents but are excluded from the calculation of diluted net loss per common unit if their effect would be anti-dilutive. The common unit equivalents that are not included in the calculation of diluted net loss per common unit but could potentially dilute basic earnings per share in the future are as follows: December 31, 2019 2020 Numerator: Net loss $ (4,721,356 ) $ (3,236,530 ) Denominator: Weighted-average basic and diluted common units 1,911,009 1,911,009 Basic and diluted net loss per common unit $ (2.47 ) $ (1.69 ) December 31, 2019 2020 Series 1 Preferred 1 Preferred Units 336,882 336,882 Series 1a Preferred Units 243,897 244,811 Series 1a Preferred Warrant Units 70,126 69,212 Series 1b Preferred Units 317,058 317,058 Series 1c Preferred Units 2,183,758 2,270,866 Class B Common Units Profits Interests 359,676 365,245 Total potentially dilutive securities 3,511,397 3,604,074 Recently Adopted Accounting Pronouncements In July 2017, the FASB issued authoritative guidance changing the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features, whereby a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock, and also clarifying existing disclosure requirements for equity-classified instruments. This guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company adopted this guidance with no material impact on its financial statements or disclosures. Recently Issued Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in an Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, ASU 2020-06 modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share computation. The amendments in ASU 2020-06 are effective for smaller reporting companies as defined by the SEC for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but not earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its financial statements |
Balance Sheet Details
Balance Sheet Details | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Balance Sheet Details | ||
4. Balance Sheet Details | 3. Balance Sheet Details The following provides certain balance sheet details: September 30, December 31, 2021 2020 Prepaid expenses and other current assets Prepaid insurance $ 1,082,446 $ 68,003 Prepaid research and development costs - 7,050 Total prepaid expenses and other current assets $ 1,082,446 $ 75,053 Fixed assets Furniture and office equipment $ 59,382 $ 59,382 Computer equipment 17,225 17,225 76,607 76,607 Less: accumulated depreciation and amortization (76,607 ) (76,607 ) Total fixed assets, net $ - $ - Accrued and other current liabilities Accrued interest payable $ - $ 49,169 Accrued compensation and benefits 424,569 84,308 Accrued research and development costs 800 - Total accrued and other current liabilities $ 425,369 $ 133,477 | 4. Balance Sheet Details The following provides certain balance sheet details: December 31, 2019 2020 Prepaid Expenses: Prepaid insurance $ 56,045 $ 68,003 Prepaid clinical trial expense 17,634 7,050 Total prepaid expenses $ 73,679 $ 75,053 Fixed Assets: Furniture and office equipment $ 59,382 $ 59,382 Computer equipment 17,225 17,225 76,607 76,607 Less: accumulated depreciation and amortization (76,285 ) (76,607 ) Total fixed assets, net $ 322 $ - December 31, 2019 2020 Accrued and Other Current Liabilities: Accrued payroll $ 38,708 $ - Accrued interest payable 5,606 49,169 Accrued employee benefits 3,663 - Accrued vacation 107,063 84,308 Total accrued and other current liabilities $ 155,040 $ 133,477 |
Subordinated Convertible Promis
Subordinated Convertible Promissory Notes | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Subordinated Convertible Promissory Notes | ||
5. Subordinated Convertible Promissory Notes | 4. Subordinated Convertible Promissory Notes In July and October 2020, the Company issued an aggregate of $3,000,000 of subordinated convertible promissory notes (the “Notes”). Notes in the amount of $1,145,000 were issued to existing investors who are also related parties (See Note 11 - Related Parties), $1,730,000 were issued to existing investors who are not related parties and notes in the amount of $125,000 were issued to new investors. The Notes bore interest at 4% per annum and were to mature on July 17, 2021. The Notes were subordinated to the Company’s long-term debt and were convertible into a qualified Series A financing of at least $10 million at a 20% discount to the lowest price per unit paid by investors for that financing. Under authoritative accounting guidance, this contingent beneficial conversion feature was to be measured and recognized when the contingency is resolved. The Notes were recorded upon issuance net of debt discount costs of $28,301. The Company recognized $497 and $16,888 of interest expense during the three and nine months ended September 30, 2021, respectively, and $155 and $14,126 of amortized debt discount costs during the three and nine months ended September 30, 2021, respectively, related to the Notes. On January 27, 2021, the Company amended the terms of the Notes to increase the maximum amount of convertible promissory notes to be issued from $3,000,000 to $5,000,000, to allow for the conversion of the convertible promissory notes into shares of common stock upon a Qualified Initial Public Offering with aggregate gross proceeds to the Company of at least $10,000,000 at a 20% discount to the lowest price per share paid by investors for that financing and to extend the maturity date to December 31, 2021. In connection with this amendment, Notes in the amount of $1,255,000 were issued to existing investors who are also related parties (See Note 11 - Related Parties) and $311,000 were issued to existing investors who are not related parties. In March 2021, the Company further amended the terms of the Notes to allow for the conversion of the Notes into Series 1d Preferred Units at the same price as purchasers of Series 1d Preferred Units. As of March 15, 2021, $4,391,000 of the Notes, along with related interest of $73,801, were converted to 5,379,247 Series 1d Preferred Units. Since the Notes did not convert at a discount, there was no beneficial conversion feature. The Company considers the above modification of the Notes in March 2021 to be a substantial modification requiring extinguishment accounting under Accounting Standards Codification (“ASC”) 470-50-40-10. Based upon an independent valuation of the reacquisition price of the Notes, the difference between the reacquisition price and the net carrying amount of the Notes immediately prior to the modification is not material to the financial statements. In connection with the Company’s IPO in August 2021, the outstanding principal of the Notes and accrued interest totaling $180,434 converted into 32,219 shares of common stock. Upon this conversion, since the conversion contained a 20% discount, the Company measured the beneficial conversion feature and determined that it was not material to the financial statements. As of September 30, 2021, the Company had no promissory notes outstanding. | 5. Subordinated Convertible Promissory Notes In July and October, 2020, the Company issued an aggregate of $3,000,000 of subordinated convertible promissory notes (“The Notes”). Notes in the amount of $1,145,000 were issued to existing investors who are also related parties (See Note 12), $1,730,000 were issued to existing investors who are not related parties and notes in the amount of $125,000 were issued to new investors. The Notes bear interest at 4% per annum and mature on July 17, 2021 which due date was extended to December 31, 2021 (See Note 13). The Notes are subordinated to the Company’s long-term debt and are convertible into a qualified Series A financing of at least $10 million at a 20% discount to the lowest price per unit paid by investors for that financing. Under authoritative accounting guidance, this contingent beneficial conversion feature will be measured and recognized when the contingency is resolved. The Notes were recorded net of debt discount costs of $25,018. The Company has accounted for the 2020 Notes as stock-settled debt and is accreting the carrying amount of the 2020 Notes to the settlement amount through maturity. The Company recognized $48,222 of interest expense and $14,497 of amortized debt discount costs in 2020 related to The Notes. |
Long-Term Debt
Long-Term Debt | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Long-Term Debt | ||
6. Long-Term Debt | 5. Long-Term Debt In February 2017, the Company entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”) whereas SVB agreed to provide term loans to the Company in two tranches. The first tranche of $2,500,000 was drawn in February 2017 and bore interest at a rate of 1.5% above the prime rate, which was 3.25% as of December 31, 2020, with principal and interest payable monthly through February 9, 2021. The second tranche was not utilized. In connection with the Loan and Security Agreement, SVB also received warrant units to purchase, at any time after February 9, 2017 and prior to February 9, 2027, 187,978 Series 1a Preferred Units or the equivalent Series A Preferred Units had they purchased Series 1a Preferred Units, if Series A Preferred Units are issued, at a price of $1.00 per unit. The estimated fair value of these warrant units of $104,630 (See Note 6 - Equity Securities), as well as costs associated with the term loan, including provision for a final payment of $225,000, were recorded as a discount to outstanding debt and amortized to interest expense utilizing the effective interest method over the underlying term of the loan. In June 2019, the Company and SVB entered into a First Amendment to the Loan and Security Agreement whereby if the Company did not achieve certain capital milestones by December 1, 2019, term loan principal payments would be deferred from December 21, 2019 through May 1, 2020 with the deferred principal payments being payable in equal monthly installments, in addition to those principal payments already scheduled to be paid, starting on June 1, 2020 and extending through the February 9, 2021 maturity date of the term loan. In addition, if those principal payments were deferred for that six-month period, a non-refundable amendment fee of $100,000 would be due and payable on the earliest to occur of the maturity date, the prepayment of the term loan or the occurrence of an event of default. The capital milestones were not achieved by December 1, 2019 and, therefore, the defined principal repayments were deferred. The non-refundable amendment fee of $100,000, as well as $12,280 of costs associated with the amendment, were recorded as a discount to outstanding debt and were amortized to interest expense utilizing the effective interest method over the remaining underlying term of the loan. In January and February 2021, the company paid the final principal payments of $231,482 under the SVB Loan and Security Agreement. The Company also paid the final payment fee of $225,000 in February 2021 and the amendment fee of $100,000 in March 2021. As of September 30, 2021, the Company had no long-term debt outstanding. Paycheck Protection Program On April 22, 2020, the Company received proceeds of a $133,592 loan from SVB under provisions of the Small Business Administration Paycheck Protection Program (“PPP”). This loan was forgiven in December 2020 under provisions of the PPP. | 6. Long-Term Debt In February 2017, the Company entered into a Loan and Security Agreement with Silicon Valley Bank (SVB) whereas SVB agreed to provide term loans to the Company in two tranches. The first tranche of $2,500,000 was drawn in February 2017 and bears interest at a rate of 1.5% above the prime rate, which was 3.25% as of December 31, 2020, payable monthly through February 9, 2021. The second tranche was not utilized. In connection with the Loan and Security Agreement, SVB also received warrant units to purchase, at any time after February 9, 2017 and prior to February 9, 2027, 187,978 Series 1a Preferred Units or the equivalent Series A Preferred Units had they purchased Series 1a Preferred Units, if Series A Preferred Units are issued, at a price of $1.00 per unit. The estimated fair value of these warrant units of $104,630 (See Note 8), as well as costs associated with the term loan, including provision for a final payment of $225,000, was recorded as a discount to outstanding debt and is being amortized to interest expense utilizing the effective interest method over the underlying term of the loan. In June 2019, the Company and SVB entered into a First Amendment to the Loan and Security Agreement whereby if the Company did not achieve certain capital milestones by December 1, 2019, Term Loan principal payments would be deferred from December 21, 2019 through May 1, 2020 with the deferred principal payments being payable in equal monthly installments, in addition to those principal payments already scheduled to be paid, starting on June 1, 2020 and extending through the February 9, 2021 maturity date of the Term Loan. In addition, if those principal payments were deferred for that six-month period, a non-refundable amendment fee of $100,000 would be due and payable on the earliest to occur of the Maturity Date, the prepayment of the Term Loan or the occurrence of an Event of Default. The capital milestones were not achieved by December 1, 2019 and, therefore, the defined principal repayments were deferred. The non-refundable amendment fee of $100,000, as well as $12,280 of costs associated with the amendment, have been recorded as a discount to outstanding debt and are being amortized to interest expense utilizing the effective interest method over the remaining underlying term of the loan. Pursuant to the Loan and Security Agreement, the Company is bound by certain affirmative and negative covenants setting forth actions that must and must not take place during the term thereof. Upon the occurrence of an event of default under the Loan and Security Agreement, subject to cure periods for certain events of default, all amounts owed by the Company thereunder shall begin to bear interest at a rate of 5.0% above the rate that is otherwise applicable thereto and may be declared immediately due and payable by SVB. As of December 31, 2020, the Company was in compliance with all covenants. In addition, in accordance with the terms of the First Amendment, SVB was granted a lien on all of the Company’s intellectual property rights. Future principal payments of $231,482 under the Term Loan payable as of December 31, 2020 were due and paid in January and February 2021 (See Note 13 - Subsequent Events). Payroll Protection Program On April 22, 2020, the Company received proceeds of a $133,592 loan from SVB under provisions of the Small Business Administration Payroll Protection Program (PPP). This loan was forgiven in December 2020 under provisions of the PPP and the gain is included in other income on the statement of operations and comprehensive loss. |
Equity Securities
Equity Securities | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Equity Securities | ||
7. Equity Securities | 6. Equity Securities Common Stock and Preferred Stock On March 24, 2021, the Company entered into a Plan of Conversion (“Conversion”) whereby the Company converted from an LLC under the laws of the State of Delaware to a Delaware C-corporation with the name Dermata Therapeutics, Inc. In connection with the Conversion, each fully paid Preferred and Common Unit in the LLC was converted into a like number of shares of Preferred and Common Stock of the Company with a par value of $0.0001 per share. The Shares issued had the same rights, preferences and privileges that had accrued to the pre-converted Units. Any references in these Notes to Financial Statements to equity securities as “units” refer to pre-conversion equity securities and any references to “shares” or “stock” in these Notes to Financial Statements refer to post-conversion equity securities. On July 1, 2021, the Company effected a reverse split of shares of the Company’s common stock at a ratio of 1-for-20.5 pursuant to an amendment to the Company’s certificate of incorporation approved by the Company’s board of directors and stockholders. The par value was not adjusted as a result of the reverse split. All issued and outstanding common stock share and per share amounts contained in the financial statements have been retroactively adjusted to reflect this reverse split for all periods presented. On August 17, 2021, the Company completed its IPO, in which it sold 2,571,428 shares of its common stock together with 2,571,428 warrants to purchase one share of common stock with an exercise price of $7.00 per share at a combined offering price of $7.00. Additionally, the underwriters exercised their option to purchase an additional 385,714 warrants with an exercise price of $7.00 per warrant. The Company received net cash proceeds of approximately $15.4 million from the IPO after deducting underwriters’ discounts and offering expenses of approximately $2.6 million. Each of the following occurred in connection with the completion of the IPO in August 2021: - The sale of 2,571,428 shares of common stock along with 2,957,142 warrants to purchase common stock. - The conversion of 65,823,015 shares of convertible preferred stock into an aggregate of 3,813,973 shares of common stock. - The conversion of $175,000 principal amount of outstanding convertible promissory notes and accrued interest of $5,434 into 32,219 shares of common stock. - The conversion of 1,419,228 Series 1a preferred warrants into 69,212 warrant shares exercisable into common stock. After the IPO, there were no shares of preferred stock or preferred stock warrants outstanding. Prior to the IPO, the Company had 1,911,009 shares of common stock outstanding after the Company’s reverse stock split in July 2021. The Company’s total common stock issued and outstanding was 8,328,629 as of September 30, 2021. Series 1 Preferred Units From the Company’s formation on December 8, 2014 through 2016, the Company issued 6,906,244 Series 1 Preferred Units for net consideration of $6,833,877. The Company’s Series 1 Preferred Units were converted to preferred stock during the first quarter of 2021. Additionally, in August 2021, the Company converted all preferred stock into common stock. No Series 1 Preferred Units were outstanding as of September 30, 2021. Series 1a Preferred Units In 2016, the Company issued 5,000,000 Series 1a Preferred Units in exchange for cash of $5,000,000 and net of issuance costs of $19,868. Purchasers of the Series 1a Preferred Units also received 1,250,000 Warrant Units to purchase an additional amount of Series 1a Preferred Units. The estimated fair value of the warrant units was recorded as a separate component of members’ equity (deficit) in the accompanying balance sheet as of December 31, 2020 with an offset to the Series 1a proceeds. In June 2020, 18,750 of the warrants were exercised for consideration of $18,750, which consideration was received in July 2020. The Company’s Series 1a Preferred Units were converted to preferred stock during the first quarter of 2021. Additionally, in August 2021, the Company converted all preferred stock into common stock. No Series 1a Preferred Units were outstanding as of September 30, 2021. Series 1b Preferred Units In 2018, the Company issued 6,500,000 Series 1b Preferred Units in exchange for cash of $6,500,000 and net of issuance costs of $40,405. Purchasers of the Series 1b Preferred Units also received 1,268,279 Class B Common Units. The estimated fair value of the Class B Common units has been recorded as a component of members’ equity (deficit) in the accompanying balance sheet as of December 31, 2020 with an offset to the Series 1b proceeds. The Company’s Series 1b Preferred Units were converted to preferred stock during the first quarter of 2021. Additionally, in August 2021, the Company converted all preferred stock into common stock. No Series 1b Preferred Units were outstanding as of September 30, 2021. Series 1c Preferred Units On June 14, 2019, the Company closed participation in a $5,785,000 Series 1c financing from current and new investors. As of December 31, 2019, cash of $5,535,000, including $150,000 from the conversion of a convertible note issued to a Managing Member of the Company for a loan made to the Company, net of issuance costs of $25,857, had been received. The accrued interest on the convertible note in the amount of $1,487 was also converted into Series 1c Preferred Units. The remaining balance of $250,000 committed to the financing was paid in the amounts of $125,000 in May 2020 and $125,000 in June 2020. In June 2019, 5,221,156 Series 1c Preferred Units were issued in connection with the settlement and license agreement, and in July 2021, the Company redeemed these units/shares in connection with an amendment to the settlement and license agreement. See Note 9 - License Agreements for more information. The Company’s Series 1c Preferred Units were converted to preferred stock during the first quarter of 2021. Additionally, in August 2021, the Company converted all preferred stock into common stock. No Series 1c Preferred Units were outstanding as of September 30, 2021. Series 1d Preferred Units In March 2021, the Company issued 686,742 Series 1d Preferred Units at a cost of $0.83 per unit for total proceeds of $570,000. In addition, as described in Note 4 - Subordinated Convertible Promissory Notes, as of March 15, 2021, $4,391,000 of convertible promissory notes, along with related interest of $73,801, were converted into 5,379,247 Series 1d Preferred Units. The outstanding Series 1d Preferred Units were converted to preferred stock during the first quarter of 2021. Additionally, in August 2021, the Company converted all preferred stock into common stock. No Series 1d Preferred Units were outstanding as of September 30, 2021. Class A Common Units During 2014 and 2015, the Company issued 508,777 Class A Common Units in exchange for consideration of $10,430. The Class A Common Units outstanding converted to common stock during the first quarter of 2021. No Class A Common Units were outstanding as of September 30, 2021. Class B Common Units The Company had 1,767,477 Class B Common Units outstanding as of December 31, 2020. This includes 133,953 Class B Common Units issued for consideration of $2,853 and 1,268,279 Class B Common Units issued in connection with the issuance of the Series 1b Preferred Units, which were assigned an estimated fair value of $2,340,000. The remaining 365,245 Class B Common Units were issued as a profits interest as that term is defined by Revenue Procedure 93-27, 1993-2 C.B. 343, as clarified by Revenue Procedure 2001-43, 2001-2 C.B. 191, with participation thresholds from $0.001 to $0.36. During the first quarter 2020, the Company issued 2,439 Class B Common Units, all of which represented a profits interest. During the first quarter of 2021, 22,494 Class B Common Units were forfeited as a result of employee resignations. The remaining Class B Common Units outstanding converted to common stock during the first quarter of 2021. No Class B Common Units were outstanding as of September 30, 2021. Liquidation Preference Prior to the Company’s IPO in August 2021, the Company’s preferred units were subject to liquidation preferences contained herein. So long as there were no Series A Preferred Units outstanding at the time of a liquidity event, any liquidity event proceeds would have been distributed as follows: First, the Series 1d Preferred Units had a two times preference in liquidation over the Series 1c Preferred Units and then participated with the Series 1c, 1b and 1a Preferred Units once the Series 1c Preferred Unit preferences had been satisfied. Second, proceeds to Series 1c Preferred Unit holders sufficient to cover two times their Series 1c investment; third, proceeds to Series 1, Series 1a, Series 1b, Series 1c, and Series 1d Preferred Unit holders sufficient to cover interest at the rate of 8% per annum on the Series 1 Preferred Units, the Series 1a Preferred Units, the Series 1b Preferred Units, the Series 1c Preferred Units, and Series 1d Preferred Units; fourth, proceeds to the Series 1, Series 1a, Series 1b and Series 1c Preferred Unit holders sufficient to cover the unit value of Series 1 Preferred Units, Series 1a Preferred Units, Series 1b Preferred Units, Series 1c Preferred Units, and Series 1d Preferred Units; fifth, to Class A and Class B Common holders proceeds sufficient to cover their pro-rata portion of distributions made to Series 1, Series 1a, Series 1b, Series 1c, and Series 1d Preferred Unit holders, provided that no Class B Common Units would share in any distribution until after the point at which the amount per Class A Common Unit exceeds the amount of such Class B Common Unit’s Participation Threshold; and sixth, a pro-rata distribution of the remaining proceeds to all equity holders. Upon the issuance of Series A Preferred Units, each Series 1 Preferred Unit, each Series 1a Preferred Unit, each Series 1b Preferred Unit, each Series 1c Preferred Unit and each Series 1d Preferred Unit would have automatically converted into the number of Series A Preferred Units equal to the sum of the unit value of the Series 1, Series 1a, Series 1b, Series 1c or Series 1d Preferred Units plus all accumulated preferred return as of the conversion date that would have been due with respect to such Series 1, Series 1a, Series 1b, Series 1c or Series 1d Preferred Units in the case of a liquidity event. As of September 30, 2021, no Series A Preferred Units had been issued, and no preferred stock remained outstanding. Conversion Rights Prior to the Company’s IPO in August 2021, the Company’s preferred units were subject to conversion rights contained herein. Upon the first issuance by the Company of any Series A Preferred Units, each Series 1 Preferred Unit and each Series 1a Preferred Unit and each Series 1b Preferred Unit and each Series 1c Preferred Unit and each Series 1d Preferred Unit would have automatically been converted into the number of Series A Preferred Units equal to the sum of the Unit Value with respect to such Series 1 Preferred Unit or Series 1a Preferred Unit or Series 1b Preferred Unit or Series 1c Preferred Unit or Series 1d Preferred Unit as of the conversion date divided by the product of 0.80 multiplied by the Unit Value of the Series 1 Preferred Units or Series 1a Preferred Units or Series 1b Preferred Units or Series 1c Preferred Units or Series 1d Preferred Unit issued on the conversion date. The Series A Preferred Units issued to the Series 1 Preferred Members and Series 1a Preferred Members and Series 1b Preferred Members and Series 1c Preferred Members and Series 1d Preferred Members upon conversion of such Series 1 Preferred Units and Series 1a Preferred Units and such Series 1b Preferred Units and Series 1c Preferred Units and Series 1d Preferred Units would have had the same rights, privileges and preferences as the other Series A Preferred Units issued by the Company on the conversion date. The Company considered the classification of the Preferred Units and concluded that they were appropriately included as a component of equity since each class of Preferred Units participates in the same form of consideration received upon a change in control. As of September 30, 2021, no preferred units or stock remained outstanding. Stockholders’ Agreements On March 24, 2021, in connection with the conversion of Dermata Therapeutics, LLC into a Delaware corporation, the Company entered into a Stockholders’ Agreement (as amended, the Stockholders’ Agreement) with all of its then-existing stockholders, including Proehl Investment Ventures, LLC and Hale Biopharma Ventures, LLC. The Stockholders’ Agreement among other things, provided for certain restrictions on transfer of the Company’s shares of capital stock, set forth agreements and understandings with respect to how shares of its capital stock held by the stockholders party thereto will have been voted on, or tendered in connection with, an acquisition of the Company and provided for certain voting rights with respect to the election of directors. In addition, pursuant to the Stockholders’ Agreement, holders of the Company’s Series 1a Preferred Stock were entitled to purchase, at any time prior to March 14, 2026, such number of shares of the Company’s Series 1a Preferred Stock as such Series 1a Stockholder shall request, up to an aggregate number of shares of Series 1a Preferred Stock not to exceed the product of 25% and the aggregate number of shares Series 1a Preferred Stock then held by such Series 1a Stockholder (or the Series 1a Preferred Warrant Rights). The shares of Series 1a Preferred Stock purchased pursuant to any Series 1a Preferred Warrant Right had a per share purchase price of $20.50 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination, or other similar recapitalization). Upon the consummation of the Company’s IPO of common stock, each Series 1a Preferred Stock Warrant became exercisable for the same number of shares of Common Stock with the same per share exercise price of $20.50 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination, or other similar recapitalization). The Stockholders’ Agreement would have automatically terminated upon the earliest of (a) immediately prior to the consummation of the Company’s initial public offering of common stock, and (b) the consummation of a sale of the Company, subject to certain conditions. The Company completed the IPO of common stock in August 2021, thereby terminating the Stockholders’ Agreement. On June 29, 2021, with effectiveness on July 1, 2021, the Company’s board of directors amended its Certificate of Incorporation to adjust the conversion price and certain conversion mechanics of the Company’s issued and outstanding Series 1d Preferred Stock, whereby each share of Series 1d Preferred stock would convert into such number of Common Stock as determined by dividing (i) the product of (a) the Original Issue Price for the Series 1d Preferred Stock, multiplied by (b) 1.2, rounded to the nearest whole cent, by (ii) the 80% of the initial public per share offering price in the IPO. The Series 1d conversion shall not be subject to further adjustment for any stock split. On June 29, 2021, with effectiveness on July 1, 2021, the Company’s board of directors approved an amendment to the 2021 Plan to increase the number of shares of Common Stock available for issuances from 593,340 to 1,648,213 shares. On June 29, 2021, the Company’s board of directors approved a 1-for-20.5 reverse split of all outstanding shares of common stock, effected on July 1, 2021 (no fractional shares were issued). Except as otherwise noted, all references to share and per share amounts related to common stock and common units have been restated to reflect the reverse stock split. On July 12, 2021, the Company’s board of directors amended its Certificate of Incorporation to further adjust the conversion price and certain conversion mechanics of the Company’s issued and outstanding Series 1d Preferred Stock. The two amendments to the Series 1d Preferred Stock conversion terms were combined for purposes of accounting for the amendments. In order to determine if these amendments resulted in a modification or extinguishment of the Series 1d Preferred Stock, pursuant to the related authoritative guidance, the Company engaged an independent third-party valuation firm to assist with determining the fair value of the Series 1d Preferred Stock immediately before the change in conversion terms, as well as immediately after the change in conversion terms. This resulted in a substantive increase in fair value, and as such, the Company determined the amendments resulted in extinguishment accounting. Accordingly, the Company applied ASC 260, Earnings per Share, and ASC 470, Debt, by analogy to determine the appropriate measurement and presentation. The Company compared the fair value of the Series 1d Preferred Stock, as amended, to its carrying value and recorded the resulting difference of approximately $2.3 million as a deemed dividend for the Series 1d preferred shareholders. The Company recorded the deemed dividend to additional paid-in capital because the Company is in an accumulated deficit position, thereby increasing the net loss attributable to the common shareholders for the three and nine months ended September 30, 2021. On July 30, 2021, the Company entered into a Second Amendment to the License and Settlement Agreement (or, the Second License Amendment), whereby, for the settlement of certain disputes arising under the License Agreement, the Company agreed to exchange the shares of Series 1c Preferred Stock owned by Villani, Inc. (“Villani”) for an increase of milestone payments and royalty rates due to Villani under the License Agreement. On July 30, 2021, Villani surrendered 5,221,156 shares of Series 1c Preferred Stock to the Company and on August 17, 2021, the Company paid to Villani $1.0 million upon the close of the Company’s initial public offering for the redemption of the Series 1c shares. The Company determined that the deemed dividend to Villani for the Series 1c preferred share redemption was the difference between the $1.0 million paid for the shares and the carrying value of the shares of $730,962, resulting in a deemed dividend of $269,038. This deemed dividend of $269,038 was recorded to additional paid-in capital because the Company is in an accumulated deficit position, thereby increasing the net loss attributable to common shareholders for the three and nine months ended September 30, 2021. On August 14, 2021, the Company’s board of directors approved an amendment to the Company’s Certificate of Incorporation to increase the number of shares of Common Stock authorized to 90,000,000. Warrants Warrants issued at IPO On August 17, 2021, the Company completed its IPO, in which it sold 2,571,428 shares of its common stock together with 2,571,428 warrants to purchase one share of common stock with an exercise price of $7.00 per share at a combined offering price of $7.00. The underwriters exercised their option to purchase an additional 385,714 warrants, increasing the number of warrants issued at IPO to 2,957,142. Each warrant is immediately exercisable at the option of the holder and expires five years from the date of issuance. The Company evaluated the terms of the warrants issued at the IPO and determined that they should be classified as equity instruments based upon accounting guidance provided in ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. Since the Company determined that the warrants were equity classified, the Company recorded the proceeds from the IPO, net of issuance costs, within common stock at par value and the balance of proceeds to additional paid in capital. The fair value of each warrant on August 17, 2021 was $0.9995 based on the closing trading price on that day. As of September 30, 2021, the outstanding warrants are exercisable into 2,957,142 shares of common stock whose fair value was $4.49 per share, based on the closing trading price on that day. As of September 30, 2021, the Company had 2,957,142 warrants outstanding resulting from the IPO with an exercise price of $7.00 and which expire August 17, 2026. Warrants issued with Class B Common Units In March 2021, the Company granted Class B Common Units Profits interests to certain former employees and consultants. In connection with the conversion from an LLC to a C-Corporation, the Company converted 65,303 of vested Units to fully vested Common Stock Warrants with an exercise price of $5.74. These Common Stock Warrants issuances were considered a modification under ASC 718, Stock Compensation, in which the fair value of the Class B Common Units profits interests were measured at the modification date and compared to the fair value of the common stock warrants, with the difference of $279,812 recorded as stock-based compensation expense in the first quarter of 2021. As of September 30, 2021, the Company had 65,303 common warrants outstanding related to the prior Class B Common Units with an exercise price of $5.74 and which expire December 31, 2024. Warrants issued with Series 1a Preferred Units In connection with the issuance of 5,000,000 Series 1a Preferred Units in November 2016, each Series 1a Preferred Member received Warrant Units to purchase from the Company, at any time after November 15, 2016 and on or prior to November 15, 2021, such number of Series 1a Preferred Units as such Series 1a Preferred Member shall request, up to an aggregate number of Series 1a Preferred Units not to exceed the product of 25% and the aggregate number of Series 1a Preferred Units then held by such Series 1a Preferred Member, which was 1,231,250 units at December 31, 2020. The exercise price for each Warrant Unit was $1.00, subject to adjustment for unit splits and combinations. The warrants had a 5-year term. The Company received total proceeds of $5,000,000 for the Series 1a Preferred Units and warrants which were allocated on a relative fair value basis to the Units and warrants resulting in a relative fair value of $4,381,199 and $618,801, respectively. The estimated fair value of the Series 1a Warrant Units was recorded as a separate component of members’ equity (deficit) in the accompanying financial statements as of December 31, 2020. In June 2020, 18,750 of the warrants were exercised for consideration of $18,750, which consideration was received in July 2020. In connection with the Loan and Security Agreement, SVB also received Warrant Units to purchase, at any time after February 9, 2017 and prior to February 9, 2027, 187,978 Series 1a Preferred Units or the equivalent Series A Preferred Units had they purchased Series 1a Preferred Units, if Series A Preferred Units are issued, at an exercise price of $1.00 per unit. On March 24, 2021, in connection with the conversion from an LLC to a C-Corporation, each warrant to purchase Series 1a Preferred Units in the LLC was automatically converted into a warrant to purchase, upon the same terms and conditions, shares of Series 1a Preferred Stock of the Company. In July 2021, the Company effected a reverse split of shares of the Company’s common stock at a ratio of 1-for-20.5, and the conversion ratio of the preferred stock was adjusted accordingly. In August 2021, in connection with the Company’s IPO, the outstanding Series 1a preferred warrants were converted into 69,212 common warrants. As of September 30, 2021, the Company had 69,212 common warrants outstanding related to the prior Series 1a preferred warrants with an exercise price of $20.50 and which expire November 15, 2026. | 7. Equity Securities Series 1 Preferred Units From the Company’s formation on December 8, 2014 through 2016, the Company issued 6,906,244 Series 1 Preferred Units for net consideration of $6,833,877. Series 1a Preferred Units In 2016, the Company issued 5,000,000 Series 1a Preferred Units in exchange for cash of $5,000,000 and net of issuance costs of $19,868. Purchasers of the Series 1a Preferred Units also received 1,250,000 Warrant Units to purchase an additional amount of Series 1a Preferred Units (see Note 8 - Series 1a Warrants Outstanding). The estimated fair value of the warrant units has been recorded as a separate component of members’ equity (deficit) in the accompanying balance sheet with an offset to the Series 1a proceeds. Series 1b Preferred Units In 2018, the Company issued 6,500,000 Series 1b Preferred Units in exchange for cash of $6,500,000 and net of issuance costs of $40,405. Purchasers of the Series 1b Preferred Units also received 26,000,000 Class B Common Units, not representing a profits interest. The estimated fair value of the Class B Common units has been recorded as a component of members’ equity (deficit) in the accompanying balance sheet with an offset to the Series 1b proceeds. Series 1c Preferred Units On June 14, 2019, the Company closed participation in a $5,785,000 Series 1c financing from current and new investors. As of December 31, 2019, cash of $5,535,000, including $150,000 from the conversion of a convertible note issued to a Managing Member of the Company for a loan made to the Company, net of issuance costs of $25,857 had been received. The interest on the convertible note in the amount of $1,487 was also converted into Series 1c Preferred units. The remaining balance of $250,000 committed to the financing was paid in 2020. In addition, in June 2019 5,221,156 Series 1c Preferred units were issued in connection with the settlement and license agreement described in Note 11 - Commitments and Contingencies. Class A Common Units During 2014 and 2015, the Company issued, in exchange for consideration of $10,430, 508,777 Class A Common Units. Class B Common Units The Company has 1,767,477 Class B Common Units outstanding at December 31, 2020. This includes 133,953 Class B Common Units issued for consideration of $2,853 and 1,268,279 Class B Common Units issued in connection with the issuance of the Series 1b Preferred Units, which were assigned an estimated fair value of $2,340,000. The remaining 365,245 Class B Common Units were issued as a profits interest as that term is defined by Revenue Procedure 93-27, 1993-2 C.B. 343, as clarified by Revenue Procedure 2001-43, 2001-2 C.B. 191, with participation thresholds from $0.001 to $0.36. For performance-based awards, if and when the achievement of the predetermined performance criteria become probable, expense will be recognized. To date stock based compensation expense has not been material. Such units may be issued as vested units or unvested units. Those units designated as Unvested Units were issued with vesting occurring over periods ranging from six to forty-eight months from the date of the award. During 2019 and 2020, the Company issued 161,142 and 5,569 Class B Common Units, respectively, all of which represented a profits interest. There were 230,691 and 134,331 unvested units at December 31, 2019 and 2020, respectively. Liquidation Preference So long as there are no Series A Preferred Units outstanding at the time of a liquidity event, any liquidity event proceeds will be distributed as follows: first, proceeds to Series 1c Preferred Unit holders sufficient to cover two times their Series 1c investment; second, proceeds to Series 1, Series 1a, Series 1b and Series 1c Preferred Unit holders sufficient to cover interest at the rate of 8% per annum on the Series 1 Preferred Units, the Series 1a Preferred Units, the Series 1b Preferred Units and the Series 1c Preferred Units; third, proceeds to the Series 1, Series 1a, Series 1b and Series 1c Preferred Unit holders sufficient to cover the unit value of Series 1 Preferred Units, Series 1a Preferred Units, Series 1b Preferred Units and Series 1c Preferred Units; fourth, to Class A and Class B Common holders proceeds sufficient to cover their pro-rata portion of distributions made to Series 1, Series 1a, Series 1b and Series 1c Preferred Unit holders, provided that no Class B Common Units will share in any distribution until after the point at which the amount per Class A Common Unit exceeds the amount of such Class B Common Unit’s Participation Threshold; and fifth, a pro-rata distribution of the remaining proceeds to all equity holders. Upon the issuance of Series A Preferred Units, each Series 1 Preferred Unit, each Series 1a Preferred Unit, each Series 1b Preferred Unit and each Series 1c Preferred Unit will automatically convert into the number of Series A Preferred Units equal to the sum of the unit value of the Series 1, Series 1a, Series 1b or Series 1c Preferred Units plus all accumulated preferred return as of the conversion date that would be due with respect to such Series 1, Series 1a, Series 1b or Series 1c Preferred Units in the case of a liquidity event. As of December 31, 2020, no Series A Preferred Units have been issued. Conversion Rights Upon the first issuance by the Company of any Series A Preferred Units, each Series 1 Preferred Unit and each Series 1a Preferred Unit and each Series 1b Preferred Unit and each Series 1c Preferred Unit shall automatically be converted into the number of Series A Preferred Units equal to the sum of the Unit Value with respect to such Series 1 Preferred Unit or Series 1a Preferred Unit or Series 1b Preferred Unit or Series 1c Preferred Unit as of the conversion date divided by the product of 0.80 multiplied by the Unit Value of the Series 1 Preferred Units or Series 1a Preferred Units or Series 1b Preferred Units or Series 1c Preferred Units issued on the conversion date. The Series A Preferred Units issued to the Series 1 Preferred Members and Series 1a Preferred Members and Series 1b Preferred Members and Series 1c Preferred Members upon conversion of such Series 1 Preferred Units and Series 1a Preferred Units and such Series 1b Preferred Units and Series 1c Preferred Units shall have the same rights, privileges and preferences as the other Series A Preferred Units issued by the Company on the conversion date. The Company considered the classification of the Preferred Units and concluded that they were appropriately included as a component of equity since each class of Preferred Units participates in the same form of consideration received upon a change in control. |
Equity Incentive Plan
Equity Incentive Plan | 9 Months Ended |
Sep. 30, 2021 | |
Equity Incentive Plan | |
7. Equity Incentive Plan | 7. Equity Incentive Plan Under the Company’s 2021 Omnibus Equity Incentive Plan (the “2021 Plan”), the Company may grant options to purchase common stock, restricted stock awards, performance stock awards, incentive bonus awards, other cash-based awards or directly issue shares of common stock to employees, directors, and consultants of the Company. The 2021 Plan provides for the issuance of up to 1,648,213 shares, all of which may, but need not, be issued in respect of Incentive Stock Options. Options may be granted at an exercise price per share of not less than 100% of the fair market value at the date of grant. Stock awards granted are exercisable over a maximum term of 10 years from the date of grant and generally vest over a period of four years for employees and one year for directors of the Company’s board and consultants. As of September 30, 2021, there remain an additional 1,125,014 shares reserved for issuance under the 2021 Plan. Stock Award Activity A summary of the Company’s Equity Plans stock option activity is as follows: Number of Options Outstanding Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in Years) Balance at December 31, 2020 - $ - - Options granted 523,199 5.84 9.0 Options exercised - - - Options cancelled - - - Balance at September 30, 2021 523,199 $ 5.84 9.0 Options exercisable at September 30, 2021 233,686 $ 5.80 9.3 The aggregate intrinsic value of options exercisable as of September 30, 2021 is calculated as the difference between the exercise price of the underlying options and the closing market price of the Company’s common stock on that date, which was $4.49 per share. The intrinsic value of options outstanding and exercisable as of September 30, 2021 was zero due to the underlying options exercise price above market value. Fair Value Measurement The Company uses the Black-Scholes option valuation model, which requires the use of highly subjective assumptions, to determine the fair value of stock-based awards. The fair value of each employee stock option is estimated on the grant date under the fair value method using the Black-Scholes model. The estimated fair value of each stock option is then expensed over the requisite service period, which is generally the vesting period. The assumptions and estimates that the Company uses in the Black-Scholes model are as follows: · Fair Value of Common Stock. The estimated fair value of the common stock underlying the Company’s stock option plan was determined by management by considering various factors as discussed below. All options to purchase shares of the Company’s common stock are intended to be exercisable at a price per share not less than the per-share fair value of the Company’s common stock underlying those options on the date of grant. In the absence of a public trading market for the Company’s common stock, before the initial public offering, on each grant date, the Company developed an estimate of the fair value of its common stock based on the information known to the Company on the date of grant, upon a review of any recent events and their potential impact on the estimated fair value per share of the common stock and in part on input from an independent third-party valuation firm. After the Company’s initial public offering, the fair value of common stock is measured as the Company’s closing price of common stock on the date of grant. · Risk-Free Interest Rate. The Company bases the risk-free interest rate used in the Black-Scholes valuation model on the implied yield available on U.S. Treasury zero-coupon issues with a term equivalent to that of the expected term of the options. · Expected Term. The expected term represents the period that the Company’s stock-based awards are expected to be outstanding. Because of the limitations on the sale or transfer of the Company’s common stock as a privately held company, the Company does not believe its historical exercise pattern is indicative of the pattern it will experience as a publicly traded company. The Company plans to continue to use the SAB 110 simplified method until it has sufficient trading history as a publicly traded company. · Volatility. The Company determines the price volatility based on the historical volatilities of industry peers as it has limited trading history for its common stock price. Industry peers consist of several public companies in the biotechnology industry with comparable characteristics, including clinical trials progress and therapeutic indications. · Dividend Yield. The expected dividend assumption is based on the Company’s current expectations about its anticipated dividend policy. To date, the Company has not declared any dividends to common shareholders, and therefore the Company has used an expected dividend yield of zero. The following table presents the weighted-average assumptions used for the stock option grants for the three and nine months ended September 30, 2021: Three Months Ended 2021 Nine Months Ended September 30, 2021 Grant date fair value $ 4.54 $ 4.87 Risk-free interest rate 0.98 % 0.92 % Dividend yield 0.00 % 0.00 % Expected life in years 5.8 5.7 Expected volatility 125 % 122 % Stock-based Compensation Expense In general, stock-based compensation is allocated to research and development expense or general and administrative expense according to the classification of cash compensation paid to the employee, director, or consultant to whom the stock award was granted. On March 24, 2021, in connection with the conversion from an LLC to a C-Corporation, the Company converted 277,448 of Class B Common Units profits interests, for which no consideration had been received, into 277,448 options to purchase common stock at an exercise price of $5.74 to $6.314 per share. The fair value of common stock prior to IPO was determined in part based upon input from an independent third-party valuation firm. The Company considered the conversion of these Class B Common Units profits interests as a modification under ASC 718, Stock Compensation, in which the fair value of the Class B Common Units profits interests was measured at the modification date and compared to the fair value of the common stock options, with the difference of $1,339,993 resulting in incremental stock-based compensation expense recorded in the first quarter of 2021. The following table summarizes the total stock-based compensation expense included in the Company’s statements of operations for the periods presented: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Research and development $ 30,075 $ - $ 310,046 $ - General and administrative 112,580 - 1,106,645 - $ 142,655 $ - $ 1,416,691 $ - As of September 30, 2021, total unrecognized compensation cost related to stock options was approximately $1.4 million and the weighted average period over which this cost is expected to be recognized is 2.9 years. |
Series 1a Warrants Outstanding
Series 1a Warrants Outstanding | 12 Months Ended |
Dec. 31, 2020 | |
Subordinated Convertible Promissory Notes | |
8. Series 1a Warrants Outstanding | 8. Series 1a Warrants Outstanding In connection with the issuance of 5,000,000 Series 1a Preferred Units in November, 2016, each Series 1a Preferred Member received Warrant Units to purchase from the Company, at any time after November 15, 2016 and on or prior to November 15, 2021, such number of Series 1a Preferred Units as such Series 1a Preferred Member shall request, up to an aggregate number of Series 1a Preferred Units not to exceed the product of 25% and the aggregate number of Series 1a Preferred Units then held by such Series 1a Preferred Member, which is 1,231,250 units at December 31, 2020. The exercise price for each Warrant Unit is $1.00, subject to adjustment for unit splits and combinations. The warrant has a 5-year term. The Company received total proceeds of $5,000,000 for the Series 1a Preferred Units and warrants which were allocated on a relative fair value basis to the Units and warrants resulting in a relative fair value of $4,381,199 and $618,801, respectively. The estimated fair value of the Series 1a Warrant Units is recorded as a separate component of members’ equity (deficit) in the accompanying financial statements. In 2020, 18,750 of the warrants were exercised for consideration of $18,750. In connection with the Loan and Security Agreement, SVB also received Warrant Units to purchase, at any time after February 9, 2017 and prior to February 9, 2027, 187,978 Series 1a Preferred Units or the equivalent Series A Preferred Units had they purchased Series 1a Preferred Units, if Series A Preferred Units are issued, at an exercise price of $1.00 per unit. The estimated fair value of $104,630 of the Series 1a Warrant Units is recorded as a separate component of members’ equity (deficit) in the accompanying financial statements. |
401(k) Plan
401(k) Plan | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
401(k) Plan | ||
10. 401(k) Plan | 8. 401(k) Plan The Company sponsors a 401(k) savings plan for all eligible employees. The Company may make discretionary matching contributions to the plan to be allocated to employee accounts based upon employee deferrals and compensation. To date, the Company has not made any matching contributions into the savings plan. | 9. 401(k) Plan The Company sponsors a 401(k) savings plan for all eligible employees. The Company may make discretionary matching contributions to the plan to be allocated to employee accounts based upon employee deferrals and compensation. To date, the Company has not made any matching contributions into the savings plan. |
License Agreements
License Agreements | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
11. License Agreements | 9. License Agreements On March 31, 2017, the Company entered into a license agreement, as amended (“The License Agreement”) with Villani, Inc. whereby Villani has granted the Company an exclusive, sub-licensable, royalty-bearing license (“The License”) under the Licensed Patents (as defined in the License Agreement), to formulate, develop, seek regulatory approval for, make or sell products that contain Spongilla lacustris (alone or in combination with other active or inactive ingredients) for the treatment of diseases, disorders and conditions of the skin, including but not limited to acne, rosacea, psoriasis, atopic dermatitis, seborrheic dermatitis, actinic keratosis and eczema that were developed using certain licensed know-how (“Licensed Products”). The Company is responsible for the development (including manufacturing, packaging, non-clinical studies, clinical trials and obtaining regulatory approval and commercialization (including marketing, promotion, distribution, etc.)) for all Licensed Products. In partial consideration of the License, the Company forgave a previous outstanding loan to Villani in the amount of $400,000. The original License Agreement was amended in 2019 and, in consideration of the receipt of certain know-how and patents, the Company issued to Villani 5,221,156 Series 1c Preferred Units equal to 5% of the Company’s fully diluted capitalization, valued at $730,962. Pursuant to the amended License Agreement, the Company was required to make future milestone payments to Villani in an aggregate amount of up to $20.25 million upon the achievement of specified development and sales milestones, payable in cash or in equity, at the option of Villani, as well as single-digit royalty payments on net sales. On July 30, 2021, the Company further amended the license agreement with Villani in the Second Amendment to the License and Settlement Agreement (“Second Amendment”). In consideration of the Second Amendment, Villani exchanged the 5,221,156 Series 1c Preferred Shares issued to Villani in 2019 for an increase in milestones and royalty rates and the Company paid Villani $1 million after the close of the IPO. Pursuant to the Second Amendment, the Company is required to make future milestone payments to Villani in an aggregate amount of up to $40.5 million upon the achievement of specified development and sales milestones, payable in cash or in equity, at the option of Villani, as well as single-digit royalty payments on net sales. The Second Amendment includes customary terms relating to, among others, indemnification, intellectual property protection, confidentiality, remedies, and warranties. See Note 6 - Equity Securities for additional information regarding the Company’s redemption of the Series 1c Preferred Shares from Villani. | 10. License Agreements On March 31, 2017, the Company entered into a license agreement, as amended (“The License Agreement”) with Villani, Inc. (“Villani”) whereby Villani has granted the Company an exclusive, sub-licensable, royalty-bearing license (“The License”) under the Licensed Patents (as defined in the License Agreement), to formulate, develop, seek regulatory approval for, make or sell products that contain Spongilla lacustris In partial consideration of the License, the Company forgave a previous outstanding loan to Villani in the amount of $400,000. The License was amended in 2019 and, in consideration of the receipt of certain know-how and patents, the Company issued to Villani 5,221,156 Series 1c Preferred Units equal to 5% of the Company’s fully diluted capitalization, valued at $730,962. Pursuant to the License Agreement, the Company is required to make future milestone payments to Villani in an aggregate amount of up to $20.25 million upon the achievement of specified development and sales milestones, payable in cash or in equity, at the option of Villani. If the Company sublicenses the License, the Company is obligated to pay to Villani a sublicense fee of between 5% and 15% of Sublicense revenues (as defined in the License Agreement) received by the Company. Pursuant to the License Agreement, the Company is required to make royalty payments to Villani in amounts equal to a single-digit percentage of net sales of Licensed Products and HMW Combination Products (as defined in the License Agreement), subject to certain adjustments as set forth in the License Agreement. Royalties shall be payable, on a country-by-country and Licensed Product-by Licensed Product basis, for the period of time from the effective date of the License Agreement until the later of (i) the expiration of the last to expire valid claim in such country (which is set to expire in 2023), (ii) the expiration of regulatory exclusivity for such Licensed Product in such country, and (iii) 15 years from the date of the first commercial sale of the Licensed Product in such country. The License Agreement may be terminated (i) by either party for material breach with 90 days written notice, or 30 days’ notice if for material payment breach, if such material breach is not cured within such notice period, (ii) immediately upon written notice to either party if either party initiates a voluntary bankruptcy proceeding, dissolves or winds-up its business, (iii) immediately upon written notice to either party if either party becomes subject to involuntary bankruptcy proceedings, if such proceedings are not dismissed or stayed within 90 days. The License agreement includes customary terms relating to, among others, indemnification, intellectual property protection, confidentiality, remedies and warranties. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Commitments and Contingencies | ||
12. Commitments and Contingencies | 10. Commitments and Contingencies Coronavirus Pandemic On March 11, 2020, the World Health Organization declared the outbreak of a coronavirus (COVID-19) pandemic. Significant uncertainties may arise with respect to potential shutdowns of operations or government orders to cease activities due to emergency declarations, inability to operate, employee shortages, or claims for business interruption insurance, etc. Each of these matters may have a significant impact on the future results of the Company. Legal Proceedings In the normal course of business, the Company may be involved in legal proceedings or threatened legal proceedings. The Company is not a party to any legal proceedings or aware of any threatened legal proceedings which are expected to have a material adverse effect on its financial condition, results of operations or liquidity. | 11. Commitments and Contingencies Employee Bonuses In December 2016, the Company approved employee bonuses in the amount of $305,200 contingent on the closing of a one-time financing transaction in excess of $20 million. The amount was not accrued since the closing of such a financing was not probable as of December 31, 2019 or December 31, 2020. Such amount is not subject to a formal bonus plan agreement and no time limitation was ascribed to the closing of a one-time financing transaction. The Company anticipates that employees who were employed at December 31, 2016 would still need to be employed at the time of such a one-time financing transaction in order to qualify for the bonus and that the bonus, if earned, would be settled by the payment of cash. Coronavirus Pandemic On March 11, 2020, the World health Organization declared the outbreak of a coronavirus (COVID-19) pandemic. Significant uncertainties may arise with respect to potential shutdowns of operations or government orders to cease activities due to emergency declarations, inability to operate, or employee shortages, claims for business interruption insurance, etc. Each of these matters may have a significant impact on the future results of the Company. Legal Proceedings In 2018, the Company and Villani were involved in a dispute with respect to the payment of certain milestones, as defined in The License Agreement. On June 4, 2019, the Company entered into a License Amendment and Settlement Agreement with Villani, also a related party, regarding Villani’s claim for a license agreement milestone payment of $250,000. That payment, and related interest, was accrued as of December 31, 2018 and payment was made in June 2019. The License Amendment and Settlement Agreement also required a milestone payment of $500,000, and accrued interest from June 20, 2020, to be made on or before October 1, 2020. The milestone payment was accrued as of December 31, 2018 and was paid, along with accrued interest from June 20, 2020, in September 2020. These amounts were accrued as of December 31, 2018 as the settlement occurred prior to the Company issuing its December 31, 2018 financial statements. The License Amendment and Settlement Agreement also modified The License Agreement entered into in 2017 as described above in Note 10. In the normal course of business, the Company may be involved in legal proceedings or threatened legal proceedings. The Company is not a party to any legal proceedings or aware of any threatened legal proceedings which are expected to have a material adverse effect on its financial condition, results of operations or liquidity. |
Related Parties
Related Parties | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Related Parties | ||
13. Related Parties | 11. Related Parties Prior to the Company converting from an LLC to a C corporation in March 2021, the Company had two Managing Members. One of the Managing Members remained the Company’s majority stockholder upon the close of the Company’s IPO and serves as the Company’s President, Chief Executive Officer, and Chairman of the Board of Directors. The other Managing Member remained a beneficial owner upon the close of the Company’s IPO and serves as the Company’s Lead Director of the Board of Directors. Hereinafter these two Managing Members, and their affiliates, are referred to collectively as the Principal Stockholders after the completion of the IPO. During 2020, the Managing Members and other related parties loaned the Company $1,145,000 as subordinated convertible promissory notes. Additionally, during the first quarter of 2021, the Managing Members and other related parties loaned the Company $1,255,000 as subordinated convertible promissory notes. Refer to Note 4 - Subordinated Convertible Promissory Notes for further discussion. During the third quarter of 2021, the Company amended the conversion terms of its Series 1d preferred stock, as described in Note 6 - Equity Securities. As a result of the Series 1d preferred stock amendments, the Company presented a deemed dividend of approximately $2.3 million during the three and nine months ended September 30, 2021, approximately $1.2 million of which related to Series 1d preferred shares owned by the Company’s Principal Stockholders and their affiliates. | 12. Related Parties During 2019, a Managing Member of the Company loaned the Company through a convertible note $150,000. This convertible note, and accrued interest thereon, was then converted into Series 1c Preferred units in conjunction with the Series 1c Preferred Unit financing described in Note 7 - Equity Securities. The Chief Executive Officer of the licensor with whom the Company entered into the settlement and license agreement on June 4, 2019 is a holder of Class B Common units. During 2020, the Managing Members and other related parties to the Company loaned the Company $1,145,000 of subordinated convertible promissory notes as described in Note 5 - Subordinated Convertible Promissory Notes. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2020 | |
Subsequent Events | |
13. Subsequent Events | 13. Subsequent Events In January and February, 2021, the Company paid the final principal payments of $231,482 under the SVB Loan and Security Agreement. The Company also paid the final payment fee of $225,000 in February 2021 and the amendment fee of $100,000 in March 2021. On January 27, 2021, the Company amended the terms of The Notes to increase the maximum amount of convertible promissory notes to be issued from $3,000,000 to $5,000,000, to allow for the conversion of the convertible promissory notes into shares of common stock upon a Qualified Initial Public Offering with aggregate gross proceeds to the Company of at least $10,000,000 and to extend the maturity date to December 31, 2021. In connection with this amendment, the Company received proceeds from the issuance of new convertible promissory notes of $1,566,000 from the Managing Members of the Company and other investors. On March 15, 2021, the Company amended its LLC Agreement to provide for Series 1d Preferred Units at a cost of $0.83 per unit. So long as there are no Series A Preferred Units outstanding, the Series 1d Preferred Units have a two times preference in liquidation over the Series 1c Preferred Units and then participate with the Series 1c, 1b and 1a Preferred Units once the Series 1c Preferred Unit preferences have been satisfied. In March 2021, the Company received proceeds of $570,000 in exchange for the issuance of 686,742 Series 1d Preferred Units. In addition, the Company further amended the terms of The Notes to allow for the conversion of The Notes into Series 1d Preferred Units. As of March 15, 2021, $4,391,000 of The Notes, along with related interest of $73,801, have been so converted in exchange for 5,379,247 Series 1d Preferred Units. On March 24, 2021, the Company entered into a Plan of Conversion (“Conversion”) whereby the Company converted from a limited liability company (LLC) under the laws of the State of Delaware to a Delaware corporation with the name Dermata Therapeutics, Inc. In connection with the Conversion, each fully-paid Preferred and Common Unit in the LLC was converted into a like number of shares of Preferred and Common Stock of the Company with a par value $0.0001 per share. The Shares issued shall have the same rights, preferences and privileges that had accrued to the pre-converted Units. In addition, each warrant to purchase Series 1a Preferred Units in the LLC were automatically converted into a warrant to purchase, upon the same terms and conditions, shares of Series 1a Preferred Stock of the Company and any subordinated convertible promissory notes outstanding at the time of Conversion were automatically converted into a subordinated convertible promissory note of the Company with the same terms and conditions, provided that any right to convert the subordinated convertible promissory note into membership interests of the LLC shall, instead, be a right to convert into equivalent shares of capital stock of the Company. Class B Common Units that were considered a profits interest were converted into Common Stock Options or warrants. On March 24, 2021, in connection with our conversion from a limited liability company to a Delaware corporation, we issued common stock options exercisable for an aggregate of 398,199 shares of our common stock. These options have an exercise price of $5.74 per share. In April 2021, the Board of Directors cancelled the employee bonuses (See Note 11). On June 29, 2021, the Company’s board of directors amended its Certificate of Incorporation to adjust the conversion price and certain conversion mechanics of the Company’s issued and outstanding Series 1d Preferred Stock, whereby each share of Series 1d Preferred stock will convert into such number of Common Stock as determined by dividing (i) the product of (a) the Original Issue Price for the Series 1d Preferred Stock, multiplied by (b) 1.2, rounded to the nearest whole cent, by (ii) the 80% of the initial public per share offering price in the IPO. The Series 1d conversion shall not be subject to further adjustment for any stock split. On June 29, 2021, the Company’s board of directors approved an amendment to the 2021 Plan to increase the number of shares of Common Stock available for issuances from 593,340 to 1,648,199 shares. On June 29, 2021, the Company’s board of directors approved a 1-for-20.5 reverse split of all outstanding shares of common stock, effected on July 1, 2021 (no fractional shares were issued). Except as otherwise noted, all references to share and per share amounts related to common stock and common units have been restated to reflect the reverse stock split. On July 8, 2021, the Company’s board of directors amended its Certificate of Incorporation to adjust the conversion price and certain conversion mechanics of the Company’s issued and outstanding Series 1d Preferred Stock, whereby each share of Series 1d Preferred Stock is convertible into such number of fully paid and nonassessable shares of Common Stock as is determined by multiplying the Adjusted As Converted Number (as defined below) by the Series 1d IPO Conversion Ratio (as defined below) (the “ Series 1d IPO Conversion Number (a) The “ Adjusted Conversion Price (b) The “ Adjusted Conversion Ratio (c) The “ Adjusted As Converted Number (d) The “ IPO Discount Ratio (e) The “ Series 1d IPO Conversion Ratio The Company has completed an evaluation of all subsequent events through July 9, 2021, which is the date the financial statements were available to be issued. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Summary of Significant Accounting Policies | ||
Basis of Presentation | The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as found in the Accounting Standards Codification (“ASC”), the Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). | |
Reverse Stock Split | On July 1, 2021, the Company effected a reverse split of shares of the Company’s common stock at a ratio of 1-for-20.5 pursuant to an amendment to the amended and restated certificate of incorporation approved by the Company’s board of directors and stockholders. The par value was not adjusted as a result of the reverse split. All issued and outstanding common stock share and per share amounts contained in the financial statements have been retroactively adjusted to reflect this reverse split for all periods presented, and the conversion ratio of the preferred stock was adjusted accordingly. | |
Use of Estimates | The Company’s financial statements are prepared in accordance with GAAP. The preparation of the Company’s financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, and expenses and disclosure of contingent assets and liabilities in the financial statements and accompanying notes. On an ongoing basis, management evaluates these estimates and judgments, including those related to accrued research and development expenses, stock-based compensation, and the estimated fair values of equity instruments. Management evaluates its estimates on an ongoing basis. The Company bases its estimates on various assumptions that it believes are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. | The preparation of financial statements 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. On an ongoing basis, management evaluates these estimates and judgments, including those related to useful lives of long-lived assets, accrued research and development expenses and estimated fair values of equity instruments. The Company bases its estimates on various assumptions that it believes are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. |
Segment Information | Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company and the Company’s chief operating decision maker view the Company’s operations and manage its business in one operating segment, which is the business of developing and commercializing pharmaceuticals. The Company operates in only one segment. | Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company and the Company’s chief operating decision maker view the Company’s operations and manage its business in one operating segment, which is the business of developing and commercializing pharmaceuticals. The Company operates in only one segment. |
Cash | The Company deposits its cash with reputable financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”). This cash is held in checking and savings accounts. At times, deposits held may exceed the amount of insurance provided by the FDIC. The Company has not experienced any losses in its cash and believes they are not exposed to any significant credit risk. | The Company places its cash with reputable financial institutions that are insured by the Federal Deposit Insurance Corporation, or FDIC. At times, deposits held may exceed the amount of insurance provided by the FDIC. The Company has not experienced any losses in its cash and believes they are not exposed to any significant credit risk. |
Fair Value Measurement | The Company uses a three-tier fair value hierarchy to prioritize the inputs used in the Company’s fair value measurements. These tiers include Level 1, defined as observable inputs such as quoted prices in active markets for identical assets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company believes the carrying amount of cash, accounts payable, accrued expenses and debt approximate their estimated fair values due to the short-term maturities of these financial instruments. | The Company uses a three-tier fair value hierarchy to prioritize the inputs used in the Company’s fair value measurements. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company believes the carrying amount of cash, accounts payable, accrued expenses and debt approximate their estimated fair values due to the short-term maturities of these financial instruments. |
Fixed Assets | Fixed assets consist of furniture and fixtures and computer equipment. Fixed assets are stated at cost less accumulated depreciation and amortization. Additions, improvements, and major renewals are capitalized. Maintenance, repairs, and minor renewals are expensed as incurred. Depreciation is determined using the straight-line method over the estimated useful lives of the assets, which is primarily three years. Depreciation and amortization expense for the nine months ended September 30, 2021 and 2020 were $0 and $322, respectively. | Fixed assets consist of furniture and fixtures and computer equipment. Fixed assets are stated at cost less accumulated depreciation and amortization. Additions, improvements, and major renewals are capitalized. Maintenance, repairs, and minor renewals are expensed as incurred. Depreciation is determined using the straight-line method over the estimated useful lives of the assets, which is primarily three years. Depreciation and amortization expense for the years ended December 31, 2019 and 2020 was $1,355 and $322, respectively |
Patent Costs | Patent costs related to obtaining and maintaining patent protection in both the United States and other countries are expensed as incurred. Patents costs are classified as general and administrative expenses. | Patent costs related to obtaining and maintaining patent protection in both the United States and other countries are expensed as incurred. The amounts expensed in the years ended December 31, 2019 and 2020 were $74,920 and $32,411, respectively. |
Research and Development | Research and development costs consist of expenses incurred in connection with the development of the Company’s product candidates. Such expenses include expenses incurred under agreements with contract research organizations, manufacturing and supply scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial supply, outsourced laboratory services, including materials and supplies used to support the Company’s research and development activities, and payments made for license fees and milestones that have not been demonstrated to have commercial value. Such costs are expensed in the periods in which they are incurred. Upfront payments and milestone payments for licensed technology are expensed as research and development as incurred or when the milestone is achieved or is determined to be probable of being achieved. Advanced payments for goods or services to be received in the future for research and development activities are recorded as prepaid expenses and expensed as the related goods are received or services are performed. | Research and development costs consist of expenses incurred in connection with the development of the Company’s product candidates. Such expenses include expenses incurred under agreements with contract research organizations, manufacturing and supply scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial supply, outsourced laboratory services, including materials and supplies used to support the Company’s research and development activities, and payments made for license fees and milestones that have not been demonstrated to have commercial value. Such expenses are expensed as incurred. The amounts expensed in the years ended December 31, 2019 and 2020 were $2,623,280 and $1,607,819, respectively. |
Income Taxes | From inception until March 24, 2021, the Company operated as a limited liability company taxed as a partnership. Therefore, any income tax liability or benefit through that date accrued to the Company’s members. Since March 24, 2021, the Company has operated as a C-Corporation and accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence. The Company records the difference between the benefit recognized and measured pursuant to the accounting guidance on accounting for uncertain tax positions taken or expected to be taken on the Company’s tax return. The Company records uncertain tax positions on the basis of a two-step process whereby (1) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. The liabilities are adjusted in light of changing facts and circumstances, such as the outcome of tax audits. To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. There are no uncertain tax positions. | Through March 24, 2021, the Company operated as a limited liability company taxed as a partnership. Therefore, any income tax liability or benefit through that date accrued to the members. |
Net Loss Per Common Unit/Share | On March 24, 2021, the Company converted from an LLC to a C-corporation. Upon the conversion, each outstanding common unit and preferred unit was converted into one share of common stock and preferred stock, respectively. Common units had similar rights and characteristics of common stock issued upon the conversion. In calculating net loss per share, the Company retrospectively applied the effects of the conversion to the number of common units outstanding prior to the conversion. Net loss per share for periods prior to the conversion to a C-corporation refers to net loss per common unit. Basic net loss per unit/share is calculated by dividing net loss attributable to common unitholders or shareholders by the weighted-average number of units or shares outstanding during the period, without consideration of common unit or share equivalents. Diluted net loss per unit or share is calculated by adjusting weighted-average shares outstanding for the dilutive effect of common unit or share equivalents outstanding for the period. For purposes of the diluted net loss per unit or share calculation, preferred units or shares, profit interests, and warrants to purchase preferred units or shares are considered to be common unit or share equivalents but are excluded from the calculation of diluted net loss per common unit or share if their effect would be anti-dilutive. As the Company has reported a net loss for the periods presented, diluted net loss per common unit or share is the same as the basic net loss per common unit or share for the periods presented. Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net loss $ (1,712,920 ) $ (597,395 ) $ (5,349,621 ) $ (2,840,217 ) Deemed dividend upon redemption of 5,221,156 shares of Series 1c convertible preferred stock $ 269,038 $ - $ 269,038 $ - Deemed dividend upon amendment of the terms to the Series 1d convertible preferred stock $ 2,293,199 $ - $ 2,293,199 $ - Net loss attributable to common stockholders $ (4,275,157 ) $ (597,395 ) $ (7,911,858 ) $ (2,840,217 ) Basic and diluted net loss per common unit/share $ (0.86 ) $ (0.31 ) $ (2.69 ) $ (1.49 ) Weighted-average basic and diluted common units/shares 4,980,306 1,911,009 2,945,351 1,911,009 The common unit or share equivalents that are not included in the calculation of diluted net loss per common unit or share but could potentially dilute basic earnings per share in the future are as follows: As of September 30, 2021 September 30, 2020 Series 1 Preferred Units/Shares - 336,882 Series 1a Preferred Units/Shares - 244,811 Series 1a Preferred Warrant - 69,212 Series 1b Preferred Units/Shares - 317,058 Series 1c Preferred Units/Shares - 2,270,866 Series 1d Preferred Units/Shares - - Class B Common Units Profits Interests - 365,245 Common Stock Options 523,199 - Common Stock Warrants 3,091,657 - Total potentially dilutive securities 3,614,856 3,604,074 | Basic net loss per unit is calculated by dividing net loss attributable to common unitholders by the weighted-average units outstanding during the period, without consideration of common unit equivalents. Diluted net loss per unit is calculated by adjusting weighted-average shares outstanding for the dilutive effect of common unit equivalents outstanding for the period. For purposes of the diluted net loss per unit calculation, preferred units, profit interests, and warrants to purchase preferred units are considered to be common unit equivalents but are excluded from the calculation of diluted net loss per common unit if their effect would be anti-dilutive. The common unit equivalents that are not included in the calculation of diluted net loss per common unit but could potentially dilute basic earnings per share in the future are as follows: December 31, 2019 2020 Numerator: Net loss $ (4,721,356 ) $ (3,236,530 ) Denominator: Weighted-average basic and diluted common units 1,911,009 1,911,009 Basic and diluted net loss per common unit $ (2.47 ) $ (1.69 ) December 31, 2019 2020 Series 1 Preferred 1 Preferred Units 336,882 336,882 Series 1a Preferred Units 243,897 244,811 Series 1a Preferred Warrant Units 70,126 69,212 Series 1b Preferred Units 317,058 317,058 Series 1c Preferred Units 2,183,758 2,270,866 Class B Common Units Profits Interests 359,676 365,245 Total potentially dilutive securities 3,511,397 3,604,074 |
Recently Adopted Accounting Pronouncements | In December 2019, the Financial Accounting Standards Board (“FASB”) issued Account Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. ASU 2019-12 also improves the consistent application, and the simplification, of other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Adoption of this new guidance on January 1, 2021 did not have an impact on the Company’s financial position and results of operations. In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in an Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, ASU 2020-06 modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share computation. The amendments in ASU 2020-06 are effective for smaller reporting companies as defined by the U.S. Securities and Exchange Commission (“SEC”) for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but not earlier than fiscal years beginning after December 15, 2020. Adoption of this new guidance on January 1, 2021 did not have an impact on the Company’s financial position and results of operations. | In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASC 842”), which supersedes all existing lease guidance. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. The new standard requires lessees to recognize an operating lease with a term greater than one year on their balance sheets as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. Lessees are required to classify leases as either finance or operating leases. If the lease is effectively a financed-purchase by the lessee, it is classified as a financing lease, otherwise, it is classified as an operating lease. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. ASC 842 provides accounting guidance for transactions that meet specific criteria for a leaseback transaction. If the criteria are not met, the transaction is considered a “failed sale” and the transaction must be accounted for as a financing arrangement. The new standard was effective for the Company as of January 1, 2019. Upon adoption, lessees must apply a modified retrospective transition approach for leases existing at, or entered after, the beginning of the earliest comparative period presented in the financial statements. Adoption of this new guidance did not have an impact on the Company’s financial position and results of operations. In July 2017, the FASB issued authoritative guidance changing the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features, whereby a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock, and also clarifying existing disclosure requirements for equity-classified instruments. This guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company adopted this guidance with no material impact on its financial statements or disclosures. |
Recently Issued Accounting Pronouncements | In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in an Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, ASU 2020-06 modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share computation. The amendments in ASU 2020-06 are effective for smaller reporting companies as defined by the SEC for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but not earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its financial statements | |
Deferred Financing Costs | The Company capitalizes certain legal, accounting, and other fees and costs that are directly attributable to in-process equity financings as deferred offering costs until such financings are completed. Upon the completion of an equity financing, these costs are recorded as a reduction of additional paid-in capital of the related offering. Upon the completion of the IPO in August 2021, approximately $2.6 million of offering costs related to the IPO were reclassified to additional paid-in capital. The Company had no deferred financing costs as of September 30, 2021. | |
Stock-Based Compensation | In March 2021, the Company’s board of directors and shareholders approved the 2021 Omnibus Equity Incentive Plan (“the 2021 Plan”). For stock options granted under the 2021 Plan, the Company measures and recognizes compensation expense for all stock-based awards made to employees, directors, and non-employees, based on estimated fair values recognized using the straight-line method over the requisite service period. The fair value of options to purchase common stock granted to employees is estimated on the grant date using the Black-Scholes valuation model. The calculation of stock-based compensation expense requires that the Company make certain assumptions and judgments about variables used in the Black-Scholes model, including the expected term of the stock-based award, expected volatility of the underlying common stock, dividend yield, and the risk-free interest rate. Forfeitures are accounted for in the period they occur. Refer to Note 7- Equity Incentive Plan for further discussion. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Summary of Significant Accounting Policies | ||
Schedule of anti dilutive net loss per common shares | Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net loss $ (1,712,920 ) $ (597,395 ) $ (5,349,621 ) $ (2,840,217 ) Deemed dividend upon redemption of 5,221,156 shares of Series 1c convertible preferred stock $ 269,038 $ - $ 269,038 $ - Deemed dividend upon amendment of the terms to the Series 1d convertible preferred stock $ 2,293,199 $ - $ 2,293,199 $ - Net loss attributable to common stockholders $ (4,275,157 ) $ (597,395 ) $ (7,911,858 ) $ (2,840,217 ) Basic and diluted net loss per common unit/share $ (0.86 ) $ (0.31 ) $ (2.69 ) $ (1.49 ) Weighted-average basic and diluted common units/shares 4,980,306 1,911,009 2,945,351 1,911,009 | December 31, 2019 2020 Numerator: Net loss $ (4,721,356 ) $ (3,236,530 ) Denominator: Weighted-average basic and diluted common units 1,911,009 1,911,009 Basic and diluted net loss per common unit $ (2.47 ) $ (1.69 ) |
Schedule of potentially dilutive securities | As of September 30, 2021 September 30, 2020 Series 1 Preferred Units/Shares - 336,882 Series 1a Preferred Units/Shares - 244,811 Series 1a Preferred Warrant - 69,212 Series 1b Preferred Units/Shares - 317,058 Series 1c Preferred Units/Shares - 2,270,866 Series 1d Preferred Units/Shares - - Class B Common Units Profits Interests - 365,245 Common Stock Options 523,199 - Common Stock Warrants 3,091,657 - Total potentially dilutive securities 3,614,856 3,604,074 | December 31, 2019 2020 Series 1 Preferred 1 Preferred Units 336,882 336,882 Series 1a Preferred Units 243,897 244,811 Series 1a Preferred Warrant Units 70,126 69,212 Series 1b Preferred Units 317,058 317,058 Series 1c Preferred Units 2,183,758 2,270,866 Class B Common Units Profits Interests 359,676 365,245 Total potentially dilutive securities 3,511,397 3,604,074 |
Balance Sheet Details (Tables)
Balance Sheet Details (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Balance Sheet Details | ||
Schedule of assets in balancesheet | September 30, December 31, 2021 2020 Prepaid expenses and other current assets Prepaid insurance $ 1,082,446 $ 68,003 Prepaid research and development costs - 7,050 Total prepaid expenses and other current assets $ 1,082,446 $ 75,053 Fixed assets Furniture and office equipment $ 59,382 $ 59,382 Computer equipment 17,225 17,225 76,607 76,607 Less: accumulated depreciation and amortization (76,607 ) (76,607 ) Total fixed assets, net $ - $ - Accrued and other current liabilities Accrued interest payable $ - $ 49,169 Accrued compensation and benefits 424,569 84,308 Accrued research and development costs 800 - Total accrued and other current liabilities $ 425,369 $ 133,477 | December 31, 2019 2020 Prepaid Expenses: Prepaid insurance $ 56,045 $ 68,003 Prepaid clinical trial expense 17,634 7,050 Total prepaid expenses $ 73,679 $ 75,053 Fixed Assets: Furniture and office equipment $ 59,382 $ 59,382 Computer equipment 17,225 17,225 76,607 76,607 Less: accumulated depreciation and amortization (76,285 ) (76,607 ) Total fixed assets, net $ 322 $ - December 31, 2019 2020 Accrued and Other Current Liabilities: Accrued payroll $ 38,708 $ - Accrued interest payable 5,606 49,169 Accrued employee benefits 3,663 - Accrued vacation 107,063 84,308 Total accrued and other current liabilities $ 155,040 $ 133,477 |
Equity Incentive Plan (Tables)
Equity Incentive Plan (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Equity Incentive Plan | |
Schedule of stock option activity | Number of Options Outstanding Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in Years) Balance at December 31, 2020 - $ - - Options granted 523,199 5.84 9.0 Options exercised - - - Options cancelled - - - Balance at September 30, 2021 523,199 $ 5.84 9.0 Options exercisable at September 30, 2021 233,686 $ 5.80 9.3 |
Weighted-average assumptions used for the stock option grants | Three Months Ended 2021 Nine Months Ended September 30, 2021 Grant date fair value $ 4.54 $ 4.87 Risk-free interest rate 0.98 % 0.92 % Dividend yield 0.00 % 0.00 % Expected life in years 5.8 5.7 Expected volatility 125 % 122 % |
Schedule of stock-based compensation expense | Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Research and development $ 30,075 $ - $ 310,046 $ - General and administrative 112,580 - 1,106,645 - $ 142,655 $ - $ 1,416,691 $ - |
Organization and Basis of Pre_2
Organization and Basis of Presentation (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended | 12 Months Ended | ||
Aug. 17, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Total Cash | $ 12,603,341 | $ 530,400 | $ 1,991,802 | ||
Accumulated deficit | (33,400,000) | ||||
Net Cash Used In Operation | $ 3,900,000 | $ 4,000,000 | |||
Sale of stock | 2,571,428 | ||||
Warrants to purchase one share of common stock | 2,957,142 | ||||
Conversion of stock | 65,823,015 | ||||
Common stock outstanding | 8,328,629 | ||||
Warrant exercise price | $ 7 | ||||
Conversion of stock amount | $ 6,582 | $ 0 | |||
Convertible Notes [Member] | |||||
Conversion of stock | 32,219 | ||||
Accrued interest | $ 5,434 | ||||
Conversion of stock amount | $ 175,000 | ||||
Initial Public Offering [Member] | |||||
Sale of stock | 2,571,428 | ||||
Warrants to purchase one share of common stock | 2,571,428 | ||||
Common stock outstanding | 1,911,009 | ||||
Warrant exercise price | $ 7 | ||||
Incremental number of warrants issued at IPO | 385,714 | ||||
Option exercise price | $ 7 | ||||
Gross Proceeds from warrants purchase of common stock | $ 15,400,000 | ||||
Issuance costs | $ 2,600,000 | ||||
Common Stock [Member] | |||||
Conversion of stock | 3,813,973 | ||||
Series 1a Preferred Stock | |||||
Conversion of stock | 1,419,228 | ||||
Warrants exercisable into common stock | 69,212 |
Liquidity and Going Concern U_2
Liquidity and Going Concern Uncertainty (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended | 12 Months Ended | |||||
Mar. 31, 2021 | Feb. 28, 2021 | Jan. 31, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Accumulated deficit | $ (33,429,418) | $ (28,079,798) | $ (24,843,268) | |||||
Cash | 12,603,341 | $ 753,046 | 530,400 | 1,991,802 | $ 1,179,613 | |||
Net Cash Used In Operation | $ (3,889,483) | $ (3,492,567) | $ (4,028,541) | $ (3,922,272) | ||||
Series1d Preferred Unit Offering | ||||||||
Gross proceeds from purchase of stock | $ 570,000 | |||||||
Managing Members and Other Investors | ||||||||
Proceeds from issuance of subordinated convertible promissory notes | $ 1,566,000 | $ 1,566,000 | $ 1,566,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||
Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Net loss | $ (1,712,920) | $ (1,331,792) | $ (2,304,908) | $ (396,313) | $ (597,395) | $ (821,649) | $ (1,421,173) | $ (5,349,621) | $ (2,840,217) | $ (3,236,530) | $ (4,721,356) |
Deemed dividend upon amendment of the terms to Series 1d convertible preferred stock | 2,293,199 | 0 | 2,293,199 | 0 | |||||||
Net loss attributable to common stockholders | $ (4,275,157) | $ (597,395) | $ (7,911,858) | $ (2,840,217) | |||||||
Basic and diluted net loss per common unit | $ (0.86) | $ (0.31) | $ (2.69) | $ (1.49) | $ (1.69) | $ (2.47) | |||||
Weighted-average basic and diluted common units | 4,980,306 | 1,911,009 | 2,945,351 | 1,911,009 | 1,911,009 | 1,911,009 | |||||
Net loss per common share [Member] | |||||||||||
Net loss | $ (1,712,920) | $ (597,395) | $ (5,349,621) | $ (2,840,217) | $ (3,236,530) | $ (4,721,356) | |||||
Deemed dividend upon redemption of 5,221,156 shares of Series 1c convertible preferred stock | 269,038 | 0 | 269,038 | 0 | |||||||
Deemed dividend upon amendment of the terms to Series 1d convertible preferred stock | 2,293,199 | 0 | 2,293,199 | 0 | |||||||
Net loss attributable to common stockholders | $ (4,275,157) | $ (597,395) | $ (7,911,858) | $ (2,840,217) | |||||||
Basic and diluted net loss per common unit | $ (0.86) | $ (0.31) | $ (2.69) | $ (1.49) | $ (1.69) | $ (2.47) | |||||
Weighted-average basic and diluted common units | 4,980,306 | 1,911,009 | 2,945,351 | 1,911,009 | 1,911,009 | 1,911,009 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details 1) - shares | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Summary of Significant Accounting Policies (Details) | ||||
Series 1 Preferred Units/Shares | 336,882 | 336,882 | 336,882 | |
Series 1a Preferred Units/Shares | 244,811 | 244,811 | 243,897 | |
Series 1a Prerferred Warrant Units/Shares | 69,212 | 69,212 | 70,126 | |
Series 1b Preferred Units/Shares | 317,058 | 317,058 | 317,058 | |
Series 1c Preferred Units/Shares | 2,270,866 | 2,270,866 | 2,183,758 | |
Class B Common Units Profits Interests | 365,245 | 365,245 | 359,676 | |
Common Stock Options | 523,199 | |||
Common Stock Warrants | 3,091,657 | |||
Total potentially dilutive securities | 3,614,856 | 3,604,074 | 3,604,074 | 3,511,397 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Aug. 17, 2021 | Jun. 30, 2020 | |
Depreciation and amortization expense | $ 0 | $ 322 | $ 1,355 | ||
Deferred offering costs | $ 2,600,000 | ||||
Patent cost | 74,920 | 32,411 | |||
Research and developement expenses | $ 2,623,280 | $ 1,607,819 | |||
Warrant [Member] | IPO [Member] | |||||
Offering price | $ 7 |
Balance Sheet Details (Details)
Balance Sheet Details (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Assets: | |||
Total fixed assets, net | $ 0 | $ 0 | $ 322 |
Balance Sheet [Member] | |||
Assets: | |||
Prepaid insurance | 1,082,446 | 68,003 | 56,045 |
Prepaid external development costs | 0 | 7,050 | 17,634 |
Total prepaid expenses | 1,082,446 | 75,053 | 73,679 |
Furniture and office equipment | 59,382 | 59,382 | 59,382 |
Computer equipment | 17,225 | 17,225 | 17,225 |
Total fixed assets, gross | 76,607 | 76,607 | 76,607 |
Less: accumulated depreciation and amortization | (76,607) | (76,607) | (76,285) |
Total fixed assets, net | 0 | 0 | 322 |
Accrued interest payable | 0 | 49,169 | 5,606 |
Accrued compensation and benefits | 424,569 | 84,308 | 107,063 |
Accrued payroll | 0 | 38,708 | |
Accrued employee benefits | 0 | 3,663 | |
Accrued research and development costs | 800 | 0 | |
Total accrued and other current liabilities | $ 425,369 | $ 133,477 | $ 155,040 |
Subordinated Convertible Prom_2
Subordinated Convertible Promissory Notes (Details Narrative) - USD ($) | Mar. 15, 2021 | Aug. 31, 2021 | Aug. 17, 2021 | Jan. 27, 2021 | Oct. 31, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 |
Subordinated convertible promissory notes | $ 3,000,000 | $ 0 | $ 0 | $ 1,848,495 | |||||||
Notes payable | 1,145,000 | ||||||||||
Notes payable related parties | $ 125,000 | 1,730,000 | |||||||||
Notes payable non related parties | $ 311,000 | $ 125,000 | |||||||||
Maturity date | Dec. 31, 2021 | Jul. 17, 2021 | |||||||||
Interest expense | 651 | $ 57,333 | 45,613 | $ 158,791 | 197,269 | $ 250,748 | |||||
Bear interest rate | 4.00% | ||||||||||
20% Discount rate for preferred shares | $ 10,000,000 | ||||||||||
Notes issued to related parties | $ 1,255,000 | ||||||||||
Percentage of discount offered to Qualified Initial Public Offering | 20.00% | ||||||||||
Exchange shares | 65,823,015 | ||||||||||
Amortized debt discount costs | $ 14,126 | $ 88,293 | 97,104 | $ 141,753 | |||||||
Series A | |||||||||||
Interest expense | 497 | 16,888 | 48,222 | ||||||||
Proceeds from Series A financing | $ 10,000,000 | ||||||||||
Net of debt discount costs | 28,301 | ||||||||||
Amortized debt discount costs | $ 155 | $ 14,126 | $ 14,497 | ||||||||
Maximum | |||||||||||
Increase convertible promissory notes | 5,000,000 | ||||||||||
Minimum | |||||||||||
Increase convertible promissory notes | $ 3,000,000 | ||||||||||
Series 1d Preferred Stock | |||||||||||
Notes payable | $ 4,391,000 | $ 1,145,000 | |||||||||
Exchange shares | 5,379,247 | ||||||||||
Interest payable | $ 73,801 | ||||||||||
Notes Payable [Member] | |||||||||||
Debt conversion converted instrument shares issued | 32,219 | ||||||||||
Debt conversion amount converted | $ 180,434 |
Long-Term Debt (Details Narrati
Long-Term Debt (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||
Feb. 28, 2021 | Jan. 31, 2021 | Apr. 22, 2020 | Jun. 30, 2019 | Feb. 28, 2017 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Mar. 31, 2021 | Mar. 24, 2021 | Dec. 31, 2016 | |
Non-refundable amendment fee | $ 100,000 | $ 100,000 | |||||||||
Exercise price per share | $ 7 | ||||||||||
Proceeds of loan | $ 0 | $ 133,592 | $ 133,592 | ||||||||
SVB [Member] | |||||||||||
Proceeds of loan | $ 133,592 | ||||||||||
Series 1a Preferred Units | |||||||||||
Warrant units to purchase stocks | 1,250,000 | ||||||||||
Exercise price per share | $ 20.50 | $ 20.50 | |||||||||
Loan and Security Agreement with Silicon Valley Bank | |||||||||||
Non-refundable amendment fee | 100,000 | ||||||||||
Proceeds from borrowing | $ 2,500,000 | ||||||||||
Bearing interest prime rate (percentage) | 1.50% | 3.25% | |||||||||
Estimated fair value of warrant units | $ 104,630 | ||||||||||
Provision for final payment | $ 225,000 | ||||||||||
Costs associated with amendment recorded as discount to outstanding debt amortized to interest expense | $ 12,280 | ||||||||||
Final principal payments | $ 231,482 | $ 231,482 | |||||||||
Final payment fee | $ 225,000 | ||||||||||
Long-term debt outstanding | $ 0 | ||||||||||
Loan and Security Agreement with Silicon Valley Bank | Series 1a Preferred Units | |||||||||||
Warrant units to purchase stocks | 187,978 | ||||||||||
Exercise price per share | $ 1 |
Equity Securities (Details Narr
Equity Securities (Details Narrative) - USD ($) | Aug. 14, 2021 | Jul. 12, 2021 | Mar. 15, 2021 | Jun. 14, 2019 | Aug. 31, 2021 | Aug. 17, 2021 | Jun. 29, 2021 | Mar. 31, 2021 | Jan. 31, 2021 | Oct. 31, 2020 | Jun. 30, 2020 | May 31, 2020 | Nov. 30, 2016 | Mar. 31, 2021 | Mar. 31, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | Jul. 31, 2021 | Jul. 30, 2021 | Mar. 24, 2021 | Jun. 30, 2019 | Mar. 31, 2017 | Feb. 28, 2017 |
Series 1c preferred units issued | 5,221,156 | ||||||||||||||||||||||||||||
Deemed dividend | $ 269,038 | ||||||||||||||||||||||||||||
Common stock, Warrant issued | 69,212 | 69,212 | |||||||||||||||||||||||||||
Series 1a preferred warrants exercise price | $ 20.50 | ||||||||||||||||||||||||||||
Series 1a preferred warrants expire | which expire November 15, 2026 | ||||||||||||||||||||||||||||
Common units issued | 133,953 | 5,569 | 161,142 | ||||||||||||||||||||||||||
Unvested units | 134,331 | 230,691 | |||||||||||||||||||||||||||
Common stock, shares issued | 8,328,629 | ||||||||||||||||||||||||||||
Common stock, shares outstanding | 8,328,629 | ||||||||||||||||||||||||||||
Common stock, authorized | 90,000,000 | ||||||||||||||||||||||||||||
Warrant outstanding | 2,957,142 | ||||||||||||||||||||||||||||
Exercise price of warrant | $ 7 | ||||||||||||||||||||||||||||
Warrant expire | which expire August 17, 2026 | ||||||||||||||||||||||||||||
Common stock, Shares available for issuances increased | 1,648,199 | 1,648,213 | |||||||||||||||||||||||||||
Common stock, shares available for issuances | 593,340 | ||||||||||||||||||||||||||||
Stock-based compensation expense | $ 1,416,691 | $ 0 | |||||||||||||||||||||||||||
Debt Conversion, Converted Instrument, Principal Amount | $ 1,145,000 | $ 1,145,000 | |||||||||||||||||||||||||||
Preferred stock, Conversion of Stock, Shares Converted | 65,823,015 | ||||||||||||||||||||||||||||
Exercise of Series 1a Preferred Warrant Units, amount | 18,750 | ||||||||||||||||||||||||||||
Subordinated convertible promissory notes interest | 180,434 | 0 | |||||||||||||||||||||||||||
Proceeds from issuance of preferred stock | 0 | 18,750 | $ 18,750 | $ 0 | |||||||||||||||||||||||||
Deemed dividend presented | $ 2,200,000 | $ 2,300,000 | |||||||||||||||||||||||||||
Description of reverse split | 1-for-20.5 reverse split | ||||||||||||||||||||||||||||
Board of Directors [Member] | |||||||||||||||||||||||||||||
Percentages of initial public per share offering price | 80.00% | ||||||||||||||||||||||||||||
Description of reverse split | 1-for-20.5 | ||||||||||||||||||||||||||||
June 2020 [Member] | |||||||||||||||||||||||||||||
Exercise of Series 1a Preferred Warrant Units, shares | 18,750 | ||||||||||||||||||||||||||||
Exercise of Series 1a Preferred Warrant Units, amount | $ 18,750 | ||||||||||||||||||||||||||||
License Agreement | Villani, Inc | |||||||||||||||||||||||||||||
Series 1c preferred units issued | 5,221,156 | 5,221,156 | |||||||||||||||||||||||||||
Deemed dividend | $ 269,038 | ||||||||||||||||||||||||||||
Payment to Licensor | 1,000,000 | ||||||||||||||||||||||||||||
Carrying value | 730,962 | ||||||||||||||||||||||||||||
Series 1c preferred share redemption, Paid for the shares | $ 1,000,000 | ||||||||||||||||||||||||||||
IPO [Member] | Warrant [Member] | |||||||||||||||||||||||||||||
Common stock, shares sold | 2,571,428 | ||||||||||||||||||||||||||||
Warrants sold to purchase one share of common stock | 2,571,428 | ||||||||||||||||||||||||||||
Warrants sold to purchase one share of common stock, Exercise price | $ 7 | ||||||||||||||||||||||||||||
Offering price | $ 7 | ||||||||||||||||||||||||||||
Warrant units to purchase stocks | 2,957,142 | ||||||||||||||||||||||||||||
Additional shares of warrant | 385,714 | ||||||||||||||||||||||||||||
Offering price per share | $ 7 | ||||||||||||||||||||||||||||
Closing trading price | $ 0.9995 | ||||||||||||||||||||||||||||
Outstanding warrants exercisable | 2,957,142 | ||||||||||||||||||||||||||||
Fair value per share | $ 4.49 | ||||||||||||||||||||||||||||
Class B Common Units | |||||||||||||||||||||||||||||
Common units issued | 133,953 | 133,953 | |||||||||||||||||||||||||||
Common stock, shares issued | 1,767,477 | 1,761,908 | |||||||||||||||||||||||||||
Common stock, shares outstanding | 1,767,477 | 1,761,908 | |||||||||||||||||||||||||||
Warrant outstanding | 65,303 | ||||||||||||||||||||||||||||
Exercise price of warrant | $ 5.74 | $ 5.74 | $ 7 | ||||||||||||||||||||||||||
Stock-based compensation expense | $ 279,812 | ||||||||||||||||||||||||||||
Common Stock, Conversion of Stock, Shares Issued | 65,303 | ||||||||||||||||||||||||||||
Common units outstanding | 1,767,477 | 1,767,477 | |||||||||||||||||||||||||||
Common units issued consideration | $ 2,853 | $ 2,853 | |||||||||||||||||||||||||||
Common units issued as profits interest | 365,245 | 365,245 | |||||||||||||||||||||||||||
Thresholds price per share minimum | $ 0.001 | $ 0.001 | |||||||||||||||||||||||||||
Thresholds price per share maximum | $ 0.36 | $ 0.36 | |||||||||||||||||||||||||||
Stock issued during period | 2,439 | ||||||||||||||||||||||||||||
Common units forfeited | 22,494 | ||||||||||||||||||||||||||||
Estimated fair value of common stock issued | $ 2,340,000 | ||||||||||||||||||||||||||||
Common Stock and Preferred Stock [Member] | |||||||||||||||||||||||||||||
Common stock, shares outstanding | 1,911,009 | ||||||||||||||||||||||||||||
Common Stock, Conversion of Stock, Shares Issued | 3,813,973 | ||||||||||||||||||||||||||||
Preferred and common stock par value per share | $ 0.0001 | ||||||||||||||||||||||||||||
Common stock, shares sold | 2,571,428 | 2,571,428 | |||||||||||||||||||||||||||
Warrants sold to purchase one share of common stock | 2,957,142 | 2,571,428 | |||||||||||||||||||||||||||
Warrants sold to purchase one share of common stock, Exercise price | $ 7 | ||||||||||||||||||||||||||||
Offering price | $ 7 | ||||||||||||||||||||||||||||
Options exercised to purchase additional warrants | 385,714 | ||||||||||||||||||||||||||||
Options exercised to purchase additional warrants, Exercise price | $ 7 | ||||||||||||||||||||||||||||
Proceeds from issuance initial public offering | $ 15,400,000 | ||||||||||||||||||||||||||||
Underwriters' discounts and offering expenses | $ 2,600,000 | ||||||||||||||||||||||||||||
Preferred stock, Conversion of Stock, Shares Converted | 65,823,015 | ||||||||||||||||||||||||||||
Common Stock and Preferred Stock [Member] | Convertible promissory notes [Member] | |||||||||||||||||||||||||||||
Common Stock, Conversion of Stock, Shares Issued | 32,219 | ||||||||||||||||||||||||||||
Debt Conversion, Converted Instrument, Principal Amount | $ 175,000 | ||||||||||||||||||||||||||||
Debt Conversion, Converted Instrument, Accrued Interest | $ 5,434 | ||||||||||||||||||||||||||||
Series 1a Preferred Units | |||||||||||||||||||||||||||||
Series 1c preferred units issued | 5,000,000 | ||||||||||||||||||||||||||||
Common stock, shares outstanding | 5,018,750 | 5,000,000 | |||||||||||||||||||||||||||
Exercise price of warrant | $ 20.50 | $ 20.50 | |||||||||||||||||||||||||||
Preferred stock, Conversion of Stock, Shares Converted | 1,419,228 | ||||||||||||||||||||||||||||
Warrant units to purchase stocks | 1,250,000 | ||||||||||||||||||||||||||||
Net of issuance costs | $ 19,868 | ||||||||||||||||||||||||||||
Proceeds from issuance of stock | $ 5,000,000 | ||||||||||||||||||||||||||||
Warrants exercised | 18,750 | ||||||||||||||||||||||||||||
Consideration of warrants exercised | $ 18,750 | ||||||||||||||||||||||||||||
Preferred stock not to exceed the product as percentage description | 25 | ||||||||||||||||||||||||||||
Common Stock, Conversion of Stock, Warrant Exercisable | 69,212 | ||||||||||||||||||||||||||||
Conversion price per share | $ 0.80 | ||||||||||||||||||||||||||||
Series 1a Preferred Units | Warrant [Member] | |||||||||||||||||||||||||||||
Series 1c preferred units issued | 5,000,000 | 1,231,250 | |||||||||||||||||||||||||||
Proceeds from issuance of stock | $ 5,000,000 | ||||||||||||||||||||||||||||
Series 1a Preferred Units | Loan and Security Agreement [Member] | |||||||||||||||||||||||||||||
Exercise price of warrant | $ 1 | ||||||||||||||||||||||||||||
Warrant units to purchase stocks | 187,978 | ||||||||||||||||||||||||||||
Series 1c Preferred Units | |||||||||||||||||||||||||||||
Common stock, shares outstanding | 46,553,188 | 44,767,474 | |||||||||||||||||||||||||||
Financing from current and new investors | $ 5,785,000 | ||||||||||||||||||||||||||||
Net of issuance costs | $ 25,857 | ||||||||||||||||||||||||||||
Cash received from conversion of onvertible note issued | 150,000 | ||||||||||||||||||||||||||||
Cash proceeds | $ 5,535,000 | ||||||||||||||||||||||||||||
Interest on convertible note | 1,487 | ||||||||||||||||||||||||||||
Remaining balance committed to financing payable amount | $ 250,000 | $ 125,000 | $ 125,000 | ||||||||||||||||||||||||||
Preferred unit interest rate | 8% per annum | ||||||||||||||||||||||||||||
Series 1b Preferred Units | |||||||||||||||||||||||||||||
Series 1c preferred units issued | 6,500,000 | ||||||||||||||||||||||||||||
Common units issued | 1,268,279 | 1,268,279 | |||||||||||||||||||||||||||
Common stock, shares outstanding | 6,500,000 | 6,500,000 | |||||||||||||||||||||||||||
Estimated fair value of common stock issued | $ 2,340,000 | $ 2,340,000 | |||||||||||||||||||||||||||
Warrant units to purchase stocks | 1,268,279 | ||||||||||||||||||||||||||||
Net of issuance costs | $ 40,405 | ||||||||||||||||||||||||||||
Proceeds from issuance of stock | $ 6,500,000 | ||||||||||||||||||||||||||||
Series 1b Preferred Units | Warrant [Member] | |||||||||||||||||||||||||||||
Issuance of series 1a preferred units | 5,000,000 | ||||||||||||||||||||||||||||
Description of warrant | up to an aggregate number of Series 1a Preferred Units not to exceed the product of 25% and the aggregate number of Series 1a Preferred Units then held by such Series 1a Preferred Member, which was 1,231,250 units at December 31, 2020. The exercise price for each Warrant Unit was $1.00, subject to adjustment for unit splits and combinations. The warrants had a 5-year term | ||||||||||||||||||||||||||||
Proceeds from issuance of warrant | $ 5,000,000 | ||||||||||||||||||||||||||||
Fair value basis | 4,381,199 | ||||||||||||||||||||||||||||
Relative fair value | $ 618,801 | ||||||||||||||||||||||||||||
Series 1a preferred units held | 1,231,250 | ||||||||||||||||||||||||||||
Series 1d Preferred Stock | |||||||||||||||||||||||||||||
Stock issued during period | 686,742 | 686,742 | |||||||||||||||||||||||||||
Preferred stock, Conversion of Stock, Shares Converted | 5,379,247 | ||||||||||||||||||||||||||||
Proceeds from issuance of stock | $ 570,000 | ||||||||||||||||||||||||||||
Conversion price per share | $ 0.83 | ||||||||||||||||||||||||||||
Subordinated convertible promissory notes | $ 4,391,000 | ||||||||||||||||||||||||||||
Subordinated convertible promissory notes interest | $ 73,801 | ||||||||||||||||||||||||||||
Subordinated convertible promissory notes converted into shares units | 5,379,247 | ||||||||||||||||||||||||||||
Proceeds from issuance of preferred stock | $ 570,000 | ||||||||||||||||||||||||||||
Deemed dividend presented | $ 800,000 | ||||||||||||||||||||||||||||
Class A Common Units | |||||||||||||||||||||||||||||
Common stock, shares issued | 508,777 | 508,777 | |||||||||||||||||||||||||||
Common stock, shares outstanding | 508,777 | 508,777 | |||||||||||||||||||||||||||
Stock issued during period | 508,777 | 508,777 | |||||||||||||||||||||||||||
Stock issued during period consideration | $ 10,430 | $ 10,430 | |||||||||||||||||||||||||||
Series 1 Preferred Units | |||||||||||||||||||||||||||||
Series 1c preferred units issued | 6,906,244 | ||||||||||||||||||||||||||||
Common stock, shares outstanding | 6,906,244 | 6,906,244 | |||||||||||||||||||||||||||
Proceeds from issuance of preferred stock | $ 6,833,877 |
Equity Incentive Plan (Details)
Equity Incentive Plan (Details) - Stock Option [Member] | 9 Months Ended |
Sep. 30, 2021$ / sharesshares | |
Number of Options Outstanding, Beginning balance | shares | 0 |
Number of Options Outstanding, Options granted | shares | 523,199 |
Number of Options Outstanding, Options exercised | shares | 0 |
Number of Options Outstanding, Options cancelled | shares | 0 |
Number of Options Outstanding, Ending balance | shares | 523,199 |
Number of Options Outstanding, Options exercisable | shares | 233,686 |
Weighted-Average Exercise Price, Beginning balance | $ / shares | $ 0 |
Weighted-Average Exercise Price, Options granted | $ / shares | 5.84 |
Weighted-Average Exercise Price, Options exercised | $ / shares | 0 |
Weighted-Average Exercise Price, Options cancelled | $ / shares | 0 |
Weighted-Average Exercise Price, Ending balance | $ / shares | 5.84 |
Weighted-Average Exercise Price, Options exercisable | $ / shares | $ 5.80 |
Weighted-Average Remaining Contractual Term (in Years), Beginning balance | 0 |
Weighted-Average Remaining Contractual Term (in Years), Options granted | 9.0 |
Weighted-Average Remaining Contractual Term (in Years), Options exercised | 0 |
Weighted-Average Remaining Contractual Term (in Years), Options cancelled | 0 |
Weighted-Average Remaining Contractual Term (in Years), Ending balance | 9.0 |
Weighted-Average Remaining Contractual Term (in Years), Options exercisable | 9.3 |
Equity Incentive Plan (Details
Equity Incentive Plan (Details 1) - Stock Option [Member] - $ / shares | 3 Months Ended | 9 Months Ended |
Sep. 30, 2021 | Sep. 30, 2021 | |
Grant date fair value | $ 4.54 | $ 4.87 |
Risk-free interest rate | $ 0.98 | $ 0.92 |
Dividend yield | 0.00% | 0.00% |
Expected life in years | 5.8 | 5.7 |
Expected volatility | 125.00% | 122.00% |
Equity Incentive Plan (Detail_2
Equity Incentive Plan (Details 2) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Research and development | $ 2,623,280 | $ 1,607,819 | ||||
Stock-based compensation expense | $ 1,416,691 | $ 0 | ||||
Stock Option [Member] | ||||||
General and administrative | $ 30,075 | $ 0 | 310,046 | 0 | ||
Research and development | 112,580 | 0 | 1,106,645 | 0 | ||
Stock-based compensation expense | $ 142,655 | $ 0 | $ 1,416,691 | $ 0 |
Equity Incentive Plan (Detail_3
Equity Incentive Plan (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |
Mar. 24, 2021 | Mar. 31, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Unrecognized future stock based compensation expense | $ 1,400,000 | |||
Class B Common Units profits interests converted due to the conversion from an LLC to a C-Corporation | 277,448 | |||
Class B Common Units profits interests converted into options | 277,448 | |||
Incremental stock-based compensation expense | $ 1,339,993 | |||
Expected lenght of recognized term | 2 years 10 months 24 days | |||
Common stock shares authorized under plan | 90,000,000 | |||
Maximum | ||||
Class B Common Units profits interests converted into options, exercise price | $ 5.74 | |||
Minimum | ||||
Class B Common Units profits interests converted into options, exercise price | $ 6.314 | |||
2021 Omnibus Equity Incentive Plan [Member] | ||||
Common stock shares authorized under plan | 1,648,213 | |||
Stock awards granted, exercisable period | 10 years | |||
Stock awards granted, vesting period | four years for employees and one year for directors | |||
Additional shares reserved for future issuance | 1,125,014 | |||
Common stock traded price | $ 4.49 |
Series 1a Warrants Outstanding
Series 1a Warrants Outstanding (Details Narrative) - USD ($) | 1 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Jul. 31, 2020 | Feb. 28, 2017 | Jun. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2016 | Jun. 30, 2020 | Jun. 30, 2019 | Nov. 30, 2016 | |
Preferred units, issued | 5,221,156 | |||||||
Loan and Security Agreement with Silicon Valley Bank | ||||||||
Fair value adjustment of Warrants | $ 104,630 | |||||||
Series 1a Preferred Units | ||||||||
Preferred units, issued | 5,000,000 | |||||||
Proceeds from issuance of stock | $ 5,000,000 | |||||||
Series 1a Preferred Units | Warrant [Member] | ||||||||
Preferred units, issued | 1,231,250 | 5,000,000 | ||||||
Proceeds from issuance of stock | $ 5,000,000 | |||||||
Fair value adjustment of Warrants | $ 4,381,199 | $ 618,801 | ||||||
Exercise price | $ 1 | $ 1 | ||||||
Term | 5 years | |||||||
Warrant exercised | 18,750 | |||||||
Consideration from exercise of warrant | $ 18,750 | |||||||
Warrant issued to purchase stock | 187,978 |
License Agreements (Details Nar
License Agreements (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Jul. 30, 2021 | Mar. 31, 2017 | Dec. 31, 2020 | Jun. 30, 2019 | |
Series 1c preferred units issued | 5,221,156 | |||
License Agreement | Villani, Inc | ||||
Outstanding loan forgiven | $ 400,000 | |||
Series 1c preferred units issued | 5,221,156 | 5,221,156 | ||
Percentage of fully diluted capitalization | 5.00% | |||
Proceeds from stock issued | $ 730,962 | |||
Maximum future milestone payments | $ 20,250,000 | |||
Description of sublicense revenue | If the Company sublicenses the License, the Company is obligated to pay to Villani a sublicense fee of between 5% and 15% of Sublicense revenues (as defined in the License Agreement) received by the Company | |||
Description of termination of agreement | (i) by either party for material breach with 90 days written notice, or 30 days’ notice if for material payment breach, if such material breach is not cured within such notice period, (ii) immediately upon written notice to either party if either party initiates a voluntary bankruptcy proceeding, dissolves or winds-up its business, (iii) immediately upon written notice to either party if either party becomes subject to involuntary bankruptcy proceedings, if such proceedings are not dismissed or stayed within 90 days. | |||
License Agreement (Second Amendment) | Villani, Inc | ||||
Payments made to related party after IPO closed | $ 1,000,000 | |||
Future milestone payments payable upon the achievement of specified development and sales milestones | $ 40,500,000 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Jun. 20, 2020 | Jun. 04, 2019 | |
Commitments and Contingencies | |||
Agreegate milestone payments | $ 500,000 | $ 250,000 | |
One-time financing transaction | $ 20,000,000 | ||
Approved employee bonuses | $ 305,200 |
Related Parties (Details Narrat
Related Parties (Details Narrative) - USD ($) | Jul. 12, 2021 | Oct. 31, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 |
Deemed dividend presented | $ 2,200,000 | $ 2,300,000 | ||||
Subordinated convertible promissory notes | $ 1,145,000 | $ 1,145,000 | ||||
Convertible promissory notes | $ 1,255,000 | $ 150,000 | ||||
Series 1d Preferred Stock | ||||||
Deemed dividend presented | $ 800,000 | |||||
Deemed dividend presented | $ 1,200,000 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Mar. 15, 2021 | Aug. 17, 2021 | Jun. 29, 2021 | Mar. 31, 2021 | Mar. 24, 2021 | Feb. 28, 2021 | Jan. 31, 2021 | Jan. 27, 2021 | Oct. 31, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Jun. 30, 2019 |
Exercise price | $ 5.74 | |||||||||||
Non-refundable amendment fee | $ 100,000 | $ 100,000 | ||||||||||
Maturity date | Dec. 31, 2021 | Jul. 17, 2021 | ||||||||||
Proceeds from the issuance of new convertible promissory notes | $ 1,566,000 | |||||||||||
Common stock options exercisable | 398,199 | |||||||||||
Common stock, shares available for issuances | 593,340 | |||||||||||
Common stock, Shares available for issuances increased | 1,648,199 | 1,648,213 | ||||||||||
Description of reverse split | 1-for-20.5 reverse split | |||||||||||
Subordinated convertible promissory notes interest | $ 180,434 | $ 0 | ||||||||||
Loan and Security Agreement with Silicon Valley Bank | ||||||||||||
Non-refundable amendment fee | $ 100,000 | |||||||||||
Final principal payments | $ 231,482 | $ 231,482 | ||||||||||
Final payment fee | $ 225,000 | |||||||||||
Series 1d Preferred Stock | ||||||||||||
Share price | $ 0.83 | |||||||||||
Proceeds from issuance of stock | $ 570,000 | |||||||||||
Subordinated convertible promissory notes | $ 4,391,000 | |||||||||||
Stock issued during period | 686,742 | 686,742 | ||||||||||
Subordinated convertible promissory notes interest | $ 73,801 | |||||||||||
Subordinated convertible promissory notes converted into shares units | 5,379,247 | |||||||||||
Common Stock and Preferred Stock [Member] | ||||||||||||
Proceeds from initial public offering | $ 15,400,000 | |||||||||||
Preferred and common stock par value per share | $ 0.0001 | |||||||||||
Minimum | ||||||||||||
Increase convertible promissory notes | 3,000,000 | |||||||||||
Proceeds from initial public offering | 10,000,000 | |||||||||||
Maximum | ||||||||||||
Increase convertible promissory notes | $ 5,000,000 |