10-Q 1 mnmd-20220331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2022

OR

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

Commission File Number 001-40360

 

Mind Medicine (MindMed) Inc.

(Exact name of Registrant as specified in its Charter)

 

 

British Columbia, Canada

98-1582538

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

One World Trade Center, Suite 8500

New York, New York

10007

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 208-2454

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Subordinate Voting Shares, no par value per share

 

MNMD

 

The Nasdaq Stock Market LLC

(The Nasdaq Capital Market)

 

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

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

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No

As of May 3, 2022, the registrant had 422,444,539 shares of Subordinate Voting Shares outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I

FINANCIAL INFORMATION

4

Item 1.

Financial Statements

4

 

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

5

 

Condensed Consolidated Statements of Shareholders' Equity

6

 

Condensed Consolidated Statements of Cash Flows

7

 

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

 

 

 

PART II

OTHER INFORMATION

25

 

 

 

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

Item 3.

Defaults Upon Senior Securities

26

Item 4.

Mine Safety Disclosures

26

Item 5.

Other Information

26

Item 6.

Exhibits

27

Signatures

 

28

 

 

 

 


 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

 

the timing, progress and results of our investigational MM-120 LSD treatment, MM-110 opioid withdrawal treatment and MM-402 R(-)-MDMA treatment product candidates (together, our “lead drug candidates”), including statements regarding the timing of initiation and completion of trials or studies and related preparatory work, the period during which the results of the trials will become available and our research and development programs;
our reliance on the success of our investigational MM-120 LSD treatment;
the timing, scope or likelihood of regulatory filings and approvals and ability to obtain and maintain regulatory approvals for product candidates for any indication;
our expectations regarding the size of the eligible patient populations for MM-120 LSD treatment, MM-110 opioid withdrawal treatment and MM-402 R(-)-MDMA treatment, if approved for commercial use;
our ability to identify third-party therapy sites to conduct our trials and our ability to identify and train appropriately qualified therapists to administer our treatments;
our ability to implement our business model and our strategic plans for our business and our investigational MM-120 LSD treatment;
our ability to identify new indications for our lead drug candidates beyond our current primary focuses;
our ability to identify, develop or acquire digital technologies to enhance our administration of our lead drug candidates;
our ability to achieve profitability and then sustain such profitability;
our commercialization, marketing and manufacturing capabilities and strategy;
the pricing, coverage and reimbursement of our lead drug candidates, if approved;
the rate and degree of market acceptance and clinical utility of our lead drug candidates, in particular, and controlled substances, in general;
future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;
our ability to establish or maintain collaborations or strategic relationships or obtain additional funding;
our expectations regarding potential benefits of our investigational lead drug candidates and our therapeutic approach generally;
our ability to operate our business without infringing, misappropriating, or otherwise violating the intellectual property rights and proprietary technology of third parties;
regulatory developments in the United States, under the laws and regulations of England and Wales, and other jurisdictions;
the effectiveness of our internal control over financial reporting;
the effect of the ongoing and evolving COVID-19 pandemic, including mitigation efforts and economic effects, on any of the foregoing or other aspects of our business or operations;
our expectations regarding our revenue, expenses and other operating results;
the costs and success of our marketing efforts, and our ability to promote our brand;
our reliance on key personnel and our ability to identify, recruit and retain skilled personnel;
our ability to effectively manage our growth; and

 


 

our ability to compete effectively with existing competitors and new market entrants.

 

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” previously disclosed in Part I, Item 1A. in our Annual Report on Form 10-K, as filed with the SEC on March 28, 2022. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

 

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

 

We may announce material business and financial information to our investors using our investor relations website (https://mindmed.co/investor-resources/). We therefore encourage investors and others interested in our company to review the information that we make available on our website.

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

 

Mind Medicine (MindMed) Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)

 

 

 

March 31,

 

 

December 31,

 

 

 

 

2022

 

 

2021

 

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash

 

$

120,472

 

 

$

133,539

 

 

Prepaid and other current assets

 

 

2,755

 

 

 

3,676

 

 

Total current assets

 

 

123,227

 

 

 

137,215

 

 

Goodwill

 

 

19,918

 

 

 

19,918

 

 

Intangible assets, net

 

 

6,089

 

 

 

6,869

 

 

Total assets

 

$

149,234

 

 

$

164,002

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

3,332

 

 

$

4,178

 

 

Accrued expenses

 

 

7,227

 

 

 

6,230

 

 

Total current liabilities

 

 

10,559

 

 

 

10,408

 

 

Contribution payable, long-term

 

 

1,870

 

 

 

1,930

 

 

Total liabilities

 

 

12,429

 

 

 

12,338

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

Shareholders' Equity:

 

 

 

 

 

 

 

Subordinate voting shares, no par value, unlimited authorized as of
   March 31, 2022 and December 31, 2021;
422,401,776 and 421,444,157 issued and
   outstanding as of March 31, 2022 and December 2021, respectively

 

 

 

 

 

 

 

Multiple voting shares, no par value, unlimited authorized as of
   March 31, 2022 and December 31, 2021;
none and 4,521 issued and
   outstanding as of March 31, 2022 and December 31, 2021, respectively

 

 

 

 

 

 

 

Additional paid-in capital

 

 

291,931

 

 

 

288,290

 

 

Accumulated other comprehensive income

 

 

997

 

 

 

1,046

 

 

Accumulated deficit

 

 

(156,123

)

 

 

(137,672

)

 

Total shareholders' equity

 

 

136,805

 

 

 

151,664

 

 

Total liabilities and shareholders' equity

 

$

149,234

 

 

$

164,002

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

4


 

Mind Medicine (MindMed) Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

For the
Three Months
 Ended
March 31,
2022

 

 

For the
Three Months
 Ended
March 31,
2021

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

10,241

 

 

$

6,813

 

General and administrative

 

 

8,264

 

 

 

7,035

 

Total operating expenses

 

 

18,505

 

 

 

13,848

 

Loss from operations

 

 

(18,505

)

 

 

(13,848

)

Other income (expense):

 

 

 

 

 

 

Interest expense, net

 

 

(27

)

 

 

(87

)

Foreign exchange gain, net

 

 

45

 

 

 

8

 

Other income

 

 

36

 

 

 

168

 

Total other income, net

 

 

54

 

 

 

89

 

Net loss

 

 

(18,451

)

 

 

(13,759

)

Other comprehensive gain/(loss):

 

 

 

 

 

 

(Loss)/gain on foreign currency translation

 

 

(49

)

 

 

59

 

Comprehensive loss

 

$

(18,500

)

 

$

(13,700

)

Net loss per common share, basic and diluted

 

$

(0.04

)

 

$

(0.04

)

Weighted-average common shares, basic and diluted

 

 

422,212,489

 

 

 

389,575,029

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

5


 

Mind Medicine (MindMed) Inc.

Condensed Consolidated Statements of Shareholders’ Equity

(Unaudited)

(In thousands, except share amounts)

 

 

 

Subordinate Voting

 

 

Multiple Voting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional Paid-In Capital

 

 

Accumulated OCI

 

 

Accumulated Deficit

 

 

Total

 

Balance, December 31, 2021

 

 

421,444,157

 

 

$

 

 

 

4,521

 

 

$

 

 

$

288,290

 

 

$

1,046

 

 

$

(137,672

)

 

$

151,664

 

Multiple Voting Shares conversion to Subordinate Voting Shares

 

 

452,060

 

 

 

 

 

 

(4,521

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of warrants

 

 

187,851

 

 

 

 

 

 

 

 

 

 

 

 

118

 

 

 

 

 

 

 

 

 

118

 

Exercise of stock options

 

 

317,708

 

 

 

 

 

 

 

 

 

 

 

 

123

 

 

 

 

 

 

 

 

 

123

 

Withholding taxes paid on vested restricted share units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(407

)

 

 

 

 

 

 

 

 

(407

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,807

 

 

 

 

 

 

 

 

 

3,807

 

Net loss and Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(49

)

 

 

(18,451

)

 

 

(18,500

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2022

 

 

422,401,776

 

 

 

 

 

 

 

 

 

 

 

 

291,931

 

 

 

997

 

 

 

(156,123

)

 

 

136,805

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2020

 

 

306,135,160

 

 

$

 

 

 

550,000

 

 

$

 

 

$

120,220

 

 

$

284

 

 

$

(44,636

)

 

$

75,868

 

Issuance of Subordinate Voting Shares and warrants net of share issuance costs

 

 

26,930,000

 

 

 

 

 

 

 

 

 

 

 

 

82,113

 

 

 

 

 

 

 

 

 

82,113

 

Subordinate Voting Shares conversion to Multiple Voting Shares

 

 

(3,500,000

)

 

 

 

 

 

35,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Subordinate Voting Shares for vested director compensation

 

 

622,435

 

 

 

 

 

 

 

 

 

 

 

 

66

 

 

 

 

 

 

 

 

 

66

 

HealthMode acquisition

 

 

 

 

 

 

 

 

81,497

 

 

 

 

 

 

27,159

 

 

 

 

 

 

 

 

 

27,159

 

Exercise of warrants

 

 

4,228,880

 

 

 

 

 

 

 

 

 

 

 

 

6,697

 

 

 

 

 

 

 

 

 

6,697

 

Exercise of stock options

 

 

4,519,879

 

 

 

 

 

 

 

 

 

 

 

 

1,178

 

 

 

 

 

 

 

 

 

1,178

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,213

 

 

 

 

 

 

 

 

 

1,213

 

Net loss and Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

59

 

 

 

(13,759

)

 

 

(13,700

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2021

 

 

338,936,354

 

 

$

 

 

 

666,497

 

 

$

 

 

$

238,646

 

 

$

343

 

 

$

(58,395

)

 

$

180,594

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

6


 

Mind Medicine (MindMed) Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

For the
Three Months
 Ended
March 31,
2022

 

 

For the
Three Months
 Ended
March 31,
2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(18,451

)

 

$

(13,759

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation

 

 

3,792

 

 

 

1,279

 

Amortization of intangible assets

 

 

780

 

 

 

260

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid and other current assets

 

 

922

 

 

 

(732

)

Accounts payable

 

 

(843

)

 

 

1,581

 

Accrued expenses

 

 

994

 

 

 

1,377

 

Contribution payable

 

 

(60

)

 

 

(44

)

Net cash used in operating activities

 

 

(12,866

)

 

 

(10,038

)

Cash flows from investing activities

 

 

 

 

 

 

Acquisition, net of cash acquired

 

 

 

 

 

(297

)

Other investing activities

 

 

 

 

 

(19

)

Net cash used in financing activities

 

 

 

 

 

(316

)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of share capital, net of issuance costs

 

 

 

 

 

82,113

 

Proceeds from exercise of warrants

 

 

118

 

 

 

6,697

 

Proceeds from exercise of options

 

 

123

 

 

 

1,178

 

Withholding taxes paid on vested restricted stock units

 

 

(407

)

 

 

 

Net cash (used in) provided by financing activities

 

 

(166

)

 

 

89,988

 

Effect of exchange rate changes on cash

 

 

(35

)

 

 

313

 

Net (decrease) increase in cash

 

 

(13,067

)

 

 

79,947

 

Cash, beginning of period

 

 

133,539

 

 

 

80,094

 

Cash, end of period

 

$

120,472

 

 

$

160,041

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

7


 

Mind Medicine (MindMed) Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

1.
DESCRIPTION OF THE BUSINESS

Mind Medicine (MindMed) Inc. (formerly Broadway Gold Mining Ltd.) (the “Company” or “MindMed”) is incorporated under the laws of the Province of British Columbia. Its wholly owned subsidiaries, Mind Medicine, Inc. (“MindMed US”), HealthMode, Inc., MindMed Pty Ltd., and MindMed GmbH, are incorporated in Delaware, Delaware, Australia and Switzerland respectively. Prior to February 27, 2020, the Company’s operations were conducted through MindMed US.

MindMed US was incorporated on May 30, 2019. On February 27, 2020, MindMed US completed a reverse takeover transaction with Broadway Gold Mining Ltd. (“Broadway”) by way of a plan of arrangement (the "Arrangement") which resulted in Broadway becoming the legal parent company of MindMed US. MindMed US is deemed to be the accounting acquirer in the reverse takeover transaction. The reverse takeover transaction was accounted for as a reverse recapitalization and Broadway was treated as the “acquired” company for accounting purposes. The reverse takeover transaction was accounted as the equivalent of MindMed issuing stock for the net assets of Broadway, accompanied by a recapitalization. Accordingly, all historical financial information for all periods prior to the reverse takeover transaction are the consolidated financial statements of MindMed US, “as if” MindMed US is the predecessor to the Company. As a result, the consolidated balance sheets are presented as a continuance of MindMed US and the comparative figures presented are those of MindMed US.

MindMed is a clinical stage biopharmaceutical company developing novel products to treat brain health disorders, with a particular focus on psychiatry, addiction, pain and neurology. The Company's mission is to be the global leader in the development and delivery of treatments that unlock new opportunities to improve patient outcomes. The Company is developing a pipeline of innovative drug candidates, with and without acute perceptual effects, targeting the serotonin, dopamine and acetylcholine systems. This specifically includes pharmaceutically optimized drug products derived from the psychedelic and empathogen drug classes including LSD, R(-)-MDMA and zolunicant, or 18-MC, a congener of ibogaine.

As of March 31, 2022, the Company had an accumulated deficit of $156.1 million. Through March 31, 2022, all of the Company’s financial support has primarily been provided by proceeds from the issuance of Subordinate Voting Shares and warrants to purchase Subordinate Voting Shares.

As the Company continues its expansion, it may seek additional financing and/or strategic investments, however, there can be no assurance that any additional financing or strategic investments will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company does not obtain additional funding, it will most likely be required to reduce its plans and/or certain discretionary spending, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if it were unable to continue as a going concern. Management believes that it has sufficient working capital on hand to fund operations through at least the next twelve months from the date of the issuance of these financial statements.

 

COVID-19

The outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Depending on the length and severity of the pandemic, COVID-19 could impact the Company's operations, could cause delays relating to approval from the FDA and equivalent organizations in other countries, could postpone research activities, could impair the Company's ability to raise funds depending on COVID-19’s effect on capital markets, and could affect logistics and the Company’s ability to move materials in a timely manner to clinical trial sites or production of Good Manufacturing Practice ("GMP") materials (which availability of GMP materials may also impact clinical trial timelines).

To the knowledge of the Company’s management as of the date hereof, COVID-19 does not present, at this time, any specific known impacts to the Company in relation to the Company's business objectives or milestones related thereto. The Company relies on third parties to conduct and monitor the Company’s pre-clinical studies and clinical trials. However, to the knowledge of Company’s management, the ability of these third parties to conduct and monitor pre-clinical studies and clinical trials has not been and is not

8


 

anticipated to be impacted by COVID-19. The Company is not currently aware of any changes in laws, regulations or guidelines, including tax and accounting requirements, arising from COVID-19 which would be reasonably anticipated to materially affect the Company’s business.

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use the extended transition period for complying with new or revised accounting standards, and as a result of this election, the condensed consolidated financial statements may not be comparable to companies that comply with public company FASB standards’ effective dates. The Company may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of an offering or such earlier time that it is no longer an EGC.

2.
BASIS OF pRESENTATION AND Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2021, which are included in the Company’s Annual Report on Form 10-K filed with the SEC. The Company’s significant accounting policies are disclosed in the audited financial statements for the periods ended December 31, 2021 and 2020, included in the Company’s Annual Report on Form 10-K. Since the date of those financial statements, there have been no changes to its significant accounting policies, except as noted below.

The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates of the Financial Accounting Standards Board (“FASB”).

The preparation of financial statements in conformity with U.S. GAAP requires management to make a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates under different assumptions or conditions.

Intercompany balances and transactions, and any unrealized income and expenses arising from intercompany transactions, are eliminated in preparing the condensed consolidated financial statements.

Foreign Currency

The Company’s reporting currency is the U.S. dollar. The Company's functional currency is the Canadian dollar (“CAD”). The local currency of the Company’s foreign affiliates is generally their functional currency. Accordingly, the assets and liabilities of the foreign affiliates and the parent entity, are translated from their respective functional currency to U.S. dollars using fiscal year-end exchange rates, income and expense accounts are translated at the average rates in effect during the fiscal year and equity accounts are translated at historical rates. Transactions denominated in currencies other than the functional currency are remeasured to the functional currency at the exchange rate on the transaction date. Monetary assets and liabilities denominated in currencies other than the functional currency are remeasured at period-end using the period-end exchange rate.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position, results of operations, or cash flows upon adoption.

9


 

In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. In July 2018, the FASB issued ASU 2018-11 to amend certain aspects of Topic 842. These amendments provide entities with an additional (and optional) transition method to adopt Topic 842. Under this transition method, an entity initially applies the transition requirements in Topic 842 at that Topic’s effective date with the effects of initially applying Topic 842 recognized as a cumulative effect adjustment to the opening balance of retained earnings (or other components of equity or net assets, as appropriate) in the period of adoption. On April 8, 2020, the FASB changed the effective date of this standard applicable to the Company as an emerging growth company to January 1, 2022. The Company adopted this standard effective January 1, 2022, the adoption had no impact on the consolidated financial statements.

3.
ACQUISITIONS

HealthMode Acquisition

On February 26, 2021 the Company acquired 100% of the issued and outstanding shares of HealthMode Inc. (“HealthMode”), a developer of technologies using Artificial Intelligence (AI)-enabled digital measurement to increase the precision and speed of clinical research and patient monitoring. The Company plans to utilize these technologies in its clinical trials to enhance the quality of the data that is collected during the Company’s clinical trials.

The consideration paid for the acquisition of HealthMode was $27.6 million, and consisted of $0.5 million cash, 81,497 Multiple Voting Shares (equivalent to 8,149,700 Subordinate Voting Shares), valued at approximately $27.0 million based upon the closing price of the Company's Subordinate Voting Shares on the acquisition date, and $0.1 million in stock options (33,619 stock options), which are convertible into Subordinate Voting Shares of the Company. The Company incurred acquisition costs of $0.3 million in connection with the acquisition, primarily related to legal, accounting, and other professional services, which were recorded to general and administrative expense in the accompanying condensed consolidated statements of operations and comprehensive loss.

The Company recognized this transaction as a business combination. The Company recognized approximately $9.5 million of identifiable finite-lived intangible assets and $19.9 million of goodwill related to the acquisition of HealthMode. The identifiable finite-lived intangible assets are expected to be amortized over their useful lives which are estimated to be three years. The Company has made no adjustments to the purchase price during the measurement period.

 

Actual and pro forma results for this acquisition have not been presented as the financial impact to the Company’s condensed consolidated statement of operations is not material.

The goodwill is attributable to the value of the assembled workforce, and the related expertise and developed business function. Further, the acquisition is expected to allow the Company to streamline its product development processes. None of the goodwill is expected to be deductible for tax purposes.

4.
FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and the fair value hierarchy of the valuation techniques utilized. The Company classifies its assets and liabilities as either short- or long-term based on maturity and anticipated realization dates. The Company had no assets measured at fair value on a recurring basis as of March 31, 2022 or December 31, 2021.

 

 

 

March 31, 2022

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Directors' Deferred Share Unit Liability

 

$

490

 

 

$

 

 

$

 

 

$

490

 

 

 

December 31, 2021

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Directors' Deferred Share Unit Liability

 

$

509

 

 

$

 

 

$

 

 

$

509

 

 

There were no transfers into or out of Level 1, Level 2, or Level 3 during the three months ended March 31, 2022 and the year ended December 31, 2021.

10


 

5.
GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

During the three months ended March 31, 2022, the Company has made no additions to its outstanding goodwill. There were no triggering events identified, no indication of impairment of the Company’s goodwill and long-lived assets, and no impairment charges recorded during the three months ended March 31, 2022 and 2021.

Intangible assets, net

The following table summarizes the carrying value of the Company's intangible assets (in thousands):

 

 

 

 

 

 

 

March 31, 2022

 

 

Useful Lives
(in years)

 

Gross Carrying
Value

 

 

Accumulated
Amortization

 

 

Net Carrying
Value

 

Developed Technology

3

 

$

9,485

 

 

$

(3,396

)

 

$

6,089

 

Total intangible assets, net

 

 

$

9,485

 

 

$

(3,396

)

 

$

6,089

 

 

Developed technology has a remaining useful life of 2.0 years. Amortization expense included in research and development expense was $0.8 million and $0.3 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, the expected future amortization expense for finite-lived intangible assets was as follows (in thousands):

 

Period Ending March 31,

 

Amount

 

2023

 

$

3,127

 

2024

 

 

2,962

 

 Total

 

$

6,089

 

 

6.
ACCRUED EXPENSES

At March 31, 2022 and December 31, 2021, accrued expenses consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Professional services

 

$

1,696

 

 

$

2,313

 

Accrued compensation

 

 

3,685

 

 

 

2,295

 

Accrued clinical and manufacturing costs

 

 

1,071

 

 

 

906

 

Contribution payable

 

 

730

 

 

 

713

 

Other payables

 

 

45

 

 

 

3

 

Total accrued expenses

 

$

7,227

 

 

$

6,230

 

 

7.
SHAREHOLDERS’ EQUITY

Pursuant to the terms of the Arrangement, the Company’s equity structure reflects the equity structure of Broadway (the accounting acquiree), including the equity interests Broadway issued to effect the combination. Accordingly, the equity structure of MindMed US (the accounting acquirer) is restated using the exchange ratio established in the Agreement to reflect the number of shares of Broadway (the accounting acquiree) issued in the reverse takeover. On February 27, 2020, all outstanding Class B common shares (“Class B Shares”), Class C common shares (“Class C Shares”) and Class D common shares (“Class D Shares”) of MindMed US were exchanged for Class A common shares of MindMed US (“Class A Shares”), immediately following which all Class A Shares were exchanged, on a one-for-one basis (the “Exchange Ratio”), for Subordinate Voting Shares or Multiple Voting Shares (in the case of Multiple Voting Shares the exchange was on a one-for-one-hundred basis) of the Resulting Issuer (“Resulting Issuer Shares”) on a post-Consolidation basis. Such Class A Shares were then cancelled pursuant to the Arrangement, and MindMed US issued 1,000 common shares to the Company as consideration for issuing the Resulting Issuer Shares to the former MindMed US shareholders.

Subordinate Voting Shares

The Company is authorized to issue an unlimited number of Subordinate Voting Shares, which have no par value. As of March 31, 2022, the Company had issued and outstanding 422,401,776 shares of Subordinate Voting Shares.

 

11


 

Voting Rights - The holders of Subordinate Voting Shares are entitled to one vote for each Subordinate Voting Share held. All holders of Subordinate Voting Shares are entitled to receive notice of any meeting of shareholders of the Company, and to attend, vote and speak at such meetings, except those meetings at which only holders of a specific class of shares are entitled to vote separately as a class under the Business Corporations Act (British Columbia). A quorum for the transaction of business at any meeting of shareholders is two persons present at the meeting, each of whom is entitled to vote at the meeting, and who hold or represent by proxy in the aggregate not less than 5% of the outstanding shares of the Company entitled to vote at the meeting.

Multiple Voting Shares

The Company is authorized to issue an unlimited number of Multiple Voting Shares, which have no par value. As of March 31, 2022, the Company had no issued and outstanding Multiple Voting Shares.

Subordinate Voting Shares and Multiple Voting Shares Issued

2022 Equity Transactions

During the first quarter of 2022, holders of 4,521 Multiple Voting Shares exchanged their shares for 452,060 Subordinate Voting Shares.

8.
WARRANTS

Bought Deal Compensation and Financing Warrants

 

The below table represents the activity associated with the Company's outstanding equity classified Compensation and Financing warrants for the three months ended March 31, 2022:

 

 

 

Compensation Warrants

 

 

Financing
Warrants

 

 

Weighted
Average Exercise
Price (CAD$)

 

Balance – December 31, 2021

 

 

1,888,350

 

 

 

20,651,580

 

 

 

4.24

 

Issued

 

 

 

 

 

 

 

 

 

Issued on exercise of compensation warrants