UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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 No.
(Exact name of registrant as specified in its charter)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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| Name of each exchange on which registered |
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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ |
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| 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
The number of shares of the registrant’s common stock, $0.01 par value per share, outstanding as of August 8, 2022 was
Outlook Therapeutics, Inc.
Table of Contents
In this report, unless otherwise stated or as the context otherwise requires, references to “Outlook Therapeutics,” “Outlook,” “the Company,” “we,” “us,” “our” and similar references refer to Outlook Therapeutics, Inc. and its consolidated subsidiaries. The Outlook logo, LYTENAVA and other trademarks or service marks of Outlook Therapeutics, Inc. appearing in this report are the property of Outlook Therapeutics, Inc. This report also contains registered marks, trademarks and trade names of other companies. All other trademarks, registered marks and trade names appearing in this report are the property of their respective holders. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report 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 report, including statements regarding our future 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 by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “seek,” “should,” “will,” “would,” or the negative of these terms or similar expressions in this report.
We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” contained in our Annual Report on Form 10-K for the year ended September 30, 2021, filed with the Securities and Exchange Commission (“SEC”) on December 23, 2021, including, among other things, risks associated with:
| ● | the initiation, timing, progress and results of our past, current and planned clinical trials of our lead product candidate, ONS-5010; |
| ● | our reliance on our contract manufacturing organizations and other vendors; |
| ● | whether the results of our clinical trials will be sufficient to support domestic or global regulatory approvals; |
| ● | our ability to obtain and maintain regulatory approval for ONS-5010 in the United States and other markets; |
| ● | our expectations regarding the potential market size and the size of the patient populations for our product candidates, if approved, for commercial use; |
| ● | our ability to fund our working capital requirements, and our expectations regarding our current cash resources; |
| ● | the rate and degree of market acceptance of our current and future product candidates including our commercialization strategy and manufacturing capabilities for ONS-5010; |
| ● | the implementation of our business model and strategic plans for our business and product candidates; |
| ● | developments or disputes concerning our intellectual property or other proprietary rights; |
| ● | our ability to maintain and establish collaborations or obtain additional funding; |
| ● | our expectations regarding government and third-party payor coverage and reimbursement; |
| ● | our ability to compete in the markets we serve; |
| ● | the factors that may impact our financial results; and |
| ● | our estimates regarding the sufficiency of our cash resources and our need for additional funding. |
These risks are not exhaustive. Additional factors could harm our business and financial performance, such as risks associated with the ongoing novel coronavirus (“COVID-19”) global pandemic. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Unless required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information or future events or developments. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. We qualify all of the forward-looking statements in this report by these cautionary statements.
ii
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Outlook Therapeutics, Inc.
Consolidated Balance Sheets
(unaudited)
June 30, 2022 |
| September 30, 2021 | ||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Prepaid expenses and other current assets | | | ||||
Total current assets | | | ||||
Property and equipment, net | | | ||||
Operating lease right-of-use assets, net | | | ||||
Equity method investment | | | ||||
Other assets | | | ||||
Total assets | $ | | $ | | ||
Liabilities, convertible preferred stock and stockholders’ equity | ||||||
Current liabilities: | ||||||
Current portion of long-term debt | $ | | $ | | ||
Current portion of finance lease liabilities | | | ||||
Current portion of operating lease liabilities | | | ||||
Accounts payable | | | ||||
Accrued expenses | | | ||||
Income taxes payable | | | ||||
Total current liabilities | | | ||||
Long-term debt | — | | ||||
Finance lease liabilities | | | ||||
Operating lease liabilities | — | | ||||
Warrant liability | | | ||||
Total liabilities | | | ||||
Commitments and contingencies (Note 9) | ||||||
Convertible preferred stock: | ||||||
Series A convertible preferred stock, par value $ | ||||||
Series A-1 convertible preferred stock, par value $ | ||||||
Total convertible preferred stock | ||||||
Stockholders’ equity: | ||||||
Preferred stock, par value $ | ||||||
Series B convertible preferred stock, par value $ | ||||||
Common stock, par value $ | | | ||||
Additional paid-in capital | | | ||||
Accumulated deficit | ( | ( | ||||
Total stockholders' equity | | | ||||
Total liabilities, convertible preferred stock and stockholders' equity | $ | | $ | | ||
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
1
Outlook Therapeutics, Inc.
Consolidated Statements of Operations
(unaudited)
Three months ended June 30, | Nine months ended June 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Operating expenses: | ||||||||||||
Research and development | $ | | $ | | $ | | $ | | ||||
General and administrative | | | | | ||||||||
Loss from operations | ( | ( | ( | ( | ||||||||
Loss on equity method investment | | | | | ||||||||
Interest expense, net | | | | | ||||||||
Loss on extinguishment of debt | — | — | | — | ||||||||
Change in fair value of unsecured convertible promissory note | | — | | — | ||||||||
Change in fair value of warrant liability | ( | | ( | | ||||||||
Loss before income taxes | ( | ( | ( | ( | ||||||||
Income tax expense | — | — | | | ||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Per share information: | ||||||||||||
Net loss per share of common stock, basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted average shares outstanding, basic and diluted | | | | | ||||||||
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
2
Outlook Therapeutics, Inc.
Consolidated Statements of Stockholders’ Equity (Deficit)
(unaudited)
Stockholders' Equity (Deficit) | ||||||||||||||
Common Stock | Additional Paid-in | Accumulated | Total Stockholders' | |||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity (Deficit) | |||||
Balance at October 1, 2021 | | $ | | $ | | $ | ( | $ | | |||||
Issuance of common stock in connection with exercise of stock options | | | | — | | |||||||||
Sale of common stock, net of issuance costs | | | | — | | |||||||||
Stock-based compensation expense | — | — | | — | | |||||||||
Net loss | — | — | — | ( | ( | |||||||||
Balance at December 31, 2021 | | $ | | $ | | $ | ( | $ | | |||||
Issuance of common stock in connection with exercise of warrants | | | | — | | |||||||||
Sale of common stock, net of issuance costs | | | | — | | |||||||||
Stock-based compensation expense | — | — | | — | | |||||||||
Net loss | — | — | — | ( | ( | |||||||||
Balance at March 31, 2022 | | $ | | $ | | $ | ( | $ | | |||||
Issuance of common stock in connection with exercise of warrants | — | — | — | — | — | |||||||||
Sale of common stock, net of issuance costs | | | | — | | |||||||||
Stock-based compensation expense | — | — | | — | | |||||||||
Net loss | — | — | — | ( | ( | |||||||||
Balance at June 30, 2022 | | $ | | $ | | $ | ( | $ | | |||||
Stockholders' Equity (Deficit) | ||||||||||||||
Common Stock | Additional Paid-in | Accumulated | Total Stockholders' | |||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity (Deficit) | |||||
Balance at October 1, 2020 | | $ | | $ | | $ | ( | $ | | |||||
Stock-based compensation expense | — | — | | — | | |||||||||
Net loss | — | — | — | ( | ( | |||||||||
Balance at December 31, 2020 | | $ | | $ | | $ | ( | $ | ( | |||||
Issuance of common stock in connection with exercise of warrants | | | | — | | |||||||||
Sale of common stock, net of issuance costs | | | | — | | |||||||||
Stock-based compensation expense | — | — | | — | | |||||||||
Net loss | — | — | — | ( | ( | |||||||||
Balance at March 31, 2021 | | $ | | $ | | $ | ( | $ | | |||||
Sale of common stock, net of issuance costs | | | | — | | |||||||||
Stock-based compensation expense | — | — | | — | | |||||||||
Net loss | — | — | — | ( | ( | |||||||||
Balance at June 30, 2021 | | $ | | $ | | $ | ( | $ | | |||||
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
3
Outlook Therapeutics, Inc.
Consolidated Statements of Cash Flows
(unaudited)
Nine months ended June 30, | ||||||
| 2022 |
| 2021 | |||
OPERATING ACTIVITIES | ||||||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
Depreciation and amortization | | | ||||
Loss on extinguishment of debt | | — | ||||
Non-cash interest expense | | | ||||
Stock-based compensation | | | ||||
Change in fair value of unsecured convertible promissory note | | — | ||||
Change in fair value of warrant liability | ( | | ||||
Gain on settlement of lease termination obligation | — | ( | ||||
Loss on equity method investment | | | ||||
Changes in operating assets and liabilities: | ||||||
Prepaid expenses and other current assets | ( | ( | ||||
Other assets | — | | ||||
Operating lease liability | ( | ( | ||||
Accounts payable | | | ||||
Accrued expenses | | ( | ||||
Net cash used in operating activities | ( | ( | ||||
FINANCING ACTIVITIES | ||||||
Proceeds from the sale of common stock, net of issuance costs | | | ||||
Proceeds from debt | | | ||||
Payment of debt issuance costs | — | ( | ||||
Proceeds from exercise of common stock warrants | | | ||||
Proceeds from exercise of stock options | | — | ||||
Payments of finance lease obligations | ( | ( | ||||
Repayment of debt | ( | ( | ||||
Payment of financing costs | ( | — | ||||
Net cash provided by financing activities | | | ||||
Net increase in cash and cash equivalents | | | ||||
Cash and cash equivalents at beginning of period | | | ||||
Cash and cash equivalents at end of period | $ | | $ | | ||
Supplemental disclosure of cash flow information: | ||||||
Cash paid for interest | $ | | $ | | ||
Supplemental schedule of non-cash financing activities: | ||||||
Deferred offering costs amortization | $ | | $ | | ||
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
4
1. Organization and Description of Business
Outlook Therapeutics, Inc. (“Outlook” or the “Company”) was incorporated in New Jersey on January 5, 2010, started operations in July 2011, reincorporated in Delaware by merging with and into a Delaware corporation in October 2015 and changed its name to “Outlook Therapeutics, Inc.” in November 2018. The Company is a pre-commercial biopharmaceutical company focused on developing and commercializing ONS-5010, an ophthalmic formulation of bevacizumab for use in retinal indications. The Company is based in Iselin, New Jersey.
The Company has been actively monitoring the ongoing COVID-19 pandemic and its impact globally. Given the Company’s current infrastructure needs and current strategy, the Company was able to transition to remote working with limited impact on productivity as shelter-in-place and similar government orders were imposed. All development activities are currently active in support of the Company’s Biologics License Application (“BLA”) registration program for ONS-5010 for wet age-related macular degeneration (“wet AMD”).
The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition will depend on future developments that are highly uncertain, including any new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19. Management believes the financial results for the nine months ended June 30, 2022 were not significantly impacted by COVID-19.
2. Liquidity
The Company has incurred recurring losses and negative cash flows from operations since its inception and has an accumulated deficit of $
Management believes that the Company’s existing cash and cash equivalents as of June 30, 2022 will be sufficient to fund its operations into the first calendar quarter of 2023. Additional financing will be needed by the Company to fund its operations in the future and to commercially develop ONS-5010 and any other product candidates. Management is currently evaluating different strategies to obtain the required funding for future operations such as continuing to access capital through the current ATM Offering (as defined below) and negotiating a potential extension of maturity for notes that are scheduled to mature in January 2023. Refer to Note 10 for further details on the ATM Offering. These strategies may also include, but are not limited to, proceeds from potential licensing and/or marketing arrangements or collaborations with pharmaceutical or other companies, the issuance of equity securities, the issuance of additional debt, and revenues from potential future product sales, if any. There can be no assurance that these future funding efforts will be successful.
The Company’s future operations are highly dependent on a combination of factors, including (i) the timely and successful completion of additional financing discussed above; (ii) the Company’s ability to successfully begin marketing of its product candidates or complete revenue-generating partnerships with other companies; (iii) the success of its research and development; (iv) the development of competitive therapies by other biotechnology and pharmaceutical companies; and, ultimately, (v) regulatory approval and market acceptance of the Company’s proposed future products.
5
Outlook Therapeutics, Inc.
Notes to Unaudited Interim Consolidated Financial Statements
3. Basis of Presentation and Summary of Significant Accounting Policies
Basis of presentation
The accompanying unaudited interim consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
In the opinion of management, the accompanying unaudited interim consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s financial position as of June 30, 2022 and its results of operations for the three and nine months ended June 30, 2022 and 2021, cash flows for the nine months ended June 30, 2022 and 2021, and stockholders’ equity (deficit) for the three and nine months ended June 30, 2022 and 2021. Operating results for the nine months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the full year ending September 30, 2022. The unaudited interim consolidated financial statements presented herein do not contain all of the required disclosures under GAAP for annual consolidated financial statements. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and related notes as of and for the year ended September 30, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on December 23, 2021.
Use of estimates
The preparation of the unaudited interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of the unaudited interim consolidated financial statements, including as a result of the ongoing COVID-19 pandemic, actual results may materially vary from these estimates. Estimates and assumptions are periodically reviewed, and the effects of revisions are reflected in the unaudited interim consolidated financial statements in the period they are determined to be necessary.
Fair value option
As permitted under ASC 825, Financial Instruments (“ASC 825") the Company has elected the fair value option to account for its convertible promissory note (Note 8). In accordance with ASC 825, the Company records the convertible promissory note at fair value with changes in fair value recorded in the consolidated statements of operations.
Net loss per share
Basic and diluted net loss per common share is determined by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.
For purposes of calculating diluted loss per common share, the denominator includes both the weighted average common shares outstanding and the number of common stock equivalents if the inclusion of such common stock equivalents would be dilutive. Potentially dilutive securities include warrants, performance-based stock options and units, stock options and non-vested restricted stock unit (“RSU”) awards using the treasury stock method. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares due to the Company’s loss.
6
Outlook Therapeutics, Inc.
Notes to Unaudited Interim Consolidated Financial Statements
The following table sets forth the computation of basic loss per share and diluted loss per share:
Three months ended June 30, | Nine months ended June 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Common stock shares outstanding (weighted average) | | | | | ||||||||
Basic and diluted net loss per share | $ | ( | $ | ( | $ | ( | $ | ( | ||||
The following potentially dilutive securities (in common stock equivalents) have been excluded from the computation of diluted weighted-average shares outstanding as of June 30, 2022, and 2021, as they would be antidilutive:
As of June 30, | ||||
| 2022 |
| 2021 | |
Performance-based stock units | | | ||
Performance-based stock options | | — | ||
Stock options | | | ||
Common stock warrants | | | ||
Recently issued accounting pronouncements
In January 2020, FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), which, generally, provides guidance for investments in entities accounted for under the equity method of accounting. ASU 2020-01 is effective for public companies with fiscal years beginning after December 15, 2020 and for all other entities the amendments are effective for fiscal years beginning after December 15, 2021, including interim periods therein. The Company adopted ASU 2020-01 on October 1, 2021 and the adoption of this standard did not have a material impact on the Company’s consolidated financial condition, results of operations, cash flows and financial statement disclosures.
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 Entity’s Own Equity (Subtopic 815-40) — Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for annual and interim periods beginning after December 15, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the new standard, but adoption is not expected to have a material impact on its consolidated financial condition, results of operations, cash flows and financial statement disclosures.
4. Fair Value Measurements
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
| ● | Level 1 - Quoted prices in active markets for identical assets or liabilities. |
7
Outlook Therapeutics, Inc.
Notes to Unaudited Interim Consolidated Financial Statements
| ● | Level 2 - Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. |
| ● | Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. |
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
The following table presents the Company’s liabilities that are measured at fair value on a recurring basis:
June 30, 2022 | |||||||||
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
Liabilities | |||||||||
Warrant liability | $ | — | $ | — | $ | | |||
September 30, 2021 | |||||||||
(Level 1) |
| (Level 2) |
| (Level 3) | |||||
Liabilities | |||||||||
Warrant liability | $ | — | $ | — | $ | | |||
The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuation for the warrant liability and unsecured convertible promissory note for the nine months ended June 30, 2022:
Unsecured Convertible | ||||||
| Promissory Note |
| Warrants | |||
Balance at October 1, 2021 | $ | — | $ | | ||
Fair value at issuance date | | — | ||||
Change in fair value | | ( | ||||
Repayment | ( | — | ||||
Balance at June 30, 2022 | $ | — | $ | | ||
As further described in Note 8, the Company elected the fair value option to account for its amended unsecured convertible promissory note. The fair value of the amended unsecured convertible promissory note at issuance was estimated using a discounted cash flow model. Significant estimates in the cash flow model include the discount rate and the probability and timing of redemption.
The warrants issued in connection with the convertible senior secured notes originally issued pursuant to a certain Note and Warrant Purchase Agreement dated December 22, 2017 are classified as liabilities on the accompanying consolidated balance sheets as the warrants include cash settlement features at the option of the holders under certain circumstances. The warrant liability is revalued each reporting period with the change in fair value recorded in the accompanying
8
Outlook Therapeutics, Inc.
Notes to Unaudited Interim Consolidated Financial Statements
consolidated statements of operations until the warrants are exercised or expire. The fair value of the warrant liability is estimated using the Black-Scholes option pricing model using the following assumptions:
June 30, 2022 | September 30, 2021 | |||||||
Risk-free interest rate | | % | | % | ||||
Remaining contractual term of warrant (years) | | | ||||||
Expected volatility | | % | | % | ||||
Annual dividend yield | | % | | % | ||||
Fair value of common stock (per share) | $ | | $ | | ||||
Fair Value of Other Financial Instruments
At June 30, 2022, the fair value and carrying value of the unsecured promissory note included in long-term debt on the consolidated balance sheet on June 30, 2022 was $
5. Property and Equipment, Net
Property and equipment, net, consists of:
| June 30, 2022 |
| September 30, 2021 | |||
Laboratory equipment | $ | | $ | | ||
Less: accumulated depreciation | ( | ( | ||||
$ | | $ | | |||
Depreciation expense was $
6. Equity Method Investment
In connection with the execution of a stock purchase agreement with Syntone Ventures LLC (“Syntone Ventures”), the U.S. based affiliate of Syntone Technologies Group Co. Ltd. (“Syntone PRC”) on May 22, 2020, the Company and Syntone PRC entered into a joint venture agreement pursuant to which they agreed to form a People’s Republic of China (“PRC”) joint venture, Beijing Syntone Biopharma Ltd (“Syntone”), that is
The Company made the initial investment of $
9
Outlook Therapeutics, Inc.
Notes to Unaudited Interim Consolidated Financial Statements
7. Accrued Expenses
Accrued expenses consists of:
| June 30, 2022 |
| September 30, 2021 | |||
Compensation | $ | | $ | | ||
Research and development | | | ||||
Interest payable | — | | ||||
Professional fees | | — | ||||
Other accrued expenses | | | ||||
$ | | $ | | |||
8. Debt
Debt consists of:
| June 30, 2022 |
| September 30, 2021 | |||
Unsecured promissory note | $ | | | |||
Paycheck Protection Program term loan | — | | ||||
Total debt | | | ||||
Less: unamortized loan costs | ( | ( | ||||
Total debt, net of unamortized loan costs | | | ||||
Less: current portion | ( | ( | ||||
Long-term debt | $ | — | $ | | ||
Unsecured convertible promissory note
On November 5, 2020, the Company received $
The Company prepaid the note in full on June 30, 2022 by paying
Unsecured promissory note
On November 16, 2021, the Company received $
10
Outlook Therapeutics, Inc.
Notes to Unaudited Interim Consolidated Financial Statements
deducted from the principal in the accompanying consolidated balance sheets. The debt discount is amortized as a component of interest expense over the term of the underlying debt using the effective interest method. The note bears interest at a rate of
During the three months ended June 30, 2022 and 2021, the Company recognized $
Paycheck Protection Program term loan
On May 4, 2020, the Company received $
9. Commitments and Contingencies
Litigation
On July 20, 2020, Laboratorios Liomont S.A. de C.V. (“Liomont”), filed a complaint against the Company in the U.S. District Court of the Southern District of New York alleging certain breach of contract claims under the June 25, 2014 strategic development, license and supply agreement relating to the biosimilar development program for ONS-3010 and ONS-1045 claiming $
Leases
Corporate office
In March 2021, the Company assigned its Monmouth Junction, New Jersey corporate office lease to a third party and does not have remaining future obligations. In March 2021, the Company entered into a new
Equipment leases
The Company has equipment leases, with terms between
Certain lease agreements contain provisions for future rent increases. Payments due under the lease contracts include minimum payments that the Company is obligated to make under the non-cancelable initial terms of the leases as the renewal terms are at the Company’s option. Lease expense is recorded as research and development or general and administrative based on the use of the leased asset.
11
Outlook Therapeutics, Inc.
Notes to Unaudited Interim Consolidated Financial Statements
The components of lease cost for the three and nine months ended June 30, 2022 and 2021 are as follows:
Three months ended June 30, | Nine months ended June 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Lease cost: |
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|
|
|
|
|
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Amortization of right-of-use assets | $ | — | $ | — | $ | — | $ | — | ||||
Interest on lease liabilities |
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| |
| |
| | ||||
Total finance lease cost |
| |
| |
| |
| | ||||
Operating lease cost |
| |
| |
| |
| | ||||
Total lease cost | $ | | $ | | $ | | $ | | ||||
Amounts reported in the consolidated balance sheets for leases where the Company is the lessee are as follows:
| ||||||
June 30, 2022 |
| September 30, 2021 | ||||
Operating leases: |
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|
| |||
Right-of-use asset | $ | | $ | | ||
Operating lease liabilities |
| |
| | ||
Finance leases: |
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Right-of-use asset | $ | — | $ | — | ||
Financing lease liabilities |
| |
| | ||
Weighted-average remaining lease term (years): |
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Operating leases | ||||||
Finance leases |
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Weighted-average discount rate: |
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Operating leases | ||||||
Finance leases |
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Other information related to leases for the nine months ended June 30, 2022 and 2021 are as follows:
Nine months ended June 30, | ||||||
| 2022 |
| 2021 | |||
Cash paid for amounts included in the measurement of lease obligations: |
|
|
| |||
Operating cash flows from finance leases | $ | | $ | | ||
Operating cash flows from operating leases |
| |
| | ||
Financing cash flows from finance leases |
| |
| | ||
Right-of-use assets obtained in exchange for lease obligations: |
|
|
|
| ||
Operating leases | $ | — | $ | | ||
Future minimum lease payments under non-cancelable leases as of June 30, 2022 are as follows for the years ending September 30:
Operating leases | Finance leases | |||||
2022 (remaining three months) | $ | | $ | | ||
2023 |
| |
| | ||
2024 |
| — |
| | ||
Total undiscounted lease payments | $ | | $ | | ||
Less: Imputed interest |
| |
| | ||
Total lease obligations | $ | | $ | | ||
12
Outlook Therapeutics, Inc.
Notes to Unaudited Interim Consolidated Financial Statements
10. Common Stock and Stockholders’ Equity (Deficit)
Common stock
In November 2021, the Company issued
H.C. Wainwright & Co. At-the-Market Offering Agreement
On March 26, 2021, the Company entered into an At-the-Market Offering Agreement (the “Agreement”) with H.C. Wainwright & Co., as sales agent (“Wainwright” or the “Agent”), under which the Company may issue and sell shares of its common stock from time to time through Wainwright as sales agent (the “ATM Offering”). The Company filed a prospectus supplement, dated March 26, 2021, with the Securities and Exchange Commission pursuant to which the Company may offer and sell shares of common stock having an aggregate offering price of up to up to $
Under the Agreement, the Company pays Wainwright a commission equal to
During the nine months ended June 30, 2022, the Company sold
Common stock warrants
As of June 30, 2022, shares of common stock issuable upon the exercise of outstanding warrants were as follows:
Shares of | ||||||
common stock | ||||||
issuable upon | ||||||
exercise of | Exercise Price | |||||
Expiration Date |
| warrants |
| Per Share | ||
December 22, 2024 | (i) | | $ | | ||
April 13, 2025 | (i) | | $ | | ||
May 31, 2025 | (i) | | $ | | ||
February 24, 2025 | | $ | | |||
February 26, 2024 | | $ | | |||
June 22, 2025 | | $ | | |||
January 28, 2026 | | $ | | |||
November 23, 2026 | | $ | | |||
| ||||||
13
Outlook Therapeutics, Inc.
Notes to Unaudited Interim Consolidated Financial Statements
| (i) | The warrants were issued in connection with the convertible senior secured notes originally issued pursuant to the certain Note and Warrant Purchase Agreement dated December 22, 2017 and are classified as liabilities on the accompanying consolidated balance sheets, as the warrants include cash settlement features at the option of the holders under certain circumstances. Refer to Note 4 for fair value measurements disclosures. |
During the nine months ended June 30, 2022, warrants to purchase an aggregate of
11. Stock-Based Compensation
2011 Equity Incentive Plan
The Company’s 2011 Equity Compensation Plan (the “2011 Plan”) provided for the Company to sell or issue restricted common stock, RSUs, performance-based awards (“PSUs”), cash-based awards or to grant stock options for the purchase of common stock to officers, employees, consultants and directors of the Company. The 2011 Plan was administered by the board of directors or, at the discretion of the board of directors, by a committee of the board. As of June 30, 2022, PSUs representing
2015 Equity Incentive Plan
In December 2015, the Company adopted the 2015 Plan. The 2015 Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, RSU awards, performance stock awards and other forms of equity compensation to Company employees, directors and consultants. The aggregate number of shares of common stock authorized for issuance pursuant to the Company’s 2015 Plan is
Stock options and RSUs are granted under the Company’s 2015 Plan and generally vest over a period of to
The Company recorded stock-based compensation expense in the following expense categories of its statements of operations for the three and nine months ended June 30, 2022 and 2021:
Three months ended June 30, | Nine months ended June 30, | |||||||||||
2022 |
| 2021 |
| 2022 |
| 2021 | ||||||
Research and development | $ | | $ | | $ | | $ | | ||||
General and administrative | | | | | ||||||||
$ | | $ | | $ | ||||||||