10-Q 1 otlk-20231231x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 December 31, 2023

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. 001-37759

OUTLOOK THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

-

Delaware

 

38-3982704

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

485 Route 1 South
Building F, Suite 320

Iselin, New Jersey

 

08830

(Address of principal executive offices)

 

(Zip Code)

(609619-3990

(Registrant’s telephone number, including area code)

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

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

Common Stock

OTLK

Nasdaq Stock Market LLC

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

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

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

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

Emerging growth company

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

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

The number of shares of the registrant’s common stock, $0.01 par value per share, outstanding as of February 12, 2024 was 260,257,517.

Outlook Therapeutics, Inc.

Table of Contents

    

Page
Number

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

1

Consolidated Balance Sheets as of December 31, 2023 and September 30, 2023

1

Consolidated Statements of Operations for the Three Months Ended December 31, 2023 and 2022

2

Consolidated Statements of Stockholders’ (Deficit) Equity for the Three Months Ended December 31, 2023 and 2022

3

Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2023 and 2022

4

Notes to Unaudited Interim Consolidated Financial Statements

5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3. Quantitative and Qualitative Disclosures About Market Risk

32

Item 4. Controls and Procedures

32

PART II. OTHER INFORMATION

34

Item 1. Legal Proceedings

34

Item 1A. Risk Factors

34

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

34

Item 3. Defaults Upon Senior Securities

34

Item 4. Mine Safety Disclosures

34

Item 5. Other Information

34

Item 6. Exhibits

35

SIGNATURES

36

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, 2023, filed with the Securities and Exchange Commission (“SEC”) on December 22, 2023, including, among other things, risks associated with:

the initiation, timing, progress and results of our 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 current macroeconomic environment, including as a result of the impacts of inflation, high interest rates, current or potential future bank failures or ongoing overseas conflict. 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)

December 31, 2023

    

September 30, 2023

Assets

Current assets:

Cash and cash equivalents

$

10,356,630

$

23,391,982

Prepaid expenses and other current assets

10,032,579

7,587,216

Total current assets

20,389,209

30,979,198

Operating lease right-of-use assets, net

14,956

26,172

Equity method investment

796,480

793,932

Other assets

484,320

501,299

Total assets

$

21,684,965

$

32,300,601

Liabilities, convertible preferred stock and stockholders’ deficit

Current liabilities:

Current portion of long-term debt

$

36,544,000

$

35,551,000

Current portion of finance lease liabilities

1,084

4,267

Accounts payable

3,480,326

6,574,523

Accrued expenses

4,086,770

2,745,740

Income taxes payable

1,856,629

1,856,629

Total current liabilities

45,968,809

46,732,159

Warrant liability

59,561

6,219

Total liabilities

46,028,370

46,738,378

Commitments and contingencies (Note 8)

Convertible preferred stock:

Series A convertible preferred stock, par value $0.01 per share: 1,000,000 shares authorized, no shares issued and outstanding

Series A-1 convertible preferred stock, par value $0.01 per share: 200,000 shares authorized, no shares issued and outstanding

Total convertible preferred stock

Stockholders’ deficit:

Preferred stock, par value $0.01 per share: 7,300,000 shares authorized, no shares issued and outstanding

Series B convertible preferred stock, par value $0.01 per share: 1,500,000 shares authorized, no shares issued and outstanding

Common stock, par value $0.01 per share; 425,000,000 shares authorized; 260,257,517 shares issued and outstanding at December 31, 2023 and September 30, 2023

2,602,574

2,602,574

Additional paid-in capital

452,150,446

450,877,835

Accumulated deficit

(479,096,425)

(467,918,186)

Total stockholders' deficit

(24,343,405)

(14,437,777)

Total liabilities, convertible preferred stock and stockholders' deficit

$

21,684,965

$

32,300,601

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 December 31, 

    

2023

    

2022

Operating expenses:

Research and development

$

4,529,358

$

9,862,424

General and administrative

5,793,764

5,825,604

Loss from operations

(10,323,122)

(15,688,028)

Income on equity method investment

(2,548)

(21,505)

Interest (income) expense, net

(188,677)

2,448,591

Loss on extinguishment of debt

577,659

Change in fair value of promissory notes

993,000

Change in fair value of warrant liability

53,342

(30,260)

Net loss

$

(11,178,239)

$

(18,662,513)

Per share information:

Net loss per share of common stock, basic and diluted

$

(0.04)

$

(0.08)

Weighted average shares outstanding, basic and diluted

260,257,517

227,410,533

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

2

Outlook Therapeutics, Inc.

Consolidated Statements of Stockholders’ (Deficit) Equity

(unaudited)

Stockholders' Deficit

Common Stock

Additional Paid-in

Accumulated

Total Stockholders'

    

Shares

    

Amount

    

Capital

    

Deficit

    

Deficit

Balance at October 1, 2023

260,257,517

 

$

2,602,574

 

$

450,877,835

 

$

(467,918,186)

$

(14,437,777)

Stock-based compensation expense

1,272,611

1,272,611

Net loss

(11,178,239)

(11,178,239)

Balance at December 31, 2023

260,257,517

$

2,602,574

$

452,150,446

$

(479,096,425)

$

(24,343,405)

Stockholders' Equity

Common Stock

Additional Paid-in

Accumulated

Total Stockholders'

    

Shares

    

Amount

    

Capital

    

Deficit

    

Equity

Balance at October 1, 2022

227,310,572

$

2,273,105

$

415,398,984

$

(408,935,518)

$

8,736,571

Sale of common stock, net of issuance costs

29,356,222

293,562

23,998,598

24,292,160

Stock-based compensation expense

1,392,393

1,392,393

Net loss

(18,662,513)

(18,662,513)

Balance at December 31, 2022

256,666,794

$

2,566,667

$

440,789,975

$

(427,598,031)

$

15,758,611

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

3

Outlook Therapeutics, Inc.

Consolidated Statements of Cash Flows

(unaudited)

Three months ended December 31, 

    

2023

    

2022

OPERATING ACTIVITIES

Net loss

$

(11,178,239)

$

(18,662,513)

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

Depreciation and amortization

28,195

10,778

Loss on extinguishment of debt

577,659

Non-cash interest expense

2,529,830

Stock-based compensation

1,272,611

1,392,393

Change in fair value of promissory notes

993,000

Change in fair value of warrant liability

53,342

(30,260)

Income on equity method investment

(2,548)

(21,505)

Interest paid on debt

(1,158,609)

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

(2,445,363)

788,509

Operating lease liabilities

(11,422)

Accounts payable

(3,094,197)

678,394

Accrued expenses

1,341,030

5,005,500

Net cash used in operating activities

(13,032,169)

(8,901,246)

FINANCING ACTIVITIES

Proceeds from the sale of common stock, net of issuance costs

24,637,009

Proceeds from debt

30,000,000

Payments of finance lease obligations

(3,183)

(2,797)

Repayment of debt

(10,220,000)

Payment of financing costs

(568,930)

Net cash (used in) provided by financing activities

(3,183)

43,845,282

Net (decrease) increase in cash and cash equivalents

(13,035,352)

34,944,036

Cash and cash equivalents at beginning of period

23,391,982

17,396,812

Cash and cash equivalents at end of period

$

10,356,630

$

52,340,848

Supplemental disclosure of cash flow information:

Cash paid for interest

$

$

1,159,008

Supplemental schedule of non-cash financing activities:

Debt issuance costs in accrued expenses

$

$

254,964

Common stock issuance costs in accrued expenses

$

$

339,275

Deferred offering costs amortization

$

$

5,573

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

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Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

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 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.

In the fourth quarter of calendar 2023, the Company agreed to conduct an additional adequate and well-controlled clinical trial following discussions with the U.S. Food and Drug Administration (“FDA”) in support of the Company’s Biologics License Application (“BLA”) for ONS-5010. In December 2023, the Company submitted a Special Protocol Assessment (“SPA”) to the FDA for this study (NORSE EIGHT) seeking confirmation that, if successful, it will address the FDA’s requirement for a second adequate and well-controlled clinical trial to support its planned resubmission of the ONS-5010 BLA. In January 2024, the Company received confirmation that the FDA has reviewed and agreed upon the NORSE EIGHT trial protocol pursuant to the SPA and that, if the NORSE EIGHT trial is successful, it would satisfy the FDA’s requirement for a second adequate and well-controlled clinical trial to address fully the clinical deficiency identified in the Complete Response Letter (“CRL”). The first subject was enrolled in NORSE EIGHT in January 2024.  In addition, through a Type A meeting and additional interactions, the Company has identified the approaches needed to resolve the chemistry, manufacturing and controls (“CMC”) comments in the CRL.

Separately, in October 2022 the Company submitted a Marketing Authorization Application (“MAA”), for ONS-5010 with the European Medicines Agency (“EMA”). On December 22, 2022, the Company’s MAA was validated for review by the EMA. The formal review process of the MAA by the EMA’s Committee for Medicinal Products for Human Use (“CHMP”) is now underway with an estimated decision date expected in the first half of calendar 2024. ONS-5010 is the Company’s sole product candidate in active development.

2.    Liquidity

The Company has incurred recurring losses and negative cash flows from operations since its inception and has an accumulated deficit of $479,096,425 as of December 31, 2023. As of December 31, 2023, the Company had $37,666,716 of principal, accrued interest and exit fees due under an unsecured convertible promissory note issued in December 2022 (the “December 2022 Note”), maturing on April 1, 2024. As a result, there is substantial doubt about the Company’s ability to continue as a going concern. The accompanying unaudited interim consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The unaudited interim consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

In January 2024, the Company entered into a securities purchase agreement with the investors named therein, pursuant to which the Company agreed to sell and the investors agreed to purchase shares of common stock and accompanying warrants to purchase shares of common stock in a private placement (the "Private Placement”), for gross proceeds of up to $60,000,000 at closing, plus up to an additional $99,000,000 upon full cash exercise of the warrants. In addition, in January 2024, the Company entered into a securities purchase agreement with Syntone Ventures, LLC (“Syntone”), pursuant to which the Company agreed to sell and Syntone agreed to purchase shares of common stock and accompanying warrants to purchase shares of common stock in a private placement (the “Syntone Private Placement” and together with the Private Placement, the “Private Placements”), for gross proceeds of up to $5,000,000 at closing. Concurrently with the Private Placements, the Company entered into an amendment to the December 2022 Note (the “Note Amendment”), which, among other things, would extend the maturity of the December 2022 Note to July 1, 2025. Both the Private Placements and the Note Amendment are subject to satisfaction of certain closing conditions, including various required stockholder approvals and, with respect to the Syntone Private Placement, certain regulatory approvals. The Private Placements will not close, the shares of common stock and warrants will not be issued and the proceeds of the Private Placements will not be received by the Company unless and until the closing conditions are satisfied. Similarly, the Note Amendment will not

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Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

be effective unless the relevant conditions are satisfied. Therefore, there can be no assurance that the Private Placements and the Note Amendment will be successful. See Note 12 for additional information on the Private Placements and the Note Amendment.

Management does not believe that the existing cash and cash equivalents as of December 31, 2023 are sufficient to fund the Company’s operations through one year from the Form 10-Q filing date. However, management does believe that the existing cash and cash equivalents when combined with the expected proceeds from the Private Placements (subject to closing conditions being met and meeting the requirements for calling the associated warrants) are sufficient to support the Company’s operations through June 2025. If stockholders do not approve the Private Placements or the change in terms for the December 2022 Note at the upcoming annual meeting of stockholders, it would raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s consolidated financial statements do not include any adjustments that might be necessary if it is unable to continue as a going concern.

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.

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 (“ASC”) 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 December 31, 2023 and its results of operations for the three months ended December 31, 2023 and 2022, cash flows for the three months ended December 31, 2023 and 2022, and stockholders’ (deficit) equity for the three months ended December 31, 2023 and 2022. Operating results for the three months ended December 31, 2023 are not necessarily indicative of the results that may be expected for the full year ending September 30, 2023. 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, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on December 22, 2023.

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, such as the current macroeconomic environment, including as a result of inflation, high interest rates or ongoing overseas conflict, 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.

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Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

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.

The following table sets forth the computation of basic loss per share and diluted loss per share:

Three months ended December 31, 

    

2023

    

2022

Net loss attributable to common stockholders

$

(11,178,239)

$

(18,662,513)

Common stock shares outstanding (weighted average)

260,257,517

227,410,533

Basic and diluted net loss per share

$

(0.04)

$

(0.08)

The following potentially dilutive securities (in common stock equivalents) have been excluded from the computation of diluted weighted-average shares outstanding as of December 31, 2023 and 2022, as they would be antidilutive:

As of December 31, 

    

2023

    

2022

Performance-based stock units

2,470

2,470

Performance-based stock options

700,000

1,900,000

Stock options

25,982,109

20,726,330

Common stock warrants

7,328,549

7,328,549

Convertible debt

17,519,402

15,910,000

(i)

(i)The potentially dilutive securities related to convertible debt are calculated based on a fixed conversion price of $2.00 per share, which is subject to change as described in Note 7.

Recently issued accounting pronouncements

In  November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07, which is applicable to entities with a single reportable segment and will primarily require enhanced disclosures about significant segment expenses and enhanced disclosures in interim periods. The guidance in ASU 2023-07 will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023 and interim reporting periods in fiscal years beginning after December 31, 2024, with early adoption permitted. The Company is currently evaluating the impact that the adoption of ASU 2023-07 will have on its consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 which is intended to improve income tax disclosure requirements by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) the disaggregation of income taxes paid by jurisdiction. The guidance makes several other changes to the income tax disclosure requirements. The guidance in ASU 2023-09 will be effective for annual reporting periods in fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact that the adoption of ASU 2023-09 will have on its consolidated financial statements and disclosures.

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Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

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.
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:

December 31, 2023

    

(Level 1)

    

(Level 2)

    

(Level 3)

Liabilities

Unsecured convertible promissory note

$

$

$

36,544,000

Warrant liability

59,561

Total

$

$

$

36,603,561

September 30, 2023

(Level 1)

    

(Level 2)

    

(Level 3)

Liabilities

Unsecured convertible promissory note

$

$

$

35,551,000

Warrant liability

6,219

Total

$

$

$

35,557,219

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 three months ended December 31, 2023:

Unsecured Convertible

    

Promissory Note

    

Warrants

Balance at October 1, 2023

$

35,551,000

$

6,219

Change in fair value

993,000

53,342

Balance at December 31, 2023

$

36,544,000

$

59,561

As further described in Note 7, the Company elected the fair value option to account for the December 2022 Note. The fair value of the December 2022 Note is estimated using a binomial lattice model, which evaluates the payouts under hold,

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Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

convert or call decisions. Significant estimates in the binomial lattice model include the Company’s stock price, volatility, risk-free rate of return, and credit-adjusted discount rate.

The fair value of the December 2022 Note as of December 31, 2023 was estimated using a binomial lattice model with the following assumptions:

December 31, 2023

September 30, 2023

Term (years)

0.3

0.3

Stock price

$

0.39

$

0.22

Volatility

186.0

%  

71.0

%

Risk-free rate

5.4

%

5.5

%

Dividend yield

%

%

Credit-adjusted discount rate

21.8

%

22.8

%

The warrants issued in connection with the convertible senior secured notes originally issued pursuant to that certain Note and Warrant Purchase Agreement dated December 22, 2017 are classified as liabilities on the accompanying unaudited interim 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 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:

    

December 31, 2023

September 30, 2023

Risk-free interest rate

4.72

%  

5.30

%

Remaining contractual term of warrants (years)

1.1

1.4

Expected volatility

235.4

%

158.3

%

Annual dividend yield

%

%

Fair value of common stock (per share)

$

0.39

$

0.22

5.  Equity Method Investment

In connection with the execution of a stock purchase agreement with Syntone Ventures LLC, the United States-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 JV”), that is 80% owned by Syntone PRC and 20% owned by the Company. As the Company can exert significant influence over, but does not control, Syntone JV’s operations through voting rights or representation on Syntone JV’s board of directors, the Company accounts for this investment using the equity method of accounting. Upon formation of Syntone JV in April 2021, the Company entered into a royalty-free license with Syntone JV for the development, commercialization and manufacture of ONS-5010 in the greater China market, which includes Hong Kong, Taiwan and Macau.

The Company made the initial investment of $900,000 in June 2020 and  is committed to making capital contributions to Syntone JV of approximately $2,100,000, based upon the development plan contemplated in the license agreement. The maximum exposure to a loss as a result of the Company’s involvement in Syntone JV is limited to the initial investment and the future capital contributions totaling approximately $2,100,000.

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Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

6.     Accrued Expenses

Accrued expenses consists of:

    

December 31, 2023

September 30, 2023

Compensation

$

1,112,512

$

919,970

Research and development

1,631,674

1,234,192

Professional fees

1,161,512

165,192

Other accrued expenses

181,072

426,386

$

4,086,770

$

2,745,740

7.    Debt

Debt consists of:

    

December 31, 2023

    

September 30, 2023

Unsecured convertible promissory note (measured at fair value)

$

36,544,000

$

35,551,000

Less: current portion

(36,544,000)

(35,551,000)

Long-term debt

$

$

December 2022 Note

On December 22, 2022, the Company entered into a Securities Purchase Agreement and issued the December 2022 Note with a face amount of $31,820,000 to Streeterville Capital, LLC (the “Lender”), the holder of the Company’s unsecured promissory note issued in November 2021 (the “November 2021 Note”). The December 2022 Note has an original issue discount of $1,820,000. The Company received net proceeds of $18,052,461 upon the closing on December 28, 2022 after deducting the Lender’s transaction costs in connection with the issuance and a full payment of the remaining outstanding principal and accrued interest on the November 2021 Note. The November 2021 Note was cancelled upon repayment. See below for additional disclosures relating to November 2021 Note.

The December 2022 Note bears interest at 9.5% per annum and matures on April 1, 2024. The December 2022 Note contains customary covenants, including a restriction on the Company’s ability to pledge certain of the Company’s assets, subject to certain exceptions, without the Lender’s consent. Beginning on April 1, 2023, the Lender will have the right to convert the December 2022 Note at the Conversion Price (as defined below). The principal amount and conversion price of the December 2022 Note are subject to adjustment upon certain triggering events. In addition, the Company has the right to convert all or any portion of the outstanding balance under the December 2022 Note into shares of common stock at the Conversion Price if certain conditions have been met at the time of conversion, including if at any time after the six-month anniversary of the closing date, the daily volume-weighted average price of the common stock on Nasdaq equals or exceeds $2.50 per share (subject to adjustments for stock splits and stock combinations) for a period of 30 consecutive trading days. Payments may be made by the Company (i) in cash, (ii) in shares of common stock, with the number of shares being equal to the portion of the applicable payment amount divided by the Conversion Price (as defined below), or (iii) a combination of cash and shares of common stock. Any payments made by the Company in cash, including prepayments or repayment at maturity, will be subject to an additional fee of 7.5%. Upon the occurrence of certain events described in the December 2022 Note, including, among others, the Company’s failure to pay amounts due and payable under the December 2022 Note, events of insolvency or bankruptcy, failure to observe covenants contained in the Securities Purchase Agreement and the December 2022 Note, breaches of representations and warranties in the Securities Purchase Agreement, and the occurrence of certain transactions without the Lender’s consent (each such event, a “Trigger Event”), the Lender shall have the right, subject to certain exceptions, to increase the balance of the December 2022 Note by 10% for a Major Trigger Event (as defined in the December 2022 Note) and 5% for a Minor Trigger Event (as defined in the December 2022 Note). If a Trigger Event is not cured within ten (10) trading days of written notice thereof from the Lender, it will result in an event of default (such event, an “Event of Default”). Following an Event of Default, the Lender

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Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

may accelerate the December 2022 Note such that all amounts thereunder become immediately due and payable, and interest shall accrue at a rate of 22% annually until paid. Under the December 2022 Note, “Conversion Price” means, prior to a Major Trigger Event, $2.00 per share (subject to adjustment for stock splits and stock combinations), and following a Major Trigger Event, the lesser of (i) $2.00 per share (subject to adjustment for stock splits and stock combinations), and (ii) 90% multiplied by the lowest closing bid price of the Company’s common stock in the three trading days prior to the date on which the conversion notice is delivered. If the Conversion Price is below $0.1756 per share, the Company will be required to satisfy a conversion notice from the Lender in cash. Subject to certain exceptions, while the December 2022 Note is outstanding, the Lender will have a consent right on any future variable rate transactions or any debt and a 10% participation right in any future debt or equity financings.

In December 2023, the Company extended the maturity of the December 2022 Note from January 1, 2024 to April 1, 2024. The Company incurred a $475,000 extension fee, which was expensed in the three months ended December 31, 2023 and included in general and administrative expense in the unaudited interim consolidated statement of operations. In January 2024, the Company entered into the Note Amendment, which would further extend the maturity of the December 2022 Note to July 1, 2025. The Note Amendment is subject to satisfaction of certain closing conditions, including various required stockholder approvals. The Note Amendment will not be effective unless the relevant conditions are satisfied. Therefore, there can be no assurance that the Note Amendment will be successful. See Note 12 for additional information on the Note Amendment.

The Company elected to account for the December 2022 Note at fair value (Note 4) and was not required to bifurcate the conversion option as a derivative and as a result the original issue discount of $1,820,000 and debt issuance costs were written off upon election to fair value and accounted for as interest. During the three months ended December 31, 2022 the Company recognized $2,074,964 of interest expense related to the December 2022 Note related to original issue discount of $1,820,000 and other third party debt issuance costs of $254,964 as the Company elected the fair value option.

November 2021 Note

On November 16, 2021, the Company received $10,000,000 in net proceeds from the issuance of the November 2021 Note with a face amount of $10,220,000. Debt issuance costs totaling $820,000 were recorded as debt discount and were deducted from the principal. The debt discount was amortized as a component of interest expense over the term of the underlying debt using the effective interest method. The November 2021 Note bore interest at a rate of 9.5% per annum compounding daily and was set to mature on January 1, 2023. The Company could prepay all or a portion of the November 2021 Note at any time by paying 105% of the outstanding balance elected for pre-payment.

As discussed above, the November 2021 Note was cancelled using proceeds from the December 2022 Note issued to the same lender. The total repayment was $11,947,539, which represented 105% of the outstanding balance and included $1,158,609 of interest expense. The transaction has been accounted for as an extinguishment of the November 2021 Note. As a result, the Company recorded a loss on debt extinguishment of $577,659, which included $8,729 of unamortized debt discount, and prepayment fees of $568,930.

During the three months ended December 31, 2022, the Company recognized $454,866 of interest expense related to the November 2021 Note of which $190,775 was related to the amortization of debt discount.

8.     Commitments and Contingencies

Litigation

On November 3, 2023, a securities class action lawsuit was filed against the Company and certain of its officers in the United States District Court for the District of New Jersey. The class action complaint alleges violations of the Securities Exchange Act of 1934, as amended, or the Exchange Act, in connection with allegedly false and misleading statements made by the Company related to the Company’s BLA during the period from December 29, 2022 through August 29,

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Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

2023. The complaint alleges, among other things, that the Company violated Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 by failing to disclose that there was an alleged lack of evidence supporting ONS-5010 as a treatment for wet AMD and that we and/or our manufacturing partner had deficient CMC controls for ONS-5010, which remained unresolved at the time the Company’s BLA was re-submitted to the FDA and, as a result, the FDA was unlikely to approve the Company’s BLA, and that the Company’s stock price dropped when such information was disclosed. The plaintiffs in the class action complaint seek damages and interest, and an award of reasonable costs, including attorneys’ fees.

The pending lawsuit and any other related lawsuits are subject to inherent uncertainties, and the actual defense and disposition costs will depend upon many unknown factors. The outcome of the pending lawsuit and any other related lawsuits is necessarily uncertain. The Company could be forced to expend significant resources in the defense of the pending lawsuit and any additional lawsuits, and the Company may not prevail. In addition, the Company may incur substantial legal fees and costs in connection with such lawsuits. The Company currently is not able to estimate the possible cost to it from these matters, as the pending lawsuit is currently at an early stage, and the Company cannot be certain how long it may take to resolve the pending lawsuit or the possible amount of any damages that the Company may be required to pay. Such amounts could be material to the Company’s financial statements if it does not prevail in the defense of the pending lawsuit and any other related lawsuits, or even if it does prevail. The Company has not established any reserve for any potential liability relating to the pending lawsuit and any other related lawsuits. It is possible that the Company could, in the future, incur judgments or enter into settlements of claims for monetary damages.

Leases

Corporate office

In March 2021, the Company entered into a three-year term corporate office lease in Iselin, New Jersey that commenced on April 23, 2021.

Equipment leases

The Company has equipment leases, with terms between 12 and 36 months, recorded as finance leases. The equipment leases bear interest between 4.0% and 13.0% per annum.

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.

The components of lease cost for the three months ended December 31, 2023 and 2022 are as follows:

Three months ended December 31, 

    

2023

    

2022

Lease cost:

 

  

 

  

Amortization of right-of-use assets

$

$

Interest on lease liabilities

 

104

 

491

Total finance lease cost

 

104

 

491

Operating lease cost

 

11,217

 

11,217

Total lease cost

$

11,321

$

11,708

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Notes to Unaudited Interim Consolidated Financial Statements

Amounts reported in the unaudited interim consolidated balance sheets for leases where the Company is the lessee are as follows:

December 31, 2023

    

September 30, 2023

Operating leases:

 

 

  

Right-of-use asset

$

14,956

$

26,172

Operating lease liabilities

 

 

Finance leases:

 

  

 

  

Right-of-use asset

$

$

Financing lease liabilities

 

1,084

 

4,267

Weighted-average remaining lease term (years):

 

  

 

  

Operating leases

0.3

0.6

Finance leases

 

 

0.3

Weighted-average discount rate:

 

  

 

  

Operating leases

7.5%

7.5%

Finance leases

 

13.0%

 

13.0%

Other information related to leases for the three months ended December 31, 2023 and 2022 are as follows:

Three months ended December 31, 

    

2023

    

2022

Cash paid for amounts included in the measurement of lease obligations:

 

 

  

Operating cash flows from finance leases

$

104

$

491

Operating cash flows from operating leases

 

 

11,861

Financing cash flows from finance leases

 

3,183

 

2,797

Future minimum lease payments under non-cancelable leases as of December 31, 2023 are as follows for the years ending September 30:

Finance leases

2024 (remaining one month)

$

1,096

Less: Imputed interest

 

12

Total lease obligations

$

1,084

9.    Common Stock and Stockholders’ Equity

Common stock

On March 29, 2023, following receipt of stockholder approval at the Company’s 2023 annual meeting of stockholders, the number of authorized shares of common stock under the Company’s Certificate of Incorporation was increased from 325,000,000 shares to 425,000,000 shares.

In December 2022, in a registered direct equity offering to certain institutional and accredited investors, including GMS Ventures and Investments (“GMS Ventures”), the Company’s largest stockholder, the Company issued 28,460,831 shares of common stock at a purchase price per share of $0.8784 for $23,208,679 in net proceeds after payment of placement agent fees and other offering costs. GMS Ventures purchased an aggregate of 14,230,418 shares of common stock in the registered direct equity offering. In connection with the registered direct equity offering, the Company issued to M.S. Howells & Co., the placement agent, warrants to purchase up to an aggregate of 515,755 shares of common stock at an exercise price of $1.05 per share, which warrants have a three-year term.

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Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

H.C. Wainwright & Co. At-the-Market Offering Agreement

On March 26, 2021, the Company entered into an At-the-Market Offering Agreement with H.C. Wainwright & Co., as sales agent (“Wainwright”) (the “Wainwright ATM Agreement” or the “Wainwright ATM Offering”), under which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $40,000,000 from time to time through Wainwright. The Company incurred financing costs of $197,654, which were capitalized and are being reclassified to additional paid in capital on a pro rata basis when the Company sells common stock under the Wainwright ATM Offering.

Under the Wainwright ATM Agreement, the Company paid Wainwright a commission equal to 3.0% of the aggregate gross proceeds of any sales of common stock under the Wainwright ATM Agreement. The Company terminated the Wainwright ATM Agreement effective May 15, 2023. As a result, the Company wrote off unamortized deferred costs under the Wainwright ATM Agreement effective as of the termination date.

During the three months ended December 31, 2022, the Company sold 895,391 shares of common stock under the Wainwright ATM Offering and generated $1,089,105 in net proceeds. The Company paid fees to Wainwright and other issuance costs of $38,799.

BTIG, LLC At-the-Market Offering Agreement

On May 16, 2023, the Company entered into an At-the-Market Sales Agreement with BTIG, LLC (“BTIG”) as sales agent (the “BTIG ATM Agreement” or the “BTIG ATM Offering”), under which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $100,000,000 from time to time through BTIG. The Company incurred financing costs of $353,688, which were capitalized and are being reclassified to additional paid in capital on a pro rata basis when the Company sells common stock under the BTIG ATM Offering. As of December 31, 2023, $331,512 of such deferred costs are included in other assets on the unaudited interim consolidated balance sheets.

Under the BTIG ATM Agreement, the Company pays BTIG a commission equal to 3.0% of the aggregate gross proceeds of any sales of common stock under the BTIG ATM Agreement. The offering of common stock pursuant to the BTIG ATM Agreement will terminate upon the earlier of (i) the sale of all common stock subject to the BTIG ATM Agreement or (ii) termination of the BTIG ATM Agreement in accordance with its terms.

No shares of common stock were sold under the BTIG ATM Offering during the three months ended December 31, 2023.

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Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

Common stock warrants

As of December 31, 2023, 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)

277,128

$

12.00

February 26, 2024

1,747,047

$

0.9535

February 24, 2025

172,864

$

1.27

April 13, 2025

(i)

145,686

$

12.00

May 31, 2025

(i)

62,437

$

12.00

June 22, 2025

191,268

$

1.51875

December 28, 2025

515,755

$

1.0500

January 28, 2026

2,116,364

$

1.25

November 23, 2026

2,100,000

$

1.5625

7,328,549

(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 unaudited interim 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.

10.  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 December 31, 2023, PSUs representing 2,470 shares of the Company’s common stock were outstanding under the 2011 Plan. Effective with the December 2015 adoption of the 2015 Equity Incentive Plan, (the “2015 Plan”), no future awards under the 2011 Plan will be granted.

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 42,265,841. As of December 31, 2023, 15,389,080 shares remained available for grant under the 2015 Plan.

Stock options and RSUs are granted under the Company’s 2015 Plan and generally vest over a period of one to four years from the date of grant and, in the case of stock options, have a term of 10 years. The Company recognizes the grant date fair value of each option and RSU over its vesting period.

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Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

The Company recorded stock-based compensation expense in the following expense categories of its unaudited interim consolidated statements of operations for the three months ended December 31, 2023 and 2022:

Three months ended December 31, 

    

2023

    

2022

Research and development

$

231,416

$

290,656

General and administrative

1,041,195

1,101,737

$

1,272,611

$

1,392,393

Stock options

As of December 31, 2023 options to purchase common stock of the Company outstanding under the 2015 Plan were as follows:

Weighted

Average

Weighted

Remaining

Number of

Average

Contractual

Aggregate

    

Shares

    

Exercise Price

    

Term (Years)

    

Intrinsic Value

Balance at October 1, 2023

23,956,279

$

1.44

Granted

2,559,158

0.29

Forfeited or expired

(533,328)

1.37

Balance at December 31, 2023

25,982,109

$

1.32

7.5

$

307,927

Exercisable at December 31, 2023

16,097,527

$

1.42

7.0

$

76,981

Vested and expected to vest at December 31, 2023

25,982,109

$

1.32

7.5

$

307,927

The aggregate intrinsic value represents the total amount by which the fair value of the common stock subject to options exceeds the exercise price of the related options.

The weighted average grant date fair value of the options awarded to employees for the three months ended December 31, 2023 and 2022 was $0.26 and $0.99 per option, respectively. The fair value of the options was estimated on the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

Three months ended December 31, 

2023

    

2022

Risk-free interest rate

    

4.6

%  

3.9

%

Expected term (years)

5.5

5.3

Expected volatility

130.6

%  

115.0

%

Expected dividend yield

As of December 31, 2023, there was $7,989,001 of unrecognized compensation expense that is expected to be recognized over a weighted-average period of 1.9 years.

Performance-based stock options

The Company granted certain officers of the Company option awards whose vesting is contingent upon meeting company-wide performance goals. The performance stock options were granted “at-the-money” and have a term of 10 years.

The fair value of each option grant under the performance share option plan was estimated on the date of grant using the same option valuation model used for non-statutory options above. Compensation expense for performance-based stock options is only recognized when management determines it is probable that the awards will vest.

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Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

A summary of the activity under the performance share option plan as of December 31, 2023 and changes during the three months then ended are presented below.

Weighted

Average

Weighted

Remaining

Number of

Average

Contractual

Aggregate

    

Shares

    

Exercise Price

    

Term (Years)

    

Intrinsic Value

Balance at October 1, 2023

700,000

$

1.44

Granted

1.44

Balance at December 31, 2023

700,000

$

1.44

8.0

$

Exercisable at December 31, 2023

700,000

$

1.44

8.0

$

Vested and expected to vest at December 31, 2023

700,000

$

1.44

8.0

$

The weighted average grant date fair value of the performance stock options awarded during the three months ended December 31, 2022, was $0.91 per option. As of December 31, 2023, the Company assessed that the performance conditions related to the performance options granted were not probable of achievement. The assessment was based on the relevant facts and circumstances and therefore no compensation costs were recognized. The fair value of the options was estimated on the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

Three months ended December 31, 

    

2022

Risk-free interest rate

3.8

%

Expected term (years)

10.0

Expected volatility

91.3

%

Expected dividend yield

Performance-based stock units

The Company has issued PSUs, which generally have a ten-year term from the date of grant. Upon exercise, the PSU holder receives common stock or cash at the Company’s discretion.

The following table summarizes the activity related to PSUs during the three months ended December 31, 2023:

Weighted

Average

Number

Base

Remaining

of

Price

Contractual

Aggregate

    

PSUs

    

Per PSU

    

Term (Years)

    

Intrinsic Value

Balance at October 1, 2023

2,470

$

49.97

Forfeitures

Balance at December 31, 2023

2,470

$

49.97

0.5

$

Exercisable at December 31, 2023

2,470

$

49.97

0.5

$

Vested and expected to vest at December 31, 2023

2,470

$

49.97

0.5

$

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Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

11.   Related-Party Transactions

MTTR - strategic partnership agreement (ONS-5010)

In February 2018, the Company entered into a strategic partnership agreement with MTTR to advise on regulatory, clinical and commercial strategy and assist in obtaining approval of ONS-5010.

In November 2018, the board of directors of the Company appointed Mr. Terry Dagnon as Chief Operations Officer and Mr. Jeff Evanson as Chief Commercial Officer. Both Mr. Dagnon and Mr. Evanson initially provided services to the Company pursuant to the February 2018 strategic partnership agreement with MTTR, as amended. Mr. Dagnon and Mr. Evanson were both principals in MTTR. Both Mr. Dagnon and Mr. Evanson were compensated directly by MTTR for services provided to the Company as the Company's Chief Operations Officer and Chief Commercial Officer, respectively, pursuant to the strategic partnership agreement until such agreement, as amended, was terminated effective March 19, 2020. The Company began compensating Mr. Dagnon and Mr. Evanson directly as consultants effective March 19, 2020 pursuant to their respective consulting agreements with the Company, which became effective March 19, 2020 following stockholder approval of the share issuances contemplated therein.

On January 27, 2020, the Company entered into a termination agreement and mutual release with MTTR to terminate the strategic partnership agreement. Pursuant to the agreement, the Company agreed (x) to issue to the four principals of MTTR (who include two of its named executive officers, Messrs. Dagnon and Evanson) an aggregate of 7,244,739 shares of its common stock, subject to stockholder approval, (y) to enter into consulting agreements with each of the four principals setting forth the terms of his respective compensation arrangement, and (z) to pay MTTR a one-time settlement fee of $110,000 upon effectiveness of the agreement. The restricted stock compensation expense was accelerated during the year ended September 30, 2022 as a result of the Company achieving certain performance conditions related to the Company’s BLA submission and the corresponding repurchase rights lapsing.

Concurrently, the Company also entered into consulting agreements directly with each of the four principals of MTTR setting forth the terms of his respective compensation arrangement, as well as providing for certain transfer restrictions and repurchase rights applicable to the shares of common stock to be issued pursuant hereto. The termination agreement and the consulting agreements became effective upon stockholder approval of the share issuance on March 19, 2020.

On December 21, 2021, the Company entered into employment agreements with each of Mr. Dagnon and Mr. Evanson, which superseded and replaced their prior consulting agreements. Pursuant to their new employment agreements, each of Mr. Dagnon and Mr. Evanson will receive a base salary of $450,000 and a discretionary annual cash bonus with a target amount equal to 50% of his respective base salary. In connection with their entry into the employment agreements, each of Mr. Dagnon and Mr. Evanson received a grant of 800,000 options to purchase common stock, one quarter of which will vest on the first anniversary of the grant and the remainder of which will vest in monthly installments over the succeeding three years, subject to their continued service through each vesting date. In addition, each of Mr. Dagnon and Mr. Evanson received a performance grant of 200,000 options to purchase common stock, which will vest upon the Company’s achievement of certain milestones. An aggregate of 200,000 performance-based stock options vested as a result of achieving the performance condition related to the Company’s BLA submission.

Mr. Dagnon transitioned from Chief Operations Officer to Senior Advisor on December 6, 2023, as part of the Company's strategic organizational realignment program.

During the three months ended December 31, 2023 and 2022, MTTR and its four principals under the strategic partnership agreement and the subsequent individual consulting agreements earned an aggregate of $60,000 and $58,069, respectively, which includes monthly consulting fees and expense reimbursement. There were no amounts payable to the former MTTR principals at December 31, 2023 and September 30, 2023.

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Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

12. Subsequent Events

Private Placement

Securities Purchase Agreement

On January 22, 2024, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with the institutional and accredited investors named therein (the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors, and the Investors agreed to purchase, in the Private Placement an aggregate of $60,000,000 in shares (the “Shares”) of the Company’s common stock, par value $0.01 per share, and, for each Share issued in the Private Placement, accompanying warrants to purchase up to one and a half shares of common stock (the “Warrants” and, together with the Shares, the “Securities”). The purchase price per Share and accompanying Warrant will be equal to the lower of (a) $0.35 and (b) the Market Price of the common stock as of the Closing (as defined below) (the “Per Share Price”). “Market Price” means the lower of (i) the closing price of the common stock on the Nasdaq Capital Market as of the trading day immediately preceding Closing (the “Pricing Date”) and (ii) the volume weighted average price (“VWAP”) of the common stock on the Nasdaq Capital Market over the five trading days prior to the Closing (but in no event lower than $0.07 per share).

The Warrants will have a per share exercise price equal to 110% of the Per Share Price, subject to proportional adjustments in the event of stock splits or combinations or similar events (such as the reverse stock split to be implemented prior to Closing as discussed below). The Warrants will be exercisable only for cash, except in limited circumstances, at any time after the date of issuance (the “Issue Date”) and will expire five years from the Issue Date. A holder of Warrants may not exercise the Warrant if the holder, together with its affiliates, would beneficially own more than a specified percentage of the outstanding common stock (4.99%, 9.99% or 19.99%, as applicable), immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”), which may be increased or decreased at the holders’ option (not to exceed