10-Q

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 March 31, 2022

or

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

For the transition period from              to

Commission File 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)

(609) 619-3990

(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 May 11, 2022 was 225,942,719.

Outlook Therapeutics, Inc.

Table of Contents

	Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)	1
Consolidated Balance Sheets as of March 31, 2022 and September 30, 2021	1
Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2022 and 2021	2
Consolidated Statements of Stockholders’ Equity (Deficit) for the Three and Six Months Ended March 31, 2022 and 2021	3
Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2022 and 2021	4
Notes to Unaudited Interim Consolidated Financial Statements	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures About Market Risk	30
Item 4. Controls and Procedures	30
PART II. OTHER INFORMATION	32
Item 1. Legal Proceedings	32
Item 1A. Risk Factors	32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3. Defaults Upon Senior Securities	33
Item 4. Mine Safety Disclosures	33
Item 5. Other Information	33
Item 6. Exhibits	34
SIGNATURES	35

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)

	March 31, 2022		September 30, 2021
Assets
Current assets:
Cash and cash equivalents	$	58,424,097	$	14,477,324
Prepaid expenses and other current assets		8,123,275		7,030,823
Total current assets		66,547,372		21,508,147
Property and equipment, net		81,812		163,625
Operating lease right-of-use assets, net		91,289		111,429
Equity method investment		823,961		853,660
Other assets		141,859		174,590
Total assets	$	67,686,293	$	22,811,451
Liabilities, convertible preferred stock and stockholders’ equity
Current liabilities:
Current portion of long-term debt (includes debt measured at fair value of $12,557,521 at March 31, 2022)	$	22,781,233	$	904,200
Current portion of finance lease liabilities		18,422		26,464
Current portion of operating lease liabilities		45,171		42,854
Accounts payable		4,159,987		2,196,349
Accrued expenses		2,549,876		1,725,721
Income taxes payable		1,856,629		1,856,629
Total current liabilities		31,411,318		6,752,217
Long-term debt		—		10,885,854
Finance lease liabilities		10,332		16,018
Operating lease liabilities		3,929		26,995
Warrant liability		298,033		522,918
Total liabilities		31,723,612		18,204,002
Commitments and contingencies (Note 9)
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’ equity:
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; 325,000,000 shares authorized; 225,792,742 and 176,461,628 shares issued and outstanding at March 31, 2022 and September 30, 2021, respectively		2,257,927		1,764,616
Additional paid-in capital		410,755,286		345,726,087
Accumulated deficit		(377,050,532)		(342,883,254)
Total stockholders' equity		35,962,681		4,607,449
Total liabilities, convertible preferred stock and stockholders' equity	$	67,686,293	$	22,811,451

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 March 31,				Six months ended March 31,
	2022		2021		2022		2021
Operating expenses:
Research and development	$	12,219,666	$	8,529,393	$	22,092,142	$	20,477,974
General and administrative		6,689,914		4,095,891		9,967,119		6,338,245
Loss from operations		(18,909,580)		(12,625,284)		(32,059,261)		(26,816,219)
Loss on equity method investment		6,044		—		29,699		—
Interest expense, net		418,327		250,409		769,861		410,072
Loss on extinguishment of debt		—		—		1,025,402		—
Change in fair value of unsecured convertible promissory note		343,585		—		505,940		—
Change in fair value of warrant liability		25,013		228,828		(224,885)		334,144
Loss before income taxes		(19,702,549)		(13,104,521)		(34,165,278)		(27,560,435)
Income tax expense		2,000		2,000		2,000		2,000
Net loss	$	(19,704,549)	$	(13,106,521)	$	(34,167,278)	$	(27,562,435)
Per share information:
Net loss per share of common stock, basic and diluted	$	(0.09)	$	(0.09)	$	(0.17)	$	(0.20)
Weighted average shares outstanding, basic and diluted		219,067,900		150,730,191		203,443,077		136,080,637

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	176,461,628	$	1,764,616	$	345,726,087	$	(342,883,254)	$	4,607,449
Issuance of common stock in connection with exercise of stock options	25,000		250		17,500		—		17,750
Sale of common stock, net of issuance costs	47,773,974		477,740		56,979,163		—		57,456,903
Stock-based compensation expense	—		—		1,204,048		—		1,204,048
Net loss	—		—		—		(14,462,729)		(14,462,729)
Balance at December 31, 2021	224,260,602	$	2,242,606	$	403,926,798	$	(357,345,983)	$	48,823,421
Issuance of common stock in connection with exercise of warrants	15,675		157		187,943		—		188,100
Sale of common stock, net of issuance costs	1,516,465		15,164		2,877,750		—		2,892,914
Stock-based compensation expense	—		—		3,762,795		—		3,762,795
Net loss	—		—		—		(19,704,549)		(19,704,549)
Balance at March 31, 2022	225,792,742	$	2,257,927	$	410,755,286	$	(377,050,532)	$	35,962,681

	Stockholders' Equity (Deficit)
	Common Stock			Additional Paid-in		Accumulated		Total Stockholders'
	Shares	Amount		Capital		Deficit		Equity (Deficit)
Balance at October 1, 2020	127,183,109	$	1,271,831	$	291,274,366	$	(289,719,906)	$	2,826,291
Stock-based compensation expense	—		—		1,154,641		—		1,154,641
Net loss	—		—		—		(14,455,914)		(14,455,914)
Balance at December 31, 2020	127,183,109	$	1,271,831	$	292,429,007	$	(304,175,820)	$	(10,474,982)
Issuance of common stock in connection with exercise of warrants	3,815,304		38,153		3,547,656		—		3,585,809
Sale of common stock, net of issuance costs	42,607,394		426,074		39,091,045		—		39,517,119
Stock-based compensation expense	—		—		1,129,747		—		1,129,747
Net loss	—		—		—		(13,106,521)		(13,106,521)
Balance at March 31, 2021	173,605,807	$	1,736,058	$	336,197,455	$	(317,282,341)	$	20,651,172

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

3

Outlook Therapeutics, Inc.

Consolidated Statements of Cash Flows

(unaudited)

	Six months ended March 31,
	2022		2021
OPERATING ACTIVITIES
Net loss	$	(34,167,278)	$	(27,562,435)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		101,953		163,283
Loss on extinguishment of debt		1,025,402		—
Non-cash interest expense		763,104		392,028
Stock-based compensation		4,966,843		2,284,388
Change in fair value of unsecured convertible promissory note		505,940		—
Change in fair value of warrant liability		(224,885)		334,144
Gain on settlement of lease termination obligation		—		(552,340)
Loss on equity method investment		29,699		—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(1,092,452)		(1,323,108)
Other assets		—		137,579
Operating lease liability		(20,749)		(91,721)
Accounts payable		1,963,638		3,685,278
Accrued expenses		824,155		(2,537,903)
Net cash used in operating activities		(25,324,630)		(25,070,807)
FINANCING ACTIVITIES
Proceeds from the sale of common stock, net of issuance costs		60,382,548		39,779,507
Proceeds from debt		10,000,000		10,000,000
Payment of debt issuance costs		—		(8,032)
Proceeds from exercise of common stock warrants		188,100		3,585,809
Proceeds from exercise of stock options		17,750		—
Payments of finance lease obligations		(13,728)		(16,533)
Repayment of debt		(703,267)		(3,637,076)
Payment of financing costs		(600,000)		—
Net cash provided by financing activities		69,271,403		49,703,675
Net increase in cash and cash equivalents		43,946,773		24,632,868
Cash and cash equivalents at beginning of period		14,477,324		12,535,986
Cash and cash equivalents at end of period	$	58,424,097	$	37,168,854
Supplemental disclosure of cash flow information
Cash paid for interest	$	22,017	$	10,490
Supplemental schedule of non-cash financing activities:
Common stock issuance costs in accounts payable	$	—	$	262,388
Deferred offering costs amortization	$	32,731	$	—

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

4

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 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 as a result of 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 three and six months ended March 31, 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 $377,050,532 as of March 31, 2022. As of March 31, 2022, the Company had $22,601,716 of principal and accrued interest due under unsecured promissory notes maturing on January 1, 2023, and a $200,933 loan granted pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP loan was fully repaid on May 2, 2022. 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.

Management believes that the Company’s existing cash and cash equivalents as of March 31, 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 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 March 31, 2022 and its results of operations for the three and six months ended March 31, 2022 and 2021, cash flows for the six months ended March 31, 2022 and 2021, and stockholders’ equity (deficit) for the three and six months ended March 31, 2022 and 2021. Operating results for the six months ended March 31, 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 March 31,			Six months ended March 31,
	2022		2021		2022		2021
Net loss attributable to common stockholders	$	(19,704,549)	$	(13,106,521)	$	(34,167,278)	$	(27,562,435)
Common stock shares outstanding (weighted average)		219,067,900		150,730,191		203,443,077		136,080,637
Basic and diluted net loss per share	$	(0.09)	$	(0.09)	$	(0.17)	$	(0.20)

The following potentially dilutive securities (in common stock equivalents) have been excluded from the computation of diluted weighted-average shares outstanding as of March 31, 2022, and 2021, as they would be antidilutive:

	As of March 31,
	2022	2021
Performance-based stock units	2,470	2,470
Performance-based stock options	1,900,000	—
Stock options	19,783,581	12,010,781
Common stock warrants	6,812,794	5,129,460

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 all entities with fiscal years beginning after December 15, 2021, including interim periods therein. The Company is currently evaluating the impact of adopting this guidance to its consolidated financial statements.

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:

	March 31, 2022
	(Level 1)		(Level 2)		(Level 3)
Liabilities
Unsecured convertible promissory note	$	—	$	—	$	12,557,521
Warrant liability		—		—		298,033
	$	—	$	—	$	12,855,554
	September 30, 2021
	(Level 1)		(Level 2)		(Level 3)
Liabilities
Unsecured convertible promissory note	$	—	$	—	$	—
Warrant liability		—		—		522,918
	$	—	$	—	$	522,918

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 six months ended March 31, 2022:

	Unsecured Convertible
	Promissory Note		Warrants
Balance at October 1, 2021	$	—	$	522,918
Fair value at issuance date		12,051,581		—
Change in fair value		505,940		(224,885)
Balance at March 31, 2022	$	12,557,521	$	298,033

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 and at March 31, 2022, 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:

	March 31, 2022			September 30, 2021
Risk-free interest rate		2.42	%		0.62	%
Remaining contractual term of warrant (years)		2.9			3.4
Expected volatility		115.6	%		124.7	%
Annual dividend yield		—	%		—	%
Fair value of common stock (per share)	$	1.78		$	2.17

Fair Value of Other Financial Instruments

At March 31, 2022, the carrying value of the PPP loan approximates its fair value due to the short duration to maturity. The fair value and carrying value of the unsecured promissory note included in long-term debt on the consolidated balance sheet on March 31, 2022 was $10,448,000 and $10,022,779, respectively. The estimated fair value was based on discounted expected future cash flows using the prevailing interest rate that is a Level 3 input under the fair value hierarchy.

5.    Property and Equipment, Net

Property and equipment, net, consists of:

	March 31, 2022		September 30, 2021
Laboratory equipment	$	1,067,351	$	1,067,351
Less: accumulated depreciation		(985,539)		(903,726)
	$	81,812	$	163,625

Depreciation expense was $40,906 for both the three months ended March 31, 2022 and 2021, and $81,813 and $81,812 for the six months ended March 31, 2022 and 2021, respectively.

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 80% owned by Syntone PRC and 20% owned by the Company. As the Company can exert significant influence over, but does not control, Syntone’s operations through voting rights or representation on Syntone’s board of directors, the Company accounts for this investment using the equity method of accounting. Upon formation of Syntone in April 2021, the Company entered into a royalty-free license with Syntone 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 expects to be required to make an additional capital contribution to Syntone of approximately $2,100,000, which will be made within four years after the establishment date in accordance with the development plan contemplated in the license agreement or on such other terms within such four-year period. The maximum exposure to a loss as a result of the Company’s involvement in Syntone is limited to the initial investment and the future capital contributions of approximately $2,100,000.

9

Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

7.     Accrued Expenses

Accrued expenses consists of:

	March 31, 2022		September 30, 2021
Compensation	$	774,484	$	753,808
Research and development		1,151,115		808,780
Interest payable		89		12,909
Professional fees		206,079		—
Commercial consulting		216,729		—
Other accrued expenses		201,380		150,224
	$	2,549,876	$	1,725,721

8.    Debt

Debt consists of:

	March 31, 2022		September 30, 2021
Unsecured convertible promissory note (measured at fair value)	$	12,557,521	$	—
Unsecured promissory note		10,590,601		10,938,145
Paycheck Protection Program term loan		200,933		904,200
Total debt		23,349,055		11,842,345
Less: unamortized loan costs		(567,822)		(52,291)
Total debt, net of unamortized loan costs		22,781,233		11,790,054
Less: current portion		(22,781,233)		(904,200)
Long-term debt	$	—	$	10,885,854

Unsecured convertible promissory note

On November 5, 2020, the Company received $10,000,000 in net proceeds from issuance of an unsecured promissory note with face amount of $10,220,000, which was amended in November 2021 and became convertible. Debt issuance costs totaling $228,032 were recorded as debt discount and were deducted from the principal in the accompanying consolidated balance sheets. The debt discount was amortized as a component of interest expense over the 14-month term of the underlying debt using the effective interest method. The note bore interest at a rate of 7.5% per annum and was due to mature January 1, 2022. On November 16, 2021, the Company entered into a note amendment which, among other things, (i) extended the maturity date to January 1, 2023, (ii) increased the interest rate from 7.5% per annum to 10% per annum beginning on January 1, 2022, and (iii) provided for the lender’s right to redeem some or all of the outstanding balance of the note for shares of the Company’s common stock beginning July 1, 2022, subject to certain limitations. The Company may prepay all or a portion of the note at any time by paying 105% of the outstanding balance elected for pre-payment. The amendment was accounted for as an extinguishment of the old promissory note. As a result, the Company recorded a loss on debt extinguishment of $1,025,402 which is the difference between the fair value of the amended promissory note and the net carrying value of the old promissory note which includes $26,488 of unamortized debt discount and lender fees of $552,633. The amended promissory note includes redemption options whereby beginning on July 1, 2022, the holder has the option to redeem up to $2,000,000 of outstanding principal and accrued and unpaid interest per calendar month for shares of the Company’s common stock at a redemption price equal to 75% of the lowest closing bid price in the three trading days immediately preceding the date the holder delivers written notice. The Company elected to account for the amended promissory note at fair value (Note 4) and is not required to bifurcate the redemption options as derivatives. Since the redemption options provide the lender with the right to put the total outstanding principal and interest back to the Company within one year from the balance sheet date, the entire amount is classified as a current liability. As of March 31, 2022, the aggregate unpaid principal and interest outstanding and the fair value of the amended promissory note were $12,011,115 and $12,557,521, respectively.

10

Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

Unsecured promissory note

On November 16, 2021, the Company received $10,000,000 in net proceeds from issuance of an unsecured promissory note with face amount of $10,220,000. Debt issuance costs totaling $820,000 are recorded as debt discount and are 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 9.5% per annum compounding daily and matures January 1, 2023. The Company may prepay all or a portion of the note at any time by paying 105% of the outstanding balance elected for pre-payment.

During the three months ended March 31, 2022 and 2021, the Company recognized $418,388 and $242,819, respectively, of interest expense related to the unsecured promissory notes of which $169,857 and $47,137, respectively, are related to the amortization of debt discount. During the six months ended March 31, 2022 and 2021, the Company recognized $763,104 and $392,028, respectively, of interest expense related to the unsecured promissory notes of which $277,980 and $76,428, respectively, are related to the amortization of debt discount.

Paycheck Protection Program term loan

On May 4, 2020, the Company received $904,200 in proceeds from a loan granted pursuant to the PPP of the CARES Act. The PPP term loan is evidenced by a promissory note containing the terms and conditions for repayment of the PPP term loan. The PPP term loan provides for an initial six-month deferral of payments and any amount owed on the loan has a two-year maturity (May 2022), with an interest rate of 1% per annum. Commencing October 15, 2021, the Company began to pay the lender equal monthly payments of principal and interest as required to fully amortize any principal amount outstanding on the PPP term loan as of October 15, 2021 by May 2, 2022. The loan was fully repaid on May 2, 2022. Aggregate interest expense on the PPP loan for the three months ended March 31, 2022 and 2021 was $879 and $2,205, respectively and for the six months ended March 31, 2022 and 2021 was $2,587 and $4,484, respectively.

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 $3,000,000 in damages. On March 30, 2021, the Company entered into a confidential settlement agreement with Liomont, and the complaint was dismissed on April 11, 2021. The Company agreed to make an initial settlement payment of $625,000 that was paid in April 2021; and an additional payment of $750,000, which was accrued at March 31, 2022 and paid in April 2022. There are no remaining future financial obligations to the Company.

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 three-year term corporate office lease in Iselin, New Jersey which 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.

11

Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

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 and six months ended March 31, 2022 and 2021 are as follows:

	Three months ended March 31,				Six months ended March 31,
	2022		2021		2022		2021
Lease cost:
Amortization of right-of-use assets	$	—	$	—	$	—	$	—
Interest on lease liabilities		849		1,005		1,823		2,787
Total finance lease cost		849		1,005		1,823		2,787
Operating lease cost		11,217		43,625		22,433		87,250
Total lease cost	$	12,066	$	44,630	$	24,256	$	90,037

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

	March 31, 2022		September 30, 2021
Operating leases:
Right-of-use asset	$	91,289	$	111,429
Operating lease liabilities		49,100		69,849
Finance leases:
Right-of-use asset	$	—	$	—
Financing lease liabilities		28,754		42,482
Weighted-average remaining lease term (years):
Operating leases		2.1		2.6
Finance leases		1.4		1.7
Weighted-average discount rate:
Operating leases		7.5%		7.5%
Finance leases		10.7%		9.5%

Other information related to leases for the six months ended March 31, 2022 and 2021 are as follows:

	Six months ended March 31,
	2022		2021
Cash paid for amounts included in the measurement of lease obligations:
Operating cash flows from finance leases	$	1,823	$	2,787
Operating cash flows from operating leases		23,043		97,500
Financing cash flows from finance leases		13,728		16,533

12

Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

Future minimum lease payments under non-cancelable leases as of March 31, 2022 are as follows for the years ending September 30:

	Operating leases		Finance leases
2022 (remaining six months)	$	23,608	$	14,055
2023		27,675		13,149
2024		—		4,383
Total undiscounted lease payments	$	51,283	$	31,587
Less: Imputed interest		2,183		2,833
Total lease obligations	$	49,100	$	28,754

10.    Common Stock and Stockholders’ Equity (Deficit)

Common stock

In November 2021, the Company issued 46,000,000 shares of common stock in an underwritten public offering at a purchase price per share of $1.25 for $53,968,057 in net proceeds after payment of underwriter discounts and commissions and other underwriter offering costs. GMS Ventures and Investments (“GMS Ventures”), the Company’s largest stockholder and strategic partner, purchased an aggregate of 16,000,000 shares of common stock in the public offering at the public offering price per share. In connection with the underwritten public offering, the Company issued the underwriter warrants to purchase up to an aggregate of 2,100,000 shares of common stock at an exercise price of $1.5625 per share, which warrants have a 5-year term.

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 $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 ATM Offering. As of March 31, 2022, $129,265 of such deferred costs are included in other assets on the consolidated balance sheets.

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

During the six months ended March 31, 2022, the Company sold 3,290,439 shares of common stock under the ATM Offering and generated $6,626,696 in gross proceeds. The Company paid fees to the Agent and other issuance costs of $212,206.

13

Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

Common stock warrants

As of March 31, 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)	277,128	$	12.00
April 13, 2025	(i)	145,686	$	12.00
May 31, 2025	(i)	62,437	$	12.00
February 24, 2025		172,864	$	1.27
February 26, 2024		1,747,047	$	0.9535
June 22, 2025		191,268	$	1.51875
January 28, 2026		2,116,364	$	1.25000
November 23, 2026		2,100,000	$	1.56250
		6,812,794

(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 six months period ended March 31, 2022, warrants to purchase an aggregate of 400,360 shares of common stock with a weighted average exercise price of $12.00 expired; and warrants to purchase an aggregate of 15,675 shares of common stock with a weighted average exercise price of $12.00 were exercised for cash.

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 March 31, 2022, 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 34,565,837. As of March 31, 2022, 12,687,604 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 share of RSU over its vesting period.

14

Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

The Company recorded stock-based compensation expense in the following expense categories of its statements of operations for the three and six months ended March 31, 2022 and 2021:

	Three months ended March 31,				Six months ended March 31,
	2022		2021		2022		2021
Research and development	$	1,820,262	$	228,240	$	2,072,657	$	468,211
General and administrative		1,942,533		901,507		2,894,186		1,816,177
	$	3,762,795	$	1,129,747	$	4,966,843	$	2,284,388

Stock options

As of March 31, 2022 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, 2021	16,110,015	$	1.46
Granted	3,698,566		1.63
Exercised	(25,000)		0.71		$	38,960
Balance at March 31, 2022	19,783,581		1.49	8.8	$	10,641,834
Exercisable	6,587,549		1.34	8.2	$	4,724,871
Vested and expected to vest at March 31, 2022	19,783,581	$	1.49	8.8	$	10,641,834

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 March 31, 2022 and 2021 was $1.25 and $0.56 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:

	Six months ended March 31,
	2022		2021
Risk-free interest rate	1.64	%	0.39	%
Expected term (years)	6.0		6.0
Expected volatility	95.7	%	95.4	%
Expected dividend yield	—		—

As of March 31, 2022, there was $13,432,195 of unrecognized compensation expense that is expected to be recognized over a weighted-average period of 3.01 years.

Performance-based stock options

The Company granted certain officers of the Company share 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.

15

Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

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. A summary of the activity under the performance share option plan as of March 31, 2022, and changes during the six 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, 2021	1,000,000	$	2.42
Granted	1,900,000		1.44
Forfeited or expired	(1,000,000)		2.42
Balance at March 31, 2022	1,900,000	$	1.44	9.72	$	646,000
Exercisable	700,000	$	1.44	9.72	$	238,000
Vested and expected to vest at March 31, 2022	700,000	$	1.44	9.72	$	238,000

The weighted average grant date fair value of the performance stock options awarded during the six months ended March 31, 2022 was $1.03 per option. During the six months ended March 31, 2022, an aggregate of 700,000 performance-based stock options vested as a result of achieving one of the set performance conditions related to the Company’s BLA submission that resulted in the Company recognizing stock-based compensation expense of $718,950 during the three and six months ended March 31, 2022. As of March 31, 2022 the Company assessed that the remaining performance conditions were not probable of achievement. The assessment was based on the relevant facts and circumstances and therefore no compensation costs was 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:

	Six months ended March 31, 2022
Risk-free interest rate	1.26	%
Expected term (years)	5.22
Expected volatility	91.46	%
Expected dividend yield	—

There were no performance-based stock options granted during the six months ended March 31, 2021.

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.

16

Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

The following table summarizes the activity related to PSUs during the six months ended March 31, 2022:

				Weighted
				Average
	Number	Base		Remaining
	of	Price		Contractual	Aggregate
	PSUs	Per PSU		Term (Years)	Intrinsic Value
Balance at October 1, 2021	2,470	$	49.97
Forfeitures	—		—
Balance at March 31, 2022	2,470		49.97	3.0	$	—
Vested and exercisable at March 31, 2022	2,470		49.97	3.0	$	—
Vested and expected to vest at March 31, 2022	2,470	$	49.97	3.0	$	—

Restricted stock

In connection with the consulting agreements entered into by the Company and four former principals of MTTR, in March 2020, the Company issued an aggregate of 7,244,739 shares of its common stock. Refer to Note 12 for further details on the consulting agreements and terminated strategic partnership agreement. These shares may not be sold until the earlier of  (i) six months following FDA approval of ONS-5010, (ii) the date the Company publicly announces not to pursue development of ONS-5010, (iii) a change in control or (iv) January 2025. In addition, the Company has the right to repurchase the shares for $0.01 per share if the consultant terminates his agreement other than for good reason or the Company terminates the agreement for cause. The repurchase right lapses, in tiered percentages, based upon the completion of enrollment of the Company’s NORSE TWO clinical trial of ONS-5010 by certain dates. The repurchase right may also lapse as to 50% or 100% of the shares if the Company enters into certain agreements pertaining to ONS-5010 that meet certain value thresholds or the Company’s share price meets certain predefined targets. The repurchase right also lapses as to 100% of the shares upon the earliest to occur of (i) submission of the BLA for ONS-5010, (ii) termination of the agreement by the consultant for good reason or by the Company other than for cause, (iii) in the event of disability, or (iv) upon a change in control. As of March 31, 2022, the repurchase rights on all 7,244,739 shares of common stock had lapsed.

The grant date fair value of the restricted shares was $0.54 per share and equal to the closing stock price of the Company’s common stock at the time of grant. Compensation expense is recognized over the shorter of the explicit service period or derived service period, which was determined to be 4.8 years at the time of grant. The compensation expense was accelerated during the three and six months ended March 31, 2022 as a result of the Company achieving certain performance conditions related to the Company’s BLA submission which caused the lapsing of the repurchase rights. During the three months ended March 31, 2022 and 2021, the Company recognized compensation expense related to the restricted stock of $1,852,182 and $151,764, respectively. During the six months ended March 31, 2022 and 2021, the Company recognized compensation expense related to the restricted stock of $2,003,946 and $78,984, respectively. As of March 31, 2022, there was no unrecognized compensation expense related to the restricted stock.

12.   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 Operating 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. The Company did not pay Mr. Dagnon or Mr. Evanson any direct compensation as consultants or as employees during the three months ended December 31, 2019, nor during the period from October 1,

17

Outlook Therapeutics, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

2019 through March 19, 2020. Both Mr. Dagnon and Mr. Evanson were compensated directly by MTTR for services provided to the Company as the Company's Chief Operating 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.

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. Refer to Note 11 for the accounting of the restricted stock issued and compensation expense recognized.

During the three months ended March 31, 2022 and 2021, MTTR and its four principals under the strategic partnership agreement and the subsequent individual consulting agreements earned an aggregate $99,380 and $73,572, respectively, and $413,366 and $541,225 during the six months ended March 31, 2022 and 2021, respectively, which includes monthly consulting fees and expense reimbursement, but excludes stock-based compensation related to restricted stock (Note 11). As of March 31, 2022 and September 30, 2021, an aggregate $18,333 and $89,762, respectively, was due to the former MTTR principals as consultants, which is included in accounts payable in the accompanying consolidated balance sheets.

On December 21, 2021, we 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 one of the set performance conditions related to the Company’s BLA submission.

18

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

You should read this section in conjunction with our unaudited interim consolidated financial statements and related notes included in Part I. Item 1 of this report and our audited consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations for the years ended September 30, 2021 and 2020 included in our Annual Report on Form 10-K for the year ended September 30, 2021, filed with the Securities and Exchange Commission, or SEC, on December 23, 2021.

Forward-Looking Statements

This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements are identified by words 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. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements are subject to certain risks and uncertainties that could cause a material difference including, but not limited to, those discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2021, filed with the SEC on December 23, 2021, and elsewhere in this report. See “Special Note Regarding Forward-Looking Statements.” Forward-looking statements are based on our management’s current beliefs and assumptions and based on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments.

Overview

We are a pre-commercial biopharmaceutical company working to launch the first ophthalmic formulation of bevacizumab approved by the U.S. Food and Drug Administration, or FDA, for use in retinal indications. Our goal is to launch directly in the United States as the first and only approved bevacizumab for the treatment of wet age-related macular degeneration, or wet AMD, diabetic macular edema, or DME, and branch retinal vein occlusion, or BRVO. Our plans also include potentially securing a strategic partner for the United Kingdom, Europe, Japan and other markets.  If approved, we expect to receive 12 years of regulatory exclusivity in the U.S. and up to 10 years of regulatory exclusivity in the EU.

In March 2022, we submitted a Biologics License Application (BLA) with the FDA for ONS-5010 (LYTENAVA (bevacizumab-vikg)), an investigational ophthalmic formulation of bevacizumab, which we have developed to be administered as an intravitreal injection for the treatment of wet AMD and other retinal diseases. ONS-5010 is our sole product candidate in active clinical development. Bevacizumab is a full-length, humanized anti-VEGF (Vascular Endothelial Growth Factor) recombinant monoclonal antibody, or mAb, that inhibits VEGF and associated angiogenic activity. The study design for our Phase 3 clinical program to evaluate ONS-5010 as an ophthalmic formulation of bevacizumab was reviewed at an end of Phase 2 meeting with the FDA in April 2018, and we filed our investigational new drug application, or IND, with the FDA in the first quarter of calendar 2019.

Our BLA registration program for ONS-5010 in wet AMD involved three clinical trials, which we refer to as NORSE ONE, NORSE TWO and NORSE THREE. We reported achieving the anticipated safety and efficacy and positive proof-of-concept topline results from NORSE ONE, a clinical experience study, in August 2020. NORSE TWO is our pivotal Phase 3 clinical trial comparing ONS-5010 (bevacizumab-vikg) to ranibizumab (LUCENTIS). The topline results reported from NORSE TWO in August 2021 showed that ONS-5010 met the primary and key secondary endpoint for efficacy with clinically impactful change observed for treated patients. The NORSE TWO primary endpoint difference in proportion of subjects gaining at least 15 letters BCVA was met and was both highly statistically significant and clinically relevant. In the intent-to-treat (ITT) primary dataset, the percentage of patients who gained at least 15 letters who were treated with ONS-5010, was 41.7 %, and the percentage of patients who gained at least 15 letters who were treated with ranibizumab was 23.1% (p = 0.0052). The primary endpoint was also statistically significant and clinically relevant in the secondary per-protocol (PP) dataset (p = 0.04) where the percentages were almost identical, at 41.0% with ONS-5010, and 24.7% with ranibizumab. The key secondary endpoint BCVA score change from baseline to month 11 in the primary ITT dataset

19

was also highly statistically significant and clinically relevant (p = 0.0043). A mean change in BCVA was observed with ONS-5010 was 11.2 letters, and with ranibizumab the mean change was 5.8 letters. The results were also statistically significant in the secondary PP dataset (p = 0.05) with a mean change with ONS-5010 of 11.1 letters versus 7.0 letters with ranibizumab. Results were also positive for the remaining NORSE TWO secondary endpoints with 56.5% (p = 0.0016) of ONS-5010 subjects gaining ≥ 10 letters of vision and 68.5% (p = 0.0116) of ONS-5010 subjects gaining ≥ 5 letters of vision. NORSE THREE is an open-label safety study we conducted to ensure the adequate number of safety exposures to ONS-5010 are available for the initial ONS-5010 BLA submission with the FDA. In March 2021 we reported that the results from NORSE THREE provided a positive safety profile for ONS-5010. The data from all three of these completed clinical trials support our March 2022 BLA submission for wet AMD.

Additionally, in November 2021, we began enrolling patients in our NORSE SEVEN clinical trial. The study compares the safety of ophthalmic bevacizumab in vials versus pre-filled syringes in subjects diagnosed with a retinal condition that would benefit from treatment with intravitreal injection of bevacizumab, including exudative age-related macular degeneration, DME, or BRVO. Subjects will be treated for three months and the enrollment of subjects in the arm of the study receiving ONS-5010 in vials has been completed.

We have also received agreement from the FDA on three Special Protocol Assessments, or SPAs, for three additional registration clinical trials for our ongoing Phase 3 program for ONS-5010. The agreements reached with the FDA on these SPAs cover the protocols for NORSE FOUR, a registration clinical trial evaluating ONS-5010 to treat BRVO, and NORSE FIVE and NORSE SIX, two registration clinical trials evaluating ONS-5010 to treat DME. We intend to initiate these studies following the anticipated FDA approval of our planned BLA for wet AMD.

Currently, the cancer drug Avastin (bevacizumab) is used off-label for the treatment of wet AMD and other retinal diseases such as DME and BRVO even though Avastin has not been approved by regulatory authorities for use in these diseases. In addition to our BLA submission in the United States, we plan to submit for regulatory approval in multiple other markets beginning in late 2022 in Europe and other major markets. Because there are no approved bevacizumab products for the treatment of retinal diseases in the United States and other major markets, we submitted a standard BLA, and are not using the biosimilar drug development pathway that would be required if Avastin were an approved drug for the targeted diseases. If approved, we believe ONS-5010 has potential to mitigate risks associated with off-label use of unapproved bevacizumab. Off-label use of unapproved bevacizumab is currently estimated to account for at least 50% of all wet AMD prescriptions in the United States.

Going Concern

Through March 31, 2022 we have funded substantially all of our operations with $408.5 million in proceeds from the sale and issuance of our equity and debt securities. We have also received $29.0 million pursuant to our collaboration and licensing agreements through such date.

Our current cash resources of $58.4 million as of March 31, 2022 are expected to fund our operations into the first calendar quarter of 2023. We will need to raise additional capital and, if we are not successful in raising additional capital or entering into one or more licensing and/or co-development rights agreements for ONS-5010, we may be required to, among other things, modify our future clinical trial plans for ONS-5010 in additional indications, make reductions in our workforce, discontinue our development programs, liquidate all or a portion of our assets, and/or seek protection under the provisions of the U.S. Bankruptcy Code.

We do not have any products approved for sale and we have only generated revenue from our collaboration agreements. We have incurred operating losses and negative operating cash flows since inception and there is no assurance that we will ever achieve profitable operations, and if achieved, that profitable operations will be sustained. Our net loss for the six months ended March 31, 2022 was $34.2 million. In addition, development activities, clinical and preclinical testing and commercialization of our product candidates will require significant additional financing.

We have incurred recurring losses and negative cash flows from operations since inception. As of March 31, 2022, we had substantial indebtedness that included $22.6 million of principal and accrued interest under unsecured promissory notes maturing on January 1, 2023, and a $0.2 million loan granted pursuant to the Paycheck Protection Program, or PPP, of the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act.  The PPP loan was fully repaid on May 2, 2022. As

20

a result, there is substantial doubt about our ability to continue as a going concern. We will need to raise additional capital to fund our planned future operations, commence clinical trials, receive approval for and commercialize ONS-5010, or to develop other product candidates. We plan to finance our future operations with a combination of proceeds from our ATM facility, renegotiation of the maturity date for existing unsecured notes, 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 are no assurances that we will be successful in obtaining an adequate level of financing for the development and commercialization of ONS-5010 or any other current or future product candidates. If we are unable to secure adequate additional funding, our business, operating results, financial condition and cash flows may be materially and adversely affected. Our consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Impacts of the COVID-19 Pandemic

We continue to monitor the ongoing COVID-19 global pandemic, which has resulted in travel and other restrictions to reduce the spread of the disease. To date, we have experienced only minor disruptions from the ongoing COVID-19 pandemic, including a brief delay in patient enrollment and recruitment in NORSE TWO in 2020 at the beginning of the pandemic due to local clinical trial site protocols designed to protect staff and patients. Given our current infrastructure needs and current strategy, we were able to transition to remote working with limited impact on productivity, as shelter-in-place and other types of local and state orders were imposed. We have confirmed with the Ophthalmic Division of the FDA that it considers both approved and investigational treatments for sight-threatening conditions such as wet AMD not to be elective, and that as such they should continue during the COVID-19 restrictions. All clinical and chemistry, manufacturing and control, or CMC, activities are currently active.

All three of our clinical trials required to support our March 2022 BLA submission are now complete. To date, we have not experienced any significant COVID-19 disruptions to patient follow-up in NORSE SEVEN, but the clinical trial protocol accounts for potential delayed or missed visits for any reason, including COVID-19 type interruptions. The FDA has provided guidance in the event of COVID-19 disruptions, and we intend to confer with the FDA and follow the appropriate guidance in the event that any of our ongoing or planned future clinical trials experience an unusually high number of delayed or missed patient visits due to COVID-19.

The safety, health and well-being of all patients, medical staff and our internal and external teams is paramount and is our primary focus. As the pandemic and its resulting restrictions evolve in jurisdictions across the country, we are aware that the potential exists for further disruptions to our projected timelines. We are in close communication with our clinical teams and key vendors and are prepared to take action should the pandemic worsen and impact our business in the future.

The ultimate impact of the ongoing COVID-19 pandemic is highly uncertain and subject to change. We do not yet know the full extent of any impacts the evolving COVID-19 pandemic may have on our business, operations, financial position and our CMC, clinical and regulatory activities. To the extent the evolving effects of the COVID-19 pandemic adversely affect our business and financial condition, it may also have the effect of heightening many of the other risks and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2021 that we filed with the SEC on December 23, 2021.

Collaboration, License and Strategic Partnership Agreements

From time to time, we enter into collaboration and license agreements for the research and development, manufacture and/or commercialization of our products and/or product candidates. These agreements generally provide for non-refundable upfront license fees, development and commercial performance milestone payments, cost sharing, royalty payments and/or profit sharing. We have also licensed rights to our inactive biosimilar program product candidates (ONS-3010, ONS-1045 and ONS-1050) in other markets.

Syntone – PRC Joint Venture

In May 2020, we entered into a stock purchase agreement with Syntone, pursuant to which we sold and issued in June 2020, in a private placement, 16,000,000 shares of our common stock at a purchase price of $1.00 per share, for aggregate gross proceeds of $16.0 million. In connection with the entry into the stock purchase agreement, we entered into a joint

21

venture agreement with Syntone’s People’s Republic of China, or PRC, based-affiliate, pursuant to which we agreed to form a PRC joint venture that will be 80% owned by Syntone’s PRC-affiliate and 20% owned by us. Upon formation of the PRC joint venture in April 2021, we entered into a royalty-free license with the PRC joint venture for the development, commercialization and manufacture of ONS-5010 in the greater China market, which includes Hong Kong, Taiwan and Macau.

We used approximately $0.9 million of the proceeds from the May 2020 private placement to Syntone Ventures to fund our initial capital contribution to the PRC joint venture, and expect to be required to make an additional capital contribution to the PRC joint venture of approximately $2.1 million within the next four years.

Selexis SA

In April 2013 we entered into three commercial license agreements with Selexis S.A., or Selexis, for a perpetual, non-exclusive, worldwide commercial license under the Selexis technology to manufacture, or have manufactured, a recombinant protein produced by a cell line developed using the Selexis technology for clinical testing and commercial sale for our legacy biosimilar product candidates ONS-3010, ONS-1045 (which covers ONS-5010) and ONS-1050 product candidates. We paid an upfront licensing fee to Selexis for each commercial license and also agreed to pay a fixed milestone payment for each licensed product. In addition, we are required to pay a single-digit royalty on a final product-by-final product and country-by-country basis, based on worldwide net sales of such final products by us or any of our affiliates or sub-licensees during the royalty term. At any time during the term, we have the right to terminate our royalty payment obligation by providing written notice to Selexis and paying Selexis a royalty termination fee. The initiation of our Phase 3 clinical program for ONS-5010 triggered a CHF 65,000 (approximately $0.1 million) milestone payment under the commercial license agreement, which we paid in November 2019. As of March 31, 2022, we have paid Selexis an aggregate of approximately $0.4 million under the commercial license agreements.

Components of our Results of Operations

Research and Development Expenses

Research and development expense consists of expenses incurred in connection with the discovery and development of our product candidates. We expense research and development costs as incurred. These expenses include:

● expenses incurred under agreements with contract research organizations, or CROs, as well as investigative sites and consultants that conduct our preclinical studies and clinical trials;

● expenses incurred by us directly, as well as under agreements with contract manufacturing organizations, or CMOs, for manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial materials and commercial materials, including manufacturing validation batches;

● outsourced professional scientific development services;

● employee-related expenses, which include salaries, benefits and stock-based compensation;

● payments made under a third-party assignment agreement, under which we acquired intellectual property;

● expenses relating to regulatory activities, including filing fees paid to regulatory agencies;

● laboratory materials and supplies used to support our research activities; and

● allocated expenses, utilities and other facility-related costs.

The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or when, if ever, material net cash inflows may commence from any of our other product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials, which vary significantly over the life of a project as a result of many factors, including:

● the number of clinical sites included in the trials;

● the length of time required to enroll suitable patients;

● the number of patients that ultimately participate in the trials;

● the number of doses patients receive;

● the duration of patient follow-up;

● the results of our clinical trials;

22

● the establishment of commercial manufacturing capabilities;

● the receipt of marketing approvals; and

● the commercialization of product candidates.

Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals. We may never succeed in achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment and follow-up in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. Product commercialization will take several years and millions of dollars in development costs.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size, complexity and duration of later-stage clinical trials.

General and Administrative Expenses

General and administrative expenses consist principally of salaries and related costs for personnel in executive, administrative, finance and legal functions, including stock-based compensation, travel expenses and recruiting expenses. Other general and administrative expenses include facility related costs, patent filing and prosecution costs and professional fees for business development, legal, auditing and tax services and insurance costs.

We anticipate that our general and administrative expenses will increase if and when we believe a regulatory approval of a product candidate appears likely, and we anticipate an increase in payroll and expense as a result of our preparation for commercial operations, particularly as it relates to the sales and marketing of our product.

Loss on Equity Method Investment

Loss on equity method investment represents our proportionate share for the period of the net loss of our investee to which the equity method of accounting is applied.

Interest Expense

Interest expense consists of cash paid and non-cash interest expense related to our unsecured notes with current and former stockholders, unsecured promissory notes, equipment loans, finance leases and other finance obligations.

Loss on Extinguishment of Debt

Loss on extinguishment of debt is related to an unsecured promissory note amendment during the period that was accounted for as an extinguishment of the old promissory note.

Change in Fair Value of Unsecured Promissory Note

The change in fair value relates to an amended promissory note which we elected to account for at fair value. As permitted under ASC 825, we elected the fair value option to account for our convertible promissory note. We record the convertible promissory note at fair value with changes in fair value recorded in the consolidated statements of operations.

Change in Fair Value of Warrant Liability

Warrants to purchase our common stock that were issued in conjunction with the convertible senior secured notes originally issued December 2017 are classified as liabilities and recorded at fair value. The warrants are subject to re-measurement at each balance sheet date and we recognize any change in fair value in our statements of operations.

23

Income Taxes

Since inception, we have not recorded any U.S. federal or state income tax benefits (excluding the sale of New Jersey state net operating losses “NOLs” and research and development “R&D” tax credits) for the net losses we have incurred in each year or on our earned R&D tax credits, due to our uncertainty of realizing a benefit from those items. As of September 30, 2021, we had federal and state NOL carryforwards of $282.4 million and $118.2 million, respectively, that will begin to expire in 2030 and 2039, respectively. As of September 30, 2021, we had federal foreign tax credit carryforwards of $2.4 million available to reduce future tax liabilities, which begin to expire starting in 2023. As of September 30, 2021, we also had federal research and development tax credit carryforwards of $8.1 million and $0.8 million, respectively, which begin to expire in 2032 and 2033, respectively.

In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an "ownership change" is subject to limitations on its ability to utilize its NOLs to offset future taxable income. We have not completed a study to assess whether an ownership change has occurred in the past. Our existing NOLs may be subject to limitations arising from previous ownership changes, and if we undergo an ownership change, our ability to utilize NOLs could be further limited by Section 382 of the Code. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Code. Our NOLs are also subject to international regulations, which could restrict our ability to utilize our NOLs. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities.

Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities.

Results of Operations

Comparison of Three Months Ended March 31, 2022 and 2021

	Three months ended March 31,
	2022		2021		Change
Operating expenses:
Research and development	$	12,219,666	$	8,529,393	$	3,690,273
General and administrative		6,689,914		4,095,891		2,594,023
Loss from operations		(18,909,580)		(12,625,284)		(6,284,296)
Loss on equity method investment		6,044		—		6,044
Interest expense, net		418,327		250,409		167,918
Change in fair value of convertible promissory note		343,585		—		343,585
Change in fair value of warrant liability		25,013		228,828		(203,815)
Loss before income taxes		(19,702,549)		(13,104,521)		(6,598,028)
Income tax expense		2,000		2,000		—
Net loss	$	(19,704,549)	$	(13,106,521)	$	(6,598,028)

24

Research and development expenses

The following table summarizes our research and development expenses by functional area for the three months ended March 31, 2022 and 2021:

	Three months ended March 31,
	2022		2021
ONS-5010 development	$	6,371,227	$	7,440,604
Compensation and related benefits		600,296		383,883
Stock-based compensation		1,820,261		228,240
Other research and development		3,427,882		476,666
Total research and development expenses	$	12,219,666	$	8,529,393

Research and development expenses for the three months ended March 31, 2022, increased by $3.7 million compared to the three months ended March 31, 2021. The increase was primarily due to BLA submission fees of $3.1 million incurred during the period.  Additionally, stock-based compensation expenses increased by $1.6 million primarily as a result of vested equity grants during the period related to the achievement of a milestone for performance-based stock options for some of our executives.  These increased expenses were partially offset by a decrease in ONS-5010 development costs of $1.0 million and clinical trial expenses for ONS-5010 of $0.1 million as a result of the completion of the NORSE TWO and NORSE THREE clinical trials in 2021.

General and administrative expenses

The following table summarizes our general and administrative expenses by type for the three months ended March 31, 2022 and 2021:

	Three months ended March 31,
	2022		2021
Professional fees	$	2,200,563	$	1,531,809
Compensation and related benefits		938,640		263,901
Stock-based compensation		1,942,534		901,507
Facilities, fees and other related costs		1,608,177		1,398,674
Total general and administrative expenses	$	6,689,914	$	4,095,891

General and administrative expenses for the three months ended March 31, 2022, increased by $2.6 million compared to the three months ended March 31, 2021. The increase compared to the prior period was due to an increase in stock-based compensation expenses of $1.0 million primarily as a result of vested equity grants during the period related to the achievement of a milestone for performance-based stock options for some of our executives, a $0.7 million increase in compensation and related benefits due to an increase in headcount, and an increase in professional fees of $0.8 million related to our ongoing pre-launch preparations in anticipation of the potential approval of our BLA for ONS-5010.

Interest expense

Interest expense increased by $0.1 million to $0.4 million for the three months ended March 31, 2022, as compared to $0.3 million for the three months ended March 31, 2021. The increase was primarily related to a new unsecured promissory note issued in November 2021.

Change in fair value of unsecured promissory note

The change in fair value relates to an amended promissory note which we elected to account for at fair value. As permitted under ASC 825, we elected the fair value option to account for our convertible promissory note. We record the convertible promissory note at fair value with changes in fair value recorded in the consolidated statements of operations.

25

Comparison of Six Months Ended March 31, 2022 and 2021

	Six months ended March 31,
	2022		2021		Change
Operating expenses:
Research and development	$	22,092,142	$	20,477,974	$	1,614,168
General and administrative		9,967,119		6,338,245		3,628,874
Loss from operations		(32,059,261)		(26,816,219)		(5,243,042)
Loss on equity method investment		29,699		—		29,699
Interest expense, net		769,861		410,072		359,789
Loss on extinguishment of debt		1,025,402		—		1,025,402
Change in fair value of convertible promissory note		505,940		—		505,940
Change in fair value of warrant liability		(224,885)		334,144		(559,029)
Loss before income taxes		(34,165,278)		(27,560,435)		(6,604,843)
Income tax expense		2,000		2,000		—
Net loss	$	(34,167,278)	$	(27,562,435)	$	(6,604,843)

Research and Development Expenses

The following table summarizes our research and development expenses by functional area for the six months ended March 31, 2022 and 2021:

	Six months ended March 31,
	2022		2021
ONS-5010 development	$	15,100,096	$	18,223,935
Compensation and related benefits		1,033,310		753,735
Stock-based compensation		2,072,657		468,211
Other research and development		3,886,079		1,032,093
Total research and development expenses	$	22,092,142	$	20,477,974

Research and development expenses for the six months ended March 31, 2022, increased by $1.6 million compared to the six months ended March 31, 2021. The increase was primarily due to BLA submission fees of $3.1 million incurred during the period. Additionally, stock-based compensation expenses increased $1.6 million primarily as a result of vested equity grants during the period related to the achievement of a milestone for performance-based stock options for some of our executives, and compensation and related benefits increased by $0.3 million due to an increase in headcount.  These increases were offset by a $3.1 million decrease in ONS-5010 development costs primarily related to the completion of the NORSE TWO and NORSE THREE clinical trials in 2021.

General and Administrative Expenses

The following table summarizes our general and administrative expenses by type for the six months ended March 31, 2022 and 2021:

	Six months ended March 31,
	2022		2021
Professional fees	$	3,352,694	$	2,945,133
Compensation and related benefits		1,568,666		558,631
Stock-based compensation		2,894,186		1,816,177
Facilities, fees and other related costs		2,151,573		1,018,304
Total general and administrative expenses	$	9,967,119	$	6,338,245

General and administrative expenses for the six months ended March 31, 2022, increased by $3.6 million compared to the six months ended March 31, 2021. The increase was due to a $1.1 million increase in stock-based compensation primarily

26

as a result of vested equity grants during the period related to the achievement of a milestone for performance-based stock options for some of our executives, increased compensation and related benefits of $1.0 million due to increased headcount, a $0.4 million increase in professional fees primarily related to our ongoing pre-launch preparations in anticipation of the potential approval of our BLA for ONS-5010, and a $1.1 million increase in facilities, fees and other expenses associated with increased business insurance premiums and a gain recorded after the assignment of our Monmouth Junction, New Jersey corporate office lease in 2021.

Interest Expense

Interest expense increased by $0.4 million to $0.8 million for the six months ended March 31, 2022, as compared to $0.4 million for the six months ended March 31, 2021. The increase was primarily related to a new unsecured promissory note issued in November 2021.

Loss on extinguishment of debt

We recognized a $1.0 million loss on extinguishment related to an unsecured promissory note amendment during the period that was accounted for as an extinguishment of the old promissory note.

Change in Fair Value of Warrant Liability

During the six months ended March 31, 2022, we recorded a gain of $0.2 million related to the decrease in the fair value of our common stock warrant liability associated with the warrants issued in connection with the senior secured notes originally issued December 2017 which resulted from a decrease in the price of our common stock.

During the six months ended March 31, 2021, we recorded a loss of $0.3 million related to an increase in the fair value of our common stock warrant liability associated with the warrants issued in connection with the senior secured notes originally issued December 2017 which resulted from an increase in the price of our common stock.

Liquidity and Capital Resources

We have not generated any revenue from product sales. Since inception, we have incurred net losses and negative cash flows from our operations. Through March 31, 2022, we have funded substantially all of our operations with $408.5 million in net proceeds from the sale and issuance of our equity securities, debt securities and borrowings under debt facilities. We have also received an aggregate of $29.0 million pursuant to emerging markets collaboration and licensing agreements for our inactive biosimilar development programs.

We anticipate incurring additional losses until such time, if ever, that we can generate significant sales of ONS-5010 or any other product candidate we may develop. We will need additional financing to fund our operations and to commercially develop ONS-5010 or any other product candidate we may develop. Management is currently evaluating various strategic opportunities to obtain the required funding for future operations. These strategies may include but are not limited to 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. Alternatively, we will be required to, among other things, make further reductions in our workforce, scale back our plans and place certain activities on hold, discontinue our development programs, liquidate all or a portion of our assets, and/or seek protection under the provisions of the U.S. Bankruptcy Code.

On November 5, 2020, we received $10.0 million in net proceeds from issuance of an unsecured promissory note, or 2020 Note, with face amount of $10.2 million. The note bears interest at a rate of 7.5% per annum, matures January 1, 2022, and includes an original issue discount of $0.2 million. On November 16, 2021, entered into a note amendment (the “Note Amendment”) which, among other things, (i) extended the maturity date to January 1, 2023, (ii) increased the interest rate from 7.5% per annum to 10% per annum beginning on January 1, 2022 and (iii) provided for the lender’s right to redeem some or all of the outstanding balance of the Note for shares of our common stock beginning July 1, 2022, subject to certain limitations. We may prepay all or a portion of the note at any time by paying 105% of the outstanding balance elected for pre-payment.

27

On November 16, 2021, we received $10.0 million in net proceeds from issuance of an unsecured promissory note, or 2021 Note, with face amount of $10.2 million. The note bears interest at a rate of 9.5% per annum, matures January 1, 2023, and includes an original issue discount of $0.2 million. We may prepay all or a portion of the note at any time by paying 105% of the outstanding balance elected for pre-payment.

In November 2021, we issued in an underwritten public offering an aggregate of 46,000,000 shares of common stock at a purchase price per share of $1.25 for $54.0 million in net proceeds after payment of underwriter discounts and commissions and other underwriter offering costs. GMS Ventures purchased an aggregate of 16,000,000 shares of common stock in the public offering at the public offering price per share. In connection with the underwritten public offering, we issued the underwriter warrants to purchase up to an aggregate of 2,100,000 shares of common stock at an exercise price of $1.5625 per share, which warrants have a 5-year term.

During the period from October 2021 through April 2022, we sold 3,440,416 shares of common stock under, and generated $6.7 million in net proceeds from, the ATM Offering after payment of fees to the sales agent of $0.2 million.

We evaluated whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern. As of March 31, 2022, we had an accumulated deficit of $377.1 million. In addition, $22.6 million of unsecured promissory notes, which bear interest compounding daily and mature January 1, 2023 and a $0.2 million loan granted pursuant to the PPP of the CARES Act are outstanding as of March 31, 2022. The PPP loan was fully repaid on May 2, 2022. As a result, there is substantial doubt about our ability to continue as a going concern. Our current cash resources of $58.4 million as of March 31, 2022 are expected to fund our operations through the anticipated approval of the ONS-5010 BLA expected in the first calendar quarter of 2023.

Our future operations are highly dependent on a combination of factors, including (i) the timely and successful completion of additional financing discussed above, (ii) our ability to successfully begin marketing of our product candidates or complete revenue-generating partnerships with other companies, (iii) the success of our research and development, (iv) the development of competitive therapies by other biotechnology and pharmaceutical companies, and, ultimately, (v) regulatory approval and market acceptance of our proposed future products.

Funding Requirements

We anticipate we will incur net losses and negative cash flow from operations for the foreseeable future. We may not be able to complete the development and initiate commercialization of ONS-5010 if, among other things, if the FDA does not approve our BLA when we expect, or at all, or if we are not able to enter into strategic partnerships for ONS-5010 providing for sufficient funding of our expected commercial and development costs and we are unable to obtain such funding elsewhere.

Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, manufacturing and facility costs, external research and development services, laboratory and related supplies, legal and other regulatory expenses, and administrative and overhead costs. Our future funding requirements will be heavily determined by the resources needed to support development of our lead product candidate and any other product candidates we may choose to pursue.

We believe our existing cash of $58.4 million as of March 31, 2022, can fund our operations into the first calendar quarter of 2023. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. We may need to raise substantial additional capital to complete our planned ONS-5010 development and commercialization program. We plan to finance our future operations with a combination of proceeds from our ATM facility, renegotiation of the maturity date for existing unsecured notes, 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. If we raise additional capital through the sale of equity or convertible debt securities, your ownership will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a holder of our common stock. There are no assurances that we will be successful in obtaining an adequate level of financing for the development and commercialization of ONS-5010 or any other current or future product candidates. Alternatively, we will be required to, among other things, modify our clinical trial plans for ONS-5010 in additional indications, make reductions in our

28

workforce, scale back our plans and place certain activities on hold, discontinue our development programs, liquidate all or a portion of our assets, and/or seek protection under the provisions of the U.S. Bankruptcy Code.

Cash Flows

The following table summarizes our cash flows for each of the periods presented:

	Six months ended March 31,
	2022		2021
Net cash used in operating activities	$	(25,324,630)	$	(25,070,807)
Net cash provided by financing activities		69,271,403		49,703,675

Operating Activities

During the six months ended March 31, 2022, we used $25.3 million of cash in operating activities resulting primarily from our net loss of $34.2 million. This use of cash was partially offset by $7.2 million of non-cash items such as stock-based compensation, non-cash interest expense, change in fair value of warrant liability, change in fair value of unsecured convertible promissory note, loss on extinguishment of debt, loss on equity method investment and depreciation and amortization expense. The net cash inflow of $1.7 million from changes in our operating assets and liabilities was primarily due to an increase in accounts payable of $2.0 million primarily from activities related to our BLA submission, an increase of $0.8 million in accrued expenses. These outflows were partially offset by an increase in prepaid expenses of $1.1 million for prepayments associated with ONS-5010 development costs.

During the six months ended March 31, 2021, we used $25.1 million of cash in operating activities resulting primarily from our net loss of $27.6 million. This use of cash was partially offset by $2.6 million of non-cash items such as stock-based compensation, non-cash interest expense, change in fair value of warrant liability, gain on settlement of lease termination obligation, and depreciation and amortization expense. The net cash outflow of $0.1 million from changes in our operating assets and liabilities was primarily due to an increase in our accounts payable of $3.7 million primarily relating to clinical trial and ONS-5010 development costs and a decrease in other assets of $0.1 million. These inflows were partially offset by a decrease in accrued expenses of $2.5 million primarily due to the settlement of lease termination obligation and payments to clinical trial sites for accrued costs, $0.1 million of payments for operating leases, and an increase in prepaid expenses of $1.3 million for prepayments associated with our clinical trials and ONS-5010 development costs.

Financing Activities

During the six months ended March 31, 2022, net cash provided by financing activities was $69.3 million, primarily attributable to $54.0 million in net proceeds from an underwritten public offering in November 2021 of an aggregate of 46,000,000 shares of our common stock and accompanying 2,100,000 warrants to purchase shares of our common stock, $0.2 million in net proceeds from exercise of common stock warrants, $6.4 million in net proceeds from the sale of common stock under the ATM Offering and $9.4 million in net proceeds from issuance of an unsecured promissory note with face amount of $10.2 million in November 2021. We also made $0.7 million in debt and finance lease obligation payments.

During the six months ended March 31, 2021, net cash provided by financing activities was $49.7 million, primarily attributable to $39.8 million in net proceeds from the registered direct offering and concurrent private placements in February 2021 for an aggregate of 42,607,394 shares of our common stock and accompanying 2,116,364 warrants to purchase shares of our common stock and $10.0 million in net proceeds from issuance of an unsecured promissory note with face amount of $10.2 million in November 2020. Additionally, we received $3.6 million in net proceeds from common stock warrants exercised. We also made $3.7 million in debt and finance lease obligation payments.

Description of Indebtedness

In November 2020, we entered into a note purchase agreement with Streeterville Capital, LLC, a Utah limited liability company pursuant to which we issued an unsecured promissory note in the original principal amount of $10.2 million for $10.0 million in cash proceeds, which was amended in November 2021. The unsecured note included an original issue

29

discount of $0.2 million, bore interest at a rate of 7.5% per annum compounding daily and was due to mature January 1, 2022. On November 16, 2021, we entered into the Note Amendment which, among other things, (i) extended the maturity date to January 1, 2023, (ii) increased the interest rate from 7.5% per annum to 10% per annum beginning on January 1, 2022 and (iii) provided for the lender’s right to redeem some or all of the outstanding balance of the Note for shares of our common stock beginning July 1, 2022, subject to certain limitations. We may prepay all or a portion of the unsecured note at any time by paying 105% of the outstanding balance elected for pre-payment.

On November 16, 2021, we received $10.0 million in net proceeds from issuance of an unsecured promissory note, or 2021 Note, with face amount of $10.2 million. The note bears interest at a rate of 9.5% per annum compounding daily, matures January 1, 2023, and includes an original issue discount of $0.2 million. We may prepay all or a portion of the note at any time by paying 105% of the outstanding balance elected for pre-payment.

While the unsecured notes are outstanding, we agreed to keep adequate public information available, maintain our Nasdaq listing, and refrain from undertaking certain “Variable Security Issuances” without the noteholders’ consent, subject to certain limited exempt issuances, in addition to other negative covenants. The unsecured notes provide that in the event of default if we breach our negative covenants under the purchase agreements, undertake certain “Fundamental Transactions” (as defined therein), along with other customary events of default, in addition to providing for a default rate of 14%, the noteholder has the right to increase the outstanding balance by 5%.

Critical Accounting Policies and Significant Judgments and Estimates

The Critical Accounting Policies and Significant Judgments and Estimates included in our Form 10-K for the fiscal year ended September 30, 2021, filed with the SEC on December 23, 2021 have not materially changed.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a “Smaller Reporting Company”, this Item and the related disclosure is not required.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Because there are inherent limitations in all control systems, a control system, no matter how well conceived and operated, can provide only reasonable, as opposed to absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control

30

over financial reporting during our first fiscal quarter ended March 31, 2022. We have not experienced any material impact to our internal control over financial reporting despite the fact that our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

31

Part II. Other Information

Item 1. Legal Proceedings

We are not party to any material pending legal proceedings. From time to time, we may become involved in litigation relating to claims arising from the ordinary course of business.

Item 1A. Risk Factors

The ongoing armed conflict between Russia and Ukraine could adversely affect our business, financial condition and results of operations.

On February 24, 2022, Russian military forces launched a military action in Ukraine, and sustained conflict and disruption in the region is likely. The length, impact, and outcome of this ongoing military conflict is highly unpredictable and could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, trade disputes or trade barriers, changes in consumer or purchaser preferences, as well as an increase in cyberattacks and espionage.

Russia’s recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military action against Ukraine have led to substantial expansion of sanction programs imposed by the United States, the European Union, the United Kingdom, Canada, Switzerland, Japan, and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including, among others:

● blocking sanctions against some of the largest state-owned and private Russian financial institutions (and their subsequent removal from the Society for Worldwide Interbank Financial Telecommunication payment system) and certain Russian businesses, some of which have significant financial and trade ties to the European Union;

● blocking sanctions against Russian and Belarusian individuals, including the Russian President, other politicians, and those with government connections or involved in Russian military activities; and

● blocking of Russia’s foreign currency reserves as well as expansion of sectoral sanctions and export and trade restrictions, limitations on investments and access to capital markets, and bans on various Russian imports.

In retaliation against new international sanctions and as part of measures to stabilize and support the volatile Russian financial and currency markets, the Russian authorities also imposed significant currency control measures aimed at restricting the outflow of foreign currency and capital from Russia, imposed various restrictions on transacting with non-Russian parties, banned exports of various products, and imposed other economic and financial restrictions. The situation is rapidly evolving, and additional sanctions by Russia on the one hand, and by the other countries on the other hand, could adversely affect the global economy, financial markets, energy supply and prices, certain critical materials and metals, supply chains, and global logistics and could adversely affect our business, financial condition, and results of operations.

We are actively monitoring the situation in Ukraine and Russia and assessing its impact on our business, including our business partners and customers. To date, we have not experienced any material interruptions in our infrastructure, supplies, technology systems, or networks needed to support our operations. We have no way to predict the progress or outcome of the military conflict in Ukraine or its impacts in Ukraine, Russia, Belarus, Europe, or the U.S. The extent and duration of the military action, sanctions, and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business, operations, operating results and financial condition as well as our ability to raise additional capital when needed on acceptable terms for an unknown period of time.  Any such disruption may also magnify the impact of other risks described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021.

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

Not applicable.

32

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

33

Item 6. Exhibits

Exhibit Number	Description
3.1	Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K filed with the SEC on May 19, 2016).
3.2	Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K filed with the SEC on December 6, 2018).
3.3	Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K filed with the SEC on March 18, 2019).
3.4	Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K filed with the SEC on March 26, 2021).
3.5	Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s current report on Form 8-K filed with the SEC on March 26, 2021).
31.1	Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
31.2	Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
32.1*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

* Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

34

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	OUTLOOK THERAPEUTICS, INC.
Date: May 13, 2022	By:	/s/ Lawrence A. Kenyon
		Lawrence A. Kenyon
		Chief Financial Officer (Principal Financial and Accounting Officer)

35

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, C. Russell Trenary III, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Outlook Therapeutics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2022	By:	/s/ C. Russell Trenary III
		C. Russell Trenary III
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Lawrence A. Kenyon, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Outlook Therapeutics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2022	By:	/s/ Lawrence A. Kenyon
		Lawrence A. Kenyon
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Outlook Therapeutics, Inc. (the “Company”) for the period ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, that to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 13, 2022	By	/s/ C. Russell Trenary III
		C. Russell Trenary III
		Chief Executive Officer

Date: May 13, 2022	By	/s/ Lawrence A. Kenyon
		Lawrence A. Kenyon
		Chief Financial Officer

“This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Outlook Therapeutics, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.”

XML

Document And Entity Information - shares	6 Months Ended
	Mar. 31, 2022	May 11, 2022
Document And Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2022
Document Transition Report	false
Entity File Number	001-37759
Entity Registrant Name	OUTLOOK THERAPEUTICS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	38-3982704
Entity Address, Address Line One	485 Route 1 South
Entity Address, Address Line Two	Building F, Suite 320
Entity Address, City or Town	Iselin
Entity Address, State or Province	NJ
Entity Address, Postal Zip Code	08830
City Area Code	609
Local Phone Number	619-3990
Title of 12(b) Security	Common Stock
Trading Symbol	OTLK
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		225,942,719
Entity Central Index Key	0001649989
Current Fiscal Year End Date	--09-30
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Consolidated Balance Sheets - USD ($)	Mar. 31, 2022	Sep. 30, 2021
Current assets:
Cash and cash equivalents	$ 58,424,097	$ 14,477,324
Prepaid expenses and other current assets	8,123,275	7,030,823
Total current assets	66,547,372	21,508,147
Property and equipment, net	81,812	163,625
Operating lease right-of-use assets, net	91,289	111,429
Equity method investment	823,961	853,660
Other assets	141,859	174,590
Total assets	67,686,293	22,811,451
Current liabilities:
Current portion of long-term debt (includes debt measured at fair value of $12,557,521 at March 31, 2022)	22,781,233	904,200
Current portion of finance lease liabilities	18,422	26,464
Current portion of operating lease liabilities	45,171	42,854
Accounts payable	4,159,987	2,196,349
Accrued expenses	2,549,876	1,725,721
Income taxes payable	1,856,629	1,856,629
Total current liabilities	31,411,318	6,752,217
Long-term debt		10,885,854
Finance lease liabilities	10,332	16,018
Operating lease liabilities	3,929	26,995
Warrant liability	298,033	522,918
Total liabilities	31,723,612	18,204,002
Commitments and contingencies (Note 9)
Convertible preferred stock:
Total convertible preferred stock
Stockholders' equity:
Preferred stock, value
Common stock, par value $0.01 per share; 325,000,000 shares authorized; 225,792,742 and 176,461,628 shares issued and outstanding at March 31, 2022 and September 30, 2021, respectively	2,257,927	1,764,616
Additional paid-in capital	410,755,286	345,726,087
Accumulated deficit	(377,050,532)	(342,883,254)
Total stockholders' equity	35,962,681	4,607,449
Total liabilities, convertible preferred stock and stockholders' equity	67,686,293	22,811,451
Series A convertible preferred stock
Convertible preferred stock:
Total convertible preferred stock
Convertible Preferred Stock Series A-1
Convertible preferred stock:
Total convertible preferred stock
Series B convertible preferred stock
Stockholders' equity:
Preferred stock, value

XML

Consolidated Balance Sheets (Parentheticals) - USD ($)	Mar. 31, 2022	Sep. 30, 2021
Debt measured at fair value	$ 12,557,521
Preferred stock, par value per share (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	7,300,000	7,300,000
Preferred stock, shares issued	0	0
Preferred stock shares outstanding	0	0
Common stock, par value per share (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	325,000,000	325,000,000
Common stock, shares issued	225,792,742	176,461,628
Common stock, shares outstanding	225,792,742	176,461,628
Series A convertible preferred stock
Convertible stock, par value (in dollars per share)	$ 0.01	$ 0.01
Convertible preferred stock, shares authorized	1,000,000	1,000,000
Convertible preferred stock, shares issued	0	0
Convertible preferred stock outstanding	0	0
Convertible Preferred Stock Series A-1
Convertible stock, par value (in dollars per share)	$ 0.01	$ 0.01
Convertible preferred stock, shares authorized	200,000	200,000
Convertible preferred stock, shares issued	0	0
Convertible preferred stock outstanding	0	0
Series B convertible preferred stock
Preferred stock, par value per share (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,500,000	1,500,000
Preferred stock, shares issued	0	0
Preferred stock shares outstanding	0	0
Unsecured convertible promissory note
Debt measured at fair value	$ 12,557,521

XML

Consolidated Statements of Operations - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Operating expenses:
Research and development	$ 12,219,666	$ 8,529,393	$ 22,092,142	$ 20,477,974
General and administrative	6,689,914	4,095,891	9,967,119	6,338,245
Loss from operations	(18,909,580)	(12,625,284)	(32,059,261)	(26,816,219)
Loss on equity method investment	6,044		29,699
Interest expense, net	418,327	250,409	769,861	410,072
Loss on extinguishment of debt			1,025,402
Change in fair value of unsecured convertible promissory note	343,585		505,940
Change in fair value of warrant liability	25,013	228,828	(224,885)	334,144
Loss before income taxes	(19,702,549)	(13,104,521)	(34,165,278)	(27,560,435)
Income tax expense	2,000	2,000	2,000	2,000
Net loss	$ (19,704,549)	$ (13,106,521)	$ (34,167,278)	$ (27,562,435)
Per share information:
Net loss per share of common stock, basic (in dollars per share)	$ (0.09)	$ (0.09)	$ (0.17)	$ (0.20)
Net loss per share of common stock, diluted (in dollars per share)	$ (0.09)	$ (0.09)	$ (0.17)	$ (0.20)
Weighted average shares outstanding, basic (in shares)	219,067,900	150,730,191	203,443,077	136,080,637
Weighted average shares outstanding, diluted (in shares)	219,067,900	150,730,191	203,443,077	136,080,637

XML

Consolidated Statements of Stockholders' Equity (Deficit) - USD ($)	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Total
Balance at Sep. 30, 2020	$ 1,271,831	$ 291,274,366	$ (289,719,906)	$ 2,826,291
Balance, beginning (in shares) at Sep. 30, 2020	127,183,109
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense		1,154,641		1,154,641
Net loss			(14,455,914)	(14,455,914)
Balance at Dec. 31, 2020	$ 1,271,831	292,429,007	(304,175,820)	(10,474,982)
Balance, ending (in shares) at Dec. 31, 2020	127,183,109
Balance at Sep. 30, 2020	$ 1,271,831	291,274,366	(289,719,906)	2,826,291
Balance, beginning (in shares) at Sep. 30, 2020	127,183,109
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss				(27,562,435)
Balance at Mar. 31, 2021	$ 1,736,058	336,197,455	(317,282,341)	20,651,172
Balance, ending (in shares) at Mar. 31, 2021	173,605,807
Balance at Dec. 31, 2020	$ 1,271,831	292,429,007	(304,175,820)	(10,474,982)
Balance, beginning (in shares) at Dec. 31, 2020	127,183,109
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock in connection with exercise of warrants	$ 38,153	3,547,656		3,585,809
Issuance of common stock in connection with exercise of warrants (in shares)	3,815,304
Sale of common stock, net of issuance costs	$ 426,074	39,091,045		39,517,119
Sale of common stock, net of issuance costs (in shares)	42,607,394
Stock-based compensation expense		1,129,747		1,129,747
Net loss			(13,106,521)	(13,106,521)
Balance at Mar. 31, 2021	$ 1,736,058	336,197,455	(317,282,341)	20,651,172
Balance, ending (in shares) at Mar. 31, 2021	173,605,807
Balance at Sep. 30, 2021	$ 1,764,616	345,726,087	(342,883,254)	4,607,449
Balance, beginning (in shares) at Sep. 30, 2021	176,461,628
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock in connection with exercise of stock options	$ 250	17,500		17,750
Issuance of common stock in connection with exercise of stock options (in shares)	25,000
Sale of common stock, net of issuance costs	$ 477,740	56,979,163		57,456,903
Sale of common stock, net of issuance costs (in shares)	47,773,974
Stock-based compensation expense		1,204,048		1,204,048
Net loss			(14,462,729)	(14,462,729)
Balance at Dec. 31, 2021	$ 2,242,606	403,926,798	(357,345,983)	48,823,421
Balance, ending (in shares) at Dec. 31, 2021	224,260,602
Balance at Sep. 30, 2021	$ 1,764,616	345,726,087	(342,883,254)	4,607,449
Balance, beginning (in shares) at Sep. 30, 2021	176,461,628
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss				(34,167,278)
Balance at Mar. 31, 2022	$ 2,257,927	410,755,286	(377,050,532)	35,962,681
Balance, ending (in shares) at Mar. 31, 2022	225,792,742
Balance at Dec. 31, 2021	$ 2,242,606	403,926,798	(357,345,983)	48,823,421
Balance, beginning (in shares) at Dec. 31, 2021	224,260,602
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock in connection with exercise of warrants	$ 157	187,943		188,100
Issuance of common stock in connection with exercise of warrants (in shares)	15,675
Sale of common stock, net of issuance costs	$ 15,164	2,877,750		2,892,914
Sale of common stock, net of issuance costs (in shares)	1,516,465
Stock-based compensation expense		3,762,795		3,762,795
Net loss			(19,704,549)	(19,704,549)
Balance at Mar. 31, 2022	$ 2,257,927	$ 410,755,286	$ (377,050,532)	$ 35,962,681
Balance, ending (in shares) at Mar. 31, 2022	225,792,742

XML

Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
OPERATING ACTIVITIES
Net loss	$ (34,167,278)	$ (27,562,435)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	101,953	163,283
Loss on extinguishment of debt	1,025,402
Non-cash interest expense	763,104	392,028
Stock-based compensation	4,966,843	2,284,388
Change in fair value of unsecured convertible promissory note	505,940
Change in fair value of warrant liability	(224,885)	334,144
Gain on settlement of lease termination obligation		(552,340)
Loss on equity method investment	29,699
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(1,092,452)	(1,323,108)
Other assets		137,579
Operating lease liability	(20,749)	(91,721)
Accounts payable	1,963,638	3,685,278
Accrued expenses	824,155	(2,537,903)
Net cash used in operating activities	(25,324,630)	(25,070,807)
FINANCING ACTIVITIES
Proceeds from the sale of common stock, net of issuance costs	60,382,548	39,779,507
Proceeds from debt	10,000,000	10,000,000
Payment of debt issuance costs		(8,032)
Proceeds from exercise of common stock warrants	188,100	3,585,809
Proceeds from exercise of stock options	17,750
Payments of finance lease obligations	(13,728)	(16,533)
Repayment of debt	(703,267)	(3,637,076)
Payment of financing costs	(600,000)
Net cash provided by financing activities	69,271,403	49,703,675
Net increase in cash and cash equivalents	43,946,773	24,632,868
Cash and cash equivalents at beginning of period	14,477,324	12,535,986
Cash and cash equivalents at end of period	58,424,097	37,168,854
Supplemental disclosure of cash flow information
Cash paid for interest	22,017	10,490
Supplemental schedule of non-cash financing activities:
Common stock issuance costs in accounts payable		$ 262,388
Deferred offering costs amortization	$ 32,731

XML

Organization and Description of Business

6 Months Ended

Mar. 31, 2022

Organization and Description of Business

Organization and Description of Business

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 as a result of 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 three and six months ended March 31, 2022 were not significantly impacted by COVID-19.

XML

Liquidity

6 Months Ended

Mar. 31, 2022

Liquidity

Liquidity

2.    Liquidity

The Company has incurred recurring losses and negative cash flows from operations since its inception and has an accumulated deficit of $377,050,532 as of March 31, 2022. As of March 31, 2022, the Company had $22,601,716 of principal and accrued interest due under unsecured promissory notes maturing on January 1, 2023, and a $200,933 loan granted pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP loan was fully repaid on May 2, 2022. 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.

Management believes that the Company’s existing cash and cash equivalents as of March 31, 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 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.

XML

Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Mar. 31, 2022

Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Summary of Significant Accounting Policies

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 March 31, 2022 and its results of operations for the three and six months ended March 31, 2022 and 2021, cash flows for the six months ended March 31, 2022 and 2021, and stockholders’ equity (deficit) for the three and six months ended March 31, 2022 and 2021. Operating results for the six months ended March 31, 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.

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

		Three months ended March 31,			Six months ended March 31,
	2022		2021		2022		2021
Net loss attributable to common stockholders	$	(19,704,549)	$	(13,106,521)	$	(34,167,278)	$	(27,562,435)
Common stock shares outstanding (weighted average)		219,067,900		150,730,191		203,443,077		136,080,637
Basic and diluted net loss per share	$	(0.09)	$	(0.09)	$	(0.17)	$	(0.20)

The following potentially dilutive securities (in common stock equivalents) have been excluded from the computation of diluted weighted-average shares outstanding as of March 31, 2022, and 2021, as they would be antidilutive:

	As of March 31,
	2022	2021
Performance-based stock units	2,470	2,470
Performance-based stock options	1,900,000	—
Stock options	19,783,581	12,010,781
Common stock warrants	6,812,794	5,129,460

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 all entities with fiscal years beginning after December 15, 2021, including interim periods therein. The Company is currently evaluating the impact of adopting this guidance to its consolidated financial statements.

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.

XML

Fair Value Measurements

6 Months Ended

Mar. 31, 2022

Fair Value Measurements

Fair Value Measurements

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:

	March 31, 2022
	(Level 1)		(Level 2)		(Level 3)
Liabilities
Unsecured convertible promissory note	$	—	$	—	$	12,557,521
Warrant liability		—		—		298,033
	$	—	$	—	$	12,855,554
	September 30, 2021
	(Level 1)		(Level 2)		(Level 3)
Liabilities
Unsecured convertible promissory note	$	—	$	—	$	—
Warrant liability		—		—		522,918
	$	—	$	—	$	522,918

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 six months ended March 31, 2022:

	Unsecured Convertible
	Promissory Note		Warrants
Balance at October 1, 2021	$	—	$	522,918
Fair value at issuance date		12,051,581		—
Change in fair value		505,940		(224,885)
Balance at March 31, 2022	$	12,557,521	$	298,033

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 and at March 31, 2022, 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

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:

	March 31, 2022			September 30, 2021
Risk-free interest rate		2.42	%		0.62	%
Remaining contractual term of warrant (years)		2.9			3.4
Expected volatility		115.6	%		124.7	%
Annual dividend yield		—	%		—	%
Fair value of common stock (per share)	$	1.78		$	2.17

Fair Value of Other Financial Instruments

At March 31, 2022, the carrying value of the PPP loan approximates its fair value due to the short duration to maturity. The fair value and carrying value of the unsecured promissory note included in long-term debt on the consolidated balance sheet on March 31, 2022 was $10,448,000 and $10,022,779, respectively. The estimated fair value was based on discounted expected future cash flows using the prevailing interest rate that is a Level 3 input under the fair value hierarchy.

XML

Property and Equipment, Net

6 Months Ended

Mar. 31, 2022

Property and Equipment, Net

Property and Equipment, Net

5.    Property and Equipment, Net

Property and equipment, net, consists of:

	March 31, 2022		September 30, 2021
Laboratory equipment	$	1,067,351	$	1,067,351
Less: accumulated depreciation		(985,539)		(903,726)
	$	81,812	$	163,625

Depreciation expense was $40,906 for both the three months ended March 31, 2022 and 2021, and $81,813 and $81,812 for the six months ended March 31, 2022 and 2021, respectively.

XML

Equity Method Investment

6 Months Ended

Mar. 31, 2022

Equity Method Investment

Equity Method Investment

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 80% owned by Syntone PRC and 20% owned by the Company. As the Company can exert significant influence over, but does not control, Syntone’s operations through voting rights or representation on Syntone’s board of directors, the Company accounts for this investment using the equity method of accounting. Upon formation of Syntone in April 2021, the Company entered into a royalty-free license with Syntone 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 expects to be required to make an additional capital contribution to Syntone of approximately $2,100,000, which will be made within four years after the establishment date in accordance with the development plan contemplated in the license agreement or on such other terms within such four-year period. The maximum exposure to a loss as a result of the Company’s involvement in Syntone is limited to the initial investment and the future capital contributions of approximately $2,100,000.

XML

Accrued Expenses

6 Months Ended

Mar. 31, 2022

Accrued Expenses

Accrued Expenses

7.     Accrued Expenses

Accrued expenses consists of:

	March 31, 2022		September 30, 2021
Compensation	$	774,484	$	753,808
Research and development		1,151,115		808,780
Interest payable		89		12,909
Professional fees		206,079		—
Commercial consulting		216,729		—
Other accrued expenses		201,380		150,224
	$	2,549,876	$	1,725,721

XML

Debt

6 Months Ended

Mar. 31, 2022

Debt

Debt

8.    Debt

Debt consists of:

	March 31, 2022		September 30, 2021
Unsecured convertible promissory note (measured at fair value)	$	12,557,521	$	—
Unsecured promissory note		10,590,601		10,938,145
Paycheck Protection Program term loan		200,933		904,200
Total debt		23,349,055		11,842,345
Less: unamortized loan costs		(567,822)		(52,291)
Total debt, net of unamortized loan costs		22,781,233		11,790,054
Less: current portion		(22,781,233)		(904,200)
Long-term debt	$	—	$	10,885,854

Unsecured convertible promissory note

On November 5, 2020, the Company received $10,000,000 in net proceeds from issuance of an unsecured promissory note with face amount of $10,220,000, which was amended in November 2021 and became convertible. Debt issuance costs totaling $228,032 were recorded as debt discount and were deducted from the principal in the accompanying consolidated balance sheets. The debt discount was amortized as a component of interest expense over the 14-month term of the underlying debt using the effective interest method. The note bore interest at a rate of 7.5% per annum and was due to mature January 1, 2022. On November 16, 2021, the Company entered into a note amendment which, among other things, (i) extended the maturity date to January 1, 2023, (ii) increased the interest rate from 7.5% per annum to 10% per annum beginning on January 1, 2022, and (iii) provided for the lender’s right to redeem some or all of the outstanding balance of the note for shares of the Company’s common stock beginning July 1, 2022, subject to certain limitations. The Company may prepay all or a portion of the note at any time by paying 105% of the outstanding balance elected for pre-payment. The amendment was accounted for as an extinguishment of the old promissory note. As a result, the Company recorded a loss on debt extinguishment of $1,025,402 which is the difference between the fair value of the amended promissory note and the net carrying value of the old promissory note which includes $26,488 of unamortized debt discount and lender fees of $552,633. The amended promissory note includes redemption options whereby beginning on July 1, 2022, the holder has the option to redeem up to $2,000,000 of outstanding principal and accrued and unpaid interest per calendar month for shares of the Company’s common stock at a redemption price equal to 75% of the lowest closing bid price in the three trading days immediately preceding the date the holder delivers written notice. The Company elected to account for the amended promissory note at fair value (Note 4) and is not required to bifurcate the redemption options as derivatives. Since the redemption options provide the lender with the right to put the total outstanding principal and interest back to the Company within one year from the balance sheet date, the entire amount is classified as a current liability. As of March 31, 2022, the aggregate unpaid principal and interest outstanding and the fair value of the amended promissory note were $12,011,115 and $12,557,521, respectively.

Unsecured promissory note

On November 16, 2021, the Company received $10,000,000 in net proceeds from issuance of an unsecured promissory note with face amount of $10,220,000. Debt issuance costs totaling $820,000 are recorded as debt discount and are 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 9.5% per annum compounding daily and matures January 1, 2023. The Company may prepay all or a portion of the note at any time by paying 105% of the outstanding balance elected for pre-payment.

During the three months ended March 31, 2022 and 2021, the Company recognized $418,388 and $242,819, respectively, of interest expense related to the unsecured promissory notes of which $169,857 and $47,137, respectively, are related to the amortization of debt discount. During the six months ended March 31, 2022 and 2021, the Company recognized $763,104 and $392,028, respectively, of interest expense related to the unsecured promissory notes of which $277,980 and $76,428, respectively, are related to the amortization of debt discount.

Paycheck Protection Program term loan

On May 4, 2020, the Company received $904,200 in proceeds from a loan granted pursuant to the PPP of the CARES Act. The PPP term loan is evidenced by a promissory note containing the terms and conditions for repayment of the PPP term loan. The PPP term loan provides for an initial six-month deferral of payments and any amount owed on the loan has a two-year maturity (May 2022), with an interest rate of 1% per annum. Commencing October 15, 2021, the Company began to pay the lender equal monthly payments of principal and interest as required to fully amortize any principal amount outstanding on the PPP term loan as of October 15, 2021 by May 2, 2022. The loan was fully repaid on May 2, 2022. Aggregate interest expense on the PPP loan for the three months ended March 31, 2022 and 2021 was $879 and $2,205, respectively and for the six months ended March 31, 2022 and 2021 was $2,587 and $4,484, respectively.

XML

Commitments and Contingencies

6 Months Ended

Mar. 31, 2022

Commitments and Contingencies.

Commitments and Contingencies

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 $3,000,000 in damages. On March 30, 2021, the Company entered into a confidential settlement agreement with Liomont, and the complaint was dismissed on April 11, 2021. The Company agreed to make an initial settlement payment of $625,000 that was paid in April 2021; and an additional payment of $750,000, which was accrued at March 31, 2022 and paid in April 2022. There are no remaining future financial obligations to the Company.

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 three-year term corporate office lease in Iselin, New Jersey which 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 and six months ended March 31, 2022 and 2021 are as follows:

	Three months ended March 31,				Six months ended March 31,
	2022		2021		2022		2021
Lease cost:
Amortization of right-of-use assets	$	—	$	—	$	—	$	—
Interest on lease liabilities		849		1,005		1,823		2,787
Total finance lease cost		849		1,005		1,823		2,787
Operating lease cost		11,217		43,625		22,433		87,250
Total lease cost	$	12,066	$	44,630	$	24,256	$	90,037

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

	March 31, 2022		September 30, 2021
Operating leases:
Right-of-use asset	$	91,289	$	111,429
Operating lease liabilities		49,100		69,849
Finance leases:
Right-of-use asset	$	—	$	—
Financing lease liabilities		28,754		42,482
Weighted-average remaining lease term (years):
Operating leases		2.1		2.6
Finance leases		1.4		1.7
Weighted-average discount rate:
Operating leases		7.5%		7.5%
Finance leases		10.7%		9.5%

Other information related to leases for the six months ended March 31, 2022 and 2021 are as follows:

	Six months ended March 31,
	2022		2021
Cash paid for amounts included in the measurement of lease obligations:
Operating cash flows from finance leases	$	1,823	$	2,787
Operating cash flows from operating leases		23,043		97,500
Financing cash flows from finance leases		13,728		16,533

Future minimum lease payments under non-cancelable leases as of March 31, 2022 are as follows for the years ending September 30:

	Operating leases		Finance leases
2022 (remaining six months)	$	23,608	$	14,055
2023		27,675		13,149
2024		—		4,383
Total undiscounted lease payments	$	51,283	$	31,587
Less: Imputed interest		2,183		2,833
Total lease obligations	$	49,100	$	28,754

XML

Common Stock and Stockholders' Equity (Deficit)

6 Months Ended

Mar. 31, 2022

Common Stock and Stockholders' Equity (Deficit)

Common Stock and Stockholders' Equity (Deficit)

10.    Common Stock and Stockholders’ Equity (Deficit)

Common stock

In November 2021, the Company issued 46,000,000 shares of common stock in an underwritten public offering at a purchase price per share of $1.25 for $53,968,057 in net proceeds after payment of underwriter discounts and commissions and other underwriter offering costs. GMS Ventures and Investments (“GMS Ventures”), the Company’s largest stockholder and strategic partner, purchased an aggregate of 16,000,000 shares of common stock in the public offering at the public offering price per share. In connection with the underwritten public offering, the Company issued the underwriter warrants to purchase up to an aggregate of 2,100,000 shares of common stock at an exercise price of $1.5625 per share, which warrants have a 5-year term.

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 $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 ATM Offering. As of March 31, 2022, $129,265 of such deferred costs are included in other assets on the consolidated balance sheets.

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

During the six months ended March 31, 2022, the Company sold 3,290,439 shares of common stock under the ATM Offering and generated $6,626,696 in gross proceeds. The Company paid fees to the Agent and other issuance costs of $212,206.

Common stock warrants

As of March 31, 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)	277,128	$	12.00
April 13, 2025	(i)	145,686	$	12.00
May 31, 2025	(i)	62,437	$	12.00
February 24, 2025		172,864	$	1.27
February 26, 2024		1,747,047	$	0.9535
June 22, 2025		191,268	$	1.51875
January 28, 2026		2,116,364	$	1.25000
November 23, 2026		2,100,000	$	1.56250
		6,812,794

(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 six months period ended March 31, 2022, warrants to purchase an aggregate of 400,360 shares of common stock with a weighted average exercise price of $12.00 expired; and warrants to purchase an aggregate of 15,675 shares of common stock with a weighted average exercise price of $12.00 were exercised for cash.

XML

Stock-Based Compensation

6 Months Ended

Mar. 31, 2022

Stock-Based Compensation

Stock-Based Compensation

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 March 31, 2022, 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 34,565,837. As of March 31, 2022, 12,687,604 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 share of RSU over its vesting period.

The Company recorded stock-based compensation expense in the following expense categories of its statements of operations for the three and six months ended March 31, 2022 and 2021:

	Three months ended March 31,				Six months ended March 31,
	2022		2021		2022		2021
Research and development	$	1,820,262	$	228,240	$	2,072,657	$	468,211
General and administrative		1,942,533		901,507		2,894,186		1,816,177
	$	3,762,795	$	1,129,747	$	4,966,843	$	2,284,388

Stock options

As of March 31, 2022 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, 2021	16,110,015	$	1.46
Granted	3,698,566		1.63
Exercised	(25,000)		0.71		$	38,960
Balance at March 31, 2022	19,783,581		1.49	8.8	$	10,641,834
Exercisable	6,587,549		1.34	8.2	$	4,724,871
Vested and expected to vest at March 31, 2022	19,783,581	$	1.49	8.8	$	10,641,834

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 March 31, 2022 and 2021 was $1.25 and $0.56 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:

	Six months ended March 31,
	2022		2021
Risk-free interest rate	1.64	%	0.39	%
Expected term (years)	6.0		6.0
Expected volatility	95.7	%	95.4	%
Expected dividend yield	—		—

As of March 31, 2022, there was $13,432,195 of unrecognized compensation expense that is expected to be recognized over a weighted-average period of 3.01 years.

Performance-based stock options

The Company granted certain officers of the Company share 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. A summary of the activity under the performance share option plan as of March 31, 2022, and changes during the six 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, 2021	1,000,000	$	2.42
Granted	1,900,000		1.44
Forfeited or expired	(1,000,000)		2.42
Balance at March 31, 2022	1,900,000	$	1.44	9.72	$	646,000
Exercisable	700,000	$	1.44	9.72	$	238,000
Vested and expected to vest at March 31, 2022	700,000	$	1.44	9.72	$	238,000

The weighted average grant date fair value of the performance stock options awarded during the six months ended March 31, 2022 was $1.03 per option. During the six months ended March 31, 2022, an aggregate of 700,000 performance-based stock options vested as a result of achieving one of the set performance conditions related to the Company’s BLA submission that resulted in the Company recognizing stock-based compensation expense of $718,950 during the three and six months ended March 31, 2022. As of March 31, 2022 the Company assessed that the remaining performance conditions were not probable of achievement. The assessment was based on the relevant facts and circumstances and therefore no compensation costs was 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:

	Six months ended March 31, 2022
Risk-free interest rate	1.26	%
Expected term (years)	5.22
Expected volatility	91.46	%
Expected dividend yield	—

There were no performance-based stock options granted during the six months ended March 31, 2021.

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 six months ended March 31, 2022:

				Weighted
				Average
	Number	Base		Remaining
	of	Price		Contractual	Aggregate
	PSUs	Per PSU		Term (Years)	Intrinsic Value
Balance at October 1, 2021	2,470	$	49.97
Forfeitures	—		—
Balance at March 31, 2022	2,470		49.97	3.0	$	—
Vested and exercisable at March 31, 2022	2,470		49.97	3.0	$	—
Vested and expected to vest at March 31, 2022	2,470	$	49.97	3.0	$	—

Restricted stock

In connection with the consulting agreements entered into by the Company and four former principals of MTTR, in March 2020, the Company issued an aggregate of 7,244,739 shares of its common stock. Refer to Note 12 for further details on the consulting agreements and terminated strategic partnership agreement. These shares may not be sold until the earlier of  (i) six months following FDA approval of ONS-5010, (ii) the date the Company publicly announces not to pursue development of ONS-5010, (iii) a change in control or (iv) January 2025. In addition, the Company has the right to repurchase the shares for $0.01 per share if the consultant terminates his agreement other than for good reason or the Company terminates the agreement for cause. The repurchase right lapses, in tiered percentages, based upon the completion of enrollment of the Company’s NORSE TWO clinical trial of ONS-5010 by certain dates. The repurchase right may also lapse as to 50% or 100% of the shares if the Company enters into certain agreements pertaining to ONS-5010 that meet certain value thresholds or the Company’s share price meets certain predefined targets. The repurchase right also lapses as to 100% of the shares upon the earliest to occur of (i) submission of the BLA for ONS-5010, (ii) termination of the agreement by the consultant for good reason or by the Company other than for cause, (iii) in the event of disability, or (iv) upon a change in control. As of March 31, 2022, the repurchase rights on all 7,244,739 shares of common stock had lapsed.

The grant date fair value of the restricted shares was $0.54 per share and equal to the closing stock price of the Company’s common stock at the time of grant. Compensation expense is recognized over the shorter of the explicit service period or derived service period, which was determined to be 4.8 years at the time of grant. The compensation expense was accelerated during the three and six months ended March 31, 2022 as a result of the Company achieving certain performance conditions related to the Company’s BLA submission which caused the lapsing of the repurchase rights. During the three months ended March 31, 2022 and 2021, the Company recognized compensation expense related to the restricted stock of $1,852,182 and $151,764, respectively. During the six months ended March 31, 2022 and 2021, the Company recognized compensation expense related to the restricted stock of $2,003,946 and $78,984, respectively. As of March 31, 2022, there was no unrecognized compensation expense related to the restricted stock.

XML

Related-Party Transactions

6 Months Ended

Mar. 31, 2022

Related-Party Transactions

Related-Party Transactions

12.   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 Operating 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. The Company did not pay Mr. Dagnon or Mr. Evanson any direct compensation as consultants or as employees during the three months ended December 31, 2019, nor during the period from October 1,

2019 through March 19, 2020. Both Mr. Dagnon and Mr. Evanson were compensated directly by MTTR for services provided to the Company as the Company's Chief Operating 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.

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. Refer to Note 11 for the accounting of the restricted stock issued and compensation expense recognized.

During the three months ended March 31, 2022 and 2021, MTTR and its four principals under the strategic partnership agreement and the subsequent individual consulting agreements earned an aggregate $99,380 and $73,572, respectively, and $413,366 and $541,225 during the six months ended March 31, 2022 and 2021, respectively, which includes monthly consulting fees and expense reimbursement, but excludes stock-based compensation related to restricted stock (Note 11). As of March 31, 2022 and September 30, 2021, an aggregate $18,333 and $89,762, respectively, was due to the former MTTR principals as consultants, which is included in accounts payable in the accompanying consolidated balance sheets.

On December 21, 2021, we 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 one of the set performance conditions related to the Company’s BLA submission.

XML

Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Mar. 31, 2022

Basis of Presentation and Summary of Significant Accounting Policies

Basis of presentation

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 March 31, 2022 and its results of operations for the three and six months ended March 31, 2022 and 2021, cash flows for the six months ended March 31, 2022 and 2021, and stockholders’ equity (deficit) for the three and six months ended March 31, 2022 and 2021. Operating results for the six months ended March 31, 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

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

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

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 March 31,			Six months ended March 31,
	2022		2021		2022		2021
Net loss attributable to common stockholders	$	(19,704,549)	$	(13,106,521)	$	(34,167,278)	$	(27,562,435)
Common stock shares outstanding (weighted average)		219,067,900		150,730,191		203,443,077		136,080,637
Basic and diluted net loss per share	$	(0.09)	$	(0.09)	$	(0.17)	$	(0.20)

The following potentially dilutive securities (in common stock equivalents) have been excluded from the computation of diluted weighted-average shares outstanding as of March 31, 2022, and 2021, as they would be antidilutive:

	As of March 31,
	2022	2021
Performance-based stock units	2,470	2,470
Performance-based stock options	1,900,000	—
Stock options	19,783,581	12,010,781
Common stock warrants	6,812,794	5,129,460

Recently issued accounting pronouncements

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 all entities with fiscal years beginning after December 15, 2021, including interim periods therein. The Company is currently evaluating the impact of adopting this guidance to its consolidated financial statements.

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.

XML

Basis of Presentation and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Mar. 31, 2022

Basis of Presentation and Summary of Significant Accounting Policies

Schedule of computation of basic earnings per share and diluted earnings per share

		Three months ended March 31,			Six months ended March 31,
	2022		2021		2022		2021
Net loss attributable to common stockholders	$	(19,704,549)	$	(13,106,521)	$	(34,167,278)	$	(27,562,435)
Common stock shares outstanding (weighted average)		219,067,900		150,730,191		203,443,077		136,080,637
Basic and diluted net loss per share	$	(0.09)	$	(0.09)	$	(0.17)	$	(0.20)

Schedule of dilutive securities excluded from the computation weighted-average shares

	As of March 31,
	2022	2021
Performance-based stock units	2,470	2,470
Performance-based stock options	1,900,000	—
Stock options	19,783,581	12,010,781
Common stock warrants	6,812,794	5,129,460

XML

Fair Value Measurements (Tables)

6 Months Ended

Mar. 31, 2022

Fair Value Measurements

Schedule of assets and liabilities measured at fair value on a recurring basis

	March 31, 2022
	(Level 1)		(Level 2)		(Level 3)
Liabilities
Unsecured convertible promissory note	$	—	$	—	$	12,557,521
Warrant liability		—		—		298,033
	$	—	$	—	$	12,855,554
	September 30, 2021
	(Level 1)		(Level 2)		(Level 3)
Liabilities
Unsecured convertible promissory note	$	—	$	—	$	—
Warrant liability		—		—		522,918
	$	—	$	—	$	522,918

Schedule of changes in the fair value of Level 3 valuation for the warrant liability

	Unsecured Convertible
	Promissory Note		Warrants
Balance at October 1, 2021	$	—	$	522,918
Fair value at issuance date		12,051,581		—
Change in fair value		505,940		(224,885)
Balance at March 31, 2022	$	12,557,521	$	298,033

Schedule of fair value of the warrant liability

	March 31, 2022			September 30, 2021
Risk-free interest rate		2.42	%		0.62	%
Remaining contractual term of warrant (years)		2.9			3.4
Expected volatility		115.6	%		124.7	%
Annual dividend yield		—	%		—	%
Fair value of common stock (per share)	$	1.78		$	2.17

XML

Property and Equipment, Net (Tables)

6 Months Ended

Mar. 31, 2022

Property and Equipment, Net

Schedule of property and equipment

	March 31, 2022		September 30, 2021
Laboratory equipment	$	1,067,351	$	1,067,351
Less: accumulated depreciation		(985,539)		(903,726)
	$	81,812	$	163,625

XML

Accrued Expenses (Tables)

6 Months Ended

Mar. 31, 2022

Accrued Expenses

Schedule of accrued expenses

	March 31, 2022		September 30, 2021
Compensation	$	774,484	$	753,808
Research and development		1,151,115		808,780
Interest payable		89		12,909
Professional fees		206,079		—
Commercial consulting		216,729		—
Other accrued expenses		201,380		150,224
	$	2,549,876	$	1,725,721

XML

Debt (Tables)

6 Months Ended

Mar. 31, 2022

Debt

Schedule of debt

	March 31, 2022		September 30, 2021
Unsecured convertible promissory note (measured at fair value)	$	12,557,521	$	—
Unsecured promissory note		10,590,601		10,938,145
Paycheck Protection Program term loan		200,933		904,200
Total debt		23,349,055		11,842,345
Less: unamortized loan costs		(567,822)		(52,291)
Total debt, net of unamortized loan costs		22,781,233		11,790,054
Less: current portion		(22,781,233)		(904,200)
Long-term debt	$	—	$	10,885,854

XML

Commitments and Contingencies (Tables)

6 Months Ended

Mar. 31, 2022

Commitments and Contingencies.

Schedule of lease information

The components of lease cost for the three and six months ended March 31, 2022 and 2021 are as follows:

	Three months ended March 31,				Six months ended March 31,
	2022		2021		2022		2021
Lease cost:
Amortization of right-of-use assets	$	—	$	—	$	—	$	—
Interest on lease liabilities		849		1,005		1,823		2,787
Total finance lease cost		849		1,005		1,823		2,787
Operating lease cost		11,217		43,625		22,433		87,250
Total lease cost	$	12,066	$	44,630	$	24,256	$	90,037

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

	March 31, 2022		September 30, 2021
Operating leases:
Right-of-use asset	$	91,289	$	111,429
Operating lease liabilities		49,100		69,849
Finance leases:
Right-of-use asset	$	—	$	—
Financing lease liabilities		28,754		42,482
Weighted-average remaining lease term (years):
Operating leases		2.1		2.6
Finance leases		1.4		1.7
Weighted-average discount rate:
Operating leases		7.5%		7.5%
Finance leases		10.7%		9.5%

Other information related to leases for the six months ended March 31, 2022 and 2021 are as follows:

	Six months ended March 31,
	2022		2021
Cash paid for amounts included in the measurement of lease obligations:
Operating cash flows from finance leases	$	1,823	$	2,787
Operating cash flows from operating leases		23,043		97,500
Financing cash flows from finance leases		13,728		16,533

Schedule of operating lease future minimum payments

Future minimum lease payments under non-cancelable leases as of March 31, 2022 are as follows for the years ending September 30:

	Operating leases		Finance leases
2022 (remaining six months)	$	23,608	$	14,055
2023		27,675		13,149
2024		—		4,383
Total undiscounted lease payments	$	51,283	$	31,587
Less: Imputed interest		2,183		2,833
Total lease obligations	$	49,100	$	28,754

Schedule of finance lease future minimum payments

	Operating leases		Finance leases
2022 (remaining six months)	$	23,608	$	14,055
2023		27,675		13,149
2024		—		4,383
Total undiscounted lease payments	$	51,283	$	31,587
Less: Imputed interest		2,183		2,833
Total lease obligations	$	49,100	$	28,754

XML

Common Stock and Stockholders' Equity (Deficit) (Tables)

6 Months Ended

Mar. 31, 2022

Common Stock and Stockholders' Equity (Deficit)

Schedule of warrants outstanding

As of March 31, 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)	277,128	$	12.00
April 13, 2025	(i)	145,686	$	12.00
May 31, 2025	(i)	62,437	$	12.00
February 24, 2025		172,864	$	1.27
February 26, 2024		1,747,047	$	0.9535
June 22, 2025		191,268	$	1.51875
January 28, 2026		2,116,364	$	1.25000
November 23, 2026		2,100,000	$	1.56250
		6,812,794

(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.

XML

Stock-Based Compensation (Tables)

6 Months Ended

Mar. 31, 2022

Share-based Compensation

Schedule of stock-based compensation expense

	Three months ended March 31,				Six months ended March 31,
	2022		2021		2022		2021
Research and development	$	1,820,262	$	228,240	$	2,072,657	$	468,211
General and administrative		1,942,533		901,507		2,894,186		1,816,177
	$	3,762,795	$	1,129,747	$	4,966,843	$	2,284,388

Schedule of performance-based stock units activity

				Weighted
				Average
	Number	Base		Remaining
	of	Price		Contractual	Aggregate
	PSUs	Per PSU		Term (Years)	Intrinsic Value
Balance at October 1, 2021	2,470	$	49.97
Forfeitures	—		—
Balance at March 31, 2022	2,470		49.97	3.0	$	—
Vested and exercisable at March 31, 2022	2,470		49.97	3.0	$	—
Vested and expected to vest at March 31, 2022	2,470	$	49.97	3.0	$	—

Stock options

Share-based Compensation

Schedule of stock option activity

				Weighted
				Average
		Weighted		Remaining
	Number of	Average		Contractual	Aggregate
	Shares	Exercise Price		Term (Years)	Intrinsic Value
Balance at October 1, 2021	16,110,015	$	1.46
Granted	3,698,566		1.63
Exercised	(25,000)		0.71		$	38,960
Balance at March 31, 2022	19,783,581		1.49	8.8	$	10,641,834
Exercisable	6,587,549		1.34	8.2	$	4,724,871
Vested and expected to vest at March 31, 2022	19,783,581	$	1.49	8.8	$	10,641,834

Schedule of option assumptions

	Six months ended March 31,
	2022		2021
Risk-free interest rate	1.64	%	0.39	%
Expected term (years)	6.0		6.0
Expected volatility	95.7	%	95.4	%
Expected dividend yield	—		—

Performance-based stock options

Share-based Compensation

Schedule of stock option activity

				Weighted
				Average
		Weighted		Remaining
	Number of	Average		Contractual	Aggregate
	Shares	Exercise Price		Term (Years)	Intrinsic Value
Balance at October 1, 2021	1,000,000	$	2.42
Granted	1,900,000		1.44
Forfeited or expired	(1,000,000)		2.42
Balance at March 31, 2022	1,900,000	$	1.44	9.72	$	646,000
Exercisable	700,000	$	1.44	9.72	$	238,000
Vested and expected to vest at March 31, 2022	700,000	$	1.44	9.72	$	238,000

Schedule of option assumptions

	Six months ended March 31, 2022
Risk-free interest rate	1.26	%
Expected term (years)	5.22
Expected volatility	91.46	%
Expected dividend yield	—

XML

Liquidity (Details) - USD ($)	Mar. 31, 2022	Sep. 30, 2021
Liquidity
Accumulated deficit	$ 377,050,532	$ 342,883,254
Debt carrying amount	23,349,055	11,842,345
Unsecured promissory notes-aggregate
Liquidity
Debt carrying amount	22,601,716
Paycheck Protection Program
Liquidity
Debt carrying amount	$ 200,933	$ 904,200

XML

Basis of Presentation and Summary of Significant Accounting Policies (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Basic and diluted earnings per share:
Net loss attributable to common stockholders	$ (19,704,549)	$ (13,106,521)	$ (34,167,278)	$ (27,562,435)
Basic Earnings Per Share
Weighted average shares outstanding, basic (in shares)	219,067,900	150,730,191	203,443,077	136,080,637
Net loss per share of common stock, basic (in dollars per share)	$ (0.09)	$ (0.09)	$ (0.17)	$ (0.20)
Diluted Earnings Per Share
Weighted average shares outstanding, diluted (in shares)	219,067,900	150,730,191	203,443,077	136,080,637
Net loss per share of common stock, diluted (in dollars per share)	$ (0.09)	$ (0.09)	$ (0.17)	$ (0.20)

XML

Basis of Presentation and Summary of Significant Accounting Policies - Dilutive (Details) - shares	6 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Performance-based stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	2,470	2,470
Performance-based stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	1,900,000
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	19,783,581	12,010,781
Common stock warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	6,812,794	5,129,460

XML

Fair Value Measurements (Details) - Fair value measurements recurring basis - Level 3 - USD ($)	Mar. 31, 2022	Sep. 30, 2021
Liabilities
Unsecured convertible promissory note	$ 12,557,521	$ 0
Warrant liability	298,033	522,918
Fair value of liabilities	$ 12,855,554	$ 522,918

XML

Fair Value Measurements - Changes in fair value (Details) - USD ($)	3 Months Ended	6 Months Ended
	Mar. 31, 2022	Mar. 31, 2022
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Change in fair value	$ (343,585)	$ (505,940)
Unsecured convertible promissory note
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Fair value at issuance date		12,051,581
Change in fair value		505,940
Balance, ending	12,557,521	12,557,521
Warrant liability
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance, beginning		522,918
Change in fair value		(224,885)
Balance, ending	$ 298,033	$ 298,033

XML

Fair Value Measurements - Assumptions (Details)	Mar. 31, 2022 $ / shares USD ($)	Sep. 30, 2021 USD ($) $ / shares
Risk-free interest rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrant inputs	2.42	0.62
Remaining contractual term of warrant
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrant inputs | $	2.9	3.4
Expected volatility
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrant inputs	115.6	124.7
Annual dividend yield
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrant inputs	0	0
Fair value of common stock
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrant inputs | $ / shares	1.78	2.17

XML

Fair Value Measurements - Additional Information (Details) - USD ($)	Mar. 31, 2022	Sep. 30, 2021
Fair value
Debt fair value	$ 12,557,521
Carrying value	22,781,233	$ 11,790,054
Unsecured promissory note (2021)
Fair value
Debt fair value	10,448,000
Carrying value	$ 10,022,779

XML

Property and Equipment, Net (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021	Sep. 30, 2021
Property and Equipment, Net
Laboratory equipment	$ 1,067,351		$ 1,067,351		$ 1,067,351
Less: accumulated depreciation	(985,539)		(985,539)		(903,726)
Property and equipment, net	81,812		81,812		$ 163,625
Depreciation expense	$ 40,906	$ 40,906	$ 81,813	$ 81,812

XML

Equity Method Investment - Syntone (Details) - PRC Joint Venture - USD ($)		1 Months Ended
	May 22, 2020	Jun. 30, 2020
Schedule of Equity Method Investments [Line Items]
Ownership percentage	20.00%
Investment in joint venture		$ 900,000
Expected future investment	$ 2,100,000
Contract period	4 years
Syntone
Schedule of Equity Method Investments [Line Items]
Ownership percentage	80.00%

XML

Accrued Expenses (Details) - USD ($)	Mar. 31, 2022	Sep. 30, 2021
Accrued Expenses
Compensation	$ 774,484	$ 753,808
Research and development	1,151,115	808,780
Interest payable	89	12,909
Professional fees	206,079
Commercial consulting	216,729
Other accrued expenses	201,380	150,224
Accrued expenses, total	$ 2,549,876	$ 1,725,721

XML

Debt - Summary (Details) - USD ($)	Mar. 31, 2022	Nov. 16, 2021	Sep. 30, 2021	Nov. 05, 2020
Debt Instrument [Line Items]
Debt carrying amount	$ 23,349,055		$ 11,842,345
Less: unamortized loan costs	(567,822)		(52,291)
Total debt	22,781,233		11,790,054
Less: current portion	(22,781,233)		(904,200)
Long-term debt			10,885,854
Unsecured convertible promissory note
Debt Instrument [Line Items]
Debt carrying amount	12,557,521
Total debt	12,011,115
Unsecured promissory note (2021)
Debt Instrument [Line Items]
Debt carrying amount	10,590,601
Less: unamortized loan costs		$ (820,000)
Total debt	10,022,779
Unsecured promissory note (2020)
Debt Instrument [Line Items]
Debt carrying amount			10,938,145
Less: unamortized loan costs		$ (26,488)		$ (228,032)
Paycheck Protection Program
Debt Instrument [Line Items]
Debt carrying amount	$ 200,933		$ 904,200

XML

Debt - Information (Details)				3 Months Ended		6 Months Ended
	Nov. 16, 2021 USD ($) D	Nov. 05, 2020 USD ($)	May 04, 2020 USD ($)	Mar. 31, 2022 USD ($)	Mar. 31, 2021 USD ($)	Mar. 31, 2022 USD ($)	Mar. 31, 2021 USD ($)	Sep. 30, 2021 USD ($)
Debt Instrument [Line Items]
Proceeds from loan						$ 10,000,000	$ 10,000,000
Unamortized discount				$ 567,822		567,822		$ 52,291
Gain (loss) on extinguishment of debt						(1,025,402)
Payment of lender fees						600,000
Debt outstanding				22,781,233		22,781,233		$ 11,790,054
Debt fair value				12,557,521		12,557,521
Unsecured convertible promissory note
Debt Instrument [Line Items]
Interest rate (as a percent)	10.00%
Redemption price (as a percent)	75.00%
Trading day threshold | D	3
Debt outstanding				12,011,115		12,011,115
Debt fair value				12,557,521		12,557,521
Unsecured convertible promissory note | Maximum
Debt Instrument [Line Items]
Carrying value of notes exchanged	$ 2,000,000
Unsecured promissory notes-aggregate
Debt Instrument [Line Items]
Interest expense				418,388	$ 242,819	763,104	392,028
Amortization of debt issuance costs				169,857	47,137	277,980	76,428
Unsecured promissory note (2020)
Debt Instrument [Line Items]
Proceeds from loan		$ 10,000,000
Original principal amount		10,220,000
Unamortized discount	26,488	$ 228,032
Debt Instrument, term		14 months
Interest rate (as a percent)		7.50%
Gain (loss) on extinguishment of debt	(1,025,402)
Payment of lender fees	$ 552,633
Redemption price (as a percent)	105.00%
Unsecured promissory note (2021)
Debt Instrument [Line Items]
Proceeds from loan	$ 10,000,000
Original principal amount	10,220,000
Unamortized discount	$ 820,000
Interest rate (as a percent)	9.50%
Redemption price (as a percent)	105.00%
Debt outstanding				10,022,779		10,022,779
Debt fair value				10,448,000		10,448,000
Paycheck Protection Program
Debt Instrument [Line Items]
Proceeds from loan			$ 904,200
Debt Instrument, term			2 years
Interest rate (as a percent)			1.00%
Interest expense				$ 879	$ 2,205	$ 2,587	$ 4,484

XML

Commitments and Contingencies (Details) - USD ($)		1 Months Ended
	Jul. 20, 2020	Apr. 30, 2022	Apr. 30, 2021	Mar. 31, 2022
Commitments and Contingencies.
Loss contingency damages due to third party	$ 3,000,000
Settlement payment		$ 750,000	$ 625,000
Settlement payable				$ 0

XML

Commitments and Contingencies - Lease termination (Details)	Mar. 31, 2021
Corporate Office Lease, Iselin, New Jersey
Commitment
Lease term	3 years

XML

Commitments and Contingencies - Lease cost (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Lease cost
Interest on lease liabilities	$ 849	$ 1,005	$ 1,823	$ 2,787
Total finance lease cost	849	1,005	1,823	2,787
Operating lease cost	11,217	43,625	22,433	87,250
Total lease cost	$ 12,066	$ 44,630	$ 24,256	$ 90,037
Minimum
Leases
Finance lease term	12 months		12 months
Finance lease interest (as a percent)	4.00%		4.00%
Maximum
Leases
Finance lease term	36 months		36 months
Finance lease interest (as a percent)	13.00%		13.00%

XML

Commitments and Contingencies - Lease balance sheet (Details) - USD ($)	Mar. 31, 2022	Sep. 30, 2021
Leases
Operating leases, Right-of-use asset	$ 91,289	$ 111,429
Operating leases, Lease obligation	49,100	69,849
Finance leases, Lease obligation	$ 28,754	$ 42,482
Operating leases, Weighted-average remaining lease term	2 years 1 month 6 days	2 years 7 months 6 days
Finance leases, Weighted-average remaining lease term	1 year 4 months 24 days	1 year 8 months 12 days
Operating leases, Weighted-average discount rate (as a percent)	7.50%	7.50%
Finance leases, Weighted-average discount rate (as a percent)	10.70%	9.50%

XML

Commitments and Contingencies - Lease cashflow (Details) - USD ($)	6 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Leases
Operating cash flows from finance leases	$ 1,823	$ 2,787
Operating cash flows from operating leases	23,043	97,500
Financing cash flows from finance leases	$ 13,728	$ 16,533

XML

Commitments and Contingencies - Lease minimum payments (Details) - USD ($)	Mar. 31, 2022	Sep. 30, 2021
Operating leases
2022 (remaining six months)	$ 23,608
2023	27,675
Total undiscounted lease payments	51,283
Less: Imputed interest	2,183
Total lease obligations	49,100	$ 69,849
Finance leases
2022 (remaining six months)	14,055
2023	13,149
2024	4,383
Total undiscounted lease payments	31,587
Less: Imputed interest	2,833
Total lease obligations	$ 28,754	$ 42,482

XML

Common Stock and Stockholders' Equity (Deficit) - Common Stock (Details) - USD ($)		1 Months Ended	6 Months Ended
	Mar. 26, 2021	Nov. 30, 2021	Mar. 31, 2022	Mar. 31, 2021
Convertible Preferred Stock And Stockholders' Equity (Deficit) [Line Items]
Shares of common stock issuable upon exercise of warrants			6,812,794
Proceeds from issuance of stock			$ 60,382,548	$ 39,779,507
Underwritten Public Offering
Convertible Preferred Stock And Stockholders' Equity (Deficit) [Line Items]
Number of share issued		46,000,000
Shares of common stock issuable upon exercise of warrants		2,100,000
Shares issued price (in dollars per share)		$ 1.25
Proceeds from issuance of stock		$ 53,968,057
Exercise price per share		$ 1.5625
Warrants exercise term		5 years
GMS Ventures & Investments
Convertible Preferred Stock And Stockholders' Equity (Deficit) [Line Items]
Number of share issued		16,000,000
ATM Offering
Convertible Preferred Stock And Stockholders' Equity (Deficit) [Line Items]
Number of share issued			3,290,439
Proceeds from issuance of stock			$ 6,626,696
Aggregate offering price	$ 40,000,000
Amount reclassified on additional paid in capital	$ 197,654
Deferred costs			129,265
Percentage of commission on sale of common stock	3.00%
Payment of fees to sales agent			$ 212,206

XML

Common Stock and Stockholders' Equity (Deficit) - Warrants (Details)	6 Months Ended
	Mar. 31, 2022 $ / shares shares
Warrants
Shares of common stock issuable upon exercise of warrants	6,812,794
February 18, 2022
Warrants
Exercise price per share | $ / shares	$ 12.00
Warrant expired (in shares)	400,360
Warrants expired (in dollars per share) | $ / shares	$ 12.00
Issuance of common stock in connection with exercise of warrants (in shares)	15,675
December 22, 2024
Warrants
Shares of common stock issuable upon exercise of warrants	277,128
Exercise price per share | $ / shares	$ 12.00
April 13, 2025
Warrants
Shares of common stock issuable upon exercise of warrants	145,686
Exercise price per share | $ / shares	$ 12.00
May 31, 2025
Warrants
Shares of common stock issuable upon exercise of warrants	62,437
Exercise price per share | $ / shares	$ 12.00
February 24, 2025
Warrants
Shares of common stock issuable upon exercise of warrants	172,864
Exercise price per share | $ / shares	$ 1.27
February 26, 2024
Warrants
Shares of common stock issuable upon exercise of warrants	1,747,047
Exercise price per share | $ / shares	$ 0.9535
June 22, 2025
Warrants
Shares of common stock issuable upon exercise of warrants	191,268
Exercise price per share | $ / shares	$ 1.51875
January 28, 2026
Warrants
Shares of common stock issuable upon exercise of warrants	2,116,364
Exercise price per share | $ / shares	$ 1.25000
November 23, 2026
Warrants
Shares of common stock issuable upon exercise of warrants	2,100,000
Exercise price per share | $ / shares	$ 1.56250

XML

Stock-Based Compensation - Information (Details) - 2015 Equity Incentive Plan	6 Months Ended
	Mar. 31, 2022 shares
Share-based Compensation
Aggregate number of common stock authorized for issuance	34,565,837
Number of shares available for grant	12,687,604
Term of award	10 years
Minimum
Share-based Compensation
Vesting period	1 year
Maximum
Share-based Compensation
Vesting period	4 years

XML

Stock-Based Compensation - Expense (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 3,762,795	$ 1,129,747	$ 4,966,843	$ 2,284,388
Research and development
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	1,820,262	228,240	2,072,657	468,211
General and administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 1,942,533	$ 901,507	$ 2,894,186	$ 1,816,177

XML

Stock-Based Compensation - Stock option activity (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Other option information
Stock-based compensation expense	$ 3,762,795	$ 1,129,747	$ 4,966,843	$ 2,284,388
Stock options
Number of Shares
Balance, Beginning (in shares)			16,110,015
Granted (in shares)			3,698,566
Exercised (in shares)			(25,000)
Balance, Ending (in shares)	19,783,581		19,783,581
Exercisable (in shares)	6,587,549		6,587,549
Vested and expected to vest (in shares)	19,783,581		19,783,581
Weighted Average Exercise Price
Balance, Beginning (in dollars per share)			$ 1.46
Granted (in dollars per share)			1.63
Exercised (in dollars per share)			0.71
Balance, Ending (in dollars per share)	$ 1.49		1.49
Exercisable (in dollars per share)	1.34		1.34
Vested and expected to vest (in dollars per share)	$ 1.49		$ 1.49
Other option information
Balance-Remaining contractual term			8 years 9 months 18 days
Exercisable-Remaining contractual term			8 years 2 months 12 days
Vested and expected to vest-Remaining contractual term			8 years 9 months 18 days
Aggregate intrinsic value, Exercised			$ 38,960
Aggregate intrinsic value, Outstanding	$ 10,641,834		10,641,834
Aggregate intrinsic value, Exercisable	4,724,871		4,724,871
Aggregate intrinsic value, Vested and expected to vest	$ 10,641,834		$ 10,641,834
Grant date fair value of options (in dollars per share)	$ 1.25	$ 0.56
Performance-based stock options
Share-based Compensation
Term of award			10 years
Number of Shares
Balance, Beginning (in shares)			1,000,000
Granted (in shares)			1,900,000	0
Forfeited or expired (in shares)			(1,000,000)
Balance, Ending (in shares)	1,900,000		1,900,000
Exercisable (in shares)	700,000		700,000
Vested and expected to vest (in shares)	700,000		700,000
Weighted Average Exercise Price
Balance, Beginning (in dollars per share)			$ 2.42
Granted (in dollars per share)			1.44
Forfeited or expired (in dollars per share)			2.42
Balance, Ending (in dollars per share)	$ 1.44		1.44
Exercisable (in dollars per share)	1.44		1.44
Vested and expected to vest (in dollars per share)	$ 1.44		$ 1.44
Other option information
Balance-Remaining contractual term			9 years 8 months 19 days
Exercisable-Remaining contractual term			9 years 8 months 19 days
Vested and expected to vest-Remaining contractual term			9 years 8 months 19 days
Aggregate intrinsic value, Outstanding	$ 646,000		$ 646,000
Aggregate intrinsic value, Exercisable	238,000		238,000
Aggregate intrinsic value, Vested and expected to vest	$ 238,000		$ 238,000
Grant date fair value of options (in dollars per share)			$ 1.03
Stock-based compensation expense			$ 718,950
Number of stock options vested			700,000

XML

Stock-Based Compensation - Option Assumptions (Details) - USD ($)	6 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Stock options
Share-based Compensation
Risk-free interest rate	1.64%	0.39%
Expected life (years)	6 years	6 years
Expected volatility	95.70%	95.40%
Expected dividend yield	0.00%	0.00%
Unrecognized compensation expense	$ 13,432,195
Unrecognized compensation exercise period	3 years 3 days
Performance-based stock options
Share-based Compensation
Risk-free interest rate	1.26%
Expected life (years)	5 years 2 months 19 days
Expected volatility	91.46%
Expected dividend yield	0.00%

XML

Stock-Based Compensation - Non-options (Details) - Performance-based stock units	6 Months Ended
	Mar. 31, 2022 $ / shares shares
Share-based Compensation
Term of award	10 years
Number of PSUs
Balance, Beginning | shares	2,470
Balance, Ending | shares	2,470
Vested and exercisable | shares	2,470
Vested and expected to vest | shares	2,470
Weighted Average Base Price Per Unit
Balance, Beginning | $ / shares	$ 49.97
Balance, Ending | $ / shares	49.97
Vested and exercisable | $ / shares	49.97
Vested and expected to vest | $ / shares	$ 49.97
Weighted average remaining contractual term, Outstanding	3 years
Weighted average remaining contractual term, Vested and exercisable	3 years
Weighted average remaining contractual term, Vested and expected to vest	3 years

XML

Stock-Based Compensation - Restricted stock (Details)		1 Months Ended	3 Months Ended		6 Months Ended
	Jan. 27, 2020 item shares	Mar. 31, 2020 item $ / shares shares	Mar. 31, 2022 USD ($)	Mar. 31, 2021 USD ($)	Mar. 31, 2022 USD ($) shares	Mar. 31, 2021 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense | $			$ 3,762,795	$ 1,129,747	$ 4,966,843	$ 2,284,388
MTTR, LLC ("MTTR")
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of principals | item	4
Shares issued during period | shares	7,244,739
Restricted Stock | MTTR, LLC ("MTTR")
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of principals | item		4
Shares issued during period | shares		7,244,739
Share repurchase price | $ / shares		$ 0.01
Number of shares lapsed in period | shares					7,244,739
Grant date fair value of share | $ / shares		$ 0.54
Explicit service period		4 years 9 months 18 days
Stock-based compensation expense | $			1,852,182	$ 151,764	$ 2,003,946	$ 78,984
Unamortized expense to be recognized of stock awards other than options | $			$ 0		$ 0
Restricted Stock | MTTR, LLC ("MTTR") | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Repurchase right lapses on shares (as a percent)		50.00%
Restricted Stock | MTTR, LLC ("MTTR") | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Repurchase right lapses on shares (as a percent)		100.00%

XML

Related-Party Transactions (Details)			3 Months Ended		6 Months Ended
	Dec. 21, 2021 USD ($) shares	Jan. 27, 2020 USD ($) item individual shares	Mar. 31, 2022 USD ($)	Mar. 31, 2021 USD ($)	Mar. 31, 2022 USD ($) shares	Mar. 31, 2021 USD ($) shares	Sep. 30, 2021 USD ($)
Performance-based stock options
Related Party Transaction [Line Items]
Number of shares granted					1,900,000	0
Number of stock options vested					700,000
MTTR, LLC ("MTTR")
Related Party Transaction [Line Items]
Number of principals | item		4
Number Of Executive Officers | individual		2
Shares issued during period		7,244,739
Contract termination settlement fee | $		$ 110,000
Related party expense | $			$ 99,380	$ 73,572	$ 413,366	$ 541,225
Due to related party, current | $			$ 18,333		$ 18,333		$ 89,762
Employment agreement | Performance-based stock options
Related Party Transaction [Line Items]
Number of stock options vested					200,000
Employment agreement | Terry Dagnon
Related Party Transaction [Line Items]
Base salary | $	$ 450,000
Percentage of cash bonus	50.00%
Employment agreement | Terry Dagnon | Stock option
Related Party Transaction [Line Items]
Number of shares granted	800,000
Employment agreement | Terry Dagnon | Performance-based stock options
Related Party Transaction [Line Items]
Number of shares granted	200,000
Employment agreement | Jeff Evanson
Related Party Transaction [Line Items]
Base salary | $	$ 450,000
Percentage of cash bonus	50.00%
Employment agreement | Jeff Evanson | Stock option
Related Party Transaction [Line Items]
Number of shares granted	800,000
Employment agreement | Jeff Evanson | Performance-based stock options
Related Party Transaction [Line Items]
Number of shares granted	200,000