PROPOSAL 2
APPROVAL OF CERTIFICATE OF AMENDMENT OF OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED, TO INCREASE THE TOTAL NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
Overview
Our Board of Directors believes that it is advisable and in Outlook Therapeutics’ best interests and in the best interests of our stockholders to amend our Amended and Restated Certificate of Incorporation, as amended, or the Restated Certificate, to increase the total number of authorized shares of common stock from 200,000,000 shares to 325,000,000 shares. On February 8, 2021, the Board adopted resolutions approving the proposed certificate of amendment of the Restated Certificate, or the Common Increase Certificate, in substantially the form attached as Appendix A hereto. At that time, the Board declared the proposed Common Increase Certificate to be advisable and in the best interests of Outlook Therapeutics and our stockholders and is accordingly submitting the proposed Common Increase Certificate for approval by our stockholders.
If stockholders approve this Proposal No. 2, we expect to file the Common Increase Certificate with the Secretary of State of the State of Delaware to increase the number of authorized shares of our common stock as soon as practicable following stockholder approval. In this regard, upon filing of the Common Increase Certificate with the Secretary of State of the State of Delaware, Article IV, Paragraph A of the Restated Certificate would be amended as follows, with the proposed additions underlined and proposed deletions stricken through:
“A. The Company is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Company is authorized to issue is two hundred ten million (210,000,000) three hundred thirty-five million (335,000,000) shares. Two hundred Three hundred twenty-five million (200,000,000) (325,000,000) shares shall be Common Stock, each having a par value of one cent ($0.01). Ten million (10,000,000) shares shall be Preferred Stock, each having a par value of one cent ($0.01).”
As of the close of business on February 9, 2021, of our 200,000,000 authorized shares of common stock, there were 172,418,383 shares of common stock issued and outstanding. In addition to the 172,418,383 shares of common stock outstanding on February 9, 2021, there were 5,526,714 shares reserved for issuance pursuant to outstanding warrants, and the remainder of our authorized shares of common stock as of the close of business on February 9, 2021 have all been reserved for issuance under our various equity compensation plans. Accordingly, at present, there are no available unissued and unreserved authorized shares of our common stock.
The proposed Common Increase Certificate would increase the number of shares of common stock that we are authorized to issue from 200,000,000 shares of common stock to 325,000,000 shares of common stock, representing an increase of 125,000,000 shares of authorized common stock, with a corresponding increase in the total authorized capital stock, which includes common stock and preferred stock, from 210,000,000 shares to 335,000,000 shares.
Reasons for the Increase in Authorized Shares
We have not generated any revenue from product sales. Since inception, we have incurred net losses and negative cash flows from our operations. Through September 30, 2020, we have funded substantially all of our operations through the sale and issuance of $278.3 million net proceeds 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 substantial additional financing to fund our operations and to commercially develop ONS-5010 or any other product candidate we may develop. We have no credit facility or committed sources of capital. Accordingly, until we can generate sufficient product revenues, if ever, we expect to finance future cash needs through private placements and/or public offerings of equity and/or debt securities, or payments from potential strategic research and development, licensing and/or marketing arrangements with pharmaceutical companies.