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Item 1A. Risk Factors

2022-08-02 compared with 2022-05-04 · 23 added, 20 removed, 39 unchanged (52% of the section changed)

You should carefully review and consider the information regarding certain risks and uncertainties facing the Company that could have a material adverse effect on the Company’s business prospects, financial condition, results of operations, liquidity and available capital resources set forth in Part I, Item 1A of the Company’s 2021 Annual Report on Form 10-K.

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We will need substantial additional capital to fund our operations, which may not be available on acceptable terms, if at all.

The Company’s cash requirements for 2022 and beyond include expenses related to continuing development and clinical evaluation of its products, manufacture and supply costs, costs of regulatory filings, patent prosecution expenses and litigation expenses, expenses related to commercialization of our products, as well as costs to comply with the requirements of being a public company operating in a highly regulated industry.

As of March 31, 2022, we had $14.7 million of cash and cash equivalents.

As of June 30, 2022, we had $17.7 million of cash and cash equivalents.

On November 3, 2020, we entered into a Purchase and Sale Agreement (the "Monetization Agreement") with MAM Pangolin Royalty, LLC, an affiliate of Marathon Asset Management ("Marathon").

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We have received an aggregate amount of $50.0 million through December 31, 2021 under the Monetization Agreement.

Under the Monetization Agreement, additional aggregate contingent payments of up to $75.0 million may be due to us upon the achievement of worldwide royalty and other commercial targets within a specified timeframe, which could result in

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total potential proceeds of $125.0 million.

Based on the current forecast of estimated KYNMOBI sales as of December 31, 2021, the Company may not receive any of the additional aggregate contingent payments under the Monetization agreement.

With the upfront proceeds of the monetization, we repaid $22.5 million of the Senior Secured Notes due 2025 (the "12.5% Notes"), and issued $4.0 million of new 12.5% Notes in lieu of paying a prepayment premium on the early repayment of the 12.5% Notes, reducing the aggregate principal balance of 12.5% Notes outstanding to $51.5 million, and such aggregate principal amount remains outstanding as of December 31, 2021.

On August 6, 2021, the holders of the 12.5% Notes agreed to extend to June 30, 2022 our ability to access, at our option, an additional $30.0 million of 12.5% Notes re-openers under the Indenture.

The first $10.0 million senior notes re-opener represents a commitment of such amount by current holders of 12.5% Notes, at our option, contingent upon FDA approval of our product candidate Libervant.

A second $20.0 million senior notes re-opener represents a right, at our option, to market to current holders of our 12.5% Notes, and/or other lenders, additional senior notes up to such amount, contingent upon FDA approval of Libervant for U.S.

market access.

Based on the current forecast of estimated KYNMOBI sales as of June 30, 2022, the Company may not receive any of the additional aggregate contingent payments under the Monetization agreement.

In addition, the holders of the 12.5% Notes agreed to extend to March 31, 2023 from June 30, 2022, our ability to access, at our option, subject to certain conditions, an additional $30.0 million of 12.5% Notes re-openers under the Indenture.

If and to the extent that we access these re-openers, we will grant warrants to purchase up to 714,000 shares of common stock, with the strike price calculated based on the 30-day volume weighted average closing price of our common stock at the warrant grant date.

In addition, as of the closing of this transaction, we issued to the holders of the 12.5% Notes warrants to purchase 143,000 shares of our common stock.

In addition, as of the closing of this monetization transaction, we issued to the holders of the 12.5% Notes warrants to purchase 143,000 shares of our common stock.

On October 7, 2021, we entered into the Fourth Supplemental Indenture in connection with the 12.5% Notes.

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The Fourth Supplemental Indenture did not change the maturity date of June 30, 2025 or the interest payment obligation due under the Notes.

On May 13, 2022, pursuant to the Fifth Supplemental Indenture, the holders of the 12.5% Notes further extended to March 31, 2023 from June 30, 2022, our ability to access, at our option, $30.0 million of 12.5% Notes re-openers under the Indenture.

The Fifth Supplemental Indenture also provided that the Company's access to re-openers is subject to the full approval of Libervant by the U.S Food and Drug Administration for sale in the United States, which full approval includes U.S.

market access for Libervant.

In addition, the Fifth Supplemental Indenture provided that the holders of 12.5% Notes have the right, but not the obligation, to purchase the re-openers.

In 2019, we established an “at-the-market” (ATM) facility, under which, from time to time, we may offer and sell shares of our common stock.

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We also may be required to evaluate additional licensing opportunities, if any become available, of our proprietary product candidate programs that we currently plan to self-commercialize or explore other potential liquidity opportunities or other alternatives or options or strategic alternatives, although we cannot assure that any of these actions would be available or available on reasonable terms.

If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that would likely result in our stockholders losing most if not all of their investment in us.

We may not receive any payments under our License Agreement with Haisco.

In March 2022, we announced the grant of an exclusive license (the “Haisco Agreement”) to Haisco Pharmaceutical Group Co., Ltd.

(“Haisco”) for Haisco to develop and commercialize Exservan for the treatment of ALS in China.

If we do not have sufficient funds to continue operations, we could be required to seek

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bankruptcy protection or other alternatives that would likely result in our stockholders losing most if not all of their investment in us.

We may not receive any payments under our License Agreement with Haisco Pharmaceutical Group Co., Ltd.

In March 2022, we announced the grant of an exclusive license (the “Haisco Agreement”) to Haisco for Haisco to develop and commercialize Exservan for the treatment of ALS in China.

Under the Haisco Agreement, Haisco is obligated to pay us an upfront cash payment, regulatory milestone payments, and double-digit royalties on net sales of Exservan in China and we will earn manufacturing revenue on the sale of Exservan in China as the exclusive supplier of Exservan in China if approved for marketing and sale.

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for Exservan and is not currently the named holder of the NDA.

We are collaborating with Haisco to resolve this issue with the NMPA.

As a result of this issue, we have not received the $7 million upfront payment that was due from Haisco under the Haisco Agreement and we expect to agree with Haisco to extend the period of time under which Haisco is obligated to make such upfront payment consistent with the decision of the NMPA on the issue, or as otherwise agreed to by us and Haisco.

There is no assurance that we will come to an agreement with Haisco, or that

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there will be any contribution to the Company of cash payment, royalties or manufacturing revenue on launch of the product in China if we are not able to come to an agreement with Haisco or resolve this issue with the NMPA.

As a result of this issue, we have not received the $7 million upfront payment that was due from Haisco under the Haisco Agreement.

Effective as of July 7, 2022, the Company and Haisco amended the terms of the Haisco Agreement to provide that the due date of the $7 million upfront payment due from Haisco under the Haisco Agreement will be the first to occur of:

(i) the date that Haisco receives an official written confirmation from the NMPA that NMPA will receive and accept a Regulatory Approval Application with respect to Exservan in China that recognizes the Company as the MAH, and (ii) 21 business days after Haisco receives a copy of a written acknowledgement from the FDA that the U.S.

NDA for Exservan was transferred to the Company from a third-party licensee of Exservan in the United States.

The amendment further provides that the Haisco Agreement may be terminated by Haisco upon written notice to the Company if the Company is not the holder of the NDA for Exservan in the United States within six months from the effective date of the amendment and Haisco has not received an official written confirmation from the NMPA that the NMPA accepts a Regulatory Approval Application with respect to Exservan that recognizes the Company as the MAH in China.

There is no assurance that the Company will receive the $7 million upfront payment due from Haisco, or that there will be any other contribution to the Company of cash payments, royalties or manufacturing revenue on launch of the product in China if we are not able to resolve this issue with the NMPA or obtain the approval from the FDA of the transfer of the NDA to the Company.

The sale of our common stock through our ATM sales agreement or our Lincoln Park Purchase Agreement may cause substantial dilution to our existing stockholders, and such sales, or the anticipation of such sales, may cause the price of our common stock to decline.

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Unregistered Sales of Equity Securities and Use of Proceeds

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Defaults Upon Senior Securities

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors