☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware |
85-1231852 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
555 Skokie Boulevard, Suite 340 Northbrook, |
60062 | |
(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Common Stock, par value $0.0001 per share |
CRXT |
The Nasdaq Stock Market LLC | ||
one share of common |
CRXTW |
The Nasdaq Stock Market LLC | ||
stock at an exercise price of $11.50 |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
• | our ability to obtain funding for our operations and to grow our business; |
• | our ability to successfully commercialize and market JATENZO and any future product candidates, if approved, and the timing of any commercialization and marketing efforts; |
• | the potential market size, opportunity and growth potential for JATENZO and any future product candidates, if approved; |
• | the benefits of T replacement therapy in certain populations, patients’ drug administration preferences and acceptance of JATENZO by physicians and patients; |
• | our plans and expectations regarding our strategic alternative review process and the timing and success of such process regarding a potential transaction; |
• | the timing of our product development activities and the initiation, timing, progress and results of our exploratory trials and studies to guide the development of JATENZO for additional potential indications; |
• | the implementation of our business model, strategic plans for our business, product candidates and technology; |
• | expectations regarding sales of JATENZO and the costs of supplying, manufacturing and continuing to commercialize JATENZO; |
• | our ability to obtain marketing approval and acceptance for JATENZO in territories outside of the United States; |
• | our ability to maintain the listing of our common stock on the Nasdaq Global Market and the potential liquidity and trading of our securities; |
• | our future financial performance and expectations regarding future expenditures; |
• | the accuracy of our estimates regarding expenses, capital requirements and our future needs for additional financing; |
• | our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professional; |
• | developments relating to our competitors and our industry, and our ability to compete effectively in a competitive industry; |
• | our ability to contract with third-party suppliers, manufacturers and other service providers and their ability to perform adequately and to produce sufficient quantities of clinical and potentially future commercial supplies; |
• | our ability to enter into marketing or co-promotional arrangements and strategic partnerships; |
• | the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology; |
• | regulatory, judicial, and legislative developments and their impact on our business; |
• | the impact from the outcome of any known and unknown litigation; and |
• | other risks and uncertainties, including those listed under the section titled “Risk Factors.” |
• | We have incurred significant operating losses and there is substantial doubt about our ability to continue as a going concern, which may affect our ability to obtain future financing and may require us to curtail our operations. We will need to raise additional capital to support our operations. This additional funding may not be available on acceptable terms or at all. Failure to obtain this necessary capital or address our liquidity needs may force us to delay, limit or terminate our operations, make reductions in our workforce, discontinue our commercialization efforts for JATENZO as well as other development programs, liquidate all or a portion of our assets or pursue other strategic alternatives, and/or seek protection under the provisions of the U.S. Bankruptcy Code |
• | We have significant indebtedness and servicing our debt requires a significant amount of cash. We may not have sufficient cash flow from our operations to satisfy the financial covenants in our debt agreements. We may not receive a waiver of default for outstanding indebtedness for which we may be in default in the future. |
• | We may not be successful in identifying and implementing any strategic business combination or other transaction and any strategic transactions that we may consummate in the future could have negative consequences. |
• | JATENZO is the only product we are commercializing. If we fail to successfully commercialize JATENZO, we may need to acquire additional product candidates and our business may be impaired. |
• | We have limited experience as a commercial company and the marketing and sale of JATENZO or any future approved drugs may be unsuccessful or less successful than anticipated. |
• | Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited. |
• | Our reliance on third-party suppliers and distributors could harm our ability to commercialize JATENZO or any product candidates that may be approved in the future. |
• | The ongoing COVID-19 pandemic is having, and is expected to have, an adverse impact on our business. |
• | The U.S. Food and Drug Administration (“ FDA off-label uses. If we are found to have improperly promoted off-label uses, we may become subject to significant liability. |
• | Even though we have received marketing approval for JATENZO in the United States, we may never receive marketing approval outside of the United States, or receive pricing and reimbursement outside the United States at acceptable levels. |
• | Recent federal legislation may increase pressure to reduce prices of certain pharmaceutical products paid for by Medicare, which could materially adversely affect our revenue and our results of operations. |
• | Testosterone (“ T (non-narcotic) substance under the Controlled Substances Act and any failure to comply with this Act or its state equivalents would have a negative impact on our business. |
• | If coverage and reimbursement for JATENZO are limited, it may be difficult for us to profitably sell JATENZO. |
• | Our market is subject to intense competition. If we are unable to compete effectively, our opportunity to generate revenue from the sale of JATENZO will be impaired. |
• | If we are unable to obtain or protect intellectual property rights related to JATENZO, we may not be able to compete effectively in our market. |
• | We may be involved in lawsuits and proceedings to protect or enforce our patents, which could be expensive, time consuming and unsuccessful. |
• | We have identified material weaknesses in our internal control over financial reporting, and we may identify future material weaknesses in our internal control over financial reporting. |
• | We will need to grow our company, and we may encounter difficulties in managing this growth, which could disrupt our operations. |
• | Our future success depends on our ability to retain our chief executive officer, chief financial officer and chief commercial officer and to attract, retain and motivate qualified personnel. |
• | Our debt agreements contain restrictions that limit our flexibility in operating our business. |
• | Establish JATENZO as the preferred choice among appropriate hypogonadal men for T-replacement. |
• | Accelerate the build of our commercial infrastructure to successfully grow the market for JATENZO and launch any additional products we develop or acquire. |
• | Explore additional indications for JATENZO and consider business development opportunities to grow our pipeline and product portfolio. female-to-male |
• | a growing awareness among physicians to diagnose and treat hypogonadism and willingness by patients to discuss signs and symptoms of their medical condition than in the past; |
• | recognition and association by HCPs of the association of hypogonadism with other increasingly prevalent diseases, such as metabolic syndrome, type 2 diabetes, chronic renal disease and chronic heart disease; |
• | the ability to easily identify low serum T levels through a simple blood test; and |
• | continuing guidance from medical societies (including the Endocrine Society, American Association of Clinical Endocrinologists and American Urological Association), that clinicians measure serum T levels of patients if they present with symptoms or signs typically associated with hypogonadism. |
• | Convenient Oral Dosing. easy-to-swallow |
• | Normalized T Levels. |
• | Avoids Administration Challenges. non-oral products. JATENZO avoids the risk of T transfer to partners and children that exists with gel treatment; injection site pain, risk of POME and polycythemia seen with injections, and the gum, nasal and skin irritation and difficulty of administration seen with other TRT products |
• | Safety Profile. |
• | qualified two sources of bulk TU, Pfizer and Xianju, both of which are subject to continuing FDA review and periodic inspection, and entered into a commercial supply agreement with each; |
• | entered into an exclusive manufacturing agreement with Catalent for the manufacture of JATENZO softgel capsules; and |
• | entered into an agreement with a commercial packager for finished JATENZO capsules. |
• | nonclinical laboratory and animal tests that must be conducted in accordance with Good Laboratory Practices; |
• | submission to the FDA of an Investigational New Drug (“ IND |
• | approval by an independent institutional review board (“ IRB |
• | adequate and well controlled human clinical trials to establish the safety and efficacy of the proposed product candidate for its intended use, performed in accordance with good clinical practices (“ GCPs |
• | submission to the FDA of an NDA and payment of user fees; |
• | satisfactory completion of an FDA advisory committee review, if applicable; |
• | pre-approval inspection of manufacturing facilities and selected clinical investigators for their compliance with cGMP and GCP; |
• | satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data; and |
• | FDA review and approval of an NDA to permit commercial marketing for particular indications for use. |
• | The federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, paying, receiving or providing any remuneration (including any kickback, bride or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward or in return for, either the referral of an individual for, or the purchase order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid; a person or entity need not have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation. On November December 20, 2020, the HHS Office of Inspector General (“ OIG |
Pursuant to an order entered by the U.S. District Court for the District of Columbia, the portion of the rule eliminating safe harbor protection for certain rebates related to the sale or purchase of a pharmaceutical product from a manufacturer to a plan sponsor under Medicare Part D has been delayed to January 1, 2023. Implementation of this change and new safe harbors for point-of-sale |
• | The federal civil and criminal false claims laws, including the civil False Claims Act (“ FCA |
• | The federal civil monetary penalties laws, which impose civil fines for, among other things, the offering or transfer or remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or a state health care program, unless an exception applies; |
• | HIPAA, which imposes criminal and civil liability for knowingly and willfully executing a scheme or attempting to execute a scheme, to defraud any healthcare benefit program, including private payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense or falsifying, concealing or covering up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity need not have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; |
• | HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“ HITECH |
• | The Physician Payments Sunshine Act, enacted as part of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “ ACA pre-empted and may have a more prohibitive effect than the Physician Payments Sunshine Act, thus further complicating compliance efforts. Effective January 1, 2022, these reporting obligations extend to include transfers of value made and investment and ownership interested held in the previous year to certain non-physician providers such as physician assistants and nurse practitioners; |
• | The ACA, which became law in the United States in March 2010, increases minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations, establishes annual fees and taxes on manufacturers of certain branded prescription drugs and biologic products, and creates a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (increased to 70%, effective January 1, 2019, by the Bipartisan Budget Act of 2018) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; |
• | The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “MMA”) expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policies and payment limitations in setting their own reimbursement rates; |
• | Federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and timely manner to government programs and |
• | Analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party-payors, including private insurers, and may be broader in scope than their federal equivalents; state and foreign laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state and foreign laws that require drug manufacturers to report information related to drug pricing and payments and other transfers of value to physicians and other healthcare providers and restrict marketing practices or require disclosure of marketing expenditures and pricing information; state and local laws that require the registration of pharmaceutical sales representatives; state and foreign laws that govern the privacy and security of health information in some circumstances. These data privacy and security laws may differ from each other in significant ways and often are not pre-empted by HIPAA, which may complicate compliance efforts. |
• | created an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic products, apportioned among these entities according to their market share in certain government healthcare programs; |
• | expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability; |
• | expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic drugs and revising the definition of “average manufacturer price,” (“ AMP |
• | addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; |
• | expanded the types of entities eligible for the 340B drug discount program; |
• | established the Medicare Part D coverage gap discount program by requiring manufacturers to provide point-of-sale-discounts |
• | created a Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research. |
• | establish and maintain our relationships with healthcare providers who will be treating the patients who may receive JATENZO and any future products; |
• | obtain adequate pricing and reimbursement for JATENZO and any future products; |
• | develop and maintain successful strategic alliances; and |
• | manage our spending as costs and expenses increase due to clinical trials, marketing approvals, and commercialization. |
• | adversely impacting the third parties we solely rely on to sufficiently manufacture JATENZO in quantities we require including the availability of raw materials and other supply chain requirements; |
• | decreasing the demand for JATENZO; and |
• | the ability of our sales representatives to reach healthcare customers. |
• | physicians’ views as to the scope of the approved indication and limitations on use and warnings and precautions contained in JATENZO’s approved labeling; |
• | the availability, efficacy and safety of competitive therapies; |
• | pricing and the perception of physicians and payors as to cost effectiveness; |
• | the existence of sufficient third-party coverage or reimbursement; and |
• | the effectiveness of our sales, marketing and distribution strategies. |
• | issue warning or untitled letters or notice of violation letters; |
• | seek an injunction or impose civil or criminal penalties or monetary fines; |
• | suspend or withdraw marketing approval; |
• | suspend any ongoing clinical trials; |
• | refuse to approve pending applications or supplements to applications submitted by us; |
• | suspend or impose restrictions on operations, including costly new manufacturing requirements; or |
• | seize or detain products, refuse to permit the import or export of products, or request that we initiate a product recall. |
• | the demand for our products and any products for which we may obtain regulatory approval; |
• | our ability to set a price that we believe is fair for our products; |
• | our ability to obtain coverage and reimbursement approval for a product; |
• | our ability to generate revenues and achieve or maintain profitability; and |
• | the level of taxes that we are required to pay. |
• | T-gels, such as AndroGel, marketed by AbbVie Inc. (“AbbVie Endo |
• | generic T-injectables; |
• | oral methyl-T; |
• | transdermal patches, such as Androderm, marketed by Allergan Sales, LLC, a subsidiary of AbbVie; buccal patches, such as Striant, marketed by Endo; |
• | implanted subcutaneous pellets, such as Testopel, marketed by Endo; |
• | Aveed, a long-acting T-injectable marketed by Endo; |
• | Xyosted, a sub-cutaneous weekly auto-injector T-therapy marketed by Antares Pharma, Inc.; and |
• | Natesto, an intranasal T-therapy, marketed by Acerus Pharmaceuticals. |
• | TLANDO, an oral TU formulation developed by Lipocine, and tentatively approved by the FDA pending the expiration on March 27, 2022 of JATENZO’s three-year Hatch-Waxman exclusivity; |
• | KYZATREX, an oral TU formulation as a T-replacement therapy being developed by Marius Pharmaceuticals with a Prescription Drug User Fee Act (“PDUFA |
• | a once weekly aromatase inhibitor, for first-line therapy for the treatment of obese men with hypogonadotropic hypogonadism, which has completed its Phase 2b trials, currently being developed by Mereo BioPharma Group Ltd; and |
• | an oral bio-identical testosterone, which has completed its Phase 2 clinical studies, being developed by TesoRx LLC. |
• | substantial monetary awards to patients from our clinical trials or other claimants; |
• | decreased demand for JATENZO; |
• | damage to our business reputation and exposure to adverse publicity; |
• | increased FDA warnings on product labels; |
• | costs of related litigation; |
• | distraction of management’s attention from our primary business; |
• | loss of revenue; and |
• | the inability to successfully commercialize JATENZO. |
• | sell, transfer, lease or dispose of certain assets; |
• | encumber or permit liens on certain assets; |
• | make certain restricted payments, including paying dividends on, or repurchasing or making distributions with respect to, our common stock; and |
• | enter into certain transactions with affiliates. |
• | a limited availability of market quotations for our securities; |
• | reduced liquidity for our securities; |
• | a determination that our common stock is a “penny stock,” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
• | a limited amount of news and analyst coverage; |
• | a decreased ability to issue additional securities or obtain additional financing in the future. |
• | potential loss of confidence by partners and employees; and |
• | loss of institutional investor interest and fewer business development opportunities. |
• | results of operations that vary from the expectations of securities analysts and investors; |
• | results of operations that vary from those our competitors; |
• | changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; |
• | declines in the market prices of stocks generally; |
• | strategic actions by us or our competitors; |
• | announcements by us or our competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments; |
• | any significant change in our management; |
• | changes in general economic or market conditions or trends in our industry or markets; |
• | changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to our business; |
• | future sales of our common stock or other securities; |
• | investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives; |
• | the public’s response to press releases or other public announcements by our or third parties, including our filings with the SEC; |
• | litigation involving our, our industry, or both, or investigations by regulators into our operations or those of our competitors; |
• | guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; |
• | the development and sustainability of an active trading market for our common stock; |
• | actions by institutional or activist stockholders; |
• | changes in accounting standards, policies, guidelines, interpretations or principles; and |
• | other events or factors, including those resulting from pandemics, natural disasters, war, acts of terrorism or responses to these events. |
• | a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors; |
• | opting out of Section 203 of the DGCL to allow us to establish our own rules governing business combinations with interested parties; |
• | the ability of our board of directors to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; |
• | the limitation of the liability of, and the indemnification of, our directors and officers; |
• | the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; |
• | the requirement that directors may only be removed from our board of directors for cause; |
• | a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of stockholders and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors; |
• | the requirement that a special meeting of stockholders may be called only by our board of directors, the chairperson of our board of directors, our chief executive officer or our president (in the absence of a chief executive officer), which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; |
• | controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings; |
• | the requirement for the affirmative vote of holders of at least 2/3 of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal any provision of the Certificate of Incorporation and Bylaws, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt; |
• | the ability of our board of directors to amend the bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and |
• | advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company. |
• | continue to commercialize JATENZO in the United States for the treatment of adult males with a deficiency or absence of endogenous T; |
• | incur sales and marketing costs to support the commercialization of JATENZO; |
• | incur contractual manufacturing costs for JATENZO; |
• | implement post-approval requirements related to JATENZO; |
• | actively pursue additional indications and line extensions for JATENZO for the treatment of adult males with a deficiency or absence of endogenous T; |
• | seek to attract and retain new and existing skilled personnel; |
• | invest in measures to protect and expand our intellectual property; |
• | seek to discover and develop additional product candidates; |
• | seek to in-license or acquire additional product candidates for other medical conditions; |
• | adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products; |
• | maintain, expand and protect our intellectual property portfolio; |
• | hire additional clinical, manufacturing and scientific personnel; |
• | add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; |
• | create additional infrastructure to support operations as a public company and incur increased legal, accounting, investor relations and other expenses; and |
• | experience delays or encounter issues with additional outbreaks of the pandemic in addition to any of the above. |
• | salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions; |
• | post-marketing requirements of the FDA for JATENZO and pharmaceutical development expense related to our internally -in-licensed |
• | costs of outside consultants, including their fees and related travel expenses engaged in research and development functions. |
Years Ended December 31, |
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2021 |
2020 |
Change |
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Net product revenue |
$ | 13,957 | $ | 6,369 | $ | 7,588 | ||||||
Cost of product sales |
2,720 | 8,687 | (5,967 | ) | ||||||||
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Gross profit |
11,237 | (2,318 | ) | 13,555 | ||||||||
Operating expenses: |
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Sales and marketing |
30,677 | 30,524 | 153 | |||||||||
General and administrative |
16,662 | 11,937 | 4,725 | |||||||||
Research and development |
3,630 | 2,398 | 1,232 | |||||||||
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Total operating expenses |
50,969 | 44,859 | 6,110 | |||||||||
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Loss from operations |
(39,732 | ) | (47,177 | ) | 7,445 | |||||||
Other (expense) income, net: |
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Change in fair value of warrant liability and derivative, net |
12,508 | 66,891 | (54,383 | ) | ||||||||
Interest income |
2 | 25 | (23 | ) | ||||||||
Interest expense |
(15,895 | ) | (15,394 | ) | (501 | ) | ||||||
Litigation settlement |
2,500 | — | 2,500 | |||||||||
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Total other (expense) income, net |
(885 | ) | 51,522 | (52,407 | ) | |||||||
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Net (loss) income |
$ | (40,617 | ) | $ | 4,345 | $ | (44,962 | ) | ||||
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• | a $1.8 million increase in in commercial analytic and market research costs, primarily related to prescription and payor data; |
• | a $1.5 million decrease in in outsourced advertising and promotion costs due to timing of media buys and agency activities; and |
• | a $0.1 million increase in other sales and marketing related costs. |
• | a $2.8 million increase in personnel costs, including stock-based compensation expense, primarily due to an increase in headcount and external consultants; |
• | a $1.0 million increase in insurance fees, related to directors’ and officers’ insurance; |
• | a $0.6 million increase in in consulting and professional fees, primarily in connection with operating as a public company; and |
• | a $0.3 million increase in in other general and administrative costs. |
• | a $0.9 million increase in license fees related to the license agreements with HavaH and McGill; |
• | a $0.7 million increase in clinical costs related to Phase 4 studies related to the development of JATENZO, our lead commercial product; offset by |
• | a $0.4 million decrease in costs related to research and development consulting services. |
Years Ended December 31, |
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2021 |
2020 |
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Net cash used in operating activities |
(43,786 | ) | (41.580 | ) | ||||
Net cash used in investing activities |
(25 | ) | (63 | ) | ||||
Net cash provided by financing activities |
62,993 | 47,220 | ||||||
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Net increase in cash and cash equivalents |
$ | 19,182 | $ | 5,577 | ||||
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• | The costs, timing and ability to manufacture JATENZO; |
• | the costs of future activities, including product sales, marketing, manufacturing and distribution of JATENZO; |
• | the costs of manufacturing commercial-grade product and necessary inventory to support continued commercial launch; |
• | the costs of potential milestones related to license agreements; |
• | the ability to receive additional non-dilutive funding, including grants from organizations and foundations; |
• | the revenue from commercial sale of its products; |
• | the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining, expanding and enforcing its intellectual property rights and defending intellectual property-related claims; and |
• | our ability to establish and maintain collaborations on favorable terms, if at all. |
• | the estimated number of competing products being launched as well as the expected launch date, which we determine based on market intelligence; |
• | the estimated decline in the market price of product, which we determine based on historical experience and customer input; and |
• | the estimated levels of inventory held by customers at the time of the anticipated decrease in market price, which we determine based upon historical experience and customer input. |
• |
the prices at which it sold shares of preferred stock and the superior rights and preferences of the preferred stock relative to common stock at the time of each grant; |
• |
the progress of research and development programs, including the status and results of preclinical studies for product candidates; |
• |
stage of development and commercialization and its business strategy; |
• |
external market conditions affecting the biopharmaceutical industry and trends within the biopharmaceutical industry; |
• |
Legacy Clarus’ financial position, including cash on hand, and historical and forecasted performance and operating results; |
• |
the lack of an active public market for common stock and preferred stock; |
• |
the likelihood of achieving a liquidity event, such as an initial public offering or sale in light of prevailing market conditions; and |
• |
the analysis of initial public offerings and the market performance of similar companies in the biopharmaceutical industry. |
F-2 |
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Consolidated Financial Statements |
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F-6 |
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F-7 |
Exhibit Number |
Exhibit Description | |
2.1 † |
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3.1 |
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3.2 |
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4.1** |
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10.1# |
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10.2# |
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10.3# |
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10.4# |
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10.5# |
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10.6# |
10.7# |
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10.8# |
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10.9# |
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10.10 |
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10.11 |
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10.12 |
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10.13 |
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10.14 |
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10.15 |
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10.16 |
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10.17 |
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10.18 |
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10.19 |
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10.20 |
||
10.21¥ |
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10.22¥ |
||
10.23¥ |
10.24¥ |
||
10.25¥ |
||
10.26¥ |
||
10.27 |
||
10.28 |
||
10.29 |
||
10.30 |
||
10.31 |
||
16.1 |
||
21.1 |
||
23.1** |
||
24.1** |
||
31.1** |
||
31.2** |
||
32.1* |
||
32.2* |
||
101.INS** |
Inline XBRL Instance Document | |
101.SCH** |
Inline XBRL Taxonomy Extension Schema Document | |
101.CAL** |
Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF** |
Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB** |
Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.LAB** |
Inline XBRL Taxonomy Extension Label Linkbase Document | |
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
+ |
The schedules and exhibits to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request. |
# |
Indicates management contract or compensatory plan or arrangement. |
¥ |
Portions of this exhibit (indicated by brackets and asterisks) have been omitted because the registrant has determined that the information is both not material and is the type that the registrant treats as private or confidential. |
* |
The certifications furnished in Exhibit 32.1 hereto are deemed to be furnished with this Annual Report on Form 10-K and will not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference. |
** |
Filed herewith. |
Date: March 31, 2022 |
By: |
/s/ Robert E. Dudley | ||||
Name: |
Robert E. Dudley | |||||
Title: |
Chief Executive Officer | |||||
(Principal Executive Officer) |
Signature |
Title |
Date | ||
Chief Executive Officer, President, Founder, and Director |
||||
/s/ Robert E. Dudley. |
(Principal Executive Officer) |
March 31, 2022 | ||
Robert E. Dudley, Ph.D. |
||||
/s/ Richard Peterson |
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
March 31, 2022 | ||
Richard Peterson |
||||
/s/ Kimberly Murphy |
Director and Chair, Board of Directors |
March 31, 2022 | ||
Kimberly Murphy |
||||
/s/ Elizabeth A. Cermak |
Director |
March 31, 2022 | ||
Elizabeth A. Cermak |
||||
/s/ John Amory |
Director |
March 31, 2022 | ||
John Amory, M.D., M.P.H., M.Sc. |
||||
/s/ Joseph Hernandez |
Director |
March 31, 2022 | ||
Joseph Hernandez |
||||
/s/ Mark A. Prygocki, Sr. |
Director |
March 31, 2022 | ||
Mark A. Prygocki, Sr. |
||||
/s/ Alex Zisson |
Director |
March 31, 2022 | ||
Alex Zisson |
Consolidated Financial Statements for the Years Ended December 31, 2021 and 2020: |
||
F-2 | ||
F-3 | ||
F-4 | ||
F-5 | ||
F-6 | ||
F-7 |
December 31, 2021 |
December 31, 2020 |
|||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 26,415 | $ | 7,233 | ||||
Accounts receivable, net |
6,341 | 4,400 | ||||||
Inventory, net |
14,214 | 5,857 | ||||||
Prepaid expenses |
4,673 | 1,846 | ||||||
|
|
|
|
|||||
Total current assets |
51,643 | 19,336 | ||||||
Property and equipment, net |
65 | 64 | ||||||
|
|
|
|
|||||
Total assets |
$ | 51,708 | $ | 19,400 | ||||
|
|
|
|
|||||
Liabilities, and stockholders’ equity (deficit) |
||||||||
Current liabilities: |
||||||||
Senior notes payable |
$ | 42,269 | $ | 41,902 | ||||
Accounts payable |
13,945 | 12,107 | ||||||
Accrued expenses |
8,261 | 4,631 | ||||||
Deferred revenue |
1,585 | 1,172 | ||||||
|
|
|
|
|||||
Total current liabilities |
66,060 | 59,812 | ||||||
Convertible notes payable to related parties |
— | 77,911 | ||||||
Royalty obligation |
— | 9,262 | ||||||
Derivative warrant liability |
1,567 | — | ||||||
|
|
|
|
|||||
Total liabilities |
67,627 | 146,985 | ||||||
Commitments and contingencies (See Note 12) |
||||||||
Redeemable convertible preferred stock, $0.001 par value, 0 and 53,340,636 shares authorized at December 31, 2021 and December 31, 2020 , respectively ; 0 and 36,756,498 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively |
|
|
— |
|
|
|
198,195 |
|
Stockholders’ equity (deficit): |
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively |
— | — | ||||||
Common stock $0.0001 par value; 125,000,000 shares authorized; 24,025,817 and 0 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively |
2 | — | ||||||
Additional paid-in capital |
305,734 | — | ||||||
Accumulated deficit |
(321,655 | ) | (325,780 | ) | ||||
|
|
|
|
|||||
Total stockholders’ equity (deficit) |
(15,919 | ) | (325,780 | ) | ||||
|
|
|
|
|||||
Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit |
$ | 51,708 | $ | 19,400 | ||||
|
|
|
|
Years Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Net product revenue |
$ | 13,957 | $ | 6,369 | ||||
Cost of product sales |
2,720 | 8,687 | ||||||
|
|
|
|
|||||
Gross profit (loss) |
11,237 | (2,318 | ) | |||||
Operating expenses: |
||||||||
Sales and marketing |
30,677 | 30,524 | ||||||
General and administrative |
16,662 | 11,937 | ||||||
Research and development |
3,630 | 2,398 | ||||||
|
|
|
|
|||||
Total operating expenses |
50,969 | 44,859 | ||||||
|
|
|
|
|||||
Loss from operations |
(39,732 | ) | (47,177 | ) | ||||
Other (expense) income, net: |
||||||||
Change in fair value of warrant liability and derivative, net |
12,508 | 66,891 | ||||||
Interest income |
2 | 25 | ||||||
Interest expense |
(15,895 | ) | (15,394 | ) | ||||
Litigation settlement |
2,500 | — | ||||||
|
|
|
|
|||||
Total other (expense) income, net |
(885 | ) | 51,522 | |||||
|
|
|
|
|||||
Net (loss) income before income taxes |
(40,617 | ) | 4,345 | |||||
Provision for income taxes |
— | — | ||||||
|
|
|
|
|||||
Net (loss) income |
$ | (40,617 | ) | $ | 4,345 | |||
|
|
|
|
|||||
Net loss attributable to common stockholders, basic (Note 14) |
$ | (40,205 | ) | $ | (10,336 | ) | ||
|
|
|
|
|||||
Net loss attributable to common stockholders, diluted (Note 14) |
$ | (40,205 | ) | $ | (69,963 | ) | ||
|
|
|
|
|||||
Net loss per common share, basic |
$ | (5.72 | ) | $ | — | |||
|
|
|
|
|||||
Net loss per common share, diluted |
$ | (5.72 | ) | $ | (8.20 | ) | ||
|
|
|
|
|||||
Weighted-average common shares used in net loss, basic (Note 14) |
7,027,860 | — | ||||||
|
|
|
|
|||||
Weighted-average common shares used in net loss, diluted (Note 14) |
7,027,860 | 8,529,846 | ||||||
|
|
|
|
Redeemable Convertible Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Total Stockholders’ Deficit |
||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||
Balance at December 31, 2019 |
36,756,498 | $ | 183,513 | 870,263 | $ | 1 | $ | — | $ | (316,269 | ) | $ | (316,268 | ) | ||||||||||||||
Retroactive to the Business Combination (Note 3) |
— |
— |
(870,263 |
) |
(1 |
) |
— |
1 |
— |
|||||||||||||||||||
Adjusted balance at December 31, 2019 |
36,756,498 |
183,513 |
— |
$ |
— |
$ |
— |
$ |
(316,268 |
) |
(316,268 |
) | ||||||||||||||||
Accretion of redeemable convertible stock |
— |
14,682 |
— |
— |
(825 |
) |
(13,857 |
) |
(14,682 |
) | ||||||||||||||||||
Stock-based compensation |
— |
— |
— |
— |
825 |
— |
825 |
|||||||||||||||||||||
Net income (loss) |
— |
— |
— |
— |
— |
4,345 |
4,345 |
|||||||||||||||||||||
Balance at December 31, 2020 |
36,756,498 | 198,195 | — | $ |
— |
$ |
— | $ |
(325,780 | ) | $ |
(325,780 | ) | |||||||||||||||
Conversion of Legacy Clarus convertible notes payable into Legacy Clarus Series D redeemable convertible preferred stock (1) |
747,451 |
3,360 |
— | — | — | — | — | |||||||||||||||||||||
Accretion of Legacy Clarus Series D redeemable convertible preferred stock to redemption value (1) |
— | 7,737 |
— | — | (7,737 | ) | — |
(7,737 | ) | |||||||||||||||||||
Recapitalization on September 9, 2021 |
(37,503,949 |
) |
(209,292 |
) |
17,886,348 | 1 | 281,993 | 44,742 |
326,736 | |||||||||||||||||||
Proceeds from Blue Water Acquisition Corp. in Business Combination |
— | — | 3,839,469 | 1 |
17,008 | — | 17,009 | |||||||||||||||||||||
Issuance of shares in connection with the Private Placement Equity Offering |
— | — | 2,300,000 | — | 13,801 | — | 13,801 | |||||||||||||||||||||
Stock-based compensation |
— | — |
— | — | 668 | — | 668 | |||||||||||||||||||||
Net loss |
— | — | — | — | — | (40,617 | ) | (40,617 | ) | |||||||||||||||||||
Balance at December 31, 2021 |
— | — | 24,025,817 | $ | 2 | $ | 305,734 | $ | (321,655 | ) | $ | (15,919 | ) | |||||||||||||||
(1) |
Relates to activity associated with the Redeemable Convertible Preferred Stock prior to the reverse recapitalization on September 9, 2021. |
Years Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Operating activities |
||||||||
Net (loss) income |
$ | (40,617 | ) | $ | 5 | |||
Adjustments to reconcile net loss (income) to net cash used in operating activities: |
||||||||
Non-cash interest expense related to debt financing and royalty obligation |
13,065 | 12,459 | ||||||
Settlement of interest with payment-in-kind |
3,125 | — | ||||||
Non-cash gain on partial extinguishment of senior notes |
(296 | ) | — | |||||
Change in fair value of warrant liability |
(12,508 | ) | (551 | ) | ||||
Change in fair value of derivative liability |
— | (66,340 | ) | |||||
Stock-based compensation expense |
668 | 825 | ||||||
Depreciation |
25 | 18 | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(1,941 | ) | (4,400 | ) | ||||
Inventory |
(8,357 | ) | 1,104 | |||||
Prepaid expenses and other current assets |
(2,830 | ) | (804 | ) | ||||
Accounts payable |
1,838 | 7,728 | ||||||
Accrued expenses |
3,629 | 2,864 | ||||||
Deferred revenue |
413 | 1,172 | ||||||
Net cash used in operating activities |
(43,786 | ) | (41,580 | ) | ||||
Investing activities |
||||||||
Purchases of property and equipment |
(25 | ) | (63 | ) | ||||
Net cash used in investing activities |
(25 | ) | (63 | ) | ||||
Financing activities |
||||||||
Proceeds from business combination, net |
17,009 | — | ||||||
Proceeds from issuance of convertible notes payable |
23,591 | 1,611 | ||||||
Proceeds from issuance of senior notes payable |
8,592 | 49,125 | ||||||
Proceeds from issuance of common stock and warrants, net of issuance costs |
13,801 | — | ||||||
Proceeds from PPP loan |
— | 488 | ||||||
Repayment of PPP loan |
— | (488 | ) | |||||
Debt issuance costs |
— | (3,516 | ) | |||||
Net cash provided by financing activities |
62,993 | 47,220 | ||||||
Net increase in cash and cash equivalents |
19,182 | 5,577 | ||||||
Cash and cash equivalents—beginning of period |
7,233 | 1,656 | ||||||
Cash and cash equivalents—end of period |
$ | 26,415 | $ | 7,233 | ||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid for interest |
$ | — | $ | 3,125 | ||||
Conversion of convertible notes payable into Series D redeemable convertible preferred stock |
$ | 3,360 | $ | — | ||||
Accretion of redeemable convertible preferred stock to redemption value, including dividends on preferred stock |
7,737 | 14,682 |
||||||
Senior secured note principal and royalty obligation balance conversion to shares of common stock upon merger (Note 3) |
$ | 28,254 | — | |||||
Convertible notes principal and accrued interest balance conversion to shares of common stock upon merger (Note 3) |
$ | 103,267 | — | |||||
Conversion of Series D redeemable convertible preferred stock into share of common stock |
$ | 209,290 | — | |||||
Value of warrants assumed upon merger (Note 3) |
14,075 | — | ||||||
Level 1: |
Quoted market prices in active markets for identical assets or liabilities. | |
Level 2: |
Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted market prices, interest rates and yield curves. | |
Level 3: |
Unobservable inputs for the asset or liability (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). |
Asset Class |
Estimated Useful Life | |
Computer and office equipment |
3 years | |
Furniture and fixtures |
7 years |
Deferred Revenue |
||||
Balance at December 31, 2020 |
$ |
1,172 |
||
Amounts deferred |
14,370 |
|||
Revenue recognized |
(13,957 |
) | ||
Balance at December 31, 2021 |
$ |
1,585 |
||
Cash – Blue Water Trust Account and cash (net of redemptions) |
$ | 25,394 | ||
Less: Equity issuance costs and other costs paid |
(8,385 | ) | ||
Net Proceeds from the Business Combination |
$ | 17,009 | ||
Blue Water shares outstanding prior to the Business Combination |
3,839,469 | |||
Conversion of Legacy Clarus Series D Preferred Stock |
4,901,564 | |||
Conversion of Legacy Clarus convertible notes |
8,529,846 | |||
Conversion of additional capital provided by Legacy Clarus convertible note and senior note holders |
2,549,938 | |||
Conversion of Senior Secured Note principal and royalty rights |
1,905,000 | |||
Total shares of the Company’s common stock outstanding immediately following the Business Combination |
21,725,817 | |||
Conversion of senior notes and royalty obligation carrying value |
$ | 28,254 | ||
Conversion of Legacy Clarus convertible notes carrying value |
103,267 | |||
Conversion of Series D redeemable convertible preferred stock carrying value |
209,290 |
|||
Assumption of warrant liabilities |
(14,075 | ) | ||
Total reverse recapitalization impact on statement of equity |
$ | 326,736 | ||
December 31, 2021 |
||||||||||||||||
(in thousands) |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||
Assets |
||||||||||||||||
Cash equivalents: |
||||||||||||||||
Money market funds |
$ | 13,002 | $ | 13,002 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ | 13,002 | $ | 13,002 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities |
||||||||||||||||
Private placement warrant liability |
$ | 1,567 | $ | — | $ | — | $ | 1,567 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Liabilities |
$ | 1,567 | $ | — | $ | — | $ | 1,567 | ||||||||
|
|
|
|
|
|
|
|
December 31, 2020 |
||||||||||||||||
(in thousands) |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||
Assets |
||||||||||||||||
Cash equivalents: |
||||||||||||||||
Money market funds |
$ | 7,205 | $ | 7,205 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ | 7,205 | $ | 7,205 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
|
Fair value of underlying instrument |
$ | 2.43 | ||
Risk-free interest rate |
1.22 | % | ||
Expected term (in years) |
4.7 | |||
Expected volatility |
65.0 | % | ||
Expected dividend yield |
— | % |
Beginning warrant liability balance |
$ | — | ||
Private placement warrant liability assumed |
14,075 | |||
Change in fair value of warrant liability |
(12,508 | ) | ||
|
|
|||
Balance at December 31, 2021 |
$ | 1,567 | ||
|
|
December 31, 2021 |
December 31, 2020 |
|||||||
Raw material |
$ | 6,850 | $ | 4,225 | ||||
Work-in-process |
1,452 | — | ||||||
Finished goods |
14,500 | 9,475 | ||||||
|
|
|
|
|||||
Total inventory |
22,802 | 13,700 | ||||||
Inventory reserve |
(8,588 | ) | (7,843 | ) | ||||
|
|
|
|
|||||
Total inventory, net of reserve |
$ | 14,214 | $ | 5,857 | ||||
|
|
|
|
December 31, 2021 |
December 31, 2020 |
|||||||
Office equipment and computer hardware |
$ | 124 | $ | 99 | ||||
Furniture and fixtures |
109 | 109 | ||||||
|
|
|
|
|||||
Total property and equipment |
233 | 208 | ||||||
Less accumulated depreciation |
(168 | ) | (144 | ) | ||||
|
|
|
|
|||||
Property and equipment, net |
65 | 64 | ||||||
|
|
|
|
December 31, 2021 |
December 31, 2020 |
|||||||
Selling and marketing costs |
$ | 6,031 | $ | 3,468 | ||||
Employee compensation and related benefits |
2,005 | 1,090 | ||||||
Professional fees |
225 | 73 | ||||||
|
|
|
|
|||||
|
|
|
|
|||||
Total |
$ | 8,261 | $ | 4,631 | ||||
|
|
|
|
December 31, 2020 |
||||
Principal amount |
$ | 61,300 | ||
Accrued and unpaid interest |
17,287 | |||
Unamortized debt discount |
(676 | ) | ||
Total |
$ | 77,911 | ||
December 31, 2021 |
December 31, 2020 |
|||||||
Principal amount |
$ | 43,125 | $ | 50,000 | ||||
Accrued and unpaid interest |
4,354 | 1,278 | ||||||
Unamortized debt discount |
(5,210 | ) | (9,376 | ) | ||||
Total |
$ | 42,269 | $ | 41,902 | ||||
Years ended December 31, |
Amount |
|||
2022 |
$ | 6,000 | ||
2023 |
15,125 | |||
2024 |
14,000 | |||
2025 |
8,000 | |||
Total |
$ | 43,125 | ||
December 31, 2020 |
||||||||||||||||||||
Preferred Stock Authorized |
Preferred Stock Issued and Outstanding |
Carrying Value |
Liquidation Value |
Common Stock Issuable Upon Conversion |
||||||||||||||||
Series A Preferred Stock |
2,500,000 |
2,500,000 |
$ |
9,170 |
$ |
9,170 |
2,500,000 |
|||||||||||||
Series B Preferred Stock |
5,066,637 |
5,066,637 |
15,118 |
15,118 |
5,066,637 |
|||||||||||||||
Series C Preferred Stock |
9,438,744 |
9,438,744 |
20,057 |
20,057 |
9,438,744 |
|||||||||||||||
Series D Preferred Stock |
36,335,255 |
19,751,117 |
153,850 |
153,850 |
19,751,117 |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
53,340,636 |
36,756,498 |
$ |
198,195 |
$ |
198,195 |
36,756,498 |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
||||
2021 |
||||
Risk free interest rate |
1.34 | % | ||
Expected term (in years) |
5.95 | |||
Expected dividend yield |
0 | % | ||
Expected volatility of underlying common stock |
79.76 | % |
Stock Options |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life (in Years) |
Intrinsic Value (in thousands) |
|||||||||||||
Outstanding January 1, 2021 |
— | $ | — | — | $ | — | ||||||||||
Granted |
1,083,550 | 4.78 | 9.95 | |||||||||||||
Exercised |
— | |||||||||||||||
Canceled |
— | |||||||||||||||
|
|
|||||||||||||||
Outstanding December 31, 2021 |
1,083,550 | $ | 4.78 | 9.95 | $ | — | ||||||||||
|
|
|||||||||||||||
Options vested or expected to vest as of December 31, 2021 |
— | $ | — | — | $ | — | ||||||||||
|
|
|||||||||||||||
Stock options unvested as of December 31, 2021 |
1,083,550 | $ | 4.78 | 9.95 | $ | — | ||||||||||
|
|
Number of Shares |
Weighted Average Grant Date Fair Value |
|||||||
Unvested restricted stock as of January 1, 2021 |
— | $ | — | |||||
Granted |
433,420 | $ | 4.78 | |||||
|
|
|||||||
Unvested restricted stock as of December 31, 2021 |
433,420 | $ | 4.78 | |||||
|
|
Years Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Selling and marketing |
$ | 43 | $ | 183 | ||||
Research and development |
60 | 189 | ||||||
General and administrative |
565 | 453 | ||||||
|
|
|
|
|||||
Total stock-based compensation expense |
$ | 668 | $ | 825 | ||||
|
|
|
|
Year Ended December 31, |
||||||||||||||||
2021 |
2020 |
|||||||||||||||
Income at U.S. statutory rate |
$ | (8,530 | ) | 21.00 | % | $ | 912 | 21.00 | % | |||||||
State taxes, net of federal benefit |
(2,578 | ) | 6.35 | % | (1,583 | ) | -36.45 | % | ||||||||
Change in fair value |
(2,627 | ) | 6.47 | % | (14,047 | ) | -323.39 | % | ||||||||
Interest Expense |
1,077 | -2.65 | % | 1,410 | 32.46 | % | ||||||||||
Stock compensation |
70 | -0.17 | % | 127 | 2.93 | % | ||||||||||
Transaction costs |
(664 | ) | 1.64 | % | — | 0.00 | % | |||||||||
Permanent differences and other |
1 | 0.00 | % | 6 | 0.13 | % | ||||||||||
Valuation allowance |
13,251 | -32.62 | % | 13,175 | 303.32 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
— | 0.00 | % | — | 0.00 | % | |||||||||||
|
|
|
|
|
|
|
|
Years Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Deferred tax assets |
||||||||
Stock compensation |
$ | 10 | $ | 64 | ||||
Accruals and other |
6,507 | 4,151 | ||||||
Debt discount |
597 | 483 | ||||||
Royalty liability |
— | 2,272 | ||||||
Net operating loss carryforwards |
62,606 | 51,981 | ||||||
Tax credits |
6,731 | 6,774 |
||||||
|
|
|
|
|||||
Total deferred tax assets |
76,451 | 65,662 | ||||||
Less: valuation allowance |
(76,451 | ) | (65,662 | ) | ||||
|
|
|
|
|||||
Deferred tax assets, net |
$ | — | $ | — | ||||
|
|
|
|
Years Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Valuation allowance at beginning of year |
$ | 65,662 | $ | 52,487 | ||||
Increases recorded due to income tax provisions |
13,251 | 13,175 | ||||||
Decreases recorded to equity |
(2,462 | ) | — | |||||
|
|
|
|
|||||
Valuation allowance at end of year |
$ | 76,451 | $ | 65,662 | ||||
|
|
|
|
Years Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Numerator: |
||||||||
Net (loss) income |
$ | (40,617 | ) | $ | 4,345 | |||
Accretion of preferred stock (3) |
— |
(14,682 |
) | |||||
Gain on extinguishment of convertible notes (1) |
412 | — | ||||||
Net (loss) income attributable to common stockholders, basic |
(40,205 | ) | (1 | 7) | ||||
Effect of convertible notes (2) |
— | (59,626 | ) | |||||
Net loss attributable to common stockholders, diluted |
$ | (40,205 | ) | $ | (69,963 | ) | ||
Denominator: |
||||||||
Weighted-average common shares attributable to common stockholders, basic |
7,027,860 | — | ||||||
Effect of convertible notes ( 2 ) |
— | 8,529,846 | ||||||
Weighted average number of common shares—diluted |
7,027,860 | 8,529,846 | ||||||
Net loss per common share attributable to common stockholders, basic |
$ | (5.72 | ) | $ | — |
|||
Effect of convertible notes |
— | (8.20 | ) | |||||
Net loss per common share attributable to common stockholders, diluted |
$ | (5.72 | ) | $ | (8.20 | ) | ||
(1) |
The gain on extinguishment of convertible notes relates to the difference between the carrying value of the convertible notes upon conversion to shares and the fair value of the shares exchanged which requires adjustment to the numerator when calculating basic EPS. |
(2) |
The effect of the convertible notes on the numerator for the year ended December 31, 2020 relates to the impact that the convertible notes had on net income during the period and are removed from net income when calculating net income (loss) attributable to common stockholders diluted using the if-converted method. The effect of the convertible notes on the shares in the denominator for the year ended December 31, 2020 was calculated based on the carrying value of the convertible notes balance at December 31, 2020, converted at the series D price of $4.50 per share and further retroactively adjusted for the effect of the Business Combination and are added back to the denominator when calculating diluted EPS using the if-converted method. These are excluded from the computation of diluted net loss per share attributable to common stockholders as of December 31, 2021 because including them would have had an anti-dilutive effect. The effect of accretion of preferred stock is $0 in 2021 because of the effect of the reversal of previous accretion forgone by the preferred shareholders upon completion of the Business Combination provided no benefit to the holders of the cancelled Legacy Clarus common stock. |
Years Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Redeemable convertible preferred stock |
— | 36,756,498 | ||||||
Legacy Clarus warrants |
9,246 | 183,438 | ||||||
IPO warrants |
5,750,000 | — | ||||||
Private Placement warrants |
3,445,000 | — | ||||||
PIPE warrants |
3,748,338 | — | ||||||
Stock options and unvested restricted stock awards |
1,516,970 | — |
Exhibit 4.1
DESCRIPTION OF SECURITIES
The following summary of certain provisions of Clarus Therapeutics Holdings, Inc.s (Clarus, we, our) securities does not purport to be complete and is subject to the Certificate of Incorporation, the Bylaws and the Warrant-related documents described herein, and the provisions of applicable law. The Certificate of Incorporation and the Bylaws are incorporated by reference to our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Authorized and Outstanding Stock
The Certificate of Incorporation authorizes the issuance of 135,000,000 shares, consisting of 125,000,000 shares of common stock, $0.0001 par value per share and 10,000,000 shares of preferred stock, $0.0001 par value per share.
Common Stock
Holders of common stock are entitled to one vote for each share of Common Stock held of record by such holder on all matters on which stockholders are generally entitled to vote; provided, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to the Certificate of Incorporation that relates solely to the terms of one or more outstanding series of preferred stock if the holders of such affected series of preferred stock are entitled, either separately or together with the holders of one or more other such series of preferred stock, to vote thereon pursuant to the Certificate of Incorporation or the DGCL. There is no cumulative voting. Our stockholders are entitled to receive ratable dividends when, as and if declared by the board of directors out of funds legally available therefor.
Holders of Common Stock have no preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to the Common Stock. If we liquidate, dissolve or wind up, our stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over Common Stock.
Preferred Stock
The Certificate of Incorporation provides that shares of preferred stock may be issued from time to time in one or more series. The Board is authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions, applicable to the shares of each series.
Warrants
Public Warrants
Each Public Warrant entitles the registered holder to purchase one share of Common Stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing 30 days after the Merger Closing. The Public Warrants will expire five years after the Merger Closing of the Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
We will not be obligated to deliver any shares of Common Stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Common Stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No warrant will be exercisable and we will not be obligated to issue shares of Common Stock upon exercise of a warrant unless the Common Stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a Public Warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will we be required to net cash settle any warrant.
We have agreed that as soon as practicable, but in no event later than 15 business days after the Merger Closing, we will use our best efforts to file with the SEC a registration statement covering the shares of Common Stock issuable upon exercise of the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Common Stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of Common Stock issuable upon exercise of the warrants is not effective by the 6th business day after the Merger Closing of the Business Combination, warrantholders may, until such time as there is an effective registration statement and during any period when we will have failed to maintain an effective registration statement, exercise warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the foregoing, if a registration statement covering Common Stock issuable upon exercise of the warrants is not effective within a specified period following the Merger Closing of the Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act of 1933, as amended, or the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
Once the Public Warrants become exercisable, we may call the warrants for redemption:
| in whole and not in part; |
| at a price of $0.01 per warrant; |
| upon not less than 30 days prior written notice of redemption to each warrantholder; and |
| if, and only if, the reported last sale price of the Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before we send the notice of redemption to the warrantholders. |
If and when the Public Warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification.
We have established the last of the redemption criteria discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the Public Warrants, each warrantholder will be entitled to exercise its warrant prior to the scheduled redemption date. However, the price of the Common Stock may fall below the $18.00 redemption trigger price (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) as well as the $11.50 warrant exercise price after the redemption notice is issued.
If we call the Public Warrants for redemption as described above, our management will have the option to require any holder that wishes to exercise its warrant to do so on a cashless basis. In determining whether to require all holders to exercise their warrants on a cashless basis, our management will consider, among other factors, our cash position, the number of warrants that are outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of Common Stock issuable upon the exercise of our warrants. If our management takes advantage of this option, all holders of Public Warrants would pay the exercise price by surrendering their warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the fair market value (defined below) by (y) the fair market value. The fair market value shall mean the average reported last sale price of the Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. If our management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of Common Stock to be received upon exercise of the Public Warrants, including the fair market value in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. We believe this feature is an attractive option to us if we do not need the cash from the exercise of the warrants after the Merger Closing. If we call our Public Warrants for redemption and our management does not take advantage of this option, the Sponsor and its permitted transferees would still be entitled to exercise their Placement Warrants for cash or on a cashless basis using the same formula described above that other warrantholders would have been required to use had all warrantholders been required to exercise their warrants on a cashless basis, as described in more detail below.
A holder of a Public Warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such persons affiliates), to the warrant agents actual knowledge, would beneficially own in excess of 4.9% or 9.8% (or such other amount as a holder may specify) of the shares of Common Stock outstanding immediately after giving effect to such exercise.
If the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split-up of shares of Common Stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Common Stock issuable on exercise of each Public Warrant will be increased in proportion to such increase in the outstanding shares of Common Stock. A rights offering to holders of Common Stock entitling holders to purchase shares of Common Stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of Common Stock equal to the product of (i) the number of shares of Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for Common Stock) and (ii) one (1) minus the quotient of (x) the price per share of Common Stock paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for Common Stock, in determining the price payable for Common Stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of Common Stock as reported during the ten (10) trading day period ending on the trading day prior to the first date on which the shares of Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
In addition, if we, at any time while the Public Warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to the holders of New Blue Water common stock on account of such shares of Common Stock (or other shares of our capital stock into which the warrants are convertible), other than (a) as described above, (b) certain ordinary cash dividends, (c) to satisfy the redemption rights of the holders of Common Stock in connection with the Merger Closing of the Business Combination, (d) to satisfy the redemption rights of the holders of New Blue Water common stock in connection with an Extension Rea stockholder vote to amend the Blue Water Charter (i) for an Extension or (ii) with respect to any other provision relating to stockholders rights or pre-initial business combination activity, or (e) in connection with the redemption of our public shares upon our failure to complete our initial business combination, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of Common Stock in respect of such event.
If the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Common Stock other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each Public Warrant will be decreased in proportion to such decrease in outstanding shares of Common Stock.
Whenever the number of shares of Common Stock purchasable upon the exercise of the Public Warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of Common Stock purchasable upon the exercise of the warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of Common Stock so purchasable immediately thereafter.
In case of any reclassification or reorganization of the outstanding shares of Common Stock (other than those described above or that solely affects the par value of such shares of Common Stock), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of our outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection with which we are dissolved, the holders of the Public Warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the warrants and in lieu of the shares of Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation,
or upon a dissolution following any such sale or transfer, that the holder of the warrants would have received if such holder had exercised their warrants immediately prior to such event. If less than 70% of the consideration receivable by the holders of Common Stock in such a transaction is payable in the form of Common Stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant within thirty days following public disclosure of such transaction, the warrant exercise price will be reduced as specified in the warrant agreement based on the Black-Scholes value (as defined in the warrant agreement) of the warrant. The purpose of such exercise price reduction is to provide additional value to holders of the warrants when an extraordinary transaction occurs during the exercise period of the warrants pursuant to which the holders of the warrants otherwise do not receive the full potential value of the warrants in order to determine and realize the option value component of the warrant. This formula is to compensate the warrant holder for the loss of the option value portion of the warrant due to the requirement that the warrant holder exercise the warrant within 30 days of the event. The Black-Scholes model is an accepted pricing model for estimating fair market value where no quoted market price for an instrument is available.
The Public Warrants and the Placement Warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and Blue Water. A copy of the warrant agreement has been publicly filed with the SEC. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding Public Warrants to make any change that adversely affects the interests of the registered holders of Public Warrants.
The Public Warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of warrants being exercised. The
warrantholders do not have the rights or privileges of holders of Common Stock and any voting rights until they exercise their warrants and receive shares of Common Stock. After the issuance of shares of Common Stock upon exercise of the warrants, each holder will be entitled to one (1) vote for each share held of record on all matters to be voted on by stockholders.
No fractional shares will be issued upon exercise of the Public Warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number of shares of Common Stock to be issued to the warrantholder.
Placement Warrants
Except as described below, the Placement Warrants have terms and provisions that are identical to those of the Public Warrants, including as to exercise price, exercisability and exercise period. The Placement Warrants (including the Common Stock issuable upon exercise of the Placement Warrants) are not transferable, assignable or salable until 30 days after the Merger Closing (except, among certain other limited exceptions to our officers and directors and other persons or entities affiliated with the Sponsor) and they will not be redeemable by us so long as they are held by the Sponsor or its permitted transferees. The Sponsor, or its permitted transferees, has the option to exercise the Placement Warrants on a cashless basis. If the Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Placement Warrants will be subject to the same terms and conditions as the Public Warrants, and among other matters, be redeemable by us and exercisable by the holders on the same basis as the Public Warrants.
If holders of the Placement Warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering their warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the fair market value (defined below) by (y) the fair market value. The fair market value shall mean the average reported last sale price of the Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent.
Pre-Funded Warrants
Each Pre-Funded Warrant entitles the registered holder to purchase one share of Common Stock at a price of $0.00001 per share, subject to adjustment as discussed below, at any time after the PIPE Closing. The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. The Pre-Funded Warrants have customary provisions for cashless exercise and anti-dilution adjustments for transactions affecting our capital stock. We filed a registration statement with the SEC covering the shares of Common Stock issuable upon exercise of the Pre-Funded Warrants and agreed to maintain a current prospectus relating to those shares of Common Stock until the Pre-Funded Warrants expire, as specified in the Pre-Funded Warrants.
Common Warrants
Except as described below, the Common Warrants have terms and provisions that are identical to those of the Pre-Funded Warrants. The Common Warrants have an exercise price of $5.25 per share, are exercisable beginning six months following the PIPE Closing and expire five years after the PIPE Closing, subject to customary adjustments.
If at the time of exercise of the Common Warrants there is no effective registration statement registering, or the prospectus contained therein is not available for the resale of the shares of Common Stock underlying such Common Warrant for a period of 15 successive days, then the Common Warrants may be exercised, in whole or in part, by means of a cashless exercise.
In the event of a Fundamental Transaction (as defined in the Common Warrant), the Company or any Successor Entity (as defined in the Common Warrant) shall, at the holders option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable Fundamental Transaction), purchase the Common Warrants from the holder by paying to the holder an amount of cash equal to the Black Scholes Value (as defined in the Common Warrant) of the remaining unexercised portion of the Common Warrants on the date of the consummation of such Fundamental Transaction; provided, however, that if the Fundamental Transaction is not within the Companys control, including not approved by the Companys board of directors, the holder shall only be entitled to receive from the Company or any Successor Entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of the Common Warrants, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction. However, if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders of Common Stock will be deemed to have received common stock of the Successor Entity (which Entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction.
Dividends
We have not paid any cash dividends on the Common Stock to date and do not intend to pay cash dividends. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial conditions and will be within the discretion of the Board at such time. Further, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection with our indebtedness.
Rule 144
Pursuant to Rule 144, a person who has beneficially owned restricted shares of Common Stock or warrants for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale and (ii) we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required reports under Section 13 or 15(d) of the Exchange Act during the 12 months (or such shorter period as we were required to file reports) preceding the sale.
Persons who have beneficially owned restricted shares of Common Stock or warrants for at least six months but who are our affiliates at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:
| 1% of the total number of shares of common stock then outstanding; or |
| the average weekly reported trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale. |
Sales by our affiliates under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current public information about us.
Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies
Rule 144 is not available for the resale of securities initially issued by shell companies (other than business combination related shell companies) or issuers that have been at any time previously a shell company. However, Rule 144 also includes an important exception to this prohibition if the following conditions are met:
| the issuer of the securities that was formerly a shell company has ceased to be a shell company; |
| the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; |
| the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports; and |
| at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company. |
Anti-Takeover Provisions
Certificate of Incorporation and Bylaws
Among other things, the Certificate of Incorporation the By-laws:
| permit the Board to issue up to 10,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate, including the right to approve an acquisition or other change of control; |
| provide that the authorized number of directors may be changed only by resolution of our Board; |
| provide that, subject to the rights of any series of preferred stock to elect directors, directors may be removed only with cause by the holders of not less than two thirds (2/3) of all of our then-outstanding shares of the capital stock entitled to vote generally at an election of directors; |
| provide that, subject to the rights of any series of preferred stock to fill director vacancies, all director vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; |
| provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide advance notice in writing, and also specify requirements as to the form and content of a stockholders notice; |
| provide that Special Meetings of our stockholders may be called our Board pursuant to a resolution adopted by a majority of the total number of authorized directors; |
| that our Board will be divided into three classes of directors, with the classes to be as nearly equal as possible, and with the directors serving three-year terms, therefore making it more difficult for stockholders to change the composition of our board of directors; and |
| not provide for cumulative voting rights, therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose. |
The combination of these provisions will make it more difficult for the existing stockholders to replace the Board well as for another party to obtain control of the Company by replacing the Board. Because the Board has the power to retain and discharge its officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management. In addition, the authorization of undesignated preferred stock
makes it possible for the Board to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change our control. These provisions are intended to enhance the likelihood of continued stability in the composition of the Board and its policies and to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to reduce our vulnerability to hostile takeovers and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and may have the effect of delaying changes in our control or management. As a consequence, these provisions may also inhibit fluctuations in the market price of our stock.
Delaware Anti-Takeover Law
We have opted out of Section 203 of the DGCL. Section 203 of the DGCL prohibits a Delaware corporation from engaging in a business combination with an interested stockholder (i.e ., a stockholder owning 15% or more of companys voting stock) for three years following the time that the interested stockholder becomes such, subject to certain exceptions.
Limitations on Liability and Indemnification of Officers and Directors
The Certificate of Incorporation limits the liability of our directors to the fullest extent permitted by the DGCL, and the Bylaws provide that we will indemnify them to the fullest extent permitted by such law. We have entered and expect to continue to enter into agreements to indemnify our directors, executive officers and other employees as determined by our board of directors. Under the terms of such indemnification agreements, we are required to indemnify each of our directors and officers, to the fullest extent permitted by the laws of the state of Delaware, if the basis of the indemnitees involvement was by reason of the fact that the indemnitee is or was a director or officer of the Company or any of its subsidiaries or was serving at our request in an official capacity for another entity. We must indemnify our officers and directors against all reasonable fees, expenses, charges and other costs of any type or nature whatsoever, including any and all expenses and obligations paid or incurred in connection with investigating, defending, being a witness in, participating in (including on appeal), or preparing to defend, be a witness or participate in any completed, actual, pending or threatened action, suit, claim or proceeding, whether civil, criminal, administrative or investigative, or establishing or enforcing a right to indemnification under the indemnification agreement. The indemnification agreements also require us, if so requested, to advance within 30 days of such request all reasonable fees, expenses, charges and other costs that such director or officer incurred, provided that such person will return any such advance if it is ultimately determined that such person is not entitled to indemnification by us. Any claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.
Exclusive Jurisdiction of Certain Actions
The Bylaws require, to the fullest extent permitted by law, unless we consent in writing to the selection of an alternative forum, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty, actions asserting a claim arising pursuant to any provision of the DGCL or the Certificate of Incorporation or the Bylaws, actions to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws and actions asserting a claim against us governed by the internal affairs doctrine may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholders counsel. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers.
In addition, the Bylaws require that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for resolving any action asserting a claim arising under the Securities Act.
Listing of Securities
The Common Stock and Public Warrants are listed on the Nasdaq Global Market under the symbols CRXT and CRXTW, respectively.
Transfer Agent and Warrant Agent
The transfer agent for the Common Stock and warrant agent for the Public Warrants and Placement Warrants is Continental Stock Transfer & Trust Company.
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statement (No. 333-261245) on Form S-8 of Clarus Therapeutics Holdings, Inc. of our report dated March 31, 2022 relating to the consolidated financial statements of Clarus Therapeutics Holdings, Inc., appearing in this Annual Report on Form 10-K of Clarus Therapeutics Holdings, Inc. for the year ended December 31, 2021.
/s/ RSM US LLP
Chicago, Illinois
March 31, 2022
EXHIBIT 31.1
CERTIFICATION
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert E. Dudley, certify that:
1. | I have reviewed this Annual Report on Form 10-K of Clarus Therapeutics Holdings, 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 registrants 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 our 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 our 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 registrants disclosure controls and procedures and presented in this report our 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 registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants 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 registrants 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 registrants internal controls over financial reporting. |
Date: March 31, 2022 | By: | /s/ Robert E. Dudley | ||||
Robert E. Dudley | ||||||
Chief Executive Officer | ||||||
(Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard Peterson, certify that:
1. | I have reviewed this Annual Report on Form 10-K of Clarus Therapeutics Holdings, 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 registrants 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 our 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 our 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 registrants disclosure controls and procedures and presented in this report our 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 registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants 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 registrants 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 registrants internal controls over financial reporting. |
Date: March 31, 2022 | By: | /s/ Richard Peterson | ||||
Richard Peterson | ||||||
Chief Financial Officer | ||||||
(Principal Financial and Accounting Officer) |
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 Annual Report of Clarus Therapeutics Holdings, Inc. (the Company) on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Robert E. Dudley, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my 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: March 31, 2022 |
/s/ Robert E. Dudley |
Name: Robert E. Dudley |
Title: Chief Executive Officer |
(Principal Executive Officer) |
EXHIBIT 32.2
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 Annual Report of Clarus Therapeutics Holdings, Inc. (the Company) on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Richard Peterson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my 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: March 31, 2022 |
/s/ Richard Peterson |
Name: Richard Peterson |
Title: Chief Financial Officer |
(Principal Financial and Accounting Officer) |