Commitments and Contingencies
|9 Months Ended
Sep. 30, 2022
|Commitments and Contingencies Disclosure [Abstract]
|Commitments and Contingencies
Note 8 – Commitments and Contingencies
The Company is involved in certain legal proceedings that arise from time to time in the ordinary course of our business. Except for income tax contingencies, we record accruals for contingencies to the extent that our management concludes that the occurrence is probable and that the related amounts of loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. Other than the item discussed below, there is no current or pending litigation of any significance with the exception of the matters that have arisen under, and are being handled in, the normal course of business.
On May 13, 2022, the Company made a claim against Michael Handelman, its former Chief Financial Officer, asserting that he misappropriated Company funds and shares of common stock, and failed to file the required SEC reports on Form 3 and Form 4 regarding each acquisition and disposition of Company’s common stock. The Company seeks monetary damages estimated at $370,000; the return of shares of common stock received without authorization and the disgorgement of any profits earned from the sale of those shares; a full accounting for all sums charged on the Company’s debit card, with payment to the Company for any charges that cannot be demonstrated to have a corporate purpose; an order directing Michael Handelman to make all filings required by Section 16(a) of the 1934 Act; an award of all sums and shares improperly issued to members of Handelman’s family; and an award of the Company’s attorneys’ fees and any forum and arbitration fees.
As a component of Mr. Handelman’s contract with the Company, disputes shall be fully addressed and finally resolved by binding arbitration conducted by the American Arbitration Association (AAA) in New York City, New York, in accordance with its National Employment Dispute Resolution rules. In connection with any such arbitration, the Company shall bear all costs not otherwise borne by a plaintiff in a court proceeding. The Company agrees that any decisions of the Arbitration Panel will be binding and enforceable in any state that the Company conducts the operation of its business. In accordance with California Labor Laws, the Company has designated Los Angeles, California as the venue for this arbitration. The Company is awaiting to receive a date of hearing from AAA.
Research and Development Agreements
Patent and License Agreements
2016 Exclusive Patent License Agreement
The Company is party to an exclusive worldwide license agreement with the Regents of the University of Minnesota, to further develop and commercialize cancer therapies using TriKE® technology developed by researchers at the UofMN to target NK cells to cancer. Under the terms of the 2016 agreement, the Company receives exclusive rights to conduct research and to develop, make, use, sell, and import TriKE® technology worldwide for the treatment of any disease, state, or condition in humans. The Company is responsible for obtaining all permits, licenses, authorizations, registrations, and regulatory approvals required or granted by any governmental authority anywhere in the world that is responsible for the regulation of products such as the TriKE® technology, including without limitation the FDA and the European Agency for the Evaluation of Medicinal Products in the European Union. Under the agreement, the UofMN received an upfront payment of $0.2 million, and an annual License Maintenance fee of $0.1 million beginning in 2021. The agreement also includes 4% royalty fees, (not to exceed 6%) under subsequent license agreements or amendments to this agreement or minimum annual royalty payments ranging from $0.25 million to $5.0 million. The agreement also includes certain performance milestone payments totaling $3.1 million, and one-time sales milestone payments of $1.0 million upon reaching $250 million in gross sales, and $5.0 million upon reaching $500 million dollars in cumulative gross sales of Licensed Products.
For the three months and nine months ended September 30, 2022, the Company incurred $90,000 and $313,000 of patent expense relating to the 2016 Exclusive Patent License Agreement. For the three months and nine months ended September 30, 2021 the Company incurred $67,000 and $339,000 of patent expense related to this agreement.
2021 Patent License Agreement
On March 26, 2021, the Company signed an agreement specific to the B7H3 targeted TriKE®. Under the agreement, the UofMN received an upfront license fee of $20,000 and will receive an annual License Maintenance fee of $5,000 beginning in 2022, 2.5% to 5% royalty fees, or minimum annual royalty payments of $0.25 million beginning in the year after the first commercial sales of Licensed Product, and $2.0 million beginning in the fifth year after the first commercial sale of such Licensed Product. The agreement also includes certain performance milestone payments totaling $3.1 million, and one-time sales milestone payments of $1.0 million upon reaching $250 million in gross sales, and $5.0 million upon reaching $500 million dollars in cumulative gross sales of Licensed Products. There is no double payment intended; if one of the milestone payments has been paid under the 2016 agreement no further payment is due for the corresponding milestone above.
For the three months and nine months ended September 30, 2022, the Company did not incur any research and development expense relating to 2021 Patent License Agreement.
On November 19, 2021 the Company entered into a sublease with a third party for approximately 4,500 square feet of office space located in Brisbane, California, at a monthly rent of $9,450, with a commencement date of January 1, 2022 and maturing on June 30, 2024. Additionally, on February 8, 2022, the Company entered into a lease of a photocopier, at a monthly rent of $415, which matures on February 7, 2025.
Rent expense related to these leases reflected on the Company’s condensed consolidated statements of operations totaled $29,000 and $87,000 for the three months and nine months ended September 30, 2022.
Other information related to leases and future minimum lease payments under non-cancellable operating leases were as follows:
Future minimum lease payments under non-cancellable operating leases were as follows: