Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

Commitments and Contingencies

12 Months Ended

Dec. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Note 7 – Commitments and Contingencies

Litigation

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, the Company records 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. 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.

	A.	On May 11, 2023, our former interim Chief Executive Officer, Dr. Greg Berk, filed a complaint with the Occupational Safety and Health Administration alleging retaliation against him during his tenure at the Company for raising concerns related to the public disclosure of certain product timelines. The Company is vigorously defending this matter and believe it to be without merit. At this early stage in the proceedings, the Company is not able to determine the probability of the outcome of this matter or a range of reasonably expected losses, if any.

	B.	On May 13, 2022, the Company made an arbitration demand upon Michael Handelman, its former Chief Financial Officer, asserting that he breached his fiduciary duty by misappropriating Company funds and shares of common stock, among other things. The Company seeks among other relief, monetary damages estimated at $470,000; the return of 13,903 shares of our common stock received without authorization; 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 connection with any such arbitration, the Company shall bear all costs not otherwise borne by a plaintiff in a court proceeding.

		On March 20, 2024, the Arbitrator issued an interim award in favor of the Company in the amount of $409,000 and directed Mr. Handelman to return the disputed 13,903 shares of common stock . The Arbitrator also awarded the Company its attorney fees and forum costs in an amount to be determined at the time of the final award.

	C.	On May 24, 2023, TWF Global, LLC (“TWF”) filed a Complaint in the California Superior Court for the County of Los Angeles naming the Company as defendant. The Complaint alleges that TWF is the holder of two Convertible Promissory Notes (“Notes”) and that the Company did not deliver shares of common stock due on conversion in February 2021. TWF was seeking per diem liquidated damages based on the terms of alleged Notes. On July 14, 2023, the Company filed a motion to dismiss for improper forum because the terms of the Notes, as alleged, require disputes to be filed in New York state and federal courts. TWF voluntarily dismissed its Complaint before the California Superior Court of Los Angeles without prejudice. The Company subsequently filed a Summons and Complaint for Interpleader against TWF and Z One LLC before the Supreme Court of the State of New York County of New York, asking the Supreme Court to determine if the Company’s shares of common stock are properly registered to TWF or Z One LLC, as both of these entities have made conflicting demands for registration of the shares of common stock. On February 5, 2024, the Company filed a motion for entry of default against TWF, seeking an order directing the Company to register the shares of common stock in the name of Z-One and that the Company be released from all associated liability and claims. The Court has not yet ruled on the Company’s motion. The Company believes that any claims related to the Notes are without merit and will continue to defend vigorously against these claims.

Significant Agreements

Research and Development Agreements

The Company is a party to a scientific research agreement with the Regents of the University of Minnesota (“UofMN”), effective June 16, 2021. This scientific research agreement aims to work with the Company with three major goals in mind: (1) support the Company’s TriKE^®product development and GMP manufacturing efforts; (2) TriKE^® pharmacokinetics optimization in humans; and (3) investigation of the patient’s native NK cell population based on insights obtained from the analysis of the human data generated during our GTB-3550 clinical trial. The major deliverables proposed here are: (1) creation of IND enabling data for TriKE^®constructs in support of our product development and GMP manufacturing efforts; (2) TriKE^® platform drug delivery changes to allow transition to alternative drug delivery means and extended PK in humans; and (3) gain an increased understanding of changes in the patient’s native NK cell population as a result of TriKE^®therapy. Most studies will use TriKE^®DNA/amino acid sequences created by us under current UMN/GTB licensing terms. This agreement expired on June 30, 2023. The Company and UofMN are negotiating the terms of a new scientific research agreement and expect to finalize it in the first half of 2024.

For the years ended December 31, 2023 and 2022, the Company recorded an expense of $383,000 and $766,000 pursuant to the scientific research agreement for each respective period. The Company has recorded expense in the aggregate of $2.1 million as of December 31, 2023 pursuant to this agreement.

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, (“UofMN”), 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 $200,000, and an annual License Maintenance fee of $100,000 beginning in 2021. The agreement also includes 4% royalty fees, (not to exceed 6% under subsequence license agreements or amendments to this agreement or minimum annual royalty payments ranging from $250,000 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.

The Company did not incur any research and development expense relating to the 2016 Exclusive Patent License Agreement for the year ended December 31, 2023.

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 $250,000 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.

The Company did not incur any research and development expense relating to the 2021 Patent License Agreement for the years ended December 31, 2023 and 2022, respectively.

Employee Compensation

The following table summarizes the Company’s future financial commitment to certain employees pursuant to their respective employment agreements (in thousands):

Year ending	Amount
2024	$	1,015
2025		53
Total	$	1,068