Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

v3.22.1
Commitments and Contingencies
12 Months Ended
Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 9 – Commitments and Contingencies

 

1. 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 August 28, 2019, a complaint was filed in the Superior Court of California, County of Los Angeles, West Judicial District, Santa Monica Courthouse, Unlimited Civil Division by Jeffrey Lion and by Daniel Vallera, as individuals. The complaint was filed against GT Biopharma, Inc. and its subsidiary Oxis Biotech, Inc. The Plaintiffs allege breach of a license agreement between the Plaintiffs and the Company entered into on or about September 3, 2015. The Company filed an answer to the complaint denying many allegations and asserting affirmative defenses. The Company reached a settlement of the case and paid on March 4, 2022, $425,000 in full and final settlement of the claims (see Note 14). This amount was fully accrued at December 31, 2021 and 2020, respectively.

 

b. On March 3, 2021, a complaint was filed by Sheffield Properties in the superior Court of California, County of Ventura. The litigation arose from a commercial lease entered into by GT Biopharma, Inc. for office space in Westlake Village in California. In July, 2021 the Company entered into settlement agreement with Sheffield Properties and the payment in the settlement amount of $0.1 million was made on August 6, 2021.

 

2. Significant Agreements:

 

Research and Development Agreements

 

The Company is a party to a Scientific Research Agreement with the Regents of the University of Minnesota, effective June 16, 2021. This scientific research agreement has three major goals: (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. The term of this agreement shall expire on June 30, 2023.

 

The University of Minnesota shall use reasonable efforts to complete the project for a fixed sum of $2.1 million. An initial payment of $541,527 was paid on December 2, 2021, followed by a payment of $191,527 on December 29, 2021 for the quarterly period ending September 30, 2021. The second quarterly payment for the quarter ending December 31, 2021 was recorded in accounts payable at December 31, 2021. Five quarterly payments of $191,527 remain, and a final payment of $192,470 will be payable within thirty (30) days of receipt of the final report.

 

On October 5, 2020, GT Biopharma entered into a Master Services Agreement with a third-party product manufacturer to perform biologic development and manufacturing services on behalf of the Company. Associated with this, the Company has subsequently signed five Statements of Work for the research and development of products for use in clinical trials. At December 31, 2021, the Company’s commitments in relation to these Statements of Work and any related Change Orders totaled approximately $13.0 million, of which $7.5 million was incurred at that date and an additional $5.5 million is in process during fiscal year 2022.

 

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 $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 subsequence 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.

 

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.

 

Office Lease Agreement

 

On November 19, 2021 the Company entered into a sublease with Aimmune Therapeutics, Inc. for 4,500 square feet of office space located in Brisbane, CA having a commencement date of January 1, 2022 and maturing on June 30, 2024. The following table summarizes the Company’s future minimum lease payments related to this lease (in thousands):

 

Year ending   Amount  
2022   $ 113  
2023     117  
2026 and thereafter     60  
Total   $ 290  

 

3. 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  
2022   $ 1,756  
2023     1,293  
2024     1,012  
2025     377  
2026 and thereafter     -  
Total   $ 4,438