Commitments and Contingencies
|9 Months Ended
Sep. 30, 2022
|Commitments and Contingencies Disclosure [Abstract]
|Commitments and Contingencies
7. Commitments and Contingencies
Additional Consideration-NTI Acquisition
In connection with the Company’s acquisition of NTI in May of 2020, the Company is obligated to pay the former sole shareholder of NTI contingent consideration based upon the exercise of certain of the Company’s outstanding warrants as follows: (i) twenty percent (20%) of the cash proceeds received by the Company upon exercise of the Company’s warrants carrying an exercise price of $0.75 and $0.90 and (ii) forty-five percent (45%) of the cash proceeds received by the Company upon exercise of the Company’s warrants carrying an exercise price of $1.00, in each case, for so long as the warrants remain outstanding. The Company’s previously issued warrants carrying an exercise price of $0.75 expired by their terms and as a result, no additional consideration will be due to the former sole shareholder of NTI relating to these warrants.
During the three months ended March 31, 2021, 1.00 per share and (ii) at an exercise price of $0.90 per share. See Note 9. Shareholders’ Equity. warrants were exercised as follows: (i) shares at an exercise price of $
As a result of the warrant exercises in 2021, the Company paid $542,263 of additional consideration to the sole former shareholder of NTI. The additional consideration payment is included in research and development expenses.
During the three months ended September 30, 2022, no warrants were exercised that resulted in the payment of additional consideration to the sole former shareholder of NTI.
Through NTI, the Company is a party to a Patent License and Biological Materials License Agreement (the “NIH License Agreement” or “NIH License”), dated March 23, 2020, with the United States Department of Health and Human Services (the “HHS”), as represented by the National Institute of Allergy and Infectious Diseases (“NIAID”), an Institute within the National Institutes of Health (“NIH”). Under the terms of the NIH License Agreement, we hold a nonexclusive, worldwide license to certain specified patent rights (including patent applications, provisional patent applications and Patent Cooperation Treaty (“PCT”) patent applications) and biological materials relating to the use of pre-fusion coronavirus spike proteins to exploit products (“Licensed Products”) and practice processes (“Licensed Processes”) that are covered by the licensed patent rights and biological materials for the purpose of developing and commercializing a vaccine product candidate for SARS-CoV-2.
Under the terms of the NIH License Agreement, the NIAID is entitled to receive a non-creditable, nonrefundable upfront license issue royalty of $30,000 and reimbursement of $11,739 for our pro rata share of the NIAID’s past and future patent prosecution-related expenses (which amounts have already been paid). Additionally, the NIAID is entitled to receive lump sum nonrefundable minimum annual royalties, which increase in the year after the first commercial sale of any Licensed Products or the practice of any Licensed Processes, as well as lump sum benchmark royalties following our completion of certain commercial development and sales-related benchmarks. The NIH is entitled to receive earned royalties on the annual net sales of Licensed Products and the practice of any Licensed Processes (subject to certain reductions), at certain low- to mid-single digit royalty rates, which rates vary based on the total amount of annual net sales and the geographic market in which those sales occur. We must provide regular written reports to the NIAID on the development status of and royalty payments relating to the Licensed Products and the Licensed Processes.
The NIH License Agreement will expire upon (a) twenty (20) years from the first commercial sale where no licensed patent rights exist or have ceased to exist or (b) the expiration of the last patent contained in the licensed patent rights, unless terminated earlier. None of the applications included in the NIH licensed patent rights have issued yet. The NIH may terminate or modify the license in the event of a material breach, including if the Company does not meet certain milestones by certain dates, or upon certain insolvency events that remain uncured following the date that is 90 days following written notice of such breach or insolvency event. The Company may terminate the license, or any portion thereof, at its sole discretion at any time upon 60 days written notice to the NIH.
On July 26, 2021, the Company entered into a non-exclusive Technology License Agreement (the “NRC License Agreement”) with the National Research Council of Canada (“NRC”) pursuant to which the NRC grants to the Company a license to use NRC’s inventions, patents, trade secrets, know-how, copyright, biological material, designs, and/or technical information created by or on behalf of the NRC (the “NRC Technologies”) relating to the derivatives of CHO 2353 TM Cell Line listed in the NRC License Agreement (the “Stable Cells”) to: (i) make, research, and develop SARS-CoV-2 spike protein manufactured by a Stable Cell (the “Drug Substance”) within Canada, Australia, the United Kingdom, the European Union and the United States (U.S.) (collectively the “Territory”); (ii) file regulatory approval, export and sell the final formulation of the Drug Substance (“Products”) and (iii) engage contractors to use the Stable Cells to make Drug Substance or Products on behalf of the Company to be used and sold, worldwide, by the Company. The NRC License Agreement was subsequently amended to include the Delta and Omicron variants. In addition, the Company subsequently amended the NRC License Agreement to broaden the non-exclusive field of use to include all diseases caused by coronaviruses and any genetic variants thereof.
As consideration for the grant of the license, the Company will pay to the NRC an annual (low five digits) license fee, with the initial portion of the fee covering the first three years of the license. Additionally, we will pay certain milestone payments (a) upon transfer of each Stable Cell listed in the Agreement and (b) with regard to each of the first three Products, (i) upon submission of the Investigational New Drug application (IND) related thereto, (ii) upon dosing the first patient in a Phase 1 or Phase 2 clinical trial, (iii) upon dosing the first patient in a Phase 3 clinical trial and (iv) upon first regulatory approval. Milestone payments range from the low five digits to high six digits. In addition, Oragenics will pay a low single-digit royalty to the NRC for the sale of Products, based on sales revenue, commencing after the first commercial sale.
Pursuant to the NRC License Agreement, the NRC is required to bear the responsibility and pay the costs to obtain and maintain patents related to the NRC Technologies in the U.S., Canada, Brazil, European Union, Japan, South Korea, Singapore, Australia, China, and India, and the NRC shall use reasonable efforts to obtain and maintain those patents. Additional countries may be requested by us, in which event, the NRC will file and maintain such patents, at our expense.
Pursuant to the NRC License Agreement, we are required to indemnify and hold the NRC and its employees and agents harmless from and against all liability and damages in connection with or arising out of all claims, demands, losses, damages, costs including solicitor and client costs, actions, suits or proceedings brought by any third party that are in any manner based upon, arising out of, related to, occasioned by, or attributable to the manufacturing, distribution, shipment, offering for sale, sale, or use of Products, services based on the NRC Technologies and product liability and infringement of intellectual property rights other than copyright, if any, licensed under the NRC License Agreement.
Unless terminated earlier, the NRC License Agreement will terminate twenty (20) years from the effective date of the NRC License Agreement. Either party may terminate the NRC License Agreement, by giving written notice to the other party, if the other party defaults or is in breach of the NRC License Agreement, provided that if the defaulting party cures the breach within 60 days after the notice is given, the NRC License Agreement shall continue in full force and effect. The NRC may terminate the NRC License Agreement if the Company becomes bankrupt, or insolvent, or has a receiver appointed to continue its operations, or passes a resolution for winding up. The NRC License Agreement contains customary confidentiality obligations.
In addition, in connection with the initiative to develop its vaccine, we also previously entered into a material transfer agreement with the NRC for SARS-CoV-2 trimeric spike protein Wuhan variant and SARS-CoV-2 trimeric spike protein South African variant to move forward with pre-clinical testing.
Lab Facility-Alachua. The Company’s Alachua facility is being leased from a real estate developer for a term of five years beginning in December 2019. Under the amended lease agreement, the rental payments range from $12,870 per month to $13,338 per month. The lease may be terminated prior to its stated expiration date upon the payment of nine-months rent.
Corporate Office – Tampa. In November of 2016, the Company entered into an amendment for the leased office space for corporate personnel located in Tampa, FL. The amended lease is for approximately 2,207 square feet. The lease period for the office space is for thirty-six months commencing on March 1, 2017. Lease payments range from $4,138 per month to $4,392 per month inclusive of insurance, taxes and utilities. The lease expired on February 29, 2020. In November of 2019, the Company entered into an amendment for the Tampa facility for a term of three years beginning in March of 2020. Under the amended lease agreement, the rental payments range from $4,524 per month to $4,800 per month.
In August of 2022, the Company entered into an amendment for the leased office space for corporate personnel located in Tampa, FL. The amended lease is for approximately 2,207 square feet. The lease period for the office space is for twelve months commencing on March 1, 2023. Lease payments are $4,944 per month inclusive of insurance, taxes and utilities. The lease expired on February 29, 2024.
Supplemental balance sheet information related to leases is as follows:
Maturities of operating lease liabilities are as follows:
The cost component of operating leases is as follows:
Supplemental cash flow information related to operating leases is as follows: