12. Commitments and Contingencies

Additional Consideration−Noachis Terra Inc.(“NTI”) Acquisition.

In connection with the Company’s acquisition of NTI, 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 $45.00 and $54.00 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 $60.00, in each case, for so long as the warrants remain outstanding.

The Company’s previously issued warrants carrying an exercise price of $45.00 have expired by their terms. 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, 41,210 warrants were exercised as follows: (i) 6,000 shares at an exercise price of $60.00 per share and (ii) 35,210 at an exercise price of $54.00 per share.

As of the three-month period ended March 31, 2023, there are 32,033 warrants outstanding carrying an exercise price of $54.00 that expire on March 25, 2024. 

Inspirevax License

As consideration for the License Agreement with Inspirevax the Company will be subject to certain milestone payments related to various events including but not limited to: (a) the Company’s decision for an appropriate nasal spray device, (b) phase 2a and 2b/3 clinical trials and patient participation, (c) certain license applications submitted to the FDA; (d) certain filing events for marketing authorizations out of the United States; and (e) certain metrics for sales within the United States, Europe and other countries or regions. Additionally, the Company is required to pay to Inspirevax certain royalties based upon net sales and subject to revenue limitations at which time the royalty amount will decrease. The amount of the milestone obligations could range from $0.1 million to $7.25 million; the Company evaluates the likelihood of triggering any milestone obligations and records the liabilities on consolidated financial statements as they are incurred.

Unless terminated earlier, the License Agreement will terminate the later of (i) twenty (20) years from the first commercial sale of a product, (ii) the last date a product is covered by a valid patent claim, or (iii) the expiration of regulatory exclusivity. The Company may terminate the License Agreement, by giving thirty (30) days written notice to Inspirevax. Either party may terminate, if the other party defaults or is in breach of the License Agreement, provided that if the defaulting party cures the breach within sixty (60) days after the notice is given, the License Agreement shall continue in full force and effect. The License Agreement contains customary confidentiality obligations.

NIH License

Under the terms of the NIH License Agreement, 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 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.

NRC License

As consideration for the grant of the NRC 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 (already paid). 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 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 certain countries, additional countries may be requested by us at our expense. In addition, the Company is required to provide certain indemnifications to the NRC and its employees.

Unless terminated earlier, the License Agreement will terminate twenty (20) years from the effective date of the License Agreement. Either party may terminate the License Agreement, by giving written notice to the other party, if the other party defaults or is in breach of the License Agreement, provided that if the defaulting party cures the breach within 60 days after the notice is given, the License Agreement shall continue in full force and effect. The NRC may terminate the 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 License Agreement contains customary confidentiality obligations.