Legal Proceedings

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Legal Proceedings

9. Legal Proceedings:

The Company may from time to time become a party to various legal proceedings arising in the ordinary course of business. Except as discussed below, the Company is not the subject of any pending legal proceedings.

On July 9, 2019, Hedgepath, LLC (“HPLLC”), a significant minority stockholder of the Company and an investment vehicle associated with the Company’s former Executive Chairman, filed a civil action captioned Hedgepath, LLC v. Magrab, et al., C.A. No. 2019-0529-JTL, in the Delaware Court of Chancery (the “Action”) against the Company’s directors and President and Chief Executive Officer, and a former director (collectively the “Individual Defendants”). On September 27, 2019, the Individual Defendants and Mayne Pharma each filed a motion to dismiss the Action.

On December 3, 2019, HPLLC filed the Verified Amended and Supplemental Complaint. In the Complaint in the Action, purportedly brought directly and derivatively on behalf of the Company, HPLLC alleges claims for breach of fiduciary duty, waste, declaratory judgment, statutory violations, and dilution of stockholder equity, against the Individual Defendants and Mayne Pharma in connection with (i) the previously announced issuance of certain Company equity securities to Mayne Pharma on or about January 8, 2018, (ii) Mayne Pharma’s alleged influence over the timing and conduct of the previous clinical trial of SUBA-Itraconazole for the treatment of BCCNS, and (iii) previously announced amendments to the Supply and License Agreement, as amended (presently memorialized at the Third Amended SLA), between the Company and Mayne Pharma and certain transactions contemplated thereby. The Complaint also alleges claims for breach of fiduciary duty and fraudulent misrepresentation in connection with allegedly false and misleading statements included in Company press releases and filings with the SEC. The Complaint seeks unspecified damages from the defendant, and equitable and other relief. Legal costs associated directly with the Company as a nominal defendant were initially payable by the Company until certain retention amounts were reached. Such costs have been nominal through June 30, 2020 and are included in general and administrative expenses for the current period.

On January 10, 2020, the Individual Defendants and Mayne Pharma each filed a motion to dismiss the Complaint. A hearing on those motions was scheduled on March 26, 2020, but was postponed to June 2020 due to the coronavirus outbreak. On June 4, 2020, the Delaware Court of Chancery held a hearing at which the separate motions of the Individual Defendants and Mayne Pharma to dismiss the Complaint were presented. At the conclusion of the hearing, the Court issued an oral ruling in which it denied the motions. Accordingly, the Action is anticipated to proceed in the course typical for such litigation.

The Company believes the Action is legally and factually baseless, and the Individual Defendants intend to defend themselves vigorously.

Additionally, on March 23, 2020, a Stockholder Class Action Complaint was filed in the Delaware Court of Chancery by a Company stockholder and purported class representative Samuel P. Sears, commencing litigation captioned Sears v. Magrab et al., C.A. No. 2020-0215-JTL (the “Putative Class Action”). The plaintiff amended his complaint in May 2020. The defendants named in the Putative Class Action are identical to those named in the Action, with the exception that the Company is not a party to the litigation. The Putative Class Action asserts three direct breach of fiduciary duty claims-one against Mayne only, another against the Individual Defendants, and a third against all defendants-and the facts underlying those claims almost entirely mirror those alleged in the Action. On December 10, 2020, the Court of Chancery entered an order coordinating the Action and the Putative Class Action for purposes of litigations.

The Company believes the Putative Class Action is legally and factually baseless, and the Individual Defendants intend to defend themselves vigorously.