Note 7 - Commitments and Contingencies

6 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note 7. Commitments and contingencies

Leases

On February 8, 2023, the Company entered into a lease for a 5,281 square foot office space at 3 Mountainview Road, Warren, New Jersey. This lease expires on February 28, 2028. The current monthly rent at this location is $8,801.67. Pursuant to the terms of the lease, the Company has an option to terminate the lease effective as of the completion of the thirty-seventh full calendar month of the lease term, provided that certain conditions are met.

On March 10, 2021, the Company entered into a lease agreement with SIG 110 LLC with respect to a 3,127 square foot office space at 110 Allen Road, Suite 401, Basking Ridge, New Jersey. Pursuant to the terms of the lease agreement, the term was for twenty-four (24) months and expired on March 31, 2023. In connection with the lease, the Company paid a security deposit of $13,000, which is included in deposits on the accompanying condensed consolidated balance sheet as of June 30, 2023.

In connection with the Merger of BioPharmX, the Company acquired a lease and corresponding sublease for the BioPharmX facility in San Jose, California. The sublease is to be used for general office and research laboratory purposes, has an effective date of February 1, 2020, and has a lease term of 4 years which expires on December 30, 2023. The lease expense was significantly reduced by the payments received in connection with the sublease. The lessee defaulted on their lease obligation in the fourth quarter of 2022 due to significant financial difficulties. The Company was working with the landlord to attempt to resolve the situation, but during the three and six months periods ended June 30, 2023 no payments were made by the sublessee.  The sublessee went into liquidation during the three months ended June 30, 2023.  As a result, at June 30, 2023, the Company recorded an impairment charge of $157,421 for the right of use asset related to this location, as there were no future tenants immediately available that could assume the space and there was no longer any future value of the location to the Company due to the lack of sublease income.  

The components of lease expense were as follows:

	Three months ended		Six Months Ended
	June 30, 2023
Operating leases:
Operating lease cost	$	109,627	$	209,523
Variable lease cost		32,968		56,922
Net rent expense	$	142,595	$	266,445

	Three months ended			Six Months Ended
	June 30, 2022
Operating leases:
Operating lease cost	$	99,142		$	284,415
Variable lease cost		24,948			77,099
Operating lease expense	$	124,090		$	361,514
Lease income - sub lease		(106,435	)		(317,998	)
Net rent expense	$	17,655		$	43,516

Other information:

	Six months ended			Six months ended
	June 30, 2023			June 30, 2022
Operating cash flows - operating leases	$	208,369		$	98,448
Right-of-use assets obtained in exchange for operating lease liabilities	$	385,682		$	—
Weighted-average remaining lease term – operating leases		3.3			1.6
Weighted-average discount rate – operating leases		14.0	%		14.2	%

As of June 30, 2023, future minimum payments for the leases are as follows:

	Operating
	Leases
Remaining Months in Year Ending December 31, 2023	$	224,044
Year Ended December 31, 2024		107,820
Year Ended December 31, 2025		110,461
Year Ended December 31, 2026		113,101
Year Ended December 31, 2027		115,742
Thereafter		19,364
Total	$	690,532
Less: present value discount		(145,403	)
Operating lease liabilities	$	545,129

Litigation

The Company is not currently a party to any legal or governmental regulatory proceedings, nor is management aware of any pending or threatened legal or government regulatory proceedings proposed to be initiated against the Company that would have a material adverse effect on the Company’s business, financial condition or operating results.

From time to time, the Company could become involved in disputes and various litigation matters that arise in the normal course of business.  These may include disputes and lawsuits related to intellectual property, licensing, contract law and employee relations matters. Periodically, the Company reviews the status of significant matters, if any exist, and assess its potential financial exposure.  If the potential loss from any claim or legal claim is considered probable and the amount can be estimated, the Company accrues a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict; therefore, accruals are based on the best information available at the time.  As additional information becomes available, the Company reassesses the potential liability related to pending claims and litigation.