Commitments and Contingencies

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies.

Commitments and Contingencies

Note 9. Commitments and Contingencies

Contractual Obligations

The Company has commitments of approximately $425,000 as of September 30, 2021 for several licensing agreements with consultants and universities. Additionally, the Company has collaboration and license agreements, which upon clinical or commercialization success, may require the payment of milestones of up to $7.9 million and/or royalties up to 6% of net sales of covered products, if and when achieved. However, there can be no assurance that clinical or commercialization success will occur.

The Company currently leases approximately 6,200 square feet of office space at 29 Emmons Drive, Suite B-10 in Princeton, New Jersey pursuant to a lease that expires in October 2022. This office space currently serves as the Company’s corporate headquarters, and both of the Company’s business segments (Specialized BioTherapeutics and Public Health Solutions), operate from this space. The rent for the first 10 months of 2020 was approximately $11,883 per month, or $23.00 per square foot, and then decreased to approximately $11,108 per month, or $21.50 per square foot, starting November 2020, which rate will continue for the remainder of the lease period.

In September 2014, the Company entered into an asset purchase agreement with Hy Biopharma Inc. (“Hy Biopharma”) pursuant to which the Company acquired certain intangible assets, properties and rights of Hy Biopharma related to the development of Hy BioPharma’s synthetic hypericin product. As consideration for the assets acquired, the Company paid $275,000 in cash and issued 184,912 shares of common stock with a fair value based on the Company’s stock price on the date of grant of $3.75 million. These amounts were charged to research and development expense during the third quarter of 2014 as the assets will be used in the

Company’s research and development activities and do not have alternative future use pursuant to generally accepted accounting principles in the U.S. In March 2020, the Company issued 1,956,182 shares of common stock to Hy Biopharma as payment for achieving a milestone: the Company determining the Phase 3 clinical trial of HyBryte™ to be successful in the treatment of CTCL. The number of shares of common stock issued to Hy Biopharma was calculated using an effective price of $2.56 per share, based upon a formula set forth in the purchase agreement.

Provided the sole remaining future success-oriented milestone is attained, the Company will be required to make an additional payment of $5.0 million, if and when achieved. Such payment will be payable in restricted securities of the Company provided such number of shares do not exceed 19.9% ownership of the Company’s outstanding stock. As of September 30, 2021, no other milestone or royalty payments have been paid or accrued.

In January 2020, the Company’s Board of Directors authorized the amendment of Dr. Schaber’s employment agreement to increase the number of shares of the Company’s common stock from 5,000 to 500,000 issuable to Dr. Schaber immediately prior to the completion of a transaction, or series or a combination of related transactions, negotiated by its Board of Directors whereby, directly or indirectly, a majority of its capital stock or a majority of its assets are transferred from the Company and/or its stockholders to a third party.

As a result of the above agreements, the Company has the following contractual obligations:

	Research and		Property and
Year	Development		Other Leases		Total
October 1 through December 31, 2021	$	25,000	$	33,325	$	58,325
2022		100,000		111,083		211,083
2023		100,000		—		100,000
2024		100,000		—		100,000
2025		100,000		—		100,000
Total	$	425,000	$	144,408	$	569,408

Contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. A liability is only recorded if management determines that it is both probable and reasonably estimable.

COVID-19

Based on the current outbreak of SARS-CoV-2, the pathogen responsible for COVID-19, which has already had an impact on financial markets, there could be additional repercussions to the Company’s operating business, including but not limited to, the sourcing of materials for product candidates, manufacture of supplies for preclinical and/or clinical studies, delays in clinical operations, which may include the availability or the continued availability of patients for trials due to such things as quarantines, conduct of patient monitoring and clinical trial data retrieval at investigational study sites.

The continued global spread of COVID-19 has affected the Company’s operations but did not have a material impact on its business, operating results, financial condition or cash flows as of and for the three and nine months ended September 30, 2021. In particular, due to delays by the third party commercial active pharmaceutical ingredient contract manufacturer of HyBryte™ the Company is unable to provide the pre-requisite amount of accrued stability data required to file its HyBryte™ NDA with the FDA by the first half of

2022. Therefore, the timeline for anticipated NDA filing with the FDA is being adjusted to the second half of 2022 with corresponding potential FDA approval adjusted to the second half of 2023.

The future impact of the outbreak is highly uncertain and cannot be predicted, and the Company cannot provide any assurance that the outbreak will not have a material adverse impact on the Company’s operations or future results or filings with regulatory health authorities. The extent of the impact to the Company, if any, will depend on future developments, including actions taken to contain the coronavirus.

Emergent BioSolutions Legal Proceedings

In July 2020, the Company filed a demand for arbitration against Emergent BioSolutions, Inc. (“Emergent”) and certain of its subsidiaries with the American Arbitration Association in Mercer County, New Jersey. The Company alleges in the arbitration various breaches of contracts and warranties as well as acts of fraud. Emergent has answered that demand for arbitration denying the allegations and asserting affirmative defenses (see Part II, Item 1 – Legal Proceeding).

The Company is seeking to recover damages in excess of $19 million from Emergent. While the Company intends to vigorously pursue this arbitration, the Company cannot offer any assurances that it will recover any damages from Emergent.

The Company has received invoices from Emergent related to the above matter. No accrual has been made for these invoices as management deems them invalid and not probable of being required to pay them based on the numerous breaches cited in the pending arbitration. These invoices total approximately $331,000.