As filed with the Securities and Exchange Commission on September 29, 2023.

 

Registration No. 333-[*]

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

Kairos Pharma, Ltd.

(Exact name of registrant as specified in its charter)

 

 

Delaware		2834		46-2993314
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

 

 

Kairos Pharma, Ltd.

2355 Westwood Blvd., #139

Los Angeles CA 90064

(310) 948-2356

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

John S. Yu, M.D.

Chief Executive Officer

Kairos Pharma, Ltd.

2355 Westwood Blvd., #139

Los Angeles CA 90064

(310) 948-2356

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Megan Penick, Esq. Stephen A. Weiss, Esq. Michelman & Robinson, LLP 605 Third Avenue 30th Floor New York, New York 10158 Tel: (212) 730-7700

Spencer G. Feldman, Esq. Dakota J. Forsyth, Esq. Olshan Frome Wolosky LLP 1325 Avenue of the Americas 15th Floor New York, New York 10019 Tel: (212) 451-2300

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☐

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☒		Smaller reporting company	☒
			Emerging growth company	☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Prospectus (Subject to Completion)

Dated September 29, 2023

 

Shares

 

 

Kairos Pharma, Ltd.

 

Common Stock

 

This is an initial public offering of shares of common stock of Kairos Pharma, Ltd. We are offering _____________ shares of our common stock, par value $___ per share.

 

We currently expect that the initial public offering price will be between $[*] and $[*] per share of common stock.

 

Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock for trading on The Nasdaq Capital Market, or Nasdaq, under the symbol “KAPA.” The closing of this offering is contingent on Nasdaq’s approval of our listing application, and there is no assurance that our common stock will be approved for listing on Nasdaq.

 

We are an “emerging growth company” as defined under the federal securities laws and, as such, will be subject to reduced public company reporting requirements. See “Prospectus Summary — Implications of Being an Emerging Growth Company” for additional information.

 

Investing in our common stock involves a high degree of risk. You should carefully consider the risk factors beginning on page 10 of this prospectus prior to making a decision to invest in our common stock.

 

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

			Per Share				Total
Initial public offering price		$				$
Underwriting discounts and commissions(1)		$				$
Proceeds to us, before expenses		$				$

 

(1)

We have agreed to pay the underwriters a cash fee equal to 7.0% of the aggregate gross proceeds from the sale of the common stock. The underwriters will also be entitled to warrants to purchase up to 7.0% of the aggregate number of shares of our common stock sold in this offering and a 1% non-accountable expense allowance, which amount is not included above. We have also agreed to reimburse the underwriters for certain expenses incurred by them. See “Underwriting” beginning on page 131 of this prospectus for more information about the compensation payable to the underwriters.

 

We have granted the underwriters an option for a period of 45 days to purchase up to an additional         shares of common stock from us at the initial public offering price less underwriting discounts and commissions to cover over-allotments, if any. If the underwriters exercise the option in full, the total underwriting discounts and commissions payable by us will be $      , and the total proceeds to us, before expenses, will be $           .

 

Delivery of the shares is expected to be made on or about           , 2023.

 

Boustead Securities, LLC

 

Prospectus dated            , 2023

 

 

TABLE OF CONTENTS

 

	Page
About This Prospectus	i
Prospectus Summary	1
Risk Factors	10
Special Note Regarding Forward-looking Statements	69
Use of Proceeds	70
Dividend Policy	71
Capitalization	72
Dilution	73
Management’s Discussion and Analysis of Financial Condition and Results of Operations	75
Business	82
Management	112
Executive Compensation	117
Certain Relationships and Related Person Transactions	120
Principal Stockholders	121
Description of Capital Stock	122
Shares Eligible for Future Sale	126
Certain Material U.S. Federal Income Tax Consequences to Non-U.S. Holders of Our Common Stock	128
Underwriting	131
Legal Matters	135
Experts	135
Where You Can Find Additional Information	135
Index to Financial Statements	F-1

 

ABOUT THIS PROSPECTUS

 

Neither we nor the underwriters have authorized anyone to provide you any information or make any representations other than those contained in this prospectus or in any free writing prospectuses prepared by or on behalf of us or to which we have referred you. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of shares of our common stock. Our business, financial condition, results of operations, and prospects may have changed since that date.

 

For investors outside of the United States: we have not, and the underwriters have not, done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside of the United States.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RISK FACTORS

 

Investing in our common stock involves a high degree of risk. Before you invest in our common stock, you should carefully consider the risks described below together with all of the other information contained in this prospectus, including our audited financial statements and unaudited condensed financial statements and the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations, and growth prospects. Unless otherwise indicated, references in these risk factors to our business being harmed will include harm to our business, reputation, financial condition, results of operations, and prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

 

Risks Related to Our Financial Position and Capital Needs

 

We are a small development-stage biopharmaceutical company with a limited operating history and no products approved for commercial sale. We have incurred significant losses since our inception. We expect to incur losses over the next several years and may never achieve or maintain profitability.

 

We are a small development-stage biopharmaceutical company with a limited operating history and no products approved for commercial sale. There can be no assurance that we will, or if we do, when we will, obtain approval to commercialize our products and potentially generate revenue. We have incurred significant losses since our inception and we expect to incur losses over the next several years and may never achieve or maintain profitability. Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our common stock and could impair our ability to raise capital, expand our business, maintain our research and development efforts, or continue our operations. A decline in the value of our common stock could also cause you to lose all or part of your investment.

 

We require substantial additional funding to meet our financial needs and to pursue our business objectives. If we are unable to raise capital when needed, we could be forced to delay, reduce, or altogether cease our current and future product development programs or future commercialization efforts.

 

We believe that the net proceeds from this offering will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months. However, we will need to obtain substantial additional funding in connection with our continuing operations and planned activities. Our future capital requirements will depend on many factors, including:

 

	●	the timing, progress, and results of our ongoing and future clinical trials of our current in-development products;
	●	the costs, timing, and outcome of regulatory review of our current in-development products and any of our future product candidates;
	●	the scope, progress, results, and costs of identifying, obtaining, and conducting preclinical development, laboratory testing, and clinical trials of future product candidates that we may pursue;
	●	the cost and timetable of manufacturing processes for development, clinical trials, and potential commercial use;
	●	the number and development requirements of future product candidates that we may pursue;
	●	the amount of funding that we receive under our non-dilutive funding opportunities, including government awards and government awards, if any, that we may apply for;
	●	the costs and timing of future commercialization activities, including product manufacturing, marketing, sales, and distribution, for our current in-development products or any future product candidates that receive marketing approval;
	●	the pricing and revenue, if any, received from commercial sales of our current in-development products or any future product candidates that receive marketing approval;
	●	the costs and timing of preparing, filing, and prosecuting patent applications, maintaining, and enforcing our intellectual property rights, and defending any intellectual property-related claims;
	●	the costs of operating as a public company; and
	●	the extent to which we acquire or in-license other product candidates and technologies.

 

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive, and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. In addition, our current in-development products and any of our future product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be commercially available for several years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or altogether cease our research and development programs or future commercialization efforts.

 

 

Raising additional capital will likely cause dilution to our stockholders, including purchasers of shares of our common stock in this offering, restrict our operations, or require us to relinquish rights to our current in-development products or technologies or any of our future product candidates.

 

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings and debt financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.

 

If we raise additional funds through collaborations, strategic alliances, or marketing, distribution, or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs, or our current in-development products or any future product candidates, or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our development of our current in-development products or any future product candidate or future commercialization efforts or grant rights to a third party to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

 

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

 

We have limited resources and limited operating history. There is only a limited basis upon which to evaluate our prospects for achieving our intended business objectives. We have not yet demonstrated the ability to successfully complete a large-scale, pivotal clinical trial, obtain marketing approval, manufacture a commercial scale product, arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing pharmaceutical products.

 

In addition, as a business with a limited operating history, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will eventually need to transition from a company with a research focus to a company capable of supporting commercial activities. We may not be successful in such a transition and, as a result, our business may be adversely affected.

 

Because of the numerous risks and uncertainties associated with drug development, we are unable to accurately predict the timing or amount of expenses or when, or if, we will be able to achieve profitability. If we are required by regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in the initiation and completion of our clinical trials or the development of our current in-development products or any of our future product candidates, our expenses could increase.

 

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or have a greater likelihood of success.

 

Because we have limited financial and management resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial drugs or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing, or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

 

The report of our independent registered public accounting firm included a “going concern” explanatory paragraph.

 

The report of our independent registered public accounting firm on our financial statements as of and for the years ended December 31, 2021 and 2022 included an explanatory paragraph indicating that there was substantial doubt about our ability to continue as a going concern. If we are unable to raise additional capital as and when needed, our business, financial condition and results of operations will be materially and adversely affected, and we may be forced to delay our development efforts, limit our activities and reduce research and development costs. If we are unable to continue as a going concern, we may have to liquidate our assets, and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements. The inclusion of a going concern explanatory paragraph by our independent registered public accounting firm, our lack of cash resources and our potential inability to continue as a going concern may materially adversely affect our share price and our ability to raise new capital, enter into licensing and collaboration arrangements or other contractual relationships with third parties and otherwise execute our development strategy.

 

 

Risks Related to Development, Clinical Testing, Manufacturing and Regulatory Approval

 

We are heavily dependent on the success of our initial drug candidates, which are still under clinical development, and if any of these drugs does not receive regulatory approval or is not successfully commercialized, our business may be harmed.

 

We do not have any products that have gained regulatory approval by the FDA or comparable foreign regulatory authorities. As a result, our business is dependent on our ability to successfully complete clinical development of, obtain regulatory approval for, and, if approved, successfully commercialize one or more drug therapies in a timely manner. We cannot commercialize our drug therapies in the United States without first obtaining regulatory approval from the FDA; similarly, we cannot commercialize our drug therapies outside of the United States without obtaining regulatory approval from comparable foreign regulatory authorities. Before obtaining regulatory approvals for the commercial sale of our drug therapies for a target indication, we must demonstrate with substantial evidence gathered in preclinical studies and clinical trials, generally including two adequate and well-controlled clinical trials, and, with respect to approval in the United States, to the satisfaction of the FDA, that a drug candidate is safe and effective for use for that target indication and that the manufacturing facilities, processes and controls are adequate. Even if we were to successfully obtain approval of one of our drug therapies from the FDA or comparable foreign regulatory authorities, any approval might contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, or may be subject to burdensome post-approval study or risk management requirements. If we are unable to obtain regulatory approval for one or more of our drug therapies in one or more jurisdictions, or any approval contains significant limitations, we may not be able to obtain sufficient funding or generate sufficient revenue to continue the development of any other candidate that we may in-license, develop or acquire in the future. Furthermore, even if we obtain regulatory approval for one of our drug therapies, we will still need to develop a commercial organization, establish commercially viable pricing and obtain approval for adequate reimbursement from third-party and government payors. If we are unable to successfully commercialize one or more of our drug therapies, we may not be able to earn sufficient revenue to continue our business.

 

If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize our current in-development products or our future product candidates, and our ability to generate revenue will be materially impaired.

 

Our current in-development products and our future product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, record-keeping, labeling, storage, approval, advertising, promotion, sale, and distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by comparable foreign regulatory authorities, with regulations differing from country to country. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate. We currently do not have any products approved for sale in any jurisdiction. We as a company only have limited experience in filing and supporting the applications necessary to gain marketing approvals and may rely on third-party contract research organizations to assist us in this process.

 

The time required to obtain approval, if any, by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities, government budget, and funding levels and statutory, regulatory, and policy changes. Average review times at the FDA have fluctuated in recent years, and disruptions at the FDA and other agencies may slow the time necessary for new drugs to be reviewed and/or approved. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, including the FDA, have had to furlough nonessential employees and stop routine activities. Events like this could significantly impact the ability of the FDA to timely review and process our regulatory submissions.

 

 

Approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development. For instance, recent changes to leadership, enhanced focus on countermeasures related to the COVID-19 pandemic, and the reorganization and rededication of critical resources, at the FDA and within similar governmental health authorities across the world, may impact the ability of new products and services from being developed or commercialized in a timely manner. Regulations and requirements vary among jurisdictions, including in Europe and Japan. We have not obtained regulatory approval for any product candidate, and it is possible that none of our current in-development products or any product candidates we may seek to develop in the future will ever obtain regulatory approval. We are not permitted to market any product candidate in the United States until we receive regulatory approval of an NDA from the FDA.

 

In order to obtain approval to commercialize a product candidate in the United States or abroad, we or our collaborators must demonstrate to the satisfaction of the FDA or foreign regulatory agencies, that such product candidates are safe and effective for their intended uses. Results from nonclinical studies and clinical trials can be interpreted in different ways. Even if we believe that the nonclinical or clinical data for a product candidate is promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities. The FDA may also require us to conduct additional nonclinical studies or clinical trials for product candidates either prior to or post-approval, and it may otherwise object to elements of our clinical development program.

 

We have not submitted a marketing application for any product candidates in any country or region. Any marketing application must include extensive preclinical, nonclinical, and clinical data and supporting information to establish the product candidate’s safety and efficacy for each desired indication. The marketing application(s) must also include significant information regarding the chemistry, manufacturing, and controls for the product candidate. Obtaining marketing authorization is a lengthy, expensive, and uncertain process. The FDA, EMA, PMDA, TGA, and other comparable regulatory authorities have substantial discretion in the review and approval process and may refuse to accept for filing any application or may decide that our data are insufficient for approval and require additional nonclinical, clinical, or other studies. Foreign regulatory authorities have differing requirements for approval of drugs with which we must comply prior to marketing. There can be no assurance that any foreign regulatory authorities will accept FDA approval as sufficient to support approval in that country. Obtaining marketing approval for marketing of a product candidate in one country does not ensure that we will be able to obtain marketing approval in other countries, but the failure to obtain marketing approval in one jurisdiction could negatively affect our ability to obtain marketing approval in other jurisdictions. The FDA or any foreign regulatory bodies can delay, limit or deny approval of our current in-development products or other future product candidates or require us to conduct additional nonclinical or clinical testing or abandon a program for many reasons, including:

 

	●	disagreement with the design or implementation of our clinical trials;
	●	negative or ambiguous results from our clinical trials or results that may not meet the level of statistical significance required by the FDA or comparable foreign regulatory agencies for approval (for example, otherwise positive clinical results may be called into question if patient reported outcomes introduce ambiguity due to factors such as co-morbidities and other underlying patient issues);
	●	serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using drugs similar to our product candidates;
	●	our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory body that our product candidates are safe and effective for the proposed indication;
	●	disagreement with the interpretation of data from nonclinical studies or clinical trials;
	●	our inability to demonstrate the clinical and other benefits of our product candidates outweigh any safety or other perceived risks;
	●	requirements for additional nonclinical studies or clinical trials;
	●	disagreement regarding the formulation, labeling, and/or the specifications we propose for our product candidates; or
	●	changes in a policies, requirements, or regulations rendering our clinical data insufficient for approval.

 

 

Of the large number of drugs in development, only a small percentage complete the FDA or foreign regulatory approval processes and are successfully commercialized. The lengthy review process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval, which would significantly harm our business, financial condition, results of operations, and prospects.

 

Even if we eventually receive approval of an NDA or foreign marketing application for our product candidates, the FDA, or the applicable foreign regulatory agency may grant approval contingent on the performance of costly additional clinical trials, often referred to as Phase 4 clinical trials, and the FDA may require the implementation of a REMS, which may be required to ensure safe use of the drug after approval. The FDA or the applicable foreign regulatory agency also may approve a product candidate for a more limited indication or patient population than we originally requested, and the FDA or applicable foreign regulatory agency may not approve the labeling that we believe is necessary or desirable for the successful commercialization of a product candidate. Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent commercialization of that product candidate and would materially adversely impact our business and prospects.

 

Preclinical development is uncertain. Our preclinical programs may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or commercialize these programs on a timely basis or at all.

 

Most of our product candidates are still in the preclinical stage, and the risk of failure for such product candidates is high. In order to obtain FDA approval to market a new biologic we must demonstrate proof of safety, purity and potency, including efficacy, in humans. To meet these requirements we will have to conduct adequate and well-controlled clinical trials. Before we can commence clinical trials for a product candidate, we must complete extensive preclinical testing and studies that support our planned clinical trials in humans. We cannot be certain of the timely completion or outcome of our preclinical testing and studies and cannot predict if the FDA will accept our proposed clinical programs or if the outcome of our preclinical testing and studies will ultimately support the further development of our current or future product candidates. As a result, we cannot be sure that we will be able to submit INDs or similar applications for our preclinical programs on the timelines we expect, if at all, and we cannot be sure that submission of INDs or similar applications will result in the FDA or other regulatory authorities allowing clinical trials to begin.

 

Conducting preclinical testing is a lengthy, time-consuming and expensive process. The length of time of such testing may vary substantially according to the type, complexity and novelty of the program, and often can be several years or more per program. Delays associated with programs for which we are conducting preclinical testing and studies may cause us to incur additional operating expenses. The commencement and rate of completion of preclinical studies and clinical trials for a product candidate may be delayed by many factors, including but not limited to: an inability to generate sufficient preclinical or other in vivo or in vitro data to support the initiation of clinical studies; delays in reaching a consensus with regulatory agencies on study design; any setbacks or delays on account of the COVID-19 pandemic; and the FDA or foreign regulatory authorities not permitting the reliance on preclinical or other data from published scientific literature.

 

Clinical trials are expensive, time-consuming and difficult to design and implement, and involve an uncertain outcome.

 

To obtain the requisite regulatory approvals to commercialize any of our product candidates, we must demonstrate through extensive preclinical studies and clinical trials that our product candidates are safe, pure and potent in humans. Clinical testing is expensive and can take many years to complete, and its outcome is highly uncertain. Failure can occur at any time during the clinical trial process and our future clinical trial results may not be successful. We may also experience numerous unforeseen events during our clinical trials that could delay or prevent our ability to receive marketing approval or commercialize the product candidates we develop.

 

 

Failure can occur at any time during the clinical trial process. Because the results of preclinical studies and early clinical trials are not necessarily predictive of future results, our drug therapies may not have favorable results in later preclinical and clinical studies or receive regulatory approval. We may experience delays in initiating and completing any clinical trials that we intend to conduct, and we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, or at all. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of marketing approval of our product candidates. Clinical trials can be delayed for a variety of reasons, including delays related to:

 

	●	the FDA or other regulatory authorities may change the requirements for approval even after they have reviewed and commented on the design for our clinical trials;
	●	the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our clinical studies;
	●	obtaining regulatory approval to commence and/or continue to conduct a trial, including but not limited to obtaining IND approval by FDA;
	●	reaching an agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
	●	obtaining Institutional Review Board, or IRB, approval at each site, or Independent Ethics Committee, or IEC, approval at sites outside the United States;
	●	recruiting suitable patients to participate in a trial in a timely manner and in sufficient numbers;
	●	having patients complete a trial or return for post-treatment follow-up;
	●	imposition of a clinical hold by regulatory authorities, or IRBs, including as a result of unforeseen safety issues or side effects or failure of trial sites to adhere to regulatory requirements or follow trial protocols;
	●	clinical sites deviating from trial protocol, failing to adequately enroll study subjects, committing fraud or other violations of regulatory requirements, or dropping out of a trial, which can render data from that site unusable in support of regulatory approval;
	●	addressing patient safety concerns that arise during the course of a trial;
	●	adding a sufficient number of clinical trial sites; or
	●	manufacturing sufficient quantities of our drug therapies for use in clinical trials.

 

We could also encounter delays if a clinical trial is suspended or terminated by us, the IRBs or IECs of the institutions in which such trials are being conducted, the Data Safety Monitoring Board, or DSMB, for such trial or the FDA or other regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. Furthermore, we rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials and, while we have agreements governing their committed activities, we have limited influence over their actual performance, as described in “— Risks Related to Our Dependence on Third Parties.”

 

Treatment of cancer patients with our oncology product candidates may be used in combination with other cancer drugs, such as other immuno-oncology agents, monoclonal antibodies or other protein-based drugs or small molecule anti-cancer agent such as targeted agents or chemotherapy, which can cause side effects or adverse events that are unrelated to our product candidate but may still impact the success of our clinical trials. Additionally, our product candidates could potentially cause adverse events. The inclusion of critically ill patients in our clinical trials may result in deaths or other adverse medical events due to other therapies or medications that such patients may be using. As described above, any of these events could prevent us from obtaining regulatory approval or achieving or maintaining market acceptance of our product candidates and impair our ability to commercialize our products. Because all of our product candidates are derived from our platform technologies, a clinical failure of one of our product candidates may also increase the actual or perceived likelihood that our other product candidates will experience similar failures.

 

Of the large number of products in development, only a small percentage successfully complete the FDA or comparable foreign regulatory authorities’ approval processes and are commercialized. The lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market our product candidates, which would significantly harm our business, financial condition, results of operations and prospects.

 

 

Even if we eventually complete clinical testing and receive approval of a marketing application for our product candidates, the FDA or the comparable foreign regulatory authorities may grant approval contingent on the performance of costly additional clinical trials, including post-market clinical trials. The FDA or the comparable foreign regulatory authorities also may approve a product candidate for a more limited indication or patient population than we originally request, and the FDA or comparable foreign regulatory authorities may not approve the labeling that we believe is necessary or desirable for the successful commercialization of a product candidate. Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent commercialization of that product candidate and would adversely impact our business and prospects.

 

In addition, the FDA or comparable foreign regulatory authorities may change their policies, adopt additional regulations or revise existing regulations or take other actions, which may prevent or delay approval of our future product candidates under development on a timely basis. Such policy or regulatory changes could impose additional requirements upon us that could delay our ability to obtain approvals, increase the costs of compliance or restrict our ability to maintain any marketing authorizations we may have obtained.

 

If we experience delays in the completion, or termination, of any clinical trial of our product candidates, including as a result of the COVID-19 pandemic, the commercial prospects of our product candidates will be harmed and our ability to generate product revenues from any of these product candidates will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down the development and approval process for our product candidates and jeopardize our ability to commence product sales and generate revenues. Significant clinical trial delays could also allow our competitors to bring products to market before we do or shorten any periods during which we have the exclusive right to commercialize our product candidates.

 

Future legislation, and/or regulations and policies adopted by the FDA, the EMA, or comparable regulatory authorities, may increase the time and cost required for us to conduct and complete clinical trials of our current in-development products or other future product candidates.

 

The FDA has established regulations to govern the drug development and approval process, as have foreign regulatory authorities. The policies of the FDA and other regulatory authorities may change and additional laws may be enacted or government regulations may be promulgated that could prevent, limit, delay, or alternatively accelerate regulatory review of our current in-development products or other future product candidates. Further, disruptions at the FDA and other agencies may prolong the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

 

Our product candidates are based on novel technologies, which make it difficult to predict the timing, results and cost of product candidate development and likelihood of obtaining regulatory approval.

 

We have not yet succeeded and may not succeed in demonstrating efficacy and safety for any product candidates in clinical trials or in obtaining marketing approval thereafter and use of our platform technologies may not ever result in marketable products. We may also experience delays in developing a sustainable, reproducible, and scalable manufacturing process or transferring that process to commercial partners or establishing our own commercial manufacturing capabilities, which may prevent us from completing our clinical trials or commercializing any products on a timely or profitable basis, if at all.

 

 

Serious adverse events, undesirable side effects or other unexpected properties of our product candidates may be identified during development or after approval, which could lead to the discontinuation of our clinical development programs, refusal by regulatory authorities to approve our product candidates or, if discovered following marketing approval, revocation of marketing authorizations or limitations on the use of our product candidates thereby limiting the commercial potential of such product candidate.

 

As we develop our drug therapies and initiate clinical trials of our additional drug therapies, serious adverse events, or SAEs, undesirable side effects, relapse of disease or unexpected characteristics may emerge causing us to abandon these product candidates or limit their development to more narrow uses or subpopulations in which the SAEs or undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective or in which efficacy is more pronounced or durable. Should we observe SAEs in our clinical trials or identify other undesirable side effects or other unexpected findings depending on their severity, our trials could be delayed or even stopped, and our development programs may be halted entirely.

 

Even if our product candidates initially show promise in early clinical trials, the side effects of drug therapies are frequently only detectable after they are tested in larger, longer and more extensive clinical trials or, in some cases, after they are made available to patients on a commercial scale after approval. Sometimes, it can be difficult to determine if the serious adverse or unexpected side effects were caused by the drug therapy or another factor, especially in oncology subjects who may suffer from other medical conditions and be taking other medications. If serious adverse or unexpected side effects are identified during development or after approval and are determined to be attributed to our product candidate, we may be required to develop a Risk Evaluation and Mitigation Strategy, or REMS, to ensure that the benefits of treatment with such product candidate outweigh the risks for each potential patient, which may include, among other things, a communication plan to health care practitioners, patient education, extensive patient monitoring or distribution systems and processes that are highly controlled, restrictive and more costly than what is typical for the industry. Product-related side effects could also result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.

 

In addition, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects or ADA caused by such products, a number of potentially significant negative consequences could result, including:

 

	●	regulatory authorities may suspend, withdraw or limit approvals of such product, or seek an injunction against its manufacture or distribution;
	●	regulatory authorities may require additional warnings on the label, including “boxed” warnings, or issue safety alerts, “Dear Healthcare Provider” letters, press releases or other communications containing warnings or other safety information about the product;
	●	we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;
	●	we may be required to change the way a product is administered or conduct additional clinical trials;
	●	the product may become less competitive, and our reputation may suffer;
	●	we may decide to remove the product from the marketplace; and
	●	we may be subject to fines, injunctions or the imposition of civil or criminal penalties.

 

Positive results from preclinical studies and early-stage clinical trials may not be predictive of future results. Initial positive results in any of our clinical trials may not be indicative of results obtained when the trial is completed or in later stage trials.

 

The results of preclinical studies may not be predictive of the results of clinical trials. Preclinical studies and early-stage clinical trials are primarily designed to test safety, to study pharmacokinetics and pharmacodynamics and to understand the side effects of product candidates at various doses and schedules, and the results of any early-stage clinical trials may not be predictive of the results of later-stage, large-scale efficacy clinical trials. In addition, initial success in clinical trials may not be indicative of results obtained when such trials are completed. There can be no assurance that any of our current or future clinical trials will ultimately be successful or support further clinical development of any of our product candidates. There is a high failure rate for drugs and biological products proceeding through clinical trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving promising results in earlier studies, and any such setbacks in our clinical development could have a material adverse effect on our business and operating results.

 

 

Even if our clinical trials are completed, the results may not be sufficient to obtain regulatory approval for our product candidates. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, the results of our preclinical studies may not be predictive of the results of outcomes in human clinical trials. For example, our current or future product candidates may demonstrate different chemical, biological and pharmacological properties in patients than they do in laboratory studies or may interact with human biological systems in unforeseen or harmful ways. Product candidates in later stages of clinical trials may fail to show desired pharmacological properties or produce the necessary safety and efficacy results despite having progressed through preclinical studies and initial clinical trials. Even if we are able to initiate and complete clinical trials, the results may not be sufficient to obtain regulatory approval for our product candidates. In addition, we may experience regulatory delays or rejections as a result of many factors, including changes in regulatory policy during the period of our product candidate development. Any such delays could negatively impact our business, financial condition, results of operations and prospects.

 

As an organization, we have limited experience designing and implementing clinical trials and we have never conducted pivotal clinical trials. Failure to adequately design a trial, or incorrect assumptions about the design of the trial, could adversely affect the ability to initiate the trial, enroll patients, complete the trial, or obtain regulatory approval on the basis of the trial results, as well as lead to increased or unexpected costs and in delayed timelines.

 

The design and implementation of clinical trials is a complex process. We have limited experience designing and implementing clinical trials, and we may not successfully or cost-effectively design and implement clinical trials that achieve our desired clinical endpoints efficiently, or at all. A clinical trial that is not well designed may delay or even prevent initiation of the trial, can lead to increased difficulty in enrolling patients, may make it more difficult to obtain regulatory approval for the product candidate on the basis of the study results, or, even if a product candidate is approved, could make it more difficult to commercialize the product successfully or obtain reimbursement from third-party payors. Additionally, a trial that is not well-designed could be inefficient or more expensive than it otherwise would have been, or we may incorrectly estimate the costs to implement the clinical trial, which could lead to a shortfall in funding. We also expect to continue to rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, we may not be able to obtain marketing approval for or commercialize our current or future product candidates we develop and our business could be materially harmed. Consequently, we may be unable to successfully and efficiently execute and complete clinical trials that are required for BLA submission and FDA approval of our current or future product candidates. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop.

 

Our business is dependent on our ability to advance our current and future product candidates through clinical trials, obtain marketing approval and ultimately commercialize them.

 

We are early in our development efforts. Most of our product candidates are not yet in clinical trials. Our ability to generate product revenues, which we do not expect will occur for several years, if ever, will depend heavily on the successful development and eventual commercialization of our current product candidates and any other current or future product candidates we develop, which may never occur. Our current product candidates and any future product candidates we develop will require additional preclinical or clinical development, management of clinical, preclinical and manufacturing activities, marketing approval in the United States and other jurisdictions, demonstration of effectiveness to pricing and reimbursement authorities, sufficient manufacturing supply for both preclinical and clinical development and commercial production, building of a commercial organization and substantial investment and significant marketing efforts before we generate any revenues from product sales.

 

The clinical and commercial success of our current and future product candidates will depend on several factors, including the following: timely and successful completion of preclinical studies and our clinical trials; sufficiency of our financial and other resources to complete the necessary preclinical studies and clinical trials; our plans to successfully submit IND applications with the FDA for our current and future product candidates; our ability to complete preclinical studies for current or future product candidates; successful enrollment in, including maintaining or reaching target enrollment levels during the COVID-19 pandemic, and completion of clinical trials; successful data from our clinical program that supports an acceptable risk-benefit profile of our product candidates in the intended patient populations; our ability to establish agreements with third-party manufacturers on a timely and cost efficient manner; whether we are required by the FDA or comparable foreign regulatory authorities to conduct additional clinical trials or other studies beyond those planned or anticipated to support approval of our product candidates; acceptance of our proposed indications and the primary endpoint assessments evaluated in the clinical trials of our product candidates by the FDA and comparable foreign regulatory authorities; receipt and maintenance of timely marketing approvals from applicable regulatory authorities; successfully launching commercial sales of our product candidates, if approved; the prevalence, duration and severity of potential side effects or other safety issues experienced with our product candidates, if approved; entry into collaborations to further the development of our product candidates; obtaining and maintaining patent and trade secret protection or regulatory exclusivity for our product candidates; acceptance of the benefits and uses of our product candidates, if approved, by patients, the medical community and third-party payors; maintaining a continued acceptable safety, tolerability and efficacy profile of the product candidates following approval; our compliance with any post-approval requirements imposed on our products, such as post-marketing studies, a Risk Evaluation and Mitigation Strategy, or REMS, or additional requirements that might limit the promotion, advertising, distribution or sales of our products or make the products cost prohibitive; competing effectively with other therapies; obtaining and maintaining healthcare coverage and adequate reimbursement from third-party payors; and enforcing and defending intellectual property rights and claims. There are multiple risks associated with developing companion diagnostics to ENV 105, ENV 205, and KROS 301 and there is no guarantee that these companion diagnostics will be approved by the FDA or comparable foreign regulatory agencies.

 

 

These factors, many of which are beyond our control, could cause us to experience significant delays or an inability to obtain regulatory approvals or commercialize our current or future product candidates, and could otherwise materially harm our business. Successful completion of preclinical studies and clinical trials does not mean that any of our current or future product candidates we develop will receive regulatory approval. Even if regulatory approvals are obtained, we could experience significant delays or an inability to successfully commercialize our current and any future product candidates we develop, which would materially harm our business. If we are not able to generate sufficient revenue through the sale of any current or future product candidate, we may not be able to continue our business operations or achieve profitability.

 

Interim, topline and preliminary data from our clinical trials may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

 

From time to time, we may publicly disclose preliminary, interim or topline data from our preclinical studies and clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change as patient enrollment and treatment continues and more patient data become available. Adverse differences between previous preliminary or interim data and future interim or final data could significantly harm our business prospects. We may also announce topline data following the completion of a preclinical study or clinical trial, which may be subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the interim, topline or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim, topline and preliminary data should be viewed with caution until the final data are available.

 

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine to be material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product candidate or our business. If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for and commercialize our product candidates, our business, operating results, prospects or financial condition may be harmed.

 

 

We may face future business disruption and related risks resulting from the outbreak of the coronavirus (COVID-19) or from another pandemic, epidemic or outbreak of an infectious disease, any of which could have a material adverse effect on our business.

 

The development of our drug candidates could be disrupted and materially adversely affected in the future by a pandemic, epidemic or outbreak of an infectious disease like the outbreak of COVID-19. For example, as a result of measures imposed by the governments in regions affected by COVID-19 businesses and schools have been suspended due to quarantines or “stay at home” orders intended to contain this outbreak. The spread of COVID-19 from China to other countries has resulted in the Director General of the World Health Organization declaring the outbreak of COVID-19 as a Public Health Emergency of International Concern (PHEIC), based on the advice of the Emergency Committee under the International Health Regulations (2005). In March 2020, and subsequently, various international travel restrictions were imposed and modified between the US and foreign countries and such restrictions may continue, be reimposed, or be expanded or otherwise further modified for the foreseeable future. COVID-19 continues to spread globally, including with the advent of the new “delta” and “omicron” variants in 2021 and 2022. The COVID-19 outbreak has impacted international stock markets, which continue to reflect the uncertainty associated with the slow-down in global economies and the reduced levels of international travel experienced since the beginning of January 2020. We continue to assess our business plans and the impact COVID-19 may have on our ability to advance the development of our drug candidates, including delays in starting or completing clinical trials, or to raise financing to support the development of our drug candidates, but no assurances can be given that this analysis will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or in our sector in particular.

 

The spread of an infectious disease, including COVID-19, may also result in the inability of our suppliers to deliver components or raw materials on a timely basis or materially and adversely affect our collaborators and out-license partners’ ability to perform preclinical studies and clinical trials. In addition, hospitals may reduce staffing and reduce or postpone certain treatments in response to the spread of an infectious disease. Such events may result in a period of business and manufacturing disruption, and in reduced operations, any of which could materially affect our business, financial condition and results of operations. The extent to which the coronavirus impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.

 

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, or approved or commercialized in a timely manner or at all, which could negatively impact our business.

 

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may also slow the time necessary for new biologics to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

 

Separately, in response to the global COVID-19 pandemic, on March 10, 2020 the FDA announced its intention to postpone most foreign inspections of manufacturing facilities and products, and on March 18, 2020, the FDA announced its intention to temporarily postpone routine surveillance inspections of domestic manufacturing facilities. Subsequently, on July 10, 2020 the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system. The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

 

 

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

 

Because we have limited financial and managerial resources, we must prioritize our research programs and will need to focus our discovery and development on select product candidates and indications. Correctly prioritizing our research and development activities is particularly important for us due to the breadth of potential product candidates and indications that we believe could be pursued using our platform technologies. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may also relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

 

We may not be successful in our efforts to identify or discover additional product candidates in the future.

 

Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for a number of reasons, including:

 

	●	our inability to design such product candidates with the properties that we desire; or
	●	potential product candidates may, on further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance.

 

Research programs to identify new product candidates require substantial technical, financial and human resources. If we are unable to identify suitable additional candidates for preclinical and clinical development, our opportunities to successfully develop and commercialize therapeutic products will be limited.

 

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming, expensive, and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our drug therapy candidates, our business will be substantially harmed.

 

The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that we will never obtain regulatory approval for any of our drug therapy candidates. We are not permitted to market any of our product candidates in the United States until we receive regulatory approval of a NDA from the FDA. Our ability to obtain approval by the FDA or other regulatory authorities can be adversely impacted for various reasons including:

 

	●	we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a candidate is safe and effective for its proposed indication;
	●	serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using drugs similar to our candidates, or other products containing the active ingredient in our candidates;
	●	negative or ambiguous results from our clinical trials or results that may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;
	●	we may be unable to demonstrate that a candidate’s clinical and other benefits outweigh its safety risks;
	●	the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
	●	the data collected from clinical trials of our development candidates may not be acceptable or sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere, and we may be required to conduct additional clinical trials;
	●	the FDA or comparable foreign authorities may disagree regarding the formulation, labeling and/or the specifications of our candidates;
	●	the FDA or comparable foreign regulatory authorities may fail to approve or find deficiencies with the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies;
	●	the FDA or comparable foreign regulatory authorities may inspect and find deficiencies at the clinical trial sites we use to conduct our clinical studies; and
	●	the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

 

 

Prior to obtaining approval to commercialize a candidate in the United States or abroad, we must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA or foreign regulatory agencies, that such candidates are safe and effective for their intended uses. Results from preclinical studies and clinical trials can be interpreted in different ways. Even if we believe the preclinical or clinical data for our candidates are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities. A single-study approach is permissible in certain circumstances, particularly in oncology, but such circumstances are exceptional and FDA may not agree with that proposed approach, and thus we may be required to conduct two phase 3 trials.

 

The FDA or any foreign regulatory bodies can delay, limit or deny approval of our candidates or require us to conduct additional preclinical or clinical testing or abandon a program for many reasons, including:

 

	●	the FDA or comparable foreign regulatory authorities may disagree with the adequacy of the design or implementation of our clinical trials;
	●	the FDA or comparable foreign regulatory authorities may disagree with our safety interpretation of our drug;
	●	the FDA or comparable foreign regulatory authorities may disagree with our efficacy interpretation of our drug; or
	●	the FDA or comparable foreign regulatory authorities may regard our CMC package as inadequate, and more particularly:
	●	if our NDA does not include adequate tests by all methods reasonably applicable to show whether or not such drug is safe for use under the conditions prescribed, recommended, or suggested in the proposed labeling thereof;
	●	if the results of such tests show that such drug is unsafe for use under such conditions or do not show that such drug is safe for use under such conditions;
	●	if the methods used in, and the facilities and controls used for, the manufacture, processing, and packing of such drug are inadequate to preserve its identity, strength, quality, and purity;
	●	if the FDA determines that it has insufficient information to determine whether such drug is safe for use under such conditions;
	●	if based on information we submit and any other information before the FDA, the FDA determines there is a lack of substantial evidence that the drug will have the effect it purports or is represented to have under the conditions of use prescribed, recommended, or suggested in the proposed labeling thereof; or
	●	if the FDA determines that our labeling is false or misleading in any particular way.

 

Of the large number of drugs that enter clinical development, only a small percentage successfully complete the regulatory approval processes and are approved and commercialized. This lengthy approval process, as well as the unpredictability of future clinical trial results, may result in our failing to obtain regulatory approval to market of any of our drug therapy candidates, which would significantly harm our business, results of operations and prospects.

 

In addition, the FDA or an applicable foreign regulatory agency also may approve a product candidate for a more limited indication or patient population than we originally requested, the FDA or foreign regulatory agency may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate, or may require warnings, other safety-related labeling information, or impose post-market safety requirements, including distribution restrictions, that negatively impact the commercial potential of the drug. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.

 

 

Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control.

 

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the study until its conclusion. We may encounter delays in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our clinical trials, and even once enrolled, we may be unable to retain a sufficient number of patients to complete any of our trials. Patient enrollment and retention in clinical trials depends on many factors, including:

 

	●	the patient eligibility criteria defined in the protocol;
	●	the size of the patient population required for analysis of the trial’s primary endpoints;
	●	the nature of the trial protocol;
	●	the existing body of safety and efficacy data with respect to the product candidate;
	●	the proximity of patients to clinical sites;
	●	our ability to recruit clinical trial investigators with the appropriate competencies and experience;
	●	clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating;
	●	competing clinical trials being conducted by other companies or institutions;
	●	our ability to maintain patient consents;
	●	the risk that patients enrolled in clinical trials will drop out of the trials before completion; and
	●	delays or difficulties in enrollment and completion of studies due to the COVID 19 pandemic.

 

Results of preclinical studies, early clinical trials or analyses may not be indicative of results obtained in later trials.

 

The results of preclinical studies, early clinical trials or analyses of our product candidates may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. In addition, conclusions based on promising data from analyses of clinical results may be shown to be incorrect when implemented in prospective clinical trials. Even if our clinical trials for our drug therapy candidates are completed as planned, we cannot be certain that their results will support the safety and efficacy sufficient to obtain regulatory approval.

 

Serious adverse events or undesirable side effects caused by any of our drug therapy candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Results of any clinical trial we conduct could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics.

 

If unacceptable side effects arise in the development of our candidates, we, the FDA or the IRBs at the institutions in which our studies are conducted, or the DSMB, if constituted for our clinical trials, could recommend a suspension or termination of our clinical trials, or the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of a product candidate for any or all targeted indications. In addition, drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete a trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. We expect to have to train medical personnel using our development candidates to understand the side effect profiles for our clinical trials and upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in patient injury or death. Any of these occurrences may harm our business, financial condition and prospects significantly.

 

Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including:

 

	●	regulatory authorities may withdraw approvals of such product;
	●	regulatory authorities may require additional warnings on the label, such as a “black box” warning or contraindication;
	●	additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any component thereof;
	●	we may be required to implement a Risk Evaluation and Mitigation Strategy, or REMS, or create a medication guide outlining the risks of such side effects for distribution to patients;
	●	we could be sued and held liable for harm caused to patients;
	●	the product may become less competitive; and
	●	our reputation may suffer.

 

 

Any of these events could prevent us from achieving or maintaining market acceptance of a product candidate, if approved, and could significantly harm our business, results of operations and prospects.

 

The market opportunities for any current or future product candidate we develop, if approved, may be limited to those patients who are ineligible for established therapies or for whom prior therapies have failed, and may be small.

 

Cancer therapies are sometimes characterized as first-line, second-line or third-line, and the FDA often approves new therapies initially only for third-line use. Second- and third-line therapies are administered to patients when prior therapy is not effective. The number of patients who receive second- and third-line treatment is significantly smaller than the number of patients who receive first-line treatment. We may initially seek approval for our product candidates we develop as second- or third-line therapies. If we do so, for those products that prove to be sufficiently beneficial, if any, we would expect potentially to seek approval as a first-line therapy, but there is no guarantee that any product candidate we develop, even if approved, would be approved for first-line therapy, and, prior to any such approvals, we may have to conduct additional clinical trials.

 

The number of patients who have the types of cancer or autoimmune diseases we are targeting may turn out to be lower than expected. Even if we obtain significant market share for any product candidate, if and when approved, if the potential target populations are small, we may never achieve profitability without obtaining marketing approval for additional indications, including to be used as first- or second-line therapy.

 

We have never obtained marketing approval for a drug therapy candidate and we may be unable to obtain, or may be delayed in obtaining, marketing approval for any of our development candidates.

 

We have never obtained marketing approval for a product candidate. It is possible that the FDA may refuse to accept for substantive review any NDAs that we submit for our development candidates or may conclude after review of our data that our application is insufficient to obtain marketing approval of our development candidates. If the FDA does not accept or approve our NDAs for our development candidates, it may require that we conduct additional clinical, preclinical or manufacturing validation studies and submit that data before it will reconsider our applications. Depending on the extent of these or any other FDA-required studies, approval of any NDA that we submit may be delayed or may require us to expend more resources than we have available. It is also possible that additional studies, if performed and completed, may not be considered sufficient by the FDA to approve our NDAs.

 

Any delay in obtaining, or an inability to obtain, marketing approvals would prevent us from commercializing our development candidates, generating revenues and achieving and sustaining profitability. If any of these outcomes occur, we may be forced to abandon our development efforts for our product candidates, which could significantly harm our business.

 

Even if we obtain FDA approval for any of our drug therapy candidates in the United States, we may never obtain approval for or commercialize them in any other jurisdiction, which would limit our ability to realize their full global market potential.

 

In order to market any products in any particular jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a country-by-country basis regarding safety and efficacy. Approval by the FDA in the United States does not ensure approval by regulatory authorities in other countries or jurisdictions. However, the failure to obtain approval in one jurisdiction may negatively impact our ability to obtain approval elsewhere. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country.

 

Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and increased costs for us and require additional preclinical studies or clinical trials which could be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in those countries. We do not have any product candidates approved for sale in any jurisdiction, including in international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of any product we develop will be unrealized.

 

 

Even if we obtain regulatory approval for any development candidate, we will still face extensive and ongoing regulatory requirements and obligations and any development candidates, if approved, may face future development and regulatory difficulties.

 

The FDA and other federal and state agencies, including the U.S. Department of Justice, or the DOJ, closely regulate compliance with all requirements governing prescription drug products, including requirements pertaining to marketing and promotion of drugs in accordance with the provisions of the approved labeling and manufacturing of products in accordance with cGMP requirements. The FDA and DOJ impose stringent restrictions on manufacturers’ communications regarding off-label use and if we do not market our current in-development products or our future product candidates for their approved indications, we may be subject to enforcement action for off-label marketing. Violations of such requirements may lead to investigations alleging violations of the Food, Drug and Cosmetic Act and other statutes, including the False Claims Act and other federal and state health care fraud and abuse laws as well as state consumer protection laws.

 

Any candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, packaging, distribution, adverse event reporting, storage, recordkeeping, export, import, advertising and promotional activities for such product, among other things, will be subject to extensive and ongoing requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, establishment registration and drug listing requirements, continued compliance with current Good Manufacturing Practice, or cGMP, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping and Good Clinical Practice, or GCP, requirements for any clinical trials that we conduct post-approval.

 

Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product candidate may be marketed or to the conditions of approval, including a requirement to implement a REMS. If any of our product candidates receive marketing approval, the accompanying label may limit the approved indicated use of the product candidate, which could limit sales of the product candidate. The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of a product. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off-label use, and if we market our products for uses beyond their approved indications, we may be subject to enforcement action for off-label marketing. Violations of the Federal Food, Drug, and Cosmetic Act, or FDCA, relating to the promotion of prescription drugs may lead to FDA enforcement actions and investigations alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws.

 

In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes or failure to comply with regulatory requirements, may yield various results, including:

 

	●	litigation involving patients taking our product candidates;
	●	restrictions on such products, manufacturers, or manufacturing processes;
	●	restrictions on the labeling or marketing of products;
	●	restrictions on product distribution or use;
	●	requirements to conduct post-marketing studies or clinical trials;
	●	warning letters or untitled letters;
	●	withdrawal of the products from the market;
	●	refusal to approve pending applications or supplements to approved applications that we submit;
	●	recall of products;
	●	fines, restitution or disgorgement of profits or revenues;
	●	suspension or withdrawal of marketing approvals;
	●	refusal to permit the import or export of our products;
	●	damage to relationships with any potential collaborators;
	●	unfavorable press coverage and damage to our reputation;
	●	refusal to permit the import or export of our product candidates;
	●	product seizure; or
	●	injunctions or the imposition of civil or criminal penalties.

 

Further, the FDA’s policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability. We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad.

 

 

Even if we obtain marketing approvals for our current in-development products or any future product candidates, the terms of approvals and ongoing regulation of such product candidates may limit how we manufacture and market the product candidates and compliance with such requirements may involve substantial resources, which could materially impair our ability to generate revenue.

 

Even if marketing approval of any of our current in-development products or any future product candidates is granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensive regulation, including the potential requirements to implement a risk evaluation and mitigation strategy or to conduct costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product. We must also comply with requirements concerning advertising and promotion for any of our product candidates for which we obtain marketing approval. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling. Thus, we will not be able to promote any products we develop for indications or uses for which they are not approved. In addition, manufacturers of approved products and those manufacturers’ facilities are required to comply with extensive FDA requirements including ensuring that quality control and manufacturing procedures conform to cGMP, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. We and our contract manufacturers could be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMP.

 

Accordingly, assuming we receive marketing approval for one or more product candidates, we and our contract manufacturers will continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance, and quality control. If we are not able to comply with post-approval regulatory requirements, we could have the marketing approvals for our product candidates withdrawn by regulatory authorities and our ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability. Thus, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.

 

Non-compliance by us or any future collaborator with regulatory requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with regulatory requirements regarding the protection of personal information can also lead to significant penalties and sanctions. Non-compliance with EU requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, also can result in significant financial penalties. Similarly, failure to comply with the EU’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions.

 

We may seek a Breakthrough Therapy designation for one of our drug therapy candidates from the FDA. However, we might not seek such designation or be granted the designation by the FDA if sought, and even if we are granted the designation, it may not lead to a faster development or regulatory review or approval process.

 

We may seek a Breakthrough Therapy designation for one or more of our drug therapy candidates. Breakthrough Therapy designation is a process designed to expedite the development and review of drugs that are intended to treat a serious condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapy on a clinically significant endpoint(s). For purposes of Breakthrough Therapy designation, clinically significant endpoint generally refers to an endpoint that measures an effect on irreversible morbidity or mortality (IMM) or on symptoms that represent serious consequences of the disease. A clinically significant endpoint can also refer to findings that suggest an effect on IMM or serious symptoms. For drugs that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by the FDA may also be eligible for fast-track designation (under a separate request), priority review, or accelerated approval, if supported by clinical data at the time the NDA is submitted to the FDA. FDA encourages a Breakthrough Therapy designation request to be submitted, and received by FDA, no later than the end-of-phase-2 meetings. Even if granted, accelerated approval status does not guarantee an accelerated review or marketing approval by the FDA.

 

Designation as a Breakthrough Therapy is within the discretion of the FDA both at the time of the submission of such a request, and during FDA’s review of the drug and supporting data. Even if we believe that one of our candidates meets the criteria for designation as a Breakthrough Therapy, the FDA may disagree and instead determine not to make such designation or may grant such a designation and subsequently rescind the designation prior to approval. Even if we receive and maintain Breakthrough Therapy designation, the receipt of such designation for a product candidate may not result in a faster development or regulatory review or approval process compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the product candidates no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

 

Risks Related to the Commercialization of Our Current In-Development Products and Our Future Product Candidates

 

Even if any of our current in-development products or any of our future product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors, and others in the medical community necessary for commercial success.

 

Even if we obtain approvals from the FDA, the EMA, the PMDA, the TGA, or other comparable regulatory agencies and are able to initiate commercialization of our current in-development products or any future product candidates we develop, the product candidate may not achieve market acceptance among physicians, patients, and third-party payors and, ultimately, may not be commercially successful. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

 

If the market size of any product candidate that obtains regulatory approval is significantly smaller than we anticipate, it may not achieve market acceptance or commercial success. This could significantly and negatively impact our business, financial condition, and results of operations.

 

 

If we are unable to establish sales, marketing, and distribution capabilities for our current in-development products or our future product candidates, or enter into sales, marketing, and distribution agreements with third parties, we may not be successful in commercializing our product candidates, if and when they are approved.

 

We do not have a sales or marketing infrastructure and have limited experience in the sale, marketing, or distribution of pharmaceutical products. To achieve commercial success for any product candidate for which we may obtain marketing approval, we will need to establish a sales and marketing organization or enter into collaboration, distribution, and other marketing arrangements with one or more third parties to commercialize such product candidate. In the United States, we intend to build a commercial organization to target areas with the greatest incidence of treatments for cancers and other indications to which our drugs and therapies are targeted and recruit experienced sales, marketing, and distribution professionals. The development of sales, marketing, and distribution capabilities will require substantial resources, will be time-consuming, and could delay any product launch. We may decide to work with regional specialty pharmacies, distributors, and/or multi-national pharmaceutical companies to leverage their commercialization capabilities to commercialize any product candidate for which we may obtain regulatory approval outside of the United States.

 

If the commercial launch of a product candidate for which we recruit a sales force and establish marketing and distribution capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization costs. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel. In addition, we may not be able to hire a sales force in the United States that is sufficient in size or has adequate expertise to target the areas that we intend to target. If we are unable to establish a sales force and marketing and distribution capabilities, our operating results may be adversely affected.

 

Factors that may inhibit our efforts to commercialize our drugs on our own include:

 

	●	our inability to recruit, train, and retain adequate numbers of effective sales and marketing personnel;
	●	the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future products;
	●	the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage compared to companies with more extensive product lines;
	●	unforeseen costs and expenses associated with creating an independent sales and marketing organization; and
	●	unforeseen costs and limitations with regard to setting up a distribution network.

 

If we are unable to establish our own sales, marketing, and distribution capabilities in the United States and other jurisdictions in which our current in-development products or any future product candidates are approved and, instead, enter into arrangements with third parties to perform these services, our revenues and profitability, if any, are likely to be lower than if we were to sell, market, and distribute any product candidates that we develop ourselves. We may not be successful in entering into arrangements with third parties to sell, market, and distribute our product candidates or may be unable to do so on terms that are favorable to us. We likely will have limited control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our product candidates effectively. If we do not establish sales, marketing, and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing any product candidates.

 

Coverage and adequate reimbursement may not be available for any of our in-development products or any future product candidates, which could make it difficult for us to sell profitably, if approved.

 

Market acceptance and sales of any product candidates that we commercialize, if approved, will depend in part on the extent to which reimbursement for these drugs and related treatments will be available from third-party payors, including government health administration authorities, managed care organizations and other private health insurers. Third-party payors decide which therapies they will pay for and establish reimbursement levels. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided for any product candidates that we develop will be made on a payor-by-payor basis. One payor’s determination to provide coverage for a drug does not assure that other payors will also provide coverage and adequate reimbursement for the drug. Additionally, a third-party payor’s decision to provide coverage for a therapy does not imply that an adequate reimbursement rate will be approved. Each payor determines whether or not it will provide coverage for a therapy, what amount it will pay the manufacturer for the therapy, and on what tier of its list of covered drugs, or formulary, it will be placed. The position on a payor’s formulary generally determines the co-payment that a patient will need to make to obtain the therapy and can strongly influence the adoption of such therapy by patients and physicians. Patients who are prescribed treatments for their conditions and providers prescribing such services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our drugs, and providers are unlikely to prescribe our drugs, unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost of our drugs and their administration.

 

A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. We cannot be sure that coverage and reimbursement will be available for any drug that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Inadequate coverage and reimbursement may impact the demand for, or the price of, any drug for which we obtain marketing approval. If coverage and adequate reimbursement are not available, or are available only to limited levels, we may not be able to successfully commercialize any of our current in-development products and any future product candidates that we develop.

 

If we are unable to successfully develop any required companion diagnostic tests for our product candidates, experience significant delays in doing so, or rely on third parties in the development of such companion diagnostic tests, we may be unable to realize the full commercial potential of our product candidates.

 

We will strive, in conjunction with our wholly-owned subsidiary Enviro Therapeutics, to co-develop companion biomarkers with all drugs in its portfolio and to evaluate whether a companion diagnostic test will be required for any of our product candidates. In general, the FDA expects to review and approve simultaneously NDA and pre-market approval submissions for a therapeutic and its companion diagnostic, respectively, so any delay in diagnostic approval could delay drug approval. On April 13, 2020, the FDA issued new guidance on developing and labeling companion diagnostics for a specific group of oncology therapeutic products, including recommendations to support a broader labeling claim rather than individual therapeutic products. We will continue to evaluate the impact of this guidance on our companion diagnostic development and strategy. This guidance and future issuances from the FDA and other regulatory authorities may impact our development of a companion diagnostic for our product candidates and result in delays in regulatory approval. We may be required to conduct additional studies to support a broader claim. Also, to the extent other approved diagnostics are able to broaden their labeling claims to include our approved drug products, if any, we may be forced to abandon any of our companion diagnostic development plans or we may not be able to compete effectively upon approval, which could adversely impact our ability to generate revenue from the sale of our to be approved products, if any, and our business operations.

 

We may rely on third parties for the design, development, and manufacture of companion diagnostic tests for our product candidates that require such tests. To be successful, we or our collaborators will need to address a number of scientific, technical, regulatory and logistical challenges. If we or such third parties are unable to successfully develop companion diagnostics, or experience delays in doing so, we may be unable to enroll enough patients for our current and planned clinical trials, the development of our product candidates may be adversely affected or we may not obtain marketing approval, and we may not realize the full commercial potential of our product candidates.

 

 

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

 

The use of any of our drug therapy candidates we may develop in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by patients, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:

 

	●	impairment of our business
	●	reputation and significant negative media attention;
	●	withdrawal of participants from our clinical trials;
	●	significant costs to defend the litigation;
	●	distraction of management’s attention from our primary business;
	●	substantial monetary awards to patients or other claimants;
	●	inability to commercialize THIO or any other product candidate;
	●	product recalls, withdrawals or labeling, marketing or promotional restrictions;
	●	decreased market demand for any product; and
	●	loss of revenue.

 

The product liability insurance coverage carry may not be sufficient to reimburse us for any expenses or losses we may suffer. We intend to acquire insurance coverage to include larger clinical studies, different countries and the potential sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. A successful product liability claim, or series of claims, brought against us could cause our share price to decline and, if judgments exceed our insurance coverage, could adversely affect the results of our operations and business, including preventing or limiting the commercialization of any product candidates we develop.

 

We hold $5 million in global product liability insurance coverage with a per incident limit of $5 million annually, which may not be adequate to cover all liabilities that we may incur. We may need to increase our insurance coverage as we expand our clinical trials or if we commence commercialization of any product candidates. Insurance coverage is increasingly expensive. We may not be able to obtain or maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise, if at all. Product liability insurance policies contain various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with current or future collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.

 

There are a variety of risks associated with marketing our current in-development products or any future product candidates internationally, which could affect our business.

 

We may seek regulatory approvals for ENV 105 and/or any of our product candidates outside of the United States and, accordingly, we expect that we will be subject to additional risks related to operating in foreign countries if we obtain the necessary approvals, including:

 

	●	differing regulatory requirements and reimbursement landscapes in foreign countries;
	●	the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market with low or lower prices rather than buying them locally;
	●	unexpected changes in tariffs, trade barriers, price and exchange controls, and other regulatory requirements;
	●	economic weakness, including inflation, or political instability in particular foreign economies and markets;
	●	compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad;
	●	foreign taxes, including withholding of payroll taxes;
	●	foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;
	●	difficulties staffing and managing foreign operations;
	●	workforce uncertainty in countries where labor unrest is more common than in the United States;
	●	potential liability under the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, or comparable foreign regulations;
	●	challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;
	●	production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
	●	business interruptions resulting from geo-political actions, including war and terrorism.

 

These and other risks associated with our international operations may compromise our ability to achieve or maintain profitability.

 

 

Risks Related to Our Dependence on Third Parties

 

Our employees and independent contractors, including principal investigators, clinical trial sites, contract research organizations, or CROs, consultants, vendors, and any third parties we may engage in connection with development and commercialization, may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.

 

Our employees and independent contractors, including principal investigators, clinical trial sites, consultants, vendors and any third parties we may engage in connection with development and commercialization of our product candidates, could engage in misconduct, including intentional, reckless or negligent conduct or unauthorized activities that violate: the laws and regulations of the FDA or other similar regulatory requirements of other authorities, including those laws that require the reporting of true, complete and accurate information to such authorities; manufacturing standards; data privacy, security, fraud and abuse and other healthcare laws and regulations; or laws that require the reporting of true, complete and accurate financial information and data. Specifically, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these laws could also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creation of fraudulent data in preclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in Medicare, Medicaid, other U.S. federal healthcare programs or healthcare programs in other jurisdictions, individual imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations.

 

We rely on single-sourced third parties to conduct the preclinical and nonclinical studies, clinical trials, and manufacture of our clinical trial material for our current in-development products and our future product candidates, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such studies, trials, and manufacturing services or failing to comply with applicable regulatory requirements.

 

We have engaged contract research organizations, or CROs, to conduct our ongoing and planned preclinical and nonclinical studies, clinical trials and manufacture of our clinical trial material. We also expect to engage CROs for any of our other future product candidates that may progress to clinical development. We expect to rely on CROs, as well as other third parties, such as clinical data management organizations, medical institutions, and clinical investigators, to conduct those preclinical and nonclinical studies, clinical trials, and manufacture of our clinical trial material. Currently, we rely on single source third-party research institutions, laboratories, clinical research and manufacturing organizations for research and development. Agreements with such third parties might terminate for a variety of reasons, including a failure to perform by the third parties. If we need to enter into alternative arrangements or fail to enter into alternative arrangements in a timely manner, our product development activities would be delayed.

 

Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with regulatory standards, commonly referred to as good clinical practices, or GCPs, for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity, and confidentiality of trial participants are protected. Similar regulatory requirements apply outside the United States, including the International Council for Harmonisation of Technical Requirements for the Registration of Pharmaceuticals for Human Use, or the ICH. We are also required to register certain ongoing clinical trials and post the results of certain completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within specified timeframes. Failure to do so by us or third parties can result in FDA refusal to approve applications based on the clinical data, enforcement actions, adverse publicity, and civil and criminal sanctions.

 

Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our current in-development products and our future product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize such product candidates.

 

In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and may receive cash compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, or the FDA concludes that the financial relationship may have affected the interpretation of the trial, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection by the FDA of any New Drug Application, or NDA, we submit. Any such delay or rejection could prevent us from commercializing our current in-development products or any future product candidates.

 

We will rely on third-party contract manufacturing organizations, or CMOs, for the production of clinical supply of our drug therapy candidates and intend to rely on CMOs for the production of commercial supply our drug therapies, if approved. Our dependence on CMOs may impair the development and commercialization of the drug, which would adversely impact our business and financial position.

 

We have limited personnel with experience in manufacturing, and we do not own facilities for manufacturing. Instead, we rely on and expect to continue to rely on CMOs for the supply of cGMP grade clinical trial materials and commercial quantities of any candidates we develop, if approved. Reliance on CMOs may expose us to more risk than if we were to manufacture our product candidates ourselves. We intend to have manufactured a sufficient clinical supply of our drug therapy substances to enable us to complete our clinical trials, and we have also engaged a CMO to provide clinical and commercial supply of the drug product.

 

 

The facilities used to manufacture our product candidates must be inspected by the FDA and comparable foreign authorities. While we provide oversight of manufacturing activities, we do not and will not control the execution of manufacturing activities by, and are or will be essentially dependent on, our CMOs for compliance with cGMP requirements for the manufacture of our product candidates. As a result, we are subject to the risk that our product candidates may have manufacturing defects that we have limited ability to prevent. If a CMO cannot successfully manufacture material that conforms to our specifications and the regulatory requirements, we will not be able to secure or maintain regulatory approval for the use of our product candidates in clinical trials, or for commercial distribution of our product candidates, if approved. In addition, we have limited control over the ability of our CMOs to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or comparable foreign regulatory authority finds deficiencies with or does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval or finds deficiencies in the future, we may need to find alternative manufacturing facilities, which would delay our development program and significantly impact our ability to develop, obtain regulatory approval for or commercialize our product candidates, if approved. In addition, any failure to achieve and maintain compliance with these laws, regulations and standards could subject us to the risk that we may have to suspend the manufacture of our product candidates or that obtained approvals could be revoked. Furthermore, CMOs may breach existing agreements they have with us because of factors beyond our control. They may also terminate or refuse to renew their agreement at a time that is costly or otherwise inconvenient for us. If we were unable to find an adequate CMO or another acceptable solution in time, our clinical trials could be delayed, or our commercial activities could be harmed.

 

We rely on and will continue to rely on CMOs to purchase from third-party suppliers the raw materials necessary to produce our product candidates. We do not and will not have control over the process or timing of the acquisition of these raw materials by our CMOs. Moreover, we currently do not have any agreements for the production of these raw materials. Supplies of raw material could be interrupted from time to time and we cannot be certain that alternative supplies could be obtained within a reasonable timeframe, at an acceptable cost, or at all. In addition, a disruption in the supply of raw materials could delay the commercial launch of our product candidates, if approved, or result in a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates. Growth in the costs and expenses of raw materials may also impair our ability to cost effectively manufacture our product candidates. There are a limited number of suppliers for the raw materials that we may use to manufacture our product candidates and we may need to assess alternative suppliers to prevent a possible disruption of the manufacture of our product candidates.

 

Finding new CMOs or third-party suppliers involves additional cost and requires our management’s time and focus. In addition, there is typically a transition period when a new CMO commences work. Although we generally have not, and do not intend to, begin a clinical trial unless we believe we have on hand, or will be able to obtain, a sufficient supply of our product candidates to complete the clinical trial, any significant delay in the supply of our product candidates or the raw materials needed to produce our product candidates, could considerably delay conducting our clinical trials and potential regulatory approval of our product candidates.

 

As part of their manufacture of our product candidates, our CMOs and third-party suppliers are expected to comply with and respect the proprietary rights of others. If a CMO or third-party supplier fails to acquire the proper licenses or otherwise infringes the proprietary rights of others in the course of providing services to us, we may have to find alternative CMOs or third-party suppliers or defend against claims of infringement, either of which would significantly impact our ability to develop, obtain regulatory approval for or commercialize our product candidates, if approved.

 

Any performance failure or regulatory noncompliance on the part of CMOs could delay clinical development or marketing approval of our current in-development products or any future product candidates or commercialization of such product candidates, resulting in additional losses, and depriving us of potential product revenue.

 

Our reliance on single-sourced third parties to manufacture our product candidates increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost, which could delay, prevent, or impair our development or commercialization efforts.

 

We do not own or operate manufacturing facilities for the production of clinical or commercial supplies of the product candidates that we are developing or evaluating, nor are we contemplating plans to do so. We have limited personnel with experience in drug manufacturing and lack the resources and the capabilities to manufacture any of our product candidates on a clinical or commercial scale. We currently rely on third parties, such as Fisher Clinical Services for drug supply and drug product manufacture of our current product candidate, and our strategy is to continue to outsource all manufacturing of our product candidates and approved products, if any, to third parties.

 

In order to conduct clinical trials of our product candidates and prepare for commercialization, we will need to identify suitable manufacturers with the capabilities to manufacture our compounds in large quantities in a manner consistent with existing regulations. Our future plans include the identifying, qualifying, and contracting with a U.S. manufacturing site to manufacture ENV 105, assuming we have adequate financial resources to pursue contingency manufacturing plans. Our current and future third-party manufacturers may be unable to successfully increase the manufacturing capacity for any of our product candidates in a timely or cost-effective manner, or at all. In addition, quality issues may arise during scale-up activities at any other time. If our manufacturers are unable to successfully scale up the manufacture of our product candidates in sufficient quality and quantity, the development, testing, and clinical trials of that product candidate may be delayed or infeasible, and regulatory approval or commercial launch of that product candidate may be delayed or not obtained, which could significantly harm our business.

 

 

We do not currently have any agreements with third-party manufacturers for the long-term commercial supply of our current in-development products or any of our future product candidates. In the future, we may be unable to enter into agreements with third-party manufacturers for commercial supplies of such product candidates or may be unable to do so on acceptable terms.

 

Even if we are able to establish and maintain arrangements with third-party manufacturers, reliance on third-party manufacturers entails risks, including:

 

	●	reliance on the third party for regulatory compliance and quality assurance;
	●	the possible breach of the manufacturing agreement by the third party;
	●	the possible misappropriation of our proprietary information, including our trade secrets and know-how; and
	●	the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.

 

Third-party manufacturers may not be able to comply with current Good Manufacturing Practice, or cGMP, regulations or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension, or withdrawal of approvals, license revocation, seizures, or recalls of product candidates or products, operating restrictions, and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates.

 

Our current in-development products and our future products and product candidates may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us.

 

If the third parties that we engage to supply any materials or manufacture product for our preclinical and nonclinical studies and clinical trials should cease to continue to do so for any reason, we likely would experience delays in advancing these studies and trials while we identify and qualify replacement suppliers, and we may be unable to obtain replacement supplies on terms that are favorable to us. In addition, if we are not able to obtain adequate supplies of our current in-development products or any future product candidates or the substances used to manufacture them, it will be more difficult for us to develop such product candidates and compete effectively.

 

Our current and anticipated future dependence upon others for the manufacture of our product candidates may adversely affect our future profit margins and our ability to develop product candidates and commercialize any products that receive marketing approval on a timely and competitive basis.

 

We intend to continue to rely on third parties to conduct, supervise and monitor our clinical trials. If those third parties do not successfully carry out their contractual duties, or if they perform in an unsatisfactory manner, it may harm our business.

 

We rely, and will continue to rely, on CROs, CRO-contracted vendors and clinical trial sites to ensure the proper and timely conduct of our clinical trials, including our Phase 2 trials. Our reliance on CROs for clinical development activities limits our control over these activities, but we remain responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards.

 

 

We and our CROs will be required to comply with the good laboratory practice requirements for our preclinical studies and GCP requirements for our clinical trials, which are regulations and guidelines enforced by the FDA and are also required by comparable foreign regulatory authorities. Regulatory authorities enforce GCP requirements through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CROs fail to comply with GCP requirements, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP requirements. In addition, our clinical trials must be conducted with product produced under cGMP requirements. Accordingly, if our CROs fail to comply with these requirements, we may be required to repeat clinical trials, which would delay the regulatory approval process.

 

Our CROs are not our employees, and we do not control whether or not they devote sufficient time and resources to our clinical trials. Our CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials, or other drug development activities, which could harm our competitive position. We face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by CROs, which may reduce our trade secret protection and allow our potential competitors to access and exploit our proprietary technology. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for any other reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize any product candidate that we develop. As a result, our financial results and the commercial prospects for any product candidate that we develop would be harmed, our costs could increase, and our ability to generate revenue could be delayed.

 

If our relationship with any CROs terminates, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable terms. Switching or adding additional CROs involves substantial cost and requires management’s time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we intend to carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have an adverse impact on our business, financial condition and prospects.

 

The number and type of our collaborations could adversely affect our attractiveness to future collaborators or acquirers and the loss of, or a disruption in our relationship with, any one or more collaborators could harm our business.

 

If any collaborations do not result in the successful development and commercialization of products or if one of our collaborators terminates its agreement with us, we may not receive any future research and development funding or milestone or royalty payments under such collaborations. If we do not receive the funding we expect under these agreements, our continued development of our product candidates could be delayed, and we may need additional resources to develop additional product candidates. All of the risks relating to product development, regulatory approval and commercialization described in this prospectus also apply to the activities of any collaborators and there can be no assurance that our collaborations will produce positive results or successful products on a timely basis or at all.

 

In addition, subject to its contractual obligations to us, if one of our collaborators is involved in a business combination or otherwise changes its business priorities, the collaborator might deemphasize or terminate the development or commercialization of our product candidates. If a collaborator terminates its agreement with us, we may find it more difficult to attract new collaborators and the perception of our business and our stock price could be adversely affected.

 

We may in the future collaborate with additional pharmaceutical and biotechnology companies for development and potential commercialization of therapeutic products. We face significant competition in seeking appropriate collaborators. Our ability to reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our programs, and our business may be materially and adversely affected.

 

 

We are relying exclusively on the skills and expertise of our management team in conducting our business, not all of whom will devote all of their time to managing the Company, and we currently have no full-time employees, which may impede our ability to carry on our business.

 

We are relying exclusively on the skills and expertise of our management team in conducting our business. Not all of our management team presently devotes all of their time to managing the Company. Although upon the effectiveness of this registration statement, our Chief Financial Officer will serve on a full-time basis, we presently have no full-time employees, which may impede our ability to carry on our business. The lack of full-time employees among our officers may very well prevent the Company’s operations from being efficient, and may impair the business progress and growth, which is a risk to any investor. Our lack of full-time management may be an impediment to our business development. Without full-time officers, we may not have sufficient devoted time and effort to our commercialization efforts, or efforts to find and raise additional capital, or manage our business, which could impair our ability to succeed in our business plan and could cause investment in our Company to lose value.

 

We operate with a small team and our future success depends on our ability to retain key executives and to attract, retain, and motivate qualified personnel.

 

Our future success depends on our ability to retain our key officers and employees and to attract, retain and motivate highly qualified management and scientific personnel.

 

We currently have limited personnel. As of June 8, 2023, we had three part-time employees, including our Chief Executive officer, and our Chief Financial Officer is a part-time contractor. Upon the effectiveness of this registration statement, our Chief Financial Officer will serve on a full-time basis. We are highly dependent on the management, research and development, clinical, financial, and business development expertise of Dr. Yu and Dr. Bhowmick. Each of them may currently terminate their employment with us at any time and will continue to be able to do so after the completion of this offering. We do not maintain “key person” insurance for any of our executives or employees.

 

We will need to attract, hire and retain qualified officers and employees to achieve the Company’s objectives. Recruiting and retaining qualified scientific personnel and sales and marketing personnel will be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among pharmaceutical, biotechnology and diagnostic companies for similar personnel. Furthermore, current officers or employees may decide to leave the Company, and current or former officers or employees may decide to sue the Company for owed but unpaid compensation. The loss of any of these persons’ expertise would be difficult to replace and could have a material adverse effect on our ability to achieve our business goals.

 

 

Our limited personnel and resources may result in greater workloads for our employees compared to those at companies with which we compete for personnel, which may lead to higher levels of employee dissatisfaction and turnover. Recruiting and retaining qualified research, development, and business personnel and, if we progress the development of any of our current in-development products or any future product candidates, commercialization, manufacturing, and sales and marketing personnel, will be critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize our product candidates. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain, or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of research and development personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high-quality personnel, our ability to pursue our growth strategy will be limited.

 

We face substantial competition from large, well-funded, and experienced competitors, which may result in others discovering, developing or commercializing products before or more successfully than we do.

 

The pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense competition, and a strong emphasis on proprietary products. The immuno-oncology segment of the industry is in particular highly competitive. We face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical, and biotechnology companies, academic institutions and governmental agencies, and public and private research institutions. Regardless of the degree of success in development of our technology, the Company faces competition from much larger enterprises and different technologies, disadvantages inherent in attempting to negotiate licensing or other transactions with companies with vastly larger financial, scientific and other resources, lack of management experienced in commercial business operations, reliance on contract laboratories and other third party service providers, lack of financial and other resources, challenges to the validity of intellectual property, potential product liabilities, and regulatory risks including product and reimbursement permits and regulations. Many of our competitors and potential competitors have substantially greater financial, technological, managerial and research and development resources and experience than we do. We are aware of other products under development, which, if successfully developed and commercialized, would compete with our products. We may be unable to keep pace with the rapid technological changes in the biotechnology/medical device industry and as a result, our technologies may become obsolete. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

 

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize medicines that are safer, are more effective, have fewer or less severe side effects, are more convenient or are less expensive than any medicines we may develop. Our competitors also may obtain FDA or other regulatory approval for their medicines more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic medicines.

 

Our business could be adversely affected by the effects of health epidemics, including the ongoing COVID-19 pandemic.

 

Our business could be adversely affected by health epidemics, including the COVID-19 pandemic, in regions where we or third parties on which we rely have manufacturing facilities, concentrations of potential clinical trial sites or other business operations. We continue to evaluate our protocols and practices as the global response to the COVID-19 pandemic continues to evolve. There can be no assurance that we will be able to avoid part or all of any impact from the spread of COVID-19 or its consequences.

 

In addition, our current preclinical and nonclinical studies and current and future clinical trial plans may be affected by the COVID-19 pandemic. Site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the COVID-19 pandemic, which may delay enrollment in our future global clinical trials, and some patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services. Further, some of our suppliers may experience disruption to their respective supply chain due to the effects of health epidemics, including the COVID-19 pandemic, which could delay, prevent, or impair our development or commercialization efforts.

 

The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. Several measures are currently being implemented by the United States and other governments to address the current COVID-19 pandemic and its economic impacts. At this time, it is impossible to predict the impact of these measures and whether or not they will have unforeseen negative consequences for our business. We do not yet know the full extent of potential delays or impacts on our business, our planned preclinical studies or clinical trials, healthcare systems or the global economy as a whole; nor do we know when and how such regulations may be eased. The foregoing and other continued disruptions to our business as a result of COVID-19 could result in an adverse effect on our business, results of operations, financial condition and cash flows. Furthermore, the COVID-19 pandemic could heighten the risks in certain of the other risk factors described herein.

 

 

We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business.

 

Prior to the completion of this offering, we have been a private company with limited accounting personnel to adequately execute our accounting processes and other supervisory resources with which to address our internal control over financial reporting. In connection with the preparation of our financial statements, we identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses are as follows:

 

	●	We did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we lacked a sufficient complement of resources with (i) an appropriate level of accounting knowledge, experience and training to appropriately analyze, record and disclose accounting matters timely and accurately, and (ii) an appropriate level of knowledge and experience to establish effective processes and controls. Additionally, the lack of a sufficient number of professionals resulted in an inability to consistently establish appropriate authorities and responsibilities in pursuit of our financial reporting objectives, as demonstrated by, among other things, insufficient segregation of duties in our finance and accounting functions. This material weakness contributed to the following additional material weaknesses.
	●	We did not design and maintain effective controls related to the period-end financial reporting process, including designing and maintaining formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures. Additionally, we did not design and maintain controls over the preparation and review of account reconciliations and journal entries, including maintaining appropriate segregation of duties.
	●	We did not design and maintain effective controls related to the accounting for certain non-routine or complex transactions, including the proper application of U.S. GAAP to such transactions.
	●	Additionally, these material weaknesses could result in a misstatement of substantially all of our accounts or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.
	●	We did not design and maintain effective controls over information technology, or IT, general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain (i) program change management controls to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately, (ii) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to appropriate Company personnel, (iii) computer operations controls to ensure that critical batch jobs are monitored and data backups are authorized and monitored, and (iv) testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements.

 

These IT deficiencies did not result in adjustments to the financial statements. However, the IT deficiencies, when aggregated, could impact maintaining effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected. Accordingly, management has determined the IT deficiencies in the aggregate constitute a material weakness.

 

To address our material weaknesses, we are in the process of implementing measures designed to improve our internal control over financial reporting and remediate the control deficiencies that led to the material weaknesses. These measures include (i) the ongoing hiring of additional accounting personnel; (ii), initiating design and implementation of our financial control environment, including the establishment of formal accounting policies and procedures, financial reporting controls and controls to account for and disclose complex transactions; and (iii) initiating and designing IT controls to insure appropriate and restricted access to our accounting applications, programs, and data.

 

We are working to remediate the material weaknesses as efficiently and effectively as possible. We cannot assure you that there will not be future material weaknesses in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations, or cash flows. If we fail to remediate our identified material weaknesses, or identify additional material weaknesses, in our internal control over financial reporting investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by The Nasdaq Capital Market, the Securities and Exchange Commission, or SEC, or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

 

 

We expect to expand our research, development, and business capabilities and potentially implement sales, marketing, and distribution capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

 

As the clinical development of our current in-development products and any of our future product candidates progresses, we also expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of research, drug development, regulatory affairs and, if any of our current in-development products or any future product candidate receives marketing approval, sales, marketing, and distribution. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational, and financial systems, expand our facilities, and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and research and development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

 

If we engage in future acquisitions or strategic collaborations, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.

 

From time to time, we may evaluate various acquisitions and strategic collaborations, including licensing or acquiring complementary drug products, intellectual property rights, technologies, or businesses, as deemed appropriate to carry out our business plan. Any potential acquisition or strategic collaboration may entail numerous risks, including:

 

	●	increased operating expenses and cash requirements;
	●	the assumption of additional indebtedness or contingent liabilities;
	●	assimilation of operations, intellectual property, and drug products of an acquired company, including difficulties associated with integrating new personnel;
	●	the diversion of our management’s attention from our existing drug programs and initiatives in pursuing such a strategic partnership, merger, or acquisition;
	●	retention of key employees, the loss of key personnel and uncertainties in our ability to maintain key business relationships;
	●	risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing drugs or drug candidates and regulatory approvals; and
	●	our inability to generate revenue from acquired technology and/or drugs sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.

 

Risks Related to Our Intellectual Property

 

Our exclusive licensing rights to our intellectual property are subject to agreements with third parties and we may not meet milestones set forth in those agreements; our exclusive licensing rights may be terminated; these third-party licensors also own equity with certain anti-dilution and participation rights.

 

Our agreements with Cedars-Sinai Medical Center and Tracon Pharmaceuticals, Inc. are contingent on our ability to make payments and meet commercialization goals, which we may not be able to meet based on innumerable factors. If we do not make such payments or meet such milestones, our exclusive licensing rights to our intellectual property may be terminated. Even if we meet certain milestones, we may not be able to make the required payments, which may cause us to breach such agreements.

 

Pursuant to the Enviro-Cedars license agreements, Enviro would also issue to Cedars shares of Enviro’s common stock equal to, in the aggregate between the two Enviro-Cedars license agreements, 2.0% of Enviro’s outstanding equity on a fully diluted basis. Cedars also has certain anti-dilution protections, whereby Enviro shall issue to Cedars, without consideration, additional shares necessary to ensure that Cedars maintains at least 2.0% of the equity issued and outstanding on a fully diluted basis until the earlier of (i) Enviro’s initial public offering or (ii) Enviro having raised at least $20,000,000 in capital. Cedars shall also have a right to participate in any private offering of Enviro’s equity securities and purchase for cash that number of securities issued to maintain Cedars’ pro rata ownership in Enviro on a fully diluted basis.

 

Pursuant a license and supply agreement between Enviro and Tracon Pharmaceuticals, Inc., Enviro issued Tracon equity ownership in Enviro equal to a number of shares of restricted common stock of Enviro equal to 7% on a fully diluted and converted basis of all common and preferred shares of Enviro. Until such time as Tracon has received all of the Cash Consideration (as defined in the Enviro-Tracon license agreement), Enviro or its successor in interest, shall issue to Tracon, without further consideration, any additional common stock of Enviro, or such successor in interest, necessary so that Tracon maintains ownership of shares of Enviro, or such successor in interest, equal to 7% on a fully diluted and converted basis of all common and preferred shares of Enviro (or its successor). Cash Consideration under the Enviro-Tracon license agreement consists of an upfront fee of $100,000, an additional $500,000 upon it’s or its successor’s completion of one or more financings through the sale of equity (or debt convertible to equity) in an amount of $10,000,000, and an additional $500,000 within 10 days of it’s or its successor’s completion of one or more financings through the sale of equity (or debt convertible to equity) in an amount of $22,000,000.

 

 

If the Company is not able to raise funds sufficient to terminate these anti-dilution rights granted to Cedars and Tracon, then investors in the Company’s securities could experience severe dilution in proportion to Cedars and Tracon. The presence of these anti-dilution rights granted to Cedars and Tracon may also discourage third-party investors from investing in the Company’s securities.

 

If we are unable to obtain and maintain patent and other intellectual property protection for our technology, or for any our current in-development products or our future product candidates, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and drugs similar or identical to ours, and our ability to successfully commercialize our technology and product candidates may be impaired.

 

We do not own any issued patents and we in-license patents and patent applications for ENV 105, our lead drug compounds, and our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to ENV 105 and any of our future product candidates. We seek to protect our proprietary position by in-licensing intellectual property relating to our product candidates including patent applications in the United States and abroad related to our technology and product candidates that are important to our business. If we or our licensors do not adequately protect the intellectual property, we in-license or own, competitors may be able to use our technologies and erode or negate any competitive advantage that we may have, which could harm our business and ability to achieve profitability. To protect our proprietary positions, we and our licensors file patent applications in the United States and abroad related to our novel technologies and product candidates that are important to our business. The patent application and prosecution process is expensive and time-consuming. We and our current licensors and licensees, or any future licensors and licensees may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. We or our current licensors and licensees, or any future licensors or licensees may also fail to identify patentable aspects of our research and development before it is too late to obtain patent protection or fail to continue to prosecute patents relating to our product candidates. Therefore, these and any of our in-licensed patents and patent applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. It is possible that defects of form in the preparation or filing of our licensors’ patents or our patent applications may exist, or may arise in the future, such as with respect to proper priority claims, inventorship, claim scope, or patent term adjustments. If our current licensors and licensees, or any future licensors or licensees, are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised and we might not be able to prevent third parties from making, using, and selling competing products. We cannot predict whether the patent applications we and our licensors or licensees are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection from competitors. If there are material defects in the form or preparation of our or our licensors’ patents or patent applications, such patents or applications may be invalid and unenforceable. Moreover, our competitors may independently develop equivalent knowledge, methods, and know-how and we may not be able to prevent such competitors from commercializing such equivalent knowledge, methods, and know-how. Any of these outcomes could impair our ability to prevent competition from third parties and could have a material adverse effect on our business, financial condition, results of operations, or prospects. The patent position of biotechnology and pharmaceutical companies generally is highly uncertain and has been the subject of much litigation in recent years. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. No consistent policy regarding the breadth of claims allowed in biotechnology and pharmaceutical patents has emerged to date in the United States or in many foreign jurisdictions. In addition, the determination of patent rights with respect to pharmaceutical compounds and technologies commonly involves complex legal and factual questions, which has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability, and commercial value of our patent rights are highly uncertain. Furthermore, recent changes in patent laws in the United States, including the America Invents Act of 2011, and future changes in patent laws in or outside the United States may affect the scope, strength, and enforceability of our patent rights or the nature of proceedings that may be brought by us related to our patent rights.

 

We may not be aware of all third-party intellectual property rights potentially relating to our current in-development products or our future product candidates. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in patents or pending patent applications that we in-license or own, or that we or our licensors were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, and commercial value of our patent rights cannot be predicted with any certainty. Moreover, we or our licensors may be subject to a third-party pre-issuance submission of prior art to the U.S. Patent and Trademark Office, or USPTO, or become involved in opposition, derivation, reexamination, inter partes review, or interference proceedings, in the United States or elsewhere, challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding, or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or product candidates, and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize product candidates without infringing third-party patent rights.

 

 

Our licensors’ pending and future patent applications and our own pending and future patent applications may not result in patents being issued that protect our technology or product candidates, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Even if our or our licensors’ patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection against competing products or processes sufficient to achieve our business objectives, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our in-licensed patents or any patents we may own in the future by developing similar or alternative technologies or products in a non-infringing manner. Our competitors may seek to market generic versions of any approved products by submitting abbreviated NDAs to the FDA in which they claim that patents licensed by us or may be owned by us in the future are invalid, unenforceable, and/or not infringed. Alternatively, our competitors may seek approval to market their own products similar to or otherwise competitive with our product candidates. In these circumstances, we may need to defend and/or assert our in-licensed or owned patents, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court, or other agency with jurisdiction may find our in-licensed patents or any owned patents, should such patents issue in the future, invalid and/or unenforceable.

 

The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and our in-licensed patents or patents we may own in the future may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and product candidates, or limit the duration of the patent protection of our technology and product candidates. In addition, given the amount of time required for the development, testing, and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. Any impairment of our intellectual property rights, or our failure to protect our intellectual property rights adequately, could give third parties access to our technology and product candidates and could materially and adversely impact our business, financial condition, results of operations, and prospects.

 

Our rights to develop and commercialize our technology, our current in-development products, and our other future product candidates are subject, in large part, to the terms and conditions of licenses granted to us by others, such as Cedars-Sinai Medical Center and Tracon Pharmaceuticals, Inc. If we fail to comply with our obligations in the agreements under which we in-license or acquire development or commercialization rights to products, technology, or data from third parties, we could lose such rights that are important to our business.

 

We are heavily reliant upon licenses to certain patent rights and other intellectual property that are important or necessary to the development of our current in-development products or our future product candidates. For example, we depend on license agreements from Cedars-Sinai Medical Center and Tracon Pharmaceuticals, Inc.

 

Cedars-Sinai and Tracon have relied upon, and any future licensors may have relied upon, third-party companies, consultants or collaborators, or on funds from third parties such that our licensors are not the sole and exclusive owners of the patents we in-licensed. We have sublicensed certain patents from Cedars-Sinai and Tracon. If third-party institutions such as Cedars-Sinai or Tracon fail to prosecute, maintain, enforce, and defend such patents, or lose rights to those patents, the rights we have licensed may be reduced or eliminated, and our right to develop and commercialize our current in-development products or our other future product candidates that are the subject of such licensed rights could be adversely affected. Further development and commercialization of ENV 105, and development of any future product candidates may, require us to enter into additional license or collaboration agreements. For example, our licensors or other third parties may develop intellectual property covering ENV 105 which we have not licensed. Our future licenses may not provide us with exclusive rights to use the licensed patent rights and other intellectual property or may not provide us with exclusive rights to use such patent rights and intellectual property in all relevant fields of use and in all territories in which we wish to develop or commercialize our current in-development products or our future product candidates in the future.

 

Our license agreements with Cedars-Sinai and Tracon, and other intellectual property-related agreements we may enter into in the future may impose diligence and other obligations, including payment of milestones and royalties. For example, our license agreement from Cedars requires us to satisfy diligence requirements, including using commercially reasonable efforts to develop and commercialize products. If we fail to comply with our obligations to our present or future licensors, those counterparties may have the right to terminate the license agreements, in which event we might not be able to develop, manufacture, or market any product candidate licensed under the agreements, which could materially adversely affect the value of the product candidate being developed under any such agreement and further involve termination of our rights to important intellectual property or technology.

 

In spite of our efforts, Cedars-Sinai, Tracon or any future licensors might conclude that we are in material breach of obligations under our license agreements and may therefore have the right to terminate the license agreements, thereby removing our ability to develop and commercialize product candidates and technology covered by such license agreements. If such in-licenses are terminated, or if the underlying patents fail to provide the intended exclusivity, our competitors would have the freedom to seek regulatory approval of, and to market, products identical to our product candidates and the licensors to such in-licenses could prevent us from commercializing product candidates that rely upon the patents or other intellectual property rights which were the subject matter of such terminated agreements. In addition, we may seek to obtain additional licenses from our licensors and, in connection with obtaining such licenses, we may agree to amend our existing licenses in a manner that may be more favorable to the licensors, including by agreeing to terms that could enable third parties (potentially including our competitors) to receive licenses to a portion of the intellectual property that is subject to our existing licenses. Any of these events could have a material adverse effect on our business, financial condition, results of operations, and prospects.

 

 

Under our license agreements with Cedars-Sinai and Tracon, and any future license agreements, disputes may arise regarding intellectual property subject to a licensing agreement, including:

 

	●	the scope of rights granted under the license agreement and other interpretation-related issues;
	●	the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;
	●	the sublicensing of patent and other rights under our collaborative development relationships;
	●	our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
	●	the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and
	●	the priority of invention of patented technology.

 

In addition, the license agreements involving intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations, and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

 

We may not be successful in obtaining necessary rights to any product candidates we may develop through acquisitions and in-licenses.

 

We currently have rights to intellectual property, through licenses from third parties, to identify and develop product candidates. We may find it necessary or prudent to obtain licenses from such third-party intellectual property holders in order to avoid infringing these third-party patents. For example, many pharmaceutical companies, biotechnology companies, and academic institutions compete with us and may be filing patent applications potentially relevant to our business. The licensing or acquisition of third-party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all. If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of the relevant program or product candidate, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

 

We may become involved in lawsuits to protect or enforce our owned or in-licensed patents or other intellectual property, which could be expensive, time-consuming, and unsuccessful.

 

Competitors or other third parties may infringe, misappropriate or otherwise violate our in-licensed issued patents or our other intellectual property we may own. To counter such infringement, misappropriation, or other unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming and divert the time and attention of our management and scientific personnel. Any claims we assert against third parties could provoke these parties to assert counterclaims against us alleging that we infringe, misappropriate or otherwise violate their patents, trademarks, copyrights, or other intellectual property. In addition, our in-licensed patents may become involved in inventorship or priority disputes. Third parties may raise challenges to the validity of certain of our or our in-licensed patent claims and may in the future raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. For example, we may be subject to a third-party pre-issuance submission of prior art to the USPTO, or become involved in derivation, revocation, reexamination, post-grant review, or PGR, inter partes review, or IPR, interference proceedings, and equivalent proceedings in foreign jurisdictions, such as opposition proceedings challenging any patents that we may own or in-license. Such submissions may also be made prior to a patent’s issuance, precluding the granting of a patent based on one of our owned or licensed pending patent applications. A third party may also claim that our potential future owned patents or licensed patent rights are invalid or unenforceable in a litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable. An adverse determination in any such submission, proceeding, or litigation could reduce the scope of, invalidate, or render unenforceable, our potential future owned patents or licensed patent rights, allow third parties to commercialize our current in-development products or our other future product candidates and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights In a patent infringement proceeding, there is a risk that a court will decide that a patent we in-license is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue. There is also a risk that, even if the validity of such patents are upheld, the court will construe the patent’s claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our in-licensed patents do not cover the invention. An adverse outcome in a litigation or proceeding involving our in-licensed patents could limit our ability to assert our in-licensed patents against those parties or other competitors and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products. Similarly, in the future, we expect to rely on trademarks to distinguish our current in-development products and any of our other future product candidates that are approved for marketing, and if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.

 

 

In any infringement litigation, any award of monetary damages we receive may not be commercially valuable. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Moreover, there can be no assurance that we will have sufficient financial or other resources to adequately file and pursue such infringement claims, which typically last for years before they are concluded. Some of our competitors and other third parties may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Even if we ultimately prevail in such claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing, misappropriating, or successfully challenging our intellectual property rights. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a negative impact on our ability to compete in the marketplace, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

 

Third parties may initiate legal proceedings alleging that we are infringing misappropriating, or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could significantly harm our business.

 

Our commercial success depends, in part, on our ability to develop, manufacture, market, and sell our current in-development products or other future product candidates and use our proprietary chemistry technology without infringing, misappropriating or otherwise violating the intellectual property of third parties. Numerous third-party U.S. and non-U.S. issued patents exist in the area of cancer therapies and other therapies our drugs are targeted to treat.

 

There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to, or threatened with, litigation, or other adversarial proceedings regarding intellectual property rights with respect to our technology or product candidates, including interference proceedings before the USPTO. Third parties may assert claims against us based on existing or future intellectual property rights. The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance.

 

If we are found to have infringed, misappropriated, or otherwise violated any third party’s intellectual property rights, we could be forced, including by court order, to cease developing, manufacturing, or commercializing our current in-development products or other future product candidates. Alternatively, we may be required to obtain a license from such third party in order to use technology and continue developing, manufacturing or marketing product candidates that infringe or violate such third party’s intellectual property. However, we may not be able to obtain any such required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We may also be required to pay substantial ongoing royalty or license payments, fees, or comply with other unfavorable terms. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent or other intellectual property right. A finding of infringement could prevent us from commercializing our current in-development products or other future product candidates or force us to cease some of our business operations. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative effect on our business. Even if we were to prevail in such a dispute, any litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. During the court of litigation, there could be public announcements or the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Negative publicity related to a decision by us to initiate such enforcement actions against a customer or former customer, regardless of its accuracy, may adversely impact our other customer relationships or prospective customer relationships, harm our brand and business and could cause the market price of our common stock to decline. Any of the foregoing arising from uncertainty in legal proceedings could materially and adversely impact our business, financial condition, results of operations, and prospects.

 

 

We may be subject to claims by third parties asserting that we or our employees, consultants, and advisors have misappropriated their intellectual property or claiming ownership of what we regard as our own intellectual property.

 

Many of our employees, consultants, and advisors were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants, and advisors do not use the proprietary information or know-how of third parties in their work for us, we may be subject to claims that we or such employees, consultants, and advisors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s former employer. We may also in the future be subject to claims that we have caused an employee to breach the terms of his or her non-competition or non-solicitation agreement. Litigation may be necessary to defend against these potential claims.

 

In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, such employees and contractors may breach the agreement and claim the developed intellectual property as their own. Further, we may be unsuccessful in executing such agreements with each party who, in fact, conceives, or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property.

 

If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A court could prohibit us from using technologies or features that are essential to our current in-development products or other future product candidates if such technologies or features are found to incorporate or be derived from the trade secrets or other proprietary information of the former employers. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and could be a distraction to management. In addition, any litigation or threat thereof may adversely affect our ability to hire employees or contract with independent service providers. Moreover, a loss of key personnel or their work product could hamper or prevent our ability to commercialize our product candidates. Any of the foregoing could have a material adverse impact on our business, financial condition, results of operations, and prospects.

 

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

 

As is the case with other pharmaceutical companies, our success is heavily dependent on our intellectual property rights, and particularly on our in-licensed patent rights. Obtaining and enforcing patents in the pharmaceutical industry involves both technological and legal complexity, and is therefore costly, time consuming and inherently uncertain. In addition, the U.S. has recently enacted and is currently implementing wide-ranging patent reform legislation. Certain U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain rights to patents in the future, this combination of events has created uncertainty with respect to the value of patents once rights are obtained. Depending on decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could further negatively impact the value of patent rights, narrow the scope of available patent protection or weaken the rights of patent owners.

 

Any trademarks we may obtain may be infringed or successfully challenged, resulting in harm to our business.

 

We expect to rely on trademarks as one means to distinguish any of our product candidates that are approved for marketing from the products of our competitors. We have not yet selected trademarks for our product candidates and have not yet begun the process of applying to register trademarks for our product candidates. Once we select trademarks and apply to register them, our trademark applications may not be approved. Third parties who have prior rights to our trademarks or third parties who have prior rights to similar trademarks may oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our product candidates, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands. At times, competitors may adopt trade names or trademarks similar to ours, thereby diluting or impeding our ability to build brand identity and possibly leading to market confusion. Our competitors may infringe our trademarks and we may not have adequate resources to enforce our trademarks and may not be able to prevent such third parties from using and marketing any such trademarks.

 

In addition, any proprietary name we propose to use with our current in-development products or any future product candidate in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDA typically conducts a review of proposed product names, including an evaluation of the potential for confusion with other product names. If the FDA objects to any of our proposed proprietary product names, we may be required to expend significant additional resources in an effort to identify a suitable proprietary product name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. If we are unable to establish name recognition based on our trademarks, we may not be able to compete effectively and our business, financial condition, results of operations, and prospects may be adversely affected.

 

If we are unable to protect the confidentiality of our proprietary information, know-how, and trade secrets, the value of our current in-development products or other future product candidates could be adversely affected, and our business and competitive position would be harmed.

 

In addition to seeking patent protection for our current in-development products or other future product candidates, we also rely on trade secrets, including unpatented know-how, technology, and other proprietary information, to maintain our competitive position. We seek to protect our trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors, and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. However, these agreements may be inadequate to protect our proprietary and intellectual property rights. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets. In addition, we may not be able to obtain adequate remedies for any such breaches. Although we use reasonable efforts to protect this proprietary information and technology, we also cannot guarantee that we have entered into such agreements with each party that may have or have had access to our confidential information, know-how, trade secrets, or other proprietary information or each individual who has developed intellectual property on our behalf. Monitoring unauthorized uses and disclosures of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property will be effective. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, distracting to management, and time-consuming, and the outcome is unpredictable and varied depending on the jurisdiction. In addition, some courts inside and outside the United States, in countries in which we operate or intend to operate, are less willing, or unwilling, to protect trade secrets, know-how, and other proprietary information. Any claims or litigation could cause us to incur significant expenses. Some third parties may be able to sustain the costs of complex litigation more effectively than we can because they have substantially greater resources.

 

 

Our employees, consultants, and other parties may unintentionally or willfully disclose our information or technology to competitors and there can be no assurance that the legal protections and precaution taken by us will be adequate to prevent misappropriation of our technology or that competitors will not independently develop technologies equivalent or superior to ours. Trade secrets and know-how can be difficult to protect. Our competitors or other third parties may independently develop knowledge, methods and know-how equivalent to our trade secrets. Additionally, competitors could purchase our product candidates and replicate some or all of the competitive advantages we derive from our development efforts for technologies on which we do not have patent protection. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

 

If we or our licensors do not obtain patent term extension and data exclusivity for any product candidates we or our licensors may develop, our business may be materially harmed.

 

Given the amount of time required for the development, testing, and regulatory review of new product candidates, patents we license or may own in the future protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to our product candidates. Depending upon the timing, duration, and specifics of any FDA marketing approval of any of our product candidates, one or more of our in-licensed U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Action of 1984, or Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. However, we may not be granted an extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations, and prospects could be materially harmed.

 

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

 

Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and applications will be due to be paid to the USPTO and various government patent agencies outside of the United States over the lifetime of our owned or in-licensed patents and applications. In certain circumstances, we rely on our licensing partners to pay these fees due to U.S. and non-U.S. patent agencies. The USPTO and various non-U.S. government agencies require compliance with several procedural, documentary, fee payment, and other similar provisions during the patent application process. We are also dependent on our licensors to take the necessary action to comply with these requirements with respect to our licensed intellectual property. In some cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in a partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market with similar or identical products or technology, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

 

We may not be able to protect our intellectual property rights throughout the world.

 

Filing, prosecuting, and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States. In some cases, we or our licensors may not be able to obtain patent protection for certain licensed technology outside the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States, even in jurisdictions where we or our licensors do pursue patent protection. Consequently, we may not be able to prevent third parties from practicing our in-licensed inventions in all countries outside the United States, even in jurisdictions where our licensors do pursue patent protection or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

 

Competitors may use our technologies in jurisdictions where we or our licensors have not pursued and obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our current in-development products, our future product candidates, and our preclinical programs. Our in-licensed patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

 

 

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our in-licensed patents, if pursued and obtained, or the marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our in-licensed patents at risk of being invalidated or interpreted narrowly and our in-licensed patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

 

Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected.

 

Risks Related to Healthcare Laws and Other Legal Compliance Matters

 

If we successfully commercialize our current in-development products or one of our future product candidates, failure to comply with our reporting and payment obligations under U.S. governmental pricing programs could have a material adverse effect on our business, financial condition, and results of operations.

 

If we participate in the Medicaid Drug Rebate Program, Part D, if and when we successfully commercialize a product candidate, we will be required to report certain pricing information for such product candidate to the Centers for Medicare & Medicaid Services, the federal agency that administers the Medicaid and Medicare programs. We may also be required to report pricing information to the U.S. Department of Veterans Affairs. If we become subject to these reporting requirements, we will be liable for errors associated with our submission of pricing data, for failure to report pricing data in a timely manner, and for overcharging government payers, which can result in civil monetary penalties under the Medicaid statute, the federal civil False Claims Act, and other laws and regulations.

 

Our current and future relationships with healthcare professionals, principal investigators, consultants, customers, and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency, health information privacy and security, and other healthcare laws and regulations, which could expose us to penalties.

 

Healthcare providers, physicians, and third-party payors in the United States and elsewhere will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our current and future arrangements with healthcare professionals, principal investigators, consultants, customers, and third-party payors may expose us to broadly applicable fraud and abuse and other healthcare laws, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act, that may constrain the business or financial arrangements and relationships through which we research, sell, market, and distribute any product candidates for which we obtain marketing approval. In addition, we may be subject to physician payment transparency laws and patient privacy and security regulation by the federal government and by the states and foreign jurisdictions in which we conduct our business. The applicable federal, state, and foreign healthcare laws that may affect our ability to operate include the following:

 

●

the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order, or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under federal and state healthcare programs such as Medicare and Medicaid;

 

 

	●	federal civil and criminal false claims laws, including the federal False Claims Act, which impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government;
	●	the federal civil monetary penalties statute, which imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent;
	●	the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of whether the payor is public or private, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters;
	●	HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose obligations on “covered entities,” including certain healthcare providers, health plans, and healthcare clearinghouses, as well as their respective “business associates” and their respective subcontractors that create, receive, maintain, or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security, and transmission of individually identifiable health information;
	●	the federal Physician Payments Sunshine Act, created under Section 6002 of Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA, and its implementing regulations, created annual reporting requirements for manufacturers of drugs, devices, biologicals, and medical supplies for certain payments and “transfers of value” provided to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. As of January 1, 2022, these reporting obligations will extend to include transfers of value made in the previous year to certain non-physician providers such as physician assistants and nurse practitioners; and
	●	analogous state and foreign laws, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or to adopt compliance programs as prescribed by state laws and regulations, or that otherwise restrict payments that may be made to healthcare providers; state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state and local laws requiring the licensure of pharmaceutical sales representatives; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

 

Further, the ACA, among other things, amended the intent requirement of the federal Anti-Kickback Statute and certain criminal statutes governing healthcare fraud. A person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it. In addition, the ACA provided that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

 

Efforts to ensure that our future business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal, and administrative penalties, including, without limitation, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid, and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting or oversight obligations if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with the law and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and pursue our strategy. If any of the physicians or other healthcare providers or entities with whom we expect to do business, including future collaborators, are found not to be in compliance with applicable laws, they may be subject to criminal, civil, or administrative sanctions, including exclusions from participation in government healthcare programs, which could also affect our business.

 

In addition, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been Congressional inquiries and proposed federal and state legislation designed to bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drugs. Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

 

Individual states in the United States have also become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our product candidates or put pressure on our product pricing.

 

In markets outside of the United States, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. We cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative action in the United States or any other jurisdiction. If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.

 

 

Changes in healthcare policies, laws, and regulations may impact our ability to obtain approval for, or commercialize our current in-development products or our future product candidates, if approved.

 

In the United States and some foreign jurisdictions there have been, and continue to be, several legislative and regulatory changes and proposed reforms of the healthcare system in an effort to contain costs, improve quality, and expand access to care. In the United States, there have been and continue to be a number of healthcare-related legislative initiatives, as well as executive, judicial, and Congressional challenges to existing healthcare laws that have significantly affected, and could continue to significantly affect, the healthcare industry. For example, on June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Thus, the Affordable Care Act will remain in effect in its current form. Further, prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, which began on February 15, 2021, and remained open through August 15, 2021. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is possible that the Affordable Care Act will be subject to judicial or Congressional challenges in the future. In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under government payor programs and review the relationship between pricing and manufacturer patient programs. Further, based on a recent executive order, the Biden administration expressed its intent to pursue certain policy initiatives to reduce drug prices. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for our current in-development products or our future product candidates or additional pricing pressures.

 

We are subject to privacy and data security laws, rules, regulations, policies, industry standards, and contractual obligations, and our failure to comply with them could harm our business.

 

We maintain a large quantity of sensitive information, including confidential business information and information related to our employees and we expect to maintain personal information in connection

 

with the conduct of our clinical trials. As such, we are subject to laws and regulations governing the privacy and security of such information. In the United States, there are numerous federal and state privacy and data security laws and regulations governing the collection, use, disclosure, and protection of personal information, including federal and state health information privacy laws, federal and state security breach notification laws, and federal and state consumer protection laws. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues, which may affect our business and is expected to increase our compliance costs and exposure to liability. In the United States, numerous federal and state laws and regulations could apply to our operations or the operations of our partners, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws and regulations, including Section 5 of the Federal Trade Commission Act, that govern the collection, use, disclosure, and protection of health-related and other personal information. In addition, we may obtain health information from third parties, including research institutions from which we obtain clinical trial data, that are subject to privacy and security requirements under HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and the regulations promulgated thereunder. Depending on the facts and circumstances, we could be subject to significant penalties if we obtain, use or disclose individually identifiable health information in a manner that is not authorized or permitted by HIPAA.

 

Compliance with these and any other applicable privacy and data security laws and regulations we may be subject to in the future is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. If we fail to comply with any such laws or regulations, we may face significant fines and penalties that could adversely affect our business, financial condition, results of operations or prospects. Any failure by us or our third-party processors to comply with these data protection and privacy laws and regulations could result in significant government enforcement actions, which could include civil, criminal, and administrative penalties, orders requiring that we change our practices, claims for damages, and other liabilities, regulatory investigations and enforcement action, private litigation, significant costs of remediation, and adverse publicity, any of which could negatively affect our operating results and business. Furthermore, the laws are not consistent, and compliance in the event of a widespread data breach is costly. In addition, states are constantly adopting new laws or amending existing laws, requiring attention to frequently changing regulatory requirements.

 

With laws, regulations, and other obligations relating to privacy and data protection imposing new and relatively burdensome obligations, and with the substantial uncertainty over the interpretation and application of these and other obligations, we may face challenges in addressing their requirements and making necessary changes to our policies and practices and may incur significant costs and expenses in an effort to do so. We are currently in the process of developing and updating our policies and procedures in accordance with requirements under applicable data privacy and protection laws and regulations. We do not currently have any formal data privacy policies and procedures in place and have not completed formal assessments of whether we are in compliance with all applicable data privacy laws and regulations. Additionally, if third parties with which we work, such as vendors or service providers, violate applicable laws, rules or regulations or our policies, such violations may also put our or our clinical trial and employee data, including personal data, at risk, and our business, financial condition, results of operations, and prospects may be adversely affected.

 

Any clinical trial programs we conduct or research collaborations we enter into in the European Economic Area may subject us to the General Data Protection Regulation.

 

If we conduct clinical trial programs or enter into research collaborations in the European Economic Area, or EEA, we may be subject to the General Data Protection regulation, or GDPR. The GDPR applies extraterritorially and implements stringent operational requirements for processors and controllers of personal data, including, for example, high standards for obtaining consent from individuals to process their personal data, robust disclosures to individuals, a comprehensive individual data rights regime, data export restrictions governing transfers of data from the EEA/European Union, or EU, to other jurisdictions, short timelines for data breach notifications, limitations on retention of information, increased requirements pertaining to health data, other special categories of personal data and coded data and additional obligations if we contract third-party processors in connection with the processing of personal data. The United Kingdom has implemented its own version of the GDPR, which contains similar requirements. The GDPR provides that EU member states may establish their own laws and regulations limiting the processing of personal data, including genetic, biometric or health data, which could limit our ability to use and share personal data or could cause our costs to increase. If our or our partners’ or service providers’ privacy or data security measures fail to comply with the GDPR requirements, we may be subject to litigation, regulatory investigations, enforcement notices requiring us to change the way we use personal data and/or fines of up to 20 million Euros or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, as well as compensation claims by affected individuals, negative publicity, reputational harm and a potential loss of business and goodwill.

 

 

Our product candidates may be subject to government price controls that may affect our revenue.

 

There has been heightened governmental scrutiny in the United States and abroad of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. In the United States, such scrutiny has resulted in several recent Congressional inquiries and proposed and enacted federal legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the state level, legislatures have become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access, and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Outside of the United States, particularly in the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain coverage and reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our current in-development products or our future product candidates to other available therapies. If reimbursement of our product candidates is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed.

 

If we fail to comply with environmental, health, and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

 

We are subject to numerous environmental, health, and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment, and disposal of hazardous materials and wastes. Our operations involve the use of hazardous materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

 

Although we maintain workers’ compensation insurance to cover us for costs and expenses, we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological or hazardous materials.

 

In addition, we may incur substantial costs in order to comply with current or future environmental, health, and safety laws and regulations. These current or future laws and regulations may impair our research, development, or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

 

We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic and international markets. We can face criminal liability and other serious consequences for violations, which can harm our business.

 

We are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and other state and national anti-bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors, and other collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector.

 

We may engage third parties to sell our current in-development products or our future product candidates outside the United States, to conduct clinical trials, and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations. We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors, and other collaborators, even if we do not explicitly authorize or have actual knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract, and fraud litigation, reputational harm, and other consequences.

 

 

We rely, and expect to continue to rely, on third parties to conduct, supervise, and monitor our preclinical studies and clinical trials. If those third parties do not perform satisfactorily, including failing to meet deadlines for the completion of such trials or failing to comply with regulatory requirements, we may be unable to obtain regulatory approval for our product candidates or any other product candidates that we may develop in the future.

 

We rely, and will rely, on third-party CROs, study sites and others to conduct, supervise, and monitor our preclinical studies and clinical trials for our product candidates. We expect to continue to rely on third parties, such as CROs, clinical data management organizations, medical institutions, and clinical investigators, to conduct our preclinical studies and clinical trials. Although we have agreements governing their activities, we have limited influence over their actual performance and control only certain aspects of their activities. The failure of these third parties to successfully carry out their contractual duties or meet expected deadlines could substantially harm our business because we may be delayed in completing or unable to complete the studies required to support future approval of our product candidates, or we may not obtain marketing approval for or commercialize our product candidates in a timely manner or at all. Moreover, these agreements might terminate for a variety of reasons, including a failure to perform by the third parties. If we need to enter into alternative arrangements, our product development activities would be delayed and our business, financial condition, results of operations, stock price and prospects may be materially harmed.

 

Our reliance on these third parties for development activities will reduce our control over these activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards and our reliance on third parties does not relieve us of our regulatory responsibilities. For example, we will remain responsible for ensuring that each of our trials is conducted in accordance with the general investigational plan and protocols for the trial. We must also ensure that our preclinical trials are conducted in accordance with the FDA’s Good Laboratory Practice (GLP) regulations, as appropriate. Moreover, the FDA and comparable foreign regulatory authorities require us to comply with standards, commonly referred to as GCP guidelines, for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity, and confidentiality of trial participants are protected. Regulatory authorities enforce these requirements through periodic inspections of trial sponsors, clinical investigators, and trial sites. If we or any of our third parties fail to comply with applicable GCPs or other regulatory requirements, we or they may be subject to enforcement or other legal actions. For example, the data generated in our trials may not have been appropriately collected or documented, and thereby be deemed unreliable and the FDA or comparable foreign regulatory authorities may conclude the study findings are not adequate and require us to perform additional studies.

 

 

In addition, we will be required to report certain financial interests of our third-party investigators if these relationships exceed certain financial thresholds or meet other criteria. The FDA or comparable foreign regulatory authorities may question the integrity of the data from those clinical trials conducted by investigators who may have conflicts of interest.

 

We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our trials complies with the applicable regulatory requirements. In addition, our clinical trials must be conducted with product candidates that were produced under cGMP regulations. Failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. We also are required to register certain clinical trials and post the results of certain completed clinical trials on one or more government-sponsored databases, e.g., ClinicalTrials.gov, within specified timeframes. Failure to do so can result in enforcement actions and adverse publicity.

 

The third parties with which we work may also have relationships with other entities, some of which may be our competitors, for whom they may also be conducting trials or other therapeutic development activities that could harm our competitive position. In addition, such third parties are not our employees, and except for remedies available to us under our agreements with such third parties we cannot control whether or not they devote sufficient time and resources to our ongoing clinical, non-clinical, and preclinical programs. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our preclinical studies or clinical trials in accordance with regulatory requirements or our stated protocols, if they need to be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our protocols, regulatory requirements or for other reasons, our trials may be repeated, extended, delayed, or terminated; we may not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates; we may not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates; or we or they may be subject to regulatory enforcement actions. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed. To the extent we are unable to successfully identify and manage the performance of third-party service providers in the future, our business, financial condition, results of operations, stock price and prospects may be materially harmed.

 

If any of our relationships with these third parties terminate, we may not be able to enter into arrangements with alternative providers or to do so on commercially reasonable terms. Switching or adding additional third parties involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new third party commences work. As a result, delays could occur, which could compromise our ability to meet our desired development timelines.

 

We will also rely on other third parties to store and distribute our product candidates for the clinical trials that we conduct. Any performance failure on the part of our distributors could delay clinical development, marketing approval, or commercialization of our product candidates, which could result in additional losses and deprive us of potential product revenue.

 

We have entered into, and may in the future enter into, certain collaboration agreements and strategic alliances to maximize the potential of our product candidates, and we may not realize the anticipated benefits of such collaborations or alliances. We expect to continue to form collaborations in the future with respect to our product candidates, but may be unable to do so or to realize the potential benefits of such transactions, which may cause us to alter or delay our development and commercialization plans.

 

We may form or seek other strategic alliances, joint ventures, or collaborations, or enter into additional licensing arrangements with third parties that we believe will complement or augment our development and commercialization efforts with respect to product candidates we develop. These transactions can entail numerous operational and financial risks, including exposure to unknown liabilities, disruption of our business and diversion of our management’s time and attention in order to manage a collaboration. We also cannot be certain that, following a strategic transaction or license, we will achieve the revenue or other anticipated benefits that led us to enter into the arrangement. Additionally, the success of any collaboration arrangements may depend on the efforts and activities of our collaborators. Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these arrangements. Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters can lead to delays in the development process or commercializing the applicable product candidate and, in some cases, termination of the collaboration arrangement. These disagreements can be difficult to resolve if neither of the parties has final decision-making authority.

 

If we are not able to establish future collaborations on commercially reasonable terms, we may have to alter our development and commercialization plans for one or more of our other development programs.

 

We face significant competition in seeking appropriate additional collaborators. Our ability to reach a definitive agreement for any collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.

 

If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms, or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our product platform and our business may be materially and adversely affected.

 

 

Our current and any future collaborations are not a guarantee of success, and all collaborations are as risky, or riskier, than undertaking the activities ourselves.

 

	●	collaborators may not perform their obligations as expected;
	●	collaborators may not pursue development and commercialization of product candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;
	●	collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
	●	collaborators could fail to make timely regulatory submissions for a product candidate;
	●	collaborators may not comply with all applicable regulatory requirements or may fail to report safety data in accordance with all applicable regulatory requirements, which could subject them or us to regulatory enforcement actions;
	●	collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;
	●	product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates;
	●	a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product candidate or product;
	●	disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time consuming and expensive;
	●	collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation; and
	●	collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability.

 

In addition, all of the risks relating to product development, regulatory approval and commercialization described in this prospectus also apply to the activities of any of our current or future collaborators.

 

Collaborations with biopharmaceutical companies and other third parties often are terminated or allowed to expire by the other party. Any such termination or expiration could adversely affect us financially and could harm our business reputation.

 

If any collaborations we have entered into or might enter into do not result in the successful development and commercialization of products or if one of our collaborators subsequently terminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under such collaboration. If we do not receive the funding we expect under the agreements, our development of our product candidates could be delayed and we may need additional resources to develop our product candidates and our product platform.

 

 

Additionally, if any collaborator of ours is involved in a business combination, the collaborator might deemphasize or terminate development or commercialization of any product candidate licensed to it by us. If one of our collaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and our reputation in the business and financial communities could be adversely affected.

 

We face significant competition in seeking appropriate collaborators. Our ability to reach a definitive agreement for any collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.

 

If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms, or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our product platform and our business may be materially and adversely affected.

 

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business.

 

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

 

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

 

Separately, the FDA and regulatory authorities outside the United States have and may adopt restrictions or other policy measures in response to the COVID-19 pandemic that divert resources and delay their attention to any submissions we may make. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

 

Risks Related to Commercialization

 

There is no assurance that we will be able to obtain FDA approval and, even if we do, there is no assurance that either we, or our collaboration partners, will be successful in commercializing any product candidate for which we receive regulatory approval, or experience significant delays in doing so, our business will be materially harmed.

 

Even if we obtain FDA approval, there is no assurance that we, or our collaboration partners, will be successful in obtaining marketing approval from applicable regulatory authorities for ENV 105 or any other product candidate. Our ability to generate revenues from any such products will depend on our success in:

 

	●	Successfully completing our Phase 1 and Phase 2 clinical trials and obtaining FDA approval for our product candidates;
	●	launching commercial sales of such products, whether alone or in collaboration with others;
	●	receiving approved labels with claims that are necessary or desirable for successful marketing, and that do not contain safety or other limitations that would impede our ability to market such products;
	●	creating market demand for such products through marketing, sales and promotion activities;
	●	hiring, training, and deploying a sales force or contracting with third parties to commercialize such products in the United States;
	●	creating partnerships with, or offering licenses to, third parties to promote and sell such products in foreign markets where we receive marketing approval;
	●	manufacturing such products in sufficient quantities and at acceptable quality and cost to meet commercial demand at launch and thereafter;

 

 

	●	establishing and maintaining agreements with wholesalers, distributors, and group purchasing organizations on commercially reasonable terms;
	●	maintaining patent and trade secret protection and regulatory exclusivity for such products;
	●	achieving market acceptance of such products by patients, the medical community, and third-party payors;
	●	achieving coverage and adequate reimbursement from third-party payors for such products;
	●	achieving patients’ willingness to pay out-of-pocket in the absence of such coverage and adequate reimbursement from third-party payors;
	●	competing effectively with other therapies; and
	●	maintaining a continued acceptable safety profile of such products following launch.

 

To the extent we are not able to do any of the foregoing, our business, financial condition, results of operations, stock price and prospects will be materially harmed.

 

We face significant competition from other biopharmaceutical and biotechnology companies, academic institutions, government agencies, and other research organizations, which may result in others discovering, developing or commercializing products more quickly or marketing them more successfully than us. If their product candidates are shown to be safer or more effective than ours, our commercial opportunity may be reduced or eliminated.

 

The development and commercialization of cancer resistance products and immunotherapy products is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary rights. We face competition with respect to our current product candidates, and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major biopharmaceutical companies, specialty biopharmaceutical companies, and biotechnology companies worldwide. Potential competitors also include academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, and commercialization.

 

While certain of our product candidates may be used in combination with other drugs with different mechanisms of action, if and when marketed they will still compete with a number of drugs that are currently marketed or in development that also target cancer. To compete effectively with these drugs, our product candidates will need to demonstrate advantages in clinical efficacy and safety compared to these competitors when used alone or in combination with other drugs.

 

Our commercial opportunities could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are easier to administer or are less expensive alone or in combination with other therapies than any products that we may develop alone or in combination with other therapies. Our competitors also may obtain FDA or comparable foreign regulatory authorities’ approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by third-party payors’ coverage and reimbursement decisions.

 

Many of the companies with which we are competing or may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we do. Mergers and acquisitions in the biopharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in developing or acquiring technologies complementary to, or necessary for, our programs. If we are unable to successfully compete with these companies our business, financial condition, results of operations, stock price and prospects may be materially harmed.

 

 

If we are unable to establish effective marketing, sales and distribution capabilities or enter into agreements with third parties to market and sell our product candidates, if they are approved, the revenues that we generate may be limited and we may never become profitable.

 

We currently do not have a commercial infrastructure for the marketing, sale, and distribution of any products that we may develop. If and when our product candidates receive marketing approval, we intend to commercialize our product candidates on our own or in collaboration with others and potentially with pharmaceutical or biotechnology partners in other geographies. In order to commercialize our products, we must build our marketing, sales, and distribution capabilities or make arrangements with third parties to perform these services. We may not be successful in doing so. Should we decide to move forward in developing our own marketing capabilities, we may incur expenses prior to product launch or even approval in order to recruit a sales force and develop a marketing and sales infrastructure. If a commercial launch is delayed as a result of the FDA or comparable foreign regulatory authority requirements or other reasons, we would incur these expenses prior to being able to realize any revenue from sales of our product candidates. Even if we are able to effectively hire a sales force and develop a marketing and sales infrastructure, our sales force and marketing teams may not be successful in commercializing our product candidates. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

 

We may also or alternatively decide to collaborate with third-party marketing and sales organizations to commercialize any approved product candidates, in which event, our ability to generate product revenues may be limited. To the extent we rely on third parties to commercialize any products for which we obtain regulatory approval, we may receive less revenues than if we commercialized these products ourselves, which could materially harm our prospects. In addition, we would have less control over the sales efforts of any other third parties involved in our commercialization efforts, and could be held liable if they failed to comply with applicable legal or regulatory requirements.

 

We have no prior experience in the marketing, sale, and distribution of biopharmaceutical products, and there are significant risks involved in building and managing a commercial infrastructure. The establishment and development of commercial capabilities, including compliance plans, to market any products we may develop will be expensive and time consuming and could delay any product launch, and we may not be able to successfully develop this capability. We will have to compete with other biopharmaceutical and biotechnology companies, including oncology-focused companies, to recruit, hire, train, manage, and retain marketing and sales personnel, which is expensive and time consuming and could delay any product launch. Developing our sales capabilities may also divert resources and management attention away from product development.

 

In the event we are unable to develop a marketing and sales infrastructure, we may not be able to commercialize our product candidates, which could limit our ability to generate product revenues and materially harm our business, financial condition, results of operations, stock price and prospects. Factors that may inhibit our efforts to commercialize our product candidates include:

 

	●	the inability to recruit, train, manage, and retain adequate numbers of effective sales and marketing personnel;
	●	the inability of sales personnel to obtain access to physicians or educate adequate numbers of physicians on the benefits of prescribing our product candidates;
	●	our inability to effectively oversee a geographically dispersed sales and marketing team;
	●	the costs associated with training personnel, including sales and marketing personnel, on compliance matters and monitoring their actions;
	●	an inability to secure coverage and adequate reimbursement by third-party payors, including government and private health plans;
	●	the unwillingness of patients to pay out-of-pocket in the absence of coverage and adequate reimbursement from third-party payors;
	●	the clinical indications for which the products are approved and the claims that we may make for the products;
	●	limitations or warnings, including distribution or use restrictions, contained in the products’ approved labeling;
	●	any distribution and use restrictions imposed by the FDA or comparable foreign regulatory authorities or to which we agree as part of a mandatory REMS or voluntary risk management plan;
	●	liability for our personnel, including sales or marketing personnel, who fail to comply with applicable law;
	●	the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and
	●	unforeseen costs and expenses associated with creating an independent sales and marketing organization or engaging a contract sales organization.

 

 

Even if any of our product candidates receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, hospitals, cancer treatment centers, third-party payors and others in the medical community necessary for commercial success. The revenues that we generate from their sales may be limited, and we may never become profitable.

 

We have never commercialized a product candidate for any indication. Even if our product candidates are approved by the appropriate regulatory authorities for marketing and sale, they may not gain acceptance among physicians, patients, third-party payors, and others in the medical community. If any product candidates for which we obtain regulatory approval does not gain an adequate level of market acceptance, we could be prevented from or significantly delayed in achieving profitability. Market acceptance of our product candidates by the medical community, patients, and third-party payors will depend on a number of factors, some of which are beyond our control. For example, physicians are often reluctant to switch their patients and patients may be reluctant to switch from existing therapies even when new and potentially more effective or safer treatments enter the market.

 

Efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may not be successful. If any of our product candidates is approved but does not achieve an adequate level of market acceptance, we could be prevented from or significantly delayed in achieving profitability. The degree of market acceptance of any product for which we receive marketing approval will depend on a number of factors, including:

 

	●	the efficacy of our product, including in combination with other cancer therapies;
	●	the commercial success of any cancer therapies with which our product may be co-administered;
	●	the prevalence and severity of adverse events associated with our product or those products with which it is co-administered;
	●	the clinical indications for which our product is approved and the approved claims that we may make with respect to the product;
	●	limitations or warnings contained in the FDA-approved labeling of the product or the labeling approved by comparable foreign regulatory authorities, including potential limitations or warnings for our product that may be more restrictive than other competitive products;
	●	changes in the standard of care for the targeted indications for our product, which could reduce the marketing impact of any claims that we could make following FDA approval or approval by comparable foreign regulatory authorities, if obtained;
	●	the relative convenience and ease of administration of our product and any products with which it is co-administered;
	●	the cost of treatment compared with the economic and clinical benefit of alternative treatments or therapies;
	●	the availability of coverage and adequate reimbursement by third-party payors, such as private insurance companies and government healthcare programs, including Medicare and Medicaid;
	●	the ability to have our product placed on approved formularies;
	●	patients’ willingness to pay out-of-pocket in the absence of such coverage and adequate reimbursement from third-party payors;
	●	the price concessions required by third-party payors to obtain coverage and adequate reimbursement;
	●	the extent and strength of our marketing and distribution of our product;
	●	the safety, efficacy, and other potential advantages over, and availability of, alternative treatments already used or that may later be approved;
	●	distribution and use restrictions imposed by the FDA or comparable foreign regulatory authorities with respect to our product or to which we agree as part of a REMS or voluntary risk management plan;
	●	the timing of market introduction of our product, as well as competitive products;
	●	our ability to offer our product for sale at competitive prices;
	●	the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
	●	the extent and strength of our raw material supplier and service provider support;

 

 

	●	the actions of companies that market any products with which our product is co-administered;
	●	the approval of other new products;
	●	adverse publicity about our product or any products with which it is co-administered, or favorable publicity about competitive products; and
	●	potential product liability claims.

 

The size of the potential market for our product candidates is difficult to estimate and, if any of our assumptions are inaccurate, the actual markets for our product candidates may be smaller than our estimates. If the market opportunities for any product candidates we develop are smaller than we believe they are, our potential revenues may be adversely affected, and our business may suffer.

 

The potential market opportunities for our product candidates are difficult to estimate and will depend in large part on the drugs with which our product candidates are co-administered and the success of competing therapies and therapeutic approaches. In particular, the market opportunity for cancer resistance drugs is hard to estimate given that it is an emerging field. Our projections of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are based on estimates. Our estimates of the potential market opportunities are predicated on many assumptions, which may include industry knowledge and publications, third-party research reports, and other surveys. Although we believe that our internal assumptions are reasonable, these assumptions involve the exercise of significant judgment on the part of our management, are inherently uncertain, and their reasonableness has not been assessed by an independent source. These estimates may prove to be incorrect and new studies may change the estimated incidence or prevalence of these diseases. The number of patients in the United States, Europe, and elsewhere may turn out to be lower than expected, and patients may not be amenable to treatment with our product. If any of the assumptions proves to be inaccurate, the actual markets for our product candidates could be smaller than our estimates of the potential market opportunities. Additionally, because of the potential that any product candidates we develop could cure a target disease, we may not receive recurring revenues from patients and may deplete the patient population prevalence through curative therapy.

 

Risks Related to Government Regulation

 

If we fail to comply with federal and state healthcare laws, including fraud and abuse laws, we could face substantial penalties and our business, financial condition, results of operations, stock price and prospects will be materially harmed.

 

Our current and future arrangements with healthcare providers, third-party payors, customers, and others may expose us to broadly applicable healthcare fraud and abuse, and other healthcare laws, which may constrain the business or financial arrangements and relationships through which we research, as well as sell, market and distribute any products for which we obtain marketing approval. The applicable federal, state and foreign healthcare laws and regulations that may affect our ability to operate include, but are not limited to:

 

 

	●	The federal Anti-Kickback Statute, which prohibits, among other things, individuals and entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs.
	●	The federal civil and criminal false claims laws, including, without limitation, the civil FCA, and the federal Civil Monetary Penalties Law, which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment of federal funds, and knowingly making, or causing to be made, a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government.
	●	The Health Insurance Portability and Accountability Act of 1996 (HIPAA), which prohibits, among other things, knowingly and willfully executing, or attempting to execute, a scheme or artifice to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private), willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false, fictitious or fraudulent statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters.
	●	The U.S. Federal Food, Drug and Cosmetic Act, which prohibits, among other things, the adulteration or misbranding of drugs, biological products and medical devices.

 

 

	●	The federal physician payment transparency requirements, sometimes referred to as the Physician Payments Sunshine Act, created under the ACA and its implementing regulations, which require certain manufacturers of drugs, devices, biological products and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the Centers for Medicare & Medicaid Services (CMS) information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, as well as ownership and investment interests held by such physicians and their immediate family members.
	●	Analogous state and foreign anti-kickback and false claims laws that may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, or that apply regardless of payor; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; state and local laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state laws that require the reporting of information related to drug pricing; and state and local laws requiring the registration of pharmaceutical sales representatives.

 

If we or our operations are found to be in violation of any federal or state healthcare law, or any other governmental laws or regulations that apply to us, we may be subject to penalties, including significant civil, criminal, and administrative penalties, damages, monetary fines, disgorgement, imprisonment, suspension and debarment from government contracts, and refusal of orders under existing government contracts, exclusion from participation in U.S. federal or state health care programs, additional reporting requirements and/or oversight if we become subject to corporate integrity agreements or similar agreement to resolve allegations of non-compliance, contractual damages, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could materially adversely affect our ability to operate our business and our financial results. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, it may be subject to significant criminal, civil or administrative sanctions, including but not limited to, exclusions from participation in U.S. federal or state healthcare programs, which could also materially affect our business.

 

Although an effective compliance program can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Moreover, achieving and sustaining compliance with such laws may prove costly. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.

 

If the government or third-party payors fail to provide adequate coverage, reimbursement and payment rates for our product candidates, or if health maintenance organizations or long-term care facilities choose to use therapies that are less expensive or considered a better value, our revenue and prospects for profitability will be limited.

 

In both domestic and foreign markets, sales of our products will depend in part upon the availability of coverage and adequate reimbursement from third-party payors or placement on approved product formularies. Such third-party payors include government health programs such as Medicare and Medicaid, managed care providers, private health insurers, and other organizations. Coverage decisions may depend upon clinical and economic standards that disfavor new therapeutic products when more established or lower cost therapeutic alternatives are already available or subsequently become available, even if our products are alone in a class. Third-party payors establish reimbursement levels. Therefore, even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain a market share sufficient to realize a sufficient return on our or their investments. If reimbursement is not available, or is available only to limited levels, our product candidates may be competitively disadvantaged, and we may not be able to successfully commercialize our product candidates. Alternatively, securing favorable reimbursement terms may require us to compromise pricing and prevent us from realizing an adequate margin over cost. Our failure to obtain or maintain timely or adequate pricing or formulary placement of our products, or failure to obtain such formulary placement at favorable pricing may negatively impact our revenue.

 

There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved therapeutics. Marketing approvals, pricing, and reimbursement for new therapeutic products vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a therapeutic before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription biopharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods, which may negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval. Our ability to commercialize our product candidates will depend in part on the extent to which coverage and reimbursement for these products and related treatments will be available from third-party payors.

 

 

A significant trend within the healthcare industry is cost containment, both in the United States and elsewhere. Third-party payors, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs, including use of formularies. Exclusion of a product from a formulary or other restrictions can significantly impact drug usage in the patient population and beyond. Consequently, pharmaceutical companies compete to gain access to formularies for their products, typically on the basis of unique product features, such as greater efficacy, better patient ease of use, or fewer side effects, as well as the overall cost of the therapy. Certain third-party payors are requiring that companies provide them with predetermined discounts from list prices, are using preferred drug lists to leverage greater discounts in competitive classes, are disregarding therapeutic differentiators within classes, are challenging the prices charged for therapeutics, and are negotiating price concessions based on performance goals. In addition, third-party payors are increasingly requiring higher levels of evidence of the benefits and clinical outcomes of new technologies, benchmarking against other therapies, seeking performance-based discounts, and challenging the prices charged. We cannot be sure that coverage will be available for any product candidate that we commercialize and, if available, that the reimbursement rates will be adequate. If payors subject our product candidates to maximum payment amounts, or impose limitations that make it difficult to obtain reimbursement, providers may choose to use therapies which are less expensive when compared to our product candidates. Additionally, if payors require high copayments, beneficiaries may seek alternative therapies. We may need to conduct post-marketing studies in order to demonstrate the cost-effectiveness of any products to the satisfaction of hospitals, other target customers and their third-party payors. Such studies might require us to commit a significant amount of management time and financial and other resources. Our products might not ultimately be considered cost-effective. Adequate third-party coverage and reimbursement might not be available to enable us to maintain price levels sufficient to realize an appropriate return on investment in product development.

 

In addition, in the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. Further, we believe that future coverage and reimbursement will likely be subject to increased restrictions both in the United States and in international markets. Third-party coverage and reimbursement for our products or product candidates for which we receive regulatory approval may not be available or adequate in either the United States or international markets, which could have a negative effect on our business, financial condition, results of operations, stock price and prospects.

 

There may also be delays in obtaining coverage and reimbursement for newly approved therapeutics, and coverage may be more limited than the indications for which the product is approved by the FDA or comparable foreign regulatory authorities. Such delays have made it increasingly common for manufacturers to provide newly approved drugs to patients experiencing coverage delays or disruption at no cost for a limited period in order to ensure that patients are able to access the drug. Moreover, eligibility for reimbursement does not imply that any therapeutic will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale, and distribution. Interim reimbursement levels for new therapeutics, if applicable, may also not be sufficient to cover our costs and may only be temporary. Reimbursement rates may vary, by way of example, according to the use of the product and the clinical setting in which it is used. Reimbursement rates may also be based on reimbursement levels already set for lower cost products or may be incorporated into existing payments for other services.

 

An inability to promptly obtain coverage and adequate reimbursement from third-party payors for any of our product candidates for which we obtain marketing approval could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

 

We are subject to new legislation, regulatory proposals and third-party payor initiatives that may increase our costs of compliance, and adversely affect our ability to market our products, obtain collaborators, and raise capital.

 

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any products for which we obtain marketing approval. We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we may receive for any approved products.

 

For example, the ACA was passed in March 2010 and substantially changed the way healthcare is financed by both governmental and private insurers, and continues to significantly impact the United States pharmaceutical industry.

 

There have been executive, judicial and congressional challenges to certain aspects of the ACA. For example, legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act of 2017 (the Tax Act), includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” On June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Thus, the ACA will remain in effect in its current form. Further, prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. In addition, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the IRA) into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost through a newly established manufacturer discount program. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how any such challenges and the healthcare reform measures of the Biden administration will impact the ACA and our business.

 

 

Other legislative changes have been proposed and adopted in the United States since the ACA. For example, through the process created by the Budget Control Act of 2011, there are automatic reductions of Medicare payments to providers up to 2% per fiscal year, which went into effect in April 2013 and, following passage of the Bipartisan Budget Act of 2018 (BBA) and the Infrastructure Investment and Jobs Act, will remain in effect until 2031 unless additional Congressional action is taken. However, COVID-19 relief support legislation suspended the 2% Medicare sequester from May 1, 2020 through March 31, 2022. Under current legislation the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester.

 

In addition, there have been a number of other legislative and regulatory proposals aimed at changing the biopharmaceutical industry. For instance, the Drug Quality and Security Act of 2013 imposes obligations on manufacturers of biopharmaceutical products related to product tracking and tracing. Further, manufacturers have product investigation, quarantine, disposition, and notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products that would result in serious adverse health consequences of death to humans, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death.

 

Compliance with the federal track and trace requirements may increase our operational expenses and impose significant administrative burdens. As a result of these and other new proposals, we may determine to change our current manner of operation, provide additional benefits or change our contract arrangements, any of which could have a material adverse effect on our business, financial condition, results of operations, stock price and prospects.

 

There has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biological products. Such scrutiny has resulted in presidential executive orders, congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products.

 

At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that attempt to implement several of the administration’s proposals. The FDA concurrently released a final rule and guidance in September 2020, implementing a portion of the importation executive order providing pathways for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, the U.S. Department of Health and Human Services (HHS) finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. The implementation of the rule has been delayed until 2032. In July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. In addition, the IRA directs the Secretary of HHS to establish a Drug Price Negotiation Program (the Program) to lower prices for certain single-source prescription drugs and biologics covered under Medicare Parts B and D, based on criteria established under the IRA. Under the Program, the Secretary of HHS will publish a list of “selected drugs,” and will then negotiate maximum fair prices (MFP) with their manufacturers. Beginning in 2026, the first year of the Program, the number will be limited to 10 Part D drugs and biologics. By 2029, and in subsequent years thereafter, the number will increase to 20 drugs and biologics covered under Part D and Part B. Agreements between HHS and manufacturers will remain in place until a drug or biologic is no longer considered a “selected drug” for negotiation purposes. Manufacturers who do not comply with the negotiated prices set under the Program will be subject to an excise tax based on a percentage of total sales of a “selected drug” up to 95% and the potential of civil monetary penalties. Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.

 

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

 

Any new laws or regulations, including those that may result in additional reductions in Medicare and other healthcare funding, could have a material adverse effect on customers for our products, if approved, and, accordingly, on our results of operations.

 

 

We expect that the ACA, as well as other federal and state healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria, increased regulatory burdens and operating costs, decreased net revenue from our biopharmaceutical products, decreased potential returns from our development efforts, and additional downward pressure on the price that we receive for any approved product. It is also possible that additional governmental action is taken in response to the COVID-19 pandemic. Any reduction in reimbursement from Medicare or other government healthcare programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from commercializing our products and being able to generate revenue, and we could be prevented from or significantly delayed in achieving profitability.

 

We are subject to the U.S. Foreign Corrupt Practices Act and other anti-corruption laws, as well as import and export control laws, customs laws, sanctions laws and other laws governing our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, and other consequences, which could adversely affect our business, financial condition, results of operations, stock price and prospects.

 

Our operations are subject to anti-corruption laws, including the U.S. Foreign Corrupt Practices Act (FCPA) and other anti-corruption laws that apply in countries where we do business. The FCPA and these other anti-corruption laws generally prohibit us and our employees and intermediaries from authorizing, promising, offering, providing, soliciting, or receiving, directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector. We can be held liable for the corrupt or other illegal activities of our personnel or intermediaries, even if we do not explicitly authorize or have prior knowledge of such activities.

 

We are also subject to other laws and regulations governing our international operations, including applicable import and export control regulations, economic sanctions on countries and persons, anti-money laundering laws, customs requirements and currency exchange regulations, collectively referred to as the trade control laws.

 

We can provide no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws or other legal requirements, including trade control laws. If we are not in compliance with applicable anti-corruption laws or trade control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations, stock price and prospects. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted. An investigation of any potential violations of anti-corruption laws or trade control laws by U.S. or other authorities could also have an adverse impact on our reputation, our business, financial condition, results of operations, stock price and prospects.

 

We are subject to stringent and evolving U.S. and foreign laws, regulations, rules, contractual obligations, policies and other obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.

 

In the ordinary course of business, we process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, processing) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, data we collect about trial participants in connection with clinical trials, sensitive third-party data, and patient information. Our data processing activities may subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contracts, and other obligations that govern the processing of personal data by us and on our behalf.

 

We may be subject to or affected by evolving federal, state and foreign data protection laws and regulations, such as laws and regulations that address privacy and data security. In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, and consumer protection laws (e.g. Section 5 of the Federal Trade Commission Act). For example, HIPAA as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH), imposes specific requirements relating to the privacy, security, and transmission of individually identifiable health information. We may obtain health information or other personal information from third parties, including research institutions from which we obtain clinical trial data, that are subject to privacy and security requirements under HIPAA. While we do not believe that we are currently acting as a covered entity or business associate under HIPAA and thus are not directly regulated under HIPAA, any person may be prosecuted under HIPAA’s criminal provisions if it knowingly receives individually identifiable health information from a HIPAA-covered healthcare provider or research institution that has not satisfied HIPAA’s requirements for disclosure of individually identifiable health information under aiding-and-abetting or conspiracy principles.

 

 

Certain states have also adopted data privacy and security laws and regulations, which govern the privacy, processing and protection of health-related and other personal information. Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future customers and strategic partners. For example, the California Consumer Privacy Act of 2018 (CCPA) imposes obligations on covered businesses. These obligations include, but are not limited to, providing specific disclosures in privacy notices and affording California residents certain rights related to their personal data. The CCPA allows for statutory fines for noncompliance (up to $7,500 per violation). Although the CCPA exempts some data processed in the context of clinical trials, the CCPA may increase compliance costs and potential liability with respect to other personal data we may maintain about California residents. In addition, it is anticipated that the California Privacy Rights Act of 2020 (CPRA), effective January 1, 2023, would expand the CCPA. The CPRA establishes a new California Privacy Protection Agency to implement and enforce the CPRA, which could increase the risk of enforcement. Other states have enacted data privacy laws. For example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act, both of which became effective in 2023. In addition, data privacy and security laws have been proposed at the federal, state, and local levels in recent years, which could further complicate compliance efforts.

 

Outside the United States, an increasing number of laws, regulations, and industry standards apply to data privacy and security. For example, the European Union’s General Data Protection Regulation (EU GDPR), the United Kingdom’s GDPR (UK GDPR), and the Swiss Federal Act on Data Protection impose strict requirements for processing personal data. For example, under the EU GDPR, government regulators may impose temporary or definitive bans on data processing, as well as fines of up to 20 million euros or 4% of annual global revenue, whichever is greater. Further, individuals or consumer protection organizations authorized at law to represent their interests may initiate litigation related to processing of individuals’ personal data.

 

Compliance with U.S. and foreign data protection laws and regulations could require us to take on more onerous obligations in our contracts, in addition to direct compliance obligations under those laws. We may be directly or contractually subject to data privacy and security obligations, including industry standards adopted by industry groups and may become subject to new data privacy and security obligations in the future. For example, certain privacy laws, such as the EU GDPR and the CCPA, require companies to impose specific contractual restrictions on their service providers. Moreover, clinical trial subjects about whom we or our potential collaborators obtain information, as well as the providers who share this information with us, may contractually limit our ability to use and disclose the information.

 

In the ordinary course of business, we may transfer personal data from Europe and other jurisdictions to the United States or other countries. Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries. In particular, Europe has significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it believes are inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws.

 

Although there are currently various mechanisms that may be used to transfer personal data from Europe to the United States in compliance with law, such as the EU and UK’s standard contractual clauses, these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States.

 

If there is no lawful manner for us to transfer personal data from Europe or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, which could limit our ability to conduct clinical trial activities in Europe or elsewhere, and injunctions against our processing or transferring of personal data necessary to operate our business. Some European regulators have prevented companies from transferring personal data out of Europe for allegedly violating the GDPR and EU’s cross-border data transfer limitations.

 

Obligations related to data privacy and security are quickly changing in an increasingly stringent fashion, creating some uncertainty as to the effective future legal framework. Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions. Preparing for and complying with these obligations requires significant resources and may necessitate changes to our information technologies, systems, and practices and to those of any third parties that process personal data on our behalf. Although we endeavor to comply with all applicable data privacy and security obligations, we may at times fail (or be perceived to have failed) to do so. We may also be bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful. Additionally, we publish privacy policies, self-certifications, and other documentation regarding our collection, use and disclosure of personal information and/or other confidential information. Although we endeavor to comply with our published policies, certifications, and documentation, we may at times fail to do so or may be perceived to have failed to do so. Moreover, despite our efforts, our personnel or third parties upon whom we rely may fail to comply with such obligations. Such failures can subject us to potential international, local, state and federal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices, which could negatively impact our business operations and compliance posture. For example, any failure by a third-party processor to comply with applicable law, regulations, or contractual obligations could result in adverse effects, including inability to or interruption in our ability to operate our business and proceedings against us by governmental entities or others. If we fail, or are perceived to have failed, to address or comply with data privacy and security obligations, we could face significant consequences. These consequences may include, but are not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-related claims); additional reporting requirements and/or oversight; bans on processing personal data; orders to destroy or not use personal data; and imprisonment of company officials. Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; interruptions or stoppages in our business operations (including, as relevant, clinical trials); inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or revision or restructuring of our operations.

 

 

Violations of or liabilities under environmental, health and safety laws and regulations could subject us to fines, penalties or other costs that could have a material adverse effect on the success of our business.

 

We are subject to numerous federal, state and local environmental, health and safety laws and regulations, including those governing laboratory procedures, the handling, use, storage, treatment and disposal of hazardous materials and wastes and the cleanup of contaminated sites. Our operations involve the controlled production, storage, use and disposal of hazardous and flammable materials, including chemicals and biological materials such as infectious agents and various radioactive compounds. We would incur substantial costs as a result of violations of or liabilities under environmental requirements in connection with our operations or property, including fines, penalties and other sanctions, investigation and cleanup costs and third-party claims. Although we generally contract with third parties for the disposal of hazardous materials and wastes from our operations, we cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties, as well as our curtailment of the use of these materials or even shutting down our facilities and operations.

 

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. While we maintain insurance covering our manufacturing facility only, and not our other facilities, for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological or hazardous materials, such insurance coverage may not be sufficient to cover extraordinary or unanticipated events at our manufacturing facility.

 

Risks Related to Ownership of Our Common Stock

 

If you purchase common stock in this offering, you will suffer immediate dilution of your investment.

 

The initial public offering price per share of our common stock is substantially higher than the pro forma as adjusted net tangible book value per share. Therefore, if you purchase common stock in this offering, you will pay a price per share that substantially exceeds our pro forma as adjusted net tangible book value per share after this offering. Based on an assumed initial public offering price of $____ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, you will experience immediate dilution of $____ per share, representing the difference between our pro forma as adjusted net tangible book value per share after this offering and the assumed initial public offering price per share. After this offering, we will also have outstanding options and warrants to purchase shares of our common stock, in some cases with exercise prices lower than the initial public offering price. To the extent these outstanding options or warrants are exercised, there will be further dilution to investors in this offering. For further information regarding the dilution resulting from this offering, see the section titled “Dilution” in this prospectus.

 

Future sales of our common stock, or the perception in the public markets that these sales may occur, could cause the market price for our common stock to decline.

 

Sales of a substantial number of shares of our common stock in the public market could occur at any time, subject to the restrictions and limitations described below. If our stockholders sell, or the market perceives that our stockholders intend to sell, substantial amounts of our common stock in the public market following this offering, the market price of our common stock could decline significantly.

 

Upon the closing of this offering, we will have ______outstanding shares of common stock[, after giving effect to the conversion of all ______ shares of our __________ into an equivalent number of shares of common stock], assuming no exercise of the underwriters’ over-allotment option and no exercise of outstanding options. Of these shares, the shares sold in this offering will be freely tradable and the remaining shares of common stock will be available for sale in the public market beginning after the end of the 180^th day after the date of this prospectus following the expiration of lock-up agreements between our stockholders and certain of the underwriters for this offering, subject, in the case of our affiliates, to the conditions of Rule 144 under the Securities Act. The representatives, on behalf of the underwriters, may release these stockholders from their lock-up agreements at any time and without notice, which would allow for earlier sales of shares in the public market subject to the conditions of Rule 144 under the Securities Act.

 

 

We have reserved 1,650,000 shares of common stock for issuance under our 2023 equity incentive plans (the “2023 Equity Incentive Plan”), of which we will issue a total of $150,000 in options to purchase shares of common stock to our independent directors upon completion of this initial public offering. We cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Sales of substantial amounts of shares of our common stock in the public market, or the perception that those sales will occur, could cause the market price of our common stock to decline.

 

In addition, promptly following the closing of this offering, we intend to file a registration statement on Form S-8 registering the shares of common stock subject to options or other equity awards issued or reserved for future issuance under our 2023 Equity Incentive Plan. Shares registered on Form S-8 will be available for sale in the public market subject to vesting arrangements and exercise of options, the lock-up agreements described above and, in the case of our affiliates, the restrictions of Rule 144 under the Securities Act.

 

Additionally, after this offering, the holders of an aggregate of shares of our common stock, or their transferees, will have rights, subject to some conditions, to require us to file one or more registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. If we were to register the resale of these shares, they could be freely sold in the public market without limitation. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

 

Financings could adversely affect common stock ownership interest and rights in comparison with those of other security holders.

 

Our board of directors, in accordance with our Certificate of Incorporation and Bylaws, has the power to issue additional shares of common stock or preferred stock without stockholder approval. If additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of our existing stockholders will be reduced, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.

 

Our board of directors may establish the rights, privileges, preferences and restrictions, including voting rights, of future series of stock and to issue such stock without approval from our shareholders. The rights of holders of common stock may suffer as a result of the rights granted to holders of preferred stock that may be issued in the future. In addition, we could issue preferred stock to prevent a change in control of our Company, depriving common shareholders of an opportunity to sell their stock at a price in excess of the prevailing market price.

 

If we issue any additional common stock or securities convertible into common stock, such issuance will reduce the proportionate ownership and voting power of each other stockholder. In addition, such stock issuances might result in a reduction of the per share book value of our common stock and result in what is more commonly known as dilution. We may issue further shares as consideration for the cash or assets or services out of our authorized but unissued common stock that would, upon issuance, represent a majority of the voting power and equity of our Company. The result of such an issuance would be those new stockholders and management would control our Company, and persons unknown could replace our management at that time. Such an occurrence would result in a greatly reduced percentage of ownership of our Company by our current stockholders, which could present significant risks to stockholders. The Company may raise capital in the futures in “down rounds” at a lower per share price than it’s the price in this offering or the trading price for our stock, which would be dilutive to prior investors, and there can be no assurance that future rounds will not be necessary that would be dilutive to investors in the current round. Investors may experience dilution in any future financing conducted by the Company.

 

We may not be able to satisfy listing requirements of Nasdaq or maintain a listing of our common stock on Nasdaq.

 

If our common stock is listed on Nasdaq, we must meet certain financial and liquidity criteria to maintain such listing. If we violate Nasdaq’s listing requirements, or if we fail to meet any of Nasdaq’s listing standards, our common stock may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common stock from Nasdaq may materially impair our stockholders’ ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. The delisting of our common stock could significantly impair our ability to raise capital and the value of your investment.

 

If our shares of common stock become subject to the penny stock rules, it would become more difficult to trade our shares.

 

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not retain a listing on Nasdaq or another national securities exchange and if the price of our common stock is less than $5.00, our common stock could be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.

 

While we will not be a controlled company following completion of our initial public offering, our Chairman of the board of directors presently has control over key decision making as a result of his control of a majority of our voting stock and exercises significant voting power.

 

Upon completion of this offering, John S. Yu, our Chairman, and CEO, will be able to exercise voting rights with respect to an aggregate of 5,316,572 shares of common stock, which represents approximately [___]% of the voting power of our outstanding capital stock. As a result, Dr. Yu has the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that our other stockholders support, or conversely this concentrated control could result in the consummation of such a transaction that our other stockholders do not support. This concentrated control could also discourage a potential investor from acquiring our common stock due to the limited voting power of such stock relative to the shares of common stock and might harm the market price of our common stock. In addition, Dr. Yu has the ability to control the management and major strategic investments of our company as a result of his position as our CEO and his ability to control the election or replacement of our directors. In the event of his death, the shares of our capital stock that Dr. Yu owns will be transferred to the persons or entities that he designates. As a board member and officer, Dr. Yu owes a fiduciary duty to our stockholders and must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders. As a stockholder, even a controlling stockholder, Dr. Yu is entitled to vote his shares in his own interests, which may not always be in the interests of our stockholders generally.

 

Concentration of ownership of our common stock among our existing executive officers, directors, and principal stockholders may prevent new investors from influencing significant corporate decisions and matters submitted to stockholders for approval.

 

Upon completion of this offering, our executive officers, directors, and current beneficial owners of 5% or more of our capital stock and their respective affiliates will, in the aggregate, beneficially own [*]% of our outstanding common stock, based on the number of shares of our capital stock outstanding as of June 8, 2023, assuming no exercise of the underwriters’ over-allotment option and no exercise of outstanding options. As a result, these persons, acting together, would be able to significantly influence all matters requiring stockholder approval, including the election and removal of directors, any merger, consolidation, or sale of all or substantially all of our assets, or other significant corporate transactions. In addition, these persons, acting together, may have the ability to control the management and affairs of our company. Accordingly, this concentration of ownership may harm the market price of our common stock by:

 

	●	delaying, deferring, or preventing a change in control;
	●	entrenching our management and/or the board of directors;
	●	impeding a merger, consolidation, takeover, or other business combination involving us; or
	●	discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

 

 

In addition, some of these persons or entities may have interests different than yours. For example, because many of these stockholders purchased their shares at prices substantially below the price at which shares are being sold in this offering and have held their shares for a longer period, they may be more interested in selling our company to an acquirer than other investors, or they may want us to pursue strategies that deviate from the interests of other stockholders.

 

Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

 

Provisions in our certificate of incorporation and our bylaws may discourage, delay or prevent a merger, acquisition, or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions also could limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:

 

	●	allow the authorized number of our directors to be changed only by resolution of our board of directors;
	●	limit the manner in which stockholders can remove directors from the board of directors;
	●	establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors;
	●	require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;
	●	limit who may call stockholder meetings;
	●	authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a stockholder rights plan, or so-called “poison pill,” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and
	●	require the approval of the holders of at least 66 2/3% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our charter or bylaws.

 

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or the DGCL, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired more than 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. These provisions could discourage potential acquisition proposals and could delay or prevent a change in control transaction. They could also have the effect of discouraging others from making tender offers for our common stock, including transactions that may be in your best interests. These provisions may also prevent changes in our management or limit the price that investors are willing to pay for our stock.

 

Our certificate of incorporation provides that unless we consent in writing to the selection of an alternative forum, and except for actions brought under the Securities Act or the Exchange Act, the Court of Chancery of the State of Delaware will be the exclusive forums for substantially all disputes between us and our stockholders. In addition, our exclusive forum provision may result in increased costs for investors to bring a claim.

 

Our certificate of incorporation provides that unless we consent in writing to the selection of an alternative forum, and except for actions brought under the Securities Act or the Exchange Act, the Court of Chancery of the State of Delaware is the exclusive forum for:

 

	●	any derivative action or proceeding brought on our behalf;
	●	any action asserting a breach of fiduciary duty;
	●	any action asserting a claim against us arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws,;
	●	any action or proceeding to interpret, apply, enforce, or determine the validity of our certificate of incorporation, or our bylaws; and
	●	any action asserting a claim against us or any of our directors, officers, employees, or agents that is governed by the internal-affairs doctrine.

 

 

Any person purchasing or otherwise acquiring or holding any interest in shares of our capital stock is deemed to have received notice of and consented to the foregoing provisions. These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds more favorable for disputes with us or with our directors, officers, other employees or agents, or our other stockholders, which may discourage such lawsuits against us and such other persons or may result in additional expense to a stockholder seeking to bring a claim against us. Alternatively, if a court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, results of operations, financial condition, and prospects. In addition, our exclusive forum provision may result in increased costs for investors to bring a claim.

 

The choice of forum provision in our certificate of incorporation specifically excludes actions brought under the Securities Act or Exchange Act. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Consequently, this forum selection provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction. Moreover, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

 

While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions. We note that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

 

We will have broad discretion in the use of proceeds from this offering and may invest or spend the proceeds in ways with which you do not agree and in ways that may not increase the value of your investment.

 

Our management will have broad discretion in the application of our cash, including the net proceeds from this offering, and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could have a negative impact on our business, cause the price of our common stock to decline, and delay the development of our current in-development products and planned pipeline and expansion programs as well as commercial preparedness. Pending their use, we may invest our cash, including the net proceeds from this offering, in a manner that does not produce value or that loses value. See the section titled “Use of Proceeds” for additional information.

 

We do not anticipate paying any cash dividends on our capital stock in the foreseeable future, and accordingly, stockholders must rely on capital appreciation, if any, for any return on their investment.

 

We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our existing operations. In addition, any future credit facility or debt securities may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. If we do not pay cash dividends, you could receive a return on your investment in our common stock only if you are able to sell your shares in the future and the market price of our common stock has increased when you sell your shares. As a result, investors seeking cash dividends should not purchase our common stock.

 

General Risk Factors

 

An active trading market for our common stock may not develop and you may not be able to resell your shares at or above the initial offering price, if at all.

 

This offering constitutes the initial public offering of our common stock, and no public market has previously existed for our common stock. We have applied to list our common stock on The Nasdaq Capital Market. Any delay in the commencement of trading of our common stock on The Nasdaq Capital Market would impair the liquidity of the market for the shares and make it more difficult for holders to sell their shares of our common stock. If our common stock is listed and quoted on The Nasdaq Capital Market, there can be no assurance that an active trading market for the shares will develop or be sustained after this offering is completed. The initial offering price will be determined by negotiations among the lead underwriters and us. Among the factors to be considered in determining the initial public offering price are our future prospects and the prospects of our industry in general, our financials and certain other financial and operating information in recent periods, and the market prices of securities and certain financial and operating information of companies engaged in activities similar to ours. However, there can be no assurance that, following the completion of this offering, the shares of our common stock will trade at a price equal to or greater than the public offering price.

 

 

The trading price of our common stock may be volatile, and you could lose all or part of your investment.

 

The trading price of our common stock following this offering is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume. The stock market in general and the market for biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their shares at or above the price paid for the shares. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this prospectus, these factors include:

 

	●	the commencement, enrollment, or results of our planned and future clinical trials;
	●	the loss of any of our key research, development, or management personnel;
	●	regulatory or legal changes or developments in the United States and other countries or in the status of our regulatory approvals;
	●	the success of competitive products or technologies;
	●	the emergence of new competitors or new technologies;
	●	our ability to develop and market new and enhanced products on a timely basis;
	●	adverse actions taken by regulatory agencies with respect to our clinical trials or manufacturers;
	●	changes or developments in laws or regulations applicable to our current in-development products or any future product candidates;
	●	changes to our relationships with collaborators, manufacturers, or suppliers;
	●	the results of our testing and clinical trials;
	●	disruption to our operations or those of other sources critical to our operations;
	●	unanticipated safety, tolerability, or efficacy concerns;
	●	announcements by us or our competitors of acquisitions, new products, significant contracts, commercial relationships or capital commitments;
	●	other announcements concerning our competitors or the pharmaceutical industry in general;
	●	actual or anticipated fluctuations in our operating results or those of our competitors;
	●	changes in financial estimates or recommendations by securities analysts;
	●	potential acquisitions;
	●	the results of our efforts to discover, develop, acquire, or in-license additional product candidates;
	●	commencement of, or our involvement in, litigation;
	●	dilutive issuances of our stock or the stock of our subsidiaries, or the incurrence of additional debt;
	●	changes in our board of directors or management;
	●	adoption of new or different accounting standards;
	●	the trading volume of our common stock on The Nasdaq Capital Market;
	●	sales of our common stock by us, our executive officers and directors or our stockholders or the anticipation that such sales may occur in the future;
	●	general economic, political, and market conditions and overall fluctuations in the financial markets in the United States or the United Kingdom (including those relating to macroeconomic events, such as the COVID-19 pandemic and the recent outbreak of hostilities between Russia and Ukraine);
	●	stock market price and volume fluctuations of comparable companies and, in particular, those that operate in the biopharmaceutical industry;
	●	general economic conditions and slow or negative growth of related markets; and
	●	investors’ general perception of us and our business.

 

These and other market and industry factors may cause the market price and demand for our common stock to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from selling their shares of our common stock at or above the price paid for the shares and may otherwise negatively affect the liquidity of our common stock. In addition, the stock market in general, and biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Some companies that have experienced volatility in the trading price of their shares have been the subject of securities class action litigation.

 

Any lawsuit to which we are a party, regardless of merit, may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our business practices.

 

Any lawsuit to which we are a party, regardless of the merit of such lawsuit, may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our business practices. Defending against litigation is costly and time-consuming and could divert our management’s attention and our resources. Furthermore, during the course of litigation, there could be negative public announcements of the results of hearings, motions, or other interim proceedings or developments, which could have a negative effect on the market price of our common stock.

 

 

If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about us, our business, or our market, our stock price and trading volume could decline.

 

The trading market for our common stock will be influenced by the research and reports that equity research analysts publish about us and our business. We do not currently have and may never obtain research coverage by equity research analysts. Equity research analysts may elect not to provide research coverage of our common stock after the completion of this offering, and such lack of research coverage may adversely affect the market price of our common stock. In the event we do have equity research analyst coverage, we will not have any control over the analysts or the content and opinions included in their reports. The price of our shares could decline if one or more equity research analysts downgrade our shares or issue other unfavorable commentary or research about us. If one or more equity research analysts ceases coverage of us or fails to publish reports on us regularly, demand for our shares could decrease, which in turn could cause the trading price or trading volume of our common stock to decline.

 

We will incur significantly increased costs as a result of operating as a company whose common stock is publicly traded in the United States, and our management will be required to devote substantial time to new compliance initiatives.

 

As a public company in the United States, we will incur significant legal, accounting, and other expenses that we did not incur previously. These expenses will likely be even more significant after we no longer qualify as an emerging growth company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The Nasdaq Capital Market, and other applicable securities rules and regulations impose various requirements on public companies in the United States, including the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our senior management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified senior management personnel or members for our board of directors. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

 

However, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

 

Pursuant to Section 404, public companies are required to furnish a report by our senior management on our internal control over financial reporting. However, as we are presently an emerging growth company, so long as we remain in the status, or up to five years, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. At such time as we will be required to prepare for eventual compliance with Section 404, we will be required to engage in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants, and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. Identifying material weaknesses could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

 

Significant disruptions of our information technology systems or data security incidents could result in significant financial, legal, regulatory, business, and reputational harm to us.

 

We are increasingly dependent on information technology systems and infrastructure, including mobile technologies, to operate our business. In the ordinary course of our business, we collect, store, process, and transmit large amounts of sensitive information, including intellectual property, proprietary business information, personal information, and other confidential information. It is critical that we do so in a secure manner to maintain the confidentiality, integrity, and restricted availability of such sensitive information. We have also outsourced elements of our operations, including elements of our information technology infrastructure, to third parties and, as a result, we manage a number of third-party vendors who may or could have access to our computer networks or our confidential information. In addition, many of those third parties in turn subcontract or outsource some of their responsibilities to other third parties. While all information technology operations are inherently vulnerable to inadvertent or intentional security breaches, incidents, attacks, and exposures, the accessibility and distributed nature of our information technology systems, and the sensitive information stored on those systems, make such systems potentially vulnerable to unintentional or malicious, internal, and external attacks on our technology environment. Potential vulnerabilities can be exploited from inadvertent or intentional actions of our employees, third-party vendors, business partners, or by malicious third parties. Attacks of this nature are increasing in their frequency, levels of persistence, sophistication, and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives (including industrial espionage) and expertise, including organized criminal groups, “hacktivists,” nation states, and others. In addition to the extraction of sensitive information, such attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information. In addition, the prevalent use of mobile devices increases the risk of data security incidents.

 

 

Significant disruptions of our or our third-party vendors’ or business partners’ information technology systems or other similar data security incidents could adversely affect our business operations and result in the loss, misappropriation, and unauthorized access, use or disclosure of, or the prevention of access to, sensitive information, which could result in financial, legal, regulatory, business, and reputational harm to us. In addition, information technology system disruptions, whether from attacks on our technology environment or from computer viruses, natural disasters, terrorism, war, and telecommunication and electrical failures, could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from ongoing, completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. We cannot ensure that our data protection efforts and our investment in information technology, or the efforts or investments of CROs, consultants or other third parties with which we work, will prevent breakdowns or breaches in our or their systems or other cybersecurity incidents that cause loss, destruction, unavailability, alteration, dissemination of, or damage, or unauthorized access to, our data, including personal data, assets, and other data processed or maintained on our behalf, that could have a material adverse effect upon our reputation, business, operations, or financial condition.

 

While we have implemented security measures intended to protect our information technology systems and infrastructure, there can be no assurance that such measures will successfully prevent service interruptions or security incidents. There is no way of knowing with certainty whether we have experienced any data security incidents that have not been discovered. While we have no reason to believe this to be the case, attackers have become very sophisticated in the way they conceal access to systems, and many companies that have been attacked are not aware that they have been attacked. Any event that leads to unauthorized access, use, or disclosure of personal information, including personal information regarding our patients or employees, could disrupt our business, harm our reputation, compel us to comply with applicable federal and state breach notification laws and foreign law equivalents, subject us to time-consuming, distracting, and expensive litigation, regulatory investigation and oversight, mandatory corrective action, require us to verify the correctness of database contents, or otherwise subject us to liability under laws, regulations, and contractual obligations, including those that protect the privacy and security of personal information. This could result in increased costs to us, and result in significant legal and financial exposure and reputational harm. In addition, any failure or perceived failure by us or our vendors or business partners to comply with our privacy, confidentiality, or data security-related legal or other obligations to third parties, or any further security incidents or other inappropriate access events, may result in governmental investigations, enforcement actions, regulatory fines, litigation, or public statements against us by advocacy groups or others, and could cause third parties, including clinical sites, regulators, or current and potential partners, to lose trust in us, or we could be subject to claims by third parties that we have breached our privacy- or confidentiality-related obligations. Moreover, data security incidents and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above. Any of the foregoing could have a material adverse effect on our reputation, business, operations, or financial condition.

 

We are an “emerging growth company” and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

 

We are an “emerging growth company” as defined in the JOBS Act. For so long as we remain an emerging growth company, we are permitted by SEC rules and plan to rely on exemptions from certain disclosure requirements that are applicable to other SEC-registered public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404, not being required to comply with the auditor requirements to communicate critical audit matters in the auditor’s report on the financial statements, reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, the information we provide stockholders will be different than the information that is available with respect to other public companies. We have taken advantage of reduced reporting burdens in this prospectus. In particular, in this prospectus, we have provided only two years of audited financial statements and we have not included all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.

 

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption and, therefore, we will not be subject to the same requirements to adopt new or revised accounting standards as other public companies that are not “emerging growth companies.”

 

 

We are also classified as a “smaller reporting company” and are exempt from certain disclosure requirements, which could make our stock less attractive to potential investors.

 

Rule 12b-2 of the Exchange Act defines a “smaller reporting company” as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that:

 

	●	Had a public float of less than $250 million as of the last business day of its most recently completed fiscal quarter, computed by multiplying the aggregate number of worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity; or
	●	In the case of an initial registration statement under the Securities Act or the Exchange Act for shares of its common equity, had a public float of less than $250 million as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated offering price of the shares; or
	●	In the case of an issuer who had annual revenue of less than $100 million during the most recently completed fiscal year for which audit financial statements are available, had a public float as calculated under paragraph (1) or (2) of this definition that was either zero or less than $700 million.

 

As a “smaller reporting company” we are not required and may not include a Compensation Discussion and Analysis section in our proxy statements; we provide only three years of business development information; provide fewer years of selected data; and have other “scaled” disclosure requirements that are less comprehensive than issuers that are not “smaller reporting companies” which could make our stock less attractive to potential investors, which could make it more difficult for you to sell your shares.

 

As a “smaller reporting company,” we may at some time in the future choose to exempt our company from certain corporate governance requirements that could have an adverse effect on our public shareholders.

 

Under Nasdaq rules, a “smaller reporting company,” as defined in Rule 12b-2 under the Exchange Act, is not subject to certain corporate governance requirements otherwise applicable to companies listed on Nasdaq. For example, a smaller reporting company is exempt from the requirement of having a compensation committee composed solely of directors meeting certain enhanced independence standards, as long as the compensation committee has at least two members who do meet such standards. Although we have determined not to avail ourselves of this or other exemptions from Nasdaq requirements that are or may be afforded to smaller reporting companies while we will seek to maintain our shares on Nasdaq, in the future we may elect to rely on any or all of these exemptions. By electing to utilize any such exemptions, our Company may be subject to greater risks of poor corporate governance, poorer management decision-making processes, and reduced results of operations from problems in our corporate organization. Consequently, if we were to avail ourselves of these exemptions, our stock price might suffer, and there is no assurance that we would be able to continue to meet all continuing listing requirements of Nasdaq from which we would not be exempt, including minimum stock price requirements.

 

Recent and potential future changes to U.S. and non-U.S. tax laws could materially adversely affect our company.

 

Existing, new, or future changes in tax laws, regulations, and treaties, or the interpretation thereof, in addition to tax policy initiatives and reforms under consideration in the United States or internationally and other initiatives could have an adverse effect on the taxation of international businesses. Furthermore, countries where we are subject to taxes, including the United States, are independently evaluating their tax policy and we may see significant changes in legislation and regulations concerning taxation.

 

Recently enacted U.S. tax legislation has significantly changed the U.S. federal income taxation of U.S. corporations, including by reducing the U.S. corporate income tax rate, limiting interest deductions, and revising the rules governing NOLs. Many of these changes are effective immediately, without any transition periods or grandfathering for existing transactions. The legislation is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and Internal Revenue Service, or the IRS, any of which could lessen or increase certain adverse impacts of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities.

The reduction of the corporate tax rate under the legislation may cause a reduction in the economic benefit of deferred tax assets available to us.

As of December 31, 2021, we had federal and state net operating loss, or NOLs, carryforwards of approximately $1.4 million, respectively. Under the Tax Cuts and Jobs Act of 2017, or the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, our NOLs generated in tax years beginning after December 31, 2020 may be carried forward indefinitely, but the deductibility of such federal NOLs in tax years beginning after December 31, 2020, is limited to 80% of taxable income. This change may require us to pay federal income taxes in future years despite generating a loss for federal income tax purposes in prior years. It is uncertain if and to what extent various states will conform to the Tax Act or the CARES Act.

 

In addition, under Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period, the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes (such as research and development tax credits) to offset its post-change income or taxes may be limited. We may have experienced ownership changes in the past and may experience ownership changes in the future as a result of this offering and/or subsequent shifts in our stock ownership (some of which may be outside our control). As a result, our ability to use our pre-change NOLs and tax credits to offset post-change taxable income, if any, could be subject to limitations. Similar provisions of state tax law may also apply. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

 

We are unable to predict what tax reform may be proposed or enacted in the future or what effect such changes would have on our business, but such changes, to the extent they are brought into tax legislation, regulations, policies or practices, could affect our effective tax rates in the future in countries where we have operations and have an adverse effect on our overall tax rate in the future, along with increasing the complexity, burden, and cost of tax compliance. While some of the changes made by the tax legislation may adversely affect us in one or more reporting periods and prospectively, other changes may be beneficial on a going-forward basis. We intend to work with our tax advisors and auditors to determine the full impact that the recent tax legislation as a whole will have on us.

 

We urge our stockholders to consult with their legal and tax advisors with respect to any such legislative changes and the potential tax consequences of investing in or holding our common stock.

 

Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters may materially impact reporting of our financial condition and results of operations.

 

Accounting principles generally accepted in the United States and related accounting pronouncements, implementation guidelines, and interpretations we apply to a wide range of matters that are relevant to our business, such as accounting for long-lived asset impairment and share-based compensation, are complex and involve subjective assumptions, estimates and judgments by our management. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments by our management could significantly change or add significant volatility to our reported or expected financial performance.

 

A potential failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business, financial condition, and results of operations.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles, or GAAP. Under standards established by the Public Company Accounting Oversight Board, or PCAOB, a deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. The PCAOB defines a material weakness as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented, or detected and corrected, on a timely basis.

 

We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, regarding the effectiveness of our internal control over financial reporting starting with the second annual report filed by the Company after completion of our IPO and in each year thereafter. Our auditors, however, will not be required to attest to the effectiveness of our internal control over financial reporting until we are no longer deemed an Emerging Growth Company, which will not be until after we have been a public reporting company for five fiscal years or until we have annual gross revenues of more than $1.235 billion, whichever occurs sooner. If we are unable to assert that our internal control over financial reporting is effective, or when required in the future, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected, and we could become subject to litigation or investigations by the stock exchange on which our common stock are listed, the SEC or other regulatory authorities, which could require additional financial and management resources and could have a material adverse effect on our business, financial condition, and results of operations.

 

 

The lack of public company experience of our management team could adversely impact our ability to comply with the reporting requirements of U.S. securities laws, which could have a materially adverse effect on our business.

 

Our officers have limited public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by Sarbanes-Oxley Act. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. Any such deficiencies, weaknesses or lack of compliance could have a materially adverse effect on our ability to comply with the reporting requirements of the Exchange Act, which is necessary to maintain our public company status. If we were to fail to fulfill those obligations, our ability to continue as a U.S. public company would be in jeopardy in which event you could lose your entire investment in our Company.

 

We could be subject to securities class action litigation.

 

In the past, when the market price of a stock has been volatile, holders of that stock sometimes have instituted securities class action litigation against the company that issued the stock following a decline in the market price of their securities. This risk is especially relevant for us because biotechnology companies have experienced significant share price volatility in recent years. Securities litigation against us, regardless of the merits or outcome, could result in substantial costs and divert the time and attention of our management from our business, which could have a material adverse effect on our business, financial condition, and results of operations.

 

Our directors’ liability to us and stockholders is limited; claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

 

Our certificate of incorporation and bylaws provide that we will indemnify our directors and officers, in each case, to the fullest extent permitted by Delaware law. Pursuant to our bylaws and the DGCL, our directors will not be liable to the Company or any stockholders for damages for any breach of fiduciary duty, except (i) acts that breach his or her duty of loyalty to the Company or its stockholders; (ii) acts or omissions without good faith or involving intentional misconduct or knowing violation of the law; (iii) pursuant to Section 174 of the DGCL regarding director liability for unlawful payment of a dividend or unlawful stock purchase or redemption; or (iv) for any transaction from which the director derived an improper personal benefit. Accordingly, we will have a much more limited right of action against our directors that otherwise would be the case. This provision does not affect the liability of any director under federal or applicable state securities laws. In addition, we have entered into indemnification agreements with each of our executive officers and directors. The indemnification agreements provide the executive officers and directors with contractual rights to indemnification, expense advancement and reimbursement, to the fullest extent permitted under the DGCL. The bylaws also require us, if so requested, to advance expenses that such director or officer incurred in defending or investigating a threatened or pending action, suit or proceeding, provided that such person will return any such advance if it is ultimately determined that such person is not entitled to indemnification by us. Any claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

 

Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, data protection, and other losses.

 

Our agreements with third parties may include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement or other liabilities relating to or arising from our contractual obligations. Large indemnity payments could harm our business and financial condition. Although we normally contractually limit our liability with respect to such obligations, we may still incur substantial liability. Any dispute with a third party with respect to such obligations could have adverse effects on our relationship with that third party and relationships with other existing or new partners, harming our business.

 

We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine.

 

U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. In February 2022, Russia launched a full-scale military invasion of Ukraine. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets. Additionally, Russia’s prior annexation of Crimea, recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine, subsequent military interventions in Ukraine, and attempted annexation of four oblasts in Ukraine have led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds. Any of the abovementioned factors could affect our business, prospects, financial condition, and operating results. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this prospectus.

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations and financial position, business strategy, product candidates, planned preclinical and nonclinical studies and clinical trials, results of preclinical and nonclinical studies, clinical trials, research and development costs, regulatory approvals, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that are in some cases beyond our control and may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

 

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of these terms or other similar expressions. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:

 

	●	our use of the net proceeds from this offering;
	●	the initiation, timing, progress, and results of our preclinical and nonclinical studies and clinical trials, and our research and development programs, including the manufacture of clinical trial material and drug product for launch;
	●	the ability of our planned clinical trials for are target drugs to be sufficient for regulatory approval in the United States;
	●	our ability to retain the continued service of our key professionals and to identify, hire, and retain additional qualified professionals;
	●	our ability to advance product candidates into, and successfully complete, clinical trials;
	●	the timing of and our ability to obtain and maintain regulatory approvals for our product candidates;
	●	the commercialization of our product candidates, if approved;
	●	the ability of our current in-development products, if approved, to successfully compete with other therapies, including therapies currently in development;
	●	the pricing, coverage, and reimbursement of our product candidates, if approved;
	●	the implementation of our business model, strategic plans for our business, and product candidates;
	●	the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates;
	●	our ability to identify additional product candidates and advance them into clinical development;
	●	our estimates regarding expenses, capital requirements, and needs for additional financing;
	●	our financial performance; and
	●	developments relating to our competitors and our industry.

 

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations, and prospects and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this prospectus and are subject to a number of risks, uncertainties, and assumptions described in the section titled “Risk Factors” and elsewhere in this prospectus. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein until after we distribute this prospectus, whether as a result of any new information, future events, or otherwise.

 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

 

 

USE OF PROCEEDS

 

We estimate that we will receive net proceeds from this offering of approximately $_____ million (or approximately $_______ million if the underwriters’ option to purchase additional shares of our common stock is exercised in full) based on the assumed initial public offering price of $___ per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

We intend to use the net proceeds from this offering to fund Phase 1 and Phase 2 clinical trials of our product candidates, including ENV 105 and KROS 201, potential acquisition or in-licensing activities, and working capital and general corporate purposes. The funds are expected to be used as follows:

 

	●	approximately $[*] million, or [*]% of the proceeds, will be used for product development and operational costs, including the drug manufacturing costs and the costs related to performing the clinical trials of ENV 105 and KROS 201;
	●	approximately $[*] million, or [*]% of the proceeds, will be used to fund drug manufacturing and perform pre-IND development; and
	●	the remainder to fund the further development of our drug and technology development platform and for general corporate purposes, including working capital and operating expenses.

 

We may also use a portion of the net proceeds and our existing cash to in-license, acquire, or invest in complementary businesses, technology platforms, products, or assets. However, we have no current commitments or obligations to do so.

 

We believe, based on our current operating plan, that the net proceeds from this offering will be sufficient to fund our operations for at least the next 24 months. Our expected use of proceeds from this offering described above represents our current intentions based on our present plans and business conditions. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the proceeds to be received upon the closing of this offering or the actual amounts that we will spend on the uses set forth above. In the case that the net proceeds from this offering not be sufficient for us to fund any/all of our current in-development products through regulatory approval, we may need to raise additional capital to commercialize our current in-development products and to develop any future product candidates.

 

The amounts and timing of our actual expenditures will depend on numerous factors, including the time and cost necessary to conduct our planned clinical trials, the results of our planned clinical trials and other factors described in the section titled “Risk Factors” in this prospectus, as well as the amount of cash used in our operations and any unforeseen cash needs. Therefore, our actual expenditures may differ materially from the estimates described above. We may find it necessary or advisable to use the net proceeds for other purposes. We will have broad discretion over how to use the net proceeds to us from this offering.

 

 

DIVIDEND POLICY

 

We do not anticipate declaring or paying, in the foreseeable future, any cash dividends on our capital stock. We intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business. Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors, subject to applicable laws, and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects, and other factors our board of directors may deem relevant. In addition, our ability to pay cash dividends on our capital stock in the future may be limited by the terms of any future debt or preferred securities we issue or any credit facilities we enter into.

 

 

CAPITALIZATION

 

The following table sets forth our cash, cash equivalents and investments and capitalization as of June 30, 2023:

 

	●	on an actual basis;
	●	on a pro forma basis, giving effect to the automatic conversion of all of our outstanding convertible notes into [___________________] shares of our common stock upon effectiveness of this registration statement; and
	●	on a pro forma, as adjusted basis, giving effect to the (i) pro forma adjustments set forth above and (ii) our receipt of net proceeds from the sale of shares of common stock in this offering at the assumed initial public offering price of $ _____ per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

You should read this table together with the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Capital Stock,” and our financial statements and the related notes included elsewhere in this prospectus.

 

		As of June 30, 2023
										Pro Forma
		Actual				Pro Forma				As Adjusted
		(Unaudited)				(Unaudited)				(Unaudited)
		(In thousands, except share and per share amounts)
Cash		$	232
Convertible notes payable, net of debt discount of $73		$	602
Shareholders’ Deficit
Common stock, par value $0.01, 35,000,000 shares authorized; 10,334,357 shares issued and outstanding; ____ shares issued and outstanding pro forma; _____ shares issued and outstanding pro forma as adjusted			103
Additional paid-in capital			3,118
Accumulated deficit			(4,782	)
Total shareholder’s deficit		$	(1,561	)
Total Capitalization		$	(959	)

 

The pro forma, as adjusted information above is illustrative only, and our capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase or decrease in the assumed initial public offering price of $__ per share would increase or decrease, as applicable, each of our pro forma as adjusted cash, additional paid-in capital, total stockholders’ deficit and total capitalization by approximately $_____ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase or decrease of 1.0 million shares in the number of shares common stock offered by us would increase or decrease, as applicable, each of our pro forma as adjusted cash, additional paid-in capital, total stockholders’ deficit, and total capitalization by approximately $_______ million, assuming the assumed initial public offering price of $__ per share remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

The number of shares of our common stock to be issued and outstanding, pro forma and pro forma as adjusted in the table above is based on ________ shares of common stock outstanding as of June 30, 2023, after giving effect to the automatic conversion of all of our outstanding convertible notes into ________ shares of common stock as of June 30, 2023 upon effectiveness of this registration statement, and excludes:

 

	●	150,000 shares of our common stock issuable upon the exercise of outstanding warrants as of June 30, 2023, with a weighted-average exercise price of $4.17 per share; and
	●	1,650,000 shares of our common stock will be reserved for future issuance under our 2023 Equity Incentive Plan, which will become effective once the registration statement of which this prospectus forms a part is declared effective, as well as any future automatic annual increases in the number of shares of common stock reserved for issuance under our 2023 Equity Incentive Plan.

 

 

DILUTION

 

If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share of common stock and the pro forma as adjusted net tangible book value per share immediately after this offering.

 

As of June 30, 2023, we had a historical net tangible book value (deficit) of $(1.6) million, or $(0.15) per share of common stock based on the 10,334,357 shares of common stock outstanding as of such date. Our historical net tangible book value (deficit) per share represents total tangible assets less total liabilities and redeemable convertible preferred stock, which is not included within permanent equity, divided by the number of shares of common stock outstanding as of June 30, 2023.

 

Our pro forma net tangible book value as of June 30, 2023, was $___ million, or $__ per share. Pro forma net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by ________ shares of common stock outstanding as of such date, after giving effect to the automatic conversion of all ________ shares of our outstanding redeemable convertible preferred stock as of June 30, 2023 into an equivalent number of shares of our common stock and the related reclassification of the carrying value of our redeemable convertible preferred stock to permanent equity upon the closing of this offering.

 

After giving effect to the sale by us of shares of common stock in this offering at the assumed initial public offering price of $__ per share, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of June 30, 2023 would have been $_______ million, or $__ per share. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $__ per share to our existing stockholders and an immediate dilution in pro forma as adjusted net tangible book value of $__ per share to investors purchasing common stock in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the amount of cash paid by an investor for a share of common stock in this offering. The following table illustrates this dilution on a per share basis:

 

Assumed initial public offering price per share
Historical net tangible book value (deficit) per share as of June 30, 2023		$	(0.15	)
Pro forma increase in historical net tangible book value per share attributable to the pro forma transactions described in the preceding paragraphs
Pro forma net tangible book value per share as of June 30, 2023
Increase in pro forma as adjusted net tangible book value per share attributable to investors purchasing shares in this offering
Pro forma as adjusted net tangible book value per share after this offering
Dilution in pro forma as adjusted net tangible book value per share to investors purchasing shares in this offering

 

The dilution information discussed above is illustrative only and may change based on the actual initial public offering price and other terms of this offering. Each $1.00 increase or decrease in the assumed initial public offering price of $__ per share would increase or decrease, as applicable, our pro forma as adjusted net tangible book value per share after this offering by $__ per share and increase or decrease, as applicable, the dilution to investors purchasing shares in this offering by $__ per share, in each case assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase or decrease of 1.0 million shares in the number of shares of common stock offered by us would increase or decrease our pro forma as adjusted net tangible book value by approximately $__ per share and decrease or increase, as applicable, the dilution to investors purchasing shares in this offering by approximately $ __ per share, in each case assuming the assumed initial public offering price of $__ per share remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

If the underwriters exercise their option to purchase additional shares of common stock in full, the pro forma net tangible book value per share, as adjusted to give effect to this offering, would be $__ per share, and the dilution in pro forma net tangible book value per share to investors in this offering would be $__ per share.

 

 

The following table summarizes, as of June 30, 2023:

 

	●	the total number of shares of common stock purchased from us by our existing stockholders and by investors purchasing shares in this offering;
	●	the total consideration paid to us by our existing stockholders and by investors purchasing shares in this offering, assuming an initial public offering price of $__ per share, before deducting underwriting discounts and commissions and estimated offering expenses payable by us in connection with this offering; and
	●	the average price per share paid by existing stockholders for shares issued prior to this offering and by investors purchasing shares in this offering.

 

Shares Purchased

Total Consideration

Average Price Per

Number

Percent

Amount

Percent

Share

Existing stockholders

$

$

New investors

Total

100

%

$

100

%

 

The foregoing discussion and table above (other than the historical net tangible book value calculation) are based on __________ shares of common stock outstanding as of June 30, 2023, after giving effect to the automatic conversion of all ______________ shares of our outstanding redeemable convertible preferred stock as of June 30, 2023 into an equivalent number of shares of our common stock upon the closing of this offering, and excludes:

 

	●	150,000 shares of our common stock issuable upon the exercise of outstanding warrants as of June 30, 2023, with a weighted-average exercise price of $4.17 per share;
	●	1,650,000 shares of our common stock reserved for future issuance under our 2023 Equity Incentive Plan, which will become effective once the registration statement of which this prospectus forms a part is declared effective, as well as any future automatic annual increases in the number of shares of common stock reserved for issuance under our 2023 Equity Incentive Plan.

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis should be read in conjunction with “Selected Financial Data” and our financial statements and related notes included elsewhere in this prospectus. This discussion and analysis and other parts of this prospectus contain forward-looking statements based upon current beliefs that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations and intentions. Our actual results and the timing of selected events could differ materially from those described in or implied by these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. You should carefully read the “Risk Factors” section of this prospectus to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Special Note Regarding Forward- Looking Statements.”

 

Overview

 

We are a clinical-stage biopharmaceutical company advancing therapeutics for cancer patients that are designed to overcome key hurdles in immune suppression and drug resistance.

 

Our mission is to advance our portfolio of innovative therapeutics to reverse key mechanisms of therapeutic resistance and immune suppression and transform the way cancer is treated. We have leveraged molecular insights of the mechanisms of therapeutic resistance and immune suppression to develop a new class of novel drugs that we expect will target drug resistance and checkpoints of immune suppression. As of the date of this prospectus, our product candidates have not been approved as safe or effective by the FDA or any other comparable foreign regulator.

 

Since inception, our operations have focused on organizing and staffing our company, business planning, raising capital, acquiring and developing our technology, establishing our intellectual property portfolio, identifying potential product candidates and undertaking preclinical and clinical studies and manufacturing. We do not have any products approved for sale and have not generated any revenue from product sales.

 

Since inception, we have incurred significant operating losses. Our net losses were $0.4 million and $1.1 million for the six months ended June 30, 2023, and for the year ended December 31, 2022, respectively. As of June 30, 2023, we had an accumulated deficit of $4.8 million. We expect to continue to incur significant and increasing expenses and operating losses for the foreseeable future, as we advance our current and future product candidates through preclinical and clinical development, manufacture drug product and drug supply, seek regulatory approval for our current and future product candidates, maintain and expand our intellectual property portfolio, hire additional research and development and business personnel and operate as a public company.

 

In March 2020, the World Health Organization declared COVID-19 a global pandemic and the United States declared a national emergency with respect to COVID-19. In response to the COVID-19 pandemic, a number of governmental orders and other public health guidance measures have been implemented across much of the United States, including in the locations of our office, clinical trial sites and third parties on whom we rely. As the COVID-19 pandemic started to spread in the first half of 2020, our clinical trial sites reported it had the most impact on patient care as facilities were generally ill prepared to conduct business as usual; adequate clinical evaluations, physical exams and tests were either absent or drastically reduced. Our clinical trial sites further reported that their institutions better adjusted to pandemic conditions beginning in the second half of 2020. As our corporate operations presently take place entirely virtually, COVID-19 has had no material impact on our operations through June 2023. As we begin our clinical trials, we will continue to monitor the impact COVID-19 may have on the operations of our trials. We have taken measures to secure our research and development project activities, and work in laboratories has been organized to reduce the risk of COVID-19 transmission.

 

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. In addition, if we obtain regulatory approval for our product candidates and do not enter into a third-party commercialization partnership, we will likely incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing, and distribution activities.

 

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on acceptable terms, or at all. Our failure to raise capital or enter into such agreements as, and when needed, could have a material adverse effect on our business, results of operations and financial condition.

 

The report of our independent registered public accounting firm on our financial statements for the years ended December 31, 2022 and 2021 included an explanatory paragraph indicating that there was substantial doubt about our ability to continue as a going concern. See Note 1 to our annual financial statements appearing at the end of this prospectus for additional information on our assessment.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, contemplating the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, the Company incurred a net loss of $0.4 million during the six months ended June 30, 2023, and had a shareholders’ deficit of $1.6 million as of June 30, 2023. These factors raise substantial doubt, as defined under GAAP, about the Company’s ability to continue as a going concern for the next 12 months. Management’s plan to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its strategies. The financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

 

 

At June 30, 2023, the Company had cash on hand in the amount of $0.2 million. The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, the Company has funded its operations primarily through equity and debt financings and it expects to continue to rely on these sources of capital in the future.

 

No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing.

 

Share Exchange between Kairos and Enviro

 

In June 2021, Enviro and Kairos completed the Enviro-Kairos share exchange, whereby the Enviro shareholders exchanged 100% of the issued and outstanding shares of Enviro (on a fully diluted basis) for 6,000,000 shares of newly issued restricted common stock of Kairos. After the closing, Enviro became a wholly owned subsidiary of Kairos.

 

Critical Accounting Policies and Significant Judgments and Estimates

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the balance sheets and the reported amounts of expenses during the reporting periods. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances at the time such estimates are made. Actual results may differ materially from our estimates and judgments under different assumptions or conditions. We periodically review our estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in our financial statements prospectively from the date of the change in estimate.

 

We define our critical accounting policies as those accounting principles that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. While our significant accounting policies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe the following are the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments.

 

Research and Development Expenses

 

Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates. We expense research and development costs as incurred.

 

At the end of each reporting period, we compare payments made to third-party service providers to the estimated progress toward completion of the applicable research or development objectives. Such estimates are subject to change as additional information becomes available. Depending on the timing of payments to the service providers and the progress that we estimate has been made as a result of the service provided, we may record net prepaid or accrued expenses relating to these costs. As of December 31, 2022 and June 30, 2023, we have not made any material adjustments to our prior estimates of accrued research and development expenses.

 

Off-Balance Sheet Arrangements

 

During the year ended December 31, 2022 and the six months ended June 30, 2023, we did not have, and we do not currently have, any off-balance sheet arrangements (as defined under SEC rules).

 

Quantitative and Qualitative Disclosures about Market Risk

 

Our cash is held on deposit in demand accounts at a large financial institution in amounts, at times, in excess of the Federal Deposit Insurance Corporation, or FDIC, insurance coverage limit of $250,000 per depositor, per FDIC-insured bank, per ownership category. We have reviewed the consolidated financial statements of this institution and believe it has sufficient assets and liquidity to conduct its operations in the ordinary course of business with little or no credit risk to us. Financial instruments that potentially subject us to concentrations of credit risk principally consist of cash equivalents. We limit our credit risk associated with cash equivalents by placing investments in highly rated money market funds.

 

Inflation generally affects us by increasing our cost of labor. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the years ended December 31, 2021 or 2022, and June 30, 2023.

 

Recent Accounting Pronouncements

 

For a description of recently issued accounting standards that may have a material impact on our financial statements or will otherwise apply to our operations, please see Note 2 to our audited financial statements appearing elsewhere in this prospectus.

 

Components of Results of Operations

 

Net Sales

 

We have not generated any sales to date. There was no revenue recorded from any sources during the years ended December 31, 2022 and 2021, and the six months ended June 30, 2023.

 

Operating Expenses

 

Our operating expenses consist of (i) research and development expenses and (ii) general and administrative expenses.

 

Research and Development Expenses

 

Dr. Ramachandran Murali is our Vice President of Research and Development. Dr. Murali is a doctor and scientist and Cedars-Sinai Medical Center, and the inventor, with others, of three of the patent technologies that are subject to the Kairos-Cedars license agreements, described above.

 

We are engaged in rolling out Phase 1 and Phase 2 clinical trials for ENV-105 and a Phase 1 trial for KROS-201. In addition, we are continuously performing preclinical research including animal models of disease, medicinal chemistry laboratory studies, formulation, and toxicology and biodistribution studies. Our clinical development costs may vary significantly based on factors such as: per patient trial costs; the number of trials required for approval; the number of sites included in the trials; the location where the trials are conducted; the length of time required to enroll eligible patients; the number of patients that participate in the trials; the number of doses that patients receive; the drop-out or discontinuation rates of patients; potential additional safety monitoring requested by regulatory agencies; the duration of patient participation in the trials and follow-up; the cost and timing of manufacturing our product candidates; the phase of development of our product candidates; and the efficacy and safety profile of our product candidates.

 

The successful development and commercialization of product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the following: the timing and progress of nonclinical and clinical development activities; the number and scope of nonclinical and clinical programs we decide to pursue; raising necessary additional funds; the progress of the development efforts of parties with whom we may enter into collaboration arrangements; our ability to maintain our current development program and to establish new ones; our ability to establish new licensing or collaboration arrangements; the successful initiation and completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority; the receipt and related terms of regulatory approvals from applicable regulatory authorities; the availability of drug substance and drug product for use in production of our product candidate; establishing and maintaining agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if our product candidates are approved; our ability to obtain and maintain patents, trade secret protection and regulatory exclusivity, both in the United States and internationally; our ability to protect our rights in our intellectual property portfolio; the commercialization of our product candidates, if and when approved; obtaining and maintaining third-party insurance coverage and adequate reimbursement; the acceptance of our product candidate, if approved, by patients, the medical community and third-party payors; competition with other products; the impact of any business interruptions to our operations, including the timing and enrollment of patients in our planned clinical trials, or to those of our manufacturers, suppliers, or other vendors resulting from the COVID-19 pandemic or similar public health crisis; and a continued acceptable safety profile of our therapies following approval.

 

 

A change in the outcome of any of these variables with respect to the development of our product candidates could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates.

 

General and administrative expenses

 

General and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, corporate and business development, and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and administrative consulting services; insurance costs; administrative travel expenses; marketing expenses and other operating costs.

 

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our business operations. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs, as well as investor and public relations expenses associated with being a public company.

 

Results of Operations

 

Comparison of the Three Months Ended June 30, 2022 and 2023

 

The following table summarizes our results of operations for the three months ended June 30, 2022 and 2023 (in thousands):

 

Operating Expenses:		June 30, 2022				June 30, 2023
Research and development		$	6			$	36
General and administrative			114				176
Total operating expenses			120				212
Loss from operations			(120	)			(212	)
Interest expense			(15	)			(14	)
Debt discount amortization			(250	)			(10	)
Net loss		$	(385	)		$	(236	)

 

Research and Development Expenses

 

The table below summarizes our research and development expenses for the three months ended June 30, 2022 and 2023 (in thousands):

 

Research and Development Expenses:		June 30, 2022				June 30, 2023
Clinical and related expenses		$	6			$	36
Total research and development expenses		$	6			$	36

 

Research and development expenses were $0.006 million and $0.04 million for the three months ended June 30, 2022 and 2023, respectively. There were no significant changes between periods.

 

 

General and Administrative Expenses

 

The table below summarizes our general and administrative expenses for the three ended June 30, 2022 and 2023 (in thousands):

 

General and Administrative Expenses:		June 30, 2022				June 30, 2023
Legal fees, primarily patent-related		$	33			$	—
Accounting fees			—				79
Fees relating to license agreements			26				33
Insurance expenses			5				5
Other professional fees			9				17
Amortization expense			40				40
Other expenses			1				2
Total general and administrative expenses		$	114			$	176

 

General and administrative expenses were $0.1 million and $0.2 million for the three months ended June 30, 2022 and 2023, respectively. There were no significant changes between periods.

 

Other Expenses

 

Other expenses were $0.3 million and $0.02 million for the three months ended June 30, 2022 and 2023, respectively. The decrease of $0.2 million in 2023 was primarily due to decreased debt discount amortization relating to a debt financing.

 

For the Six Months Ended June 30, 2022 and 2023

 

The following table summarizes our results of operations for the six months ended June 30, 2022 and 2023 (in thousands):

 

Operating Expenses:		June 30, 2022				June 30, 2023
Research and development		$	39			$	42
General and administrative			228				296
Total operating expenses			267				338
Loss from operations			(267	)			(338	)
Interest expense			(25	)			(24	)
Debt discount amortization			(308	)			(20	)
Financing costs			(20	)			—
Net loss		$	(620	)		$	(382	)

 

Research and Development Expenses

 

The table below summarizes our research and development expenses for the six months ended June 30, 2022 and 2023 (in thousands):

 

Research and Development Expenses:		June 30, 2022				June 30, 2023
Clinical and related expenses		$	39			$	42
Total research and development expenses		$	39			$	42

 

Research and development expenses were $0.04 million and $0.04 million for the six months ended June 30, 2022 and 2023, respectively. There were no significant changes between periods.

 

General and Administrative Expenses

 

The table below summarizes our general and administrative expenses for the six ended June 30, 2022 and 2023 (in thousands):

 

General and Administrative Expenses:		June 30, 2022				June 30, 2023
Legal fees, primarily patent-related		$	39			$	21
Accounting fees			8				98
Fees relating to license agreements			52				58
Insurance expenses			11				6
Other professional fees			36				28
Amortization expense			80				80
Other expenses			2				5
Total general and administrative expenses		$	228			$	296

 

General and administrative expenses were $0.2 million and $0.3 million for the six months ended June 30, 2022 and 2023, respectively. There were no significant changes between periods.

 

Other Expenses

 

Other expenses were $0.4 million and $0.04 million for the six months ended June 30, 2022 and 2023, respectively. The decrease of $0.3 million in 2023 was primarily due to decreased debt discount amortization and financing costs relating to a debt financing.

 

For the Years Ended December 31, 2022 and 2021

 

The following table summarizes our results of operations for the years ended December 31, 2022 and 2021 (in thousands):

 

Operating Expenses:		December 31, 2022				December 31, 2021
Research and development		$	87			$	183
General and administrative			484				1,760
Total operating expenses			571				1,943
Loss from operations			(571	)			(1,943	)
Interest expense			(51	)			(20	)
Debt discount amortization			(408	)			(144	)
Financing costs			(20	)			(38	)
Net loss		$	(1,150	)		$	(2,145	)

 

Research and Development Expenses

 

The table below summarizes our research and development expenses for the years ended December 31, 2022 and 2021 (in thousands):

 

Research and Development Expenses:		December 31, 2022				December 31, 2021
License maintenance fees		$	-			$	130
Clinical and related expenses			87				53
Total research and development expenses		$	87			$	183

 

Research and development expenses were $0.1 million and $0.2 million for the years ended December 31, 2022 and 2021, respectively, a decrease of $0.1 million. Significant changes between periods are as follows:

 

●

a $0.1 million decrease in license maintenance expenses in 2022.

 

General and Administrative Expenses

 

The table below summarizes our general and administrative expenses for the years ended December 31, 2022 and 2021 (in thousands):

 

General and Administrative Expenses:		December 31, 2022				December 31, 2021
Stock compensation for services		$	-			$	300
Patent related expenses			110				335
Legal fees			2				811
Accounting fees			28				128
Other professional fees			45				-
Fees relating to license agreements			112				46
Insurance expenses			20				13
Consulting expenses			-				23
Amortization expense			160				98
Other expenses			7				6
Total general and administrative expenses		$	484			$	1,760

 

General and administrative expenses were $0.5 million and $1.8 million for the years ended December 31, 2022 and 2021, respectively, a decrease of $1.3 million. Significant changes between periods are as follows:

 

	●	a $0.3 million decrease in stock compensation expense in 2022 due to amortization of  certain stock issuances that vested in 2021;
	●	a $0.8 million decrease in legal expenses in 2022, primarily resulting from decreased corporate legal costs; and
	●	a $0.1 million decrease in accounting expenses in 2022, primarily related to the cost of financial accounting audits for 2019 and 2020 occurring in 2021.

 

Other Expenses

 

Other expenses were $0.5 million and $0.2 million for the years ended December 31, 2022 and 2021. The increase of $0.3 million in 2022 was primarily due to increased interest expense and debt discount amortization due to the issuance of stock warrants and debt issuance costs in connection with a debt financing.

 

Liquidity and Capital Resources

 

Going Concern

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, we have not yet generated revenues and have incurred recurring net losses since our inception. During the six months ended June 30, 2023, we incurred a net loss of $0.4 million and had a shareholders’ deficit of $1.6 million as of June 30, 2023. These factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to raise additional funds and implement our strategies. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

 

As of June 30, 2023, we had cash on hand in the amount of $0.2 million. The ability to continue as a going concern is dependent on us raising additional capital and attaining and maintaining profitable operations in the future to meet our obligations and repay our liabilities arising from normal business operations when they come due. Since inception, we have funded our operations primarily through equity and debt financings and we expect to continue to rely on these sources of capital in the future.

 

No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.

 

Cash Flows for the Six Months Ended June 30, 2022 and 2023

 

The table below summarizes our cash flow activities for the six months ended June 30, 2022 and 2023 (in thousands):

 

		Six Months Ended June 30,
Net cash provided by (used in):		2022				2023
Operating activities		$	(232	)		$	(76	)
Investing activities			-				-
Financing activities			543				(129	)
Net increase (decrease) in cash		$	311			$	(205	)

 

 

Operating Activities

 

During the six months ended June 30, 2022, we used cash from operating activities of $0.2 million, compared to $0.08 million used during the six months ended June 30, 2023. During the six months ended June 30, 2022, we incurred a net loss of $0.6 million and had non-cash expenses of $0.4 million, compared to a net loss of $0.4 million and non-cash expenses of $0.1 million during the six months ended June 30, 2023. Non-cash expenses during both periods included amortization expense, totaling $0.08 million during the six months ended June 30, 2022 and 2023, respectively. During the six months ended June 30, 2023, non-cash expenses also included the amortization of debt discount in the amount of $0.3 million. The net change in assets and liabilities during the six months ended June 30, 2022 used cash of $0.02 million, compared to $0.2 million provided during the six months ended June 30, 2023. The source of cash for the six months ended June 30, 2023 was the increase in accounts payable and accrued expenses, and the use of cash for the six months ended June 30, 2022 was the increase in prepaid expenses.

 

Investing Activities

 

There was no cash used in investing activities for the six months ended June 30, 2022 and 2023.

 

Financing Activities

 

Net cash provided by (used in) financing activities for the six months ended June 30, 2022 and 2023 was $0.5 million and $(0.1) million, respectively. For the six months ended June 30, 2022, cash provided by financing activities consisted of proceeds from the issuance of convertible notes payable of $0.7 million. Cash used in financing activities during the six months ended June 30, 2022 related to the repayment of an advance from a related party of $0.01 million, repayment of a note payable of $0.03 million, payment of deferred offering costs of $0.03, and payment of debt issuance costs of $0.1 million. For the six months ended June 30, 2023, cash used in financing activities consisted of payment of deferred offering costs of $0.1 million.

 

Cash Flows for the Years Ended December 31, 2022 and 2021

 

The table below summarizes our cash flow activities for the years ended December 31, 2022 and 2021 (in thousands):

 

		Years Ended December 31,
Net cash provided by (used in):		2022				2021
Operating activities		$	(353	)		$	(412	)
Investing activities			-				(109	)
Financing activities			717				580
Net increase in cash		$	364			$	59

 

Operating Activities

 

During the year ended December 31, 2022, we used cash from operating activities of $0.4 million, compared to $0.4 million used during the year ended December 31, 2021. During the year ended December 31, 2022, we incurred a net loss of $1.1 million and had non-cash expenses of $0.6 million, compared to a net loss of $2.1 million and non-cash expenses of $0.5 million during the year ended December 31, 2021. Non-cash expenses during 2022 included amortization expense of $0.2 million and amortization of debt discount of $0.4 million. Non-cash expenses during 2021 included amortization expense of $0.1 million, amortization of debt discount of $0.1 million and the fair value of common stock issued for service of $0.3 million. The net change in assets and liabilities during the year ended December 31, 2022 provided cash of $0.1 million, compared to $1.1 million provided during the year ended December 31, 2021. The source of cash for both years resulted from financing activities, which was used to cover accounts payable and accrued expenses.

 

Investing Activities

 

There was no cash used in investing activities for the year ended December 31, 2022. Net cash used in investing activities totaling $0.1 million for the year ended December 31, 2021 related to the acquisition of Enviro Therapeutics, Inc. in 2021.

 

Financing Activities

 

Net cash provided by financing activities for the years ended December 31, 2022 and 2021 was $0.7 million and $0.6 million, respectively. For the year ended December 31, 2022, cash provided by financing activities consisted of proceeds from the issuance of convertible notes payable of $0.9 million. Cash used in financing activities during the year ended December 31, 2022 related to the repayment of a note payable of $0.03 million, the repayment of an advance from a related party of $0.01 million and the payments of deferred offering costs of $0.06 million and debt issuance costs of $0.1 million. For the year ended December 31, 2021, cash provided by financing activities consisted of proceeds from the issuance of a convertible note payable of $0.4 million and proceeds from the sale of common stock and warrants of $0.3 million. Cash used in financing activities in 2021 consisted of a repayment of a note payable of $0.02 million.

 

Debt Agreements

 

Advances from Related Parties

 

During the year ended December 31, 2021, shareholders of the Company, and a company whose principal stockholder is also a stockholder of the Company, advanced the Company $0.01 million which was all outstanding at December 31, 2021. The advances accrue no interest, are unsecured and are due on demand. As of December 31, 2021, $0.01 million was owed on the advances. During the year ended December 31, 2022, the Company repaid $0.01 million of the advances, and as of December 31, 2022 and June 30, 2023, a total of $0.004 million was outstanding.

 

Convertible Notes Payable

 

During the year ended December 31, 2022, the Company entered into several convertible note payable agreements with individuals and an entity in the aggregate total of $0.7 million. The notes accrue interest at 6% per annum, are unsecured and are due by April 2025. If the Company does not close an IPO transaction within 12 months of the date of the notes, the Company will have the choice of paying off the principal plus all accrued and unpaid interest, or the note’s principal balance will increase to 110% of its original balance. The notes are convertible at the option of the noteholders to convert into shares of the Company’s common stock at a price per share as defined in the agreement or will automatically be converted into shares of the Company’s common stock at 60% of the IPO price per share upon the closing of an IPO transaction. The net proceeds relating to the agreements, net of expenses, were $0.6 million. As of June 30, 2023, $0.7 million of principal was outstanding on the notes and $0.04 million of accrued and unpaid interest.

 

 

Funding Requirements

 

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we pursue the advancement of our product candidates through clinical trials. In addition, we expect to incur additional costs associated with operating as a public company. The timing and amount of our operating expenditures will depend largely on: the initiation, progress, timing, costs and results of clinical trials for our product candidate or any future product candidates we may develop; the initiation, progress, timing, costs and results of nonclinical studies for our product candidates or any future product candidates we may develop; our ability to maintain our relationships with key collaborators; the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities, including the potential for such authorities to require that we perform more nonclinical studies or clinical trials than those that we currently expect or change their requirements on studies that had previously been agreed to; the cost to establish, maintain, expand, enforce and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with licensing, preparing, filing, prosecuting, defending and enforcing any patents or other intellectual property rights; the effect of competing technological and market developments; the costs of continuing to grow our business, including hiring key personnel and maintain or acquiring operating space; market acceptance of any approved product candidates, including product pricing, as well as product coverage and the adequacy of reimbursement by third-party payors; the cost of acquiring, licensing or investing in additional businesses, products, product candidates and technologies; the cost and timing of selecting, auditing and potentially validating a manufacturing site for commercial-scale manufacturing; the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval and that we determine to commercialize; and our need to implement additional internal systems and infrastructure, including financial and reporting systems.

 

We believe that our existing cash, plus the net proceeds from this offering, will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. We expect that we will require additional funding to complete the clinical development and commercialize our product candidates, if we receive regulatory approval, and pursue in-licenses or acquisitions of other product candidates. If we receive regulatory approval for our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize ourselves.

 

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity and debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

 

Contractual Obligations and Commitments

 

Exclusive License Agreements with Cedars-Sinai Medical Center (Cedars)

 

We have entered into four Exclusive License Agreements with Cedars which grants us licensing rights with respect to certain patent rights owned by Cedars as follows:

 

	1.	Methods of use of compounds that bind to RelA of NFkB;
	2.	Composition and methods for treating fibrosis;
	3.	Compositions and methods for treating cancer and autoimmune diseases; and
	4.	Method of generating activated T cells for cancer therapy.

 

 

On June 2, 2021, our wholly owned subsidiary, Enviro Therapeutics, Inc. (Enviro), entered into two Exclusive License Agreements with Cedars, which granted Enviro exclusive licensing rights (which include the right to sublicense) with respect to certain patent rights owned by Cedars, as follows:

 

	●	an Exclusive License Agreement (the “Enviro-Cedars License Agreement (Mitochondrial DNA)”) for Enviro to develop, manufacture, use and sell products utilized or derived from patent rights worldwide related to the “Compositions and Methods for Treating Diseases and Conditions by Depletion of Mitochondrial DNA from Circulation and for Detection of Mitochondrial DNA” invented by Dr. Neil Bhowmick and others; and
	●	an Exclusive License Agreement, (the “Enviro-Cedars License Agreement (Endoglin Antagonism)” and, collectively with the Enviro-Cedars License Agreement (Mitochondrial DNA), the “Enviro-Cedars License Agreements”) for Enviro to develop, manufacture, use and sell products utilized or derived from the patent rights and technical information worldwide related to the “Sensitization of Tumors to Therapies Through Endoglin Antagonism” invented by Dr. Neil Bhowmick and others.

 

License Agreement with Tracon Pharmaceutical, Inc.

 

On May 21, 2021, Enviro entered into a License Agreement with Tracon Pharmaceutical, Inc. (“Tracon”). Pursuant to the Tracon License Agreement, Tracon granted Enviro access to inactive IND filings for “TRC105” in the United States; ownership of “TRC105” stored vials of drug product manufactured to GMP standards stored at Fisher Clinical or their designee; and assignment of Tracon’s patent rights to its “CD105 technologies” (all as defined or described in the Tracon License Agreement).

 

Agreement with former Chief Financial Officer

 

We have an agreement with our former Chief Financial Officer that requires us to pay $0.05 million upon the completion of raising more than $0.9 million in a debt or an equity financing. No amount was owed at December 31, 2022 or June 30, 2023. In addition, we intend to enter into an employment agreement with our Chief Financial Officer in advance of completion of this initial public offering.

 

 

BUSINESS

 

Overview

 

We are a clinical-stage biopharmaceutical company advancing therapeutics for cancer patients that are designed to overcome key hurdles in immune suppression and drug resistance. These therapeutics include antibodies and small molecules for the treatment of prostate cancer, lung cancer, breast cancer, and glioblastoma. We are driven by innovative science to develop novel and transformative drug therapies to treat cancer.

 

Our mission is to advance our portfolio of innovative therapeutics to target key mechanisms of therapeutic resistance and immune suppression and transform the way cancer is treated. We have leveraged molecular insights of the mechanisms of therapeutic resistance and immune suppression to develop a new class of novel drugs that we expect will target drug resistance and checkpoints of immune suppression. Our seven-drug portfolio offers diversification and mitigates the overall exposure to many of the inherent risks of drug development. Our proprietary technologies are licensed from Cedars-Sinai Medical Center, the largest academic medical center in the Western U.S. and ranked number one in California and number two in the nation in U.S. News & World Report’s Best Hospitals Honor Roll for 2022-2023. As of the date of this prospectus, our product candidates have not been approved as safe or effective by the FDA or any other comparable foreign regulator.

 

Our product portfolio currently consists of:

 

	●	Five pre-clinical or clinical-trial stage drug candidates developed by us and designed to target immune response.
	●	Two therapeutic agents developed by our Enviro Therapeutics, Inc. subsidiary and designed to increase anti-tumor response in conjunction with cancer therapies by addressing resistance to these agents.
	●	A variety of technologies licensed by our Enviro Therapeutics, Inc. subsidiary and consisting of compositions and methods for treating diseases and conditions by targeting CD105 and depleting mitochondrial DNA from the circulation.

 

Our Science

 

The human immune system can tell the difference between normal cells in the body and those it sees as “foreign,” which allows it to focus an attack on the foreign cells while leaving the normal cells alone. To do this, our immune system uses “checkpoints” – molecules on certain immune cells that need to be activated (or inactivated) to start an immune response. Cancer cells can find ways to use these checkpoints to avoid being attacked by the immune system.

 

We are developing small molecules that we believe can specifically target these central checkpoints. In addition, we are developing an activated T cell therapy designed to target cancer stem cells.

 

In June of 2021, we announced the acquisition of Enviro Therapeutics, Inc. to incorporate their advanced pipeline of drug candidates in Phase 1 and Phase 2 trials. The pipeline includes two therapeutic agents addressing what we believe to be significant unmet needs in prostate and lung cancer markets and that we believe can help address cancer progression, in particular, in those cancers that develop resistance to standard therapies.

 

As a result, we have a pipeline of seven drugs. We have filed an Investigational New Drug, or IND, application with the FDA that has become effective for ENV 105. As a result, we began a Phase 1 trial for non-small cell lung cancer in September 2023 and in September 2023 opened a randomized Phase 2 trial for prostate cancer. We believe that the mechanism of action for ENV 105 may addresses the resistance mechanism of tumor dormancy. This was only possible because ENV 105 targets both the cancer cells as well as its supportive non-cancer environment. The advantage of targeting the unique environment supporting the tumor cells is that their capacity to adapt and evade therapy is significantly lower than that of the cancer itself. As such, ENV 105 is designed to address resistance to chemotherapy, radiation therapy, androgen targeted therapy, EGFR inhibitors, or checkpoint inhibition when given in combination. Interestingly, since the target of ENV 105, endoglin, is upregulated by the tumor and supporting cells in response to androgen targeted therapy and EGFR inhibitors as a proven mechanism of resistance, we believe the co-administration of ENV 105 specifically targets this mechanism of resistance.

 

Through the Enviro Therapeutics, Inc. acquisition, we also obtained ENV 205, a pre-clinical therapeutic for treating diseases and conditions by depletion of mitochondrial DNA from circulation and for detection of mitochondrial DNA. We intend to use this antibody technology to treat chemotherapy resistance and for cachexia, a common problem in the cancer patient population.

 

Our Pipeline

 

We have sought to develop a broad portfolio of novel and transformative drug therapies to treat cancer. Our current portfolio consists of seven drug therapies consisting of peptide and small molecule cancer immunotherapeutics KROS 101, 102, 201, 301, and 401 and therapeutic agents ENV 105 and 205. Our three clinical trials that have started or plan to start 2023 are for KROS 201 and ENV 105.

 

 

KROS 101 is a small molecule that targets the GITR ligand, a signal for T cell growth to remove a checkpoint barrier to fight a host of cancers. Our second drug, KROS 201, is a T cell therapy activated by dendritic cells to treat glioblastoma, a deadly and common brain cancer. Our ENV 105 drug seeks to address unmet medical needs in large markets of prostate and lung cancers. For example, the global prostate cancer therapeutics market size was valued at USD 7.9 billion and at USD 1.7 billion for EGFR mutant non-small cell lung cancer. Our ENV 105 biologic drug targets endoglin and addresses resistance to androgen targeted drugs and EGFR inhibitors. A Phase 2 trial involving a heavily pre-treated population suffering from prostate cancer was initiated at Cedars-Sinai Medical Center. The primary objective of the study was to measure the proportion of patients at two months who had either disease stabilization or regression (i.e. complete or partial response), referred to as the clinical benefit rate. A clinical benefit rate of 62% was observed. This Phase 2 trial involved the use of enzalutamide (Xtandi®, Pfizer) and abiraterone (ZYTIGA®, Janssen), two forms of hormone therapy that blocks the androgen receptor and its target ligand, testosterone, respectively. These two agents are considered standard of care for nearly all recurrent prostate cancer patients.

 

The trial accrued patients that were resistant to the very androgen targeted therapy (enzalutamide or abiraterone) that was given in the trial in addition to ENV105. Importantly, ENV105 administration alone has no clinical benefit, based on pre-clinical findings (conducted by us) and previous clinical findings (through trials performed by the National Cancer Institute). However, two agents that apparently have no clinical effect, when combined result in halting tumor progression. The finding is well justified by numerous publications demonstrating hormone therapy resistance develops through the induction of CD105, the target of ENV 105 [Placencio-Hickok et al. (2020) Endocrine Related Cancer 27:1; Kato et al. (2020) Oncogene 38: 716; Smith et. al. (2023) Molecular Therapy 31: 78; Thiruvalluvanet. al. (2023) Cancers 14: 2491]. All the patients in the trial were not only resistant to the two hormone therapy agents, but the patients had all had at least one other intervention after surgical or radiation progression. For some they had failed to respond to five other drugs. The responders to the combination therapy were patients that had exceedingly few other options for survival. The study enrolled 11 patients prior to closure, each of whom were enrolled in one of two arms (or specific treatments) in the clinical trial. Three patients were enrolled in the abiraterone acetate arm and eight in the enzalutamide arm. Of these patients only two and six patients on each arm were considered assessable, respectively (i.e. completed at least two months of therapy with imaging). Of the 11 patients enrolled in the trials, nine were evaluable. This investigator-initiated trial closed to accrual prior to its planned enrollment of 40 patients due to limitation of the drug supply from the manufacturer. The drug supply has since been expanded and obtained by Kairos Pharma. The primary objective of the study was to measure the proportion of patients at two months who had either disease stabilization or regression (i.e., complete or partial response), referred to as the clinical benefit rate. Disease status assessments were made by RECIST 1.1 or PCWG3 criteria. One of the two patients on the abiraterone arm experienced a <50% decline in his serum PSA concentration with disease stabilization by scans. Four of the six patients on the enzalutamide arm experienced clinical benefit by three showing stabilization of disease, and one showing decline in his serum PSA concentration and scan improvement. Grade 3 side effects consisting of hyponatremia, urinary retention, and cellulitis were noted on the abiraterone arm. None of these grade 3 events were attributed to the use of ENV105. No grade 3 events were noted on the enzalutamide arm. The most frequent grade 1-2 events occurring in at least two patients included anemia, nausea, and gingival bleeding.

 

A three-gene panel was identified to serve as a companion biomarker for patient selection. There are no approved companion diagnostic tests for ENV105. However, candidate biomarkers revealed in the previous Phase 2 trial will be verified in the new Phase 2 trial to better predict patients that would best respond to the ENV105. Our Enviro Therapeutics, Inc. subsidiary will strive to co-develop companion biomarkers with all drugs in its portfolio, enabling identification of potential drug responders prior to therapy. As of the date of this prospectus, our companion diagnostics are in development and have not been approved by the FDA. There is no guarantee that these companion diagnostics will be approved by the FDA or comparable foreign regulatory agencies.

 

KROS 101 is a small molecule that induces trimerization of the GITR ligand and is the culmination of the pioneering work of Dr. Ramachandran Murali, our Vice President of Research and Development, in 3D crystallography. KROS 201 consists of potent T cells that are stimulated by dendritic cells in the test tube to target cancer stem cells. Our initial focus of KROS 201 is to treat glioblastoma. Dr. Yu runs a lab that is known for its pioneering work in dendritic cell immunotherapy.

 

ENV 105 demonstrated an ability to target CD105 which is elevated in drug resistance in prostate cancer. Androgen therapy resistance in prostate cancer is being targeted in the Phase 2 trial. EGFR antagonist resistance in lung cancer is being targeted in a Phase 1 trial. The ENV 105 Phase 2 trial in prostate cancer with apalutamide (Janssen) is a multicenter trial being conducted at Cedars-Sinai, University of Utah, and City of Hope. The Phase 1 trial in lung cancer with Tagrisso (AstraZeneca) is being conducted at Cedars-Sinai.

 

We are also developing KROS 102, KROS 301, and KROS 401. KROS 102 is a GITR ligand antagonist designed to increase inhibitory Treg functions while hampering T effector cell numbers and function. KROS 301 is a tumor targeting small molecule and checkpoint inhibitor with two distinct mechanisms of action resulting from blocking intranuclear localization of RelA, a key component of the NF-KB pathway. KROS 401 is a tumor microenvironment immune modulator and cyclic peptide inhibitor of IL-4 and IL-13 reversing tumor associated macrophage inhibition. Both therapies reverse the mechanism of immune suppression at the tumor site.

 

Finally, we are developing ENV 205, what we believe to be a first-of-its-kind biologic that targets prostate cancers that have become otherwise resistant to chemotherapy. As of the date of this prospectus, ENV 205 has not been approved by the FDA or any other comparable foreign regulator. ENV 205 targets the excretion of mitochondrial DNA found elevated in circulation when patients are on chemotherapy. Higher blood levels of mitochondrial DNA are not only associated with chemotherapy resistance, but more widely recognized as a mediator of cardiac toxicity and other systemic inflammatory events contributing to the negative side effects of chemotherapy use. Thus, depleting mitochondrial DNA with the administration of ENV 205 restores chemotherapy sensitivity with reduced toxic side effects.

 

Addressing these critical targets strike cancer at what we believe to be its most vulnerable point. The group of founding scientists generating our initial drugs have combined their pioneering contributions in structural, biology, immunology, and cancer therapy to bring to unmet medical needs what we believe are life changing therapeutics. As of the date of this prospectus, aside from the clinical trials, which are conducted off-site at third party facilities, our operations are all conducted virtually as we aim to be efficient in our deployment of capital and leverage our history with premier academic medical centers to efficiently enroll and execute clinical trials.

 

 

Our Development Pipeline and Programs

 

Our drug development programs for KROS 101, 102, 201, 301, and 401 as well as therapeutic agents ENV 105 and ENV 205 are summarized in the following table.

 

 

Kairos-Developed Products

 

Kairos’ products consist of five pre-clinical or clinical-trial stage drug candidates developed by Kairos and designed to target immune response.

 

KROS 101 is an orally available GITR (glucocorticoid-induced tumor necrosis factor receptor) ligand small-molecule antagonist designed to deplete regulatory T cells (Tregs) and activate effector T cells to augment the antitumor immune response for the treatment of patients with cancer. We are developing KROS 101 as a systemic immune modulator to address immunosuppressive activity of solid cancers and we are currently working towards completing IND-enabling pharmacokinetic, toxicity and safety studies in 2023. KROS 101 stabilizes the GITR ligand to signal GITR to impact cancer therapy. GITR is a powerful checkpoint that suppresses the immune response against cancer. This checkpoint is a central switch that promotes “killer” effector T cell functions and hampers inhibitory regulatory T cell (Treg) functions. Due to its central role in regulating Treg, GITR receptor complex is considered an optimal therapeutic target for treating cancer. This may be the optimal complement to add to current checkpoint inhibitors as it shows a dose dependent effective response in increasing the immune response. As a competitive antagonist, KROS 101 could be dosed to avoid the typical common side effects of checkpoint inhibitors.

 

We believe our GITR targeting small molecule has the potential to be a significant improvement over existing antibody treatments that have been tested in clinical trials. When GITRL binds to the GITR on the surface of Treg cells, the suppressive activity of Treg cells against effector T cells is reduced. While on the effector T cell, GITR-GITRL binding induces the proliferation of effector T cells. This receptor is central to the regulation of the immune system.

 

Whereas previous competitor therapeutics targeting GITR were antibodies that bind the receptor, our small molecule drug fits into the GITR ligand stabilizing the three-pronged trimer structure. This structure enables the amplification of the GITR receptor trimer, leading to physiologic signaling for T cell proliferation. The analogy is a digital signal rather than a limited analog signal. This powerful physiologic signal can lead to exponential signaling of T cells to proliferate against cancer cells. In addition, the small molecule half-life enables reversibility, allows for fine tuning to limit side effects. Having both agonist and antagonist molecules can reverse potential untoward effects. In addition, this small molecule may also be given orally as a medication. The discovery of KROS 101 was the culmination of transformative structural biology based on exclusive proprietary 3D crystallography first used to model GITR ligand by Kairos’ scientists.

 

KROS 101 is currently in pre-IND studies in development for a Phase 1 trial.

 

 

KROS 102 is a GITR antagonist designed to increase the inhibitory regulatory T cell (Treg) functions, while hampering T effector cell numbers and function. KROS 102 has been shown to decrease T effector cells and increase Treg cells in a dose dependent fashion to treat autoimmune diseases. We are developing a novel GITR inhibitor that can impact the abnormal immune responses against one’s own body.

 

Due to its central role in regulating Treg, the GITR receptor complex is an optimal therapeutic target to treat autoimmunity. By potently and specifically inhibiting an immune response, this strategy may impact autoimmune diseases such as Crohn’s disease, multiple sclerosis, and rheumatoid arthritis. KROS 102 has been shown to decrease T effector cells and increase Treg cells in a dose dependent fashion. KROS 102 is currently in preclinical studies.

 

KROS 201 is a proprietary technology for the production of activated T cells. Activated T cells (ATC) are killer T cells that are made from a patient’s white blood cells in a cell culture by activating with cytokines or T cell activating signals and by priming dendritic cells loaded with glioblastoma cancer stem cell specific antigens. Kairos generates activated T cells that will be infused intravenously into patients with recurrent glioblastoma.

 

KROS 201 begins with the activation of T cells using dendritic cells for the treatment of patients with glioblastoma. Activated T cells (ATC) are killer T cells that are made from a patient’s white blood cells in a cell culture by activating with cytokines or T cell activating signals and by priming dendritic cells loaded with glioblastoma cancer stem cell specific antigens. Cytotoxic and helper T cells are generated in a cell manufacturing center and infused into patients with recurrent glioblastoma.

 

We believe KROS 201 has the potential to become a novel T cell therapy that allows a “plug and play” scenario where a patient’s specific tumor can be addressed as well as the improvement of cancer treatment by stimulating patients’ immune systems to generate a long-term population of cytotoxic T cells & helper T cells directed against the tumor.

 

We completed IND-enabling pharmacology and toxicology studies and submitted an IND application.

 

KROS 301 is a tumor-targeting small molecule and checkpoint inhibitor with two distinct mechanisms of action resulting from blocking intranuclear localization of RelA, a key component of the NF-KB pathway. NF-KB is a key component for cancer growth and drug resistance. KROS 301 targets tumor cells in in RelA/p65 biomarker positive solid tumors. The use of this biomarker enables choosing patients that will respond to the drug enabling efficient clinical trials that are more likely to succeed. KROS 301 is in active pre-clinical development. Separate approval will be required for the development and approval of a companion diagnostic. This approval may be delayed or not issued by the FDA.

 

KROS 401 is a tumor microenvironment immune modulator and cyclic peptide inhibitor of IL-4 and IL-13 reversing tumor associated macrophage inhibition. KROS 401 reduced the M2 macrophage population and limits fibrosis of the pancreas due to anti-inflammatory process (Xue, Nature Com. 2015). Other indications may include pulmonary fibrosis, Crohn’s disease, and other inflammatory conditions. KROS 401 blocks the IL4/IL13 cytokine immune receptors for triple negative breast cancer and in addition, it increases anti-tumor response in conjunction with radiation therapy in an animal model.

 

Recently, it became clear that macrophages in tumors are altered by the Th2 cytokines IL-4 and IL-13, inducing alternatively activated macrophages or M2. Breast cancer associated tumor associated macrophages are mainly activated M2 macrophages. Thus, shifting the balance toward M1 macrophages will prevent tumor growth and enable T cell activation and killing, which is dependent on Th1 cytokines. We will target a key Th2 cytokine pathway, IL-4, and IL-13 to block macrophage immunosuppression with KROS 401, thereby allowing T cells to access tumors.

 

We believe there are significant advantages to KROS 401 as our peptide binds to IL13R alpha1 and IL4R alpha1 (type I) receptor complex and blocks both IL-4 and IL-13 mediated signaling. The implication is that targeting IL-4Ralpha is predominantly for indications such as asthma or eczema, while the type I is for macrophages/tumor growth (esp IL13R). KROS 401 is in preclinical development.

 

 

Enviro and Enviro-Licensed or -Acquired Products

 

Enviro’s product portfolio includes two therapeutic agents at different stages of clinical development.

 

ENV 105 is a Phase 2 clinical stage therapeutic agent designed to address cancer progression. ENV 105 is an antibody therapeutic designed for use by prostate cancer patients resistant to androgen-targeted therapy, which is being tested in a Phase 2 clinical trial. We began accruing patients for the trial in September 2023. This multicenter randomized Phase 2 trial involving Cedars-Sinai Medical Center and City of Hope in Los Angeles California and Huntsman Cancer Center in Utah is testing the combination of a third-generation androgen targeted therapy, apalutamide (Janssen), with or without ENV 105 for prostate cancer patients that have developed resistance to at least one other androgen targeted inhibitor (NCT05534646). Dr. Edwin Posadas is the principal investigator of this multi-institutional trial. Dr. Posadas is Director of the Experimental Therapeutics Program and the Medical Director of the Urologic Oncology Program at the Samuel Oschin Comprehensive Cancer Institute at Cedars-Sinai Medical Center. Companion biomarkers for efficient selection of patients to potentially respond to the drug will be evaluated in this trial. The genetic biomarker potentially identifies responsive patients to ENV 105 prior to therapy for a future Phase 3 trial. The companion biomarker would require a separate approval by the FDA. Prostate cancer is the most common, non-cutaneous cancer affecting men in the United States and 1.2 million new cases registered worldwide. It is also the second leading cause of cancer death in American males. Androgen targeted therapy accounts for USD 15 billion in sales in 8 primary markets. Since nearly all patients eventually develop resistance to androgen targeted therapy, addressing this population with a drug targeting endoglin (ENV 105) is of high value for this single indication. In clinical trials, ENV 105 has been shown to be reasonably well-tolerated in patients as an adjunct to contemporary androgen targeted inhibitors (NCT03418324). Grade 3 hyponatremia, urinary retention, and cellulitis were noted on the abiraterone arm. None of these were attributed to the use of ENV105. No grade 3 events were noted on the enzalutamide arm. The most frequent grade 1-2 events occurring in at least two patients (listed as abiraterone, enzalutamide) included anemia, nausea, and gingival bleeding. Careful mechanism-of-action studies have revealed that ENV 105 impacts a more ubiquitous means of cancer drug resistance, cancer dormancy, the growth potential for this drug alone can be large. A Phase 1 EGFR antagonist resistant non-small cell lung cancer targeted therapy combination of Tagrisso (osimertinib, AstraZeneca) and ENV 105 is at Cedars-Sinai Medical Center. The principal investigator of this clinical trial is Dr. Karen L. Reckamp, Professor in Medicine, Director of the Division of Medical Oncology at Cedars-Sinai Medical Center. We also expect targeted therapies to contribute to the growth of the prostate and EGFR-dependent non-small cell lung cancer market, as immune therapies have not shown efficacy for these two cancer types.

 

ENV 205, an antibody fragment targeting mitochondrial DNA was shown to limit chemotherapy resistant prostate cancer in preclinical studies. Mitochondrial DNA depletion limit inflammation-induced pro-tumorigenic activity and sensitizes prostate cancer to docetaxel. This biologic is a first of its kind strategy of chemotherapy sensitization. The development of chemotherapy resistance is an unfortunate eventuality for patients with solid tumors. The projected market share of $74.3 billion by 2027 for chemotherapy alone, support an effectively large market share for ENV205, as the only biologic reported to restore chemotherapy sensitivity in preclinical studies.

 

Our Market Opportunity

 

Global cancer drug spending is expected to reach $311.2 billion by 2026 driven largely by the growth of immuno-oncology (EvaluatePharma World Preview 2020). Global immunotherapy market estimates show significant compound growth with sales expectations ranging from $94.7-$126.9 billion by 2026, exhibiting a CAGR of up to 20.2% from 2020 (Grand View Res.). Increasing patient pool and higher mortality rates are augmenting the need for cancer immunotherapy globally. We are uniquely positioned to advance our immunotherapies that may have the potential to transform the way cancer is treated using antibodies that target CD105 to reverse drug resistance to prostate and lung cancer and activated T cells that target cancer stem cells that are the root of glioblastoma. Our pipeline of immunotherapeutic agents that signals growth of effector T cells against cancer, and reverse immunosuppression at the cancer site are being rapidly advanced to address large unmet needs in cancer immunotherapy.

 

ENV 105

 

The broad application of ENV 105 as a complementary drug to support standard of care cancer therapy for many cancer types has revealed numerous potential therapeutic strategies that have not been exhaustively explored in pre-clinical models. This is based on the identification that ENV 105 acts on both the cancer cells and cancer associated fibroblastic cells, thus it complements many cancer epithelia-directed therapies. However, we have focused on three indications in pre-clinical studies, two of which have matured to clinical trials: prostate cancer (Phase 2 with androgen signaling inhibitors), lung cancer (Phase 1 with EGFR antagonist), and head and neck cancer (preclinical with radiation or chemotherapy).

 

Prostate cancer: There are 300,000 castrate resistant prostate cancer patients in the U.S. eligible to be given combination therapy of ENV 105 + androgen signaling inhibitors for $5,000 per month (based on comparable neutralizing antibodies). This would suggest a potential US$9 billion gross sales for ENV 105 for a six-month dose in the U.S. for this single indication. As a point of reference, androgen signaling inhibitors on their own make up $10 billion market inclusive of Sanofi; Johnson and Johnson Services, Inc.; Pfizer, Inc.; Astellas Pharma, Inc.; and Bayer AG – predicted to grow to $15 billion global market by 2027 of castrate resistant prostate cancer patients. None have been approved to extend efficacy apart from chemotherapy (docetaxel and cabazitaxel) with undesirable toxicity profiles.

 

 

Lung cancer: There are approximately 30,466 patients with an EGFR driven non-small cell lung cancer annually in the U.S. The incidence of EGFR driven NSCLC is most prevalent in non-smokers and those of east Asian descent, 35-40% of NSCLC – 341,633 patients annually in Asia (China, India, Japan, S. Korea, Thailand, Philippines). To determine lung cancer market share for ENV 105, the current market share for Tagrisso (US$3 billion annual sales for AstraZeneca) can be used as point of reference. Accordingly, ENV 105 could have a $1 billion market share in the U.S. as a combination therapy with EGFR antagonists to improve or extend its efficacy.

 

Head and neck cancer: The capacity for ENV105 to complement both radiation and chemotherapy would suggest future clinical application in many solid tumor types. For head and neck cancer, the World Health Organization estimates over 550,000 new cases of and around 300,000 deaths per year. The rising consumption of alcohol and tobacco is a major factor behind estimated 7.9% increase in the head and neck cancer by 2030. The global head & neck cancer drug market is estimated at $1.51 billion in 2021. Chemotherapy is the standard of care alone or in combination with radiation therapy, where toxicity is the greatest limitation. Administration of ENV 105 enables lower radiation dosing to improve quality of life.

 

KROS 101 and KROS 102

 

Checkpoint inhibitors are immunotherapeutic agents that block proteins that suppress a potent immune response of the body against cancers and other “foreign” agents. KROS 101 and 102 are checkpoint inhibitors and agonists that enable T cells to expand and contract respectively. The global immune checkpoint inhibitor market size was $31.4 billion in 2021 and anticipated to be $148 billion in 2020 with a CAGR of 18.81% from 2022 to 2030 (Precedence Research).

 

KROS 201

 

KROS 201 is an activated T cell therapy that targets glioblastoma. T cell therapy market size is expected to be around $20.8 billion by 2030 from its value of $4.9 billion in 2021 with a CAGR of 20.4% during the forecast period 2022-2030 (Vision Research Reports).

 

KROS 301

 

The global small-molecule cancer therapies market size was valued at $175.3 billion in 2021 and is expected to have a CAGR of 5.44% from 2022 to 2030 (Grandview Research). KROS 301 is a small molecule that targets the NF-kB pathway in cancer to prevent cancer growth and block checkpoint inhibitor expression of PD-L1.

 

KROS 401

 

The global peptide therapeutics market size was estimated at $39.3 billion in 2021 and is expected to reach $42.1 billion in 2022 (Grandview Research). KROS 401 is a cyclic peptide that blocks IL-4 and IL-13 receptors on tumor associated macrophage to reverse immune suppression at the tumor site.

 

ENV 205

 

Cachexia is debilitating disease of muscle wasting not treatable by nutrition supplementation associated with the death of 30% of all cancer, 20% of AIDS, and 30% of COPD patients. Cachexia is an unfortunate underrecognized consequence of many chronic diseases. We believe ENV 205 is a molecule found to limit the process of muscle wasting through the capture and excretion of mitochondrial DNA in circulation. Cachexia is considered an orphan disease in the U.S. and Europe, increasing hospitalization costs and length of stay in several disease types. The cancer cachexia therapeutics market is estimated to reach above $1 billion in the U.S. alone. The application of ENV 105 as cachexia therapeutic is further supported by the demonstrated restoration of docetaxel therapy sensitivity in resistant prostate cancer models. Taxane-based therapy, inclusive of docetaxel, paclitaxel, and cabazataxel, is standard of care for majority of solid tumors (inclusive of breast cancer, non-small cell lung cancer, advanced stomach cancer, head and neck cancer and metastatic prostate cancer). Strong preclinical data suggest ENV 205 chemotherapy sensitization in a combination therapy setting and limit the development of cachexia as a single agent.

 

 

We will aggressively pursue ENV 105 and ENV 205 in pre-clinical and clinical trials. Future therapeutic targets will be developed based on the overriding mission to complement traditional cancer-targeted drugs with those that address the tumor microenvironment.

 

Our Strategy

 

Our goal is to unlock the power of the immune system on the two most pervasive problems in cancer treatment: (i) resistance to therapy and (ii) immune suppression by cancer. We believe this road will lead to major improvement in the quality of life of cancer patients and will transform the outcomes of patients. We seek to develop cutting-edge therapeutics for cancer patients that reverse the inhibitory effects of cancer on the immune system. To this end, our strategy involves rapidly and efficiently advancing our existing portfolio of innovative products through clinical development and leveraging our current industry-leading team. The strategy consists of the following:

 

	●	A multi-pronged toolkit of potent and life changing therapeutics with differing modalities, targets, and stages of development. Their commonality is targeting key mechanisms of drug resistance and immune suppression by cancer.
	●	Leverage our academic research and clinical connections with our industry collaborations.
	●	Complete enrollment of prostate patients in a randomized multi-institutional Phase 2 trial of ENV 105.
	●	Complete enrollment in a Phase 1 trial of ENV105 for patients with non-small lung cancer on Tagrisso.
	●	Initiate a Phase 1 trial of activated T cell therapy for KROS 201 in patients with glioblastoma.
	●	Complete pre-IND studies for the checkpoint inhibitor KROS 101.
	●	Continue to advance our pipeline of immunotherapeutics for clinical trials.
	●	Maintain a portfolio of innovative therapeutics to mitigate risk.
	●	Leverage virtual infrastructure for efficient execution of collaborative clinical and translational research.
	●	Utilize internal development capabilities to leverage close academic partnerships.

 

In particular, we intend to deploy an aggressive, three-pronged, growth strategy that we believe will help us develop our clinical pipeline and maximize our success, consisting of strategic partnerships, commercial development, and portfolio optimization.

 

	●	Strategic Partnerships – We will focus on expanding our existing pipeline through establishing strategic partnerships with companies that have interesting products and technologies. We intend to focus on novel, early-stage and preclinical assets in a variety of therapeutic areas.
	●	Commercial Development – We expect to participate and assist in the commercial development activities of its assets with our strategic partners. Commercial development activities may include, but are not limited to, clinical development, market research, healthcare economics, market access, sales/marketing, and commercial launch strategies.
	●	Portfolio Optimization – We will continue to evaluate, prioritize, optimize, and make appropriate changes in our pipeline portfolio as market development dynamics and/or product opportunities change.

 

 

Our Team

 

Our company is led by our CEO and Chairman, Dr. John S. Yu., our Chief Scientific Officer, Dr. Neil Bhowmick, our Vice President of Research and Development, Dr. Ramachandran Murali, and our Chief Financial Officer, and Mr. Doug Samuelson.

 

 

Dr. Yu is a Professor and Clinical Chief in the Department of Neurosurgery and Director of the Brain Tumor Center at Cedars-Sinai Medical Center in Los Angeles, California. Dr. Bhowmick is a Professor of the Department of Medicine and Director of the Cancer Biology Program at Cedars-Sinai Medical Center. Dr. Murali is a structural biologist at Cedars-Sinai Medical Center, and the inventor, with others, of three of the patent technologies licensed to Kairos.

 

Intellectual Property

 

Overview

 

Dr. Yu, Dr. Bhowmick, and Dr. Murali have developed certain proprietary technology, and identified other proprietary technology developed by researchers and Cedars, that the Company will pursue for commercialization. Proprietary technology invented and developed by doctors and scientists and Cedars are owned by Cedars, and then optioned and/or licensed to such doctors and scientists, or other third parties, for commercialization in partnership with Cedars. Kairos and its subsidiary Enviro have multiple such options and/or license agreements with Cedars regarding proprietary technology that the Company is pursuing for commercialization, as described below.

 

All of our patent rights are subject to the license agreements between the patent owner and the Company, described below.

 

Kairos Intellectual Property Agreements with Cedars-Sinai Medical Center

 

Kairos has entered into four Exclusive License Agreements with Cedars-Sinai Medical Center, which are sometimes referred to as the Kairos-Cedars license agreements, which grant Kairos exclusive licensing rights (which include the right to sublicense) with respect to certain patent rights owned by Cedars to the following:

 

	1.	Method of generating activated T cells for cancer therapy, invented by Dr. John S. Yu and others.
	2.	Methods of use of compounds that bind to RelA of NFkB, invented by Dr. Ramanchandran Murali and others.
	3.	Composition and methods for treating fibrosis, invented by Dr. Ramanchandran Murali and others.
	4.	Compositions and methods for treating cancer and autoimmune diseases, invented by Dr. Ramanchandran Murali and others.

 

For the exclusive license agreement in item 1 above, Kairos is required to pay (i) an initial license fee in the mid five-figures upon the raising of $500,000 in capital, (ii) an annual maintenance fee in the low five-figures, (iii) royalties based on low single-digit percentage of patent product sales and less than one percent of other sales and (iv) other non-royalty sublicense fees ranging from a mid-single-digit to low double-digit percentage of such revenues shall be due and payable to Cedars, depending on the stage of FDA authorization at the time the sublicense revenue is generated. Non-royalty sublicense revenue would be between 5% and 35% depending on the phase of FDA testing of the product during which the sublicense agreement is signed.

 

In addition, Kairos is required to the Cedars based on the following milestones: (i) successful completing of Phase 1 clinical trial; (ii) the successful completing of Phase 2 clinical trial and receipt of U.S. Food and Drug Administration, or FDA, or equivalent regulatory agency in another jurisdiction approval for a Phase 3 clinical trial; (iii) receipt of FDA approval; and (iv) cumulative net sales exceeding $50,000,000. If all of these milestones are met, the required milestone payments will total $4,400,000.

 

For each of the exclusive license agreement in items 2, 3 and 4, Kairos is required to (i) pay an initial license fee of $15,000 in total, (ii) reimburse Cedars for patent protection costs ranging from the high four-figures to the mid-five-figures, (iii) pay an annual maintenance fee in the low five-figures and (iv) pay royalties based on a low single-digit percentage of net sales. The royalty obligations as to each product shall terminate on a country-by-country basis concurrently with the expiration of the last to expire of a valid claim within the patent rights that covers such product, including any term extensions thereof. There are no non-royalty expiration dates. Patent expiration dates and specific jurisdictions of foreign patents that we in-license from Cedars-Sinai are listed in the Patent Table at page 91 below.

 

Enviro Intellectual Property Agreements with Cedars-Sinai Medical Center

 

On March 16, 2020, Enviro entered into two Exclusive Option Agreements with Cedars-Sinai Medical Center that give Enviro options to enter into an Exclusive Agreement with Cedars which would grant Enviro exclusive licensing rights (which include the right to sublicense) to certain patent rights owned by Cedars with respect to (1) compositions and methods for treating diseases and conditions by depletion of mitochondrial DNA from circulation for detection of mitochondrial DNA, and (2) sensitization of tumors to therapies through endoglin antagonism.

 

 

In consideration of these agreements, Enviro agreed to pay option fees of $2,000 and $3,000, respectively. Enviro’s options expire nine months from the effective date. On January 9, 2021 and January 11, 2021, the parties agreed to extend both nine-month option periods for an additional six months. In consideration of these extensions, Enviro agreed to pay an extension fee of $500, and $1,000, respectively. Enviro entered into two Exclusive License Agreements with Cedars-Sinai Medical Center on June 2, 2021. Enviro and Cedars entered into:

 

	(1)	an Exclusive License Agreement for Enviro to develop, manufacture, use and sell products utilized or derived from patent rights worldwide, which include one patent application in the United States related to the “Compositions and Methods for Treating Diseases and Conditions by Depletion of Mitochondrial DNA from Circulation and for Detection of Mitochondrial DNA” invented by Dr. Neil Bhowmick and others; and
	(2)	an Exclusive License Agreement for Enviro to develop, manufacture, use and sell products utilized or derived from the patent rights and technical information worldwide, which include six patent applications in the United States, Australia, Canada, China, Europe and Japan related to the “Sensitization of Tumors to Therapies Through Endoglin Antagonism” invented by Dr. Neil Bhowmick and others.

 

The milestones agreed to were as follows:

 

	1.	Completion of preclinical studies within two years of the effective date, as stipulated in the agreement thereof (the “Effective Date”);
	2.	Completion of toxicology studies within two and a half years of the Effective Date;
	3.	Obtaining IND within three years of the Effective Date; and
	4.	Beginning Phase 1 trial within four years of the Effective Date.

 

As of the date of this prospectus, we have completed milestones 1, 2, and 3.

 

The Exclusive License Agreement between Enviro and Cedars was made effective on June 2, 2021. Pursuant to the two Enviro-Cedars license agreements, Enviro must meet certain milestones relating commercialization, and, if not met or extended, Cedars may convert the exclusive licenses into non-exclusive licenses or to co-exclusive licenses, or terminate the licenses. In exchange for each of the licenses, Enviro shall pay an upfront license fee, plus an additional fee when Enviro has raised at least $250,00,00 in capital company-wide for any program or purpose; provided, however, will only have to pay such fee once between both Enviro-Cedars license agreements. Enviro shall also reimburse Cedars for the costs incurred in the prosecution of the patent rights subject to the Enviro-Cedars license agreements prior to the date of execution of such agreements. The aggregate potential fees that Enviro may have to pay in exchange for the licenses is $464,749.33 as of April 28,2023. Cedars shall also receive royalty payments of a mid-single-digit percentage of net sales of products associated with the licensed patent right and less than one percent of net sales of other products derived from Cedars’ technical information, with a minimum royalty year in the low five-digits due beginning on the third anniversary of the effective date of the license. To the extent Enviro derives non-royalty sublicensing revenues, a high single-digit to low double-digit percentage of such revenues shall be due and payable to Cedars, depending on the stage of FDA authorization at the time the sublicense revenue is generated. Non-royalty sublicense revenue would be between 5% and 35% depending on the phase of FDA testing of the product during which the sublicense agreement is signed.

 

Enviro shall pay Cedars in connection with achieving certain milestones relating to products derived from the patent rights: (i) successful completion of Phase 1 clinical trial; (ii) successful completion of Phase 2 clinical trial, receipt of FDA approval, and approval for a Phase 3 clinical trial; (iii) FDA approval of a new drug application or biologics license applications; and (iv) cumulative net sales exceeding $100,000,000. The maximum aggregate milestone payment for ENV 105 will be $7,150,000 when cumulative net sales have exceeded $100,000,000. The last-to-expire of licensed patents is scheduled to expire on June 14, 2037. Patent expiration dates, specific jurisdictions of foreign patents are listed in the Patent Table above.

 

The Enviro-Cedars license agreements will, unless sooner terminated, continue in effect on a country-by-country basis until the last to expire of the patents covering the patent rights or future patent rights. Under the terms of the Enviro-Cedars license agreements, unless waived by Cedars, the agreement shall automatically terminate: (a) if Enviro ceases, dissolves or winds up its business operations; (b) if performance by either party jeopardizes the licensure, accreditation or tax exempt status of Cedars or the agreement is deemed illegal by a governmental body; (c) within 30 days for non-payment of royalties or if of Enviro fails to undertake commercially reasonable efforts to exploit the patent rights or future patent rights; (d) within 60 days of Enviro’s failure to cure any breach or default of a material obligation under the agreements (e) within 90 days of Enviro’s failure to cure any breach or default of a material obligation under the agreements; or (f) upon mutual written agreement of the parties.

 

Enviro License and Supply Agreement with Tracon Pharmaceuticals, Inc.

 

On May 21, 2021, Enviro entered into an Enviro-Tracon license agreement with Tracon. Pursuant to the Enviro-Tracon license agreement, Tracon grants to Enviro access to inactive IND filings for “TRC105” in the United States, ownership of “TRC105” stored vials of drug product manufactured to GMP standards stored at Fisher Clinical or their designee, and assignment of Tracon’s patent rights to its “CD105 technologies.” Dr. Bhowmick, our Chief Scientific and Enviro’s CEO, is a consultant at Tracon Pharmaceuticals, Inc.

 

 

Pursuant to the Enviro-Tracon license agreement, Enviro paid Tracon an upfront fee of $100,000, and is obligated to pay Tracon an additional $500,000 upon its or its successor’s completion of one or more financings through the sale of equity (or debt convertible to equity) in an amount of $10,000,000, and an additional $500,000 within 10 days of its or its successor’s completion of one or more financings through the sale of equity (or debt convertible to equity) in an amount of $22,000,000. In addition, Enviro is obligated to pay Tracon a royalty of 3% of net sales on a country-by-country basis of the products subject to the agreement, and non-royalty payments of 3% of consideration for sublicensing fees. The royalty payments would terminate upon the completion of use of the TRC105 product. The non-royalty payments would terminate upon payment of $500,000 after the financing of an aggregate amount of $22,000,0000 to the Company.

 

Enviro issued Tracon equity ownership in Enviro equal to a number of shares of restricted common stock of Enviro equal to 7% on a fully diluted and converted basis of all common and preferred shares of Enviro. In connection with the Enviro-Kairos share exchange, the parties agreed that Tracon would receive, in exchange for its Enviro common stock, 280,000 shares of the restricted common stock of Kairos (which is equal to 1.41229% of the issued and outstanding shares of Kairos on a fully diluted and converted basis). Until such time as Tracon has received all of the cash consideration (as described above), Enviro or its successor in interest, shall issue to Tracon, without further consideration, any additional common stock of Enviro, or such successor in interest, necessary so that Tracon maintains ownership of shares of Enviro, or such successor in interest, equal to the Tracon-Enviro Equity on a fully diluted and converted basis of all stock in Enviro (or its successor). Notwithstanding the foregoing, if Tracon receives the full cash consideration within six months of the effective date of the Enviro-Tracon license agreement, then Tracon shall automatically return to Enviro (or any successor entity, if applicable) a number of shares of the restricted common stock of Enviro (or its successor) such that upon such return of shares Tracon shall possess an amount of shares in Enviro (or its successor) equal to 2% on a fully-diluted and converted basis relative to the other Enviro shareholders who exchanged their shares in the Enviro-Kairos share exchange. The returned portion of the Tracon-Enviro equity shall automatically be terminated, cancelled and of no further force and effect.

 

Pursuant to the Enviro-Tracon license agreement, we have exclusive licensing rights (which include the right to sublicense) to eight issued U.S. patents, four U.S. Utility or provisional patent applications, 24 issued patents and 24 patent applications in foreign jurisdictions. Patent expiration dates, specific jurisdictions of foreign patents are listed in the Patent Table below.

 

PATENT TABLE

 

Name of the Patent

Patent No./Application No.

Status (Patent granted or Patent application)

Products or Technologies to which the Patents or Patent Applications Relate

Type of Patent Protection

Expiration Date

Jurisdiction

ENDOGLIN ANTIBODIES

8,221,753

GRANTED

ENV 105

Product

2030-03-31

United States of America

ENDOGLIN ANTIBODIES

9,150,652

APPLICATION

ENV 105

Method of treatment

2029-09-30

United States of America

ENDOGLIN ANTIBODIES

9,944,714

GRANTED

ENV 105

Composition of matter

2030-03-31

United States of America

ANTIBODY FORMULATIONS AND USES THEREOF

201810659773.9

APPLICATION

ENV 105

Both a Product and a Method of Treatment Patent

2033-09-05

China (People’s Republic)

ANTIBODY FORMULATIONS AND USES THEREOF

1538/DELNP/2015

APPLICATION

ENV 105

Both a Product and a Method of Treatment Patent

2033-09-05

India

ANTIBODY FORMULATIONS AND USES THEREOF

6445671

GRANTED

ENV 105

Both a Product and a Method of Treatment Patent

2033-09-05

Japan

ANTIBODY FORMULATIONS AND USES THEREOF

6602446

GRANTED

ENV 105

Both a Product and a Method of Treatment Patent

2033-09-05

Japan

ANTIBODY FORMULATIONS AND USES THEREOF

368996

GRANTED

ENV 105

Both a Product and a Method of Treatment Patent

2033-09-05

Mexico

ANTIBODY FORMULATIONS AND USES THEREOF

10,195,281

GRANTED

ENV 105

Product and Formulation

2034-12-25

United States of America

ANTIBODY FORMULATIONS AND USES THEREOF

1501001224

APPLICATION

ENV 105

Both a Product and a Method of Treatment Patent

2033-09-05

Thailand

ANTIBODY FORMULATIONS AND USES THEREOF

MY-180157-A

GRANTED

ENV 105

Both a Product and a Method of Treatment Patent

2033-09-05

Malaysia

METHODS AND USE OF COMPOUNDS THAT BIND TO RELA OF NF-KB

16804352.9

APPLICATION

KROS 301

Both a Product and a Method of Treatment Patent

2036-06-01

European Patent

METHODS AND USE OF COMPOUNDS THAT BIND TO RELA OF NF-KB

10,881,641

GRANTED

KROS 301

Method of treatment

2037-11-30

United States of America

COMPOSITIONS AND METHODS FOR TREATING FIBROSIS

3194446

GRANTED

KROS 401

Both a Product and a Method of Treatment Patent

2035-09-18

European Patent

COMPOSITIONS AND METHODS FOR TREATING FIBROSIS

7095990

GRANTED

KROS 401

Both a Product and a Method of Treatment Patent

2035-09-18

Japan

COMPOSITIONS AND METHODS FOR TREATING FIBROSIS

10,245,298

GRANTED

KROS 401

Pharmaceutical composition

2035-09-18

United States of America

COMPOSITIONS AND METHODS FOR TREATING FIBROSIS

11,547,738

GRANTED

KROS 401

Method of treatment

2035-09-18

United States of America

COMPOSITIONS AND METHODS FOR TREATING FIBROSIS

18/093,667

APPLICATION

KROS 401

Both a Product and a Method of Treatment Patent

2035-09-18

United States of America

COMPOSITIONS AND METHODS FOR TREATING CANCER AND AUTOIMMUNE DISEASES

3,108,796

APPLICATION

KROS 101 and KROS 102

Both a Product and a Method of Treatment Patent

2039-08-08

Canada

 

 

Name of the Patent

Patent No./Application No.

Status (Patent granted or Patent application)

Products or Technologies to which the Patents or Patent Applications Relate

Type of Patent Protection

Expiration Date

Jurisdiction

COMPOSITIONS AND METHODS FOR TREATING CANCER AND AUTOIMMUNE DISEASES

201980062092.7

APPLICATION

KROS 101 and KROS 102

Both a Product and a Method of Treatment Patent

2039-08-08

China

COMPOSITIONS AND METHODS FOR TREATING CANCER AND AUTOIMMUNE DESEASES

19848154.1

APPLICATION

KROS 101 and KROS 102

Both a Product and a Method of Treatment Patent

2039-08-08

European Patent

COMPOSITIONS AND METHODS FOR TREATING CANCER AND AUTOIMMUNE

2021-506687

APPLICATION

KROS 101 and KROS 102

Both a Product and a Method of Treatment Patent

2039-08-08

Japan

COMPOSITIONS AND METHODS FOR TREATING CANCER AND AUTOIMMUNE DISEASES

10-2021-7006602

APPLICATION

KROS 101 and KROS 102

Both a Product and a Method of Treatment Patent

2039-08-08

Korea, Republic of (KR)

COMPOSITIONS AND METHODS FOR TREATING CANCER AND AUTOIMMUNE DISEASES

17/266,488

APPLICATION

KROS 101 and KROS 102

Both a Product and a Method of Treatment Patent

2039-08-08

United States of America

METHOD OF GENERATING ACTIVATED T CELLS FOR CANCER THERAPY

3,150,273

APPLICATION

KROS 201

Both a Product and a Method of Treatment Patent

2040-08-10

Canada

METHOD OF GENERATING ACTIVATED T CELLS FOR CANCER THERAPY

20850517.2

APPLICATION

KROS 201

Both a Product and a Method of Treatment Patent

2040-08-10

European Patent

METHOD OF GENERATING ACTIVATED T CELLS FOR CANCER THERAPY

17/633,505

APPLICATION

KROS 201

Both a Product and a Method of Treatment Patent

2040-08-10

United States of America

SENSITIZATION OF TUMORS TO THERAPIES THROUGH ENDOGLIN ANTAGONISM

2017286561

APPLICATION

ENV 105

Both a Product and a Method of Treatment Patent

2037-06-14

Australia

SENSITIZATION OF TUMORS TO THERAPIES THROUGH ENDOGLIN ANTAGONISM

3026066

APPLICATION

ENV 105

Both a Product and a Method of Treatment Patent

2037-06-14

Canada

SENSITIZATION OF TUMORS TO THERAPIES THROUGH ENDOGLIN ANTAGONISM

201780050000.4

APPLICATION

ENV 105

Both a Product and a Method of Treatment Patent

2037-06-14

China

SENSITIZATION OF TUMORS TO THERAPIES THROUGH ENDOGLIN ANTAGONISM

17814046.3

APPLICATION

ENV 105

Both a Product and a Method of Treatment Patent

2037-06-14

European Patent

 

 

Name of the Patent

Patent No./Application No.

Status (Patent granted or Patent application)

Products or Technologies to which the Patents or Patent Applications Relate

Type of Patent Protection

Expiration Date

Jurisdiction

SENSITIZATION OF TUMORS TO THERAPIES THROUGH ENDOGLIN ANTAGONISM

7092684

GRANTED

ENV 105

Both a Product and a Method of Treatment Patent

2037-06-14

Japan

SENSITIZATION OF TUMORS TO THERAPIES THROUGH ENDOGLIN ANTAGONISM

17/685,040

APPLICATION

ENV 105

Both a Product and a Method of Treatment Patent

2037-06-14

United States of America

COMPOSITIONS AND METHODS FOR TREATING DISEASES AND CONDITIONS BY DEPLETION OF MITOCHONDRIAL OR GENOMIC DNA FROM CIRCULATION

3162518

APPLICATION

ENV 205

Both a Product and a Method of Treatment Patent

2040-11-25

Canada

COMPOSITIONS AND METHODS FOR TREATING DISEASES AND CONDITIONS BY DEPLETION OF MITOCHONDRIAL OR GENOMIC DNA FROM CIRCULATION

20893032.1

APPLICATION

ENV 205

Both a Product and a Method of Treatment Patent

2040-11-25

European Patent

COMPOSITIONS AND METHODS FOR TREATING DISEASES AND CONDITIONS BY DEPLETION OF MITOCHONDRIAL OR GENOMIC DNA FROM CIRCULATION

2022-530781

APPLICATION

ENV 205

Both a Product and a Method of Treatment Patent

2040-11-25

Japan

COMPOSITIONS AND METHODS FOR TREATING DISEASES AND CONDITIONS BY DEPLETION OF MITOCHONDRIAL OR GENOMIC DNA FROM CIRCULATION

17/779,716

APPLICATION

ENV 205

Both a Product and a Method of Treatment Patent

2040-11-25

United States of America

 

Pursuant to the Kairos-Cedars license agreements, we have exclusive licensing rights (which include the right to sublicense) to four issued U.S. patents and three patent applications in foreign jurisdictions. Maximum aggregate milestone payment is $2,150,000 when each product exceeds $5,000,000 in cumulative net sales.

 

 

Name of the Patent

Patent No./Application No.

Status (Patent granted or Patent application)

Products or Technologies to which the Patents or Patent Applications Relate

Type of Patent Protection

Expiration Date

Jurisdiction

COMPOSITIONS AND METHODS FOR TREATING CANCER AND AUTOIMMUNE DESEASES

19848154.1

APPLICATION

KROS 101 and KROS 102

Both a Product and a Method of Treatment Patent

2039-08-08

European Patent

COMPOSITIONS AND METHODS FOR TREATING CANCER AND AUTOIMMUNE

2021-506687

APPLICATION

KROS 101 and KROS 102

Both a Product and a Method of Treatment Patent

2039-08-08

Japan

COMPOSITIONS AND METHODS FOR TREATING CANCER AND AUTOIMMUNE DISEASES

10-2021-7006602

APPLICATION

KROS 101 and KROS 102

Both a Product and a Method of Treatment Patent

2039-08-08

Korea, Republic of (KR)

COMPOSITIONS AND METHODS FOR TREATING CANCER AND AUTOIMMUNE DISEASES

17/266,488

APPLICATION

KROS 101 and KROS 102

Both a Product and a Method of Treatment Patent

2039-08-08

United States of America

METHOD OF GENERATING ACTIVATED T CELLS FOR CANCER THERAPY

3,150,273

APPLICATION

KROS 201

Both a Product and a Method of Treatment Patent

2040-08-10

Canada

METHOD OF GENERATING ACTIVATED T CELLS FOR CANCER THERAPY

20850517.2

APPLICATION

KROS 201

Both a Product and a Method of Treatment Patent

2040-08-10

European Patent

METHOD OF GENERATING ACTIVATED T CELLS FOR CANCER THERAPY

17/633,505

APPLICATION

KROS 201

Both a Product and a Method of Treatment Patent

2040-08-10

United States of America

SENSITIZATION OF TUMORS TO THERAPIES THROUGH ENDOGLIN ANTAGONISM

2017286561

APPLICATION

ENV 105

Both a Product and a Method of Treatment Patent

2037-06-14

Australia

SENSITIZATION OF TUMORS TO THERAPIES THROUGH ENDOGLIN ANTAGONISM

3026066

APPLICATION

ENV 105

Both a Product and a Method of Treatment Patent

2037-06-14

Canada

SENSITIZATION OF TUMORS TO THERAPIES THROUGH ENDOGLIN ANTAGONISM

201780050000.4

APPLICATION

ENV 105

Both a Product and a Method of Treatment Patent

2037-06-14

China

SENSITIZATION OF TUMORS TO THERAPIES THROUGH ENDOGLIN ANTAGONISM

17814046.3

APPLICATION

ENV 105

Both a Product and a Method of Treatment Patent

2037-06-14

European Patent

SENSITIZATION OF TUMORS TO THERAPIES THROUGH ENDOGLIN ANTAGONISM

7092684

GRANTED

ENV 105

Both a Product and a Method of Treatment Patent

2037-06-14

Japan

SENSITIZATION OF TUMORS TO THERAPIES THROUGH ENDOGLIN ANTAGONISM

17/685,040

APPLICATION

ENV 105

Both a Product and a Method of Treatment Patent

2037-06-14

United States of America

 

 

Name of the Patent

Patent No./Application No.

Status (Patent granted or Patent application)

Products or Technologies to which the Patents or Patent Applications Relate

Type of Patent Protection

Expiration Date

Jurisdiction

COMPOSITIONS AND METHODS FOR TREATING DISEASES AND CONDITIONS BY DEPLETION OF MITOCHONDRIAL OR GENOMIC DNA FROM CIRCULATION

3162518

APPLICATION

ENV 205

Both a Product and a Method of Treatment Patent

2040-11-25

Canada

COMPOSITIONS AND METHODS FOR TREATING DISEASES AND CONDITIONS BY DEPLETION OF MITOCHONDRIAL OR GENOMIC DNA FROM CIRCULATION

20893032.1

APPLICATION

ENV 205

Both a Product and a Method of Treatment Patent

2040-11-25

European Patent

COMPOSITIONS AND METHODS FOR TREATING DISEASES AND CONDITIONS BY DEPLETION OF MITOCHONDRIAL OR GENOMIC DNA FROM CIRCULATION

2022-530781

APPLICATION

ENV 205

Both a Product and a Method of Treatment Patent

2040-11-25

Japan

COMPOSITIONS AND METHODS FOR TREATING DISEASES AND CONDITIONS BY DEPLETION OF MITOCHONDRIAL OR  GENOMIC DNA FROM CIRCULATION

17/779,716

APPLICATION

ENV 205

Both a Product and a Method of Treatment Patent

2040-11-25

United States of America

 

Protecting Our Intellectual Property Rights

 

We strive to protect our proprietary technology, inventions, and know-how to enhance improvements that are commercially important to the development of our business, including seeking, maintaining, and defending patent rights. We also rely on trade secrets and know-how relating to our proprietary technology platform, on continuing technological innovation and on in-licensing opportunities to develop, strengthen and maintain the strength of our position in the field of immune therapeutics and cell therapy that may be important for the development of our business. We additionally may rely on regulatory protection afforded through data exclusivity, market exclusivity and patent term extensions where available.

 

Our commercial success depends in part on our ability to: obtain and maintain patent and other protections for commercially important technology, inventions and know-how related to our business; defend and enforce our patents; preserve the confidentiality of our trade secrets; and operate without infringing the valid enforceable patents and intellectual property rights of third parties.

 

Our ability to stop third parties from making, using, selling, offering to sell, or importing our products depends in large part on the extent to which we have rights under valid and enforceable licenses, patents, or trade secrets that cover these activities. In some cases, these rights may need to be enforced by third party licensors. With respect to Company-licensed intellectual property, we cannot be sure that patents will be granted with respect to any of the pending patent applications or with respect to any patent applications filed in the future, nor can we be sure that any of the existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our commercial products and methods of manufacturing the same. For more information, please see “Risk Factors—Risks Related to Our Intellectual Property.”

 

In connection with our licensing partners, we seek to protect our proprietary position by, among other things, filing patent applications in the United States and internationally in certain jurisdictions where it is available. For example, in coordination with our licensing partners, we file U.S. and selected foreign patent applications related to proprietary technology, inventions, and improvements that are important to the development of our business. We also intend to seek patent protection, or rely upon trade secret rights, to protect other technologies that may be used to discover and validate targets and that may be used to identify and develop novel products or improvements thereof. We seek protection, in part, through confidentiality and proprietary information agreements.

 

 

The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional application which matures into a granted patent. A U.S. patent also may be accorded a patent term adjustment, or PTA, under certain circumstances to compensate for delays in obtaining the patent caused by the U.S. Patent and Trademark Office. In some instances, such a PTA may result in a U.S. patent term extending beyond 20 years from the earliest date of filing a non-provisional patent application. In addition, in the U.S., the term of a U.S. patent that covers an FDA approved drug may also be eligible for patent term extension, which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process. The Hatch Waxman Act permits a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. Patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug may be extended. Similar provisions are available in Europe and other foreign jurisdictions to extend the term of a patent that covers an approved drug. In the future, if and when our products receive FDA approval, we expect to apply for patent term extensions on patents covering those products. We plan to seek patent term extensions to any of our issued patents in any jurisdiction where these are available; however, there is no guarantee that the applicable authorities, including the FDA in the U.S., will agree with our assessment of whether such extensions should be granted, and if granted, the length of such extensions.

 

Trademark Protection

 

We have not yet filed any trademark applications for its wordmarks; however, we intend to file applications for trademark protection in the United States for goods and services, and potentially other relevant jurisdictions, but no assurance can be given as to whether such applications will be granted.

 

Corporate Reorganizations

 

Kairos Pharma, Ltd. was originally incorporated on June 17, 2013 in the state of California as NanoGB13, Inc. The Company changed its name to “Kairos Pharma, Ltd.” on July 15, 2016. On May 10, 2023, we filed a certificate of conversion with the Secretary of State of the State of California, and on the same date, we also filed with the Delaware Secretary of State a certificate of conversion converting the Company from a non-Delaware corporation to a Delaware corporation pursuant to section 265 of the Delaware General Corporation Law t. In addition, on May 10, 2023, we filed a certificate of incorporation with the Secretary of State of the State of Delaware, thus completing our conversion into a Delaware corporation. In conjunction with the Company’s conversion into a Delaware corporation, on May 10, 2023, the Company conducted a 1-for-2.5 Reverse Stock Split. After the Reverse Stock Split, as of June 5, 2023, there were 10,334,357 shares of our common stock outstanding.

 

On November 13, 2019, Kairos entered into an Agreement of Merger with AcTcell Biopharma, Inc., or AcTcell, whereby the Company issued 5,045,000 shares of its common stock for all the issued and outstanding shares of AcTcell common stock. AcTcell was a California corporation that was incorporated on July 22, 2019. AcTcell’s only asset at the merger date an Exclusive License Agreement dated August 30, 2019 between AcTcell and Cedars-Sinai Medical Center. AcTcell had no liabilities at the merger date.

 

John Yu, the Company’s Chairman, Chief Executive Officer and majority shareholder, was the sole owner of AcTcell. The acquisition of AcTcell by Kairos was treated as a transaction between entities under common control resulting in the historical costs basis of AcTcell’s assets and liabilities being recognized.

 

 

The Company’s Enviro Therapeutics, Inc. subsidiary, or Enviro, was incorporated on November 15, 2019 under the law of the state of California and is an early-stage company that is focused on the development of therapeutics targeting the tumor microenvironment to complement conventional and targeted therapies designed against the cancer cells. Kairos’ Chairman, Chief Executive officer and majority shareholder, Dr. Yu, was also a founder and shareholder of Enviro.

 

On June 3, 2021, Kairos and Enviro entered into a share exchange whereby Kairos acquired of all of the common stock of Enviro in exchange for stock in Kairos. In the Enviro-Kairos share exchange, the Enviro shareholders exchanged 100% of the issued and outstanding shares of Enviro (on a fully diluted basis) for 6,000,000 shares of newly issued restricted common stock of Kairos, which, as of the closing of the Enviro-Kairos share exchange: (i) represented approximately twenty percent (20%) of the outstanding shares of capital stock of the Company on a fully diluted basis, including all issued and outstanding convertible promissory notes, preferred stock, SAFEs, other securities convertible into capital stock, stock options and warrants, and after giving effect to the issuance of the shares in the Enviros-Kairos share exchange, and (ii) have voting power approximately equal to twenty percent (20%) of all shares eligible to vote on matters by the shareholders of Kairos. At the closing of the Enviro-Kairos share exchange, Kairos issued each of Dr. Yu and Dr. Neil Bhowmick (the other co-founder of Enviro) 1,860,000 of Kairos’ restricted common stock in exchange for their shares of Enviro. Kairos also issued Tracon Pharmaceutical, Inc., an unaffiliated third party, 280,000 shares of Kairos’ restricted common stock in exchange from their shares of Enviro, which Tracon had received pursuant to a license and supply agreement between Enviro and Tracon, pursuant to which Enviro had acquired certain licensing rights from Tracon, described further below under “Business–Intellectual Property.”

 

At the closing of the Enviro-Kairos share exchange, prior to our 1-for-2.5 reverse split conducted in 2023 and including the newly issued shares in that transaction, Kairos had approximately 19,825,957 shares of common stock issued and outstanding on a fully diluted basis (including 18,825,957 outstanding shares of common stock, and 1,000,000 warrants exercisable into 1,000,000 shares of common stock).

 

Manufacturing

 

We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates. When we begin manufacturing, we intend to use vendors that are compliant with current “Good Manufacturing Practices” or cGMP, in pharmaceutical production. We expect that commercial quantities of any compound and materials for our product candidates, if approved, will be manufactured in facilities and by processes that comply with FDA and other regulations.

 

Competition

 

The biopharmaceutical industry is characterized by intense competition and rapid innovation. Our potential competitors include large pharmaceutical and biotechnology companies, specialty pharmaceutical companies and generic drug companies. Many of our potential competitors have greater financial and technical human resources than we do, as well as greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products, and the commercialization of those products. Accordingly, our potential competitors may be more successful than us in obtaining FDA-approved drugs and achieving widespread market acceptance. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. Finally, the development of new treatment methods for the diseases we are targeting could render our product candidates non-competitive or obsolete.

 

The immunotherapy field is characterized by the rapid evolution of technologies and products and by fierce competition based on the development of compounds, often with similar mechanisms of action. Clinical development plans are further compounded by the possibility of overlapping intellectual property. A wide variety of commercial players, large pharmaceutical companies, established and emerging biotechnology companies, and several not-for-profit entities are actively developing potentially competitive products in immunotherapy and in our lead indications.

 

With respect to KROS-101, it faces potential competition from several GITR focused monoclonal antibody products that are currently under development, including multiple candidates from large pharmaceutical companies, all of which are either Phase 1 or Phase 2 clinical trial. Another product candidate was discontinued after a completed Phase 1 in 2018.

 

 

In the area of targeted immunotherapy, Kairos’ KROS-102 candidate will, if successful compete, with several monoclonal antibody-based products that target PD-1 or PD-L1 proteins. Such PD-1 or PD-L1 inhibitors activate the immune system to attack tumors and are used to treat certain types of cancer. Currently, there are multiple marketed drugs targeting these same proteins produced by large pharmaceutical companies. In contrast to currently marketed drugs from these large pharmaceutical companies, KROS-101 is a small molecule which is expected to be significantly less expensive to manufacture than a monoclonal antibody-based product.

 

In the area of cell therapy only two products produced by large pharmaceutical companies have been approved for marketing in the United States, but we estimate that more than 150 clinical trials are currently in progress. One such product is a treatment for B-cell lymphoma, and another is a treatment for large B-cell lymphoma. Both of these therapies are based on CAR T technology where specially altered T cells are used to fight cancer. A sample of a patient’s T cells are collected from the blood, then modified to produce special structures called chimeric antigen receptors (CARs) on their surface. While CAR T therapies have proven to be effective in the above products the manufacturing process is complex and very costly leading to extremely high pricing. As an alternative, some companies are pursuing T Cell Receptor (TCR) technology. Unlike CAR T cells that recognize proteins expressed on the surface of a cell, TCRs can recognize tumor-specific proteins on the inside of cells.

 

We believe the key competitive factors that will affect the development and commercial success of our initial product candidate, ENV 105, if approved, will be other agents that in the future may address resistance mechanisms of therapeutics used for prostate cancer.

 

Government Regulation and Product Approval

 

Government authorities in the United States, at the federal, state, and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, marketing, and export and import of drug products. A new drug must be approved by the FDA through the New Drug Application, or NDA, process before it may be legally marketed in the United States. We, along with any third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval of our products and product candidates. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources.

 

U.S. Drug Development Process

 

In the United States, the FDA regulates drugs under the federal Food, Drug, and Cosmetic Act, or FD&C Act, and its implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. The process required by the FDA before a drug may be marketed in the United States generally involves the following:

 

	●	completion of preclinical laboratory tests, animal studies, and formulation studies in accordance with FDA’s Good Laboratory Practice requirements and other applicable regulations;
	●	submission to the FDA of an IND application, which must become effective before human clinical trials may begin;
	●	approval by an independent Institutional Review Board, or IRB, or ethics committee at each clinical site before each trial may be initiated;
	●	performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCPs, to establish the safety and efficacy of the proposed drug for its intended use;
	●	preparation of and submission to the FDA of an NDA after completion of all pivotal trials;
	●	a determination by the FDA within 60 days of its receipt of an NDA to file the application for review;
	●	satisfactory completion of an FDA advisory committee review, if applicable;
	●	satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with current Good Manufacturing Practice, or cGMP, requirements to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity, and of selected clinical investigation sites to assess compliance with GCPs; and
	●	FDA review and approval of the NDA to permit commercial marketing of the product for particular indications for use in the United States.

 

 

Prior to beginning the first clinical trial with a product candidate in the United States, a sponsor must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical studies. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology, and pharmacodynamic characteristics of the product; chemistry, manufacturing, and controls information; and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor, and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.

 

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site and must monitor the study until completed. Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. Depending on its charter, this group may determine whether a trial may move forward at designated check points based on access to certain data from the trial. The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. There are also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries.

 

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

 

	●	Phase 1: The product candidate is initially introduced into healthy human subjects or patients with the target disease or condition. These studies are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness.
	●	Phase 2: The product candidate is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages, and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.
	●	Phase 3: The product candidate is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy, and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval.

 

In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product. These so-called Phase 4 studies may be conducted after initial marketing approval and may be used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA.

 

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality, and purity of the final drug. In addition, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

 

While the IND is active and before approval, progress reports summarizing the results of the clinical trials and nonclinical studies performed since the last progress report must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important increased incidence of a serious suspected adverse reaction compared to that listed in the protocol or investigator brochure.

 

 

In addition, during the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to submission of an IND, at the end of Phase 2, and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to reach agreement on the next phase of development. Sponsors typically use the meetings at the end of the Phase 2 trial to discuss Phase 2 clinical results and present plans for the pivotal Phase 3 clinical trials that they believe will support approval of the new drug.

 

U.S. Review and Approval Process

 

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, preclinical, and other nonclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. Data can come from company-sponsored clinical studies intended to test the safety and effectiveness of a use of the product, or from a number of alternative sources, including studies initiated by independent investigators. The submission of an NDA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances. Additionally, no user fees are assessed on NDAs for products designated as orphan drugs, unless the product also includes a non-orphan indication.

 

The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review, The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once filed, the FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product’s identity, strength, quality, and purity. Under the Prescription Drug User Fee Act, or PDUFA, guidelines that are currently in effect, the FDA has a goal of ten months from the filing date to complete a standard review of an NDA for a drug that is a new molecular entity, and of ten months from the date of NDA receipt to complete a standard review of an NDA for a drug that is not a new molecular entity.

 

The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates, and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

 

Before approving an NDA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCPs. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

 

After the FDA evaluates an NDA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response Letter, or CRL. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A CRL will describe all of the deficiencies that the FDA has identified in the NDA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the CRL without first conducting required inspections and/or reviewing proposed labeling. In issuing the CRL, the FDA may recommend actions that the applicant might take to place the NDA in condition for approval, including requests for additional information or clarification. The FDA may delay or refuse approval of an NDA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.

 

 

If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the NDA with a Risk Evaluation and Mitigation Strategy, or REMS, to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a medicine and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries, and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. The FDA may also require one or more Phase 4 post-market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization and may limit further marketing of the product based on the results of these post-marketing studies.

 

In addition, the Pediatric Research Equity Act, or PREA, requires a sponsor to conduct pediatric clinical trials for most drugs, for a new active ingredient, new indication, new dosage form, new dosing regimen, or new route of administration. Under PREA, original NDAs and supplements must contain a pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must evaluate the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA may request a deferral of pediatric clinical trials for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that the drug is ready for approval for use in adults before pediatric clinical trials are complete or that additional safety or effectiveness data needs to be collected before the pediatric clinical trials begin. The FDA must send a non-compliance letter to any sponsor that fails to submit the required assessment, keep a deferral current, or fails to submit a request for approval of a pediatric formulation.

 

Expedited Development and Review Programs

 

The FDA offers several expedited development and review programs for qualifying product candidates. For example, the Fast Track program is intended to expedite or facilitate the process for reviewing new products that are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast Track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a Fast Track designated product has opportunities for more frequent interactions with the applicable FDA review team during product development and, once an NDA is submitted, the product candidate may be eligible for priority review. A Fast Track designated product may also be eligible for rolling review, where the FDA may consider for review sections of the NDA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA.

 

A product candidate intended to treat a serious or life-threatening disease or condition may also be eligible for Breakthrough Therapy designation to expedite its development and review. A product candidate can receive Breakthrough Therapy designation if preliminary clinical evidence indicates that the product candidate, alone or in combination with one or more other drugs or biologics, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the Fast Track program features, as well as more intensive FDA interaction and guidance beginning as early as Phase 1 and an organizational commitment to expedite the development and review of the product candidate, including involvement of senior managers.

 

A marketing application for a drug submitted to the FDA for approval, including a product candidate with a Fast Track designation and/or Breakthrough Therapy designation, may be eligible for other types of FDA programs intended to expedite the FDA review and approval process, such as priority review. A product candidate is eligible for priority review if it is designed to treat a serious or life-threatening disease or condition, and if approved, would provide a significant improvement in safety or effectiveness compared to available alternatives for such disease or condition. For new-molecular-entity NDAs, priority review designation means the FDA’s goal is to take action on the marketing application within six months of the 60-day filing date, or with respect to non-new-molecular-entity NDAs, within six months of the NDA receipt date.

 

 

Additionally, product candidates studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions may utilize an accelerated approval pathway upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of accelerated approval, the FDA will generally require the sponsor to perform adequate and well-controlled post-marketing clinical studies to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit. Products receiving accelerated approval may be subject to expedited withdrawal procedures if the sponsor fails to conduct the required post-marketing studies or if such studies fail to verify the predicted clinical benefit. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product.

 

Fast Track designation, Breakthrough Therapy designation, priority review designation, and the accelerated approval pathway do not change the standards for approval, but may expedite the development or approval process. Even if a product candidate qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

 

Exclusivity

 

The FDA provides periods of non-patent regulatory exclusivity, which provides the holder of an approved NDA limited protection from new competition in the marketplace for the innovation represented by its approved drug for a period of three or five years following the FDA’s approval of the NDA. Five years of exclusivity are available to new chemical entities, or NCEs. An NCE is a drug that contains no active moiety that has been approved by the FDA in any other NDA. An active moiety is the molecule or ion, excluding those appended portions of the molecule that cause the drug to be an ester, salt, including a salt with hydrogen or coordination bonds, or other noncovalent, or not involving the sharing of electron pairs between atoms, derivatives, such as a complex (i.e., formed by the chemical interaction of two compounds), chelate (i.e., a chemical compound), or clathrate (i.e., a polymer framework that traps molecules), of the molecule, responsible for the therapeutic activity of the drug substance. During the exclusivity period, the FDA may not accept for review or approve an Abbreviated New Drug Application, or ANDA, or a 505(b)(2) NDA submitted by another company that contains the previously approved active moiety. An ANDA or 505(b)(2) application, however, may be submitted one year before NCE exclusivity expires if a Paragraph IV certification is filed. Five-year and three-year exclusivity will not delay the submission or approval of a 505(b)(1) NDA; however, an applicant submitting a 505(b)(1) NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and efficacy. In addition, under the Generating Antibiotic Incentives Now, or GAIN, Act, the FDA may designate a product as a Qualified Infectious Disease Product, or QIDP. In order to receive this designation, a drug must qualify as an antibiotic or antifungal drug for human use intended to treat serious or life-threatening infections, including those caused by either (1) an antibiotic or antifungal resistant pathogen, including novel or emerging infectious pathogens, or (2) a so-called ‘‘qualifying pathogen’’ found on a list of potentially dangerous, drug-resistant organisms to established and maintained by the FDA. A sponsor must request such designation before submitting a marketing application. Upon approving a marketing application for a QIDP-designated product, the FDA will extend by an additional five years any non-patent marketing exclusivity period awarded. This extension is in addition to any pediatric exclusivity extension awarded, and the extension will be awarded only to a drug first approved on or after the date of enactment of the GAIN Act. The GAIN Act prohibits the grant of an exclusivity extension where the application is a supplement to an application for which an extension is in effect or has expired, is a subsequent application for a specified change to an approved product or is an application for a product that does not meet the definition of QIDP based on the uses for which it is ultimately approved.

 

Post-approval Requirements

 

Drug products manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual program fees for any marketed products. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

 

 

The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

 

	●	restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
	●	fines, warning letters, or untitled letters;
	●	clinical holds on clinical studies;
	●	refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product approvals;
	●	product seizure or detention, or refusal to permit the import or export of products;
	●	consent decrees, corporate integrity agreements, debarment, or exclusion from federal healthcare programs;
	●	mandated modification of promotional materials and labeling and the issuance of corrective information;
	●	the issuance of safety alerts, Dear Healthcare Provider letters, press releases, and other communications containing warnings or other safety information about the product; or
	●	injunctions or the imposition of civil or criminal penalties.

 

The FDA closely regulates the marketing, labeling, advertising, and promotion of drug products. A company can make only those claims relating to safety and efficacy, purity, and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising, and potential civil and criminal penalties. Physicians may prescribe, in their independent professional medical judgment, legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications regarding the label use of their products. However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA-approved labelling.

 

Other Healthcare Laws

 

In the United States, we are subject to a number of federal and state healthcare regulatory laws that restrict business practices in the healthcare industry. These laws include, but are not limited to, federal and state anti-kickback, false claims, and other healthcare fraud and abuse laws, as follows:

 

The U.S. federal Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, receiving, or providing any remuneration, directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering, or arranging for, or recommending the purchase, lease, or order of any good, facility, item or service reimbursable, in whole or in part, under Medicare, Medicaid, or other federal healthcare programs. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation.

 

The federal false claims, including the civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false, fictitious or fraudulent claim for payment to, or approval by, the federal government, knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government, or knowingly making a false statement to avoid, decrease, or conceal an obligation to pay money to the U.S. federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. Actions under the civil False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Moreover, a claim including items or services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

 

 

In addition, the civil monetary penalties statute, subject to certain exceptions, prohibits, among other things, the offer or transfer of remuneration, including waivers of copayments and deductible amounts (or any part thereof), to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or a state healthcare program. HIPAA created additional federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

 

HIPAA, as amended by HITECH, and their respective implementing regulations, which impose obligations on “covered entities,” including certain healthcare providers, health plans, and healthcare clearinghouses, as well as their respective “business associates” and their respective subcontractors that create, receive, maintain, or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security, and transmission of individually identifiable health information.

 

The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMMS, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), certain other healthcare professionals including physician assistants and nurse practitioners beginning in 2022, and teaching hospitals, and applicable manufacturers and applicable group purchasing organizations to report annually to CMMS ownership and investment interests held by physicians and their immediate family members.

 

Similar state and local laws and regulations may also restrict business practices in the pharmaceutical industry, such as state anti-kickback and false claims laws, which may apply to business practices, including but not limited to, research, distribution, sales, and marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, or by patients themselves; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require drug manufacturers to file reports relating to pricing information and marketing expenditures or which require tracking gifts and other remuneration and items of value provided to physicians, other healthcare providers and entities; and state and local laws that require the registration of pharmaceutical sales representatives.

 

Violations of any of these laws and other applicable healthcare fraud and abuse laws may be punishable by criminal and civil sanctions, including fines and civil monetary penalties, the possibility of exclusion from federal healthcare programs (including Medicare and Medicaid), disgorgement and corporate integrity agreements, which impose, among other things, rigorous operational and monitoring requirements on companies. Similar sanctions and penalties, as well as imprisonment, also can be imposed upon executive officers and employees of such companies.

 

Coverage and Reimbursement

 

Sales of any pharmaceutical product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state, and foreign government healthcare programs, commercial insurance and managed healthcare organizations, and the level of reimbursement for such product by third-party payors. In the United States, no uniform policy exists for coverage and reimbursement for pharmaceutical products among third-party payors. Therefore, decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. The process for determining whether a third-party payor will provide coverage for a product typically is separate from the process for setting the price of such product or for establishing the reimbursement rate that the payor will pay for the product once coverage is approved.

 

Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication, or place products at certain formulary levels that result in lower reimbursement levels and higher cost-sharing obligation imposed on patients. One third-party payor’s decision to cover a particular medical product or service does not ensure that other payors will also provide coverage for the medical product or service and the level of coverage and reimbursement can differ significantly from payor to payor. As a result, the coverage determination process will often require us to provide scientific and clinical support for the use of our products to each payor separately and can be a time-consuming process, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Additionally, a third-party payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved.

 

 

Moreover, as a condition of participating in, and having products covered under, certain federal healthcare programs, such as Medicare and Medicaid, we are subject to federal laws and regulations that require pharmaceutical manufacturers to calculate and report certain price reporting metrics to the government, such as Medicaid Average Manufacturer Price, or AMP, and Best Price, Medicare Average Sales Price, the 340B Ceiling Price, and Non-Federal AMP reported to the Department of Veteran Affairs, and with respect to Medicaid, pay statutory rebates on utilization of manufacturers’ products by Medicaid beneficiaries. Compliance with such laws and regulations require significant resources and any findings of non-compliance may have a material adverse effect on our revenues.

 

Healthcare Reform

 

In the United States and certain foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system. In the United States, by way of example, in March 2010, the ACA was signed into law, which substantially changed the way healthcare is financed by both governmental and private insurers in the United States and significantly affected the pharmaceutical industry. The ACA, among other things, increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs; required collection of rebates for drugs paid by Medicaid managed care organizations; required manufacturers to participate in a coverage gap discount program, under which they must agree to offer point-of-sale discounts (increased to 70 percent, effective as of January 1, 2019) off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell certain “branded prescription drugs” to specified federal government programs; implemented a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected expanded the types of entities eligible for the 340B drug discount program; expanded eligibility criteria for Medicaid programs; created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and established a Center for Medicare Innovation at CMMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

 

Since its enactment, there have been judicial, administrative, executive, and Congressional legislative challenges to certain aspects of the ACA. For example, on June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Thus, the ACA will remain in effect in its current form. Further, prior to the U.S. Supreme Court ruling, President Biden issued an executive order that initiated a special enrollment period from February 15, 2021, through August 15, 2021, for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is possible that the Affordable Care Act will be subject to judicial or Congressional challenges in the future. It is unclear how such challenges and the healthcare reform measures of the Biden administration will impact the ACA.

 

Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year, which was temporarily suspended from May 1, 2020 through December 31, 2021, and reduced payments to several types of Medicare providers. Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted legislation designed, among other things, to bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for pharmaceutical products. By way of example, the American Taxpayer Relief Act of 2021, effective January 1, 2024, would eliminate the statutory cap on rebate amounts owed by drug manufacturers under the Medicaid Drug Rebate Program, or MDRP, which is currently capped at 100% of the AMP for a covered outpatient drug. Further, based on a recent executive order, the Biden administration expressed its intent to pursue certain policy initiatives to reduce drug prices.

 

Individual states in the United States have also become increasingly active in implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures and, in some cases, mechanisms to encourage importation from other countries and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine which drugs and suppliers will be included in their healthcare programs. Furthermore, there has been increased interest by third-party payors and governmental authorities in reference pricing systems and publication of discounts and list prices.

 

 

We expect additional state and federal healthcare reform measures to be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressure.

 

Data Privacy and Security Laws

 

Numerous state, federal and foreign laws, including consumer protection laws and regulations, govern the collection, dissemination, use, access to, confidentiality, and security of personal information, including health-related information. In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws, including Health Insurance Portability and Accountability Act, or HIPAA, and federal and state consumer protection laws and regulations (e.g., Section 5 of the Federal Trade Commission Act) that govern the collection, use, disclosure, and protection of health-related and other personal information could apply to our operations or the operations of our partners. In addition, certain state and non-U.S. laws, such as the California Consumer Privacy Act, or CCPA, the California Privacy Rights Act, or CPRA, and the General Data Protection Regulation, or GDPR, govern the privacy and security of personal information, including health-related information in certain circumstances, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation. Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to make compliance efforts more challenging, and can result in investigations, proceedings, or actions that lead to significant penalties and restrictions on data processing.

 

Regulation and Procedures Governing Approval of Medicinal Products in the EU

 

In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our product candidates to the extent we choose to sell any of our product candidates outside of the United States. Whether or not we obtain FDA approval for a product, we must obtain approval of a product by equivalent competent authorities in foreign jurisdictions before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing, and reimbursement vary greatly from country to country. As in the United States, post-approval regulatory requirements, such as those regarding product manufacture, marketing, or distribution would apply to any product that is approved outside the United States.

 

The process governing the marketing authorization, or MA, of medicinal products in the EU entails satisfactory completion of preclinical studies and adequate and well-controlled clinical trials to establish the safety, quality, and efficacy of the medicinal product for each proposed therapeutic indication.

 

It also requires the submission to the relevant competent authorities of a marketing authorization application, or MAA and granting of an MA by these authorities before the product can be marketed and sold in the EU.

 

The aforementioned EU rules are generally applicable in the European Economic Area, or EEA, which consists of the 27 EU member states, as well as Norway, Liechtenstein and Iceland.

 

Failure to comply with EU and member state laws that apply to the conduct of clinical trials, manufacturing approval, MA of medicinal products and marketing of such products, both before and after grant of the MA, or with other applicable regulatory requirements may result in administrative, civil, or criminal penalties. These penalties could include delays or refusal to authorize the conduct of clinical trials, or to grant MA, product withdrawals and recalls, product seizures, suspension, withdrawal, or variation of the MA, total or partial suspension of production, distribution, manufacturing or clinical trials, operating restrictions, injunctions, suspension of licenses, fines, and criminal penalties.

 

Non-Clinical Studies and Clinical Trials

 

Similar to the United States, the various phases of non-clinical research in the EU are subject to significant regulatory controls.

 

 

Non-clinical studies are performed to demonstrate the health or environmental safety of new chemical or biological substances. Non-clinical studies must be conducted in compliance with the principles of good laboratory practice, or GLP, as set forth in Directive 2004/10/EC. In particular, non-clinical studies, both in vitro and in vivo, must be planned, performed, monitored, recorded, reported and archived in accordance with the GLP principles, which define a set of rules and criteria for a quality system for the organizational process and the conditions for non-clinical studies. These GLP standards reflect the Organization for Economic Co-operation and Development requirements.

 

The Clinical Trials Directive 2001/20/EC, the Directive 2005/28/EC on GCP and the related national implementing provisions of the individual EU member states govern the system for the approval of clinical trials in the EU.

 

Clinical trials of medicinal products in the EU must be conducted in accordance with EU and national regulations and the International Conference on International Conference on Harmonization, or ICH, guidelines on GCP, as well as the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. If the sponsor of the clinical trial is not established within the EU, it must appoint an EU entity to act as its legal representative. The sponsor must take out a clinical trial insurance policy, and in most EU member states, the sponsor is liable to provide ‘no fault’ compensation to any study subject injured in the clinical trial.

 

Under the applicable regulatory system, an applicant must obtain prior approval from the competent national authority of the EU member states in which the clinical trial is to be conducted. Furthermore, the applicant may only start a clinical trial at a specific study site after the competent ethics committee has issued a related favorable opinion. The application for authorization of a clinical trial must be accompanied by, among other documents, a copy of the trial protocol and an investigational medicinal product dossier containing information about the manufacture and quality of the medicinal product under investigation as prescribed by Directive 2001/20/EC, Directive 2005/28/EC, where relevant the related implementing national provisions of the individual EU member states, and further detailed in applicable guidance documents. Any substantial changes to the trial protocol or to other information submitted with the clinical trial application must be notified to or approved by the relevant competent national authorities and ethics committees. Medicinal products used in clinical trials must be manufactured in accordance with GMP.

 

In April 2014, the new Clinical Trials Regulation, (EU) No 536/2014, or Clinical Trials Regulation, was adopted. The Regulation is anticipated to enter into force on January 31, 2022. The Clinical Trials Regulation will be directly applicable in all of the EU member states, repealing the current Clinical Trials Directive 2001/20/EC. Conduct of all clinical trials performed in the EU will continue to be bound by currently applicable provisions until the new Clinical Trials Regulation becomes applicable. The extent to which on-going clinical trials will be governed by the Clinical Trials Regulation will depend on the duration of the individual clinical trial. If a clinical trial continues for more than three years from the day on which the Clinical Trials Regulation becomes applicable, the Clinical Trials Regulation will at that time begin to apply to the clinical trial.

 

The new Clinical Trials Regulation aims to simplify and streamline the approval of clinical trials in the EU. The main characteristics of the regulation include: a streamlined application procedure via a single-entry point, the “EU portal;” a single set of documents to be prepared and submitted for the application, as well as simplified reporting procedures for clinical trial sponsors; and a harmonized procedure for the assessment of applications for clinical trials, which is divided in two parts. Part I is assessed by the competent authorities of all EU member states in which an application for authorization of a clinical trial has been submitted (member states concerned). Part II is assessed separately by each member state concerned. Strict deadlines have been established for the assessment of clinical trial applications. The role of the relevant ethics committees in the assessment procedure will continue to be governed by the national law of the concerned EU member state. However, overall related timelines will be defined by the Clinical Trials Regulation.

 

Marketing Authorizations

 

To obtain an MA for a product in the EU, an applicant must submit an MAA either under a centralized procedure administered by the EMA or one of the procedures administered by competent authorities in the EU member states (decentralized procedure, national procedure, or mutual recognition procedure). An MA may be granted only to an applicant established in the EU.

 

The centralized procedure provides for the grant of a single MA by the European Commission that is valid for all EU member states. Pursuant to Regulation (EC) No 726/2004, the centralized procedure is compulsory for specific products, including for (i) medicinal products derived from biotechnological processes, (ii) products designated as orphan medicinal products, (iii) advanced therapy medicinal products, or ATMPs, and (iv) products with a new active substance indicated for the treatment of HIV/AIDS, cancer, neurodegenerative diseases, diabetes, autoimmune, and other immune dysfunctions and viral diseases. For products with a new active substance indicated for the treatment of other diseases and products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional.

 

 

Under the centralized procedure, the EMA’s Committee for Medicinal Products for Human Use, or CHMP, is responsible for conducting the initial assessment of a product. The CHMP is also responsible for several post-authorization and maintenance activities, such as the assessment of modifications or extensions to an existing MA.

 

Under the centralized procedure in the EU, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops when additional information or written or oral explanation is to be provided by the applicant in response to questions of the CHMP. Accelerated assessment may be granted by the CHMP in exceptional cases, when a medicinal product targeting an unmet medical need is expected to be of major interest from the point of view of public health and in particular from the viewpoint of therapeutic innovation. If the CHMP accepts a request for accelerated assessment, the time limit of 210 days will be reduced to 150 days (not including clock stops). The CHMP can, however, revert to the standard time limit for the centralized procedure if it considers that it is no longer appropriate to conduct an accelerated assessment.

 

Unlike the centralized authorization procedure, the decentralized MA procedure requires a separate application to, and leads to separate approval by, the competent authorities of each EU member state in which the product is to be marketed. This application is identical to the application that would be submitted to the EMA for authorization through the centralized procedure. The reference EU member state prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. The resulting assessment report is submitted to the concerned EU member states who, within 90 days of receipt, must decide whether to approve the assessment report and related materials. If a concerned EU member state cannot approve the assessment report and related materials due to concerns relating to a potential serious risk to public health, disputed elements may be referred to the Heads of Medicines Agencies’ Coordination Group for Mutual Recognition and Decentralised Procedures—Human (CMDh) for review. The subsequent decision of the European Commission is binding on all EU member states.

 

The mutual recognition procedure allows companies that have a medicinal product already authorized in one EU member state to apply for this authorization to be recognized by the competent authorities in other EU member states. Like the decentralized procedure, the mutual recognition procedure is based on the acceptance by the competent authorities of the EU member states of the MA of a medicinal product by the competent authorities of other EU member states. The holder of a national MA may submit an application to the competent authority of an EU member state requesting that this authority recognize the MA delivered by the competent authority of another EU member state. In principle, an MA has an initial validity of five years. The MA may be renewed after five years on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the EU member state in which the original MA was granted. To support the application, the MA holder must provide the EMA or the competent authority with a consolidated version of the Common Technical Document, or eCTD, providing up-to-date data concerning the quality, safety and efficacy of the product, including all variations introduced since the MA was granted, at least nine months before the MA ceases to be valid. The European Commission or the competent authorities of the EU member states may decide, on justified grounds relating to pharmacovigilance, to proceed with one further five-year renewal period for the MA. Once subsequently definitively renewed, the MA shall be valid for an unlimited period. Any authorization which is not followed by the actual placing of the medicinal product on the EU market (in case of centralized procedure) or on the market of the authorizing EU member state within three years after authorization ceases to be valid (the so-called sunset clause).

 

Innovative products that target an unmet medical need and are expected to be of major public health interest may be eligible for a number of expedited development and review programs, such as the Priority Medicines, or PRIME, scheme, which provides incentives similar to the breakthrough therapy designation in the United States. PRIME is a voluntary scheme aimed at enhancing the EMA’s support for the development of medicinal products that target unmet medical needs. It permits increased interaction and early dialogue with companies developing promising medicinal products, to optimize their product development plans and speed up their evaluation to help the product reach patients earlier than normal. Product developers that benefit from PRIME designation are potentially eligible for accelerated assessment of their MAA although this is not guaranteed. Benefits accrue to sponsors of product candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions on clinical trial designs and other development program elements, and potentially accelerated MAA assessment once a dossier has been submitted.

 

In the EU, a “conditional” MA may be granted in cases where all the required safety and efficacy data are not yet available. The conditional MA is subject to conditions to be fulfilled for generating the missing data or ensuring increased safety measures. It is valid for one year and must be renewed annually until all related conditions have been fulfilled. Once any pending studies are provided, the conditional MA can be converted into a traditional MA. However, if the conditions are not fulfilled within the timeframe set by the EMA, the MA will cease to be renewed.

 

 

An MA may also be granted “under exceptional circumstances” where the applicant can show that it is unable to provide comprehensive data on the efficacy and safety under normal conditions of use even after the product has been authorized and subject to specific procedures being introduced. These circumstances may arise in particular when the intended indications are very rare and, in the state of scientific knowledge at that time, it is not possible to provide comprehensive information, or when generating data may be contrary to generally accepted ethical principles. Like a conditional MA, an MA granted in exceptional circumstances is reserved to medicinal products intended to be authorized for treatment of rare diseases or unmet medical needs for which the applicant does not hold a complete data set that is required for the grant of a standard MA. However, unlike the conditional MA, an applicant for authorization in exceptional circumstances is not subsequently required to provide the missing data. Although the MA “under exceptional circumstances” is granted definitively, the risk-benefit balance of the medicinal product is reviewed annually and the MA is withdrawn in case the risk-benefit ratio is no longer favorable.

 

In addition to an MA, various other requirements apply to the manufacturing and placing on the EU market of medicinal products. Manufacture of medicinal products in the EU requires a manufacturing authorization, and import of medicinal products into the EU requires a manufacturing authorization allowing for import. The manufacturing authorization holder must comply with various requirements set out in the applicable EU laws, regulations and guidance. These requirements include compliance with EU GMP standards when manufacturing medicinal products and APIs, including the manufacture of APIs outside of the EU with the intention to import the APIs into the EU. Similarly, the distribution of medicinal products within the EU is subject to compliance with the applicable EU laws, regulations and guidelines, including the requirement to hold appropriate authorizations for distribution granted by the competent authorities of the EU member states. MA holders, manufacturing and import authorization (MIA) holders, or distribution authorization holders may be subject to civil, criminal or administrative sanctions, including suspension of manufacturing authorization, in case of non-compliance with the EU or EU member states’ requirements applicable to the manufacturing of medicinal products.

 

Data and Market Exclusivity

 

The EU provides opportunities for data and market exclusivity related to MAs. Upon receiving an MA, innovative medicinal products are generally entitled to receive eight years of data exclusivity and ten years of market exclusivity. Data exclusivity, if granted, prevents regulatory authorities in the EU from referencing the innovator’s data to assess a generic application or biosimilar application for eight years from the date of authorization of the innovative product, after which a generic or biosimilar MAA can be submitted, and the innovator’s data may be referenced. The market exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the EU until ten years have elapsed from the initial MA of the reference product in the EU. The overall ten-year period may, occasionally, be extended for a further year to a maximum of 11 years if, during the first eight years of those ten years, the MA holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. However, there is no guarantee that a product will be considered by the EU’s regulatory authorities to be a new chemical/biological entity, and products may not qualify for data exclusivity.

 

In the EU, there is a special regime for biosimilars, or biological medicinal products that are similar to a reference medicinal product but that do not meet the definition of a generic medicinal product. For such products, the results of appropriate preclinical or clinical trials must be provided in support of an application for MA. Guidelines from the EMA detail the type of quantity of supplementary data to be provided for different types of biological product.

 

Pediatric Development

 

In the EU, Regulation (EC) No 1901/2006 provides that all MAAs for new medicinal products have to include the results of trials conducted in the pediatric population, in compliance with a pediatric investigation plan, or PIP, agreed with the EMA’s Pediatric Committee, or PDCO. The PIP sets out the timing and measures proposed to generate data to support a pediatric indication of the medicinal product for which MA is being sought. The PDCO can grant a deferral of the obligation to implement some or all of the measures provided in the PIP until there are sufficient data to demonstrate the efficacy and safety of the product in adults. Further, the obligation to provide pediatric clinical trial data can be waived by the PDCO when these data are not needed or appropriate because the product is likely to be ineffective or unsafe in children, the disease or condition for which the product is intended occurs only in adult populations, or when the product does not represent a significant therapeutic benefit over existing treatments for pediatric patients. Once the MA is obtained in all EU member states and study results are included in the product information, even when negative, the product is eligible for a six-month extension to the Supplementary Protection Certificate, or SPC, if any is in effect at the time of authorization or, in the case of orphan medicinal products, a two-year extension of orphan market exclusivity.

 

 

Post-Approval Requirements

 

Where an MA is granted in relation to a medicinal product in the EU, the holder of the MA is required to comply with a range of regulatory requirements applicable to the manufacturing, marketing, promotion, and sale of medicinal products.

 

Similar to the United States, both MA holders and manufacturers of medicinal products are subject to comprehensive regulatory oversight by the EMA, the European Commission, or the competent regulatory authorities of the individual EU member states. The holder of an MA must establish and maintain a pharmacovigilance system and appoint an individual qualified person for pharmacovigilance who is responsible for oversight of that system. Key obligations include expedited reporting of suspected serious adverse reactions and submission of periodic safety update reports, or PSURs.

 

All new MAAs must include a risk management plan describing the risk management system that the company will put in place and documenting measures to prevent or minimize the risks associated with the product. The regulatory authorities may also impose specific obligations as a condition of the MA. Such risk-minimization measures or post-authorization obligations may include additional safety monitoring, more frequent submission of PSURs, or the conduct of additional clinical trials or post-authorization safety studies.

 

In the EU, the advertising and promotion of medicinal products are subject to both EU and EU member states’ laws governing promotion of medicinal products, interactions with physicians and other healthcare professionals, misleading and comparative advertising and unfair commercial practices. Although general requirements for advertising and promotion of medicinal products are established under EU directives, the details are governed by regulations in each member state and can differ from one country to another. For example, applicable laws require that promotional materials and advertising in relation to medicinal products comply with the product’s Summary of Product Characteristics, or SmPC, as approved by the competent authorities in connection with an MA. The SmPC is the document that provides information to physicians concerning the safe and effective use of the product. Promotional activity that does not comply with the SmPC is considered off-label and is prohibited in the EU. Direct-to-consumer advertising of prescription medicinal products is also prohibited in the EU.

 

Japanese Drug Regulation

 

Being a member of the ICH, Japan has pharmaceutical regulations fundamentally similar to those of the United States and the EU. Clinical trials of medicinal products in Japan must be conducted in accordance with Japanese regulations based on ICH guidelines governing GCP. If the sponsor of the clinical trial is not established within Japan, it must appoint an entity within the country to act as its caretaker who should be authorized to act on the sponsor’s behalf. The sponsor must take out a clinical trial insurance policy, and, according to the industry agreement, should put in place a common compensation policy for the injuries from the trial. Prior to the commencement of human clinical studies, the sponsor must complete an evaluation of the safety of the investigative product and submit a clinical trial notification and clinical trial protocol to the authorities in advance, upon agreement of the IRB of the participating institutions. When the authorities do not comment on the notification, the sponsor may proceed with the clinical trial. Any substantial changes to the trial protocol or other information submitted must be cleared by the IRB and notified to the authorities. Medicines used in clinical trials must be manufactured in accordance with GMP.

 

To market a medicinal product in Japan, we must obtain regulatory approval. To obtain regulatory approval of an investigational medicinal product, we must submit a new drug application. If the product is designed for treating certain “difficult diseases” or those whose patient size is limited, we may be able to obtain designation as an orphan drug product if it demonstrates unique therapeutic value. Separately, the latest amendment to the law introduced separate pathways for (i) truly innovative products with a unique mode of action and (ii) those which will satisfy unmet medical needs.

 

The evaluation of new drug applications is based on an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety, and efficacy. Once the review organization completes its review, the matter is considered by the advisory committee of experts, and the government grants approval upon positive recommendation from the committee.

 

 

The volume and quality of the clinical data are key determinants of the approval decision. Clinical trial data generated overseas is accepted as part of the data package consistent with the ICH recommendation. Typically, a limited dose response clinical trial for Japanese subjects is required to ensure that data are extrapolatable for the Japanese population.

 

Separate from the approval requirement, it is also mandatory to possess a distribution license of an appropriate class for the manufacturer to commercially distribute the product in Japan. Non-Japanese companies who possess only the product approval may designate an appropriate license holder in Japan to commercially distribute the product, rather than distributing it on its own. The license is valid for five years.

 

Employees and Human Capital Resources

 

As of September 26, 2023, we had three employees (including our executive officers), each of whom is a part-time employee primarily engaged in research and development activities, and all hold M.D. or Ph.D. degrees. Our Chief Financial Officer is currently a part-time contractor, although he will serve on a full-time basis upon the effectiveness of this registration statement. All officers and directors of the Company worked approximately 20 hours per week under their appropriate responsibility. We had no full-time employees. We consider our relationship with our employees to be good. None of our employees is subject to a collective bargaining agreement.

 

We recognize that our continued ability to attract, retain, and motivate exceptional employees is vital to ensuring our long-term competitive advantage. Our employees are critical to our long-term success and are essential to helping us meet our goals. Among other things, we support and incentivize our employees in the following ways:

 

	●	Talent development, compensation, and retention: We strive to provide our employees with a rewarding work environment, including the opportunity for growth, success, and professional development. We provide a competitive compensation and benefits package, including bonus and equity incentive plans, a 401(k) plan—all designed to attract and retain a skilled and diverse workforce.
	●	Health and safety: We support the health and safety of our employees by providing comprehensive insurance benefits, an employee assistance program, company-paid holidays, a personal time-off program, and other additional benefits which are intended to assist employees to manage their well-being.
	●	Inclusion and diversity: We are committed to efforts to increase diversity and foster an inclusive work environment that supports our workforce.

 

Properties

 

Our corporate address is 2355 Westwood Blvd. #139, Los Angeles, CA. 90064. This is the address of our registered agent. We currently do not lease any properties, but if required, we believe that suitable additional or alternative space would be available in the future on commercially reasonable terms. As of the date of this prospectus, all of our operations are conducted virtually.

 

Legal Proceedings

 

From time to time, we may become involved in material legal proceedings or be subject to claims arising in the ordinary course of our business. Regardless of outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources, and other factors, and there can be no assurances that favorable outcomes will be obtained. We are not presently party to any legal proceedings material to our operations or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by a government authority.

 

 

MANAGEMENT

 

Executive Officers, Management, and Directors

 

We are led by an industry leading senior management team and board of directors with extensive capabilities in immuno-oncology and with a wealth of experience in drug development, commercialization and successful business exits. Collectively, our team possesses a strong record of success, as demonstrated by more than 50 patents held, 12 accepted INDs and approved new drug applications, or NDAs, or biologics license applications, or BLAs, and significant experience at leading life sciences companies including Amgen Inc., Genexine Inc. and Pfizer Inc.

 

The following table sets forth information regarding our executive officers and directors as of the date of this prospectus.

 

Name		Age		Position(s)
John S. Yu, M.D.		59		CEO and Chairman of the Board of Directors
Neil Bhowmick, Ph.D.		53		Chief Scientific Officer
Ramachandran Murali. Ph.D.		64		Vice President of Research and Development
Doug Samuelson		63		Chief Financial Officer
Hyun W. Bae, M.D.		54		Director
Rosemary Mazanet M.D., Ph.D.		67		Director Designate*
Hansoo Michael Keyoung, M.D., Ph.D.		49		Director Designate*

 

* Each director designate will become a member of our board of directors upon effectiveness of this offering.

 

Executive Officers

 

John S. Yu, M.D., CEO and Chairman of the Board of Directors

 

Dr. Yu, our co-founder, Chairman and Chief Executive Officer, is a medical clinician and investigator. Since 2019, Dr. Yu has also served as the Chief Financial Officer and a director of our wholly owned subsidiary, Enviro. Dr. Yu is committed to advancing Kairos’s pipeline to tackle the most unmet needs in cancer: resistance to cancer therapeutics and the suppressed immune response in cancer. As the Professor of Neurosurgery and Director of Surgical Neuro-Oncology at Cedars-Sinai Medical Center, where he has worked since January 1998 until present, he has dedicated his medical career to the development of immunotherapy for cancer and glioblastoma. Dr. Yu is the co-inventor of the GITR and activated T cell technology. Dr. Yu earned his bachelor’s degree from Stanford University in 1985 and spent a year at the Sorbonne in Paris studying French literature while completing a fellowship in immunology at the Institut Pasteur in Paris, and earned his medical degree from Harvard Medical School in 1990 and a master’s degree from the Harvard University Department of Genetics in 1990, before pursuing a neurosurgical residency at Massachusetts General Hospital in Boston. His portfolio has included 26 research grants, 10 patents, seven FDA-approved investigational drugs and 17 IRB approved clinical trials.

 

We believe Dr. Yu, with his substantial experience in the field, is qualified to serve on our board of directors.

 

Neil Bhowmick, Ph.D., Chief Scientific Officer

 

Dr. Bhowmick, our Chief Scientific Officer, has more than 20 years of broad biochemistry experience filing and prosecuting patents in therapeutics and devices, published in peer-reviewed journals (110 publications) leading foundational and pre-clinical cancer studies, obtaining regulatory approvals, and conducting clinical trials.

 

Dr. Bhowmick discovered the role of fibroblasts in cancer therapy resistance and has used this finding to extend the time of cancer remission in multiple cancer types in preclinical and clinical examples as a founder and CEO of Enviro Therapeutics Inc. He trained at Vanderbilt University and is the Professor of Medicine at Cedars-Sinai Medical Center and Director of the Cancer Biology Program at Cedars-Sinai Cancer. He is on the Editorial Board of four scientific journals and charter member of a NIH grant study section. Dr. Bhowmick was a Consultant at Celgene (currently Bristol Myers Squibb, a New York Stock Exchange-listed company) in 2009, Xencor Inc., a Nasdaq-listed company, from 2019 to 2020 and at Tracon, a Nasdaq-listed company, from 2014 to 2019. He currently serves on the Scientific Advisory Board of FibroBiologics. Dr. Bhowmick has received NCI/NIH funding for over 15 years, has been cited over 15,000 times, and holds six patents for biomarker detection platforms and stromal targeted therapeutics (inclusive of ENV 105 and ENV 205).

 

 

Ramachandran Murali, Ph.D., Vice President of Research and Development

 

Dr. Murali, our Vice President of Research and Development, is an established structural biologist with expertise in macromolecular crystallography, computational biology, drug discovery, immunology, and cancer biology. Using these skills, Dr. Murali advanced a unique technology for creating small peptidomimetics and small molecule drugs that target protein-protein/DNA interactions for diagnostic and therapeutic applications in areas like cancer biology, immunotherapy, and autoimmune pathologies. Dr. Murali co-founded three biotech startup companies, including Xcyte Therapeutics, a cancer immunotherapy company founded in Seattle, WA in 1996, Ception Therapeutics, Inc, an immunotherapeutic pharmaceutical company founded in Philadelphia, PA in 2003 and Nidus, CA, a immunotherapeutic company founded in Los Angeles, CA in 2005. Dr. Murali’s accomplishments also include developing small molecule agonist/antagonists for numerous cell surface receptor complexes, including members of the TNFR super family. Recently, he targeted various transcription factors, such as Onecut-2, for cancer therapy. Dr. Murali has over 10 years of experience in collaborating with several biotech companies and is a co-inventor of more than 10 patents. Dr. Murali obtained his doctoral degree in Biophysics from the University of Madras, one of the pioneering institutes for structural biology in India. Upon graduation, he completed his post-doctoral training at Columbia University and the Wistar Institute (Philadelphia, PA). Later, he joined the University of Pennsylvania as a faculty member and rose to the position of Associate Professor. He is currently a Professor in the Department of Biomedical Sciences, Research Division of Immunology at Cedars-Sinai Medical Center (Los Angeles, CA).

 

Doug Samuelson, Chief Financial Officer

 

Mr. Samuelson has served as our external Chief Financial Officer since 2019. Mr. Samuelson is a finance and accounting professional with over 25 years of experience. Since 2016, Mr. Samuelson has served as the Chief Financial Officer of Wellness Center USA, Inc. in Tucson, Arizona. From 2016 to March 2020, Mr. Samuelson served as the Director of Accounting of Second Sight Medical Products, Inc., and in this position, managed all accounting functions, including all general ledger close functions, tax reporting, external audit responsibilities, banking and technical accounting issues. From 2018 to 2019, Mr. Samuelson served as the Chief Financial Officer of AdvaVet, Inc., in Los Angeles, California, the U.S. subsidiary of Swedish pharmaceutical company, Oasmia Pharmaceutical AB (NASDAQ: OASM). From 2016 to 2018, Mr. Samuelson was the Chief Financial Officer of Solis Tek, Inc. (OTC: GNAL), where he handled all financial reporting with the SEC. Mr. Samuelson obtained a Bachelor of Science in Accounting from University of Utah, College of Business and obtained a Master of Science in Computer Science from California State University, Northridge, School of Engineering. He is also a Certified Public Accountant in the State of California.

 

Non-Employee Directors

 

Hyun W. Bae, M.D., Independent Director

 

Dr. Hyun W. Bae has served on our board of directors as an independent director since September 9, 2020. Dr. Bae is currently a Professor in Orthopaedic Surgery at Cedars-Sinai Medical Center, the Director of Cedars’ Education and Fellowship program, and a clinical partner of the Orthopaedic Stem Cell and Tissue Engineering Laboratory. Since 2010, Dr. Bae has served as the Chief Medical Officer and a director of Prosidyan, a company that develops proprietary fiber-based bioactive glass products. Dr. Bae has served as a Scientific Advisory Board Member of Mesoblast since 2008, Engage Surgical since 2018, and Spine Biopharma since 2019. He also served as a Scientific Advisory Board Member of Tissuegene from 2008 to 2015. Dr. Bae is a 20-year veteran of the drug development industry and is a renowned researcher and inventor. He was principal investigator for four FDA-approved randomized clinical trials and has completed 30 clinical studies throughout his career. Dr. Bae also has authored 60 published scientific papers, written five review articles and holds 30 patents. Dr. Bae obtained a Biomechanics degree from Columbia University and a Doctor of Medicine degree, cum laude, from Yale University and is a former NIH Howard Hughes Research Fellow in Bethesda, Maryland. We believe that Dr. Bae is qualified to serve on our board of directors because of his industry and technical experience, including his operational experience in drug discovery and development, and service on multiple company boards.

 

 

Rosemary Mazanet M.D., Ph.D., Independent Director

 

Dr. Rosemary Mazanet has agreed to serve on our board of directors as an independent director upon completion of this offering. Since June 2015, Dr. Mazanet has served as the Chair of the Scientific Advisory Board and since September 2017 as Chief Science Officer for Columbia Care, Inc. She is a Director at Oncternal Therapeutics, a Nasdaq-listed company, since January 2021, and private company Angiochem. She has served as Clinical Advisor and interim C-suite management to many companies and funds through her consultancy business, R Mazanet LLC, which she has managed as President since May 2004. Dr. Mazanet also has experience in public equity markets as a Managing Partner at Apelles Investment, LLC from 2007 to 2014, and as the Head of Research at Oracle Partners LP from 1998 to 2004. Prior to her public equity work, Dr. Mazanet worked at Amgen, Inc., where she led Clinical Development teams that conducted successful development programs leading to product approvals. Dr. Mazanet served as a director and member of the audit committee of GTx, Inc., a Nasdaq-listed company, from January 2002 to June 2010 and an independent Director of MasterCell from 2019 to 2020. Both companies were subsequently acquired. Dr. Mazanet has served as a Trustee at the University of Pennsylvania Health System since July 2002, and as the Chair, Executive Advisory Board for the Wharton Leonard Davis Institute since December 2020. Dr. Mazanet holds a B.A. in biology from the University of Virginia, and a Doctor of Medicine degree and a Doctor of Philosophy degree from the University of Pennsylvania. Dr. Mazanet is trained as an internist and oncologist with privileges at the Harvard Hospitals. We believe that Dr. Mazanet is qualified to serve on our board of directors because of her extensive experience managing and advising public and private companies in medical technology fields, her experience in public equity markets, her development team experience in drug discovery and development, and service on multiple company boards.

 

Hansoo Michael Keyoung, M.D., Ph.D., Independent Director

 

Dr. Hansoo Michael Keyoung has agreed to serve on our board of directors as an independent director upon completion of this offering. For over 20 years, Dr. Keyoung has led a successful career as a physician, healthcare executive, and investor in the United States, Europe and Asia. Since 2017, Dr. Keyoung has served as the head of North America for CBC Group, a healthcare-dedicated private equity firm with over $4 billion in assets under management. He has served as Board Chair of AffaMed Therapeutics since 2019, a director of Graybug Vision, a Nasdaq-listed company, since 2019, and a director of InxMed since 2019. From 2015 to 2017, Dr. Keyoung also served as the Chief Executive Officer of Genexine, a KOSDAQ-listed biotech company with a $1 billion plus market cap focused on developing innovative biologic drugs for cancer and rare diseases. During his tenure as Chief Executive Officer of Genexine, he successfully helped lead clinical development in Europe and Asia, raised $100 million in equity, and set up partnerships with Merck, Fosun Pharma, Tasly Pharma, and Kalbe Pharma. From 2013 to 2015, he also served as President of Catalyst Biosciences, a Nasdaq-listed company and a clinical-stage hemophilia and ophthalmology company that partnered with Pfizer, MedImmune, and Isu Abxis. Additionally, he has experience advising Eli Lilly, Bausch & Lomb, and Samsung Electronics/Biologics on Asian expansion, global drug development and commercial partnership strategies. Dr. Keyoung has a Doctor of Medicine degree and a Doctor of Philosophy degree in neuroscience and neurology from Cornell University Weill Medical College and Memorial Sloan Kettering. He was also a Biomedical Fellow at Rockefeller University and Memorial Sloan Kettering. We believe that Dr. Keyoung is qualified to serve on our board of directors because of his extensive experience serving in management and on boards of directors of public company, his experience in private equity investing in healthcare companies, and his extensive advisory work to industry-leading healthcare companies.

 

Family Relationships

 

There are no other family relationships among our directors and executive officers.

 

Composition of Our Board of Directors

 

Our business and affairs are organized under the direction of our board of directors, which currently consists of two members and at the completion of our IPO will consist of four members, each of whom are elected to serve for one year terms to hold office until the next annual meeting of our stockholders and until a successor is appointed and qualified, or until their removal, resignation, or death. The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling, and direction to our management. Our board of directors meets on a regular basis and additionally as required.

 

Director Independence and Diversity

 

Under the Nasdaq Listing Rules independent directors must comprise a majority of our board of directors as a listed company within one year of the listing date. Nasdaq Listing Rules also require that boards of directors of five or more members have at least two diverse directors (including at least one woman and at least one member of an underrepresented community) or that boards of directors of four or fewer members have at least one diverse director or, each case, explain why the company has not appointed such diverse directors.

 

Our board of directors has undertaken a review of the independence and diversity of each director. Based on information provided by each director concerning her or his background, employment and affiliations, including family relationships, our board of directors has determined that three of our four directors, each of Dr. Bae, Mazanet, and Keyoung, are independent directors and that our board of directors meets the diversity requirements imposed by Nasdaq.

 

Committees of Our Board of Directors

 

Our board of directors has established an audit committee, a compensation committee, and a nominating and corporate governance committee, each of which is made up of independent directors, in compliance with the Nasdaq Listing Rules. The composition and responsibilities of each of the committees of our board of directors are described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors. Each committee intends to adopt a written charter that satisfies the application rules and regulation of the SEC and the Nasdaq Listing Rules, which we will post to our website at https://kairospharma.com upon the closing of this offering. Our board of directors may establish other committees as it deems necessary or appropriate from time to time.

 

 

Audit Committee

 

Upon completion of this offering, our audit committee will consist of Dr. Michael Keyoung, Dr. Hyun W. Bae, and Dr. Rosemary Mazanet, each of whom our board of directors has determined satisfies the independence requirements under the Nasdaq Listing Rules and Rule 10A-3(b)(1) of the Exchange Act. The chair of our audit committee will be Dr. Michael Keyoung, whom our board of directors has determined is an “audit committee financial expert” within the meaning of SEC regulations. Each member of our audit committee can read and understand fundamental financial statements in accordance with applicable requirements. In arriving at these determinations, the board of directors has examined each audit committee member’s scope of experience and the nature of their employment in the corporate finance sector.

 

The primary purpose of the audit committee is to discharge the responsibilities of our board of directors with respect to our corporate accounting and financial reporting processes, systems of internal control and financial-statement audits, and to oversee our independent registered accounting firm. Specific responsibilities of our audit committee include:

 

	●	helping our board of directors oversee our corporate accounting and financial reporting processes;
	●	managing the selection, engagement, qualifications, independence and performance of a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;
	●	discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end operating results;
	●	developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;
	●	reviewing related person transactions;
	●	obtaining and reviewing a report by the independent registered public accounting firm at least annually, that describes our internal quality control procedures, any material issues with such procedures, and any steps taken to deal with such issues when required by applicable law; and
	●	approving or, as permitted, pre-approving, audit and permissible non-audit services to be performed by the independent registered public accounting firm.

 

Compensation Committee

 

Upon completion of this offering, our compensation committee will consist of Dr, Rosemary Mazanet, Dr. Hansoo Michael Keyoung, and Dr. Hyun Bae. The chair of our compensation committee will be Dr. Rosemary Mazanet. Our board of directors has determined that each member of our compensation committee is independent under the Nasdaq Listing Rules and as a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act.

 

The primary purpose of our compensation committee is to discharge the responsibilities of our board of directors in overseeing our compensation policies, plans and programs, and to review and determine the compensation to be paid to our executive officers, directors and other senior management, as appropriate. Specific responsibilities of our compensation committee include:

 

	●	reviewing and approving the compensation of our chief executive officer, other executive officers, and senior management;
	●	reviewing and recommending to our board of directors the compensation paid to our directors;
	●	reviewing and approving the compensation arrangements with our executive officers and other senior management;
	●	administering our equity incentive plans and other benefit programs;
	●	reviewing, adopting, amending, and terminating, incentive compensation and equity plans, severance agreements, profit sharing plans, bonus plans, change-of-control protections, and any other compensatory arrangements for our executive officers and other senior management;
	●	reviewing, evaluating, and recommending to our board of directors’ succession plans for our executive officers; and
	●	reviewing and establishing general policies relating to compensation and benefits of our employees, including our overall compensation strategy, including base salary, incentive compensation, and equity-based grants, to assure that it promotes stockholder interests and supports our strategic and tactical objectives, and that it provides for appropriate rewards and incentives for our management and employees.

 

 

Nominating and Corporate Governance Committee

 

Upon completion of this offering, our nominating and corporate governance committee will consist of Dr. Rosemary Mazanet, Dr. Hyun Bae, and Dr. Michael Keyoung. The chair of our nominating and corporate governance committee will be Dr. Rosemary Mazanet. Our board of directors has determined that each member of the nominating and corporate governance committee is independent under the Nasdaq Listing Rules, a non-employee director, and free from any relationship that would interfere with the exercise of his or her independent judgment.

 

Specific responsibilities of our nominating and corporate governance committee include:

 

	●	identifying and evaluating candidates, including the nomination of incumbent directors for reelection and nominees recommended by stockholders, to serve on our board of directors;
	●	considering and making recommendations to our board of directors regarding the composition and chairmanship of the committees of our board of directors;
	●	instituting plans or programs for the continuing education of our board of directors and orientation of new directors;
	●	developing and making recommendations to our board of directors regarding corporate governance guidelines and matters; and
	●	overseeing periodic evaluations of the board of directors’ performance, including committees of the board of directors and management.

 

Code of Business Conduct and Ethics

 

In connection with this offering, we intend to adopt a written Code of Business Conduct and Ethics that applies to all our employees, officers, and directors. This includes our principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions. The full text of our Code of Business Conduct and Ethics will be posted on our website at www.kairospharma.com. We intend to disclose on our website any future amendments of our Code of Business Conduct and Ethics or waivers that exempt any principal executive officer, principal financial officer, principal accounting officer or controller, persons performing similar functions, or our directors from provisions in the Code of Business Conduct and Ethics. Information contained on, or accessible through, our website is not a part of this prospectus, and the inclusion of our website address in this prospectus is only an inactive textual reference.

 

Compensation Committee Interlocks and Insider Participation

 

None of the members of the compensation committee is currently, or has been at any time, one of our executive officers or employees. None of our executive officers currently serves, or has served during the last calendar year, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee.

 

Non-Employee Director Compensation

 

During the fiscal years ended December 31, 2022 and 2021, Hyun W. Bae, M.D. served on our board of directors as a non-employee director. No compensation was awarded to or earned by or paid to Dr. Bae for the fiscal years ended December 31, 2022 and 2021.

 

We will enter into director agreements with each of our directors in advance of effectiveness of this registration statement. Such agreements will provide for annual cash compensation of $50,000, payable in quarterly installments in arrears, plus an additional $10,000 cash compensation for the chair of the audit committee. In addition, our policy provides that, upon initial election or appointment to our board of directors, each new non-employee director will be granted a one-time grant, or Director Initial Grant, of 10,000 restricted stock units (“RSUs”) that will vest in substantially equal annual installments over a period of three years. The Director Initial Grant is subject to full acceleration vesting upon the sale of our Company, in accordance with the terms of our 2023 Equity Incentive Plan.

 

We will reimburse all reasonable out-of-pocket expenses incurred by directors for their attendance at meetings of our board of directors or any committee thereof.

 

Employee directors will receive no additional compensation for their service as a director.

 

Our certificate of incorporation contains provisions limiting the liability of directors, and our bylaws provide that we will indemnify each of our directors and officers to the fullest extent permitted under Delaware law. Our certificate of incorporation and bylaws will also provide our board of directors with discretion to indemnify our employees and other agents when determined appropriate by the board of directors. In addition, we intend to enter into an indemnification agreement with each of our directors and executive officers, which will require us to indemnify them. For more information regarding these agreements, see the section titled “Executive Compensation — Limitations on Liability and Indemnification.”

 

 

EXECUTIVE COMPENSATION

 

Our named executive officers for the year ended December 31, 2022 and 2021 were Dr. Yu, Dr. Bhowmick, Dr. Murali, and Mr. Samuelson.

 

Summary Compensation Table

 

None of our named officers were paid a salary, were granted options, or received any compensation of any type during the fiscal years ended December 31, 2022 and 2021.

 

Employment Agreements

 

We have entered into employment agreements with each of our executive officers which will become effective concurrently with the consummation of this initial public offering (“IPO”). At such time, our executive officers will receive compensation on an annual basis in cash, payable in monthly installments, as well as options to purchase common stock subject to achieving certain key performance indicators. The terms of the employment agreements are as follows:

 

Employment Agreement with John Yu, MD

 

On September 27, 2023, we entered enter into an employment agreement with our Chief Executive Officer and Chairman of the Board, John Yu, M.D. Dr. Yu’s employment agreement will become effective upon consummation of our IPO. Under the terms of his employment agreement, Dr. Yu will receive base compensation of $175,000 per year. Dr. Yu will also receive 14,000 restricted stock units (“RSUs”), which RSUs will vest annually in substantially equal installments over a period of three years. In addition, Dr. Yu will be entitled to receive an annual cash or stock bonus, as may be determined by the compensation committee of the board of directors. Should Dr. Yu terminate his employment for “Good Reason,” as defined in the agreement, he will be entitled to his then applicable base salary for period of six months, subject to his continued compliance with certain requirements of his employment agreement. Dr. Yu will also be entitled to standard benefits that may be offered by the Company from time to time, including 30 days’ paid vacation. Prior to completion of our IPO, Dr. Yu has received no salary from the Company.

 

Employment Agreement with Doug Samuelson

 

We presently have an at will agreement with our Chief Financial Officer, Doug Samuelson, pursuant to which Mr. Samuelson is paid $90.00 per hour, is eligible to receive an annual discretionary bonus, as may be determined by the board of directors, and pursuant to which Mr. Samuelson is eligible to participate in the Company’s standard medical, retirement and insurance benefit plans, and is subject to standard non-disclosure and confidentiality provisions.

 

On September 27, 2023, we entered into an employment agreement with Mr. Samuelson, which employment agreement will become effective upon consummation of our IPO. Under the employment agreement, Mr. Samuelson will be entitled to receive (i) a base salary equal to $50,000 per year, payable in monthly installments; (ii) an annual grant of 50,000 RSUs, which RSUs will be issued each year on the anniversary date of our IPO, with each grant becoming fully vested after 12 months; and (iii) such number of RSUs equal to 1.2 times the amount of outstanding invoices then owed to Mr. Samuelson according to his current consulting agreement, with such number of RSUs to be calculated at our IPO per share purchase price. In addition, in the event of “Change of Control,” as such term is defined in his employment agreement, Mr. Samuelson will be entitled to receive 250,000 RSUs, which number shall include all RSUs Mr. Samuelson has received up until the date of the Change of Control, and which shall all vest immediately upon issuance. Mr. Samuelson will also be entitled to receive an annual cash or stock bonus, as may be determined by the compensation committee of the board of directors and will be entitled to standard benefits that may be offered by the Company from time to time, including 30 days’ paid vacation and six months’ severance in the event his employment is terminated without cause.

 

Employment Agreement with Neil Bhowmick, MD

 

On September 27, 2023, we entered into an employment agreement with our Chief Scientific Officer, Neil Bhowmick, M.D., which employment agreement will become effective upon the consummation of our IPO. Under Dr. Bhowmick’s employment agreement, Dr. Bhowmick will receive a base salary equal to $100,000 per year, payable in monthly installments, and 14,000 RSUs, which RSUs will vest annually over a period of three years. In addition, Dr. Bhowmick will be entitled to receive an annual cash or stock bonus, as may be determined by the board of directors or a committee thereof. Dr. Bhowmick will also be entitled to standard benefits that may be offered by the Company from time to time, including 30 days’ paid vacation and six months’ severance in the event his employment is terminated without “Good Cause” in accordance with the terms of his employment agreement. Prior to completion of our IPO, Dr. Bhowmick received no salary from the Company.

 

Employment Agreement with Ramachandran Murali, MD

 

On September 27, 2023, we entered into an employment agreement with our Vice President of Research and Development, Ramachandran Murali, MD, which will become effective upon consummation of our IPO. Under Dr. Murali’s employment agreement, Dr. Murali will receive base compensation of $80,000 per year and will receive an initial grant of 14,0000 RSUs, which RSUs will vest annually in substantially equal installments over a period of three years. In addition, Dr. Murali will be entitled to receive an annual cash or stock bonus, as may be determined by the board of directors or a committee thereof. Dr. Murali will also be entitled to standard benefits that may be offered by the Company from time to time, including 30 days’ paid vacation and six months’ severance in the event his employment is terminated without “Good Cause” in accordance with the terms of his employment agreement. Prior to completion of our IPO, Dr. Murali received no salary from the Company.

 

Equity-Based Incentive Awards

 

Our equity-based incentive awards are designed to align our interests and those of our stockholders with those of our employees and consultants, including our executive officers. Our board of directors or an authorized committee thereof is responsible for approving equity grants.

 

We did not grant any equity awards to our named executive officers during the fiscal years ended December 31, 2022 and 2021. Following the completion of this offering, we may grant additional equity awards to our executive officers pursuant to our 2023 Equity Incentive Plan, the terms of which are described below under “—Employee Benefit and Stock Plans—2023 Equity Incentive Plan.”

 

Outstanding Equity Awards as of December 31, 2022 and 2021

 

In July 2023, we adopted our 2023 Equity Incentive Plan, which reserves 1,650,000 shares of common stock for issuance under the plan. As we only recently adopted our 2023 Equity Incentive Plan, none of our named officers had been granted options, or received any other type of equity compensation, during the fiscal years ended December 31, 2022 and 2021.

 

Emerging Growth Company Status

 

We are an “emerging growth company,” as defined in the JOBS Act. As an emerging growth company we will be exempt from certain requirements related to executive compensation, including the requirements to hold a nonbinding advisory vote on executive compensation and to provide information relating to the ratio of total compensation of our chief executive officer to the median of the annual total compensation of all of our employees, each as required by the Investor Protection and Securities Reform Act of 2010, which is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

 

Pension Benefits

 

Our named executive officers did not participate in, or otherwise receive any benefits under, any pension or retirement plan sponsored by us during the fiscal years ended December 31, 2022 and 2021.

 

Nonqualified Deferred Compensation

 

Our named executive officers did not participate in, or earn any benefits under, a non-qualified deferred compensation plan sponsored by us during the fiscal years ended December 31, 2022 and 2021.

 

Other Compensation and Benefits

 

All of our current named executive officers are eligible to participate in our employee benefit plans, including our medical, dental, and vision plans, in each case on the same basis as all of our other employees. We pay the premiums for the medical, disability, and accidental death and dismemberment insurance for all of our employees, including our named executive officers. We generally do not provide perquisites or personal benefits to our named executive officers.

 

Equity Benefit Plans

 

We believe that our ability to grant equity-based awards is a valuable and necessary compensation tool that aligns the long-term financial interests of our employees, consultants, and directors with the financial interests of our stockholders. In addition, we believe that our ability to grant options and other equity-based awards helps us to attract, retain, and motivate employees, consultants, and directors, and encourages them to devote their best efforts to our business and financial success. As a result, we adopted the 2023 Equity Incentive Plan in July 2023 in advance of this offering. The 2023 Equity Incentive Plan includes the features set forth below.

 

2023 Equity Incentive Plan

 

Tax Limitations on Options. Each option will be designated in an award agreement as either an Incentive Stock Option (“ISO”) or a Nonstatutory Stock Option (“NSO”). However, notwithstanding such designation, to the extent that the aggregate fair market value of the shares with respect to which ISOs are exercisable for the first time by the participant during any calendar year exceeds $100,000, such options will be treated as NSOs. The fair market value of the shares will be determined as of the time the option with respect to such shares is granted. The administrator will determine the term of each option in its sole discretion; provided, however, that the term will be no more than ten (10) years from the date of grant in the case of ISOs. Moreover, in the event an ISO is granted to a participant who, at the time of grant, owns stock representing more than 10% of the total combined voting power of all classes of stock of the Company, the term of the ISO will be five (5) years from the date of grant or such shorter term as may be provided in the award agreement.

 

Restricted Stock Unit Awards. Restricted stock units (“RSUs”) may be granted at any time and from time to time as determined by the administrator of the 2023 Equity Incentive Plan. Each RSU grant will be evidenced by an award agreement that will specify such other terms and conditions as the administrator, in its sole discretion, will determine in accordance with the terms and conditions of the 2023 Equity Incentive Plan. The administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed, subject to the prohibition on acceleration of the timing of distribution of deferred compensation subject to Section 409A of the Code, to the extent applicable to the award. On the date set forth in the award agreement, all unearned RSUs will be forfeited to the Company.

 

Restricted Stock Awards. Each restricted stock award will be evidenced by an award agreement that will specify the period of restriction, the number of shares granted, and such other terms and conditions as the administrator will determine. During the period of restriction, service providers holding shares of restricted stocks granted hereunder may exercise full voting rights with respect to those shares, unless the administrator determines otherwise in a manner not prohibited by the award agreement. During the period of restriction, service providers holding shares of restricted stocks will be entitled to receive all dividends and other distributions paid with respect to such shares unless otherwise provided in the award agreement. If any such dividends or distributions are paid in shares, the shares will be subject to the same restrictions on transferability and provisions for forfeiture as the shares of restricted stocks with respect to which they were paid. On the date set forth in the award agreement, the restricted stocks for which restrictions have not lapsed will revert to the Company and again will become available for grant under the 2023 Equity Incentive Plan.

 

Stock Appreciation Rights. Stock appreciation rights will be granted in accordance with stock appreciation rights agreements, in the form adopted by the administrator. The exercise price of stock appreciation rights will be not less than 100% of the fair market value of a share on the date of grant. Each stock appreciation right grant will be evidenced by an award agreement that will specify the exercise price, the number of shares with respect to which the award is granted, the term of the stock appreciation right, the conditions of exercise, and such other terms and conditions as the administrator, in its sole discretion, will determine. Stock appreciation right granted under the 2023 Equity Incentive Plan will expire upon the date determined by the administrator and set forth in the award agreement; provided, however, that the term will be no more than ten (10) years from the date of grant thereof. Upon exercise of a stock appreciation right, a participant will be entitled to receive payment from the Company in an amount determined by multiplying: (i) the difference between the fair market value of a share on the date of exercise over the “stock appreciation right exercise price,” as defined under Treasury Regulation Section 1.409A-1(b)(i)(B)(2), i.e., the fair market value of a share on the date of grant of the stock appreciation right; times (ii) the number of shares with respect to which the stock appreciation right is exercised. At the discretion of the administrator, the payment upon stock appreciation right exercise may be in cash, in shares of equivalent value, or in some combination thereof.

 

 

Performance Awards. Performance units and performance shares may be granted to service providers at any time and from time to time, as will be determined by the administrator, in its sole discretion. Each performance unit will have an initial value that is established by the administrator on or before the date of grant. Each performance share will have an initial value equal to the fair market value of a share on the date of grant. The administrator will set performance objectives or other vesting provisions. The administrator may set vesting criteria based upon the achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued employment), or any other basis determined by the administrator in its discretion. Each award of performance units/shares will be evidenced by an award agreement that will specify the performance period, and such other terms and conditions as the administrator, in its sole discretion, will determine. After the applicable performance period has ended, the holder of performance units/shares will be entitled to receive a payout of the number of performance units/shares earned by the participant over the performance period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been achieved. Payment of earned performance units/shares will be made as soon as practicable after the expiration of the applicable performance period or, if earlier, after the date on which a participant’s interest in such performance units/shares is no longer subject to a substantial risk of forfeiture, provided however, that in no event shall such payment be made after the later to occur of (i) December 31 of the year in which such risk of forfeiture lapses or (ii) two and one-half months after such risk of forfeiture lapses. The administrator, in its sole discretion, may pay earned performance units/shares in the form of cash, in shares (which have an aggregate fair market value equal to the value of the earned performance units/shares at the close of the applicable performance period) or in a combination thereof. On the date set forth in the award agreement, all unearned or unvested performance units/shares will be forfeited to the Company, and again will be available for grant under the Plan.

 

Other Stock Awards. The administrator may grant other awards based in whole or in part by reference to our common stock. The administrator will set the number of shares under the stock award (or cash equivalent) and all other terms and conditions of such awards.

 

Adjustments. In the event that any dividend or other distribution (whether in the form of cash, shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of shares or other securities of the Company, or other change in the corporate structure of the Company affecting the shares occurs, the administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the 2023 Equity Incentive Plan, will adjust the number and class of shares that may be delivered under the 2023 Equity Incentive Plan and/or the number, class, and price of shares covered by each outstanding award, and the numerical share limits set forth thereof.

 

Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, any corporate separation or division, including, but not limited to, a split-up, a split-off or a spin-off; a reverse merger in which the Company is the surviving entity, but the shares of Company stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or the transfer of more than fifty percent (50%) of the then outstanding voting stock of the Company to another person or entity, the administrator will notify each participant as soon as practicable prior to the effective date of such proposed transaction. The Company, to the extent permitted by applicable law but otherwise in its sole discretion may provide for: (i) the continuation awards by the Company (if the Company is surviving entity or its parent; (ii) the assumption of the 2023 Equity Incentive Plan and such outstanding awards by the surviving entity or its parent; (iii) the substitution by the surviving entity or its parent of rights with substantially the same terms for such outstanding awards; or (iv) the cancellation of such outstanding rights without payment of any consideration provided that in the case of this clause (iv), the administrator will provide notice of its intention to cancel award and offer a reasonable opportunity to exercise vested awards.

 

Change in Control. In the event of a merger or change in control, as defined in the 2023 Equity Incentive Plan, each outstanding award will be treated as the administrator determines, including, without limitation, that each award will be assumed or an equivalent option or right substituted by the successor corporation or a parent or subsidiary of the successor corporation. The administrator will not be required to treat all awards similarly in the transaction.

 

Plan Amendment or Termination. The administrator may at any time amend, alter, suspend, or terminate the 2023 Equity Incentive Plan. The Company will obtain stockholder approval to any amendment to the 2023 Equity Incentive Plan to the extent necessary or desirable to comply with applicable rules and regulations. No amendment, alteration, suspension, or termination of the 2023 Equity Incentive Plan will impair the rights of any participant, unless mutually agreed otherwise between the participant and the administrator, which agreement must be in writing and signed by the participant and the Company. Termination of the 2023 Equity Incentive Plan will not affect the administrator’s ability to exercise the powers granted to it thereunder with respect to awards granted under the 2023 Equity Incentive Plan prior to the date of such termination.

 

 

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

 

The following includes a summary of transactions since January 1, 2021 to which we have been a party in which the amount involved exceeded or will exceed the lesser of $120,000 as of December 31, 2022, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described under “Executive Compensation.” We also describe below certain other transactions with our directors, executive officers and stockholders.

 

ADVANCES FROM RELATED PARTIES

 

During the year ended December 31, 2021, shareholders of the Company, and a company whose principal stockholder is also a stockholder of the Company, advanced the Company $13,994, which amount remained outstanding as of June 30, 2023. The advances accrue no interest, are unsecured and are due on demand.

 

Policies and Procedures for Transactions with Related Persons

 

Prior to effectiveness of this offering, we intend to adopt a written policy that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our common stock, and any members of the immediate family of any of the foregoing persons are not permitted to enter into a related person transaction with us without the approval or ratification of our board of directors or our audit committee. Any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of any class of our common stock, or any member of the immediate family of any of the foregoing persons, in which the amount involved exceeds $120,000 (or, if less, 1% of the average of our total assets in a fiscal year) and such person would have a direct or indirect interest, must be presented to our board of directors or our audit committee for review, consideration and approval. In approving or rejecting any such proposal, our board of directors or our audit committee is to consider the material facts of the transaction, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.

 

 

PRINCIPAL STOCKHOLDERS

 

The following table sets forth information regarding beneficial ownership of our capital stock as of the date of this prospectus by:

 

	●	each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock;
	●	each of our directors and named executive officers; and
	●	all of our current executive officers and directors as a group.

 

We have determined beneficial ownership in accordance with the rules and regulations of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole investment power with respect to all shares that they beneficially own, subject to applicable community property laws.

 

Applicable percentage ownership before the offering is based on 10,334,357 shares of our common stock outstanding as of September 26, 2023, after giving effect to a 1-for-2.5 reverse stock split which was effected on May 10, 2023 in conjunction with the Company’s conversion into a Delaware corporation.

 

Applicable percentage ownership after the offering is based on shares of common stock outstanding immediately after the closing of this offering, after giving effect to the issuance of [  ] shares of common stock upon conversion of convertible notes, in connection with the closing of this offering. In computing the number of shares beneficially owned by a person and the percentage ownership of such person, we deemed to be outstanding all shares subject to options held by the person that are currently exercisable, or exercisable within 60 days of the date of this prospectus. However, except as described above, we did not deem such shares outstanding for the purpose of computing the percentage ownership of any other person.

 

Unless otherwise indicated, the address for each beneficial owner listed in the table below is 2355 Westwood Blvd. #139 Los Angeles, California 90064.

 

		Number of Shares				Percentage of Shares Beneficially Owned
Name of Beneficial Owner			Beneficially Owned (#)				Before Offering (%)				After Offering (%)
Greater than 5% Holders:
Technomedics Management and Systems, Inc.(1)			1,173,572				11.4
Judith Buchmiller(2)			801,930				11.6
Directors and Named Executive Officers:
John S. Yu, M.D.			5,316,572				51.5
Ramachandran Murali, Ph.D.			132,857				1.3
Neil Bhowmick, Ph.D.			1,116,000				10.8
Douglas Samuelson			-				-
Hyun W. Bae, M.D			44,286				**
Rosemary Mazanet, M.D.			-				-
Hansoo Michael Keyoung, M.D.			-				-
All directors and executive officers as a group (7 persons)			6,609,715				63.5

 

* Represents beneficial ownership of less than 1%.

(1) Manfred Mosk exercises voting and investment power of all shares held by Technomedics Management and Systems, Inc.

(2) Ms. Buchmiller is the beneficial owner of (i) 801,930 shares of common stock held in the name of Belmet Therapeutics, LLC and (ii) 404,820 shares of common stock held in the name of ISEM Sciences LLC.

 

 

DESCRIPTION OF CAPITAL STOCK

 

General

 

The following description of our capital stock and certain provisions of our certificate of incorporation and bylaws are summaries and are qualified by reference to the certificate of incorporation and the bylaws. Copies of these documents have been filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part.

 

Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.001 per share and 20,000,000 shares of preferred stock, par value $0.001 per share.

 

As of the date of this prospectus, prior to giving effect to the issuance of [____________] shares of common stock upon the closing of this offering, and [  ] shares of common stock issuable upon conversion of convertible notes following completion of this offering, and after giving effect to our 1-for-2.5 reverse stock split, there were 10,334,357 shares of common stock outstanding and held of record by 27 stockholders.

 

Common Stock

 

Voting Rights

 

Each holder of common stock is entitled to one vote for each share owned on all matters voted upon by shareholders, and a majority vote is required for all actions to be taken by shareholders.

 

Economic Rights

 

Except as otherwise expressly provided in our certificate of incorporation or required by applicable law, all shares of our common stock will have the same rights and privileges and rank equally, share ratably and be identical in all respects for all matters, including those described below.

 

Dividends. Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of our common stock are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to issue dividends and then only at the times and in the amounts that our board of directors may determine. See the section titled “Dividend Policy” for further information.

 

Liquidation Rights. On our liquidation, dissolution, or winding-up, the holders of our stock will be entitled to share equally, identically, and ratably in all assets remaining after the payment of any liabilities, liquidation preferences, and accrued or declared but unpaid dividends, if any, with respect to any outstanding preferred stock, unless a different treatment is approved by the affirmative vote of the holders of a majority of the outstanding shares of such affected class, voting separately as a class.

 

No Preemptive or Similar Rights

 

The holders of shares of our common stock are not entitled to preemptive rights, and are not subject to conversion, redemption, or sinking fund provisions.

 

Fully Paid and Non-Assessable

 

In connection with this offering, our legal counsel will opine that the shares of our common stock to be issued under this offering will be fully paid and non-assessable.

 

 

Preferred Stock

 

Under our certificate of incorporation, our board of directors will have the authority, without further action by the stockholders, to issue up to 20,000,000 shares of preferred stock, par value $0.001 per share, in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.

 

Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in our control that may otherwise benefit holders of our common stock and may adversely affect the market price of the common stock and the voting and other rights of the holders of our common stock. We have no current plans to issue any shares of preferred stock.

 

Registration Rights

 

Upon the closing of this offering and subject to the lock-up agreements entered into in connection with this offering and federal securities laws, certain holders of shares of our common stock, including those shares of our common stock that will be issued upon the conversion of convertible notes in connection with this offering, will initially be entitled to certain rights with respect to registration of such shares under the Securities Act. These shares are referred to as registrable securities. The holders of these registrable securities possess registration rights pursuant to the terms of our investors’ rights and lock-up agreement and are described in additional detail below. The registration of shares of our common stock pursuant to the exercise of the registration rights described below would enable the holders to trade these shares without restriction under the Securities Act when the applicable registration statement is declared effective. We will pay the registration expenses, other than underwriting discounts, selling commissions and stock transfer taxes, of the shares registered pursuant to the demand, piggyback, and Form S-3 registrations described below.

 

Generally, in an underwritten offering, the managing underwriter, if any, has the right, subject to specified conditions and limitations, to limit the number of shares the holders may include. The demand, piggyback, and Form S-3 registration rights described below will expire no later than three years after the closing of this offering.

 

Demand Registration Rights

 

Upon the closing of this offering, holders of an aggregate of shares of our common stock will be entitled to certain demand registration rights. At any time beginning 180 days after the closing of this offering, the holders of % of these shares may request that we register all or a portion of their shares. We are not required to effect more than registration statements which are declared or ordered effective. Such request for registration must cover shares with an anticipated aggregate offering price of at least $5 million. With certain exceptions, we are not required to effect the filing of a registration statement during the period starting with the date of the filing of, and ending on a date 180 days following the effective date of the registration statement for this offering.

 

Piggyback Registration Rights

 

In connection with this offering, the holders of an aggregate of [          ] shares of our common stock were entitled to, and the necessary percentage of holders waived, their rights to notice of this offering and to include their shares of registrable securities in this offering. After this offering, in the event that we propose to register any of our securities under the Securities Act, either for our own account or for the account of other security holders, the holders of these shares will be entitled to certain piggyback registration rights allowing the holder to include their shares in such registration, subject to certain marketing and other limitations.

 

 

Anti-Takeover Provisions

 

The provisions of Delaware law, our certificate of incorporation, and our bylaws, which are summarized below, may have the effect of delaying, deferring, or discouraging another person from acquiring control of our company. They are also designed, in part, to encourage persons seeking to acquire control of us to negotiate first with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.

 

Certificate of Incorporation and Bylaws

 

Because our stockholders do not have cumulative voting rights, stockholders holding a majority of the voting power of our shares of common stock will be able to elect all of our directors. Our certificate of incorporation and our bylaws provide for stockholder actions at a duly called meeting of stockholders or by written consent, subject to relevant proxy rules. A special meeting of stockholders may be called by a majority of our board of directors, the chair of our board of directors, or our chief executive officer or president. Our bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors.

 

The authorization of undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change our control.

 

These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and may have the effect of deterring hostile takeovers or delaying changes in our control or management. As a consequence, these provisions may also inhibit fluctuations in the market price of our stock that could result from actual or rumored takeover attempts.

 

Section 203 of the Delaware General Corporation Law

 

When we have a class of voting stock that is either listed on a national securities exchange or held of record by more than 2,000 stockholders, we will be subject to Section 203 of the DGCL which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years after the date that such stockholder became an interested stockholder, subject to certain exceptions.

 

Choice of Forum

 

Our certificate of incorporation provides that unless we consent in writing to the selection of an alternative forum, and except for any actions brought under the Securities Act or the Exchange Act (which actions are specifically excluded from the exclusive jurisdiction clause in our certificate of incorporation), the Court of Chancery of the State of Delaware is the sole and exclusive forum for the following claims or causes of action under the Delaware statutory or common law: (i) any derivative claim or cause of action brought on our behalf; (ii) any claim or cause of action for a breach of fiduciary duty owed by any of our current or former directors, officers, other employees to us or our stockholders; (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws; (iv) any claim or cause of action seeking to interpret, apply, enforce or determine the validity of our certificate of incorporation or our bylaws (as each may be amended from time to time, including any right, obligation, or remedy thereunder); and (v) any action asserting a claim against us governed by the internal affairs doctrine.

 

Note that Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Consequently, this forum selection provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction. Moreover, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

 

For the avoidance of doubt, these provisions are intended to benefit and may be enforced by us, our officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions. We note that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

 

Additionally, our certificate of incorporation provides that any person or entity holding, owning or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to these provisions.

 

 

Limitations on Liability and Indemnification

 

The DGCL authorizes corporations to limit or eliminate the personal liability of directors of corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties, subject to certain exceptions. The Company’s certificate of incorporation includes a provision that eliminates the personal liability of directors for damages for any breach of fiduciary duty as a director where, in civil proceedings, the person acted in good faith and in a manner that person reasonably believed to be in or not opposed to the best interests of the Company or, in criminal proceedings, where the person had no reasonable cause to believe that his or her conduct was unlawful.

 

The Company’s bylaws provide that the Company must indemnify and advance expenses to its directors and officers to the fullest extent authorized by the DGCL. The Company also is expressly authorized to carry directors’ and officers’ liability insurance providing indemnification for its directors, officers, and certain employees for some liabilities. The Company believes that these indemnification and advancement provisions and insurance are useful to attract and retain qualified directors and executive officers.

 

The limitation of liability, advancement and indemnification provisions in the certificate of incorporation and bylaws may discourage stockholders from bringing lawsuit against directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit the Company and its stockholders. In addition, your investment may be adversely affected to the extent the Company pays the costs of settlement and damage awards against directors and officer pursuant to these indemnification provisions.

 

There is currently no pending material litigation or proceeding involving any of the Company’s directors, officers, or employees for which indemnification is sought.

 

Corporate Opportunities

 

The certificate of incorporation provides for the renouncement by the Company of any interest or expectancy of the Company in, or being offered an opportunity to participate in any matter, transaction, or interest that is presented to, or acquired, created, or developed by, or which otherwise comes into possession of, any director of the Company who is not an employee or officer of the Company or any of its subsidiaries, unless such matter, transaction, or interest is presenting to, or acquired, created, or developed by, or otherwise comes into the possession of a director of the Company expressly and solely in that director’s capacity as a director of the Company.

 

Dissenters’ Rights of Appraisal and Payment

 

Under the DGCL, with certain exceptions, the Company’s stockholders will have appraisal rights in connection with a merger or consolidation of the Company. Pursuant to the DGCL, stockholders who properly request and perfect appraisal rights in connection with such merger or consolidation will have the right to receive payment of the fair value of their shares as determined by the Delaware Court of Chancery.

 

Stockholders’ Derivative Actions

 

Under the DGCL, any of the Company’s stockholders may bring an action in the Company’s name to procure a judgment in the Company’s favor, also known as a derivative action, provided that the stockholder bringing the action is a holder of the Company’s shares at the time of the transaction to which the action relates or such stockholder’s stock thereafter devolved by operation of law.

 

Exchange Listing

 

Our common stock is not currently listed on any securities exchange. We have applied to have our common stock approved for listing on The Nasdaq Capital Market under the symbol “KAPA.”

 

Transfer Agent and Registrar

 

The transfer agent for our capital stock is Transhare Corporation, located in Clearwater, Florida. The phone number of our transfer agent is (303) 662-1112.

 

 

SHARES ELIGIBLE FOR FUTURE SALE

 

Before the closing of this offering, there was no public market for our common stock. Future sales of substantial amounts of our common stock, including shares issued on the exercise of outstanding options, in the public market after this offering, or the possibility of these sales or issuances occurring, could adversely affect the prevailing market price for our common stock or impair our ability to raise equity capital.

 

Based on our shares outstanding as of [  ], 2023, upon the closing of this offering, a total of shares of common stock will be outstanding, assuming the automatic conversion of all __________ shares of our outstanding _______ as of [  ], 2023 into an equivalent number of shares of our common stock in connection with the closing of this offering. Of these shares, all of the common stock sold in this offering by us, plus any shares sold by us on exercise of the underwriters’ option to purchase additional common stock, will be freely tradable in the public market without restriction or further registration under the Securities Act, unless these shares are held by “affiliates,” as that term is defined in Rule 144 under the Securities Act, or Rule 144.

 

The remaining shares of common stock, as well as, upon issuance, the shares of common stock subject to stock options, will be “restricted securities,” as that term is defined in Rule 144. These restricted securities are eligible for public sale only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rules 144 or 701 under the Securities Act, which are summarized below.

 

Subject to the lock-up agreements described below and the provisions of Rule 144 or Rule 701 under the Securities Act, as well as our insider trading policy, these restricted securities will be available for sale in the public market after the date of this prospectus.

 

Rule 144

 

In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements of Section 13 or Section 15(d) of the Exchange Act for at least 90 days, an eligible stockholder is entitled to sell such shares without complying with the manner of sale, volume limitation, or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. To be an eligible stockholder under Rule 144, such stockholder must not be deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and must have beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then such person is entitled to sell such shares without complying with any of the requirements of Rule 144, subject to the expiration of the lock-up agreements described below.

 

 

In general, under Rule 144, as currently in effect, our affiliates, or persons selling shares on behalf of our affiliates are entitled to sell shares on expiration of the lock-up agreements described below. Beginning 90 days after the date of this prospectus, within any three-month period, such stockholders may sell a number of shares that does not exceed the greater of:

 

	●	1% of the number of shares of common stock then outstanding, which will equal approximately shares immediately after this offering, assuming no exercise of the underwriters’ option to purchase additional shares of common stock from us; or
	●	the average weekly trading volume of our common stock on The Nasdaq Capital Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

 

Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

 

Rule 701

 

Rule 701 of the Securities Act (Rule 701) generally allows a stockholder who was issued shares under a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days, to sell these shares in reliance on Rule 144, but without being required to comply with the public information, holding period, volume limitation, or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required by that rule to wait until 90 days after the date of this prospectus before selling those shares under Rule 701, subject to the expiration of the lock-up agreements described below.

 

Form S-8 Registration Statements

 

Following the effectiveness of this registration statement, we intend to file with the SEC a registration statement on Form S-8 under the Securities Act to register the offer and sale of shares of our common stock that are issuable under our equity incentive plan. This registration statement will become effective immediately upon filing. Shares covered by the registration statement on Form S-8 will then be eligible for sale in the public markets, subject to vesting restrictions, any applicable lock-up agreements described below, and Rule 144 limitations applicable to affiliates.

 

Lock-up Arrangements

 

We, and all of our directors, executive officers, and the holders of substantially all of our common stock and securities exercisable for or convertible into our common stock outstanding immediately on the closing of this offering, have agreed with the underwriters that, until 360 days for officers and directors and 180 days for all other holders after the date of the underwriting agreement related to this offering, we and they will not (and will not cause or direct any affiliate to), without the prior written consent of the representatives of the underwriters, subject to certain exceptions, directly or indirectly, offer, pledge, sell, contract to sell, assign, transfer, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right, or warrant to purchase, lend or otherwise transfer or dispose of, or announce the intention to otherwise dispose of, any of our shares of common stock, or any securities convertible into or exercisable or exchangeable for shares of our common stock, or enter into, or announce the intention to enter into, any hedging, swap, or similar agreement or arrangement that transfers, is designed to transfer or reasonably could be expected to transfer, in whole or in part, directly or indirectly, the economic consequence of ownership of the securities, whether any such swap or transaction is to be settled by delivery of our common stock or other securities, in cash or otherwise. These agreements are described in the section entitled “Underwriting.” The representatives of the underwriters, however, may, in their sole discretion, release any of the securities subject to these lock-up agreements at any time.

 

In addition to the restrictions contained in the lock-up agreements described above, we have entered into agreements with certain security holders, including the amended and restated investors’ rights agreement, our standard form of option agreement and our standard form of restricted stock agreement, that contain market stand-off provisions or incorporate market stand-off provisions from our equity incentive plan imposing restrictions on the ability of such security holders to offer, sell, or transfer our equity securities for a period of 180 days following the date of this prospectus.

 

Registration Rights

 

Upon the closing of this offering, subject to the lock-up provisions set forth above and pursuant to our amended and restated investors’ rights agreement, the holders of shares of our common stock, or their transferees, will be entitled to certain rights with respect to the registration of the offer and sale of their shares under the Securities Act, subject to the terms of the lock-up agreements described under the section titled “—Lock-up Arrangements” above. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act immediately on the effectiveness of the registration. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock. See the section titled “Description of Capital Stock—Registration Rights” for additional information.

 

 

CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

 

The following is a summary of certain material U.S. federal income tax consequences to non-U.S. holders (as defined below) of the purchase, ownership and disposition of our common stock issued pursuant to this offering. This discussion is not a complete analysis of all potential U.S. federal income tax consequences relating thereto, does not address the potential application of the Medicare contribution tax on net investment income, and does not address any estate or gift tax consequences or any tax consequences arising under any state, local, or foreign tax laws, or any other U.S. federal tax laws. This discussion is based on the Code, Treasury Regulations promulgated thereunder, judicial decisions and published rulings and administrative pronouncements of the IRS, all as in effect on the date of this prospectus. These authorities are subject to differing interpretations and may change, possibly retroactively, resulting in U.S. federal income tax consequences different from those discussed below. We have not requested a ruling from the IRS with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS or a court will agree with such statements and conclusions.

 

This discussion is limited to non-U.S. holders who purchase our common stock pursuant to this offering and who hold our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all of the U.S. federal income tax consequences that may be relevant to a non-U.S. holder in light of such non-U.S. holder’s particular circumstances. This discussion also does not consider any specific facts or circumstances that may be relevant to non-U.S. holders subject to special rules under the U.S. federal income tax laws, including:

 

	●	certain former citizens or long-term residents of the United States;
	●	partnerships or other pass-through entities (and investors therein);
	●	“controlled foreign corporations;”
	●	“passive foreign investment companies;”
	●	corporations that accumulate earnings to avoid U.S. federal income tax;
	●	banks, financial institutions, investment funds, insurance companies, brokers, dealers, or traders in securities;
	●	tax-exempt organizations and governmental organizations;
	●	tax-qualified retirement plans;
	●	persons who acquire our common stock through the exercise of an option or otherwise as compensation;
	●	qualified foreign pension funds as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds;
	●	persons subject to the alternative minimum tax;
	●	persons subject to special tax accounting rules under Section 451(b) of the Code;
	●	persons that own or have owned, actually or constructively, more than 5% of our common stock;
	●	persons who have elected to mark securities to market; and
	●	persons holding our common stock as part of a hedging or conversion transaction or straddle, or a constructive sale, or other risk reduction strategy or integrated investment.

 

If an entity or arrangement that is classified as a partnership for U.S. federal income tax purposes holds our common stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Partnerships holding our common stock and the partners in such partnerships are urged to consult their tax advisors about the particular U.S. federal income tax consequences to them of holding and disposing of our common stock.

 

THIS DISCUSSION IS NOT TAX ADVICE. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING, AND DISPOSING OF OUR COMMON STOCK, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL OR FOREIGN TAX LAWS AND ANY OTHER U.S. FEDERAL TAX LAWS.

 

Definition of Non-U.S. Holder

 

For purposes of this discussion, a non-U.S. holder is any beneficial owner of our common stock that is not a “U.S. person” or a partnership (including any entity or arrangement treated as a partnership) for U.S. federal income tax purposes. A U.S. person is any person that, for U.S. federal income tax purposes, is or is treated as any of the following:

 

●

an individual who is a citizen or resident of the United States;

 

 

	●	a corporation created or organized under the laws of the United States, any state thereof or the District of Columbia;
	●	an estate, the income of which is subject to U.S. federal income tax regardless of its source; or
	●	a trust (i) whose administration is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust, or (ii) that has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.

 

Distributions on Our Common Stock

 

As described in the section titled “Dividend Policy,” we do not anticipate declaring or paying, in the foreseeable future, any cash dividends on our capital stock. However, if we distribute cash or other property on our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and will first be applied against and reduce a holder’s tax basis in our common stock, but not below zero. Any excess will be treated as gain realized on the sale or other disposition of our common stock and will be treated as described under “–Gain on Disposition of Our Common Stock” below.

 

Subject to the discussion below regarding effectively connected income, backup withholding and FATCA (as defined below), dividends paid to a non-U.S. holder of our common stock generally will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends or such lower rate specified by an applicable income tax treaty. To receive the benefit of a reduced treaty rate, a non-U.S. holder must furnish us or our withholding agent with a valid IRS Form W-8BEN (in the case of individuals) or IRS Form W-8BEN-E (in the case of entities), or other appropriate form, certifying such holder’s qualification for the reduced rate. This certification must be provided to us or our withholding agent before the payment of dividends and must be updated periodically. In the case of a non-U.S. holder that is an entity, Treasury Regulations and the relevant tax treaty provide rules to determine whether, for purposes of determining the applicability of the tax treaty, dividends will be treated as paid to the entity or to those holding an interest in the entity. If the non-U.S. holder holds our common stock through a financial institution or other agent acting on the non-U.S. holder’s behalf, the non-U.S. holder will be required to provide appropriate documentation to the agent, which then will be required to provide certification to us or our withholding agent, either directly or through other intermediaries.

 

If a non-U.S. holder holds our common stock in connection with the conduct of a trade or business in the United States, and dividends paid on our common stock are effectively connected with such holder’s U.S. trade or business (and are attributable to such holder’s permanent establishment or fixed base in the United States if required by an applicable tax treaty), the non-U.S. holder will be exempt from U.S. federal withholding tax. To claim the exemption, the non-U.S. holder must generally furnish a valid IRS Form W-8ECI (or applicable successor form) to the applicable withholding agent.

 

However, any such effectively connected dividends paid on our common stock generally will be subject to U.S. federal income tax on a net income basis at the regular U.S. federal income tax rates in the same manner as if such holder were a resident of the United States. A non-U.S. holder that is a foreign corporation also may be subject to an additional branch profits tax equal to 30% (or such lower rate specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items.

 

Non-U.S. holders that do not provide the required certification on a timely basis, but that qualify for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. holders should consult their tax advisors regarding any applicable income tax treaties that may provide for different rules.

 

Gain on Disposition of Our Common Stock

 

Subject to the discussion below regarding backup withholding and FATCA (as defined below), a non-U.S. holder generally will not be subject to U.S. federal income tax on any gain realized on the sale or other disposition of our common stock, unless:

 

	●	the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the United States;
	●	the non-U.S. holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition, and certain other requirements are met; or
	●	we are or become a United States real property holding corporation, or a USRPHC, for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the disposition or the non-U.S. holder’s holding period for our common stock, and our common stock is not regularly traded on an established securities market during the calendar year in which the sale or other disposition occurs.

 

 

Determining whether we are a USRPHC depends on the fair market value of our U.S. real property interests relative to the fair market value of our other trade or business assets and our foreign real property interests. We believe that we are not currently and we do not anticipate becoming a USRPHC for U.S. federal income tax purposes, although there can be no assurance we will not in the future become a USRPHC.

 

Gain described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at the regular U.S. federal income tax rates in the same manner as if such holder were a resident of the United States. A non-U.S. holder that is a foreign corporation also may be subject to an additional branch profits tax equal to 30% (or such lower rate specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items. A non-U.S. holder described in the second bullet point above will be subject to U.S. federal income tax at a flat 30% rate (or such lower rate specified by an applicable income tax treaty), on gain realized upon the sale or other taxable disposition of our common stock which may be offset by certain U.S.-source capital losses (even though the individual is not considered a resident of the United States), provided that the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses. If we are or become a United States real property holding corporation during the period described in the third bullet point above and our common stock is not regularly traded for purposes of the relevant rules, gain arising from the sale or other taxable disposition of our common stock by a non-U.S. holder will generally be subject to U.S. federal income tax in the same manner as gain that is effectively connected with the conduct of a U.S. trade or business, except that the branch profits tax generally will not apply.

 

Non-U.S. holders should consult their tax advisors regarding any applicable income tax treaties that may provide for different rules.

 

Information Reporting and Backup Withholding

 

Annual reports are required to be filed with the IRS and provided to each non-U.S. holder indicating the amount of distributions on our common stock paid to such holder and the amount of any tax withheld with respect to those distributions. These information reporting requirements apply even if no withholding was required because the distributions were effectively connected with the holder’s conduct of a U.S. trade or business, or withholding was reduced or eliminated by an applicable income tax treaty. This information also may be made available under a specific treaty or agreement with the tax authorities in the country in which the non-U.S. holder resides or is established. Backup withholding, generally will not apply to payments to a non-U.S. holder of dividends on or the gross proceeds of a disposition of our common stock provided the non-U.S. holder furnishes the required certification for its non-U.S. status, such as by providing a valid IRS Form W-8BEN, IRS Form W-8BEN-E, or IRS Form W-8ECI, or certain other requirements are met, and if the payor does not have actual knowledge, or reason to know, that the holder is a U.S. person who is not an exempt recipient.

 

Backup withholding is not an additional tax. If any amount is withheld under the backup withholding rules, the non-U.S. holder should consult with a U.S. tax advisor regarding the possibility of and procedure for obtaining a refund or a credit against the non-U.S. holder’s U.S. federal income tax liability, if any.

 

Withholding on Payment to Certain Foreign Accounts or Entities

 

Sections 1471 through 1474 of the Code (commonly referred to as FATCA), impose a U.S. federal withholding tax of 30% on certain payments made to a “foreign financial institution” (as specially defined under these rules) unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding certain U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or an exemption applies. FATCA also generally will impose a U.S. federal withholding tax of 30% on certain payments made to a non-financial foreign entity unless such entity provides the withholding agent a certification identifying certain direct and indirect U.S. owners of the entity or an exemption applies. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes. FATCA currently applies to dividends paid on our common stock and would have applied also to payments of gross proceeds from the sale or other disposition of our common stock. The U.S. Treasury Department has released proposed regulations under FATCA providing for the elimination of the federal withholding tax of 30% applicable to gross proceeds of a sale or other disposition of our common stock. Under these proposed Treasury Regulations (which may be relied upon by taxpayers prior to finalization), FATCA will not apply to gross proceeds from sales or other dispositions of our common stock.

 

Prospective investors are encouraged to consult with their own tax advisors regarding the possible implications of FATCA on their investment in our common stock.

 

 

UNDERWRITING

 

In connection with this offering, we will enter into an underwriting agreement with Boustead Securities, LLC to serve as lead book-running manager of the offering and as representative of the several underwriters (if any) named below. Subject to the terms and conditions of the underwriting agreement, each underwriter will severally agree to purchase the number of shares of common stock set forth opposite its name below at the initial public offering price less underwriting discounts and commissions.

 

Underwriter		Number of Shares of Common Stock
Boustead Securities, LLC
Total

 

Subject to the terms and conditions set forth under the underwriting agreement, the underwriters have agreed to purchase ________ shares of common stock offered by this prospectus (other than those covered by over-allotment options described below, if any are purchased).

 

The underwriters are offering the shares of common stock subject to various conditions and may reject all or part of any order. The representative of the underwriters has advised us that the underwriters propose initially to offer the shares of common stock to the public at the public offering price set forth on the cover page of this prospectus and to dealers at a price less a concession not in excess of $[   ] per share of common stock. After the shares of common stock are released for sale to the public, the representative may change the offering price, the concession, and other selling terms at various times.

 

Discounts and Commissions

 

The following table provides information regarding the amount of the discounts and commissions to be paid to the underwriters by us, before expenses. The information assumes either no exercise or full exercise of the over-allotment option we granted to the representative of the underwriters:

 

Per Share of Common Stock

Total Without Over-Allotment Option

Total With Over-Allotment Option

Initial public offering price

$

$

$

Underwriting discounts and commission (7%)

$

$

Non-accountable expense allowance (1%)

$

$

Proceeds, before expenses, to us

$

$

 

We have agreed to pay the representative the reasonable out-of-pocket expenses incurred by the representative in connection with this offering up to $280,000. The representative’s reimbursable out-of-pocket expenses include: (i) reasonable fees of representative’s legal counsel up to $125,000, (ii) due diligence and other expenses incurred prior to completion of this offering up to $75,000, (iii) road show, travel, platform on-boarding fees, and other reasonable out-of-pocket accountable expenses up to $75,000, and (iv) $5,000 for background check on our officers, directors and major shareholders. As of the date of this prospectus, we have paid the representative advances of $_____ for its anticipated out-of-pocket costs. Such advance payments will be returned to us to the extent such out-of-pocket expenses are not actually incurred in accordance with FINRA Rule 5110(g)(4)(A).

 

We estimate that our total expenses of the offering, excluding the estimated underwriting discounts and commissions and excluding the non-accountable expense allowance, will be approximately $______.

 

Representative’s Warrants

 

We have also agreed to issue to the representative of the underwriters warrants to purchase a number of shares of common stock equal to an aggregate of 7% of the aggregate number of the shares sold in this offering. The warrants will be exercisable on a cashless basis at an exercise price equal to 120% of the offering price of the shares sold in this offering. The warrants are exercisable commencing six months after the date of effectiveness of the registration statement of which this prospectus forms a part, and the warrants will be exercisable for a period of five years from the effective date of the registration statement of which this prospectus forms a part. We have agreed to a one-time demand registration of the shares of common stock underlying the underwriter’s warrants for a period of five years from the effective date of the registration statement. The underwriter’s warrants also provide for immediate “piggyback” registration rights with respect to the underlying shares of common stock during the five-year period commencing from the effective date of the registration statement related to this offering. Such piggyback rights shall expire on a date which shall be five years from the date of commencement of sales of the share offered hereby. The warrants are not redeemable by us. The warrants and the shares of common stock issuable upon exercise of the warrants have been included on the registration statement of which this prospectus forms a part. Pursuant to applicable FINRA rules, and in particular Rule 5110, the warrants (and underlying shares) issued to the underwriters may not be sold, transferred, assigned, pledged, or hypothecated, or the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective disposition of the securities by any person for a period of 180 days after the effective date of the registration statement related to this offering; provided, however, that the warrants (and the underlying shares) may be transferred to the underwriters’ officers, partners, registered persons or affiliates as long as the warrants (and the underlying shares) remain subject to the lockup.

 

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.

 

Right of First Refusal

 

We have agreed to provide the representative of the underwriters the right of first refusal for one year from the date of commencement of sales of this public offering to act as financial advisor or to act as joint financial advisor on at least equal economic terms on any public or private financing (debt or equity), merger, business combination, recapitalization or sale of some or all of the equity or assets of our company.

 

Company and Shareholder Lock-Ups

 

We have agreed to a 12-month “lock-up” from the closing of this offering, during which, without the prior written consent of Boustead Securities, LLC, we will not issue, sell or register with the SEC (other than on Form S-8 or on any successor form) with respect to any of our equity securities (or any securities convertible into, exercisable for or exchangeable for any of our equity securities), except for (i) the issuance of the shares of common stock offered pursuant to this prospectus; and (ii) the issuance of shares of common stock pursuant to our existing equity incentive or bonus plan as described in the registration statement of which this prospectus forms a part.

 

 

Our executive officers, directors and certain of our significant stockholders have also agreed to a 12-month “lock-up,” during which, without the prior written consent of Boustead Securities, LLC, they will not, directly or indirectly, (i) offer, pledge, assign, encumber, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock, owned either of record or beneficially (as defined in the Exchange Act) by any signatory of the lock-up agreement on the date of the prospectus or thereafter acquired; (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock or any securities convertible into or exercisable or exchangeable for common stock, whether any such transaction described in clauses (i) or (ii) above is to be settled by delivery of common stock or such other securities, in cash or otherwise, or publicly announce an intention to do any of the foregoing; and (iii) make any demand for or exercise any right with respect to, the registration of any shares of common stock or any security convertible into or exercisable or exchangeable for common stock. The foregoing shall not apply to (i) common stock to be transferred as a gift or gifts (provided that (a) any donee shall execute and deliver to Boustead Securities, LLC, acting on behalf of the underwriters, not later than one business day prior to such transfer, a lock-up agreement to Boustead Securities, LLC and (b) if the lock-up signatory is required to file a report under Section 16(a) of the Exchange Act, reporting a reduction in beneficial ownership of shares of common stock or beneficially owned shares or any securities convertible into or exercisable or exchangeable for common stock or beneficially owned shares during the 15-month “lock-up,” the lock-up signatory shall include a statement in such report to the effect that such transfer is being made as a gift), and (ii) the sale of the shares of common stock to be sold pursuant to this prospectus.

 

Rules of the SEC may limit the ability of the underwriters to bid for or purchase shares of our common stock before the distribution of the shares is completed. However, the underwriters may engage in the following activities in accordance with the rules:

 

	●	Stabilizing transactions — the representative may make bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, so long as stabilizing bids do not exceed a specified maximum.
	●	Over-allotments and syndicate covering transactions — the underwriters may sell more shares of common stock in connection with this offering than the number of shares that they have committed to purchase. This over-allotment creates a short position for the underwriters. This short sales position may involve either “covered” short sales or “naked” short sales. Covered short sales are short sales made in an amount not greater than the underwriter’s over-allotment option to purchase additional shares in this offering described above. The underwriters may close out any covered short position either by exercising their over-allotment option or by purchasing shares in the open market. To determine how they will close the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market, as compared to the price at which they may purchase shares through the over-allotment option. Naked short sales are short sales in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that, in the open market after pricing, there may be downward pressure on the price of the shares that could adversely affect investors who purchase shares in this offering.
	●	Penalty bids — if the representative purchases shares of common stock in the open market in a stabilizing transaction or syndicate covering transaction, it may reclaim a selling concession from the underwriters and selling group members who sold those shares of common stock as part of this offering.
	●	Passive market making — market makers in the common stock who are underwriters or prospective underwriters may make bids for or purchases of shares of common stock, subject to limitations, until the time, if ever, at which a stabilizing bid is made.

 

Similar to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales or to stabilize the market price of our common stock may have the effect of raising or maintaining the market price of our common stock or preventing or mitigating a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. The imposition of a penalty bid might also have an effect on the price of the common stock if it discourages resales of our shares of common stock.

 

Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our common stock. These transactions may occur on the Nasdaq Capital Market or otherwise. If such transactions are commenced, they may be discontinued without notice at any time.

 

Prior Relationship with Boustead Securities, LLC

 

In June and September 2022, we completed a $450,000 convertible note offering and a $225,000 convertible note offering, respectively, to certain accredited investors, which notes are convertible into shares of common stock (the “Conversion Shares”) at a conversion price equal to 60% of the per share of common stock sold in this offering. The convertible note offering was completed pursuant to an exemption from registration under Rule 506(b) of the Securities Act. Boustead Securities, LLC acted as placement agent in each of the June and September 2022 private placements and received $86,893 and $19,315 cash compensation, respectively, and five-year warrants to purchase shares of common stock equal to 7.0% of the number of the Conversion Shares at an exercise price equal to the conversion price.

 

The warrants received in connection with the June and September 2022 private placements (the “Private Placement Warrants”) (and underlying shares) will not be exercisable or convertible more than five years from the commencement of this public offering. Pursuant to applicable FINRA rules and, in particular, Rule 5110(e)(1), the Private Placement Warrants (and underlying shares) may not be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of the securities for a period of 180 days beginning on the date of commencement of sales of this public offering; provided, however, the Private Placement Warrants (and underlying shares) may be transferred to the underwriter’s officers, partners, registered persons or affiliates as long as the warrants remain subject to the lock-up restriction above.

 

 

Electronic Delivery of Prospectus: A prospectus in electronic format may be delivered to potential investors by one or more of the underwriters participating in this offering. The prospectus in electronic format will be identical to the paper version of such prospectus. Other than the prospectus in electronic format, the information on any underwriter’s website and any information contained in any other website maintained by an underwriter is not part of this prospectus or the registration statement of which this prospectus forms a part.

 

Determination of Offering Price

 

Prior to the offering there has not been a public market for our shares of common stock. As a result, the public offering price for our shares of common stock has been determined by negotiations between us and the representative of the underwriters. Among the factors to be considered in these negotiations were the prevailing market conditions, our financial information, market valuations of other companies that we and the representative believe to be comparable to us, estimates of our business potential, the present states of our development and other factors deemed relevant.

 

We offer no assurance that the public offering price will correspond to the price at which the shares of common stock will trade in the public market subsequent to the offering or that an active trading market for the shares of common stock will develop and continue after the offering.

 

Selling Restrictions

 

Canada. The common stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the common stock must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

 

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

 

Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

 

European Economic Area. In relation to each Member State of the European Economic Area (each, a Relevant State), no shares of common stock have been offered or will be offered pursuant to the offering to the public in that Relevant State prior to the publication of a prospectus in relation to the shares of common stock which has been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation, except that offers of shares of common stock may be made to the public in that Relevant State at any time under the following exemptions under the Prospectus Regulation:

 

	●	to any legal entity which is a qualified investor as defined under Article 2 of the Prospectus Regulation;
	●	to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the Prospectus Regulation), subject to obtaining the prior consent of the representatives of the underwriters for any such offer; or
	●	in any other circumstances falling within Article 1(4) of the Prospectus Regulation,

 

provided that no such offer of shares of common stock shall require our company or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation and each person who initially acquires any shares of common stock or to whom any offer is made will be deemed to have represented, acknowledged, and agreed to and with each of the underwriters and our company that it is a “qualified investor” within the meaning of Article 2(e) of the Prospectus Regulation. In the case of any shares of common stock being offered to a financial intermediary as that term is used in the Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged, and agreed that the shares of common stock acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares of common stock to the public other than their offer or resale in a Relevant State to qualified investors as so defined or in circumstances in which the prior consent of the underwriters has been obtained to each such proposed offer or resale.

 

For the purposes of this provision, the expression an “offer to the public” in relation to the shares of common stock in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares of common stock to be offered so as to enable an investor to decide to purchase or subscribe for any shares of common stock, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.

 

 

United Kingdom. No shares of common stock have been offered or will be offered pursuant to the offering to the public in the United Kingdom prior to the publication of a prospectus in relation to the shares of common stock which has been approved by the Financial Conduct Authority, except that the shares of common stock may be offered to the public in the United Kingdom at any time:

 

	●	to any legal entity which is a qualified investor as defined under Article 2 of the U.K. Prospectus Regulation;
	●	to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the U.K. Prospectus Regulation), subject to obtaining the prior consent of the representatives of the underwriters for any such offer; or
	●	in any other circumstances falling within Section 86 of the FSMA,

 

provided that no such offer of the shares of common stock shall require our company or any underwriter to publish a prospectus pursuant to Section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the U.K. Prospectus Regulation. For the purposes of this provision, the expression an “offer to the public” in relation to the shares of common stock in the United Kingdom means the communication in any form and by any means of sufficient information on the terms of the offer and any shares of common stock to be offered so as to enable an investor to decide to purchase or subscribe for any shares of common stock and the expression “U.K. Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018. In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the U.K. Prospectus Regulation) (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, or the “Order,” and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as relevant persons). In the United Kingdom, any investment or investment activity to which this document relates is only available to, and will be engaged in with, relevant persons. Any person in the United Kingdom who is not a relevant person must not act on or rely upon this document or any of its contents.

 

Switzerland. The securities will not be offered, directly or indirectly, to the public in Switzerland and this prospectus does not constitute a public offering prospectus as that term is understood pursuant to article 652a or 1156 of the Swiss Federal Code of Obligations.

 

Israel. In the State of Israel this prospectus shall not be regarded as an offer to the public to purchase shares of common stock under the Israeli Securities Law, 5728–1968, which requires a prospectus to be published and authorized by the Israel Securities Authority, if it complies with certain provisions of Section 15 of the Israeli Securities Law, 5728–1968, including, inter alia, if: (i) the offer is made, distributed, or directed to not more than 35 investors, subject to certain conditions (Addressed Investors); or (ii) the offer is made, distributed, or directed to certain qualified investors defined in the First Addendum of the Israeli Securities Law, 5728–1968, subject to certain conditions (Qualified Investors). The Qualified Investors shall not be taken into account in the count of the Addressed Investors and may be offered to purchase securities in addition to the 35 Addressed Investors. Our company has not and will not take any action that would require it to publish a prospectus in accordance with and subject to the Israeli Securities Law, 5728–1968. We have not and will not distribute this prospectus or make, distribute, or direct an offer to subscribe for our common stock to any person within the State of Israel, other than to Qualified Investors and up to 35 Addressed Investors.

 

Qualified Investors may have to submit written evidence that they meet the definitions set out in of the First Addendum to the Israeli Securities Law, 5728–1968. In particular, we may request, as a condition to be offered common stock, that Qualified Investors will each represent, warrant and certify to us and/or to anyone acting on our behalf: (i) that it is an investor falling within one of the categories listed in the First Addendum to the Israeli Securities Law, 5728–1968; (ii) which of the categories listed in the First Addendum to the Israeli Securities Law, 5728–1968 regarding Qualified Investors is applicable to it; (iii) that it will abide by all provisions set forth in the Israeli Securities Law, 5728–1968 and the regulations promulgated thereunder in connection with the offer to be issued common stock; (iv) that the shares of common stock that it will be issued are, subject to exemptions available under the Israeli Securities Law, 5728–1968: (a) for its own account; (b) for investment purposes only; and (c) not issued with a view to resale within the State of Israel, other than in accordance with the provisions of the Israeli Securities Law, 5728–1968; and (v) that it is willing to provide further evidence of its Qualified Investor status. Addressed Investors may have to submit written evidence in respect of their identity and may have to sign and submit a declaration containing, inter alia, the Addressed Investor’s name, address and passport number or Israeli identification number.

 

We have not authorized and do not authorize the making of any offer of securities through any financial intermediary on our behalf, other than offers made by the underwriters and their respective affiliates, with a view to the final placement of the securities as contemplated in this document. Accordingly, no purchaser of the shares, other than the underwriters, is authorized to make any further offer of shares on our behalf or on behalf of the underwriters.

 

 

LEGAL MATTERS

 

The validity of the securities being offered by this prospectus will be passed upon for us by Michelman & Robinson, LLP, New York, New York and Los Angeles, California. Olshan Frome Wolosky LLP, New York, New York, is acting as counsel for the underwriters.

 

EXPERTS

 

The audited consolidated financial statements of Kairos Pharma, Ltd. as of December 31, 2022, and 2021 and for each of the years then ended included in this prospectus have been so included in reliance on the report of Marcum LLP, an independent registered public accounting firm, which includes an explanatory paragraph as to our company’s ability to continue as a going concern, given upon their authority as experts in auditing and accounting.

 

WHERE YOU CAN FIND ADDITIONAL INFORMATION

 

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all the information set forth in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our common stock, we refer you to the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The SEC also maintains an internet website that contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.

 

On the closing of this offering, we will be subject to the information reporting requirements of the Exchange Act, and we will file reports, proxy statements, and other information with the SEC. These reports, proxy statements, and other information will be available for inspection and copying at the public reference room and website of the SEC referred to above.

 

We also maintain a website at https://kairospharma.com. Information contained in, or accessible through, our website is not a part of this prospectus, and the inclusion of our website address in this prospectus is only as an inactive textual reference.

 

 

Kairos Pharma, Ltd.

 

Index to the Consolidated Financial Statements

 

		Page
Audited Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets at December 31, 2022 and 2021		F-3
Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021		F-4
Consolidated Statements of Shareholders’ Deficit for the Years Ended December 31, 2022 and 2021		F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021		F-6
Notes to the Consolidated Financial Statements		F-7
Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at December 31, 2022 and June 30, 2023 (unaudited)		F-18
Condensed Consolidated Statements of Operations for the Six Months Ended June 30, 2022 and 2023 (unaudited)		F-19
Condensed Consolidated Statements of Shareholders’ Deficit for the Six Months Ended June 30, 2022 and 2023 (unaudited)		F-20
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2023 (unaudited)		F-21
Notes to the Condensed Consolidated Financial Statements (unaudited)		F-22

 

 

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and Board of Directors of

Kairos Pharma, Ltd.

 

Opinion on the Consolidated Financial Statements

 

We have audited the accompanying consolidated balance sheets of Kairos Pharma, Ltd. and Subsidiary (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, shareholders’ deficit and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

 

Explanatory Paragraph – Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Marcum LLP

 

We have served as the Company’s auditor since 2021.

 

Los Angeles, California

 

June 27, 2023

 

 

Kairos Pharma, Ltd.

Consolidated Balance Sheets

(In thousands, except for share amounts and par value data)

 

		December 31,
		2022				2021
ASSETS
Current Assets
Cash		$	437			$	73
Total Current Assets			437				73
Deferred offering costs			57				-
Intangible assets, net			542				702
Total Other Assets			599				702
TOTAL ASSETS		$	1,036			$	775
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses		$	1,629			$	1,548
Due to related parties			4				14
Note payable			-				30
Convertible note payable			-				350
Total Current Liabilities			1,633				1,942
Convertible notes payable, net of debt discount of $93 at December 31, 2022			582				-
Total Liabilities			2,215				1,942
Shareholders’ Deficit
Common stock, par value $0.01, 35,000,000 shares authorized; 10,334,357 and 8,055,575 shares issued and outstanding, respectively;			103				81
Common stock to be issued, 2,124,000 to be issued at December 31, 2021			-				21
Additional paid-in capital			3,118				2,081
Accumulated deficit			(4,400	)			(3,350	)
Total Shareholders’ Deficit			(1,179	)			(1,167	)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT		$	1,036			$	775

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

Kairos Pharma, Ltd.

Consolidated Statements of Operations

(in thousands, except for share amounts and per share data)

 

		Years Ended
		December 31,
		2022				2021
Revenues		$	-			$	-
Operating expenses:
Research and development			87				183
General and administrative			484				1,760
Total operating expenses			571				1,943
Loss from operations			(571	)			(1,943	)
Other expenses:
Interest expense			(51	)			(20	)
Debt discount amortization			(408	)			(144	)
Financing costs			(20	)			(38	)
Total other expenses			(479	)			(202	)
NET LOSS		$	(1,050	)		$	(2,145	)
BASIC AND DILUTED LOSS PER COMMON SHARE		$	(0.10	)		$	(0.23	)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED			10,236,764				9,151,419

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

Kairos Pharma, Ltd.

Consolidated Statements of Shareholders’ Deficit

(in thousands, except share amounts)

 

		Common Stock								Common Stock to be Issued								Additional				Accumulated
		Shares				Amount				Shares				Amount				Paid-in Capital				Deficit				Total
Balance, December 31, 2020			5,595,575			$	56				2,100,000			$	21			$	785			$	(1,205	)		$	(343	)
Common stock issued for cash			60,000				1				-				-				249				-				250
Fair value of common stock to be issued for services			-				-				24,000				-				300				-				300
Common stock issued upon acquisition of Enviro Therapeutics Inc.			2,400,000				24				-				-				603				-				627
Fair value of stock warrant issued in connection with convertible note payable			-				-				-				-				144				-				144
Net loss			-				-				-				-				-				(2,145	)			(2,145	)
Balance, December 31, 2021			8,055,575				81				2,124,000				21				2,081				(3,350	)			(1,167	)
Shares issued from common stock to be issued			2,124,000				21				(2,124,000	)			(21	)			-				-				-
Shares issued upon conversion of convertible notes payable and accrued interest			154,782				1				-				-				647				-				648
Fair value of stock warrant issued in connection with convertible note payable			-				-				-				-				390				-				390
Net loss			-				-				-				-				-				(1,050	)			(1,050	)
Balance, December 31, 2022			10,334,357			$	103				-			$	-			$	3,118			$	(4,400	)		$	(1,179	)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

Kairos Pharma, Ltd.

Consolidated Statements of Cash Flows

(In thousands)

 

		Years Ended
		December 31,
		2022				2021
Cash Flows from Operating Activities
Net loss		$	(1,050	)		$	(2,145	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization expense			160				98
Amortization of debt discount			408				144
Fair value of common stock to be issued for services			-				300
Changes in operating assets and liabilities:
Accounts payable and accrued expenses			129				1,191
Net cash used in operating activities			(353	)			(412	)
Cash Flows from Investing Activities
Advances to Enviro Therapeutics, Inc.			-				(115	)
Cash acquired upon acquisition of Advances to Enviro Therapeutics, Inc.			-				6
Net cash used in investing activities			-				(109	)
Cash Flows from Financing Activities
Proceeds from convertible notes payable			925				350
Repayment of note payable			(30	)			(20	)
Repayment of advance from related party			(10	)			-
Payment of debt issuance costs			(111	)			-
Payment of deferred offering costs			(57	)			-
Proceeds from common stock and warrants issued for cash			-				250
Net cash provided by financing activities			717				580
Net increase in cash			364				59
Cash beginning of year			73				14
Cash end of year		$	437			$	73
Supplemental cash flows disclosures:
Interest paid		$	-			$	-
Taxes paid		$	-			$	-
Supplemental non-cash financing disclosures:
Conversion of convertible notes payable and accrued interest		$	648			$	-
Fair value of warrant recorded as debt discount on issuance of convertible note payable		$	390			$	144
Acquisition of Enviro Therapeutics, Inc.		$	-			$	800

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

KAIROS PHARMA, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022 and 2021

(In thousands, except for share amounts and per share data)

 

NOTE 1 – BASIS OF PRESENTATION

 

Organization and Operations

 

Kairos Pharma, Ltd. (the “Company” or “Kairos”) was incorporated on June 17, 2013 under the laws of the state of California as NanoGB13, Inc. The Company changed its name to Kairos Pharma, Ltd. on July 15, 2016 and subsequently converted into a Delaware corporation under the same name, Kairos Pharm, Ltd., on May 10, 2023. The Company is an early-stage biotechnology company, which is focused on the development of immunotherapy and cell therapy treatments for oncology.

 

COVID-19 Considerations

 

Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, or potential future mergers, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, the Company incurred a net loss of $1,144 and used cash in operations of $465 during the year ended December 31, 2022, and had a shareholders’ deficit of $1,273 as of December 31, 2022. These factors raise substantial doubt, as defined under GAAP, about the Company’s ability to continue as a going concern for the twelve months following the issuance of these consolidated financial statements. Management’s plan to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its strategies. The financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

 

At December 31, 2022, the Company had cash on hand in the amount of $436. The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, the Company has funded its operations primarily through equity and debt financings and it expects to continue to rely on these sources of capital in the future.

 

No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.

 

Stock Split

 

On April 28, 2022, the Company effected a 1.5-for-1 stock split of its common stock. The par value and the authorized shares of the common stock were not adjusted as a result of the stock split. The accompanying consolidated financial statements and notes to the financial statements give retroactive effect to the reverse stock split for all periods presented.

 

Reverse Stock Split

 

On May 10, 2023, the Company effected a 1-for-2.5 reverse stock split of its common stock. The par value and the authorized shares of the common stock were not adjusted as a result of the stock split. The accompanying consolidated financial statements and notes to the financial statements give retroactive effect to the reverse stock split for all periods presented.

 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Consolidation

 

The accompanying consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Enviro Therapeutics, Inc. All intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates in the accompanying consolidated financial statements include the valuation allowance on deferred tax assets, impairment analysis and useful life for intangible assets, and the valuation of stock warrants issued in connection with convertible debt agreements.

 

Cash

 

For the purpose of the statement of cash flows, cash includes currency on hand with banks and financial institutions.

 

Concentration of Credit Risk

 

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash deposits. Accounts at each financial institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to certain limits. The Company does not maintain deposits in excess of federally insured limits.

 

Intangible Assets

 

The Company’s intangible assets are stated at fair value as of the date acquired, less accumulated amortization. Amortization is calculated based on the estimated useful lives of the assets, which were determined to be five years, using the straight-line method. The intangible asset consists of a licensing agreement that the Company acquired through its acquisition of Enviro Therapeutics, Inc. during the year ended December 31, 2021, with an acquisition cost of $800 (see Note 3). Amortization expense relating to the intangible asset during the years ended December 31, 2022 and 2021 was $160 and $98.

 

Impairment of Long-Lived Assets

 

The Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment of long-lived assets. A long-lived asset that is held and used should be tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable regardless of whether such carrying amount is zero or negative. If the estimated undiscounted future cash flows are less than the carrying value, an impairment determination is required. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. No impairment was recorded relating to the Company’s intangible asset during the years ended December 31, 2022 and 2021.

 

 

Net Loss Per Share

 

Net loss per share is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”) is based on the weighted average number of common shares outstanding. Diluted EPS is based on the assumption that all dilutive securities are converted. When options or warrants are outstanding, dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and funds obtained thereby are assumed to be used to purchase common stock at the average market price during the period. For the years ended December 31, 2021 and 2022, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At December 31, 2022, the potentially dilutive securities consisted of 180,000 shares relating to outstanding stock warrants. At December 31, 2021, the potentially dilutive securities consisted of a convertible note payable that could be converted into 84,000 shares of common stock, and 120,000 shares relating to outstanding stock warrants.

 

Deferred Offering Costs

 

The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity issuances as deferred offering costs until such equity issuances are consummated. After consummation of the equity issuance, these costs are recorded as a reduction in the capitalized amount associated with the equity issuance. Should the equity issuance be delayed or abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the Statement of Operations. As of December 31, 2022, the Company incurred $57 of deferred offering costs related to the Company’s initial public offering of its common stock (“IPO”).

 

Fair Value Measurements

 

The Company determines the fair value of its assets and liabilities based on the exchange price in U.S. dollars that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value:

 

	●	Level 1 — Quoted prices in active markets for identical assets or liabilities.
	●	Level 2 — Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
	●	Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

The carrying amounts of financial instruments such as cash, and accounts payable and accrued liabilities, approximate the related fair values due to the short-term maturities of these instruments. The carrying amounts of the Company’s convertible notes payable approximate their fair values as the interest rates of the notes are based on prevailing market rates.

 

Income Taxes

 

Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. The Company recorded a 100% valuation allowance against its deferred tax assets as of December 31, 2022 and 2021.

 

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon settlement. The Company classifies the liability for unrecognized tax benefits as current to the extent that the Company anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes.

 

 

Patents and Patent Application Costs

 

Although the Company believes that its patents and underlying technology have continuing value, the amount of future benefits to be derived from the patents is uncertain. Patent costs are therefore expensed as incurred and are included in General and administrative expenses on the accompanying consolidated Statements of Operations. Patent expenses were $110 and $338 during the years ended December 31, 2022 and 2021.

 

Research and Development Costs

 

The Company expenses its research and development costs as incurred. Research and developments costs for the years ended December 31, 2022 and 2021 were $87 and $518, respectively.

 

Recent Accounting Pronouncements

 

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes which amends ASC 740 Income Taxes (ASC 740). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal years beginning after December 15, 2021. The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application permitted. The Company is currently evaluating the effect of this ASU on the Company’s financial statements and related disclosures.

 

In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).” ASU 2020-06 reduces the number of accounting models for convertible debt instruments by eliminating the cash conversion and beneficial conversion accounting models. As a result, the Company’s convertible debt instruments will be accounted for as a single liability measured at its amortized cost as long as no other features require bifurcation and recognition as derivatives. For contracts in an entity’s own equity, the type of contracts primarily affected by this update are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure to meet the settlement conditions of the derivative scope exception. The Company adopted ASU No. 2020-06 effective January 1, 2021 using the modified retrospective approach.

 

The Company accounted for convertible notes payable (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with ASC 470-20, Debt with Conversion and Other Options up through December 31, 2020. Accordingly, the Company recorded, when necessary, discounts to convertible notes payable for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements were amortized over the term of the related debt to their earliest date of redemption. The Company determined that the embedded conversion options in its issued convertible notes payable do not meet the definition of a derivative liability.

 

 

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. An issuer measures the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange. ASU 2021-04 introduces a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The adoption of ASU 2021-04 is not expected to have a material impact on the Company’s financial statements or disclosures.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

NOTE 3 – ACQUISITION OF ENVIRO THERAPEUTICS, INC.

 

On June 3, 2021, the Company and Enviro Therapeutics, Inc. (“Enviro”) entered into a share exchange agreement, whereby the Company acquired all of the common stock of Enviro in exchange for shares of the Company’s common stock (the “Enviro-Kairos Share Exchange”). Pursuant to the Enviro-Kairos Share Exchange, the Enviro shareholders exchanged 100% of the issued and outstanding shares of Enviro (on a fully diluted basis) for 2,400,000 restricted shares of the Company’s common stock.

 

The Company’s Chairman, Chief Executive Officer and majority shareholder, was also a shareholder of Enviro who exercised control over Enviro. The acquisition of Enviro by the Company is being treated as a transaction between entities under common control resulting in the historical cost basis of Enviro’s assets and liabilities being recognized, rather than the asset and liabilities being recorded at fair value as would be the case in a business combination between entities not under common control. The historical cost basis of Enviro’s asset and liabilities is as follows:

 

Cash		$	6
Intangible assets			800
Accounts payable			(51	)
Advances from related parties			(129	)
		$	627

 

NOTE 4 – ADVANCES FROM RELATED PARTIES

 

During the year ended December 31, 2021, shareholders of the Company, and a company whose principal stockholder is also a stockholder of the Company, advanced the Company $14, which was all outstanding at December 31, 2021. The advances accrue no interest, are unsecured and are due on demand. As of December 31, 2021, $14 was owed on the advances. During the year ended December 31, 2022, the Company repaid $10 of the advances, and as of December 31, 2022, a total of $4 was outstanding.

 

 

NOTE 5 – NOTE PAYABLE

 

In July 2020, the Company entered into a note payable agreement with another company under which the Company borrowed $50. The note accrues interest at 1% per annum, is unsecured and is due in July 2021. As of December 31, 2020, $50 was outstanding on the note. During the year ended December 31, 2021, the Company repaid $20 on the note, and as of December 31, 2021, $30 was outstanding on the note. During the year ended December 31, 2022, the Company repaid $30 on the note, and as of December 31, 2022, no amount was outstanding on the note.

 

NOTE 6 – CONVERTIBLE NOTES PAYABLE

 

In August 2021, the Company entered into a convertible note payable agreement with an individual in the amount of $350. The note accrues interest at 10% per annum, is unsecured and is due the latter of August 2021 or the closing of a proposed merger by the Company. The note is convertible at the option of the noteholder to convert into shares of the Company’s common stock at $4.17 per share. At December 31, 2021, principal of $350 and accrued and unpaid interest of $14, was owed on the note. During the year ended December 31, 2022, the note accrued interest of $23. In 2022, all the principal plus accrued and unpaid interest converted into 92,000 shares of the Company’s common stock based on the principal and accrued interest due on the date of conversion.

 

In connection with the convertible note payable, the Company issued the noteholder a warrant to purchase 90,000 shares of the Company’s common stock with an exercise price of $4.17 per share. The warrant expired in August 2022. The Company calculated the relative fair value of the warrant issued to the noteholder to be $144 using a Black Scholes option pricing model and recognized a debt discount at the date of issuance in the same amount. The note discount is being amortized over the term of the note and the unamortized portion is recognized as a reduction to the carrying amount of the note. As the proposed merger was cancelled, during the year ended December 31, 2021, the Company amortized the entire amount of the debt discount, leaving no unamortized balance at December 31, 2021.

 

During the year ended December 31, 2022, the Company entered into a convertible note payable agreement with the same individual in the amount of $250. The note accrues interest at 10% per annum, is unsecured and is due upon the closing of a proposed IPO transaction by the Company, or by July 2022, if the IPO transaction has not occurred by that date. The note includes an original issue discount (OID) of 8.0%. The note is convertible at the option of the noteholder to convert into shares of the Company’s common stock at $4.17 per share or will be automatically converted into shares of the Company’s common stock at $4.17 per share upon the closing of an IPO transaction. The net proceeds received relating to the agreement were $230.

 

In connection with the convertible note payable, the Company issued the noteholder a warrant to purchase 150,000 shares of the Company’s common stock for $4.17 per share. The warrant expires in March 2025. The Company calculated the relative fair value of the warrant issued to the noteholder to be $390 using a Black Scholes option pricing model and recognized a debt discount at the date of issuance in the same amount. The note discount is being amortized over the term of the note and the unamortized portion is recognized as a reduction to the carrying amount of the note. As the note matured during the year ended December 31, 2022, the Company amortized the entire amount of the debt discount, leaving no unamortized balance at December 31, 2022.

 

In 2022, all of the principal plus accrued and unpaid interest from both convertible notes payable above totaling $600 of principal, plus accrued and unpaid interest of $48, converted into 154,782 shares of the Company’s common stock based on the principal and accrued interest due on the date of conversion. As of December 31, 2022, no principal or accrued interest was outstanding on the two notes.

 

During the year ended December 31, 2022, the Company entered into several convertible note payable agreements with individuals and an entity in the aggregate total of $675. The notes accrue interest at 6% per annum, are unsecured and are due by April 2025. If the Company does not close an IPO transaction within 12 months of the date of the note, the Company will have the choice of paying off the principal plus all accrued and unpaid interest, or the note’s principal balance will increase to 110% of its original balance. The notes are convertible at the option of the noteholders to convert into shares of the Company’s common stock at a price per share as defined in the agreement or will automatically be converted into shares of the Company’s common stock at 60% of the IPO price per share upon the closing of an IPO transaction. The net proceeds relating to the agreements, net of expenses, were $564. As of December 31, 2022, $675 of principal was outstanding on the notes and $17 of accrued and unpaid interest.

 

In connection with the convertible note agreements, the Company incurred debt issuance costs of $111, which the Company recorded as a debt discount during the year ended December 31, 2022. During the year ended December 31, 2022, the Company amortized $18 of debt discount, leaving an unamortized balance of $93 at December 31, 2022.

 

 

NOTE 7 – SHAREHOLDERS’ EQUITY

 

Common Stock

 

Authorized Shares

 

The Company’s Articles of Incorporation authorize the Company to issue up to 35,000,000 of its common shares, par value of $0.01 per share. Holders of shares of common stock have full voting rights, one vote for each share held of record. Shareholders are entitled to receive dividends as may be declared by the Board out of funds legally available and share pro rata in any distributions with shareholders upon liquidation. Shareholders have no conversion, pre-emptive or subscription rights. All outstanding shares of common stock are fully paid and non-assessable. As of December 31, 2022 and 2021, there were 10,334,357 and 8,055,575 shares of common stock issued and outstanding, respectively.

 

Common Stock to be Issued

 

As of December 31, 2021, there were 2,124,000 shares of common stock to be issued. During the year ended December 31, 2022, all these shares were issued and are included in common shares issued and outstanding on the date of issuance. As of December 31, 2022, there were no shares of common stock to be issued.

 

Common Shares Issued for Cash

 

During the year ended December 31, 2021, the Company received $250 from the sale of 60,000 shares of its common stock at $4.17 per share. In connection with the sale, the Company issued a stock warrant to the shareholder to purchase 30,000 shares of the Company’s common stock with an exercise price of $8.33 per share. The warrant expires in April 2023. The warrant agreement contains a provision under which the Company may call the warrant, in which case the holder would have 20 days to exercise the warrant or else it would expire. As of December 31, 2022 and 2021, all the warrant shares were still outstanding.

 

Common Stock to be Issued for Services

 

In September 2020, the Company entered into a verbal agreement with a consulting firm to provide certain business development services to the Company. The agreement was formally executed in April 2021 but contained the same terms as the verbal agreement. The term of the agreement was from September 1, 2020 to January 31, 2021, which is the defined service period for the services to be performed, and provided for the issuance of 2,100,000 restricted shares of the Company’s common stock to the consulting firm. The shares vested over the term of the agreement and had a fair value on the date of the verbal agreement of $1,000. During the year ended December 31, 2021, the Company recorded an expense of $200 relating to the value of the shares. The shares were not issued to the consulting firm until 2022 and thus are categorized as Common Stock to be Issued on the accompanying December 31, 2021 consolidated Balance Sheet and Statement of Shareholders’ Deficit.

 

During the year ended December 31, 2021, the Company entered into an agreement with another consulting firm under which the firm would provide certain investor relations services for the Company. Under the agreement, the firm earned 24,000 restricted shares of the Company’s common stock for completing certain services. The shares vested upon grant and had a fair value on the date of grant of $100. During the year ended December 31, 2021, the Company recorded an expense of $100 relating to the value of the shares. The shares were not issued to the consulting firm until 2022 and thus are categorized as Common Stock to be Issued on the accompanying December 31, 2021 consolidated Balance Sheet and Statement of Shareholders’ Deficit.

 

 

Stock Warrants

 

There were no warrant shares outstanding as of December 31, 2020. The table below summarizes the Company’s warrant activities for years ended December 31, 2021 and 2022:

 

		Number of Warrant Shares				Exercise Price Range Per Share				Weighted Average Exercise Price
Balance, December 31, 2020			–			$	–			$	–
Granted			120,000				4.17 - 8.33				5.23
Cancelled			–				–				–
Exercised			–				–				–
Forfeited/Expired			–				–				–
Balance, December 31, 2021			120,000			$	4.17 - 8.33			$	5.23
Granted			150,000				4.17				4.17
Cancelled			–				–				–
Exercised			–				–				–
Forfeited/Expired			(90,000	)			4.17				4.17
Balance, December 31, 2022			180,000			$	4.17 - 8.33			$	4.86
Vested and exercisable, December 31, 2022			180,000			$	4.17 - 8.33			$	4.86

 

The following table summarizes information concerning outstanding and exercisable warrants as of December 31, 2022:

 

				Warrants Outstanding												Warrants Exercisable
Range of Exercise Prices				Number Outstanding				Average Remaining Contractual Life (in years)				Weighted Average Exercise Price				Number Exercisable				Average Remaining Contractual Life (in years)				Weighted Average Exercise Price
$	4.17				150,000				2.17			$	4.17				150,000				2.17			$	4.17
	8.33				30,000				0.33				8.33				30,000				0.33				8.33
$	4.17 – 8.33				180,000				1.86			$	4.86				180,000				1.86			$	4.86

 

During the year ended December 31, 2021, the Company entered into a convertible note payable agreement with an individual in the amount of $350 (see Note 6). In connection with that agreement, the Company granted a warrant to the lender to purchase up to 90,000 shares of the Company’s common stock with an exercise price of $4.17 per share. The warrant expired in August 2022. Also in 2021, the Company sold 60,000 shares of its common stock for net proceeds of $250 (see Note 7). In connection with the sale, the Company issued a stock warrant to the shareholder to purchase 30,000 shares of the Company’s common stock with an exercise price of $8.33 per share. The warrant expires in April 2023.

 

During the year ended December 31, 2022, the Company entered into a convertible note payable agreement with the same individual in the amount of $250 (see Note 6). In connection with that agreement, the Company granted a warrant to the lender to purchase up to 150,000 shares of the Company’s common stock with an exercise price of $4.17 per share. The warrant expires in March 2025.

 

Also in 2022, the Company granted the underwriters for their IPO two stock warrants in connection with bridge loans they assisted the Company in obtaining (see Note 6). The underwriters will be entitled to receive the number of warrant shares equal to 7% of the conversion shares that will be issued to the lenders at the time of the IPO. The warrants will be good for five years from the date of the IPO. However, the underwriters may not sell the shares underlying the warrants for a period of six months following the IPO. The exercise price for the warrants will be equal to 60% of the per share price of the Company’s common stock sold in the IPO.

 

There was no intrinsic value for warrant shares outstanding at December 31, 2022.

 

NOTE 8 – INCOME TAXES

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A full valuation allowance is established against all net deferred tax assets as of December 31, 2022 and 2021 based on estimates of recoverability. While the Company has optimistic plans for its business strategy, it determined that such a valuation allowance was necessary given the current and expected near term losses and the uncertainty with respect to its ability to generate sufficient profits from its business model. Because of the impacts of the valuation allowance, there was no income tax expense or benefit for the years ended December 31, 2022 and 2021.

 

 

A reconciliation of the differences between the effective and statutory income tax rates for the years ended December 31, 2022 and 2021 is shown below:

 

		2022								2021
		Amount				Percent				Amount				Percent
Federal statutory rates		$	(221	)			21.0	%		$	(450	)			21.0	%
State income taxes			(84	)			8.0	%			(172	)			8.0	%
Permanent differences			18				(0.2	)%			44				(2.2	)%
Valuation allowance against net deferred tax assets			287				(28.8	)%			578				(26.8	)%
Effective rate		$	-				-	%		$	-				-	%

 

At December 31, 2022 and 2021, the significant components of the deferred tax assets and liabilities are summarized below:

 

		2022				2021
Deferred income tax assets:
Net operating loss carryforwards		$	604			$	427
Amortization of intangibles			37				19
Accrued expenses			463				440
Total deferred income tax assets			1,104				886
Less: valuation allowance			(1,104	)			(886	)
Total deferred income tax assets		$	-			$	-

 

The valuation allowance increased by $218 and $537 in 2022 and 2021, respectively, as a result of the Company generating additional net operating losses.

 

The Company has recorded as of December 31, 2022 and 2021 a valuation allowance of $1,104 and $886, respectively, as it believes that it is more likely than not that the deferred tax assets will not be realized in future years. Management has based its assessment on the Company’s lack of profitable operating history.

 

The Company conducts an analysis of its tax positions and has concluded that it has no uncertain tax positions as of December 31, 2022 and 2021.

 

The Company has net operating loss (“NOL”) carryforwards of approximately $1,200 and are subject to IRS code section 382 limitations. Approximately $9 of the net operating loss carry-forwards begin to expire in 2031 and approximately $1,200 may be carried forward indefinitely. NOL carryforwards may be subject to limitation under Sections 382 of the Internal Revenue Code, and similar state provisions which limit the amount carryforwards that can be utilized to offset future taxable income. In general, an ownership change, as defined by Sections 382, results from transactions increasing ownership of certain stockholders in the stock of the corporation by more than 50 percentage points over a three-year period. The Company does not anticipate performing a complete analysis of the limitation on the annual use of the net operating loss carryforwards until the time that it anticipates it will be able to utilize these tax attributes. This could impose an annual limit or reduction on the Company’s ability to utilize net operating loss carryforwards and could cause U.S. federal income taxes to be paid earlier than otherwise would be paid if such limitations were not in effect. The U.S. federal net operating loss carryforwards are stated before any such anticipated limitations. If a change in ownership were to have occurred, the Company’s NOL carryforwards could be eliminated or restricted.

 

The 2020, 2021 and 2022 tax years are still subject to audit.

 

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted on March 27, 2020. Among the business provisions, the CARES Act provided for various payroll tax incentives, changes to net operating loss carryback and carryforward rules, business interest expense limitation increases, and bonus depreciation on qualified improvement property. Additionally, the Consolidated Appropriations Act of 2021 was signed on December 27, 2020 which provided additional COVID relief provisions for businesses. The Company has evaluated the impact of both the Acts and has determined that any impact is not material to its financial statements.

 

 

NOTE 9 – COMMITMENTS

 

Kairos Exclusive License Agreements with Cedars-Sinai Medical Center (Cedars)

 

The Company has entered into four Exclusive License Agreements with Cedars which grants the Company licensing rights with respect to certain patent rights owned by Cedars as follows:

 

	1.	Methods of use of compounds that bind to RelA of NFkB;
	2.	Composition and methods for treating fibrosis;
	3.	Compositions and methods for treating cancer and autoimmune diseases; and
	4.	Method of generating activated T cells for cancer therapy.

 

For each of the exclusive license agreement in items 1, 2 and 3, the Company was required to pay an initial license fee of $5, reimburse Cedars for patent protection costs ranging from approximately $9 to $61, pay an annual maintenance fee of $10, and pay royalties based on 3.75% of net sales and pay other non-royalty sublicense fees ranging from 5% to 35% of sales of products. In addition, for items 1, 2 and 3, the Company is required to pay Cedars based on the following milestones:

 

	●	$150 upon the successful completing of Phase I clinical trial;
	●	$250 (for items 1 and 2) and $500,000 (for item 3) upon the successful completing of Phase II clinical trial for a product and receipt of Food and Drug Administration (“FDA”) approval for a Phase III clinical trial;
	●	$1,500 upon receipt of FDA approval of a new drug application or equivalent foreign regulatory approval in a non-United States major commercial market; and
	●	$250 upon cumulative net sales exceeding $5,000.

 

For exclusive license agreement in item 4, the Company is required to pay an initial license fee of $50 upon the raising of $500 in capital, pay an annual maintenance fee of $10, pay royalties based on 4.25% of patent product sales and 0.5% of other sales and pay other non-royalty sublicense fees ranging from 5% to 35%. In addition, the Company is required to pay Cedars based on the following milestones:

 

	●	$150 upon the successful completing of Phase I clinical trial;
	●	$250 upon the successful completing of Phase II clinical trial and receipt of Food and Drug Administration (“FDA”) or equivalent regulatory agency in another jurisdiction approval for a Phase III clinical trial;
	●	$1,500 upon receipt of FDA approval of a new drug application; and
	●	$2,500 upon cumulative net sales exceeding $50,000.

 

Enviro Therapeutics

 

On June 2, 2021, the Company’s wholly owned subsidiary, Enviro Therapeutics, Inc. (Enviro), entered into two Exclusive License Agreements with Cedars, which granted Enviro exclusive licensing rights (which include the right to sublicense) with respect to certain patent rights owned by Cedars, as follows:

 

	●	an Exclusive License Agreement (the “Enviro-Cedars License Agreement (Mitochondrial DNA)”) for Enviro to develop, manufacture, use and sell products utilized or derived from patent rights worldwide related to the “Compositions and Methods for Treating Diseases and Conditions by Depletion of Mitochondrial DNA from Circulation and for Detection of Mitochondrial DNA” invented by Dr. Neil Bhowmick and others; and
	●	an Exclusive License Agreement, (the “Enviro-Cedars License Agreement (Endoglin Antagonism)” and, collectively with the Enviro-Cedars License Agreement (Mitochondrial DNA), the “Enviro-Cedars License Agreements”) for Enviro to develop, manufacture, use and sell products utilized or derived from the patent rights and technical information worldwide related to the “Sensitization of Tumors to Therapies Through Endoglin Antagonism” invented by Dr. Neil Bhowmick and others.

 

In exchange for each of the licenses, Enviro is required to pay an upfront license fee in the mid four-figures and low-five figures, respectively. Enviro is also required to reimburse Cedars for the costs in the mid-to-high six figures incurred in the prosecution of the patent rights subject to the Enviro-Cedars License Agreements prior to the date of execution of such agreements, and certain costs and fees then outstanding aggregating in the low-six figures owed by Kairos pursuant to the Kairos-Cedars License Agreements. Pursuant to the Enviro-Cedars License Agreements, Cedars shall also receive royalty payments of a mid-single-digit percentage of net sales of products associated with the licensed patent right and less than one percent of net sales of other products derived from Cedars’ technical information, with a minimum annual royalty fee in the low five-digits due beginning on the third anniversary of the effective date of the Enviro-Cedars License Agreements. To the extent Enviro derives non-royalty sublicensing revenues, a high single-digit to low double-digit percentage of such revenues would be due and payable to Cedars, with the actual percentage of such revenues dependent on the stage of FDA authorization at the time the sublicense revenue is generated.

 

 

Enviro is also required to pay Cedars in connection with achieving the following Payment Milestones relating to products derived from the patent rights: successful completion of a Phase I clinical trial; successful completion of a Phase II clinical trial, receipt of FDA approval, and approval for a Phase III clinical trial; FDA approval of an NDA or BLA; cumulative net sales exceeding $50,000; and cumulative net sales exceeding $100,000. If all of these payment milestones are met among both of the Enviro-Cedars License Agreements, the required milestone payments would total in the mid-to-high seven-figures.

 

Pursuant to the Enviro-Cedars License Agreements, Enviro is obligated to meet the following Commercialization Milestones. Pursuant to the Enviro-Cedars License Agreement (Endoglin Antagonism), Enviro is obligated to (1) obtain an IND for a patent product within 1 year of the effective date of the agreement, (2) commence a Phase II trial within 2 years of the effective date of the agreement, and (3) submit an NDA or BLA to the FDA or equivalent regulatory agency in another jurisdiction within 7 years of the effective date of the agreement. Pursuant to the Enviro-Cedars License Agreement (Mitochondrial DNA), Enviro is obligated to (1) complete preclinical studies of a patent product within 2 years of the effective date of the agreement, (2) complete toxicology studies within 2.5 years of the effective date of the agreement, (3) obtain IND within 3 years of the effective date of the agreement, (4) begin a Phase I trial within 4 years of the effective date of the agreement, and (5) submit an NDA or BLA to the FDA or equivalent regulatory agency in another jurisdiction within 7 years of the effective date of the agreement. If the Commercialization Milestones are not met or extended, Cedars may convert the exclusive licenses into non-exclusive licenses or to a co-exclusive licenses, or terminate the licenses.

 

The Enviro-Cedars License Agreements will, unless sooner terminated, continue in effect on a country-by-country basis until the last of the patents covering the patent rights or future patent rights expires. Under the terms of the Enviro-Cedars License Agreements, unless waived by Cedars, the agreements would automatically terminate: (a) if Enviro ceases, dissolves or winds up its business operations; (b) if performance by either party jeopardizes the licensure, accreditation or tax exempt status of Cedars or the agreement is deemed illegal by a governmental body; (c) within 30 days for non-payment of royalties or if Enviro fails to undertake commercially reasonable efforts to exploit the patent rights or future patent rights; (d) within 60 days of Cedars’ failure to cure any breach or default of a material obligation under the agreements; (e) within 90 days of Enviro’s failure to cure any breach or default of a material obligation under the agreements; or (f) upon mutual written agreement of the parties.

 

License Agreement with Tracon Pharmaceutical, Inc.

 

On May 21, 2021, Enviro entered into a License Agreement with Tracon Pharmaceutical, Inc. (“Tracon”). Pursuant to the Tracon License Agreement, Tracon granted Enviro access to inactive IND filings for “TRC105” in the United States; ownership of “TRC105” stored vials of drug product manufactured to GMP standards stored at Fisher Clinical or their designee; and assignment of Tracon’s patent rights to its “CD105 technologies” (all as defined or described in the Tracon License Agreement).

 

Pursuant to the Tracon License Agreement, Enviro paid Tracon an upfront fee of $100, and will pay Tracon an additional $500 upon its or its successor’s completion of one or more financings through the sale of equity (or debt convertible to equity) in an amount of $10,000, and an additional $500 within 10 days of its or its successor’s completion of one or more financings through the sale of equity (or debt convertible to equity) in an amount of $22,000 (the payment of the $100 and the two payments of $500 are referred to in the aggregate as the “Cash Consideration”). In addition, Enviro will pay Tracon a royalty of 3% of net sales on a country-by-country basis of the products subject to the Tracon License Agreement, and non-royalty payments of 3% of sublicensing fees.

 

Enviro issued Tracon equity ownership in Enviro equal to a number of shares of restricted common stock of Enviro equal to seven percent (7%) on a fully-diluted and converted basis of all common and preferred shares of Enviro (the “Tracon-Enviro Equity”). In connection with the Enviro-Kairos Share Exchange, the parties agreed that Tracon would receive, in exchange for its Enviro common stock, 420,000 restricted shares of Kairos Common Stock (which is equal to 1.41229% of the issued and outstanding shares of Kairos on a fully-diluted and converted basis) as the Tracon-Enviro Equity. Until such time as Tracon has received all of the Cash Consideration (as defined in the Tracon License Agreement), Enviro or its successor in interest, will issue to Tracon, without further consideration, any additional shares of common stock of Enviro, or such successor in interest, necessary so that Tracon maintains ownership of shares of Enviro, or such successor in interest, equal to the Tracon-Enviro Equity on a fully-diluted and converted basis of all stock in Enviro (or its successor). Notwithstanding the foregoing, if Tracon receives the full Cash Consideration within six (6) months of the effective date of the Tracon License Agreement, then Tracon will automatically return to Enviro (or any successor entity, if applicable) a number of restricted shares of the common stock of Enviro (or its successor) such that upon such return of shares Tracon will possess an amount of shares in Enviro (or its successor) equal to two percent (2%) on a fully-diluted and converted basis relative to the other Enviro shareholders who exchanged their shares in the Enviro-Kairos Share Exchange. The returned portion of the Tracon-Enviro Equity will automatically be terminated, cancelled and of no further force and effect.

 

Agreement with former Chief Financial Officer

 

The Company has an agreement with its former Chief Financial Officer that requires the Company to pay $50 upon the completion of raising more than $850 in debt or equity financing. No amount was owed at December 31, 2022 and 2021.

 

NOTE 10 – SUBSEQUENT EVENTS

 

Reverse Stock Split

 

On May 10, 2023, the Company effected a 1-for-2.5 reverse stock split of its common stock. The par value and the authorized shares of the common stock were not adjusted as a result of the stock split. The accompanying consolidated financial statements and notes to the financial statements give retroactive effect to the reverse stock split for all periods presented.

 

 

Kairos Pharma, Ltd.

Condensed Consolidated Balance Sheets

(In thousands, except for share amounts and par value data)

 

		December 31,				June 30,
		2022				2023
						(Unaudited)
ASSETS
Current Assets
Cash		$	437			$	232
Prepaid expenses			-				26
Total Current Assets			437				258
Deferred offering costs			57				258
Intangible assets, net			542				462
Total Other Assets			599				720
TOTAL ASSETS		$	1,036			$	978
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses		$	1,629			$	1,933
Due to related parties			4				4
Total Current Liabilities			1,633				1,937
Convertible notes payable, net of debt discount of $93 and $73 at December 31, 2022 and June 30, 2023, respectively			582				602
Total Liabilities			2,215				2,539
Shareholders’ Deficit
Common stock, par value $0.01, 35,000,000 shares authorized; 10,334,357 shares issued and outstanding, respectively; _____ shares issued and outstanding pro forma (unaudited)			103				103
Additional paid-in capital			3,118				3,118
Accumulated deficit			(4,400	)			(4,782	)
Total Shareholders’ Deficit			(1,179	)			(1,561	)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT		$	1,036			$	978

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

Kairos Pharma, Ltd.

Condensed Consolidated Statements of Operations

(in thousands, except for share amounts and per share data)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2022				2023				2022				2023
		(Unaudited)								(Unaudited)
Revenues		$	-			$	-			$	-			$	-
Operating expenses:
Research and development			6				36				39				42
General and administrative			114				176				228				296
Total operating expenses			120				212				267				338
Loss from operations			(120	)			(212	)			(267	)			(338	)
Other expenses:
Interest expense			(15	)			(14	)			(25	)			(24	)
Debt discount amortization			(250	)			(10	)			(308	)			(20	)
Financing costs			-				-				(20	)			-
Total other expenses			(265	)			(24	)			(353	)			(44	)
NET LOSS		$	(385	)		$	(236	)		$	(620	)		$	(382	)
BASIC AND DILUTED LOSS PER COMMON SHARE		$	(0.04	)		$	(0.02	)		$	(0.06	)		$	(0.04	)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED			10,179,575				10,334,357				10,179,575				10,334,357
PRO FORMA BASIC AND DILUTED LOSS PER COMMON SHARE		$	-			$	-			$	-			$	-
PRO FORMA WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED			-				-				-				-

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

Kairos Pharma, Ltd.

Condensed Consolidated Statements of Shareholders’ Deficit (Unaudited)

(in thousands, except share amounts)

 

		Common Stock								Common Stock to be Issued								Additional Paid-in				Accumulated
		Shares				Amount				Shares				Amount				Capital				Deficit				Total
Balance, March 31, 2022 (unaudited)			8,055,575			$	81				2,124,000			$	21			$	2,471			$	(3,585	)		$	(1,012	)
Net loss			-				-				-				-				-				(385	)			(385	)
Balance, June 30, 2022 (unaudited)			8,055,575			$	81				2,124,000			$	21			$	2,471			$	(3,970	)		$	(1,397	)
Balance, December 31, 2021			8,055,575			$	81				2,124,000			$	21			$	2,081			$	(3,350	)		$	(1,167	)
Fair value of stock warrant issued in connection with convertible note payable			-				-				-				-				390				-				390
Net loss			-				-				-				-				-				(620	)			(620	)
Balance, June 30, 2022 (unaudited)			8,055,575			$	81				2,124,000			$	21			$	2,471			$	(3,970	)		$	(1,397	)
Balance, March 31, 2023 (unaudited)			10,334,357			$	103				-			$	-			$	3,118			$	(4,546	)		$	(1,325	)
Net loss			-				-				-				-				-				(236	)			(236	)
Balance, June 30, 2023 (unaudited)			10,334,357			$	103				-			$	-			$	3,118			$	(4,782	)		$	(1,561	)
Balance, December 31, 2022			10,334,357			$	103				-			$	-			$	3,118			$	(4,400	)		$	(1,179	)
Net loss			-				-				-				-				-				(382	)			(382	)
Balance, June 30, 2023 (unaudited)			10,334,357			$	103				-			$	-			$	3,118			$	(4,782	)		$	(1,561	)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

Kairos Pharma, Ltd.

Condensed Consolidated Statements of Cash Flows

(In thousands)

 

		Six Months Ended
		June 30,
		2022				2023
		(Unaudited)
Cash Flows from Operating Activities
Net loss		$	(620	)		$	(382	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization expense			80				80
Amortization of debt discount			308				20
Changes in operating assets and liabilities:
(Increase) Decrease in:
Prepaid expenses			(10	)			(26	)
(Decrease) Increase in:
Accounts payable and accrued expenses			10				232
Net cash used in operating activities			(232	)			(76	)
Cash Flows from Financing Activities
Proceeds from convertible note payable			700				-
Repayment of advance from related party			(10	)			-
Repayment of note payable			(30	)			-
Payment of deferred offering costs			(25	)			(129	)
Payment of debt issuance costs			(92	)			-
Net cash provided by (used in) financing activities			543				(129	)
Net increase (decrease) in cash			311				(205	)
Cash beginning of period			73				437
Cash end of period		$	384			$	232
Supplemental cash flows disclosures:
Interest paid		$	-			$	-
Taxes paid		$	-			$	-
Supplemental non-cash financing disclosures:
Fair value of warrant recorded as debt discount on issuance of convertible note payable		$	390			$	-
Accrual for deferred offering costs		$	-			$	72

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

KAIROS PHARMA, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2022 and 2023

(In thousands, except for share amounts and per share data)

 

NOTE 1 – BASIS OF PRESENTATION

 

Organization and Operations

 

Kairos Pharma, Ltd. (the “Company” or “Kairos”) was incorporated on June 17, 2013 under the laws of the state of California as NanoGB13, Inc. The Company changed its name to Kairos Pharma, Ltd. on July 15, 2016 and subsequently converted into a Delaware corporation under the same name, Kairos Pharma, Ltd., on May 10, 2023. The Company is an early-stage biotechnology company, which is focused on the development of immunotherapy and cell therapy treatments for oncology.

 

Basis of Presentation of Unaudited Financial Information

 

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

 

COVID-19 Considerations

 

Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, or potential future mergers, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Going Concern

 

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, the Company incurred a net loss of $382 and used cash in operations of $76 during the six months ended June 30, 2023, and had a shareholders’ deficit of $1,561 as of June 30, 2023. These factors raise substantial doubt, as defined under GAAP, about the Company’s ability to continue as a going concern for the 12 months following the issuance of these condensed consolidated financial statements. Management’s plan to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its strategies. The financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

 

At June 30, 2023, the Company had cash on hand in the amount of $232. The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, the Company has funded its operations primarily through equity and debt financings and it expects to continue to rely on these sources of capital in the future.

 

No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.

 

 

Stock Split

 

On April 28, 2022, the Company effected a 1.5-for-1 stock split of its common stock. The par value and the authorized shares of the common stock were not adjusted as a result of the stock split. The accompanying consolidated financial statements and notes to the financial statements give retroactive effect to the reverse stock split for all periods presented.

 

Reverse Stock Split

 

On May 10, 2023, the Company effected a 1-for-2.5 reverse stock split of its common stock. The par value and the authorized shares of the common stock were not adjusted as a result of the stock split. The accompanying consolidated financial statements and notes to the financial statements give retroactive effect to the reverse stock split for all periods presented.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Consolidation

 

The accompanying condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Enviro Therapeutics, Inc. All intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates in the accompanying condensed consolidated financial statements include the valuation allowance on deferred tax assets, impairment analysis and useful life for intangible assets, and the valuation of stock warrants issued in connection with convertible debt agreements.

 

Cash

 

For the purpose of the statement of cash flows, cash includes currency on hand with banks and financial institutions.

 

Concentration of Credit Risk

 

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash deposits. Accounts at each financial institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to certain limits. The Company does not maintain deposits in excess of federally insured limits.

 

Intangible Assets

 

The Company’s intangible assets are stated at fair value as of the date acquired, less accumulated amortization. Amortization is calculated based on the estimated useful lives of the assets, which were determined to be five years, using the straight-line method. The intangible asset consists of a licensing agreement that the Company acquired through its acquisition of Enviro Therapeutics, Inc. during the year ended December 31, 2021, with an acquisition cost of $800. Amortization expense relating to the intangible asset during the six months ended June 30, 2022 and 2023 was $80, respectively. 

 

 

Impairment of Long-Lived Assets

 

The Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment of long-lived assets. A long-lived asset that is held and used should be tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable regardless of whether such carrying amount is zero or negative. If the estimated undiscounted future cash flows are less than the carrying value, an impairment determination is required. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. No impairment was recorded relating to the Company’s intangible asset during the six months ended June 30, 2022 and 2023.

 

Net Loss Per Share

 

Net loss per share is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”) is based on the weighted average number of common shares outstanding. Diluted EPS is based on the assumption that all dilutive securities are converted. When options or warrants are outstanding, dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and funds obtained thereby are assumed to be used to purchase common stock at the average market price during the period. For the six months ended December 31, 2021 and 2022, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. At June 30, 2022 and 2023, the potentially dilutive securities consisted of 270,000 and 150,000 shares relating to outstanding stock warrants, respectively.

 

Deferred Offering Costs

 

The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity issuances as deferred offering costs until such equity issuances are consummated. After consummation of the equity issuance, these costs are recorded as a reduction in the capitalized amount associated with the equity issuance. Should the equity issuance be delayed or abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the Statement of Operations. As of December 31, 2022 and June 30, 2023, the Company had incurred $57 and $258 of deferred offering costs related to the Company’s initial public offering of its common stock (“IPO”).

 

Fair Value Measurements

 

The Company determines the fair value of its assets and liabilities based on the exchange price in U.S. dollars that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value:

 

	●	Level 1 — Quoted prices in active markets for identical assets or liabilities.
	●	Level 2 — Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
	●	Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

 

The carrying amounts of financial instruments such as cash, and accounts payable and accrued liabilities, approximate the related fair values due to the short-term maturities of these instruments. The carrying amounts of the Company’s convertible notes payable approximate their fair values as the interest rates of the notes are based on prevailing market rates.

 

Income Taxes

 

Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. The Company recorded a 100% valuation allowance against its deferred tax assets as of December 31, 2022 and June 30, 2023.

 

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon settlement. The Company classifies the liability for unrecognized tax benefits as current to the extent that the Company anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes.

 

Patents and Patent Application Costs

 

Although the Company believes that its patents and underlying technology have continuing value, the amount of future benefits to be derived from the patents is uncertain. Patent costs are therefore expensed as incurred and are included in general and administrative expenses on the accompanying consolidated statements of operations. Patent expenses were $37 and $21 during the six months ended June 30, 2022 and 2023.

 

Research and Development Costs

 

The Company expenses its research and development costs as incurred. Research and developments costs for the six months ended June 30, 2022 and 2023 were $39 and $42, respectively.

 

Recent Accounting Pronouncements

 

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes which amends ASC 740 Income Taxes (ASC 740). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal years beginning after December 15, 2021. The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application permitted. The Company is currently evaluating the effect of this ASU on the Company’s financial statements and related disclosures.

 

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. An issuer measures the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange. ASU 2021-04 introduces a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The adoption of ASU 2021-04 is not expected to have a material impact on the Company’s financial statements or disclosures.

 

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

NOTE 3 – ADVANCES FROM RELATED PARTIES

 

During the year ended December 31, 2021, shareholders of the Company, and a company whose principal stockholder is also a stockholder of the Company, advanced the Company $14, which was all outstanding at December 31, 2021. The advances accrue no interest, are unsecured and are due on demand. As of December 31, 2021, $14 was owed on the advances. During the year ended December 31, 2022, the Company repaid $10 of the advances, and as of December 31, 2022 and June 30, 2023, a total of $4 was outstanding.

 

NOTE 4 – CONVERTIBLE NOTES PAYABLE

 

During the year ended December 31, 2022, the Company entered into several convertible note payable agreements with individuals and an entity in the aggregate total of $675. The notes accrue interest at 6% per annum, are unsecured and are due by April 2025. If the Company does not close an IPO transaction within 12 months of the date of the notes, the Company will have the choice of paying off the principal plus all accrued and unpaid interest, or the note’s principal balance will increase to 110% of its original balance. The notes are convertible at the option of the noteholders to convert into shares of the Company’s common stock at a price per share as defined in the agreement or will automatically be converted into shares of the Company’s common stock at 60% of the IPO price per share upon the closing of an IPO transaction. The net proceeds relating to the agreements, net of expenses, were $564. As of December 31, 2022, $675 of principal was outstanding on the notes and $17 of accrued and unpaid interest.

 

During the six months ended June 30, 2023, no principal or interest payments were made on the notes and the notes accrued interest of $21. As of June 30, 2023, $675 of principal was outstanding on the notes and $38 of accrued and unpaid interest.

 

In connection with the convertible note agreements, the Company incurred debt issuance costs of $111, which the Company recorded as a debt discount during the year ended December 31, 2022. During the year ended December 31, 2022, the Company amortized $18 of debt discount, leaving an unamortized balance of $93 at December 31, 2022. During the six months ended June 30, 2023, the Company amortized $20 of debt discount, leaving an unamortized balance of $73 at June 30, 2023.

 

NOTE 5 – SHAREHOLDERS’ EQUITY

 

Common Stock

 

Authorized Shares

 

The Company’s Articles of Incorporation authorize the Company to issue up to 35,000,000 of its common shares, par value of $0.01 per share. Holders of shares of common stock have full voting rights, one vote for each share held of record. Shareholders are entitled to receive dividends as may be declared by the board of directors out of funds legally available and share pro rata in any distributions with shareholders upon liquidation. Shareholders have no conversion, pre-emptive or subscription rights. All outstanding shares of common stock are fully paid and non-assessable. As of December 31, 2022 and June 30, 2023, there were 10,334,357 shares of common stock issued and outstanding, respectively.

 

 

Stock Warrants

 

The table below summarizes the Company’s warrant activities for six months ended June 30, 2023:

 

		Number of Warrant Shares				Exercise Price Range Per Share				Weighted Average Exercise Price
Balance, December 31, 2022			180,000			$	4.17 - 8.33			$	4.86
Granted			–				–				–
Cancelled			–				–				–
Exercised			–				–				–
Forfeited/Expired			(30,000	)			–				8.33
Balance, June 30, 2023			150,000			$	4.17			$	4.17
Vested and exercisable, June 30, 2023			150,000			$	4.17			$	4.17

 

The following table summarizes information concerning outstanding and exercisable warrants as of June 30, 2023:

 

				Warrants Outstanding												Warrants Exercisable
Range of Exercise Prices				Number Outstanding				Average Remaining Contractual Life (in years)				Weighted Average Exercise Price				Number Exercisable				Average Remaining Contractual Life (in years)				Weighted Average Exercise Price
$	4.17				150,000				1.67			$	4.17				150,000				1.67			$	4.17
$	4.17				150,000				1.67			$	4.17				150,000				1.67			$	4.17

 

During the six months ended June 30, 2022, the Company entered into a convertible note payable agreement with an individual in the amount of $250. In connection with the convertible note payable, the Company issued the noteholder a warrant to purchase 150,000 shares of the Company’s common stock for $4.17 per share. The Company calculated the relative fair value of the warrant issued to the noteholder to be $390 using a Black Scholes option pricing model and recognized a debt discount at the date of issuance in the same amount. The note discount is being amortized over the term of the note and the unamortized portion is recognized as a reduction to the carrying amount of the note. During the six months ended June 30, 2022, the Company amortized $308 of the debt discount, leaving an unamortized balance of $82 at June 30, 2022.

 

During the year ended December 31, 2022, the Company granted the underwriters for their IPO two stock warrants in connection with bridge loans they assisted the Company in obtaining (see Note 4). The underwriters will be entitled to receive the number of warrant shares equal to 7% of the conversion shares that will be issued to the lenders at the time of the IPO. The warrants will be good for five years from the date of the IPO and the underwriters may not sell the shares underlying the warrants for a period of six months following the IPO. The exercise price will be 60% of the per share offering price of the Company’s common stock in the IPO.

 

There was no intrinsic value for warrant shares outstanding at June 30, 2023.

 

 

NOTE 6 – COMMITMENTS

 

Exclusive License Agreements with Cedars-Sinai Medical Center (Cedars)

 

Kairos

 

The Company has entered into four Exclusive License Agreements with Cedars which grants the Company licensing rights with respect to certain patent rights owned by Cedars as follows:

 

	1.	Methods of use of compounds that bind to RelA of NFkB;
	2.	Composition and methods for treating fibrosis;
	3.	Compositions and methods for treating cancer and autoimmune diseases; and
	4.	Method of generating activated T cells for cancer therapy.

 

For each of the exclusive license agreement in items 1, 2 and 3, the Company was required to pay an initial license fee of $5 to reimburse Cedars for patent protection costs ranging from approximately $9 to $61, pay an annual maintenance fee of $10, pay royalties based on 3.75% of net sales and pay other non-royalty sublicense fees ranging from 5% to 35% of sales of products. In addition, for items 1, 2 and 3, the Company is required to pay Cedars based on the following milestones:

 

	●	$150 upon the successful completing of Phase I clinical trial;
	●	$250 (for items 1 and 2) and $500,000 (for item 3) upon the successful completing of Phase II clinical trial for a product and receipt of Food and Drug Administration (“FDA”) approval for a Phase III clinical trial;
	●	$1,500 upon receipt of FDA approval of a new drug application or equivalent foreign regulatory approval in a non-United States major commercial market; and
	●	$250 upon cumulative net sales exceeding $5,000.

 

For exclusive license agreement in item 4, the Company is required to pay an initial license fee of $50 upon the raising of $500 in capital, pay an annual maintenance fee of $10, pay royalties based on 4.25% of patent product sales and 0.5% of other sales and pay other non-royalty sublicense fees ranging from 5% to 35%. In addition, the Company is required to pay Cedars based on the following milestones:

 

	●	$150 upon the successful completing of Phase I clinical trial;
	●	$250 upon the successful completing of Phase II clinical trial and receipt of Food and Drug Administration (“FDA”) or equivalent regulatory agency in another jurisdiction approval for a Phase III clinical trial;
	●	$1,500 upon receipt of FDA approval of a new drug application; and
	●	$2,500 upon cumulative net sales exceeding $50,000.

 

Enviro Therapeutics

 

On June 2, 2021, the Company’s wholly owned subsidiary, Enviro Therapeutics, Inc. (Enviro), entered into two Exclusive License Agreements with Cedars, which granted Enviro exclusive licensing rights (which include the right to sublicense) with respect to certain patent rights owned by Cedars, as follows:

 

	●	an Exclusive License Agreement (the “Enviro-Cedars License Agreement (Mitochondrial DNA)”) for Enviro to develop, manufacture, use and sell products utilized or derived from patent rights worldwide related to the “Compositions and Methods for Treating Diseases and Conditions by Depletion of Mitochondrial DNA from Circulation and for Detection of Mitochondrial DNA” invented by Dr. Neil Bhowmick and others; and
	●	an Exclusive License Agreement, (the “Enviro-Cedars License Agreement (Endoglin Antagonism)” and, collectively with the Enviro-Cedars License Agreement (Mitochondrial DNA), the “Enviro-Cedars License Agreements”) for Enviro to develop, manufacture, use and sell products utilized or derived from the patent rights and technical information worldwide related to the “Sensitization of Tumors to Therapies Through Endoglin Antagonism” invented by Dr. Neil Bhowmick and others.

 

 

In exchange for each of the licenses, Enviro is required to pay an upfront license fee in the mid four-figures and low-five figures, respectively. Enviro is also required to reimburse Cedars for the costs in the mid-to-high six figures incurred in the prosecution of the patent rights subject to the Enviro-Cedars License Agreements prior to the date of execution of such agreements, and certain costs and fees then outstanding aggregating in the low-six figures owed by Kairos pursuant to the Kairos-Cedars License Agreements. Pursuant to the Enviro-Cedars License Agreements, Cedars shall also receive royalty payments of a mid-single-digit percentage of net sales of products associated with the licensed patent right and less than one percent of net sales of other products derived from Cedars’ technical information, with a minimum annual royalty fee in the low five-digits due beginning on the third anniversary of the effective date of the Enviro-Cedars License Agreements. To the extent Enviro derives non-royalty sublicensing revenues, a high single-digit to low double-digit percentage of such revenues would be due and payable to Cedars, with the actual percentage of such revenues dependent on the stage of FDA authorization at the time the sublicense revenue is generated.

 

Enviro is also required to pay Cedars in connection with achieving the following Payment Milestones relating to products derived from the patent rights: successful completion of a Phase I clinical trial; successful completion of a Phase II clinical trial, receipt of FDA approval, and approval for a Phase III clinical trial; FDA approval of an NDA or BLA; cumulative net sales exceeding $50,000; and cumulative net sales exceeding $100,000. If all of these payment milestones are met among both of the Enviro-Cedars License Agreements, the required milestone payments would total in the mid-to-high seven-figures.

 

Pursuant to the Enviro-Cedars License Agreements, Enviro will be obligated to meet the following Commercialization Milestones. Pursuant to the Enviro-Cedars License Agreement (Endoglin Antagonism), Enviro will be obligated to (1) obtain an IND for a patent product within 1 year of the effective date of the agreement, (2) commence a Phase II trial within 2 years of the effective date of the agreement, and (3) submit an NDA or BLA to the FDA or equivalent regulatory agency in another jurisdiction within 7 years of the effective date of the agreement. Pursuant to the Enviro-Cedars License Agreement (Mitochondrial DNA), Enviro will be obligated to (1) complete preclinical studies of a patent product within 2 years of the effective date of the agreement, (2) complete toxicology studies within 2.5 years of the effective date of the agreement, (3) obtain IND within 3 years of the effective date of the agreement, (4) begin a Phase I trial within 4 years of the effective date of the agreement, and (5) submit an NDA or BLA to the FDA or equivalent regulatory agency in another jurisdiction within 7 years of the effective date of the agreement. If the Commercialization Milestones are not met or extended, Cedars may convert the exclusive licenses into non-exclusive licenses or to a co-exclusive licenses or terminate the licenses.

 

The Enviro-Cedars License Agreements will, unless sooner terminated, continue in effect on a country-by-country basis until the last of the patents covering the patent rights or future patent rights expires. Under the terms of the Enviro-Cedars License Agreements, unless waived by Cedars, the agreements would automatically terminate: (a) if Enviro ceases, dissolves or winds up its business operations; (b) if performance by either party jeopardizes the licensure, accreditation or tax exempt status of Cedars or the agreement is deemed illegal by a governmental body; (c) within 30 days for non-payment of royalties or if Enviro fails to undertake commercially reasonable efforts to exploit the patent rights or future patent rights; (d) within 60 days of Cedars’ failure to cure any breach or default of a material obligation under the agreements; (e) within 90 days of Enviro’s failure to cure any breach or default of a material obligation under the agreements; or (f) upon mutual written agreement of the parties.

 

License Agreement with Tracon Pharmaceutical, Inc.

 

On May 21, 2021, Enviro entered into a License Agreement with Tracon Pharmaceutical, Inc. (“Tracon”). Pursuant to the Tracon License Agreement, Tracon granted Enviro access to inactive IND filings for “TRC105” in the United States; ownership of “TRC105” stored vials of drug product manufactured to GMP standards stored at Fisher Clinical or their designee; and assignment of Tracon’s patent rights to its “CD105 technologies” (all as defined or described in the Tracon License Agreement).

 

Pursuant to the Tracon License Agreement, Enviro paid Tracon an upfront fee of $100, and will pay Tracon an additional $500 upon its or its successor’s completion of one or more financings through the sale of equity (or debt convertible to equity) in an amount of $10,000, and an additional $500 within 10 days of its or its successor’s completion of one or more financings through the sale of equity (or debt convertible to equity) in an amount of $22,000 (the payment of the $100 and the two payments of $500 are referred to in the aggregate as the “Cash Consideration”). In addition, Enviro will pay Tracon a royalty of 3% of net sales on a country-by-country basis of the products subject to the Tracon License Agreement, and non-royalty payments of 3% of sublicensing fees.

 

 

Enviro issued Tracon equity ownership in Enviro equal to a number of shares of restricted common stock of Enviro equal to seven percent (7%) on a fully-diluted and converted basis of all common and preferred shares of Enviro (the “Tracon-Enviro Equity”). In connection with the Enviro-Kairos Share Exchange, the parties agreed that Tracon would receive, in exchange for its Enviro common stock, 420,000 restricted shares of Kairos Common Stock (which is equal to 1.41229% of the issued and outstanding shares of Kairos on a fully-diluted and converted basis) as the Tracon-Enviro Equity. Until such time as Tracon has received all of the Cash Consideration (as defined in the Tracon License Agreement), Enviro or its successor in interest, will issue to Tracon, without further consideration, any additional shares of common stock of Enviro, or such successor in interest, necessary so that Tracon maintains ownership of shares of Enviro, or such successor in interest, equal to the Tracon-Enviro Equity on a fully-diluted and converted basis of all stock in Enviro (or its successor). Notwithstanding the foregoing, if Tracon receives the full Cash Consideration within six (6) months of the effective date of the Tracon License Agreement, then Tracon will automatically return to Enviro (or any successor entity, if applicable) a number of restricted shares of the common stock of Enviro (or its successor) such that upon such return of shares Tracon will possess an amount of shares in Enviro (or its successor) equal to two percent (2%) on a fully-diluted and converted basis relative to the other Enviro shareholders who exchanged their shares in the Enviro-Kairos Share Exchange. The returned portion of the Tracon-Enviro Equity will automatically be terminated, cancelled and of no further force and effect.

 

Agreement with former Chief Financial Officer

 

The Company has an agreement with its former Chief Financial Officer that requires the Company to pay $50 upon the completion of raising more than $850 in debt or equity financing. No amount was owed at December 31, 2022 and June 30, 2023.

 

NOTE 7 – SUBSEQUENT EVENTS

 

In September 2023, the Company entered into employment agreements with each of its executive officers, which employment agreements will become effective upon consummation of the Company’s IPO.

 

 

 

 

 

Shares

 

[LOGO]

 

Common Stock

 

 

 

 

PROSPECTUS

 

 

 

BOUSTEAD SECURITIES LLC

 

Through and including                , 2023 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

 

 

 

 

 

PART II

 

INFORMATION NOT REQUIRED IN PROSPECTUS

 

Unless otherwise indicated, all references to “Kairos,” the “company,” “we,” “our,” “us,” or similar terms refer to Kairos Pharma, Ltd.

 

Item 13. Other Expenses of Issuance and Distribution.

 

The following table sets forth all expenses to be paid by us, other than underwriting discounts and commissions, in connection with this offering. All amounts shown are estimates except for the Securities and Exchange Commission, or the SEC, registration fee, the Financial Industry Regulatory Authority, Inc., or FINRA, filing fee, and The Nasdaq Capital Market, or Nasdaq, listing fee.

 

 

		Amount Paid or to Be Paid
SEC registration fee		$
FINRA filing fee
Nasdaq listing fee
Printing and engraving expenses			*
Legal fees and expenses			*
Accounting fees and expenses			*
Custodian transfer agent and registrar fees			*
Miscellaneous expenses			*
Total		$	*

 

*	To be provided by amendment.

 

Item 14. Indemnification of Directors and Executive Officers.

 

Section 145 of the DGCL authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and executive officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, including reimbursement for expenses incurred, arising under the Securities Act of 1933, as amended, or the Securities Act. Our certificate of incorporation permits indemnification of our directors, officers, employees and other agents to the maximum extent permitted by the DGCL, and our bylaws provide that we will indemnify our directors and executive officers and permit us to indemnify our employees and other agents, in each case to the maximum extent permitted by the DGCL.

 

We have entered into indemnification agreements with our directors and executive officers, whereby we have agreed to indemnify our directors and executive officers to the fullest extent permitted by law, including indemnification against expenses and liabilities incurred in legal proceedings to which the director or executive officer was, or is threatened to be made, a party by reason of the fact that such director or executive officer is or was a director, executive officer, employee, or agent of Kairos, provided that such director or executive officer acted in good faith and in a manner that the director or executive officer reasonably believed to be in, or not opposed to, the best interest of the company.

 

At present, there is no pending litigation or proceeding involving a director or executive officer of the company regarding which indemnification is sought, nor is the registrant aware of any threatened litigation that may result in claims for indemnification.

 

We maintain insurance policies that indemnify our directors and officers against various liabilities arising under the Securities Act and the Securities Exchange Act of 1934, as amended, that might be incurred by any director or officer in his capacity as such.

 

The underwriters are obligated, under certain circumstances, under the underwriting agreement to be filed as Exhibit 1.1 to this Registration Statement, to indemnify us and our officers and directors against liabilities under the Securities Act.

 

 

Item 15. Recent Sales of Unregistered Securities.

 

Set forth below is information regarding unregistered securities issued by us.

 

On August 5, 2021, the Company issued a $350,000 convertible note, bearing interest at a rate of 10% per annum, to a certain accredited investor. All of the principal plus accrued and unpaid interest converted into 230,000 shares of the Company’s common stock based on the principal and accrued interest due on the date of conversion. The issuance was made in accordance with an exemption from registration in accordance Section 4(a)(2) of the Securities Act. 

 

On June 3, 2021, the Company issued a total of 6,000,000 shares of common stock to the shareholders of Enviro Therapeutics, Inc. in conjunction with the Company’s acquisition of Enviro pursuant to the terms of a share exchange agreement. The issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

 

During the year ended December 31, 2021, the Company issued a total of 5,310,000 shares of common stock to certain bona fide consulting firms pursuant to an exemption from registration under Rule 701 promulgated under the Securities Act as transactions under contracts relating to compensation, or under Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering. The recipients of such securities were bona fide consulting firms. Appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions had adequate access, through employment, business, or other relationships, to information about us. 

 

In March 2022, the Company entered into a convertible note payable agreement with an individual in the amount of $250,000. The note accrues interest at 10% per annum, is unsecured and is due upon the closing of a proposed IPO transaction by the Company, or by July 2022, if the IPO transaction has not occurred by that date. The note includes an original issue discount (OID) of 8.0%. The note is convertible at the option of the noteholder to convert into shares of the Company’s common stock at $1.67 per share, or will be automatically converted into shares of the Company’s common stock at $1.67 per share upon the closing of an IPO transaction. In connection with the convertible note payable, the Company issued the noteholder a warrant to purchase 250,000 shares of the Company’s common stock for $1.67 per share. The convertible note and warrant offering were made pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act.

 

In June and September 2022, the Company entered into several convertible note payable agreements with individuals and an entity in the aggregate total of $675,000 (the “Convertible Note Offering”). The notes accrue interest at 6% per annum, are unsecured and are due by April 2025. If the Company does not close an IPO transaction within 12 months of the date of the note, the Company will have the choice of paying off the principal plus all accrued and unpaid interest, or the note’s principal balance will increase to 110% of its original balance. The notes are convertible at the option of the noteholders to convert into shares of the Company’s common stock at a price per share as defined in the agreement, or will be automatically be converted into shares of the Company’s common stock at 60% of the IPO price per share upon the closing of the IPO.

 

Boustead Securities Acted as placement agent for the Convertible Note Offering and received a commission equal to 7.0% of the gross proceeds from the offering and five-year warrants to purchase the equivalent of 7.0% of the shares issuable upon conversion of the convertible notes sold in the offering, which warrants will be exercisable at 60% of the IPO per share offering price. This offering was made pursuant to an exemption from registration under Rule 506(b) of Regulation D under the Securities Act.

 

Item 16. Exhibits and Financial Statement Schedules.

 

(a) Exhibits.

 

Exhibit  Number		Description
1.1**		Form of Underwriting Agreement by and between Karos Pharma, Ltd. and Boustead Securities, LLC, as representative of the underwriters.
2.1*		Agreement of Merger between Kairos Pharma, Ltd. and AcTcell Biopharma, Inc. dated November 13, 2019.
2.2*		Share Exchange Agreement between Kairos Pharma, Ltd. and Enviro Therapeutics, Inc. dated June 3, 2021.
3.1*		Certificate of Amendment of Article of Incorporation, field with Secretary of State of the State of California, dated July 15, 2016.
3.2*		Amended and Restated Articles of Incorporation of Kairos Pharma, Ltd., dated November 12, 2019 (California)
3.3*		Certificate of Conversion filed with the Secretary of State of the State of California, dated May 10, 2023.
3.4*		Certificate of Conversion from a non-Delaware corporation to a Delaware corporation pursuant to section 265 of the Delaware General Corporation Law filed with the Secretary of State of the State of Delaware, dated May 10, 2023.
3.5*		Certificate of Incorporation of Kairos Pharma, Ltd. filed with the Secretary of State of the State of Delaware, dated May 10, 2023.
3.6*		Bylaws of Kairos Pharma, Ltd. (Delaware).
4.1**		Form of Stock Certificate evidencing Shares of Common Stock of Kairos Pharma, Ltd.
4.2**		Form of Representative’s Warrant
5.1**		Legal Opinion of Michelman& Robinson LLP
10.1*		Exclusive Option Agreement between Cedars-Sinai Medical Center and Enviro Therapeutics, Inc. dated March 16, 2020 (re Depletion of Mitochondrial DNA).
10.2*		Amendment to Exclusive Option Agreement between Cedars-Sinai Medical Center and Enviro Therapeutics, Inc. dated January 11, 2021 (re Depletion of Mitochondrial DNA).

 

 

10.3*		Exclusive Option Agreement between Cedars-Sinai Medical Center and Enviro Therapeutics, Inc. dated March 16, 2020 (re Sensitization of Solid Tumors).
10.4*		Amendment to Exclusive Option Agreement between Cedars-Sinai Medical Center and Enviro Therapeutics, Inc. dated January 9, 2021 (re Sensitization of Solid Tumors).
10.5*		Exclusive License Agreement between Cedars-Sinai Medical Center and Enviro Therapeutics, Inc. dated June 21, 2021 (re Compositions and Methods for Treating Diseases and Conditions by Depletion of Mitochondrial or Genomic DNA from Circulation and for Detection of Mitochondrial or Genomic DNA).
10.6*		Exclusive License Agreement between Cedars-Sinai Medical Center and Enviro Therapeutics, Inc. dated June 2, 2021 (re Sensitization of Tumors to Therapies Through Endoglin Antagonism).
10.7*		Exclusive License Agreement between Cedars-Sinai Medical Center and Kairos Pharma, Ltd. (as successor to AcTcell Biopharma, Inc.) dated August 30, 2019 (re Methods of generating activated T cells for cancer therapy).
10.8*		Amendment to Exclusive License Agreement between Cedars-Sinai Medical Center and Kairos Pharma, Ltd. dated June 17, 2021 (re Methods of generating activated T cells for cancer therapy).
10.9*		Exclusive License Agreement between Cedars-Sinai Medical Center and Kairos Pharma, Ltd. dated October 1, 2017 (re Methods of use of compounds that bind to RelA of NFkB).
10.11*		Amendment to Exclusive License Agreement between Cedars-Sinai Medical Center and Kairos Pharma, Ltd. dated June 17, 2021 (re Methods of use of compounds that bind to RelA of NFkB).
10.12*		Exclusive License Agreement between Cedars-Sinai Medical Center and Kairos Pharma, Ltd. dated October 1, 2017 (re Composition and Methods for Treating Fibrosis).
10.13*		Amendment to Exclusive License Agreement between Cedars-Sinai Medical Center and Kairos Pharma, Ltd. dated June 17, 2021 (re Composition and Methods for Treating Fibrosis).
10.14*		Exclusive License Agreement between Cedars-Sinai Medical Center and Kairos Pharma, Ltd. dated March 12, 2019 (re Composition and Methods for Treating Cancer and Autoimmune Diseases).
10.15*		Amendment to Exclusive License Agreement between Cedars-Sinai Medical Center and Kairos Pharma, Ltd. dated June 17, 2021 (re Composition and Methods for Treating Cancer and Autoimmune Diseases).
10.16*		License and Supply Agreement between Tracon Pharmaceuticals, Inc., Enviro Therapeutics, Inc., and Kairos Pharma, Ltd. dated May 21, 2021.
10.17*		First Amendment to Exclusive License Agreement between Cedars-Sinai Medical Center and Enviro Therapeutics, Inc. dated April 18, 2022.
10.18*		Second Amendment to Exclusive License Agreement between Cedars-Sinai Medical Center and Enviro Therapeutics, Inc. dated October 11, 2022.
10.20*		Form of Subscription Agreement for 6% Convertible Notes
10.21*		Form of 6% Convertible Note
10.22*		Form of Investor Rights and Lock-Up Agreement for 6% Convertible Notes
10.23*		Kairos Pharma, Ltd. 2023 Equity Incentive Plan.
10.24*		Form of Director Offer Letter
10.25*		Form of Employment Agreement for John Yu
10.26*		Form of Employment Agreement with Doug Samuelson
10.27*		Form of Employment Agreement for Neil Bhowmick
10.28*		Form of Employment Agreement for Ramachandran Murali
10.29*		Form of Indemnification Agreement between Kairos Pharma, Ltd. and each of its directors.
21.1*		List of subsidiaries of Kairos Pharma, Ltd.
23.1*		Consent of Marcum LLP, independent registered public accounting firm.
23.2**		Consent of Michelman & Robinson LLP (included in Exhibit 5.1)
24.1*		Power of Attorney (included on signature page).
99.1*		Consent of Rosemary Mazanet M.D., Ph.D.
99.2*		Consent of Hansoo Michael Keyoung, M.D., Ph.D.
107*		Filing Fee Table

 

*	Submitted herewith.
**	To be filed by amendment.

 

 

(b) Financial Statement Schedules.

 

All financial statement schedules are omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or the notes thereto.

 

Item 17. Undertakings.

 

(a) The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

 

(b) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant under the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

(c) The undersigned registrant hereby undertakes that:

 

	(1)	For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance on Rule 430A and contained in a form of prospectus filed by the registrant under Rule 424(b)(1) or (4) or 497(h) under the Securities Act will be deemed to be part of this registration statement as of the time it was declared effective.
	(2)	For the purpose of determining any liability under the Securities Act of 1933, as amended, each post-effective amendment that contains a form of prospectus will be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time will be deemed to be the initial bona fide offering thereof.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on September 29, 2023.

 

	KAIROS PHARMA, LTD.
	By	/s/ John S. Yu
		John S. Yu
		Chief Executive Officer and Chairman of the Board of Directors

 

POWER OF ATTORNEY

 

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints John S. Yu as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in their name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to sign any registration statement for the same offering covered by this registration statement that is to be effective on filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature		Position		Date
/s/ John S. Yu		Chief Executive Officer and Chairman of the Board of Directors (principal executive officer)		September 29, 2023
John S. Yu
/s/ Doug Samuelson		Chief Financial Officer (principal financial and accounting officer)		September 29, 2023
Doug Samuelson
/s/ Hyun W. Bae		Director		September 29, 2023
Hyun W. Bae

 

 

 

Exhibit 2.1

 

AGREEMENT OF MERGER   BETWEEN   KAIROS PHARMA, LTD.   AND   ACTCELL BIOPHARMA, INC.

FILED Secretary of State State of California NOV 13 2019

 

This Agreement of Merger (this “Agreement of Merger”) is entered into as of November 13, 2019, between Kairos Pharma, Ltd., a California corporation (“Surviving Corporation”), and AcTcell Biopharma, Inc., a California corporation (“Merging Corporation”).

 

RECITALS

 

A.

The boards of directors of Surviving Corporation and Merging Corporation deem it advisable and in their mutual best interests and in the best interests of the shareholders of the respective entities, that parties consummate a statutory merger of Merging Corporation with and into Surviving Corporation with Surviving Corporation continuing as the surviving Corporation (the “Merger”).

 

B.

The boards of directors of each of Surviving Corporation and Merging Corporation and the shareholders of each of Surviving Corporation and Merging Corporation have approved the Merger and this Agreement of Merger.

 

AGREEMENTS

 

The parties hereto hereby agree as follows:

 

1. The Merger. Subject to the terms of this Agreement of Merger and in accordance with the applicable provisions of the Corporations Code of the State of California (the “CCC”), Merging Corporation shall be merged with and into Surviving Corporation and Surviving Corporation shall continue as the surviving corporation. The name of the Surviving Corporation shall be “Kairos Pharma, Ltd.”.

 

2. Effective Time. The Merger shall become effective on such date (the “Effective Time”) as this Agreement of Merger and the officers’ certificates of Surviving Corporation and Merging Corporation attached hereto are filed with the Secretary of State of the State of California pursuant to Section 1103 of the CCC.

 

3. Conversion of Capital Stock of Constituent Corporations.

 

(a) Merging Corporation Common Stock. At the Effective Time, all outstanding shares of common stock of Merging Corporation (“Merging Corporation Common Stock”) that are issued and outstanding immediately prior to the Effective Time shall be converted into 5,045,000 validly issued, fully paid and nonassessable shares of common stock of Surviving Corporation on a proportionate basis.

 

 

(b) Surviving Corporation Capital Stock. The outstanding shares of common stock of Surviving Corporation (“Surviving Corporation Common Stock”) shall remain outstanding and are not affected by the Merger.

 

4. Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided under the applicable provisions of the CCC. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of Surviving Corporation and Merging Corporation shall vest in the Surviving Corporation, and all debts, liabilities and duties of Surviving Corporation and Merging Corporation shall become debts, liabilities and duties of the Surviving Corporation.

 

5. Articles of Incorporation; Bylaws; Directors and Officers of Surviving Corporation. As of and after the Effective Time:

 

(a) The articles of incorporation of the Surviving Corporation immediately prior to the Merger shall continue in full force and effect until amended and changed in the manner prescribed by the provisions of the CCC.

 

(b) The bylaws of the Surviving Corporation immediately prior to the Merger shall continue to be the bylaws of the Surviving Corporation after the effective date of the Merger until such time as amended in accordance with such bylaws and the articles of incorporation of the Surviving Corporation.

 

(c) The officers of Surviving Corporation immediately prior to the Effective Time shall be appointed as the officers of the Surviving Corporation immediately after the Effective Time until their respective successors are duly appointed.

 

(d) The members of the board of directors of Surviving Corporation immediately prior to the Effective Time shall be appointed as the members of the board of directors of the Surviving Corporation immediately after the Effective Time until their respective successors are duly elected or appointed and qualified.

 

6. Miscellaneous.

 

(a) This Agreement of Merger may be terminated prior to the Effective Time by the mutual consent of the Boards of Directors of Surviving Corporation and Merging Corporation.

 

(b) In the event of the termination of this Agreement of Merger prior to the Effective Time as provided above, this Agreement of Merger shall forthwith become void and there shall be no liability on the part of Surviving Corporation and Merging Corporation or their respective officers or directors.

 

(c) This Agreement of Merger may be signed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one agreement.

 

(d) After the Effective Time, the Surviving Corporation and its officers and directors may execute and deliver such deeds, assignments and assurances and do all other things necessary or desirable to vest, perfect or confirm title to Surviving Corporation’s and Merging Corporation’s property and rights in the Surviving Corporation and otherwise to carry out the purposes of this Agreement of Merger in the name of Surviving Corporation and Merging Corporation or otherwise.

 

(e) This Agreement of Merger will be governed by and construed in accordance with the laws of the State of California applicable to contracts entered into and to be performed wholly within the State of California without regard to principles of conflicts of laws.

 

[Remainder of Page Intentionally Left Blank]

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement of Merger as of the date first written above.

 

	KAIROS PHARMA, LTD.
	By:	/s/ John Yu
	Name:	John Yu
	Title:	President and Secretary

 

	ACTCELL BIOPHARMA, INC.
	By:	/s/ John Yu
	Name:	John Yu
	Title:	President and Secretary

 

[SIGNATURE PAGE TO AGREEMENT OF MERGER]

 

 

OFFICERS’ CERTIFICATE

OF

ACTCELL BIOPHARMA, INC.

 

The undersigned, John Yu, President and Secretary of AcTcell Biopharma, Inc., a corporation duly organized and existing under the laws of the State of California (the “Corporation”), hereby certifies that:

 

1. He is the duly elected or appointed, acting and qualified President and Secretary of the Corporation.

 

2. The principal terms of the Agreement of Merger in the form attached were duly approved by the board of directors and by the shareholders of the corporation by a vote that equaled or exceeded the vote required.

 

3. The shareholder approval was by the holders of 100% of the outstanding shares of the corporation.

 

4. There is only one class of shares and the number of shares outstanding entitled to vote on the merger is 300 shares.

 

[Remainder of Page Intentionally Left Blank]

 

 

The undersigned further declares under penalty of perjury under the laws of the State of California that to his own knowledge, the matters set forth in this certificate are true and correct.

 

	By:	/s/ John Yu
		John Yu
		President and Secretary
	Dated:	November 13, 2019

 

  

OFFICERS’ CERTIFICATE

OF

KAIROS PHARMA, LTD.

 

The undersigned, John Yu, President and Secretary of Kairos Pharma, Ltd., a corporation duly organized and existing under the laws of the State of California (the “Corporation”), hereby certifies that:

 

1. He is the duly elected or appointed, acting and qualified President and Secretary of the Corporation.

 

2. The principal terms of the Agreement of Merger in the form attached were duly approved by the board of directors and by the shareholders of the corporation by a vote that equaled or exceeded the vote required.

 

3. The shareholder approval was by the holders of 100% of the outstanding shares of the corporation.

 

4. There is only one class of shares and the number of shares outstanding entitled to vote on the merger is 2,325,000 shares.

 

[Remainder of Page Intentionally Left Blank]

 

 

The undersigned further declares under penalty of perjury under the laws of the State of California that to his own knowledge, the matters set forth in this certificate are true and correct.

 

	By:	/s/ John Yu
		John Yu
		President and Secretary
	Dated:	November 13, 2019

  

[SIGNATURE PAGE TO MERGER SUB OFFICERS’ CERTIFICATE] 

 

 

 

Exhibit 2.2

 

SHARE EXCHANGE AGREEMENT

 

This Share Exchange Agreement, dated as of June 3, 2021, (this “Agreement”) is made by and among, Kairos Pharma, Ltd., a California corporation (the “Company” or “Kairos”), on the one hand, and Enviro Therapeutics, Inc., California corporation (“Enviro”) and the shareholders of Enviro set forth on Schedule I hereto (the “Enviro Shareholders”), on the other hand. For purposes of this Agreement, the Company, Enviro and the Enviro Shareholders are sometimes collectively referred to as the “Parties” and individually as a “Party.”

 

WHEREAS, the Enviro Shareholders collectively will own shares of Enviro as set forth on Schedule I, which will represent 100% of the issued and outstanding equity securities of Enviro (such shares, consisting of 8,602.150538 shares par value $0.01 per share, of the common stock of Enviro, being hereinafter referred to as the “Enviro Shares”) on the date of the Closing (as hereinafter defined);

 

WHEREAS, the Enviro Shareholders believe it is in their respective best interests for the Enviro Shareholders to exchange 100% of the Enviro Shares for 4,000,000 shares of newly issued restricted common stock of the Company (the “Company Shares”), as set forth on Schedule II, which, as of the Closing: (i) will represent approximately twenty percent (20%) of the outstanding shares of capital stock of the Company on a fully diluted basis, including all issued and outstanding convertible promissory notes, preferred stock, SAFEs, other securities convertible into capital stock, stock options and warrants, and after giving effect to the issuance of the Company Shares, and (ii) shall, as of the date of the Closing (defined below), have voting power approximately equal to twenty percent (20%) of all shares capable of voting on matters by the shareholders of the Company;

 

WHEREAS, the Company believes it is in its best interest and the best interest of its shareholders to acquire the Enviro Shares in exchange for the Company Shares, all upon the terms and subject to the conditions set forth in this Agreement (the “Share Exchange”);

 

WHEREAS, the Boards of Directors of Enviro and the Company have determined that the Share Exchange is advisable and in the best interests of their respective companies and shareholders and in furtherance thereof have approved the Share Exchange;

 

WHEREAS, it is the intention of the parties that upon the Closing: (i) Enviro shall become a wholly owned subsidiary of the Company; and (ii) the Company shall assume ownership and title to all of the Enviro Shares;

 

WHEREAS, subsequent to the Share Exchange, the Company expects that all of equity securities shall be acquired by Bio Lab Naturals, Inc. (“BLAB”) pursuant to a transaction whereby one hundred percent of the stock of Kairos will be acquired by BLAB in exchange for approximately 96,781,536 restricted shares of common stock of BLAB, which, after the transaction, will be equivalent to approximately 90% of the then outstanding shares of BLAB’s common stock (the “Kairos-BLAB Transaction”); and

 

 

WHEREAS, concurrent with the closing of the Kairos-BLAB Transaction, Kairos intends to raise money from new third party investors (the “New Investors”) in the aggregate amount of no less than $5,000,000 in a private placement of Units, for an aggregate total private placement of 2,000,000 new Kairos shares of restricted common stock and warrants to purchase 1,000,000 Kairos shares of restricted common stock (each Unit consists of one (1) share of Kairos’ common stock, sold for $2.50 per share, and one-half (1/2) warrant to purchase one-half (1/2) share of Kairos common stock, exercisable for $5.00 per share for two years from the date of the closing) (“Proposed Financing”).

 

NOW, THEREFORE, in consideration of the mutual terms, conditions and other agreements set forth herein, the parties hereto, intending to be legally bound hereby, agree as follows:

 

ARTICLE 1

EXCHANGE OF ENVIRO SHARES FOR THE COMPANY SHARES

 

Section 1.1 Incorporation of Recitals. The recitals above are incorporated by this reference and made part of this Agreement.

 

Section 1.2 Agreement to Exchange Enviro Shares for the Company Shares. On the Closing Date (as hereinafter defined) and upon the terms and subject to the conditions set forth in this Agreement, the Enviro Shareholders shall assign, transfer, convey and deliver the Enviro Shares to the Company and, in consideration and exchange for the Enviro Shares, the Company shall issue, transfer, convey and deliver the Company Shares to the Enviro Shareholders as set forth on Schedule II.

 

Section 1.3 Closing and Actions at Closing. The closing of the Share Exchange (the “Closing”) shall be completed on June 3,2021 at 5:00PM pacific standard time (the “Closing Date”) remotely via the exchange of documents and signatures pursuant to the terms and conditions of this Agreement.

 

Section 1.4 Restrictions on the Company Shares Issued Pursuant to this Agreement. The Company Shares to be issued by the Company pursuant to this Agreement have not been registered and are being issued pursuant to exemptions under the Securities Act (as defined below), as well as under certain state securities laws for transactions by an issuer not involving any public offering or in reliance on limited federal preemption from such state securities registration laws, based on the suitability and investment representations made by the Enviro Shareholders to the Company. The Company Shares to be issued by the Company pursuant to this Agreement must be held and may not be sold, transferred, or otherwise disposed of for value unless such securities are subsequently registered under the Securities Act or an exemption from such registration is available, and that the certificates representing the Company Shares issued in the Share Exchange will bear a legend in substantially the following form so restricting the sale of such securities:

 

The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and are “restricted securities” within the meaning of Rule 144 promulgated under the Securities Act The securities have been acquired for investment purposes and may not be sold, transferred, hypothecated or otherwise disposed of in the absence of an effective registration statement as to the securities under the Securities Act, or an opinion of counsel satisfactory to the Company that such registration is not required or an exemption from the registration requirements of the Securities Act is available.

 

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents, warrants and agrees that all of the statements in the following subsections of this Article II are true and complete as of the date hereof, except as set forth in the Company Schedules (defined below).

 

Section 2.1 Corporate Organization.

 

(a) Corporate Existence. Power and Authority. The Company is a company duly incorporated, validly existing, and in good standing under the laws of the jurisdiction of its incorporation and has the corporate power and is duly authorized under all applicable laws, regulations, ordinances, and orders of public authorities to carry on its business in all material respects as it is now being conducted and to own, lease or otherwise hold its properties, to enter into this Agreement, and to carry out the transactions contemplated by this Agreement, except where tire failure to be so qualified and in good standing will not have a. Material Adverse Effect on the activities, business, operations, properties, assets, condition or results of operation of the Company. “Material Adverse Effect” means, when used with respect to the Company, any event, occurrence, fact, condition, change or effect, which, individually or in the aggregate, would reasonably be expected to be materially adverse to the business, operations, properties, assets, condition (financial or otherwise), or operating results of the Company, or materially impair the ability of the Company to perform its obligations under this Agreement, excluding any change, effect or circumstance resulting from (i) the announcement, pendency or consummation of the transactions contemplated by this Agreement; or (ii) changes in the U.S. securities markets generally.

 

(b) Corporate Action. The execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby, do not violate any provision of the Company’s Articles of Incorporation or Bylaws or similar documents (including all amendments thereto, the “Company Charter Documents”). The Company has taken all actions required by law, its Company Charter Documents, or otherwise to authorize the execution and delivery of this Agreement. The Company has full power, authority, and legal capacity and has taken all action required by law, its Company Charter Documents, and otherwise to consummate the transactions herein contemplated.

 

(c) Board Authorization. The Company’s Board of Directors (the “Company Board”) has authorized the execution and delivery of this Agreement by the Company and has approved this Agreement and the transactions contemplated hereby. The minute books of the Company are current as required by law, contain the minutes of all meetings of the Company Board and its shareholders from its date of incorporation to the date of this Agreement, and adequately reflect all material actions taken by the Company Board and its shareholders.

 

 

Section 2.2 Capitalization of the Company.

 

(a) Capital Stock. The authorized capital stock of the Company consists of: (i) 35,000,000 shares of common stock, par value $0.01 per share, of which approximately 15,825,957 shares of common stock are issued and outstanding, on a fully-diluted and converted basis, immediately prior to the Share Exchange (or approximately concurrent with the Share Exchange, not including the Company Shares that will he issued to the Enviro Shareholders in connection with this Share Exchange).

 

(b) Convertible Securities. The Company has furnished or made available accurate and complete copies or detailed descriptions of any and all outstanding warrants, options or other securities convertible into or exchangeable or exercisable for common stock.

 

(c) Registration and Preemptive Rights. The Company has furnished or made available accurate and complete copies or detailed descriptions of any and all agreements and obligations with respect to any registration rights or preemptive rights.

 

(d) Voting Agreements: Encumbrances. The Company has furnished or made available accurate and complete copies or detailed descriptions of any and all voting trusts, shareholder agreements or other voting arrangements, capacities, charges, liens or encumbrances on any shares of the Company’s capital stock that have been entered into among the shareholders of the Company,

 

(e) Duly Authorized, Validly Issued. Fully Paid and Non-Assessable. All of the issued and outstanding shares of the capital stock of the Company immediately prior to this Share Exchange are, and all shares of the capital stock of the Company when issued in accordance with the terms hereof will be, duly authorized, validly issued, fully paid and non-assessable, will have been issued in compliance with all applicable U.S. federal and state securities laws and state corporate laws. The issuance of all of the capital stock of the Company described in this Section 2.2 have been, or will be, as applicable, in compliance with U.S. federal and state securities laws and state corporate laws and no shareholder of the Company has any right to rescind or bring any other claim against the Company for failure to comply with the Securities Act, or state securities laws.

 

Section 2.3 Validity and Enforceability of Agreements. This Agreement constitutes the valid and legally binding obligation of the Company and is enforceable in accordance with its terms, except as such enforcement may be limited by general equitable principles, or by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors rights generally.

 

Section 2.4 Subsidiaries. The Company does not have any subsidiaries and does not own, beneficially or of record, any shares of or control any other corporation, or equity interests in any other entity.

 

 

Section 2.5 Intellectual Property; Assets; Title to Assets. The Company has furnished or made available accurate and complete copies or detailed descriptions of any and all of the principal assets or properties of the Company (the “ Company Principal Assets”). The Company has good and marketable title to the Company Principal Assets, free and clear of all mortgages, liens, claims or encumbrances of any kind or airy conditional sale agreement or other title retention agreement. The Company Principal Assets constitute all patents, licenses, permits, consents, approvals or authorizations of governments, governmental authorities or quasi-governmental authorities (both United States and foreign) currently owned or held by the Company in connection with its business (the “Company Patents, Licenses and Permits”), and the Company is the owner or exclusive licensee of each such Company Patents, License and Permit. No claims made by third parties with respect to any of the Company Patents, Licenses and Permits are pending. There are no decrees, licenses, sublicenses, agreements or limitations now in effect relating to any of the Company Patents, Licenses and Permits and there has been no notice to the Company that any Company Patents, License or Permit infringes the rights of any third party or is being infringed by any third party.

 

Section 2.6 Trademarks, Tradenames, etc. The Company has furnished or made available accurate and complete copies or detailed descriptions of any and all registered or unregistered copyrights, trademarks, tradenames, service marks, service names, slogans or assumed names (nor are any of the same used or held for use) used in connection with the conduct of its business (the “Company Trademarks”), all of which are owned by the Company. No claims made by third parties with respect to any of the Company Trademarks are pending. There are no decrees, licenses, sublicenses, agreements or limitations now in effect relating to any of the Company Trademarks and there has been no notice to the Company that any Company Trademark infringes the rights of any third party or is being infringed by any third party.

 

Section 2.7 Company Material Contracts. The Company has furnished or made available accurate and complete copies or detailed descriptions of the Company Material Contracts (defined below), including the Patents, Licenses and Permits. With respect to any Company Material Contract, the Company is not aware of any existing breach, default or event of default by the Company, or event that with notice or lapse of time or both would constitute a breach, default or event of default by the Company, other than breaches, defaults or events of default that would not have a Material Adverse Effect on the business, assets or prospects of the Company, nor does the Company know of, and the Company has not received notice of, or made a claim with respect to, any breach or default by any other party thereto that would, severally or in the aggregate, have a Material Adverse Effect. As used herein, the term “Company Material Contracts” shall mean all (i) employee benefit plans, share option schemes or agreements and employment, consulting or similar contracts, (ii) contracts that involve remaining aggregate payments by the Company in excess of $ 10,000 or which have a remaining term in excess of two years, (iii) insurance policies, and (iv) all contracts that would, if terminated, have a Material Adverse Effect.

 

Section 2.8 Financial Statements. Except as set forth in the Company Schedules;

 

(a) Company Financial Statements. The Company has as Company Schedule 2.9 correct and complete copies of audited consolidated balance sheets of the Company as of December 31, 2020 and 2019, and the related audited consolidated statements of operations for the years ended December 31, 2020 and 2019 (collectively, the “Company Financial Statements”).

 

 

(b) Generally Accepted Accounting Principles. The Company Financial Statements were prepared in accordance with United States generally accepted accounting principles applied on a consistent basis throughout the periods involved and fairly present in all material respects the consolidated financial position and the consolidated results of operations and cash flows of the Company and its consolidated subsidiaries, in each case as of the dates and for the periods referred to therein, except as set forth in the notes thereto, and except that the unaudited interim financial statements contained in the Company Financial Statements do not include footnotes and are subject to normal, recurring year-end audit adjustments,

 

(c) Tax Returns and Payment, The Company has duly and timely filed all material tax returns required to be filed by it and has duly and timely paid all taxes, of any kind or form, shown thereon to be due.

 

Section 2.9 Governmental Authorizations and Third-Party Consents.

 

(a) Governmental Approvals. No authorization, consent or approval or other order or action of or filing or registration with any court, administrative agency, or other governmental or regulatory body or authority is required for the execution and delivery by the Company of this Agreement or the Company’s consummation of the transactions contemplated hereby, resulting from the issuance of the Company Shares in connection with the Share Exchange,

 

(b) Permits. The Company is not required to have any licenses, franchises, permits, and other government authorizations, that are legally required to enable it to conduct its business operations in all material respects as conducted on the date hereof

 

(c) Third-Party Consents. Except for compliance with federal and state securities or corporation laws, as hereinafter provided, and except as set forth in the Company Material Contracts, no authorization, approval, waiver, consent, or order of, or registration, declaration, or filing with, any court or other governmental body, or any third party, including a party to any agreement with the Company, is required in connection with the execution and delivery by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby.

 

(d) No Contravention. The execution of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in the breach of any term or provision of, constitute a default under, or terminate, accelerate or modify the terms of any indenture, mortgage, deed of trust, or other material agreement, or instrument to which the Company is a party or to which any of its assets, properties or operations are subject.

 

Section 2.10 Litigation and Proceedings. There are no actions, suits, proceedings, or investigations pending or, to the knowledge of the Company after reasonable investigation, threatened by or against the Company or affecting the Company or its properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind, Tire Company does not have any knowledge of any material default on its part with respect to any judgment, order, injunction, decree, award, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality.

 

 

Section 2.11 Compliance With Laws and Regulations, To the best of its knowledge, the Company has complied with all applicable statutes and regulations, except to the extent that noncompliance would not result in a Materially Adversely Effect. This compliance includes, but is not limited to, the filing of all reports to date with federal and state securities authorities. The Company has not received any notice of any violation of any, applicable law, order, ordinance, regulation or rule of any kind whatsoever, including without limitation the Securities Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the applicable rules and regulations of the Securities Exchange Commission (“SEC”) or the applicable securities laws and rules and regulations of any state.

 

Section 2.12 Interested Party Transactions. The Company has furnished or made available accurate and complete copies or detailed descriptions of any and all of the Company’s indebtedness to any of its officer or directors (except for amounts due as normal salaries and bonuses and in reimbursement of ordinary expenses), and any indebtedness of any such person to the Company, and there are no other transactions of the type that would be required to be disclosed pursuant to Items 402 or 404 of Regulation S-K under the Securities Act and the Exchange Act.

 

Section 2.13 Finders’ Fees. The Company has not incurred, nor will it incur, directly or indirectly, any liability for brokers’ or finders’ fees or agents’ commissions or investment bankers’ fees or any similar charges in connection with this Agreement or any transaction contemplated hereby.

 

Section 2.14 Money Laundering Laws. The operations of the Company are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the money laundering statutes of all U.S. and non-U, S. jurisdictions, tire rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental body, agency or instrumentality (collectively, the “Money Laundering Laws”) and no Action involving the Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

 

Section 2.15 Absence of Undisclosed Liabilities. Except as specifically disclosed in the Company Schedules, since December 31,2020: (a) there has been no event, occurrence or development that has resulted in or could result in a Material Adverse Effect; (b) the Company has not incurred any liabilities, obligations, claims or losses, contingent or otherwise, including debt obligations, other than professional fees to be paid prior to Closing; (c) the Company has not declared or made any dividend or distribution of cash or property to its shareholders, purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, or issued any equity securities other than with respect to transactions contemplated hereby; (d) the Company has not made any loan, advance or capital contribution to or investment in any person or entity; (e) the Company has not discharged or satisfied any Hen or encumbrance or paid any obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business; (f) the Company has not suffered any losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of prospective business; (g) except for the Share Exchange, the Company has not entered into any transaction other than in the ordinary course of business, or entered into any other material transaction, whether or not in the ordinary course of business; (h) made any accrual or arrangement for or payment of bonuses or special compensation of any kind or any severance or termination pay to any present or former officer or employee; (i) increased the rate of compensation payable or to become payable by it to any of its officers or directors or any of its employees; or (j) made any increase in any profit sharing, bonus, deferred compensation, insurance, pension, retirement, or other employee benefit plan, payment, or arrangement, made to, for, or with its officers, directors, or employees.

 

 

Section 2.16 No Undisclosed Events or Circumstances, No event or circumstance has occurred or exists with respect to the Company or its respective business, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.

 

Section 2.17 Company Schedules. The Company has delivered to Enviro and the Enviro Shareholders in connection with this Agreement the following schedules, which are collectively referred to as the “Company Schedules” and which consist of separate schedules, which are dated the date of this Agreement, all certified by the chief executive officer of the Company to be complete, true, and accurate in all material respects as of the date of this Agreement: (a) a schedule of any exceptions to the representations made herein; and (b) a schedule containing the other information requested herein.

 

Section 2.18 Material Information. To the knowledge of the Company, this Agreement and any certificate or schedule attached hereto or delivered in accordance with the terms hereof by or on behalf of the Company in connection with tire transactions contemplated by this Agreement, when taken together, do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained herein and/or therein not misleading.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF ENVIRO

 

Enviro represents, warrants and agrees that all of the statements in the following subsections of this Article III are true and complete as of the date hereof, except as set forth in the Enviro Schedules (defined below).

 

Section 3.1 Corporate Organization.

 

(a) Corporate Existence, Power and Authority. Enviro is a company duly incorporated, validly existing, and in good standing under the laws of the jurisdiction of its incorporation and has the corporate power and is duly authorized under all applicable laws, regulations, ordinances, and orders of public authorities to carry on its business in all material respects as it is now being conducted and to own, lease or otherwise hold its properties, to enter into this Agreement, and to carry out the transactions contemplated by this Agreement, except where the failure to be so qualified and in good standing will not have a Material Adverse Effect on the activities, business, operations, properties, assets, condition or results of operation of Enviro. “Material Adverse Effect” means, when used with respect to Enviro, any event, occurrence, fact, condition, change or effect, which, individually or in the aggregate, would reasonably be expected to be materially adverse to the business, operations, properties, assets, condition (financial or otherwise), or operating results of Enviro, or materially impair the ability of Enviro to perform its obligations under this Agreement, excluding any change, effect or circumstance resulting from (i) the announcement, pendency or consummation of the transactions contemplated by this Agreement; or (ii) changes in the U.S. securities markets generally.

 

 

(b) Corporate Action. The execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby, do not violate any provision of Enviro’s Articles of Incorporation or Bylaws or similar documents (including all amendments thereto, the “Enviro Charter Documents”). Enviro has taken all actions required by law, its Enviro Charter Documents, or otherwise to authorize the execution and delivery of this Agreement. Enviro has full power, authority, and legal capacity and has taken all action required by law, its Enviro Charter Documents, and otherwise to consummate the transactions herein contemplated,

 

(c) Board Authorization. Enviro’s Board of Directors (the “Enviro Board”) has authorized the execution and delivery of this Agreement by Enviro and has approved this Agreement and the transactions contemplated hereby. The minute books of Enviro are current as required by law, contain the minutes of all meetings of the Enviro Board and its shareholders from its date of incorporation to the date of this Agreement, and adequately reflect all material actions taken by the Enviro Board and its shareholders.

 

Section 3.2 Capitalization of Enviro.

 

(a) Capital Stock. The authorized capital stock of Enviro consists of: (i) 10,000 shares of common stock, par value $0.01 per share, of which 8,602.150538 shares of common stock are issued and outstanding immediately prior to the Share Exchange.

 

(b) Convertible Securities. Enviro has furnished or made available accurate and complete copies or detailed descriptions of any and all outstanding warrants, options or other securities convertible into or exchangeable or exercisable for common stock.

 

(c) Registration and Preemptive Rights. Enviro has furnished or made available accurate and complete copies or detailed descriptions of any and all agreements and obligations with respect to any registration rights or preemptive rights.

 

(d) Voting Agreements; Encumbrances. Enviro has furnished or made available accurate and complete copies or detailed descriptions of any and all voting trusts, shareholder agreements or other voting arrangements, capacities, charges, liens or encumbrances on any shares of Enviro’s capital stock that have been entered into among the shareholders of Enviro.

 

(e) Duly Authorized, Validly Issued, Fully Paid and Non-Assessable. All of the issued and outstanding shares of the capital stock of Enviro immediately prior to this Share Exchange are, and all shares of the capital stock of Enviro when issued in accordance with the terms hereof will be, duly authorized, validly issued, fully paid and non-assessable, will have been issued in compliance with all applicable U.S. federal and state securities laws and state corporate laws. The issuance of all of the capital stock of Enviro described in this Section 3.2 have been, or will be, as applicable, in compliance with U.S. federal and state securities laws and state corporate laws and no shareholder of Enviro has any right to rescind or bring any other claim against Enviro for failure to comply with the Securities Act, or state securities laws.

 

 

Section 3.3 Validity and Enforceability of Agreements, This Agreement constitutes the valid and legally binding obligation of Enviro and is enforceable in accordance with its terms, except as such enforcement may be limited by general equitable principles, or by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors rights generally.

 

Section 3.4 Subsidiaries. Enviro does not have any subsidiaries and does not own, beneficially or of record, any shares of or control any other corporation, or equity interests in any other entity.

 

Section 3.5 Intellectual Property; Assets; Title to Assets. Enviro has furnished or made available accurate and complete copies or detailed descriptions of any and all of the principal assets or properties of Enviro (the “Enviro Principal Assets”). Enviro has good and marketable title to the Enviro Principal Assets, free and clear of all mortgages, liens, claims or encumbrances of any land or any conditional sale agreement or other title retention agreement. The Enviro Principal Assets constitute all patents, licenses, permits, consents, approvals or authorizations of governments, governmental authorities or quasi-governmental authorities (both United States and foreign) currently owned or held by Enviro in connection with its business (the “Enviro Patents, Licenses and Permits”), and Enviro is the owner or exclusive licensee of each such Enviro Patents, License and Permit. No claims made by third parties with respect to any of the Enviro Patents, Licenses and Permits are pending. There are no decrees, licenses, sublicenses, agreements or limitations now in effect relating to any of the Enviro Patents, Licenses and Permits and there has been no notice to Enviro that any Enviro Patents, License or Permit infringes the rights of any third party or is being infringed by any third party.

 

Section 3.6 Trademarks, Tradenames, etc. Enviro has furnished or made available accurate and complete copies or detailed descriptions of any and all registered or unregistered copyrights, trademarks, tradenames, service marks, service names, slogans or assumed names (nor are any of the same used or held for use) used in connection with the conduct of its business (the “Enviro Trademarks”), all of which are owned by Enviro. No claims made by third parties with respect to any of the Enviro Trademarks are pending. There are no decrees, licenses, sublicenses, agreements or limitations now in effect relating to any of the Enviro Trademarks and there has been no notice to Enviro that any Enviro Trademark infringes the rights of any third party or is being infringed by any third party.

 

Section 3.7 Enviro Material Contracts. Enviro has furnished or made available accurate and complete copies or detailed descriptions of the Enviro Material Contracts (defined below), including tire Enviro Patents, Licenses and Permits. With respect to any Enviro Material Contract, Enviro is not aware of any existing breach, default or event of default by Enviro, or event that with notice or lapse of time or both would constitute a breach, default or event of default by Enviro, other than breaches, defaults or events of default that would not have a Material Adverse Effect on the business, assets or prospects of Enviro, nor does Enviro know of, and Enviro has not received notice of, or made a claim with respect to, any breach or default by any other party thereto that would, severally or in the aggregate, have a Material Adverse Effect. As used herein, the term “Enviro Material Contracts” shall mean all (i) employee benefit plans, share option schemes or agreements and employment, consulting or similar contracts, (ii) contracts that involve remaining aggregate payments by Enviro in excess of $10,000 or which have a remaining term in excess of two years, (iii) insurance policies, and (iv) all contracts that would, if terminated, have a Material Adverse Effect.

 

 

Section 3.8 Financial Statements. Except as set forth in Enviro Schedules:

 

(a) Enviro Financial Statements. Enviro has as Enviro Schedule 3.9 correct and complete copies of audited consolidated balance sheets of Enviro as of December 31,2020 and 2019, and the related audited consolidated statements of operations for the years ended December 31, 2020 and 2019 (collectively, the “Enviro Financial Statements”).

 

(b) Generally Accepted Accounting Principles. The Enviro Financial Statements were prepared in accordance with United States generally accepted accounting principles applied on a consistent basis throughout the periods involved and fairly present in ail material respects the consolidated financial position and the consolidated results of operations and cash flows of Enviro and its consolidated subsidiaries, in each case as of the dates and for tire periods referred to therein, except as set forth in tire notes thereto, and except that the unaudited interim financial statements contained in the Enviro Financial Statements do not include footnotes and are subject to normal, recurring year-end audit adjustments.

 

(c) Tax Returns and Payment. Enviro has duly and timely filed all material tax returns required to be filed by it and has duly and timely paid all taxes, of any kind or form, shown thereon to be due,

 

Section 3.9 Governmental Authorizations and Third-Party Consents.

 

(a) Governmental Approvals. No authorization, consent or approval or other order or action of or filing or registration with any court, administrative agency, or other governmental or regulatory body or authority is required for the execution and delivery by Enviro of this Agreement or Enviro’s consummation of the transactions contemplated hereby.

 

(b) Permits. Enviro is not required to have any licenses, franchises, permits, and other government authorizations, that are legally required to enable it to conduct its business operations in all material respects as conducted on the date hereof.

 

(c) Third-Party Consents. Except for compliance with federal and state securities or corporation laws, as hereinafter provided, and except as set forth in the Enviro Material Contracts, no authorization, approval, waiver, consent, or order of, or registration, declaration, or filing with, any court or other governmental body, or any third party, including a party to any agreement with Enviro, is required in connection with the execution and delivery by Enviro of this Agreement and the consummation by Enviro of the transactions contemplated hereby.

 

(d) No Contravention. The execution of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in the breach of any term or provision of, constitute a default under, or terminate, accelerate or modify the terms of any indenture, mortgage, deed of trust, or other material agreement, or instrument to which Enviro is a party or to which any of its assets, properties or operations are subject.

 

Section 3.10 Litigation and Proceedings. There are no actions, suits, proceedings, or investigations pending or, to the knowledge of Enviro after reasonable investigation, threatened by or against Enviro or affecting Enviro or its properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind. Enviro does not have any knowledge of any material default on its part with respect to any judgment, order, injunction, decree, award, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality.

 

 

Section 3.11 Compliance With Laws and Regulations. To the best of its knowledge, Enviro has complied with all applicable statutes and regulations, except to the extent that noncompliance would not result in a Materially Adversely Effect. This compliance includes, but is not limited, to, the filing of all reports to date with federal and state securities authorities. Enviro has not received any notice of any violation of any, applicable law, order, ordinance, regulation or rule of any kind whatsoever, including without limitation the Securities Act, the Exchange Act, the applicable rules and regulations of the SEC or the applicable securities laws and rules and regulations of any state.

 

Section 3.12 Interested Party Transactions. Enviro has furnished or made available accurate and complete copies or detailed descriptions of any and all of Enviro’s indebtedness to any of its officer or directors (except for amounts due as normal salaries and bonuses and In reimbursement of ordinary expenses), and any indebtedness of any such person to Enviro, and there are no other transactions of the type that would be required to be disclosed pursuant to Items 402 or 404 of Regulation S-K under the Securities Act and the Exchange Act.

 

Section 3.13 Finders’ Fees. Enviro has not incurred, nor will it incur, directly or indirectly, any liability for brokers’ or finders’ fees or agents’ commissions or investment bankers’ fees or any similar charges in connection with this Agreement or any transaction contemplated hereby.

 

Section 3,14 Money Laundering Laws. The operations of Enviro are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the money laundering statutes of all U.S. and non-U.S. jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental body, agency or instrumentality (collectively, the “Money Laundering Laws”) and no Action involving Enviro with respect to the Money Laundering Laws is pending or, to the knowledge of Enviro, threatened.

 

Section 3.15 Absence of Undisclosed Liabilities. Except as specifically disclosed in the Enviro Schedules, since December 31, 2020: (a) there has been no event, occurrence or development that has resulted in or could result in a Material Adverse Effect; (b) Enviro has not incurred any liabilities, obligations, claims or losses, contingent or otherwise, including debt obligations, other than professional fees to be paid prior to Closing; (c) Enviro has not declared or made any dividend or distribution of cash or property to its shareholders, purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, or issued any equity securities other than with respect to transactions contemplated hereby; (d) Enviro has not made any loan, advance or capital contribution to or investment in any person or entity; (e) Enviro has not discharged or satisfied any Hen or encumbrance or paid any obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business; (f) Enviro has not suffered any losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of prospective business; (g) except for the Share Exchange, Enviro has not entered into any transaction other than in the ordinary course of business, or entered into any other material transaction, whether or not in the ordinary course of business; (h) made any accrual or arrangement for or payment of bonuses or special compensation of any kind or any severance or termination pay to any present or former officer or employee; (i) increased the rate of compensation payable or to become payable by it to any of its officers or directors or any of its employees; or (j) made any increase in any profit sharing, bonus, deferred compensation, insurance, pension, retirement, or other employee benefit plan, payment, or arrangement, made to, for, or with its officers, directors, or employees.

 

 

Section 3.16 No Undisclosed Events or Circumstances. No event or circumstance has occurred or exists with respect to Enviro or its respective business, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by Enviro but which has not been so publicly announced or disclosed.

 

Section 3.17 Enviro Schedules. Enviro has delivered to in connection with this Agreement the following schedules, which are collectively referred to as the “Enviro Schedules” and which consist of separate schedules, which are dated the date of this Agreement, all certified by the chief executive officer of Enviro to be complete, true, and accurate in all material respects as of the date of this Agreement: (a) a schedule of any exceptions to the representations made herein; and (b) a schedule containing the other information requested herein.

 

Section 3.18 Material Information. To the knowledge of Enviro, this Agreement and any certificate or schedule attached hereto or delivered in accordance with the terms hereof by or on behalf of Enviro in connection with the transactions contemplated by this Agreement, when taken together, do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained herein and/or therein not misleading.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

OF THE ENVIRO THERAPEUTICS, INC. SHAREHOLDERS

 

Each of the Enviro Shareholders, hereby severally and not jointly represents, warrants and agrees that all of the statements in the following subsections of this Article IV are true and complete as of the date hereof, except as set forth in the Enviro Shareholders Schedules (defined below):

 

Section 4.1 Authority. Each Enviro Shareholder has the right, power, authority and capacity to execute and deliver this Agreement to which such Enviro Shareholder is each a party, to consummate the transactions contemplated by this Agreement, and to perform such Enviro Shareholder’s obligations under this Agreement This Agreement has been duly and validly authorized and approved, executed and delivered by such Enviro Shareholder, and constitutes the legal, valid and binding obligations of such Enviro Shareholder, enforceable against such Enviro Shareholder in accordance with their respective terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors rights generally.

 

 

Section 4.2 No Conflict. Neither the execution or delivery by such Enviro Shareholder of this Agreement nor the consummation or performance by such Enviro Shareholder of the transactions contemplated hereby will, directly or indirectly, (a) contravene, conflict with, or result in a violation of any provision of the organizational documents of such Enviro Shareholder (if such Enviro Shareholder is not a natural person); (b) contravene, conflict with, constitute a default (or an event or condition which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or acceleration of, any agreement or instrument to which any of such Enviro Shareholder is a party or by which the properties or assets of such Enviro Shareholders is bound; or (c) contravene, conflict with, or result in a violation of, any law or order to which any of such Enviro Shareholder, or any of the properties or assets of such Enviro Shareholder, may be subject.

 

Section 4.3 Litigation. There is no pending Action against such Enviro Shareholder that involves the Enviro Shares or that challenges, or may have the effect of preventing, delaying or making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement or the business of Enviro and, to the knowledge of such Enviro Shareholder, no such Action has been threatened, and no event or circumstance exists that is reasonably likely to give rise to or serve as a basis for the commencement of any such Action.

 

Section 4.4 Ownership of Shares. Such Enviro Shareholder is both the record and beneficial owner of the Enviro Shares held by such Enviro Shareholder, Such Enviro Shareholder is not the record or beneficial owner of any other shares of Enviro. Such Enviro Shareholder has and shall transfer at the Closing, good and marketable title to the Enviro Shares held by such Enviro Shareholder, tree and clear of all liens, claims, charges, encumbrances, pledges, mortgages, security interests, options, rights to acquire, proxies, voting trusts or similar agreements, restrictions on transfer or adverse claims of any nature whatsoever, excepting only restrictions on future transfers imposed by applicable agreements or law.

 

Section 4.5 Pre-emptive Rights. Such Enviro Shareholder has no pre-emptive rights or any other rights to acquire any shares of Enviro that have not been disclosed as part of the Enviro Material Contracts, waived or exercised.

 

Section 4.6 Restricted Securities. Such Enviro Shareholder (a) is acquiring the Company Shares for his or its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act; (b) understands that the Company Shares are being issued in reliance on specific exemptions from the registration requirements of United States federal and state securities laws; (c) is an “accredited investor” as that term is defined in Rule 501 of Regulation D (and for any foreign Enviro Shareholder, if applicable, is acquired pursuant to the requirements of Regulation D and Regulation S and in compliance with applicable foreign securities laws and regulations) and (d) understands that the Company Shares have not been and will not he registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (i) subsequently registered thereunder, (ii) such Enviro Shareholder shall have delivered to the Company an opinion of counsel to the effect that such securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration or (iii) such Enviro Shareholder provides the Company with reasonable assurance that such securities can be sold, assigned or transferred in compliance with an exemption from registration under the Securities Act. Furthermore, any foreign Enviro Shareholder, if applicable, understands that the Company Shares may not be offered for sale, sold, assigned or transferred unless done in compliance with applicable securities laws and regulations in the U.S. (or such foreign jurisdiction) as applicable. If the Enviro Shareholder is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code), the Enviro Shareholder hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Company Shares or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Company Shares, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Company Shares. The Enviro Shareholder’s subscription and payment for and continued beneficial ownership of the Company Shares will not violate any applicable securities or other laws of the Enviro Shareholder’s jurisdiction.

 

Section 4.7 Legends. The Enviro Shareholders understand that the Company Shares and any securities issued in respect of or exchange for the Company Shares, may be notated with a legend as substantially set forth below:

 

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933”

 

Section 4.8 Disclosure. Such Enviro Shareholder (a) has been furnished with or has been given access to all materials relating to the business, finances and operations of the Company and materials relating to the Company Shares which have been requested by such Enviro Shareholder; (b) is familiar with the business, operations, and financial condition of the Company; (c) understand that an investment in the Company Shares involves a high degree of risk; (d) has sought such accounting, legal and tax advice as he or it deemed necessary to make an informed investment decision with respect to the Share Exchange and (e) understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Company shares or the fairness of the Share Exchange contemplated hereby, nor have such authorities passed upon or endorsed the merits of the Share Exchange.

 

Section 4.9 Enviro Shareholder Schedules. Such Enviro Shareholder has delivered to the Company and the following schedules, which are collectively referred to as the “Enviro Shareholder Schedules” and which consist of separate schedules, which are dated the date of this Agreement, all certified by each of the Enviro Shareholders to be complete, true, and accurate in all material respects as of the date of this Agreement: (a) a schedule of any exceptions to the representations made herein; and (b) a schedule containing the other information requested herein.

 

 

ARTICLE V

CONDITIONS TO OBLIGATIONS OF THE ENVIRO THERAPEUTICS, INC.

SHAREHOLDERS

 

The obligations of Enviro and the Enviro Shareholders to consummate the transactions contemplated by this Agreement are subject to the fulfillment, at or before the Closing Date, of the following conditions, any one or more of which may be waived by Enviro or the Enviro Shareholders, as the case may be, in their sole discretion:

 

Section 5.1 Representations and Warranties of the Company. All representations and warranties made by the Company in this Agreement shall be true and correct in all material respects on and as of the Closing Date.

 

Section 5.2 Agreements and Covenants. The Company shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with on or prior to the Closing Date.

 

Section 5.3 Consents and Approvals. All consents, waivers, authorizations and approvals of any governmental or regulatory authority, domestic or foreign, and of any other person, firm or corporation, required in connection with the execution, delivery and performance of this Agreement shall be in full force and effect on the Closing Date.

 

Section 5.4 No Violation of Orders. No preliminary or permanent injunction or other order issued by any court or governmental or regulatory authority, domestic or foreign, nor any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, which declares this Agreement invalid in any respect or prevents the consummation of the transactions contemplated hereby, or which materially and adversely affects the assets, properties, operations, prospects, net income or financial condition of the Company shall be in effect; and no action or proceeding before any court or governmental or regulatory authority, domestic or foreign, shall have been instituted or threatened by any government or governmental or regulatory authority, domestic or foreign, or by any other person or entity, which seeks to prevent or delay the consummation of the transactions contemplated by this Agreement or which challenges the validity or enforceability of this Agreement.

 

Section 5.5 Documents. The Company must have caused the following documents to be delivered to Enviro:

 

(a) Executed Agreement. This Agreement duly executed;

 

(b) Assignment of Contracts. All executed forms of assignment for any of the Company’s agreements with third-party that must he assigned, as may be applicable.

 

(c) Consents; Approvals. All necessary consents and approvals of the Company’s Boards of Directors and shareholders, if required, and all consents, approvals, permits and authorizations required under their respective charter documents, and all consents, including any material consents and waivers by the Company’s lenders and other third-parties, if necessary, to the consummation of the transactions contemplated by this Agreement.

 

 

(d) Minute Book. The original minute book(s) of the Company, including those of any applicable predecessors.

 

(e) Resolutions. Copies of all applicable resolutions, filings and other documents establishing, in form and substance acceptable to Enviro and the Enviro Shareholders, that the transactions contemplated by this Agreement were fully authorized by all appropriate action on the part of the Company certified by an officer of the Company.

 

(f) Good Standing Certificates, Current good standing certificates or the equivalent for the Company from its jurisdiction of formation and, from each other jurisdiction, if any, in which the Company is qualified or registered to do business as a foreign company.

 

(g) Other Documents, Such other documents as Enviro or the Enviro Shareholders may reasonably request for the purpose of (i) evidencing the accuracy of any of the representations and warranties of the Company, (ii) evidencing the performance of, or compliance by the Company with any covenant or obligation required to be performed or complied with by the Company, (iii) evidencing the satisfaction of any condition referred to in this Article V, or (iv) otherwise facilitating the consummation or performance of any of the transactions contemplated by this Agreement.

 

Section 5.6 No Material Adverse Effect. There shall not have been any event, occurrence or development that has resulted in or could result in a Material Adverse Effect on or with respect to the Company.

 

Section 5.7 Satisfactory Due Diligence, Enviro and the Enviro Shareholders shall be satisfied in all respects with the results of its due diligence review of the Company.

 

Section 5.8 Liabilities or Agreements. As of the Closing, the Company shall have no debts and no liabilities of any nature nor any contractual or other obligations to the knowledge of the Company except as set forth in the Company Schedules.

 

Section 5.9 Taxes. Any unpaid taxes of the Company, if any, shall be fully and completely settled prior to the Closing,

 

ARTICLE VI

CONDITIONS TO OBLIGATIONS OF THE COMPANY

 

The obligations of the Company to consummate the transactions contemplated by this Agreement are subject to the fulfillment, at or before the Closing Date, of the following conditions, any one or more of which may be waived by tire Company in its sole discretion:

 

Section 6.1 Representations and Warranties of Enviro and the Enviro Shareholders. All representations and warranties made by Enviro and the Enviro Shareholders on behalf of themselves individually in this Agreement shall be true and correct on and as of the Closing Date.

 

 

Section 6.2 Agreements and Covenants. Enviro and the Enviro Shareholders shall have performed and, complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by each of them on or prior to the Closing Date.

 

Section 6.3 Consents and Approvals. All consents, waivers, authorizations and approvals of any governmental or regulatory authority, domestic or foreign, and of any other person, firm or corporation, required in connection with the execution, delivery and performance of this Agreement, shall have been duly obtained and shall be in full force and effect on the Closing Date.

 

Section 6.4 No Violation of Orders. No preliminary or permanent injunction or other order issued by any court or other governmental or regulatory authority, domestic or foreign, nor any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, domestic or foreign, that declares this Agreement invalid or unenforceable in any respect or which prevents the consummation of the transactions contemplated hereby, or which materially and adversely affects the assets, properties, operations, prospects, net income or financial condition of Enviro shall be in effect; and no action or proceeding before any court or government or regulatory authority, domestic or foreign, shall have been instituted or threatened by any government or governmental or regulatory authority, domestic or foreign, or by any other person or entity, which seeks to prevent or delay the consummation of the transactions contemplated by this Agreement or which challenges the validity or enforceability of this Agreement.

 

Section 6.5 Documents. Enviro and the Enviro Shareholders must deliver to the Company at the Closing:

 

(a) Executed Agreement. This Agreement duly executed;

 

(b) Assignment of Contracts. All executed forms of assignment for any of the Company’s agreements with third-party that must be assigned, as may be applicable,

 

(c) Consents; Approvals. All necessary consents and approvals of the Enviro’s Boards of Directors and the Enviro Shareholders, if required, and all consents, approvals, permits and authorizations required under their respective charter documents, and all consents, including any material consents and waivers by Enviro or the Enviro Shareholder’s lenders and other third-parties, if necessary, to the consummation of the transactions contemplated by this Agreement.

 

(d) Minute Book. The original minute book(s) of Enviro, including those of any applicable predecessors.

 

(e) Resolutions. Copies of all applicable resolutions, filings and other documents establishing, in form and substance acceptable to the Company, that the transactions contemplated by this Agreement were fully authorized by all appropriate action on the part of the Enviro certified by an officer of Enviro.

 

 

(f) Good Standing Certificates. Current good standing certificates or the equivalent for Enviro from its jurisdiction of formation and, from each other jurisdiction, if any, in which Enviro is qualified or registered to do business as a foreign company,

 

(g) Other Documents. Such other documents as the Company may reasonably request for the purpose of (i) evidencing the accuracy of any of the representations and warranties of Enviro and the Enviro Shareholders, (ii) evidencing the performance of, or compliance by Enviro and the Enviro Shareholders with, any covenant or obligation required to be performed or complied with by Enviro and the Enviro Shareholders, as the case may be, (iii) evidencing the satisfaction of any condition referred to in this Article VI, or (iv) otherwise facilitating the consummation or performance of any of the transactions contemplated by this Agreement

 

Section 6.6 Satisfactory Due Diligence. The Company shall be satisfied in all respects with the results of its due diligence review of Enviro.

 

Section 6.7 No Claim Regarding Stock Ownership or Consideration. There must not have been made or threatened by any person, any claim asserting that such person (a) is the holder of, or has the right to acquire or to obtain beneficial ownership of the Enviro Shares, or any other stock, voting, equity, or ownership interest in, Enviro, or (b) is entitled to all or any portion of the Company Shares.

 

ARTICLE VII

SURVIVAL, CONFIDENTIALITY AND POST-CLOSING COVENANTS

 

Section 7.1 Survival of Provisions. The respective representations, warranties, covenants and agreements of each of the parties to this Agreement (except covenants and agreements which are expressly required to be performed after the Closing Date) shall expire on the Closing Date, and each party to this Agreement acknowledges they will have no claims against any other party to this Agreement after the Closing Date.

 

Section 7.2 Post-Closing Covenants. As soon as possible after the Closing, the Company Board and Company’s shareholders, to the extent required, shall approve:

 

(a) any required amendment to amended and restated bylaws,

 

(b) other matters necessary or advisable in connection with this Agreement and the transactions contemplated hereby.

 

The Company shall use its commercially reasonable efforts to cause the conditions set forth in this Section 7.2 to be satisfied as soon as possible after the Closing.

 

Section 7.3 Further Assurances. Each of the parties hereto agrees that it will, from time to time after the date of the Agreement, execute and deliver such other certificates, documents and instruments and take such other action as may be reasonably requested by the other party to carry out the actions and transactions contemplated by this Agreement, including the closing conditions described in Articles V and VI. Enviro and the Enviro Shareholders shall reasonably cooperate with the Company in its obtaining of the books and records of Enviro, or in preparing any solicitation materials to be sent to the shareholders of the Company in connection with the approval of the Share Exchange and the transactions contemplated by this Agreement.

 

 

ARTICLE VIII

MISCELLANEOUS PROVISIONS

 

Section 8.1 Successors and Assigns. This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors and assigns; provided that no party shall assign or delegate any of the obligations created under this Agreement without the prior written consent of the other parties.

 

Section 8.2 Fees and Expenses. Except as otherwise expressly provided in this Agreement, all legal and other fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by each Party, as incurred respectively.

 

Section 8.3 Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been given or made if in writing and delivered personally or seven (7) days after being sent by registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses:

 

If to Enviro or the Enviro Shareholders, to:

 

2355 Westwood Boulevard #139

Los Angeles, California 90064

Attention: Neil Bhowmick, Chief Executive Officer of Enviro

 

If to the Company, to:

 

2355 Westwood Boulevard #139

Los Angeles, California 90064

Attention: John S. Yu, Chief Executive Officer of Kairos

 

With a copy to (which copy shall not constitute notice):

 

Baker & Hostetler, LLP

11601 Wilshire Boulevard, Suite 1400

Los Angeles, CA 90025-0509

Attention: Jeffrey P. Berg

 

or to such other persons or at such other addresses as shall be furnished by any party by like notice to the others, and such notice or communication shall be deemed to have been given or made as of the date so delivered or mailed. No change in any of such addresses shall be effective insofar as notices under this Section 8.3 are concerned unless notice of such change shall have been given to such other party hereto as provided in this Section 8.3.

 

 

Section 8.4 Entire Agreement. This Agreement, together with the exhibits hereto, represents the entire agreement and understanding of the parties with reference to the transactions set forth herein and no representations or warranties have been made in connection with this Agreement other than those expressly set forth herein or in the exhibits, certificates and other documents delivered in accordance herewith. This Agreement supersedes all prior negotiations, discussions, correspondence, communications, understandings and agreements between the parties relating to the subject matter of this Agreement and all prior drafts of this Agreement, all of which are merged into this Agreement. No prior drafts of this Agreement and no words or phrases from any such prior drafts shall be admissible into evidence in any action or suit involving this Agreement.

 

Section 8.5 Severability. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible so as to be valid and enforceable.

 

Section 8.6 Titles and Headings. The Article and Section headings contained in this Agreement are solely for convenience of reference and shall not affect the meaning or interpretation of this Agreement or of any term or provision hereof.

 

Section 8.7 Counterparts. This Agreement may be executed in two or more counterparts, including via electronic signatures (such as DocuSign), each of which shall be deemed an original and all of which together shall be considered one and the same agreement. Fax and PDF copies shall be considered originals for all purposes.

 

Section 8.8 Enforcement of the Agreement. The parties hereto agree that irreparable damage would occur if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereto, this being in addition to any other remedy to which they are entitled at law or in equity.

 

Section 8.9 Governing Law: Jurisdiction; Venue. This Agreement shall be governed by and interpreted and enforced in accordance with the laws of the State of California without giving effect to the choice of law provisions thereof. The parties irrevocably consent to the jurisdiction and venue of the state and federal courts located in Los Angeles County, California, in connection with any action.

 

Section 8.10 Amendments and Waivers. Except as otherwise provided herein, no amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by all of the parties hereto. No waiver by any party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any such prior or subsequent occurrence.

 

Section 8.11 California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE PARTIES, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION BEING AVAILABLE.

 

[Balance of Page Intentionally Left Blank]

 

 

[SIGNATURE PAGE TO SHARE EXCHANGE AGREEMENT]

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

	KAIROS PHARMA, LTD.
		/s/ John S. Yu
	Name:	John S. Yu
	Title:	Chief Executive Officer

 

	ENviro Therapeutics, Inc.
		/s/ Neil Bhowmick
	Name:	Neil Bhowmick
	Title:	Chief Executive Officer

 

	Enviro Shareholders
		/s/ John S. Yu
		John S. Yu
		/s/ Neil Bhowmick
		Neil Bhowmick

 

	TRacon Pharmaceuticals
		/s/ Charles Theuer
	Name:	Charles Theuer
	Title:	CEO

 

 

SCHEDULE I

 

ENVIRO SHAREHOLDERS

 

Beneficial Owner		Title of Class				Number of Shares
John S. Yu			Common				4,000
Neil Bhowmick			Common				4,000
Tracon Pharmaceuticals, Inc.			Common				602.150538

 

 

SCHEDULE II

 

ENVIRO ISSUEES

 

Beneficial Owner		Address		Common Shares
John S. Yu		2355 Westwood Boulevard #139		1,860,000
		Los Angeles, California 90064
Neil Bhowmick		2355 Westwood Boulevard #139		1,860,000
		Los Angeles, California 90064
Tracon Pharmaceuticals, Inc.1		4350 La Jolla Village Drive, Suite 800 San Diego CA 92122		280,000

 

¹ Pursuant to that certain License and Supply Agreement (the “Tracon Agreement”), dated May 28,2021 between Enviro and Tracon Pharmacouficals, Inc, (“Tracon”), Enviro issued Tracon equity ownership in Enviro equal to a number of shares of restricted common stock of Enviro equal to seven percent (7%) on a fully diluted and converted basis of all common and preferred shares of Enviro (the “Enviro Equity”), In connection with the Enviro-Kairos Share Exchange, the parties agreed that Tracon would receive, in exchange for its Enviro common stock, 280,000 shares of the restricted common stock of Kairos (which is equal to 1.41229% of the issued and outstanding shares of Kairos on a fully-diluted and converted basis) as the Enviro Equity. In the Kairos-BLAB Transaction, the parties agreed that Tracon would receive, in exchange for its Kairos common stock, approximately 1,366,835.92 shares of the restricted common stock of BLAB (which is equal approximately 1.271078% of the issued and outstanding shares of BLAB on a fully-diluted and converted basis) as the Enviro Equity. Until such time as Tracon has received all of the Cash Consideration (as defined in the Tracon Agreement), Enviro or its successor in interest, shall issue to Tracon, without further consideration, any additional common stock of Enviro, or such successor in interest, necessary so that Tracon maintains ownership of shares of Enviro, or such successor in interest, equal to the Enviro Equity on a fully-diluted and converted basis of all stock in Enviro (or its successor). Notwithstanding the foregoing, if Tracon receives the foil Cash Consideration within six (6) months of the effective date of the Tracon Agreement, then Tracon shall automatically return to Enviro (or any successor entity, if applicable) a number of shares of the restricted common stock of Enviro (or its successor) such that upon such return of shares Tracon shall possess an amount of shares in Enviro (or its successor) equal to two percent (2%) on a fully-diluted and converted basis relative to foe other Enviro shareholders who exchanged their shares in foe Enviro-Kairos Exchange. The returned portion of foe Enviro Equity shall automatically be terminated, cancelled and of no further force and effect.  

 

 

Exhibit 3.1

 

	FILED
	Secretary of State
	State of California
	JUL 15, 2016

 

Certificate of Amendment of Articles of Incorporation

 

The undersigned certify that:

 

1. They are the president and the secretary, respectively, of NanoGB13, Inc., a California corporation.

 

2. Article 1 of the Articles of Incorporation of this corporation is amended to read as follows:

 

The name of the Corporation is Kairos Pharma, Ltd.

 

3. The foregoing amendment of Articles of Incorporation has been duly approved by the board of directors.

 

4. The foregoing amendment of Articles of Incorporation has been duly approved by the required vote of shareholders in accordance with Section 902, California Corporations Code. The total number of outstanding shares of the corporation is 1,000.

 

The number of shares voting in favor of the amendment equaled or exceeded the vote required.

 

The percentage vote required was more than 50%.

 

We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge.

 

DATE: July 8, 2016
/s/ Silvan B. Lutkewitte
Silvan B. Lutkewitte, President
/s/ John S. Yu, M.D
John S. Yu, M.D., Secretary

 

 

 

Exhibit 3.2

 

	FILED
	Secretary of State
	State of California
	NOV 12, 2019

 

AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
KAIROS PHARMA, LTD.

 

John Yu hereby certifies that:

 

(i) He is the President and Secretary of Kairos Pharma, Ltd., a California corporation (the “Corporation”).

 

(ii) The Articles of Incorporation of the Corporation are hereby amended and restated in full to read in their entirety as set forth in Exhibit A attached hereto and are incorporated by reference as if fully set forth herein.

 

(iii) The Articles of Incorporation have been duly approved by the required vote of the Board of Directors of the Corporation in accordance with Section 901 of the California Corporations Code.

 

(iv) The Articles of Incorporation have been duly approved by the required vote of the shareholders of the Company entitled to vote in accordance with the articles of incorporation of the Company and Sections 902 and 903 of the California Corporations Code. The total number of outstanding shares entitled to vote with respect to the foregoing articles of incorporation was 580 shares. The number of shares voting in favor of the Articles of Incorporation equaled or exceeded the vote required. The percentage vote required was a majority of the outstanding shares.

 

The undersigned declares under penalty of perjury that the matters set forth in the foregoing certificate are true and correct of his own knowledge.

 

Date: November 12, 2019
Los Angeles, California	/s/ John Yu
	John Yu
	President and Secretary

 

 

EXHIBIT A

 

ARTICLE I.

 

The name of this Corporation is Kairos Pharma, Ltd.

 

ARTICLE II.

 

The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.

 

ARTICLE III.

 

A. Effective upon the filing of this Amended and Restated Articles of Incorporation with the Secretary of State for the State of California, a 7,380.96 for 1 forward split of the outstanding Common Stock of the Corporation shall occur pursuant to which each 1 share of outstanding Common Stock of the Corporation shall be converted into 7,380.96 shares of Common Stock (the “Forward Split’’). All share and per share references herein reflect the Corporation’s Common Stock as existing after such Forward Split. No fractional shares of Common Stock shall be issued in the Forward Split, but in lieu thereof each holder of Common Stock who would otherwise have been entitled to a fraction of a share of Common Stock shall be paid cash equal to such fraction times the fair market value of Common Stock as determined by the Corporation’s Board of Directors.

 

B. This Corporation is authorized to issue one class of shares to be designated Common Stock (“Common Stock”). The total number of shares of capital stock that the Corporation is authorized to issue is Thirty-Five Million (35,000,000), all of which shall be designated Common Stock. The Common Stock shall have a par value of $0.01 per share.

 

C. The powers, preferences, privileges, rights, restrictions, and other matters relating to the Common Stock are as follows:

 

1. Redemption. The Common Stock is not redeemable by any holder thereof.

 

2. Voting Rights. Each holder of Common Stock shall have the right to one vote per share of Common Stock, and shall be entitled to notice of any shareholders’ meeting in accordance with the Bylaws of the Corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law.

 

ARTICLE IV.

 

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors shall have the power, both before and after receipt of any payment for any of the Corporation’s capital stock, to adopt, amend, repeal or otherwise alter the Bylaws of the Corporation without any action on the part of the shareholders except as provided in Section 212 of the California Corporations Code.

 

 

ARTICLE V.

 

1. Limitation of Directors’ Liability. The liability of the directors of this Corporation for monetary damages shall be eliminated to the fullest extent permissible under California law.

 

2. Indemnification of Corporate Agents. This Corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California Corporations Code) through bylaw provisions, agreements with agents, votes of shareholders or disinterested directors or otherwise, in excess of the indemnification otherwise permitted by Section 317 of the California Corporations Code, subject only to the applicable limits set forth in Section 204 of the California Corporations Code with respect to actions for breach of duty to this Corporation and its shareholders.

 

3. Repeal or Modification. Any repeal or modification of the foregoing provisions of this Article V shall not adversely affect any right of indemnification or limitation of liability of an agent of this Corporation relating to acts or omissions occurring prior to such repeal or modification.

 

* * *

 

 

 

Exhibit 3.3

 

California Secretary of State Business Programs Division 1500 11th Street, Sacramento, CA 95814

 

 

KAIROS PHARMA, LTD.

2355 WESTWOOD BLVD. #139

LOS ANGELES, CA 90064

 

Business Amendment Filing Approved

 

May 12, 2023

 

Entity Name: KAIROS PHARMA, LTD.

Entity Type: Stock Corporation - CA - General

Entity No.: 3580096

Document Type: Conversion to Nonqualified Entity .

Document No.: BA20230776950

File Date: 05/10/2023

 

The above referenced document has been approved and filed with the California Secretary of State. To access free copies of filed documents, go to bizfileOnline.sos.ca.gov and enter the entity name or entity number in the Search module.

 

What’s Next?

 

The most up to date records may be obtained by searching for the Entity Name or Entity Number in the Search module at bizfileOnline.sos.ca.gov.

 

For further assistance, contact us at (916) 657-5448 or visit bizfileOnline.sos.ca.gov.

 

Thank you for using bizfile California, the California Secretary of State’s business portal for online filings, searches, business records, and additional resources.

 

 

California Secretary of State Business Programs Division 1500 11th Street, Sacramento, CA 95814

 

 

Request Type: Certified Copies	Issuance Date: 05/11/2023
Entity Name: KAIROS PHARMA, LTD.	Copies Requested: 1
Formed In: CALIFORNIA	Receipt No.: 004203192
Entity No.: 3580096 Entity Type: Stock Corporation - CA - General	Certificate No.: 107602823

 

 

Document Listing
Reference #		Date Filed		Filing Description		Number of Pages
B1699-4983		05/10/2023		Conversion to Nonqualified Entity		1

 

**    ****     ******    End of list    ******    ****    **

 

 

I, SHIRLEY N. WEBER, PH.D., California Secretary of State, do hereby certify on the Issuance Date, the attached document(s) referenced above are true and correct copies and were filed in this office on the date(s) indicated above.

 

		IN WITNESS WHEROF, I execute this Certificate and affix the great seal of the State of California on May 11,2023
		/s/ SHIRLEY N. WEBER, PH.D.
		SHIRLEY N. WEBER, PH.D.
		Secretary of State

 

To verify the issuance of this Certificate, use the Certificate No. above with the Secretary of State Certification Verification Search available at bizfileQnline.sos.ca.gov.

 

 

 

 

 

Exhibit 3.4

 

State of Delaware
Secretary of State
Division of Corporations
Delivered 04:05 PM 05/10/2023
FILED 04:05 PM 05/10/2023
SR 20231949280 - File Number 7454140

 

STATE OF DELAWARE

CERTIFICATE OF CONVERSION

FROM A NON-DELAWARE CORPORATION

TO A DELAWARE CORPORATION

PURSUANT TO SECTION 265 OF THE

DELAWARE GENERAL CORPORATION LAW

 

1.)	The jurisdiction where the Non-Delaware Corporation first formed is California.
2.)	The jurisdiction immediately prior to filing this Certificate is California.
3.)	The date the Non-Delaware Corporation first formed is 06/17/2013.
4.)	The name of the Non-Delaware Corporation immediately prior to filing this Certificate is Kairos Pharma, Ltd.
5.)	The name of the Corporation as set forth in the Certificate of Incorporation is Kairos Pharma, Ltd.

 

IN WITNESS WHEREOF, the undersigned being duly authorized to sign on behalf of the converting Non-Delaware Corporation have executed this Certificate on the 10th________ day of May_________ , A.D.2023_______.

 

	By:	/s/ John Sun Yu
	Name:	John Sun Yu
		Print or Type
	Title:	Chief Executive Officer
		Print or Type

 

 

CERTIFICATE OF INCORPORATION
OF

KAIROS PHARMA, LTD.

 

ARTICLE I

 

The name of this Corporation is Kairos Pharma, Ltd.

 

ARTICLE 11

 

Its registered office in the State of Delaware is to be located at 108 W. 13th St, Ste 100, in the City of Wilmington, County of New Castle, Zip Code 19801. The registered agent in charge thereof is Vcorp Agent Services, Inc.

 

ARTICLE III

 

The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware (“DGCL”), as the same exists or as may hereafter be amended from time to time.

 

ARTICLE IV

 

4.1 Authorized Capital Stock. The total number of shares of all classes of capital stock that the Corporation is authorized to issue is One Hundred and Twenty Million (120,000,000) shares, consisting of One Hundred Million (100,000,000) shares of Common Stock, par value $0,001 per share (the “Common Stock”), and Twenty Million (20,000,000) shares of Preferred Stock, par value $0,001 per share (the “Preferred Stock”).

 

4.2 Increase or Decrease in Authorized Capital Stock. The number of authorized shares of Preferred Stock or Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote generally in the election of directors, irrespective of the provisions of Section 242(b)(2) of the DGCL (or any successor provision thereto), voting together as a single class, without a separate vote of the holders of the class or classes the number of authorized shares of which are being increased or decreased, unless a vote by any holders of one or more series of Preferred Stock is required by the express terms of any series of Preferred Stock as provided for or fixed pursuant to the provisions of Section 4.4 of this Article IV.

 

4.3 Common Stock.

 

(a) The holders of shares of Common Stock shall be entitled to one vote for each such share on each matter properly submitted to the stockholders on which the holders of shares of Common Stock are entitled to vote. Except as otherwise required by law or this certificate of incorporation (this “Certificate of Incorporation” which term, as used herein, shall mean the certificate of incorporation of the Corporation, as amended from time to time, including the terms of any certificate of designations of any series of Preferred Stock), and subject to the rights of the holders of Preferred Stock, at any annual or special meeting of the stockholders the holders of shares of Common Stock shall have the right to vote for the election of directors and on all other matters properly submitted to a vote of the stockholders; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation that relates solely to the terms, number of shares, powers, designations, preferences, or relative participating, optional or other special rights (including, without limitation, voting rights), or to qualifications, limitations or restrictions thereon, of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one more other such series, to vote thereon pursuant to this Certificate of Incorporation (including, without limitation, by any certificate of designations relating to any series of Preferred Stock) or pursuant to the DGCL.

 

State of Delaware
Secretary of State
Division of Corporations
Delivered 04:05 PM 05/10/2023
FILED 04:05 PM 05/10/2023
SR 20231949280 - File Number 7454140

 

 

(b) Subject to the rights of the holders of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive such dividends and other distributions (payable in cash, property or capital stock of the Corporation) when, as and if declared thereon by the Board of Directors of the Corporation (the “Board of Directors”) from time to time out of any assets or funds of the Corporation legally available therefor and shall share equally on a per share basis in such dividends and distributions.

 

(c) In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, and subject to the rights of the holders of Preferred Stock in respect thereof, the holders of shares of Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of Common Stock held by them.

 

4.4 Preferred Stock.

 

(a) The Preferred Stock may be issued from time to time in one or more series pursuant to a resolution or resolutions providing for such issue duly adopted by the Board of Directors (authority to do so being hereby expressly vested in the Board of Directors). The Board of Directors is further authorized, subject to limitations prescribed by law, to fix by resolution or resolutions and to set forth in a certification of designations filed pursuant to the DGCL the powers, designations, preferences, participation, optional or other rights, if any, and the qualifications, limitations or restrictions thereof, if any, of any wholly unissued series of Preferred Stock, including without limitation authority to fix by resolution or resolutions that dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including, without limitation, sinking fund provisions), redemption price or prices, and liquidation preferences of any such series, and the number of shares constituting any such series and the designation thereof, or any of the foregoing.

 

(b) The Board of Directors is further authorized to increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares of any such series then outstanding) the number of shares of any series, the number of which was fixed by it, subsequent to the issuance of shares of such series then outstanding, subject to the powers, preferences and rights, and the qualifications, limitations and restrictions thereof stated in the Certificate of Incorporation or the resolution of the Board of Directors originally fixing the number of shares of such series. If the number of shares of any series is so decreased, then the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.

 

4.5 Reverse Stock Split. Upon the effectiveness (the “Effective Time”) of this Certificate of Incorporation, each of two and one-half (2.5) shares of the Corporation’s Common Stock issued and outstanding immediately prior to the Effective Time (the “Old Common Stock”) shall automatically and without further action on the part of the Corporation or any holder of Old Common Stock, be reclassified, combined, and changed into one (1) fully paid and nonassessable share of common stock, par value $0,001 per share (the “New Common Stock”), subject to the treatment of fractional share interests as described below (the “Reverse Stock Split”). From and after the Effective Time, certificates representing the Old Common Stock shall represent the number of shares of New Common Stock into which the Old Common Stock shall have been combined pursuant to this Certificate of Incorporation. Holders who otherwise would be entitled to receive fractional share interests of New Common Stock upon the effectiveness of the Reverse Stock Split shall be entitled to receive a whole share of New Common Stock in lieu of any fractional share created as a result of such Reverse Stock Split.

 

ARTICLE V

 

5.1 General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.

 

5.2 Number of Directors: Election: Term.

 

(a) Subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, the number of directors that constitutes the entire Board of Directors shall be fixed solely by resolution of the Board of Directors.

 

 

(b) Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

 

5.3 Removal. Subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, a director may be removed from office by the stockholders of the Corporation only for cause and only by the affirmative vote of fire holders of at least two-thirds of the voting power of the then-outstanding shares of capital stock of the Corporation then entitled to vote at an election of directors. No decrease in the authorized number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

 

5.4 Vacancies and Newly Created Directorships. Subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, and except as otherwise provided in the DGCL, vacancies occurring on the Board of Directors for any reason and newly created directorships resulting from an increase in the authorized number of directors may be filled only by vote of a majority of the remaining members of the Board of Directors, although less than a quorum, or by a sole remaining director, at any meeting of the Board of Directors. A person so elected by the Board of Directors to fill a vacancy or newly created directorship shall hold office until the next election of the class for which such director shall have been assigned by the Board of Directors and until his or her successor shall be duly elected and qualified.

 

ARTICLE VI

 

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, amend or repeal the Bylaws of the Corporation.

 

ARTICLE VII

 

7.1 Advance Notice. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation. Business transacted at special meetings of stockholders shall be confined to the purpose or purposes stated in the notice of meeting.

 

7.2 Exclusive Jurisdiction. Unless the Corporation consents in writing to the selection of an alternative forum, and except for actions brought under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, (Hi) any action asserting a claim against the Corporation arising pursuant to any provision of the DGCL or the Corporation’s Certificate of Incorporation or Bylaws, (iv) any action to interpret, apply, enforce or determine the validity of the Corporation’s Certificate of Incorporation or Bylaws, or (v) any action asserting a claim against the Corporation governed by the internal affairs doctrine, in each such case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 7.2.

 

ARTICLE VIII

 

8.1 Limitation of Personal Liability. To the fullest extent permitted by the DGCL, as it presently exists or may hereafter be amended from time to time, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.

 

 

8.2 Indemnification.

 

The Corporation shall indemnify, to the fullest extent permitted by applicable law, any director or officer of the Corporation who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding. The Corporation shall be required to indemnify a person in connection with a Proceeding initiated by such person only if the Proceeding was authorized by the Board of Directors.

 

The Corporation shall have the power to indemnify, to the extent permitted by the DGCL, as it presently exists or may hereafter be amended from time to time, any employee or agent of the Corporation who was or is a party or is threatened to be made a party to any Proceeding by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding.

 

Any repeal or amendment of this Article VIII by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Certificate of Incorporation inconsistent with this Article VIII, will, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to further limit or eliminate the liability of directors) and shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or amendment or adoption of such inconsistent provision with respect to acts or omissions occurring prior to such repeal or amendment or adoption of such inconsistent provision.

 

ARTICLE IX

 

If any provision of this Certificate of Incorporation becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Certificate of Incorporation, and the court will replace such illegal, void or unenforceable provision of this Certificate of Incorporation with a valid and enforceable provision that most accurately reflects the Corporation’s Intent, in order to achieve, to the maximum extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision. The balance of this Certificate of Incorporation shall be enforceable in accordance with its terms.

 

The Corporation reserves die right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation (including, without limitation, any rights, preferences or other designations of Preferred Stock), in the manner now or hereafter prescribed by this Certificate of Incorporation and the DGCL; and all rights, preferences and privileges herein conferred upon stockholders by and pursuant to this Certificate of Incorporation in its present form or s& hereafter amended are granted subject to the right reserved in this Article IX. Notwithstanding any other provision of this Certificate of Incorporation, and in addition to any other vote that may be required by law or the terms of any series of Preferred Stock, the affirmative vote of the holders of at least 66%% of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend, alter or repeal, or adopt any provision as part of this Certificate of Incorporation inconsistent with the purpose and intent of, Article V, Article VI, Article VII or this Article IX (including, without limitation, any such Article as renumbered as a result of any amendment, alteration, change, repeal or adoption of any other Article).

 

 

ARTICLE X

 

The name and mailing address of the Incorporator is John S. Yu, M.D., 2355 Westwood Blvd. #139, Los Angeles, CA 90064,

 

I, The Undersigned, for the purpose of forming a corporation under the laws of the State of Delaware, do make, file and record this Certificate of Incorporation, and do certify that the facts herein stated are true, and I have accordingly hereunto set my hand this 10th day of May, 2023,

 

	Kairos Pharma, Ltd.
	NAME	/s/ John S. Yu, M.D.
	BY:	John S. Yu, M.D.
		INCORPORATOR

 

[Signature page]

 

 

 

Exhibit 3.5

 

CERTIFICATE OF INCORPORATION
OF

KAIROS PHARMA, LTD.

 

ARTICLE I

 

The name of this Corporation is Kairos Pharma, Ltd.

 

ARTICLE II

 

Its registered office in the State of Delaware is to be located at 108 W. 13th St, Ste 100, in the City of Wilmington, County of New Castle, Zip Code 19801. The registered agent in charge thereof is Vcorp Agent Services, Inc.

 

ARTICLE III

 

The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware (“DGCL”), as the same exists or as may hereafter be amended from time to time.

 

ARTICLE IV

 

4.1 Authorized Capital Stock. The total number of shares of all classes of capital stock that the Corporation is authorized to issue is One Hundred and Twenty Million (120,000,000) shares, consisting of One Hundred Million (100,000,000) shares of Common Stock, par value $0.001 per share (the “Common Stock”), and Twenty Million (20,000,000) shares of Preferred Stock, par value $0.001 per share (the “Preferred Stock”).

 

4.2 Increase or Decrease in Authorized Capital Stock. The number of authorized shares of Preferred Stock or Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote generally in the election of directors, irrespective of the provisions of Section 242(b)(2) of the DGCL (or any successor provision thereto), voting together as a single class, without a separate vote of the holders of the class or classes the number of authorized shares of which are being increased or decreased, unless a vote by any holders of one or more series of Preferred Stock is required by the express terms of any series of Preferred Stock as provided for or fixed pursuant to the provisions of Section 4.4 of this Article IV.

 

4.3 Common Stock.

 

(a) The holders of shares of Common Stock shall be entitled to one vote for each such share on each matter properly submitted to the stockholders on which the holders of shares of Common Stock are entitled to vote. Except as otherwise required by law or this certificate of incorporation (this “Certificate of Incorporation” which term, as used herein, shall mean the certificate of incorporation of the Corporation, as amended from time to time, including the terms of any certificate of designations of any series of Preferred Stock), and subject to the rights of the holders of Preferred Stock, at any annual or special meeting of the stockholders the holders of shares of Common Stock shall have the right to vote for the election of directors and on all other matters properly submitted to a vote of the stockholders; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation that relates solely to the terms, number of shares, powers, designations, preferences, or relative participating, optional or other special rights (including, without limitation, voting rights), or to qualifications, limitations or restrictions thereon, of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one more other such series, to vote thereon pursuant to this Certificate of Incorporation (including, without limitation, by any certificate of designations relating to any series of Preferred Stock) or pursuant to the DGCL.

 

 

(b) Subject to the rights of the holders of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive such dividends and other distributions (payable in cash, property or capital stock of the Corporation) when, as and if declared thereon by the Board of Directors of the Corporation (the “Board of Directors”) from time to time out of any assets or funds of the Corporation legally available therefor and shall share equally on a per share basis in such dividends and distributions.

 

(c) In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, and subject to the rights of the holders of Preferred Stock in respect thereof, the holders of shares of Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of Common Stock held by them.

 

4.4 Preferred Stock.

 

(a) The Preferred Stock may be issued from time to time in one or more series pursuant to a resolution or resolutions providing for such issue duly adopted by the Board of Directors (authority to do so being hereby expressly vested in the Board of Directors). The Board of Directors is further authorized, subject to limitations prescribed by law, to fix by resolution or resolutions and to set forth in a certification of designations filed pursuant to the DGCL the powers, designations, preferences, participation, optional or other rights, if any, and the qualifications, limitations or restrictions thereof, if any, of any wholly unissued series of Preferred Stock, including without limitation authority to fix by resolution or resolutions that dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including, without limitation, sinking fund provisions), redemption price or prices, and liquidation preferences of any such series, and the number of shares constituting any such series and the designation thereof, or any of the foregoing.

 

(b) The Board of Directors is further authorized to increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares of any such series then outstanding) the number of shares of any series, the number of which was fixed by it, subsequent to the issuance of shares of such series then outstanding, subject to the powers, preferences and rights, and the qualifications, limitations and restrictions thereof stated in the Certificate of Incorporation or the resolution of the Board of Directors originally fixing the number of shares of such series. If the number of shares of any series is so decreased, then the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.

 

4,5 Reverse Stock Split. Upon the effectiveness (the “Effective Time”) of this Certificate of Incorporation, each of two and one-half (2.5) shares of the Corporation’s Common Stock issued and outstanding immediately prior to the Effective Time (the “Old Common Stock”) shall automatically and without further action on the part of the Corporation or any holder of Old Common Stock, be reclassified, combined, and changed into one (1) fully paid and nonassessable share of common stock, par value $0.001 per share (the “New Common Stock”), subject to the treatment of fractional share interests as described below (the “Reverse Stock Split”). From and after the Effective Time, certificates representing the Old Common Stock shall represent the number of shares of New Common Stock into which the Old Common Stock shall have been combined pursuant to this Certificate of Incorporation. Holders who otherwise would be entitled to receive fractional share interests of New Common Stock upon the effectiveness of the Reverse Stock Split shall be entitled to receive a whole share of New Common Stock in lieu of any fractional share created as a result of such Reverse Stock Split.

 

ARTICLE V

 

5.1 General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.

 

5.2 Number of Directors: Election: Term.

 

(a) Subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, the number of directors that constitutes the entire Board of Directors shall be fixed solely by resolution of the Board of Directors.

 

 

(b) Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

 

5.3 Removal. Subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, a director may be removed from office by the stockholders of the Corporation only for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of the then-outstanding shares of capital stock of the Corporation then entitled to vote at an election of directors. No decrease in the authorized number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

 

5.4 Vacancies and Newly Created Directorships. Subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, and except as otherwise provided in the DGCL, vacancies occurring on the Board of Directors for any reason and newly created directorships resulting from an increase in the authorized number of directors may be filled only by vote of a majority of the remaining members of the Board of Directors, although less than a quorum, or by a sole remaining director, at any meeting of the Board of Directors. A person so elected by the Board of Directors to fill a vacancy or newly created directorship shall hold office until the next election of the class for which such director shall have been assigned by the Board of Directors and until his or her successor shall be duly elected and qualified.

 

ARTICLE VI

 

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, amend or repeal the Bylaws of the Corporation.

 

ARTICLE VII

 

7.1 Advance Notice. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation. Business transacted at special meetings of stockholders shall be confined to the purpose or purposes stated in the notice of meeting.

 

7.2 Exclusive Jurisdiction. Unless the Corporation consents in writing to the selection of an alternative forum, and except for actions brought under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation arising pursuant to any provision of the DGCL or the Corporation’s Certificate of Incorporation or Bylaws, (iv) any action to interpret, apply, enforce or determine the validity of the Corporation’s Certificate of Incorporation or Bylaws, or (v) any action asserting a claim against the Corporation governed by the internal affairs doctrine, in each such case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 7.2.

 

ARTICLE VIII

 

8.1 Limitation of Personal Liability. To the fullest extent permitted by the DGCL, as it presently exists or may hereafter be amended from time to time, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.

 

8.2 Indemnification.

 

The Corporation shall indemnify, to the fullest extent permitted by applicable law, any director or officer of the Corporation who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding. The Corporation shall be required to indemnify a person in connection with a Proceeding initiated by such person only if the Proceeding was authorized by the Board of Directors.

 

 

The Corporation shall have the power to indemnify, to the extent permitted by the DGCL, as it presently exists or may hereafter be amended from time to time, any employee or agent of the Corporation who was or is a party or is threatened to be made a party to any Proceeding by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding.

 

Any repeal or amendment of this Article VIII by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Certificate of Incorporation inconsistent with this Article VIII, will, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to further limit or eliminate the liability of directors) and shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or amendment or adoption of such inconsistent provision with respect to acts or omissions occurring prior to such repeal or amendment or adoption of such inconsistent provision.

 

ARTICLE IX

 

If any provision of this Certificate of Incorporation becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Certificate of Incorporation, and the court will replace such illegal, void or unenforceable provision of this Certificate of Incorporation with a valid and enforceable provision that most accurately reflects the Corporation’s intent, in order to achieve, to the maximum extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision. The balance of this Certificate of Incorporation shall be enforceable in accordance with its terms.

 

The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation (including, without limitation, any rights, preferences or other designations of Preferred Stock), in the manner now or hereafter prescribed by this Certificate of Incorporation and the DGCL; and all rights, preferences and privileges herein conferred upon stockholders by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article IX. Notwithstanding any other provision of this Certificate of Incorporation, and in addition to any other vote that may be required by law or the terms of any series of Preferred Stock, the affirmative vote of the holders of at least 66^2/3% of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend, alter or repeal, or adopt any provision as part of this Certificate of Incorporation inconsistent with the purpose and intent of, Article V, Article VI, Article VII or this Article IX (including, without limitation, any such Article as renumbered as a result of any amendment, alteration, change, repeal or adoption of any other Article).

 

[signature page to follow]

 

 

I, The Undersigned, for the purpose of forming a corporation under the laws of the State of Delaware, do make, file and record this Certificate of Incorporation, and do certify that the facts herein stated are true, and I have accordingly hereunto set my hand this 10th day of May, 2023.

 

	NAME:	Kairos Pharma, Ltd.
	BY:	/s/John S. Yu, M.D.
		John S.Yu, M.D.
		Chairman and Chief Executive Officer

 

[signature page]

 

 

Exhibit 3.6

 

KAIROS PHARMA, LTD.

 

Incorporated Under the Laws of the

State of Delaware

 

BY-LAWS

 

ARTICLE I

OFFICES

 

Kairos Pharma, Ltd. (the “Corporation”) shall maintain a registered office in the State of Delaware. The Corporation may also have other offices at such places, either within or without the State of Delaware, as the board of directors of the Corporation (the “Board of Directors”) may from time to time designate or the business of the Corporation may require.

 

ARTICLE II

STOCKHOLDERS

 

Section 1. Place of Meetings. Meetings of the stockholders for the election of directors or for any other purpose shall be held on such date, at such time and at such place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Only if so determined by the Board of Directors, in its sole discretion, (a) stockholders may, by means of remote communication, participate in a meeting of stockholders and be deemed present in person and vote thereat and/or (b) a meeting of stockholders may be held not at any place, but may instead be held solely by means of remote communication, both as provided in the General Corporation Law of the State of Delaware (the “DGCL”).

 

Section 2. Annual Meeting. The annual meeting of stockholders shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which meeting the stockholders shall elect by a plurality vote a Board of Directors and transact only such other business as is properly brought before the meeting in accordance with these By-Laws. Notice of the annual meeting, stating the place (if any), date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and the record date for determining the stockholders entitled to vote and to receive notice of the meeting shall be given as permitted by law to each stockholder not less than ten (10) nor more than sixty (60) days before the date of the meeting.

 

Section 3. Special Meetings. Unless otherwise prescribed by law or the Certificate of Incorporation (such Certificate, as amended from time to time, including resolutions adopted from time to time by the Board of Directors establishing the designation, rights, preferences and other terms of any class or series of capital stock, the “Certificate of Incorporation”), special meetings of the stockholders may be called only at the request of a majority of the Board of Directors by the Chairman of the Board of Directors, if any, the Chief Executive Officer, if any, or the President of the Corporation. Notice of a special meeting stating the place, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote and to receive notice of the meeting, and the purpose or purposes for which the meeting is called, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. Only such business as is specified in the notice of special meeting shall come before such meeting.

 

Section 4. Quorum. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of shares of capital stock issued and outstanding entitled to vote thereat representing at least a majority of the votes entitled to be cast thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. Whether or not a quorum is present, the chairman of the meeting, or the stockholders entitled to vote thereat, present or represented by proxy, holding shares representing at least a majority of the votes so present or represented and entitled to be cast thereon, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting. Once a quorum is present, it is not broken by the subsequent withdrawal of any stockholder.

 

 

Section 5. Appointment of Inspectors of Election. The Board of Directors shall, in advance of sending to the stockholders any notice of a meeting of the holders of any class of shares, appoint one or more inspectors of election (“inspectors”) to act at such meeting or any adjournment or postponement thereof and make a written report thereof. The Board of Directors may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is so appointed or if no inspector or alternate is able to act, the Chairman of the Board of Directors, or if none, the secretary of the Corporation (the “Secretary”) shall appoint one or more inspectors to act at such meeting. Each inspector, before entering upon the discharge of such inspector’s duties, shall take and sign an oath to faithfully execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability.

 

Section 6. Voting. Except as otherwise provided by law or by the Certificate of Incorporation, each stockholder of record of any class or series of stock other than the common stock, par value $0.00001 per share, (the “Common Stock”) of the Corporation shall be entitled on each matter submitted to a vote at each meeting of stockholders to such number of votes for each share of such stock as may be fixed in the Certificate of Incorporation, and each stockholder of record of Common Stock shall be entitled at each meeting of stockholders to one vote for each share of such stock, in each case, registered in such stockholder’s name on the books of the Corporation on the date fixed pursuant to these By-Laws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting, or if no such record date shall have been so fixed, then at the close of business on the day next preceding the day on which notice of such meeting is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

 

Each stockholder entitled to vote at any meeting may vote either in person or by proxy duly appointed.

 

At all meetings of stockholders all matters, except as otherwise provided by law, the Certificate of Incorporation or these By-Laws, shall be determined by the affirmative vote of the stockholders present in person or represented by proxy holding shares representing at least a majority of the votes so present or represented and entitled to be cast thereon, and where a separate vote by class is required, a majority of the votes represented by the shares of the stockholders of such class present in person or represented by proxy and entitled to be cast thereon shall be the act of such class. Notwithstanding the immediately preceding sentence, the Board of Directors, when establishing a matter to be voted at a meeting of stockholders, may establish a voting requirement greater than the voting requirement set forth in the immediately preceding sentence with respect to such matter.

 

The vote on any matter, including the election of directors, shall be by written ballot, or, if authorized by the Board of Directors, in its sole discretion, by electronic ballot given in accordance with a procedure set out in the notice of such meeting. Each ballot shall state the number of shares voted.

 

Proxy cards solicited by the Corporation or the Board of Directors shall be returned in envelopes addressed to the inspectors, any transfer agent with respect to capital stock of the Corporation and/or any third party, as determined from time to time by the Board of Directors, who shall receive, inspect and tabulate the proxies. Comments on proxies, consents or ballots shall be transcribed and provided to the Secretary with the name and address of the stockholder. Nothing in this Article II shall prohibit the inspector from making available to the Corporation, prior to, during or after any annual or special meeting, information as to which stockholders have not voted and periodic status reports on the aggregate vote.

 

Unless otherwise provided by law, the Certificate of Incorporation or these By-Laws, any action required to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office in the State of Delaware shall be by hand or by certified or registered mail, return receipt requested.

 

 

ARTICLE III

DIRECTORS

 

Section 1. Number; Resignation; Removal. Except as otherwise required by the Certificate of Incorporation, the number of directors which shall constitute the whole Board of Directors shall be fixed from time to time by resolution of the Board of Directors, but at no time shall be less than one (1) nor more than seven (7). Except as provided in Section 2 of this Article III and in the Certificate of Incorporation, a nominee for director shall be elected to the Board of Directors by a plurality of the votes cast at the annual meeting of stockholders. A director may resign at any time upon notice to the Corporation. A director may be removed, with or without cause, by the affirmative vote of holders of shares of capital stock issued and outstanding entitled to vote at an election of directors representing at least a majority of the votes entitled to be cast thereon.

 

Section 2. Duties and Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done solely by the stockholders.

 

Section 3. Term, Qualifications and Classification.

 

(a) Directors need not be stockholders unless so required by the Board of Directors. If for any cause, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these By-Laws.

 

(b) Each director shall serve a term of one year, or until his or her successor is duly elected and qualified or until his or her death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

 

Section 4. Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the remaining directors then in office, even though such number may be less than a quorum, or by a sole remaining director, and the directors so elected shall hold office until the next annual meeting of stockholders and until their successors are duly elected and qualified, or until their earlier resignation or removal. If there are no directors in office, then an election of directors may be held in the manner provided by the DGCL. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

 

Section 5. Meetings. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors, the Chief Executive Officer, the President or any director. Notice stating the place, date and hour of the meeting shall be given to each director either (i) by mail or courier not less than forty-eight (48) hours before the date of the meeting or (ii) by telephone, telegram or facsimile or electronic transmission, not less than twenty-four (24) hours before the time of the meeting or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate under the circumstances (provided that notice of any meeting need not be given to any director who (i) submits a waiver of notice either before or after such meeting or (ii) attends the meeting without protesting, at the beginning of such meeting, the lack of notice).

 

Section 6. Quorum. Except as may be otherwise provided by law, the Certificate of Incorporation or these By-Laws, a majority of the entire Board of Directors shall be necessary to constitute a quorum for the transaction of business, and the vote of a majority of the directors present at a meeting at which a quorum is present shall constitute the act of the Board of Directors. Whether or not a quorum is present at a meeting of the Board of Directors, a majority of the directors then present may adjourn the meeting to such time and place as they may determine without notice other than an announcement at such meeting.

 

 

Section 7. Action Without a Meeting. Unless otherwise provided by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken by the Board of Directors or any committee of the Board of Directors may be taken without a meeting if all members of the Board of Directors or a committee thereof consent in writing or by electronic transmission to the adoption of a resolution authorizing the action. The resolution and the consents thereto in writing or by electronic transmission by the members of the Board of Directors or committee shall be filed with the minutes of the proceedings of the Board of Directors or such committee.

 

Section 8. Participation by Telephone. Unless otherwise provided by the Certificate of Incorporation or these By-Laws, any one or more members of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or other communications equipment allowing all persons participating in the meeting to hear each other. Participation by such means shall constitute presence in person at the meeting.

 

Section 9. Compensation. The directors may be paid their expenses, if any, for attendance at each meeting of the Board of Directors or any committee thereof and may be paid compensation as a director, committee member or chairman of any committee and for attendance at each meeting of the Board of Directors or committee thereof and each meeting of stockholders of the Corporation. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefore or entering into transactions otherwise permitted by the Certificate of Incorporation, these By-Laws or applicable law.

 

Section 10. Resignation. Any director may resign at any time. Such resignation shall be made in writing or by electronic transmission and shall take effect at the time specified therein, or, if no time be specified, at the time of its receipt by the Chairman of the Board of Directors, if any, the Chief Executive Officer, if any, the President or the Secretary. The acceptance of a resignation shall not be necessary to make it effective unless so specified therein.

 

ARTICLE IV

COMMITTEES

 

Section 1. Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. Any committee, to the extent allowed by law and provided in the resolution establishing such committee or in these By-Laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, including the power to adopt a certificate of ownership and merger pursuant to Section 253 of the DGCL, the authority to issue shares, and the authority to declare a dividend, except as limited by DGCL or other applicable law, but no such committee shall have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval or (ii) adopting, amending or repealing any By-Law of the Corporation. All acts done by any committee within the scope of its powers and duties pursuant to these By-Laws and the resolutions adopted by the Board of Directors shall be deemed to be, and may be certified as being, done or conferred under authority of the Board of Directors. The Secretary or any assistant Secretary is empowered to certify that any resolution duly adopted by any such committee is binding upon the Corporation and to execute and deliver such certifications from time to time as may be necessary or proper to the conduct of the business of the Corporation.

 

Section 2. Resignation. Any member of a committee may resign at any time. Such resignation shall be made in writing or by electronic transmission and shall take effect at the time specified therein, or, if no time be specified, at the time of its receipt by the Chairman of the Board of Directors, or if none, by the Chief Executive Officer, President(s) or the Secretary. The acceptance of a resignation shall not be necessary to make it effective unless so specified therein.

 

 

Section 3. Quorum. A majority of the members of a committee shall constitute a quorum. The vote of a majority of the members of a committee presents at any meeting at which a quorum is present shall be the act of such committee.

 

Section 4. Record of Proceedings. Each committee shall keep a record of its acts and proceedings and shall report the same to the Board of Directors when and as required by the Board of Directors.

 

Section 5. Organization, Meetings, Notices. A committee may hold its meetings at the principal office of the Corporation, or at any other place upon which a majority of the committee may at any time agree. Each committee may make such rules as it may deem expedient for the regulation and carrying on of its meetings and proceedings.

 

ARTICLE V

OFFICERS

 

Section 1. General. The officers of the Corporation shall be elected by the Board of Directors and shall consist of a President, a Secretary and a Treasurer. The Board of Directors, in its discretion, may also elect and specifically identify as officers of the Corporation a Chairman of the Board of Directors, a Chief Executive Officer, a Chief Financial Officer, a Controller, one or more vice presidents, assistant secretaries and assistant treasurers, and such other officers and agents as in its judgment may be necessary or desirable. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these By-Laws. The officers of the Corporation need not be stockholders or directors of the Corporation. Any office named or provided for in this Article V (including, without limitation, Chairman of the Board of Directors, Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and Controller) may, at any time and from time to time, be held by one or more persons. Unless otherwise determined by the Board of Directors, if an office is held by more than one person, each person holding such office shall serve as a co-officer (with the appropriate corresponding title) and shall have general authority, individually and without the need for any action by any other co-officer, to exercise all the powers of the holder of such office of the Corporation specified in these By-Laws and shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or such other officer specified in this Article V.

 

Section 2. Election; Removal; Remuneration. The Board of Directors at its first meeting held after each annual meeting of stockholders shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors and may elect additional officers and may fill vacancies among the officers previously elected at any subsequent meeting of the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified, or until their earlier resignation or removal. Any officer elected by the Board of Directors may be removed at any time, either for or without cause, by the affirmative vote of a majority of the Board of Directors.

 

Section 3. Voting Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meetings, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman of the Board of Directors, if any, the Chief Executive Officer, if any, the President or the Secretary, and any such officer may, in the name and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation, company, partnership or other entity in which the Corporation may own securities, or to execute written consents in lieu thereof, and at any such meeting, or in giving any such consent, shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons.

 

Section 4. Chairman of the Board of Directors. The Chairman of the Board of Directors, if any, may be, but need not be, a person other than the Chief Executive Officer or the President of the Corporation. The Chairman of the Board of Directors may be, but need not be, an officer or employee of the Corporation. The Chairman of the Board of Directors shall preside at meetings of the Board of Directors and shall establish agendas for such meetings. In addition, the Chairman of the Board of Directors shall assure that matters of significant interest to stockholders and the investment community are addressed by management.

 

 

Section 5. Chief Executive Officer. The Chief Executive Officer, if any, shall, subject to the direction of the Board of Directors, have general and active control of the affairs and business of the Corporation and general supervision of its officers, officials, employees and agents. The Chief Executive Officer shall preside at all meetings of the stockholders and shall preside at all meetings of the Board of Directors and any committee thereof of which he is a member, unless the Board of Directors or such committee shall have chosen another chairman. The Chief Executive Officer shall see that all orders and resolutions of the Board of Directors are carried into effect, and in addition, the Chief Executive Officer shall have all the powers and perform all the duties generally appertaining to the office of the chief executive officer of a corporation. The Chief Executive Officer shall designate the person or persons who shall exercise his powers and perform his duties in his absence or disability and the absence or disability of the President.

 

Section 6. President. The President shall have such powers and perform such duties as are prescribed by the Chief Executive Officer or the Board of Directors, and in the absence or disability of the Chief Executive Officer, the President shall have the powers and perform the duties of the Chief Executive Officer, except to the extent the Board of Directors shall have otherwise provided. In addition, the President shall have such powers and perform such duties generally appertaining to the office of the president of a corporation, except to the extent the Chief Executive Officer, if any, or the Board of Directors shall have otherwise provided.

 

Section 7. Vice President. The Vice Presidents of the Corporation shall perform such duties and have such powers as may, from time to time, be assigned to them by the Board of Directors, the Chief Executive Officer, if any, the President or these By-Laws.

 

Section 8. Secretary. Unless otherwise determined by the Board of Directors, the Secretary shall attend all meetings of the Board of Directors and of the stockholders and, unless the Board of Directors appoints another person to perform such service(s), record all votes and the minutes of all proceedings in a book to be kept for that purpose, and shall perform like duties for any committee appointed by the Board of Directors. The Secretary shall keep in safe custody the seal of the Corporation and affix it to any instrument when so authorized by the Board of Directors. The Secretary shall give or cause to be given, notice of all meetings of stockholders and special meetings of the Board of Directors and shall perform generally all the duties usually appertaining to the office of secretary of a corporation and shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or these By-Laws. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature.

 

Section 9. Assistant Secretary. The Assistant Secretary shall be empowered and authorized to perform all of the duties of the Secretary in the absence or disability of the Secretary and shall perform such other duties and have such other powers as may be prescribed by the Board of Directors, the Secretary or these By-Laws.

 

Section 10. Chief Financial Officer. The Chief Financial Officer, if any, shall have responsibility for the administration of the financial affairs of the Corporation and shall exercise supervisory responsibility for the performance of the duties of the Treasurer and the Controller, if any. The Chief Financial Officer shall render to the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all of the transactions effected by the Treasurer and the Controller and of the financial condition of the Corporation. The Chief Financial Officer shall generally perform all the duties usually appertaining to the affairs of a chief financial officer of a corporation and shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or these By-Laws.

 

Section 11. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall cause to be kept full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by persons authorized by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board of Directors, if any, the Chief Executive Officer, if any, the President and the Board of Directors whenever they may require it, an account of all of the transactions effected by the Treasurer and of the financial condition of the Corporation. The Treasurer shall generally perform all duties appertaining to the office of treasurer of a corporation and shall perform such other duties and have such other powers as may be prescribed by the Board of Directors, the Chief Executive Officer, if any, the President or these By-Laws.

 

 

Section 12. Assistant Treasurer. The Assistant Treasurers shall be empowered and authorized to perform all the duties of the Treasurer in the absence or disability of the Treasurer and shall perform such other duties and have such other powers as may be prescribed by the Board of Directors, the Treasurer or these By-Laws.

 

Section 13. Controller. The Controller, if any, shall prepare and have the care and custody of the books of account of the Corporation. The Controller shall keep a full and accurate account of all monies, received and paid on account of the Corporation, and shall render a statement of the Controller’s accounts whenever the Board of Directors shall require. The Controller shall generally perform all the duties usually appertaining to the affairs of the controller of a corporation and shall perform such other duties and have such other powers as may be prescribed by the Board of Directors, the Chief Financial Officer, if any, the President or these By-Laws.

 

Section 14. Additional Powers and Duties. In addition to the foregoing especially enumerated duties and powers, the several officers of the Corporation shall perform such other duties and exercise such further powers as the Board of Directors may, from time to time, determine or as may be assigned to them by any superior officer.

 

Section 15. Other Officers. The Board of Directors may designate such other officers having such duties and powers as it may specify from time to time.

 

ARTICLE VI

CAPITAL STOCK

 

Section 1. Form of Certificate; Uncertificated Shares. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of its stock may be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Every holder of stock in the Corporation represented by a certificate shall be entitled to have a certificate signed in the name of the Corporation (i) by the Chairman of the Board of Directors, if any, the Chief Executive Officer, if any, the President or any Vice President and (ii) by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, representing the number of shares registered in certificate form. Except as otherwise provided by law or these By-Laws, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.

 

Section 2. Signatures. Any signature required to be on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

 

Section 3. Lost, Stolen or Destroyed Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation and/or its transfer agent a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

 

Section 4. Transfers. Stock of the Corporation shall be transferable in the manner prescribed by law and in these By-Laws. Transfers of stock shall be made on the books of the Corporation only by the holder of record or by such person’s attorney duly authorized, and upon the surrender of properly endorsed certificates for a like number of shares (or, with respect to uncertificated shares, by delivery of duly executed instructions or in any other manner permitted by applicable law).

 

Section 5. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

 

 

Section 6. Beneficial Owners. The Corporation shall be entitled to recognize the exclusive right of the person registered on its books as the owner of a share to receive dividends and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.

 

Section 7. Dividends. Subject to the provisions of the Certificate of Incorporation or applicable law, dividends upon the capital stock of the Corporation, if any, may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in property, or in shares of capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation or for any proper purpose, and the Board of Directors may modify or abolish any such reserve.

 

Section 8. Common Stock. The voting, dividend and liquidation rights of the holders of shares of Common Stock are subject to, and qualified by, the rights of the holders of the preferred stock, if any, of the Corporation. Each share of Common Stock shall be treated identically as all other shares of Common Stock with respect to dividends, distributions, rights in liquidation and in all other respects.

 

ARTICLE VII

INDEMNIFICATION

 

Section 1. Indemnification Respecting Third Party Claims. The Corporation, to the full extent and in a manner permitted by Delaware law as in effect from time to time, shall indemnify, in accordance with the provisions of this Article, any person (including the heirs, executors, administrators or estate of any such person) who was or is made a party to or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (including any appeal thereof), whether civil, criminal, administrative, or investigative (other than an action by or in the right of the Corporation or by any corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which the Corporation owns, directly or indirectly through one or more other entities, a majority of the voting power or otherwise possesses a similar degree of control), by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, member, manager, partner, trustee, fiduciary, employee or agent (a “Subsidiary Officer”) of another corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise (any such entity for which a Subsidiary Officer so serves, an “Associated Entity”), against expenses, including attorneys’ fees and disbursements, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful; provided, however, that (i) the Corporation shall not be obligated to indemnify a person who is or was a director, officer employee or agent of the Corporation or a Subsidiary Officer of an Associated Entity against expenses incurred in connection with an action, suit, proceeding or investigation to which such person is threatened to be made a party but does not become a party unless the incurring of such expenses was authorized by or under the authority of the Board of Directors and (ii) the Corporation shall not be obligated to indemnify against any amount paid in settlement unless the Board of Directors has consented to such settlement. The termination of any action, suit or proceeding by judgment, order, settlement or conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, that such person had reasonable cause to believe that his conduct was unlawful. Notwithstanding anything to the contrary in the foregoing provisions of this Section 1, a person shall not be entitled, as a matter of right, to indemnification pursuant to this Section 1 against costs or expenses incurred in connection with any action, suit or proceeding commenced by such person against the Corporation or any Associated Entity or any person who is or was a director, officer, fiduciary, employee or agent of the Corporation or a Subsidiary Officer of any Associated Entity (including, without limitation, any action, suit or proceeding commenced by such person to enforce such person’s rights under this Article, unless and only to the extent that such person is successful on the merits of such claim), but such indemnification may be provided by the Corporation in a specific case as permitted by Section 7 below in this Article.

 

 

Section 2. Indemnification Respecting Derivative Claims. The Corporation, to the full extent and in a manner permitted by Delaware law as in effect from time to time, shall indemnify, in accordance with the provisions of this Article, any person (including the heirs, executors, administrators or estate of any such person) who was or is made a party to or is threatened to be made a party to any threatened, pending or completed action or suit (including any appeal thereof) brought in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Subsidiary Officer of an Associated Entity, against expenses (including attorneys’ fees and disbursements) and costs actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless, and only to the extent that, the Delaware Court of Chancery or the court in which such action or suit was brought shall determine that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses and costs as the Court of Chancery or such other court shall deem proper; provided, however, that the Corporation shall not be obligated to indemnify a director, officer, employee or agent of the Corporation or a Subsidiary Officer of an Associated Entity against expenses incurred in connection with an action or suit to which such person is threatened to be made a party but does not become a party unless the incurrence of such expenses was authorized by or under the authority of the Board of Directors. Notwithstanding anything to the contrary in the foregoing provisions of this Section 2, a person shall not be entitled, as a matter of right, to indemnification pursuant to this Section 2 against costs and expenses incurred in connection with any action or suit in the right of the Corporation commenced by such person, but such indemnification may be provided by the Corporation in any specific case as permitted by Section 7 below in this Article.

 

Section 3. Determination of Entitlement to Indemnification. Any indemnification to be provided under either of Section 1 or 2 above in this Article (unless ordered by a court of competent jurisdiction or advanced as provided in Section 5 of this Article) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification is proper under the circumstances because the person to be indemnified had met the applicable standard of conduct set forth in such section of this Article. Such determination shall be made, with respect to a person who is a director or officer of the Corporation at the time of such determination, (i) by a majority vote of the directors who are not parties to the action, suit or proceeding in respect of which indemnification is sought, even though less than a quorum, or (ii) by majority vote of the members of a committee composed of at least two directors each of whom is not a party to such action, suit or proceeding, designated by majority vote of directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (iii) if there are no directors who are not parties to such action, suit or proceeding, or if such directors so direct, by independent legal counsel in a written opinion, or (iv) by action of the stockholders taken as permitted by law and these By-Laws. Such determination shall be made, with respect to any other person, by such officer or officers of the Corporation as the Board of Directors or the Executive Committee (if any) of the Board of Directors may designate, in accordance with any procedures that the Board of Directors, the Executive Committee or such designated officer or officers may determine, or, if any such officer or officers have not been so designated, by the Chief Legal Officer or the General Counsel of the Corporation. In the event a request for indemnification is made by any person referred to in Section 1 or 2 above in this Article, the Corporation shall use its reasonable best efforts to cause such determination to be made not later than sixty (60) days after such request is made after the final disposition of such action, suit or proceeding.

 

 

Section 4. Right to Indemnification upon Successful Defense and for Service as a Witness.

 

(a) Notwithstanding any other provisions of this Article, to the extent that a present or former director or officer has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in either Section 1 or 2 above of this Article, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees and disbursements) and costs actually and reasonably incurred by such person in connection therewith.

 

(b) To the extent any person who is or was a director, officer, employee or agent of the Corporation or a Subsidiary Officer of an Associated Entity has served or prepared to serve as a witness in, but is not a party to, any action, suit or proceeding (whether civil, criminal, administrative, regulatory or investigative in nature), including any investigation by any legislative or regulatory body or by any securities or commodities exchange of which the Corporation or an Associated Entity is a member or to the jurisdiction of which it is subject, by reason of his or her services as a director, officer, employee or agent of the Corporation, or his or her service as a Subsidiary Officer of an Associated Entity (assuming such person is or was serving at the request of the Corporation as a Subsidiary Officer of such Associated Entity), the Corporation may indemnify such person against expenses (including attorneys’ fees and disbursements) and out-of-pocket costs actually and reasonably incurred by such person in connection therewith and, if the Corporation has determined to so indemnify such person, shall use its reasonable best efforts to provide such indemnity within sixty (60) days after receipt by the Corporation of a statement requesting such indemnification, which request must set forth reasonable evidence of such expenses and costs; it being understood, however, that the Corporation shall have no obligation under this Article to compensate such person for such person’s time or efforts so expended.

 

Section 5. Advance of Expenses. (a) Expenses and costs incurred by any present or former director or officer of the Corporation in defending a civil, criminal, administrative, regulatory or investigative action, suit or proceeding shall, to the extent permitted by law, be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking in writing by or on behalf of such person to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified in respect of such costs and expenses by the Corporation as authorized by this Article.

 

(b) Expenses and costs incurred by any other person referred to in Section 1 or 2 above in this Article in defending a civil, criminal, administrative, regulatory or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by or under the authority of the Board of Directors upon receipt of an undertaking in writing by or on behalf of such person to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation in respect of such costs and expenses as authorized by this Article and subject to any limitations or qualifications provided by or under the authority of the Board of Directors.

 

Section 6. Notice of Action; Assumption of the Defense. Promptly after receipt by any person referred to in Section 1, 2 or 5 above in this Article of notice of the commencement of any action, suit or proceeding in respect of which indemnification or advancement of expenses may be sought under any such Section, such person (the “Indemnitee”) shall notify the Corporation thereof. The Corporation shall be entitled to participate in the defense of any such action, suit or proceeding and, to the extent that it may wish, except in the case of a criminal action or proceeding, to assume the defense thereof with counsel chosen by it. If the Corporation shall have notified the Indemnitee of its election so to assume the defense, it shall be a condition of any further obligation of the Corporation under such Sections to indemnify the Indemnitee with respect to such action, suit or proceeding that the Indemnitee shall have provided an undertaking in writing to repay all legal or other costs and expenses subsequently incurred by the Corporation in conducting such defense if it shall ultimately be determined that the Indemnitee is not entitled to be indemnified in respect of the costs and expenses of such action, suit or proceeding by the Corporation as authorized by this Article. Notwithstanding anything in this Article to the contrary, after the Corporation shall have notified the Indemnitee of its election so to assume the defense, the Corporation shall not be liable under such Sections for any legal or other costs or expenses subsequently incurred by the Indemnitee in connection with the defense of such action, suit or proceeding, unless (a) the parties thereto include both (i) the Corporation and the Indemnitee, or (ii) the Indemnitee and other persons who may be entitled to seek indemnification or advancement of expenses under any such Section and with respect to whom the Corporation shall have elected to assume the defense, and (b) the counsel chosen by the Corporation to conduct the defense shall have determined, in their sole discretion, that, under applicable standards of professional conduct, a conflict of interest exists that would prevent them from representing both (i) the Corporation and the Indemnitee, or (ii) the Indemnitee and such other persons, as the case may be, in which case the Indemnitee may retain separate counsel at the expense of the Corporation to the extent provided in such Sections and Section 3 above in this Article.

 

 

Section 7. Indemnification Not Exclusive. The provision of indemnification to or the advancement of expenses and costs to any person under this Article, or the entitlement of any person to indemnification or advancement of expenses and costs under this Article, shall not limit or restrict in any way the power of the Corporation to indemnify or advance expenses and costs to such person in any other way permitted by law or be deemed exclusive of, or invalidate, any right to which any person seeking indemnification or advancement of expenses and costs may be entitled under any law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s capacity as an officer, director, employee or agent of the Corporation or a Subsidiary Officer of an Associated Entity and as to action in any other capacity.

 

Section 8. Corporate Obligations; Reliance. The provisions of Sections 1, 2, 4(a) and 5(a) above of this Article shall be deemed to create a binding obligation on the part of the Corporation to the directors, officers, employees and agents of the Corporation, and the persons who are serving at the request of the Corporation as Subsidiary Officers of Associated Entities, on the effective date of this Article and persons thereafter elected as directors and officers or retained as employees or agents, or serving at the request of the Corporation as Subsidiary Officers of Associated Entities (including persons who served as directors, officers, employees and agents, or served at the request of the Corporation as Subsidiary Officers of Associated Entities, on or after such date but who are no longer so serving at the time they present claims for advancement of expenses or indemnity), and such persons in acting in their capacities as directors, officers, employees or agents of the Corporation, or serving at the request of the Corporation as Subsidiary Officers of any Associated Entity, shall be entitled to rely on such provisions of this Article.

 

Section 9. Further Changes. Neither the amendment nor repeal of this Article, nor the adoption of any provision of the Certificate of Incorporation inconsistent with this Article, shall eliminate or reduce the effect of such provisions in respect of any act or omission or any matter occurring prior to such amendment, repeal or adoption of an inconsistent provision regardless of when any cause of action, suit or claim relating to any such matter accrued or matured or was commenced, and such provision shall continue to have effect in respect of such act, omission or matter as if such provision had not been so amended or repealed or if a provision inconsistent therewith had not been so adopted.

 

Section 10. Successors. The right, if any, of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Subsidiary Officer of an Associated Entity, to indemnification or advancement of expenses under Sections 1 through 9 above in this Article shall continue after he shall have ceased to be a director, officer, employee or agent or a Subsidiary Officer of an Associated Entity and shall inure to the benefit of the heirs, distributees, executors, administrators and other legal representatives of such person.

 

Section 11. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Subsidiary Officer of any Associated Entity, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article or applicable law.

 

Section 12. Definitions of Certain Terms. For purposes of this Article, references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; references to “serving at the request of the Corporation” shall include any service as a director, officer employee or agent of the Corporation or as a Subsidiary Officer of any Associated Entity which service imposes duties on, or involves services by, such person with respect to any employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article.

 

 

ARTICLE VIII

GENERAL

 

Section 1. Fiscal Year. The fiscal year of the Corporation shall be such date as shall be fixed by resolution of the Board of Directors from time to time.

 

Section 2. Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words “Corporate Seal, Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise upon any paper, certificate or document.

 

Section 3. Disbursements. All checks, drafts or demands for money out of the funds of the Corporation and all notes and other evidences of indebtedness of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

 

Section 4. Amendments. These By-Laws may be altered, amended or repealed, in whole or in part, or new By-Laws may be adopted by the stockholders or by the Board of Directors at any meeting thereof; provided, however, that notice of such alteration, amendment, repeal or adoption of new By-Laws shall be contained in the notice of such meeting of stockholders or in a notice of such meeting of the Board of Directors, as the case may be. Unless a higher percentage is required by law or by the Certificate of Incorporation as to any matter which is the subject of these By-Laws, all such amendments must be approved by either the affirmative vote of holders of shares of capital stock issued and outstanding entitled to vote thereon representing at least a majority of the votes and entitled to be cast thereon or by a majority of the entire Board of Directors then in office; provided, however, that any amendments to these By-Laws that was approved by the stockholders may not be altered, amended or repealed without the affirmative vote of the holders of shares of capital stock issued and outstanding and entitled to vote thereon representing at least a majority of the votes entitled to be cast thereupon.

 

Section 5. Forum for Adjudication of Disputes. Unless the Corporation consents in writing to the selection of an alternative forum, any state court within the state of Delaware that has jurisdiction (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (1) any derivative action or proceeding brought on behalf of the Corporation, (2) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (3) any action asserting a claim pursuant to any provision of the General Corporation Law of the State of Delaware or the Certificate of Incorporation or these By-Laws (in each case, as they may be amended from time to time), and (4) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 5. Notwithstanding the foregoing, the exclusive forum selection provision set forth in this Section 5 shall not apply to any actions brought under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

 

Section 6. Definitions. As used in this Article and in these By-Laws generally, the term “entire Board of Directors” means the total number of directors which the Corporation would have if there were no vacancies.

 

 

 

Exhibit 10.1

 

EXCLUSIVE OPTION AGREEMENT

 

THIS EXCLUSIVE OPTION AGREEMENT (“Agreement”) is entered into this 16th day of March 2020 (“Effective Date”) by and between CEDARS-SINAI MEDICAL CENTER, a California nonprofit public benefit corporation (“CSMC”), with offices at 8700 Beverly Boulevard, Los Angeles, CA 90048, and ENVIRO THERAPEUTICS, INC., a C corporation (hereinafter, “Licensee”), with offices at 2355 Westwood Blvd. #139, Los Angeles CA 90064 (each, a “Party,” and together, the “Parties”).

 

R E C I T A L S

 

A. CSMC owns and is entitled to grant license rights with respect to certain Patent Rights and Technical Information (as such terms are defined in Section 1) invented by Neil Bhowmick and Subhash Haldar (“Inventors”).

 

B. CSMC desires to have the Patent Rights and Technical Information developed, used and commercialized, and the Parties desire to enter into discussions regarding an exclusive license to Licensee to develop, manufacture, use and sell products utilized or derived from the Patent Rights and Technical Information in the Territory (“Exclusive Licensee”).

 

C. CSMC desires to grant to Licensee and Licensee desires to accept from CSMC, subject to the terms and conditions herein, an exclusive option to obtain the Exclusive License. Other than the rights expressly granted by CSMC hereunder, Licensee acknowledges that CSMC shall retain all other rights with respect to the Patent Rights and Technical Information.

 

D. CSMC and Licensee intend that the execution, delivery and performance of this Agreement by each Party, and the consummation of the transactions contemplated hereunder, shall not at any time threaten CSMC’s tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and Section 23701d of the California Revenue and Taxation Code, or cause CSMC to be in default under any of CSMC’s issued and outstanding tax-exempt bonds.

 

NOW, THEREFORE, in consideration of the mutual covenants and premises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows:

 

1.

Definition of “Patent Rights” and “Technical Information.” For purposes of this Agreement, the term “Patent Rights” shall mean the patents and/or patent applications existing on the Effective Date which are described on Schedule A attached hereto, and all patents and/or patent applications (including provisional patent applications) existing as of the Effective Date in any other country corresponding to any of the foregoing, and all divisions, continuations, reissues, reexaminations, supplementary protection certificates and extensions thereof, whether domestic or foreign, all claims of continuations-in-part that are entitled to the benefit of the priority date of any of the foregoing, and any patent that issues thereon. For purposes of this Agreement, the term “Technical Information” shall mean the following information in the Field of Use which is described in the Patent Rights or otherwise provided to Licensee: know-how, trade secrets, unpublished patent applications, software, bioinformatics, unpatented technology, technical information, statistical information and analyses, biological materials, chemical reagents, preclinical and clinical information, in each case which has been conceived or reduced to practice prior to the Effective Date, in the conduct by CSMC of the Sensitization of Solid Tumor programs at CSMC under the direction of one or any of the Inventors. The Technical Information shall further include information in the Field of Use described in Schedule B hereto and which has been reduced to practice prior to the Effective Date in the conduct of the aforementioned research programs at CSMC under the direction of one or any of the Inventors. The Patent Rights and Technical Information are all owned by CSMC.

 

 

2.

Option Fee. In consideration of the execution and delivery by CSMC of this Agreement, Licensee agrees to pay to CSMC a non-refundable fee of Two Thousand Dollars ($2,000.00) (“Option Fee”), payable in cash, no later than thirty (30) days after the execution of this Agreement. The Option Fee may be credited against any license fees payable under the Exclusive License in the event that the Parties enter into the Exclusive License.

 

3.	Development Plan. In consideration of the execution and delivery by CSMC of this Agreement, Licensee agrees to perform the development activities described in the Development Plan attached as Schedule C.

 

4.

Grant of Option. Except as provided hereinafter and subject to the terms of this Agreement, Licensee shall have until the expiration of nine (9) months from the Effective Date as an exclusive option period (“Option Period”) to notify CSMC of its desire to enter into an Exclusive License (“Option Notice”). Upon receipt of the Option Notice within the Option Period, the Parties shall enter into the Exclusive License in substantially the form attached as Schedule D hereto within ninety (90) days following the Option Notice. If, after such ninety (90) day period, Licensee does not consummate the Exclusive License, or if an Option Notice is not delivered within the Option Period, then this Agreement and the exclusive option herein shall terminate, CSMC shall have no further obligation whatsoever to Licensee with respect to the Patent Rights and Technical Information, and CSMC may freely dispose of the Patent Rights and Technical Information as it sees fit in its own discretion.

 

5.	No Warranties. CSMC makes no representation or warranty other than those expressly specified in this Agreement.

 

6.

Indemnification. Licensee shall hold harmless, defend and indemnify CSMC and each of its officers, directors, employees and agents and Inventors (each, an “Indemnified Party”, and collectively, the “Indemnified Parties”) from and against any and all claims, damages, losses, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses and costs of investigation, whether or not suit is filed) suffered or incurred by any of the Indemnified Parties in any action, suit, litigation, arbitration or dispute of any kind (“Action”) arising or resulting from any negligence or willful acts or omissions on the part of Licensee in connection with this Agreement. As part of its obligations hereunder, Licensee shall defend any Action brought against any of the Indemnified Parties with counsel of its own choosing and reasonably acceptable to CSMC, and neither CSMC nor any other Indemnified Party shall enter into any settlement of any such Action without first obtaining prior approval of Licensee. Should CSMC or any other Indemnified Party not afford Licensee the right to defend any such Action, or should CSMC or any other Indemnified Party not obtain the approval of Licensee to any such settlement, Licensee shall have no obligation to indemnify CSMC or any other Indemnified Party hereunder. Should Licensee fail to provide a defense for the Indemnified Parties as required hereunder, then Licensee shall reimburse CSMC for its out-of-pocket expenses (including reasonable attorneys’ fees and expenses and costs of investigation) which are incurred as a result of any investigation, defense or settlement relating to an indemnified matter, which reimbursement shall be made to CSMC upon receipt by Licensee of invoices reflecting in reasonable detail such expenses incurred by CSMC. Licensee shall obtain and maintain insurance policies or a program of self-insurance (including products liability and general liability policies at such time as is appropriate) which are reasonable and necessary to cover its activities and to comply with the indemnification obligations set forth above. CSMC shall promptly notify Licensee in writing of any claim or Action or material threat thereof brought against any Indemnified Party in respect of which indemnification may be sought and, to the extent allowed by law, shall reasonably cooperate with Licensee in defending or settling any such claim or Action.

 

 

7.

Prosecution Costs. CSMC will prepare, file, prosecute and maintain the Patent Rights during the Option Period and Licensee shall reimburse CSMC for the costs and expenses, including reasonable attorneys’ fees, filing fees and translation fees actually incurred by CSMC (including but not limited to any costs and expenses related to foreign filings) in the prosecution of the Patent Rights (“Prosecution Costs”) during the Option Period. Licensee shall reimburse CSMC within thirty (30) days of receiving an invoice from CSMC for such Prosecution Costs. Further, the Exclusive License shall provide that Licensee will reimburse CSMC for Prosecution Costs actually incurred by CSMC in the prosecution of any Patent Rights prior to the Option Period. The Exclusive License shall provide that Licensee shall control patent prosecution and be responsible for all Prosecution Costs related to the Patent Rights following its exercise of the Option.

 

8.

Use of Names. Licensee shall not make any written use of or reference to the name of CSMC and/or any of its trademarks, service marks, trade names or fictitious business names without the prior written consent of CSMC, which consent may be withheld or granted in CSMC’s sole and absolute discretion. Further, prior to any reference by Licensee to the names or marks of CSMC in any manner, Licensee shall provide CSMC with a writing reflecting the proposed reference so that CSMC can review the reference within a reasonable period of time prior to the proposed use thereof by Licensee. This limitation includes, but is not limited to, use by Licensee in any regulatory filing, advertising, offering circular, prospectus, sales presentation, news release or trade publication.

 

9.

Confidentiality. The terms of this Agreement and any information disclosed by either Party hereunder shall be maintained in the strictest of confidence by the Parties hereto and their respective officers, directors, employees and agents, including any proprietary, non-public information designated as such and disclosed by one Party to the other in connection with the transactions proposed in this Agreement. Furthermore, the Patent Rights and Technical Information are understood by Licensee to be the Confidential Information of CSMC to the extent “unpublished” as such term is construed under the United States Patent Laws. As such, Licensee’s confidentiality obligations hereunder automatically extend to any and all patent applications of CSMC relating to any Patent Rights. Any public announcements, notices or other communications regarding such matters to third parties, other than the Parties’ respective professional advisors or potential investors or business partners, including, without limitation, any disclosure regarding the transactions contemplated hereby, shall require the prior written approval of both Licensee and CSMC.

 

 

10.

Notices. Any notice, request, instruction or other document required by this Agreement, including the Option Notice, shall be in writing and shall be deemed to have been given: (a) if mailed with the United States Postal Service by prepaid, first class, certified mail, return receipt requested, at the time of receipt by the intended recipient, (b) if sent by Federal Express®, Airborne®, or other overnight carrier, signature of delivery required, at the time of receipt by the intended recipient, or (c) if sent by facsimile transmission, when so sent and when receipt has been acknowledged by appropriate telephone or facsimile receipt, addressed as follows:

 

in the case of CSMC, to:

Cedars-Sinai Medical Center

8700 Beverly Boulevard

Los Angeles, CA 90048-1865

Attention: Executive Vice President for Finance & CFO

Copy to: Vice President, Intellectual Property

 

or in the case of Licensee, to:

Enviro Therapeutics, Inc.

2355 Westwood Blvd. #139

Los Angeles CA 90064

Attention: CEO

 

or to such other address or to such other person(s) as may be given from time to time under the terms of this Section.

 

11.	Wire Transfer Instructions. All payments due hereunder shall be made by Licensee to CSMC in accordance with the following wire transfer instructions:

 

City National Bank

400 N. Roxbury Drive

Beverly Hills, CA 90210

ABA# 122 016 066

Account Number: 210-132260

Account Name: Cedars-Sinai Medical Center – Tech Transfer

Reference: Tech Transfer – Enviro Therapeutics, Inc.

 

 

12.	Miscellaneous.

 

a.

Compliance with Laws. Each Party shall comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this Agreement.

 

b.

Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the United States of America and of the State of California, irrespective of choice of laws provisions.

 

c.

Waiver. Failure of any Party to enforce a right under this Agreement shall not act as a waiver of that right or the ability to assert that right relative to the particular situation involved.

 

d.

Enforceability. If any provision of this Agreement shall be found by a court of competent jurisdiction to be void, invalid or unenforceable, the same shall be reformed to comply with applicable law or stricken if not so conformable, so as not to affect the validity or enforceability of the remainder of this Agreement.

 

e.

Modification. No change, modification, or addition or amendment to this Agreement, or waiver of any term or condition of this Agreement, is valid or enforceable unless in writing and signed and dated by the authorized officers of the Parties to this Agreement.

 

f.

Entire Agreement. This Agreement and the Confidentiality Agreement currently in effect between the Parties constitute the entire agreements between the Parties with respect to the subject matter hereof and thereof, and replace and supersede as of the date hereof and thereof any and all prior agreements and understandings, whether oral or written, between the Parties with respect to the subject matter of such agreements.

 

g.

Construction. This Agreement has been prepared, examined, negotiated and revised by each Party and their respective attorneys, and no implication shall be drawn and no provision shall be construed against any Party to this Agreement by virtue of the purported identity of the drafter of this Agreement or any portion thereof.

 

h.

Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall constitute one and the same instrument. This Agreement may be executed by facsimile.

 

i.

Assignment. Except as otherwise expressly provided in this Agreement, this Agreement shall be binding upon, inures to the benefit of, and is enforceable by, the Parties and their respective heirs, legal representatives, successors and permitted assigns. This Agreement shall not be assignable by Licensee absent the prior written consent of CSMC unless to a successor to Licensee or a purchaser of all or substantially all of the assets of Licensee relating to the subject matter of this Agreement.

 

j.

Further Assurances. At any time and from time to time after the Effective Date, each Party shall do, execute, acknowledge and deliver, and cause to be done, executed, acknowledged or delivered, all such further acts, transfers, conveyances, assignments or assurances as may be reasonably required to consummate the transactions contemplated by this Agreement.

 

k.

Survival. The following sections shall survive any expiration or earlier termination of this Agreement: Section 5 (“No Warranties”), Section 6 (“Indemnification”), Section 7 (“Prosecution Costs”) and Section 8 (“Use of Names”).

 

 

IN WITNESS WHEREOF, the Parties have caused their duly authorized representatives to execute this Agreement as of the Effective Date.

 

“CSMC”:			“Licensee”
Cedars-Sinai Medical Center			Enviro Therapeutics, Inc.
A California Nonprofit Public Benefit Corporation			A Corporation
By:	/s/ James D. Laur		By:	/s/ Neil A. Bhowmick
	James D. Laur, JD			Neil A. Bhowmick, PhD
	Vice President, Intellectual			CEO
By:	Edward M. Prunchunas
	Executive Vice President for Finance & CFO

 

 

Schedule A

 

Patent Rights

 

 

1. Compositions and Methods for Treating Diseases and Conditions by Depletion of Mitochondrial DNA from Circulation and for Detection of Mitochondrial DNA

 

Inventor(s):	Bhowmick NA, Haldar, S.
Application No.:	62/940,457
Filing Date:	Nov 26, 2019
Docket No.:	065472-000793PR00 CSMC
Tech ID:	bho001234

 

 

Schedule B

 

Technical Information

 

All lab notes, methods, protocols, SOPs, and technical know-how developed by inventors, including:

 

Haldar et al (2019). Cancer epithelia-derived mitochondrial DNA is a targetable initiator of a paracrine signaling loop that confers taxane resistance. Submitted.

 

 

Schedule C

 

Development Plan

 

See attached.

 

 

Business Plan

 

I. Executive summary

 

Our mission is to develop therapeutics targeting the tumor microenvironment to complement conventional and targeted therapies designed against the cancer cells. The focus on the non-tumor supportive cells of solid tumors has emerged from the Bhowmick laboratory, where multiple viable therapeutic targets have been identified in the last 15 years. One such target for the depletion of mitochondrial DNA is of therapeutic interest for Enviro Therapeutics. Strong preclinical data demonstrate mitochondrial DNA secretion illicit an inflammatory response that contributes to therapeutic resistance to standard of care chemotherapy for prostate cancer patient with advanced disease.

 

ENV205, is a mitochondrial DNA depletion compound that is being developed in partnership with Xencor Co. ENV205 is found to serve as a synergistic taxane sensitizer. The further capacity to limit co-morbidities of cardiac toxicity and chemo-brain associated with taxane-based therapy will be tested. The intellectual property owned by Cedars-Sinai Medical Center will be licensed by Enviro Therapeutics.

 

ENV205 will be aggressively pursued in pre-clinical and clinical trials. Future therapeutic targets will be developed based on the overriding mission to complement traditional cancer-targeted drugs with those that address the tumor microenvironment. Enviro Therapeutics will strive to co-develop companion biomarkers with all drugs in its portfolio.

 

II. Leadership team

 

Enviro Therapeutics Inc. was incorporated on November 15, 2019 in the state of California. Neil Bhowmick is the CEO and Secretary. John Yu is the Treasurer and Director.

 

III. Market analysis

 

The initial market for ENV205 will be for prostate and breast cancer patients. Breast cancer therapeutics market size was valued over $16 million in 2018 and the specific chemotherapy drug sector is expected to grow 6.6% (2019-2025). Prostate cancer afflict an estimated 174,650 men in the United States per year. The market share of this population that require chemotherapy is approximately $56.5 million. The market of prostate and breast cancer is highest in the Americas. The diseases are significant in the Europe and rapidly growing in east Asia.

 

Taxane based therapy, inclusive of docetaxel, paclitaxel, and cabazataxel, is standard of care for majority of solid tumors (inclusive of breast cancer, non-small cell lung cancer, advanced stomach cancer, head and neck cancer and metastatic prostate cancer). Mortality for these diseases is primarily due to the development of resistance to the taxane. ENV205 is designed to extend the efficacy at lower doses of taxane-based therapy. The application in other traditional chemotherapies (e.g. anthacyclins, 5-flurouracil) have yet to be explored. Neurologic and cardiac comorbidities from this class of drugs can be dose limiting for patients. The capacity for ENV205 to limit these comorbidities provide an added advantage over their primary objective.

 

IV. Value Proposition

 

-	No sensitizers for chemotherapy for prostate and breast cancer patients exist
-	There are no companies that have the goal of making cancer therapeutics that target the non-vascular tumor microenvironment.
-	Partnership with Xencor Co. provide experience in therapeutic development.

 

 

 

V. Milestones and Timeline

 

-	Produce ENV205 for preclinical testing.
-	Demonstrate ENV205 efficacy in synergizing with docetaxel in breast cancer mouse models.
-	Measure changes in cognitive impairment and cardiac toxicity with ENV205.
-	Study biomarkers for ENV205
-	Develop Phase 1 clinical trial for ENV205 combination with paclitaxel for metastatic breast and prostate cancer.

 

Enviro Therapeutics Inc. Development Plan

 

ENV205 will be aggressively pursued in pre-clinical and clinical trials. Future therapeutic targets will be developed based on the overriding mission to complement traditional cancer-targeted drugs with those that address the tumor microenvironment. Enviro Therapeutics will strive to co-develop companion biomarkers with all drugs in its portfolio.

 

Preclinical Plan:

 

-	Year 1: Produce ENV205 for preclinical testing. Demonstrate ENV205 efficacy in synergizing with docetaxel in breast cancer mouse models.
-	Year 2: Measure changes in cognitive impairment and cardiac toxicity with ENV205.
-	Year 2: And identify other cancer targets for ENV205
-	Year 2: Study biomarkers for ENV205

 

Clinical Plan:

 

-	Year 3: Develop Phase 1 clinical trial for ENV201 combination with paclitaxel for metastatic breast and prostate cancer.

 

 

Schedule D

 

Exclusive License Agreement

 

THIS EXCLUSIVE LICENSE AGREEMENT (“Agreement”) is entered into as of this 16th day of March 2020 (“Effective Date”) by and between CEDARS-SINAI MEDICAL CENTER, a California nonprofit public benefit corporation (“CSMC”), with offices at 8700 Beverly Boulevard, Los Angeles, California 90048-1865, and ENVIRO THERAPEUTICS, INC.., a C Corporation (“Licensee”), with offices at 2355 Westwood Blvd. #139, Los Angeles CA 90064.

 

R E C I T A L S

 

A. CSMC owns and/or is entitled to grant license rights with respect to certain Patent Rights and Technical Information (as defined below) invented or developed in the course of the research programs at CSMC conducted under the direction of Neil Bhowmick and Subhash Haldar (hereinafter collectively referred to as the “Inventors”).

 

B. CSMC and Licensee entered into that certain Exclusive Option Agreement dated March 16, 2020 (“Option Agreement”), under which CSMC granted to Licensee an exclusive option to negotiate and obtain an exclusive license to the Patent Rights and Technical Information.

 

C. Licensee has exercised its option under the Option Agreement to negotiate and obtain an exclusive license to the Patent Rights and Technical Information, under which CSMC desires to have the Patent Rights and the Technical Information developed, used and commercialized in the Field of Use (as defined below) by Licensee, and Licensee desires to obtain an exclusive, worldwide license to conduct research in the Field of Use, and to develop, manufacture, use and sell Products (as defined below) in the Field of Use, using the Patent Rights and Technical Information in accordance with the terms of this Agreement. Other than the rights expressly granted by CSMC hereunder within the Field of Use, Licensee acknowledges that CSMC shall retain all other rights with respect to the Patent Rights and the Technical Information.

 

D. CSMC and Licensee intend that the execution, delivery and performance of this Agreement by each party, and the consummation of the transactions contemplated hereunder, shall not at any time threaten CSMC’s tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and Section 23701d of the California Revenue and Taxation Code, or cause CSMC to be in default under any of CSMC’s issued and outstanding tax-exempt bonds.

 

NOW, THEREFORE, in consideration of the mutual covenants and premises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1. DEFINITIONS

 

1.1 “Affiliate” or “Affiliates” shall mean any corporation, person or entity, which controls, is controlled by, or is under common control with, a party to this Agreement without regard to stock or other equity ownership. For purposes hereof, the terms “control” and “controls” mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a corporation, person or entity, whether through the ownership of voting securities, by contract or otherwise.

 

 

1.2 “Confidential Information” shall mean any confidential or proprietary information furnished by one party (the “Disclosing Party”) to the other party (the “Receiving Party”) in connection with this Agreement, including, without limitation, all specifications, know-how, trade secrets, technical information, drawings, software, models, business information and patent applications pertaining to the Patent Rights and Technical Information, and as further provided in Section 10 hereof.

 

1.3 “FDA” shall mean the United States Food and Drug Administration, or any successor agency thereof.

 

1.4 “Field of Use” shall mean the treatment of cancer.

 

1.5 “Funding Agencies” shall mean any public or private granting agencies which have provided funding to CSMC or to any of the Inventors for the development of any of the Patent Rights or Technical Information prior to the Effective Date.

 

1.6 “Improvements” shall mean all improvements or enhancements to the Patent Rights that, after the Effective Date, are conceived and reduced to practice if patentable, or reduced to practice if not patentable, by at least one Inventor (other than by an Inventor that conceived or reduced to practice such Improvement in his or her role as a paid consultant or employee of Licensee).

 

1.7 “Licensee Developments” shall mean any and all processes, uses, designs, applications, methods and compositions-of-matter, indications, improvements, enhancements and modifications in the Field of Use directly based upon or directly created using the Patent Rights and/or Technical Information and which were discovered or developed by or on behalf of Licensee (exclusive of work performed by CSMC or the Inventors on behalf of CSMC) during the term of this Agreement. The Licensee Developments are all owned by Licensee.

 

1.8 “Net Sales” shall mean the gross amount invoiced by or on behalf of Licensee and Permitted Sublicensees to third parties for all sales of Products less (a) discounts actually allowed; (b) credits for claims, allowances, retroactive price reductions or returned goods; (c) prepaid freight; and (d) sales taxes or other governmental charges actually paid in connection with sales of Products (but excluding what are commonly known as income taxes and value-added taxes). Sales of Products by Licensee, or a Permitted Sublicensee of Licensee, to any Affiliate or Permitted Sublicensee which is a reseller thereof shall be excluded, and only the subsequent sale of such Products by Affiliates or Permitted Sublicensees of Licensee to unrelated parties shall be deemed Net Sales hereunder. If a Product is sold or provided as part of a system, package, or combination product or service that involve one or more products or services not covered by the definition of Product (each, a “Combination Product”), Net Sales shall be calculated by multiplying the Net Sales of such Combination Product, by the fraction A/B, where “A” is the price of the Product included in such Combination Product when sold separately from any other products or services not covered by the definition of Product and “B” is the price of the Combination Product. In the event that no market price is available for the Product included in such Combination Product when supplied or priced separately, CSMC and Licensee shall determine in good faith the fair market value thereof.

 

 

1.9 “Non-Royalty Sublicense Revenues” shall mean, but is not limited to, upfront fees, license maintenance fees, and milestone payments, or other payments, including the fair market value of any non-cash consideration, received by Licensee in consideration for any rights granted to Patent Rights under a sublicense agreement, and excludes any and all sales-based royalties paid to Licensee.

 

1.10 “Other Product” or “Other Products” shall mean any products and/or services in the Field of Use, other than a Patent Product, derived in any manner whatsoever from any of the Technical Information and/or Licensee Developments.

 

1.11 “Patent Rights” shall mean the patents and/or patent applications existing on the Effective Date which are described on Schedule A attached hereto, and all patents and/or patent applications (including provisional patent applications) existing as of the Effective Date in any other country corresponding to any of the foregoing, and all divisions, continuations, reissues, reexaminations, supplementary protection certificates and extensions thereof, whether domestic or foreign, all claims of continuations-in-part that are entitled to the benefit of the priority date of any of the foregoing, and any patent that issues thereon. The Patent Rights are all owned by CSMC.

 

1.12 “Patent Product” or “Patent Products” shall mean any products and/or services in the Field of Use that, except for the license granted hereunder, would infringe a Valid Claim.

 

1.13 “Product” or “Products” shall mean a Patent Product and/or an Other Product.

 

1.14 “Technical Information” shall mean, as of the Effective Date, the following information in the Field of Use which is described in the Patent Rights or otherwise provided to Licensee: know-how, trade secrets, unpublished patent applications, software, bioinformatics, unpatented technology, technical information, statistical information and analyses, biological materials, chemical reagents, preclinical and clinical information, in each case which has been conceived or reduced to practice prior to the Effective Date, in the conduct by CSMC of the Sensitization of Solid Tumor programs at CSMC under the direction of one or any of the Inventors. The Technical Information shall further include information in the Field of Use described in Schedule B hereto and which has been reduced to practice prior to the Effective Date in the conduct of the aforementioned research programs at CSMC under the direction of one or any of the Inventors. Technical Information is all owned by CSMC.

 

1.15 “Territory” shall mean worldwide.

 

1.16 “Valid Claim” shall mean a claim of an issued patent included within the Patent Rights and/or Licensee Developments, which claim has not (a) lapsed, been canceled or become abandoned, (b) been declared invalid or unenforceable by a non-appealable decision or judgment of a court or other appropriate body or authority of competent jurisdiction, or (c) been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise. The term Valid Claim shall also include the claims of a pending patent application within the Patent Rights and/or Licensee Developments for a period of seven (7) years from the actual filing date of that patent application.

 

 

2. LICENSE

 

2.1 Grant of Exclusive Rights. Subject to the terms of this Agreement, CSMC hereby grants to Licensee, and Licensee hereby accepts from CSMC, the exclusive license, with the right to grant sublicenses (subject to the terms of Section 2.2 hereof), under and to the Patent Rights and Technical Information during the term of this Agreement (as provided in Section 6 hereof) to conduct research in the Field of Use and to make, have made, use, import, offer for sale, sell and/or have sold Products in the Field of Use in the Territory. The foregoing grant of exclusivity is made expressly subject to the following:

 

(a) All applicable laws and regulations, including, without limitation, the requirements of federal law as pertains to the manufacture of products within the United States;

 

(b) All applicable rules of the Funding Agencies which have provided funding to CSMC or to any of its employees (including any of the Inventors) for the development of the Patent Rights and Technical Information; and

 

(c) The following non-exclusive rights to the Patent Rights and Technical Information, which are retained by CSMC within the Field of Use:

 

(i) the right to submit for publication the scientific findings from research conducted by or through CSMC or its investigators (including the Inventors) related to the Patent Rights and the Technical Information; and

 

(ii) the right (A) to use any tangible or intangible information contained in the Patent Rights or the Technical Information or any Improvements (so long as CSMC shall treat such information as Confidential Information and maintain its confidentiality in accordance with Section 10 hereof), for CSMC’s research, internal teaching and other educationally-related and non-commercial (except for charges to its own patients) clinical purposes, where clinical use does not involve a third party funding grant to commercialize such information, and (B) to obtain research funding for further study and development thereof from governmental and other nonprofit organizations (including grant applications).

 

(d) Notwithstanding any other provision hereof to the contrary, all rights to the Patent Rights, Technical Information and Improvements outside of the Field of Use are retained by CSMC. Furthermore, this Agreement confers no license or rights by implication, estoppel, or otherwise under any patent applications or patents of CSMC other than Patent Rights regardless of whether such patents are dominant or subordinate to Patent Rights.

 

 

2.2 Sublicensing. Licensee shall have the right to grant sublicenses or to assign any or all of the rights granted hereunder only to an entity which has been approved in writing by CSMC (each, “Permitted Sublicensee”). Any such Permitted Sublicensee shall be subject in all respects to the provisions contained in this Agreement and Licensee will remain primarily liable to CSMC for, and shall be responsible for monitoring and enforcing, performance of all of Licensee’s obligations hereunder by any such Permitted Sublicensee. Without limiting the generality of the foregoing, as an express condition of any such sublicense, any such Permitted Sublicensee shall be required to agree in writing to be bound by commercially reasonable reporting and record keeping, indemnification and inspection provisions, and the applicable provisions of this Agreement, including, without limitation, those pertaining to the use of CSMC’s name and marks, indemnification of CSMC and the use of CSMC’s Confidential Information. Permitted Sublicensees may not further sublicense without CSMC’s prior written consent, which consent shall not be unreasonably withheld. Licensee shall promptly forward to CSMC a copy of any and all fully executed sublicense agreements, any subsequent amendments, and all copies of Permitted Sublicensees’ profit sharing or royalty reports, in no event more than thirty (30) days following execution or receipt thereof, as applicable. Licensee shall also keep CSMC reasonably informed with respect to the progress of any relations entered into with any Permitted Sublicensees. If Licensee shall conduct one or more audits of its Permitted Sublicensees hereunder during the term hereof, Licensee shall provide copies of all audit reports to CSMC on a timely basis. The covenants pertaining to the use of CSMC’s name and marks, the indemnification of CSMC and the use of CSMC’s Confidential Information in any sublicense or assignment shall run for the benefit of CSMC, who shall be expressly stated as being a third-party beneficiary thereof with respect to the covenants set forth in this Agreement. Licensee understands and agrees that none of its permitted sublicenses hereunder shall reduce in any manner any of its obligations set forth in this Agreement.

 

(a) Royalty-Free Sublicenses. If, and only if, Licensee pays all royalties due CSMC from a Permitted Sublicensee’s Net Sales, Licensee may grant that Permitted Sublicensee a royalty-free or non-cash sublicense or cross-license.

 

2.3 Improvements. Subject to the rights and applicable rules of the Funding Agencies, Licensee shall have, for a period of sixty (60) days after receipt by Licensee of written notice from CSMC disclosing an Improvement, the exclusive first right to negotiate with CSMC to obtain one or more licenses to the Improvement in the Field of Use upon such terms and conditions as shall be agreed by the parties hereto, which terms and conditions shall include provisions for fair market value consideration for the grant of any such licenses. If Licensee declines or fails to pursue, or if the parties fail to conclude negotiations for a license to, such Improvement in the Field of Use during the sixty (60) day period specified above, then CSMC shall have the right to commence discussions with any other party concerning such Improvement. Subject to the provisions of this Section 2.3, Licensee acknowledges and agrees that CSMC expressly retains and reserves any and all right, title and interest in and to the Improvement, whether or not in the Field of Use and, accordingly, no license to any Improvement is granted to Licensee under this Agreement.

 

2.4 Licensee Developments. Licensee hereby grants, and shall require its Permitted Sublicensee(s) to grant to CSMC a nonexclusive, royalty-free, irrevocable, paid-up license, with the right to grant sublicenses to non-profit research institutions and governmental agencies, to practice and use Licensee Developments for non-commercial research purposes, which license shall include, without limitation, the rights to: (a) publish the scientific findings from research conducted by or through CSMC or on its behalf, (b) use any tangible or intangible information contained in the Licensee Developments (so long as CSMC shall treat such information as Confidential Information and maintain its confidentiality in accordance with Section 10 hereof), for CSMC’s internal teaching and other educationally-related and non-commercial (except for charges to its own patients) clinical purposes, where clinical use does not involve a third party funding grant to commercialize such information, and (c) obtain research funding from governmental and other nonprofit organizations (including grant applications).

 

 

2.5 Diligent Commercialization. Licensee acknowledges that it is important to CSMC, and a requirement of the United States Government under Title 35, Section 203 of the United States Code, that Licensee pursue the development, commercialization and marketing of Products and otherwise exercise commercially reasonable efforts to maximize the value of this Agreement to CSMC. Without limiting the foregoing, Licensee shall maintain a bona fide, funded, ongoing and active research, development, manufacturing, regulatory, marketing or sales program (all as commercially reasonable) to make Products commercially available to the public as soon as commercially practicable in the Territory. Should CSMC determine that Licensee fails to use commercially reasonable efforts to maximize the Patent Rights in any national political jurisdiction in the Territory at any time following the one (1) year anniversary of the Effective Date of this Agreement, CSMC shall provide Licensee with notice of such determination and give Licensee a period of ninety (90) days to provide written evidence satisfactory to CSMC that Licensee or its Permitted Sublicensee(s) has sales of Products in such jurisdiction in question or an effective, ongoing and active research, development, manufacturing, marketing or sales program, as appropriate, directed toward obtaining regulatory approval, and/or production and/or sales of Products in such jurisdiction in accordance with Licensee’s business, legal, medical and scientific judgment and Licensee’s normal practices and procedures for products having similar technical and commercial potential. Should Licensee fail to provide such written evidence satisfactory to CSMC within such ninety (90) day period, CSMC shall have the right, at CSMC’s sole and absolute discretion, to either: (i) terminate this Agreement with respect to the applicable national political jurisdiction within the Territory or (ii) require Licensee to negotiate in good faith a sublicense with a Permitted Sublicensee(s) in the applicable national jurisdiction to maximize the Patent Rights in such jurisdiction.

 

2.6 Milestones. As part of Licensee’s diligent commercialization efforts under Section 2.5, CSMC and Licensee have agreed on the Milestones set forth on Schedule C, with each such Milestone being deemed a separate and independent condition. Within sixty (60) days after each anniversary of the Effective Date, Licensee shall prepare and deliver to CSMC an annual written report (to be certified by an executive officer of Licensee) indicating its compliance with the Milestones. If Licensee believes that it is or will be unable to achieve such Milestones despite its diligent efforts, Licensee may request amendments or reasonable extensions to Schedule C in writing for CSMC’s consideration. Licensee agrees to provide any additional information reasonably required by CSMC to evaluate Licensee’s performance under this Agreement. If Licensee fails to meet any annual Milestone designated in Schedule C hereto, and has not obtained an extension or amendment to such Milestone(s), CSMC may, at its option and as its sole remedy for Licensee’s breach of this Section 2.6, upon written notice to Licensee, convert the exclusive license granted under Section 2.1 hereof to a non-exclusive license or to a co-exclusive license, or terminate the license.

 

2.7 Preference for United States Industry. To the extent that the Patent Rights and Technical Information have been developed using funding from the United States Government, Licensee agrees that any Products made, used or sold in the United States shall be manufactured substantially in the United States.

 

 

3. REPRESENTATIONS AND WARRANTIES

 

3.1 Rights to Technology. Except for the rights, if any, of the Funding Agencies or the United States Government, CSMC represents and warrants to Licensee that, to the best of its actual, current knowledge (without investigation outside of CSMC as to such representations and warranties) (a) it has the right to grant the licenses in this Agreement, (b) it has not granted licenses to the Patent Rights or Technical Information to any other party that would restrict the rights granted hereunder except as stated herein and (c) there are no claims, judgments or settlements to be paid by CSMC with respect the Patent Rights or Technical Information or pending claims or litigation relating to the Patent Rights or Technical Information. Except for any potential or actual rights of Funding Agencies or the United States Government, CSMC is not aware that any additional rights or licenses are necessary for Licensee to exercise its licensed rights granted by CSMC under this Agreement.

 

3.2 Limited Warranty; Certain Damages.

 

(a) Limited Warranty. CSMC makes no representation or warranty other than those expressly specified in this Agreement. Licensee accepts the Patent Rights and the Technical Information on an “AS-IS” basis. CSMC MAKES NO OTHER WARRANTIES CONCERNING PATENT RIGHTS OR TECHNICAL INFORMATION COVERED BY THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO PATENT RIGHTS, TECHNICAL INFORMATION OR ANY PRODUCT. CSMC MAKES NO WARRANTY OR REPRESENTATION AS TO THE VALIDITY OR SCOPE OF PATENT RIGHTS, OR THAT ANY PRODUCT WILL BE FREE FROM AN INFRINGEMENT ON PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THAT NO THIRD PARTIES ARE IN ANY WAY INFRINGING PATENT RIGHTS COVERED BY THIS AGREEMENT. LICENSEE HEREBY AGREES THAT LICENSEE WILL NOT GIVE, AND SHALL NOT PERMIT ANY AFFILIATES OR SUBLICENSEES OR AFFILIATES THEREOF TO GIVE, ANY SUCH WARRANTY OR REPRESENTATION TO THIRD PARTIES ON BEHALF OF CSMC.

 

(b) Certain Damages. EXCEPT FOR THE BREACH OF THE CONFIDENTIALITY PROVISIONS IN SECTION 10 OR IN ACCORDANCE WITH THE OBLIGATION TO INDEMNIFY SET FORTH IN SECTION 8, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF PROFITS OR EXPECTED SAVINGS OR OTHER ECONOMIC LOSSES, OR FOR INJURY TO PERSONS OR PROPERTY) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ITS SUBJECT MATTER, REGARDLESS OF WHETHER SUCH PARTY KNOWS OR SHOULD KNOW OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING EXCLUSIONS AND LIMITATIONS SHALL APPLY TO ALL CLAIMS AND ACTIONS OF ANY KIND, WHETHER BASED ON CONTRACT, TORT (INCLUDING, BUT NOT LIMITED TO NEGLIGENCE), OR ANY OTHER GROUNDS.

 

 

3.3 Rights Retained by Funding Agencies. Licensee acknowledges that to the extent that the Patent Rights and Technical Information have been developed in part under one or more funding agreements (“Funding Agreements”) with one or more Funding Agencies, such Funding Agencies have certain statutory, non-exclusive rights relative thereto for use for government purposes as well as regulatory or statutory “march-in rights” (collectively, “Statutory Rights”). Licensee also acknowledges that to the extent that the Improvements may be developed in part under one or more Funding Agreements with one or more Funding Agencies, such Funding Agencies may have certain Statutory Rights relative thereto. This Agreement is explicitly made subject to such Statutory Rights and, to the extent of any conflict between any such Statutory Rights and this Agreement, such Statutory Rights shall prevail.

 

4. CONSIDERATION

 

In consideration of the execution and delivery by CSMC of this Agreement, Licensee agrees as follows:

 

4.1 License Fee.

 

(a) Upfront Fee. Licensee shall pay to CSMC a non-refundable license fee in two (2) installments in accordance with the following: (i) an amount equal to $5,000 shall be payable within thirty (30) days of the Effective Date, and (ii) an amount equal to $25,000 shall be payable within thirty (30) days of the date on which Licensee has raised at least $250,000 in capital company-wide for any program or purpose; provided, that if Licensee has paid CSMC the second installment of the license fee described in clause (ii) of this Section 4.1(a), then Licensee shall not be required to pay CSMC the second installment of the license fee described in the license agreement between Licensee and CSMC with respect to CSMC’s technology titled “Sensitization of solid tumors to hormonal, chemo-, or radiation therapy through endoglin antagonism” (bho000961) (the “Endoglin Antagonism License”). For the avoidance of doubt, upon raising at least $250,000 in capital company-wide for any program or purpose, Licensee shall only be required to pay CSMC one (1) $25,000 license fee installment in total, and such payment shall satisfy the requirements to make a second license fee installment payment which are set forth in both this Agreement and the Endoglin Antagonism License.

 

(b) Patent Cost Reimbursement. Within thirty (30) days of the execution of this Agreement, Licensee shall reimburse CSMC for the costs, including attorneys’ fees and filing fees, actually incurred to date by CSMC in the prosecution of the Patent Rights (which have not already been reimbursed by Licensee under the Option Agreement), which are [$    ] as of    , 202_.

 

4.2 Equity Grant. Licensee shall issue to CSMC that number of shares of Licensee’s common stock as is equal, in the aggregate, to 0.5% of the outstanding shares of the capital stock of Licensee on a Fully Diluted Basis (as defined hereafter), as of the Effective Date, subject to execution of a Stock Issuance Agreement of the form attached hereto as Schedule C. Failure of Licensee to issue such shares shall render this Agreement null and void (ab initio). Such shares issued hereunder shall be of the same class and series as founders’ shares. A true and complete copy of Licensee’s capitalization table as of the Effective Date of the Agreement is set forth in Schedule E hereto. For the purposes of this Agreement, “Fully Diluted Basis” shall include all of the issued and outstanding shares of common stock, preferred stock and other capital stock of the Licensee (calculated on an as-converted to common stock basis) plus any then issued and outstanding options and warrants to purchase common stock (calculated on an as-exercised, as converted to common stock basis) plus any unissued but reserved for shares of common stock for future issuance as options or stock grants under the Licensee’s stock plan.

 

(a) Anti-Dilution Protection. Licensee will issue to CSMC, without further consideration, any additional shares of stock of the class issued pursuant to Section 4.2 necessary to ensure that the number of shares issued CSMC pursuant to Section 4.2 does not represent less than 0.5% of the shares issued and outstanding on a Fully-Diluted Basis at any time until the earlier of (i) Licensee’s initial public offering or (ii) Licensee having raised at least $20,000,000 in capital.

 

 

(b) Future Offerings. In any private offering of Licensee’s equity securities in exchange for cash (or in satisfaction of debt issued for cash), CSMC may purchase for cash that number of the securities issued in such offering as is necessary for CSMC to maintain its pro rata ownership interest in the Licensee on a Fully-Diluted Basis. This right is in addition to CSMC’s rights under Section 4.2(a). In any offering subject to this Section 4.2(b), (i) CSMC’s purchase right shall be on the same terms as the other investors in the financing in question, except that CSMC shall not have any board representation or board meeting attendance rights, (ii) Licensee will give CSMC notice of the terms of the offering, including the names of the investors and the amounts to be invested by each, and CSMC may elect to exercise its right of purchase, in whole or in part, by notice given to Licensee within thirty (30) days after receipt of Licensee’s notice, and (iii) if CSMC elects not to purchase, or fails to give an election notice within such period, CSMC’s purchase right will not apply to the offering if (and only if and to the extent) it is consummated within ninety (90) days on the same or less favorable (to the investor) terms as stated in Licensee’s notice to CSMC. CSMC’s rights under this Section 4.2(b) will not apply to the issuance of stock to employees and other service providers pursuant to a plan approved by Licensee’s board of directors, to shares issued in connection with an acquisition, joint venture or other strategic transaction, or to shares issued as additional consideration in lending or leasing transactions. The rights granted in this Section 4.2(b) will terminate (in addition to any earlier termination pursuant to their terms) immediately before Licensee’s initial public offering or a merger, sale or consolidation with a company that is subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Securities Exchange Act of 1934, as amended.

 

4.3 Royalties and Non-Royalty Revenue.

 

(a) Running Royalties for Products. Licensee agrees to pay and shall pay to CSMC the following non-refundable running royalties (each, a “Royalty”) in the amounts set forth below:

 

(i) a running royalty of four percent (4%) on Net Sales of Patent Products made, used, sold or otherwise distributed by Licensee or any Permitted Sublicensee hereunder (“Patent Product Royalty Rate”) and

 

(ii) a running royalty of one-half percent (0.5%) on Net Sales of Other Products made, used, sold or otherwise distributed by Licensee or any Permitted Sublicensee hereunder (“Other Product Royalty Rate”).

 

 

(b) Minimum Royalties. Beginning on the third (3rd) anniversary of the Effective Date, Licensee shall pay CSMC a minimum royalty of $10,000 per year (“Minimum Royalty”). Each annual payment of the Minimum Royalty shall be credited against Royalties payable such that no Royalties shall be payable unless the Royalties for such annual period exceed $10,000; provided, that excess amounts paid in respect of the Minimum Royalty may not be carried over to the following calendar year.

 

(c) Permitted Deductions. If Licensee is required to make any payment to a third party to obtain a license for the manufacture, use, sale or import of a Product or otherwise exploit the Patent Rights, Licensee shall be entitled to deduct up to fifty percent (50%) of such third party payments made in a particular calendar year against Royalties payable to CSMC for that year; provided, however, that in no event shall the Royalties payable to CSMC hereunder for any one-year period be reduced by operation of this section by more than fifty percent (50%); and provided, further, that such third party payments shall only be creditable against Royalties payable to CSMC for the calendar year in which the third party payment was actually made by Licensee.

 

(d) Highest Royalty Due. If a Product is covered by both the definition of Patent Product and Other Product, CSMC shall be entitled to the Patent Product Royalty Rate on the Product as defined in Section 4.3(a)(i), but shall not be entitled to also receive the Other Product Royalty Rate on the same Product under Section 4.3(a)(ii). To the extent a Product ceases being a Patent Product, but is still an Other Product, CSMC shall be entitled to receive a Royalty on such Product at the Other Product Royalty Rate, but only for such time as specified in Section 4.3(g).

 

(e) Licensee Challenge of Patent Rights. Should Licensee bring, directly or through a third party indirectly, an action challenging the validity, scope or enforceability of any Patent Rights, Licensee will first provide CSMC with at least ninety (90) days’ prior written notice that it intends so to do before filing such a challenge. Following the giving of such notice, Licensee will pay to CSMC the Royalties and Non-Royalty Sublicense Revenue due hereunder at the rate of two times the applicable rate during the pendency of such action. Should the outcome of such action determine that any claim of a patent challenged by Licensee is valid and/or infringed and/or enforceable, as applicable, Licensee will thereafter pay to CSMC the Royalties and Non-Royalty Sublicense Revenue due hereunder at the rate of three times the applicable rate for all Products sold that would infringe such claim and/or transactions that include a grant of rights to such claim. Such increased royalty reflects the increased value of the Patent Rights upheld in such action. In the event that a challenge to the Patent Rights brought by Licensee is partially or entirely successful, Licensee will have no right to recoup any Royalties or other amounts paid before or during the period of the challenge. Additionally, Licensee agrees to disburse any and all proceeds received from any sublicense of the applicable Patent Rights throughout the duration of any such challenge to CSMC, and agrees to reimburse CSMC for all costs actually incurred by CSMC in connection with the applicable legal proceedings. In the event that all or any portion of this Section 4.3(e) is invalid, illegal or unenforceable, then the parties will use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, gives effect to the intent of this Section 4.3(e).

 

 

(f) Arm’s-Length Transactions. On sales of Products which are made in other than an arms’-length transaction, the value of the Net Sales attributed under this Section 4.3 to such a transaction shall be that which would have been received in an arms’-length transaction, based on sales of like quality and quantity products on or about the time of such transaction.

 

(g) Duration of Royalty Obligations. The royalty obligations of Licensee as to each Product shall terminate on a country-by-country and product-by-product basis concurrently with the expiration of:

 

(i) For Patent Products, the last to expire of a Valid Claim that covers such Patent Product, including any term extensions thereof, and

(ii) For Other Products, the longer of twenty (20) years after the first bona fide commercial sale of such Other Product in a country or expiration of any market exclusivity period granted by a regulatory agency for such Other Product.

 

(h) Non-Royalty Revenues.

 

(i) Non-Royalty Sublicense Revenues. Any and all “Non-Royalty Sublicense Revenues” shall be reported and paid to CSMC by Licensee as set forth below within sixty (60) days of receipt by Licensee. Licensee shall pay to CSMC a percentage of these Non- Royalty Sublicense Revenues according to the following schedule:

 

Date of Receipt of Non-Royalty Sublicense Revenue		Percent of Non-Royalty Sublicense Revenues Payable to CSMC
Prior to receipt of FDA authorization of an Investigational New Drug (“IND”) application or equivalent regulatory agency authorization in another jurisdiction for a Product		35%
After receipt of FDA authorization of an IND application for a Product or equivalent regulatory agency authorization in another jurisdiction, but prior to submission of a New Drug Application (“NDA”) or Biologics License Applications (BLA) to the FDA or equivalent regulatory agency in another jurisdiction		10%
After submission of an NDA/BLA for a Product but prior to receipt of FDA approval of an NDA/BLA or equivalent regulatory agency approval in another jurisdiction for a Product		8%
After receipt of FDA approval of an NDA/BLA or equivalent regulatory agency approval in another jurisdiction for a Product		5%

 

Any non-cash consideration received by Licensee from Permitted Sublicensees shall be valued at its fair market value as of the date of receipt and such amount shall be paid in cash to CSMC in accordance with the schedule above. In the event that the Patent Rights are sublicensed in combination with one or more patented technologies that are not covered under this Agreement, Non-Royalty Sublicense Revenues for the purposes of this Section 4.3(g) shall be calculated on a pro-rata basis in a manner to be mutually agreed by CSMC and Licensee (which agreement may be a condition of approval under Section 2.2).

 

 

(ii) Product Development Milestones. Licensee agrees to pay and shall pay to CSMC the following non-creditable, non-refundable product development milestone payments within sixty (60) days of the first occurrence of the following milestones (or their equivalents):

 

Milestone Event		Milestone Payment
Successful completion of Phase I clinical trial for a Product		$	150,000
Successful completion of a Phase II clinical trial for a product and receipt of FDA or equivalent regulatory agency in another jurisdiction and approval for a Phase III clinical trial		$	250,000
Receipt of FDA approval of a New Drug Application (“NDA”) or Biologics License Applications (“BLA”) or equivalent foreign regulatory approval in a non-United States major commercial market		$	1,500,000
Cumulative Net Sales have exceeded $50,000,000		$	2,500,000

 

(i) Payment and Accounting.

 

(i) Reports. Each payment of Royalties shall be accompanied by a report in the form attached as Schedule F hereto, which sets forth in reasonable detail the number and each type of Product sold and the calculation of Net Sales applicable thereto, and such additional details as may be reasonably requested by CSMC for the determination of Royalties payable hereunder. Products shall be considered as being sold for the purpose of the calculation of Royalties under this Agreement when the Products have been invoiced. Each payment of Non- Royalty Sublicense Revenue shall be accompanied by a report in the form attached as Schedule F hereto setting forth in reasonable detail the basis for the calculation of such amounts, and such additional details as may be reasonably requested by CSMC for the determination of Non-Royalty Sublicense Revenue payable hereunder. All copies of reports under this Section shall be sent by electronic mail to CSTechTransfer@cshs.org. Except as otherwise provided herein, all amounts due hereunder shall be paid in United States dollars and shall be made without set off and free and clear of (and without any deduction or withholding for) any taxes, duties, levies, imposts or similar fees or charges. Royalties shall be payable by Licensee quarterly, within forty-five (45) days after the end of each calendar quarter, based upon revenues accrued during the immediately preceding calendar quarter. Licensee agrees to pay and shall pay to CSMC, or cause its Permitted Sublicensees to pay to CSMC, all Royalties resulting from the activities of its Permitted Sublicensees, within forty-five (45) days after the end of each calendar quarter.

 

 

(ii) Notice of Payment. Licensee shall provide prompt written notice to CSMC that it has paid the licensee fee required by Section 4.1 or any product development milestone payment required by Section 4.3(h)(ii) by electronic mail to CSTechTransfer@cshs.org.

 

(iii) Wire Transfer Instructions. All payments due hereunder shall be made by Licensee to CSMC in accordance with the following wire transfer instructions:

 

City National Bank

400 N. Roxbury Drive

Beverly Hills, CA 90210

ABA# 122 016 066

Account Number: 210-132260

Account Name: Cedars-Sinai Medical Center – Tech Transfer

Reference: Tech Transfer – Enviro Therapeutics, Inc.

 

(iv) Records and Audits. Licensee shall create and maintain complete and accurate records and documentation concerning all sales of Products by Licensee, its Affiliates and Permitted Sublicensees as well as transactions based upon which Non-Royalty Sublicense Revenue is due, in sufficient detail to enable the Royalties and Non-Royalty Sublicense Revenue, respectively, that is payable hereunder to be determined. Licensee shall retain such records and documentation for not less than seven (7) years from the date of their creation. During the term of this Agreement and for a period of three (3) years thereafter, CSMC and its representatives shall have the right to audit such records and documentation as shall pertain to the determination and payment of Royalties and Non-Royalty Sublicense Revenue. Such examiners shall have reasonable access during regular business hours to Licensee’s offices and the relevant records, files and books of account, and shall have the right to examine any other records reasonably necessary to determine the accuracy of the calculations provided by Licensee. The costs of any such audit shall be borne by CSMC, unless as a result of such inspection it is determined that the amounts payable by Licensee for any period are in error by greater than five percent (5%), in which case the costs of such audit shall be borne by Licensee. CSMC shall report the results of any such audit to Licensee within forty-five (45) days of completion. Thereafter, Licensee shall promptly pay to CSMC the amount of any underpayment discovered in such audit, or CSMC shall credit to Licensee against future Royalty payments the amount of any overpayment discovered in such audit, as the case may be. In addition, Licensee shall pay interest on any underpayment at the rate that is the lower of (i) two percent (2%) over the rate of interest announced by Bank of America in Los Angeles, California (or any successor in interest thereto or any commercially equivalent financial institution if no such successor exists) to be its “prime rate”, or (ii) the highest rate permitted by applicable law, from the date such amount was underpaid to the date payment is actually received.

 

(v) Currency Transfer Restrictions. If any restrictions on the transfer of currency exist in any country or other jurisdiction so as to prevent Licensee from making payments to CSMC, Licensee shall take all commercially reasonable steps to obtain a waiver of such restrictions or to otherwise enable Licensee to make such payments. If Licensee is unable to do so, Licensee shall make such payments to CSMC in a bank account or other depository designated by CSMC in such country or jurisdiction, which payments shall be in the local currency of such country or jurisdiction, unless payment in United States dollars is permitted. Any payment by Licensee to CSMC in currencies other than United States dollars shall be calculated using the appropriate foreign exchange rate for such currency quoted in the California edition of The Wall Street Journal for the close of business of the last banking day of the calendar quarter in which such payment is being made.

 

 

(vi) Late Charges. A service charge of two percent (2%) per month, not to exceed the maximum rate allowed by applicable law, shall be payable by Licensee on any portion of Licensee’s outstanding Royalty or Non-Royalty Sublicense Revenue balance or any other amount payable by Licensee hereunder (including, without limitation, reimbursement for Prosecution costs as set forth in Section 4.1 hereof) that is not paid to CSMC within thirty (30) days past the due date.

 

(vii) Taxes. Licensee shall pay, or cause to be paid, any and all taxes required to be paid or withheld on any sales, licenses or other transfers for value of Products or Patent Rights (other than taxes imposed on the income or revenues of CSMC); provided, however, that under no circumstances shall the amounts of such taxes be deducted from the total amount of payments otherwise due to CSMC hereunder. Upon CSMC’s request, Licensee shall secure and send to CSMC proof of any such taxes withheld and paid by Licensee, its Affiliates or Permitted Sublicensees.

 

(viii) No Escrow. Licensee shall pay all Royalties and Non-Royalty Sublicense Revenue directly to CSMC and shall not pay royalties into any escrow or other similar account, including in the event of a validity or non-infringement challenge to the Patent Rights.

 

5. PATENT RIGHTS

 

5.1 Prosecution. Commencing on the Effective Date, Licensee shall assume, in coordination with CSMC, full responsibility for the application, maintenance, reexamination, reissue, opposition and prosecution of any kind (collectively “Prosecution”) relating to the Patent Rights in the Territory, including, but not limited to, payment of all costs, fees and expenses related thereto. Subject to the approval of CSMC (which approval shall not be unreasonably withheld), Licensee shall have the right to select counsel with respect to the responsibility assumed by Licensee in this Section 5.1, and Licensee shall diligently pursue the Prosecution of the Patent Rights to the benefit of CSMC. For all purposes of the patent Prosecution, CSMC shall be the named “client” of such patent counsel. Each party shall provide the other with copies of any and all material or communications with the United States Patent and Trademark Office, or any foreign patent office, and CSMC shall be afforded the opportunity of prior review and comment on such action or paper.

 

(a) Foreign Filings. Should Licensee elect not to file for patent protection for the Patent Rights in a certain national jurisdiction in the Territory, Licensee shall notify CSMC of such election at least forty-five (45) days before a final due date which would result in the bar of patent protection for the Patent Rights in such national jurisdiction. In such event, CSMC may, at its sole option and expense, file for patent protection for the Patent Rights in the applicable national jurisdiction, and Licensee’s license under this Agreement with respect to such national jurisdiction shall terminate, allowing CSMC to freely dispose of its Patent Rights in the applicable national jurisdiction as it sees fit in its sole discretion.

 

 

5.2 Abandonment, Disclaimers, etc. Licensee shall obtain the prior written consent of CSMC (which consent shall not be unreasonably withheld), prior to abandoning, disclaiming, withdrawing, seeking reissue, seeking reexamination or allowing to lapse any patent or patent application within the Patent Rights. In the event that Licensee shall elect to abandon the Prosecution (including the payment of maintenance fees or annuities) of any patent or patent application included in the Patent Rights, Licensee shall notify CSMC of such election at least forty-five (45) days before a final due date which would result in abandonment or bar of patentability of the patent or patent application. In such event, CSMC may, at its sole option and expense, continue Prosecution of the patent application or patent. Licensee further agrees that it shall not file any continuation-in-part application relating to the Patent Rights unless the additional disclosure or material to be included in the continuation-in-part application is necessary or appropriate to support the patentability of a claim recited in a parent application on which the continuation-in-part application is based. Licensee shall not file any continuation-in-part application without CSMC’s prior written consent, which shall not be unreasonably withheld.

 

5.3 Expenses. Licensee shall pay all expenses resulting from its obligations in Section 5.1 hereof. CSMC shall exercise reasonable efforts to cause the Inventors (to the extent they are available and on CSMC’s staff as employees) to cooperate fully with Licensee with respect to the Prosecution of the Patent Rights, and CSMC shall be reimbursed for all reasonable out-of-pocket expenses as such expenses are incurred.

 

5.4 CREATE Act. Licensee shall not invoke the Cooperative Research and Technology Enhancement Act of 2004, as set forth under Title 35, Section 102(c) of the United States Code (the “CREATE Act”), with respect to the Patent Rights without first obtaining the prior written consent of CSMC.

 

6. TERM AND TERMINATION

 

6.1 Term. Unless earlier terminated as provided in Section 6.2 hereof, the term of this Agreement shall commence on the Effective Date and shall expire, on a country-by-country and product-by-product basis, on the later of (i) the date upon which the last to expire Valid Claim shall expire, (ii) twenty (20) years after the first bona fide commercial sale of an Other Product in the country in question or (iii) the expiration of any market exclusivity period granted by a regulatory agency.

 

6.2 Termination. Except as provided by Section 6.3 hereof, and in addition to the termination provisions of Sections 2.5, 2.6 and 5.1(a), this Agreement shall terminate upon the earliest to occur of the following:

 

(a) Automatically if Licensee shall enter into a liquidating bankruptcy, be adjudged insolvent, liquidate, dissolve and/or if the business of Licensee shall be placed in the hands of a receiver, assignee, or trustee, whether by voluntary act of Licensee or otherwise; provided, however, that if any such action is involuntary, termination shall not take place unless the action is not reversed within thirty (30) days. Further, Licensee shall give CSMC at least forty- five (45) days’ prior written notice before Licensee initiates any bankruptcy proceeding, and CSMC shall have the right to terminate this Agreement immediately upon receipt of such notice;

 

 

(b) Automatically if the performance by either party to this Agreement of any term, covenant, condition or provision hereof (i) shall jeopardize (A) the licensure of CSMC, (B) CSMC’s participation in the Medicare, Medi-Cal or other reimbursement or payment programs, (C) the full accreditation of CSMC by the Joint Commission of Accreditation of Healthcare Organizations or any other state or nationally recognized accreditation organization, or (D) CSMC’s tax-exempt status; or (ii) is deemed illegal or unethical by any recognized governmental agency or body. Upon the occurrence of any of the items set forth in this subparagraph (b), CSMC shall provide written notice to Licensee setting forth the reason for such termination (which termination shall be effective immediately);

 

(c) Upon thirty (30) days’ written notice from CSMC if, within such thirty (30) day period (i) Licensee shall fail to pay fully any Royalty or Non-Royalty Sublicense Revenue payment required by Section 4.3 hereof, or (ii) Licensee shall fail to undertake commercially reasonable efforts to exploit the Patent Rights in the Field of Use in the Territory, regardless of Licensee’s satisfaction of the Milestones provided in Schedule D hereto;

 

(d) Upon sixty (60) days’ written notice from CSMC if, within such sixty (60) day period, Licensee shall fail to cure fully any breach or default of any material obligation under this Agreement as described in such written notice detailing the facts of such breach with reasonable specificity; provided, however, that Licensee may avoid such termination if, before the end of such 60-day period, such breach or default has been cured by Licensee to the reasonable satisfaction of CSMC;

 

(e) Upon ninety (90) days’ written notice from Licensee if, within such ninety (90) day period, CSMC shall fail to cure fully any breach or default of any material obligation under this Agreement as described in such written notice detailing the facts of such breach with reasonable specificity; provided, however, that CSMC may avoid such termination if, before the end of such 90-day period, such breach or default has been cured by CSMC to the reasonable satisfaction of Licensee; and

 

(f) Upon the mutual written agreement of the parties hereto (such termination to be effective as of the date mutually agreed upon in such written agreement).

 

6.3 Obligations Upon Termination. Upon any termination of this Agreement pursuant to Section 6.2 hereof, nothing herein shall be construed to release any party from any liability for any obligation incurred through the effective date of termination (e.g., confidentiality, reimbursement of patent expenses incurred prior to such date, etc.) or for any breach of this Agreement prior to the effective date of such termination. Licensee may, for a period of one (1) year after the effective date of such termination, sell all tangible Products customarily classified as “inventory” that it has on hand at the date of termination, subject to payment by Licensee to CSMC of the applicable Royalty and Non-Royalty Sublicense Revenue; provided, however, that any such action by Licensee does not subject CSMC to any of the occurrences set forth in Section 6.2(b) hereof.

 

 

6.4 Effect of Termination. In the event of any termination of this Agreement pursuant to Section 6.2 hereof, where such termination has not been caused by any action or inaction on the part of any Permitted Sublicensee of Licensee or by any breach by such Permitted Sublicensee of its obligations under its sublicense from Licensee, such termination of this Agreement shall be without prejudice to the rights of each non-breaching Permitted Sublicensee of Licensee and each non-breaching Permitted Sublicensee shall be deemed to be a licensee of CSMC thereunder, and CSMC shall be entitled to all rights, but shall not be subject to any obligations (other than the grant of license and appurtenant obligations under this Agreement to the extent provided for in such sublicense) of Licensee thereunder. This Section 6.4, however, shall not be applicable if this Agreement has been terminated under Section 6.2(b) under circumstances where the application of this Section 6.4 would subject CSMC to any of the occurrences set forth in Section 6.2(b).

 

6.5 Right to Institute Legal Actions. Notwithstanding the provisions of Section 6.2 hereof, CSMC, on the one hand, and Licensee, on the other hand, may institute any other legal action or pursue any other remedy against the other party permitted by applicable law if the other party does not substantially cure any breach or default of any material obligation as provided herein.

 

6.6 Reversion of Rights. Notwithstanding anything to the contrary set forth herein (including, but not limited to, Section 5 hereof), full responsibility for Prosecution of the Patent Rights shall, at the option of CSMC (exercisable in its sole and absolute discretion), and at its sole expense from the date of reversion, revert to CSMC upon any termination of this Agreement.

 

6.7 Return of Data. In the event of any termination or expiration of this Agreement, Licensee shall promptly provide CSMC with copies of all data, information and materials obtained or generated by or on behalf of Licensee in the course of conducting research and developing Products using the Patent Rights and the Technical Information.

 

7. INFRINGEMENT BY THIRD PARTIES

 

7.1 Enforcement. Licensee shall have the first right and the obligation to enforce, at its sole expense, any Patent Rights to the extent licensed hereunder against infringement by third parties and shall notify CSMC in writing in advance of all such enforcement efforts. Upon Licensee’s undertaking to pay all expenditures reasonably incurred by CSMC, CSMC shall reasonably cooperate in any such enforcement and, as necessary, join as a party therein. Licensee shall reimburse CSMC for all expenses, including reasonable attorneys’ fees, incurred in connection with any such enforcement. In the event that Licensee does not file suit against or commence and conclude settlement negotiations with a substantial infringer of Patent Rights within ninety (90) days of receipt of a written demand from CSMC that Licensee bring suit, then the parties will consult with one another in an effort to determine whether a reasonably prudent licensee would institute litigation to enforce the patent in question in light of all relevant business and economic factors (including, but not limited to, the projected cost of such litigation, the likelihood of success on the merits, the probable amount of any damage award, the prospects for satisfaction of any judgment against the alleged infringer, the possibility of counterclaims against the parties hereto, the impact of any possible adverse outcome on Licensee and the effect any publicity might have on the parties’ respective reputations and goodwill). If, after such process, it is determined that a suit should be filed and Licensee does not file suit or commence settlement negotiations forthwith against the infringer, then CSMC shall have the right, at its own expense, to enforce any Patent Rights licensed hereunder on behalf of itself and Licensee. Any damages or other recovery from an infringement action undertaken by Licensee shall first be used to reimburse the parties, on a pro rata pari passu basis, for the costs and expenses incurred in such action, and shall thereafter be allocated between the parties as follows: (i) fifty percent (50%) to CSMC and (ii) fifty percent (50%) to Licensee. If Licensee fails to prosecute any such action to completion, then any damages or other recovery net of the parties’ costs and expenses incurred in such infringement action shall be the sole property of CSMC.

 

 

7.2 Defense Of Patent Rights. In the event that any Patent Rights are the subject of a legal action seeking declaratory relief or of any reexamination, inter partes review, post grant review, opposition, or similar proceeding instituted by a third party, the parties agree to promptly consult with each other concerning the defense of such actions or proceedings. If the parties agree that such defense should be undertaken, then Licensee shall bear the expenses, including attorneys’ fees, associated with such defense and in any recoupment of expenses. If the parties disagree, then the party desiring to defend the action or proceeding may proceed with such defense and will bear its own expenses, and be entitled to all sums recovered.

 

8. INDEMNIFICATION

 

8.1 Indemnification by Licensee. Subject to Section 8.2 hereof, Licensee shall hold harmless, defend and indemnify CSMC and each of its officers, directors, employees (including the Inventors), agents and sponsors of the research (except Licensee) (each, an “Indemnified Party”, and collectively, the “Indemnified Parties”) from and against any and all claims, damages, losses, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses and costs of investigation, whether or not suit is filed) suffered or incurred by any of the Indemnified Parties in any action, suit, litigation, arbitration or dispute of any kind (“Action”) arising or resulting from any negligence or willful acts or omissions on the part of Licensee, its Affiliates or Permitted Sublicensees in connection with (a) their use of the Patent Rights or Technical Information and/or (b) the exercise of their rights hereunder or under any sublicense, including, but not limited to (i) the preclinical development and clinical testing of Products, and (ii) the manufacture, sale, use, marketing, or other disposition of Products developed, manufactured, sold, marketed, used or otherwise disposed of under this Agreement. As part of its obligations hereunder, Licensee shall defend any Action brought against any of the Indemnified Parties with counsel of its own choosing and reasonably acceptable to CSMC, and neither CSMC nor any other Indemnified Party shall enter into any settlement of any such Action without first obtaining prior approval of Licensee. Licensee shall pay all costs, including attorney’s fees, incurred in enforcing this indemnification provision. Should CSMC or any other Indemnified Party not afford Licensee the right to defend any such Action, or should CSMC or any other Indemnified Party not obtain the approval of Licensee to any such settlement, Licensee shall have no obligation to indemnify CSMC or any other Indemnified Party hereunder. Should Licensee fail to provide a defense for the Indemnified Parties as required hereunder, then Licensee shall reimburse CSMC for its out-of-pocket expenses (including reasonable attorneys’ fees and expenses and costs of investigation) which are incurred as a result of any investigation, defense or settlement relating to the foregoing, which reimbursement shall be made to CSMC upon receipt by Licensee of invoices reflecting in reasonable detail such expenses incurred by CSMC. Licensee shall obtain and maintain insurance policies (including products liability and general liability policies at such time as is appropriate) which are reasonable and necessary to cover its activities and to comply with the indemnification obligations set forth above. Such insurance policies shall name CSMC as an additional insured party and shall provide a minimum of $3,000,000 in coverage per occurrence. Upon initiation of any human clinical studies of Products, Licensee shall have first increased its insurance coverage to a minimum of $10,000,000 in the aggregate. Licensee shall provide CSMC with prompt written notice of any material change in coverage under such policies. If the parties determine that evidence of Licensee’s insurance coverage is necessary and appropriate, within thirty (30) days of the Effective Date (subject to extension if reasonably required) and annually thereafter, Licensee shall provide CSMC with a certificate of insurance issued by the appropriate insurance company evidencing the insurance coverage required by this Section 8.1, together with copies of the endorsement which specifies CSMC as an additional insured and the declarations page for each such insurance policy. The certificate of insurance, endorsements and declarations pages (and any renewals or replacements thereof), if required, shall be sent to CSMC’s Technology Transfer Office by electronic mail at CSTechTransfer@cshs.org.

 

 

8.2 Notice of Claim. CSMC shall promptly notify Licensee in writing of any claim or Action or material threat thereof brought against any Indemnified Party in respect of which indemnification may be sought and, to the extent allowed by law, shall reasonably cooperate with Licensee in defending or settling any such claim or Action. No settlement of any claim, Action or threat thereof received by CSMC and for which CSMC intends to seek indemnification (for itself or on behalf of any other Indemnified Party) shall be made without the prior joint written approval of Licensee and CSMC.

 

9. USE OF NAMES

 

9.1 CSMC Names and Marks. Licensee shall not, unless as required by any law or governmental regulation, use the name of CSMC, and/or any of its trademarks, service marks, trade names or fictitious business names or the name of any CSMC officer, faculty member, employee, student or volunteer (collectively, “CSMC Names and Marks”) without express prior written consent of the Vice President for Public Relations and Marketing of CSMC. Further, prior to any reference by Licensee to CSMC Names and Marks in any manner, Licensee shall provide CSMC with a writing reflecting the proposed reference so that CSMC can review the reference within a reasonable period of time prior to the proposed use thereof by Licensee. This limitation includes, but is not limited to, use by Licensee in any regulatory filing, advertising, offering circular, prospectus, sales presentation, news release or trade publication. Subject to compliance by Licensee with the foregoing, which shall be deemed conditions precedent to any use of CSMC Names and Marks by Licensee, Licensee shall ensure that the CSMC Names and Marks are used as scientifically or academically appropriate in the “byline” of any article, abstract, manuscript or any other publication related to the subject matter hereof.

 

9.2 No Endorsements by CSMC. By entering into this Agreement, CSMC does not directly or indirectly endorse any product or service provided, or to be provided, by Licensee whether directly or indirectly related to this Agreement. Licensee shall not state or imply that this Agreement is an endorsement by CSMC.

 

 

10. CONFIDENTIALITY

 

10.1 Non-Disclosure. The parties hereto shall keep the terms of this Agreement and all business and scientific discussions relating to the business of the parties strictly confidential. All patient information to which a party is given access by the other party shall be subject to the provisions of the Confidentiality of Medical Information Act (Cal. Civ. Code §§56, et seq.) and the Health Insurance Portability and Accountability Act of 1996, and all regulations promulgated thereunder. It may, from time to time, be necessary for the parties, in connection with performance under this Agreement, to disclose Confidential Information (including know-how) to each other. The Receiving Party (as defined in Section 1.2 hereof) shall keep in strictest confidence the Confidential Information of the Disclosing Party (as defined in Section 1.2 hereof), using the standard of care it normally uses for information of like character, and shall not disclose the Confidential Information to any third party or use it except as expressly authorized by the prior written consent of the Disclosing Party or as otherwise permitted by this Agreement; provided, however, that Licensee may disclose the Confidential Information received from CSMC to its Affiliates and Permitted Sublicensees as shall be reasonably necessary to carry out the intent of this Agreement or any sublicense granted by Licensee as contemplated by this Agreement if, but only if, such Affiliates and/or Permitted Sublicensees each execute a confidentiality agreement containing confidentiality provisions no less restrictive than those confidentiality provisions contained in this Section 10. The Receiving Party’s obligation hereunder shall not apply to Confidential Information that the Receiving Party can show:

 

(a) Is or later becomes part of the public domain through no fault or neglect of the Receiving Party;

 

(b) Is received in good faith from a third party having no obligations of confidentiality to the Disclosing Party, provided that the Receiving Party complies with any restrictions imposed by the third party;

 

(c) Is independently developed by the Receiving Party without use of the Disclosing Party’s Confidential Information; or

 

(d) Is required by law or regulation to be disclosed (including, without limitation, in connection with FDA filings, filings with another government agency or as required under the California Public Records Act), provided that the Receiving Party uses reasonable efforts to restrict disclosure and to obtain confidential treatment.

 

10.2 Limits on Permitted Disclosures. Each party agrees that any disclosure or distribution of the other party’s Confidential Information within its own organization shall be made only as is reasonably necessary to carry out the intent of this Agreement. The parties further agree that all of their respective officers, employees, agents, representatives or approved sublicensees to whom any Confidential Information is disclosed or distributed shall have agreed to maintain its confidentiality. In such event, the Receiving Party shall identify with reasonable particularity, upon request by the Disclosing Party, each person within the Receiving Party’s organization to whom the Receiving Party has disclosed or distributed Confidential Information.

 

10.3 Legally Required Disclosures. If a subpoena or other legal process concerning Confidential Information is served upon any party hereto pertaining to the subject matter hereof, the party served shall notify the other party immediately, the other party shall cooperate with the party served, at the other party’s expense, in any effort to contest the validity of such subpoena or other legal process. This Section 10.3 shall not be construed in any way to limit any party’s ability to satisfy any disclosure of its relationship with the other party required by any governmental authority.

 

 

10.4 Patent Rights as Confidential Information. The Patent Rights are understood by Licensee to be the Confidential Information of CSMC to the extent “unpublished” as such term is construed under the United States Patent Laws. As such, Licensee’s confidentiality obligations hereunder automatically extend to any and all Technical Information and to any and all patent applications of CSMC relating to any Patent Rights, Technical Information and Improvements and to any and all communications with the United States Patent Office, and any foreign patent office relating to any Patent Rights, Technical Information or Improvements.

 

10.5 Return of Confidential Information. In the event of any termination of this Agreement, the Receiving Party shall promptly return all Confidential Information and any copies made thereof previously made available to the Receiving Party by the Disclosing Party.

 

10.6 Remedies. Both parties acknowledge and agree that it would be difficult to measure damages for breach by either party of the covenants set forth in this Section 10, and that injury from any such breach would be incalculable, and that money damages would therefore be an inadequate remedy for any such breach. Accordingly, either party shall be entitled, in addition to all other remedies available hereunder or under law or equity, to injunctive or such other equitable relief as a court may deem appropriate to restrain or remedy any breach of such covenants.

 

11. INFORMATION EXCHANGE

 

In addition to the Patent Rights and Technical Information, the parties shall cooperate to exchange such non-confidential information as may be appropriate and necessary to facilitate Licensee’s development and commercialization of Products incorporating any Patent Rights or Technical Information.

 

12. PATENT MARKING

 

Licensee shall actually or virtually mark all Patent Products made, sold or otherwise disposed of by or on behalf of it or any of its Permitted Sublicensees as set forth under Title 35, Section 287(a) of the United States Code and shall respond to any request or disclosure under Title 35, Section 287(b)(4)(B) of the United States Code by only notifying CSMC of the request for disclosure.

 

 

13. MISCELLANEOUS

 

13.1 Notices. Any notice, request, instruction or other document required by this Agreement shall be in writing and shall be deemed to have been given (a) if mailed with the United States Postal Service by prepaid, first class, certified mail, return receipt requested, at the time of receipt by the intended recipient, (b) if sent by Federal Express or other overnight carrier, signature of delivery required, at the time of receipt by the intended recipient, or (c) if sent by facsimile transmission, when so sent and when receipt has been acknowledged by appropriate telephone or facsimile receipt, addressed as follows:

 

In the case of CSMC to:

 

Cedars-Sinai Medical Center

8700 Beverly Boulevard

Los Angeles, California 90048-1865

Attention: Executive Vice President for Finance & CFO

with a copy to Vice President, Intellectual Property

 

or in the case of Licensee to:

 

Enviro Therapeutics, Inc.

2355 Westwood Blvd. #139

Los Angeles CA 90064

Attention: CEO

 

or to such other address or to such other person(s) as may be given from time to time under the terms of this Section 13.1.

 

13.2 Compliance with Laws. Each party shall comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this Agreement.

 

13.3 Governing Law. For any dispute between the parties to this Agreement which arises from or relates to this Agreement, the Agreement shall be construed and enforced in accordance with the laws of the United States of America and of the State of California, irrespective of choice of laws provisions. The parties agree that Los Angeles County, California shall be the situs of any legal proceeding arising out of or relating to this Agreement. Each party hereby waives any right it may have to assert the doctrine of forum non conveniens or similar doctrine or to object to venue with respect to any proceeding brought in accordance with this Section, and stipulates that the state and federal courts located in Los Angeles, California shall have in personam jurisdiction and venue over each of them for the purpose of litigating any dispute, controversy, or proceeding arising out of or related to this Agreement. Each party hereby authorizes and accepts service of process sufficient for personal jurisdiction in any action against it as contemplated by this Section by registered or certified mail, return receipt requested, postage prepaid, to its address for the giving of notices as set forth in this Agreement.

 

13.4 Waiver. Failure of any party to enforce a right under this Agreement shall not act as a waiver of that right or the ability to assert that right relative to the particular situation involved.

 

13.5 Enforceability. If any provision of this Agreement shall be found by a court of competent jurisdiction to be void, invalid or unenforceable, the same shall be reformed to comply with applicable law or stricken if not so conformable, so as not to affect the validity or enforceability of the remainder of this Agreement.

 

13.6 Modification. No change, modification, or addition or amendment to this Agreement, or waiver of any term or condition of this Agreement, is valid or enforceable unless in writing and signed and dated by the authorized officers of the parties to this Agreement.

 

 

13.7 Entire Agreement. This Agreement and the Schedules hereto (which are incorporated herein by this reference as if fully set forth herein) constitute the entire agreement between the parties with respect to the subject matter hereof and thereof, and replace and supersede as of the date hereof and thereof any and all prior agreements and understandings, whether oral or written, between the parties with respect to the subject matter of such agreements.

 

13.8 Construction. This Agreement has been prepared, examined, negotiated and revised by each party and their respective attorneys, and no implication shall be drawn and no provision shall be construed against any party to this Agreement by virtue of the purported identity of the drafter of this Agreement or any portion thereof.

 

13.9 Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall constitute one and the same instrument. This Agreement may be executed by facsimile or in .pdf format.

 

13.10 Attorneys’ Fees. In the event of any action at law or in equity between the parties hereto to enforce any of the provisions hereof, the unsuccessful party to such litigation shall pay to the successful party all reasonable costs and expenses, including reasonable attorneys’ fees, incurred therein by such successful party; and if such successful party shall recover a judgment in any such action or proceeding, such reasonable costs, expenses and attorneys’ fees may be included in and as part of such judgment.

 

13.11 Assignment; Successors.

 

(a) Subject to Section 13.11(b), Licensee may assign this Agreement as part of a sale, regardless of whether such a sale occurs through an asset sale, stock sale, merger or other combination, or any other transfer of Licensee’s entire business, or that part of Licensee’s business that exercises all rights granted under this Agreement. Any other attempt to assign this Agreement by Licensee is null and void. In the event of a bankruptcy, assignment is permitted only to a party that can provide adequate assurance of future performance, including diligent development and sales, of Products.

 

(b) Prior to any assignment, the following conditions must be met: (i) Licensee must give CSMC thirty (30) days prior written notice of the assignment, including the new assignee’s contact information, (ii) the new assignee must agree in writing to CSMC to be bound by this Agreement, and (iii) CSMC must have received a $25,000.00 assignment fee.

 

(c) Subject to the limitations on assignment herein, this Agreement shall be binding upon and inure to the benefit of any successors in interest and assigns of CSMC and Licensee. CSMC shall have the right to assign its rights hereunder as part of any reorganization or bond financing.

 

13.12 Further Assurances. At any time and from time to time after the Effective Date, each party shall do, execute, acknowledge and deliver, and cause to be done, executed, acknowledged or delivered, all such further acts, transfers, conveyances, assignments or assurances as may be reasonably required to consummate the transactions contemplated by this Agreement.

 

13.13 Survival. The following sections shall survive any expiration or earlier termination of this Agreement: 4.3(e), 6.3, 8, 9, 10, 12 and 13.

 

[signature page follows]

 

 

 

 

Schedule A

 

Patent Rights

 

2. Compositions and Methods for Treating Diseases and Conditions by Depletion of Mitochondrial DNA from Circulation and for Detection of Mitochondrial DNA

 

Inventor(s):	Bhowmick NA, Haldar, S.
Application No.:	62/940,457
Filing Date:	Nov 26, 2019
Docket No.:	065472-000793PR00
CSMC Tech ID:	bho001234

 

 

Schedule B

 

Technical Information

 

All lab notes, methods, protocols, SOPs, and technical know-how developed by inventors, including:

 

Haldar et al (2019). Cancer epithelia-derived mitochondrial DNA is a targetable initiator of a paracrine signaling loop that confers taxane resistance. Submitted.

 

 

Schedule C

 

Stock Issuance Agreement

 

[to be completed]

 

 

Schedule D

 

Milestones

 

1. Completion of preclinical studies within 2 year of the Effective Date

2. Completion of toxicology studies within 2.5 years of the Effective Date

3. Obtaining IND within 3 years of the Effective Date

4. Beginning Phase I trial within 4 years of the Effective Date

5. Submission of NDA/BLA to FDA or equivalent regulatory agency in another jurisdiction within 7 years of the Effective Date

 

 

Schedule E

 

Licensee Capitalization Table

 

[to be completed]

 

 

Schedule F

 

Royalty Reporting Form

 

Licensee name:

Reporting period:

Date of report:

Date of first commercial sale:

 

Royalty Report

 

Product (list products by name)

No. units sold

Invoiced price per unit

Gross sales

Allowable deductions (attached itemized detail)

Country of sale/foreign currency/ conversion rate

Net sales

Product name

Product name

Product name

Total

 

Total net sales		$
Royalty rate
Royalty due		$

 

Total royalty due: $                               

 

Non-Royalty Sublicense Revenue Report

 

Total Non-Royalty Sublicense Revenue received		$
Date received
Applicable percentage payable to CSMC
Total Non-Royalty Sublicense Revenue payable to CSMC		$

 

Report prepared by:

Title:

Date:

 

Please send electronic copy of report to CSTechTransfer@cshs.org.

 

 

 

Exhibit 10.2

 

 

 

January 11, 2021

 

Enviro Therapeutics, Inc.

2355 Westwood Blvd., #139

Los Angeles, CA 90064

Attention: Neil Bhowmick, Ph.D., CEO

 

Re: Exclusive Option Agreement – Amendment (Depletion of mtDNA)

 

Dear Dr. Bhowmick:

 

Upon execution by you, this letter will serve as the Amendment (“Amendment”) to the Exclusive Option Agreement entered on March 16, 2020 (“Agreement”), by and between Cedars-Sinai Medical Center, a California nonprofit public benefit corporation (“CSMC”), and Enviro Therapeutics, Inc. (“Licensee”) for the above-referenced technology.

 

The parties to the Agreement hereby agree as follows:

 

1. The parties agree to extend the 9-month option term set forth in Section 4 of the Agreement for an additional six (6) month period, which will end on June 15, 2021. In consideration thereof, Licensee agrees to pay to CSMC a non-refundable extension fee of Five Hundred Dollars ($500.00) (“Extension Fee”), payable in cash, no later than thirty (30) days after the execution of this Agreement. The Extension Fee may be credited against any license fees payable under the Exclusive License in the event that the Parties enter into the Exclusive License.

 

2. The terms and conditions of the Agreement shall remain in full force and effect as modified by this Amendment, and this Amendment shall be deemed a part of the Agreement. In the event of a conflict between a provision of this Amendment and a provision of the Agreement, this Amendment shall govern.

 

 

 

If this Amendment to the Agreement is acceptable to you, please return a signed copy of it to Cedars-Sinai Medical Center, 8700 Beverly Blvd., Los Angeles, California 90048, at your earliest convenience.

 

	Sincerely yours,
	CEDARS-SINAI MEDICAL CENTER
	/s/ James D. Laur, JD
	James D. Laur, JD
	Vice President, Intellectual Property

 

ACKNOWLEDGED AND AGREED TO

As of the date first set forth above

 

ENVIRO THERAPEUTICS, INC.
		Approved
/s/ Neil Bhowmick, Ph.D.
Neil Bhowmick, Ph.D.		Technology Ventures
CEO

 

 

 

Exhibit 10.3

 

EXCLUSIVE OPTION AGREEMENT

 

THIS EXCLUSIVE OPTION AGREEMENT (“Agreement”) is entered into this 16th day of March 2020 (“Effective Date”) by and between CEDARS-SINAI MEDICAL CENTER, a California nonprofit public benefit corporation (“CSMC”), with offices at 8700 Beverly Boulevard, Los Angeles, CA 90048, and ENVIRO THERAPEUTICS, INC., a C corporation (hereinafter, “Licensee”), with offices at 2355 Westwood Blvd. #139, Los Angeles CA 90064 (each, a “Party,” and together, the “Parties”).

 

R E C I T A L S

 

A. CSMC owns and is entitled to grant license rights with respect to certain Patent Rights and Technical Information (as such terms are defined in Section 1) invented by Neil Bhowmick, Veronica Placencio-Hickok, Bethany Smith, and Anisha Madhav (“Inventors”).

 

B. CSMC desires to have the Patent Rights and Technical Information developed, used and commercialized, and the Parties desire to enter into discussions regarding an exclusive license to Licensee to develop, manufacture, use and sell products utilized or derived from the Patent Rights and Technical Information in the Territory (“Exclusive License”).

 

C. CSMC desires to grant to Licensee and Licensee desires to accept from CSMC, subject to the terms and conditions herein, an exclusive option to obtain the Exclusive License. Other than the rights expressly granted by CSMC hereunder, Licensee acknowledges that CSMC shall retain all other rights with respect to the Patent Rights and Technical Information.

 

D. CSMC and Licensee intend that the execution, delivery and performance of this Agreement by each Party, and the consummation of the transactions contemplated hereunder, shall not at any time threaten CSMC’s tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and Section 23701d of the California Revenue and Taxation Code, or cause CSMC to be in default under any of CSMC’s issued and outstanding tax-exempt bonds.

 

NOW, THEREFORE, in consideration of the mutual covenants and premises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows:

 

1.

Definition of “Patent Rights” and “Technical Information.” For purposes of this Agreement, the term “Patent Rights” shall mean the patents and/or patent applications existing on the Effective Date which are described on Schedule A attached hereto, and all patents and/or patent applications (including provisional patent applications) existing as of the Effective Date in any other country corresponding to any of the foregoing, and all divisions, continuations, reissues, reexaminations, supplementary protection certificates and extensions thereof, whether domestic or foreign, all claims of continuations-in-part that are entitled to the benefit of the priority date of any of the foregoing, and any patent that issues thereon. For purposes of this Agreement, the term “Technical Information” shall mean the following information in the Field of Use which is described in the Patent Rights or otherwise provided to Licensee: know-how, trade secrets, unpublished patent applications, software, bioinformatics, unpatented technology, technical information, statistical information and analyses, biological materials, chemical reagents, preclinical and clinical information, in each case which has been conceived or reduced to practice prior to the Effective Date, in the conduct by CSMC of the Sensitization of Solid Tumor programs at CSMC under the direction of one or any of the Inventors. The Technical Information shall further include information in the Field of Use described in Schedule B hereto and which has been reduced to practice prior to the Effective Date in the conduct of the aforementioned research programs at CSMC under the direction of one or any of the Inventors. The Patent Rights and Technical Information are all owned by CSMC.

 

  

2.

Option Fee. In consideration of the execution and delivery by CSMC of this Agreement, Licensee agrees to pay to CSMC a non-refundable fee of Three Thousand Dollars ($3,000.00) (“Option Fee”), payable in cash, no later than thirty (30) days after the execution of this Agreement. The Option Fee may be credited against any license fees payable under the Exclusive License in the event that the Parties enter into the Exclusive License.

 

3.

Development Plan. In consideration of the execution and delivery by CSMC of this Agreement, Licensee agrees to perform the development activities described in the Development Plan attached as Schedule C.

 

4.

Grant of Option. Except as provided hereinafter and subject to the terms of this Agreement, Licensee shall have until the expiration of nine (9) months from the Effective Date as an exclusive option period (“Option Period”) to notify CSMC of its desire to enter into an Exclusive License (“Option Notice”). Upon receipt of the Option Notice within the Option Period, the Parties shall enter into the Exclusive License in substantially the form attached as Schedule D hereto within ninety (90) days following the Option Notice. If, after such ninety (90) day period, the Licensee does not consummate the Exclusive License, or if an Option Notice is not delivered within the Option Period, then this Agreement and the exclusive option herein shall terminate, CSMC shall have no further obligation whatsoever to Licensee with respect to the Patent Rights and Technical Information, and CSMC may freely dispose of the Patent Rights and Technical Information as it sees fit in its own discretion.

 

5.

No Warranties. CSMC makes no representation or warranty other than those expressly specified in this Agreement.

 

6.

Indemnification. Licensee shall hold harmless, defend and indemnify CSMC and each of its officers, directors, employees and agents and Inventors (each, an “Indemnified Party”, and collectively, the “Indemnified Parties”) from and against any and all claims, damages, losses, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses and costs of investigation, whether or not suit is filed) suffered or incurred by any of the Indemnified Parties in any action, suit, litigation, arbitration or dispute of any kind (“Action”) arising or resulting from any negligence or willful acts or omissions on the part of Licensee in connection with this Agreement. As part of its obligations hereunder, Licensee shall defend any Action brought against any of the Indemnified Parties with counsel of its own choosing and reasonably acceptable to CSMC, and neither CSMC nor any other Indemnified Party shall enter into any settlement of any such Action without first obtaining prior approval of Licensee. Should CSMC or any other Indemnified Party not afford Licensee the right to defend any such Action, or should CSMC or any other Indemnified Party not obtain the approval of Licensee to any such settlement, Licensee shall have no obligation to indemnify CSMC or any other Indemnified Party hereunder. Should Licensee fail to provide a defense for the Indemnified Parties as required hereunder, then Licensee shall reimburse CSMC for its out-of-pocket expenses (including reasonable attorneys’ fees and expenses and costs of investigation) which are incurred as a result of any investigation, defense or settlement relating to an indemnified matter, which reimbursement shall be made to CSMC upon receipt by Licensee of invoices reflecting in reasonable detail such expenses incurred by CSMC. Licensee shall obtain and maintain insurance policies or a program of self-insurance (including products liability and general liability policies at such time as is appropriate) which are reasonable and necessary to cover its activities and to comply with the indemnification obligations set forth above. CSMC shall promptly notify Licensee in writing of any claim or Action or material threat thereof brought against any Indemnified Party in respect of which indemnification may be sought and, to the extent allowed by law, shall reasonably cooperate with Licensee in defending or settling any such claim or Action.

 

 

7.

Prosecution Costs. CSMC will prepare, file, prosecute and maintain the Patent Rights during the Option Period and Licensee shall reimburse CSMC for the costs and expenses, including reasonable attorneys’ fees, filing fees and translation fees actually incurred by CSMC (including but not limited to any costs and expenses related to foreign filings) in the prosecution of the Patent Rights (“Prosecution Costs”) during the Option Period. Licensee shall reimburse CSMC within thirty (30) days of receiving an invoice from CSMC for such Prosecution Costs. Further, the Exclusive License shall provide that Licensee will reimburse CSMC for Prosecution Costs actually incurred by CSMC in the prosecution of any Patent Rights prior to the Option Period. The Exclusive License shall provide that Licensee shall control patent prosecution and be responsible for all Prosecution Costs related to the Patent Rights following its exercise of the Option.

 

8.

Use of Names. Licensee shall not make any written use of or reference to the name of CSMC and/or any of its trademarks, service marks, trade names or fictitious business names without the prior written consent of CSMC, which consent may be withheld or granted in CSMC’s sole and absolute discretion. Further, prior to any reference by Licensee to the names or marks of CSMC in any manner, Licensee shall provide CSMC with a writing reflecting the proposed reference so that CSMC can review the reference within a reasonable period of time prior to the proposed use thereof by Licensee. This limitation includes, but is not limited to, use by Licensee in any regulatory filing, advertising, offering circular, prospectus, sales presentation, news release or trade publication.

 

9.

Confidentiality. The terms of this Agreement and any information disclosed by either Party hereunder shall be maintained in the strictest of confidence by the Parties hereto and their respective officers, directors, employees and agents, including any proprietary, non-public information designated as such and disclosed by one Party to the other in connection with the transactions proposed in this Agreement. Furthermore, the Patent Rights and Technical Information are understood by Licensee to be the Confidential Information of CSMC to  the extent “unpublished” as such term is construed under the United States Patent Laws. As such, Licensee’s confidentiality obligations hereunder automatically extend to any and all patent applications of CSMC relating to any Patent Rights. Any public announcements, notices or other communications regarding such matters to third parties, other than the Parties’ respective professional advisors or potential investors or business partners, including, without limitation, any disclosure regarding the transactions contemplated hereby, shall require the prior written approval of both Licensee and CSMC.

 

10.

Notices. Any notice, request, instruction or other document required by this Agreement, including the Option Notice, shall be in writing and shall be deemed to have been given: (a) if mailed with the United States Postal Service by prepaid, first class, certified mail, return receipt requested, at the time of receipt by the intended recipient, (b) if sent by Federal Express®, Airborne®, or other overnight carrier, signature of delivery required, at the time of receipt by the intended recipient, or (c) if sent by facsimile transmission, when so sent and when receipt has been acknowledged by appropriate telephone or facsimile receipt, addressed as follows:

 

in the case of CSMC, to:

Cedars-Sinai Medical Center

8700 Beverly Boulevard

Los Angeles, CA 90048-1865

Attention: Executive Vice President for Finance & CFO

Copy to: Vice President, Intellectual Property

 

or in the case of Licensee, to:

Enviro Therapeutics, Inc.

2355 Westwood Blvd. #139

Los Angeles CA 90064

Attention: CEO

 

or to such other address or to such other person(s) as may be given from time to time under the terms of this Section.

 

11.

Wire Transfer Instructions. All payments due hereunder shall be made by Licensee to CSMC in accordance with the following wire transfer instructions:

 

City National Bank

400 N. Roxbury Drive

Beverly Hills, CA 90210

ABA# 122 016 066

Account Number: 210-132260

Account Name: Cedars-Sinai Medical Center – Tech Transfer

Reference: Tech Transfer – Enviro Therapeutics, Inc.

 

 

12.

Miscellaneous.

 

a.

Compliance with Laws. Each Party shall comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this Agreement.

 

b.

Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the United States of America and of the State of California, irrespective of choice of laws provisions.

 

c.

Waiver. Failure of any Party to enforce a right under this Agreement shall not act as a waiver of that right or the ability to assert that right relative to the particular situation involved.

 

d.

Enforceability. If any provision of this Agreement shall be found by a court of competent jurisdiction to be void, invalid or unenforceable, the same shall be reformed to comply with applicable law or stricken if not so conformable, so as not to affect the validity or enforceability of the remainder of this Agreement.

 

e.

Modification. No change, modification, or addition or amendment to this Agreement, or waiver of any term or condition of this Agreement, is valid or enforceable unless in writing and signed and dated by the authorized officers of the Parties to this Agreement.

 

f.

Entire Agreement. This Agreement and the Confidentiality Agreement currently in effect between the Parties constitute the entire agreements between the Parties with respect to the subject matter hereof and thereof, and replace and supersede as of the date hereof and thereof any and all prior agreements and understandings, whether oral or written, between the Parties with respect to the subject matter of such agreements.

 

g.

Construction. This Agreement has been prepared, examined, negotiated and revised by each Party and their respective attorneys, and no implication shall be drawn and no provision shall be construed against any Party to this Agreement by virtue of the purported identity of the drafter of this Agreement or any portion thereof.

 

h.

Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall constitute one and the same instrument. This Agreement may be executed by facsimile.

 

i.

Assignment. Except as otherwise expressly provided in this Agreement, this Agreement shall be binding upon, inures to the benefit of, and is enforceable by, the Parties and their respective heirs, legal representatives, successors and permitted assigns. This Agreement shall not be assignable by Licensee absent the prior written consent of CSMC unless to a successor to Licensee or a purchaser of all or substantially all of the assets of Licensee relating to the subject matter of this Agreement.

 

j.

Further Assurances. At any time and from time to time after the Effective Date, each Party shall do, execute, acknowledge and deliver, and cause to be done, executed, acknowledged or delivered, all such further acts, transfers, conveyances, assignments or assurances as may be reasonably required to consummate the transactions contemplated by this Agreement.

 

k.

Survival. The following sections shall survive any expiration or earlier termination of this Agreement: Section 5 (“No Warranties”), Section 6 (“Indemnification”), Section 7 (“Prosecution Costs”) and Section 8 (“Use of Names”).

 

IN WITNESS WHEREOF, the Parties have caused their duly authorized representatives to execute this Agreement as of the Effective Date.

 

“CSMC”:			“Licensee”
Cedars-Sinai Medical Center			Enviro Therapeutics, Inc.
A California Nonprofit Public Benefit Corporation			A Corporation
By:	/s/ James D. Laur		By:	/s/ Neil A. Bhowmick
	James D. Laur, JD			Neil A. Bhowmick, PhD
	Vice President, Intellectual			CEO
By:	Edward M. Prunchunas
	Executive Vice President for Finance & CFO

 

 

Schedule A

 

Patent Rights

 

1. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s):	Bhowmick NA, Smith B, Placencio V, Madhav, A.
Application No.:	2017286561
Country:	Australia
Filing Date:	June 14, 2017
Docket No.:	065472.000621AU00
CSMC Tech ID:	bho000961

 

2. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s):	Bhowmick NA, Smith B, Placencio V, Madhav, A.
Application No.:	3026066
Country:	Canada
Filing Date:	June 14, 2017
Docket No.:	065472.000621CA00
CSMC Tech ID:	bho000961

 

3. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s):	Bhowmick NA, Smith B, Placencio V, Madhav, A.
Application No.:	201780000000
Country:	China
Filing Date:	June 14, 2017
Docket No.:	065472.000621CN00
CSMC Tech ID:	bho000961

 

4. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s):	Bhowmick NA, Smith B, Placencio V, Madhav, A.
Application No.:	17814046.3
Country:	Europe
Filing Date:	June 14, 2017
Docket No.:	065472.000621EP00
CSMC Tech ID:	bho000961

 

5. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s):	Bhowmick NA, Smith B, Placencio V, Madhav, A.
Application No.:	2018-565397
Country:	Japan
Filing Date:	June 14, 2017
Docket No.:	065472.000621JP00
CSMC Tech ID:	bho000961

 

6. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s):	Bhowmick NA, Smith B, Placencio V, Madhav, A.
Application No.:	16/305,821
Country:	United States
Filing Date:	Nov 29, 2018
Docket No.:	065472.000621US00
CSMC Tech ID:	bho000961

 

 

 

Schedule B

 

Technical Information

 

All lab notes, methods, protocols, SOPs, and technical know-how developed by inventors, including

 

Madhav et al (2018) Antagonizing CD105 enhances radiation sensitivity in prostate cancer.

 

Oncogene. 2018 Aug;37(32):4385-4397

 

 

Schedule C

 

Development Plan

 

See attached.

 

 

 

Business Plan

 

I. Executive summary

 

Our mission is to develop therapeutics targeting the tumor microenvironment to complement conventional and targeted therapies designed against the cancer cells. The focus on the non-tumor supportive cells of solid tumors has emerged from the Bhowmick laboratory, where multiple viable therapeutic targets have been identified in the last 15 years. One such target for the endoglin receptor is the lead therapeutic interest for Enviro Therapeutics. This target has a partially humanized neutralizing antibody that been in the laboratory and clinical trials by Tracon Pharmaceuticals Inc. for many years. Most recently, we performed a Phase 2 clinical trial (IND134672) for castrate resistant prostate cancer patients that were failing androgen signaling inhibitor therapy with a drug combination including the endoglin inhibitor (ENV105). In this heavily pre-treated population, the 43% progression free survival rate was extraordinary. In addition, a three gene panel was identified to serve as a companion biomarker for patient selection. Enviro Therapeutics will strive to co-develop companion biomarkers with all drugs in its portfolio.

 

The intellectual property owned by Cedars-Sinai Medical Center will be licensed by Enviro Therapeutics. The current preclinical data suggest efficacy of ENV105 for combinations with androgen signaling inhibitors for prostate cancer and as a radiation sensitizer for multiple solid tumors having intact p53 activity.

 

ENV105 will be aggressively pursued in pre-clinical and clinical trials. Future therapeutic targets will be developed based on the overriding mission to complement traditional cancer-targeted drugs with those that address the tumor microenvironment.

 

II. Leadership team

 

Enviro Therapeutics Inc. was incorporated on November 15, 2019 in the state of California. Neil Bhowmick is the CEO and Secretary. John Yu is the Treasurer and Director.

 

III. Market analysis

 

The initial market for ENV105 will be prostate cancer. More than 2.9 million men in the US live diagnosed with prostate cancer today. The market of prostate cancer is highest in the Americas ($12 billion by 2025). The disease is significant in the Europe and rapidly growing in east Asia. The main drivers of growth will be an aging population, continued uptake of second-generation hormonal agents in the metastatic and non- metastatic castration resistant prostate cancer settings.

 

In the spectrum of prostate cancer progression, 26,730 fatalities will occur primarily of metastatic castration- resistant prostate cancer (mCRPC) annually in the US. Historically the median survival for men with mCRPC has been less than two years. The goal will be to address this patient population with a combination of ENV105 and androgen signaling inhibitors to extend overall survival. However, ENV105 is an effective radiation therapy sensitizer for breast and prostate cancer. The potential market share for ENV105 in combination external beam irradiation will be vast. 70% of the estimated 268,600 new cases of invasive breast cancer patients expected to be diagnosed in the U.S. this year (being p53 positive) would be eligible for this therapeutic strategy, as would nearly 100% of the 174,650 prostate cancer patients diagnosed yearly in the US. ENV105 use enable significantly lower doses of the irradiation for otherwise frail subjects to be eligible for irradiation therapy than otherwise possible. Other solid tumors will be explored in preclinical models to further expand market share.

 

IV. Value Proposition

 

	-	No sensitizers to irradiation, androgen signaling inhibition, or chemotherapy for prostate cancer patients exist (apart from androgen signaling inhibitors themselves)
	-	There are no companies that have the goal of making cancer therapeutics that target the non-vascular tumor microenvironment.
	-	Having companion biomarkers for ENV105 provide the advantage of improved clinical success.
		Biomarkers provide an 18% advantage for phase 2 trials moving to phase 3 and 21% improvement in gaining an NDA for drugs in phase 3 trials.
	-	ENV105 has a proven safety record in 4 independent clinical trials employed in single agent and combination therapy strategies.
	-	Formulation and capacity to scale up ENV105 production is in hand (Lonza Group)
	-	Partnership with Tracon Pharmaceuticals Inc. provide experience in therapeutic development.

 

 

V. Milestones and Timeline

 

-

Phase 2 clinical trial will be initiated for castrate resistant prostate cancer patients – based on the results of IND134672. The new trial will be executed combining an androgen signaling inhibitor (e.g. abiraterone [Zytiga; Janssen]) with ENV105. This involves obtaining FDA approval for the ENV105 Phase 2 trial following regulatory approval by Cedars-Sinai Medical Center.

 

-

Study biomarkers for ENV105

 

-

Develop Phase 1 clinical trial for ENV105 combination with external beam irradiation for localized ER+ breast cancer.

 

 

 

Enviro Therapeutics Inc. Development Plan

 

ENV105 will be aggressively pursued in pre-clinical and clinical trials. Future therapeutic targets will be developed based on the overriding mission to complement traditional cancer-targeted drugs with those that address the tumor microenvironment. Enviro Therapeutics will strive to co-develop companion biomarkers with all drugs in its portfolio.

 

Preclinical Plan:

 

	-	Year 1: Identify other cancer targets for ENV105
	-	Year 2: Study biomarkers for ENV105

 

-

Clinical Plan:

 

	-	Year 1: Develop Phase 2 clinical trial for ENV105 combination with darolutamide for castrate resistance prostate cancer patients
	-	Year 2: Begin accrual for ENV105 clinical trial
	-	Year 2: Develop Phase 1 clinical trial for external beam irradiation for localized ER+ breast cancer with ENV105.
	-	Year 3: Complete accrual for ENV105 clinical trial

 

 

Schedule D

 

Exclusive License Agreement

 

THIS EXCLUSIVE LICENSE AGREEMENT (“Agreement”) is entered into as of this 16th day of March 2020 (“Effective Date”) by and between CEDARS-SINAI MEDICAL CENTER, a California nonprofit public benefit corporation (“CSMC”), with offices at 8700 Beverly Boulevard, Los Angeles, California 90048-1865, and ENVIRO THERAPEUTICS, INC.., a C Corporation (“Licensee”), with offices at 2355 Westwood Blvd. #139, Los Angeles CA 90064.

 

R E C I T A L S

 

A. CSMC owns and/or is entitled to grant license rights with respect to certain Patent Rights and Technical Information (as defined below) invented or developed in the course of the Sensitization of Solid Tumor programs at CSMC conducted under the direction of Neil Bhowmick, Veronica Placencio-Hickok, Bethany Smith, and Anisha Madhav (hereinafter collectively referred to as the “Inventors”).

 

B. CSMC and Licensee entered into that certain Exclusive Option Agreement dated March 16, 2020 (“Option Agreement”), under which CSMC granted to Licensee an exclusive option to negotiate and obtain an exclusive license to the Patent Rights and Technical Information.

 

C. Licensee has exercised its option under the Option Agreement to negotiate and obtain an exclusive license to the Patent Rights and Technical Information, under which CSMC desires to have the Patent Rights and the Technical Information developed, used and commercialized in the Field of Use (as defined below) by Licensee, and Licensee desires to obtain an exclusive, worldwide license to conduct research in the Field of Use, and to develop, manufacture, use and sell Products (as defined below) in the Field of Use, using the Patent Rights and Technical Information in accordance with the terms of this Agreement. Other than the rights expressly granted by CSMC hereunder within the Field of Use, Licensee acknowledges that CSMC shall retain all other rights with respect to the Patent Rights and the Technical Information.

 

D. CSMC and Licensee intend that the execution, delivery and performance of this Agreement by each party, and the consummation of the transactions contemplated hereunder, shall not at any time threaten CSMC’s tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and Section 23701d of the California Revenue and Taxation Code, or cause CSMC to be in default under any of CSMC’s issued and outstanding tax-exempt bonds.

 

NOW, THEREFORE, in consideration of the mutual covenants and premises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.	DEFINITIONS

 

1.1 “Affiliate” or “Affiliates” shall mean any corporation, person or entity, which controls, is controlled by, or is under common control with, a party to this Agreement without regard to stock or other equity ownership. For purposes hereof, the terms “control” and “controls” mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a corporation, person or entity, whether through the ownership of voting securities, by contract or otherwise.

 

 

1.2 “Confidential Information” shall mean any confidential or proprietary information furnished by one party (the “Disclosing Party”) to the other party (the “Receiving Party”) in connection with this Agreement, including, without limitation, all specifications, know-how, trade secrets, technical information, drawings, software, models, business information and patent applications pertaining to the Patent Rights and Technical Information, and as further provided in Section 10 hereof.

 

1.3 “FDA” shall mean the United States Food and Drug Administration, or any successor agency thereof.

 

1.4 “Field of Use” shall mean the treatment of cancer.

 

1.5 “Funding Agencies” shall mean any public or private granting agencies which have provided funding to CSMC or to any of the Inventors for the development of any of the Patent Rights or Technical Information prior to the Effective Date.

 

1.6 “Improvements” shall mean all improvements or enhancements to the Patent Rights that, after the Effective Date, are conceived and reduced to practice if patentable, or reduced to practice if not patentable, by at least one Inventor (other than by an Inventor that conceived or reduced to practice such Improvement in his or her role as a paid consultant or employee of Licensee).

 

1.7 “Licensee Developments” shall mean any and all processes, uses, designs, applications, methods and compositions-of-matter, indications, improvements, enhancements and modifications in the Field of Use directly based upon or directly created using the Patent Rights and/or Technical Information and which were discovered or developed by or on behalf of Licensee (exclusive of work performed by CSMC or the Inventors on behalf of CSMC) during the term of this Agreement. The Licensee Developments are all owned by Licensee.

 

1.8 “Net Sales” shall mean the gross amount invoiced by or on behalf of Licensee and Permitted Sublicensees to third parties for all sales of Products less (a) discounts actually allowed;

 

(b) credits for claims, allowances, retroactive price reductions or returned goods; (c) prepaid freight; and (d) sales taxes or other governmental charges actually paid in connection with sales of Products (but excluding what are commonly known as income taxes and value-added taxes). Sales of Products by Licensee, or a Permitted Sublicensee of Licensee, to any Affiliate or Permitted Sublicensee which is a reseller thereof shall be excluded, and only the subsequent sale of such Products by Affiliates or Permitted Sublicensees of Licensee to unrelated parties shall be deemed Net Sales hereunder. If a Product is sold or provided as part of a system, package, or combination product or service that involve one or more products or services not covered by the definition of Product (each, a “Combination Product”), Net Sales shall be calculated by multiplying the Net Sales of such Combination Product, by the fraction A/B, where “A” is the price of the Product included in such Combination Product when sold separately from any other products or services not covered by the definition of Product and “B” is the price of the Combination Product. In the event that no market price is available for the Product included in such Combination Product when supplied or priced separately, CSMC and Licensee shall determine in good faith the fair market value thereof.

 

 

1.9 “Non-Royalty Sublicense Revenues” shall mean, but is not limited to, upfront fees, license maintenance fees, and milestone payments, or other payments, including the fair market value of any non-cash consideration, received by Licensee in consideration for any rights granted to Patent Rights under a sublicense agreement, and excludes any and all sales-based royalties paid to Licensee.

 

1.10 “Other Product” or “Other Products” shall mean any products and/or services in the Field of Use, other than a Patent Product, derived in any manner whatsoever from any of the Technical Information and/or Licensee Developments.

 

1.11 “Patent Rights” shall mean the patents and/or patent applications existing on the Effective Date which are described on Schedule A attached hereto, and all patents and/or patent applications (including provisional patent applications) existing as of the Effective Date in any other country corresponding to any of the foregoing, and all divisions, continuations, reissues, reexaminations, supplementary protection certificates and extensions thereof, whether domestic or foreign, all claims of continuations-in-part that are entitled to the benefit of the priority date of any of the foregoing, and any patent that issues thereon. The Patent Rights are all owned by CSMC.

 

1.12 “Patent Product” or “Patent Products” shall mean any products and/or services in the Field of Use that, except for the license granted hereunder, would infringe a Valid Claim.

 

1.13 “Product” or “Products” shall mean a Patent Product and/or an Other Product.

 

1.14 “Technical Information” shall mean, as of the Effective Date, the following information in the Field of Use which is described in the Patent Rights or otherwise provided to Licensee: know-how, trade secrets, unpublished patent applications, software, bioinformatics, unpatented technology, technical information, statistical information and analyses, biological materials, chemical reagents, preclinical and clinical information, in each case which has been conceived or reduced to practice prior to the Effective Date, in the conduct by CSMC of the Sensitization of Solid Tumor programs at CSMC under the direction of one or any of the Inventors. The Technical Information shall further include information in the Field of Use described in Schedule B hereto and which has been reduced to practice prior to the Effective Date in the conduct of the aforementioned research programs at CSMC under the direction of one or any of the Inventors. Technical Information is all owned by CSMC.

 

1.15 “Territory” shall mean worldwide.

 

1.16 “Valid Claim” shall mean a claim of an issued patent included within the Patent Rights and/or Licensee Developments, which claim has not (a) lapsed, been canceled or become abandoned, (b) been declared invalid or unenforceable by a non-appealable decision or judgment of a court or other appropriate body or authority of competent jurisdiction, or (c) been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise. The term Valid Claim shall also include the claims of a pending patent application within the Patent Rights and/or Licensee Developments for a period of seven (7) years from the actual filing date of that patent application.

 

 

2.

LICENSE

 

2.1 Grant of Exclusive Rights. Subject to the terms of this Agreement, CSMC hereby grants to Licensee, and Licensee hereby accepts from CSMC, the exclusive license, with the right to grant sublicenses (subject to the terms of Section 2.2 hereof), under and to the Patent Rights and Technical Information during the term of this Agreement (as provided in Section 6 hereof) to conduct research in the Field of Use and to make, have made, use, import, offer for sale, sell and/or have sold Products in the Field of Use in the Territory. The foregoing grant of exclusivity is made expressly subject to the following:

 

(a) All applicable laws and regulations, including, without limitation, the requirements of federal law as pertains to the manufacture of products within the United States;

 

(b) All applicable rules of the Funding Agencies which have provided funding to CSMC or to any of its employees (including any of the Inventors) for the development of the Patent Rights and Technical Information; and

 

(c) The following non-exclusive rights to the Patent Rights and Technical Information, which are retained by CSMC within the Field of Use:

 

(i) the right to submit for publication the scientific findings from research conducted by or through CSMC or its investigators (including the Inventors) related to the Patent Rights and the Technical Information; and

 

(ii) the right (A) to use any tangible or intangible information contained in the Patent Rights or the Technical Information or any Improvements (so long as CSMC shall treat such information as Confidential Information and maintain its confidentiality in accordance with Section 10 hereof), for CSMC’s research, internal teaching and other educationally-related and non-commercial (except for charges to its own patients) clinical purposes, where clinical use does not involve a third party funding grant to commercialize such information, and (B) to obtain research funding for further study and development thereof from governmental and other nonprofit organizations (including grant applications).

 

(d) Notwithstanding any other provision hereof to the contrary, all rights to the Patent Rights, Technical Information and Improvements outside of the Field of Use are retained by CSMC. Furthermore, this Agreement confers no license or rights by implication, estoppel, or otherwise under any patent applications or patents of CSMC other than Patent Rights regardless of whether such patents are dominant or subordinate to Patent Rights.

 

2.2 Sublicensing. Licensee shall have the right to grant sublicenses or to assign any or all of the rights granted hereunder only to an entity which has been approved in writing by CSMC (each, “Permitted Sublicensee”). Any such Permitted Sublicensee shall be subject in all respects to the provisions contained in this Agreement and Licensee will remain primarily liable to CSMC for, and shall be responsible for monitoring and enforcing, performance of all of Licensee’s obligations hereunder by any such Permitted Sublicensee. Without limiting the generality of the foregoing, as an express condition of any such sublicense, any such Permitted Sublicensee shall be required to agree in writing to be bound by commercially reasonable reporting and record keeping, indemnification and inspection provisions, and the applicable provisions of this Agreement, including, without limitation, those pertaining to the use of CSMC’s name and marks, indemnification of CSMC and the use of CSMC’s Confidential Information. Permitted Sublicensees may not further sublicense without CSMC’s prior written consent, which consent shall not be unreasonably withheld. Licensee shall promptly forward to CSMC a copy of any and all fully executed sublicense agreements, any subsequent amendments, and all copies of Permitted Sublicensees’ profit sharing or royalty reports, in no event more than thirty (30) days following execution or receipt thereof, as applicable. Licensee shall also keep CSMC reasonably informed with respect to the progress of any relations entered into with any Permitted Sublicensees. If Licensee shall conduct one or more audits of its Permitted Sublicensees hereunder during the term hereof, Licensee shall provide copies of all audit reports to CSMC on a timely basis. The covenants pertaining to the use of CSMC’s name and marks, the indemnification of CSMC and the use of CSMC’s Confidential Information in any sublicense or assignment shall run for the benefit of CSMC, who shall be expressly stated as being a third-party beneficiary thereof with respect to the covenants set forth in this Agreement. Licensee understands and agrees that none of its permitted sublicenses hereunder shall reduce in any manner any of its obligations set forth in this Agreement.

 

 

(a) Royalty-Free Sublicenses. If, and only if, Licensee pays all royalties due CSMC from a Permitted Sublicensee’s Net Sales, Licensee may grant that Permitted Sublicensee a royalty-free or non-cash sublicense or cross-license.

 

2.3 Improvements. Subject to the rights and applicable rules of the Funding Agencies, Licensee shall have, for a period of sixty (60) days after receipt by Licensee of written notice from CSMC disclosing an Improvement, the exclusive first right to negotiate with CSMC to obtain one or more licenses to the Improvement in the Field of Use upon such terms and conditions as shall be agreed by the parties hereto, which terms and conditions shall include provisions for fair market value consideration for the grant of any such licenses. If Licensee declines or fails to pursue, or if the parties fail to conclude negotiations for a license to, such Improvement in the Field of Use during the sixty (60) day period specified above, then CSMC shall have the right to commence discussions with any other party concerning such Improvement. Subject to the provisions of this Section 2.3, Licensee acknowledges and agrees that CSMC expressly retains and reserves any and all right, title and interest in and to the Improvement, whether or not in the Field of Use and, accordingly, no license to any Improvement is granted to Licensee under this Agreement.

 

2.4 Licensee Developments. Licensee hereby grants, and shall require its Permitted Sublicensee(s) to grant to CSMC a nonexclusive, royalty-free, irrevocable, paid-up license, with the right to grant sublicenses to non-profit research institutions and governmental agencies, to practice and use Licensee Developments for non-commercial research purposes, which license shall include, without limitation, the rights to: (a) publish the scientific findings from research conducted by or through CSMC or on its behalf, (b) use any tangible or intangible information contained in the Licensee Developments (so long as CSMC shall treat such information as Confidential Information and maintain its confidentiality in accordance with Section 10 hereof), for CSMC’s internal teaching and other educationally-related and non-commercial (except for charges to its own patients) clinical purposes, where clinical use does not involve a third party funding grant to commercialize such information, and (c) obtain research funding from governmental and other nonprofit organizations (including grant applications).

 

 

2.5 Diligent Commercialization. Licensee acknowledges that it is important to CSMC, and a requirement of the United States Government under Title 35, Section 203 of the United States Code, that Licensee pursue the development, commercialization and marketing of Products and otherwise exercise commercially reasonable efforts to maximize the value of this Agreement to CSMC. Without limiting the foregoing, Licensee shall maintain a bona fide, funded, ongoing and active research, development, manufacturing, regulatory, marketing or sales program (all as commercially reasonable) to make Products commercially available to the public as soon as commercially practicable in the Territory. Should CSMC determine that Licensee fails to use commercially reasonable efforts to maximize the Patent Rights in any national political jurisdiction in the Territory at any time following the one (1) year anniversary of the Effective Date of this Agreement, CSMC shall provide Licensee with notice of such determination and give Licensee a period of ninety (90) days to provide written evidence satisfactory to CSMC that Licensee or its Permitted Sublicensee(s) has sales of Products in such jurisdiction in question or an effective, ongoing and active research, development, manufacturing, marketing or sales program, as appropriate, directed toward obtaining regulatory approval, and/or production and/or sales of Products in such jurisdiction in accordance with Licensee’s business, legal, medical and scientific judgment and Licensee’s normal practices and procedures for products having similar technical and commercial potential. Should Licensee fail to provide such written evidence satisfactory to CSMC within such ninety (90) day period, CSMC shall have the right, at CSMC’s sole and absolute discretion, to either: (i) terminate this Agreement with respect to the applicable national political jurisdiction within the Territory or (ii) require Licensee to negotiate in good faith a sublicense with a Permitted Sublicensee(s) in the applicable national jurisdiction to maximize the Patent Rights in such jurisdiction.

 

2.6 Milestones. As part of Licensee’s diligent commercialization efforts under Section 2.5, CSMC and Licensee have agreed on the Milestones set forth on Schedule C, with each such Milestone being deemed a separate and independent condition. Within sixty (60) days after each anniversary of the Effective Date, Licensee shall prepare and deliver to CSMC an annual written report (to be certified by an executive officer of Licensee) indicating its compliance with the Milestones. If Licensee believes that it is or will be unable to achieve such Milestones despite its diligent efforts, Licensee may request amendments or reasonable extensions to Schedule C in writing for CSMC’s consideration. Licensee agrees to provide any additional information reasonably required by CSMC to evaluate Licensee’s performance under this Agreement. If Licensee fails to meet any annual Milestone designated in Schedule C hereto, and has not obtained an extension or amendment to such Milestone(s), CSMC may, at its option and as its sole remedy for Licensee’s breach of this Section 2.6, upon written notice to Licensee, convert the exclusive license granted under Section 2.1 hereof to a non-exclusive license or to a co-exclusive license, or terminate the license.

 

2.7 Preference for United States Industry. To the extent that the Patent Rights and Technical Information have been developed using funding from the United States Government, Licensee agrees that any Products made, used or sold in the United States shall be manufactured substantially in the United States.

 

 

3.	REPRESENTATIONS AND WARRANTIES

 

3.1 Rights to Technology. Except for the rights, if any, of the Funding Agencies or the United States Government, CSMC represents and warrants to Licensee that, to the best of its actual, current knowledge (without investigation outside of CSMC as to such representations and warranties) (a) it has the right to grant the licenses in this Agreement, (b) it has not granted licenses to the Patent Rights or Technical Information to any other party that would restrict the rights granted hereunder except as stated herein and (c) there are no claims, judgments or settlements to be paid by CSMC with respect the Patent Rights or Technical Information or pending claims or litigation relating to the Patent Rights or Technical Information. Except for any potential or actual rights of Funding Agencies or the United States Government, CSMC is not aware that any additional rights or licenses are necessary for Licensee to exercise its licensed rights granted by CSMC under this Agreement.

 

3.2 Limited Warranty; Certain Damages.

 

(a) Limited Warranty. CSMC makes no representation or warranty other than those expressly specified in this Agreement. Licensee accepts the Patent Rights and the Technical Information on an “AS-IS” basis. CSMC MAKES NO OTHER WARRANTIES CONCERNING PATENT RIGHTS OR TECHNICAL INFORMATION COVERED BY THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO PATENT RIGHTS, TECHNICAL INFORMATION OR ANY PRODUCT. CSMC MAKES NO WARRANTY OR REPRESENTATION AS TO THE VALIDITY OR SCOPE OF PATENT RIGHTS, OR THAT ANY PRODUCT WILL BE FREE FROM AN INFRINGEMENT ON PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THAT NO THIRD PARTIES ARE IN ANY WAY INFRINGING PATENT RIGHTS COVERED BY THIS AGREEMENT. LICENSEE HEREBY AGREES THAT LICENSEE WILL NOT GIVE, AND SHALL NOT PERMIT ANY AFFILIATES OR SUBLICENSEES OR AFFILIATES THEREOF TO GIVE, ANY SUCH WARRANTY OR REPRESENTATION TO THIRD PARTIES ON BEHALF OF CSMC.

 

(b) Certain Damages. EXCEPT FOR THE BREACH OF THE CONFIDENTIALITY PROVISIONS IN SECTION 10 OR IN ACCORDANCE WITH THE OBLIGATION TO INDEMNIFY SET FORTH IN SECTION 8, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF PROFITS OR EXPECTED SAVINGS OR OTHER ECONOMIC LOSSES, OR FOR INJURY TO PERSONS OR PROPERTY) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ITS SUBJECT MATTER, REGARDLESS OF WHETHER SUCH PARTY KNOWS OR SHOULD KNOW OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING EXCLUSIONS AND LIMITATIONS SHALL APPLY TO ALL CLAIMS AND ACTIONS OF ANY KIND, WHETHER BASED ON CONTRACT, TORT (INCLUDING, BUT NOT LIMITED TO NEGLIGENCE), OR ANY OTHER GROUNDS.

 

3.3 Rights Retained by Funding Agencies. Licensee acknowledges that to the extent that the Patent Rights and Technical Information have been developed in part under one or more funding agreements (“Funding Agreements”) with one or more Funding Agencies, such Funding Agencies have certain statutory, non-exclusive rights relative thereto for use for government purposes as well as regulatory or statutory “march-in rights” (collectively, “Statutory Rights”). Licensee also acknowledges that to the extent that the Improvements may be developed in part under one or more Funding Agreements with one or more Funding Agencies, such Funding Agencies may have certain Statutory Rights relative thereto. This Agreement is explicitly made subject to such Statutory Rights and, to the extent of any conflict between any such Statutory Rights and this Agreement, such Statutory Rights shall prevail.

 

4.	CONSIDERATION

 

In consideration of the execution and delivery by CSMC of this Agreement, Licensee agrees as follows:

 

4.1 License Fee.

 

(a) Upfront Fee. Licensee shall pay to CSMC a non-refundable license fee in two (2) installments in accordance with the following: (i) an amount equal to $10,000 shall be payable within thirty (30) days of the Effective Date, and (ii) an amount equal to $25,000 shall be payable within thirty (30) days of the date on which Licensee has raised at least $250,000 in capital company-wide for any program or purpose; provided, that if Licensee has paid CSMC the second installment of the license fee described in clause (ii) of this Section 4.1(a), then Licensee shall not be required to pay CSMC the second installment of the license fee described in the license agreement between Licensee and CSMC with respect to CSMC’s technology titled “Depletion of mitochondrial DNA from circulation” (bho001234) (the “Mitochondrial DNA License.”). For the avoidance of doubt, upon raising at least $250,000 in capital company-wide for any program or purpose, Licensee shall only be required to pay CSMC one (1) $25,000 license fee installment in total, and such payment shall satisfy the requirements to make a second license fee installment payment which are set forth in both this Agreement and the Mitochondrial DNA License.

 

(b) Patent Cost Reimbursement. Within thirty (30) days of the execution of this Agreement, Licensee shall reimburse CSMC for the costs, including attorneys’ fees and filing fees, actually incurred to date by CSMC in the prosecution of the Patent Rights (which have not already been reimbursed by Licensee under the Option Agreement), which are [$                 ] as of ______________, 202_.

 

 

4.2 Equity Grant. Licensee shall issue to CSMC that number of shares of Licensee’s common stock as is equal, in the aggregate, to 1.5% of the outstanding shares of the capital stock of Licensee on a Fully Diluted Basis (as defined hereafter), as of the Effective Date, subject to execution of a Stock Issuance Agreement of the form attached hereto as Schedule C. Failure of Licensee to issue such shares shall render this Agreement null and void (ab initio). Such shares issued hereunder shall be of the same class and series as founders’ shares. A true and complete copy of Licensee’s capitalization table as of the Effective Date of the Agreement is set forth in Schedule E hereto. For the purposes of this Agreement, “Fully Diluted Basis” shall include all of the issued and outstanding shares of common stock, preferred stock and other capital stock of the Licensee (calculated on an as-converted to common stock basis) plus any then issued and outstanding options and warrants to purchase common stock (calculated on an as-exercised, as converted to common stock basis) plus any unissued but reserved for shares of common stock for future issuance as options or stock grants under the Licensee’s stock plan.

 

(a) Anti-Dilution Protection. Licensee will issue to CSMC, without further consideration, any additional shares of stock of the class issued pursuant to Section 4.2 necessary to ensure that the number of shares issued CSMC pursuant to Section 4.2 does not represent less than 1.5% of the shares issued and outstanding on a Fully-Diluted Basis at any time until the earlier of (i) Licensee’s initial public offering or (ii) Licensee having raised at least $20,000,000 in capital.

 

(b) Future Offerings. In any private offering of Licensee’s equity securities in exchange for cash (or in satisfaction of debt issued for cash), CSMC may purchase for cash that number of the securities issued in such offering as is necessary for CSMC to maintain its pro rata ownership interest in the Licensee on a Fully-Diluted Basis. This right is in addition to CSMC’s rights under Section 4.2(a). In any offering subject to this Section 4.2(b), (i) CSMC’s purchase right shall be on the same terms as the other investors in the financing in question, except that CSMC shall not have any board representation or board meeting attendance rights, (ii) Licensee will give CSMC notice of the terms of the offering, including the names of the investors and the amounts to be invested by each, and CSMC may elect to exercise its right of purchase, in whole or in part, by notice given to Licensee within thirty (30) days after receipt of Licensee’s notice, and (iii) if CSMC elects not to purchase, or fails to give an election notice within such period, CSMC’s purchase right will not apply to the offering if (and only if and to the extent) it is consummated within ninety (90) days on the same or less favorable (to the investor) terms as stated in Licensee’s notice to CSMC. CSMC’s rights under this Section 4.2(b) will not apply to the issuance of stock to employees and other service providers pursuant to a plan approved by Licensee’s board of directors, to shares issued in connection with an acquisition, joint venture or other strategic transaction, or to shares issued as additional consideration in lending or leasing transactions. The rights granted in this Section 4.2(b) will terminate (in addition to any earlier termination pursuant to their terms) immediately before Licensee’s initial public offering or a merger, sale or consolidation with a company that is subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Securities Exchange Act of 1934, as amended.

 

4.3 Royalties and Non-Royalty Revenue.

 

(a) Running Royalties for Products. Licensee agrees to pay and shall pay to CSMC the following non-refundable running royalties (each, a “Royalty”) in the amounts set forth below:

 

(i) a running royalty of four percent (4%) on Net Sales of Patent Products made, used, sold or otherwise distributed by Licensee or any Permitted Sublicensee hereunder (“Patent Product Royalty Rate”) and

 

(ii) a running royalty of one-half percent (0.5%) on Net Sales of Other Products made, used, sold or otherwise distributed by Licensee or any Permitted Sublicensee hereunder (“Other Product Royalty Rate”).

 

(b) Minimum Royalties. Beginning on the third (3rd) anniversary of the Effective Date, Licensee shall pay CSMC a minimum royalty of $10,000 per year (“Minimum Royalty”). Each annual payment of the Minimum Royalty shall be credited against Royalties payable such that no Royalties shall be payable unless the Royalties for such annual period exceed $10,000; provided, that excess amounts paid in respect of the Minimum Royalty may not be carried over to the following calendar year.

 

 

(c) Permitted Deductions. If Licensee is required to make any payment to a third party to obtain a license for the manufacture, use, sale or import of a Product or otherwise exploit the Patent Rights, Licensee shall be entitled to deduct up to fifty percent (50%) of such third party payments made in a particular calendar year against Royalties payable to CSMC for that year; provided, however, that in no event shall the Royalties payable to CSMC hereunder for any one-year period be reduced by operation of this section by more than fifty percent (50%); and provided, further, that such third party payments shall only be creditable against Royalties payable to CSMC for the calendar year in which the third party payment was actually made by Licensee.

 

(d) Highest Royalty Due. If a Product is covered by both the definition of Patent Product and Other Product, CSMC shall be entitled to the Patent Product Royalty Rate on the Product as defined in Section 4.3(a)(i), but shall not be entitled to also receive the Other Product Royalty Rate on the same Product under Section 4.3(a)(ii). To the extent a Product ceases being a Patent Product, but is still an Other Product, CSMC shall be entitled to receive a Royalty on such Product at the Other Product Royalty Rate, but only for such time as specified in Section 4.3(g).

 

(e) Licensee Challenge of Patent Rights. Should Licensee bring, directly or through a third party indirectly, an action challenging the validity, scope or enforceability of any Patent Rights, Licensee will first provide CSMC with at least ninety (90) days’ prior written notice that it intends so to do before filing such a challenge. Following the giving of such notice, Licensee will pay to CSMC the Royalties and Non-Royalty Sublicense Revenue due hereunder at the rate of two times the applicable rate during the pendency of such action. Should the outcome of such action determine that any claim of a patent challenged by Licensee is valid and/or infringed and/or enforceable, as applicable, Licensee will thereafter pay to CSMC the Royalties and Non-Royalty Sublicense Revenue due hereunder at the rate of three times the applicable rate for all Products sold that would infringe such claim and/or transactions that include a grant of rights to such claim. Such increased royalty reflects the increased value of the Patent Rights upheld in such action. In the event that a challenge to the Patent Rights brought by Licensee is partially or entirely successful, Licensee will have no right to recoup any Royalties or other amounts paid before or during the period of the challenge. Additionally, Licensee agrees to disburse any and all proceeds received from any sublicense of the applicable Patent Rights throughout the duration of any such challenge to CSMC, and agrees to reimburse CSMC for all costs actually incurred by CSMC in connection with the applicable legal proceedings. In the event that all or any portion of this Section 4.3(e) is invalid, illegal or unenforceable, then the parties will use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, gives effect to the intent of this Section 4.3(e).

 

(f) Arm’s-Length Transactions. On sales of Products which are made in other than an arms’-length transaction, the value of the Net Sales attributed under this Section 4.3 to such a transaction shall be that which would have been received in an arms’-length transaction, based on sales of like quality and quantity products on or about the time of such transaction.

 

 

(g) Duration of Royalty Obligations. The royalty obligations of Licensee as to each Product shall terminate on a country-by-country and product-by-product basis concurrently with the expiration of:

 

(i) For Patent Products, the last to expire of a Valid Claim that covers such Patent Product, including any term extensions thereof, and

 

(ii) For Other Products, the longer of twenty (20) years after the first bona fide commercial sale of such Other Product in a country or expiration of any market exclusivity period granted by a regulatory agency for such Other Product.

 

(h) Non-Royalty Revenues.

 

(i) Non-Royalty Sublicense Revenues. Any and all “Non-Royalty Sublicense Revenues” shall be reported and paid to CSMC by Licensee as set forth below within sixty (60) days of receipt by Licensee. Licensee shall pay to CSMC a percentage of these Non- Royalty Sublicense Revenues according to the following schedule:

 

Date of Receipt of Non-Royalty Sublicense Revenue		Percent of Non-Royalty Sublicense Revenues Payable to CSMC
Prior to receipt of FDA authorization of an Investigational New Drug (“IND”) application or equivalent regulatory agency authorization in another jurisdiction for a Product		35%
After receipt of FDA authorization of an IND application for a Product or equivalent regulatory agency authorization in another jurisdiction, but prior to submission of a New Drug Application (“NDA”) or Biologics License Applications (BLA) to the FDA or equivalent regulatory agency in another jurisdiction		10%
After submission of an NDA/BLA for a Product but prior to receipt of FDA approval of an NDA/BLA or equivalent regulatory agency approval in another jurisdiction for a Product		8%
After receipt of FDA approval of an NDA/BLA or equivalent regulatory agency approval in another jurisdiction for a Product		5%

 

Any non-cash consideration received by Licensee from Permitted Sublicensees shall be valued at its fair market value as of the date of receipt and such amount shall be paid in cash to CSMC in accordance with the schedule above. In the event that the Patent Rights are sublicensed in combination with one or more patented technologies that are not covered under this Agreement, Non-Royalty Sublicense Revenues for the purposes of this Section 4.3(g) shall be calculated on a pro-rata basis in a manner to be mutually agreed by CSMC and Licensee (which agreement may be a condition of approval under Section 2.2).

 

 

(ii) Product Development Milestones. Licensee agrees to pay and shall pay to CSMC the following non-creditable, non-refundable product development milestone payments within sixty (60) days of the first occurrence of the following milestones (or their equivalents):

 

Milestone Event		Milestone Payment
Successful completion of a Phase II clinical trial for a product and receipt of FDA or equivalent regulatory agency in another jurisdiction and approval for a Phase III clinical trial		$	300,000
Receipt of FDA approval of a New Drug Application (“NDA”) or Biologics License Applications (“BLA”) or equivalent foreign regulatory approval in a non-United States major commercial market		$	1,500,000
Cumulative Net Sales have exceeded $50,000,000		$	2,500,000

 

(i) Payment and Accounting.

 

(i) Reports. Each payment of Royalties shall be accompanied by a report in the form attached as Schedule F hereto, which sets forth in reasonable detail the number and each type of Product sold and the calculation of Net Sales applicable thereto, and such additional details as may be reasonably requested by CSMC for the determination of Royalties payable hereunder. Products shall be considered as being sold for the purpose of the calculation of Royalties under this Agreement when the Products have been invoiced. Each payment of Non- Royalty Sublicense Revenue shall be accompanied by a report in the form attached as Schedule F hereto setting forth in reasonable detail the basis for the calculation of such amounts, and such additional details as may be reasonably requested by CSMC for the determination of Non-Royalty Sublicense Revenue payable hereunder. All copies of reports under this Section shall be sent by electronic mail to CSTechTransfer@cshs.org. Except as otherwise provided herein, all amounts due hereunder shall be paid in United States dollars and shall be made without set off and free and clear of (and without any deduction or withholding for) any taxes, duties, levies, imposts or similar fees or charges. Royalties shall be payable by Licensee quarterly, within forty-five (45) days after the end of each calendar quarter, based upon revenues accrued during the immediately preceding calendar quarter. Licensee agrees to pay and shall pay to CSMC, or cause its Permitted Sublicensees to pay to CSMC, all Royalties resulting from the activities of its Permitted Sublicensees, within forty-five (45) days after the end of each calendar quarter.

 

(ii) Notice of Payment. Licensee shall provide prompt written notice to CSMC that it has paid the licensee fee required by Section 4.1 or any product development milestone payment required by Section 4.3(h)(ii) by electronic mail to CSTechTransfer@cshs.org.

 

 

(iii) Wire Transfer Instructions. All payments due hereunder shall be made by Licensee to CSMC in accordance with the following wire transfer instructions:

 

City National Bank

400 N. Roxbury Drive

Beverly Hills, CA 90210

ABA# 122 016 066

Account Number: 210-132260

Account Name: Cedars-Sinai Medical Center – Tech Transfer

Reference: Tech Transfer – Enviro Therapeutics, Inc.

 

(iv) Records and Audits. Licensee shall create and maintain complete and accurate records and documentation concerning all sales of Products by Licensee, its Affiliates and Permitted Sublicensees as well as transactions based upon which Non-Royalty Sublicense Revenue is due, in sufficient detail to enable the Royalties and Non-Royalty Sublicense Revenue, respectively, that is payable hereunder to be determined. Licensee shall retain such records and documentation for not less than seven (7) years from the date of their creation. During the term of this Agreement and for a period of three (3) years thereafter, CSMC and its representatives shall have the right to audit such records and documentation as shall pertain to the determination and payment of Royalties and Non-Royalty Sublicense Revenue. Such examiners shall have reasonable access during regular business hours to Licensee’s offices and the relevant records, files and books of account, and shall have the right to examine any other records reasonably necessary to determine the accuracy of the calculations provided by Licensee. The costs of any such audit shall be borne by CSMC, unless as a result of such inspection it is determined that the amounts payable by Licensee for any period are in error by greater than five percent (5%), in which case the costs of such audit shall be borne by Licensee. CSMC shall report the results of any such audit to Licensee within forty-five (45) days of completion. Thereafter, Licensee shall promptly pay to CSMC the amount of any underpayment discovered in such audit, or CSMC shall credit to Licensee against future Royalty payments the amount of any overpayment discovered in such audit, as the case may be. In addition, Licensee shall pay interest on any underpayment at the rate that is the lower of (i) two percent (2%) over the rate of interest announced by Bank of America in Los Angeles, California (or any successor in interest thereto or any commercially equivalent financial institution if no such successor exists) to be its “prime rate”, or (ii) the highest rate permitted by applicable law, from the date such amount was underpaid to the date payment is actually received.

 

(v) Currency Transfer Restrictions. If any restrictions on the transfer of currency exist in any country or other jurisdiction so as to prevent Licensee from making payments to CSMC, Licensee shall take all commercially reasonable steps to obtain a waiver of such restrictions or to otherwise enable Licensee to make such payments. If Licensee is unable to do so, Licensee shall make such payments to CSMC in a bank account or other depository designated by CSMC in such country or jurisdiction, which payments shall be in the local currency of such country or jurisdiction, unless payment in United States dollars is permitted. Any payment by Licensee to CSMC in currencies other than United States dollars shall be calculated using the appropriate foreign exchange rate for such currency quoted in the California edition of The Wall Street Journal for the close of business of the last banking day of the calendar quarter in which such payment is being made.

 

 

(vi) Late Charges. A service charge of two percent (2%) per month, not to exceed the maximum rate allowed by applicable law, shall be payable by Licensee on any portion of Licensee’s outstanding Royalty or Non-Royalty Sublicense Revenue balance or any other amount payable by Licensee hereunder (including, without limitation, reimbursement for Prosecution costs as set forth in Section 4.1 hereof) that is not paid to CSMC within thirty (30) days past the due date.

 

(vii) Taxes. Licensee shall pay, or cause to be paid, any and all taxes required to be paid or withheld on any sales, licenses or other transfers for value of Products or Patent Rights (other than taxes imposed on the income or revenues of CSMC); provided, however, that under no circumstances shall the amounts of such taxes be deducted from the total amount of payments otherwise due to CSMC hereunder. Upon CSMC’s request, Licensee shall secure and send to CSMC proof of any such taxes withheld and paid by Licensee, its Affiliates or Permitted Sublicensees.

 

(viii) No Escrow. Licensee shall pay all Royalties and Non-Royalty Sublicense Revenue directly to CSMC and shall not pay royalties into any escrow or other similar account, including in the event of a validity or non-infringement challenge to the Patent Rights.

 

5.	PATENT RIGHTS

 

5.1 Prosecution. Commencing on the Effective Date, Licensee shall assume, in coordination with CSMC, full responsibility for the application, maintenance, reexamination, reissue, opposition and prosecution of any kind (collectively “Prosecution”) relating to the Patent Rights in the Territory, including, but not limited to, payment of all costs, fees and expenses related thereto. Subject to the approval of CSMC (which approval shall not be unreasonably withheld), Licensee shall have the right to select counsel with respect to the responsibility assumed by Licensee in this Section 5.1, and Licensee shall diligently pursue the Prosecution of the Patent Rights to the benefit of CSMC. For all purposes of the patent Prosecution, CSMC shall be the named “client” of such patent counsel. Each party shall provide the other with copies of any and all material or communications with the United States Patent and Trademark Office, or any foreign patent office, and CSMC shall be afforded the opportunity of prior review and comment on such action or paper.

 

(a) Foreign Filings. Should Licensee elect not to file for patent protection for the Patent Rights in a certain national jurisdiction in the Territory, Licensee shall notify CSMC of such election at least forty-five (45) days before a final due date which would result in the bar of patent protection for the Patent Rights in such national jurisdiction. In such event, CSMC may, at its sole option and expense, file for patent protection for the Patent Rights in the applicable national jurisdiction, and Licensee’s license under this Agreement with respect to such national jurisdiction shall terminate, allowing CSMC to freely dispose of its Patent Rights in the applicable national jurisdiction as it sees fit in its sole discretion.

 

5.2 Abandonment, Disclaimers, etc. Licensee shall obtain the prior written consent of CSMC (which consent shall not be unreasonably withheld), prior to abandoning, disclaiming, withdrawing, seeking reissue, seeking reexamination or allowing to lapse any patent or patent application within the Patent Rights. In the event that Licensee shall elect to abandon the Prosecution (including the payment of maintenance fees or annuities) of any patent or patent application included in the Patent Rights, Licensee shall notify CSMC of such election at least forty-five (45) days before a final due date which would result in abandonment or bar of patentability of the patent or patent application. In such event, CSMC may, at its sole option and expense, continue Prosecution of the patent application or patent. Licensee further agrees that it shall not file any continuation-in-part application relating to the Patent Rights unless the additional disclosure or material to be included in the continuation-in-part application is necessary or appropriate to support the patentability of a claim recited in a parent application on which the continuation-in-part application is based. Licensee shall not file any continuation-in-part application without CSMC’s prior written consent, which shall not be unreasonably withheld.

 

 

5.3 Expenses. Licensee shall pay all expenses resulting from its obligations in Section 5.1 hereof. CSMC shall exercise reasonable efforts to cause the Inventors (to the extent they are available and on CSMC’s staff as employees) to cooperate fully with Licensee with respect to the Prosecution of the Patent Rights, and CSMC shall be reimbursed for all reasonable out-of-pocket expenses as such expenses are incurred.

 

5.4 CREATE Act. Licensee shall not invoke the Cooperative Research and Technology Enhancement Act of 2004, as set forth under Title 35, Section 102(c) of the United States Code (the “CREATE Act”), with respect to the Patent Rights without first obtaining the prior written consent of CSMC.

 

6.	TERM AND TERMINATION

 

6.1 Term. Unless earlier terminated as provided in Section 6.2 hereof, the term of this Agreement shall commence on the Effective Date and shall expire, on a country-by-country and product-by-product basis, on the later of (i) the date upon which the last to expire Valid Claim shall expire, (ii) twenty (20) years after the first bona fide commercial sale of an Other Product in the country in question or (iii) the expiration of any market exclusivity period granted by a regulatory agency.

 

6.2 Termination. Except as provided by Section 6.3 hereof, and in addition to the termination provisions of Sections 2.5, 2.6 and 5.1(a), this Agreement shall terminate upon the earliest to occur of the following:

 

(a) Automatically if Licensee shall enter into a liquidating bankruptcy, be adjudged insolvent, liquidate, dissolve and/or if the business of Licensee shall be placed in the hands of a receiver, assignee, or trustee, whether by voluntary act of Licensee or otherwise; provided, however, that if any such action is involuntary, termination shall not take place unless the action is not reversed within thirty (30) days. Further, Licensee shall give CSMC at least forty- five (45) days’ prior written notice before Licensee initiates any bankruptcy proceeding, and CSMC shall have the right to terminate this Agreement immediately upon receipt of such notice;

 

(b) Automatically if the performance by either party to this Agreement of any term, covenant, condition or provision hereof (i) shall jeopardize (A) the licensure of CSMC, (B) CSMC’s participation in the Medicare, Medi-Cal or other reimbursement or payment programs, (C) the full accreditation of CSMC by the Joint Commission of Accreditation of Healthcare Organizations or any other state or nationally recognized accreditation organization, or (D) CSMC’s tax-exempt status; or (ii) is deemed illegal or unethical by any recognized governmental agency or body. Upon the occurrence of any of the items set forth in this subparagraph (b), CSMC shall provide written notice to Licensee setting forth the reason for such termination (which termination shall be effective immediately);

 

 

(c) Upon thirty (30) days’ written notice from CSMC if, within such thirty (30) day period (i) Licensee shall fail to pay fully any Royalty or Non-Royalty Sublicense Revenue payment required by Section 4.3 hereof, or (ii) Licensee shall fail to undertake commercially reasonable efforts to exploit the Patent Rights in the Field of Use in the Territory, regardless of Licensee’s satisfaction of the Milestones provided in Schedule D hereto;

 

(d) Upon sixty (60) days’ written notice from CSMC if, within such sixty (60) day period, Licensee shall fail to cure fully any breach or default of any material obligation under this Agreement as described in such written notice detailing the facts of such breach with reasonable specificity; provided, however, that Licensee may avoid such termination if, before the end of such 60-day period, such breach or default has been cured by Licensee to the reasonable satisfaction of CSMC;

 

(e) Upon ninety (90) days’ written notice from Licensee if, within such ninety (90) day period, CSMC shall fail to cure fully any breach or default of any material obligation under this Agreement as described in such written notice detailing the facts of such breach with reasonable specificity; provided, however, that CSMC may avoid such termination if, before the end of such 90-day period, such breach or default has been cured by CSMC to the reasonable satisfaction of Licensee; and

 

(f) Upon the mutual written agreement of the parties hereto (such termination to be effective as of the date mutually agreed upon in such written agreement).

 

6.3 Obligations Upon Termination. Upon any termination of this Agreement pursuant to Section 6.2 hereof, nothing herein shall be construed to release any party from any liability for any obligation incurred through the effective date of termination (e.g., confidentiality, reimbursement of patent expenses incurred prior to such date, etc.) or for any breach of this Agreement prior to the effective date of such termination. Licensee may, for a period of one (1) year after the effective date of such termination, sell all tangible Products customarily classified as “inventory” that it has on hand at the date of termination, subject to payment by Licensee to CSMC of the applicable Royalty and Non-Royalty Sublicense Revenue; provided, however, that any such action by Licensee does not subject CSMC to any of the occurrences set forth in Section 6.2(b) hereof.

 

6.4 Effect of Termination. In the event of any termination of this Agreement pursuant to Section 6.2 hereof, where such termination has not been caused by any action or inaction on the part of any Permitted Sublicensee of Licensee or by any breach by such Permitted Sublicensee of its obligations under its sublicense from Licensee, such termination of this Agreement shall be without prejudice to the rights of each non-breaching Permitted Sublicensee of Licensee and each non-breaching Permitted Sublicensee shall be deemed to be a licensee of CSMC thereunder, and CSMC shall be entitled to all rights, but shall not be subject to any obligations (other than the grant of license and appurtenant obligations under this Agreement to the extent provided for in such sublicense) of Licensee thereunder. This Section 6.4, however, shall not be applicable if this Agreement has been terminated under Section 6.2(b) under circumstances where the application of this Section 6.4 would subject CSMC to any of the occurrences set forth in Section 6.2(b).

 

 

6.5 Right to Institute Legal Actions. Notwithstanding the provisions of Section 6.2 hereof, CSMC, on the one hand, and Licensee, on the other hand, may institute any other legal action or pursue any other remedy against the other party permitted by applicable law if the other party does not substantially cure any breach or default of any material obligation as provided herein.

 

6.6 Reversion of Rights. Notwithstanding anything to the contrary set forth herein (including, but not limited to, Section 5 hereof), full responsibility for Prosecution of the Patent Rights shall, at the option of CSMC (exercisable in its sole and absolute discretion), and at its sole expense from the date of reversion, revert to CSMC upon any termination of this Agreement.

 

6.7 Return of Data. In the event of any termination or expiration of this Agreement, Licensee shall promptly provide CSMC with copies of all data, information and materials obtained or generated by or on behalf of Licensee in the course of conducting research and developing Products using the Patent Rights and the Technical Information.

 

7.	INFRINGEMENT BY THIRD PARTIES

 

7.1 Enforcement. Licensee shall have the first right and the obligation to enforce, at its sole expense, any Patent Rights to the extent licensed hereunder against infringement by third parties and shall notify CSMC in writing in advance of all such enforcement efforts. Upon Licensee’s undertaking to pay all expenditures reasonably incurred by CSMC, CSMC shall reasonably cooperate in any such enforcement and, as necessary, join as a party therein. Licensee shall reimburse CSMC for all expenses, including reasonable attorneys’ fees, incurred in connection with any such enforcement. In the event that Licensee does not file suit against or commence and conclude settlement negotiations with a substantial infringer of Patent Rights within ninety (90) days of receipt of a written demand from CSMC that Licensee bring suit, then the parties will consult with one another in an effort to determine whether a reasonably prudent licensee would institute litigation to enforce the patent in question in light of all relevant business and economic factors (including, but not limited to, the projected cost of such litigation, the likelihood of success on the merits, the probable amount of any damage award, the prospects for satisfaction of any judgment against the alleged infringer, the possibility of counterclaims against the parties hereto, the impact of any possible adverse outcome on Licensee and the effect any publicity might have on the parties’ respective reputations and goodwill). If, after such process, it is determined that a suit should be filed and Licensee does not file suit or commence settlement negotiations forthwith against the infringer, then CSMC shall have the right, at its own expense, to enforce any Patent Rights licensed hereunder on behalf of itself and Licensee. Any damages or other recovery from an infringement action undertaken by Licensee shall first be used to reimburse the parties, on a pro rata pari passu basis, for the costs and expenses incurred in such action, and shall thereafter be allocated between the parties as follows: (i) fifty percent (50%) to CSMC and (ii) fifty percent (50%) to Licensee. If Licensee fails to prosecute any such action to completion, then any damages or other recovery net of the parties’ costs and expenses incurred in such infringement action shall be the sole property of CSMC.

 

 

7.2 Defense Of Patent Rights. In the event that any Patent Rights are the subject of a legal action seeking declaratory relief or of any reexamination, inter partes review, post grant review, opposition, or similar proceeding instituted by a third party, the parties agree to promptly consult with each other concerning the defense of such actions or proceedings. If the parties agree that such defense should be undertaken, then Licensee shall bear the expenses, including attorneys’ fees, associated with such defense and in any recoupment of expenses. If the parties disagree, then the party desiring to defend the action or proceeding may proceed with such defense and will bear its own expenses, and be entitled to all sums recovered.

 

8.	INDEMNIFICATION

 

8.1 Indemnification by Licensee. Subject to Section 8.2 hereof, Licensee shall hold harmless, defend and indemnify CSMC and each of its officers, directors, employees (including the Inventors), agents and sponsors of the research (except Licensee) (each, an “Indemnified Party”, and collectively, the “Indemnified Parties”) from and against any and all claims, damages, losses, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses and costs of investigation, whether or not suit is filed) suffered or incurred by any of the Indemnified Parties in any action, suit, litigation, arbitration or dispute of any kind (“Action”) arising or resulting from any negligence or willful acts or omissions on the part of Licensee, its Affiliates or Permitted Sublicensees in connection with (a) their use of the Patent Rights or Technical Information and/or (b) the exercise of their rights hereunder or under any sublicense, including, but not limited to (i) the preclinical development and clinical testing of Products, and (ii) the manufacture, sale, use, marketing, or other disposition of Products developed, manufactured, sold, marketed, used or otherwise disposed of under this Agreement. As part of its obligations hereunder, Licensee shall defend any Action brought against any of the Indemnified Parties with counsel of its own choosing and reasonably acceptable to CSMC, and neither CSMC nor any other Indemnified Party shall enter into any settlement of any such Action without first obtaining prior approval of Licensee. Licensee shall pay all costs, including attorney’s fees, incurred in enforcing this indemnification provision. Should CSMC or any other Indemnified Party not afford Licensee the right to defend any such Action, or should CSMC or any other Indemnified Party not obtain the approval of Licensee to any such settlement, Licensee shall have no obligation to indemnify CSMC or any other Indemnified Party hereunder. Should Licensee fail to provide a defense for the Indemnified Parties as required hereunder, then Licensee shall reimburse CSMC for its out-of-pocket expenses (including reasonable attorneys’ fees and expenses and costs of investigation) which are incurred as a result of any investigation, defense or settlement relating to the foregoing, which reimbursement shall be made to CSMC upon receipt by Licensee of invoices reflecting in reasonable detail such expenses incurred by CSMC. Licensee shall obtain and maintain insurance policies (including products liability and general liability policies at such time as is appropriate) which are reasonable and necessary to cover its activities and to comply with the indemnification obligations set forth above. Such insurance policies shall name CSMC as an additional insured party and shall provide a minimum of $3,000,000 in coverage per occurrence. Upon initiation of any human clinical studies of Products, Licensee shall have first increased its insurance coverage to a minimum of $10,000,000 in the aggregate. Licensee shall provide CSMC with prompt written notice of any material change in coverage under such policies. If the parties determine that evidence of Licensee’s insurance coverage is necessary and appropriate, within thirty (30) days of the Effective Date (subject to extension if reasonably required) and annually thereafter, Licensee shall provide CSMC with a certificate of insurance issued by the appropriate insurance company evidencing the insurance coverage required by this Section 8.1, together with copies of the endorsement which specifies CSMC as an additional insured and the declarations page for each such insurance policy. The certificate of insurance, endorsements and declarations pages (and any renewals or replacements thereof), if required, shall be sent to CSMC’s Technology Transfer Office by electronic mail at CSTechTransfer@cshs.org.

 

 

8.2 Notice of Claim. CSMC shall promptly notify Licensee in writing of any claim or Action or material threat thereof brought against any Indemnified Party in respect of which indemnification may be sought and, to the extent allowed by law, shall reasonably cooperate with Licensee in defending or settling any such claim or Action. No settlement of any claim, Action or threat thereof received by CSMC and for which CSMC intends to seek indemnification (for itself or on behalf of any other Indemnified Party) shall be made without the prior joint written approval of Licensee and CSMC.

 

9.	USE OF NAMES

 

9.1 CSMC Names and Marks. Licensee shall not, unless as required by any law or governmental regulation, use the name of CSMC, and/or any of its trademarks, service marks, trade names or fictitious business names or the name of any CSMC officer, faculty member, employee, student or volunteer (collectively, “CSMC Names and Marks”) without express prior written consent of the Vice President for Public Relations and Marketing of CSMC. Further, prior to any reference by Licensee to CSMC Names and Marks in any manner, Licensee shall provide CSMC with a writing reflecting the proposed reference so that CSMC can review the reference within a reasonable period of time prior to the proposed use thereof by Licensee. This limitation includes, but is not limited to, use by Licensee in any regulatory filing, advertising, offering circular, prospectus, sales presentation, news release or trade publication. Subject to compliance by Licensee with the foregoing, which shall be deemed conditions precedent to any use of CSMC Names and Marks by Licensee, Licensee shall ensure that the CSMC Names and Marks are used as scientifically or academically appropriate in the “byline” of any article, abstract, manuscript or any other publication related to the subject matter hereof.

 

9.2 No Endorsements by CSMC. By entering into this Agreement, CSMC does not directly or indirectly endorse any product or service provided, or to be provided, by Licensee whether directly or indirectly related to this Agreement. Licensee shall not state or imply that this Agreement is an endorsement by CSMC.

 

10.	CONFIDENTIALITY

 

10.1 Non-Disclosure. The parties hereto shall keep the terms of this Agreement and all business and scientific discussions relating to the business of the parties strictly confidential. All patient information to which a party is given access by the other party shall be subject to the provisions of the Confidentiality of Medical Information Act (Cal. Civ. Code §§56, et seq.) and the Health Insurance Portability and Accountability Act of 1996, and all regulations promulgated thereunder. It may, from time to time, be necessary for the parties, in connection with performance under this Agreement, to disclose Confidential Information (including know-how) to each other. The Receiving Party (as defined in Section 1.2 hereof) shall keep in strictest confidence the Confidential Information of the Disclosing Party (as defined in Section 1.2 hereof), using the standard of care it normally uses for information of like character, and shall not disclose the Confidential Information to any third party or use it except as expressly authorized by the prior written consent of the Disclosing Party or as otherwise permitted by this Agreement; provided, however, that Licensee may disclose the Confidential Information received from CSMC to its Affiliates and Permitted Sublicensees as shall be reasonably necessary to carry out the intent of this Agreement or any sublicense granted by Licensee as contemplated by this Agreement if, but only if, such Affiliates and/or Permitted Sublicensees each execute a confidentiality agreement containing confidentiality provisions no less restrictive than those confidentiality provisions contained in this Section 10. The Receiving Party’s obligation hereunder shall not apply to Confidential Information that the Receiving Party can show:

 

(a) Is or later becomes part of the public domain through no fault or neglect of the Receiving Party;

 

 

(b) Is received in good faith from a third party having no obligations of confidentiality to the Disclosing Party, provided that the Receiving Party complies with any restrictions imposed by the third party;

 

(c) Is independently developed by the Receiving Party without use of the Disclosing Party’s Confidential Information; or

 

(d) Is required by law or regulation to be disclosed (including, without limitation, in connection with FDA filings, filings with another government agency or as required under the California Public Records Act), provided that the Receiving Party uses reasonable efforts to restrict disclosure and to obtain confidential treatment.

 

10.2 Limits on Permitted Disclosures. Each party agrees that any disclosure or distribution of the other party’s Confidential Information within its own organization shall be made only as is reasonably necessary to carry out the intent of this Agreement. The parties further agree that all of their respective officers, employees, agents, representatives or approved sublicensees to whom any Confidential Information is disclosed or distributed shall have agreed to maintain its confidentiality. In such event, the Receiving Party shall identify with reasonable particularity, upon request by the Disclosing Party, each person within the Receiving Party’s organization to whom the Receiving Party has disclosed or distributed Confidential Information.

 

10.3 Legally Required Disclosures. If a subpoena or other legal process concerning Confidential Information is served upon any party hereto pertaining to the subject matter hereof, the party served shall notify the other party immediately, the other party shall cooperate with the party served, at the other party’s expense, in any effort to contest the validity of such subpoena or other legal process. This Section 10.3 shall not be construed in any way to limit any party’s ability to satisfy any disclosure of its relationship with the other party required by any governmental authority.

 

 

10.4 Patent Rights as Confidential Information. The Patent Rights are understood by Licensee to be the Confidential Information of CSMC to the extent “unpublished” as such term is construed under the United States Patent Laws. As such, Licensee’s confidentiality obligations hereunder automatically extend to any and all Technical Information and to any and all patent applications of CSMC relating to any Patent Rights, Technical Information and Improvements and to any and all communications with the United States Patent Office, and any foreign patent office relating to any Patent Rights, Technical Information or Improvements.

 

10.5 Return of Confidential Information. In the event of any termination of this Agreement, the Receiving Party shall promptly return all Confidential Information and any copies made thereof previously made available to the Receiving Party by the Disclosing Party.

 

10.6 Remedies. Both parties acknowledge and agree that it would be difficult to measure damages for breach by either party of the covenants set forth in this Section 10, and that injury from any such breach would be incalculable, and that money damages would therefore be an inadequate remedy for any such breach. Accordingly, either party shall be entitled, in addition to all other remedies available hereunder or under law or equity, to injunctive or such other equitable relief as a court may deem appropriate to restrain or remedy any breach of such covenants.

 

11.	INFORMATION EXCHANGE

 

In addition to the Patent Rights and Technical Information, the parties shall cooperate to exchange such non-confidential information as may be appropriate and necessary to facilitate Licensee’s development and commercialization of Products incorporating any Patent Rights or Technical Information.

 

12.	PATENT MARKING

 

Licensee shall actually or virtually mark all Patent Products made, sold or otherwise disposed of by or on behalf of it or any of its Permitted Sublicensees as set forth under Title 35, Section 287(a) of the United States Code and shall respond to any request or disclosure under Title 35, Section 287(b)(4)(B) of the United States Code by only notifying CSMC of the request for disclosure.

 

13.	MISCELLANEOUS

 

13.1 Notices. Any notice, request, instruction or other document required by this Agreement shall be in writing and shall be deemed to have been given (a) if mailed with the United States Postal Service by prepaid, first class, certified mail, return receipt requested, at the time of receipt by the intended recipient, (b) if sent by Federal Express or other overnight carrier, signature of delivery required, at the time of receipt by the intended recipient, or (c) if sent by facsimile transmission, when so sent and when receipt has been acknowledged by appropriate telephone or facsimile receipt, addressed as follows:

 

In the case of CSMC to:

 

Cedars-Sinai Medical Center

8700 Beverly Boulevard

Los Angeles, California 90048-1865

Attention: Executive Vice President for Finance & CFO

with a copy to Vice President, Intellectual Property

 

or in the case of Licensee to:

 

Enviro Therapeutics, Inc.

2355 Westwood Blvd. #139

Los Angeles CA 90064

Attention: CEO

 

or to such other address or to such other person(s) as may be given from time to time under the terms of this Section 13.1.

 

13.2 Compliance with Laws. Each party shall comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this Agreement.

 

13.3 Governing Law. For any dispute between the parties to this Agreement which arises from or relates to this Agreement, the Agreement shall be construed and enforced in accordance with the laws of the United States of America and of the State of California, irrespective of choice of laws provisions. The parties agree that Los Angeles County, California shall be the situs of any legal proceeding arising out of or relating to this Agreement. Each party hereby waives any right it may have to assert the doctrine of forum non conveniens or similar doctrine or to object to venue with respect to any proceeding brought in accordance with this Section, and stipulates that the state and federal courts located in Los Angeles, California shall have in personam jurisdiction and venue over each of them for the purpose of litigating any dispute, controversy, or proceeding arising out of or related to this Agreement. Each party hereby authorizes and accepts service of process sufficient for personal jurisdiction in any action against it as contemplated by this Section by registered or certified mail, return receipt requested, postage prepaid, to its address for the giving of notices as set forth in this Agreement.

 

13.4 Waiver. Failure of any party to enforce a right under this Agreement shall not act as a waiver of that right or the ability to assert that right relative to the particular situation involved.

 

13.5 Enforceability. If any provision of this Agreement shall be found by a court of competent jurisdiction to be void, invalid or unenforceable, the same shall be reformed to comply with applicable law or stricken if not so conformable, so as not to affect the validity or enforceability of the remainder of this Agreement.

 

13.6 Modification. No change, modification, or addition or amendment to this Agreement, or waiver of any term or condition of this Agreement, is valid or enforceable unless in writing and signed and dated by the authorized officers of the parties to this Agreement.

 

 

13.7 Entire Agreement. This Agreement and the Schedules hereto (which are incorporated herein by this reference as if fully set forth herein) constitute the entire agreement between the parties with respect to the subject matter hereof and thereof, and replace and supersede as of the date hereof and thereof any and all prior agreements and understandings, whether oral or written, between the parties with respect to the subject matter of such agreements.

 

13.8 Construction. This Agreement has been prepared, examined, negotiated and revised by each party and their respective attorneys, and no implication shall be drawn and no provision shall be construed against any party to this Agreement by virtue of the purported identity of the drafter of this Agreement or any portion thereof.

 

13.9 Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall constitute one and the same instrument. This Agreement may be executed by facsimile or in .pdf format.

 

13.10 Attorneys’ Fees. In the event of any action at law or in equity between the parties hereto to enforce any of the provisions hereof, the unsuccessful party to such litigation shall pay to the successful party all reasonable costs and expenses, including reasonable attorneys’ fees, incurred therein by such successful party; and if such successful party shall recover a judgment in any such action or proceeding, such reasonable costs, expenses and attorneys’ fees may be included in and as part of such judgment.

 

13.11 Assignment; Successors.

 

(a) Subject to Section 13.11(b), Licensee may assign this Agreement as part of a sale, regardless of whether such a sale occurs through an asset sale, stock sale, merger or other combination, or any other transfer of Licensee’s entire business, or that part of Licensee’s business that exercises all rights granted under this Agreement. Any other attempt to assign this Agreement by Licensee is null and void. In the event of a bankruptcy, assignment is permitted only to a party that can provide adequate assurance of future performance, including diligent development and sales, of Products.

 

(b) Prior to any assignment, the following conditions must be met: (i) Licensee must give CSMC thirty (30) days prior written notice of the assignment, including the new assignee’s contact information, (ii) the new assignee must agree in writing to CSMC to be bound by this Agreement, and (iii) CSMC must have received a $25,000.00 assignment fee.

 

(c) Subject to the limitations on assignment herein, this Agreement shall be binding upon and inure to the benefit of any successors in interest and assigns of CSMC and Licensee. CSMC shall have the right to assign its rights hereunder as part of any reorganization or bond financing.

 

13.12 Further Assurances. At any time and from time to time after the Effective Date, each party shall do, execute, acknowledge and deliver, and cause to be done, executed, acknowledged or delivered, all such further acts, transfers, conveyances, assignments or assurances as may be reasonably required to consummate the transactions contemplated by this Agreement.

 

13.13 Survival. The following sections shall survive any expiration or earlier termination of this Agreement: 4.3(e), 6.3, 8, 9, 10, 12 and 13.

 

[signature page follows]

 

 

 

 

Schedule A

 

Patent Rights

 

1. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s):	Bhowmick NA, Smith B, Placencio V, Madhav, A.
Application No.:	2017286561
Country:	Australia
Filing Date:	June 14, 2017
Docket No.:	065472.000621AU00
CSMC Tech ID:	bho000961

 

2. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s):	Bhowmick NA, Smith B, Placencio V, Madhav, A.
Application No.:	3026066
Country:	Canada
Filing Date:	June 14, 2017
Docket No.:	065472.000621CA00
CSMC Tech ID:	bho000961

 

3. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s):	Bhowmick NA, Smith B, Placencio V, Madhav, A.
Application No.:	201780000000
Country:	China
Filing Date:	June 14, 2017
Docket No.:	065472.000621CN00
CSMC Tech ID:	bho000961

 

4. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s):	Bhowmick NA, Smith B, Placencio V, Madhav, A.
Application No.:	17814046.3
Country:	Europe
Filing Date:	June 14, 2017
Docket No.:	065472.000621EP00
CSMC Tech ID:	bho000961

 

5. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s):	Bhowmick NA, Smith B, Placencio V, Madhav, A.
Application No.:	2018-565397
Country:	Japan
Filing Date:	June 14, 2017
Docket No.:	065472.000621JP00
CSMC Tech ID:	bho000961

 

6. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s):	Bhowmick NA, Smith B, Placencio V, Madhav, A.
Application No.:	16/305,821
Country:	United States
Filing Date:	Nov 29, 2018
Docket No.:	065472.000621US00
CSMC Tech ID:	bho000961

 

 

Schedule B

 

Technical Information

 

All lab notes, methods, protocols, SOPs, and technical know-how developed by inventors, including

 

Madhav et al (2018) Antagonizing CD105 enhances radiation sensitivity in prostate cancer.

 

Oncogene. 2018 Aug;37(32):4385-4397

 

 

Schedule C

 

Stock Issuance Agreement

 

[to be completed]

 

 

Schedule D

 

Milestones

 

	1.	Licensee shall obtain an IND for a Product within one (1) year of the Effective Date
	2.	Licensee shall commence a Phase II trial for a Product within two (2) years of the Effective Date
	3.	Licensee shall submit an NDA/BLA to the FDA or equivalent regulatory agency in another jurisdiction for a Product within seven (7) years of the Effective Date

 

 

Schedule E

 

Licensee Capitalization Table

 

[to be completed]

 

 

Schedule F

Royalty Reporting Form

 

Licensee name:

Reporting period:

Date of report:

Date of first commercial sale:

 

Royalty Report

 

Product (list products by name)

No. units sold

Invoiced price per unit

Gross sales

Allowable deductions (attached itemized detail)

Country of sale/foreign currency/ conversion rate

Net sales

Product name

Product name

Product name

Total

 

Total net sales		$
Royalty rate
Royalty due		$

 

Total royalty due: $                               

 

Non-Royalty Sublicense Revenue Report

 

Total Non-Royalty Sublicense Revenue received		$
Date received
Applicable percentage payable to CSMC
Total Non-Royalty Sublicense Revenue payable to CSMC		$

 

Report prepared by:

Title:

Date:

 

Please send electronic copy of report to CSTechTransfer@cshs.org.

 

 

 

Exhibit 10.4

 

 

January 9, 2021

 

Enviro Therapeutics, Inc.

2355 Westwood Blvd., #139

Los Angeles, CA 90064

Attention: Neil Bhowmick, Ph.D., CEO

 

Re:

Exclusive Option Agreement - Amendment (Sensitization of Tumors to Therapies Through Endoglin Antagonism)

 

Dear Dr. Bhowmick:

 

Upon execution by you, this letter will serve as the Amendment (“Amendment”) to the Exclusive Option Agreement entered on March 16, 2020 (“Agreement”), by and between Cedars-Sinai Medical Center, a California nonprofit public benefit corporation (“CSMC”), and Enviro Therapeutics, Inc. (“Licensee”) for the above-referenced technology.

 

The parties to the Agreement hereby agree as follows:

 

1. The parties agree to extend the 9-month option term set forth in Section 4 of the Agreement for an additional six (6) month period, which will end on June 15, 2021. In consideration thereof, Licensee agrees to pay to CSMC a non-refundable extension fee of One Thousand Dollars ($1,000.00) (“Extension Fee”), payable in cash, no later than thirty (30) days after the execution of this Agreement. The Extension Fee may be credited against any license fees payable under the Exclusive License in the event that the Parties enter into the Exclusive License.

 

2. The terms and conditions of the Agreement shall remain in full force and effect as modified by this Amendment, and this Amendment shall be deemed a part of the Agreement. In the event of a conflict between a provision of this Amendment and a provision of the Agreement, this Amendment shall govern.

 

 

 

If this Amendment to the Agreement is acceptable to you, please return a signed copy of it to Cedars-Sinai Medical Center, 8700 Beverly Blvd., Los Angeles, California 90048, at your earliest convenience.

 

	Sincerely yours,
	CEDARS-SINAI MEDICAL CENTER
	/s/ James D. Laur, JD
	James D. Laur, JD
	Vice President, Intellectual Property

 

ACKNOWLEDGED AND AGREED TO
As of the date first set forth above
ENVIRO THERAPEUTICS, INC.		Approved
/s/ Neil Bhowmick, Ph.D.		Technology Ventures
Neil Bhowmick, Ph.D.
CEO		PC

 

 

 

Exhibit 10.5

 

Exclusive License Agreement

 

This Exclusive License Agreement (“Agreement”) is entered into as of this 2^nd day of June 2021 (“Effective Date”) by and between Cedars-Sinai Medical Center, a California nonprofit public benefit corporation (“CSMC”), with offices at 8700 Beverly Boulevard, Los Angeles, California 90048-1865, and Enviro Therapeutics, Inc., (“Licensee”), with offices at 2355 Westwood Blvd., #139, Los Angeles, CA 90069.

 

RECITALS

 

A. CSMC owns and/or is entitled to grant license rights with respect to certain Patent Rights and Technical Information (as defined below) invented or developed in the course of the research programs at CSMC conducted under the direction of Neil Bhowmick and Subhash Haidar (hereinafter collectively referred to as the “Inventors”).

 

B. CSMC and Licensee entered into that certain Exclusive Option Agreement dated March 16, 2020 (“Option Agreement”), under which CSMC granted to Licensee an exclusive option to negotiate and obtain an exclusive license to the Patent Rights and Technical Information.

 

C. Licensee has exercised its option under the Option Agreement to negotiate and obtain an exclusive license to the Patent Rights and Technical Information, under which CSMC desires to have the Patent Rights and the Technical Information developed, used and commercialized in the Field of Use (as defined below) by Licensee, and Licensee desires to obtain an exclusive, worldwide license to conduct research in the Field of Use, and to develop, manufacture, use and sell Products (as defined below) in the Field of Use, using the Patent Rights and Technical Information in accordance with the terms of this Agreement. Other than the rights expressly granted by CSMC hereunder within the Field of Use, Licensee acknowledges that CSMC shall retain all other rights with respect to the Patent Rights and the Technical Information.

 

D. CSMC and Licensee intend that the execution, delivery and performance of this Agreement by each party, and the consummation of the transactions contemplated hereunder, shall not at any time threaten CSMC’s tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and Section 23701d of the California Revenue and Taxation Code, or cause CSMC to be in default under any of CSMC’s issued and outstanding tax-exempt bonds.

 

Now, Therefore, in consideration of the mutual covenants and premises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1. Definitions

 

1.1 “Affiliate” or “Affiliates” shall mean any corporation, person or entity, which controls, is controlled by, or is under common control with, a party to this Agreement without regard to stock or other equity ownership. For purposes hereof, the terms “control” and “controls” mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a corporation, person or entity, whether through the ownership of voting securities, by contract or otherwise.

 

 

1.2 “Confidential Information” shall mean any confidential or proprietary information furnished by one party (the “Disclosing Party”) to the other party (the “Receiving Party”) in connection with this Agreement, including, without limitation, all specifications, know-how, trade secrets, technical information, drawings, software, models, business information and patent applications pertaining to the Patent Rights and Technical Information, and as further provided in Section 10 hereof.

 

1.3 “FDA” shall mean the United States Food and Drug Administration, or any successor agency thereof.

 

1.4 “Field of Use” shall mean the treatment of cancer.

 

1.5 “Funding Agencies” shall mean any public or private granting agencies which have provided funding to CSMC or to any of the Inventors for the development of any of the Patent Rights or Technical Information prior to the Effective Date.

 

1.6 “Improvements” shall mean all improvements or enhancements to the Patent Rights that, after the Effective Date, are conceived and reduced to practice if patentable, or reduced to practice if not patentable, by at least one Inventor (other than by an Inventor that conceived or reduced to practice such Improvement in his or her role as a paid consultant or employee of Licensee).

 

1.7 “Licensee Developments” shall mean any and all processes, uses, designs, applications, methods and compositions-of-matter, indications, improvements, enhancements and modifications in the Field of Use directly based upon or directly created using the Patent Rights and/or Technical Information and which were discovered or developed by or on behalf of Licensee (exclusive of work performed by CSMC or the Inventors on behalf of CSMC) during the term of this Agreement. The Licensee Developments are all owned by Licensee.

 

1.8 “Net Sales” shall mean the gross amount invoiced by or on behalf of Licensee and Permitted Sublicensees to third parties for all sales of Products less (a) discounts actually allowed; (b) credits for claims, allowances, retroactive price reductions or returned goods; (c) prepaid freight; and (d) sales taxes or other governmental charges actually paid in connection with sales of Products (but excluding what are commonly known as income taxes and value-added taxes). Sales of Products by Licensee, or a Permitted Sublicensee of Licensee, to any Affiliate or Permitted Sublicensee which is a reseller thereof shall be excluded, and only the subsequent sale of such Products by Affiliates or Permitted Sublicensees of Licensee to unrelated parties shall be deemed Net Sales hereunder. If a Product is sold or provided as part of a system, package, or combination product or service that involve one or more products or services not covered by the definition of Product (each, a “Combination Product”), Net Sales shall be calculated by multiplying the Net Sales of such Combination Product, by the fraction A/B, where “A” is the price of the Product included in such Combination Product when sold separately from any other products or services not covered by the definition of Product and “B” is the price of the Combination Product. In the event that no market price is available for the Product included in such Combination Product when supplied or priced separately, CSMC and Licensee shall determine in good faith the fair market value thereof.

 

 

1.9 “Non-Royalty Sublicense Revenues” shall mean, but is not limited to, upfront fees, license maintenance fees, and milestone payments, or other payments, including the fair market value of any non-cash consideration, received by Licensee in consideration for any rights granted to Patent Rights under a sublicense agreement, and excludes any and all sales-based royalties paid to Licensee.

 

1.10 “Other Product” or “Other Products” shall mean any products and/or services in the Field of Use, other than a Patent Product, derived in any manner whatsoever from any of the Technical Information and/or Licensee Developments.

 

1.11 “Patent Rights” shall mean the patents and/or patent applications existing on the Effective Date which are described on Schedule A attached hereto, and all patents and/or patent applications (including provisional patent applications) existing as of the Effective Date in any other country corresponding to any of the foregoing, and all divisions, continuations, reissues, reexaminations, supplementary protection certificates and extensions thereof, whether domestic or foreign, all claims of continuations-in-part that are entitled to the benefit of the priority date of any of the foregoing, and any patent that issues thereon. The Patent Rights are all owned by CSMC.

 

1.12 “Patent Product” or “Patent Products” shall mean any products and/or services in the Field of Use that, except for the license granted hereunder, would infringe a Valid Claim.

 

1.13 “Product” or “Products” shall mean a Patent Product and/or an Other Product.

 

1.14 “Technical Information” shall mean, as of the Effective Date, the following information in the Field of Use which is described in the Patent Rights or otherwise provided to Licensee: know-how, trade secrets, unpublished patent applications, software, bioinformatics, unpatented technology, technical information, statistical information and analyses, biological materials, chemical reagents, preclinical and clinical information, in each case which has been conceived or reduced to practice prior to the Effective Date, in the conduct by CSMC of the Sensitization of Solid Tumor programs at CSMC under the direction of one or any of the Inventors. The Technical Information shall further include information in the Field of Use described in Schedule B hereto and which has been reduced to practice prior to the Effective Date in the conduct of the aforementioned research programs at CSMC under the direction of one or any of the Inventors. Technical Information is all owned by CSMC.

 

1.15 “Territory” shall mean worldwide.

 

1.16 “Valid Claim” shall mean a claim of an issued patent included within the Patent Rights and/or Licensee Developments, which claim has not (a) lapsed, been canceled or become abandoned, (b) been declared invalid or unenforceable by a non-appealable decision or judgment of a court or other appropriate body or authority of competent jurisdiction, or (c) been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise. The term Valid Claim shall also include the claims of a pending patent application within the Patent Rights and/or Licensee Developments for a period of seven (7) years from the actual filing date of that patent application.

 

 

2. License

 

2.1 Grant of Exclusive Rights. Subject to the terms of this Agreement, CSMC hereby grants to Licensee, and Licensee hereby accepts from CSMC, the exclusive license, with the right to grant sublicenses (subject to the terms of Section 2.2 hereof), under and to the Patent Rights and Technical Information during the term of this Agreement (as provided in Section 6 hereof) to conduct research in the Field of Use and to make, have made, use, import, offer for sale, sell and/or have sold Products in the Field of Use in the Territory. The foregoing grant of exclusivity is made expressly subject to the following:

 

(a) All applicable laws and regulations, including, without limitation, the requirements of federal law as pertains to the manufacture of products within the United States;

 

(b) All applicable rules of the Funding Agencies which have provided funding to CSMC or to any of its employees (including any of the Inventors) for the development of the Patent Rights and Technical Information; and

 

(c) The following non-exclusive rights to the Patent Rights and Technical Information, which are retained by CSMC within the Field of Use:

 

(i) the right to submit for publication the scientific findings from research conducted by or through CSMC or its investigators (including the Inventors) related to the Patent Rights and the Technical Information; and

 

(ii) the right (A) to use any tangible or intangible information contained in the Patent Rights or the Technical Information or any Improvements (so long as CSMC shall treat such information as Confidential Information and maintain its confidentiality in accordance with Section 10 hereof), for CSMC’s research, internal teaching and other educationally-related and non-commercial (except for charges to its own patients) clinical purposes, where clinical use does not involve a third party funding grant to commercialize such information, and (B) to obtain research funding for further study and development thereof from governmental and other nonprofit organizations (including grant applications).

 

(d) Notwithstanding any other provision hereof to the contrary, all rights to the Patent Rights, Technical Information and Improvements outside of the Field of Use are retained by CSMC. Furthermore, this Agreement confers no license or rights by implication, estoppel, or otherwise under any patent applications or patents of CSMC other than Patent Rights regardless of whether such patents are dominant or subordinate to Patent Rights.

 

 

2.2 Sublicensing. Licensee shall have the right to grant sublicenses or to assign any or all of the rights granted hereunder only to an entity which has been approved in writing by CSMC (each, “Permitted Sublicensee”). Any such Permitted Sublicensee shall be subject in all respects to the provisions contained in this Agreement and Licensee will remain primarily liable to CSMC for, and shall be responsible for monitoring and enforcing, performance of all of Licensee’s obligations hereunder by any such Permitted Sublicensee. Without limiting the generality of the foregoing, as an express condition of any such sublicense, any such Permitted Sublicensee shall be required to agree in writing to be bound by commercially reasonable reporting and record keeping, indemnification and inspection provisions, and the applicable provisions of this Agreement, including, without limitation, those pertaining to the use of CSMC’s name and marks, indemnification of CSMC and the use of CSMC’s Confidential Information. Permitted Sublicensees may not further sublicense without CSMC’s prior written consent, which consent shall not be unreasonably withheld. Licensee shall promptly forward to CSMC a copy of any and all fully executed sublicense agreements, any subsequent amendments, and all copies of Permitted Sublicensees’ profit sharing or royalty reports, in no event more than thirty (30) days following execution or receipt thereof, as applicable. Licensee shall also keep CSMC reasonably informed with respect to the progress of any relations entered into with any Permitted Sublicensees. If Licensee shall conduct one or more audits of its Permitted Sublicensees hereunder during the term hereof, Licensee shall provide copies of all audit reports to CSMC on a timely basis. The covenants pertaining to the use of CSMC’s name and marks, the indemnification of CSMC and the use of CSMC’s Confidential Information in any sublicense or assignment shall run for the benefit of CSMC, who shall be expressly stated as being a third-party beneficiary thereof with respect to the covenants set forth in this Agreement. Licensee understands and agrees that none of its permitted sublicenses hereunder shall reduce in any manner any of its obligations set forth in this Agreement.

 

(a) Royalty-Free Sublicenses. If, and only if, Licensee pays all royalties due CSMC from a Permitted Sublicensee’s Net Sales, Licensee may grant that Permitted Sublicensee a royalty-free or non-cash sublicense or cross-license.

 

2.3 Improvements. Subject to the rights and applicable rules of the Funding Agencies, Licensee shall have, for a period of sixty (60) days after receipt by Licensee of written notice from CSMC disclosing an Improvement, the exclusive first right to negotiate with CSMC to obtain one or more licenses to the Improvement in the Field of Use upon such terms and conditions as shall be agreed by the parties hereto, which terms and conditions shall include provisions for fair market value consideration for the grant of any such licenses. If Licensee declines or fails to pursue, or if the parties fail to conclude negotiations for a license to, such Improvement in the Field of Use during the sixty (60) day period specified above, then CSMC shall have the right to commence discussions with any other party concerning such Improvement. Subject to the provisions of this Section 2.3, Licensee acknowledges and agrees that CSMC expressly retains and reserves any and all right, title and interest in and to the Improvement, whether or not in the Field of Use and, accordingly, no license to any Improvement is granted to Licensee under this Agreement.

 

2.4 Licensee Developments. Licensee hereby grants, and shall require its Permitted Sublicensee(s) to grant to CSMC a nonexclusive, royalty-free, irrevocable, paid-up license, with the right to grant sublicenses to non-profit research institutions and governmental agencies, to practice and use Licensee Developments for non-commercial research purposes, which license shall include, without limitation, the rights to: (a) publish the scientific findings from research conducted by or through CSMC or on its behalf, (b) use any tangible or intangible information contained in the Licensee Developments (so long as CSMC shall treat such information as Confidential Information and maintain its confidentiality in accordance with Section 10 hereof), for CSMC’s internal teaching and other educationally-related and non-commercial (except for charges to its own patients) clinical purposes, where clinical use does not involve a third party funding grant to commercialize such information, and (c) obtain research funding from governmental and other nonprofit organizations (including grant applications).

 

 

2.5 Diligent Commercialization. Licensee acknowledges that it is important to CSMC, and a requirement of the United States Government under Title 35, Section 203 of the United States Code, that Licensee pursue the development, commercialization and marketing of Products and otherwise exercise commercially reasonable efforts to maximize the value of this Agreement to CSMC. Without limiting the foregoing, Licensee shall maintain a bona fide, funded, ongoing and active research, development, manufacturing, regulatory, marketing or sales program (all as commercially reasonable) to make Products commercially available to the public as soon as commercially practicable in the Territory. Should CSMC determine that Licensee fails to use commercially reasonable efforts to maximize the Patent Rights in any national political jurisdiction in the Territory at any time following the one (1) year anniversary of the Effective Date of this Agreement, CSMC shall provide Licensee with notice of such determination and give Licensee a period of ninety (90) days to provide written evidence satisfactory to CSMC that Licensee or its Permitted Sublicensee(s) has sales of Products in such jurisdiction in question or an effective, ongoing and active research, development, manufacturing, marketing or sales program, as appropriate, directed toward obtaining regulatory approval, and/or production and/or sales of Products in such jurisdiction in accordance with Licensee’s business, legal, medical and scientific judgment and Licensee’s normal practices and procedures for products having similar technical and commercial potential. Should Licensee fail to provide such written evidence satisfactory to CSMC within such ninety (90) day period, CSMC shall have the right, at CSMC’s sole and absolute discretion, to either: (i) terminate this Agreement with respect to the applicable national political jurisdiction within the Territory or (ii) require Licensee to negotiate in good faith a sublicense with a Permitted Sublicensee(s) in the applicable national jurisdiction to maximize the Patent Rights in such jurisdiction.

 

2.6 Milestones. As part of Licensee’s diligent commercialization efforts under Section 2.5, CSMC and Licensee have agreed on the Milestones set forth on Schedule C, with each such Milestone being deemed a separate and independent condition. Within sixty (60) days after each anniversary of the Effective Date, Licensee shall prepare and deliver to CSMC an annual written report (to be certified by an executive officer of Licensee) indicating its compliance with the Milestones. If Licensee believes that it is or will be unable to achieve such Milestones despite its diligent efforts, Licensee may request amendments or reasonable extensions to Schedule C in writing for CSMC’s consideration. Licensee agrees to provide any additional information reasonably required by CSMC to evaluate Licensee’s performance under this Agreement. If Licensee fails to meet any annual Milestone designated in Schedule C hereto, and has not obtained an extension or amendment to such Milestone(s), CSMC may, at its option and as its sole remedy for Licensee’s breach of this Section 2.6, upon written notice to Licensee, convert the exclusive license granted under Section 2.1 hereof to a non-exclusive license or to a co-exclusive license, or terminate the license.

 

2.7 Preference for United States Industry. To the extent that the Patent Rights and Technical Information have been developed using funding from the United States Government, Licensee agrees that any Products made, used or sold in the United States shall be manufactured substantially in the United States.

 

 

3. Representations And Warranties

 

3.1 Rights to Technology. Except for the rights, if any, of the Funding Agencies or the United States Government, CSMC represents and warrants to Licensee that, to the best of its actual, current knowledge (without investigation outside of CSMC as to such representations and warranties) (a) it has the right to grant the licenses in this Agreement, (b) it has not granted licenses to the Patent Rights or Technical Information to any other party that would restrict the rights granted hereunder except as stated herein and (c) there are no claims, judgments or settlements to be paid by CSMC with respect the Patent Rights or Technical Information or pending claims or litigation relating to the Patent Rights or Technical Information. Except for any potential or actual rights of Funding Agencies or the United States Government, CSMC is not aware that any additional rights or licenses are necessary for Licensee to exercise its licensed rights granted by CSMC under this Agreement.

 

3.2 Limited Warranty; Certain Damages.

 

(a) Limited Warranty. CSMC makes no representation or warranty other than those expressly specified in this Agreement. Licensee accepts the Patent Rights and the Technical Information on an “AS-IS” basis. CSMC MAKES NO OTHER WARRANTIES CONCERNING PATENT RIGHTS OR TECHNICAL INFORMATION COVERED BY THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO PATENT RIGHTS, TECHNICAL INFORMATION OR ANY PRODUCT. CSMC MAKES NO WARRANTY OR REPRESENTATION AS TO THE VALIDITY OR SCOPE OF PATENT RIGHTS, OR THAT ANY PRODUCT WILL BE FREE FROM AN INFRINGEMENT ON PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THAT NO THIRD PARTIES ARE IN ANY WAY INFRINGING PATENT RIGHTS COVERED BY THIS AGREEMENT. LICENSEE HEREBY AGREES THAT LICENSEE WILL NOT GIVE, AND SHALL NOT PERMIT ANY AFFILIATES OR SUBLICENSEES OR AFFILIATES THEREOF TO GIVE, ANY SUCH WARRANTY OR REPRESENTATION TO THIRD PARTIES ON BEHALF OF CSMC.

 

(b) Certain Damages. EXCEPT FOR THE BREACH OF THE CONFIDENTIALITY PROVISIONS IN SECTION 10 OR IN ACCORDANCE WITH THE OBLIGATION TO INDEMNIFY SET FORTH IN SECTION 8, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF PROFITS OR EXPECTED SAVINGS OR OTHER ECONOMIC LOSSES, OR FOR INJURY TO PERSONS OR PROPERTY) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ITS SUBJECT MATTER, REGARDLESS OF WHETHER SUCH PARTY KNOWS OR SHOULD KNOW OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING EXCLUSIONS AND LIMITATIONS SHALL APPLY TO ALL CLAIMS AND ACTIONS OF ANY KIND, WHETHER BASED ON CONTRACT, TORT (INCLUDING, BUT NOT LIMITED TO NEGLIGENCE), OR ANY OTHER GROUNDS.

 

 

3.3 Rights Retained by Funding Agencies. Licensee acknowledges that to the extent that the Patent Rights and Technical Information have been developed in part under one or more funding agreements (“Funding Agreements”) with one or more Funding Agencies, such Funding Agencies have certain statutory, non-exclusive rights relative thereto for use for government purposes as well as regulatory or statutory “march-in rights” (collectively, “Statutory Rights”). Licensee also acknowledges that to the extent that the Improvements may be developed in part under one or more Funding Agreements with one or more Funding Agencies, such Funding Agencies may have certain Statutory Rights relative thereto. This Agreement is explicitly made subject to such Statutory Rights and, to the extent of any conflict between any such Statutory Rights and this Agreement, such Statutory Rights shall prevail.

 

4. Consideration

 

In consideration of the execution and delivery by CSMC of this Agreement, Licensee agrees as follows:

 

4.1 License Fee.

 

(a) Upfront Fee. Licensee shall pay to CSMC a non-refundable license fee of $30,000, which shall be payable within thirty (30) days of the Effective Date.

 

(b) Patent Cost Reimbursement. Within thirty (30) days of the execution of this Agreement, Licensee shall reimburse CSMC for the costs, including attorneys’ fees and filing fees, actually incurred to date by CSMC in the prosecution of the Patent Rights (which have not already been reimbursed by Licensee under the Option Agreement), which are $22,808.50 as of May 18, 2021.

 

4.2 Royalties and Non-Royalty Revenue.

 

(a) Running Royalties for Products. Licensee agrees to pay and shall pay to CSMC the following non-refundable running royalties (each, a “Royalty”) in the amounts set forth below:

 

(i) a running royalty of four percent (4%) on Net Sales of Patent Products made, used, sold or otherwise distributed by Licensee or any Permitted Sublicensee hereunder (“Patent Product Royalty Rate”) and

 

(ii) a running royalty of one-half percent (0.5%) on Net Sales of Other Products made, used, sold or otherwise distributed by Licensee or any Permitted Sublicensee hereunder (“Other Product Royalty Rate”).

 

(b) Minimum Royalties. Beginning on the third (3^rd) anniversary of the Effective Date, Licensee shall pay CSMC a minimum royalty of $10,000 per year (“Minimum Royalty”). Each annual payment of the Minimum Royalty shall be credited against Royalties payable such that no Royalties shall be payable unless the Royalties for such annual period exceed $10,000’, provided, that excess amounts paid in respect of the Minimum Royalty may not be carried over to the following calendar year.

 

 

(c) Permitted Deductions. If Licensee is required to make any payment to a third party to obtain a license for the manufacture, use, sale or import of a Product or otherwise exploit the Patent Rights, Licensee shall be entitled to deduct up to fifty percent (50%) of such third party payments made in a particular calendar year against Royalties payable to CSMC for that year; provided, however, that in no event shall the Royalties payable to CSMC hereunder for any one-year period be reduced by operation of this section by more than fifty percent (50%); and provided, further, that such third party payments shall only be creditable against Royalties payable to CSMC for the calendar year in which the third party payment was actually made by Licensee.

 

(d) Highest Royalty Due. If a Product is covered by both the definition of Patent Product and Other Product, CSMC shall be entitled to the Patent Product Royalty Rate on the Product as defined in Section 4.2(a)(i), but shall not be entitled to also receive the Other Product Royalty Rate on the same Product under Section 4.2(a)(ii). To the extent a Product ceases being a Patent Product, but is still an Other Product, CSMC shall be entitled to receive a Royalty on such Product at the Other Product Royalty Rate, but only for such time as specified in Section 4.2(g).

 

(e) Licensee Challenge of Patent Rights. Should Licensee bring, directly or through a third party indirectly, an action challenging the validity, scope or enforceability of any Patent Rights, Licensee will first provide CSMC with at least ninety (90) days’ prior written notice that it intends so to do before filing such a challenge. Following the giving of such notice, Licensee will pay to CSMC the Royalties and Non-Royalty Sublicense Revenue due hereunder at the rate of two times the applicable rate during the pendency of such action. Should the outcome of such action determine that any claim of a patent challenged by Licensee is valid and/or infringed and/or enforceable, as applicable, Licensee will thereafter pay to CSMC the Royalties and Non-Royalty Sublicense Revenue due hereunder at the rate of three times the applicable rate for all Products sold that would infringe such claim and/or transactions that include a grant of rights to such claim. Such increased royalty reflects the increased value of the Patent Rights upheld in such action. In the event that a challenge to the Patent Rights brought by Licensee is partially or entirely successful, Licensee will have no right to recoup any Royalties or other amounts paid before or during the period of the challenge. Additionally, Licensee agrees to disburse any and all proceeds received from any sublicense of the applicable Patent Rights throughout the duration of any such challenge to CSMC, and agrees to reimburse CSMC for all costs actually incurred by CSMC in connection with the applicable legal proceedings. In the event that all or any portion of this Section 4.2(e) is invalid, illegal or unenforceable, then the parties will use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, gives effect to the intent of this Section 4.2(e).

 

(f) Arm’s-Length Transactions. On sales of Products which are made in other than an arms’-length transaction, the value of the Net Sales attributed under this Section 4.2 to such a transaction shall be that which would have been received in an arms’-length transaction, based on sales of like quality and quantity products on or about the time of such transaction.

 

(g) Duration of Royalty Obligations. The royalty obligations of Licensee as to each Product shall terminate on a country-by-country and product-by-product basis concurrently with the expiration of:

 

(i) For Patent Products, the last to expire of a Valid Claim that covers such Patent Product, including any term extensions thereof, and

 

 

(ii) For Other Products, the longer of twenty (20) years after the first bona fide commercial sale of such Other Product in a country or expiration of any market exclusivity period granted by a regulatory agency for such Other Product.

 

(h) Non-Royalty Revenues.

 

(i) Non-Royalty Sublicense Revenues. Any and all “Non-Royalty Sublicense Revenues” shall be reported and paid to CSMC by Licensee as set forth below within sixty (60) days of receipt by Licensee. Licensee shall pay to CSMC a percentage of these Non-Royalty Sublicense Revenues according to the following schedule:

 

Date of Receipt of Non-Royalty Sublicense Revenue		Percent of Non-Royalty Sublicense Revenues Payable to CSMC
Prior to receipt of FDA authorization of an Investigational New Drug (“IND”) application or equivalent regulatory agency authorization in another jurisdiction for a Product			35	%
After receipt of FDA authorization of an IND application for a Product or equivalent regulatory agency authorization in another jurisdiction, but prior to submission of a New Drug Application (“NDA”) or Biologics License Applications (BLA) to the FDA or equivalent regulatory agency in another jurisdiction			10	%
After submission of an NDA/BLA for a Product but prior to receipt of FDA approval of an NDA/BLA or equivalent regulatory agency approval in another jurisdiction for a Product			8	%
After receipt of FDA approval of an NDA/BLA or equivalent regulatory agency approval in another jurisdiction for a Product			5	%

 

Any non-cash consideration received by Licensee from Permitted Sublicensees shall be valued at its fair market value as of the date of receipt and such amount shall be paid in cash to CSMC in accordance with the schedule above. In the event that the Patent Rights are sublicensed in combination with one or more patented technologies that are not covered under this Agreement, Non-Royalty Sublicense Revenues for the purposes of this Section 4.2(g) shall be calculated on a pro-rata basis in a manner to be mutually agreed by CSMC and Licensee (which agreement may be a condition of approval under Section 2.2).

 

 

(ii) Product Development Milestones. Licensee agrees to pay and shall pay to CSMC the following non-creditable, non-refundable product development milestone payments within sixty (60) days of the first occurrence of the following milestones (or their equivalents):

 

Milestone Event		Milestone Payment
Successful completion of Phase I clinical trial for a Product		$	150,000
Successful completion of a Phase II clinical trial for a product and receipt of FDA or equivalent regulatory agency in another jurisdiction and approval for a Phase III clinical trial		$	500,000
Receipt of FDA approval of a New Drug Application (“NDA”) or Biologics License Applications (“BLA”) or equivalent foreign regulatory approval in a non-United States major commercial market		$	1,500,000
Cumulative Net Sales have exceeded $50,000,000		$	2,500,000
Cumulative Net Sales have exceeded $100,000,000		$	2,500,000

 

(i) Payment and Accounting.

 

(i) Reports. Each payment of Royalties shall be accompanied by a report in the form attached as Schedule D hereto, which sets forth in reasonable detail the number and each type of Product sold and the calculation of Net Sales applicable thereto, and such additional details as may be reasonably requested by CSMC for the determination of Royalties payable hereunder. Products shall be considered as being sold for the purpose of the calculation of Royalties under this Agreement when the Products have been invoiced. Each payment of Nonn-Royalty Sublicense Revenue shall be accompanied by a report in the form attached as Schedule D hereto setting forth in reasonable detail the basis for the calculation of such amounts, and such additional details as may be reasonably requested by CSMC for the determination of Non-Royalty Sublicense Revenue payable hereunder. All copies of reports under this Section shall be sent by electronic mail to CSTechTransfer@cshs.org. Except as otherwise provided herein, all amounts due hereunder shall be paid in United States dollars and shall be made without set off and free and clear of (and without any deduction or withholding for) any taxes, duties, levies, imposts or similar fees or charges. Royalties shall be payable by Licensee quarterly, within forty-five (45) days after the end of each calendar quarter, based upon revenues accrued during the immediately preceding calendar quarter. Licensee agrees to pay and shall pay to CSMC, or cause its Permitted Sublicensees to pay to CSMC, all Royalties resulting from the activities of its Permitted Sublicensees, within forty-five (45) days after the end of each calendar quarter.

 

(ii) Notice of Payment. Licensee shall provide prompt written notice to CSMC that it has paid the licensee fee required by Section 4.1 or any product development milestone payment required by Section 4.2(h)(ii) by electronic mail to CSTechTransfer@cshs.org.

 

 

(iii) Wire Transfer Instructions. All payments due hereunder shall be made by Licensee to CSMC in accordance with the following wire transfer instructions:

 

City National Bank

400 N. Roxbury Drive

Beverly Hills, CA 90210

ABA# 122 016 066

Account Number: 210-132260

Account Name: Cedars-Sinai Medical Center - Tech Transfer

Reference: Tech Transfer - Enviro Therapeutics, Inc.

 

(iv) Records and Audits. Licensee shall create and maintain complete and accurate records and documentation concerning all sales of Products by Licensee, its Affiliates and Permitted Sublicensees as well as transactions based upon which Non-Royalty Sublicense Revenue is due, in sufficient detail to enable the Royalties and Non-Royalty Sublicense Revenue, respectively, that is payable hereunder to be determined. Licensee shall retain such records and documentation for not less than seven (7) years from the date of their creation. During the term of this Agreement and for a period of three (3) years thereafter, CSMC and its representatives shall have the right to audit such records and documentation as shall pertain to the determination and payment of Royalties and Non-Royalty Sublicense Revenue. Such examiners shall have reasonable access during regular business hours to Licensee’s offices and the relevant records, files and books of account, and shall have the right to examine any other records reasonably necessary to determine the accuracy of the calculations provided by Licensee. The costs of any such audit shall be borne by CSMC, unless as a result of such inspection it is determined that the amounts payable by Licensee for any period are in error by greater than five percent (5%), in which case the costs of such audit shall be borne by Licensee. CSMC shall report the results of any such audit to Licensee within forty-five (45) days of completion. Thereafter, Licensee shall promptly pay to CSMC the amount of any underpayment discovered in such audit, or CSMC shall credit to Licensee against future Royalty payments the amount of any overpayment discovered in such audit, as the case may be. In addition, Licensee shall pay interest on any underpayment at the rate that is the lower of (i) two percent (2%) over the rate of interest announced by Bank of America in Los Angeles, California (or any successor in interest thereto or any commercially equivalent financial institution if no such successor exists) to be its “prime rate”, or (ii) the highest rate permitted by applicable law, from the date such amount was underpaid to the date payment is actually received.

 

(v) Currency Transfer Restrictions. If any restrictions on the transfer of currency exist in any country or other jurisdiction so as to prevent Licensee from making payments to CSMC, Licensee shall take all commercially reasonable steps to obtain a waiver of such restrictions or to otherwise enable Licensee to make such payments. If Licensee is unable to do so, Licensee shall make such payments to CSMC in a bank account or other depository designated by CSMC in such country or jurisdiction, which payments shall be in the local currency of such country or jurisdiction, unless payment in United States dollars is permitted. Any payment by Licensee to CSMC in currencies other than United States dollars shall be calculated using the appropriate foreign exchange rate for such currency quoted in the California edition of The Wall Street Journal for the close of business of the last banking day of the calendar quarter in which such payment is being made.

 

 

(vi) Late Charges. A service charge of two percent (2%) per month, not to exceed the maximum rate allowed by applicable law, shall be payable by Licensee on any portion of Licensee’s outstanding Royalty or Non-Royalty Sublicense Revenue balance or any other amount payable by Licensee hereunder (including, without limitation, reimbursement for Prosecution costs as set forth in Section 4.1 hereof) that is not paid to CSMC within thirty (30) days past the due date.

 

(vii) Taxes. Licensee shall pay, or cause to be paid, any and all taxes required to be paid or withheld on any sales, licenses or other transfers for value of Products or Patent Rights (other than taxes imposed on the income or revenues of CSMC)’, provided, however, that under no circumstances shall the amounts of such taxes be deducted from the total amount of payments otherwise due to CSMC hereunder. Upon CSMC’s request, Licensee shall secure and send to CSMC proof of any such taxes withheld and paid by Licensee, its Affiliates or Permitted Sublicensees.

 

(viii) No Escrow. Licensee shall pay all Royalties and Non-Royalty Sublicense Revenue directly to CSMC and shall not pay royalties into any escrow or other similar account, including in the event of a validity or non-infringement challenge to the Patent Rights.

 

5. Patent Rights

 

5.1 Prosecution. Commencing on the Effective Date, Licensee shall assume, in coordination with CSMC, full responsibility for the application, maintenance, reexamination, reissue, opposition and prosecution of any kind (collectively “Prosecution”) relating to the Patent Rights in the Territory, including, but not limited to, payment of all costs, fees and expenses related thereto. Subject to the approval of CSMC (which approval shall not be unreasonably withheld), Licensee shall have the right to select counsel with respect to the responsibility assumed by Licensee in this Section 5.1, and Licensee shall diligently pursue the Prosecution of the Patent Rights to the benefit of CSMC. For all purposes of the patent Prosecution, CSMC shall be the named “client” of such patent counsel. Each party shall provide the other with copies of any and all material or communications with the United States Patent and Trademark Office, or any foreign patent office, and CSMC shall be afforded the opportunity of prior review and comment on such action or paper.

 

(a) Foreign Filings. Should Licensee elect not to file for patent protection for the Patent Rights in a certain national jurisdiction in the Territory, Licensee shall notify CSMC of such election at least forty-five (45) days before a final due date which would result in the bar of patent protection for the Patent Rights in such national jurisdiction. In such event, CSMC may, at its sole option and expense, file for patent protection for the Patent Rights in the applicable national jurisdiction, and Licensee’s license under this Agreement with respect to such national jurisdiction shall terminate, allowing CSMC to freely dispose of its Patent Rights in the applicable national jurisdiction as it sees fit in its sole discretion.

 

 

5.2 Abandonment, Disclaimers, etc. Licensee shall obtain the prior written consent of CSMC (which consent shall not be unreasonably withheld), prior to abandoning, disclaiming, withdrawing, seeking reissue, seeking reexamination or allowing to lapse any patent or patent application within the Patent Rights. In the event that Licensee shall elect to abandon the Prosecution (including the payment of maintenance fees or annuities) of any patent or patent application included in the Patent Rights, Licensee shall notify CSMC of such election at least forty-five (45) days before a final due date which would result in abandonment or bar of patentability of the patent or patent application. In such event, CSMC may, at its sole option and expense, continue Prosecution of the patent application or patent. Licensee further agrees that it shall not file any continuation-in-part application relating to the Patent Rights unless the additional disclosure or material to be included in the continuation-in-part application is necessary or appropriate to support the patentability of a claim recited in a parent application on which the continuation-in-part application is based. Licensee shall not file any continuation-in-part application without CSMC’s prior written consent, which shall not be unreasonably withheld.

 

5.3 Expenses. Licensee shall pay all expenses resulting from its obligations in Section 5.1 hereof. CSMC shall exercise reasonable efforts to cause the Inventors (to the extent they are available and on CSMC’s staff as employees) to cooperate fully with Licensee with respect to the Prosecution of the Patent Rights, and CSMC shall be reimbursed for all reasonable out-of-pocket expenses as such expenses are incurred.

 

5.4 CREATE Act. Licensee shall not invoke the Cooperative Research and Technology Enhancement Act of 2004, as set forth under Title 35, Section 102(c) of the United States Code (the “CREATE Act”), with respect to the Patent Rights without first obtaining the prior written consent of CSMC.

 

6. Term And Termination

 

6.1 Term. Unless earlier terminated as provided in Section 6.2 hereof, the term of this Agreement shall commence on the Effective Date and shall expire, on a country-by-country and product-by-product basis, on the later of (i) the date upon which the last to expire Valid Claim shall expire, (ii) twenty (20) years after the first bona fide commercial sale of an Other Product in the country in question or (iii) the expiration of any market exclusivity period granted by a regulatory agency.

 

6.2 Termination. Except as provided by Section 6.3 hereof, and in addition to the termination provisions of Sections 2.5, 2.6 and 5.1(a), this Agreement shall terminate upon the earliest to occur of the following:

 

(a) Automatically if Licensee shall enter into a liquidating bankruptcy, be adjudged insolvent, liquidate, dissolve and/or if the business of Licensee shall be placed in the hands of a receiver, assignee, or trustee, whether by voluntary act of Licensee or otherwise; provided, however, that if any such action is involuntary, termination shall not take place unless the action is not reversed within thirty (30) days. Further, Licensee shall give CSMC at least forty- five (45) days’ prior written notice before Licensee initiates any bankruptcy proceeding, and CSMC shall have the right to terminate this Agreement immediately upon receipt of such notice;

 

(b) Automatically if the performance by either party to this Agreement of any term, covenant, condition or provision hereof (i) shalljeopardize (A) the licensure of CSMC, (B) CSMC’s participation in the Medicare, Medi-Cal or other reimbursement or payment programs, (C) the full accreditation of CSMC by the Joint Commission of Accreditation of Healthcare Organizations or any other state or nationally recognized accreditation organization, or (D) CSMC’s tax-exempt status; or (ii) is deemed illegal or unethical by any recognized governmental agency or body. Upon the occurrence of any of the items set forth in this subparagraph (b), CSMC shall provide written notice to Licensee setting forth the reason for such termination (which termination shall be effective immediately);

 

 

(c) Upon thirty (30) days’ written notice from CSMC if, within such thirty (30) day period (i) Licensee shall fail to pay fully any Royalty or Non-Royalty Sublicense Revenue payment required by Section 4.2 hereof, or (ii) Licensee shall fail to undertake commercially reasonable efforts to exploit the Patent Rights in the Field of Use in the Territory, regardless of Licensee’s satisfaction of the Milestones provided in Schedule C hereto;

 

(d) Upon sixty (60) days’ written notice from CSMC if, within such sixty (60) day period, Licensee shall fail to cure fully any breach or default of any material obligation under this Agreement as described in such written notice detailing the facts of such breach with reasonable specificity; provided, however, that Licensee may avoid such termination if, before the end of such 60-day period, such breach or default has been cured by Licensee to the reasonable satisfaction of CSMC;

 

(e) Upon ninety (90) days’ written notice from Licensee if, within such ninety (90) day period, CSMC shall fail to cure fully any breach or default of any material obligation under this Agreement as described in such written notice detailing the facts of such breach with reasonable specificity; provided, however, that CSMC may avoid such termination if, before the end of such 90-day period, such breach or default has been cured by CSMC to the reasonable satisfaction of Licensee; and

 

(f) Upon the mutual written agreement of the parties hereto (such termination to be effective as of the date mutually agreed upon in such written agreement).

 

6.3 Obligations Upon Termination. Upon any termination of this Agreement pursuant to Section 6.2 hereof, nothing herein shall be construed to release any party from any liability for any obligation incurred through the effective date of termination (e.g., confidentiality, reimbursement of patent expenses incurred prior to such date, etc.) or for any breach of this Agreement prior to the effective date of such termination. Licensee may, for a period of one (1) year after the effective date of such termination, sell all tangible Products customarily classified as “inventory” that it has on hand at the date of termination, subject to payment by Licensee to CSMC of the applicable Royalty and Non-Royalty Sublicense Revenue’, provided, however, that any such action by Licensee does not subject CSMC to any of the occurrences set forth in Section 6.2(b) hereof.

 

6.4 Effect of Termination. In the event of any termination of this Agreement pursuant to Section 6.2 hereof, where such termination has not been caused by any action or inaction on the part of any Permitted Sublicensee of Licensee or by any breach by such Permitted Sublicensee of its obligations under its sublicense from Licensee, such termination of this Agreement shall be without prejudice to the rights of each non-breaching Permitted Sublicensee of Licensee and each non-breaching Permitted Sublicensee shall be deemed to be a licensee of CSMC thereunder, and CSMC shall be entitled to all rights, but shall not be subject to any obligations (other than the grant of license and appurtenant obligations under this Agreement to the extent provided for in such sublicense) of Licensee thereunder. This Section 6.4, however, shall not be applicable if this Agreement has been terminated under Section 6.2(b) under circumstances where the application of this Section 6.4 would subject CSMC to any of the occurrences set forth in Section 6.2(b).

 

 

6.5 Right to Institute Legal Actions. Notwithstanding the provisions of Section 6.2 hereof, CSMC, on the one hand, and Licensee, on the other hand, may institute any other legal action or pursue any other remedy against the other party permitted by applicable law if the other party does not substantially cure any breach or default of any material obligation as provided herein.

 

6.6 Reversion of Rights. Notwithstanding anything to the contrary set forth herein (including, but not limited to, Section 5 hereof), full responsibility for Prosecution of the Patent Rights shall, at the option of CSMC (exercisable in its sole and absolute discretion), and at its sole expense from the date of reversion, revert to CSMC upon any termination of this Agreement.

 

6.7 Return of Data. In the event of any termination or expiration of this Agreement, Licensee shall promptly provide CSMC with copies of all data, information and materials obtained or generated by or on behalf of Licensee in the course of conducting research and developing Products using the Patent Rights and the Technical Information.

 

7. Infringement By Third Parties

 

7.1 Enforcement. Licensee shall have the first right and the obligation to enforce, at its sole expense, any Patent Rights to the extent licensed hereunder against infringement by third parties and shall notify CSMC in writing in advance of all such enforcement efforts. Upon Licensee’s undertaking to pay all expenditures reasonably incurred by CSMC, CSMC shall reasonably cooperate in any such enforcement and, as necessary, join as a party therein. Licensee shall reimburse CSMC for all expenses, including reasonable attorneys’ fees, incurred in connection with any such enforcement. In the event that Licensee does not file suit against or commence and conclude settlement negotiations with a substantial infringer of Patent Rights within ninety (90) days of receipt of a written demand from CSMC that Licensee bring suit, then the parties will consult with one another in an effort to determine whether a reasonably prudent licensee would institute litigation to enforce the patent in question in light of all relevant business and economic factors (including, but not limited to, the projected cost of such litigation, the likelihood of success on the merits, the probable amount of any damage award, the prospects for satisfaction of any judgment against the alleged infringer, the possibility of counterclaims against the parties hereto, the impact of any possible adverse outcome on Licensee and the effect any publicity might have on the parties’ respective reputations and goodwill). If, after such process, it is determined that a suit should be filed and Licensee does not file suit or commence settlement negotiations forthwith against the infringer, then CSMC shall have the right, at its own expense, to enforce any Patent Rights licensed hereunder on behalf of itself and Licensee. Any damages or other recovery from an infringement action undertaken by Licensee shall first be used to reimburse the parties, on apro rata pari passu basis, for the costs and expenses incurred in such action, and shall thereafter be allocated between the parties as follows: (i) fifty percent (50%) to CSMC and (ii) fifty percent (50%) to Licensee. If Licensee fails to prosecute any such action to completion, then any damages or other recovery net of the parties’ costs and expenses incurred in such infringement action shall be the sole property of CSMC.

 

 

7.2 Defense Of Patent Rights. In the event that any Patent Rights are the subject of a legal action seeking declaratory relief or of any reexamination, inter partes review, post grant review, opposition, or similar proceeding instituted by a third party, the parties agree to promptly consult with each other concerning the defense of such actions or proceedings. If the parties agree that such defense should be undertaken, then Licensee shall bear the expenses, including attorneys’ fees, associated with such defense and in any recoupment of expenses. If the parties disagree, then the party desiring to defend the action or proceeding may proceed with such defense and will bear its own expenses, and be entitled to all sums recovered.

 

8. Indemnification

 

8.1 Indemnification by Licensee. Subject to Section 8.2 hereof, Licensee shall hold harmless, defend and indemnify CSMC and each of its officers, directors, employees (including the Inventors), agents and sponsors of the research (except Licensee) (each, an “Indemnified Party”, and collectively, the “Indemnified Parties”) from and against any and all claims, damages, losses, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses and costs of investigation, whether or not suit is filed) suffered or incurred by any of the Indemnified Parties in any action, suit, litigation, arbitration or dispute of any kind (“Action”) arising or resulting from any negligence or willful acts or omissions on the part of Licensee, its Affiliates or Permitted Sublicensees in connection with (a) their use of the Patent Rights or Technical Information and/or (b) the exercise of their rights hereunder or under any sublicense, including, but not limited to (i) the preclinical development and clinical testing of Products, and (ii) the manufacture, sale, use, marketing, or other disposition of Products developed, manufactured, sold, marketed, used or otherwise disposed of under this Agreement. As part of its obligations hereunder, Licensee shall defend any Action brought against any of the Indemnified Parties with counsel of its own choosing and reasonably acceptable to CSMC, and neither CSMC nor any other Indemnified Party shall enter into any settlement of any such Action without first obtaining prior approval of Licensee. Licensee shall pay all costs, including attorney’s fees, incurred in enforcing this indemnification provision. Should CSMC or any other Indemnified Party not afford Licensee the right to defend any such Action, or should CSMC or any other Indemnified Party not obtain the approval of Licensee to any such settlement, Licensee shall have no obligation to indemnify CSMC or any other Indemnified Party hereunder. Should Licensee fail to provide a defense for the Indemnified Parties as required hereunder, then Licensee shall reimburse CSMC for its out-of-pocket expenses (including reasonable attorneys’ fees and expenses and costs of investigation) which are incurred as a result of any investigation, defense or settlement relating to the foregoing, which reimbursement shall be made to CSMC upon receipt by Licensee of invoices reflecting in reasonable detail such expenses incurred by CSMC. Licensee shall obtain and maintain insurance policies (including products liability and general liability policies at such time as is appropriate) which are reasonable and necessary to cover its activities and to comply with the indemnification obligations set forth above. Such insurance policies shall name CSMC as an additional insured party and shall provide a minimum of $3,000,000 in coverage per occurrence. Upon initiation of any human clinical studies of Products, Licensee shall have first increased its insurance coverage to a minimum of $10,000,000 in the aggregate. Licensee shall provide CSMC with prompt written notice of any material change in coverage under such policies. If the parties determine that evidence of Licensee’s insurance coverage is necessary and appropriate, within thirty (30) days of the Effective Date (subject to extension if reasonably required) and annually thereafter, Licensee shall provide CSMC with a certificate of insurance issued by the appropriate insurance company evidencing the insurance coverage required by this Section 8.1, together with copies of the endorsement which specifies CSMC as an additional insured and the declarations page for each such insurance policy. The certificate of insurance, endorsements and declarations pages (and any renewals or replacements thereof), if required, shall be sent to CSMC’s Technology Transfer Office by electronic mail at CSTechTransfer@cshs.org.

 

 

8.2 Notice of Claim. CSMC shall promptly notify Licensee in writing of any claim or Action or material threat thereof brought against any Indemnified Party in respect of which indemnification may be sought and, to the extent allowed by law, shall reasonably cooperate with Licensee in defending or settling any such claim or Action. No settlement of any claim, Action or threat thereof received by CSMC and for which CSMC intends to seek indemnification (for itself or on behalf of any other Indemnified Party) shall be made without the prior joint written approval of Licensee and CSMC.

 

9. Use Of Names

 

9.1 CSMC Names and Marks. Licensee shall not, unless as required by any law or governmental regulation, use the name of CSMC, and/or any of its trademarks, service marks, trade names or fictitious business names or the name of any CSMC officer, faculty member, employee, student or volunteer (collectively, “CSMC Names and Marks”) without express prior written consent of the Vice President for Public Relations and Marketing of CSMC. Further, prior to any reference by Licensee to CSMC Names and Marks in any manner, Licensee shall provide CSMC with a writing reflecting the proposed reference so that CSMC can review the reference within a reasonable period of time prior to the proposed use thereof by Licensee. This limitation includes, but is not limited to, use by Licensee in any regulatory filing, advertising, offering circular, prospectus, sales presentation, news release or trade publication. Subject to compliance by Licensee with the foregoing, which shall be deemed conditions precedent to any use of CSMC Names and Marks by Licensee, Licensee shall ensure that the CSMC Names and Marks are used as scientifically or academically appropriate in the “byline” of any article, abstract, manuscript or any other publication related to the subject matter hereof.

 

9.2 No Endorsements by CSMC. By entering into this Agreement, CSMC does not directly or indirectly endorse any product or service provided, or to be provided, by Licensee whether directly or indirectly related to this Agreement. Licensee shall not state or imply that this Agreement is an endorsement by CSMC.

 

 

10. Confidentiality

 

10.1 Non-Disclosure. The parties hereto shall keep the terms of this Agreement and all business and scientific discussions relating to the business of the parties strictly confidential. All patient information to which a party is given access by the other party shall be subject to the provisions of the Confidentiality of Medical Information Act (Cal. Civ. Code §§56, et seq.) and the Health Insurance Portability and Accountability Act of 1996, and all regulations promulgated thereunder. It may, from time to time, be necessary for the parties, in connection with performance under this Agreement, to disclose Confidential Information (including know-how) to each other. The Receiving Party (as defined in Section 1.2 hereof) shall keep in strictest confidence the Confidential Information of the Disclosing Party (as defined in Section 1.2 hereof), using the standard of care it normally uses for information of like character, and shall not disclose the Confidential Information to any third party or use it except as expressly authorized by the prior written consent of the Disclosing Party or as otherwise permitted by this Agreement; provided, however, that Licensee may disclose the Confidential Information received from CSMC to its Affiliates and Permitted Sublicensees as shall be reasonably necessary to carry out the intent of this Agreement or any sublicense granted by Licensee as contemplated by this Agreement if, but only if, such Affiliates and/or Permitted Sublicensees each execute a confidentiality agreement containing confidentiality provisions no less restrictive than those confidentiality provisions contained in this Section 10. The Receiving Party’s obligation hereunder shall not apply to Confidential Information that the Receiving Party can show:

 

(a) Is or later becomes part of the public domain through no fault or neglect of the Receiving Party;

 

(b) Is received in good faith from a third party having no obligations of confidentiality to the Disclosing Party, provided that the Receiving Party complies with any restrictions imposed by the third party;

 

(c) Is independently developed by the Receiving Party without use of the Disclosing Party’s Confidential Information; or

 

(d) Is required by law or regulation to be disclosed (including, without limitation, in connection with FDA filings, filings with another government agency or as required under the California Public Records Act),.provided that the Receiving Party uses reasonable efforts to restrict disclosure and to obtain confidential treatment.

 

10.2 Limits on Permitted Disclosures. Each party agrees that any disclosure or distribution of the other party’s Confidential Information within its own organization shall be made only as is reasonably necessary to carry out the intent of this Agreement. The parties further agree that all of their respective officers, employees, agents, representatives or approved sublicensees to whom any Confidential Information is disclosed or distributed shall have agreed to maintain its confidentiality. In such event, the Receiving Party shall identify with reasonable particularity, upon request by the Disclosing Party, each person within the Receiving Party’s organization to whom the Receiving Party has disclosed or distributed Confidential Information.

 

10.3 Legally Required Disclosures. If a subpoena or other legal process concerning Confidential Information is served upon any party hereto pertaining to the subject matter hereof, the party served shall notify the other party immediately, the other party shall cooperate with the party served, at the other party’s expense, in any effort to contest the validity of such subpoena or other legal process. This Section 10.3 shall not be construed in any way to limit any party’s ability to satisfy any disclosure of its relationship with the other party required by any governmental authority.

 

10.4 Patent Rights as Confidential Information. The Patent Rights are understood by Licensee to be the Confidential Information of CSMC to the extent “unpublished” as such term is construed under the United States Patent Laws. As such, Licensee’s confidentiality obligations hereunder automatically extend to any and all Technical Information and to any and all patent applications of CSMC relating to any Patent Rights, Technical Information and Improvements and to any and all communications with the United States Patent Office, and any foreign patent office relating to any Patent Rights, Technical Information or Improvements.

 

 

10.5 Return of Confidential Information. In the event of any termination of this Agreement, the Receiving Party shall promptly return all Confidential Information and any copies made thereof previously made available to the Receiving Party by the Disclosing Party.

 

10.6 Remedies. Both parties acknowledge and agree that it would be difficult to measure damages for breach by either party of the covenants set forth in this Section 10, and that injury from any such breach would be incalculable, and that money damages would therefore be an inadequate remedy for any such breach. Accordingly, either party shall be entitled, in addition to all other remedies available hereunder or under law or equity, to injunctive or such other equitable relief as a court may deem appropriate to restrain or remedy any breach of such covenants.

 

11. Information Exchange

 

In addition to the Patent Rights and Technical Information, the parties shall cooperate to exchange such non-confidential information as may be appropriate and necessary to facilitate Licensee’s development and commercialization of Products incorporating any Patent Rights or Technical Information.

 

12. Patent Marking

 

Licensee shall actually or virtually mark all Patent Products made, sold or otherwise disposed of by or on behalf of it or any of its Permitted Sublicensees as set forth under Title 35, Section 287(a) of the United States Code and shall respond to any request or disclosure under Title 35, Section 287(b)(4)(B) of the United States Code by only notifying CSMC of the request for disclosure.

 

13. Miscellaneous

 

13.1 Notices. Any notice, request, instruction or other document required by this Agreement shall be in writing and shall be deemed to have been given (a) if mailed with the United States Postal Service by prepaid, first class, certified mail, return receipt requested, at the time of receipt by the intended recipient, (b) if sent by Federal Express or other overnight carrier, signature of delivery required, at the time of receipt by the intended recipient, or (c) if sent by facsimile transmission, when so sent and when receipt has been acknowledged by appropriate telephone or facsimile receipt, addressed as follows:

 

In the case of CSMC to:

 

Cedars-Sinai Medical Center

8700 Beverly Boulevard

Los Angeles, California 90048-1865

Attention: Executive Vice President for Finance & CFO

with a copy to Vice President, Intellectual Property

 

or in the case of Licensee to:

 

Enviro Therapeutics, Inc.

2355 Westwood Blvd., #139

Los Angeles, CA 90069

Attention:

 

or to such other address or to such other person(s) as may be given from time to time under the terms of this Section 13.1.

 

 

13.2 Compliance with Laws. Each party shall comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this Agreement.

 

13.3 Governing Law. For any dispute between the parties to this Agreement which arises from or relates to this Agreement, the Agreement shall be construed and enforced in accordance with the laws of the United States of America and of the State of California, irrespective of choice of laws provisions. The parties agree that Los Angeles County, California shall be the situs of any legal proceeding arising out of or relating to this Agreement. Each party hereby waives any right it may have to assert the doctrine of forum non conveniens or similar doctrine or to object to venue with respect to any proceeding brought in accordance with this Section, and stipulates that the state and federal courts located in Los Angeles, California shall have in personam jurisdiction and venue over each of them for the purpose of litigating any dispute, controversy, or proceeding arising out of or related to this Agreement. Each party hereby authorizes and accepts service of process sufficient for personal jurisdiction in any action against it as contemplated by this Section by registered or certified mail, return receipt requested, postage prepaid, to its address for the giving of notices as set forth in this Agreement.

 

13.4 Waiver. Failure of any party to enforce a right under this Agreement shall not act as a waiver of that right or the ability to assert that right relative to the particular situation involved.

 

13.5 Enforceability. If any provision of this Agreement shall be found by a court of competent jurisdiction to be void, invalid or unenforceable, the same shall be reformed to comply with applicable law or stricken if not so conformable, so as not to affect the validity or enforceability of the remainder of this Agreement.

 

13.6 Modification. No change, modification, or addition or amendment to this Agreement, or waiver of any term or condition of this Agreement, is valid or enforceable unless in writing and signed and dated by the authorized officers of the parties to this Agreement.

 

13.7 Entire Agreement. This Agreement and the Schedules hereto (which are incorporated herein by this reference as if fully set forth herein) constitute the entire agreement between the parties with respect to the subject matter hereof and thereof, and replace and supersede as of the date hereof and thereof any and all prior agreements and understandings, whether oral or written, between the parties with respect to the subject matter of such agreements.

 

 

13.8 Construction. This Agreement has been prepared, examined, negotiated and revised by each party and their respective attorneys, and no implication shall be drawn and no provision shall be construed against any party to this Agreement by virtue of the purported identity of the drafter of this Agreement or any portion thereof.

 

13.9 Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall constitute one and the same instrument. This Agreement may be executed by facsimile or in .pdf format.

 

13.10 Attorneys’ Fees. In the event of any action at law or in equity between the parties hereto to enforce any of the provisions hereof, the unsuccessful party to such litigation shall pay to the successful party all reasonable costs and expenses, including reasonable attorneys’ fees, incurred therein by such successful party; and if such successful party shall recover a judgment in any such action or proceeding, such reasonable costs, expenses and attorneys’ fees may be included in and as part of such judgment.

 

13.11 Assignment; Successors.

 

(a) Subject to Section 13.11(b), Licensee may assign this Agreement as part of a sale, regardless of whether such a sale occurs through an asset sale, stock sale, merger or other combination, or any other transfer of Licensee’s entire business, or that part of Licensee’s business that exercises all rights granted under this Agreement. Any other attempt to assign this Agreement by Licensee is null and void. In the event of a bankruptcy, assignment is permitted only to a party that can provide adequate assurance of future performance, including diligent development and sales, of Products.

 

(b) Prior to any assignment, the following conditions must be met: (i) Licensee must give CSMC thirty (30) days prior written notice of the assignment, including the new assignee’s contact information, (ii) the new assignee must agree in writing to CSMC to be bound by this Agreement, and (iii) CSMC must have received a $25,000.00 assignment fee.

 

(c) Subject to the limitations on assignment herein, this Agreement shall be binding upon and inure to the benefit of any successors in interest and assigns of CSMC and Licensee. CSMC shall have the right to assign its rights hereunder as part of any reorganization or bond financing.

 

13.12 Further Assurances. At any time and from time to time after the Effective Date, each party shall do, execute, acknowledge and deliver, and cause to be done, executed, acknowledged or delivered, all such further acts, transfers, conveyances, assignments or assurances as may be reasonably required to consummate the transactions contemplated by this Agreement.

 

13.13 Survival. The following sections shall survive any expiration or earlier termination of this Agreement: 4.2(e), 6.3, 8, 9, 10, 12 and 13.

 

[signature page follows]

 

 

In Witness Whereof, the parties have caused their duly authorized representatives to execute this Agreement as of the date first above written.

 

	“LICENSEE”:
	Enviro Therapeutics, Inc., a CORPORATION
	By:	/s/ Neil Bhowmick
	Name	Neil Bhowmick
	Title:	CEO
	Date:	June 2. 2021
	“CSMC”:
	Cedars-Sinai Medical Center, a California nonprofit public benefit CORPORATION
	By:	/s/ Edward M. Prunchunas
		Edward M. Prunchunas
		Executive Vice President for Finance and Treasurer
	Date:	June 3, 2021
	By:	/s/ James D. Laur, JD
		James D. Laur, JD
		Vice President, Intellectual Property
	Date:	June 3, 2022

 

 

Schedule A

 

Patent Rights

 

1.

Compositions and Methods for Treating Diseases and Conditions by Depletion of Mitochondrial or Genomic DNA from Circulation and for Detection of Mitochondrial or Genomic DNA

 

Inventor(s):		Bhowmick NA, Haldar, S., Borah, S.
Application No.:		PCT/US2020/062330
Filing Date:		Nov 25, 2020
Docket No.:		065472-000793WO00
CSMC Tech ID:		bho001234

 

 

Schedule B

 

Technical Information

 

All lab notes, methods, protocols, SOPs, and technical know-how developed by inventors, including:

 

Haidar et al (2019). Cancer epithelia-derived mitochondrial DNA is a targetable initiator of a paracrine signaling loop that confers taxane resistance. Submitted.

 

 

Schedule C

 

Milestones

 

1. Completion of preclinical studies within 2 year of the Effective Date

2. Completion of toxicology studies within 2.5 years of the Effective Date

3. Obtaining IND within 3 years of the Effective Date

4. Beginning Phase I trial within 4 years of the Effective Date

5. Submission of NDA/BLA to FDA or equivalent regulatory agency in another jurisdiction within 7 years of the Effective Date

 

 

Schedule D

 

Royalty Reporting Form

 

Licensee name:

Reporting period:

Date of report:

Date of first commercial sale:

 

Royalty Report

 

Product (list products by name)

No. units sold

Invoiced price per unit

Gross sales

Allowable deductions (attached itemized detail)

Country of sale/foreign currency/ conversion rate

Net sales

Product name

Product name

Product name

Total

 

Total net sales		$
Royalty rate
Royalty due		$

 

Total royalty due: $_________________________________

 

Non-Royalty Sublicense Revenue Report

 

Total Non-Royalty Sublicense Revenue received		$
Date received
Applicable percentage payable to CSMC
Total Non-Royalty Sublicense Revenue payable to CSMC		$

 

Report prepared by:

Title:

Date:

 

Please send electronic copy of report to CSTechTransfer@cshs.org.

 

 

Exhibit 10.6

 

Exclusive License Agreement

 

This Exclusive License Agreement (“Agreement”) is entered into as of this 2nd day of June, 2021 (“Effective Date”) by and between Cedars-Sinai Medical Center, a California nonprofit public benefit corporation (“CSMC”), with offices at 8700 Beverly Boulevard, Los Angeles, California 90048-1865, and Enviro Therapeutics, Inc., (“Licensee”), with offices at 2355 Westwood Blvd., #139, Los Angeles, CA 90069.

 

RECITALS

 

A. CSMC owns and/or is entitled to grant license rights with respect to certain Patent Rights and Technical Information (as defined below) invented or developed in the course of the Sensitization of Solid Tumor programs at CSMC conducted under the direction of Neil Bhowmick, Veronica Placencio-Hickok, Bethany Smith, and Anisha Madhav (hereinafter collectively referred to as the “Inventors”).

 

B. CSMC and Licensee entered into that certain Exclusive Option Agreement dated March 16, 2020 (“Option Agreement”), under which CSMC granted to Licensee an exclusive option to negotiate and obtain an exclusive license to the Patent Rights and Technical Information.

 

C. Licensee has exercised its option under the Option Agreement to negotiate and obtain an exclusive license to the Patent Rights and Technical Information, under which CSMC desires to have the Patent Rights and the Technical Information developed, used and commercialized in the Field of Use (as defined below) by Licensee, and Licensee desires to obtain an exclusive, worldwide license to conduct research in the Field of Use, and to develop, manufacture, use and sell Products (as defined below) in the Field of Use, using the Patent Rights and Technical Information in accordance with the terms of this Agreement. Other than the rights expressly granted by CSMC hereunder within the Field of Use, Licensee acknowledges that CSMC shall retain all other rights with respect to the Patent Rights and the Technical Information.

 

D. CSMC and Licensee intend that the execution, delivery and performance of this Agreement by each party, and the consummation of the transactions contemplated hereunder, shall not at any time threaten CSMC’s tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and Section 23701d of the California Revenue and Taxation Code, or cause CSMC to be in default under any of CSMC’s issued and outstanding tax-exempt bonds.

 

Now, Therefore, in consideration of the mutual covenants and premises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1. Definitions

 

1.1 “Affiliate” or “Affiliates” shall mean any corporation, person or entity, which controls, is controlled by, or is under common control with, a party to this Agreement without regard to stock or other equity ownership. For purposes hereof, the terms “control” and “controls” mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a corporation, person or entity, whether through the ownership of voting securities, by contract or otherwise.

 

 

1.2 “Confidential Information” shall mean any confidential or proprietary information furnished by one party (the “Disclosing Party”) to the other party (the “Receiving Party”) in connection with this Agreement, including, without limitation, all specifications, know-how, trade secrets, technical information, drawings, software, models, business information and patent applications pertaining to the Patent Rights and Technical Information, and as further provided in Section 10 hereof.

 

1.3 “FDA” shall mean the United States Food and Drug Administration, or any successor agency thereof.

 

1.4 “Field of Use” shall mean the treatment of cancer.

 

1.5 “Funding Agencies” shall mean any public or private granting agencies which have provided funding to CSMC or to any of the Inventors for the development of any of the Patent Rights or Technical Information prior to the Effective Date.

 

1.6 “Improvements” shall mean all improvements or enhancements to the Patent Rights that, after the Effective Date, are conceived and reduced to practice if patentable, or reduced to practice if not patentable, by at least one Inventor (other than by an Inventor that conceived or reduced to practice such Improvement in his or her role as a paid consultant or employee of Licensee).

 

1.7 “Licensee Developments” shall mean any and all processes, uses, designs, applications, methods and compositions-of-matter, indications, improvements, enhancements and modifications in the Field of Use directly based upon or directly created using the Patent Rights and/or Technical Information and which were discovered or developed by or on behalf of Licensee (exclusive of work performed by CSMC or the Inventors on behalf of CSMC) during the term of this Agreement. The Licensee Developments are all owned by Licensee.

 

1.8 “Net Sales” shall mean the gross amount invoiced by or on behalf of Licensee and Permitted Sublicensees to third parties for all sales of Products less (a) discounts actually allowed; (b) credits for claims, allowances, retroactive price reductions or returned goods; (c) prepaid freight; and (d) sales taxes or other governmental charges actually paid in connection with sales of Products (but excluding what are commonly known as income taxes and value-added taxes). Sales of Products by Licensee, or a Permitted Sublicensee of Licensee, to any Affiliate or Permitted Sublicensee which is a reseller thereof shall be excluded, and only the subsequent sale of such Products by Affiliates or Permitted Sublicensees of Licensee to unrelated parties shall be deemed Net Sales hereunder. If a Product is sold or provided as part of a system, package, or combination product or service that involve one or more products or services not covered by the definition of Product (each, a “Combination Product”), Net Sales shall be calculated by multiplying the Net Sales of such Combination Product, by the fraction A/B, where “A” is the price of the Product included in such Combination Product when sold separately from any other products or services not covered by the definition of Product and “B” is the price of the Combination Product. In the event that no market price is available for the Product included in such Combination Product when supplied or priced separately, CSMC and Licensee shall determine in good faith the fair market value thereof.

 

 

1.9 “Non-Royalty Sublicense Revenues” shall mean, but is not limited to, upfront fees, license maintenance fees, and milestone payments, or other payments, including the fair market value of any non-cash consideration, received by Licensee in consideration for any rights granted to Patent Rights under a sublicense agreement, and excludes any and all sales-based royalties paid to Licensee.

 

1.10 “Other Product” or “Other Products” shall mean any products and/or services in the Field of Use, other than a Patent Product, derived in any manner whatsoever from any of the Technical Information and/or Licensee Developments.

 

1.11 “Patent Rights” shall mean the patents and/or patent applications existing on the Effective Date which are described on Schedule A attached hereto, and all patents and/or patent applications (including provisional patent applications) existing as of the Effective Date in any other country corresponding to any of the foregoing, and all divisions, continuations, reissues, reexaminations, supplementary protection certificates and extensions thereof, whether domestic or foreign, all claims of continuations-in-part that are entitled to the benefit of the priority date of any of the foregoing, and any patent that issues thereon. The Patent Rights are all owned by CSMC.

 

1.12 “Patent Product” or “Patent Products” shall mean any products and/or services in the Field of Use that, except for the license granted hereunder, would infringe a Valid Claim.

 

1.13 “Product” or “Products” shall mean a Patent Product and/or an Other Product.

 

1.14 “Technical Information” shall mean, as of the Effective Date, the following information in the Field of Use which is described in the Patent Rights or otherwise provided to Licensee: know-how, trade secrets, unpublished patent applications, software, bioinformatics, unpatented technology, technical information, statistical information and analyses, biological materials, chemical reagents, preclinical and clinical information, in each case which has been conceived or reduced to practice prior to the Effective Date, in the conduct by CSMC of the Sensitization of Solid Tumor programs at CSMC under the direction of one or any of the Inventors. The Technical Information shall further include information in the Field of Use described in Schedule B hereto and which has been reduced to practice prior to the Effective Date in the conduct of the aforementioned research programs at CSMC under the direction of one or any of the Inventors. Technical Information is all owned by CSMC.

 

1.15 “Territory” shall mean worldwide.

 

1.16 “Valid Claim” shall mean a claim of an issued patent included within the Patent Rights and/or Licensee Developments, which claim has not (a) lapsed, been canceled or become abandoned, (b) been declared invalid or unenforceable by a non-appealable decision or judgment of a court or other appropriate body or authority of competent jurisdiction, or (c) been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise. The term Valid Claim shall also include the claims of a pending patent application within the Patent Rights and/or Licensee Developments for a period of seven (7) years from the actual filing date of that patent application.

 

 

2. License

 

2.1 Grant of Exclusive Rights. Subject to the terms of this Agreement, CSMC hereby grants to Licensee, and Licensee hereby accepts from CSMC, the exclusive license, with the right to grant sublicenses (subject to the terms of Section 2.2 hereof), under and to the Patent Rights and Technical Information during the term of this Agreement (as provided in Section 6 hereof) to conduct research in the Field of Use and to make, have made, use, import, offer for sale, sell and/or have sold Products in the Field of Use in the Territory. The foregoing grant of exclusivity is made expressly subject to the following:

 

(a) All applicable laws and regulations, including, without limitation, the requirements of federal law as pertains to the manufacture of products within the United States;

 

(b) All applicable rules of the Funding Agencies which have provided funding to CSMC or to any of its employees (including any of the Inventors) for the development of the Patent Rights and Technical Information; and

 

(c) The following non-exclusive rights to the Patent Rights and Technical Information, which are retained by CSMC within the Field of Use:

 

(i) the right to submit for publication the scientific findings from research conducted by or through CSMC or its investigators (including the Inventors) related to the Patent Rights and the Technical Information; and

 

(ii) the right (A) to use any tangible or intangible information contained in the Patent Rights or the Technical Information or any Improvements (so long as CSMC shall treat such information as Confidential Information and maintain its confidentiality in accordance with Section 10 hereof), for CSMC’s research, internal teaching and other educationally-related and non-commercial (except for charges to its own patients) clinical purposes, where clinical use does not involve a third party funding grant to commercialize such information, and (B) to obtain research funding for further study and development thereof from governmental and other nonprofit organizations (including grant applications).

 

(d) Notwithstanding any other provision hereof to the contrary, all rights to the Patent Rights, Technical Information and Improvements outside of the Field of Use are retained by CSMC. Furthermore, this Agreement confers no license or rights by implication, estoppel, or otherwise under any patent applications or patents of CSMC other than Patent Rights regardless of whether such patents are dominant or subordinate to Patent Rights.

 

 

2.2 Sublicensing. Licensee shall have the right to grant sublicenses or to assign any or all of the rights granted hereunder only to an entity which has been approved in writing by CSMC (each, “Permitted Sublicensee”). Any such Permitted Sublicensee shall be subject in all respects to the provisions contained in this Agreement and Licensee will remain primarily liable to CSMC for, and shall be responsible for monitoring and enforcing, performance of all of Licensee’s obligations hereunder by any such Permitted Sublicensee. Without limiting the generality of the foregoing, as an express condition of any such sublicense, any such Permitted Sublicensee shall be required to agree in writing to be bound by commercially reasonable reporting and record keeping, indemnification and inspection provisions, and the applicable provisions of this Agreement, including, without limitation, those pertaining to the use of CSMC’s name and marks, indemnification of CSMC and the use of CSMC’s Confidential Information. Permitted Sublicensees may not further sublicense without CSMC’s prior written consent, which consent shall not be unreasonably withheld. Licensee shall promptly forward to CSMC a copy of any and all fully executed sublicense agreements, any subsequent amendments, and all copies of Permitted Sublicensees’ profit sharing or royalty reports, in no event more than thirty (30) days following execution or receipt thereof, as applicable. Licensee shall also keep CSMC reasonably informed with respect to the progress of any relations entered into with any Permitted Sublicensees. If Licensee shall conduct one or more audits of its Permitted Sublicensees hereunder during the term hereof, Licensee shall provide copies of all audit reports to CSMC on a timely basis. The covenants pertaining to the use of CSMC’s name and marks, the indemnification of CSMC and the use of CSMC’s Confidential Information in any sublicense or assignment shall run for the benefit of CSMC, who shall be expressly stated as being a third-party beneficiary thereof with respect to the covenants set forth in this Agreement. Licensee understands and agrees that none of its permitted sublicenses hereunder shall reduce in any manner any of its obligations set forth in this Agreement.

 

(a) Royalty-Free Sublicenses. If, and only if, Licensee pays all royalties due CSMC from a Permitted Sublicensee’s Net Sales, Licensee may grant that Permitted Sublicensee a royalty-free or non-cash sublicense or cross-license.

 

2.3 Improvements. Subject to the rights and applicable rules of the Funding Agencies, Licensee shall have, for a period of sixty (60) days after receipt by Licensee of written notice from CSMC disclosing an Improvement, the exclusive first right to negotiate with CSMC to obtain one or more licenses to the Improvement in the Field of Use upon such terms and conditions as shall be agreed by the parties hereto, which terms and conditions shall include provisions for fair market value consideration for the grant of any such licenses. If Licensee declines or fails to pursue, or if the parties fail to conclude negotiations for a license to, such Improvement in the Field of Use during the sixty (60) day period specified above, then CSMC shall have the right to commence discussions with any other party concerning such Improvement. Subject to the provisions of this Section 2.3, Licensee acknowledges and agrees that CSMC expressly retains and reserves any and all right, title and interest in and to the Improvement, whether or not in the Field of Use and, accordingly, no license to any Improvement is granted to Licensee under this Agreement.

 

2.4 Licensee Developments. Licensee hereby grants, and shall require its Permitted Sublicensee(s) to grant to CSMC a nonexclusive, royalty-free, irrevocable, paid-up license, with the right to grant sublicenses to non-profit research institutions and governmental agencies, to practice and use Licensee Developments for non-commercial research purposes, which license shall include, without limitation, the rights to: (a) publish the scientific findings from research conducted by or through CSMC or on its behalf, (b) use any tangible or intangible information contained in the Licensee Developments (so long as CSMC shall treat such information as Confidential Information and maintain its confidentiality in accordance with Section 10 hereof), for CSMC’s internal teaching and other educationally-related and non-commercial (except for charges to its own patients) clinical purposes, where clinical use does not involve a third party funding grant to commercialize such information, and (c) obtain research funding from governmental and other nonprofit organizations (including grant applications).

 

 

2.5 Diligent Commercialization. Licensee acknowledges that it is important to CSMC, and a requirement of the United States Government under Title 35, Section 203 of the United States Code, that Licensee pursue the development, commercialization and marketing of Products and otherwise exercise commercially reasonable efforts to maximize the value of this Agreement to CSMC. Without limiting the foregoing, Licensee shall maintain a bona fide, funded, ongoing and active research, development, manufacturing, regulatory, marketing or sales program (all as commercially reasonable) to make Products commercially available to the public as soon as commercially practicable in the Territory. Should CSMC determine that Licensee fails to use commercially reasonable efforts to maximize the Patent Rights in any national political jurisdiction in the Territory at any time following the one (1) year anniversary of the Effective Date of this Agreement, CSMC shall provide Licensee with notice of such determination and give Licensee a period of ninety (90) days to provide written evidence satisfactory to CSMC that Licensee or its Permitted Sublicensee(s) has sales of Products in such jurisdiction in question or an effective, ongoing and active research, development, manufacturing, marketing or sales program, as appropriate, directed toward obtaining regulatory approval, and/or production and/or sales of Products in such jurisdiction in accordance with Licensee’s business, legal, medical and scientific judgment and Licensee’s normal practices and procedures for products having similar technical and commercial potential. Should Licensee fail to provide such written evidence satisfactory to CSMC within such ninety (90) day period, CSMC shall have the right, at CSMC’s sole and absolute discretion, to either: (i) terminate this Agreement with respect to the applicable national political jurisdiction within the Territory or (ii) require Licensee to negotiate in good faith a sublicense with a Permitted Sublicensee(s) in the applicable national jurisdiction to maximize the Patent Rights in such jurisdiction.

 

2.6 Milestones. As part of Licensee’s diligent commercialization efforts under Section 2.5, CSMC and Licensee have agreed on the Milestones set forth on Schedule C, with each such Milestone being deemed a separate and independent condition. Within sixty (60) days after each anniversary of the Effective Date, Licensee shall prepare and deliver to CSMC an annual written report (to be certified by an executive officer of Licensee) indicating its compliance with the Milestones. If Licensee believes that it is or will be unable to achieve such Milestones despite its diligent efforts, Licensee may request amendments or reasonable extensions to Schedule C in writing for CSMC’s consideration. Licensee agrees to provide any additional information reasonably required by CSMC to evaluate Licensee’s performance under this Agreement. If Licensee fails to meet any annual Milestone designated in Schedule C hereto, and has not obtained an extension or amendment to such Milestone(s), CSMC may, at its option and as its sole remedy for Licensee’s breach of this Section 2.6, upon written notice to Licensee, convert the exclusive license granted under Section 2.1 hereof to a non-exclusive license or to a co-exclusive license, or terminate the license.

 

2.7 Preference for United States Industry. To the extent that the Patent Rights and Technical Information have been developed using funding from the United States Government, Licensee agrees that any Products made, used or sold in the United States shall be manufactured substantially in the United States.

 

 

3. Representations And Warranties

 

3.1 Rights to Technology. Except for the rights, if any, of the Funding Agencies or the United States Government, CSMC represents and warrants to Licensee that, to the best of its actual, current knowledge (without investigation outside of CSMC as to such representations and warranties) (a) it has the right to grant the licenses in this Agreement, (b) it has not granted licenses to the Patent Rights or Technical Information to any other party that would restrict the rights granted hereunder except as stated herein and (c) there are no claims, judgments or settlements to be paid by CSMC with respect the Patent Rights or Technical Information or pending claims or litigation relating to the Patent Rights or Technical Information. Except for any potential or actual rights of Funding Agencies or the United States Government, CSMC is not aware that any additional rights or licenses are necessary for Licensee to exercise its licensed rights granted by CSMC under this Agreement.

 

3.2 Limited Warranty; Certain Damages.

 

(a) Limited Warranty. CSMC makes no representation or warranty other than those expressly specified in this Agreement. Licensee accepts the Patent Rights and the Technical Information on an “AS-IS” basis. CSMC MAKES NO OTHER WARRANTIES CONCERNING PATENT RIGHTS OR TECHNICAL INFORMATION COVERED BY THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO PATENT RIGHTS, TECHNICAL INFORMATION OR ANY PRODUCT. CSMC MAKES NO WARRANTY OR REPRESENTATION AS TO THE VALIDITY OR SCOPE OF PATENT RIGHTS, OR THAT ANY PRODUCT WILL BE FREE FROM AN INFRINGEMENT ON PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THAT NO THIRD PARTIES ARE IN ANY WAY INFRINGING PATENT RIGHTS COVERED BY THIS AGREEMENT. LICENSEE HEREBY AGREES THAT LICENSEE WILL NOT GIVE, AND SHALL NOT PERMIT ANY AFFILIATES OR SUBLICENSEES OR AFFILIATES THEREOF TO GIVE, ANY SUCH WARRANTY OR REPRESENTATION TO THIRD PARTIES ON BEHALF OF CSMC.

 

(b) Certain Damages. EXCEPT FOR THE BREACH OF THE CONFIDENTIALITY PROVISIONS IN SECTION 10 OR IN ACCORDANCE WITH THE OBLIGATION TO INDEMNIFY SET FORTH IN SECTION 8, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF PROFITS OR EXPECTED SAVINGS OR OTHER ECONOMIC LOSSES, OR FOR INJURY TO PERSONS OR PROPERTY) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ITS SUBJECT MATTER, REGARDLESS OF WHETHER SUCH PARTY KNOWS OR SHOULD KNOW OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING EXCLUSIONS AND LIMITATIONS SHALL APPLY TO ALL CLAIMS AND ACTIONS OF ANY KIND, WHETHER BASED ON CONTRACT, TORT (INCLUDING, BUT NOT LIMITED TO NEGLIGENCE), OR ANY OTHER GROUNDS.

 

 

3.3 Rights Retained by Funding Agencies. Licensee acknowledges that to the extent that the Patent Rights and Technical Information have been developed in part under one or more funding agreements (“Funding Agreements”) with one or more Funding Agencies, such Funding Agencies have certain statutory, non-exclusive rights relative thereto for use for government purposes as well as regulatory or statutory “march-in rights” (collectively, “Statutory Rights”). Licensee also acknowledges that to the extent that the Improvements may be developed in part under one or more Funding Agreements with one or more Funding Agencies, such Funding Agencies may have certain Statutory Rights relative thereto. This Agreement is explicitly made subject to such Statutory Rights and, to the extent of any conflict between any such Statutory Rights and this Agreement, such Statutory Rights shall prevail.

 

4. Consideration

 

In consideration of the execution and delivery by CSMC of this Agreement, Licensee agrees as follows:

 

4.1 License Fee; Reimbursement of Costs and Other Fees.

 

(a) Upfront Fee. Licensee shall pay to CSMC a non-refundable license fee in an amount equal to $100,000 within thirty (30) days of the Effective Date.

 

(b) Patent Cost Reimbursement. Within thirty (30) days of the execution of this Agreement, Licensee shall reimburse CSMC for the costs, including attorneys’ fees and filing fees, actually incurred to date by CSMC in the prosecution of the Patent Rights (which have not already been reimbursed by Licensee under the Option Agreement), which are $93,537.39 as of June 1, 2021.

 

(c) Reimbursement of Other Fees and Costs. Within thirty (30) days of the execution of this Agreement, Licensee shall reimburse CSMC an amount equal to $196,223.87 (the “Kairos Payment”), which consists of the following additional costs and fees which are owed to CSMC by Licensee’s Affiliates, Kairos Pharma, Ltd. (“Kairos”) and ACTCell Biopharma, Inc. (“ACTCell”), in connection with the following agreements: (i) unreimbursed patent prosecution costs owed by Kairos to CSMC under Section 4.2 of that certain Exclusive License Agreement between CSMC and Kairos dated October 1, 2017 for the RelA technology (the “RelA License”) in the amount of $21,555.78, plus $4,827.60 in accrued interest thereon at the rate of 6.25% per year; (ii) unpaid Annual License Maintenance Fee of $10,000 owed by Kairos to CSMC under Section 4.3 of the ReIA License, which was due and payable as of October 1, 2020; (iii) unreimbursed patent prosecution costs owed by Kairos to CSMC under Section 4.3 of that certain Exclusive License Agreement between CSMC and Kairos dated October 1, 2017 for the Fibrosis technology (the “Fibrosis License”) in the amount of $61,146.27, plus $13,694.22 in accrued interest thereon at the rate of 6.25% per year; (iv) unpaid Annual License Maintenance Fee of $10,000 owed by Kairos to CSMC under Section 4.4 of the Fibrosis License, which was due and payable as of October 1, 2020; (v) unpaid $25,000 assignment fee owed by ACTCell to CSMC under Section 13.11(b) of that certain Exclusive License Agreement between CSMC and ACTCell dated August 30, 2019 (the “ACTCell License”), in connection with ACTCell’s assignment of the ACTCell License to Kairos; and (vi) $50,000 License Fee payment owed by ACTCell to CSMC under Section 4.1 of the ACTCell License (which due and payable within thirty (30) days of ACTCell having raised $500,000 in capitalization). CSMC accepts and acknowledges that the Kairos Payment represents all amounts presently due and payable by Kairos under Sections 4.2 and 4.3 of the RelA License and Sections 4.4 or 4.4 of the Fibrosis License and by ACTCell to CSMC under Sections 4.1 and 13.11(b) of the ACTCell License as of the date of execution of this Agreement, and that all such amounts, and Kairos’ and ACTCell’s obligations to pay the same, will be fully satisfied by the payment of the Kairos Payment to CSMC.

 

 

4.2 Royalties and Non-Royalty Revenue.

 

(a) Running Royalties for Products. Licensee agrees to pay and shall pay to CSMC the following non-refundable running royalties (each, a “Royalty”) in the amounts set forth below:

 

(i) a running royalty of four percent (4%) on Net Sales of Patent Products made, used, sold or otherwise distributed by Licensee or any Permitted Sublicensee hereunder (“Patent Product Royalty Rate”) and

 

(ii) a running royalty of one-half percent (0.5%) on Net Sales of Other Products made, used, sold or otherwise distributed by Licensee or any Permitted Sublicensee hereunder (“Other Product Royalty Rate”).

 

(b) Minimum Royalties. Beginning on the third (3^rd) anniversary of the Effective Date, Licensee shall pay CSMC a minimum royalty of $10,000 per year (“Minimum Royalty”). Each annual payment of the Minimum Royalty shall be credited against Royalties payable such that no Royalties shall be payable unless the Royalties for such annual period exceed $10,000’, provided, that excess amounts paid in respect of the Minimum Royalty may not be carried over to the following calendar year.

 

(c) Permitted Deductions. If Licensee is required to make any payment to a third party to obtain a license for the manufacture, use, sale or import of a Product or otherwise exploit the Patent Rights, Licensee shall be entitled to deduct up to fifty percent (50%) of such third party payments made in a particular calendar year against Royalties payable to CSMC for that year; provided, however, that in no event shall the Royalties payable to CSMC hereunder for any one-year period be reduced by operation of this section by more than fifty percent (50%); and provided, further, that such third party payments shall only be creditable against Royalties payable to CSMC for the calendar year in which the third party payment was actually made by Licensee.

 

(d) Highest Royalty Due. If a Product is covered by both the definition of Patent Product and Other Product, CSMC shall be entitled to the Patent Product Royalty Rate on the Product as defined in Section 4.2(a)(i), but shall not be entitled to also receive the Other Product Royalty Rate on the same Product under Section 4.2(a)(ii). To the extent a Product ceases being a Patent Product, but is still an Other Product, CSMC shall be entitled to receive a Royalty on such Product at the Other Product Royalty Rate, but only for such time as specified in Section 4.2(g).

 

 

(e) Licensee Challenge of Patent Rights. Should Licensee bring, directly or through a third party indirectly, an action challenging the validity, scope or enforceability of any Patent Rights, Licensee will first provide CSMC with at least ninety (90) days’ prior written notice that it intends so to do before filing such a challenge. Following the giving of such notice, Licensee will pay to CSMC the Royalties and Non-Royalty Sublicense Revenue due hereunder at the rate of two times the applicable rate during the pendency of such action. Should the outcome of such action determine that any claim of a patent challenged by Licensee is valid and/or infringed and/or enforceable, as applicable, Licensee will thereafter pay to CSMC the Royalties and Non-Royalty Sublicense Revenue due hereunder at the rate of three times the applicable rate for all Products sold that would infringe such claim and/or transactions that include a grant of rights to such claim. Such increased royalty reflects the increased value of the Patent Rights upheld in such action. In the event that a challenge to the Patent Rights brought by Licensee is partially or entirely successful, Licensee will have no right to recoup any Royalties or other amounts paid before or during the period of the challenge. Additionally, Licensee agrees to disburse any and all proceeds received from any sublicense of the applicable Patent Rights throughout the duration of any such challenge to CSMC, and agrees to reimburse CSMC for all costs actually incurred by CSMC in connection with the applicable legal proceedings. In the event that all or any portion of this Section 4.2(e) is invalid, illegal or unenforceable, then the parties will use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, gives effect to the intent of this Section 4.2(e).

 

(f) Arm’s-Length Transactions. On sales of Products which are made in other than an arms’-length transaction, the value of the Net Sales attributed under this Section 4.2 to such a transaction shall be that which would have been received in an arms’-length transaction, based on sales of like quality and quantity products on or about the time of such transaction.

 

(g) Duration of Royalty Obligations. The royalty obligations of Licensee as to each Product shall terminate on a country-by-country and product-by-product basis concurrently with the expiration of:

 

(i) For Patent Products, the last to expire of a Valid Claim that covers such Patent Product, including any term extensions thereof, and

 

(ii) For Other Products, the longer of twenty (20) years after the first bona fide commercial sale of such Other Product in a country or expiration of any market exclusivity period granted by a regulatory agency for such Other Product.

 

(h) Non-Royalty Revenues.

 

(i) Non-Royalty Sublicense Revenues. Any and all “Non-Royalty Sublicense Revenues” shall be reported and paid to CSMC by Licensee as set forth below within sixty (60) days of receipt by Licensee. Licensee shall pay to CSMC a percentage of these Non-Royalty Sublicense Revenues according to the following schedule:

 

Date of Receipt of Non-Royalty Sublicense Revenue		Percent of Non-Royalty Sublicense Revenues Payable to CSMC
Prior to receipt of FDA authorization of an Investigational New Drug (“IND”) application or equivalent regulatory agency authorization in another jurisdiction for a Product		35%
After receipt of FDA authorization of an IND application for a Product or equivalent regulatory agency authorization in another jurisdiction, but prior to submission of a New Drug Application (“NDA”) or Biologics License Applications (BLA) to the FDA or equivalent regulatory agency in another jurisdiction		10%
After submission of an NDA/BLA for a Product but prior to receipt of FDA approval of an NDA/BLA or equivalent regulatory agency approval in another jurisdiction for a Product		8%
After receipt of FDA approval of an NDA/BLA or equivalent regulatory agency approval in another jurisdiction for a Product		5%

 

Any non-cash consideration received by Licensee from Permitted Sublicensees shall be valued at its fair market value as of the date of receipt and such amount shall be paid in cash to CSMC in accordance with the schedule above. In the event that the Patent Rights are sublicensed in combination with one or more patented technologies that are not covered under this Agreement, Non-Royalty Sublicense Revenues for the purposes of this Section 4.2(g) shall be calculated on a pro-rata basis in a manner to be mutually agreed by CSMC and Licensee (which agreement may be a condition of approval under Section 2.2).

 

 

(ii) Product Development Milestones. Licensee agrees to pay and shall pay to CSMC the following non-creditable, non-refundable product development milestone payments within sixty (60) days of the first occurrence of the following milestones (or their equivalents):

 

Milestone Event		Milestone Payment
Successful completion of a Phase II clinical trial for a product and receipt of FDA or equivalent regulatory agency in another jurisdiction and approval for a Phase III clinical trial		$	750,000
Receipt of FDA approval of a New Drug Application (“NDA”) or Biologics License Applications (“BLA”) or equivalent foreign regulatory approval in a non-United States major commercial market		$	1,500,000
Cumulative Net Sales have exceeded $50,000,000		$	2,500,000
Cumulative Net Sales have exceeded $100,000,000		$	2,500,000

 

(i) Payment and Accounting.

 

(i) Reports. Each payment of Royalties shall be accompanied by a report in the form attached as Schedule D hereto, which sets forth in reasonable detail the number and each type of Product sold and the calculation of Net Sales applicable thereto, and such additional details as may be reasonably requested by CSMC for the determination of Royalties payable hereunder. Products shall be considered as being sold for the purpose of the calculation of Royalties under this Agreement when the Products have been invoiced. Each payment of Non-Royalty Sublicense Revenue shall be accompanied by a report in the form attached as Schedule D hereto setting forth in reasonable detail the basis for the calculation of such amounts, and such additional details as may be reasonably requested by CSMC for the determination of Non-Royalty Sublicense Revenue payable hereunder. All copies of reports under this Section shall be sent by electronic mail to CSTechTransfer@cshs.org. Except as otherwise provided herein, all amounts due hereunder shall be paid in United States dollars and shall be made without set off and free and clear of (and without any deduction or withholding for) any taxes, duties, levies, imposts or similar fees or charges. Royalties shall be payable by Licensee quarterly, within forty-five (45) days after the end of each calendar quarter, based upon revenues accrued during the immediately preceding calendar quarter. Licensee agrees to pay and shall pay to CSMC, or cause its Permitted Sublicensees to pay to CSMC, all Royalties resulting from the activities of its Permitted Sublicensees, within forty-five (45) days after the end of each calendar quarter.

 

(ii) Notice of Payment. Licensee shall provide prompt written notice to CSMC that it has paid the licensee fee required by Section 4.1 or any product development milestone payment required by Section 4.2(h)(ii) by electronic mail to CSTechTransfer@cshs.org.

 

(iii) Wire Transfer Instructions. All payments due hereunder shall be made by Licensee to CSMC in accordance with the following wire transfer instructions:

 

City National Bank

400 N. Roxbury Drive

Beverly Hills, CA 90210

ABA# 122 016 066

Account Number: 210-132260

Account Name: Cedars-Sinai Medical Center - Tech Transfer

Reference: Tech Transfer - Enviro Therapeutics, Inc.

 

 

(iv) Records and Audits. Licensee shall create and maintain complete and accurate records and documentation concerning all sales of Products by Licensee, its Affiliates and Permitted Sublicensees as well as transactions based upon which Non-Royalty Sublicense Revenue is due, in sufficient detail to enable the Royalties and Non-Royalty Sublicense Revenue, respectively, that is payable hereunder to be determined. Licensee shall retain such records and documentation for not less than seven (7) years from the date of their creation. During the term of this Agreement and for a period of three (3) years thereafter, CSMC and its representatives shall have the right to audit such records and documentation as shall pertain to the determination and payment of Royalties and Non-Royalty Sublicense Revenue. Such examiners shall have reasonable access during regular business hours to Licensee’s offices and the relevant records, files and books of account, and shall have the right to examine any other records reasonably necessary to determine the accuracy of the calculations provided by Licensee. The costs of any such audit shall be borne by CSMC, unless as a result of such inspection it is determined that the amounts payable by Licensee for any period are in error by greater than five percent (5%), in which case the costs of such audit shall be borne by Licensee. CSMC shall report the results of any such audit to Licensee within forty-five (45) days of completion. Thereafter, Licensee shall promptly pay to CSMC the amount of any underpayment discovered in such audit, or CSMC shall credit to Licensee against future Royalty payments the amount of any overpayment discovered in such audit, as the case may be. In addition, Licensee shall pay interest on any underpayment at the rate that is the lower of (i) two percent (2%) over the rate of interest announced by Bank of America in Los Angeles, California (or any successor in interest thereto or any commercially equivalent financial institution if no such successor exists) to be its “prime rate”, or (ii) the highest rate permitted by applicable law, from the date such amount was underpaid to the date payment is actually received.

 

(v) Currency Transfer Restrictions. If any restrictions on the transfer of currency exist in any country or other jurisdiction so as to prevent Licensee from making payments to CSMC, Licensee shall take all commercially reasonable steps to obtain a waiver of such restrictions or to otherwise enable Licensee to make such payments. If Licensee is unable to do so, Licensee shall make such payments to CSMC in a bank account or other depository designated by CSMC in such country or jurisdiction, which payments shall be in the local currency of such country or jurisdiction, unless payment in United States dollars is permitted. Any payment by Licensee to CSMC in currencies other than United States dollars shall be calculated using the appropriate foreign exchange rate for such currency quoted in the California edition of The Wall Street Journal for the close of business of the last banking day of the calendar quarter in which such payment is being made.

 

(vi) Late Charges. A service charge of two percent (2%) per month, not to exceed the maximum rate allowed by applicable law, shall be payable by Licensee on any portion of Licensee’s outstanding Royalty or Non-Royalty Sublicense Revenue balance or any other amount payable by Licensee hereunder (including, without limitation, reimbursement for Prosecution costs as set forth in Section 4.1 hereof) that is not paid to CSMC within thirty (30) days past the due date.

 

(vii) Taxes. Licensee shall pay, or cause to be paid, any and all taxes required to be paid or withheld on any sales, licenses or other transfers for value of Products or Patent Rights (other than taxes imposed on the income or revenues of CSMC)’, provided, however, that under no circumstances shall the amounts of such taxes be deducted from the total amount of payments otherwise due to CSMC hereunder. Upon CSMC’s request, Licensee shall secure and send to CSMC proof of any such taxes withheld and paid by Licensee, its Affiliates or Permitted Sublicensees.

 

(viii) No Escrow. Licensee shall pay all Royalties and Non-Royalty Sublicense Revenue directly to CSMC and shall not pay royalties into any escrow or other similar account, including in the event of a validity or non-infringement challenge to the Patent Rights.

 

 

5. Patent Rights

 

5.1 Prosecution. Commencing on the Effective Date, Licensee shall assume, in coordination with CSMC, full responsibility for the application, maintenance, reexamination, reissue, opposition and prosecution of any kind (collectively “Prosecution”) relating to the Patent Rights in the Territory, including, but not limited to, payment of all costs, fees and expenses related thereto. Subject to the approval of CSMC (which approval shall not be unreasonably withheld), Licensee shall have the right to select counsel with respect to the responsibility assumed by Licensee in this Section 5.1, and Licensee shall diligently pursue the Prosecution of the Patent Rights to the benefit of CSMC. For all purposes of the patent Prosecution, CSMC shall be the named “client” of such patent counsel. Each party shall provide the other with copies of any and all material or communications with the United States Patent and Trademark Office, or any foreign patent office, and CSMC shall be afforded the opportunity of prior review and comment on such action or paper.

 

(a) Foreign Filings. Should Licensee elect not to file for patent protection for the Patent Rights in a certain national jurisdiction in the Territory, Licensee shall notify CSMC of such election at least forty-five (45) days before a final due date which would result in the bar of patent protection for the Patent Rights in such national jurisdiction. In such event, CSMC may, at its sole option and expense, file for patent protection for the Patent Rights in the applicable national jurisdiction, and Licensee’s license under this Agreement with respect to such national jurisdiction shall terminate, allowing CSMC to freely dispose of its Patent Rights in the applicable national jurisdiction as it sees fit in its sole discretion.

 

5.2 Abandonment, Disclaimers, etc. Licensee shall obtain the prior written consent of CSMC (which consent shall not be unreasonably withheld), prior to abandoning, disclaiming, withdrawing, seeking reissue, seeking reexamination or allowing to lapse any patent or patent application within the Patent Rights. In the event that Licensee shall elect to abandon the Prosecution (including the payment of maintenance fees or annuities) of any patent or patent application included in the Patent Rights, Licensee shall notify CSMC of such election at least forty-five (45) days before a final due date which would result in abandonment or bar of patentability of the patent or patent application. In such event, CSMC may, at its sole option and expense, continue Prosecution of the patent application or patent. Licensee further agrees that it shall not file any continuation-in-part application relating to the Patent Rights unless the additional disclosure or material to be included in the continuation-in-part application is necessary or appropriate to support the patentability of a claim recited in a parent application on which the continuation-in-part application is based. Licensee shall not file any continuation-in-part application without CSMC’s prior written consent, which shall not be unreasonably withheld.

 

5.3 Expenses. Licensee shall pay all expenses resulting from its obligations in Section 5.1 hereof. CSMC shall exercise reasonable efforts to cause the Inventors (to the extent they are available and on CSMC’s staff as employees) to cooperate fully with Licensee with respect to the Prosecution of the Patent Rights, and CSMC shall be reimbursed for all reasonable out-of-pocket expenses as such expenses are incurred.

 

5.4 CREATE Act. Licensee shall not invoke the Cooperative Research and Technology Enhancement Act of 2004, as set forth under Title 35, Section 102(c) of the United States Code (the “CREATE Act”), with respect to the Patent Rights without first obtaining the prior written consent of CSMC.

 

 

6. Term And Termination

 

6.1 Term. Unless earlier terminated as provided in Section 6.2 hereof, the term of this Agreement shall commence on the Effective Date and shall expire, on a country-by-country and product-by-product basis, on the later of (i) the date upon which the last to expire Valid Claim shall expire, (ii) twenty (20) years after the first bona fide commercial sale of an Other Product in the country in question or (iii) the expiration of any market exclusivity period granted by a regulatory agency.

 

6.2 Termination. Except as provided by Section 6.3 hereof, and in addition to the termination provisions of Sections 2.5, 2.6 and 5.1(a), this Agreement shall terminate upon the earliest to occur of the following:

 

(a) Automatically if Licensee shall enter into a liquidating bankruptcy, be adjudged insolvent, liquidate, dissolve and/or if the business of Licensee shall be placed in the hands of a receiver, assignee, or trustee, whether by voluntary act of Licensee or otherwise; provided, however, that if any such action is involuntary, termination shall not take place unless the action is not reversed within thirty (30) days. Further, Licensee shall give CSMC at least forty- five (45) days’ prior written notice before Licensee initiates any bankruptcy proceeding, and CSMC shall have the right to terminate this Agreement immediately upon receipt of such notice;

 

(b) Automatically if the performance by either party to this Agreement of any term, covenant, condition or provision hereof (i) shall jeopardize (A) the licensure of CSMC, (B) CSMC’s participation in the Medicare, Medi-Cal or other reimbursement or payment programs, (C) the full accreditation of CSMC by the Joint Commission of Accreditation of Healthcare Organizations or any other state or nationally recognized accreditation organization, or (D) CSMC’s tax-exempt status; or (ii) is deemed illegal or unethical by any recognized governmental agency or body. Upon the occurrence of any of the items set forth in this subparagraph (b), CSMC shall provide written notice to Licensee setting forth the reason for such termination (which termination shall be effective immediately);

 

(c) Upon thirty (30) days’ written notice from CSMC if, within such thirty (30) day period (i) Licensee shall fail to pay fully any Royalty or Non-Royalty Sublicense Revenue payment required by Section 4.2 hereof, or (ii) Licensee shall fail to undertake commercially reasonable efforts to exploit the Patent Rights in the Field of Use in the Territory, regardless of Licensee’s satisfaction of the Milestones provided in Schedule C hereto;

 

(d) Upon sixty (60) days’ written notice from CSMC if, within such sixty (60) day period, Licensee shall fail to cure fully any breach or default of any material obligation under this Agreement as described in such written notice detailing the facts of such breach with reasonable specificity; provided, however, that Licensee may avoid such termination if, before the end of such 60-day period, such breach or default has been cured by Licensee to the reasonable satisfaction of CSMC;

 

 

(e) Upon ninety (90) days’ written notice from Licensee if, within such ninety (90) day period, CSMC shall fail to cure fully any breach or default of any material obligation under this Agreement as described in such written notice detailing the facts of such breach with reasonable specificity; /vmyAv/. however, that CSMC may avoid such termination if, before the end of such 90-day period, such breach or default has been cured by CSMC to the reasonable satisfaction of Licensee; and

 

(f) Upon the mutual written agreement of the parties hereto (such termination to be effective as of the date mutually agreed upon in such written agreement).

 

6.3 Obligations Upon Termination. Upon any termination of this Agreement pursuant to Section 6.2 hereof, nothing herein shall be construed to release any party from any liability for any obligation incurred through the effective date of termination (e.g., confidentiality, reimbursement of patent expenses incurred prior to such date, etc.) or for any breach of this Agreement prior to the effective date of such termination. Licensee may, for a period of one (1) year after the effective date of such termination, sell all tangible Products customarily classified as “inventory” that it has on hand at the date of termination, subject to payment by Licensee to CSMC of the applicable Royalty and Non-Royalty Sublicense Revenue’, provided, however, that any such action by Licensee does not subject CSMC to any of the occurrences set forth in Section 6.2(b) hereof.

 

6.4 Effect of Termination. In the event of any termination of this Agreement pursuant to Section 6.2 hereof, where such termination has not been caused by any action or inaction on the part of any Permitted Sublicensee of Licensee or by any breach by such Permitted Sublicensee of its obligations under its sublicense from Licensee, such termination of this Agreement shall be without prejudice to the rights of each non-breaching Permitted Sublicensee of Licensee and each non-breaching Permitted Sublicensee shall be deemed to be a licensee of CSMC thereunder, and CSMC shall be entitled to all rights, but shall not be subject to any obligations (other than the grant of license and appurtenant obligations under this Agreement to the extent provided for in such sublicense) of Licensee thereunder. This Section 6.4, however, shall not be applicable if this Agreement has been terminated under Section 6.2(b) under circumstances where the application of this Section 6.4 would subject CSMC to any of the occurrences set forth in Section 6.2(b).

 

6.5 Right to Institute Legal Actions. Notwithstanding the provisions of Section 6.2 hereof, CSMC, on the one hand, and Licensee, on the other hand, may institute any other legal action or pursue any other remedy against the other party permitted by applicable law if the other party does not substantially cure any breach or default of any material obligation as provided herein.

 

6.6 Reversion of Rights. Notwithstanding anything to the contrary set forth herein (including, but not limited to, Section 5 hereof), full responsibility for Prosecution of the Patent Rights shall, at the option of CSMC (exercisable in its sole and absolute discretion), and at its sole expense from the date of reversion, revert to CSMC upon any termination of this Agreement.

 

6.7 Return of Data. In the event of any termination or expiration of this Agreement, Licensee shall promptly provide CSMC with copies of all data, information and materials obtained or generated by or on behalf of Licensee in the course of conducting research and developing Products using the Patent Rights and the Technical Information.

 

 

7. Infringement By Third Parties

 

7.1 Enforcement. Licensee shall have the first right and the obligation to enforce, at its sole expense, any Patent Rights to the extent licensed hereunder against infringement by third parties and shall notify CSMC in writing in advance of all such enforcement efforts. Upon Licensee’s undertaking to pay all expenditures reasonably incurred by CSMC, CSMC shall reasonably cooperate in any such enforcement and, as necessary, join as a party therein. Licensee shall reimburse CSMC for all expenses, including reasonable attorneys’ fees, incurred in connection with any such enforcement. In the event that Licensee does not file suit against or commence and conclude settlement negotiations with a substantial infringer of Patent Rights within ninety (90) days of receipt of a written demand from CSMC that Licensee bring suit, then the parties will consult with one another in an effort to determine whether a reasonably prudent licensee would institute litigation to enforce the patent in question in light of all relevant business and economic factors (including, but not limited to, the projected cost of such litigation, the likelihood of success on the merits, the probable amount of any damage award, the prospects for satisfaction of any judgment against the alleged infringer, the possibility of counterclaims against the parties hereto, the impact of any possible adverse outcome on Licensee and the effect any publicity might have on the parties’ respective reputations and goodwill). If, after such process, it is determined that a suit should be filed and Licensee does not file suit or commence settlement negotiations forthwith against the infringer, then CSMC shall have the right, at its own expense, to enforce any Patent Rights licensed hereunder on behalf of itself and Licensee. Any damages or other recovery from an infringement action undertaken by Licensee shall first be used to reimburse the parties, on apro rata pari passu basis, for the costs and expenses incurred in such action, and shall thereafter be allocated between the parties as follows: (i) fifty percent (50%) to CSMC and (ii) fifty percent (50%) to Licensee. If Licensee fails to prosecute any such action to completion, then any damages or other recovery net of the parties’ costs and expenses incurred in such infringement action shall be the sole property of CSMC.

 

7.2 Defense Of Patent Rights. In the event that any Patent Rights are the subject of a legal action seeking declaratory relief or of any reexamination, inter partes review, post grant review, opposition, or similar proceeding instituted by a third party, the parties agree to promptly consult with each other concerning the defense of such actions or proceedings. If the parties agree that such defense should be undertaken, then Licensee shall bear the expenses, including attorneys’ fees, associated with such defense and in any recoupment of expenses. If the parties disagree, then the party desiring to defend the action or proceeding may proceed with such defense and will bear its own expenses, and be entitled to all sums recovered.

 

8. Indemnification

 

8.1 Indemnification by Licensee. Subject to Section 8.2 hereof, Licensee shall hold harmless, defend and indemnify CSMC and each of its officers, directors, employees (including the Inventors), agents and sponsors of the research (except Licensee) (each, an “Indemnified Party”, and collectively, the “Indemnified Parties”) from and against any and all claims, damages, losses, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses and costs of investigation, whether or not suit is filed) suffered or incurred by any of the Indemnified Parties in any action, suit, litigation, arbitration or dispute of any kind (“Action”) arising or resulting from any negligence or willful acts or omissions on the part of Licensee, its Affiliates or Permitted Sublicensees in connection with (a) their use of the Patent Rights or Technical Information and/or (b) the exercise of their rights hereunder or under any sublicense, including, but not limited to (i) the preclinical development and clinical testing of Products, and (ii) the manufacture, sale, use, marketing, or other disposition of Products developed, manufactured, sold, marketed, used or otherwise disposed of under this Agreement. As part of its obligations hereunder, Licensee shall defend any Action brought against any of the Indemnified Parties with counsel of its own choosing and reasonably acceptable to CSMC, and neither CSMC nor any other Indemnified Party shall enter into any settlement of any such Action without first obtaining prior approval of Licensee. Licensee shall pay all costs, including attorney’s fees, incurred in enforcing this indemnification provision. Should CSMC or any other Indemnified Party not afford Licensee the right to defend any such Action, or should CSMC or any other Indemnified Party not obtain the approval of Licensee to any such settlement, Licensee shall have no obligation to indemnify CSMC or any other Indemnified Party hereunder. Should Licensee fail to provide a defense for the Indemnified Parties as required hereunder, then Licensee shall reimburse CSMC for its out-of-pocket expenses (including reasonable attorneys’ fees and expenses and costs of investigation) which are incurred as a result of any investigation, defense or settlement relating to the foregoing, which reimbursement shall be made to CSMC upon receipt by Licensee of invoices reflecting in reasonable detail such expenses incurred by CSMC. Licensee shall obtain and maintain insurance policies (including products liability and general liability policies at such time as is appropriate) which are reasonable and necessary to cover its activities and to comply with the indemnification obligations set forth above. Such insurance policies shall name CSMC as an additional insured party and shall provide a minimum of $3,000,000 in coverage per occurrence. Upon initiation of any human clinical studies of Products, Licensee shall have first increased its insurance coverage to a minimum of $10,000,000 in the aggregate. Licensee shall provide CSMC with prompt written notice of any material change in coverage under such policies. If the parties determine that evidence of Licensee’s insurance coverage is necessary and appropriate, within thirty (30) days of the Effective Date (subject to extension if reasonably required) and annually thereafter, Licensee shall provide CSMC with a certificate of insurance issued by the appropriate insurance company evidencing the insurance coverage required by this Section 8.1, together with copies of the endorsement which specifies CSMC as an additional insured and the declarations page for each such insurance policy. The certificate of insurance, endorsements and declarations pages (and any renewals or replacements thereof), if required, shall be sent to CSMC’s Technology Transfer Office by electronic mail at CSTechTransfer@cshs.org.

 

 

8.2 Notice of Claim. CSMC shall promptly notify Licensee in writing of any claim or Action or material threat thereof brought against any Indemnified Party in respect of which indemnification may be sought and, to the extent allowed by law, shall reasonably cooperate with Licensee in defending or settling any such claim or Action. No settlement of any claim, Action or threat thereof received by CSMC and for which CSMC intends to seek indemnification (for itself or on behalf of any other Indemnified Party) shall be made without the prior joint written approval of Licensee and CSMC.

 

9. Use Of Names

 

9.1 CSMC Names and Marks. Licensee shall not, unless as required by any law or governmental regulation, use the name of CSMC, and/or any of its trademarks, service marks, trade names or fictitious business names or the name of any CSMC officer, faculty member, employee, student or volunteer (collectively, “CSMC Names and Marks”) without express prior written consent of the Vice President for Public Relations and Marketing of CSMC. Further, prior to any reference by Licensee to CSMC Names and Marks in any manner, Licensee shall provide CSMC with a writing reflecting the proposed reference so that CSMC can review the reference within a reasonable period of time prior to the proposed use thereof by Licensee. This limitation includes, but is not limited to, use by Licensee in any regulatory filing, advertising, offering circular, prospectus, sales presentation, news release or trade publication. Subject to compliance by Licensee with the foregoing, which shall be deemed conditions precedent to any use of CSMC Names and Marks by Licensee, Licensee shall ensure that the CSMC Names and Marks are used as scientifically or academically appropriate in the “byline” of any article, abstract, manuscript or any other publication related to the subject matter hereof.

 

9.2 No Endorsements by CSMC. By entering into this Agreement, CSMC does not directly or indirectly endorse any product or service provided, or to be provided, by Licensee whether directly or indirectly related to this Agreement. Licensee shall not state or imply that this Agreement is an endorsement by CSMC.

 

10. Confidentiality

 

10.1 Non-Disclosure. The parties hereto shall keep the terms of this Agreement and all business and scientific discussions relating to the business of the parties strictly confidential. All patient information to which a party is given access by the other party shall be subject to the provisions of the Confidentiality of Medical Information Act (Cal. Civ. Code §§56, et seq.) and the Health Insurance Portability and Accountability Act of 1996, and all regulations promulgated thereunder. It may, from time to time, be necessary for the parties, in connection with performance under this Agreement, to disclose Confidential Information (including know-how) to each other. The Receiving Party (as defined in Section 1.2 hereof) shall keep in strictest confidence the Confidential Information of the Disclosing Party (as defined in Section 1.2 hereof), using the standard of care it normally uses for information of like character, and shall not disclose the Confidential Information to any third party or use it except as expressly authorized by the prior written consent of the Disclosing Party or as otherwise permitted by this Agreement; /vmy’Av/. however, that Licensee may disclose the Confidential Information received from CSMC to its Affiliates and Permitted Sublicensees as shall be reasonably necessary to carry out the intent of this Agreement or any sublicense granted by Licensee as contemplated by this Agreement if, but only if, such Affiliates and/or Permitted Sublicensees each execute a confidentiality agreement containing confidentiality provisions no less restrictive than those confidentiality provisions contained in this Section 10. The Receiving Party’s obligation hereunder shall not apply to Confidential Information that the Receiving Party can show:

 

(a) Is or later becomes part of the public domain through no fault or neglect of the Receiving Party;

 

 

(b) Is received in good faith from a third party having no obligations of confidentiality to the Disclosing Party, provided that the Receiving Party complies with any restrictions imposed by the third party;

 

(c) Is independently developed by the Receiving Party without use of the Disclosing Party’s Confidential Information; or

 

(d) Is required by law or regulation to be disclosed (including, without limitation, in connection with FDA filings, filings with another government agency or as required under the California Public Records provided that the Receiving Party uses reasonable efforts to restrict disclosure and to obtain confidential treatment.

 

10.2 Limits on Permitted Disclosures. Each party agrees that any disclosure or distribution of the other party’s Confidential Information within its own organization shall be made only as is reasonably necessary to carry out the intent of this Agreement. The parties further agree that all of their respective officers, employees, agents, representatives or approved sublicensees to whom any Confidential Information is disclosed or distributed shall have agreed to maintain its confidentiality. In such event, the Receiving Party shall identify with reasonable particularity, upon request by the Disclosing Party, each person within the Receiving Party’s organization to whom the Receiving Party has disclosed or distributed Confidential Information.

 

10.3 Legally Required Disclosures. If a subpoena or other legal process concerning Confidential Information is served upon any party hereto pertaining to the subject matter hereof, the party served shall notify the other party immediately, the other party shall cooperate with the party served, at the other party’s expense, in any effort to contest the validity of such subpoena or other legal process. This Section 10.3 shall not be construed in any way to limit any party’s ability to satisfy any disclosure of its relationship with the other party required by any governmental authority.

 

10.4 Patent Rights as Confidential Information. The Patent Rights are understood by Licensee to be the Confidential Information of CSMC to the extent “unpublished” as such term is construed under the United States Patent Laws. As such, Licensee’s confidentiality obligations hereunder automatically extend to any and all Technical Information and to any and all patent applications of CSMC relating to any Patent Rights, Technical Information and Improvements and to any and all communications with the United States Patent Office, and any foreign patent office relating to any Patent Rights, Technical Information or Improvements.

 

10.5 Return of Confidential Information. In the event of any termination of this Agreement, the Receiving Party shall promptly return all Confidential Information and any copies made thereof previously made available to the Receiving Party by the Disclosing Party.

 

10.6 Remedies. Both parties acknowledge and agree that it would be difficult to measure damages for breach by either party of the covenants set forth in this Section 10, and that injury from any such breach would be incalculable, and that money damages would therefore be an inadequate remedy for any such breach. Accordingly, either party shall be entitled, in addition to all other remedies available hereunder or under law or equity, to injunctive or such other equitable relief as a court may deem appropriate to restrain or remedy any breach of such covenants.

 

 

11. Information Exchange

 

In addition to the Patent Rights and Technical Information, the parties shall cooperate to exchange such non-confidential information as may be appropriate and necessary to facilitate Licensee’s development and commercialization of Products incorporating any Patent Rights or Technical Information.

 

12. Patent Marking

 

Licensee shall actually or virtually mark all Patent Products made, sold or otherwise disposed of by or on behalf of it or any of its Permitted Sublicensees as set forth under Title 35, Section 287(a) of the United States Code and shall respond to any request or disclosure under Title 35, Section 287(b)(4)(B) of the United States Code by only notifying CSMC of the request for disclosure.

 

13. Miscellaneous

 

13.1 Notices. Any notice, request, instruction or other document required by this Agreement shall be in writing and shall be deemed to have been given (a) if mailed with the United States Postal Service by prepaid, first class, certified mail, return receipt requested, at the time of receipt by the intended recipient, (b) if sent by Federal Express or other overnight carrier, signature of delivery required, at the time of receipt by the intended recipient, or (c) if sent by facsimile transmission, when so sent and when receipt has been acknowledged by appropriate telephone or facsimile receipt, addressed as follows:

 

In the case of CSMC to:

 

Cedars-Sinai Medical Center

8700 Beverly Boulevard

Los Angeles, California 90048-1865

Attention: Executive Vice President for Finance & CFO

with a copy to Vice President, Intellectual Property

 

or in the case of Licensee to:

 

Enviro Therapeutics, Inc.

2355 Westwood Blvd., #139

Los Angeles, CA 90069

 

or to such other address or to such other person(s) as may be given from time to time under the terms of this Section 13.1.

 

13.2 Compliance with Laws. Each party shall comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this Agreement.

 

 

13.3 Governing Law. For any dispute between the parties to this Agreement which arises from or relates to this Agreement, the Agreement shall be construed and enforced in accordance with the laws of the United States of America and of the State of California, irrespective of choice of laws provisions. The parties agree that Los Angeles County, California shall be the situs of any legal proceeding arising out of or relating to this Agreement. Each party hereby waives any right it may have to assert the doctrine of forum non conveniens or similar doctrine or to object to venue with respect to any proceeding brought in accordance with this Section, and stipulates that the state and federal courts located in Los Angeles, California shall have in personam jurisdiction and venue over each of them for the purpose of litigating any dispute, controversy, or proceeding arising out of or related to this Agreement. Each party hereby authorizes and accepts service of process sufficient for personal jurisdiction in any action against it as contemplated by this Section by registered or certified mail, return receipt requested, postage prepaid, to its address for the giving of notices as set forth in this Agreement.

 

13.4 Waiver. Failure of any party to enforce a right under this Agreement shall not act as a waiver of that right or the ability to assert that right relative to the particular situation involved.

 

13.5 Enforceability. If any provision of this Agreement shall be found by a court of competent jurisdiction to be void, invalid or unenforceable, the same shall be reformed to comply with applicable law or stricken if not so conformable, so as not to affect the validity or enforceability of the remainder of this Agreement.

 

13.6 Modification. No change, modification, or addition or amendment to this Agreement, or waiver of any term or condition of this Agreement, is valid or enforceable unless in writing and signed and dated by the authorized officers of the parties to this Agreement.

 

13.7 Entire Agreement. This Agreement and the Schedules hereto (which are incorporated herein by this reference as if fully set forth herein) constitute the entire agreement between the parties with respect to the subject matter hereof and thereof, and replace and supersede as of the date hereof and thereof any and all prior agreements and understandings, whether oral or written, between the parties with respect to the subject matter of such agreements.

 

13.8 Construction. This Agreement has been prepared, examined, negotiated and revised by each party and their respective attorneys, and no implication shall be drawn and no provision shall be construed against any party to this Agreement by virtue of the purported identity of the drafter of this Agreement or any portion thereof.

 

13.9 Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall constitute one and the same instrument. This Agreement may be executed by facsimile or in .pdf format.

 

13.10 Attorneys’ Fees. In the event of any action at law or in equity between the parties hereto to enforce any of the provisions hereof, the unsuccessful party to such litigation shall pay to the successful party all reasonable costs and expenses, including reasonable attorneys’ fees, incurred therein by such successful party; and if such successful party shall recover a judgment in any such action or proceeding, such reasonable costs, expenses and attorneys’ fees may be included in and as part of such judgment.

 

 

13.11 Assignment; Successors.

 

(a) Subject to Section 13.11(b), Licensee may assign this Agreement as part of a sale, regardless of whether such a sale occurs through an asset sale, stock sale, merger or other combination, or any other transfer of Licensee’s entire business, or that part of Licensee’s business that exercises all rights granted under this Agreement. Any other attempt to assign this Agreement by Licensee is null and void. In the event of a bankruptcy, assignment is permitted only to a party that can provide adequate assurance of future performance, including diligent development and sales, of Products.

 

(b) Prior to any assignment, the following conditions must be met: (i) Licensee must give CSMC thirty (30) days prior written notice of the assignment, including the new assignee’s contact information, (ii) the new assignee must agree in writing to CSMC to be bound by this Agreement, and (iii) CSMC must have received a $25,000.00 assignment fee.

 

(c) Subject to the limitations on assignment herein, this Agreement shall be binding upon and inure to the benefit of any successors in interest and assigns of CSMC and Licensee. CSMC shall have the right to assign its rights hereunder as part of any reorganization or bond financing.

 

13.12 Further Assurances. At any time and from time to time after the Effective Date, each party shall do, execute, acknowledge and deliver, and cause to be done, executed, acknowledged or delivered, all such further acts, transfers, conveyances, assignments or assurances as may be reasonably required to consummate the transactions contemplated by this Agreement.

 

13.13 Survival. The following sections shall survive any expiration or earlier termination of this Agreement: 4.2(e), 6.3, 8, 9, 10, 12 and 13.

 

[signature page follows]

 

 

IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to execute this Agreement as of the date first above written. 

 

	“LICENSEE”:
	Enviro Therapeutics, Inc., a
	______________CORPORATION
	By:	/s/ Neil Bhowmick
	Name	Neil Bhowmick
	Title:	CEO
	Date:	June 2, 2021
	“CSMC”:
	Cedars-Sinai Medical Center, a
	California nonprofit public benefit CORPORATION
	By:	/s/ Edward M. Prunchunas
		Edward M. Prunchunas
		Executive Vice President and Treasurer
	Date:	June 3, 2021
	By:	/s/ James D. Laur, JD
		James D. Laur, JD
		Vice President, Intellectual Property
	Date:	June 3, 2021

 

 

Schedule A

 

Patent Rights

 

1. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s): Application No.: Country: Filing Date: Docket No.: CSMC Tech ID:

Bhowmick NA, Smith B, Placencio V, Madhav, A. 2017286561 Australia June 14,2017 065472.000621AU00 bho000961

 

2. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s): Application No.: Country: Filing Date: Docket No.: CSMC Tech ID:

Bhowmick NA, Smith B, Placencio V, Madhav, A. 3026066 Canada June 14,2017 065472.000621CA00 bho000961

 

3. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s): Application No.: Country: Filing Date: Docket No.: CSMC Tech ID:

Bhowmick NA, Smith B, Placencio V, Madhav, A. 201780000000 China June 14,2017 065472.000621CN00 bho000961

 

4. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s): Application No.: Country: Filing Date: Docket No.: CSMC Tech ID:

Bhowmick NA, Smith B, Placencio V, Madhav, A. 17814046.3 Europe June 14,2017 065472.000621EP00 bho000961

 

5. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s): Application No.: Country: Filing Date: Docket No.: CSMC Tech ID:

Bhowmick NA, Smith B, Placencio V, Madhav, A. 2018-565397 Japan June 14,2017 065472.000621JP00 bho000961

 

6. Sensitization of Tumors to Therapies Through Endoglin Antagonism

 

Inventor(s): Application No.: Country: Filing Date: Docket No.: CSMC Tech ID:

Bhowmick NA, Smith B, Placencio V, Madhav, A. 16/305,821 United States Nov29, 2018 065472.000621US00 bho000961

 

 

Schedule B

 

Technical Information

 

All lab notes, methods, protocols, SOPs, and technical know-how developed by inventors, including

 

Madhav et al (2018) Antagonizing CD105 enhances radiation sensitivity in prostate cancer. Oncogene. 2018 Aug;37(32):4385-4397

 

 

Schedule C

 

Milestones

 

	1.	Licensee shall obtain an IND for a Product within one (1) year of the Effective Date
	2.	Licensee shall commence a Phase II trial for a Product within two (2) years of the Effective Date
	3.	Licensee shall submit an NDA/BLA to the FDA or equivalent regulatory agency in another jurisdiction for a Product within seven (7) years of the Effective Date

 

 

Schedule D

Royalty Reporting Form

 

Licensee name:

Reporting period:

Date of report:

Date of first commercial sale:

 

Royalty Report

 

Product (list products by name)

No. units sold

Invoiced price per unit

Gross sales

Allowable deductions (attached itemized detail)

Country of sale/foreign currency/ conversion rate

Net sales

Product name

Product name

Product name

Total

 

Total net sales		$
Royalty rate
Royalty due		$

 

Total royalty due: $_________________________________

 

Non-Royalty Sublicense Revenue Report

 

Total Non-Royalty Sublicense Revenue received		$
Date received
Applicable percentage payable to CSMC
Total Non-Royalty Sublicense Revenue payable to CSMC		$

 

Report prepared by:

Title:

Date:

 

Please send electronic copy of report to CSTechTransfer@cshs.org.

 

 

 

Exhibit 10.7

 

EXCLUSIVE LICENSE AGREEMENT

 

THIS EXCLUSIVE LICENSE AGREEMENT (“Agreement”) is entered into as of this 30th day of August 2019 (“Effective Date”) by and between CEDARS-SINAI MEDICAL CENTER, a California nonprofit public benefit corporation (“CSMC”), with offices at 8700 Beverly Boulevard, Los Angeles, California 90048-1865, and ACTCELL BIOPHARMA, INC., a California corporation (“Licensee”), with offices at 2355 Westwood Blvd. #139, Los Angeles, CA 90064.

 

R E C I T A L S

 

A. CSMC owns and/or is entitled to grant license rights with respect to certain Patent Rights and Technical Information (as defined below) invented or developed at CSMC under the direction of Dr. John S. Yu, MD and Keith L. Black, MD (hereinafter collectively referred to as the “Inventors”).

 

B. CSMC desires to have the Patent Rights and the Technical Information developed, used and commercialized in the Field of Use (as defined below) by Licensee, and Licensee desires to obtain an exclusive, worldwide license to conduct research in the Field of Use, and to develop, manufacture, use and sell Products (as defined below) in the Field of Use, using the Patent Rights and Technical Information in accordance with the terms of this Agreement. Other than the rights expressly granted by CSMC hereunder within the Field of Use, Licensee acknowledges that CSMC shall retain all other rights with respect to the Patent Rights and the Technical Information.

 

C. CSMC and Licensee intend that the execution, delivery and performance of this Agreement by each party, and the consummation of the transactions contemplated hereunder, shall not at any time threaten CSMC’s tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and Section 23701d of the California Revenue and Taxation Code, or cause CSMC to be in default under any of CSMC’s issued and outstanding tax-exempt bonds.

 

NOW, THEREFORE, in consideration of the mutual covenants and premises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.	DEFINITIONS

 

1.1 “Affiliate” or “Affiliates” shall mean any corporation, person or entity, which controls, is controlled by, or is under common control with, a party to this Agreement without regard to stock or other equity ownership. For purposes hereof, the terms “control” and “controls” mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a corporation, person or entity, whether through the ownership of voting securities, by contract or otherwise.

 

1.2 “Confidential Information” shall mean any confidential or proprietary information furnished by one party (the “Disclosing Party”) to the other party (the “Receiving Party”) in connection with this Agreement, including, without limitation, all specifications, know-how, trade secrets, technical information, drawings, software, models, business information and patent applications pertaining to the Patent Rights and Technical Information, and as further provided in Section 10 hereof.

 

 

1.3 “FDA” shall mean the United States Food and Drug Administration, or any successor agency thereof.

 

1.4 “Field of Use” shall mean the treatment of cancer.

 

1.5 “Funding Agencies” shall mean any public or private granting agencies which have provided funding to CSMC or to any of the Inventors for the development of any of the Patent Rights or Technical Information prior to the Effective Date.

 

1.6 “Improvements” shall mean all improvements or enhancements to the Patent Rights that, after the Effective Date, are conceived and reduced to practice if patentable, or reduced to practice if not patentable, by at least one Inventor.

 

1.7 “Licensee Developments” shall mean any and all processes, uses, designs, applications, methods and compositions-of-matter, indications, improvements, enhancements and modifications in the Field of Use directly based upon or directly created using the Patent Rights and/or Technical Information and which were discovered or developed by or on behalf of Licensee (exclusive of work performed by CSMC or the Inventors) during the term of this Agreement.

 

1.8 “Net Sales” shall mean the gross amount invoiced by Licensee, its Affiliates, Permitted Sublicensees, affiliates of Permitted Sublicensees, or any of them, to third parties for all sales of Products less (a) discounts actually allowed; (b) credits for claims, allowances, retroactive price reductions or returned goods; (c) prepaid freight; and (d) sales taxes or other governmental charges actually paid in connection with sales of Products (but excluding what are commonly known as income taxes and value-added taxes). Sales of Products by Licensee, or a Permitted Sublicensee of Licensee, to any Affiliate or Permitted Sublicensee which is a reseller thereof shall be excluded, and only the subsequent sale of such Products by Affiliates or Permitted Sublicensees of Licensee to unrelated parties shall be deemed Net Sales hereunder. If a Product is sold or provided as part of a system, package, or combination product or service that involve one or more products or services not covered by the Patent Rights (each, a “Combination Product”), Net Sales shall be calculated by multiplying the Net Sales of such Combination Product, by the fraction A/B, where “A” is the price of the Product included in such Combination Product when sold separately from any other products or services not covered by the Patent Rights and “B” is the price of the Combination Product. In the event that no market price is available for the Product included in such Combination Product when supplied or priced separately, CSMC and Licensee shall determine in good faith the fair market value thereof.

 

1.9 “Non-Royalty Sublicense Revenues” shall mean, but is not limited to, upfront fees, license maintenance fees, and milestone payments, or other payments, including the fair market value of any non-cash consideration, received by Licensee in consideration for any rights granted to Patent Rights under a sublicense agreement, and excludes any and all sales-based royalties paid to Licensee.

 

 

1.10 “Other Product” or “Other Products” shall mean any products and/or services in the Field of Use, other than a Patent Product, derived in any manner whatsoever from any of the Technical Information.

 

1.11 “Patent Rights” shall mean the patents and/or patent applications existing on the Effective Date which are described on Schedule A attached hereto, and all patents and/or patent applications (including provisional patent applications) existing as of the Effective Date in any other country corresponding to any of the foregoing, and all divisions, continuations, reissues, reexaminations, supplementary protection certificates and extensions thereof, whether domestic or foreign, all claims of continuations-in-part that are entitled to the benefit of the priority date of any of the foregoing, and any patent that issues thereon. The Patent Rights are all owned by CSMC.

 

1.12 “Patent Product” or “Patent Products” shall mean any products and/or services in the Field of Use that, except for the license granted hereunder, would infringe a Valid Claim of the Patent Rights.

 

1.13 “Product” or “Products” shall mean a Patent Product and/or an Other Product.

 

1.14 “Technical Information” shall mean, as of the Effective Date, the following information in the Field of Use which is described in the Patent Rights or otherwise provided to Licensee: know-how, trade secrets, unpublished patent applications, software, bioinformatics, unpatented technology, technical information, statistical information and analyses, biological materials, chemical reagents, preclinical and clinical information, in each case which has been conceived or reduced to practice prior to the Effective Date, in the conduct by CSMC of the Activated T Cells for Cancer programs at CSMC under the direction of one or any of the Inventors. The Technical Information shall further include information in the Field of Use described in Schedule B hereto and which has been reduced to practice prior to the Effective Date in the conduct of the aforementioned research programs at CSMC under the direction of one or any of the Inventors. Technical Information is all owned by CSMC.

 

1.15 “Territory” shall mean worldwide.

 

1.16 “Valid Claim” shall mean a claim of an issued patent included within the Patent Rights, which claim has not (a) lapsed, been canceled or become abandoned, (b) been declared invalid or unenforceable by a non-appealable decision or judgment of a court or other appropriate body or authority of competent jurisdiction, or (c) been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise. The term Valid Claim shall also include the claims of a pending patent application within the Patent Rights for a period of seven (7) years from the actual filing date of that patent application.

 

2.

LICENSE

 

2.1 Grant of Exclusive Rights. Subject to the terms of this Agreement, CSMC hereby grants to Licensee, and Licensee hereby accepts from CSMC, the exclusive license, with the right to grant sublicenses (subject to the terms of Section 2.2 hereof), under and to the Patent Rights and Technical Information during the term of this Agreement (as provided in Section 6 hereof) to conduct research in the Field of Use and to make, have made, use, import, offer for sale, sell and/or have sold Products in the Field of Use in the Territory. The foregoing grant of exclusivity is made expressly subject to the following:

 

(a) All applicable laws and regulations, including, without limitation, the requirements of federal law as pertains to the manufacture of products within the United States;

 

 

(b) All applicable rules of the Funding Agencies which have provided funding to CSMC or to any of its employees (including any of the Inventors) for the development of the Patent Rights and Technical Information; and

 

(c) The following non-exclusive rights to the Patent Rights and Technical Information, which are retained by CSMC within the Field of Use:

 

(i) the right to submit for publication the scientific findings from research conducted by or through CSMC or its investigators (including the Inventors) related to the Patent Rights and the Technical Information; and

 

(ii) the right (A) to use any tangible or intangible information contained in the Patent Rights or the Technical Information or any Improvements (so long as CSMC shall treat such information as Confidential Information and maintain its confidentiality in accordance with Section 10 hereof), for CSMC’s research, internal teaching and other educationally-related and non-commercial (except for charges to its own patients) clinical purposes, where clinical use does not involve a third party funding grant to commercialize such information, and (B) to obtain research funding for further study and development thereof from governmental and other nonprofit organizations (including grant applications).

 

(d) Notwithstanding any other provision hereof to the contrary, all rights to the Patent Rights, Technical Information and Improvements outside of the Field of Use are retained by CSMC. Furthermore, this Agreement confers no license or rights by implication, estoppel, or otherwise under any patent applications or patents of CSMC other than Patent Rights regardless of whether such patents are dominant or subordinate to Patent Rights.

 

2.2 Sublicensing. Licensee shall have the right to grant sublicenses or to assign any or all of the rights granted hereunder only to an entity which has been approved in writing by CSMC (each, “Permitted Sublicensee”). Any such Permitted Sublicensee shall be subject in all respects to the provisions contained in this Agreement and Licensee will remain primarily liable to CSMC for, and shall be responsible for monitoring and enforcing, performance of all of Licensee’s obligations hereunder by any such Permitted Sublicensee. Without limiting the generality of the foregoing, as an express condition of any such sublicense, any such Permitted Sublicensee shall be required to agree in writing to be bound by commercially reasonable reporting and record keeping, indemnification and inspection provisions, and the applicable provisions of this Agreement, including, without limitation, those pertaining to the use of CSMC’s name and marks, indemnification of CSMC and the use of CSMC’s Confidential Information. Permitted Sublicensees may not further sublicense without CSMC’s prior written consent, which consent shall not be unreasonably withheld. Licensee shall promptly forward to CSMC a copy of any and all fully executed sublicense agreements, any subsequent amendments, and all copies of Permitted Sublicensees’ profit sharing or royalty reports, in no event more than thirty (30) days following execution or receipt thereof, as applicable. Licensee shall also keep CSMC reasonably informed with respect to the progress of any relations entered into with any Permitted Sublicensees. If Licensee shall conduct one or more audits of its Permitted Sublicensees hereunder during the term hereof, Licensee shall provide copies of all audit reports to CSMC on a timely basis. The covenants pertaining to the use of CSMC’s name and marks, the indemnification of CSMC and the use of CSMC’s Confidential Information in any sublicense or assignment shall run for the benefit of CSMC, who shall be expressly stated as being a third-party beneficiary thereof with respect to the covenants set forth in this Agreement. Licensee understands and agrees that none of its permitted sublicenses hereunder shall reduce in any manner any of its obligations set forth in this Agreement.

 

 

(a) Royalty-Free Sublicenses. If, and only if, Licensee pays all royalties due CSMC from a Permitted Sublicensee’s Net Sales, Licensee may grant that Permitted Sublicensee a royalty-free or non-cash sublicense or cross-license.

 

2.3 Improvements. Subject to the rights and applicable rules of the Funding Agencies, Licensee shall have, for a period of sixty (60) days after receipt by Licensee of written notice from CSMC disclosing an Improvement, the exclusive first right to negotiate with CSMC to obtain one or more licenses to the Improvement in the Field of Use upon such terms and conditions as shall be agreed by the parties hereto, which terms and conditions shall include provisions for fair market value consideration for the grant of any such licenses. If Licensee declines or fails to pursue, or if the parties fail to conclude negotiations for a license to, such Improvement in the Field of Use during the sixty (60) day period specified above, then CSMC shall have the right to commence discussions with any other party concerning such Improvement. Subject to the provisions of this Section 2.3, Licensee acknowledges and agrees that CSMC expressly retains and reserves any and all right, title and interest in and to the Improvement, whether or not in the Field of Use and, accordingly, no license to any Improvement is granted to Licensee under this Agreement.

 

2.4 Licensee Developments. Licensee hereby grants, and shall require its Permitted Sublicensee(s) to grant to CSMC a nonexclusive, royalty-free, irrevocable, paid-up license, with the right to grant sublicenses to non-profit research institutions and governmental agencies, to practice and use Licensee Developments for non-commercial research purposes, which license shall include, without limitation, the rights to: (a) publish the scientific findings from research conducted by or through CSMC or on its behalf, (b) use any tangible or intangible information contained in the Licensee Developments (so long as CSMC shall treat such information as Confidential Information and maintain its confidentiality in accordance with Section 10 hereof), for CSMC’s internal teaching and other educationally-related and non-commercial (except for charges to its own patients) clinical purposes, where clinical use does not involve a third party funding grant to commercialize such information, and (c) obtain research funding from governmental and other nonprofit organizations (including grant applications).

 

 

2.5 Diligent Commercialization. Licensee acknowledges that it is important to CSMC, and a requirement of the United States Government under Title 35, Section 203 of the United States Code, that Licensee pursue the development, commercialization and marketing of Products and otherwise exercise commercially reasonable efforts to maximize the value of this Agreement to CSMC. Without limiting the foregoing, Licensee shall maintain a bona fide, funded, ongoing and active research, development, manufacturing, regulatory, marketing or sales program (all as commercially reasonable) to make Products commercially available to the public as soon as commercially practicable in the Territory. Should CSMC determine that Licensee fails to use commercially reasonable efforts to maximize the Patent Rights in any national political jurisdiction in the Territory at any time following the one (1) year anniversary of the Effective Date of this Agreement, CSMC shall provide Licensee with notice of such determination and give Licensee a period of ninety (90) days to provide written evidence satisfactory to CSMC that Licensee or its Permitted Sublicensee(s) has sales of Products in such jurisdiction in question or an effective, ongoing and active research, development, manufacturing, marketing or sales program, as appropriate, directed toward obtaining regulatory approval, and/or production and/or sales of Products in such jurisdiction in accordance with Licensee’s business, legal, medical and scientific judgment and Licensee’s normal practices and procedures for products having similar technical and commercial potential. Should Licensee fail to provide such written evidence satisfactory to CSMC within such ninety (90) day period, CSMC shall have the right, at CSMC’s sole and absolute discretion, to either: (i) terminate this Agreement with respect to the applicable national political jurisdiction within the Territory or (ii) require Licensee to negotiate in good faith a sublicense with a Permitted Sublicensee(s) in the applicable national jurisdiction to maximize the Patent Rights in such jurisdiction.

 

2.6 Milestones. As part of Licensee’s diligent commercialization efforts under Section 2.5, CSMC and Licensee have agreed on the Milestones set forth on Schedule C, with each such Milestone being deemed a separate and independent condition. Within sixty (60) days after each anniversary of the Effective Date, Licensee shall prepare and deliver to CSMC an annual written report (to be certified by an executive officer of Licensee) indicating its compliance with the Milestones. If Licensee believes that it is or will be unable to achieve such Milestones despite its diligent efforts, Licensee may request amendments or reasonable extensions to Schedule C in writing for CSMC’s consideration. Licensee agrees to provide any additional information reasonably required by CSMC to evaluate Licensee’s performance under this Agreement. If Licensee fails to meet any annual Milestone designated in Schedule C hereto, and has not obtained an extension or amendment to such Milestone(s), CSMC may, at its option and as its sole remedy for Licensee’s breach of this Section 2.6, upon written notice to Licensee, convert the exclusive license granted under Section 2.1 hereof to a non-exclusive license or to a co-exclusive license, or terminate the license.

 

2.7 Preference for United States Industry. To the extent that the Patent Rights and Technical Information have been developed using funding from the United States Government, Licensee agrees that any Products made, used or sold in the United States shall be manufactured substantially in the United States.

 

3.	REPRESENTATIONS AND WARRANTIES

 

3.1 Rights to Technology. Except for the rights, if any, of the Funding Agencies or the United States Government, CSMC represents and warrants to Licensee that, to the best of its actual, current knowledge (without investigation outside of CSMC as to such representations and warranties) (a) it has the right to grant the licenses in this Agreement, (b) it has not granted licenses to the Patent Rights or Technical Information to any other party that would restrict the rights granted hereunder except as stated herein and (c) there are no claims, judgments or settlements to be paid by CSMC with respect the Patent Rights or Technical Information or pending claims or litigation relating to the Patent Rights or Technical Information. Except for any potential or actual rights of Funding Agencies or the United States Government, CSMC is not aware that any additional rights or licenses are necessary for Licensee to exercise its licensed rights granted by CSMC under this Agreement.

 

 

3.2 Limited Warranty; Certain Damages.

 

(a) Limited Warranty. CSMC makes no representation or warranty other than those expressly specified in this Agreement. Licensee accepts the Patent Rights and the Technical Information on an “AS-IS” basis. CSMC MAKES NO OTHER WARRANTIES CONCERNING PATENT RIGHTS OR TECHNICAL INFORMATION COVERED BY THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO PATENT RIGHTS, TECHNICAL INFORMATION OR ANY PRODUCT. CSMC MAKES NO WARRANTY OR REPRESENTATION AS TO THE VALIDITY OR SCOPE OF PATENT RIGHTS, OR THAT ANY PRODUCT WILL BE FREE FROM AN INFRINGEMENT ON PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THAT NO THIRD PARTIES ARE IN ANY WAY INFRINGING PATENT RIGHTS COVERED BY THIS AGREEMENT. LICENSEE HEREBY AGREES THAT LICENSEE WILL NOT GIVE, AND SHALL NOT PERMIT ANY AFFILIATES OR SUBLICENSEES OR AFFILIATES THEREOF TO GIVE, ANY SUCH WARRANTY OR REPRESENTATION TO THIRD PARTIES ON BEHALF OF CSMC.

 

(b) Certain Damages. EXCEPT FOR THE BREACH OF THE CONFIDENTIALITY PROVISIONS IN SECTION 10 OR IN ACCORDANCE WITH THE OBLIGATION TO INDEMNIFY SET FORTH IN SECTION 8, IN NO EVENT SHALL CSMC BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF PROFITS OR EXPECTED SAVINGS OR OTHER ECONOMIC LOSSES, OR FOR INJURY TO PERSONS OR PROPERTY) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ITS SUBJECT MATTER, REGARDLESS OF WHETHER CSMC KNOWS OR SHOULD KNOW OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR THE BREACH OF THE CONFIDENTIALITY PROVISIONS IN SECTION 10 OR IN ACCORDANCE WITH THE OBLIGATION TO INDEMNIFY SET FORTH IN SECTION 8, CSMC’S AGGREGATE LIABILITY FOR ALL DAMAGES OF ANY KIND RELATING TO THIS AGREEMENT OR ITS SUBJECT MATTER SHALL NOT EXCEED THE AMOUNT PAID BY LICENSEE TO CSMC UNDER THIS AGREEMENT. THE FOREGOING EXCLUSIONS AND LIMITATIONS SHALL APPLY TO ALL CLAIMS AND ACTIONS OF ANY KIND, WHETHER BASED ON CONTRACT, TORT (INCLUDING, BUT NOT LIMITED TO NEGLIGENCE), OR ANY OTHER GROUNDS.

 

3.3 Rights Retained by Funding Agencies. Licensee acknowledges that to the extent that the Patent Rights and Technical Information have been developed in part under one or more funding agreements (“Funding Agreements”) with one or more Funding Agencies, such Funding Agencies have certain statutory, non-exclusive rights relative thereto for use for government purposes as well as regulatory or statutory “march-in rights” (collectively, “Statutory Rights”). Licensee also acknowledges that to the extent that the Improvements may be developed in part under one or more Funding Agreements with one or more Funding Agencies, such Funding Agencies may have certain Statutory Rights relative thereto. This Agreement is explicitly made subject to such Statutory Rights and, to the extent of any conflict between any such Statutory Rights and this Agreement, such Statutory Rights shall prevail.

 

 

4.	CONSIDERATION

 

In consideration of the execution and delivery by CSMC of this Agreement, Licensee agrees as follows:

 

4.1 License Fee. Within thirty (30) days of Licensee having raised $500,000 in capital, Licensee shall pay to CSMC a non-refundable license fee in an amount equivalent to $50,000, plus the costs, including attorneys’ fees and filing fees, actually incurred by CSMC before or after the Effective Date in the prosecution of the Patent Rights.

 

4.2 Royalties and Non-Royalty Revenue.

 

(a) Running Royalties for Products. Licensee agrees to pay and shall pay to CSMC the following non-refundable running royalties (each, a “Royalty”) in the amounts set forth below:

 

(i) a running royalty of 4.25% on Net Sales of Patent Products made, used, sold or otherwise distributed by Licensee or any Permitted Sublicensee hereunder (“Patent Product Royalty Rate”) and

 

(ii) a running royalty of 0.5% on Net Sales of Other Products made, used, sold or otherwise distributed by Licensee or any Permitted Sublicensee hereunder (“Other Product Royalty Rate”).

 

(b) Minimum Royalties. Licensee shall pay to CSMC an annual minimum royalty payment (“Minimum Royalty”) of $10,000 per year beginning on the third (3^rd) anniversary of the Effective Date and on each anniversary of the Effective Date thereafter. Each annual payment of the Minimum Royalty shall be credited against Royalties payable such that no Royalties shall be payable unless the Royalties for such annual period exceed $10,000; provided, that excess amounts paid in respect of the Minimum Royalty may not be carried over to the following calendar year. Licensee’s failure to pay the Minimum Royalty payment to CSMC shall constitute a material breach of this Agreement by Licensee.

 

(c) Permitted Deductions. If Licensee is required to make any payment to a third party to obtain a license for the manufacture, use, sale or import of a Product or otherwise exploit the Patent Rights, Licensee shall be entitled to deduct the amount of such third party payments made in a particular calendar year against Royalties payable to CSMC for that year; provided, however, that in no event shall the Royalties payable to CSMC hereunder for any one- year period be reduced by operation of this section by more than fifty percent (50%); and provided, further, that such third party payments shall only be creditable against Royalties payable to CSMC for the calendar year in which the third party payment was actually made by Licensee.

 

 

(d) Highest Royalty Due. If a Product is covered by both the definition of Patent Product and Other Product, CSMC shall be entitled to the Patent Product Royalty Rate on the Product as defined in Section 4.2(a)(i), but shall not be entitled to also receive the Other Product Royalty Rate on the same Product under Section 4.2(a)(ii). To the extent a Product ceases being a Patent Product, but is still an Other Product, CSMC shall be entitled to receive a Royalty on such Product at the Other Product Royalty Rate, but only for such time as specified in Section 4(f).

 

(e) Licensee Challenge of Patent Rights. Should Licensee bring, directly or through a third party indirectly, an action challenging the validity, scope or enforceability of any Patent Rights, Licensee will first provide CSMC with at least ninety (90) days’ prior written notice that it intends so to do before filing such a challenge. Following the giving of such notice, Licensee will pay to CSMC the Royalties and Non-Royalty Sublicense Revenue due hereunder at the rate of two times the applicable rate during the pendency of such action. Should the outcome of such action determine that any claim of a patent challenged by Licensee is valid and/or infringed and/or enforceable, as applicable, Licensee will thereafter pay to CSMC the Royalties and Non-Royalty Sublicense Revenue due hereunder at the rate of three times the applicable rate for all Products sold that would infringe such claim and/or transactions that include a grant of rights to such claim. Such increased royalty reflects the increased value of the Patent Rights upheld in such action. In the event that a challenge to the Patent Rights brought by Licensee is partially or entirely successful, Licensee will have no right to recoup any Royalties or other amounts paid before or during the period of the challenge. Additionally, Licensee agrees to disburse any and all proceeds received from any sublicense of the applicable Patent Rights throughout the duration of any such challenge to CSMC, and agrees to reimburse CSMC for all costs actually incurred by CSMC in connection with the applicable legal proceedings. In the event that all or any portion of this Section 4.2(e) is invalid, illegal or unenforceable, then the parties will use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, gives effect to the intent of this Section 4.2(e).

 

(f) Arm’s-Length Transactions. On sales of Products which are made in other than an arms’-length transaction, the value of the Net Sales attributed under this Section 4.2 to such a transaction shall be that which would have been received in an arms’-length transaction, based on sales of like quality and quantity products on or about the time of such transaction.

 

(g) Duration of Royalty Obligations. The royalty obligations of Licensee as to each Product shall terminate on a country-by-country and product-by-product basis concurrently with the expiration of:

 

(i) For Patent Products, the last to expire of a Valid Claim within the Patent Rights that covers such Patent Product, including any term extensions thereof, and

 

(ii) For Other Products, the longer of twenty (20) years after the first bona fide commercial sale of such Other Product in a country or expiration of any market exclusivity period granted by a regulatory agency for such Other Product.

 

 

(h) Non-Royalty Revenues.

 

(i) Non-Royalty Sublicense Revenues. Any and all “Non-Royalty Sublicense Revenues” shall be reported and paid to CSMC by Licensee as set forth below within sixty (60) days of receipt by Licensee. Licensee shall pay to CSMC a percentage of these Non Royalty Sublicense Revenues according to the following schedule:

 

Timing of Receipt of Non-Royalty Sublicense Revenue		Percent of Non-Royalty Sublicense Revenues Payable to CSMC
Prior to receipt of FDA authorization of an Investigational New Drug (“IND”) application or equivalent regulatory agency authorization in another jurisdiction for a Product		35%
After receipt of FDA authorization of an IND application for a Product or equivalent regulatory agency authorization in another jurisdiction, but prior to submission of a New Drug Application (“NDA”) or Biologics License Applications (BLA) to the FDA or equivalent regulatory agency in another jurisdiction		10%
After submission of an NDA/BLA for a Product but prior to receipt of FDA approval of an NDA/BLA or equivalent regulatory agency approval in another jurisdiction for a Product		8%
After receipt of FDA approval of an NDA/BLA or equivalent regulatory agency approval in another jurisdiction for a Product		5%

 

Any non-cash consideration received by Licensee from Permitted Sublicensees shall be valued at its fair market value as of the date of receipt and such amount shall be paid in cash to CSMC in accordance with the schedule above. In the event that the Patent Rights are sublicensed in combination with one or more patented technologies that are not covered under this Agreement, Non-Royalty Sublicense Revenues for the purposes of this Section 4.2(h) shall be calculated on a pro-rata basis in a manner to be mutually agreed by CSMC and Licensee (which agreement may be a condition of approval under Section 2.2).

 

(ii) Product Development Milestones. Licensee agrees to pay and shall pay to CSMC the following non-creditable, non-refundable product development milestone payments within sixty (60) days of the first occurrence of the following milestones (or their equivalents):

 

Milestone Event		Milestone Payment
Successful completion of Phase I clinical trial for a Product		$150,000
Successful completion of a Phase II clinical trial for a product and receipt of FDA or equivalent regulatory agency in another jurisdiction approval for a Phase III clinical trial		$250,000
Receipt of FDA approval of an NDA/BLA or equivalent foreign regulatory approval in a non-United States major commercial market		$1,500,000
Cumulative Net Sales have exceeded $50,000,000		$2,500,000

 

 

(i) Payment and Accounting.

 

(i) Reports. Each payment of Royalties shall be accompanied by a report in the form attached as Schedule D hereto, which sets forth in reasonable detail the number and each type of Product sold and the calculation of Net Sales applicable thereto, and such additional details as may be reasonably requested by CSMC for the determination of Royalties payable hereunder. Products shall be considered as being sold for the purpose of the calculation of Royalties under this Agreement when the Products have been invoiced. Each payment of Non-Royalty Sublicense Revenue shall be accompanied by a report in the form attached as Schedule D hereto setting forth in reasonable detail the basis for the calculation of such amounts, and such additional details as may be reasonably requested by CSMC for the determination of Non-Royalty Sublicense Revenue payable hereunder. All copies of reports under this Section shall be sent by electronic mail to CSTechTransfer@cshs.org. Except as otherwise provided herein, all amounts due hereunder shall be paid in United States dollars and shall be made without set off and free and clear of (and without any deduction or withholding for) any taxes, duties, levies, imposts or similar fees or charges. Royalties shall be payable by Licensee quarterly, within forty-five (45) days after the end of each calendar quarter, based upon revenues accrued during the immediately preceding calendar quarter. Licensee agrees to pay and shall pay to CSMC, or cause its Permitted Sublicensees to pay to CSMC, all Royalties resulting from the activities of its Permitted Sublicensees, within forty-five (45) days after the end of each calendar quarter.

 

(ii) Notice of Payment. Licensee shall provide prompt written notice to CSMC that it has paid the licensee fee required by Section 4.1 or any product development milestone payment required by Section 4.2(i) by electronic mail to CSTechTransfer@cshs.org.

 

(iii) Wire Transfer Instructions. All payments due hereunder shall be made by Licensee to CSMC in accordance with the following wire transfer instructions:

 

City National Bank

400 N. Roxbury Drive

Beverly Hills, CA 90210

ABA# 122 016 066

Account Number: 210-132260

Account Name: Cedars-Sinai Medical Center - Tech Transfer

Reference: Tech Transfer - ACTcell Biopharma, Inc.

 

 

(iv) Records and Audits. Licensee shall create and maintain complete and accurate records and documentation concerning all sales of Products by Licensee, its Affiliates and Permitted Sublicensees as well as transactions based upon which Non-Royalty Sublicense Revenue is due, in sufficient detail to enable the Royalties and Non-Royalty Sublicense Revenue, respectively, that is payable hereunder to be determined. Licensee shall retain such records and documentation for not less than seven (7) years from the date of their creation. During the term of this Agreement and for a period of three (3) years thereafter, CSMC and its representatives shall have the right to audit such records and documentation as shall pertain to the determination and payment of Royalties and Non-Royalty Sublicense Revenue. Such examiners shall have reasonable access during regular business hours to Licensee’s offices and the relevant records, files and books of account, and shall have the right to examine any other records reasonably necessary to determine the accuracy of the calculations provided by Licensee. The costs of any such audit shall be borne by CSMC, unless as a result of such inspection it is determined that the amounts payable by Licensee for any period are in error by greater than five percent (5%), in which case the costs of such audit shall be borne by Licensee. CSMC shall report the results of any such audit to Licensee within forty-five (45) days of completion. Thereafter, Licensee shall promptly pay to CSMC the amount of any underpayment discovered in such audit, or CSMC shall credit to Licensee against future Royalty payments the amount of any overpayment discovered in such audit, as the case may be. In addition, Licensee shall pay interest on any underpayment at the rate that is the lower of (i) two percent (2%) over the rate of interest announced by Bank of America in Los Angeles, California (or any successor in interest thereto or any commercially equivalent financial institution if no such successor exists) to be its “prime rate”, or (ii) the highest rate permitted by applicable law, from the date such amount was underpaid to the date payment is actually received.

 

(v) Currency Transfer Restrictions. If any restrictions on the transfer of currency exist in any country or other jurisdiction so as to prevent Licensee from making payments to CSMC, Licensee shall take all commercially reasonable steps to obtain a waiver of such restrictions or to otherwise enable Licensee to make such payments. If Licensee is unable to do so, Licensee shall make such payments to CSMC in a bank account or other depository designated by CSMC in such country or jurisdiction, which payments shall be in the local currency of such country or jurisdiction, unless payment in United States dollars is permitted. Any payment by Licensee to CSMC in currencies other than United States dollars shall be calculated using the appropriate foreign exchange rate for such currency quoted in the California edition of The Wall Street Journal for the close of business of the last banking day of the calendar quarter in which such payment is being made.

 

(vi) Late Charges. A service charge of two percent (2%) per month, not to exceed the maximum rate allowed by applicable law, shall be payable by Licensee on any portion of Licensee’s outstanding Royalty or Non-Royalty Sublicense Revenue balance or any other amount payable by Licensee hereunder (including, without limitation, reimbursement for Prosecution costs as set forth in Section 4.1 hereof) that is not paid to CSMC within thirty (30) days past the due date.

 

(vii) Taxes. Licensee shall pay, or cause to be paid, any and all taxes required to be paid or withheld on any sales, licenses or other transfers for value of Products or Patent Rights (other than taxes imposed on the income or revenues of CSMC); provided, however, that under no circumstances shall the amounts of such taxes be deducted from the total amount of payments otherwise due to CSMC hereunder. Upon CSMC’s request, Licensee shall secure and send to CSMC proof of any such taxes withheld and paid by Licensee, its Affiliates or Permitted Sublicensees.

 

 

(viii) No Escrow. Licensee shall pay all Royalties and Non-Royalty Sublicense Revenue directly to CSMC and shall not pay royalties into any escrow or other similar account, including in the event of a validity or non-infringement challenge to the Patent Rights.

 

5.	PATENT RIGHTS

 

5.1 Prosecution. Commencing on the Effective Date, Licensee shall assume, in coordination with CSMC, full responsibility for the application, maintenance, reexamination, reissue, opposition and prosecution of any kind (collectively “Prosecution”) relating to the Patent Rights in the Territory, including, but not limited to, payment of all costs, fees and expenses related thereto. Subject to the approval of CSMC (which approval shall not be unreasonably withheld), Licensee shall have the right to select counsel with respect to the responsibility assumed by Licensee in this Section 5.1, and Licensee shall diligently pursue the Prosecution of the Patent Rights to the benefit of CSMC. For all purposes of the patent Prosecution, CSMC shall be the named “client” of such patent counsel. Each party shall provide the other with copies of any and all material or communications with the United States Patent and Trademark Office, or any foreign patent office, and CSMC shall be afforded the opportunity of prior review and comment on such action or paper.

 

(a) Foreign Filings. Should Licensee elect not to file for patent protection for the Patent Rights in a certain national jurisdiction in the Territory, Licensee shall notify CSMC of such election at least forty-five (45) days before a final due date which would result in the bar of patent protection for the Patent Rights in such national jurisdiction. In such event, CSMC may, at its sole option and expense, file for patent protection for the Patent Rights in the applicable national jurisdiction, and Licensee’s license under this Agreement with respect to such national jurisdiction shall terminate, allowing CSMC to freely dispose of its Patent Rights in the applicable national jurisdiction as it sees fit in its sole discretion.

 

5.2 Abandonment, Disclaimers, etc. Licensee shall obtain the prior written consent

 

of CSMC (which consent shall not be unreasonably withheld), prior to abandoning, disclaiming, withdrawing, seeking reissue, seeking reexamination or allowing to lapse any patent or patent application within the Patent Rights. In the event that Licensee shall elect to abandon the Prosecution (including the payment of maintenance fees or annuities) of any patent or patent application included in the Patent Rights, Licensee shall notify CSMC of such election at least forty-five (45) days before a final due date which would result in abandonment or bar of patentability of the patent or patent application. In such event, CSMC may, at its sole option and expense, continue Prosecution of the patent application or patent. Licensee further agrees that it shall not file any continuation-in-part application relating to the Patent Rights unless the additional disclosure or material to be included in the continuation-in-part application is necessary or appropriate to support the patentability of a claim recited in a parent application on which the continuation-in-part application is based. Licensee shall not file any continuation-in-part application without CSMC’s prior written consent, which shall not be unreasonably withheld.

 

 

5.3 Expenses. Licensee shall pay all expenses resulting from its obligations in Section 5.1 hereof. CSMC shall exercise reasonable efforts to cause the Inventors (to the extent they are available and on CSMC’s staff as employees) to cooperate fully with Licensee with respect to the Prosecution of the Patent Rights, and CSMC shall be reimbursed for all reasonable out-of-pocket expenses as such expenses are incurred.

 

5.4 CREATE Act. Licensee shall not invoke the Cooperative Research and Technology Enhancement Act of 2004, as set forth under Title 35, Section 102(c) of the United States Code (the “CREATE Act”), with respect to the Patent Rights without first obtaining the prior written consent of CSMC.

 

6.	TERM AND TERMINATION

 

6.1 Term. Unless earlier terminated as provided in Section 6.2 hereof, the term of this Agreement shall commence on the Effective Date and shall expire, on a country-by-country and product-by-product basis, on the later of (i) the date upon which the last to expire of the patents covering the Patent Rights or a Valid Claim shall expire, (ii) twenty (20) years after the first bona fide commercial sale of a Product in the country in question or (iii) the expiration of any market exclusivity period granted by a regulatory agency.

 

6.2 Termination. Except as provided by Section 6.3 hereof, and in addition to the termination provisions of Sections 2.5, 2.6 and 5.1(a), this Agreement shall terminate upon the earliest to occur of the following:

 

(a) Automatically if Licensee shall enter into a liquidating bankruptcy, be adjudged insolvent, liquidate, dissolve and/or if the business of Licensee shall be placed in the hands of a receiver, assignee, or trustee, whether by voluntary act of Licensee or otherwise; provided, however, that if any such action is involuntary, termination shall not take place unless the action is not reversed within thirty (30) days. Further, Licensee shall give CSMC at least forty- five (45) days’ prior written notice before Licensee initiates any bankruptcy proceeding, and CSMC shall have the right to terminate this Agreement immediately upon receipt of such notice;

 

(b) Automatically if the performance by either party to this Agreement of any term, covenant, condition or provision hereof (i) shall jeopardize (A) the licensure of CSMC, (B) CSMC’s participation in the Medicare, Medi-Cal or other reimbursement or payment programs, (C) the full accreditation of CSMC by the Joint Commission of Accreditation of Healthcare Organizations or any other state or nationally recognized accreditation organization, or (D) CSMC’s tax-exempt status; or (ii) is deemed illegal or unethical by any recognized governmental agency or body. Upon the occurrence of any of the items set forth in this subparagraph (b), CSMC shall provide written notice to Licensee setting forth the reason for such termination (which termination shall be effective immediately);

 

(c) Upon thirty (30) days’ written notice from CSMC if, within such thirty (30) day period (i) Licensee shall fail to pay fully any Royalty or Non-Royalty Sublicense Revenue payment required by Section 4.2 hereof, or (ii) Licensee shall fail to undertake commercially reasonable efforts to exploit the Patent Rights in the Field of Use in the Territory, regardless of Licensee’s satisfaction of the Milestones provided in Schedule C hereto;

 

 

(d) Upon sixty (60) days’ written notice from CSMC if, within such sixty (60) day period, Licensee shall fail to cure fully any breach or default of any material obligation under this Agreement as described in such written notice detailing the facts of such breach with reasonable specificity; provided, however, that Licensee may avoid such termination if, before the end of such 60-day period, such breach or default has been cured by Licensee to the reasonable satisfaction of CSMC;

 

(e) Upon ninety (90) days’ written notice from Licensee if, within such ninety (90) day period, CSMC shall fail to cure fully any breach or default of any material obligation under this Agreement as described in such written notice detailing the facts of such breach with reasonable specificity; provided, however, that CSMC may avoid such termination if, before the end of such 90-day period, such breach or default has been cured by CSMC to the reasonable satisfaction of Licensee; and

 

(f) Upon the mutual written agreement of the parties hereto (such termination to be effective as of the date mutually agreed upon in such written agreement).

 

6.3 Obligations Upon Termination. Upon any termination of this Agreement pursuant to Section 6.2 hereof, nothing herein shall be construed to release any party from any liability for any obligation incurred through the effective date of termination (e.g., confidentiality, reimbursement of patent expenses incurred prior to such date, etc.) or for any breach of this Agreement prior to the effective date of such termination. Licensee may, for a period of one (1) year after the effective date of such termination, sell all tangible Products customarily classified as “inventory” that it has on hand at the date of termination, subject to payment by Licensee to CSMC of the applicable Royalty and Non-Royalty Sublicense Revenue; provided, however, that any such action by Licensee does not subject CSMC to any of the occurrences set forth in Section 6.2(b) hereof.

 

6.4 Effect of Termination. In the event of any termination of this Agreement pursuant to Section 6.2 hereof, where such termination has not been caused by any action or inaction on the part of any Permitted Sublicensee of Licensee or by any breach by such Permitted Sublicensee of its obligations under its sublicense from Licensee, such termination of this Agreement shall be without prejudice to the rights of each non-breaching Permitted Sublicensee of Licensee and each non-breaching Permitted Sublicensee shall be deemed to be a licensee of CSMC thereunder, and CSMC shall be entitled to all rights, but shall not be subject to any obligations (other than the grant of license and appurtenant obligations under this Agreement to the extent provided for in such sublicense) of Licensee thereunder. This Section 6.4, however, shall not be applicable if this Agreement has been terminated under Section 6.2(b) under circumstances where the application of this Section 6.4 would subject CSMC to any of the occurrences set forth in Section 6.2(b).

 

6.5 Right to Institute Legal Actions. Notwithstanding the provisions of Section 6.2 hereof, CSMC, on the one hand, and Licensee, on the other hand, may institute any other legal action or pursue any other remedy against the other party permitted by applicable law if the other party does not substantially cure any breach or default of any material obligation as provided herein.

 

 

6.6 Reversion of Rights. Notwithstanding anything to the contrary set forth herein (including, but not limited to, Section 5 hereof), full responsibility for Prosecution of the Patent Rights shall, at the option of CSMC (exercisable in its sole and absolute discretion), and at its sole expense from the date of reversion, revert to CSMC upon any termination of this Agreement.

 

6.7 Return of Data. In the event of any termination or expiration of this Agreement, Licensee shall promptly provide CSMC with copies of all data, information and materials obtained or generated by or on behalf of Licensee in the course of conducting research and developing Products using the Patent Rights and the Technical Information.

 

7.	INFRINGEMENT BY THIRD PARTIES

 

7.1 Enforcement. Licensee shall have the first right and the obligation to enforce, at its sole expense, any Patent Rights to the extent licensed hereunder against infringement by third parties and shall notify CSMC in writing in advance of all such enforcement efforts. Upon Licensee’s undertaking to pay all expenditures reasonably incurred by CSMC, CSMC shall reasonably cooperate in any such enforcement and, as necessary, join as a party therein. Licensee shall reimburse CSMC for all expenses, including reasonable attorneys’ fees, incurred in connection with any such enforcement. In the event that Licensee does not file suit against or commence and conclude settlement negotiations with a substantial infringer of Patent Rights within ninety (90) days of receipt of a written demand from CSMC that Licensee bring suit, then the parties will consult with one another in an effort to determine whether a reasonably prudent licensee would institute litigation to enforce the patent in question in light of all relevant business and economic factors (including, but not limited to, the projected cost of such litigation, the likelihood of success on the merits, the probable amount of any damage award, the prospects for satisfaction of any judgment against the alleged infringer, the possibility of counterclaims against the parties hereto, the impact of any possible adverse outcome on Licensee and the effect any publicity might have on the parties’ respective reputations and goodwill). If, after such process, it is determined that a suit should be filed and Licensee does not file suit or commence settlement negotiations forthwith against the infringer, then CSMC shall have the right, at its own expense, to enforce any Patent Rights licensed hereunder on behalf of itself and Licensee. Any damages or other recovery from an infringement action undertaken by Licensee shall first be used to reimburse the parties, on a pro rata pari passu basis, for the costs and expenses incurred in such action, and shall thereafter be allocated between the parties as follows: (i) fifty percent (50%) to CSMC and (ii) fifty percent (50%) to Licensee. If Licensee fails to prosecute any such action to completion, then any damages or other recovery net of the parties’ costs and expenses incurred in such infringement action shall be the sole property of CSMC.

 

7.2 Defense Of Patent Rights. In the event that any Patent Rights are the subject of a legal action seeking declaratory relief or of any reexamination or opposition proceeding instituted by a third party, the parties agree to promptly consult with each other concerning the defense of such actions or proceedings. If the parties agree that such defense should be undertaken, then Licensee shall bear the expenses, including attorneys’ fees, associated with such defense and in any recoupment of expenses. If the parties disagree, then the party desiring to defend the action or proceeding may proceed with such defense and will bear its own expenses, and be entitled to all sums recovered.

 

 

8.	INDEMNIFICATION

 

8.1 Indemnification by Licensee. Subject to Section 8.2 hereof, Licensee shall hold harmless, defend and indemnify CSMC and each of its officers, directors, employees (including the Inventors), agents and sponsors of the research (except Licensee) (each, an “Indemnified Party”, and collectively, the “Indemnified Parties”) from and against any and all claims, damages, losses, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses and costs of investigation, whether or not suit is filed) suffered or incurred by any of the Indemnified Parties in any action, suit, litigation, arbitration or dispute of any kind (“Action”) arising or resulting from any negligence or willful acts or omissions on the part of Licensee, its Affiliates or Permitted Sublicensees in connection with (a) their use the Patent Rights or Technical Information and/or (b) the exercise of their rights hereunder or under any sublicense, including, but not limited to (i) the preclinical development and clinical testing of Products, and (ii) the manufacture, sale, use, marketing, or other disposition of Products developed, manufactured, sold, marketed, used or otherwise disposed of under this Agreement. As part of its obligations hereunder, Licensee shall defend any Action brought against any of the Indemnified Parties with counsel of its own choosing and reasonably acceptable to CSMC, and neither CSMC nor any other Indemnified Party shall enter into any settlement of any such Action without first obtaining prior approval of Licensee. Licensee shall pay all costs, including attorney’s fees, incurred in enforcing this indemnification provision. Should CSMC or any other Indemnified Party not afford Licensee the right to defend any such Action, or should CSMC or any other Indemnified Party not obtain the approval of Licensee to any such settlement, Licensee shall have no obligation to indemnify CSMC or any other Indemnified Party hereunder. Should Licensee fail to provide a defense for the Indemnified Parties as required hereunder, then Licensee shall reimburse CSMC for its out-of-pocket expenses (including reasonable attorneys’ fees and expenses and costs of investigation) which are incurred as a result of any investigation, defense or settlement relating to the foregoing, which reimbursement shall be made to CSMC upon receipt by Licensee of invoices reflecting in reasonable detail such expenses incurred by CSMC. Licensee shall obtain and maintain insurance policies (including products liability and general liability policies at such time as is appropriate) which are reasonable and necessary to cover its activities and to comply with the indemnification obligations set forth above. Such insurance policies shall name CSMC as an additional insured party and shall provide a minimum of $3,000,000 in coverage per occurrence. Upon initiation of any human clinical studies of Products, Licensee shall have first increased its insurance coverage to a minimum of $10,000,000 in the aggregate. Licensee shall provide CSMC with prompt written notice of any material change in coverage under such policies. If the parties determine that evidence of Licensee’s insurance coverage is necessary and appropriate, within thirty (30) days of the Effective Date (subject to extension if reasonably required) and annually thereafter, Licensee shall provide CSMC with a certificate of insurance issued by the appropriate insurance company evidencing the insurance coverage required by this Section 8.1, together with copies of the endorsement which specifies CSMC as an additional insured and the declarations page for each such insurance policy. The certificate of insurance, endorsements and declarations pages (and any renewals or replacements thereof), if required, shall be sent to CSMC’s Technology Transfer Office by electronic mail at CSTechTransfer@cshs.org.

 

 

8.2 Notice of Claim. CSMC shall promptly notify Licensee in writing of any claim or Action or material threat thereof brought against any Indemnified Party in respect of which indemnification may be sought and, to the extent allowed by law, shall reasonably cooperate with Licensee in defending or settling any such claim or Action. No settlement of any claim, Action or threat thereof received by CSMC and for which CSMC intends to seek indemnification (for itself or on behalf of any other Indemnified Party) shall be made without the prior joint written approval of Licensee and CSMC.

 

9.	USE OF NAMES

 

9.1 CSMC Names and Marks. Licensee shall not, unless as required by any law or governmental regulation, use the name of CSMC, and/or any of its trademarks, service marks, trade names or fictitious business names or the name of any CSMC officer, faculty member, employee, student or volunteer (collectively, “CSMC Names and Marks”) without express prior written consent of the Vice President for Public Relations and Marketing of CSMC. Further, prior to any reference by Licensee to CSMC Names and Marks in any manner, Licensee shall provide CSMC with a writing reflecting the proposed reference so that CSMC can review the reference within a reasonable period of time prior to the proposed use thereof by Licensee. This limitation includes, but is not limited to, use by Licensee in any regulatory filing, advertising, offering circular, prospectus, sales presentation, news release or trade publication. Subject to compliance by Licensee with the foregoing, which shall be deemed conditions precedent to any use of CSMC Names and Marks by Licensee, Licensee shall ensure that the CSMC Names and Marks are used as scientifically or academically appropriate in the “byline” of any article, abstract, manuscript or any other publication related to the subject matter hereof.

 

9.2 No Endorsements by CSMC. By entering into this Agreement, CSMC does not directly or indirectly endorse any product or service provided, or to be provided, by Licensee whether directly or indirectly related to this Agreement. Licensee shall not state or imply that this Agreement is an endorsement by CSMC.

 

10.	CONFIDENTIALITY

 

10.1 Non-Disclosure. The parties hereto shall keep the terms of this Agreement and all business and scientific discussions relating to the business of the parties strictly confidential. All patient information to which a party is given access by the other party shall be subject to the provisions of the Confidentiality of Medical Information Act (Cal. Civ. Code §§56, et seq.) and the Health Insurance Portability and Accountability Act of 1996, and all regulations promulgated thereunder. It may, from time to time, be necessary for the parties, in connection with performance under this Agreement, to disclose Confidential Information (including know-how) to each other. The Receiving Party (as defined in Section 1.2 hereof) shall keep in strictest confidence the Confidential Information of the Disclosing Party (as defined in Section 1.2 hereof), using the standard of care it normally uses for information of like character, and shall not disclose the Confidential Information to any third party or use it except as expressly authorized by the prior written consent of the Disclosing Party or as otherwise permitted by this Agreement; provided, however, that Licensee may disclose the Confidential Information received from CSMC to its Affiliates and Permitted Sublicensees as shall be reasonably necessary to carry out the intent of this Agreement or any sublicense granted by Licensee as contemplated by this Agreement if, but only if, such Affiliates and/or Permitted Sublicensees each execute a confidentiality agreement containing confidentiality provisions no less restrictive than those confidentiality provisions contained in this Section 10. The Receiving Party’s obligation hereunder shall not apply to Confidential Information that the Receiving Party can show:

 

(a) Is or later becomes part of the public domain through no fault or neglect of the Receiving Party;

 

 

(b) Is received in good faith from a third party having no obligations of confidentiality to the Disclosing Party, provided that the Receiving Party complies with any restrictions imposed by the third party;

 

(c) Is independently developed by the Receiving Party without use of the Disclosing Party’s Confidential Information; or

 

(d) Is required by law or regulation to be disclosed (including, without limitation, in connection with FDA filings, filings with another government agency or as required under the California Public Records Act), provided that the Receiving Party uses reasonable efforts to restrict disclosure and to obtain confidential treatment.

 

10.2 Limits on Permitted Disclosures. Each party agrees that any disclosure or distribution of the other party’s Confidential Information within its own organization shall be made only as is reasonably necessary to carry out the intent of this Agreement. The parties further agree that all of their respective officers, employees, agents, representatives or approved sublicensees to whom any Confidential Information is disclosed or distributed shall have agreed to maintain its confidentiality. In such event, the Receiving Party shall identify with reasonable particularity, upon request by the Disclosing Party, each person within the Receiving Party’s organization to whom the Receiving Party has disclosed or distributed Confidential Information.

 

10.3 Legally Required Disclosures. If a subpoena or other legal process concerning Confidential Information is served upon any party hereto pertaining to the subject matter hereof, the party served shall notify the other party immediately, the other party shall cooperate with the party served, at the other party’s expense, in any effort to contest the validity of such subpoena or other legal process. This Section 10.3 shall not be construed in any way to limit any party’s ability to satisfy any disclosure of its relationship with the other party required by any governmental authority.

 

10.4 Patent Rights as Confidential Information. The Patent Rights are understood by Licensee to be the Confidential Information of CSMC to the extent “unpublished” as such term is construed under the United States Patent Laws. As such, Licensee’s confidentiality obligations hereunder automatically extend to any and all Technical Information and to any and all patent applications of CSMC relating to any Patent Rights, Technical Information and Improvements and to any and all communications with the United States Patent Office, and any foreign patent office relating to any Patent Rights, Technical Information or Improvements.

 

10.5 Return of Confidential Information. In the event of any termination of this Agreement, the Receiving Party shall promptly return all Confidential Information and any copies made thereof previously made available to the Receiving Party by the Disclosing Party.

 

 

10.6 Remedies. Both parties acknowledge and agree that it would be difficult to measure damages for breach by either party of the covenants set forth in this Section 10, and that injury from any such breach would be incalculable, and that money damages would therefore be an inadequate remedy for any such breach. Accordingly, either party shall be entitled, in addition to all other remedies available hereunder or under law or equity, to injunctive or such other equitable relief as a court may deem appropriate to restrain or remedy any breach of such covenants.

 

11.	INFORMATION EXCHANGE

 

In addition to the Patent Rights and Technical Information, the parties shall cooperate to exchange such non-confidential information as may be appropriate and necessary to facilitate Licensee’s development and commercialization of Products incorporating any Patent Rights or Technical Information.

 

12.	PATENT MARKING

 

Licensee shall actually or virtually mark all Patent Products made, sold or otherwise disposed of by or on behalf of it or any of its Permitted Sublicensees as set forth under Title 35, Section 287(a) of the United States Code and shall respond to any request or disclosure under Title 35, Section 287(b)(4)(B) of the United States Code by only notifying CSMC of the request for disclosure.

 

13.	MISCELLANEOUS

 

13.1 Notices. Any notice, request, instruction or other document required by this Agreement shall be in writing and shall be deemed to have been given (a) if mailed with the United States Postal Service by prepaid, first class, certified mail, return receipt requested, at the time of receipt by the intended recipient, (b) if sent by Federal Express or other overnight carrier, signature of delivery required, at the time of receipt by the intended recipient, or (c) if sent by facsimile transmission, when so sent and when receipt has been acknowledged by appropriate telephone or facsimile receipt, addressed as follows:

 

In the case of CSMC to:

 

Cedars-Sinai Medical Center

8700 Beverly Boulevard

Los Angeles, California 90048-1865

Attention: Executive Vice President for Finance & CFO

 

with a copy to Vice President, Intellectual Property

 

or in the case of Licensee to:

 

ACTcell Biopharma, Inc.

2355 Westwood Blvd. #139

Los Angeles, CA 90064

Attention: Chairman

 

or to such other address or to such other person(s) as may be given from time to time under the terms of this Section 13.1.

 

 

13.2 Compliance with Laws. Each party shall comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this Agreement.

 

13.3 Governing Law. For any dispute between the parties to this Agreement which arises from or relates to this Agreement, the Agreement shall be construed and enforced in accordance with the laws of the United States of America and of the State of California, irrespective of choice of laws provisions. The parties agree that Los Angeles County, California shall be the situs of any legal proceeding arising out of or relating to this Agreement. Each party hereby waives any right it may have to assert the doctrine of forum non conveniens or similar doctrine or to object to venue with respect to any proceeding brought in accordance with this Section, and stipulates that the state and federal courts located in Los Angeles, California shall have in personam jurisdiction and venue over each of them for the purpose of litigating any dispute, controversy, or proceeding arising out of or related to this Agreement. Each party hereby authorizes and accepts service of process sufficient for personal jurisdiction in any action against it as contemplated by this Section by registered or certified mail, return receipt requested, postage prepaid, to its address for the giving of notices as set forth in this Agreement.

 

13.4 Waiver. Failure of any party to enforce a right under this Agreement shall not act as a waiver of that right or the ability to assert that right relative to the particular situation involved.

 

13.5 Enforceability. If any provision of this Agreement shall be found by a court of competent jurisdiction to be void, invalid or unenforceable, the same shall be reformed to comply with applicable law or stricken if not so conformable, so as not to affect the validity or enforceability of the remainder of this Agreement.

 

13.6 Modification. No change, modification, or addition or amendment to this Agreement, or waiver of any term or condition of this Agreement, is valid or enforceable unless in writing and signed and dated by the authorized officers of the parties to this Agreement.

 

13.7 Entire Agreement. This Agreement and the Schedules hereto (which are incorporated herein by this reference as if fully set forth herein) constitute the entire agreement between the parties with respect to the subject matter hereof and thereof, and replace and supersede as of the date hereof and thereof any and all prior agreements and understandings, whether oral or written, between the parties with respect to the subject matter of such agreements.

 

13.8 Construction. This Agreement has been prepared, examined, negotiated and revised by each party and their respective attorneys, and no implication shall be drawn and no provision shall be construed against any party to this Agreement by virtue of the purported identity of the drafter of this Agreement or any portion thereof.

 

13.9 Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall constitute one and the same instrument. This Agreement may be executed by facsimile or in .pdf format.

 

 

13.10 Attorneys’ Fees. In the event of any action at law or in equity between the parties hereto to enforce any of the provisions hereof, the unsuccessful party to such litigation shall pay to the successful party all reasonable costs and expenses, including reasonable attorneys’ fees, incurred therein by such successful party; and if such successful party shall recover a judgment in any such action or proceeding, such reasonable costs, expenses and attorneys’ fees may be included in and as part of such judgment.

 

13.11 Assignment; Successors.

 

(a) Subject to Section 13.11(b), Licensee may assign this Agreement as part of

 

a sale, regardless of whether such a sale occurs through an asset sale, stock sale, merger or other combination, or any other transfer of Licensee’s entire business, or that part of Licensee’s business that exercises all rights granted under this Agreement. Any other attempt to assign this Agreement by Licensee is null and void. In the event of a bankruptcy, assignment is permitted only to a party that can provide adequate assurance of future performance, including diligent development and sales, of Products.

 

(b) Prior to any assignment, the following conditions must be met: (i) Licensee

 

must give CSMC thirty (30) days prior written notice of the assignment, including the new assignee’s contact information, (ii) the new assignee must agree in writing to CSMC to be bound by this Agreement, and (iii) CSMC must have received a $25,000.00 assignment fee.

 

(c) Subject to the limitations on assignment herein, this Agreement shall be binding upon and inure to the benefit of any successors in interest and assigns of CSMC and Licensee. CSMC shall have the right to assign its rights hereunder as part of any reorganization or bond financing.

 

13.12 Further Assurances. At any time and from time to time after the Effective Date, each party shall do, execute, acknowledge and deliver, and cause to be done, executed, acknowledged or delivered, all such further acts, transfers, conveyances, assignments or assurances as may be reasonably required to consummate the transactions contemplated by this Agreement.

 

13.13 Survival. The following sections shall survive any expiration or earlier termination of this Agreement: 4.2(f), 6.3, 8, 9, 10, 12 and 13.

 

[signature page follows]

 

 

IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to execute this Agreement as of the date first above written.

 

	“LICENSEE”:
	ACTCELL BIOPHARMA, INC., A CALIFORNIA CORPORATION
	By:	/s/ John S. Yu
	Name:	John S. Yu
	Title:	Chairman

 

Date:

August 28, 2019

 

	“CSMC”:
	CEDARS SINAI MEDICAL CENTER, A
	CALIFORNIA NONPROFIT PUBLIC BENEFIT CORPORATION
	By:	/s/ Edward M. Prunchunas
		Edward M. Prunchunas
		Executive Vice President for Finance and CFO

 

Date:

8/29/2019

 

	By:	/s/ James D. Laur
		James D. Laur
		Vice President, Intellectual Property

 

Date:

8/29/2019

 

 

Schedule A

 

Patent Rights

 

1.	METHOD OF GENERATING ACTIVATED T CELLS FOR CANCER THERAPY

Inventor(s):	John S. Yu, MD, Keith L. Black, MD
Application No.:	62/884,570
Filing Date:	August 08, 2019
CSMC Tech ID:	yu001273

 

 

Schedule B

 

Technical Information

 

All lab notes, methods, protocols, SOPs, and technical know-how developed by inventors.

 

 

Schedule C

 

Milestones

 

1.	Completion of preclinical studies within one (1) year of the Effective Date.
2.	Completion of toxicology studies within two (2) years of the Effective Date.
3.	Obtaining IND within three (3) years of the Effective Date.
4.	Commencing Phase I trial within four (4) years of the Effective Date.
5.	Submission of NDA/BLA to FDA or equivalent regulatory agency in another jurisdiction within seven (7) years of the Effective Date.

 

 

Schedule D

Royalty Reporting Form

 

Licensee name: ACTcell Biopharma, Inc.

Reporting period:

Date of report:

Date of first commercial sale:

 

Royalty Report

 

Product (list products by name)

No. units sold

Invoiced price per unit

Gross sales

Allowable deductions (attached itemized detail)

Country of sale/foreign currency/ conversion rate

Net sales

Product name

Product name

Product name

Total

 

Total net sales		$
Royalty rate
Royalty due		$

 

Total royalty due: $_________________________________

 

Non-Royalty Sublicense Revenue Report

 

Total Non-Royalty Sublicense Revenue received		$
Date received
Applicable percentage payable to CSMC
Total Non-Royalty Sublicense Revenue payable to CSMC		$

 

Report prepared by:

Title:

Date:

 

Please send report to:

 

Cedars-Sinai Medical Center 8700 Beverly Boulevard

Los Angeles, California 90048-1865

Attention: Senior Vice President for Finance & CFO

with a copy to Vice President for Legal & Technology Affairs

 

Please send electronic copy to CSTechTransfer@cshs.org.

 

 

Exhibit 10.8

 

Effective Date: June 17, 2021

Cedars-Sinai Medical Center

8700 Beverly Boulevard,

Los Angeles, California 90048-1865

Attention: Vice President, Intellectual Property

 

Re: Exclusive License Agreement dated August 30, 2019 – Amendment

 

Dear Cedars-Sinai Medical Center:

 

Reference is made to that certain Exclusive License Agreement regarding the technology titled “Methods of generating activated T cells for cancer therapy” dated August 30, 2019 (as amended from time to time, the “License Agreement”) by and between CEDARS-SINAI MEDICAL CENTER, a California nonprofit public benefit corporation (“CSMC”), and ACTCELL BIOPHARMA, INC., a California corporation (“ACTCELL”). Kairos Pharma, Ltd, a California corporation (“Kairos”) is the successor-by-merger to ACTCELL’s rights and obligations under the License Agreement. Kairos shall be referred to hereinafter as the “Licensee.”

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties in this letter amendment agreement (this “Letter Amendment”) hereby agree to, and acknowledge, the following:

 

1. Each milestone due date listed on Schedule C of the License Agreement is hereby extended by twenty-four (24) months from the original deadline listed in the License Agreement.

 

2. Except as expressly provided in this Letter Amendment, all of the terms and provisions of the License Agreement remain unchanged. On and after the Effective Date stated at the top of this Letter Amendment, each reference in the License Agreement to “this Agreement,” “the Agreement,” “hereunder,” “hereof,” “herein,” or words of like import, and each reference to the License Agreement in any other agreements, documents, or instruments executed and delivered pursuant to, or in connection with, the License Agreement, will mean and be a reference to the License Agreement as amended by this Letter Amendment.

 

Please acknowledge your agreement to, and acceptance of, the foregoing by signing this Letter Amendment below. Please return a signed copy to the undersigned, it being agreed that this Letter Amendment may be executed in counterparts and signatures received by electronic transmission shall have the same effect as original signatures.

 

	Sincerely,
	/s/ John S. Yu, M.D.
	John S. Yu, M.D.
	Chief Executive Officer of Kairos Pharma, Ltd.
	2355 Westwood Blvd. #139,
	Los Angeles, CA 90064

 

(CSMC signature page follows)

 

 

ACKNOWLEDGED AND AGREED TO ON JUNE 17, 2021 BY:

 

	CEDARS-SINAI MEDICAL CENTER
	By:	/s/ James D. Laur, JD
		James D. Laur, JD
		Vice President, Intellectual Property
	By:	/s/ Edward M. Prunchunas
		Edward M. Prunchunas
		Executive Vice President, Finance & Treasurer

 

 

 

Exhibit 10.9

 

EXCLUSIVE LICENSE AGREEMENT

 

This Exclusive License Agreement (“Agreement”) is entered into as of this 1^st day of October 2017 (“Effective Date”) by and between Cedars-Sinai Medical Center, a California nonprofit public benefit corporation (“CSMC”), with offices at 8700 Beverly Boulevard, Los Angeles, California 90048-1865, and Kairos Pharma Ltd. f/k/a NanoGB13, Inc., a California corporation (“Licensee”), with offices at 565 Esplanade, Suite 206, Redondo Beach, CA 90277.

 

R E C I T A L S

 

A. CSMC owns and is entitled to grant license rights with respect to certain Patent Rights (as defined below) invented or developed in connection with research performed at CSMC’s Molecular Therapeutics Core, a laboratory wholly owned by CSMC, under the direction of Ramachandran Murali, Ph.D., and Hirotaka Kanzaki, Ph.D. (hereinafter collectively referred to as the “Inventors”).

 

B. CSMC desires to have the Patent Rights developed, used and commercialized in the Field of Use (as defined below) by Licensee, and Licensee desires to obtain an exclusive, worldwide license to conduct research in the Field of Use, and to develop, manufacture, use and sell Products (as defined below) in the Field of Use, using the Patent Rights in accordance with the terms of this Agreement. Other than the rights expressly granted by CSMC hereunder within the Field of Use, Licensee acknowledges that CSMC shall retain all other rights with respect to the Patent Rights.

 

C. CSMC and Licensee intend that the execution, delivery and performance of this Agreement by each party, and the consummation of the transactions contemplated hereunder, shall not at any time threaten CSMC’s tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and Section 2370Id of the California Revenue and Taxation Code, or cause CSMC to be in default under any of CSMC’s issued and outstanding tax-exempt bonds.

 

Now, Therefore, in consideration of the mutual covenants and premises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1. Definitions

 

1.1 “Affiliate” or “Affiliates” shall mean any corporation, person or entity, which controls, is controlled by, or is under common control with, a party to this Agreement without regard to stock or other equity ownership. For purposes hereof, the terms “control” and “controls” mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a corporation, person or entity, whether through the ownership of voting securities, by contract or otherwise.

 

 

1.2 “Confidential Information” shall mean any confidential or proprietary information furnished by one party (the “Disclosing Party”) to the other party (the “Receiving Party”) in connection with this Agreement, including, without limitation, all specifications, know-how, trade secrets, technical information, drawings, software, models, business information and patent applications pertaining to the Patent Rights, and as further provided in Section 10 hereof.

 

1.3 “FDA” shall mean the United States Food and Drug Administration, or any successor agency thereof.

 

1.4 “Field of Use” shall mean the diagnosis of diseases and disorders in humans and animals, the therapeutic treatment of disease and disorders in humans and animals, and the maintenance and improvement of health in humans and animals.

 

1.5 “Future Patent Rights” shall mean all improvements or enhancements to the Patent Rights that, after the Effective Date, are conceived and reduced to practice if patentable, or reduced to practice if not patentable, by at least one Inventor using any facilities, resources or personnel of CSMC.

 

1.6 “Licensee Improvements” shall mean any and all processes, uses, designs, applications, methods and compositions-of-matter, indications, improvements, enhancements and modifications in the Field of Use directly based upon or directly created using the Patent Rights and which were discovered or developed by or on behalf of Licensee during the term of this Agreement, exclusive of work performed by CSMC or the Inventors except (i) in the case of Dr. John Yu working in his capacity as Licensee’s Chairman and without using any facilities, resources or personnel of CSMC and (ii) in the case of Dr. Bong Seop Lee, Ph.D., working in his capacity as Licensee’s Vice President of Research and Development and without using any facilities, resources or personnel of CSMC. For the avoidance of doubt, any inventions created, discovered or developed by or on behalf of Licensee which were not directly based upon or directly created using the Patent Rights shall not be considered “Licensee Improvements” and shall not be subject to this Agreement.

 

1.7 “Net Sales” shall mean the gross amount invoiced by Licensee, its Affiliates, Permitted Sublicensees, affiliates of Permitted Sublicensees, or any of them, to third parties for all sales of Products less (a) discounts actually allowed; (b) credits for claims, allowances, retroactive price reductions or returned goods; (c) prepaid freight; and (d) sales taxes or other governmental charges actually paid in connection with sales of Products (but excluding what are commonly known as income taxes and value-added taxes). Sales of Products by Licensee, or a Permitted Sublicensee of Licensee, to any Affiliate or Permitted Sublicensee which is a reseller thereof shall be excluded, and only the subsequent sale of such Products by Affiliates or Permitted Sublicensees of Licensee to unrelated parties shall be deemed Net Sales hereunder. If a Product is sold or provided as part of a system, package, or combination product or service that involve one or more products or services not covered by the Patent Rights (each, a “Combination Product”), Net Sales shall be calculated by multiplying the Net Sales of such Combination Product, by the fraction A/B, where “A” is the price of the Product included in such Combination Product when sold separately from any other products or services not covered by the Patent Rights and “B” is the price of the Combination Product. In the event that no market price is available for the Product included in such Combination Product when supplied or priced separately, CSMC and Licensee shall determine in good faith the fair market value thereof.

 

 

1.8 “Non-Royalty Sublicense Revenues” shall mean upfront fees, license maintenance fees, and milestone payments, or other payments, including the fair market value of any non-cash consideration, received by Licensee in consideration for any rights granted to Patent Rights under a sublicense agreement, and excludes (a) any and all sales-based royalties paid to Licensee; and (b) payments received by Licensee from granting agencies and/or from a Permitted Sublicensee for costs related to research and development activities, regardless of whether the activities are preclinical or clinical.

 

1.9 “Patent Rights” shall mean the patents and/or patent applications existing on the Effective Date which are described on Schedule A attached hereto, and all patents and/or patent applications (including provisional patent applications) existing as of the Effective Date in any other country corresponding to any of the foregoing, and all divisions, continuations, reissues, reexaminations, supplementary protection certificates and extensions thereof, whether domestic or foreign, all claims of continuations-in-part that include at least one claim that is entitled to the benefit of the priority date of any of the foregoing, and any patent that issues thereon. The Patent Rights are all owned by CSMC. For the avoidance of doubt, the Patent Rights shall not include any Licensee Improvements.

 

1.10 “Product” shall mean any diagnostic or therapeutic product and/or service in the Field of Use that, except for the license granted hereunder, would infringe a Valid Claim of the Patent Rights.

 

1.11 “Territory” shall mean worldwide.

 

1.12 “Valid Claim” shall mean a claim of an issued patent included within the Patent Rights, which claim has not (a) lapsed, been canceled or become abandoned, (b) been declared invalid or unenforceable by a non-appealable decision or judgment of a court or other appropriate body or authority of competent jurisdiction, or (c) been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise. The term Valid Claim shall also include the claims of a pending patent application within the Patent Rights for a period of five (5) years from the earliest filing date of that patent application. For purposes of the preceding sentence, “earliest filing date” means, for a continuation, continuation-in-part or divisional application, the filing date of the earliest non-provisional application from which the continuation, continuation-in-part or divisional application claims priority in which the Valid Claim first actually appeared.

 

 

2. License

 

2.1 Grant of Exclusive Rights. Subject to the terms of this Agreement, CSMC hereby grants to Licensee, and Licensee hereby accepts from CSMC, the exclusive license, with the right to grant sublicenses (subject to the terms of Section 2.2 hereof), under and to the Patent Rights during the term of this Agreement (as provided in Section 6 hereof) to conduct research in the Field of Use and to make, have made, use, import, offer for sale, sell and/or have sold Products in the Field of Use in the Territory. The foregoing grant of exclusivity is made expressly subject to the following:

 

(a) All applicable laws and regulations, including, without limitation, the requirements of federal law as pertains to the manufacture of products within the United States;

 

(b) The following non-exclusive rights to the Patent Rights, which are retained by CSMC within the Field of Use:

 

(i) subject to Licensee’s right to prior review, the right to submit for publication the scientific findings from research conducted by or through CSMC or its investigators (including the Inventors) related to the Patent Rights; provided, that Licensee retains the rights to (a) delete Licensee’s Confidential Information from any proposed publication and CSMC shall delay such publication for a reasonable period of time, but no longer than thirty (30) days, to facilitate such deletion; and (b) request, within thirty (30) days of receiving the publication, a reasonable delay of no more than forty-five (45) days from the date of such request to allow the appropriate party to protect any know-how and/or patentable subject matter contained in such publication; and

 

(ii) the right (A) to use any tangible or intangible information contained in the Patent Rights (so long as CSMC shall treat such information as Confidential Information and maintain its confidentiality in accordance with Section 10 hereof), for CSMC’s research, internal teaching and other educationally-related and non-commercial clinical purposes, where clinical use does not involve a third party funding grant to commercialize such information, and (B) to obtain research funding for further study and development thereof from governmental and other nonprofit organizations (including grant applications).

 

(c) Notwithstanding any other provision hereof to the contrary, all rights to the Patent Rights and Future Patent Rights outside of the Field of Use are retained by CSMC. Furthermore, this Agreement confers no license or rights by implication, estoppel, or otherwise under any patent applications or patents of CSMC other than Patent Rights regardless of whether such patents are dominant or subordinate to Patent Rights.

 

 

2.2 Sublicensing. Licensee shall have the right to grant sublicenses or to assign any or all of the rights granted hereunder only to (a) an Affiliate; (b) a biopharmaceutical, pharmaceutical or bio-diagnostic company which is generally recognized in such industries and which, at the time of the sublicense, is in good standing and has a market capitalization of over $100,000,000; and (c) an entity which has been approved in writing by CSMC; provided, that such approval shall not be unreasonably withheld; provided, further, that the Licensee shall request consent from CSMC by submitting a written request to CSMC’s Technology Transfer Office by electronic mail at CSTechTransfer@cshs.org, and CSMC shall advise Licensee of its decision and of the reason for its decision within thirty (30) days of receiving the request from Licensee. Any sublicensee permitted under subsection (a) or (b) of the preceding sentence shall be referred to as a “Permitted Sublicensee”. In the event CSMC denies a requested sublicense, Licensee shall have the right to petition CSMC in writing for reconsideration of the denial within thirty (30) days. Any such Permitted Sublicensee shall be subject in all respects to the provisions contained in this Agreement and Licensee will remain primarily liable to CSMC for, and shall be responsible to the best of Licensee’s ability and resources for monitoring and enforcing, performance of all of Licensee’s obligations hereunder by any such Permitted Sublicensee. Without limiting the generality of the foregoing, as an express condition of any such sublicense, any such Permitted Sublicensee shall be required to agree in writing to be bound by commercially reasonable reporting and record keeping, indemnification and inspection provisions, and the applicable provisions of this Agreement, including, without limitation, those pertaining to the use of CSMC’s name and marks, indemnification of CSMC and the use of CSMC’s Confidential Information. Permitted Sublicensees may not further sublicense without CSMC’s prior written consent, which consent shall not be unreasonably withheld. Licensee shall promptly forward to CSMC a copy of any and all fully executed sublicense agreements, any subsequent amendments, and all copies of Permitted Sublicensees’ profit sharing or royalty reports, in no event more than thirty (30) days following execution or receipt thereof, as applicable. Licensee shall also keep CSMC reasonably informed with respect to the progress of any relations entered into with any Permitted Sublicensees. If Licensee shall conduct one or more audits of its Permitted Sublicensees hereunder during the term hereof, Licensee shall provide copies of all audit reports to CSMC on a timely basis. Licensee understands and agrees that none of its permitted sublicenses hereunder shall reduce in any manner any of its obligations set forth in this Agreement.

 

(a) Required Sublicensing. If Licensee is unable or unwilling to serve or develop a potential market or market territory for which there is a company willing to be a Permitted Sublicensee, Licensee will, at CSMC’s request, negotiate in good faith a sublicense with any such Permitted Sublicensee containing such terms as are standard for sublicense agreements in the biopharmaceutical industry.

 

(b) Royalty-Free Sublicenses. If, and only if, Licensee pays all royalties due CSMC from a Permitted Sublicensee’s Net Sales, Licensee may grant that Permitted Sublicensee a royalty-free or non-cash sublicense or cross-license.

 

2.3 CSMC Future Patent Rights. CSMC shall promptly notify Licensee in writing of all Future Patent Rights. Licensee shall have, for a period of sixty (60) days after receipt by Licensee of written notice from CSMC disclosing an Future Patent Right, the exclusive first right to negotiate with CSMC to obtain one or more licenses to the Future Patent Right in the Field of Use upon such terms and conditions as shall be agreed by the parties hereto, which terms and conditions shall include provisions for fair market value consideration for the grant of any such licenses. If Licensee declines or fails to pursue, or if the parties fail to conclude negotiations for a license to, such Future Patent Right in the Field of Use during the sixty (60) day period specified above, then CSMC shall have the right to commence discussions with any other party concerning such Future Patent Right. Subject to the provisions of this Section 2.3, Licensee acknowledges and agrees that CSMC expressly retains and reserves any and all right, title and interest in and to the Future Patent Right, whether or not in the Field of Use and, accordingly, no license to any Future Patent Right is granted to Licensee under this Agreement.

 

 

2.4 Licensee Improvements. Licensee hereby grants, and shall require its Permitted Sublicensee(s) to grant, to CSMC a nonexclusive, royalty-free, irrevocable, paid-up license to practice and use Licensee Improvements for non-commercial research purposes, which license shall include, without limitation, the rights to: (a) publish the scientific findings from research conducted by or through CSMC or on its behalf, subject to the prior approval of Licensee, which approval shall not be unreasonably delayed or withheld, (b) use any tangible or intangible information contained in the Licensee Improvements (so long as CSMC shall treat such information as Confidential Information and maintain its confidentiality in accordance with Section 10 hereof), for CSMC’s internal teaching and other educationally-related and non-commercial clinical purposes, where clinical use does not involve a third party funding grant to commercialize such information, and (c) obtain research funding from governmental and other nonprofit organizations (including grant applications). CSMC may not sublicense any Licensee Improvements to a third party or share such Licensee Improvements with a third party without Licensee’s prior written consent, not to be unreasonably withheld.

 

2.5 Milestones. Licensee acknowledges that it is important to CSMC, and a requirement of the United States Government under Title 35, Section 203 of the United States Code, that Licensee pursue the development, commercialization and marketing of Products and otherwise exercise commercially reasonable efforts to maximize the value of this Agreement to CSMC. CSMC and Licensee have agreed on the Milestones set forth on Schedule B, with each such Milestone being deemed a separate and independent condition. Within sixty (60) days after each anniversary of the Effective Date, Licensee shall prepare and deliver to CSMC an annual written report (to be certified by an executive officer of Licensee) that provides an overview of Licensee’s progress towards achieving each Milestone and its other efforts with respect to the ongoing development, commercialization, and marketing of the Products. If Licensee believes that it is or will be unable to achieve such Milestones despite its diligent efforts, Licensee may request amendments or reasonable extensions to Schedule B in writing for CSMC’s consideration, such amendments or reasonable extensions not to be unreasonably withheld, delayed or conditioned upon additional consideration. Licensee agrees to provide any additional information reasonably required by CSMC to evaluate Licensee’s performance under this Agreement. If Licensee fails to meet any Milestone designated in Schedule B hereto, and has not requested an extension or amendment to such Milestone(s), CSMC may, at its option and as its sole remedy (and Licensee’s sole liability) for Licensee’ breach of this Section 2.5, upon written notice to Licensee, convert the exclusive license granted under Section 2.1 hereof to a non-exclusive license or to a co-exclusive license, or terminate the license. Notwithstanding the foregoing or anything to the contrary herein, CSMC shall not exercise the right to convert the exclusive license granted under Section 2.1 hereof to a non-exclusive license or to a co-exclusive license, or terminate the license under this Section 2.5, for so long as Licensee is using diligent efforts to achieve the Milestone that has not yet been achieved.

 

3. Representations And Warranties

 

3.1 Rights to Technology. CSMC represents and warrants to Licensee that, to the best of its actual, current knowledge (without investigation outside of CSMC as to such representations and warranties) (a) it has not received any notice alleging that the Patent Rights are owned by any third party; (b) it has the right to grant the licenses in this Agreement, (c) it has not granted licenses to the Patent Rights to any other party that would restrict the rights granted hereunder except as stated herein and (d) there are no claims, judgments or settlements to be paid by CSMC with respect the Patent Rights or pending claims or litigation relating to the Patent Rights. CSMC is not aware that any additional rights or licenses are necessary for Licensee to exercise its licensed rights granted by CSMC under this Agreement.

 

 

3.2 Limited Warranty; Certain Damages.

 

(a) Limited Warranty. CSMC makes no representation or warranty other than those expressly specified in this Agreement. Licensee accepts the Patent Rights on an “AS-IS” basis. CSMC MAKES NO OTHER WARRANTIES CONCERNING PATENT RIGHTS COVERED BY THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO PATENT RIGHTS OR ANY PRODUCT. CSMC MAKES NO WARRANTY OR REPRESENTATION AS TO THE VALIDITY OR SCOPE OF PATENT RIGHTS, OR THAT ANY PRODUCT WILL BE FREE FROM AN INFRINGEMENT ON PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THAT NO THIRD PARTIES ARE IN ANY WAY INFRINGING PATENT RIGHTS COVERED BY THIS AGREEMENT. LICENSEE HEREBY AGREES THAT LICENSEE WILL NOT GIVE, AND SHALL NOT PERMIT ANY AFFILIATES OR SUBLICENSEES OR AFFILIATES THEREOF TO GIVE, ANY SUCH WARRANTY OR REPRESENTATION TO THIRD PARTIES ON BEHALF OF CSMC.

 

(b) Certain Damages. EXCEPT FOR THE BREACH OF THE CONFIDENTIALITY PROVISIONS IN SECTION 10 OR IN ACCORDANCE WITH THE OBLIGATION TO INDEMNIFY SET FORTH IN SECTION 8, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, SPECIAL, PUNITIVE, EXEMPLARY, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF PROFITS OR EXPECTED SAVINGS OR OTHER ECONOMIC LOSSES, LOSS OF USE OR FOR INJURY TO PERSONS OR PROPERTY) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ITS SUBJECT MATTER, REGARDLESS OF WHETHER A PARTY KNOWS OR SHOULD KNOW OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR THE BREACH OF THE CONFIDENTIALITY PROVISIONS IN SECTION 10 OR IN ACCORDANCE WITH THE OBLIGATION TO INDEMNIFY SET FORTH IN SECTION 8, THE FOREGOING EXCLUSIONS SHALL APPLY TO ALL CLAIMS AND ACTIONS OF ANY KIND, WHETHER BASED ON CONTRACT, TORT (INCLUDING, BUT NOT LIMITED TO NEGLIGENCE), OR ANY OTHER GROUNDS.

 

3.3 Rights of Funding Agencies. The Patent Rights have not been developed under any funding agreements (“Funding Agreements”) with any public, private or not for profit granting agencies or organizations (“Funding Agencies”); provided, that Licensee acknowledges that to the extent that the CSMC Future Patent Rights may be developed in part under one or more Funding Agreements with one or more Funding Agencies, such Funding Agencies may have certain statutory or contractual rights (“Funding Agency Rights”) relative thereto. This Agreement is explicitly made subject to such Funding Agency Rights and, to the extent of any conflict between any such Funding Agency Rights and this Agreement, such Funding Agency Rights shall prevail.

 

 

4. CONSIDERATION

 

In consideration of the execution and delivery by CSMC of this Agreement, Licensee agrees as follows:

 

4.1 License Fee. Within thirty (30) days of the Effective Date, Licensee shall pay CSMC a non-refundable license fee in the amount of Five Thousand Dollars ($5,000.)

 

4.2 Patent Costs. Licensee shall reimburse CSMC for all costs, including attorneys’ fees and filing fees, actually incurred by CSMC in the prosecution and maintenance of the Patent Rights through the Effective Date (“Prosecution Costs”). The Parties acknowledge and agree that the Prosecution Costs are $21,140.58 as of September 25, 2017. Licensee shall have the right to reimburse CSMC for the Prosecution Costs in installments in accordance with the following schedule: (a) within forty-five (45) days of commencing the first Phase I trial of a Product, Licensee shall pay CSMC $7,000; and (b) on the third anniversary of the Effective Date, Licensee shall pay CMSC the remaining balance of the Prosecution Costs; provided, that commencing on the Effective Date and continuing until the Prosecution Costs are paid in full, interest shall accrue and be payable on all outstanding amounts due under this Section 4.2 at the rate of two percent (2%) over the rate of interest announced by Bank of America in Los Angeles, California to be its “prime rate” on the Effective Date.

 

4.3 Annual License Maintenance Fee. Commencing on the third anniversary of the Effective Date and thereafter on each anniversary of the Effective Date for the duration of the Term of this Agreement, Licensee shall pay to CSMC a non-refundable annual license maintenance fee in the amount of Ten Thousand Dollars ($10,000) per year (“Maintenance Fee”). The annual Maintenance Fee shall be creditable against Royalties otherwise payable under Sections 4.4(a) and (b) during the applicable twelve (12) month period; provided, however, that Licensee may not carry over to the following year any amount by which the Maintenance Fee paid exceeds the actual amount of Royalties payable under Sections 4.4(a) and (b) during the applicable 12-month period.

 

4.4 Royalties and Non-Royalty Revenue.

 

(a) Direct Royalties. Licensee agrees to pay and shall pay to CSMC a running royalty of three and three-quarters percent (3.75%) on Net Sales of Products made, used, sold or otherwise distributed by Licensee hereunder (each, a “Direct Royalty”).

 

(b) Sublicense Royalties. In the event that Licensee has sublicensed the Patent Rights for a given country, Licensee agrees to pay and shall pay to CSMC fifteen percent (15%) of any royalties received by Licensee from its Permitted Sublicensees with respect to sales of Products by its Permitted Sublicensee in such country (each, a “Sublicense Royalty,” and together with Direct Royalties, “Royalties”), regardless of the effective date of the sublicense agreement Licensee does not intend to knowingly sublicense the Patent Rights in any country where government marketing approvals have not been obtained.

 

 

(c) Third Party Payments. If Licensee is required to make any payment to a third party to obtain a license for the manufacture, use, sale or import of a Product or otherwise exploit the Licensed Patent Rights, Licensee shall be entitled to deduct up to fifty percent (50%) of such third party payments made in a calendar year against royalties payable to CSMC for that year; provided, however, that in no event shall the Royalties payable to CSMC hereunder for any one-year period be reduced by operation of this section by more than fifty percent (50%); and provided, further, that such third party payments shall only be creditable against Royalties payable to CSMC for the calendar year in which the third party payment was actually made by Licensee.

 

(d) Licensee Challenge of Patent Rights. Should Licensee bring, directly or through a third party indirectly, an action challenging the validity, scope or enforceability of any Patent Rights, Licensee will first provide CSMC with at least ninety (90) days’ prior written notice that it intends so to do before filing such a challenge. Following the giving of such notice, Licensee will pay to CSMC the Royalties and Non-Royalty Sublicense Revenue due hereunder at the rate of two times the applicable rate during the pendency of such action. Should the outcome of such action determine that any claim of a patent challenged by Licensee is valid and/or infringed and/or enforceable, as applicable, Licensee will thereafter pay to CSMC the Royalties and Non-Royalty Sublicense Revenue due hereunder at the rate of three times the applicable rate for all Products sold that would infringe such claim and/or transactions that include a grant of rights to such claim. Such increased royalty reflects the increased value of the Patent Rights upheld in such action. In the event that a challenge of Licensed Patents brought by Licensee is partially or entirely successful, Licensee will have no right to recoup any Royalties or other amounts paid before or during the period of the challenge. Additionally, Licensee agrees to disburse any and all proceeds received from any sublicense of the applicable Patent Rights throughout the duration of any such challenge to CSMC, and agrees to reimburse CSMC for all costs actually incurred by CSMC in connection with the applicable legal proceedings. In the event that all or any portion of this Section 4.3(d) is invalid, illegal or unenforceable, then the parties will use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, gives effect to the intent of this Section 4.3(d).

 

(e) Arm’s-Length Transactions. On sales of Products which are made in other than an arms’-length transaction, the value of the Net Sales attributed under this Section 4.4 to such a transaction shall be that which would have been received in an arms’-length transaction, based on sales of like quality and quantity products on or about the time of such transaction.

 

(f) Duration of Royalty Obligations. The royalty obligations of Licensee as to each Product shall terminate on a country-by-country basis concurrently with the expiration of the last to expire of a Valid Claim within the Patent Rights that covers such Product, including any term extensions thereof.

 

 

(g) Non-Royalty Revenues.

 

(i) Non-Royalty Sublicense Revenues. Any and all “Non-Royalty Sublicense Revenues” shall be reported and paid to CSMC by Licensee as set forth below within sixty (60) days of receipt by Licensee. Licensee shall pay to CSMC a percentage of these Non- Royalty Sublicense Revenues according to the following schedule:

 

Date of Receipt of Non-Royalty Sublicense Revenue (from Effective Date)		Percent of Non-Royalty Sublicense Revenues Payable to CSMC
Prior to receipt of FDA authorization of an Investigational New Drug (“IND”) application for a Product			35	%
After receipt of FDA authorization of an IND application for a Product but prior to submission of a New Drug Application (“NDA”) to the FDA			10	%
After submission of an NDA for a Product but prior to receipt of FDA approval therefor			8	%
After receipt of FDA approval of an NDA for a Product			5	%

 

Any non-cash consideration received by Licensee from Permitted Sublicensees shall be valued at its fair market value as of the date of receipt and such amount shall be paid in kind to CSMC in accordance with the schedule above. In the event that the Patent Rights are sublicensed in combination with one or more patented technologies that are not covered under this Agreement, Non-Royalty Sublicense Revenues for the purposes of this Section 4.4(g) shall be calculated on a pro-rata basis in a manner to be mutually agreed by CSMC and Licensee (which agreement may be a condition of approval under Section 2.2).

 

(ii) Product Development Milestones. Licensee agrees to pay and shall pay to CSMC the following non-creditable, non-refundable product development milestone payments within sixty (60) days of the first occurrence of a Milestone (or its equivalent):

 

Milestone Event		Milestone Payment
Successful completion of Phase I clinical trial for a Product		$	150,000
Successful completion of a Phase II clinical trial for a product and receipt of FDA approval for a Phase III clinical trial		$	250,000
Receipt of FDA approval of a New Drug Application (“NDA”) or equivalent foreign regulatory approval in a non-United States major commercial market		$	1,500,000
Cumulative Net Sales have exceeded $5,000,000		$	250,000

 

 

(iii) In the event that Licensee has sublicensed the Patent Rights to a Permitted Sublicensee and, in accordance with such sublicense arrangement, Non-Royalty Sublicense Revenues are payable to Licensee by the Permitted Sublicensee in connection with or within ninety (90) days before or after the occurrence of any of the Milestone events set forth in Section 4.3(g)(ii), Licensee shall only be obligated to pay to CSMC the greater of (A) the percentage of the Non-Royalty Sublicense Revenues set forth in Section 4.4(g)(i) or (B) the applicable Milestone payment set forth in Section 4.4(g)(ii), but not both.

 

(h) Payment and Accounting.

 

(i) Reports. Each payment of Royalties shall be accompanied by a report in the form attached as Schedule C hereto, which sets forth in reasonable detail the number and each type of Product sold and the calculation of Net Sales applicable thereto, and such additional details as may be reasonably requested by CSMC for the determination of Royalties payable hereunder. Products shall be considered as being sold for the purpose of the calculation of Royalties under this Agreement when the revenues have been received from Sales of the Products. Each payment of Non-Royalty Sublicense Revenue shall be accompanied by a report in the form attached as Schedule C hereto setting forth in reasonable detail the basis for the calculation of such amounts, and such additional details as may be reasonably requested by CSMC for the determination of Non-Royalty Sublicense Revenue payable hereunder. Electronic copies of such reports shall be sent by electronic mail to CSTechTransfer@cshs.org. Except as otherwise provided herein, all amounts due hereunder shall be paid in United States dollars and shall be made without set off and free and clear of (and without any deduction or withholding for) any taxes, duties, levies, imposts or similar fees or charges. Royalties shall be payable by Licensee quarterly, within forty-five (45) days after the end of each calendar quarter, based upon revenues received during the immediately preceding calendar quarter. Licensee agrees to pay and shall pay to CSMC, or cause its Permitted Sublicensees to pay to CSMC, all Royalties resulting from the activities of its Permitted Sublicensees, within forty-five (45) days after the end of each calendar quarter.

 

(ii) Notice of Payment. Licensee shall provide prompt written notice to CSMC that it has paid the licensee fee required by Section 4.1 or any product development milestone payment required by Section 4.4(g)(ii) by electronic mail to CSTechTransfer@cshs.org.

 

(iii) Wire Transfer Instructions. All payments due hereunder shall be made by Licensee to CSMC in accordance with the following wire transfer instructions:

 

City National Bank

400 N. Roxbury Drive

Beverly Hills, CA 90210

ABA# 122 016 066

Account Number: 210-132260

Account Name: Cedars-Sinai Medical Center - Tech Transfer

Reference: Tech Transfer - Kairos Pharma - RelA

 

 

(iv) Records and Audits. Licensee shall create and maintain complete and accurate records and documentation concerning all sales of Products by Licensee, its Affiliates and Permitted Sublicensees as well as transactions based upon which Non-Royalty Sublicense Revenue is due, in sufficient detail to enable the Royalties and Non-Royalty Sublicense Revenue, respectively, that is payable hereunder to be determined. Licensee shall retain such records and documentation for not less than five (5) years from the date of their creation. During the term of this Agreement and for a period of three (3) years thereafter, CSMC and its representatives shall have the right to audit such records and documentation as shall pertain to the determination and payment of Royalties and Non-Royalty Sublicense Revenue. Such examiners shall have reasonable access during regular business hours to Licensee’s offices and the relevant records, files and books of account, and shall have the right to examine any other records reasonably necessary to determine the accuracy of the calculations provided by Licensee. The costs of any such audit shall be borne by CSMC, unless as a result of such inspection it is determined that the amounts payable by Licensee for any period are in error by greater than seven and one-half percent (7.5%), in which case the reasonable costs of such audit shall be borne by Licensee. CSMC shall report the results of any such audit to Licensee within forty-five (45) days of completion. Thereafter, Licensee shall promptly pay to CSMC the amount of any underpayment discovered in such audit, or CSMC shall credit to Licensee against future Royalty payments the amount of any overpayment discovered in such audit, as the case may be. In addition, Licensee shall pay interest on any underpayment at the rate that is the lower of (i) two percent (2%) over the rate of interest announced by Bank of America in Los Angeles, California (or any successor in interest thereto or any commercially equivalent financial institution if no such successor exists) to be its “prime rate”, or (ii) the highest rate permitted by applicable law, from the date such amount was underpaid to the date payment is actually received.

 

(v) Currency Transfer Restrictions. If any restrictions on the transfer of currency exist in any country or other jurisdiction so as to prevent Licensee from making payments to CSMC, Licensee shall take all commercially reasonable steps to obtain a waiver of such restrictions or to otherwise enable Licensee to make such payments. If Licensee is unable to do so, Licensee shall make such payments to CSMC in a bank account or other depository designated by CSMC in such country or jurisdiction, which payments shall be in the local currency of such country or jurisdiction, unless payment in United States dollars is permitted. Any payment by Licensee to CSMC in currencies other than United States dollars shall be calculated using the appropriate foreign exchange rate for such currency quoted in the California edition of The Wall Street Journal for the close of business of the last banking day of the calendar quarter in which such payment is being made.

 

(vi) Late Charges. A service charge of two percent (2%) per month, not to exceed the maximum rate allowed by applicable law, shall be payable by Licensee on any portion of Licensee’s outstanding Royalty or Non-Royalty Sublicense Revenue balance or any other amount payable by Licensee hereunder (including, without limitation, reimbursement for Prosecution costs as set forth in Section 4.1 hereof) that is not paid to CSMC within thirty (30) days past the due date.

 

 

(vii) Taxes. Licensee shall pay, or cause to be paid, any and all taxes required to be paid or withheld on any sales, licenses or other transfers for value of Products or Patent Rights (other than taxes imposed on the income or revenues of CSMC); provided, however, that under no circumstances shall the amounts of such taxes be deducted from the total amount of payments otherwise due to CSMC hereunder other than as set forth in Section 1.7(d). Upon CSMC’s request, Licensee shall secure and send to CSMC proof of any such taxes withheld and paid by Licensee, its Affiliates or Permitted Sublicensees.

 

5. Patent Rights

 

5.1 Prosecution. Commencing on the Effective Date, Licensee shall assume, in coordination with CSMC, full responsibility for the application, maintenance, reexamination, reissue, opposition and prosecution of any kind (collectively “Prosecution”) relating to the Patent Rights in the Territory, including, but not limited to, payment of all costs, fees and expenses related thereto. Subject to the approval of CSMC (which approval shall not be unreasonably withheld and which approval shall be provided within fifteen (15) days of CSMC’s receipt of Licensee’s written request), Licensee shall have the right to select counsel with respect to the responsibility assumed by Licensee in this Section 5.1, and Licensee shall diligently pursue the Prosecution of the Patent Rights to the benefit of CSMC. For purposes of the patent Prosecution, Licensee shall be the named “client” of such patent counsel. Each party shall provide the other with copies of any and all material or communications with the United States Patent and Trademark Office, or any foreign patent office, and CSMC shall be afforded the opportunity of prior review and comment on such action or paper, at CSMC’s cost.

 

5.2 Abandonment, Disclaimers, etc. Licensee shall obtain the prior written consent of CSMC (which consent shall not be unreasonably withheld), prior to abandoning, disclaiming, withdrawing, seeking reissue, seeking reexamination or allowing to lapse any patent or patent application within the Patent Rights. In the event that Licensee shall elect to abandon the Prosecution (including the payment of maintenance fees or annuities) of any patent or patent application included in the Patent Rights, Licensee shall notify CSMC of such election at least forty-five (45) days before a final due date which would result in abandonment or bar of patentability of the patent or patent application. In such event, CSMC may, at its sole option and expense, continue Prosecution of the patent application or patent. Licensee further agrees that it shall not file any continuation-in-part application relating to the Patent Rights unless the additional disclosure or material to be included in the continuation-in-part application is necessary or appropriate to support the patentability of a claim recited in a parent application on which the continuation-in-part application is based. Licensee shall not file any continuation-in- part application without CSMC’s prior written consent, which shall not be unreasonably withheld.

 

5.3 Expenses. Licensee shall pay all expenses resulting from its obligations in Section 5.1 hereof. CSMC shall exercise reasonable efforts to cause the Inventors (to the extent they are available and on CSMC’s staff as employees) to cooperate fully with Licensee with respect to the Prosecution of the Patent Rights and CSMC shall be reimbursed for all reasonable out-of-pocket expenses as such expenses are incurred.

 

 

5.4 CREATE Act. Licensee shall not invoke the Cooperative Research and Technology Enhancement Act of 2004, as set forth under Title 35, Section 102(c) of the United States Code (the “CREATE Act”), with respect to the Patent Rights without first obtaining the prior written consent of CSMC.

 

6. Term And Termination

 

6.1 Term. Unless earlier terminated as provided in Section 6.2 hereof, the term of this Agreement shall commence on the Effective Date and shall expire, on a country-by-country basis, the date upon which the last to expire of the patents of the Patent Rights shall expire.

 

6.2 Termination. Except as provided by Section 6.3 hereof, and in additional to the termination provisions of Section 2.5, this Agreement shall terminate upon the earliest to occur of the following:

 

(a) Automatically if Licensee shall enter into a liquidating bankruptcy, be adjudged insolvent, liquidate, dissolve and/or if the business of Licensee shall be placed in the hands of a receiver, assignee, or trustee, whether by voluntary act of Licensee or otherwise; provided, however, that if any such action is involuntary, termination shall not take place unless the action is not reversed within forty-five (45) days. Further, Licensee shall give CSMC at least forty-five (45) days’ prior written notice before Licensee initiates any bankruptcy proceeding, and CSMC shall have the right to terminate this Agreement immediately upon receipt of such notice;

 

(b) Automatically if the performance by either party to this Agreement of any term, covenant, condition or provision hereof (i) shall jeopardize (A) the licensure of CSMC, (B) CSMC’s participation in the Medicare, Medi-Cal or other reimbursement or payment programs, (C) the full accreditation of CSMC by the Joint Commission of Accreditation of Healthcare Organizations or any other state or nationally recognized accreditation organization, or (D) CSMC’s tax-exempt status; or (ii) is deemed illegal or unethical by any recognized governmental agency or body. Upon the occurrence of any of the items set forth in this subparagraph (b), CSMC shall provide written notice to Licensee setting forth the reason for such termination and the parties shall work in good faith to attempt to revise the terms of this Agreement to mitigate the issues described in (i) and (ii) of the preceding sentence while protecting Licensee’s interest in the Patent Rights. If CSMC and Licensee cannot within thirty (30) days from the foregoing notice by CSMC resolve the issues described in (i) and (ii) above through a revision to the terms of this Agreement reasonably satisfactory to CSMC, CSMC may immediately terminate this Agreement upon written notice to Licensee;

 

(c) Upon sixty (60) days’ written notice from CSMC that a required payment by Licensee is delinquent if, within such sixty (60) day period, Licensee shall fail to pay fully any payment required by Section 4.1,4.3 or 4.4 hereof;

 

(d) Upon sixty (60) days’ written notice from CSMC if, within such sixty (60) day period, Licensee shall fail to cure fully any breach or default of any material obligation under this Agreement as described in such written notice detailing the facts of such breach with reasonable specificity; provided, however, that Licensee may avoid such termination if, before the end of such 60-day period, such breach or default has been cured by Licensee to the reasonable satisfaction of CSMC;

 

 

(e) Upon sixty (60) days’ written notice from Licensee if, within such sixty (60) day period, CSMC shall fail to cure fully any breach or default of any material obligation under this Agreement as described in such written notice detailing the facts of such breach with reasonable specificity; provided, however, that CSMC may avoid such termination if, before the end of such 60-day period, such breach or default has been cured by CSMC to the reasonable satisfaction of Licensee; and

 

(f) By either party upon sixty (60) days’ written notice to the other party in the event that Licensee has provided satisfactory evidence that it has made reasonable efforts to achieve the Milestones required by Section 2.5 and Schedule B, but (i) has been unable to secure a capital commitment in the aggregate amount of at least $500,000 within twelve (12) months from the Effective Date; or (ii) Licensee cannot move forward with development of a Product due to (A) significant safety concerns identified by an Institutional Review Board overseeing any clinical trial of a Product; or (B) regulatory restrictions or prohibitions and (C) formulation and manufacturing process problems.

 

(g) Upon the mutual written agreement of the parties hereto (such termination to be effective as of the date mutually agreed upon in such written agreement).

 

6.3 Obligations Upon Termination. Upon any termination of this Agreement pursuant to Section 6.2 hereof, nothing herein shall be construed to release any party from any liability for any obligation incurred through the effective date of termination (e.g., confidentiality, reimbursement of patent expenses incurred prior to such date), or for any breach of this Agreement prior to the effective date of such termination. Upon any termination of this Agreement pursuant to Section 6.2 hereof, all amounts owed by Licensee to CSMC under Section 4.1 of this Agreement which are outstanding as of the effective date of termination (including any interest that has accrued thereon) shall become immediately due and payable, and Licensee shall pay the full outstanding amounts to CSMC within thirty (30) days of the effective date of such termination. Licensee may, for a period of one (1) year after the effective date of such termination, sell all tangible Products customarily classified as “inventory” that it has on hand at the date of termination, subject to payment by Licensee to CSMC of the applicable Royalty and Non-Royalty Sublicense Revenue.

 

6.4 Effect of Termination. In the event of any termination of this Agreement pursuant to Section 6.2 hereof, where such termination has not been caused by any action or inaction on the part of any Permitted Sublicensee of Licensee or by any breach by such Permitted Sublicensee of its obligations under its sublicense from Licensee, such termination of this Agreement shall be without prejudice to the rights of each non-breaching Permitted Sublicensee of Licensee and each non-breaching Permitted Sublicensee shall be deemed to be a licensee of CSMC thereunder, and CSMC shall be entitled to all rights, but shall not be subject to any obligations (other than the grant of license and appurtenant obligations under this Agreement to the extent provided for in such sublicense) of Licensee thereunder. In the event of any termination of this Agreement pursuant to Section 6.2(f) hereof, Licensee shall, promptly upon termination, assign all of its right, title and interest in the Licensee Improvements to CSMC.

 

 

6.5 Right to Institute Legal Actions. Notwithstanding the provisions of Section 6.2 hereof, but subject to Section 2.4 hereof, termination is not an exclusive remedy and CSMC, on the one hand, and Licensee, on the other hand, may institute any other legal action or pursue any other remedy against the other party permitted by applicable law if the other party does not substantially cure any material breach or default of any material obligation as provided herein, subject to any exclusions on damages provided for in this Agreement.

 

6.6 Reversion of Rights. Notwithstanding anything to the contrary set forth herein (including, but not limited to, Section 5 hereof), full responsibility for Prosecution of the Patent Rights shall, at the option of CSMC (exercisable in its sole and absolute discretion), and at its sole expense from the date of reversion, revert to CSMC upon any termination of this Agreement.

 

6.7 Return of Data. In the event of any termination or expiration of this Agreement, Licensee shall promptly provide CSMC with copies of all data, information and materials obtained or generated by or on behalf of Licensee in the course of conducting research and developing Products using the Patent Rights.

 

7. Infringement By Third Parties

 

7.1 Enforcement. Licensee shall have the first right to enforce, at its sole expense, any Patent Rights to the extent licensed hereunder against infringement by third parties and shall notify CSMC in writing in advance of all such enforcement efforts. Upon Licensee’s undertaking to pay all documented out-of-pocket third party expenditures reasonably incurred by CSMC, CSMC shall reasonably cooperate in any such enforcement and, as necessary, join as a party therein. Licensee shall reimburse CSMC for all reasonable, documented out of pocket third party expenses, including reasonable attorneys’ fees, incurred in connection with any such enforcement. In the event that Licensee does not file suit against or commence and conclude settlement negotiations with a substantial infringer of Patent Rights within ninety (90) days of receipt of a written demand from CSMC that Licensee bring suit, the parties will consult with one another in an effort to determine whether a reasonably prudent licensee would institute litigation to enforce the patent in question in light of all relevant business and economic factors (including, but not limited to, the projected cost of such litigation, the likelihood of success on the merits, the probable amount of any damage award, the prospects for satisfaction of any judgment against the alleged infringer, the possibility of counterclaims against the parties hereto, the impact of any possible adverse outcome on Licensee and the effect any publicity might have on the parties’ respective reputations and goodwill). If, after such process, it is determined that a suit should be filed and Licensee does not file suit or commence settlement negotiations forthwith against the infringer, then CSMC shall have the right, at its own expense, to enforce any Patent Rights. Any damages or other recovery from an infringement action undertaken by Licensee shall first be used to reimburse the parties, on a pro rata pari passu basis, for the costs and expenses incurred in such action, and shall thereafter be treated as Non-Royalty Sublicense Revenue in accordance with Section 4.4(g)(i). If Licensee fails to prosecute any such action to completion, then any damages or other recovery net of the parties’ costs and expenses incurred in such infringement action shall be the sole property of CSMC.

 

 

7.2 Defense Of Patent Rights. In the event that any Patent Rights are the subject of a legal action seeking declaratory relief or of any reexamination, inter partes review, post-grant review or opposition proceeding instituted by a third party, the parties agree to promptly consult with each other concerning the defense of such actions or proceedings. If the parties agree that such defense should be undertaken, then Licensee shall bear the expenses, including attorneys’ fees, associated with such defense and in any recoupment of expenses. If the parties disagree, then the party desiring to defend the action or proceeding may proceed with such defense and will bear its own expenses, and be entitled to all sums recovered.

 

8. Indemnification

 

8.1 Indemnification by Licensee. Subject to Section 8.2 hereof, Licensee shall hold harmless, defend and indemnify CSMC and each of its officers, directors, employees (including the Inventor), agents and sponsors of the research (except Licensee) (each, an “Indemnified Party”, and collectively, the “Indemnified Parties”) from and against any and all third party claims, damages, losses, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses and costs of investigation, whether or not suit is filed) incurred by any of the Indemnified Parties in any action, suit, litigation, arbitration or dispute of any kind (“Action”) to the extent arising or resulting from any negligence or willful acts or omissions on the part of Licensee, its Affiliates or Permitted Sublicensees in connection with (a) their use of the Patent Rights and/or (b) the exercise of their rights hereunder or under any sublicense, including, but not limited to (i) the preclinical development and clinical testing of Products, and (ii) the manufacture, sale, use, marketing, or other disposition of Products developed, manufactured, sold, marketed, used or otherwise disposed of under this Agreement. The foregoing indemnification shall not apply to any claim, damage, loss, liability, cost or expense to the extent attributable to the negligent activities or intentional misconduct of any of the Indemnified Parties. As part of its obligations hereunder, Licensee shall defend any Action brought against any of the Indemnified Parties with counsel of its own choosing and reasonably acceptable to CSMC, and neither CSMC nor any other Indemnified Party shall agree to the compromise or disposition of or enter into any settlement of any such Action without first obtaining prior written approval of Licensee. Licensee shall pay all reasonable, documented costs, including attorneys’ fees, incurred in enforcing this indemnification action. Should CSMC or any other Indemnified Party not promptly notify Licensee in writing of or afford Licensee the right to defend any such Action, or should CSMC or any other Indemnified Party not cooperate with Licensee in the defense or settlement of such Action or obtain the prior written approval of Licensee to any such settlement or other compromise or disposition of such Action, Licensee shall have no obligation to indemnify CSMC or any other Indemnified Party hereunder. Should Licensee fail to provide a defense for the Indemnified Parties as required hereunder, then Licensee shall reimburse CSMC for its reasonable, documented out-of-pocket expenses (including reasonable attorneys’ fees and expenses and costs of investigation) which are incurred as a result of any investigation, defense or settlement relating to the foregoing, which reimbursement shall be made to CSMC upon receipt by Licensee of invoices reflecting in reasonable detail such expenses incurred by CSMC. Licensee shall obtain and maintain insurance policies (including products liability and general liability policies at such time as is appropriate) which are reasonable and necessary to cover its activities and to comply with the indemnification obligations set forth above. Notwithstanding the foregoing, Licensee’s indemnification obligations hereunder shall not exceed an amount equal to the sum of (a) the market capitalization of Licensee; plus (b) the aggregate amount of Licensee’s insurance coverage. Such insurance policies shall name CSMC as an additional insured party, and shall provide a minimum of Three Million Dollars (S3,000,000) in coverage per occurrence. Upon initiation of any human clinical studies using a therapeutic molecule covered by the Patent Rights, Licensee shall have first increased its insurance coverage to an aggregate amount that in Licensee’s reasonable judgment, is commercially reasonable and consistent with prevailing business practice for the risks involved. Licensee shall provide CSMC with Certificates of Insurance within thirty (30) days of the Effective Date (subject to extension if reasonably required) and annually thereafter, evidencing the policies required in accordance with this Section 8.1, together with copies of the endorsement which specifies CSMC as an additional insured and the declarations page for each such insurance policy. Licensee shall provide CSMC with prompt written notice of any material change in coverage under such policies. The certificate of insurance, endorsements and declarations pages (and any renewals or replacements thereof), if required, shall be sent to CSMC’s Technology Transfer Office by electronic mail at CSTechTransfer@cshs.org.

 

 

8.2 Notice of Claim. CSMC shall promptly notify Licensee in writing of any claim or Action or material threat thereof brought against any Indemnified Party in respect of which indemnification may be sought and, to the extent allowed by law, shall reasonably cooperate with Licensee in defending or settling any such claim or Action. No compromise, disposition or settlement of any claim, Action or threat thereof received by CSMC and for which CSMC intends to seek indemnification (for itself or on behalf of any other Indemnified Party) shall be made without the prior joint written approval of Licensee and CSMC.

 

9. Use Of Names

 

Licensee shall not, unless as required by any law or governmental regulation, use the name of CSMC, and/or any of its trademarks, service marks, trade names or fictitious business names without express prior written consent of the Vice President for Public Relations and Marketing of CSMC. Further, prior to any reference by Licensee to the names or marks of CSMC in any manner, Licensee shall provide CSMC with a writing reflecting the proposed reference so that CSMC can review the reference within a reasonable period of time prior to the proposed use thereof by Licensee. This limitation includes, but is not limited to, use by Licensee in any advertising, offering circular, prospectus, sales presentation, news release or trade publication. Notwithstanding the foregoing, certain specific language shall be mutually agreed upon by the parties for Licensee’s use in certain contexts and with respect to certain topics, and once agreed upon, may be utilized by Licensee in connection with the approved contexts and topics without further permission of CSMC. Subject to compliance by Licensee with the foregoing, which shall be deemed conditions precedent to any use of CSMC’s name or marks by Licensee, Licensee shall ensure that the name of CSMC is used as scientifically or academically appropriate in the “byline” of any article, abstract, manuscript or any other publication related to the subject matter hereof.

 

10. Confidentiality

 

10.1 Non-Disclosure. Except to the extent Licensee’s counsel determines that disclosure of the terms of this Agreement is required by law, the parties hereto shall keep the terms of this Agreement and all business and scientific discussions relating to the business of the parties strictly confidential. All patient information to which a party is given access by the other party shall be subject to the provisions of the Confidentiality of Medical Information Act (Cal. Civ. Code §§56, et seq.) and the Health Insurance Portability and Accountability Act of 1996, and all regulations promulgated thereunder and amendments thereto. It may, from time to time, be necessary for the parties, in connection with performance under this Agreement, to disclose Confidential Information (including know-how) to each other. The Receiving Party (as defined in Section 1.2 hereof) shall keep in strictest confidence the Confidential Information of the Disclosing Party (as defined in Section 1.2 hereof), using the standard of care it normally uses for information of like character but using no less than a reasonable degree of care, and shall not disclose the Confidential Information to any third party or use it except as expressly authorized by the prior written consent of the Disclosing Party or as otherwise permitted by this Agreement (including, without limitation, Section 10.2). Without limiting the foregoing, Licensee’s Confidential Information includes any and all progress reports made hereunder (including under Section 2.5), sublicenses, any reports or other information regarding Sales of Products and Royalties (including any royalty reports including as required under Section 4.4, whether from Licensee or any Permitted Sublicensee), audit reports of Permitted Sublicensees, Sublicense Income and Sublicense Fees. Confidential Information of Licensee also includes any and all copies and derivations of and improvements on Licensee’s Confidential Information. The Receiving Party’s obligation hereunder shall not apply to Confidential Information that the Receiving Party can show:

 

(a) Was in the Receiving Party’ possession prior to receipt from the Disclosing Party hereunder as shown by the Receiving Party’s records, or later becomes part of the public domain through no fault or neglect of the Receiving Party or anyone to whom the Receiving Party disclosed Confidential Information;

 

(b) Is received in good faith from a third party having no obligations of confidentiality to the Disclosing Party, provided that the Receiving Party complies with any restrictions imposed by the third party; or

 

(c) Is independently developed by the Receiving Party without use of or reference to the Disclosing Party’s Confidential Information as shown by the Receiving Party’s records.

 

 

If a Receiving Party is required by law or regulation or court order to disclose Confidential Information of the Disclosing Party, (including, without limitation, in connection with filings with another government agency or as required under the California Public Records Act), the Receiving Party may disclose that portion of the Confidential information that is required to be disclosed provided that the Receiving Party notifies the Disclosing Party in writing in advance of such disclosure and uses reasonable efforts to restrict disclosure and to obtain confidential treatment and/or allows the Disclosing Party to challenge or limit such disclosure or obtain a protective order or confidential treatment. The obligations set forth herein shall remain in effect for a period of five (5) years after the effective termination or expiration of this Agreement.

 

10.2 Limits on Permitted Disclosures. Each party agrees that any disclosure or distribution of the other party’s Confidential Information within its own organization shall be made (a) only as is reasonably necessary to carry out the intent of this Agreement, and (b) only to those of its officers and employees who have agreed to maintain its confidentiality. In such event, the Receiving Party shall identify with reasonable particularity, upon request by the Disclosing Party, each person within the Receiving Party’s organization to whom the Receiving Party has disclosed or distributed Confidential Information. Furthermore, Licensee may disclose the Confidential Information received from CSMC to its Affiliates and its and their directors, officers, employees, agents, contractors, consultants and actual and potential Permitted Sublicensees, investors and acquirers as shall be reasonably necessary to carry out the intent of this Agreement or any sublicense granted by Licensee as contemplated by this Agreement if, but only if, such third party recipients of Confidential Information each execute a confidentiality agreement containing confidentiality provisions no less restrictive than those confidentiality provisions contained in this Section 10. In such event, Licensee shall identify with reasonable particularity, upon CSMC’s request, each third party to whom Licensee has disclosed or distributed CSMC’s Confidential Information. Furthermore, Licensee shall have the right to disclose this Agreement or the terms thereof to potential investors and acquirers for the purpose of investment discussions without the additional consent or approval of CSMC

 

10.3 Legally Required Disclosures. If a subpoena or other legal process concerning Confidential Information is served upon any party hereto pertaining to the subject matter hereof, the party served shall notify the other party immediately in writing, the other party shall cooperate with the party served, at the other party’s expense, in any effort requested by the other party to contest the validity of such subpoena or other legal process. This Section 10.3 shall not be construed in any way to limit any party’s ability to satisfy any disclosure of its relationship with the other party required by any governmental authority.

 

10.4 Patent Rights as Confidential Information. The Patent Rights are understood by Licensee to be the Confidential Information of CSMC to the extent “unpublished” as such term is construed under the United States Patent Laws. As such, Licensee’s confidentiality obligations hereunder automatically extend to any and all unpublished patent applications of CSMC relating to any Patent Rights and CSMC Future Patent Rights and to any and all communications with the United States Patent Office, and any foreign patent office relating to any Patent Rights or CSMC Future Patent Rights, to the extent that such communications are not available to the public. Notwithstanding the foregoing, CSMC shall not use any of Licensee’s Confidential Information to apply for, secure or perfect any intellectual property rights, without Licensee’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed.

 

10.5 Return of Confidential Information. In the event of any termination of this Agreement, the Receiving Party shall promptly return all Confidential Information and any copies made thereof previously made available to the Receiving Party by the Disclosing Party, except that the Receiving Party may retain one copy of the Confidential Information in the custody of its legal files solely for the purpose of monitoring compliance with this Agreement.

 

 

10.6 Remedies. Both parties acknowledge and agree that it would be difficult to measure damages for breach by either party of the covenants set forth in this Section 10, and that injury from any such breach would be incalculable, and that money damages would therefore be an inadequate remedy for any such breach. Accordingly, either party shall be entitled, in addition to all other remedies available hereunder or under law or equity, to injunctive or such other equitable relief as a court may deem appropriate to restrain or remedy any breach of such covenants without having to prove actual damages or post a bond, unless the court so requires.

 

11. Information Exchange

 

In addition to the Patent Rights, the parties shall cooperate to exchange such non-confidential information as may be appropriate and necessary to facilitate Licensee’s development and commercialization of Products incorporating any Patent Rights.

 

12. Patent Marking

 

In the event any Product is the subject of a patent under the Patent Rights, Licensee shall actually or virtually mark all Products made, sold or otherwise disposed of by or on behalf of it or any of its Permitted Sublicensees as set forth under Title 35, Section 287(a) of the United States Code and shall respond to any request or disclosure under Title 35, Section 287(b)(4)(B) of the United States Code by only notifying CSMC of the request for disclosure.

 

13. Miscellaneous

 

13.1 Notices. Any notice, request, instruction or other document required by this Agreement shall be in writing and shall be deemed to have been given (a) if mailed with the United States Postal Service by prepaid, first class, certified mail, return receipt requested, at the time of receipt by the intended recipient, (b) if sent by Federal Express or other overnight carrier, signature of delivery required, at the time of receipt by the intended recipient, or (c) if sent by facsimile transmission, when so sent and when receipt has been acknowledged by appropriate telephone or facsimile receipt, addressed as follows:

 

In the case of CSMC to:

 

Cedars-Sinai Medical Center

8700 Beverly Boulevard

Los Angeles, California 90048-1865

Attention: Executive Vice President for Finance & CFO

 

with a copy to Vice President for Legal & Technology Affairs or in the case of Licensee to:

 

NanoGB13, Inc.

565 Esplanade, Suite 206

Redondo Beach, CA 90277

Attention: Chairman

 

or to such other address or to such other person(s) as may be given from time to time under the terms of this Section 13.1. 

 

 

13.2 Compliance with Laws. Each party shall comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this Agreement.

 

13.3 Governing Law. For any dispute between the parties to this Agreement which arises from or relates to this Agreement, the Agreement shall be construed and enforced in accordance with the laws of the United States of America and of the State of California, irrespective of choice of laws provisions. The parties agree that Los Angeles County, California shall be the situs of any legal proceeding arising out of or relating to this Agreement. Each party hereby waives any right it may have to assert the doctrine of forum non conveniens or similar doctrine or to object to venue with respect to any proceeding brought in accordance with this Section, and stipulates that the state and federal courts located in Los Angeles, California shall have personam jurisdiction and venue over each of them for the purpose of litigating any dispute, controversy, or proceeding arising out of or related to this Agreement. Each party hereby authorizes and accepts service of process sufficient for personal jurisdiction in any action against it as contemplated by this Section by registered or certified mail, return receipt requested, postage prepaid, to its address for the giving of notices as set forth in this Agreement.

 

13.4 Waiver. Failure of any party to enforce a right under this Agreement shall not act as a waiver of that right or the ability to assert that right relative to the particular situation involved.

 

13.5 Enforceability. If any provision of this Agreement shall be found by a court of competent jurisdiction to be void, invalid or unenforceable, the same shall be reformed to comply with applicable law or stricken if not so conformable, so as not to affect the validity or enforceability of the remainder of this Agreement.

 

13.6 Modification. No change, modification, or addition or amendment to this Agreement, or waiver of any term or condition of this Agreement, is valid or enforceable unless in writing and signed and dated by the authorized officers of the parties to this Agreement.

 

13.7 Entire Agreement. This Agreement, the Schedules hereto (which are incorporated herein by this reference as if fully set forth herein) and the Stock Purchase Agreement constitute the entire agreements among the parties with respect to the subject matter hereof and thereof, and replace and supersede as of the date hereof and thereof any and all prior and contemporaneous agreements and understandings, whether oral or written, between the parties with respect to the subject matter of such agreements.

 

 

13.8 Construction. This Agreement has been prepared, examined, negotiated and revised by each party and their respective attorneys, and no implication shall be drawn and no provision shall be construed against any party to this Agreement by virtue of the purported identity of the drafter of this Agreement or any portion thereof.

 

13.9 Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall constitute one and the same instrument. This Agreement may be executed by facsimile or in .pdf format.

 

13.10 Attorneys’ Fees. In the event of any action at law or in equity between the parties hereto to enforce any of the provisions hereof, the unsuccessful party to such litigation shall pay to the successful party all reasonable documented costs and expenses, including reasonable attorneys’ fees, incurred therein by such successful party; and if such successful party shall recover a judgment in any such action or proceeding, such reasonable costs, expenses and attorneys’ fees may be included in and as part of such judgment.

 

13.11 Assignment; Successors.

 

(a) Subject to Section 13.12(b), Licensee may assign this Agreement as part of a sale, regardless of whether such a sale occurs through an asset sale, stock sale, merger or other combination, or any other transfer of Licensee’s entire business, or that part of Licensee’s business that exercises all rights granted under this Agreement. Any other attempt to assign this Agreement by Licensee is null and void. In the event of a bankruptcy, assignment is permitted only to a party that can provide adequate assurance of future performance, including diligent development and sales, of Products.

 

(b) After any assignment, the following conditions must be met: (i) Licensee must notify CSMC in writing within thirty (30) days of the assignment, including the new assignee’s contact information, and (ii) the new assignee must agree in writing to CSMC to be bound by this Agreement.

 

(c) Subject to the limitations on assignment herein, this Agreement shall be binding upon and inure to the benefit of any successors in interest and assigns of CSMC and Licensee. CSMC shall have the right to assign its rights hereunder as part of any reorganization or bond financing.

 

13.12 Further Assurances. At any time and from time to time after the Effective Date, each party shall do, execute, acknowledge and deliver, and cause to be done, executed, acknowledged or delivered, all such further acts, transfers, conveyances, assignments or assurances as may be reasonably required to consummate the transactions contemplated by this Agreement.

 

13.13 Survival. The following sections shall survive any expiration or earlier termination of this Agreement: 6.3, 8, 9, 10, and 13.

[signature page follows]

 

 

In Witness Whereof, the parties have caused their duly authorized representatives to execute this Agreement as of the date first above written.

 

	“LICENSEE”:
	Kairos Pharma Ltd., a California
	CORPORATION
	By:	/s/ John S. Yu, M.D
	Name:	John S. Yu, M.D
	Title	Chairman
	Date:	October 2, 2017
	“CSMC”:
	CEDARS-SIGNAI MEDICAL CENTER, A
	California nonprofit public benefit CORPORATION
	By:	/s/ James D. Laur, Esq.
		James D. Laur, Esq.
		Vice President for Legal & Technology
		Affairs
	Date:	October 2, 2017
	By:	/s/ Edward M. Prunchunas
		Edward M. Prunchunas
		Executive Vice President for Finance
		and CFO
	Date:	October 2, 2017

 

 

ACKNOWLEDGED AND AGREED:
“INVENTORS”:
/s/ Ramachandran Murali, Ph.D.
Ramachandran Murali, Ph.D.
/s/ Hirotaka Kanzaki, Ph.D.
Hirotaka Kanzaki, Ph.D.

 

 

Schedule A

 

Patent Rights

 

TITLE:		“METHODS AND USE OF COMPOUNDS THAT BIND TO RELA OF NF-κB”
CSMC TECH ID:		mur000893
INVENTORS:		Ramachandran Murali
		Hirotaka Kanzaki
APPLICATION NO.:		PCT/US2016/035318
FILING DATE:		June 1,2016
DOCKET NO.:		065472-000545WO00

 

 

Schedule B

 

Milestones

 

1. Licensee shall have completed preclinical studies of a Product within 36 months of the Effective Date.

 

2. Licensee shall have submitted an IND application for a Product to the FDA and received approval of such IND application from the FDA within 48 months of the Effective Date.

 

3. Licensee shall have initiated a Phase I clinical trial of a Product within 50 months of the Effective Date (subject to FDA approval).

 

4. Licensee shall have made the first commercial sale of a Product within 10 years of the Effective Date.

 

 

Schedule C

 

Royalty Reporting Form

 

Licensee name:

Reporting period:

Date of report:

Date of first commercial sale:

 

Royalty Report

 

Product (list products by name)

No. units sold

Invoiced price per unit

Gross sales

Allowable deductions (attached itemized detail)

Country of sale/foreign currency/ conversion rate

Net sales

Product name

Product name

Product name

Total

 

Total net sales		$
Royalty rate
Royalty due		$

 

Total royalty due: $________________________

 

Non-Royalty Sublicense Revenue Report

 

Total Non-Royalty Sublicense Revenue received		$
Date received
Applicable percentage payable to CSMC
Total Non-Royalty Sublicense Revenue payable to CSMC		$

 

Report prepared by:

Title:

Date:

 

Please send electronic copy to CSTechTransfer@cshs.org.

 

 

Exhibit 10.11

 

Effective Date: June 17, 2021

 

Cedars-Sinai Medical Center

8700 Beverly Boulevard,

Los Angeles, California 90048-1865

Attention: Vice President, Intellectual Property

 

Re: Exclusive License Agreement dated October 1, 2017 - Amendment

 

Dear Cedars-Sinai Medical Center:

 

Reference is made to that certain Exclusive License Agreement regarding the technology titled “Methods of use of compounds that bind to RelA of NFkB” dated October 1, 2017 (as amended from time to time, the “License Agreement”), by and between CEDARS-SINAI MEDICAL CENTER, a California nonprofit public benefit corporation (“CSMC”), and Kairos Pharma, Ltd, a California corporation (“Licensee”).

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties in this letter amendment agreement (this “Letter Amendment”) hereby agree to, and acknowledge, the following:

 

1. Each milestone due date listed on Schedule B of the License Agreement is hereby extended by twenty-four (24) months from the original deadline listed in the License Agreement.

 

2. Except as expressly provided in this Letter Amendment, all of the terms and provisions of the License Agreement remain unchanged. On and after the Effective Date stated at the top of this Letter Amendment, each reference in the License Agreement to “this Agreement,” “the Agreement,” “hereunder,” “hereof,” “herein,” or words of like import, and each reference to the License Agreement in any other agreements, documents, or instruments executed and delivered pursuant to, or in connection with, the License Agreement, will mean and be a reference to the License Agreement as amended by this Letter Amendment.

 

Please acknowledge your agreement to, and acceptance of, the foregoing by signing this Letter Amendment below. Please return a signed copy to the undersigned, it being agreed that this Letter Amendment may be executed in counterparts and signatures received by electronic transmission shall have the same effect as original signatures.

 

	Sincerely,
	/s/ John s. Yu, M.D
	John S. Yu, M.D.
	Chief Executive Officer of Kairos Pharma, Ltd. 2355 Westwood Blvd. #139,
	Los Angeles, CA 90064

 

(CSMC signature page follows)

 

 

ACKNOWLEDGED AND AGREED TO ON JUNE 17, 2021, BY:

 

	CEDARS-SINAI MEDICAL CENTER
	By:	/s/ James D. Laur, JD
		James D. Laur, JD
		Vice President, Intellectual Property

 

	By:	/s/ Edward M. Prunchunas
		Edward  M. Prunchunas
		Executive Vice President, Finance & Treasurer

 

 

 

 

Exhibit 10.12

 

EXCLUSIVE LICENSE AGREEMENT

 

This Exclusive License Agreement (“Agreement”) is entered into as of this 1^st day of October 2017 (“Effective Date”) by and between Cedars-Sinai Medical CENTER, a California nonprofit public benefit corporation (“CSMC”), with offices at 8700 Beverly Boulevard, Los Angeles, California 90048-1865, on behalf of itself and the Board of Trustees of the Leland Stanford Junior University, a California nonprofit public benefit corporation (“Stanford”, and together with CSMC, “Licensors”), with offices at 3000 El Camino Real, Building 5, Suite 300, Palo Alto, CA 94306, and Kairos Pharma Ltd. f/k/a NanoGB13, INC., a California corporation (“Licensee”), with offices at 565 Esplanade, Suite 206, Redondo Beach, CA 90277.

 

R E C I T A L S

 

	A.	Licensors co-own and are entitled to grant license rights with respect to certain Patent Rights (as defined below) invented or developed by Ramachandran Murali and Stephen Pandol of CSMC and Aida Habtezion of Stanford (hereinafter collectively referred to as the “Inventors”).
	B.	Under the terms of the Cooperation Agreement entered into by CSMC and Stanford on April 14, 2015 (“Cooperation Agreement”), Licensors have agreed that CSMC shall have the sole right to negotiate and procure license agreements with respect to the Patent Rights on behalf of the Licensors.
	C.	Licensors desire to have the Patent Rights developed, used and commercialized in the Field of Use (as defined below) by Licensee, and Licensee desires to obtain an exclusive, worldwide license to conduct research in the Field of Use, and to develop, manufacture, use and sell Products (as defined below) in the Field of Use, using the Patent Rights in accordance with the terms of this Agreement. Other than the rights expressly granted by Licensors hereunder within the Field of Use, Licensee acknowledges that Licensors shall retain all other rights with respect to the Patent Rights.
	D.	The parties intend that the execution, delivery and performance of this Agreement by each party, and the consummation of the transactions contemplated hereunder, shall not at any time threaten CSMC’s tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and Section 2370Id of the California Revenue and Taxation Code, or cause CSMC to be in default under any of CSMC’s issued and outstanding tax-exempt bonds.

 

 

NOW, THEREFORE, in consideration of the mutual covenants and premises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1. Definitions

 

1.1 “Affiliate” or “Affiliates” shall mean any corporation, person or entity, which controls, is controlled by, or is under common control with, a party to this Agreement without regard to stock or other equity ownership. For purposes hereof, the terms “control” and “controls” mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a corporation, person or entity, whether through the ownership of voting securities, by contract or otherwise.

 

1.2 “Confidential Information” shall mean any confidential or proprietary information furnished by one party (the “Disclosing Party”) to the other party or parties (the “Receiving Party”) in connection with this Agreement, including, without limitation, all specifications, know-how, trade secrets, technical information, drawings, software, models, business information and patent applications pertaining to the Patent Rights, and as further provided in Section 10 hereof.

 

1.3 “CSMC Future Patent Rights” shall mean all improvements or enhancements to the Patent Rights that, after the Effective Date, are conceived and reduced to practice if patentable, or reduced to practice if not patentable, by at least one CSMC Inventor using any facilities, resources or personnel of CSMC.

 

1.4 “FDA” shall mean the United States Food and Drug Administration, or any successor agency thereof.

 

1.5 “Field of Use” shall mean the diagnosis of diseases and disorders in humans and animals, the therapeutic treatment of disease and disorders in humans and animals, and the maintenance and improvement of health in humans and animals.

 

1.6 “Licensee Improvements” shall mean any and all processes, uses, designs, applications, methods and compositions-of-matter, indications, improvements, enhancements and modifications in the Field of Use directly based upon or directly created using the Patent Rights and which were discovered or developed by or on behalf of Licensee during the term of this Agreement, exclusive of work performed by either Licensor or the Inventors, except (i) in the case of Dr. John Yu working in his capacity as Licensee’s Chairman and without using any facilities, resources or personnel of either Licensor and (ii) in the case of Dr. Bong Seop Lee, Ph.D., working in his capacity as Licensee’s Vice President of Research and Development and without using any facilities, resources or personnel of CSMC. For the avoidance of doubt, any inventions created, discovered or developed by or on behalf of Licensee which were not directly based upon or directly created using the Patent Rights shall not be considered “Licensee Improvements” and shall not be subject to this Agreement.

 

 

1.7 “Net Sales” shall mean the gross amount invoiced by Licensee, its Affiliates, Permitted Sublicensees, affiliates of Permitted Sublicensees, or any of them, to third parties for all sales of Products less (a) discounts actually allowed; (b) credits for claims, allowances, retroactive price reductions or returned goods; (c) prepaid freight; and (d) sales taxes or other governmental charges actually paid in connection with sales of Products (but excluding what are commonly known as income taxes and value-added taxes). Sales of Products by Licensee, or a Permitted Sublicensee of Licensee, to any Affiliate or Permitted Sublicensee which is a reseller thereof shall be excluded, and only the subsequent sale of such Products by Affiliates or Permitted Sublicensees of Licensee to unrelated parties shall be deemed Net Sales hereunder. If a Product is sold or provided as part of a system, package, or combination product or service that involve one or more products or services not covered by the Patent Rights (each, a “Combination Product”), Net Sales shall be calculated by multiplying the Net Sales of such Combination Product, by the fraction A/B, where “A” is the price of the Product included in such Combination Product when sold separately from any other products or services not covered by the Patent Rights and “B” is the price of the Combination Product. In the event that no market price is available for the Product included in such Combination Product when supplied or priced separately, CSMC (on behalf of Licensors) and Licensee shall determine in good faith the fair market value thereof.

 

1.8 “Non-Royalty Sublicense Revenues” shall mean upfront fees, license maintenance fees, and milestone payments, or other payments, including the fair market value of any non-cash consideration, received by Licensee in consideration for any rights granted to Patent Rights under a sublicense agreement, and excludes (a) any and all sales-based royalties paid to Licensee; and (b) payments received by Licensee from granting agencies and/or from a Permitted Sublicensee for costs related to research and development activities, regardless of whether the activities are preclinical or clinical.

 

1.9 “Patent Rights” shall mean the patents and/or patent applications existing on the Effective Date which are described on Schedule A attached hereto, and all patents and/or patent applications (including provisional patent applications) existing as of the Effective Date in any other country corresponding to any of the foregoing, and all divisions, continuations, reissues, reexaminations, supplementary protection certificates and extensions thereof, whether domestic or foreign, all claims of continuations-in-part that include at least one claim that is entitled to the benefit of the priority date of any of the foregoing, and any patent that issues thereon. The Patent Rights are all co-owned by Licensors. For the avoidance of doubt, the Patent Rights shall not include any Licensee Improvements.

 

1.10 “Product” shall mean any diagnostic or therapeutic product and/or service in the Field of Use that, except for the license granted hereunder, would infringe a Valid Claim of the Patent Rights.

 

1.11 “Territory” shall mean worldwide.

 

1.12 “Valid Claim” shall mean a claim of an issued patent included within the Patent Rights, which claim has not (a) lapsed, been canceled or become abandoned, (b) been declared invalid or unenforceable by a non-appealable decision or judgment of a court or other appropriate body or authority of competent jurisdiction, or (c) been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise. The term Valid Claim shall also include the claims of a pending patent application within the Patent Rights for a period of five (5) years from the earliest filing date of that patent application. For purposes of the preceding sentence, “earliest filing date” means, for a continuation, continuation-in-part or divisional application, the filing date of the earliest non-provisional application from which the continuation, continuation-in-part or divisional application claims priority in which the Valid Claim first actually appeared.

 

 

2. License

 

2.1 Grant of Exclusive Rights. Subject to the terms of this Agreement, each Licensor hereby grants to Licensee, and Licensee hereby accepts from each Licensor, the exclusive license, with the right to grant sublicenses (subject to the terms of Section 2.2 hereof), under and to the Patent Rights during the term of this Agreement (as provided in Section 6 hereof) to conduct research in the Field of Use and to make, have made, use, import, offer for sale, sell and/or have sold Products in the Field of Use in the Territory. The foregoing grant of exclusivity is made expressly subject to the following:

 

(a) All applicable laws and regulations, including, without limitation, the requirements of federal law as pertains to the manufacture of products within the United States;

 

(b) The following non-exclusive rights to the Patent Rights, which are retained by Licensors and Licensors’ third-party academic or nonprofit research institution collaborators (“Third Party Collaborators”) within the Field of Use:

 

(i) the right to submit for publication the scientific findings from research conducted by or through either Licensor, its investigators (including the Inventors) or Third Party Collaborators related to the Patent Rights; provided, that Licensee shall have the rights to (a) delete Licensee’s Confidential Information from any publication proposed by CSMC and CSMC shall delay such publication for a reasonable period of time, but no longer than thirty (30) days, to facilitate such deletion; and (b) request, within thirty (30) days of receiving any publication proposed by CSMC, that CSMC delay such publication for a reasonable time of no more than forty-five (45) days from the date of such request, to allow the appropriate party to protect any know-how and/or patentable subject matter contained in such publication; and

 

(ii) the right (A) to use any tangible or intangible information contained in the Patent Rights (so long as Licensors and Third Party Collaborators shall treat such information as Confidential Information and maintain its confidentiality in accordance with Section 10 hereof), for any nonprofit purpose, including Licensors’ and Third Party Collaborators’ research, internal teaching and other educationally-related and non-commercial clinical purposes, where clinical use does not involve a third party funding grant to commercialize such information, and (B) to obtain research funding for further study and development thereof from governmental and other for-profit or nonprofit organizations (including grant applications).

 

(c) Notwithstanding any other provision hereof to the contrary, all rights to the Patent Rights outside of the Field of Use are retained by Licensors, and all rights to the CSMC Future Patent Rights outside the Field of Use are retained by CSMC. Furthermore, this Agreement confers no license or rights by implication, estoppel, or otherwise under any patent applications or patents of Licensors other than Patent Rights regardless of whether such patents arc dominant or subordinate to Patent Rights.

 

 

2.2 Sublicensing. Licensee shall have the right to giant sublicenses or to assign any or all of the rights granted hereunder only to (a) an Affiliate; (b) a biopharmaceutical, pharmaceutical or bio-diagnostic company which is generally recognized in such industries and which, at the time of the sublicense, is in good standing and has a market capitalization of over $100,000,000; and (c) an entity which has been approved in writing by CSMC (on behalf Licensors); provided, that such approval shall not be unreasonably withheld; provided, further, that the Licensee shall request consent from CSMC by submitting a written request to CSMC’s Technology Transfer Office by electronic mail at CSTechTransfer@cshs.org, and CSMC shall advise Licensee of its decision and of the reason for its decision within thirty (30) days of receiving the request from Licensee. Any sublicensee permitted under subsection (a) or (b) of the preceding sentence shall be referred to as a “Permitted Sublicensee”. In the event CSMC denies a requested sublicense, Licensee shall have the right to petition CSMC in writing for reconsideration of the denial within thirty (30) days. Any such Permitted Sublicensee shall be subject in all respects to the provisions contained in this Agreement and Licensee will remain primarily liable for, and shall be responsible to the best of Licensee’s ability and resources for monitoring and enforcing, performance of all of Licensee’s obligations hereunder by any such Permitted Sublicensee. Without limiting the generality of the foregoing, as an express condition of any such sublicense, any such Permitted Sublicensee shall be required to agree in writing to be bound by commercially reasonable reporting and record keeping, indemnification and inspection provisions, and the applicable provisions of this Agreement, including, without limitation, those pertaining to the use of the Licensors’ names and marks, indemnification of Licensors and the use of Licensors’ Confidential Information. Permitted Sublicensees may not further sublicense without CSMC’s prior written consent (on behalf of licensors), which consent shall not be unreasonably withheld. Licensee shall promptly forward to CSMC (on behalf of Licensors) a copy of any and all fully executed sublicense agreements, any subsequent amendments, and all copies of Permitted Sublicensees’ profit sharing or royalty reports, in no event more than thirty (30) days following execution or receipt thereof, as applicable. Licensee shall also keep CSMC (on behalf of Licensors) reasonably informed with respect to the progress of any relations entered into with any Permitted Sublicensees. If Licensee shall conduct one or more audits of its Permitted Sublicensees hereunder during the term hereof. Licensee shall provide copies of all audit reports to CSMC (on behalf of Licensors) on a timely basis. Licensee understands and agrees that none of its permitted sublicenses hereunder shall reduce in any manner any of its obligations set forth in this Agreement.

 

(a) Required Sublicensing. If Licensee is unable or unwilling to serve or develop a potential market or market territory for which there is a company willing to be a Permitted Sublicensee, Licensee will, at CSMC’s request (on behalf of Licensors), negotiate in good faith a sublicense with any such Permitted Sublicensee containing such terms as are standard for sub license agreements in the biopharmaceutical industry.

 

(b) Royalty-Free Sublicenses. If, and only if, Licensee pays all royalties due CSMC (on behalf of Licensors) from a Permitted Sublicensee’s Net Sales, Licensee may grant that Permitted Sublicensee a royalty-free or non-cash sublicense or cross-license.

 

 

2.3 CSMC Future Patent Rights. CSMC shall promptly notify Licensee in writing of any CSMC Future Patent Rights. Licensee shall have, for a period of sixty (60) days after receipt by Licensee of written notice from CSMC disclosing a CSMC Future Patent Right, the exclusive first right to negotiate with CSMC to obtain one or more licenses to the CSMC Future Patent Right in the Field of Use upon such terms and conditions as shall be agreed by the parties hereto, which terms and conditions shall include provisions for fair market value consideration for the grant of any such licenses. If Licensee declines or fails to pursue, or if the parties fail to conclude negotiations for a license to, such CSMC Future Patent Right in the Field of Use during the sixty (60) day period specified above, then CSMC shall have the right to commence discussions with any other party concerning such CSMC Future Patent Right. Subject to the provisions of this Section 2.3, Licensee acknowledges and agrees that CSMC expressly retains and reserves any and all right, title and interest in and to the CSMC Future Patent Rights, whether or not in the Field of Use and, accordingly, no license to any CSMC Future Patent Right is granted to Licensee under this Agreement.

 

2.4 Licensee Improvements. Licensee hereby grants, and shall require its Permitted Sublicensee(s) to grant, to Licensors a nonexclusive, royalty-free, irrevocable, paid-up license to practice and use Licensee Improvements for non-commercial research purposes, which license shall include, without limitation, the rights to: (a) publish the scientific findings from research conducted by or through Licensors or on their behalf, subject to the prior approval of Licensee, which approval shall not be unreasonably delayed or withheld, (b) use any tangible or intangible information contained in the Licensee Improvements (so long as Licensors shall treat such information as Confidential Information and maintain its confidentiality in accordance with Section 10 hereof), for Licensors’ internal teaching and other educationally-related and non-commercial clinical purposes, where clinical use does not involve a third party funding grant to commercialize such information, and (c) obtain research funding from governmental and other nonprofit organizations (including grant applications). Licensors may not sublicense any Licensee Improvements to a third party or share such Licensee Improvements with a third party without Licensee’s prior written consent, not to be unreasonably withheld.

 

2.5 Milestones. Licensee acknowledges that it is important to Licensors, and a requirement of the United States Government under Title 35, Section 203 of the United States Code, that Licensee pursue the development, commercialization and marketing of Products and otherwise exercise commercially reasonable efforts to maximize the value of this Agreement to Licensors. Licensors and Licensee have agreed on the Milestones set forth on Schedule B, with each such Milestone being deemed a separate and independent condition. Within sixty (60) days after each anniversary of the Effective Date, Licensee shall prepare and deliver to CSMC (on behalf of Licensors) an annual written report (to be certified by an executive officer of Licensee) that provides an overview of Licensee’s progress towards achieving each Milestone and its other efforts with respect to the ongoing development, commercialization, and marketing of the Products. If Licensee believes that it is or will be unable to achieve such Milestones despite its diligent efforts, Licensee may request amendments or reasonable extensions to Schedule B in writing for CSMC’s consideration (on behalf of Licensors), such amendments or reasonable extensions not to be unreasonably withheld, delayed or conditioned upon additional consideration. Licensee agrees to provide any additional information reasonably required by CSMC (on behalf of Licensors) to evaluate Licensee’s performance under this Agreement. If Licensee fails to meet any Milestone designated in Schedule B hereto, and has not requested an extension or amendment to such Milestone(s), CSMC may (on behalf of Licensors), at its option and as its sole remedy (and Licensee’s sole liability) for Licensee’ breach of this Section 2.5, upon written notice to Licensee, convert the exclusive license granted under Section 2.1 hereof to a non-exclusive license or to a co-exclusive license, or terminate the license. Notwithstanding the foregoing or anything to the contrary herein, CSMC shall not exercise the right to convert the exclusive license granted under Section 2.1 hereof to a non-exclusive license or to a co-exclusive license, or terminate the license under this Section 2.5, for so long as Licensee is using diligent efforts to achieve the Milestone that has not yet been achieved.

 

 

3. Representations and Warranties

 

3.1 Rights to Technology. Each Licensor represents and warrants to Licensee that, to the best of its actual, current knowledge (without investigation outside of such Licensor as to such representations and warranties) (a) it has not received any notice alleging that the Patent Rights are owned by any third party; (b) it has the right to grant the licenses in this Agreement, (c) it has not granted licenses to the Patent Rights to any other party that would restrict the rights granted hereunder except as stated herein and (d) there are no claims, judgments or settlements to be paid by such Licensor with respect to the Patent Rights or pending claims or litigation relating to the Patent Rights. Neither Licensor is aware that any additional rights or licenses are necessary for Licensee to exercise its licensed rights granted by such Licensor under this Agreement.

 

3.2 Limited Warranty; Certain Damages.

 

(a) Limited Warranty. Neither Licensor makes any representation or warranty other than those expressly specified in this Agreement. Licensee accepts the Patent Rights on an “AS-IS” basis. NEITHER LICENSOR MAKES ANY OTHER WARRANTIES CONCERNING PATENT RIGHTS COVERED BY THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO PATENT RIGHTS OR ANY PRODUCT. NEITHER LICENSOR MAKES ANY WARRANTY OR REPRESENTATION AS TO THE VALIDITY OR SCOPE OF PATENT RIGHTS, OR THAT ANY PRODUCT WILL BE FREE FROM AN INFRINGEMENT ON PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THAT NO THIRD PARTIES ARE IN ANY WAY INFRINGING PATENT RIGHTS COVERED BY THIS AGREEMENT. LICENSEE HEREBY AGREES THAT LICENSEE WILL NOT GIVE, AND SHALL NOT PERMIT ANY AFFILIATES OR SUBLICENSEES OR AFFILIATES THEREOF TO GIVE, ANY SUCH WARRANTY OR REPRESENTATION TO THIRD PARTIES ON BEHALF OF LICENSORS.

 

(b) Certain Damages. EXCEPT FOR THE BREACH OF THE CONFIDENTIALITY PROVISIONS IN SECTION 10 OR IN ACCORDANCE WITH THE OBLIGATION TO INDEMNIFY SET FORTH IN SECTION 8, IN NO EVENT SHALL ANY PARTY BE LIABLE FOR ANY INDIRECT, SPECIAL, PUNITIVE, EXEMPLARY, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF PROFITS OR EXPECTED SAVINGS OR OTHER ECONOMIC LOSSES. LOSS OF USE OR FOR INJURY TO PERSONS OR PROPERTY) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ITS SUBJECT MATTER, REGARDLESS OF WHETHER A PARTY KNOWS OR SHOULD KNOW OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR THE BREACH OF THE CONFIDENTIALITY PROVISIONS IN SECTION 10 OR IN ACCORDANCE WITH THE OBLIGATION TO INDEMNIFY SET FORTH IN SECTION 8, THE FOREGOING EXCLUSIONS SHALL APPLY TO ALL CLAIMS AND ACTIONS OF ANY KIND, WHETHER BASED ON CONTRACT, TORT (INCLUDING, BUT NOT LIMITED TO NEGLIGENCE), OR ANY OTHER GROUNDS.

 

 

3.3 Rights of Funding Agencies. The Patent Rights have not been developed under any funding agreements (“Funding Agreements”) with any public, private or not for profit granting agencies or organizations (“Funding Agencies”); provided, that Licensee acknowledges that to the extent that any CSMC Future Patent Rights may be developed in part under one or more Funding Agreements with one or more Funding Agencies, such Funding Agencies may have certain statutory or contractual rights (“Funding Agency Rights”) relative thereto. This Agreement is explicitly made subject to such Funding Agency Rights and, to the extent of any conflict between any such Funding Agency Rights and this Agreement, such Funding Agency Rights shall prevail.

 

4. Consideration

 

In consideration of the execution and delivery by CSMC of this Agreement on behalf of Licensors, Licensee agrees as follows:

 

4.1 Distribution of Fees and Royalties. The parties acknowledge and agree that CSMC shall distribute the relevant percentage of fees, royalties or other remuneration payable by Licensee hereunder to Stanford in accordance with the terms of the Cooperation Agreement.

 

4.2 License Fee. Within thirty (30) days of the Effective Date, Licensee shall pay CSMC (on behalf of Licensors) a non-refundable license fee in the amount of Five Thousand Dollars (S5.000).

 

4.3 Patent Costs. Licensee shall reimburse CSMC for all costs, including attorneys’ fees and filing fees, actually incurred by CSMC in the prosecution and maintenance of the Patent Rights through the Effective Date (“Prosecution Costs”). The Parties acknowledge and agree that the Prosecution Costs are $60,189.50 as of September 25, 2017. Licensee shall have the right to reimburse CSMC for the Prosecution Costs in installments in accordance with the following schedule: (a) within forty-five (45) days of commencing the first Phase I trial of a Product, Licensee shall pay CSMC $20,000; and (b) on the third anniversary of the Effective Date, Licensee shall pay CMSC the remaining balance of the Prosecution Costs; provided, that commencing on the Effective Date and continuing until the Prosecution Costs are paid in full, interest shall accrue and be payable on all outstanding amounts due under this Section 4.3 at the rate of two percent (2%) over the rate of interest announced by Bank of America in Los Angeles, California to be its “prime rate” on the Effective Date.

 

 

4.4 Annual License Maintenance Fee. Commencing on the third anniversary of the Effective Date and thereafter on each anniversary of the Effective Date for the duration of the Term of this Agreement, Licensee shall pay to CSMC (on behalf of Licensors) a non-refundable annual license maintenance fee in the amount of Ten Thousand Dollars ($10,000) per year (“Maintenance Fee”). The annual Maintenance Fee shall be creditable against Royalties otherwise payable under Sections 4.5(a) and (b) during the applicable twelve (12) month period; provided, however, that Licensee may not carry over to the following year any amount by which the Maintenance Fee paid exceeds the actual amount of Royalties payable under Sections 4.5(a) and (b) during the applicable 12-month period.

 

4.5 Royalties and Non-Royalty Revenue.

 

(a) Direct Royalties. Licensee agrees to pay and shall pay to CSMC (on behalf of Licensors) a running royalty of three and three-quarters percent (3.75%) on Net Sales of Products made, used, sold or otherwise distributed by Licensee hereunder (each, a “Direct Royalty”).

 

(b) Sublicense Royalties. In the event that Licensee has sublicensed the Patent Rights for a given country, Licensee agrees to pay and shall pay to CSMC (on behalf of Licensors) fifteen percent (15%) of any royalties received by Licensee from its Permitted Sublicensees with respect to sales of Products by its Permitted Sublicensee in such country (each, a “Sublicense Royalty,” and together with Direct Royalties, “Royalties”), regardless of the effective date of the sublicense agreement Licensee does not intend to knowingly sublicense the Patent Rights in any country where government marketing approvals have not been obtained.

 

(c) Third Party Payments. If Licensee is required to make any payment to a third party to obtain a license for the manufacture, use, sale or import of a Product or otherwise exploit the Licensed Patent Rights, Licensee shall be entitled to deduct up to fifty percent (50%) of such third party payments made in a calendar year against royalties payable to CSMC (on behalf of Licensors) for that year; provided, however, that in no event shall the Royalties payable to CSMC (on behalf of Licensors) hereunder for any one-year period be reduced by operation of this section by more than fifty percent (50%); and provided, further, that such third party payments shall only be creditable against Royalties payable to CSMC (on behalf of Licensors) for the calendar year in which the third party payment was actually made by Licensee.

 

(d) Licensee Challenge of Patent Rights. Should Licensee bring, directly or through a third party indirectly, an action challenging the validity, scope or enforceability of any Patent Rights, Licensee will first provide CSMC (on behalf of Licensors) with at least ninety (90) days’ prior written notice that it intends so to do before filing such a challenge. Following the giving of such notice. Licensee will pay to CSMC (on behalf of Licensors) the Royalties and Non-Royalty Sublicense Revenue due hereunder at the rate of two times the applicable rate during the pendency of such action. Should the outcome of such action determine that any claim of a patent challenged by Licensee is valid and/or infringed and/or enforceable, as applicable, Licensee will thereafter pay to CSMC (on behalf of Licensors) the Royalties and Non-Royalty Sublicense Revenue due hereunder at the rate of three times the applicable rate for all Products sold that would infringe such claim and/or transactions that include a grant of rights to such claim. Such increased royalty reflects the increased value of the Patent Rights upheld in such action. In the event that a challenge of Licensed Patents brought by Licensee is partially or entirely successful, Licensee will have no right to recoup any Royalties or other amounts paid before or during the period of the challenge. Additionally, Licensee agrees to disburse any and all proceeds received from any sublicense of the applicable Patent Rights throughout the duration of any such challenge to CSMC (on behalf of Licensors), and agrees to reimburse Licensors for all costs actually incurred by them in connection with the applicable legal proceedings. In the event that all or any portion of this Section 4.5(d) is invalid, illegal or unenforceable, then the parties will use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, gives effect to the intent of this Section 4.5(d).

 

 

(e) Arm’s-Length Transactions. On sales of Products which are made in other than an arms’-length transaction, the value of the Net Sales attributed under this Section 4.5 to such a transaction shall be that which would have been received in an arms’-length transaction, based on sales of like quality and quantity products on or about the time of such transaction.

 

(f) Duration of Royalty Obligations. The royalty obligations of Licensee as to each Product shall terminate on a country-by-country basis concurrently with the expiration of the last to expire of a Valid Claim within the Patent Rights that covers such Product, including any term extensions thereof.

 

(g) Non-Royalty Revenues.

 

(i) Non-Royalty Sublicense Revenues. Any and all “Non-Royalty Sublicense Revenues” shall be reported and paid to CSMC (on behalf of Licensors) by Licensee as set forth below within sixty (60) days of receipt by Licensee. Licensee shall pay to CSMC (on behalf of Licensors) a percentage of these Non-Royalty Sublicense Revenues according to the following schedule:

 

Date of Receipt of Non-Royalty Sublicense Revenue (from Effective Date)		Percent of Non-Royalty Sublicense Revenues Payable to Licensors
Prior to receipt of FDA authorization of an Investigational New Drug (“IND”) application for a Product			35%
After receipt of FDA authorization of an IND application for a Product but prior to submission of a New Drug Application (“NDA”) to the FDA			10%
After submission of an NDA for a Product but prior to receipt of FDA approval therefor			8%
After receipt of FDA approval of an NDA for a Product			5%

 

 

Any non-cash consideration received by Licensee from Permitted Sublicensees shall be valued at its fair market value as of the date of receipt and such amount shall be paid in kind to CSMC (on behalf of Licensors) in accordance with the schedule above. In the event that the Patent Rights are sublicensed in combination with one or more patented technologies that are not covered under this Agreement, Non-Royalty Sublicense Revenues for the purposes of this Section 4.5(g) shall be calculated on a pro-rata basis in a manner to be mutually agreed by CSMC (on behalf of Licensors) and Licensee (which agreement may be a condition of approval under Section 2.2).

 

(ii) Product Development Milestones. Licensee agrees to pay and shall pay to CSMC (on behalf of Licensors) the following non-creditable, non-refundable product development milestone payments within sixty (60) days of the first occurrence of a Milestone (or its equivalent):

 

Milestone Event		Milestone Payment
Successful completion of Phase I clinical trial for a Product		$	150,000
Successful completion of a Phase 11 clinical trial for a product and receipt of FDA approval for a Phase III clinical trial		$	250,000
Receipt of FDA approval of a New Drug Application (“NDA”) or equivalent foreign regulatory approval in a non-United States major commercial market		$	1,500,000
Cumulative Net Sales have exceeded $5,000,000		$	250,000

 

(iii) In the event that Licensee has sublicensed the Patent Rights to a Permitted Sublicensee and, in accordance with such sublicense arrangement, Non-Royalty Sublicense Revenues are payable to Licensee by the Permitted Sublicensee in connection with or within ninety (90) days before or after the occurrence of any of the Milestone events set forth in Section 4.5(g)(ii), Licensee shall only be obligated to pay to CSMC (on behalf of Licensors) the greater of (A) the percentage of the Non-Royalty Sublicense Revenues set forth in Section 4.5(g)(i) or (B) the applicable Milestone payment set forth in Section 4.5(g)(ii), but not both.

 

 

(h) Payment and Accounting.

 

(i) Reports. Each payment of Royalties shall be accompanied by a report in the form attached as Schedule C hereto, which sets forth in reasonable detail the number and each type of Product sold and the calculation of Net Sales applicable thereto, and such additional details as may be reasonably requested by CSMC (on behalf of Licensors) for the determination of Royalties payable hereunder. Products shall be considered as being sold for the purpose of the calculation of Royalties under this Agreement when the revenues have been received from Sales of the Products. Each payment of Non-Royalty Sublicense Revenue shall be accompanied by a report in the form attached as Schedule C hereto setting forth in reasonable detail the basis for the calculation of such amounts, and such additional details as may be reasonably requested by CSMC (on behalf of Licensors) for the determination of Non-Royalty Sublicense Revenue payable hereunder. Electronic copies of such reports shall be sent by electronic mail to CSTechTransfer@cshs.ora. Except as otherwise provided herein, all amounts due hereunder shall be paid in United States dollars and shall be made without set off and free and clear of (and without any deduction or withholding for) any taxes, duties, levies, imposts or similar fees or charges. Royalties shall be payable by Licensee quarterly, within forty-five (45) days after the end of each calendar quarter, based upon revenues received during the immediately preceding calendar quarter. Licensee agrees to pay and shall pay to CSMC (on behalf of Licensors), or cause its Permitted Sublicensees to pay to CSMC (on behalf of Licensors), all Royalties resulting from the activities of its Permitted Sublicensees, within forty-five (45) days after the end of each calendar quarter.

 

(ii) Notice of Payment. Licensee shall provide prompt written notice to CSMC (on behalf of Licensors) that it has paid the licensee fee required by Section 4.2 or any product development milestone payment required by Section 4.5(g)(ii) by electronic mail to CSTechTransfer@cshs.oru.

 

(iii) Wire Transfer Instructions. All payments due hereunder shall be made by Licensee to CSMC in accordance with the following wire transfer instructions:

 

City National Bank

400 N. Roxbury Drive

Beverly Hills, CA 90210

ABA# 122 016 066

Account Number: 210-132260

Account Name: Cedars-Sinai Medical Center-Tech Transfer

Reference: Tech Transfer - Kairos Pharma - I14/IL13

 

(iv) Records and Audits. Licensee shall create and maintain complete and accurate records and documentation concerning all sales of Products by Licensee, its Affiliates and Permitted Sublicensees as well as transactions based upon which Non-Royalty Sublicense Revenue is due, in sufficient detail to enable the Royalties and Non-Royalty Sublicense Revenue, respectively, that is payable hereunder to be determined. Licensee shall retain such records and documentation for not less than five (5) years from the date of their creation. During the term of this Agreement and for a period of three (3) years thereafter, CSMC (on behalf of Licensors) and its representatives shall have the right to audit such records and documentation as shall pertain to the determination and payment of Royalties and Non-Royalty Sublicense Revenue. Such examiners shall have reasonable access during regular business hours to Licensee’s offices and the relevant records, files and books of account, and shall have the right to examine any other records reasonably necessary to determine the accuracy of the calculations provided by Licensee. The costs of any such audit shall be borne by CSMC, unless as a result of such inspection it is determined that the amounts payable by Licensee for any period are in error by greater than seven and one-half percent (7.5%), in which case the reasonable costs of such audit shall be borne by Licensee. CSMC shall report the results of any such audit to Licensee within forty-five (45) days of completion. Thereafter, Licensee shall promptly pay to CSMC the amount of any underpayment discovered in such audit, or CSMC shall credit to Licensee against future Royalty payments the amount of any overpayment discovered in such audit, as the case may be. In addition. Licensee shall pay interest on any underpayment at the rate that is the lower of (i) two percent (2%) over the rate of interest announced by Bank of America in Los Angeles, California (or any successor in interest thereto or any commercially equivalent financial institution if no such successor exists) to be its “prime rate”, or (ii) the highest rate permitted by applicable law, from the date such amount was underpaid to the date payment is actually received.

 

 

(v) Currency Transfer Restrictions. If any restrictions on the transfer of currency exist in any country or other jurisdiction so as to prevent Licensee from making payments to CSMC, Licensee shall take all commercially reasonable steps to obtain a waiver of such restrictions or to otherwise enable Licensee to make such payments. If Licensee is unable to do so, Licensee shall make such payments to CSMC in a bank account or other depository designated by CSMC in such country or jurisdiction, which payments shall be in the local currency of such country or jurisdiction, unless payment in United States dollars is permitted. Any payment by Licensee to CSMC in currencies other than United States dollars shall he calculated using the appropriate foreign exchange rate for such currency quoted in the California edition of The Wall Street Journal for the close of business of the last banking day of the calendar quarter in which such payment is being made.

 

(vi) Late Charges. A service charge of two percent (2%) per month, not to exceed the maximum rate allowed by applicable law, shall be payable by Licensee on any portion of Licensee’s outstanding Royalty or Non-Royalty Sublicense Revenue balance or any other amount payable by Licensee hereunder (including, without limitation, reimbursement for Prosecution costs as set forth in Section 4.1 hereof) that is not paid to CSMC within thirty (30) days past the due date.

 

(vii) Taxes. Licensee shall pay, or cause to be paid, any and all taxes required to be paid or withheld on any sales, licenses or other transfers for value of Products or Patent Rights (other than taxes imposed on the income or revenues of Licensors); provided, however, that under no circumstances shall the amounts of such taxes be deducted from the total amount of payments otherwise due to CSMC (on behalf of Licensors) hereunder other than as set forth in Section 1.7(d). Upon CSMC’s request (on behalf of Licensors), Licensee shall secure and send to CSMC proof of any such taxes withheld and paid by Licensee, its Affiliates or Permitted Sublicensees.

 

5. Patent Rights

 

5.1 Prosecution. Commencing on the Effective Date, Licensee shall assume, in coordination with CSMC, full responsibility for the application, maintenance, reexamination, reissue, opposition and prosecution of any kind (collectively “Prosecution”) relating to the Patent Rights in the Territory, including, but not limited to. payment of all costs, fees and expenses related thereto. Subject to the approval of CSMC (on behalf of Licensors) (which approval shall not be unreasonably withheld and which approval shall be provided within fifteen (15) days of CSMC’s receipt of Licensee’s written request), Licensee shall have the right to select counsel with respect to the responsibility assumed by Licensee in this Section 5.1, and Licensee shall diligently pursue the Prosecution of the Patent Rights to the benefit of Licensors, For purposes of Prosecution in accordance with this Agreement, Licensors in their capacity as owners/assignees and Licensee in its capacity as having been given power of attorney by Licensors, shall be considered co-clients of such patent counsel (e.g., for the purpose of attorney-client privilege). Each party shall provide the other parties with copies of any and all material or communications with the United States Patent and Trademark Office, or any foreign patent office, and each Licensor shall be afforded the opportunity of prior review and comment on such action or paper, at its cost.

 

 

5.2 Abandonment, Disclaimers, etc. Licensee shall obtain the prior written consent of CSMC (on behalf of Licensors) (which consent shall not be unreasonably withheld), prior to abandoning, disclaiming, withdrawing, seeking reissue, seeking reexamination or allowing to lapse any patent or patent application within the Patent Rights. In the event that Licensee shall elect to abandon the Prosecution (including the payment of maintenance fees or annuities) of any patent or patent application included in the Patent Rights, Licensee shall notify CSMC (on behalf of Licensors) of such election at least forty-five (45) days before a final due date which would result in abandonment or bar of patentability of the patent or patent application, hi such event, CSMC or Stanford may, at their sole option and expense, continue Prosecution of the patent application or patent. Licensee further agrees that it shall not file any continuation-in-part application relating to the Patent Rights unless the additional disclosure or material to be included in the continuation-in-part application is necessary or appropriate to support the patentability of a claim recited in a parent application on which the continuation-in-part application is based. Licensee shall not file any continuation-in-part application without CSMC’s (on behalf of Licensors) prior written consent, which shall not be unreasonably withheld.

 

5.3 Expenses. Licensee shall pay all expenses resulting from its obligations in Section 5.1 hereof. CSMC shall exercise reasonable efforts to cause the CSMC Inventors (to the extent they are available and on CSMC’s staff as employees) to cooperate fully with Licensee with respect to the Prosecution of the Patent Rights and CSMC shall be reimbursed for all reasonable out-of-pocket expenses as such expenses are incurred. Stanford shall exercise reasonable efforts to cause the Stanford Inventor (to the extent she is available and on Stanford’s staff as an employee) to cooperate fully with Licensee with respect to the Prosecution of the Patent Rights and Stanford shall be reimbursed for all reasonable out-of-pocket expenses as such expenses are incurred.

 

5.4 CREATE Act. Licensee shall not invoke the Cooperative Research and Technology Enhancement Act of 2004, as set forth under Title 35, Section 102(c) of the United States Code (the “CREATE Act”), with respect to the Patent Rights without first obtaining the prior written consent of CSMC (on behalf of Licensors).

 

 

6. Term And Termination

 

6.1 Term. Unless earlier terminated as provided in Section 6.2 hereof, the term of this Agreement shall commence on the Effective Date and shall expire, on a country-by-country basis, on the date upon which the last to expire of the patents of the Patent Rights shall expire.

 

6.2 Termination. Except as provided by Section 6.3 hereof, and in addition to the termination provisions of Section 2.5, this Agreement shall terminate upon the earliest to occur of the following:

 

(a) Automatically if Licensee shall enter into a liquidating bankruptcy, be adjudged insolvent, liquidate, dissolve and/or if the business of Licensee shall be placed in the hands of a receiver, assignee, or trustee, whether by voluntary act of Licensee or otherwise; provided, however, that if any such action is involuntary, termination shall not take place unless the action is not reversed within forty-five (45) days. Further, Licensee shall give CSMC (on behalf of Licensors) at least forty-five (45) days’ prior written notice before Licensee initiates any bankruptcy proceeding, and CSMC shall have the right to terminate this Agreement immediately upon receipt of such notice (on behalf of Licensors);

 

(b) Automatically if the performance by any party to this Agreement of any term, covenant, condition or provision hereof (i) shall jeopardize (A) the licensure of CSMC, (B) CSMC’s participation in the Medicare, Medi-Cal or other reimbursement or payment programs, (C) the full accreditation of CSMC by The Joint Commission or any other state or nationally recognized accreditation organization, or (D) CSMC’s tax-exempt status; or (ii) is deemed illegal or unethical by any recognized governmental agency or body. Upon the occurrence of any of the items set forth in this subparagraph (b), CSMC shall provide written notice to Licensee setting forth the reason for such termination and the parties shall work in good faith to attempt to revise the terms of this Agreement to mitigate the issues described in (i) and (ii) of the preceding sentence while protecting Licensee’s interest in the Patent Rights. If CSMC and Licensee cannot within thirty (30) days from the foregoing notice by CSMC resolve the issues described in (i) and (ii) above through a revision to the terms of this Agreement reasonably satisfactory to CSMC, CSMC may immediately terminate this Agreement upon written notice to Licensee (on behalf of Licensors);

 

(c) Upon sixty (60) days’ written notice from CSMC (on behalf of Licensors) that a required payment by Licensee is delinquent if, within such sixty (60) day period, Licensee shall fail to pay fully any payment required by Section 4.2, 4.3, 4.4 or 4.5 hereof;

 

(d) Upon sixty (60) days’ written notice from CSMC (on behalf of Licensors) if, within such sixty (60) day period. Licensee shall fail to cure fully any breach or default of any material obligation under this Agreement as described in such written notice detailing the facts of such breach with reasonable specificity; provided, however, that Licensee may avoid such termination if, before the end of such 60-day period, such breach or default has been cured by Licensee to the reasonable satisfaction of CSMC;

 

 

(e) Upon sixty (60) days’ written notice from Licensee if, within such sixty (60) day period. Licensors shall fail to cure fully any breach or default of any material obligation under this Agreement as described in such written notice detailing the facts of such breach with reasonable specificity; provided, however, that Licensors may avoid such termination if, before the end of such 60-day period, such breach or default has been cured by Licensors to the reasonable satisfaction of Licensee; and

 

(f) By either Licensee or CSMC (on behalf of Licensors) upon sixty (60) days’ written notice to the other party in the event that Licensee has provided satisfactory evidence that it has made reasonable efforts to achieve the Milestones required by Section 2.5 and Schedule B, but (i) has been unable to secure a capital commitment in the aggregate amount of at least S500,000 within twelve (12) months from the Effective Date; or (ii) Licensee cannot move forward with development of a Product due to (A) significant safety concerns identified by an Institutional Review Board overseeing any clinical trial of a Product; or (B) regulatory restrictions or prohibitions and (C) formulation and manufacturing process problems.

 

(g) Upon the mutual written agreement of the parties hereto (such termination to be effective as of the date mutually agreed upon in such written agreement).

 

6.3 Obligations Upon Termination. Upon any termination of this Agreement pursuant to Section 6.2 hereof nothing herein shall be construed to release any party from any liability for any obligation incurred through the effective date of termination (e.g., confidentiality, reimbursement of patent expenses incurred prior to such date), or for any breach of this Agreement prior to the effective date of such termination. Upon any termination of this Agreement pursuant to Section 6.2 hereof, all amounts owed by Licensee to CSMC under Section 4.2 of this Agreement which are outstanding as of the effective date of termination (including any interest that has accrued thereon) shall become immediately due and payable, and Licensee shall pay the full outstanding amounts to CSMC within thirty (30) days of the effective date of such termination. Licensee may, for a period of one (1) year after the effective date of such termination, sell all tangible Products customarily classified as “inventory” that it has on hand at the date of termination, subject to payment by Licensee to CSMC (on behalf of Licensors) of the applicable Royalty and Non-Royalty Sublicense Revenue.

 

6.4 Effect of Termination. In the event of any termination of this Agreement pursuant to Section 6.2 hereof, where such termination has not been caused by any action or inaction on the part of any Permitted Sublicensee of Licensee or by any breach by such Permitted Sublicensee of its obligations under its sublicense from Licensee, such termination of this Agreement shall be without prejudice to the rights of each non-breaching Permitted Sublicensee of Licensee and each non-breaching Permitted Sublicensee shall be deemed to be a licensee of Licensors thereunder, and Licensors shall be entitled to all rights, but shall not be subject to any obligations (other than the grant of license and appurtenant obligations under this Agreement to the extent provided for in such sublicense) of Licensee thereunder. In the event of any termination of this Agreement pursuant to Section 6.2(f) hereof, Licensee shall, promptly upon termination, assign all of its right, title and interest in the Licensee Improvements to Licensors.

 

 

6.5 Right to Institute Legal Actions. Notwithstanding the provisions of Section 6.2 hereof, but subject to Section 2.4 hereof, termination is not an exclusive remedy and Licensors, on the one hand, and Licensee, on the other hand, may institute any other legal action or pursue any other remedy against the other party permitted by applicable law if the other party does not substantially cure any material breach or default of any material obligation as provided herein, subject to any exclusions on damages provided for in this Agreement.

 

6.6 Reversion of Rights. Notwithstanding anything to the contrary set forth herein (including, but not limited to, Section 5 hereof), full responsibility for Prosecution of the Patent Rights shall, at the option of CSMC (exercisable in its sole and absolute discretion), and at its sole expense from the date of reversion, revert to CSMC (on behalf of Licensors) upon any termination of this Agreement.

 

6.7 Return of Data. In the event of any termination or expiration of this Agreement, Licensee shall promptly provide CSMC (on behalf of Licensors) with copies of all data, information and materials obtained or generated by or on behalf of Licensee in the course of conducting research and developing Products using the Patent Rights.

 

7. Infringement By Third Parties

 

7.1 Enforcement. Licensee shall have the first right to enforce, at its sole expense, any Patent Rights to the extent licensed hereunder against infringement by third parties and shall notify CSMC (on behalf of Licensors) in writing in advance of all such enforcement efforts. Notwithstanding the foregoing, Licensee shall have no right to enforce the Patent Rights against any nonprofit research institution without the prior written consent of both CSMC and Stanford. Upon Licensee’s undertaking to pay all documented out-of-pocket third party expenditures reasonably incurred by Licensors, Licensors shall reasonably cooperate in any such enforcement and, as necessary, join as parties therein. Licensee shall reimburse Licensors for all reasonable, documented out of pocket third party expenses, including reasonable attorneys’ fees, incurred in connection with any such enforcement. In the event that Licensee does not file suit against or commence and conclude settlement negotiations with a substantial infringer of Patent Rights within ninety (90) days of receipt of a written demand from CSMC (on behalf of Licensors) that Licensee bring suit, the parties will consult with one another in an effort to determine whether a reasonably prudent licensee would institute litigation to enforce the patent in question in light of all relevant business and economic factors (including, but not limited to, the projected cost of such litigation, the likelihood of success on the merits, the probable amount of any damage award, the prospects for satisfaction of any judgment against the alleged infringer, the possibility of counterclaims against the parties hereto, the impact of any possible adverse outcome on Licensee and the effect any publicity might have on the parties’ respective reputations and goodwill). If, after such process, it is determined that a suit should be filed and Licensee does not file suit or commence settlement negotiations forthwith against the infringer, then Licensors shall have the right, at their own expense, to enforce any Patent Rights. Any damages or other recovery from an infringement action undertaken by Licensee shall first be used to reimburse the parties, on a pro rata pari passu basis, for the costs and expenses incurred in such action, and shall thereafter be treated as Non-Royalty Sublicense Revenue in accordance with Section 4.5(g)(i). If Licensee fails to prosecute any such action to completion, then any damages or other recovery net of the parties’ costs and expenses incurred in such infringement action shall be the sole property of Licensors.

 

7.2 Defense Of Patent Rights. In the event that any Patent Rights are the subject of a legal action seeking declaratory relief or of any reexamination, inter partes review, post-grant review or opposition proceeding instituted by a third party, the parties agree to promptly consult with each other concerning the defense of such actions or proceedings. If the parties agree that such defense should be undertaken, then Licensee shall bear the expenses, including attorneys’ fees, associated with such defense and in any recoupment of expenses. If the parties disagree, then the party desiring to defend the action or proceeding may proceed with such defense and will bear its own expenses, and be entitled to all sums recovered.

 

 

8. Indemnification

 

8.1 Indemnification by Licensee. Subject to Section 8.2 hereof, Licensee shall hold harmless, defend and indemnify Licensors, the Stanford Indemnitees, and each of their officers, directors, employees (including the Inventor), agents and sponsors of the research (except Licensee) (each, an “Indemnified Party”, and collectively, the “Indemnified Parties”) from and against any and all third party claims, damages, losses, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses and costs of investigation, whether or not suit is filed) incurred by any of the Indemnified Parties in any action, suit, litigation, arbitration or dispute of any kind (“Action”) to the extent arising or resulting from any negligence or willful acts or omissions on the part of Licensee, its Affiliates or Permitted Sublicensees in connection with (a) their use of the Patent Rights and/or (b) the exercise of their rights hereunder or under any sublicense, including, but not limited to (i) the preclinical development and clinical testing of Products, and (ii) the manufacture, sale, use, marketing, or other disposition of Products developed, manufactured, sold, marketed, used or otherwise disposed of under this Agreement. The term “Stanford Indemnitees” means Stanford and Stanford Hospitals and Clinics, and their respective trustees, officers, employees, students, agents, faculty, representatives, and volunteers. The foregoing indemnification shall not apply to any claim, damage, loss, liability, cost or expense to the extent attributable to the negligent activities or intentional misconduct of any of the Indemnified Parties. As part of its obligations hereunder, Licensee shall defend any Action brought against any of the Indemnified Parties with counsel of its own choosing and reasonably acceptable to CSMC (on behalf of Licensors), and neither Licensor nor any other Indemnified Party shall agree to the compromise or disposition of or enter into any settlement of any such Action without first obtaining prior written approval of Licensee. Licensee shall pay all reasonable, documented costs, including attorneys’ fees, incurred in enforcing this indemnification action. Should Licensors or any other Indemnified Party not promptly notify Licensee in writing of or afford Licensee the right to defend any such Action, or should Licensors or any other Indemnified Party not cooperate with Licensee in the defense or settlement of such Action or obtain the prior written approval of Licensee to any such settlement or other compromise or disposition of such Action, Licensee shall have no obligation to indemnify Licensors or any other Indemnified Party hereunder. Should Licensee fail to provide a defense for the Indemnified Parties as required hereunder, then Licensee shall reimburse Licensors for their reasonable, documented out-of-pocket expenses (including reasonable attorneys’ fees and expenses and costs of investigation) which arc incurred as a result of any investigation, defense or settlement relating to the foregoing, which reimbursement shall be made to Licensors upon receipt by Licensee of invoices reflecting in reasonable detail such expenses incurred by Licensors. Licensee shall obtain and maintain insurance policies (including products liability and general liability policies at such time as is appropriate) which are reasonable and necessary to cover its activities and to comply with the indemnification obligations set forth above. Notwithstanding the foregoing, Licensee’s indemnification obligations hereunder shall not exceed an amount equal to the sum of (a) the market capitalization of Licensee; plus (b) the aggregate amount of Licensee’s insurance coverage, Such insurance policies shall name Licensors as additional insured parties, and shall provide a minimum of Three Million Dollars (S3,000,000) in coverage per occurrence. Upon initiation of any human clinical studies using a Product covered by the Patent Rights, Licensee shall have first increased its insurance coverage to an aggregate amount that in Licensee’s reasonable judgment, is commercially reasonable and consistent with prevailing business practice for the risks involved. Licensee shall provide CSMC (on behalf of Licensors) with Certificates of Insurance within thirty (30) days of the Effective Date (subject to extension if reasonably required) and annually thereafter, evidencing the policies required in accordance with this Section 8.1, together with copies of the endorsement which specifies Licensors as additional insureds and the declarations page for each such insurance policy. Licensee shall provide CSMC (on behalf of Licensors) with prompt written notice of any material change in coverage under such policies. The certificate of insurance, endorsements and declarations pages (and any renewals or replacements thereof), if required, shall be sent to (a) CSMC’s Technology Transfer Office by electronic mail at CSTechTransfer@cshs.org and (b) to Stanford at its address set forth in Section 13.1 hereof.

 

 

8.2 Notice of Claim. CSMC (on behalf of Licensors) shall promptly notify Licensee in writing of any claim or Action or material threat thereof brought against any Indemnified Party in respect of which indemnification may be sought and, to the extent allowed by law, shall reasonably cooperate with Licensee in defending or settling any such claim or Action. No compromise, disposition or settlement of any claim, Action or threat thereof received by Licensors and for which Licensors intend to seek indemnification (for themselves or on behalf of any other Indemnified Party) shall be made without the prior mutual written approval of Licensee and Licensors.

 

9. Use Of Names

 

Licensee shall not, unless as required by any law or governmental regulation, use the names of either Licensor in any promotional statement, or otherwise use the name of any CSMC or Stanford faculty member, employee or student, or any trademarks, service marks, trade names or fictitious business names of CSMC, Stanford or Stanford Hospitals and Clinics, without express prior written consent of the applicable CSMC or Stanford, as the case may be. Permission to license may be withheld at CSMC’s or Stanford’s sole discretion. Further, prior to any reference by Licensee to the names or marks of either Licensor in any manner, Licensee shall provide such Licensor with a writing reflecting the proposed reference so that such Licensor can review the reference within a reasonable period of time prior to the proposed use thereof by Licensee. This limitation includes, but is not limited to, use by Licensee in any advertising, offering circular, prospectus, sales presentation, news release or trade publication. Subject to compliance by Licensee with the foregoing, which shall be deemed conditions precedent to any use of either Licensor’s name or marks by Licensee, Licensee shall ensure that the name of such Licensor is used as scientifically or academically appropriate in the “byline” of any article, abstract, manuscript or any other publication related to the subject matter hereof.

 

10. Confidentiality

 

10.1 Non-Disclosure. Except to the extent Licensee’s counsel determines that disclosure of the terms of this Agreement is required by law, the parties hereto shall keep the terms of this Agreement and all business and scientific discussions relating to the business of the parties strictly confidential. All patient information to which a party is given access by the other party shall be subject to the provisions of the Confidentiality of Medical Information Act (Cal. Civ. Code §§56, et seq.) and the Health Insurance Portability and Accountability Act of 1996, and all ‘regulations promulgated thereunder and amendments thereto. It may, from time to time, be necessary for the parties, in connection with performance under this Agreement, to disclose Confidential Information (including know-how) to each other. The Receiving Party (as defined in Section 1.2 hereof) shall keep in strictest confidence the Confidential Information of the Disclosing Party (as defined in Section 1.2 hereof), using the standard of care it normally uses for information of like character but using no less than a reasonable degree of care, and shall not disclose the Confidential Information to any third party or use it except as expressly authorized by the prior written consent of the Disclosing Party or as otherwise permitted by this Agreement (including, without limitation, Section 10,2). Without limiting the foregoing, Licensee’s Confidential Information includes any and all progress reports made hereunder (including under Section 2.5), sublicenses, any reports or other information regarding Sales of Products and Royalties (including any royalty reports including as required under Section 4.5, whether from Licensee or any Permitted Sublicensee), audit reports of Permitted Sublicensees, Sublicense income and Sublicense Fees. Confidential Information of Licensee also includes any and all copies and derivations of and improvements on Licensee’s Confidential Information. The Receiving Party’s obligation hereunder shall not apply to Confidential Information that the Receiving Party can show:

 

(a) Was in the Receiving Party’ possession prior to receipt from the Disclosing Party hereunder as shown by the Receiving Party’s records, or later becomes part of the public domain through no fault or neglect of the Receiving Party or anyone to whom the Receiving Party disclosed Confidential Information;

 

(b) Is received in good faith from a third party having no obligations of confidentiality to the Disclosing Party, provided that the Receiving Party complies with any restrictions imposed by the third party; or

 

(c) Is independently developed by the Receiving Party without use of or reference to the Disclosing Party’s Confidential Information as shown by the Receiving Party’s records.

 

 

If a Receiving Party is required by law or regulation or court order to disclose Confidential Information of the Disclosing Party, (including, without limitation, in connection with filings with another government agency or as required under the California Public Records Act), the Receiving Party may disclose that portion of the Confidential information that is required to be disclosed provided that the Receiving Party notifies the Disclosing Party in writing in advance of such disclosure and uses reasonable efforts to restrict disclosure and to obtain confidential treatment and/or allows the Disclosing Party to challenge or limit such disclosure or obtain a protective order or confidential treatment. The obligations set forth herein shall remain in effect for a period of five (5) years after the effective termination or expiration of this Agreement.

 

10.2 Limits on Permitted Disclosures. Each party agrees that any disclosure or distribution of the other party’s Confidential Information within its own organization shall be made (a) only as is reasonably necessary to carry out the intent of this Agreement, and (b) only to those of its officers and employees who have agreed to maintain its confidentiality. In such event, the Receiving Party shall identify with reasonable particularity, upon request by the Disclosing Party, each person within the Receiving Party’s organization to whom the Receiving Party has disclosed or distributed Confidential Information. Furthermore, Licensee may disclose the Confidential Information received from Licensors to its Affiliates and its and their directors, officers, employees, agents, contractors, consultants and actual and potential Permitted Sublicensees, investors and acquirers as shall be reasonably necessary to carry out the intent of this Agreement or any sublicense granted by Licensee as contemplated by this Agreement if, but only if, such third party recipients of Confidential Information each execute a confidentiality agreement containing confidentiality provisions no less restrictive than those confidentiality provisions contained in this Section 10. In such event, Licensee shall identify with reasonable particularity, upon CSMC’s request (on behalf of Licensors), each third party to whom Licensee has disclosed or distributed Licensors’ Confidential Information. Furthermore, Licensee shall have the right to disclose this Agreement or the terms thereof to potential investors and acquirers for the purpose of investment discussions without the additional consent or approval of Licensors.

 

10.3 Legally Required Disclosures. If a subpoena or other legal process concerning Confidential Information is served upon any party hereto pertaining to the subject matter hereof, the party served shall notify the other parties immediately in writing, the other parties shall cooperate with the party served, at the other parties; expense, in any effort requested by the other party to contest the validity of such subpoena or other legal process. This Section 10.3 shall not be construed in any way to limit any party’s ability to satisfy any disclosure of its relationship with the other party required by any governmental authority.

 

10.4 Patent Rights as Confidential Information. The Patent Rights are understood by Licensee to be the Confidential Information of Licensors to the extent “unpublished” as such term is construed under the United States Patent Laws. As such, Licensee’s confidentiality obligations hereunder automatically extend to any and all unpublished patent applications of Licensors relating to any Patent Rights and CSMC Future Patent Rights and to any and all communications with the United States Patent Office, and any foreign patent office relating to any Patent Rights or CSMC Future Patent Rights, to the extent that such communications are not available to the public. Notwithstanding the foregoing, Licensors shall not use any of Licensee’s Confidential Information to apply for, secure or perfect any intellectual property rights, without Licensee’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed.

 

10.5 Return of Confidential Information. In the event of any termination of this Agreement, the Receiving Party shall promptly return all Confidential Information and any copies made thereof previously made available to the Receiving Party by the Disclosing Party, except that the Receiving Party may retain one copy of the Confidential Information in the custody of its legal files solely for the purpose of monitoring compliance with this Agreement.

 

 

10.6 Remedies. The parties acknowledge and agree that it would be difficult to measure damages for breach by any party of the covenants set forth in this Section 10, and that injury from any such breach would be incalculable, and that money damages would therefore be an inadequate remedy for any such breach. Accordingly, each party shall be entitled, in addition to all other remedies available hereunder or under law or equity, to injunctive or such other equitable relief as a court may deem appropriate to restrain or remedy any breach of such covenants without having to prove actual damages or post a bond, unless the court so requires.

 

11. Information Exchange

 

In addition to the Patent Rights, the parties shall cooperate to exchange such non-confidential information as may be appropriate and necessary to facilitate Licensee’s development and commercialization of Products incorporating any Patent Rights.

 

12. Patent Marking

 

In the event any Product is the subject of a patent under the Patent Rights, Licensee shall actually or virtually mark all Products made, sold or otherwise disposed of by or on behalf of it or any of its Permitted Sublicensees as set forth under Title 35, Section 287(a) of the United States Code and shall respond to any request or disclosure under Title 35. Section 287(b)(4)(B) of the United States Code by only notifying CSMC (on behalf of Licensors) of the request for disclosure.

 

13. Miscellaneous

 

13.1 Notices. Any notice, request, instruction or other document required by this Agreement shall be in writing and shall be deemed to have been given (a) if mailed with the United States Postal Service by prepaid, first class, certified mail, return receipt requested, at the time of receipt by the intended recipient, (b) if sent by Federal Express or other overnight earner, signature of delivery required, at the time of receipt by the intended recipient, or (c) if sent by facsimile transmission, when so sent and when receipt has been acknowledged by appropriate telephone or facsimile receipt, addressed as follows:

 

In the case of CSMC to:

 

Cedars-Sinai Medical Center

8700 Beverly Boulevard

Los Angeles, California 90048-1865

Attention: Executive Vice President for Finance & CFO

 

with a copy to Vice President for Legal & Technology Affairs

 

or in the case of Stanford to:

 

Office of Technology Licensing

Stanford University

3000 El Camino Real

Building 5, Suite 300

Palo Alto, CA 94306

Attn: Docket 14-261

info@otlmail.stanford.edu

 

or in the case of Licensee to:

 

NanoGB13, Inc.

565 Esplanade, Suite 206

Redondo Beach, CA 90277

Attention: Chairman

 

or to such other address or to such other person(s) as may be given from time to time under the terms of this Section 13.1.

 

 

13.2 Compliance with Laws. Each party shall comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this Agreement.

 

13.3 Governing Law. For any dispute among the parties to this Agreement which arises from or relates to this Agreement, the Agreement shall be construed and enforced in accordance with the laws of the United States of America and of the State of California, irrespective of choice of laws provisions. The parties agree that Los Angeles County, California shall be the situs of any legal proceeding arising out of or relating to this Agreement. Each party hereby waives any right it may have to assert the doctrine of forum non conveniens or similar doctrine or to object to venue with respect to any proceeding brought in accordance with this Section, and stipulates that the state and federal courts located in Los Angeles, California shall have in personam jurisdiction and venue over each of them for the purpose of litigating any dispute, controversy, or proceeding arising out of or related to this Agreement. Each party hereby authorizes and accepts service of process sufficient for personal jurisdiction in any action against it as contemplated by this Section by registered or certified mail, return receipt requested, postage prepaid, to its address for the giving of notices as set forth in this Agreement.

 

13.4 Waiver. Failure of any party to enforce a right under this Agreement shall not act as a waiver of that right or the ability to assert that right relative to the particular situation involved.

 

13.5 Enforceability. If any provision of this Agreement shall be found by a court of competent jurisdiction to be void, invalid or unenforceable, the same shall be reformed to comply with applicable law or stricken if not so conformable, so as not to affect the validity or enforceability of the remainder of this Agreement.

 

13.6 Modification. No change, modification, or addition or amendment to this Agreement, or waiver of any term or condition of this Agreement, is valid or enforceable unless in writing and signed and dated by the authorized officers of the parties to this Agreement.

 

13.7 Entire Agreement. This Agreement and the Schedules hereto (which are incorporated herein by this reference as if fully set forth herein) constitute the entire agreements among the parties with respect to the subject matter hereof and thereof, and replace and supersede as of the date hereof and thereof any and all prior and contemporaneous agreements and understandings, whether oral or written, between the parties with respect to the subject matter of such agreements.

 

13.8 Construction. This Agreement has been prepared, examined, negotiated and revised by each party and their respective attorneys, and no implication shall be drawn and no provision shall be construed against any party to this Agreement by virtue of the purported identity of the drafter of this Agreement or any portion thereof.

 

13.9 Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall constitute one and the same instrument. This Agreement may be executed by facsimile or in .pdf format.

 

13.10 Attorneys’ Fees. In the event of any action at law or in equity between the parties hereto to enforce any of the provisions hereof, the unsuccessful party to such litigation shall pay to the successful party all reasonable documented costs and expenses, including reasonable attorneys’ fees, incurred therein by such successful party; and if such successful party shall recover a judgment in any such action or proceeding, such reasonable costs, expenses and attorneys’ fees may be included in and as part of such judgment.

 

 

13.11 Assignment; Successors.

 

(a) Subject to Section 13.11(b), Licensee may assign this Agreement as part of a sale, regardless of whether such a sale occurs through an asset sale, stock sale, merger or other combination, or any other transfer of Licensee’s entire business, or that part of Licensee’s business that exercises all rights granted under this Agreement. Any other attempt to assign this Agreement by Licensee is null and void. In the event of a bankruptcy, assignment is permitted only to a party that can provide adequate assurance of future performance, including diligent development and sales, of Products.

 

(b) After any assignment, the following conditions must be met: (i) Licensee must notify CSMC (on behalf of Licensors) in writing within thirty (30) days of the assignment, including the new assignee’s contact information, and (ii) the new assignee must agree in writing to be bound by this Agreement.

 

(c) Subject to the limitations on assignment herein, this Agreement shall be binding upon and inure to the benefit of any successors in interest and assigns of the parties. CSMC shall have the right to assign its rights hereunder as part of any reorganization or bond financing.

 

13.12 Further Assurances. At any time and from time to time after the Effective Date, each party shall do, execute, acknowledge and deliver, and cause to be done, executed, acknowledged or delivered, all such further acts, transfers, conveyances, assignments or assurances as may be reasonably required to consummate the transactions contemplated by this Agreement.

 

13.13 Survival. The following sections shall survive any expiration or earlier termination of this Agreement: 6.3, 8, 9, 10, and 13.

 

13.14 Third Party Beneficiary. Stanford is an intended third party beneficiary of this Agreement.

 

[signature page follows]

 

 

IN WITNESS Whereof, the parties have caused their duly authorized representatives to execute this Agreement as of the date first above written.

 

	“LICENSEE”:
	Kairos Pharma Ltd., a California CORPORATION
	By:	/s/ John S. Yu, M.D.
	Name:	John S. Yu, M.D.
	Title:	Chairman
	Date:	October 2, 2017
	“CSMC”:
	Cedars-Sinai Medical CENTER, a
	California nonprofit public benefit CORPORATION
	By:	/s/ James D. Laur, Esq.
		James D. Laur, Esq.
		Vice President for Legal & Technology
		Affairs
	Date:	October 2, 2017
	By:	/s/ Edward M. Prunchunas
		Edward M. Prunchunas
		Executive Vice President for Finance
		and CFO
	Date:	October 2, 2017

 

 

ACKNOWLEDGED AND AGREED:
“INVENTORS”:
/s/ Ramachandran Murali, Ph.D.
Ramachandran Murali, Ph.D.
/s/ Stephen Pandol, M.D.
Stephen Pandol, M.D.
/s/ Aida Habtezion, M.D.
Aida Habtezion, M.D.

 

 

Schedule A

 

Patent Rights

 

TITLE:		“COMPOSITIONS AND METHODS FOR TREATING FIBROSIS”
CSMC TECH ID:		mur000819
INVENTORS:		Ramachandran Murali, Ph.D.
		Stephen Pandof, M.D.
		Aida Habtezion, Ph.D.
APPLICATION NO.:		US 15/460,151
COUNTRY:		United States
FILING DATE:		March 15, 2017
DOCKET NO.:		065472-000495 US00
TITLE:		“COMPOSITIONS AND METHODS FOR TREATING FIBROSIS”
CSMC TECH ID:		mur000819
INVENTORS:		Ramachandran Murali, Ph.D.
		Stephen Pandol, M.D.
		Aida Habtezion, Ph.D.
APPLICATION NO.:		15841396.3
COUNTRY:		Europe
FILING DATE:		September 18, 2015
DOCKET NO.:		065472-000495EP00
TITLE:		“COMPOSITIONS AND METHODS FOR TREATING FIBROSIS
CSMC TECH ID:		mur000819
INVENTORS:		Ramachandran Murali, Ph.D.
		Stephen Pandol, M.D.
		Aida Habtezion, Ph.D.
APPLICATION NO.:		2017-515820
COUNTRY:		Japan
FILING DATE:		September 18, 2015
DOCKET NO.:		065472-00Q495JP00

 

 

Schedule B

 

Milestones

 

1. Licensee shall have completed preclinical studies of a Product within 36 months of the Effective Date.

 

2. Licensee shall have submitted an IND application for a Product to the FDA and received approval of such IND application from the FDA within 48 months of the Effective Date.

 

3. Licensee shall have initiated a Phase I clinical trial of a Product within 50 months of the Effective Date (subject to FDA approval).

 

4. Licensee shall have made the first commercial sale of a Product within 10 years of the Effective Date.

 

 

Schedule C

 

Royalty Reporting Form

 

Licensee name:

Reporting period:

Date of report:

Date of first commercial sale:

 

Royalty Report

 

Product (list products by name)

No. units sold

Invoiced price per unit

Gross sales

Allowable deductions (attached itemized detail)

Country of sale/foreign currency/ conversion rate

Net sales

Product name

Product name

Product name

Total

 

Total net sales		$
Royalty rate
Royalty due		$

 

Total royalty due: $ ______________________________

 

Non-Royalty Sublicense Revenue Report

 

Total Non-Royalty Sublicense Revenue received		$
Date received
Applicable percentage payable to Licensors
Total Non-Royalty Sublicense Revenue payable to Licensors		$

 

Report prepared by:

Title:

Date:

 

Please send electronic copy to CSTechTransfer@cshs.org.

 

 

 

Exhibit 10.13

 

Effective Date: June 17, 2021

 

Cedars-Sinai Medical Center

8700 Beverly Boulevard,

Los Angeles, California 90048-1865

Attention: Vice President, Intellectual Property

 

Re:	Exclusive License Agreement dated October 1, 2017 - Amendment

 

Dear Cedars-Sinai Medical Center:

 

Reference is made to that certain Exclusive License Agreement regarding the technology titled “Composition and Methods for Treating Fibrosis” dated October 1, 2017 (as amended from time to time, the “License Agreement”) by and between CEDARS-SINAI MEDICAL CENTER, a California nonprofit public benefit corporation (“CSMC”), and Kairos Pharma, Ltd, a California corporation (“Licensee”).

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties in this letter amendment agreement (this “Letter Amendment”) hereby agree to, and acknowledge, the following:

 

1. Each milestone due date listed on Schedule B of the License Agreement is hereby extended by twenty-four (24) months from the original deadline listed in the License Agreement.

 

2. Except as expressly provided in this Letter Amendment, all of the terms and provisions of the License Agreement remain unchanged. On and after the Effective Date stated at the top of this Letter Amendment, each reference in the License Agreement to “this Agreement,” “the Agreement,” “hereunder,” “hereof,” “herein,” or words of like import, and each reference to the License Agreement in any other agreements, documents, or instruments executed and delivered pursuant to, or in connection with, the License Agreement, will mean and be a reference to the License Agreement as amended by this Letter Amendment.

 

Please acknowledge your agreement to, and acceptance of, the foregoing by signing this Letter Amendment below. Please return a signed copy to the undersigned, it being agreed that this Letter Amendment may be executed in counterparts and signatures received by electronic transmission shall have the same effect as original signatures.

 

	Sincerely,
	/s/ John S. Yu, M.D.
	John S. Yu, M.D.
	Chief Executive Officer of Kairos Pharma, Ltd.
	2355 Westwood Blvd. #139,
	Los Angeles, CA 90064

 

(CSMC signature page follows)

 

 

ACKNOWLEDGED AND AGREED TO ON JUNE 17, 2021 BY:

 

	CEDARS-SINAI MEDICAL CENTER
	By:	/s/ James D. Laur, JD
		James D. Laur, JD
		Vice President, Intellectual Property
	By:	/s/ Edward M. Prunchunas
		Edward M. Prunchunas
		Executive Vice President, Finance & Treasurer

 

 

 

Exhibit 10.14

 

EXCLUSIVE LICENSE AGREEMENT

 

This Exclusive License Agreement (“Agreement”) is entered into as of this 12 day of March 2019 (“Effective Date”) by and between Cedars-Slnai Medical Center, a California nonprofit public benefit corporation (“CSMC”), with offices at 8700 Beverly Boulevard, Los Angeles, California 90048-1865, and Kairos Pharma, Ltd, a California corporation (“Licensee”), with offices at 565 Esplanade, Suite 206, Redondo Beach, CA 90277.

 

RECITALS

 

A. CSMC owns and is entitled to grant license rights with respect to certain Patent Rights (as defined below) invented or developed in connection with research performed at CSMC’s Molecular Therapeutics Core under the direction of Ramaehandran Murali, Ph.D., Randall McNally, Ph.D. and Xinlei Pan, Ph.D. (hereinafter collectively referred to as the “Inventors”).

 

B. CSMC desires to have the Patent Rights developed, used and commercialized in the Field of Use (as defined below) by Licensee, and Licensee desires to obtain an exclusive, worldwide license to conduct research in the Field of Use, and to develop, manufacture, use and sell Products (as defined below) in the Field of Use, using the Patent Rights in accordance with the terms of this Agreement. Other than the rights expressly granted by CSMC hereunder within the Field of Use, Licensee acknowledges that CSMC shall retain all other rights with respect to the Patent Rights.

 

C. CSMC and Licensee intend that the execution, delivery and performance of this Agreement by each party, and the consummation of the transactions contemplated hereunder, shall not at any time threaten CSMC’s tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and Section 23701d of the California Revenue and Taxation Code, or cause CSMC to be in default under any of CSMC’s issued and outstanding tax-exempt bonds.

 

Now, Therefore, in consideration of the mutual covenants and premises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1. Definitions

 

1.1 “Affiliate” or “Affiliates” shall mean any corporation, person or entity, which controls, is controlled by, or is under common control with, a party to this Agreement without regard to stock or other equity ownership. For purposes hereof, the terms “control” and “controls” mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a corporation, person or entity, whether through the ownership of voting securities, by contract or otherwise.

 

1.2 “Confidential Information” shall mean any confidential or proprietary information furnished by one party (the “Disclosing Party”) to the other party (the “Receiving Party”) in connection with this Agreement, including, without limitation, all specifications, know-how. trade secrets, technical information, drawings, software, models, business information and patent applications pertaining to the Patent Rights, and as further provided in Section 10 hereof.

 

 

1.3 “FDA” shall mean the United States Food and Drug Administration, or any successor agency thereof.

 

1.4 “Field of Use” shall mean the diagnosis of diseases and disorders in humans and animals, the therapeutic treatment of disease and disorders in humans and animals, and the maintenance and improvement of health in humans and animals.

 

1.5 “Future Patent Rights” shall mean all improvements or enhancements to the Patent Rights that, after the Effective Date, are conceived and reduced to practice if patentable, or reduced to practice if not patentable, by at least one Inventor using any facilities, resources or personnel of CSMC.

 

1.6 “Licensee Improvements” shall mean any and all processes, uses, designs, applications, methods and compositions-of-matter, indications, improvements, enhancements and modifications in the Field of Use directly based upon or directly created using the Patent Rights and which were discovered or developed by or on behalf of Licensee during the term of this Agreement, exclusive of work performed by CSMC or the Inventors except (i) in the case of Dr. John Yu working in his capacity as Licensee’s Chairman and without using any facilities, resources or personnel of CSMC and (ii) in the case of Dr. Bong Seop Lee, PhD., working in his capacity as Licensee’s Vice President of Research and Development and without using any facilities, resources or personnel of CSMC. For the avoidance of doubt, any inventions created, discovered or developed by or on behalf of Licensee which were not directly based upon or directly created using the Patent Rights shall not be considered “Licensee Improvements” and shall not be subject to this Agreement.

 

1.7 “Net Sales” shall mean the gross amount invoiced by Licensee, its Affiliates, Permitted Sublicensees, affiliates of Permitted Sublicensees, or any of them, to third parties for all sales of Products less (a) discounts actually allowed; (b) credits for claims, allowances, retroactive price reductions or returned goods; (c) prepaid freight; and (d) sales taxes or other governmental charges actually paid in connection with sales of Products (but excluding what are commonly known as income taxes and value-added taxes). Sales of Products by Licensee, or a Permitted Sublicensee of Licensee, to any Affiliate or Permitted Sublicensee which is a reseller thereof shall be excluded, and only the subsequent sale of such Products by Affiliates or Permitted Sublicensees of Licensee to unrelated parties shall be deemed Net Sales hereunder. If a Product is sold or provided as part of a system, package, or combination product or service that involve one or more products or services not covered by the Patent Rights (each, a “Combination Product”), Net Sales shall be calculated by multiplying the Net Sales of such Combination Product, by the fraction A/B, where “A” is the price of the Product included in such Combination Product when sold separately from any other products or services not covered by the Patent Rights and “B” is the price of the Combination Product. In the event that no market price is available for the Product included in such Combination Product when supplied or priced separately, CSMC and Licensee shall determine in good faith the fair market value thereof.

 

 

1.8 “Non-Royalty Sublicense Revenues” shall mean upfront fees, license maintenance fees, and milestone payments, or other payments, including the fair market value of any non-cash consideration, received by Licensee in consideration for any rights granted to Patent Rights under a sublicense agreement, and excludes (a) any and all sales-based royalties paid to Licensee: and (b) payments received by Licensee from granting agencies and/or from a Permitted Sublicensee for costs related to research and development activities, regardless of whether the activities are preclinical or clinical.

 

1.9 “Patent Rights” shall mean the patents and/or patent applications existing on the Effective Date which are described on Schedule A attached hereto, and all patents and/or patent applications (including provisional patent applications) existing as of the Effective Date in any other country corresponding to any of the foregoing, and all divisions, continuations, reissues, reexaminations, supplementary protection certificates and extensions thereof, whether domestic or foreign, all claims of continuations-in-part that include at least one claim that is entitled to the benefit of the priority date of any of the foregoing, and any patent that issues thereon. The Patent Rights are all owned by CSMC. For the avoidance of doubt, the Patent Rights shall not include any Licensee Improvements.

 

1.10 “Product” shall mean any diagnostic or therapeutic product and/or service in the Field of Use that, except for the license granted hereunder, would infringe a Valid Claim of the Patent Rights.

 

1.11 “Territory” shall mean worldwide.

 

1.12 “Valid Claim” shall mean a claim of an issued patent included within the Patent Rights, which claim has not (a) lapsed, been canceled or become abandoned, (b) been declared invalid or unenforceable by a non-appealable decision or judgment of a court or other appropriate body or authority of competent jurisdiction, or (c) been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise. The term Valid Claim shall also include the claims of a pending patent application within the Patent Rights for a period of five (5) years from the earliest filing date of that patent application. For purposes of the preceding sentence, “earliest filing date” means, for a continuation, continuation-in-part or divisional application, the filing date of the earliest non-provisional application from which the continuation, continuation-in-part or divisional application claims priority in which the Valid Claim first actually appeared.

 

 

2. License

 

2.1 Grant of Exclusive Rights. Subject to the terms of this Agreement, CSMC hereby grants to Licensee, and Licensee hereby accepts from CSMC, the exclusive license, with the right to grant sublicenses (subject to the terms of Section 2.2 hereof), under and to the Patent Rights during the term of this Agreement (as provided in Section 6 hereof) to conduct research in the Field of Use and to make, have made, use, import, offer for sale, sell and/or have sold Products in the Field of Use in the Territory. The foregoing grant of exclusivity is made expressly subject to the following:

 

(a) All applicable laws and regulations, including, without limitation, the requirements of federal law as pertains to the manufacture of products within the United States;

 

(b) The following non-exclusive rights to the Patent Rights, which are retained by CSMC within the Field of Use:

 

(i) subject to Licensee’s right to prior review, the right to submit for publication the scientific findings from research conducted by or through CSMC or its investigators (including the Inventors) related to the Patent Rights; provided, that Licensee retains the rights to (a) delete Licensee’s Confidential Information from any proposed publication and CSMC shall delay such publication for a reasonable period of time, but no longer than fifteen (15) days, to facilitate such deletion; and (b) request, within fifteen (15) days of receiving the publication, a reasonable delay of no more than forty-five (45) days from the date of such request to allow the appropriate party to protect any know-how and/or patentable subject matter contained in such publication; and

 

(ii) the right (A) to use any tangible or intangible information contained in the Patent Rights (so long as CSMC shall treat such information as Confidential Information and maintain its confidentiality in accordance with Section 10 hereof), for CSMC’s research, internal teaching and other educationally-related and non-commercial clinical purposes, where clinical use does not involve a third party funding grant to commercialize such information, and (B) to obtain research funding for further study and development thereof from governmental and other nonprofit organizations (including giant applications).

 

(c) Notwithstanding any other provision hereof to the contrary, all rights to the Patent Rights and Future Patent Rights outside of the Field of Use are retained by CSMC. Furthermore, this Agreement confers no license or rights by implication, estoppel, or otherwise under any patent applications or patents of CSMC other than Patent Rights regardless of whether such patents are dominant or subordinate to Patent Rights.

 

 

2.2 Sublicensing. Licensee shall have the right to grant sublicenses or to assign any or all of the rights granted hereunder only to (a) an Affiliate; (b) a biopharmaceutical, pharmaceutical or bio-diagnostic company which is generally recognized in such industries and which, at the time of the sublicense, is in good standing and has a market capitalization of over $100,000,000; and (c) an entity which has been approved in writing by CSMC; provided, that such approval shall not be unreasonably withheld; provided, further, that the Licensee shall request consent from CSMC by submitting a written request to CSMC’s Technology Transfer Office by electronic mail at CSTechTransfer@cshs.org, and CSMC shall advise Licensee of its decision and of the reason for its decision within thirty (30) days of receiving the request from Licensee. Any sublicensee permitted under subsection (a) or (b) of the preceding sentence shall be referred to as a “Permitted Sublicensee”. In the event CSMC denies a requested sublicense. Licensee shall have the right to petition CSMC in writing for reconsideration of the denial within thirty (30) days. Any such Permitted Sublicensee shall be subject in all respects to the provisions contained in this Agreement and Licensee will remain primarily liable to CSMC for, and shall be responsible to the best of Licensee’s ability and resources for monitoring and enforcing, performance of all of Licensee’s obligations hereunder by any such Permitted Sublicensee. Without limiting the generality of the foregoing, as an express condition of any such sublicense, any such Permitted Sublicensee shall be required to agree in writing to be bound by commercially reasonable reporting and record keeping, indemnification and inspection provisions, and the applicable provisions of this Agreement, including, without limitation, those pertaining to the use of CSMC’s name and marks, indemnification of CSMC and the use of CSMC’s Confidential Information. Permitted Sublicensees may not further sublicense without CSMC’s prior written consent, which consent shall not be unreasonably withheld. Licensee shall promptly forward to CSMC a copy of any and all fully executed sublicense agreements, any subsequent amendments, and all copies of Permitted Sublicensees’ profit sharing or royalty reports, in no event more than thirty (30) days following execution or receipt thereof, as applicable. Licensee shall also keep CSMC reasonably informed with respect to the progress of any relations entered into with any Permitted Sublicensees. If Licensee shall conduct one or more audits of its Permitted Sublicensees hereunder during the term hereof. Licensee shall provide copies of all audit reports to CSMC on a timely basis. Licensee understands and agrees that none of its permitted sublicenses hereunder shall reduce in any manner any of its obligations set forth in this Agreement.

 

(a) Required Sublicensing. If Licensee is unable or unwilling to serve or develop a potential market or market territory for which there is a company willing to be a Permitted Sublicensee, Licensee will, at CSMC’s request, negotiate in good faith a sublicense with any such Permitted Sublicensee containing such terms as are standard for sublicense agreements in the biopharmaceutical industry.

 

(b) Royalty-Free Sublicenses. If, and only if. Licensee pays all royalties due CSMC from a Permitted Sublicensee’s Net Sales, Licensee may grant that Permitted Sublicensee a royalty-free or non-cash sublicense or cross-license.

 

2.3 CSMC Future Patent Rights. CSMC shall promptly notify Licensee in writing of all Future Patent Rights. Licensee shall have, for a period of sixty (60) days after receipt by Licensee of written notice from CSMC disclosing a Future Patent Right, the exclusive first right to negotiate with CSMC to obtain one or more licenses to the Future Patent Right in the Field of Use upon such terms and conditions as shall be agreed by the parties hereto, which terms and conditions shall include provisions for fair market value consideration for the grant of any such licenses. If Licensee declines or fails to pursue, or if the parties fail to conclude negotiations for a license to, such Future Patent Right in the Field of Use during the sixty (60) day period specified above, then CSMC shall have the right to commence discussions with any other party concerning such Future Patent Right. Subject to the provisions of this Section 2.3, Licensee acknowledges and agrees that CSMC expressly retains and reserves any and all right, title and interest in and to the Future Patent Right, whether or not in the Field of Use and, accordingly, no license to any Future Patent Right is granted to Licensee under this Agreement.

 

 

2.4 Licensee Improvements. Licensee hereby grants, and shall require its Permitted Sublicensee(s) to grant, to CSMC a nonexclusive, royalty-free, irrevocable, paid-up license to practice and use Licensee Improvements for non-commercial research purposes, which license shall include, without limitation, the rights to: (a) publish the scientific findings from research conducted by or through CSMC or on its behalf, subject to the prior approval of Licensee, which approval shall not be unreasonably delayed or withheld, (b) use any tangible or intangible information contained in the Licensee Improvements (so long as CSMC shall treat such information as Confidential Information and maintain its confidentiality in accordance with Section 10 hereof), for CSMC’s internal teaching and other educationally-related and non-commercial clinical purposes, where clinical use does not involve a third party funding grant to commercialize such information, and (c) obtain research funding from governmental and other nonprofit organizations (including grant applications). CSMC may not sublicense any Licensee Improvements to a third party or share such Licensee Improvements with a third party without Licensee’s prior written consent, not to be unreasonably withheld.

 

2.5 Milestones. Licensee acknowledges that it is important to CSMC, and a requirement of the United States Government under Title 35, Section 203 of the United States Code, that Licensee pursue the development, commercialization and marketing of Products and otherwise exercise commercially reasonable efforts to maximize the value of this Agreement to CSMC. CSMC and Licensee have agreed on the Milestones set forth on Schedule B. with each such Milestone being deemed a separate and independent condition. Within sixty (60) days after each anniversary of the Effective Date. Licensee shall prepare and deliver to CSMC an annual written report (to be certified by an executive officer of Licensee) that provides an overview of Licensee’s progress towards achieving each Milestone and its other efforts with respect to the ongoing development, commercialization, and marketing of the Products. If Licensee believes that it is or will be unable to achieve such Milestones despite its diligent efforts, Licensee may request amendments or reasonable extensions to Schedule B in writing for CSMC’s consideration, such amendments or reasonable extensions not to be unreasonably withheld, delayed or conditioned upon additional consideration. Licensee agrees to provide any additional information reasonably required by CSMC to evaluate Licensee’s performance under this Agreement. If Licensee fails to meet any Milestone designated in Schedule B hereto, and has not requested an extension or amendment to such Milestone(s), CSMC may, at its option and as its sole remedy (and Licensee’s sole liability) for Licensee’ breach of this Section 2.5, upon written notice to Licensee, convert the exclusive license granted under Section 2.1 hereof to a non-exclusive license or to a co-exclusive license, or terminate the license. Notwithstanding the foregoing or anything to the contrary herein, CSMC shall not exercise the right to convert the exclusive license granted under Section 2.1 hereof to a non-exclusive license or to a co-exclusive license, or terminate the license under this Section 2.5, for so long as Licensee is using diligent efforts to achieve the Milestone that has not yet been achieved.

 

3. Representations And Warranties

 

3.1 Rights to Technology. CSMC represents and warrants to Licensee that, to the best of its actual, current knowledge (without investigation outside of CSMC as to such representations and warranties) (a) it has not received any notice alleging that the Patent Rights are owned by any third party; (b) it has the right to grant the licenses in this Agreement, (c) it has not granted licenses to the Patent Rights to any other party that would restrict the rights granted hereunder except as stated herein and (d) there are no claims, judgments or settlements to be paid by CSMC with respect the Patent Rights or pending claims or litigation relating to the Patent Rights. CSMC is not aware that any additional rights or licenses are necessary for Licensee to exercise its licensed rights granted by CSMC under this Agreement.

 

 

3.2 Limited Warranty; Certain Damages.

 

(a) Limited Warranty. CSMC makes no representation or warranty other than those expressly specified in this Agreement. Licensee accepts the Patent Rights on an “AS- IS” basis. CSMC MAKES NO OTHER WARRANTIES CONCERNING PATENT RIGHTS COVERED BY THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO PATENT RIGHTS OR ANY PRODUCT. CSMC MAKES NO WARRANTY OR REPRESENTATION AS TO THE VALIDITY OR SCOPE OF PATENT RIGHTS, OR THAT ANY PRODUCT WILL BE FREE FROM AN INFRINGEMENT ON PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THAT NO THIRD PARTIES ARE IN ANY WAY INFRINGING PATENT RIGHTS COVERED BY THIS AGREEMENT. LICENSEE HEREBY AGREES THAT LICENSEE WILL NOT GIVE, AND SHALL NOT PERMIT ANY AFFILIATES OR SUBLICENSEES OR AFFILIATES THEREOF TO GIVE, ANY SUCH WARRANTY OR REPRESENTATION TO THIRD PARTIES ON BEHALF OF CSMC.

 

(b) Certain Damages. EXCEPT FOR THE BREACH OF THE CONFIDENTIALITY PROVISIONS IN SECTION 10 OR IN ACCORDANCE WITH THE OBLIGATION TO INDEMNIFY SET FORTH IN SECTION 8, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, SPECIAL, PUNITIVE, EXEMPLARY, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF PROFITS OR EXPECTED SAVINGS OR OTHER ECONOMIC LOSSES, LOSS OF USE OR FOR INJURY TO PERSONS OR PROPERTY) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ITS SUBJECT MATTER, REGARDLESS OF WHETHER A PARTY KNOWS OR SHOULD KNOW OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR THE BREACH OF THE CONFIDENTIALITY PROVISIONS IN SECTION 10 OR IN ACCORDANCE WITH THE OBLIGATION TO INDEMNIFY SET FORTH IN SECTION 8, THE FOREGOING EXCLUSIONS SHALL APPLY TO ALL CLAIMS AND ACTIONS OF ANY KIND, WHETHER BASED ON CONTRACT, TORT (INCLUDING, BUT NOT LIMITED TO NEGLIGENCE), OR ANY OTHER GROUNDS.

 

3.3 Rights of Funding Agencies. The Patent Rights have not been developed under any funding agreements (“Funding Agreements”) with any public, private or not for profit granting agencies or organizations (“Funding Agencies”); provided, that Licensee acknowledges that to the extent that the CSMC Future Patent Rights may be developed in part under one or more Funding Agreements with one or more Funding Agencies, such Funding Agencies may have certain statutory or contractual rights (“Funding Agency Rights”) relative thereto. This Agreement is explicitly made subject to such Funding Agency Rights and, to the extent of any conflict between any such Funding Agency Rights and this Agreement, such Funding Agency Rights shall prevail.

 

 

4. CONSIDERATION

 

In consideration of the execution and delivery by CSMC of this Agreement, Licensee agrees as follows:

 

4.1 License Fee. Within thirty (30) days of the Effective Date, Licensee shall pay CSMC a non-refundable license fee in the amount of Five Thousand Dollars ($5,000.)

 

4.2 Patent Costs. Licensee shall reimburse CSMC for all costs, including attorneys’ fees and filing fees, actually incurred by CSMC, before and after the Effective Date, in the prosecution and maintenance of the Patent Rights (“Prosecution Costs”). The Parties acknowledge and agree that the Prosecution Costs amount to a total of $9,456.51 as of February 28. 2019. Licensee shall reimburse CSMC for the Prosecution Costs within thirty (30) days of the Effective Date. Any outstanding amounts due under this Section 4,2 shall accrue interest at the rate of two percent (2%) over the rate of interest announced by Bank of America in Los Angeles, California to be its “prime rate” on the Effective Date.

 

4.3 Annual License Maintenance Fee. Commencing on the third anniversary of the Effective Date and thereafter on each anniversary of the Effective Date for the duration of the Term of this Agreement, Licensee shall pay to CSMC a non-refundable annual license maintenance fee in the amount of Ten Thousand Dollars ($10,000) per year (“Maintenance Fee”). The annual Maintenance Fee shall be creditable against Royalties otherwise payable under Sections 4.4(a) and (b) during the applicable twelve (12) month period: provided, however, that Licensee may not carry over to the following year any amount by which the Maintenance Fee paid exceeds the actual amount of Royalties payable under Sections 4.4(a) and (b) during the applicable 12-month period.

 

4.4 Royalties and Non-Royalty Revenue.

 

(a) Direct Royalties. Licensee agrees to pay and shall pay to CSMC a running royalty of three and three-quarters percent (3.75%) on Net Sales of Products made, used, sold or otherwise distributed by Licensee hereunder (each, a “Direct Royalty”).

 

(b) Sublicense Royalties. In the event that Licensee has sublicensed the Patent Rights for a given country, Licensee agrees to pay and shall pay to CSMC fifteen percent (15%) of any royalties received by Licensee from its Permitted Sublicensees with respect to sales of Products by its Permitted Sublicensee in such country (each, a “Sublicense Royalty.” and together with Direct Royalties, “Royalties”), regardless of the effective date of the sublicense agreement Licensee does not intend to knowingly sublicense the Patent Rights in any country where government marketing approvals have not been obtained.

 

(c) Third Party Payments. If Licensee is required to make any payment to a third party to obtain a license for the manufacture, use, sale or import of a Product or otherwise exploit the Licensed Patent Rights, Licensee shall be entitled to deduct up to fifty percent (50%) of such third party payments made in a calendar year against royalties payable to CSMC for that year; provided, however, that in no event shall the Royalties payable to CSMC hereunder for any one-year period be reduced by operation of this section by more than fifty percent (50%); and provided, further, that such third party payments shall only be creditable against Royalties payable to CSMC for the calendar year in which the third party payment was actually made by Licensee,

 

 

(d) Licensee Challenge of Patent Rights. Should Licensee bring, directly or through a third party indirectly, an action challenging the validity, scope or enforceability of any Patent Rights, Licensee will first provide CSMC with at least ninety (90) days’ prior written notice that it intends so to do before filing such a challenge. Following the giving of such notice, Licensee will pay to CSMC the Royalties and Non-Royalty Sublicense Revenue due hereunder at the rate of two times the applicable rate during the pendency of such action. Should the outcome of such action determine that any claim of a patent challenged by Licensee is valid and/or infringed and/or enforceable, as applicable. Licensee will thereafter pay to CSMC the Royalties and Non-Royalty Sublicense Revenue due hereunder at the rate of three times the applicable rate for all Products sold that would infringe such claim and/or transactions that include a grant of rights to such claim. Such increased royalty reflects the increased value of the Patent Rights upheld in such action. In the event that a challenge of Licensed Patents brought by Licensee is partially or entirely successful, Licensee will have no right to recoup any Royalties or other amounts paid before or during the period of the challenge. Additionally, Licensee agrees to disburse any and all proceeds received from any sublicense of the applicable Patent Rights throughout the duration of any such challenge to CSMC, and agrees to reimburse CSMC for all costs actually incurred by CSMC in connection with the applicable legal proceedings. In the event that all or any portion of this Section 4.3(d) is invalid, illegal or unenforceable, then the parties will use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, gives effect to the intent of this Section 4.3(d).

 

(e) Arm’s-Length Transactions. On sales of Products which are made in other than an arms’-length transaction, the value of the Net Sales attributed under this Section 4.4 to such a transaction shall be that which would have been received in an arms’-length transaction, based on sales of like quality and quantity products on or about the time of such transaction.

 

(f) Duration of Royalty Obligations. The royalty obligations of Licensee as to each Product shall terminate on a country-by-country basis concurrently with the expiration of the last to expire of a Valid Claim within the Patent Rights that covers such Product, including any term extensions thereof

 

 

(g) Non-Royalty Revenues.

 

(i) Non-Royalty Sublicense Revenues. Any and all “Non-Royalty Sublicense Revenues” shall be reported and paid to CSMC by Licensee as set forth below within sixty (60) days of receipt by Licensee. Licensee shall pay to CSMC a percentage of these Non- Royalty Sublicense Revenues according to the following schedule:

 

		Percent of Non-Royalty Sublicense
Date of Receipt of Non-Royalty Sublicense Revenue (from Effective Date)		Revenues Payable to CSMC
Prior to first patient dosing in a Phase I clinical trial for a Product			35	%
After initiation of a Phase I clinical trial but prior to submission of a New Drug Application (“NDA”) to the FDA			10	%
After submission of an NDA for a Product but prior to receipt of FDA approval therefor			8	%
After receipt of FDA approval of an NDA for a Product			5	%

 

Any non-cash consideration received by Licensee from Permitted Sublicensees shall be valued at its fair market value as of the date of receipt and such amount shall be paid in kind to CSMC in accordance with the schedule above. In the event that the Patent Rights are sublicensed in combination with one or more patented technologies that are not covered under this Agreement, Non-Royalty Sublicense Revenues for the purposes of this Section 4.4(g) shall be calculated on a pro-rata basis in a manner to be mutually agreed by CSMC and Licensee (which agreement may be a condition of approval under Section 2.2).

 

(ii) Product Development Milestones. Licensee agrees to pay and shall pay to CSMC the following non-creditable, non-refundable product development milestone payments within sixty (60) days of the first occurrence of a Milestone (or its equivalent):

 

Milestone Event		Milestone Payment
Successful completion of Phase I clinical trial for a Product		$	150,000
Successful completion of a Phase II clinical trial for a product and receipt of FDA approval for a Phase III clinical trial		$	500,000
Receipt of FDA approval of a New Ding Application (“NDA”) or equivalent foreign regulatory approval in a non-United States major commercial market		$	1,500,000
Cumulative Net Sales have exceeded $5,000,000		$	250,000

 

(iii) In the event that Licensee has sublicensed the Patent Rights to a Permitted Sublicensee and, in accordance with such sublicense arrangement, Non-Royalty Sublicense Revenues are payable to Licensee by the Permitted Sublicensee in connection with or within ninety (90) days before or after the occurrence of any of the Milestone events set forth in Section 4.3(g)(ii), Licensee shall only be obligated to pay to CSMC the greater of (A) the percentage of the Non-Royalty Sublicense Revenues set forth in Section 4.4(g)(i) or (B) the applicable Milestone payment set forth in Section 4.4(g)(ii), but not both.

 

 

(h) Payment and Accounting.

 

(i) Reports. Each payment of Royalties shall be accompanied by a report in the form attached as Schedule C hereto, which sets forth in reasonable detail the number and each type of Product sold and the calculation of Net Sales applicable thereto, and such additional details as may be reasonably requested by CSMC for the determination of Royalties payable hereunder. Products shall be considered as being sold for the purpose of the calculation of Royalties under this Agreement when the revenues have been received from Sales of the Products. Each payment of Non-Royalty Sublicense Revenue shall be accompanied by a report in the form attached as Schedule C hereto setting forth in reasonable detail the basis for the calculation of such amounts, and such additional details as may be reasonably requested by CSMC for the determination of Non-Royalty Sublicense Revenue payable hereunder. Electronic copies of such reports shall be sent to CSMC by electronic mail to CSTechTransfer@cshs.ore. Except as otherwise provided herein, all amounts due hereunder shall be paid in United States dollars and shall be made without set off and free and clear of (and without any deduction or withholding for) any taxes, duties, levies, imposts or similar fees or charges. Royalties shall be payable by Licensee quarterly, within forty-five (45) days after the end of each calendar quarter, based upon revenues received during the immediately preceding calendar quarter. Licensee agrees to pay and shall pay to CSMC, or cause its Permitted Sublicensees to pay to CSMC, all Royalties resulting from the activities of its Permitted Sublicensees, within forty-five (45) days after the end of each calendar quarter.

 

(ii) Notice of Payment. Licensee shall provide prompt written notice to CSMC that it has paid the licensee fee required by Section 4.1 or any product development milestone payment required by Section 4.4(g)(ii) by electronic mail to CSTeehTransfer@cshs.org.

 

(iii) Wire Transfer Instructions. All payments due hereunder shall be made by Licensee to CSMC in accordance with the following wire transfer instructions:

 

City National Bank

400 N. Roxbury Drive

Beverly Hills, CA 90210

ABA# 122 016 066

Account Number: 210-132260

Account Name: Cedars-Sinai Medical Center-Tech Transfer

Reference: Tech Transfer - Kairos, Inc. - GITR

 

 

(iv) Records and Audits. Licensee shall create and maintain complete and accurate records and documentation concerning all sales of Products by Licensee, its Affiliates and Permitted Sublicensees as well as transactions based upon which Non-Royalty Sublicense Revenue is due, in sufficient detail to enable the Royalties and Non-Royalty Sublicense Revenue, respectively, that is payable hereunder to be determined. Licensee shall retain such records and documentation for not less than five (5) years from the date of their creation. During the term of this Agreement and for a period of three (3) years thereafter, CSMC and its representatives shall have the right to audit such records and documentation as shall pertain to the determination and payment of Royalties and Non-Royalty Sublicense Revenue. Such examiners shall have reasonable access during regular business hours to Licensee’s offices and the relevant records, files and books of account, and shall have the right to examine any other records reasonably necessary to determine the accuracy of the calculations provided by Licensee. The costs of any such audit shall be home by CSMC, unless as a result of such inspection it is determined that the amounts payable by Licensee for any period are in error by greater than seven and one-half percent (7.5%), in which case the reasonable costs of such audit shall be borne by Licensee. CSMC shall report the results of any such audit to Licensee within forty-five (45) days of completion. Thereafter, Licensee shall promptly pay to CSMC the amount of any underpayment discovered in such audit, or CSMC shall credit to Licensee against future Royalty payments the amount of any overpayment discovered in such audit, as the case may be. In addition. Licensee shall pay interest on any underpayment at the rate that is the lower of (i) two percent (2%) over the rate of interest announced by Bank of America in Los Angeles. California (or any successor in interest thereto or any commercially equivalent financial institution if no such successor exists) to be its “prime rate”, or (ii) the highest rate permitted by applicable law. from the date such amount was underpaid to the date payment is actually received.

 

(v) Currency Transfer Restrictions. If any restrictions on the transfer of currency exist in any country or other jurisdiction so as to prevent Licensee from making payments to CSMC, Licensee shall take all commercially reasonable steps to obtain a waiver of such restrictions or to otherwise enable Licensee to make such payments. If Licensee is unable to do so, Licensee shall make such payments to CSMC in a bank account or other depository designated by CSMC in such country or jurisdiction, which payments shall be in the local currency of such country or jurisdiction, unless payment in United States dollars is permitted. Any payment by Licensee to CSMC in currencies other than United States dollars shall be calculated using the appropriate foreign exchange rate for such currency quoted in the California edition of The Wall Street Journal for the close of business of the last banking day of the calendar quarter in which such payment is being made.

 

(vi) Late Charges. A service charge of two percent (2%) per month, not to exceed the maximum rate allowed by applicable law, shall be payable by Licensee on any portion of Licensee’s outstanding Royalty or Non-Royalty Sublicense Revenue balance or any other amount payable by Licensee hereunder (including, without limitation, reimbursement for Prosecution costs as set forth in Section 4.1 hereof) that is not paid to CSMC within thirty (30) days past the due date.

 

(vii) Taxes. Licensee shall pay, or cause to be paid, any and all taxes required to be paid or withheld on any sales, licenses or other transfers for value of Products or Patent Rights (other than taxes imposed on the income or revenues of CSMC); provided, however, that under no circumstances shall the amounts of such taxes be deducted from the total amount of payments otherwise due to CSMC hereunder other than as set forth in Section 1.7(d). Upon CSMC’s request, Licensee shall secure and send to CSMC proof of any such taxes withheld and paid by Licensee, its Affiliates or Permitted Sublicensees.

 

 

5. Patent Rights

 

5.1 Prosecution. Commencing on the Effective Date, Licensee shall assume, in coordination with CSMC, full responsibility for the application, maintenance, reexamination, reissue, opposition and prosecution of any kind (collectively “Prosecution”) relating to the Patent Rights in the Territory, including, but not limited to, payment of all costs, fees and expenses related thereto. Subject to the approval of CSMC (which approval shall not be unreasonably withheld and which approval shall be provided within fifteen (15) days of CSMC’s receipt of Licensee’s written request). Licensee shall have the right to select counsel with respect to the responsibility assumed by Licensee in this Section 5.1, and Licensee shall diligently pursue the Prosecution of the Patent Rights to the benefit of CSMC. For purposes of the patent Prosecution, Licensee shall be the named ‘‘client” of such patent counsel. Each party shall provide the other with copies of any and all material or communications with the United States Patent and Trademark Office, or any foreign patent office, and CSMC shall be afforded the opportunity of prior review and comment on such action or paper, at CSMC’s cost.

 

5.2 Abandonment, Disclaimers, etc. Licensee shall obtain the prior written consent of CSMC (which consent shall not be unreasonably withheld), prior to abandoning, disclaiming, withdrawing, seeking reissue, seeking reexamination or allowing to lapse any patent or patent application within the Patent Rights. In the event that Licensee shall elect to abandon the Prosecution (including the payment of maintenance fees or annuities) of any patent or patent application included in the Patent Rights. Licensee shall notify CSMC of such election at least forty-five (45) days before a final due date which would result in abandonment or bar of patentability of the patent or patent application. In such event, CSMC may, at its sole option and expense, continue Prosecution of the patent application or patent. Licensee further agrees that it shall not file any continuation-in-part application relating to the Patent Rights unless the additional disclosure or material to be included in the continuation-in-part application is necessary or appropriate to support the patentability of a claim recited in a parent application on which the continuation-in-part application is based. Licensee shall not file any continuation-in- part application without CSMC’s prior written consent, which shall not be unreasonably withheld.

 

5.3 Expenses. Licensee shall pay all expenses resulting from its obligations in Section 5.1 hereof. CSMC shall exercise reasonable efforts to cause the Inventors (to the extent they are available and on CSMC’s staff as employees) to cooperate fully with Licensee with respect to the Prosecution of the Patent Rights and CSMC shall be reimbursed for all reasonable out-of-pocket expenses as such expenses are incurred.

 

5.4 CREATE Act. Licensee shall not invoke the Cooperative Research and Technology Enhancement Act of 2004, as set forth under Title 35, Section 102(c) of the United States Code (the “CREATE Act”), with respect to the Patent Rights without first obtaining the prior written consent of CSMC.

 

 

6. Term and Termination

 

6.1 Term. Unless earlier terminated as provided in Section 6.2 hereof, the term of this Agreement shall commence on the Effective Date and shall expire, on a country-by-country basis, the date upon which the last to expire of the patents of the Patent Rights shall expire.

 

6.2 Termination. Except as provided by Section 6.3 hereof, and in additional to the termination provisions of Section 2.5, this Agreement shall terminate upon the earliest to occur of the following:

 

(a) Automatically if Licensee shall enter into a liquidating bankruptcy, be adjudged insolvent, liquidate, dissolve and/or if the business of Licensee shall be placed in the hands of a receiver, assignee, or trustee, whether by voluntary act of Licensee or otherwise; provided, however, that if any such action is involuntary, termination shall not take place unless the action is not reversed within forty-five (45) days. Further, Licensee shall give CSMC at least forty-five (45) days’ prior written notice before Licensee initiates any bankruptcy proceeding, and CSMC shall have the right to terminate this Agreement immediately upon receipt of such notice;

 

(b) Automatically if the performance by either party to this Agreement of any term, covenant, condition or provision hereof (i) shall jeopardize (A) the licensure of CSMC, (B) CSMC’s participation in the Medicare, Medi-Cal or other reimbursement or payment programs, (C) the full accreditation of CSMC by the Joint Commission of Accreditation of Healthcare Organizations or any other state or nationally recognized accreditation organization, or (D) CSMC’s tax-exempt status; or (ii) is deemed illegal or unethical by any recognized governmental agency or body. Upon the occurrence of any of the items set forth in this subparagraph (b), CSMC shall provide written notice to Licensee setting forth the reason for such termination and the parties shall work in good faith to attempt to revise the tenus of this Agreement to mitigate the issues described in (i) and (ii) of the preceding sentence while protecting Licensee’s interest in the Patent Rights. If CSMC and Licensee cannot within thirty (30) days from the foregoing notice by CSMC resolve the issues described in (i) and (ii) above through a revision to the terms of this Agreement reasonably satisfactory to CSMC, CSMC may immediately terminate this Agreement upon written notice to Licensee;

 

(c) Upon sixty (60) days’ written notice from CSMC that a required payment by Licensee is delinquent if, within such sixty (60) day period, Licensee shall fail to pay frilly any payment required by Section 4.1,4.3 or 4.4 hereof;

 

(d) Upon sixty (60) days’ written notice from CSMC if, within such sixty (60) day period, Licensee shall fail to cure fully any breach or default of any material obligation under this Agreement as described in such written notice detailing the facts of such breach with reasonable specificity; provided, however, that Licensee may avoid such termination if, before the end of such 60-day period, such breach or default has been cured by Licensee to the reasonable satisfaction of CSMC;

 

 

(e) Upon sixty (60) days’ written notice from Licensee if, within such sixty (60) day period, CSMC shall fail to cure fully any breach or default of any material obligation under this Agreement as described in such written notice detailing the facts of such breach with reasonable specificity; provided, however, that CSMC may avoid such termination if. before the end of such 60-day period, such breach or default has been cured by CSMC to the reasonable satisfaction of Licensee; and

 

(f) By either party upon sixty (60) days’ written notice to the other party in the event that Licensee has provided satisfactory evidence that it has made reasonable efforts to achieve the Milestones required by Section 2.5 and Schedule B. but (i) has been unable to secure a capital commitment in the aggregate amount of at least $500.000 within twelve (12) months from the Effective Date; or (ii) Licensee cannot move forward with development of a Product due to (A) significant safety concerns identified by an Institutional Review Board overseeing any clinical trial of a Product; or (B) regulatory restrictions or prohibitions and (C) formulation and manufacturing process problems.

 

(g) Upon the mutual written agreement of the parties hereto (such termination to be effective as of the date mutually agreed upon in such written agreement ).

 

6.3 Obligations Upon Termination. Upon any termination of this Agreement pursuant to Section 6.2 hereof, nothing herein shall be construed to release any party from any liability for any obligation incurred through the effective date of termination (e.g., confidentiality, reimbursement of patent expenses incurred prior to such date), or for any breach of this Agreement prior to the effective date of such termination. Upon any termination of this Agreement pursuant to Section 6.2 hereof, all amounts owed by Licensee to CSMC under Section 4.1 of this Agreement which are outstanding as of the effective date of termination (including any interest that has accrued thereon) shall become immediately due and payable, and Licensee shall pay the full outstanding amounts to CSMC within thirty (30) days of the effective date of such termination. Licensee may, for a period of one (1) year after the effective date of such termination, sell all tangible Products customarily classified as “inventory” that it has on hand at the date of termination, subject to payment by Licensee to CSMC of the applicable Royalty and Non-Royalty Sublicense Revenue.

 

6.4 Effect of Termination. In the event of any termination of this Agreement pursuant to Section 6.2 hereof, where such termination has not been caused by any action or inaction on the part of any Permitted Sublicensee of Licensee or by any breach by such Permitted Sublicensee of its obligations under its sublicense from Licensee, such termination of this Agreement shall be without prejudice to the rights of each non-breaching Permitted Sublicensee of Licensee and each non-breaching Permitted Sublicensee shall be deemed to be a licensee of CSMC thereunder, and CSMC shall be entitled to all rights, but shall not be subject to any obligations (other than the grant of license and appurtenant obligations under this Agreement to the extent provided for in such sublicense) of Licensee thereunder. In the event of any termination of this Agreement pursuant to Section 6.2(f) hereof. Licensee shall, promptly upon termination, assign all of its right, title and interest in the Licensee Improvements to CSMC.

 

6.5 Right to Institute Legal Actions. Notwithstanding the provisions of Section 6.2 hereof, but subject to Section 2.4 hereof, termination is not an exclusive remedy and CSMC, on the one hand, and Licensee, on the other hand, may institute any other legal action or pursue any other remedy against the other party permitted by applicable law if the other party does not substantially cure any material breach or default of any material obligation as provided herein, subject to any exclusions on damages provided for in this Agreement.

 

 

6.6 Reversion of Rights. Notwithstanding anything to the contrary set forth herein (including, but not limited to, Section 5 hereof), frill responsibility for Prosecution of the Patent Rights shall, at the option of CSMC (exercisable in its sole and absolute discretion), and at its sole expense from the date of reversion, revert to CSMC upon any termination of this Agreement.

 

6.7 Return of Data. In the event of any termination or expiration of this Agreement, Licensee shall promptly provide CSMC with copies of all data, information and materials obtained or generated by or on behalf of Licensee in the course of conducting research and developing Products using the Patent Rights.

 

7. Infringement By Third Parties

 

7.1 Enforcement. Licensee shall have the first right to enforce, at its sole expense, any Patent Rights to the extent licensed hereunder against infringement by third parties and shall notify CSMC in writing in advance of all such enforcement efforts. Upon Licensee’s undertaking to pay all documented out-of-pocket third party expenditures reasonably incurred by CSMC, CSMC shall reasonably cooperate in any such enforcement and, as necessary, join as a party therein. Licensee shall reimburse CSMC for all reasonable, documented out of pocket third party expenses, including reasonable attorneys’ fees, incurred in connection with any such enforcement. In the event that Licensee does not file suit against or commence and conclude settlement negotiations with a substantial infringer of Patent Rights within ninety (90) days of receipt of a written demand from CSMC that Licensee bring suit, the parties will consult with one another in an effort to determine whether a reasonably prudent licensee would institute litigation to enforce the patent in question in light of all relevant business and economic factors (including, but not limited to, the projected cost of such litigation, the likelihood of success on the merits, the probable amount of any damage award, the prospects for satisfaction of any judgment against the alleged infringer, the possibility of counterclaims against the parties hereto, the impact of any possible adverse outcome on Licensee and the effect any publicity might have on the parties’ respective reputations and goodwill). If, after such process, it is determined that a suit should be filed and Licensee does not file suit or commence settlement negotiations forthwith against the infringer, then CSMC shall have the right, at its own expense, to enforce any Patent Rights. Any damages or other recovery from an infringement action undertaken by Licensee shall first be used to reimburse the parties, on a pro rata pari passu basis, for the costs and expenses incurred in such action, and shall thereafter be treated as Non-Royalty Sublicense Revenue in accordance with Section 4.4(u)(i). If Licensee fails to prosecute any such action to completion, then any damages or other recovery net of the parties’ costs and expenses incurred in such infringement action shall be the sole property of CSMC.

 

 

7.2 Defense Of Patent Rights. In the event that any Patent Rights are the subject of a legal action seeking declaratory relief or of any reexamination, inter partes review, post-grant review or opposition proceeding instituted by a third party, the parties agree to promptly consult with each other concerning the defense of such actions or proceedings. If the parties agree that such defense should be undertaken, then Licensee shall bear the expenses, including attorneys’ fees, associated with such defense and in any recoupment of expenses. If the parties disagree, then the party desiring to defend the action or proceeding may proceed with such defense and will bear its own expenses, and be entitled to all sums recovered.

 

8. Indemnification

 

8.1 Indemnification by Licensee, Subject to Section 8.2 hereof. Licensee shall hold harmless, defend and indemnify CSMC and each of its officers, directors, employees (including the Inventor), agents and sponsors of the research (except Licensee) (each, an “Indemnified Party”, and collectively, the “Indemnified Parties”) from and against any and all third party claims, damages, losses, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses and costs of investigation, whether or not suit is filed) incurred by any of the Indemnified Parties in any action, suit, litigation, arbitration or dispute of any kind (“Action”) to the extent arising or resulting from any negligence or willful acts or omissions on the part of Licensee, its Affiliates or Permitted Sublicensees in connection with (a) their use of the Patent Rights and/or (b) the exercise of their rights hereunder or under any sublicense, including, but not limited to (i)the preclinical development and clinical testing of Products, and (ii) the manufacture, sale, use, marketing, or other disposition of Products developed, manufactured, sold, marketed, used or otherwise disposed of under this Agreement. The foregoing indemnification shall not apply to any claim, damage, loss, liability, cost or expense to the extent attributable to the negligent activities or intentional misconduct of any of the Indemnified Parties. As part of its obligations hereunder. Licensee shall defend any Action brought against any of the Indemnified Parties with counsel of its own choosing and reasonably acceptable to CSMC, and neither CSMC nor any other Indemnified Party shall agree to the compromise or disposition of or enter into any settlement of any such Action without first obtaining prior written approval of Licensee. Licensee shall pay all reasonable, documented costs, including attorneys’ fees, incurred in enforcing this indemnification action. Should CSMC or any other Indemnified Party not promptly notify Licensee in writing of or afford Licensee the right to defend any such Action, or should CSMC or any other Indemnified Party not cooperate with Licensee in the defense or settlement of such Action or obtain the prior written approval of Licensee to any such settlement or other compromise or disposition of such Action, Licensee shall have no obligation to indemnify CSMC or any other Indemnified Party hereunder. Should Licensee fail to provide a defense for the Indemnified Parties as required hereunder, then Licensee shall reimburse CSMC for its reasonable, documented out-of-pocket expenses (including reasonable attorneys’ fees and expenses and costs of investigation) which are incurred as a result of any investigation, defense or settlement relating to the foregoing, which reimbursement shall be made to CSMC upon receipt by Licensee of invoices reflecting in reasonable detail such expenses incurred by CSMC. Licensee shall obtain and maintain insurance policies (including products liability and general liability policies at such time as is appropriate) which are reasonable and necessary to cover its activities and to comply with the indemnification obligations set forth above. Notwithstanding the foregoing, Licensee’s indemnification obligations hereunder shall not exceed an amount equal to the sum of (a) the market capitalization of Licensee: plus (b) the aggregate amount of Licensee’s insurance coverage. Such insurance policies shall name CSMC as an additional insured party, and shall provide a minimum of Three Million Dollars ($3,000,000) in coverage per occurrence. Upon initiation of any human clinical studies using a therapeutic molecule covered by the Patent Rights, Licensee shall have first increased its insurance coverage to an aggregate amount that in Licensee’s reasonable judgment, is commercially reasonable and consistent with prevailing business practice for the risks involved. Licensee shall provide CSMC with Certificates of Insurance within thirty (30) days of the Effective Date (subject to extension if reasonably required) and annually thereafter, evidencing the policies required in accordance with this Section 8.1, together with copies of the endorsement which specifies CSMC as an additional insured and the declarations page for each such insurance policy. Licensee shall provide CSMC with prompt written notice of any material change in coverage under such policies. The certificate of insurance, endorsements and declarations pages (and any renewals or replacements thereof), if required, shall be sent to CSMC’s Technology Transfer Office by electronic mail at CSTechTransfer@cshs.org.

 

 

8.2 Notice of Claim. CSMC shall promptly notify Licensee in writing of any claim or Action or material threat thereof brought against any Indemnified Party in respect of which indemnification may be sought and, to the extent allowed by law, shall reasonably cooperate with Licensee in defending or settling any such claim or Action. No compromise, disposition or settlement of any claim, Action or threat thereof received by CSMC and for which CSMC intends to seek indemnification (for itself or on behalf of any other Indemnified Party) shall be made without the prior joint written approval of Licensee and CSMC.

 

9. Use Of Names

 

Licensee shall not, unless as required by any law or governmental regulation, use the name of CSMC, and/or any of its trademarks, service marks, trade names or fictitious business names without express prior written consent of the Vice President for Public Relations and Marketing of CSMC. Further, prior to any reference by Licensee to the names or marks of CSMC in any manner. Licensee shall provide CSMC with a writing reflecting the proposed reference so that CSMC can review the reference within a reasonable period of time prior to the proposed use thereof by Licensee. This limitation includes, but is not limited to, use by Licensee in any advertising, offering circular, prospectus, sales presentation, news release or trade publication. Notwithstanding the foregoing, certain specific language shall be mutually agreed upon by the parties for Licensee’s use in certain contexts and with respect to certain topics, and once agreed upon, may be utilized by Licensee in connection with the approved contexts and topics without further permission of CSMC. Subject to compliance by Licensee with the foregoing, which shall be deemed conditions precedent to any use of CSMC’s name or marks by Licensee, Licensee shall ensure that the name of CSMC is used as scientifically or academically appropriate in the “byline” of any article, abstract, manuscript or any other publication related to the subject matter hereof.

 

 

10. Confidentiality

 

10.1 Non-Disclosure. Except to the extent Licensee’s counsel determines that disclosure of the terms of this Agreement is required by law, the parties hereto shall keep the terms of this Agreement and all business and scientific discussions relating to the business of the parties strictly confidential. All patient information to which a party is given access by the other party shall be subject to the provisions of the Confidentiality of Medical Information Act (Cal, Civ. Code §§56, et seq.) and the Health Insurance Portability and Accountability Act of 1996. and all regulations promulgated thereunder and amendments thereto. It may, from time to time, be necessary for the parties, in connection with performance under this Agreement, to disclose Confidential Information (including know-how) to each other. The Receiving Party (as defined in Section 1.2 hereof) shall keep in strictest confidence the Confidential Information of the Disclosing Party (as defined in Section 1.2 hereof), using the standard of care it normally uses for information of like character but using no less than a reasonable degree of care, and shall not disclose the Confidential Information to any third party or use it except as expressly authorized by the prior written consent of the Disclosing Party or as otherwise permitted by this Agreement (including, without limitation, Section 10.2). Without limiting the foregoing. Licensee’s Confidential Information includes any and all progress reports made hereunder (including under Section 2.5), sublicenses, any reports or other information regarding Sales of Products and Royalties (including any royalty reports including as required under Section 4.4, whether from Licensee or any Permitted Sublicensee), audit reports of Permitted Sublicensees, Sublicense Income and Sublicense Fees. Confidential Information of Licensee also includes any and all copies and derivations of and improvements on Licensee’s Confidential Information. The Receiving Party’s obligation hereunder shall not apply to Confidential Information that the Receiving Party can show:

 

(a) Was in the Receiving Party’ possession prior to receipt from the Disclosing Party hereunder as shown by the Receiving Party’s records, or later becomes part of the public domain through no fault or neglect of the Receiving Party or anyone to whom the Receiving Party disclosed Confidential Information;

 

(b) Is received in good faith from a third party having no obligations of confidentiality to the Disclosing Party, provided that the Receiving Party complies with any restrictions imposed by the third party; or

 

(c) Is independently developed by the Receiving Party without use of or reference to the Disclosing Party’s Confidential Information as shown by the Receiving Party’s records.

 

If a Receiving Party is required by law or regulation or court order to disclose Confidential Information of the Disclosing Party, (including, without limitation, in connection with filings with another government agency or as required under the California Public Records Act), the Receiving Party may disclose that portion of the Confidential information that is required to be disclosed provided that the Receiving Party notifies the Disclosing Party in writing in advance of such disclosure and uses reasonable efforts to restrict disclosure and to obtain confidential treatment and/or allows the Disclosing Party to challenge or limit such disclosure or obtain a protective order or confidential treatment.

 

 

10.2 Limits on Permitted Disclosures. Each party agrees that any disclosure or distribution of the other party’s Confidential Information within its own organization shall be made (a) only as is reasonably necessary to carry out the intent of this Agreement, and (b) only to those of its officers and employees who have agreed to maintain its confidentiality. In such event, the Receiving Party shall identify with reasonable particularity, upon request by the Disclosing Party, each person within the Receiving Party’s organization to whom the Receiving Party has disclosed or distributed Confidential Information. Furthermore, Licensee may disclose the Confidential Information received from CSMC to its Affiliates and its and their directors, officers, employees, agents, contractors, consultants and actual and potential Permitted Sublicensees, investors and acquirers as shall be reasonably necessary to carry out the intent of this Agreement or any sublicense granted by Licensee as contemplated by this Agreement if, but only if, such third party recipients of Confidential Information each execute a confidentiality agreement containing confidentiality provisions no less restrictive than those confidentiality provisions contained in this Section 10. In such event, Licensee shall identify with reasonable particularity, upon CSMC’s request, each third party to whom Licensee has disclosed or distributed CSMC’s Confidential Information. Furthermore, Licensee shall have the right to disclose this Agreement or the terms thereof to potential investors and acquirers for the purpose of investment discussions without the additional consent or approval of CSMC

 

10.3 Legally Required Disclosures. If a subpoena or other legal process concerning Confidential Information is served upon any party hereto pertaining to the subject matter hereof, the party served shall notify the other party immediately in writing, the other party shall cooperate with the party served, at the other party’s expense, in any effort requested by the other party to contest the validity of such subpoena or other legal process. This Section 10.3 shall not be construed in any way to limit any party’s ability to satisfy any disclosure of its relationship with the other party required by any governmental authority.

 

10.4 Patent Rights as Confidential Information. The Patent Rights are understood by Licensee to be the Confidential Information of CSMC to the extent “unpublished” as such term is construed under the United States Patent Laws. As such. Licensee’s confidentiality obligations hereunder automatically extend to any and all unpublished patent applications of CSMC relating to any Patent Rights and CSMC Future Patent Rights and to any and all communications with the United States Patent Office, and any foreign patent office relating to any Patent Rights or CSMC Future Patent Rights, to the extent that such communications are not available to the public. Notwithstanding the foregoing, CSMC shall not use any of Licensee’s Confidential Information to apply for, secure or perfect any intellectual property rights, without Licensee’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed.

 

10.5 Return of Confidential Information. In the event of any termination of this Agreement, the Receiving Party shall promptly return all Confidential Information and any copies made thereof previously made available to the Receiving Party by the Disclosing Party, except that the Receiving Party may retain one copy of the Confidential Information in the custody of its legal files solely for the purpose of monitoring compliance with this Agreement.

 

10.6 Remedies. Both parties acknowledge and agree that it would be difficult to measure damages for breach by either party of the covenants set forth in this Section 10, and that injury from any such breach would be incalculable, and that money damages would therefore be an inadequate remedy for any such breach. Accordingly, either party shall be entitled, in addition to all other remedies available hereunder or under law or equity, to injunctive or such other equitable relief as a court may deem appropriate to restrain or remedy any breach of such covenants without having to prove actual damages or post a bond, unless the court so requires.

 

 

11. Information Exchange

 

In addition to the Patent Rights, the parties shall cooperate to exchange such non-confidential information as may be appropriate and necessary to facilitate Licensee’s development and commercialization of Products incorporating any Patent Rights.

 

12. Patent Marking

 

In the event any Product is the subject of a patent under the Patent Rights, Licensee shall actually or virtually mark all Products made, sold or otherwise disposed of by or on behalf of it or any of its Permitted Sublicensees as set forth under Title 35, Section 287(a) of the United States Code and shall respond to any request or disclosure under Title 35, Section 287(b)(4)(B) of the United States Code by only notifying CSMC of the request for disclosure.

 

13. Miscellaneous

 

13.1 Notices. Any notice, request, instruction or other document required by this Agreement shall be in writing and shall be deemed to have been given (a) if mailed with the United States Postal Service by prepaid, first class, certified mail, return receipt requested, at the time of receipt by the intended recipient, (b) if sent by Federal Express or other overnight carrier, signature of delivery required, at the time of receipt by the intended recipient, or (c) if sent by facsimile transmission, when so sent and when receipt has been acknowledged by appropriate telephone or facsimile receipt, addressed as follows:

 

In the case of CSMC to:

 

Cedars-Sinai Medical Center

8700 Beverly Boulevard

Los Angeles, California 90048-1865

Attention: Executive Vice President for Finance & CFO

 

with a copy to Vice President for Legal &. Technology Affairs

 

or in the case of Licensee to:

 

Kairos Pharma, Ltd.

565 Esplanade, Suite 206

Redondo Beach, CA 90277

Attention: Chairman

 

or to such other address or to such other person(s) as may be given from time to time under the terms of this Section 13.1,

 

 

13.2 Compliance with Laws. Each party shall comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this Agreement.

 

13.3 Governing Law. For any dispute between the parties to this Agreement which arises from or relates to this Agreement, the Agreement shall be construed and enforced in accordance with the laws of the United States of America and of the State of California, irrespective of choice of laws provisions. The parties agree that Los Angeles County. California shall be the situs of any legal proceeding arising out of or relating to this Agreement. Each party hereby waives any right it may have to assert the doctrine of forum non conveniens or similar doctrine or to object to venue with respect to any proceeding brought in accordance with this Section, and stipulates that the state and federal courts located in Los Angeles, California shall have in personam jurisdiction and venue over each of them for the purpose of litigating any dispute, controversy, or proceeding arising out of or related to this Agreement. Each party hereby authorizes and accepts service of process sufficient for personal jurisdiction in any action against it as contemplated by this Section by registered or certified mail, return receipt requested, postage prepaid, to its address for the giving of notices as set forth in this Agreement.

 

13.4 Waiver. Failure of any party to enforce a right under this Agreement shall not act as a waiver of that right or the ability to assert that right relative to the particular situation involved.

 

13.5 Enforceability. If any provision of this Agreement shall be found by a court of competent jurisdiction to be void, invalid or unenforceable, the same shall be refined to comply with applicable law or stricken if not so conformable, so as not to affect the validity or enforceability of the remainder of this Agreement.

 

13.6 Modification. No change, modification, or addition or amendment to this Agreement, or waiver of any term or condition of this Agreement, is valid or enforceable unless in writing and signed and dated by the authorized officers of the parties to this Agreement.

 

13.7 Entire Agreement. This Agreement, the Schedules hereto (which are incorporated herein by this reference as if fully set forth herein) and the Stock Purchase Agreement constitute the entire agreements among the parties with respect to the subject matter hereof and thereof, and replace and supersede as of the date hereof and thereof any and all prior and contemporaneous agreements and understandings, whether oral or written, between the parties with respect to the subject matter of such agreements.

 

13.8 Construction. This Agreement has been prepared, examined, negotiated and revised by each party and their respective attorneys, and no implication shall be drawn and no provision shall be construed against any party to this Agreement by virtue of the purported identity of the drafter of this Agreement or any portion thereof.

 

13.9 Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall constitute one and the same instrument. This Agreement may be executed by facsimile or in .pdf format.

 

 

13.10 Attorneys’ Fees. In the event of any action at law or in equity between the parties hereto to enforce any of the provisions hereof, the unsuccessful party to such litigation shall pay to the successful party all reasonable documented costs and expenses, including reasonable attorneys’ fees, incurred therein by such successful party; and if such successful party shall recover a judgment in any such action or proceeding, such reasonable costs, expenses and attorneys’ fees may be included in and as part of such judgment.

 

13.11 Assignment; Successors.

 

(a) Subject to Section 13.12(b), Licensee may assign this Agreement as part of a sale, regardless of whether such a sale occurs through an asset sale, stock sale, merger or other combination, or any other transfer of Licensee’s entire business, or that part of Licensee’s business that exercises all rights granted under this Agreement. Any other attempt to assign this Agreement by Licensee is null and void. In the event of a bankruptcy, assignment is permitted only to a party that can provide adequate assurance of future performance, including diligent development and sales, of Products.

 

(b) After any assignment, the following conditions must be met: (i) Licensee must notify CSMC in writing within thirty (30) days of the assignment, including the new assignee’s contact information, and (ii) the new assignee must agree in writing to CSMC to be bound by this Agreement.

 

(c) Subject to the limitations on assignment herein, this Agreement shall be binding upon and inure to the benefit of any successors in interest and assigns of CSMC and Licensee. CSMC shall have the right to assign its rights hereunder as part of any reorganization or bond financing.

 

13.12 Further Assurances. At any time and from time to time after the Effective Date, each party shall do, execute, acknowledge and deliver, and cause to be done, executed, acknowledged or delivered, all such further acts, transfers, conveyances, assignments or assurances as may be reasonably required to consummate the transactions contemplated by this Agreement.

 

13.13 Survival. The following sections shall survive any expiration or earlier termination of this Agreement; 6.3, 8, 9, 10, and 13.

 

[signature page follows]

 

 

In Witness Whereof, the parties have caused their duly authorized representatives to execute this Agreement as of the date first above written.

 

	“LICENSEE”:
	Kairos Pharma, Ltd., a California CORPORATION
	By:	/s/ John S. Yu
	Name:	John S. Yu, M.D.
	Title	Chairman
	Date:	March 12, 2019
	“CSMC”:
	Cedars-Sinai Medical Center, a California nonprofit public benefit Corporation
	By:	/s/ James D. Laur, Esq.
		James D. Laur, Esq.
		Vice President for Legal & Technology Affairs
	Date:	13 March, 2019
	By:	/s/ Edward M. Prunchunas
		Edward M. Prunchunas
		Executive Vice President for Finance and CFO
	Date:	March 13, 2019

 

 

ACKNOWLEDGED AND AGREED:
“INVENTORS’:
/s/ Ramachandran Murali,
Ramachandran Murali, Ph.D.
/s/ Randall McNally
Randall McNally, Ph.D.
Xinlei Pan, Ph.D.

 

 

ACKNOWLEDGED AND AGREED:
“INVENTORS”:
Ramachandran Murali, Ph.D.
Randall McNally, Ph.D.
Xinlei Pan, Ph.D.

 

 

ACKNOWLEDGED AND AGREED:
“INVENTORS’:
Ramachandran Murali, Ph.D.
Randall McNally, Ph.D.
Xinlei Pan, Ph.D.

 

 

Schedule A

 

Patent Rights

 

TITLE:		“COMPOSITIONS AND METHODS FOR TREATING CANCER AND AUTOIMMUNE DISEASES”
INVENTORS:		Ramachandran Murali Randall McNally Xinlei Pan
APPLICATION NO.:		62/542,070
FILING DATE:		August 7, 2017
DOCKET NO.:		065472-000694PR00
TITLE:		“COMPOSITIONS AND METHODS FOR TREATING CANCER AND AUTOIMMUNE DISEASES”
INVENTORS:		Ramachandran Murali Randall McNally Xinlei Pan
APPLICATION NO.:		62/716,101
FILING DATE:		August 8, 2018
DOCKET NO.:		065472-000694PR10

 

 

Schedule B

 

Milestones

 

1. Licensee shall have completed preclinical studies of a Product within 36 months of the Effective Date.

 

2. Licensee shall have submitted an IND application for a Product to the FDA and received approval of such IND application from the FDA within 48 months of the Effective Date.

 

3. Licensee shall have initiated a Phase I clinical trial of a Product within 50 months of the Effective Date (subject to FDA approval).

 

4. Licensee shall have made the first commercial sale of a Product within 10 years of the Effective Date.

 

 

Schedule C

 

Royalty Reporting Form

 

Licensee name:

Reporting period:

Date of report:

Date of first commercial sale:

 

Royalty Report

 

Product (list products by name)

No. units sold

Invoiced price per unit

Gross sales

Allowable deductions (attached itemized detail)

Country of sale/foreign currency/ conversion rate

Net sales

Product name

Product name

Product name

Total

 

Total net sales		$
Royalty rate
Royalty due		$

 

Total royalty due: $_________________________________

 

Non-Royalty Sublicense Revenue Report

 

Total Non-Royalty Sublicense Revenue received		$
Date received
Applicable percentage payable to CSMC
Total Non-Royalty Sublicense Revenue payable to CSMC		$

 

Report prepared by:

Title:

Date:

 

Please send electronic copy to CSTechTransfer@cshs.org.

 

 

 

Exhibit 10.15

 

Effective Date: June 17, 2021

 

Cedars-Sinai Medical Center

8700 Beverly Boulevard,

Los Angeles, California 90048-1865

Attention: Vice President, Intellectual Property

 

Re:	Exclusive License Agreement dated March 12, 2019 – Amendment

 

Dear Cedars-Sinai Medical Center:

 

Reference is made to that certain Exclusive License Agreement for the technology titled “Composition and Methods for Treating Cancer and Autoimmune Diseases” dated March 12, 2019 (as amended from time to time, the “License Agreement”), by and between CEDARS-SINAI MEDICAL CENTER, a California nonprofit public benefit corporation (“CSMC”), and Kairos Pharma, Ltd, a California corporation (“Licensee”).

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties in this letter amendment agreement (this “Letter Amendment”) hereby agree to, and acknowledge, the following:

 

1. Each milestone due date listed on Schedule B of the License Agreement is hereby extended by twenty-four (24) months from the original deadline listed in the License Agreement.

 

2. Except as expressly provided in this Letter Amendment, all of the terms and provisions of the License Agreement remain unchanged. On and after the Effective Date stated at the top of this Letter Amendment, each reference in the License Agreement to “this Agreement,” “the Agreement,” “hereunder,” “hereof,” “herein,” or words of like import, and each reference to the License Agreement in any other agreements, documents, or instruments executed and delivered pursuant to, or in connection with, the License Agreement, will mean and be a reference to the License Agreement as amended by this Letter Amendment.

 

Please acknowledge your agreement to, and acceptance of, the foregoing by signing this Letter Amendment below. Please return a signed copy to the undersigned, it being agreed that this Letter Amendment may be executed in counterparts and signatures received by electronic transmission shall have the same effect as original signatures.

 

	Sincerely,
	/s/ John S. Yu, M.D.
	John S. Yu, M.D.
	Chief Executive Officer of Kairos Pharma, Ltd.
	2355 Westwood Blvd. #139,
	Los Angeles, CA 90064

 

(CSMC signature page follows)

 

 

ACKNOWLEDGED AND AGREED TO ON JUNE 17, 2021 BY:

 

	CEDARS SINAI MEDICAL CENTER
	By:	/s/ James D. Laur, JD
		James D. Laur, JD
		Vice President, Intellectual Property
	By:	/s/ Edward M. Prunchunas
		Edward M. Prunchunas
		Executive Vice President, Finance & Treasurer

 

 

 

Exhibit 10.16

 

License and Supply Agreement

 

This Agreement (“Agreement”) between and among

 

Tracon Pharmaceuticals, Inc., a Delaware corporation, 4350 La Jolla Village Drive, Suite 800, San Diego CA 92122 (“Tracon”),

 

Enviro Therapeutics Inc. a California corporation, 2355 Westwood Blvd. #139, Los Angeles CA 90064 (“Enviro”), and

 

Kairos Pharma, Ltd,, a California corporation, 2355 Westwood Blvd. #139, Los Angeles CA 90064 (“Kairos”)

 

when signed by all parties is effective as of May 21, 2021 (the “Effective Date”).

 

RECITALS

 

WHEREAS, Tracon is the holder of multiple inactive INDs for the Antibody TRC105 (“Product”) in the United States, such INDs (the “Product INDs”) are listed in Appendix B;

 

WHEREAS, Tracon has stored vials of TRC105 drug product manufactured to GMP standards at Patheon or their designee, with four-year stability dating under refrigerated conditions;

 

WHEREAS, Tracon owns patent rights to CD105 antibodies and related technologies;

 

WHEREAS, Enviro is engaged in the research, development and commercialization of pharmaceutical products;

 

WHEREAS, subsequent to the Effective Date, Enviro will be acquired by Kairos pursuant to a transaction whereby one hundred percent of the stock of Enviro will be exchanged for stock in Kairos (the “Enviro-Kairos Share Exchange”), the principal terms of which are summarized in Appendix C;

 

WHEREAS, subsequent to the Enviro-ICairos Share Exchange, Kairos (as the successor to Enviro) expects to be acquired by Bio Lab Naturals, Inc. (“BLAB”) pursuant to a transaction whereby one hundred percent of the stock of Kairos will be acquired by BLAB in exchange for stock in BLAB (the “Kairos-BLAB Transaction”), the principal terms for such transaction are summarized in Appendix D;

 

WHEREAS, concurrent with the closing of the Kairos -BLAB Transaction, Kairos intends to raise money from new third party investors (the “New Investors”) in a $5,000,000 private placement of Units, for an aggregate total private placement of 2,000,000 new Kairos shares of restricted common stock and warrants to purchase 1,000,000 Kairos shares of restricted common stock (each Unit consists of one (1) share of Kairos’ common stock, sold for $2.50 per share, and one-half (1/2) warrant to purchase one-half (1/2) share of Kairos common stock, exercisable for $5.00 per share for two years from the date of the closing) (“Proposed Financing”); and

 

 

WHEREAS, Enviro desires to obtain from Tracon, and Tracon desires to grant to Enviro, access to inactive IND filings for TRC105 in the United States; ownership of TRC105 drug product manufactured to GMP standards stored at Patheon or their designee; and, assignment of Tracon’s patent rights to CD 105 technologies;

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Tracon and Enviro hereby agree as follows:

 

1. DEFINITIONS

 

Capitalized terms shall have the meanings set forth below or as set forth elsewhere in this Agreement.

 

	1.1.	“Affiliate” shall mean, with respect to any Person, any other Person which directly or indirectly controls, is controlled by, or is under common control with, such Person. A Person shall be regarded as in control of another Person if it owns, or directly or indirectly controls, at least fifty percent (50%) of the voting stock or other ownership interest of the other Person, or if it directly or indirectly possesses the power to direct or cause the direction of the management and policies of the other Person by any means whatsoever.
	1.2.	“CD 105 Patents” shall mean all patents and patent applications, worldwide, owned by Tracon that are (i) directed to CD 105 antibody technologies and listed in Appendix A, (ii) all patents or patent applications claiming priority to any patent or application in (i), (iii) any patents or patent applications having common priority with any patent or application in (i), (iv) any patents issuing from any application of (i)-(iii), and (v) any divisional applications, continuation applications, reexaminations and/or reissues of any application or patent of (i)-(iv).
	1.3.	“Net Sales” shall mean the gross amounts invoiced for sales or other dispositions of Products by or on behalf of Enviro or any of its Affiliates or any of their sublicensees (each, a “Selling Party”) to Third Parties, less deductions actually incurred, allowed, paid, accrued or otherwise specifically allocated to Products by the Selling Party in accordance with U.S. generally accepted accounting principles or international financial reporting standards, in either case, consistently applied throughout the organization of the applicable Selling Party for:

 

	1.3.1.	trade, cash and quantity discounts or rebates actually allowed or taken.
	1.3.2.	credits or allowances given or made for rejection of or return of previously sold Products or for retroactive price reductions and billing errors or for stocking allowances;
	1.3.3.	amounts repaid or credited by reason of recalls;
	1.3.4.	governmental and other rebates (or credits or other equivalents thereof) granted to managed health care organizations, commercial insurance companies, pharmacy benefit managers (or equivalents thereof), distributors, national, state/provincial, local, and other governments, their agencies and purchasers, and reimburses, or to trade customers;

 

 

	1.3.5.	costs of freight, insurance, and other transportation charges directly related to the distribution of Products, to the extent included in gross invoiced sales prices; and
	1.3.6.	taxes, duties or other governmental charges (including any tax such as a value added or similar tax or government charge other than an income tax) levied on or measured by the billing amount for Products, as adjusted for rebates and refunds.

 

	1.4.	“Party” shall mean Tracon or Enviro or Kairos and “Parries” shall mean Tracon, Enviro, and Kairos.
	1.5.	“Payments” shall mean any and all of the payments owed to Tracon pursuant to the Payments section of this Agreement, including the Upfront Fee, Cash Consideration, Royalties, Sublicense Fees, and Enviro Equity.
	1.6.	“Person” shall mean an individual, corporation, partnership, trust, business trust, association, joint stock company, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.
	1.7.	“Product” shall have the meaning set forth in the recitals.
	1.8.	“Product INDs” shall have the meaning set forth in the recitals.
	1.9.	“Term” shall have the meaning set forth in the Termination section.
	1.10.	“Third Party” shall mean, with respect to a Party, any Person other than such Party or its Affiliates.

 

2. TRANSFER AND ASSIGNMENT BY TRACON

 

2.1.

Access to IND Filings and Associated Correspondence. As of the Effective Date, Tracon will provide copies of all of the Product INDs and related correspondence with the U.S. FDA through an electronic portal designated by Enviro for the purpose of assisting with and/or facilitating Enviro’s IND filings for the Product (tire “Purpose”). Enviro may share this information with any employees, officers or agents having a need to know associated with the Purpose. During the Term of this Agreement, Tracon shall not provide any access to the Product INDs and related correspondence to any Third Parties.

 

 

	2.2.	Transfer of Rights to Stored Vials of Product. As of the Effective Date, Tracon will transfer and assign all rights and ownership to stored vials of Product that are manufactured to GMP standards and stored at Patheon or their designee. During the Term of this Agreement and at Enviro’s request, Tracon agrees to perform all acts and execute all documents reasonably necessary to effectuate such transfer.
	2.3.	Assignment of CD105 Patents. Tracon hereby assigns, effective upon Enviro’s timely payment of the Upfront Fee to Tracon, all rights in the CD 105 Patents to Enviro, Tracon agrees to perform all acts and execute all documents reasonably necessary to effectuate such assignment, including executing recordable assignment agreements for the United States Patent and Trademark Office. At Enviro’s request and at Enviro’s reasonable expense, Tracon also agrees to perform all acts and execute all documents reasonably necessary for Enviro to enforce any of the CD 105 Patents.

 

3. CONFIDENTIALITY

 

	3.1.	Each Party may in support of the Purpose provide the other Party certain confidential information about such party’s technology, research, or business plans (“Confidential Information”). Each party may provide such Confidential Information to the other party in writing or other tangible form marked as CONFIDENTIAL or may initially disclose such information orally and then summarize and confirm it in writing as CONFIDENTIAL within 30 days after the date of oral disclosure; provided that, for clarity, all Product INDs and information related thereto shall in any event be Confidential Information of Tracon regardless of whether disclosed orally, in writing or in any other form.
	3.2.	Exclusions. Confidential Information of a Party does not include information that

 

	3.2.1.	is known or open to the public or otherwise in the public domain at the time of disclosure,
	3.2.2.	becomes part of the public domain by any means other than breach of this Agreement by the other Party,
	3.2.3.	is already known to the other Party at the time of disclosure and is free of any obligations of confidentiality, or
	3.2.4.	is obtained by the other Party, free of any obligations of confidentiality, from a Third Party who has a lawful right to disclose it.

 

3.3.

Obligations of Confidentiality. Unless the disclosing Party provides prior written consent, the receiving Party may not use Confidential Information of the disclosing Party for any purpose except for the Purpose, nor may the receiving party disclose Confidential Information to any Third Party except as authorized in this Agreement or as required by law or regulation. Tracon specifically authorizes any reasonably necessary disclosure of Confidential Information to authorized representatives of any regulatory authority associated with the Purpose. Tracon specifically authorizes disclosure of Confidential Information to the extent the Purpose requires or is reasonably facilitated by disclosure or publication any Confidential Information.

 

 

3.4.

Disclosure Required by Law. If disclosure of Confidential Information of the disclosing Party other than as expressly permitted under this Agreement is required by law, that disclosure does not constitute a breach of this Agreement so long as the receiving Party

 

	3.4.1.	notifies the disclosing Party in writing as far as possible in advance of the disclosure so as to allow the disclosing party to take legal action to protect its Confidential Information,
	3.4.2.	discloses only that Confidential Information required to comply with the legal requirement, and
	3.4.3.	continues to maintain the confidentiality of this Confidential Information with respect to all other Third Parties.

 

4. PAYMENTS

 

	4.1.	Upfront Fee. Subject to (1) receiving copies of all Product INDs and related correspondence with the U.S. FDA through an electronic portal designated by Enviro as set forth above, and (2) the transfer of all rights and ownership to stored vials of Product manufactured to GMP standards that are stored at Patheon to Enviro or their designee as set forth above, Enviro shall make a one-time, non-refundable, non-creditable payment to Tracon of one hundred thousand U.S. dollars (US$100,000) (“Upfront Fee”) within 10 days of the Effective Date of this Agreement.
	4.2.	Commercialization of Product. Any sales or commercialization of the Product, and any associated efforts to commercialize or sell the Product, shall be at Enviro’s sole discretion. Any collaboration and/or licenses, and any associated efforts to commercialize or license, shall also be at Enviro’s sole discretion.
	4.3.	Royalties. During the Term of this Agreement, Enviro shall pay a three percent (3%) royalty (“Royalties”) to Tracon on aggregate annual Net Sales on a country-by-country basis anywhere in the world of each Product in each calendar year. No later than sixty (60) days following the end of each calendar year, Enviro shall provide to Tracon a report on a country-by country basis of all Net Sales of Product by Enviro, its Affiliates and sublicensees and the amount of Royalties owed for such year. Enviro shall pay the Royalties to Tracon no later than the date by which such report is due. Enviro shall keep and cause its Affiliates and sublicensees to keep, accurate books and records sufficient to determine the amount of Net Sales for at least three years following the year* in which the applicable sales occurred. Enviro shall promptly pay to Tracon the amount of any underpayment plus accrued interest as determined by the audit.
	4.4.	Non-Royalty Payments In addition to Royalties, during the Term of this Agreement, Enviro shall pay Tracon three percent (3%) of all consideration received from any Third Party in connection with any collaboration or license related to Product, including without limitation any grant of any right in or option to acquire any right in any CD 105 Patents or intellectual property of Enviro in Product (“Sublicense Fees”). Sublicense Fees shall be earned with respect to payments received as upfront, lump-sum, milestone and all other payments except for royalties on Net Sales of Products. No later than sixty (60) days following the end of each calendar year, Enviro shall provide to Tracon a report of all Sublicense Fees owed for such year, including the amount, source and detailed rationale for all consideration giving rise to such Sublicense Fees. Enviro shall pay tire Sublicense Fees to Tracon no later than the date by which such report is due. Enviro shall keep and cause its Affiliates to keep, accurate books and records sufficient to determine the amount of Sublicense Fees for at least three years following the year in which the applicable consideration was received. Enviro shall promptly pay to Tracon the amount of any underpayment plus accrued interest as determined by the audit.

 

 

	4.5.	Reporting, Audits, and Interest. Tracon shall have the right to have a Third Party accounting firm audit all such books and records of Enviro and its Affiliates and their sublicensees to determine the amount of Royalties and Sublicense Fees owed. Such audits shall be at the expense of Tracon unless an audit undercovers an underpayment of greater than ten percent (10%) of the amount under audit in which case Enviro shall reimburse Tracon for the cost of such audit. All amounts owed under this Agreement shall accrue interest at the rate of five percent (5%) per year from the date due until paid.
	4.6.	Enviro Financing Milestones. During the Term of this Agreement, Enviro shall make a one-time, non-refundable, non-creditable payment to Tracon of US$500,000 within 10 days of it’s or its successor’s completion of one or more financings through the sale of equity (or debt convertible to equity) in an amount of US$10,000,000 or greater in the aggregate. During the Term of this Agreement, Enviro shall make a one-time, non- refundable, non -creditable payment to Tracon of US$500,000 within 10 days of if s or its successor’s completion of one or more financings through the sale of equity (or debt convertible to equity) in an amount of US$22,000,000 or greater in the aggregate (including such financings giving rise to the first financing milestone payment). For clarity, in the event that the Enviro-Kairos Share Exchange occurs or the Kairos-BLAB Transaction occurs, financings by each of Enviro, Kairos, and BLAB shall be considered in aggregate for the purpose of determining the occurrence of a financing milestone. For illustrative purposes, Enviro will owe Tracon $500,000 when Enviro and its successors have, in aggregate, raised $10 million, and an additional $500,000 when Enviro and its successors have, in aggregate, raised an additional $12 million amounting to a total of $22 million (subject to prior Termination of the Agreement). Enviro shall report the occurrence of each such financing milestone and make the corresponding payment to Tracon within ten (10) days of their occurrence. Any efforts to obtain such financing by Enviro shall be at Enviro5 s sole discretion. The payment of the $ 100,000 and the two payments of $500,000 each referenced above shall in the aggregate be referred to as the “Cash Consideration.”
	4.7.	Ownership in Enviro. Subject to (1) receiving copies of all Product INDs and related correspondence with the U.S, FDA through an electronic portal designated by Enviro as set forth above, and (2) the transfer of all rights and ownership to stored vials of Product manufactured to GMP standards that are stored at Patheon to Enviro or their designee as set forth above, Enviro will issue to Tracon a number of shares of restricted common stock of Enviro equal to seven percent (7%) on a fully diluted and converted basis of all common and preferred shares of Enviro (the “Enviro Equity”), Enviro and Kairos represent and warrant that in connection with the Enviro-Kairos Share Exchange, detailed on Appendix C, Tracon shall receive in exchange for its Enviro common stock 280,000 shares of the restricted common stock of Kairos (out of a total of 4,000,000 shares of restricted common stock issued to the Enviro shareholders in the Enviro-Kairos Share Exchange, which is equal to 1.41229% of the issued and outstanding shares of Kairos on a fully-diluted and converted basis), which the Parties hereto acknowledge and agree represents the Enviro Equity. In the Kairos-BLAB Transaction, detailed on Appendix D, Tracon shall receive in exchange for its Kairos common stock approximately 1,366,835.92 shares of the restricted common stock of BLAB (out of a total of 96,781,536 shares of restricted common stock issued to the Kairos shareholders in the Kairos-BLAB Transaction, which is equal approximately 1.271078% of the issued and outstanding shares of BLAB on a fully-diluted and converted basis), which the Parties hereto acknowledge and agree represents the Enviro Equity. Conditioned on the foregoing and Kairos’s assumption of the obligations of Enviro under this Agreement, Tracon consents to the Enviro-Kairos Share Exchange. Conditioned on the foregoing and BLAB’s assumption of the obligations of Enviro and Kairos under this Agreement, Tracon consents to the Kairos-BLAB Transaction.

 

 

	4.8.	Anti-Dilution. Until such time as Tracon has received all of the Cash Consideration, Enviro or its successor in interest, will issue to Tracon, without further consideration, any additional common stock of Enviro, or such successor in interest, necessary so that Tracon maintains ownership of shares of Enviro, or such successor in interest, equal to the Enviro Equity on a fully-diluted and converted basis of all stock in Enviro (or its successor). For the avoidance of doubt, Kairos shall also be obligated to issue further restricted shares to Tracon (in addition to the 280,000 shares received in consideration of the Enviro-Kairos Share Exchange or the 1,366,835.92 shares received in consideration of the Kairos-BLAB Transaction) as may be necessary to keep Tracon’s post-closing ownership at a percentage of shares of Kairos (equal to 1.41229% on a fully-diluted and converted basis) or BLAB (equal to 1.271078% on a fully-diluted and converted basis), as applicable. For the avoidance of doubt, the anti-dilution obligations of this Section 4.8 shall apply to the Proposed Financing and all financings of Enviro and its successors that in aggregate raise up to 22 million dollars, provided that where a financing results in an aggregate raise from all financings of greater than $22million, such financing shall be deemed, for purposes of this Section 4.8, to be split into two financings with the first financing in an amount sufficient to reach $22 million raised with the obligation to issue shares to Tracon pursuant to the anti-dilution provisions of this Section 4.8 applying only to such first of two financings.
	4.9.	Payment within Six Months. Notwithstanding the foregoing, if Tracon receives the full Cash Consideration within six (6) months of the Effective Date, then Tracon shall automatically return to Enviro (or any successor entity, if applicable) a number of shares of the restricted common stock of Enviro (or its successor) such that upon such return of shares Tracon shall possess an amount of shares in Enviro (or its successor) equal to two percent (2%) on a fully-diluted and converted basis relative to the other Enviro shareholders who exchanged their shares in the Enviro-Kairos Share Exchange. The returned portion of the Enviro Equity shall automatically be terminated, cancelled and of no further force and effect.

 

 

4.10.

Restricted Legend. The certificates evidencing the Enviro shares (or Kairos shares or BLAB shares, as applicable) issued to Tracon pursuant to this Agreement shall bear the following legend:

 

“THE SHARES REPRESENTED HEREBY WERE ISSUED IN CONNECTION WITH THAT CERTAIN LICENSE AND SUPPLY AGREEMENT BETWEEN REGISTERED HOLDER AND THE COMPANY AND SHALL NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, WITHOUT THE CONSENT OF THE COMPANY AND IN COMPLIANCE WITH THE TERMS OF THAT CERTAIN LICENSE AND SUPPLY AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES). THE SECRETARY OF THE COMPANY SHALL, UPON WRITTEN REQUEST, FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE”

 

4.11.

Lock-Up/Leak-Out Agreement. The shares issued to Tracon pursuant to this Agreement shall be subject to the terms and conditions of that certain Lock-Up/Leak-Out Agreement, attached hereto as Appendix E; provided, however, that:

 

	4.11.1.	In connection with the Enviro-Kairos Share Exchange, Tracon shall receive shares of Kairos on the same terms and with the same restrictions as those of other holders of common stock of Enviro (who will have their shares converted into shares of Kairos in the Enviro-Kairos Share Exchange), and, if such other Enviro shareholders do not have (or have less restrictive) Lock-Up/Leak-Out Agreements, Tracon5 s Lock-Up/Leak-Out Agreement and restrictions shall automatically be adjusted, or eliminated, as applicable, on a most favored nations basis with the other Enviro shareholders; and
	4.11.2.	In connection with any Kairos-BLAB Transaction, Tracon shall receive shares of BLAB on the same terms and with the same restrictions as those of other holders of common stock of Kairos, including New Investors, if applicable, (who will have their shares converted into shares of BLAB in the Kairos-BLAB Transaction), and, if such other Kairos shareholders or New Investors do not have, or have less restrictive, Lock-Up/Leak-Out Agreements in connection therewith, then Tracon’s Lock-Up/Leak-Out Agreement and restrictions shall automatically be adjusted, or eliminated, as applicable, on a most favored nations basis with the other Kairos shareholders or New Investors.

 

 

5. INDEMNIFICATION

 

5.1.

Enviro (and its successors) shall indemnify, defend and hold harmless each of Tracon and its Affiliates and their respective directors, officers, employees, consultants, agents and successors and assigns (each a “Tracon Indemnitee”) of any of the foregoing from and against any and all losses, damages, liabilities, expenses and costs, including reasonable legal expense and attorneys’ fees, incurred by any Tracon Indemnitee as a result of any claims, demands, actions, suits or proceedings (“Claims”) brought by a Third Party arising directly or indirectly out of the research, development, manufacture, use, handling, storage, sale or other disposition of the Products by Enviro, its successors, or any of their Affiliates or sublicensees or the negligence or misconduct of Enviro, its Affiliates, sublicensees or any of their officers, directors, employees, agents, consultants, or representatives. Such indemnification shall not apply to the extent that such Claims arise from or relate to any breached warranties or representations of Tracon as set forth in this Agreement. In no event, however, may Enviro compromise or settle any Claim in a manner which admits fault or negligence on the pail of Tracon or the Tracon Indemnitees without the prior written consent of Tracon or the Tracon Indemnitee(s), as applicable. Tracon shall not have any liability under this Section 5.1 with respect to Claims settled or compromised without its prior written consent, such consent not to be unreasonably withheld, conditioned or delayed. This section shall survive all terminations or expirations of the Agreement.

 

6. TERMINATION

 

	6.1.	Subject to earlier Termination due to breach, this Agreement will remain in effect until the completion of all Payments and transfer of all shares of Enviro stock due to Tracon under the “Payments” section by Enviro to Tracon (the “Term”).
	6.2.	Termination by Tracon. Tracon may terminate the Agreement, in its sole discretion, upon 15 business days prior written notice to Enviro, if Enviro fails to make any of the Payments required in the “Payments” section above, and if Enviro has not cured such breach within 15 business days after written notice thereof by Tracon; or upon or after the material breach of Enviro’s obligations under the Agreement if Enviro has not cured such breach within 15 business days after written notice thereof by Tracon.
	6.3.	Termination by Enviro. Except as otherwise provided in the article below regarding force majeure, if Tracon materially breaches its obligations of this Agreement, and Tracon has not cured such breach within 15 business days after written notice thereof by Enviro, then Enviro may terminate the Agreement upon 15 business days prior written notice to Tracon. Except as otherwise provided in the article below regarding force majeure, if Tracon materially breaches its warranties set forth in this Agreement, then Enviro may terminate the Agreement upon 15 business days prior written notice to Tracon,
	6.4.	Effect of Termination. Expiration or termination of the Agreement shall not relieve the parties of any obligation accruing prior to such expiration or termination, and the provisions of the following sections shall survive the expiration or termination of the Agreement: Indemnification; Confidentiality; Governing Law; Dispute Resolution; Notices; and Tracon’s obligations with respect to assignment of the CD 105 Patents.

 

 

7. ASSIGNMENT

 

	7.1.	Enviro may not assign this Agreement without consent from Tracon, which consent shall not be unreasonably withheld, except that Enviro may, without Tracon’s consent, assign the Agreement and its rights and obligations hereunder in connection with the transfer or sale of all or substantially all of its business or divisions or subdivisions relating to the Product, or in the event of its merger, consolidation, change in control, spin-off, recapitalization or similar transaction. Any permitted assignee shall assume all obligations of its assignor under the Agreement. Tracon acknowledges that Enviro expects to be acquired by Kairos shortly following the Effective Date in the Enviro- Kairos Share Exchange and Kairos agrees to assume all of the obligations of Enviro under this Agreement in connection with the Enviro-Kairos Share Exchange. Tracon acknowledges that Kairos intends to enter into a share exchange (or merger) with Bio Lab Naturals, Inc. (“BLAB”) pursuant to the Kairos-BLAB Transaction, whereby Kairos will become a wholly owned subsidiary of BLAB, Assuming the Enviro-Kairos Share Exchange occurs and Kairos* s assumption of the obligations of Enviro under this Agreement, Tracon consents to Kairos as a permitted assignee. Assuming the Kairos- BLAB Transaction occurs and BLAB’S assumption of the obligations of Enviro and Kairos under this Agreement, Tracon consents BLAB as a permitted assignee.
	7.2.	Tracon may not assign any of its obligations set forth in this Agreement without prior written consent from Enviro, except that Tracon may, without Enviro’s consent, assign this agreement to in connection with the sale or transfer of all or substantially all of its assets whether by merger, operation of law, stock sale, asset transfer, or otherwise, Tracon may freely assign its rights to “Payments” to any third party upon providing prior written notice to Enviro.

 

8. NOTICES

 

Any consent, notice or report required or permitted to be given or made under the Agreement by one party to the other party shall be in writing, delivered personally, by email (read receipt required) or by traceable delivery such as registered mail, and addressed to the other party at its address indicated below, or to such other address as the addressee shall have last furnished in writing to the addressor. Except as otherwise provided in the Agreement, such consent, notice, or report shall be effective upon receipt by the addressee.

 

If to Tracon:

 

Tracon Pharmaceuticals, Inc.

4350 La Jolla Village Drive, Suite 800

San Diego CA 92122

Attention: Chief Executive Officer

 

If to Enviro:

 

Enviro Therapeutics, Inc.

2355 Westwood Blvd.#139

Los Angeles CA 90064

Attention: Chief Executive Officer

 

 

9. REPRESENTATIONS AND WARRANTIES

 

	9.1.	CORPORATE EXISTENCE AND POWER. Each party represents and warrants that such party (a) is a corporation duly organized, validly existing and in good standing under the laws of the state in which it is incorporated, (b) has the corporate power and authority and the legal right to enter into the Agreement and to perform its obligations hereunder and (c) is in compliance with all requirements of applicable law, except to the extent that any noncompliance would not have a material adverse effect on the properties, business, financial or other condition of it and would not materially adversely affect its ability to perform its obligations under the Agreement.
	9.2.	NO CONSENTS. Each party represents and warrants that all necessary consents, approvals, and authorizations of all governmental authorities and other Persons required to be obtained by such party in connection with the Agreement have been obtained.
	9.3.	NO CONFLICT. Each party represents and warrants that the execution and delivery of the Agreement and the performance of such party’s obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations, and (b) do not conflict with, or constitute a default under, any contractual obligation of it.
	9.4.	TRC105 PRODUCT STORAGE. Tracon represents and warrants that Tracon owns approximately 14,000 unlabeled and stored 8 mL vials of TRC105 drug product manufactured to GMP standards at Patheon or their designee, with four-year stability dating under refrigerated conditions. Tracon further represents and warrants that the stored vials of TRC105 drug product were manufactured on 11 October 2018 and stored at Patheon on 7 December 2018. Tracon further represents and warrants that the stored vials of TRC105 drug product are owned by Tracon without any lien or any encumbrance of any kind and are fully transferable to Enviro.
	9.5.	TRC105 PRODUCT INFRINGEMENT CLAIMS. Tracon represents and warrants that it has no actual knowledge that the Product infringes or misappropriates any intellectual property rights of any third parties. Further, Tracon represents and warrants that Tracon has not received any notice or communications from any third party regarding potential or alleged infringement of third-party intellectual property rights by the Product.
	9.6.	OWNERSHIP OF THE CD105 PATENTS. Tracon represents and warrants that it is the sole and full owner of the CD 105 Patents. Tracon further represents and warrants that the CD 105 patents are owned by Tracon without any lien or any encumbrance of any kind,
	9.7.	IND INFORMATION. Tracon represents and warrants that Tracon is the holder of the multiple Product INDs for the Product in the United States as listed in Appendix B. Tracon further represents and warrants that it has maintained complete copies of such Product INDs and all related correspondence with the U.S. FDA for such IND filings.

 

 

9.8.

DISCLAIMER OF WARRANTIES. NOTHING IN THE AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE OR WARRANTY GIVEN BY TRACON THAT ANY PATENT WILL ISSUE BASED UPON ANY PENDING PATENT APPLICATION INCLUDED IN THE CD105 PATENT RIGHTS; OR THAT ANY PATENT INCLUDED IN THE CD 105 PATENT RIGHTS IS VALID, ENFORCEABLE OR ACTIVE. EXCEPT AS OTHERWISE SET FORTH ABOVE, NOTHING IN THE AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE OR WARRANTY GIVEN BY TRACON THAT THE USE OF ANY CD 105 PATENT RIGHTS, THE PRODUCT OR THE IND INFORMATION WILL NOT INFRINGE ANY INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY. EXCEPT AS OTHERWISE SET FORTH ABOVE, TRACON MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE CD 105 PATENT RIGHTS, THE PRODUCT, OR IND INFORMATION, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

10. GOVERNING LAW

 

This Agreement shall be governed by the laws of the State of New York, excluding its conflict of laws principles.

 

11. DISPUTE RESOLUTION

 

The Parties agree that for any issues or disputes arising regarding matters associated with this Agreement or regarding the interpretation of its provisions, the Parties shall first attempt to resolve such issues or disputes through mutual consultation in good faith. If such good faith consultation does not resolve the issues or disputes, the Parties agree to next submit their issues or disputes promptly to non-binding mediation before an unaffiliated mediator. Such mediation shall occur in Los Angeles, California or another location agreed by the Parties. Each Party shall pay its own mediation expenses. The Parties shall equally share payment of invoices and expenses received from the mediator. Only after the procedures set forth above fail to resolve the issues or disputes within a six month period from the initial notice of one Party to the other Party of the relevant issues or disputes, may either Party file a lawsuit to resolve any remaining issues or disputes. The Parties agree to toll any statute of limitations with respect to the specific dispute during such six-month period.

 

12. ENTIRE AGREEMENT

 

This Agreement (together with the Lock Up Agreement) represents the entire understanding between the parties relating to this subject matter. This Agreement supersedes all previous agreements between the parties (oral and written).

 

 

13. WAIVERS AND AMENDMENTS

 

	13.1.	No change, modification, extension, termination, or waiver of the Agreement, or any of the provisions herein contained, shall be valid unless made in writing and signed by duly authorized representatives of the Parties hereto.
	13.2.	No waiver by either Party, whether express or implied, of any provision of this Agreement or of any breach or default by either Party, shall constitute a continuing waiver or a waiver of any other provision of this Agreement, and no waiver by either Party shall prevent such Party from enforcing any and all provisions of this Agreement to the extent not waived or from acting upon the same or any subsequent breach or default of the other Party. No waiver of any provision hereunder shall be effective unless it is in writing signed by the Party against whom enforcement of such waiver may be sought.
	13.3.	The provisions set forth in this Agreement shall be severable and independent of each other. In the event that any provision of this Agreement shall be determined in any jurisdiction to be unenforceable, such determination shall not be deemed to affect the enforceability of any other provision and the parties agree that any court making such a determination is hereby requested and empowered to modify such provision and to substitute for such unenforceable provision such limitation or provision of a maximum scope as the court then deems reasonable and judicially enforceable and the parties agree that such substitute provision shall be as enforceable in said jurisdiction as if set forth initially in this Agreement. Any such substitute provision shall be applicable only in the jurisdiction in which the original provision was determined to be unenforceable.

 

14. FORCE MAJEURE

 

Neither party shall be held liable or responsible to the other party nor be deemed to have defaulted under or breached the Agreement for failure or delay in fulfilling or performing any term of the Agreement (other than payment of amounts owed) to the extent, and for so long as, such failure or delay is caused by or results from causes beyond the reasonable control of the affected party including but not limited to fires, earthquakes, floods, embargoes, wars, acts of war (whether war is declared or not), insurrections, riots, civil commotions, blackouts, network outages, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmental authority or other party.

 

 

15. COUNTERPART SIGNATURES

 

This Agreement may be executed in any number of counterparts and by the different Parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement, A scanned PDF of the signed Agreement shall have the full force and effect of a signed original Agreement. Execution of tins Agreement may be accomplished by signing this Agreement and transmitting the signature page to the other Parties by email (scanned/PDF version). The Parties so executing and delivering shall promptly thereafter deliver signed originals of at least the signature page(s), but the failure to do so shall not affect the validity or enforceability of this Agreement.

 

Accepted and Agreed to by:

 

TRACON PHARMACEUTICALS, INC.
/s/ Charles Theuer		21 MAY 2021
Charles Theuer		DATE
Chief Executive Officer

 

ENVIRO THERAPEUTICS INC.
/s/ Neil Bhowmick		5/22/2021
Neil Bhowmick		DATE
Chief Executive Officer

 

KAIROS PHARMA, LTD.
/s/ John S. Yu		5/21/2021
John S. Yu		DATE
Chief Executive Officer

 

 

APPENDIX A - CD105 Patents

 

Title		Country		Application No.		Patent No.
HUMANIZED ENDOGLIN ANTIBODIES		AR		P090103781
HUMANIZED ENDOGLIN ANTIBODIES		TW		098133277
HUMANIZED ENDOGLIN ANTIBODIES		US		61/247,290
HUMANIZED ENDOGLIN ANTIBODIES		US		12/570,918
HUMANIZED ENDOGLIN ANTIBODIES		WO		US2009/59086
HUMANIZED ENDOGLIN ANTIBODIES		US		15/337,113		9,944,714
HUMANIZED ENDOGLIN ANTIBODIES		US		61/101,941
HUMANIZED ENDOGLIN ANTIBODIES		US		12/751,907		8,221,753
HUMANIZED ENDOGLIN ANTIBODIES		WO		PCT/US2010/050759
HUMANIZED ENDOGLIN ANTIBODIES		AU		2010300668		2010300668
HUMANIZED ENDOGLIN ANTIBODIES		BR		1120120073184
HUMANIZED ENDOGLIN ANTIBODIES		CA		2,775,810		2,775,810
HUMANIZED ENDOGLIN ANTIBODIES		CN		201080054202.4		ZL201080054202.4
HUMANIZED ENDOGLIN ANTIBODIES		EA		201290173		025174
HUMANIZED ENDOGLIN ANTIBODIES		EP		10821188.9
HUMANIZED ENDOGLIN ANTIBODIES		IN		3643/DELNP/2012		294860
HUMANIZED ENDOGLIN ANTIBODIES		IL		218724		218724
HUMANIZED ENDOGLIN ANTIBODIES		JP		2012-532280		5632002
HUMANIZED ENDOGLIN ANTIBODIES		KR		10-2012-7011203		1398707
HUMANIZED ENDOGLIN ANTIBODIES		US		13/485,702		8,609,094

 

 

Title		Country		Application No.		Patent No.
HUMANIZED ENDOGLIN ANTIBODIES		US		14/054,446		9,150,652
HUMANIZED ENDOGLIN ANTIBODIES		US		14/838,006		9,518,122
HUMANIZED ENDOGLIN ANTIBODIES		JP		2014-144256		5960203
HUMANIZED ENDOGLIN ANTIBODIES		CN		201510115139.5
HUMANIZED ENDOGLIN ANTIBODIES		US		15/907,505
HUMANIZED ENDOGLIN ANTIBODIES		GB		10821188.9
HUMANIZED ENDOGLIN ANTIBODIES		FR		10821188.9
HUMANIZED ENDOGLIN ANTIBODIES		DE		10821188.9
HUMANIZED ENDOGLIN ANTIBODIES		ES		10821188.9
HUMANIZED ENDOGLIN ANTIBODIES		IT		10821188.9
ANTIBODY FORMULATIONS AND USES THEREOF		US		61/697,111
ANTIBODY FORMULATIONS AND USES THEREOF		WO		PCT/US2013/058265
ANTIBODY FORMULATIONS AND USESTHEREOF		US		14/421,108		10,195,281
ANTIBODY FORMULATIONS AND USES THEREOF		HK		15111622.6
ANTIBODY FORMULATIONS AND USES THEREOF		EA		201590412		029214
ANTIBODY FORMULATIONS AND USES THEREOF		EP		13834890.9
ANTIBODY FORMULATIONS AND USES THEREOF		AU		2013312536		2013312536
ANTIBODY FORMULATIONS AND USES THEREOF		CA		2,883,343
ANTIBODY FORMULATIONS AND USES THEREOF		CN		201380046405.2
ANTIBODY FORMULATIONS AND USES THEREOF		IL		237287
ANTIBODY FORMULATIONS AND USES THEREOF		IN		1538/DELNP/2015
ANTIBODY FORMULATIONS AND USES THEREOF		JP		2015-531196
ANTIBODY FORMULATIONS AND USES THEREOF		KR		10-2015-7008487		1820582

 

  

Title		Country		Application No.		Patent No.
ANTIBODY FORMULATIONS AND USES THEREOF		BR		BR1120150048757
ANTIBODY FORMULATIONS AND USES THEREOF		GE		AP2013013760		6789
ANTIBODY FORMULATIONS AND USES THEREOF		ID		P00201501859
ANTIBODY FORMULATIONS AND USES THEREOF		MX		MX/a/2015/002840
ANTIBODY FORMULATIONS AND USES THEREOF		MY		PI2015000556
ANTIBODY FORMULATIONS AND USES THEREOF		NZ		705109		705109
ANTIBODY FORMULATIONS AND USES THEREOF		PH		1-2015-500480
ANTIBODY FORMULATIONS AND USES THEREOF		SG		11201501659S		11201501659S
ANTIBODY FORMULATIONS AND USES THEREOF		TH		1501001224
ANTIBODY FORMULATIONS AND USES THEREOF		UA		A 2015 01709		115789
ANTIBODY FORMULATIONS AND USES THEREOF		UZ		IAP 2015 0104
ANTIBODY FORMULATIONS AND USES THEREOF		VN		1-2015-01109
ANTIBODY FORMULATIONS AND USES THEREOF		SG		10201705070P
ANTIBODY FORMULATIONS AND USES THEREOF		JP		2017-243830		6445671
ANTIBODY FORMULATIONS AND USES THEREOF		KR		10-2018-7001035
ANTIBODY FORMULATIONS AND USES THEREOF		CN		201810659773.9
ANTIBODY FORMULATIONS AND USES THEREOF		US		16/034,658
ANTIBODY FORMULATIONS AND USES THEREOF		AU		2018204044
ANTIBODY FORMULATIONS AND USES THEREOF		ID		P00201808092
ANTIBODY FORMULATIONS AND USES THEREOF		JP		2018-223128
ANTI-ENDOGLIN ANTIBODIES AND USES THEREOF		US		62/161,669
ANTI-ENDOGLIN ANTIBODIES AND USES THEREOF		WO		PCT/US2015/060136
ANTI-ENDOGLIN ANTIBODIES AND USES THEREOF		US		62/078,788

 

 

Title		Country		Application No.		Patent No.
ANTI-ENDOGLIN ANTIBODIES AND USES THEREOF		CA		2,966,905
ANTI-ENDOGLIN ANTIBODIES AND USES THEREOF		IL		251837
ANTI-ENDOGLIN ANTIBODIES AND USES THEREOF		JP		2017-525583
ANTI-ENDOGLIN ANTIBODIES AND USES THEREOF		US		15/520,020		10,155,820
ANTI-ENDOGLIN ANTIBODIES AND USES THEREOF		AU		2015346444
ANTI-ENDOGLIN ANTIBODIES AND USES THEREOF		US		15/131,312		9,926,375
ANTI-ENDOGLIN ANTIBODIES AND USES THEREOF		US		16/037,282
ANTI-ENDOGLIN ANTIBODIES AND USES THEREOF		US		16/148,571
COMPOSITIONS AND METHODS FOR TREATMENT OF CANCERS		US		62/405,059
COMPOSITIONS AND METHODS FOR TREATMENT OF CANCERS		WO		PCT/US2017/055345
COMBINATION THERAPY OF CANCER WITH ENDOGLIN ANTIBODIES AND ANTI-PROGRAMMED DEATH RECEPTOR AGENTS		US		62/483,054
COMBINATION THERAPY OF CANCER WITH ENDOGLIN ANTIBODIES AND ANTI-PROGRAMMED DEATH RECEPTOR AGENTS		WO		PCT/US2018/025207

 

 

APPENDIX B – Identification of IND

Submissions

 

100,522

 

123,896

 

131,053

 

 

APPENDIX C – Enviro-Kairos Share

Exchange Terms

 

In the Enviro-Kairos Share Exchange, the Enviro shareholders will exchange 100% of the issued and outstanding shares of Enviro (on a fully diluted basis) for 4,000,000 shares of newly issued restricted common stock of Kairos (the “Exchange Shares”), which, as of the closing of the Enviro-Kairos Share Exchange: (i) will represent approximately twenty percent (20%) of the outstanding shares of capital stock of Kairos on a fully diluted basis, including all issued and outstanding convertible promissory notes, preferred stock, SAFEs, other securities convertible into capital stock, stock options and warrants, and after giving effect to the issuance of the Exchange Shares, and (ii) shall have voting power approximately equal to twenty percent (20%) of all shares capable of voting on matters by the shareholders of Kairos. At the closing of the Enviro- Kairos Share Exchange, and assuming the occurrence of the Proposed Financing and including the newly issued Exchange Shares, Kairos will have approximately 19,825,957 shares of common stock issued and outstanding on a fully diluted basis (including 18,825,957 outstanding shares of common stock, and 1,000,000 warrants exercisable into 1,000,000 shares of common stock).

 

The above summary is provided herein for convenience, is not intended to include every term of the agreement, and is subject to non-material changes that may be agreed to by the parties thereto in the drafting of the definitive agreements and closing of the above summarized transactions.

 

 

APPENDIX D – Kairos-BLAB Transaction

Terms

 

Pursuant to the Kairos-BLAB Transaction, which will be between BLAB, Kairos, and a newly formed corporation and wholly-owned subsidiary of BLAB (“Merger Sub”), the newly formed Merger Sub will be merged into Kairos, with Kairos being the surviving entity (the “Merger”). As a result of the Merger, Kairos will became a wholly-owned subsidiary of BLAB.

 

BLAB is authorized to issue a total of 200,000,000 shares of its common stock, par value $0,0001 per share, and 5,000,000 shares of its preferred stock, par value $0.0001 per share, of which 500,000 shares are designated as Class A Convertible Preferred shares. Immediately prior to the closing of the Merger, BLAB will have approximately 10,753,504 shares of common stock issued and outstanding on a fully diluted basis, and 500,000 shares of Class A Convertible Preferred shares issued and outstanding. Immediately prior to the closing of the Merger, Kairos will have approximately 19,825,957 shares of common stock, par value $0,01 per share, issued and outstanding on a fully diluted basis (including 18,825,957 outstanding shares of common stock, and 1,000,000 warrants exercisable into 1,000,000 shares of common stock).

 

At the closing of the Merger, BLAB will issue 96,781,536 shares of common stock to the former Kairos shareholders, on a pro rata basis. In consideration of and upon the closing of the Merger, Helion Holdings, LLC and W. Edward Nichols will return to BLAB an aggregate of 500,000 Class A Convertible Preferred Shares of BLAB (representing 100% of those issued and outstanding) for cancellation, without any additional consideration.

 

The aggregate total amount of BLAB common shares issued and outstanding, on a fully diluted basis, upon the closing of the Merger will be 107,535,040 consisting of 96,781,536 newly issues shares of common stock (and warrants exercisable into common stock) shares to the former- Kairos shareholders, and 10,753,504 shares of common stock held by the pre-Merger shareholders of BLAB (subject to the rights of the former stockholders of Kairos to exercise and perfect then- appraisal rights under applicable provisions of Delaware law). Upon completion of the Merger, and assuming the conversion of the warrants into shares of BLAB’s common stock, the former stockholders of Kairos will own approximately 90% of the then outstanding shares of BLAB’s common stock (including warrants convertible into shares of BLAB’s common stock) and the holders of BLAB’s previously outstanding shares of BLAB’s common stock will own the balance.

 

Following the consummation of the Merger, BLAB will take such actions as are necessary in order to affect the following officer and director changes. John S, Yu shall be appointed Chairman of BLAB’s board of directors and Chief Executive Officer, and Kairos shall also appoint a Chief Financial Officer. Upon closing of the Merger, W. Edward Nichols shall resign as President of BLAB, and Darrel Avery shall resign as CFO and Vice President, and all other directors of BLAB immediately prior to closing shall resign effective on closing the Merger. Michael Keyoung, Rosemary Mazanet and Hyun Bae shall be appointed as members of BLAB’s board of directors upon closing of the Merger.

 

The above summary is provided herein for convenience, is not intended to include every term of the agreement, and is subject to non-material changes that may be agreed to by the parties thereto in the drafting of the definitive agreements and closing of the above summarized transactions.

 

 

APPENDIX E – Lock-Up Agreement

 

 

Exhibit 10.17

 

FIRST AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT

 

This FIRST AMENDMENT TO EXCLUSIVE LICENSEE AGREEMENT (this “First Amendment”) is made and entered into as of April 18, 2022 (“First Amendment Effective Date”) by and between CEDARS-SINAI MEDICAL CENTER, a California nonprofit public benefit corporation (“CSMC”), and ENVIRO THERAPEUTICS INC., a California corporation (“Licensee”), and as of the First Amendment Effective Date, amends that certain Exclusive License Agreement by and between CSMC and Licensee, dated June 2, 2021 (the “Agreement”).

 

WHEREAS, CSMC and Licensee entered into an Agreement for Patent Rights in CSMC proprietary technology titled “Compositions and Methods for Treating Diseases and Conditions by Depletion of Mitochondrial or Genomic DNA from Circulation and for Detection of Mitochondrial or Genomic DNA”;

 

WHEREAS, CSMC and Licensee wish to amend the Agreement as set forth below,

 

NOW, THEREFORE, the parties hereby agree as follows:

 

	1.	Defined Terms. All capitalized terms used herein that are not otherwise defined shall have the same meanings set forth in the Agreement.
	2.	Amendment to the Agreement. CSMC and Licensee acknowledge that, as of the First Amendment Effective Date, none of the payments due to CSMC under Sections 4.l(a) and 4.1(b) of the Agreement have been paid by Licensee to CSMC. New Section 4.1(c) is added to the Agreement as follows:

 

(c) Extension of Payment Deadline. Notwithstanding the deadlines set forth in Sections 4.l(a) and 4.l(b), subject to the contemporaneous payment of all late charges, in accordance with Section 4.2(i)(vi), calculated from August 1, 2021 (i.e., thirty (30) days after the amounts were originally due under the Agreement) through the date that payments are actually made, the deadline for payment of all amounts due and payable under Sections 4.l(a) and 4.l(b) is extended to September 30, 2022.

 

	3.	Ratification of Agreement. Except as modified by this First Amendment, the parties hereby ratify, reaffirm and reapprove all of the terms, covenants and conditions of the Agreement. Any further alteration or modification of the provisions of the Agreement shall not be effective unless and until reduced to writing and executed by the parties.
	4.	Further Assurances. Each of the parties shall execute such further documents and instruments and do all such further acts as may be necessary or required in order to effectuate the intent and accomplish the purposes of this First Amendment.
	5.	Counterparts. This First Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterpart signature pages delivered by facsimile or similar electronic transmission (including via e-mail in PDF format or via DocuSign) shall be deemed binding as originals.

 

 

IN WITNESS WHEREOF, the parties hereto have entered into this First Amendment as of the First Amendment Effective Date.

 

CEDARS-SINAI MEDICAL CENTER			ENVIRO THERAPEUTICS INC.
By:	/s/ James D. Laur, JD		By:	/s/ John S. Yu
Name:	James D. Laur, JD		Name:	John S. Yu
Title:	Vice President, Intellectual Property		Title:	CEO
Date:	4/20/2022		Date:	4/18/2022

 

 

 

Exhibit 10.18

 

SECOND AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT

 

This SECOND AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT (this “Second Amendment”) is effective this October 11, 2022 (“Second Amendment Effective Date”) by and between CEDARS-SINAI MEDICAL CENTER, a California nonprofit public benefit corporation (“CSMC”), and ENVIRO THERAPEUTICS INC., a California corporation (“Licensee”).

 

WHEREAS, CSMC and Licensee entered into that certain Exclusive License Agreement for Patent Rights in CSMC proprietary technology titled “Sensitization of Tumors to Therapies Through Endoglin Antagonism” dated June 2, 2021, as amended by the First Amendment to Exclusive License Agreement dated April 18, 2022 (collectively, the “Agreement”); and

 

WHEREAS, CSMC and Licensee wish to amend the Agreement as set forth below,

 

NOW, THEREFORE, the parties hereby agree as follows:

 

	1.	Defined Terms. All capitalized terms used herein that are not otherwise defined shall have the same meanings set forth in the Agreement.
	2.	Amendment to the Agreement. CSMC and Licensee acknowledge that, as of the Second Amendment Effective Date, none of the payments due to CSMC under Sections 4.1(a), 4.1(b), and 4.1(c) of the Agreement have been paid by Licensee to CSMC. Section 4.1(d) is deleted in its entirety and replaced with the following:

 

(d) Extension of Payment Deadline. Notwithstanding the deadlines set forth in Sections 4.1(a), 4.1(b) and 4.1(c), subject to the contemporaneous payment of all late charges, in accordance with Section 4.2(i)(vi), calculated from August 1, 2021 (i.e., thirty (30) days after the amounts were originally due under the Agreement) through the date that payments are actually made, the deadline for payment of all amounts due and payable under Sections 4.1(a), 4.1(b), and 4.1(c) is extended to March 30, 2023.

 

	3.	Ratification of Agreement. Except as modified by this Second Amendment, the parties hereby ratify, reaffirm and reapprove all of the terms, covenants and conditions of the Agreement. Any further alteration or modification of the provisions of the Agreement shall not be effective unless and until reduced to writing and executed by the parties.
	4.	Further Assurances. Each of the parties shall execute such further documents and instruments and do all such further acts as may be necessary or required in order to effectuate the intent and accomplish the purposes of this Second Amendment.
	5.	Counterparts. This Second Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterpart signature pages delivered by facsimile or similar electronic transmission (including via e-mail in PDF format or via DocuSign) shall be deemed binding as originals.

 

 

IN WITNESS WHEREOF, the parties hereto have entered into this Second Amendment as of the Second Amendment Effective Date.

 

CEDARS-SINAI MEDICAL CENTER			ENVIRO THERAPEUTICS INC.
By:	/s/ James D. Laur, JD		By:	/s/ John S. Yu
Name:	James D. Laur, JD		Name:	John S. Yu
Title:	VP, Intellectual Property		Title:	CEO
Date:	10/11/2022		Date:	October 11, 2022

 

 

 

 

Exhibit 10.20

 

THE SECURITIES TO BE ISSUED PURSUANT TO THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“SECURITIES ACT”), OR ANY OTHER APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD UNLESS REGISTERED THEREUNDER OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

 

SUBSCRIPTION AGREEMENT

 

Subscription. The undersigned (sometimes referred to herein as the “Investor”) hereby subscribes for and agrees to purchase the principal amount of the Notes (as defined below) of Kairos Pharma, Ltd., a California corporation (the “Company” or “Kairos”), for the purchase price (the “Purchase Price”) set forth on the signature page hereto, on the terms and conditions described herein and in Exhibits A, B, C, D, E, F and G hereto (collectively, the “Offering Documents”). Terms not defined herein are as defined in the Offering Documents. The Company is seeking to raise, through a private placement of the Notes pursuant to Rule 506(b) promulgated under the Securities Act of 1933, as amended, up to $3,000,000 principal amount of Notes (the “Maximum Offering Amount”) in this Offering, although the Company and Boustead reserve the right, in their sole discretion, to increase the Maximum Offering Amount of Notes to an aggregate principal amount that is in excess of $3,000,000. The minimum amount of investment required from any one subscriber to participate in this Offering is $25,000, however, the Company reserves the right, in its sole discretion, to accept subscriptions less than this amount. All references to $ or “dollar(s)” means United States dollars. The undersigned acknowledges that the Company has engaged Boustead Securities, LLC (“Boustead” or “Placement Agent”) as its exclusive placement agent in connection with this offering.

 

The Offering will commence on the date of this Investor Package and continue until the earlier of the sale of all $3,000,000 of Notes or September 30, 2022, unless extended by the Company and Boustead in their sole discretion, to as late as October 15, 2022 (the “Expiration Date”). The Offering has no minimum dollar principal amount of Notes that must be sold to complete the Offering and all proceeds from the sale of Notes, net of commissions and fees payable to Boustead will be delivered to the Company at the Initial Closing and subsequent Closings described below.

 

The undersigned Investor together with other purchasers of Notes in the Offering are sometimes collectively referred to herein as “Subscribers.”

 

1.	Description of Securities; Description of Company and Risk Factors; Lock-Up.

 

a.

Description of Securities. The Company is offering (the “Offering”) to the Investor in the minimum subscription amount of $25,000, however, the Company reserves the right, in its sole discretion, to accept subscriptions less than this amount, of the Company’s 6% convertible unsecured promissory notes (the “Notes”) due as to principal and accrued interest on April 25, 2025, being three years from the date of the Initial Investor Package (the “Maturity Date”).

 

This Offering is being conducted in advance of the Company’s intended initial public offering (“IPO”) of our common stock, par value $0.01 per share (the “Common Stock”) and listing of our Common Stock for trading on the Nasdaq Capital Market or other national securities exchange.

 

The Notes issued herein may be converted at any time by the holders into Common Stock. In addition, in connection with an IPO, the Notes will automatically (and without any action on the part of the holders) be converted into shares of Common Stock of the Company at a conversion price (the “Conversion Price”) equal to the 60% of the public offering price per share of the Common Stock offered to the public in the IPO. For the avoidance of doubt if, for example, the initial per share offering price in the IPO is $5.00 per share, the conversion price would be $3.00 (60% of the $5.00 per share IPO price).

 

 

Under our engagement letter with Boustead, dated as of March 28, 2022 (the “Engagement Letter”), Boustead has been engaged as our exclusive financial advisor for the 18-month term of the Engagement Letter. In addition, Boustead has expressed its intent to enter into an Underwriting Agreement with the Company to act as the lead underwriter for the proposed IPO on a “firm commitment” basis. There can be no assurance that we and Boustead will be able to agree on the terms of such Underwriting Agreement or that our proposed IPO will be successfully consummated.

 

In the event that an IPO is not consummated, and if the Company (a) is acquired as a result of a “Sale of Control” (as defined below), (b) merges with a “SPAC” (as defined below) or (c) consummates a “Reverse Merger” (as defined below) (each, a “Liquidity Event”) prior to the Maturity Date of the Notes, the Notes will be convertible at the option of the holders into shares of common stock of any successor-in-interest to the Company at a price per share equal to 60% of the aggregate “Transaction Consideration” (as defined below), divided by the total number of outstanding shares of common stock of the acquiror resulting from the Liquidity Event.

 

As used herein, (i) the term “Sale of Control” shall mean a sale of all or substantially as of the capital stock or assets of the Company to any unaffiliated third Person, whether through share sale, asset sale, merger, consolidation or like combination, as a result of which the ability to control the board of directors of the Company shall pass to such third Person, (ii) the term “SPAC” shall mean a special purpose acquisition corporation listed on Nasdaq or other national securities exchange, and (iii) the term “Reverse Merger” shall mean a reverse merger of the Company with a fully-reporting public corporation without any significant business activities, including a special purpose acquisition corporation or “SPAC,” that is then trading on Nasdaq or the OTCQX platform of the OTC Market (“Pubco”; it being contemplated that in a transaction with a SPAC or a Reverse Merger, the stockholders of the Company will own a substantial majority of the equity securities of the SPAC or Pubco. As used herein, the term “Transaction Consideration” shall mean the dollar value placed on the total consideration paid to the Company including, but not limited to, (i) the value of the Liquidity Event, including consideration whether in cash, stock or in-kind, received by and/or paid by the Company, (ii) the total amount of indebtedness for borrowed funds, capitalized lease obligations and non-trade liabilities of the Company that are either assumed by the acquirer, redeemed or otherwise satisfied in connection with the Liquidity Event, or which remain outstanding after the Liquidity Event is consummated; (iii) the fair market value of any assets excluded from the Liquidity Event; (iv) the fair market value of any ownership interests which are retained by the Company’s shareholders or which remain outstanding after the Liquidity Event is consummated; and (v) the amount of any contingent payments, including, without limitation, earn-outs and future royalties payable in connection with the Liquidity Event.

 

Within one hundred and eighty-one (181) days or six calendar months, whichever is later, following the consummation of the IPO, the Company shall use its reasonable commercial efforts to file a registration statement on Form S-1 (the “Resale Registration Statement”) with the SEC in order to register for resale all of the shares of Common Stock of the Company or common stock of any successor-in-interest to the Company issued to all holders of the Notes upon conversion of the Notes (the “Conversion Shares”), and will use its reasonable best efforts to cause such Resale Registration Statement to be declared effective by the SEC within forty-five (45) business days from the date of its initial submission or filing; provided, that such Conversion Shares will continue to be subject to restrictions on resale for a period of six (6) months following consummation of the IPO.

 

In the event neither an IPO nor another Liquidity Event is consummated within twelve (12) months of the Closing of the Offering, the Company may elect either to (a) repay the Notes in whole or in part (subject to the conversion rights of the Holders), or (b) if the Company does not repay the Notes the unpaid principal amount of the Notes will automatically increase to 110% of the outstanding principal amount. The Company may also elect to prepay the Note at any time after April 25, 2023 upon 20 business days’ prior written notice to the Holder; provided, that the Holder may elect to convert the Note into Common Stock prior to the date fixed for prepayment at a conversion price equal to 60% of the “Optional Conversion Price” (defined below).

 

 

In the event that the Company shall elect to raise additional capital through a private placement of Common Stock or other securities that are convertible or exercisable for a price less than the “Optional Conversion Price,” as defined below, then and in such event the Conversion Price of the Notes shall be adjusted to reflect such lower amount. The “Optional Conversion Price” shall mean a price or conversion price that is equal to the price per share determined by dividing $50 million by the total number of outstanding shares of Common Stock of the Company.

 

Holders of the Notes will enter into an Investor Rights Agreement and Lock-Up Agreement. The Investor Rights Agreement will provide for typical “drag along” and “tag along” rights and will permit the holders to participate in subsequent securities offerings, including the IPO, in a percentage amount of such securities offering equal to 100% of the percentage invested by such Holder in the Notes. For the avoidance of doubt, if a holder purchases $100,000 of Notes, such holder has the right to invest in subsequent offerings no less than $100,000 in the subsequent offerings, including the IPO.

 

The form of Note is attached as Exhibit E hereto and is part of the Offering Documents. In addition, holders of the Notes will also enter into an Investor Rights and Lock-Up Agreement with the Company in the form of Exhibit F attached hereto which shall contain customary “tag along” and “drag along” rights.

 

For a more detailed description of the Notes see the Term Sheet attached hereto as Exhibit A. The Notes and the shares of Common Stock or common stock of a SPAC or Pubco (“Successor Common Stock”) into which the Notes are convertible are sometimes referred to herein as the “Securities.” The above referenced IPO, SPAC acquisition or Reverse Merger is sometimes hereinafter collectively referred to as a “Liquidity Event” and the Company Common Stock or Successor Common Stock into which the Notes are convertible are sometimes collectively referred to herein as the “Conversion Shares”). The Notes and the Conversion Shares are sometimes collectively referred to herein as the “Securities.”

 

b.

Risks Related to the Investment in the Securities. Investing in the Securities involves a high degree of risk. Before investing, Investors should carefully consider the description of our business annexed hereto as Exhibit B, the risks related to our business, as set forth in Exhibit C and the investor presentation set forth in Exhibit D, together with the other information contained in Offering Documents.

 

c.

Lock-Up. In connection with this Offering, the Investor shall enter into an Investors Rights and Lock-up Agreement in the form of Exhibit F, pursuant to which the Investor shall agree that from and after the date hereof and until the 180th day after the first to occur of (i) consummation of an IPO, (ii) consummation of a transaction with a SPAC or, (iii) consummation of another form of Reverse Merger, as applicable (each, the “Lock-Up Trigger Date”), the Investor agrees not to sell, transfer or otherwise dispose of the Conversion Shares.

 

2.

Purchase.

 

a.

I hereby agree to tender to Sutter Securities, Inc. (the “Escrow Agent”), by check or wire transfer of immediately available funds (to a bank account and related wire instructions to be provided to me on my request) made payable to “Sutter Securities, Inc., as Agent for the Investors in Kairos Pharma, Ltd.” for the principal amount of the Note indicated on the signature page hereto, an executed copy of this Subscription Agreement, an executed copy of the Investor Rights and Lock-Up Agreement and an executed copy of my Investor Questionnaire attached as Exhibit A hereto. Funds will be held in escrow, as set forth in more detail below (the “Escrow Account”), pending the Initial Closing.

 

 

b.

The Offering is for up to $3,000,000 principal amount of Notes (the “Maximum Offering Amount”), although the Company and Boustead reserve the right, in their sole discretion, to increase the Maximum Offering Amount of Notes to an aggregate principal amount that is in excess of $3,000,000. All subscriptions to purchase Notes will be held in a noninterest-bearing escrow account (the “Escrow Account”) maintained by the Escrow Agent. The subscriptions will remain in the Escrow Account until the Company has accepted such subscriptions and the Company. There is no minimum dollar principal amount of Notes that must be sold prior to the “Expiration Date” described below in order to complete the Offering and at each Closing described below all escrowed proceeds from accepted subscriptions, less commissions and expenses payable to Boustead, shall be remitted to the Company.

 

c.

This Offering will continue until the earlier of (a) the sale Notes for the Maximum Offering Amount, (b) September 30, 2022, or such extension date agreed to, in their sole discretion, by the Company and Boustead, to as late as October 15, 2022 (the “Expiration Date”). Upon the earlier of a “Closing” (defined below) on my subscription or completion of the Offering, I will be notified promptly by the Company as to whether my subscription has been accepted by the Company. If my subscription has been accepted, the Company will promptly deliver to me a duly executed Note in principal amount equal to the dollar amount of my subscription.

 

3.	Acceptance or Rejection of Subscription.

 

a.

I understand and agree that the Company reserves the right to reject this subscription for the Securities, in whole or in part, for any reason and at any time prior to the “Closing” (defined below) of my subscription.

 

b.

In the event the Company rejects this subscription, my subscription payment will be promptly returned to me without interest or deduction and this Subscription Agreement shall be of no force or effect. In the event my subscription is accepted, and the Offering is completed, the subscription funds submitted by me shall be released to the Company.

 

4. Closing. The closing (“Closing”) of this Offering may occur at any time and from time to time on or before the Expiration Date. The Company may conduct an initial Closing (the “Initial Closing”) at any time after the acceptance of an investor’s subscription, at which time the Initial Closing will be held and all funds will be released from the Escrow Account and paid to the Company, less professional fees and compensation paid to the Placement Agent and syndicate members, if any. Thereafter, additional Closings will be held as funds are received up to the earlier to occur of receipt of the Maximum Offering Amount or the Expiration Date. All subscriptions will be placed in escrow with the Escrow Agent. If, for any reason, at the Company’s sole discretion, an investors subscription is rejected the subscribers escrowed funds will be returned to subscribers, without interest or deduction. The Securities subscribed for herein shall not be deemed issued to or owned by me until one copy of this Subscription Agreement has been executed by me and countersigned by the Company and the Closing with respect to such Securities has occurred.

 

5. Disclosure. Because this Offering is limited to accredited investors as defined in Section 2(15) of the Securities Act, and Rule 501 promulgated thereunder, in reliance upon the exemption contained in Section 4(a)(2) of the Securities Act and applicable state securities laws, the Securities are being sold without registration under the Securities Act. I acknowledge receipt of the Offering Documents and represent that I have carefully reviewed and understand the Offering Documents, including all exhibits attached hereto. I have received all information and materials regarding the Company that I have requested. I fully understand that the Company has a limited financial and operating history and that the Securities are speculative investments which involve a high degree of risk, including the potential loss of my entire investment. I fully understand the nature of the risks involved in purchasing the Securities and I am qualified to make such investment based on my knowledge of and experience in investing in securities of this type. I have carefully considered the potential risks relating to the Company and purchase of its Securities and have, in particular, reviewed each of the risks set forth in the Offering Documents. Both my advisors and I have had the opportunity to ask questions of and receive answers from representatives of the Company or persons acting on its behalf concerning the Company and the terms and conditions of a proposed investment in the Company and my advisors and I have also had the opportunity to obtain additional information necessary to verify the accuracy of information furnished about the Company. Accordingly, I have independently evaluated the risks of purchasing the Securities.

 

 

6. Investor Representations and Warranties. I acknowledge, represent and warrant to, and agree with, the Company as follows:

 

	a.	I am aware that my investment involves a high degree of risk as disclosed in the Offering Documents and have read carefully the Offering Documents, and I understand that by signing this Subscription Agreement I am agreeing to be bound by all of the terms and conditions of the Offering Documents.
	b.	I acknowledge and am aware that there is no assurance as to the future performance of the Company.
	c.	I acknowledge that there may be certain adverse tax consequences to me in connection with my purchase of Securities, and the Company has advised me to seek the advice of experts in such areas prior to making this investment.
	d.	I am purchasing the Securities for my own account for investment purposes only and not with a view to or for sale in connection with the distribution of the Securities, nor with any present intention of selling or otherwise disposing of all or any part of the foregoing securities. I agree that I must bear the entire economic risk of my investment for an indefinite period of time because, among other reasons, the Securities have not been registered under the Securities Act or under the securities laws of any state and, therefore, cannot be resold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and under applicable securities laws of certain states or an exemption from such registration is available. I hereby authorize the Company to place a restrictive legend on the Securities that are issued to me.
	e.	I recognize that the Securities, as an investment, involve a high degree of risk including, but not limited to, the risk of economic losses from operations of the Company and the total loss of my investment. I believe that the investment in the Securities is suitable for me based upon my investment objectives and financial needs, and I have adequate means for providing for my current financial needs and contingencies and have no need for liquidity with respect to my investment in the Company.
	f.	I have been given access to full and complete information regarding the Company and have utilized such access to my satisfaction for the purpose of obtaining information in addition to, or verifying information included in, the Offering Documents, and I have either met with or been given reasonable opportunity to meet with officers of the Company for the purpose of asking questions of, and receiving answers from, such officers concerning the terms and conditions of the offering of the Securities and the business and operations of the Company and to obtain any additional information, to the extent reasonably available.
	g.	I have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Securities and have obtained, in my judgment, sufficient information from the Company to evaluate the merits and risks of an investment in the Company. I have not utilized any person as my purchaser representative as defined in Regulation D under the Securities Act in connection with evaluating such merits and risks.

 

 

	h.	I have relied solely upon my own investigation in making a decision to invest in the Company.
	i.	I have received no representation or warranty from the Company or any of its officers, directors, employees or agents in respect of my investment in the Company and I have received no information (written or otherwise) from them relating to the Company or its business other than as set forth in the Offering Documents. I am not participating in the offer as a result of or subsequent to: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.
	j.	I have had full opportunity to ask questions and to receive satisfactory answers concerning the offering and other matters pertaining to my investment and all such questions have been answered to my full satisfaction.
	k.	I have been provided an opportunity to obtain any additional information concerning the offering and the Company and all other information to the extent the Company possesses such information or can acquire it without unreasonable effort or expense.
	l.	I am an “accredited investor” as defined in Section 2(15) of the Securities Act and in Rule 501 promulgated thereunder and have attached the completed Accredited Investor Questionnaire to indicate my “accredited investor” status. I can bear the entire economic risk of the investment in the Securities for an indefinite period of time and I am knowledgeable about and experienced in making investments in the equity securities of non-publicly traded companies, including early-stage companies. I am not acting as an underwriter or a conduit for sale to the public or to others of unregistered securities, directly or indirectly, on behalf of the Company or any person with respect to such securities.
	m.	I understand that (1) the Securities have not been registered under the Securities Act, or the securities laws of certain states, in reliance on specific exemptions from registration, (2) no securities administrator of any state or the federal government has recommended or endorsed this offering or made any finding or determination relating to the fairness of an investment in the Company, and (3) the Company is relying on my representations and agreements for the purpose of determining whether this transaction meets the requirements of certain exemptions from registration afforded by the Securities Act and certain state securities laws.
	n.	I understand that since neither the offer nor sale of the Securities has been registered under the Securities Act or the securities laws of any state, the Securities may not be sold, assigned, pledged or otherwise disposed of unless they are so registered or an exemption from such registration is available.
	o.	I have had the opportunity to seek independent advice from my professional advisors relating to the suitability of an investment in the Company in view of my overall financial needs and with respect to the legal and tax implications of such investment.
	p.	If the Investor is a corporation, company, trust, employee benefit plan, individual retirement account, Keogh Plan, or other tax-exempt entity, it is authorized and qualified to become an Investor in the Company and the person signing this Subscription Agreement on behalf of such entity has been duly authorized by such entity to do so.
	q.	The information contained in my Investor Questionnaire, as well as any information which I have furnished to the Company with respect to my financial position and business experience, is correct and complete as of the date of this Subscription Agreement and, if there should be any material change in such information prior to the Closing of the offering, I will furnish such revised or corrected information to the Company. I hereby acknowledge and am aware that except for any rescission rights that may be provided under applicable laws, I am not entitled to cancel, terminate or revoke this subscription and any agreements made in connection herewith shall survive my death or disability.

 

 

7. Placement Agent. The Company has engaged Boustead Securities LLC, a broker-dealer licensed with FINRA (the “Placement Agent”), as placement agent for the Offering on a reasonable best-efforts basis. The Company anticipates that the Placement Agent and its sub-agents or syndicate members will be paid at each Closing from the proceeds in the Escrow Account, fees including and not to exceed: a cash commission of seven percent (7%) of the gross Purchase Price paid by Subscribers in the Offering. Boustead shall also receive a non-accountable expense allowance of one percent (1%) of the gross purchase price paid by Subscribers in the Offering and will receive warrants to purchase a number of shares of Common Stock equal to seven percent (7%) of the Common Stock underlying the Notes sold in the Offering to investors, with a term of five (5) years from the relevant Closing Date, and at a per share exercise price equal to the conversion price of the Notes issued to the Subscribers herein (the “Placement Agent Warrants”). Any sub-agent or syndicate member of the Placement Agent that introduces investors to the Offering will be entitled to share in the cash fees and Placement Agent Warrants attributable to those investors as described above, pursuant to the terms of an executed sub-agent or selected dealer agreement. The Company will also pay certain expenses of the Placement Agent.

 

8. Representations and Warranties of the Company. When used in this Section 8, unless the context indicates otherwise, all references to the “Company” also mean and include the direct and indirect subsidiaries of the Company. The Company hereby represents and warrants to the Subscriber, as of the date hereof and on each Closing Date, the following:

 

	a.	Organization and Qualification. The Company and each of its subsidiaries, if any, is a corporation or other business entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has the requisite corporate power to own its properties and to carry on its business as now being conducted. The Company and each of its subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the assets, business, financial condition, results of operations or future prospects of the Company and its subsidiaries taken as a whole (a “Material Adverse Effect”).
	b.	Authorization, Enforcement, Compliance with Other Instruments. (i) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, and each of the Offering Documents and to issue the Securities in accordance with the terms hereof, (ii) the execution and delivery by the Company of each of the Offering Documents and the consummation by it of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Securities have been, or will be at the time of execution of such Offering Document, duly authorized by the Company’s Board of Directors, and no further consent or authorization is, or will be at the time of execution of such Offering Document, required by the Company, its respective Board of Directors or its stockholders, (iii) each of the Offering Documents will be duly executed and delivered by the Company, (iv) the Offering Documents when executed and delivered by the Company and each other party thereto will constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies.

 

c.

Capitalization. The authorized capital stock of the Company consists of 35,000,000 shares of common stock, $0.01 par value per share. 25,448,931 shares of common stock are issued and outstanding. In addition, the Company has issued 300,000 warrants that expire from August 2022 to August 2023 that are exercisable for up to 300,000 shares of common stock at a weighted average exercise price of $2.08 per share. Also, there is outstanding a $350,000 convertible note that is convertible into 210,000 shares of common stock and a $250,000 convertible note that is convertible into 83,333 shares of common stock. All of the outstanding shares of Common Stock of the Company and all of the share capital of each of the Company’s subsidiaries have been or will be, as of the Initial Closing, duly authorized, validly issued and are fully paid and nonassessable. No shares of capital stock of the Company or any of its subsidiaries will be subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company. There are no securities or instruments of the Company or any of its subsidiaries containing anti-dilution or similar provisions, including the right to adjust the exercise, exchange or reset price under such securities, that will be triggered by the issuance of the Securities as described in this Agreement. Upon request, the Company will make available to the Subscriber true and correct copies of the Company’s Articles of Incorporation, as amended and restated and as in effect on the date hereof (the “Articles of Incorporation”), and the Company’s By-laws, as amended as in effect on the date hereof (the “By-laws”), and the terms of all securities exercisable for Common Stock and the material rights of the holders thereof in respect thereto other than stock options issued to officers, directors, employees and consultants. The Company intends to re-domicile from California to Delaware prior to the effectiveness of the IPO and will adopt a new Certificate of Incorporation and Bylaws at that time. In the re-domicile the Company will have 200,000,000 authorized shares of $0.001 par value Common Stock and 10,000,000 authorized shares of $0.001 blank check Preferred Stock. Upon the effectiveness of the re-domiciling all issues and outstanding securities of the Company will be exchanged an a one-for-one basis for securities of the Delaware corporation.

 

 

	d.	Subsidiaries and Affiliates. The Company’s direct operating subsidiary is AcTcell Biopharma, Inc. Dr. John Yu is the Company’s Chief Executive Officer and principal shareholder.
	e.	Issuance of Securities. The Securities are duly authorized and, upon issuance in accordance with the terms hereof, shall be duly issued, fully paid and nonassessable, and will be free and clear of all taxes, liens and charges with respect to the issue thereof.
	f.	No Conflicts. The execution, delivery and performance of each of the Offering Documents by the Company, and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) result in a violation of the Articles of Incorporation or the By-laws (or equivalent constitutive document) of the Company or any of its subsidiaries or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any subsidiary is a party, except for those which would not reasonably be expected to have a Material Adverse Effect, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including U.S. federal and state securities laws and regulations) applicable to the Company or any subsidiary or by which any property or asset of the Company or any subsidiary is bound or affected except for those which could not reasonably be expected to have a Material Adverse Effect. Except those which could not reasonably be expected to have a Material Adverse Effect, neither the Company nor any subsidiary is in violation of any term of or in default under its constating documents. Except those which could not reasonably be expected to have a Material Adverse Effect, neither the Company nor any subsidiary is in violation of any term of or in default under any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or any subsidiary. The business of the Company and its subsidiaries is not being conducted, and shall not be conducted in violation of any law, ordinance, or regulation of any governmental entity, except for any violation which could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the Securities Act and any applicable state securities laws, neither the Company nor any of its subsidiaries is required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under or contemplated by this Agreement or the other Offering Documents in accordance with the terms hereof or thereof. Neither the execution and delivery by the Company of the Offering Documents, nor the consummation by the Company of the transactions contemplated hereby or thereby, will require any notice, consent or waiver under any contract or instrument to which the Company or any subsidiary is a party or by which the Company or any subsidiary is bound or to which any of their assets is subject, except for any notice, consent or waiver the absence of which would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect and would not adversely affect the consummation of the transactions contemplated hereby or thereby. All consents, authorizations, orders, filings and registrations which the Company or any of its subsidiaries is required to obtain pursuant to the preceding two sentences have been or will be obtained or effected on or prior to the Closing.

 

 

	g.	Absence of Litigation. There is no action, suit, claim, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation before or by any court, public board, governmental or administrative agency, self-regulatory organization, arbitrator, regulatory authority, stock market, stock exchange or trading facility (an “Action”) now pending or, to the knowledge of the Company, threatened, against or affecting the Company or any of its subsidiaries, wherein an unfavorable decision, ruling or finding would (i) adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under this Agreement or any of the other Offering Documents, or (ii) have a Material Adverse Effect.
	h.	Acknowledgment Regarding Subscriber’s Purchase of the Securities. The Company acknowledges and agrees that each Subscriber is acting solely in the capacity of an arm’s length purchaser with respect to the Offering Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that each Subscriber is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Offering Documents and the transactions contemplated hereby and thereby and any advice given by such Subscriber or any of their respective representatives or agents in connection with the Offering Documents and the transactions contemplated hereby and thereby is merely incidental to such Subscriber’s purchase of the Securities.
	i.	No General Solicitation. Neither the Company, nor any of its “affiliates” (as defined in Rule 144 under the Securities Act), nor, to the knowledge of the Company, any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities.
	j.	No Integrated Offering. Neither the Company, nor any of its affiliates, nor to the knowledge of the Company, any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the Securities under the Securities Act or cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of the Securities Act.
	k.	Employee Relations. Neither the Company nor any subsidiary is involved in any labor dispute nor, to the knowledge of the Company, is any such dispute threatened. Neither the Company nor any subsidiary is party to any collective bargaining agreement. The Company’s and/or its subsidiaries’ employees are not members of any union, and the Company believes that its and its subsidiaries’ relationship with their respective employees is good.

 

 

	l.	Permits. The Company and its subsidiaries have all authorizations, approvals, clearances, licenses, permits, certificates or exemptions (including manufacturing approvals and authorizations, pricing and reimbursement approvals, labeling approvals, registration notifications or their foreign equivalent) issued by any regulatory authority or governmental agency (collectively, “Permits”) required to conduct their respective businesses as currently conducted except to the extent that the failure to have such Permits would not have a Material Adverse Effect. The Company or its subsidiaries have fulfilled and performed in all material respects their obligations under each Permit, and, as of the date hereof, to the knowledge of the Company, no event has occurred or condition or state of facts exists which would constitute a breach or default or would cause revocation or termination of any such Permit except to the extent that such breach, default, revocation or termination would not have a Material Adverse Effect.
	m.	Title. Each of the Company and its subsidiaries has good and marketable title to all of its real and personal property and assets, free and clear of any material restriction, mortgage, deed of trust, pledge, lien, security interest or other charge, claim or encumbrance which would have a Material Adverse Effect. With respect to properties and assets it leases, each of the Company and its subsidiaries is in material compliance with such leases and holds a valid leasehold interest free of any liens, claims or encumbrances which would have a Material Adverse Effect.
	n.	Rights of First Refusal. The Company is not obligated to offer the Securities offered hereunder on a right of first refusal basis or otherwise to any third parties including, but not limited to, current or former stockholders of the Company, underwriters, brokers, agents or other third parties.
	o.	Reliance. The Company acknowledges that the Subscriber is relying on the representations and warranties made by the Company hereunder and that such representations and warranties are a material inducement to the Subscriber purchasing the Securities. The Company further acknowledges that without such representations and warranties of the Company made hereunder, the Subscribers would not enter into this Agreement.
	p.	Brokers’ Fees. The Company does not have any liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement, other than those set forth in Section 7 above.
	q.	Off-Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company or any subsidiary and an unconsolidated or other off-balance sheet entity that is required to be disclosed by the Company in the Financial Statements and is not so disclosed or that otherwise would have a Material Adverse Effect.
	r.	Investment Company. The Company is not required to be registered as, and is not an affiliate of, and immediately following the Closing will not be required to register as, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
	s.	Reliance. The Company acknowledges that the Purchaser is relying on the representations and warranties made by the Company hereunder and that such representations and warranties are a material inducement to the Purchaser purchasing the Notes. The Company further acknowledges that without such representations and warranties of the Company made hereunder, the Purchaser would not enter into this Agreement.

 

 

9. Indemnification. I hereby agree to indemnify and hold harmless the Company and its officers, directors, shareholders, employees, agents, advisors and counsel, and Boustead Securities, LLC and its officers, directors, shareholders, employees, agents, advisors and counsel, against any and all losses, claims, demands, liabilities and expenses (including reasonable legal or other expenses, including reasonable attorneys’ fees) incurred by each such person in connection with defending or investigating any such claims or liabilities, whether or not resulting in any liability to such person, to which any such indemnified party may become subject under the Securities Act, under any other statute, at common law or otherwise, insofar as such losses, claims, demands, liabilities and expenses (a) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact made by me and contained in this Subscription Agreement or my Investor Questionnaire, or (b) arise out of or are based upon any breach by me of any representation, warranty, or agreement made by me contained herein or therein.

 

10. Severability. In the event any parts of this Subscription Agreement are found to be void, the remaining provisions of this Subscription Agreement shall nevertheless be binding with the same force and effect as though the void parts were deleted.

 

11. Choice of Law and Jurisdiction. This Subscription Agreement shall be governed by the laws of the State of New York as applied to contracts entered into and to be performed entirely within the State of New York. Any action arising out of this Subscription Agreement shall be brought exclusively in a court of competent jurisdiction in New York County, New York, and the parties hereby irrevocably waive any objections they may have to venue in New York County, New York.

 

12. Counterparts. This Subscription Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The execution of this Subscription Agreement may be by actual or facsimile signature.

 

13. Benefit. This Subscription Agreement shall be binding upon and inure to the benefit of the parties hereto.

 

14. Notices and Addresses. All notices, offers, acceptance and any other acts under this Subscription Agreement (except payment) shall be in writing, and shall be sufficiently given if delivered to the addresses in person, by Federal Express or similar courier delivery or by electronic facsimile delivered to the party’s email address, as follows:

 

Investor:	At the address designated on the signature page of this Subscription Agreement.   Or the email address on the signature page of the Subscription Agreement
The Company:	Kairos Pharma, Ltd. 2355 Westwood Blvd. #139 Los Angeles, CA 90064   With a copy to John.Yu@cshs.org

 

or to such other address as any of them, by notice to the others may designate from time to time. The transmission confirmation receipt from the sender’s facsimile machine shall be conclusive evidence of successful facsimile delivery. Time shall be counted to, or from, as the case may be, the delivery in person or by mailing.

 

15. Entire Agreement. This Subscription Agreement, together with the Offering Documents, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior oral and written agreements between the parties hereto with respect to the subject matter hereof. This Subscription Agreement may not be changed, waived, discharged, or terminated orally but, rather, only by a statement in writing signed by the party or parties against which enforcement or the change, waiver, discharge or termination is sought.

 

 

16. Section Headings. Section headings herein have been inserted for reference only and shall not be deemed to limit or otherwise affect, in any matter, or be deemed to interpret in whole or in part, any of the terms or provisions of this Subscription Agreement.

 

17. Survival of Representations, Warranties and Agreements. The representations, warranties and agreements of Investor contained herein shall survive the delivery of, and the payment for, the Securities.

 

18. Acceptance of Subscription. The Company may accept this Subscription Agreement at any time for all or any portion of the Securities subscribed for by executing a copy hereof as provided and notifying me within a reasonable time thereafter.

 

RESIDENTS OF ALL STATES: THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING DOCUMENTS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

 

SALES IN FLORIDA: THE SECURITIES OFFERED HEREBY WILL BE SOLD, AND ACQUIRED, IN A TRANSACTION EXEMPT UNDER SECTION 517.061(11) OF THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA. PURSUANT TO SECTION 517.061(11) OF THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT, WHEN SALES ARE MADE TO FIVE (5) OR MORE PERSONS IN THE STATE OF FLORIDA, ANY SALE IN THE STATE OF FLORIDA MADE PURSUANT TO SECTION 517.061(11) OF SUCH ACT IS VOIDABLE BY THE PURCHASER IN SUCH SALE (WITHOUT INCURRING ANY LIABILITY TO THE COMPANY OR TO ANY OTHER PERSON OR ENTITY) EITHER WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR WITHIN THREE (3) DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER. TO VOID HIS OR HER PURCHASE, THE PURCHASER NEED ONLY SEND A LETTER OR TELEGRAM TO THE COMPANY AT THE ADDRESS INDICATED HEREIN. ANY SUCH LETTER OR TELEGRAM SHOULD BE SENT AND POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED THREE (3) DAY PERIOD. IT IS PRUDENT TO SEND ANY SUCH LETTER BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ASSURE THAT IT IS RECEIVED AND ALSO TO HAVE EVIDENCE OF THE TIME THAT IT WAS MAILED. SHOULD A PURCHASER MAKE THIS REQUEST ORALLY, THAT PURCHASER MUST ASK FOR WRITTEN CONFIRMATION THAT THE REQUEST HAS BEEN RECEIVED. IF NOTICE IS NOT RECEIVED WITHIN THE TIME LIMIT SPECIFIED HEREIN, THE FOREGOING RIGHT TO VOID THE PURCHASE SHALL BE NULL AND VOID.

 

(Remainder of Page left intentionally blank.)

 

 

THE AGGREGATE AMOUNT SUBSCRIBED FOR HEREBY IS:

 

$__________ principal amount of Notes

 

Manner in Which Title is to be Held. (check one)

 

—	Individual Ownership	— Community Property
—	Joint Tenant with Right of Survivorship (both parties must sign)
—	Partnership	— Tenants in common
—	Corporation or Trust	— IRA or Keogh
—	Other (please indicate)

 

INDIVIDUAL INVESTORS			ENTITY INVESTORS
			Name of Entity, if any
Signature (Individual)			By:
			*Signature
			Its:
Signature	(Joint)		Title:
(all record holders must sign)
Name(s) Typed or Printed			Name Typed or Printed
Address to Which Correspondence Should be Directed			Address to Which Correspondence Should be Directed
City, State and Zip Code			City, State and Zip Code
Email address for notices			Email address for notices
Name(s) Typed or Tax Identification or Social Security Number			Name(s) Typed or Tax Identification or Social Security Number

* If Securities are being subscribed for by any entity, the Certificate of Signatory on the below page must also be completed

The foregoing subscription is accepted and the Company hereby agrees to be bound by its terms on _____ day of _________________, 2022.

 

	Kairos Pharma, Ltd.
Dated:	By:
	Name:	Dr. John Yu
	Its:	Chief Executive Officer

 

 

CERTIFICATE OF SIGNATORY

 

(To be completed if Securities are being subscribed for by an entity)

 

I,		,the
	(name of signatory)		(title)

 

Of		(“Entity”), a
	(name of entity)		(type of entity)

 

Organized under the laws of _______________, hereby certify that I am empowered and duly authorized by the Entity to execute the Subscription Agreement and to purchase the Securities and certify further that the Subscription Agreement has been duly and validly executed on behalf of the Entity and constitutes a legal and binding obligation of the Entity.

IN WITNESS WHEREOF, I have set my hand this ______ day of ___________, 2022.

 

	(Signature)

 

 

INSTRUCTIONS FOR COMPLETION OF

INVESTOR REPRESENTATION

AND SUITABILITY QUESTIONNAIRE

 

Item I:

Name and address information must be provided. Securities will be issued in the name(s) set forth in this Item and delivered to the address set forth in this Item. If two people are subscribing jointly, both people must provide their names and social security numbers. A telephone number must also be provided.

 

Item II:

If the securities are to be held in a different name than the investor and sent to a different address (i.e., an IRA or other account held at a brokerage firm), this Item must be completed. If the securities are to be issued and delivered directly to the entity listed in Item I, this Item need not be completed.

 

Item III:

This Item needs to be read by the investor, but nothing needs to be written here. The Securities are suitable for investment only by prospective investors who are “Accredited Investors.”

 

Item IV:

A. Only complete this Item by checking the appropriate line if you are an individual investor.

 

B. Only complete this Item if you are an entity investor.

 

C. Only complete this Item if you are a trust investor.

 

Item V:

This Item needs to be read by the investor, but nothing needs to be written here.

 

Item VI:

The USA Freedom Act requires us to collect information on the sources of funds. Please complete section 1, add the documents requested in section 2 only if funds did not come from an approved country (U.S. is approved), and complete section 3.

 

Item VII:

You must thoroughly complete the Suitability Questionnaire in order for the Company and the Managing Dealer to make a determination whether this is a suitable investment for you.

 

Item VIII:

You must sign and date here.

 

 

INSTRUCTIONS FOR PAYMENT

 

Review and complete the Investor Representation and Suitability Questionnaire and deliver it
to the email below, then send a wire transfer using the instructions below:

 

Sutter Securities, Inc.

 

Email: offerings@boustead1828.com

 

If you prefer to send a wire transfer instead of a check, please mail or deliver your completed Investor Representation and Suitability Questionnaire to the address above and send the wire transfer using these instructions:

 

Wiring Instructions

 

Bank Name: Banc of California
Bank Address: 3 MacArthur Pl, Santa Ana, CA 92707
SWIFT Code: BCLFUS66
Routing Number: 122243774

Account Name: Sutter Securities Inc.
Account Number: 2030626790

REF: Kairos Pharma – [Investor Name]

 

If you prefer to send a check instead of a wire transfer, please send a
check to the account name and address below:

 

Sutter Securities, Inc.
6 Venture, Suite 395
Irvine, CA 92618

 

If you need assistance, please contact:

 

Contact: Adam Carles

 

Email: offerings@boustead1828.com
Phone: 714-615-2156

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 10.21

 

Form of Note

 

NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

KAIROS PHARMA, LTD.

 

CONVERTIBLE NOTE

 

Issuance Date: ____________ __, 2022		Original Principal Amount: $_____________
Note No. __

 

FOR VALUE RECEIVED, Kairos Pharma, Ltd. a California corporation (“Kairos Pharma” or the “Maker”), hereby promises to pay to the order of _________________________ (the “Subscriber”), or registered assigns (together with the Subscriber, the “Holder”), the amount set out above as the Original Principal Amount, as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise (the “Principal”), when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at the applicable Interest Rate from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, upon the Maturity Date or acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof).

 

The Original Principal Amount is _________________________ Dollars ($__________). For purposes hereof, the term “Outstanding Balance” means the Original Principal Amount, as reduced or increased, as the case may be, pursuant to the terms hereof for conversion, breach hereof or otherwise, plus any accrued but unpaid interest, collection and enforcements costs, and any other fees or charges incurred under this Note provided that, in the event of an optional or mandatory conversion of the Note into shares of Common Stock (as provided herein), all accrued interest on the Principal subject to such conversion shall be waived.

 

This Note is being issued pursuant to the terms of a subscription agreement dated as of ____ __, 2022 between the Maker and the Subscriber and exhibits thereto (collectively, the “Transaction Documents”). Unless otherwise defined herein, all capitalized terms, when used in this Note, shall have the same meaning as they are defined in the Transaction Documents.

 

1. GENERAL TERMS

 

(a) Payment of Principal. Unless previously converted into shares of the common stock, $0.00001par value, of Kairos Pharma or the common stock of any successor in interest to the Maker (each the “Common Stock”) as contemplated hereby, this Note, together with all accrued interest hereon at the Interest Rate, shall be due and payable on April 25, 2025 (the “Maturity Date”). In the event that within 12 months of the Issuance Date, the Maker shall not have consummated an initial public offering of its Common Stock and the listing or trading of its Common Stock on a “Qualified Securities Market”, as defined below (the “IPO”) or other “Liquidity Event” (hereinafter defined), the Maker may elect either (a) up on twenty (20) days prior written notice to the Holder, elect to prepay all of the principal amount of the Note and accrued interest hereon, subject to the Holder’s right to convert the Note into Common Stock during such thirty (30) day period, or (b) if the Maker does not prepay the entire principal amount of the Note or the remaining principal amount of the Note, this Note will automatically increase to 110% of the original or unpaid portion of the outstanding principal amount.

 

 

(b) Interest. Interest shall accrue from the Issuance Date on the Original Principal Amount or other outstanding Principal at an annual rate of six percent (6%) (the “Interest Rate”) and all accrued interest shall be fully paid on the Maturity Date (or sooner as provided herein) to the Holder or its assignee in whose name this Note is registered on the records of the Maker regarding registration and transfers of Notes in cash. However, in the event of an optional or mandatory conversion of the Note into shares of Common Stock (as provided herein), all accrued interest on the principal subject to such conversion shall be waived.

 

2. EVENTS OF DEFAULT.

 

Whenever used herein, an “Event of Default” means the occurrence and continuation of any one of the following events, whatever the reason, and whether it shall be voluntary or involuntary, or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body:

 

(a) The Maker’s failure to pay to the Holder any amount of Principal, Interest, or other amounts when and as due under this Note; or

 

(b) A Conversion Failure as defined in Section 3(d)(ii); or

 

(c) A material breach by Kairos Pharma of any material representation, warranty or covenant contained in the Transaction Documents or a material breach by Kairos Pharma of any material representation, warranty or covenant contained in the Purchase Agreement, that, if capable of cure, is not cured within 30 days from the date such breach has occurred; or

 

(d) The Maker or any subsidiary of the Maker shall commence, or there shall be commenced against the Maker or any subsidiary of the Maker under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Maker or any subsidiary of the Maker commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Maker or any subsidiary of the Maker or there is commenced against the Maker or any subsidiary of the Maker any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of ninety-one (91) days; or the Maker or any subsidiary of the Maker is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Maker or any subsidiary of the Maker suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of ninety-one (91) days; or the Maker or any subsidiary of the Maker makes a general assignment for the benefit of creditors; or the Maker or any subsidiary of the Maker shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Maker or any subsidiary of the Maker shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Maker or any subsidiary of the Maker shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Maker or any subsidiary of the Maker for the purpose of effecting any of the foregoing.

 

3. CONVERSION OF NOTE. This Note shall be convertible into shares of Common Stock, on the terms and conditions set forth in this Section 3.

 

(a) Certain Definitions. As used in this Note, the following capitalized terms shall have the meaning set forth below:

 

(i) “Alternative Liquidity Event” shall mean any one of a Sale of Control, a SPAC Acquisition, or a Reverse Merger.

 

 

(ii) “Alternative Liquidity Event Conversion Price” shall mean a conversion price that is equal to 60% of the aggregate “Transaction Consideration” (as defined) divided by the total number of outstanding shares of common stock of the acquiror resulting from a Sale of Control, the merger with a SPAC or the successor in interest “Pubco” (as defined) in connection with a Reverse Merger.

 

(iii) “Common Stock” shall mean, as applicable, the individual or collective reference to the Common stock, $0.00001 par value per share, of the Maker or the common stock of any acquiror in a Sale of Control, SPAC or Pubco resulting from a Sale of Control, SPAC Acquisition or Reverse Merger.

 

(iv) “Conversion Shares” shall mean the aggregate number of shares of Common Stock of the Maker, the Acquiror in a Sale of Control the SPAC or Pubco, as applicable (each an “Issuer”) that are issuable to the Holder in connection with any mandatory conversion (set forth in Section 3(b)) or optional conversion (set forth in Section 3(c)) of this Note.

 

(v) “IPO” shall mean an initial public offering of Common Stock of the Maker pursuant to a registration statement on Form S-1 that is declared effective by the Securities and Exchange Commission.

 

(vi) “IPO Conversion Price” shall mean a conversion price equal to 60% of the initial public offering price per share of the Common Stock offered to the public in the IPO.

 

(vii) “Liquidity Event” shall mean any one of an IPO, a Sale of Control, a SPAC Acquisition or a Reverse Merger.

 

(viii) “Optional Conversion Price” shall mean a conversion price that is equal to the price per share determined by dividing $50 million by the total number of outstanding shares of Common Stock of the Maker.

 

(ix) “Pre-Money Valuation” shall mean the dollar value placed on the total number of outstanding shares of Common Stock and Preferred Stock of the Company immediately prior to a Liquidity Event.

 

(x) “Preferred Stock” means the Series A convertible preferred stock, par value $0.00001 per share, of the Company, of which there are 1,212.5 shares outstanding.

 

(xi) “Pubco” means a fully-reporting public corporation under the Securities Exchange Act of 1934, as amended, that does not have any significant business activities and is trading on Nasdaq or the OTCQX platform of the OTC Market.

 

(xii) “Qualified Securities Market” shall mean any one of the Nasdaq Stock Exchange (including the Nasdaq Capital Market), the NYSE:Amex Exchange, the New York Stock Exchange or the OTCQX platform of the OTC Markets.

 

(xiii) “Reverse Merger” means a merger of the Maker with or the acquisition of the Maker by Pubco, as a result of which such transaction, the stockholders of the Maker will own a substantial majority of the equity securities of Pubco.

 

(xiv) “Sale of Control” shall mean a sale of all or substantially as of the capital stock or assets of the Company to any unaffiliated third Person, whether through share sale, asset sale, merger, consolidation or like combination, as a result of which the ability to control the board of directors of the Company shall pass to such third Person.

 

 

(xv) “SPAC” means a special purpose acquisition corporation whose securities are listed on Nasdaq or the New York Stock Exchange.

 

(xvi) “SPAC Acquisition” means a merger of the Maker with or the acquisition of the Maker by a SPAC or its subsidiary, as a result of which such transaction, the stockholders of the Maker will own a majority of the equity securities of the SPAC.

 

(xvii) “Transaction Consideration” shall mean the dollar value placed on the total consideration paid to the Company including, but not limited to, (i) the value of the Transaction, including consideration whether in cash, stock or in-kind, received by and/or paid by the Company, (ii) the total amount of indebtedness for borrowed funds, capitalized lease obligations and non-trade liabilities of the Company that are either assumed by the acquirer, redeemed or otherwise satisfied in connection with the transaction, or which remain outstanding after the transaction is consummated; (iii) the fair market value of any assets excluded from the transaction; (iv) the fair market value of any ownership interests which are retained by the Company’s shareholders or which remain outstanding after the transaction is consummated; and (v) the amount of any contingent payments, including, without limitation, earn-outs and future royalties payable in connection with the transaction.

 

(b) Mandatory Conversion. In the event that prior to the Maturity Date of this Note, the Maker shall consummate an IPO and its Common Stock shall be approved for listing or trading on any Qualified Securities Market, the entire Outstanding Balance of this Note shall automatically, and without any further consent or approval of the Holder, be converted into Common Stock of the Maker at the IPO Conversion Price. In the event that prior to the Maturity Date, the Maker shall consummate an Alternative Liquidity Event, the Holder may elect at his or its option to convert the outstanding and unpaid Outstanding Balance of this Note into Common Stock of the Maker at the Alternative Liquidity Event Conversion Price. The IPO Conversion Price and the Alternative Liquidity Event Conversion Price (either, the “Mandatory Conversion Price”) shall be subject to adjustment, as provided for in Section 3(f) below.

 

(c) Optional Conversion. At any time, at the Holder’s option, such Holder may convert the outstanding and unpaid Outstanding Balance of this Note into fully paid and nonassessable shares of Common Stock in accordance with this Section 3(c), at the Optional Conversion Price, subject to adjustment as provided in Section 3(f) below. If the issuance would result in the issuance of a fraction of a share of Common Stock, Kairos Pharma shall round such fraction of a share of Common Stock up to the nearest whole share. Kairos Pharma shall pay any and all transfer agent fees, legal fees, costs and any other fees or costs that may be incurred or charged in connection with the issuance and legend removal of shares of Common Stock to the Holder arising out of or relating to the conversion of this Note up to a maximum of five thousand dollars ($5,000).

 

(d) Mechanics of Conversion.

 

(i) Optional Conversion. To convert the Note pursuant to an optional conversion into shares of Common Stock on any date (a “Conversion Date”), the Holder shall (A) transmit by email, facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York, NY Time, a copy of an executed notice of conversion in the form attached hereto as Exhibit A (the “Conversion Notice”) to Kairos Pharma. On or before the tenth (10^th) Business Day following the date of receipt of a Conversion Notice (the “Share Delivery Date”), Kairos Pharma shall (A) if legends are not required to be placed on certificates of Common Stock pursuant to the then existing provisions of Rule 144 of the Securities Act of 1933 (“Rule 144”) and provided that the Transfer Agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (B) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled which certificates shall not bear any restrictive legends unless required pursuant the Rule 144. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock upon the transmission of a Conversion Notice.

 

 

(ii) Issuer’s Failure to Timely Convert. If within ten (10) business days after a Liquidity Event or (in the case of an optional conversion) Kairos Pharma receipt of the facsimile or email copy of a Conversion Notice together with documentation satisfactory to the Transfer Agent that the Conversion Shares are eligible for such electronic issuance, the Issuer shall fail to issue and deliver to Holder via “DWAC/FAST” electronic transfer (assuming that such shares are “DWAC/FAST” eligible) the number of Conversion Shares to which the Holder is entitled upon such holder’s conversion of any Conversion Shares (a “Conversion Failure”), the Outstanding Balance of the Note shall increase by 0.05% per day until such time as the Issuer of the Conversion Shares issues and delivers a certificate to the Holder or credit the Holder’s balance account with DTC for the number of Conversion Shares to which the Holder is entitled upon such mandatory or optional conversion. The Issuer of the Conversion Shares will not be subject to any penalties once its transfer agent processes the shares to the DWAC system. If the issuer fails to deliver shares in accordance with the timeframe stated in this Section, resulting in a Conversion Failure, the Holder, at any time prior to selling all of those Conversion Shares, may rescind any portion, in whole or in part, of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the Outstanding Balance with the rescinded Conversion Shares returned to the applicable Issuer.

 

(iii) Book-Entry. Notwithstanding anything to the contrary set forth herein, in connection with any optional or mandatory conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to Kairos Pharma unless and until such time as the Holder has converted his or her shares in full. Upon a partial or full conversion, Holder shall receive either (i) one or more stock certificates, or a book entry account statement, evidencing the Conversion Shares (in the event Kairos Pharma’s Common Stock is not yet DTC eligible) or (ii) physical evidence from the Issuer’s transfer agent that the Holder’s balance account with DTC showing that the Conversion Shares have been credited for the number of Conversion Shares to which the Holder is entitled upon such mandatory or optional conversion. The Holder and the Issuer shall maintain records showing the Outstanding Balance converted and the dates of such conversions or shall use such other method reasonably satisfactory to the Holder and Issuer, so as not to require physical surrender of this Note upon conversion, unless so requested by Kairos Pharma.

 

(e) Limitations on Conversions or Trading.

 

If at any time after the Closing, the Holder shall or would receive Conversion Shares or shall purchase additional shares of Common Stock of an Issuer, so that the Holder would, together with other shares of Common Stock held by it or its Affiliates, own or beneficially own by virtue of such action or receipt of additional shares of Common Stock a number of shares exceeding 9.99% of the number of shares of Common Stock outstanding on such date (the “Maximum Percentage”), the Issuer shall not be obligated and shall not issue to the Holder Conversion Shares which would exceed the Maximum Percentage, but only until such time as the Maximum Percentage would no longer be exceeded by any such receipt of shares of Common Stock by the Holder. Upon delivery of a written notice to the applicable Issuer the Holder may from time to time increase (with such increase not effective until the sixty-first (61st) day after delivery of such notice) or decrease the Maximum Percentage to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until the sixty-first (61st) day after such notice is delivered to Kairos Pharma and (ii) any such increase or decrease will apply only to the Holder and its Affiliates. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 3(e) to the extent necessary to correct this paragraph (or any portion of this paragraph) which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 3(e) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to a successor holder of the Note.

 

(f) Adjustment of Conversion Price. In the event that a Liquidity Event prior to the December 31, 2024, Maturity Date of this Note, the Maker shall raise additional capital through a private placement of Common Stock or other securities that are convertible or exercisable for Common Stock, in either case, at a price less than the Optional Conversion Price, then and in such event the Conversion Price of the Notes shall be adjusted to reflect such lower amount.

 

 

(g) Other Provisions.

 

(i) Share Reservation. Kairos Pharma shall at all times reserve and keep available out of its authorized Common Stock a number of shares equal to at least the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Note.

 

(ii) Prepayment. This Note may not be prepaid by Kairos Pharma until [ ] 2022. Thereafter, the Note may either be prepaid by the Company in whole or in part without penalty, fees or premium upon not less than twenty (20) business days prior written notice to the Holder (the “Prepayment Notice”) which shall set forth the date on which the Note shall be prepaid (the “Prepayment Date”), subject to the Holder’s right to convert all or any portion of this Note into Conversion Shares at the Optional Conversion Price prior to the Prepayment Date.

 

(iii) All calculations under this Section 3 shall be rounded up to the nearest whole share.

 

(iv) Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for Kairos Pharma’s failure to deliver certificates or credit entries representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

(v) The Maker shall use its best efforts to assist the Holder to obtain a legal opinion for the removal of any restrict legend in connection with any shares converted from this Note.

 

(vi) This Note is one of the Convertible Notes issued on or about the date of this Note by the Maker in an aggregate principal amount of up to $3,000,000, (the “Notes”). Each of the Notes shall rank equally without preference or priority of any kind over one another, and all payments and recoveries under the Notes payable on account of principal and interest on the Notes shall be paid and applied ratably and proportionately on the balance of all outstanding Notes on the basis of their original principal amount.

 

4. REISSUANCE OF THIS NOTE.

 

Upon receipt by the Maker of evidence reasonably satisfactory to the Maker of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Maker in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Maker shall execute and deliver to the Holder a new Note representing the outstanding Principal.

 

5. NOTICES. Any notices, consents, waivers or other communications required or permitted to
be given under the terms shall be handled according to the Notice clause in the Subscription Agreement.

 

The addresses for such communications shall be:

 

If to the Maker:

Dr. John Yu, M.D

Kairos Pharma, Ltd.

2355 Westwood Blvd. #139

Los Angeles, CA 90064

Email: John.Yu@cshs.org

 

If to the Holder:

 

 

6. APPLICABLE LAW AND VENUE. This Note shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of laws thereof. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in New York County, in the State of New York. Both parties and the individuals signing this Agreement agree to submit to the jurisdiction of such courts.

 

7. WAIVER. Any waiver by the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver must be in writing.

 

8. MISCELLANEOUS

 

(a) Lawful Money; Costs of Collection. All amounts payable hereunder are payable in lawful money of the United States. Kairos Pharma agrees to pay all costs of collection when incurred, including reasonable attorneys’ fees and costs, whether or not a suit or action is instituted to enforce this Note, including but not limited to court costs, appraisal fees, the cost of searching records, obtaining title reports and title insurance and trustee’s fees, to the extent permitted by applicable law.

 

(b) No Offset; Holder in Due Course. All payments under this Note made by or on behalf of Kairos Pharma shall be made without setoff or counterclaim and free and clear of, and without deduction or withholding for or on account of, any federal, state, or local taxes. Kairos Pharma waives any right of offset it now has or may hereafter have against Agent or Holder and its successors and assigns as to this Note (but retains any such rights as to any other prior or future transaction between these parties) and agrees to make the payments called for hereunder in accordance with the terms hereof. The holder hereof and all successors thereof shall have all the rights of a holder in due course as provided in the California Uniform Commercial Code and other laws of the State of California.

 

(c) Waivers. Kairos Pharma and any endorsers, guarantors or sureties hereof severally waive presentment and demand for payment, notice of intent to accelerate maturity, protest or notice of protest or non-payment, bringing of suit and diligence in taking any action to collect any sums owing hereunder or in proceeding against any of the rights and properties securing payment hereunder; expressly agree that this Note, or any payment hereunder, may be extended from time to time; and consent to the acceptance of further security or the release of any security for this Note, all without in any way affecting the liability of Kairos Pharma and any endorsers or guarantors hereof. No extension of time for the payment of this Note, or any installment hereof, made by agreement by the holder hereof with any person now or hereafter liable for the payment of this Note, shall affect the original liability under this Note of Kairos Pharma, even if Kairos Pharma (or any entity comprising Kairos Pharma) is not a party to such agreement.

 

(d) Usury Protection. The parties hereto intend to conform strictly to the applicable usury laws. In no event, regardless of any provisions contained therein or in any other document executed or delivered in connection herewith, shall the holder hereof ever be deemed to have contracted for or be entitled to receive, collect or apply as interest on this Note, any amount in excess of the maximum amount permitted by applicable law (the “Maximum Rate”). In no event, whether by reason of demand for payment, prepayment, acceleration of the maturity hereof or otherwise, shall the interest contracted for, charged or received by the holder hereunder or otherwise exceed the Maximum Rate. If for any circumstance whatsoever interest would otherwise be payable to the holder in excess of the maximum lawful amount, the interest payable to the holder shall be reduced automatically to the Maximum Rate and any payment received in excess of such amount shall be applied to the outstanding principal balance of the Note.

 

(e) Entire Agreement. This Note, the other Transaction Documents, and all other documents and instruments contemplated hereby and thereby together constitute the entire agreement between and among the parties pertaining to the subject matter hereof. No supplement, modification or amendment of this Note shall be binding unless executed in writing by the parties. No waiver shall be binding unless executed in writing by the party making the waiver. No provision of this Note shall be interpreted for or against the drafting party.

 

 

(f) Commercial Purpose. Kairos Pharma agrees that no funds advanced under this Note shall be used for personal, family or household purposes, and that all funds advanced hereunder shall be used solely for business, commercial, investment or other similar purposes.

 

(g) Successors and Assigns. All the terms and provisions of this Note shall be binding upon and inure to the benefit of the parties to this Note and their respective successors and assigns.

 

(h) Assignment. Kairos Pharma may not, voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise, sell, transfer, assign, hypothecate, pledge or in any way alienate this Note or any right or interest in this Note (each a “Transfer”) without Holder’s prior written consent, which Holder may withhold in its sole and absolute discretion. Any consent by Holder to any Transfer shall not constitute consent to any other Transfer. Holder may freely Transfer its interest, rights, or title in or to this Note or the other Transaction Documents in Holder’s sole and absolute discretion.

 

(i) Construction. Whenever used in this Note, the terms “including,” “include,” “includes” and the like are not intended as terms of limitation, and, hence, shall be deemed to be followed by “without limitation.”

 

(j) Severability. If any provision of this Note, as applied to any party or to any circumstance, shall be found by a court of competent jurisdiction to be void, invalid or unenforceable, the same shall in no way affect any other provision of this Note, the application of any such provision in any other circumstance, or the validity or enforceability of this Note, and any provision which is found to be void, invalid or unenforceable shall be curtailed and limited only to the extent necessary to bring such provision within the requirements of the law.

 

(k) Survival of Terms. The terms and provisions of this Note shall survive the Maturity Date until full payment of all amounts due hereunder.

 

(l) Preferential Payment. If at any time any payment made pursuant to this Note is deemed to have been a voidable preference, fraudulent conveyance or other similar conveyance or preferential payment under any bankruptcy, insolvency or other debtor relief or similar law, then the obligation to make such payment shall survive any cancellation or satisfaction of this Note or return of this Note to Kairos Pharma and shall not be discharged or satisfied with any such payment or cancellation. Such payment shall instead remain a valid and binding obligation enforceable in accordance with the terms of this Note and shall be immediately due and payable.

 

(m) Relief From Stay. As an additional inducement to and material consideration for Holder agreeing to execute this this Note and the other Transaction Documents, Kairos Pharma agrees that in the event a Bankruptcy or Judicial Action (as hereinafter defined in this Section 8(n)) is commenced which subjects Holder to any stay in the exercise of Holder’s rights and remedies under this Note or the other Transaction Documents, including, but not limited to, the automatic stay imposed by Section 362 of the United States Bankruptcy Code (individually and collectively, “Stay”), then Kairos Pharma irrevocably consents and agrees that such Stay shall automatically be lifted and released against Holder, and Holder shall thereafter be entitled to exercise all of its rights and remedies against Kairos Pharma that is or could be subject any Stay under this Note or the other Transaction Documents. Nothing contained herein shall limit or prevent Holder from exercising all of its rights and remedies against Kairos Pharma that is not the subject any Stay under this Note or the other Transaction Documents. Kairos Pharma acknowledges that it is knowingly, voluntarily, and intentionally waiving its rights to any Stay and agrees that the benefits provided to Kairos Pharma under the terms of this Note are valuable consideration for such waiver. As used in this Section 8(n), the term “Bankruptcy or Judicial Action” shall mean any voluntary or involuntary case filed by or against a Kairos Pharma under the United States Bankruptcy Code, or any voluntary or involuntary petition in composition, readjustment, liquidation, or dissolution, or any state and federal bankruptcy law action filed by or against a Kairos Pharma, any action where a Kairos Pharma is adjudicated as bankrupt or insolvent, any action for dissolution of a Kairos Pharma, or any action in furtherance of any of the foregoing, or any other action, case, or proceeding that has the effect of staying (or in which a stay is being obtained against) the enforcement by Holder of its rights and remedies under the this Note or the other Transaction Documents.

 

 

Except to enforce the terms of the Transaction Documents, Kairos Pharma shall not take any action and shall not fail to take any action which such action or omission will or might tend to interfere with, delay, enjoin or otherwise prohibit the commencement, continuation or completion of efforts by Holder to enforce its remedies under this Note or the other Transaction Documents, or applicable law. Without limiting the generality of the foregoing and except to enforce the terms of the Transaction Documents, each Kairos Pharma waives its, his, or her rights, if any, to seek or obtain a stay, injunction or other form of order prohibiting in any way any act necessary or appropriate for the commencement or completion of Holder’s enforcement of its remedies under the this Note or the other Transaction Documents, or applicable law (without limiting the generality of the foregoing, such waiver extends to such rights which may exist under any statute or rule relating to bankruptcy cases, including, without limitation, 11 U.S.C. § 105, 11 U.S.C. § 301, 11 U.S.C. § 302, 11 U.S.C. § 303, 11 U.S.C. § 304, 11 U.S.C. § 362, 11 U.S.C. § 348, 11 U.S.C. § 706, 28 U.S.C. § 157, 28 U.S.C. § 158, Federal Rule of bankruptcy Procedure (“FRBP”) 3007, FRBP 3008, FRBP 3012, FRBP 8005, FRBP 9023, FRBP 9024, or FRBP 9029).

 

9. AMENDMENT AND WAIVER OF RIGHTS. This Note may be amended and the observance of any term hereof may be waived (either generally or in a particular instance either retroactively or prospectively) only by a written instrument executed by the Maker and the Holder.

 

10. WAIVER OF RIGHT TO TRIAL BY JURY.

 

EACH PARTY TO THIS NOTE HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (1) ARISING UNDER THIS NOTE, THE OTHER TRANSACTION DOCUMENTS, OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY. THE PARTIES HERETO HEREBY AGREE THAT THE PROVISIONS CONTAINED HEREIN HAVE BEEN FAIRLY NEGOTIATED ON AN ARM’S-LENGTH BASIS, WITH BOTH SIDES AGREEING TO THE SAME KNOWINGLY AND BEING AFFORDED THE OPPORTUNITY TO HAVE THEIR RESPECTIVE LEGAL COUNSEL CONSENT TO THE MATTERS CONTAINED HEREIN. ANY PARTY TO THIS NOTE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY AND THE AGREEMENTS CONTAINED HEREIN REGARDING THE APPLICATION OF JUDICIAL REFERENCE IN THE EVENT OF THE INVALIDITY OF SUCH JURY TRIAL WAIVER.

 

IN WITNESS WHEREOF, each of the Maker has caused this Note to be duly executed by a duly authorized officer as of the date set forth above.

 

	Kairos Pharma, Ltd.
	By:
	Name:	John Yu, M.D.
	Title:	Chief Executive Officer

 

Note No. [      ]

 

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

Kairos Pharma, Ltd.

2355 Westwood Blvd. #139
Los Angeles, CA 90064

Email: John.Yu@cshs.org

 

The undersigned hereby elects to convert $[       ] of the $[       ] Convertible Note (Note No. [         ]) issued to [                              ] on [         ], 2022 into Shares of Common Stock of Kairos Pharma, Ltd., according to the conditions set forth in such Note as of the date written below.

 

If the number of shares to be delivered represents more than 4.99% of the common stock outstanding, this conversion notice shall immediately automatically extinguish, and Holder must be immediately notified.

 

Date of Conversion:
Optional Conversion Amount:
Conversion Price:
Shares to be Delivered:
Shares delivered in name of:

 

	HOLDER
	[            ]
	By:
	Title:

 

 

 

Exhibit 10.22

 

INVESTOR RIGHTS AND LOCK-UP AGREEMENT

 

This INVESTOR RIGHTS AND LOCK-UP AGREEMENT (this “Agreement”) is made and entered into as of ____________ ____, 2022 by and among Kairos Pharma, Ltd., a California corporation (the “Company”) and the investor on the signature page hereto.

 

RECITALS

 

A. The Investors have agreed to purchase from the Company, and the Company has agreed to sell to the Investors, 6% convertible notes of the Company due April 25, 2025 (the “Notes”) on the terms and conditions set forth in that certain Subscription Agreement, dated as of April 25, 2022 by and among the Company and the Investors, as amended from time to time (the “Subscription Agreement” and together with the related Exhibits to the Subscription Agreement, and the Notes, collectively, the “Transaction Documents”); and

 

B. Unless otherwise defined in this Agreement all capitalized terms when used herein shall have the same meaning as they are defined in the Subscription Agreement and the Notes.

 

C. It is a condition to the closing of the sale of the Notes that the parties hereto execute and deliver this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter set forth, the parties hereto agree as follows:

 

1. COVENANTS OF THE COMPANY

 

1.1 Information Rights.

 

(a) Basic Financial Information. The Company will furnish to each Investor and any owner of 5% or more of the outstanding shares of Common Stock (“Qualifying Owner”):

 

(i) as soon as practicable, but no later than 120 days after the end of each fiscal year of the Company, (A) a balance sheet as of the end of such fiscal year, (B) a profit and loss statement as of the end of such fiscal year, (C) a statement of cash flows of the Company as of the end of such fiscal year, and (D) a statement of stockholders’ equity as of the end of such fiscal year, all prepared in accordance with generally accepted accounting principles and practices (“GAAP”) and audited and certified by an recognized accounting firm that is a PCAOB qualified auditor, commencing with the 2022 fiscal year;

 

(ii) as soon as practicable, but not later than 45 days after each fiscal quarter of the Company, quarterly reports of management of the Company generally describing material Company events from that quarter (except that such reports may (A) be subject to normal year-end auditing adjustments, and (B) not contain all notes thereto that may be required in accordance with GAAP, as required);

 

(iii) as soon as practicable, after a change of more than ten percent (10%) of the stock ownership of the Company, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the Common Stock issuable upon conversion or exercise of any outstanding securities convertible or exercisable for Common Stock and the exchange ratio or exercise price applicable thereto, and the number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit the Holders to calculate their respective percentage equity ownership in the Company, and certified by the Chief Executive Officer or senior finance officer of the Company as being true, complete, and correct;

 

 

(iv) as soon as practicable, but in any event by December 1 of each calendar year, the officers of the Company shall prepare and present an annual budget (the “Budget”) for the Company and each of its subsidiaries for the upcoming year, which Budget shall include, without limitation, all expense and capital spending expectations for the Company;

 

(v) as soon as practicable, but in any event by March 15 after the end of the fiscal year of the Company, all tax information necessary for the Investors to file their respective state and federal tax filings;

 

(vi) at the option of an Investor holding a majority of the outstanding Notes (the “Majority Investor”), and up to two times annually, certain officers of the Company, as selected by the Majority Investor (which may include, among others, the Chief Executive Officer and/or senior finance officer), shall provide an in-person presentation to the Investors at the Company’s corporate headquarters or by Video teleconference covering, among any other topic(s) selected by the Investor or Qualifying Owner, the performance of (past and forecasted), recent developments relating to, and material risks facing, the Company; and

 

(vii) such other information relating to the financial condition, business, prospects, or corporate affairs of the Company as the Majority Investor may from time-to-time reasonably request.

 

If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.

 

Notwithstanding anything else in this Section 1.1 to the contrary, the Company may cease providing the information set forth in this Section 1.1 during the period starting with the date thirty (30) days before the Company’s good faith estimate of the date of filing of a registration statement in accordance with the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended; provided that (i) the Company’s covenants under this Section 1.1 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective or such registration statement is withdrawn.

 

(b) Inspection Rights. At all times while the Notes remain outstanding, the Company shall cause to be maintained full and accurate books of account, which shall reflect all Company transactions and be appropriate and adequate for the Company’s business. The books and records of the Company shall be maintained at the principal office of the Company. Each Investor shall have the right during ordinary business hours and upon reasonable notice to inspect and copy all books and records of the Company.

 

2. RESTRICTIONS ON TRANSFER.

 

2.1 Each of the Holders hereby covenant and agree that except as set forth below, they shall not sell, transfer, convey or assign (collectively “Transfer”) any Conversion Shares to any Person, other than to members of their immediate family (children, spouse or parents, any entity wholly-owned by such Holder or trusts for the benefit of the Holder or members of his or its family (each a “Permitted Transferee”). As a condition to each Transfer to a Permitted Transferee, such Permitted Transferee shall agree to execute a joinder or related agreement pursuant to which he, she or it shall agree to be bound by the terms of this Agreement.

 

2.2 From and after the date hereof and until the 180th day after the first to occur of (a) consummation of an IPO, (b) consummation of a sale to a SPAC, or (c) consummation of another form of Reverse Merger, as applicable (each , the “Lock-Up Trigger Date”), the Holder and each Permitted Transferee agrees not to sell, transfer or otherwise dispose of the Conversion Shares or common stock of any successor-in-interest to the Company. After the 180^th day following the Lock-Up Trigger Date, the Holder will be entitled to sell all or any portion of the Conversion Shares or other common stock without restriction.

 

 

3. TAG-ALONG RIGHTS. If a majority of the holders of the Company’s outstanding voting equity (collectively, the “Majority Stockholders”) want to consummate a transaction that constitutes a Sale of Control (a “Sale of Control Transaction”), then the Majority Stockholder(s) shall notify the other Investors of such proposed Sale of Control Transaction by a date which shall be not later than fifteen (15) days prior to the Company or any such Majority Stockholder(s) entering into any definitive binding agreement in respect thereof (the “Sale Notice’). Thereafter, each other Investor or Stockholder (each a “Tag-Along Stockholder”) may cause the Company or such Majority Stockholders to effect a Transfer of such other Stockholder’s Stock; in each case, only pursuant to and in accordance with the following provisions of this Section 3:

 

(a) The Tag-Along Stockholders shall have the right, but not the obligation, to participate in the Proposed Sale of Control Transaction on the terms and conditions herein stated (the “Tag-Along Option”), which right shall be exercisable upon written notice (the “Acceptance Notice”) to the Company and/or the Majority Stockholders, as the case may be, within ten (10) days of receipt of the Sale Notice. Each Acceptance Notice shall indicate the maximum amount of Notes or number of Conversion Shares that the Tag-Along Stockholder wishes to sell on the terms and conditions stated in the Sale Notice.

 

(b) Each Tag-Along Stockholder shall have the right to sell a portion of its Notes or Conversion Shares pursuant to the Sale of Control Transaction which is equal to that percentage equal of the Common Stock that is being sold by the Majority Stockholders in the Sale of Control Transaction.

 

(c) Within ten (10) days after the date by which a Tag-Along Stockholder notifies the Company or the Majority Stockholders of its intent to exercise the Tag-Along Option, the Company or the Majority Stockholders shall notify such Tag-Along Stockholder of the amount of Notes and number of Conversion Shares held by such Tag-Along Stockholder that will be included in the sale and the date on which the Sale of Control Transaction will be consummated, which shall be no later than the later of (i) twenty (20) days after the date by which each Holder was required to notify the Company or the Majority Stockholders of its intent to exercise the Tag-Along Option and (ii) five (5) days after the satisfaction of any governmental approval or filing requirements, if any.

 

(d) Each Tag-Along Stockholder may effect its participation in any Sale of Control Transaction, and as part of its participation in the Sale of Control Transaction pursuant to a duly exercised Tag-Along Option, shall deliver to the Proposed Transferee at a closing to be held at the offices of the Company (or such other place as the parties agree), one or more Notes or certificates, properly endorsed for transfer, which represent all of the Notes or Conversion Shares owned by such Tag-Along Stockholder which is to be transferred in connection with the Sale of Control Transaction, and each Tag-Along Stockholder shall make such representations and warranties, and shall enter into such agreements, as are customary and reasonable in the context of the proposed Sale of Control Transaction, including, without limitation, representations and warranties (and indemnities with respect thereto) that the Proposed Transferee of the Notes or Conversion Shares (or interests therein) is receiving good and marketable title to such Notes or Conversion Shares (or interests therein), free and clear of all pledges, security interests, or other liens; provided, however, that with respect to any matter as to which a Tag-Along Stockholder shall agree to provide indemnification (other than its own title to such Notes or Conversion Shares), such Tag-Along Stockholder shall in no event be required to provide indemnification in an amount that would exceed its pro rata portion of the total liability for which such indemnification is sought, which pro rata portion shall be determined on the basis of the percentage of the total Notes or Conversion Shares involved in such transfer that are represented by the Notes or Conversion Shares owned by such Tag-Along Stockholder. In addition, each Tag-Along Stockholder and the Majority Stockholders shall reasonably cooperate and consult with each other in order to effect the Sale of Control Transaction, and each Tag-Along Stockholder shall provide reasonable assistance to the Majority Stockholders in connection with the preparation of disclosure schedules relating to representations and warranties to be made to the Proposed Transferee in connection with such Sale of Control Transaction and in the determination of the appropriate scope of, or limitations or exceptions to, such representations and warranties. At the time of consummation of the Sale of Control Transaction, the Proposed Transferee shall remit directly to each such Tag-Along Stockholder that portion of the sale proceeds to which such Tag-Along Stockholder is entitled by reason of its participation therein (less any adjustments due to the conversion of any convertible securities or the exercise of any exercisable securities)

 

 

4. DRAG ALONG RIGHTS. If the Company or one or more of Majority Stockholders (collectively, the “Drag-Along Sellers”) wants to consummate a Sale of Control Transaction, the Company or the Drag-Along Sellers, as the case may be, shall have the right (but not the obligation) to require the other Investors owning Notes or Conversion Shares (each a “Drag-Along Investor”) to Transfer all of their Notes or Conversion Shares to the Proposed Transferee for the same consideration per share and otherwise on the same terms and conditions upon which the Drag-Along Sellers are selling their Common Stock pursuant to the provisions set forth below (subject to any adjustments due to the conversion of any convertible securities or the exercise of any exercisable securities) (the “Drag-Along Right”). The Company and the Drag-Along Sellers may not exercise the right set forth in this Section 4 unless it or they hold not less than fifty percent (50%) of the Company Fully-Diluted Common Stock.

 

(a) Prior to making the Transfer, the Drag-Along Sellers shall first send an Offer Notice and copies of all documentation, including relevant agreements, relating to the Transfer. Within fifteen (15) days following the date of the Offer Notice. Each Drag-Along Investor shall effect its participation in any Sale of Control Transaction, and as part of its participation in the Sale of Control Transaction pursuant to a duly exercised Drag-Along Right, shall deliver to the Proposed Transferee at a closing to be held at the offices of the Company (or such other place as the parties agree), one or more certificates, properly endorsed for transfer, which represent all of the Notes or Conversion Shares owned by such Drag-Along Investor which is to be transferred in connection with the Sale of Control Transaction, and each Drag-Along Investor shall make such representations and warranties, and shall enter into such agreements, as are customary and reasonable in the context of the proposed Sale of Control Transaction, including, without limitation, representations and warranties (and indemnities with respect thereto) that the Proposed Transferee of the Notes or Conversion Shares (or interests therein) is receiving good and marketable title to such Notes or Conversion Shares (or interests therein), free and clear of all pledges, security interests, or other liens; provided, however, that with respect to any matter as to which a Tag-Along Stockholder shall agree to provide indemnification (other than its own title to such Stock), such Drag-Along Investor shall in no event be required to provide indemnification in an amount that would exceed its pro rata portion of the total liability for which such indemnification is sought, which pro rata portion shall be determined on the basis of the percentage of the total Stock involved in such transfer that are represented by the Notes or Conversion Shares owned by such Drag-Along Investor. In addition, each Drag-Along Investor and the Drag-Along Sellers shall reasonably cooperate and consult with each other in order to effect the Sale of Control Transaction, and each Drag-Along Investor shall provide reasonable assistance to the Drag-Along Sellers in connection with the preparation of disclosure schedules relating to representations and warranties to be made to the Proposed Transferee in connection with such Sale of Control Transaction and in the determination of the appropriate scope of, or limitations or exceptions to, such representations and warranties. If any Drag-Along Investor should fail to deliver such certificates and instruments of transfer to the Drag-Along Sellers (or their designee), the Company shall cause its books and records to show that such shares of Notes or Conversion Shares are bound by the provisions of this Section 4 and that such Notes or Conversion Shares shall have been transferred to the Proposed Transferee, and all certificates or other evidence of ownership of the Notes or Conversion Shares subject to this Section 4 shall be deemed to be cancelled.

 

(b) Simultaneously with the consummation of the Sale of Control, pursuant to this Section 4, the Company shall notify the Drag-Along Investors and the other Company stockholders of the consummation of the sale, and shall cause the Proposed Transferee to remit directly to the Drag-Along Investors and other Company stockholders (including the Drag-Along Sellers) the total sales price, based on each stockholder’s pro rata Share ownership, of the Sale of Control or consideration paid pursuant thereto and shall furnish such other evidence of the completion and time of completion of such sale or other disposition and the terms thereof as may be reasonably requested.

 

5. PARTICIPATION RIGHT.

 

5.1 General. Each of the Investors (individually and collectively, the “Participation Right Holders”) has the right to co-invest and to purchase such Participation Right Holder’s Pro Rata Share (as defined below) of all (or any part) of any New Securities (including Common Stock being sold to the public in the IPO) that the Company may from time to time issue after the date of this Agreement (the “Participation Right”), provided, however, such Participation Right Holder shall have no right to purchase any such New Securities and exercise such Participation Right if such New Securities are being issued in a private placement pursuant to Regulation 506(b) under the Securities Act and such Participation Right Holder cannot demonstrate to the Company’s reasonable satisfaction that such Participation Right Holder is, at the time of the proposed issuance of such New Securities, an “accredited investor” as such term is defined in Regulation D under the Securities Act. A Participation Right Holder’s “Pro Rata Share” for purposes of this participation and co-investment right is a percentage of any New Securities (including Common Stock sold in the IPO) equal to one hundred (100%) of the amount of all Notes sold in the Offering to each Investor’s Note. For the avoidance of doubt, if for example, an Investor purchased a $100,000 principal amount of this Note, representing 10% of all $1,000,000 of the Notes held by all Investors and $10,000,000 of New Securities (including Common Stock sold in the IPO) are issued prior to termination of this Agreement, then and in such event such Investor’s Pro Rata Share of the New Securities would be $100,000.

 

 

5.2 Procedures. In the event that the Company proposes to undertake an issuance of New Securities, it shall give to each Participation Right Holder a written notice of its intention to issue New Securities (the “Participation Right Notice”), describing the type of New Securities and the price and the general terms upon which the Company proposes to issue such New Securities. Each Participation Right Holder shall have twenty (20) days from the date such Participation Right Notice is given, to agree in writing to purchase such Participation Right Holder’s Pro Rata Share of such New Securities for the price and upon the general terms specified in the Notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased (not to exceed such Participation Right Holder’s Pro Rata Share).

 

5.3 Failure to Exercise. In the event that the Participation Right Holders fail to exercise in full the pa within such twenty (20) day period, then the Company shall have one hundred twenty (120) days thereafter to sell the New Securities with respect to which the Participation Right Holders’ Participation Right was not exercised, at a price not more favorable and upon general terms not materially more favorable to the purchasers thereof than specified in the Participation Right Notice to the Participation Right Holders. In the event that the Company has not issued and sold the New Securities within such one hundred twenty (120) day period, then the Company shall not thereafter issue or sell any New Securities without again first offering the Participation Right in such New Securities to the Participation Right Holders pursuant to this Section 5.

 

6. REGISTRATION RIGHTS. The Company covenants and agrees as follows:

 

6.1 Demand Registration.

 

(a) Resale Registration Statement. Within one hundred and eighty-one (181) days or six calendar months, whichever is later, following the consummation of the IPO, the Company shall use its reasonable commercial efforts to file a registration statement on Form S-1 (the “Resale Registration Statement”) with the SEC in order to register for resale all of the shares of Common Stock of the Company or common stock of any successor-in-interest to the Company issued to all holders of the Notes upon automatic conversion of the Notes (the “Conversion Shares”), and will use its reasonable bests efforts to cause such Resale Registration Statement to be declared effective by the SEC within forty-five (45) business days from the date of its initial submission or filing; provided, that such Conversion Shares will continue to be subject to restrictions on resale for a period of six (6) months following consummation of the IPO.

 

(b) Form S-1 Demand. In the event that, for any reason, the Company is unable to comply with the provisions of Section 6.1(a), at any time after one hundred eighty (180) days from the effective date of the Form S-1 registration statement in connection with the IPO, the Company receives a request from the Majority Investor(s) (the “Initiating Investors”) that the Company file a Form S-1 registration statement with respect to the Conversion Shares then outstanding having an anticipated aggregate offering price, net of selling expenses, of at least five million dollars ($5,000,000), then the Company shall (x) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Investors other than the Initiating Investors; and (y) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Investors, file a Form S-1 registration statement under the Securities Act covering all Conversion Shares that the Initiating Investors requested to be registered and any additional Conversion Shares requested to be included in such registration by any other Investors, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Section 6.1(d) and Section 6.3, provided, however, that the Initiating Investors may not invoke this right more than twice.

 

(c) Deferral of Registration. Notwithstanding the foregoing obligations, if the Company furnishes to Investors requesting a registration pursuant to Section 6.1(b) above a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Board it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than sixty (60) days after the request of the Initiating Investors is given; provided, however, that the Company may not invoke this right more than once in any twelve (12) month period; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such sixty (60) day period other than an Excluded Registration.

 

 

(d) Deferral for Company-Initiated Registration. The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 6.1(b) (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; or (ii) after the Company has effected one registration pursuant to Section 6.1(b). A registration shall not be counted as “effected” for purposes of this Section 6.1(d) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Investors withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Section 6.6, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Section 6.1(d).

 

6.2 Piggyback Registration. If, following its IPO, the Company proposes to register under the Securities Act (including, for this purpose, a registration of Common Stock effected by the Company or for the benefit of selling stockholders other than the Investors in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), unless the Conversion Shares shall have been previously registered for resale, the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Section 6.3, cause to be registered all of the Conversion Shares that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 6.2 before the effective date of such registration, whether or not any Holder has elected to include Conversion Shares in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 6.6.

 

6.3 Underwriting Requirements.

 

(a) In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 6.1(b), Section 6.1(c) or Section 6.2, the Company shall not be required to include any of the Investors’ Conversion Shares in such underwriting unless the Investors accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity, if any, as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Conversion Shares, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Conversion Shares, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Conversion Shares requested to be registered can be included in such offering, then the Conversion Shares that are included in such offering shall be allocated among the selling Investors in proportion (as nearly as practicable to) the number of Conversion Shares owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Investors. To facilitate the allocation of shares in accordance with the above provisions, the Company may in its sole discretion round the number of shares allocated to the Holder to the nearest 100 shares. Notwithstanding the foregoing, in no event shall (i) the number of Conversion Shares included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, or (ii) the number of Conversion Shares included in the offering be reduced below twenty percent (20%) of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Investors may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering or (iii) notwithstanding (ii) above, any Conversion Shares which are not Conversion Shares of the Key Owner be excluded from such underwriting unless all Conversion Shares of the Key Owner are first excluded from such offering. For purposes of the provision in this Section 6.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Conversion Shares owned by all Persons included in such “selling Holder,” as defined in this sentence.

 

 

(b) For purposes of Section 6.1, a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Section 6.3(a), fewer than fifty percent (50%) of the total number of Conversion Shares that Investors have requested to be included in such registration statement are actually included.

 

6.4 Obligations of the Company. Whenever required under this Section 6 to effect the registration of any Conversion Shares, the Company shall, as expeditiously as reasonably possible:

 

(a) prepare and file with the SEC a registration statement with respect to such Conversion Shares and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Investors of a majority of the Conversion Shares registered thereunder, keep such registration statement effective for a period of up to one hundred eighty (180) days following the termination of the lock-up agreement entered into in connection with the IPO or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such one hundred eighty (180) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration, and (ii) in the case of any registration of Conversion Shares on Form S-1 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such one hundred eighty (180) day period shall be extended for up to sixty (60) days, if necessary, to keep the registration statement effective until all such Conversion Shares are sold;

 

(b) prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

 

(c) furnish to the selling Investors such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Investors may reasonably request in order to facilitate their disposition of their Conversion Shares;

 

(d) use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Investors; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

 

(e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;

 

(f) use its commercially reasonable efforts to cause all such Conversion Shares covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

 

(g) provide a transfer agent and registrar for all Conversion Shares registered pursuant to this Agreement and provide a CUSIP number for all such Conversion Shares, in each case not later than the effective date of such registration;

 

(h) promptly make available for inspection by the selling Investors, any underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Investors, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

 

 

(i) notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and

 

(j) after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.

 

In addition, the Company shall ensure that, at all times after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, its insider trading policy shall provide that the Company’s directors may implement a trading program under Rule 10b5-1 of the Exchange Act.

 

6.5 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 4 with respect to the Conversion Shares of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Conversion Shares held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Conversion Shares.

 

6.6 Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 4, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements of one counsel for the selling Investors (“Selling Holder Counsel”), shall be borne and paid by the Company; provided however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 6.1 if the registration request is subsequently withdrawn at the request of the Investors of a majority of the Conversion Shares to be registered (in which case all selling Investors shall bear such expenses pro rata based upon the number of Conversion Shares that were to be included in the withdrawn registration), unless the Investors of a majority of the Conversion Shares agree to forfeit their right to one registration pursuant to Section 6.1 (a) or Section 6.1(b), as the case may be; provided further that if, at the time of such withdrawal, the Investors shall have learned of a material adverse change in the condition, business or prospects of the Company from that known to the Investors at the time of their request and have withdrawn the request with reasonable promptness after learning of such information then the Investors shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Section 6.1(a) or Section 6.1(b). All Selling Expenses relating to Conversion Shares registered pursuant to this Section 5 shall be borne and paid by the Investors pro rata on the basis of the number of Conversion Shares registered on their behalf.

 

6.7 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 6.

 

6.8 Indemnification. If any Conversion Shares are included in a registration statement under this Section 6:

 

(a) To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, only to the extent such Damages arise out of or are based upon any untrue statement or alleged untrue statement of a material fact made by the Company or arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 6.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

 

 

(b) To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 6.8(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided, further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Section 6.8(b) and 6.8(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.

 

(c) Promptly after receipt by an indemnified party under this Section 6.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 6.8, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 6.8, to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 6.8.

 

(d) To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 6.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 6.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 6.8, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case, (x) no Holder will be required to contribute any amount in excess of the public offering price of all such Conversion Shares offered and sold by such Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided, further that in no event shall a Holder’s liability pursuant to this Section 6.8(d), when combined with the amounts paid or payable by such Holder pursuant to Section 6.8(b), exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.

 

 

(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

 

(f) Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Investors under this Section 6.8 shall survive the completion of any offering of Conversion Shares in a registration under this Section 6.8, and otherwise shall survive the termination of this Agreement.

 

6.9 Reports Under Exchange Act. With a view to making available to the Investors the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration, the Company shall:

 

(a) make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the registration statement filed by the Company for the IPO;

 

(b) use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and

 

(c) furnish to any Holder, so long as the Holder owns any Conversion Shares, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the registration statement filed by the Company for the IPO), the Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).

 

6.10 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, until such time as the Conversion Shares are registered and without the prior written consent of the Investors of a majority of the Conversion Shares then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that (i) would allow such holder or prospective holder to include such securities in any registration unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the number of the Conversion Shares of the Investors that are included; or (ii) allow such holder or prospective holder to initiate a demand for registration of any securities held by such holder or prospective holder. Upon the registration of the Conversion Shares, this paragraph 6.10 shall no longer be applicable.

 

 

6.11 “Market Stand-off” Agreement. Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the registration by the Company of shares of its Common Stock and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred and eighty (180) days in the case of the IPO), (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Section 6.11 shall apply only to the IPO, shall not (A) prohibit any Holder from buying registered shares of Common Stock in the IPO or in the aftermarket or selling such shares of Common Stock, or (B) apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, and shall be applicable to the Investors only if all officers and directors are subject to the same restrictions. The underwriters in connection with such registration are intended third party beneficiaries of this Section 6.11 and shall have the right, power, and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 6.11 or that are necessary to give further effect thereto. Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall apply pro rata to all Investors subject to such agreements based on the number of shares subject to such agreements.

 

6.12 Termination of Registration Rights. The right of any Holder to request registration or inclusion of Conversion Shares in any registration pursuant to Section 6.1 or Section 6.2 shall terminate upon the termination of the Restricted Period on Transfers set forth in Section 2.2 above and the ability of each Holder to sell all of his or its remaining Conversion Shares in any broker transaction under Rule 144 and without any volume or percentage limitations on such sales.

 

7. ADDITIONAL INVESTOR RIGHTS. The Company shall use commercially reasonable efforts to cause the Conversion Shares, within the meaning of Section 1202(f) of the Internal Revenue Code (the “Code”), to constitute “qualified small business stock” as defined in Section 1202(c) of the Code; provided, however, that such requirement shall not be applicable if the Board determines, in its good faith business judgment, that such qualification is inconsistent with the best interests of the Company. The Company shall submit to its stockholders (including the Investors) and to the Internal Revenue Service any reports that may be required under Section 1202(d)(1)(C) of the Code and the regulations promulgated thereunder. In addition, within twenty (20) business days after any Investor’s written request therefor, the Company shall, at its option, either (i) deliver to such Investor a written statement indicating whether (and what portion of) such Investor’s interest in the Company constitutes “qualified small business stock” as defined in Section 1202(c) of the Code or (ii) deliver to such Investor such factual information in the Company’s possession as is reasonably necessary to enable such Investor to determine whether (and what portion of) such Investor’s interest in the Company constitutes “qualified small business stock” as defined in Section 1202(c) of the Code.

 

8. GENERAL PROVISIONS.

 

8.1 Amendment and Waiver of Rights. This Agreement may be amended or terminated, and the observance of any term hereof may be waived (either generally or in a particular instance either retroactively or prospectively) only by a written instrument executed by (a) the Company; (b) the Key Owner (as defined below) and (c) the Majority Investor(s) (as defined below). Notwithstanding the foregoing:

 

(a) any provision hereof may be waived by the waiving party on such party’s own behalf, without the consent of any other party; and

 

(b) no such amendment, modification or waiver shall amend, modify or waive (i) any provision of this Agreement granting any personal rights to a specific Investor or Key Owner (as opposed to the Investors or the holders of a specific class of stock generally), without the prior written consent of such Investor or Key Owner; or (ii) any rights of any Investor or Key Owner in a manner that materially adversely affects the rights of such Investor or Key Owner, unless approved in writing by such Investor or Key Owner.

 

 

For the purposes of this section, “Key Owner” shall mean Dr. John Yu and/or an entity or entities controlled by him or her, and “Majority Investor(s)” shall mean an Investor or the Investors holding a majority of the outstanding Notes.

 

The Company shall give prompt written notice of any amendment, termination or waiver hereunder to any party that did not consent in writing thereto. Any amendment, termination or waiver effected in accordance with this Subsection 7.1 shall be binding on each party and all of such party’s successors and permitted assigns, whether or not any such party, successor or assignee entered into or approved such amendment, termination or waiver. For purposes of this Subsection 7.1, the requirement of a written instrument may be satisfied in the form of an action by written consent of the Investors circulated by the Company and executed by the Holder parties specified, whether or not such action by written consent makes explicit reference to the terms of this Agreement.

 

8.2 Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth on the signature page hereto, or to such address as subsequently modified by written notice given in accordance with this Section 8.2.

 

8.3 Entire Agreement. This Agreement and the documents referred to herein, together with all the Exhibits hereto, constitute the entire agreement and understanding of the parties with respect to the subject matter of this Agreement, and supersede any and all prior understandings and agreements, whether oral or written, between or among the parties hereto with respect to the specific subject matter hereof.

 

8.4 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.

 

8.5 Severability The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

 

8.6 Third Parties. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties hereto and their successors and assigns, any rights or remedies under or by reason of this Agreement.

 

8.7 Successors and Assigns. This Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred, delegated or sublicensed by any party without the prior written consent of the other parties. Any attempt by a party without such permission to assign, transfer, delegate or sublicense any rights, duties or obligations that arise under this Agreement shall be void. Subject to the foregoing, and except as otherwise provided herein, this Agreement, and the rights and obligations of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and legal representatives.

 

8.8 Titles and Headings. The titles, captions and headings of this Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Agreement. Unless otherwise specifically stated, all references herein to “sections” and “exhibits” will mean “sections” and “exhibits” to this Agreement.

 

8.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered will be deemed an original, and all of which together shall constitute one and the same agreement.

 

8.10 Costs and Attorneys’ Fees. In the event that any action, suit or other proceeding is instituted concerning or arising out of this Agreement or any transaction contemplated hereunder, the prevailing party shall recover all of such party’s costs and attorneys’ fees incurred in each such action, suit or other proceeding, including any and all appeals or petitions therefrom.

 

 

8.11 Adjustments for Stock Splits, Etc. Wherever in this Agreement there is a reference to a specific number of shares of Common Stock of the Company of any class or series, then, upon the occurrence of any subdivision, combination or stock dividend of such class or series of stock, the specific number of shares so referenced in this Agreement shall automatically be proportionally adjusted to reflect the effect on the outstanding shares of such class or series of stock by such subdivision, combination or stock dividend.

 

8.12 Further Assurances. The parties agree to execute such further documents and instruments and to take such further actions as may be reasonably necessary to carry out the purposes and intent of this Agreement.

 

8.13 Electronic Signatures. This Agreement may be executed and delivered by electronic signature (such as .pdf or Docusign) and upon such delivery the electronic signature will be deemed to have the same effect as if the original signature had been delivered to the other party.

 

8.14 Termination of Agreement. Except for the provisions of Section 1 (Information Rights) and Section 5 (Participation Rights) of this Agreement which shall terminate upon the consummation of the Company’s IPO of Common Stock pursuant to an effective registration statement filed under the Securities Act and listing of such Common Stock on a Qualified Securities Market, following the Company’s IPO, this Agreement and all of the other rights and obligations of the parties hereunder shall continue to survive and remain in full force and effect. Notwithstanding anything to the contrary herein, this Agreement (excluding any then-existing obligations) shall terminate upon the Investors ceasing to hold Notes or Conversion Shares or upon the Company ceasing to have more than one Holder.

 

8.15 Dispute Resolution. Each party (a) hereby irrevocably and unconditionally submits to the jurisdiction of the federal or state courts located in New York County, New York for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement or the Transaction Documents, (b) agrees not to commence any suit, action or other proceeding arising out of or based upon this Agreement or the Transaction Documents except in the federal or state courts located in New York County, New York, and (c) hereby waives and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement, the Transaction Documents or the subject matter hereof and thereof may not be enforced in or by such court.

 

9. DEFINITIONS. Except as otherwise noted herein, for purposes of this Agreement:

 

“Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

 

“Common Stock” has the meaning as defined in the Note.

 

“Common Stock Equivalents” shall mean any shares of Common Stock issuable upon conversion of any securities (other than the Notes) convertible into shares of Common Stock or any warrants or other rights (other than options or restricted stock units issued under the Company’s Incentive Stock Plan) entitling the holder to purchase Common Stock upon the exercise thereof.

 

“Conversion Shares” means (i) the Common Stock issuable or issued upon conversion of the Notes, (ii) any Common Stock issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company, acquired by the Investors after the date hereof; and (iii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clauses (i) and (ii) above; excluding in all cases, however, any Conversion Shares sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Section 8.7, and excluding for purposes of Section 5 any shares for which registration rights have terminated pursuant to Section 6.12 of this Agreement.

 

 

“Damages” means any loss, damage, claim or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, claim or liability (or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Excluded Registration” means (i) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Conversion Shares; or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

 

“Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.

 

“Form S-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.

 

“Holder” means collectively, each Investor owning Notes or Conversion Shares and each Permitted Transferee of such Holder.

 

“Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, of a natural person referred to herein.

 

“Initiating Investors” means, collectively, Holders who properly initiate a registration request under this Agreement.

 

“IPO” means the Company’s first underwritten public offering of its Common Stock under the Securities Act.

 

“New Securities” means any Common Stock, whether now authorized or not, and rights, options or warrants to purchase such Common Stock, and securities of any type whatsoever that are, or may become, convertible or exchangeable into such Common Stock that are issued for cash consideration; provided, however, that the term “New Securities” does not include any (a) New Securities issued as part of the consideration in connection with any acquisition of the assets or capital stock of any other Person, or (b) any options or other securities issued pursuant to the Incentive Stock Plan of the Company or any successor in interest to the Company.

 

“Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

 

 

“Qualified Securities Market” shall mean any one of the Nasdaq Stock Exchange (including the Nasdaq Capital Market), the NYSE:Amex Exchange, the New York Stock Exchange or the OTCQX platform of the OTC Markets.

 

“SEC” means the Securities and Exchange Commission.

 

“SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.

 

“SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Conversion Shares, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Section 6.6.

 

[Remainder of Page Intentionally Left Blank]

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above.

 

THE COMPANY:
Kairos Pharma, Ltd.
By:
Name:	Dr. John Yu
Title:	Chief Executive Officer
Address:	2355 Westwood Blvd. #139 Los Angeles, CA 90064

 

Investor:
[Name]
[Name]

 

 

Exhibit 10.23

 

KAIROS PHARMA, LTD.

 

2023 EQUITY INCENTIVE PLAN

 

the “Plan”

 

1. Purposes of the Plan. The purposes of this Plan are:

 

●

to attract and retain the best available personnel for positions of substantial responsibility,

 

●

to provide incentives to individuals who perform services for the Company (as defined below), and

 

●

to promote the success of the Company’s business.

 

The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares and other stock or cash awards as the Administrator (as defined below) may determine.

 

2. Definitions. As used herein, the following definitions will apply:

 

a)

“Administrator” means the Board or any of its Committees as will be administering the Plan, in accordance with Section 4 hereof.

 

b)

“Affiliate” means any corporation or any other entity (including, but not limited to, partnerships and joint ventures) controlling, controlled by, or under common control with the Company.

 

c)

“Applicable Laws” means the requirements relating to the administration of equity-based awards under U.S. federal and state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plans.

 

d)

“Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares and other stock or cash awards as the Administrator may determine.

 

e)

“Award Agreement” means the written agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.

 

f)

“Board” means the Board of Directors of the Company.

 

 

g)

“Change in Control” means the occurrence of any of the following events after the Effective Date:

 

(i)

A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (“Person”), acquires ownership of stock in the Company that, together with the stock already held by such Person, constitutes more than 50% of the total voting power of the stock of the Company; provided, however, that for purposes of this subsection (i), the acquisition of additional stock by any Person who is considered to own more than 50% of the total voting power of the stock of the Company before the acquisition will not be considered a Change in Control; or

 

(ii)

The individuals who constitute the members of the Board cease, by reason of a financing, merger, combination, acquisition, takeover or other non-ordinary course transaction affecting the Company, to constitute at least fifty-one percent (51%) of the members of the Board; or

 

(iii)

The consummation of any of the following events: (A) a change in the ownership of a substantial portion of the Company’s assets, which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such Person) assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions, or (B) a merger, consolidation or reorganization involving the Company, where either or both of the events described in clauses (i) or (ii) above would be the result. For purposes of this subsection (iii), the following will not constitute a change in the ownership of a substantial portion of the Company’s assets or a Change in Control: (A) a transfer to an entity that is controlled by the Company’s stockholders immediately after the transfer, or (B) a transfer of assets by the Company to: (1) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s stock, (2) an entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a Person that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company, or (4) an entity, at least 50% of the total equity or voting power of which is owned, directly or indirectly, by a Person described in subsection (iii)(B)(3) above. For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

 

For purposes of this Section 2(g), persons will be considered to be acting as a group if they are owners of a corporation or other entity that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.

 

 

h)

“Code” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.

 

i)

“Committee” means a committee of Directors or of other individuals satisfying Applicable Laws appointed by the Board in accordance with Section 4 hereof.

 

j)

“Common Stock” means the common stock, par value $0.001 per share, of the Company.

 

k)

“Company” means Kairos Pharma, Ltd., a Delaware corporation, or any successor thereto.

 

l)

“Consultant” means any person, including an advisor, other than an Employee engaged by the Company or a Parent, Subsidiary or Affiliate to render services to such entity.

 

m)

“Director” means a member of the Board.

 

n)

“Disability” means permanent and total disability as defined in Section 22(e)(3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.

 

o)

“Effective Date” shall have the meaning set forth in Section 17 hereof.

 

p)

“Employee” means any person, including Officers and Directors, other than a Consultant employed by the Company or any Parent, Subsidiary or Affiliate of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.

 

q)

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

r)

“Exchange Program” means a program under which (i) outstanding Awards are surrendered or cancelled in exchange for Awards of the same type (which may have lower exercise prices and different terms), Awards of a different type, and/or cash, and/or (ii) the exercise price of an outstanding Award is reduced. The Administrator will determine the terms and conditions of any Exchange Program in its sole discretion.

 

s)

“Fair Market Value” means, as of any date, the value of the Common Stock as the Administrator may determine in good faith, by reference to the closing price of such stock on any established stock exchange or on a national market system on the day of determination, if the Common Stock is so listed on any established stock exchange or on a national market system. If the Common Stock is not listed on any established stock exchange or on a national market system, the value of the Common Stock will be determined as the Administrator may determine in good faith using (i) a valuation methodology set forth in Treasury Regulation 1.409A-1(b)(5)(iv)(B) or (ii) with respect to valuations applicable to Awards that are not subject to Code Section 409A, such other valuation methods as the Administrator may select.

 

 

t)

“Fiscal Year” means the fiscal year of the Company.

 

u)

“Incentive Stock Option” means an Option that by its terms qualifies and is otherwise intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

 

v)

“Nonstatutory Stock Option” means an Option that by its terms does not qualify or expressly provides that it is not intended to qualify as an Incentive Stock Option.

 

w)

“Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

 

x)

“Option” means a stock option granted pursuant to Section 6 hereof.

 

y)

“Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

 

z)

“Participant” means the holder of an outstanding Award.

 

aa)

“Performance Goals” will have the meaning set forth in Section 11 hereof.

 

bb)

“Performance Period” means any Fiscal Year of the Company or such other period as determined by the Administrator in its sole discretion.

 

cc)

“Performance Share” means an Award denominated in Shares which may be earned in whole or in part upon attainment of Performance Goals or other vesting criteria as the Administrator may determine pursuant to Section 10 hereof.

 

dd)

“Performance Unit” means an Award which may be earned in whole or in part upon attainment of Performance Goals or other vesting criteria as the Administrator may determine and which may be settled for cash, Shares or other securities or a combination of the foregoing pursuant to Section 10 hereof.

 

ee)

“Period of Restriction” means the period during which transfers of Shares of Restricted Stock are subject to restrictions and, therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events specified in the applicable Award, as interpreted and construed by the Administrator.

 

ff)

“Plan” means this 2023 Equity Incentive Plan.

 

gg)

“Restricted Stock” means Shares issued pursuant to an Award of Restricted Stock under Section 8 hereof, or issued pursuant to the early exercise of an Option.

 

 

hh)

“Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, granted pursuant to Section 9 hereof. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.

 

ii)

“Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

 

jj)

“Section 16(b)” means Section 16(b) of the Exchange Act.

 

kk)

“Service Provider” means an Employee, Director, or Consultant.

 

ll)

“Share” means a share of the Common Stock, as adjusted in accordance with Section 14 hereof.

 

mm)

“Stock Appreciation Right” means an Award, granted alone or in connection with an Option, that pursuant to Section 7 is designated as a Stock Appreciation Right.

 

nn)

“Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

 

3. Stock Subject to the Plan.

 

a)

Subject to the provisions of Section 14 hereof, the maximum aggregate number of Shares that may be awarded and sold under the Plan is 1.65 million (1,650,000) Shares. The Shares may be authorized, but unissued, or reacquired Common Stock.

 

b)

Lapsed Awards. If an Award expires or becomes unexercisable without having been exercised in full, or, with respect to Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units, is forfeited to or repurchased by the Company, the unpurchased Shares (or for Awards other than Options and Stock Appreciation Rights, the forfeited or repurchased Shares) which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated). Upon exercise of a Stock Appreciation Right settled in Shares, the gross number of Shares covered by the portion of the Award so settled will cease to be available under the Plan. Shares that have actually been issued under the Plan under any Award will not be returned to the Plan and will not become available for future distribution under the Plan; provided, however, that if unvested Shares of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units are repurchased by the Company or are forfeited to the Company, such Shares will become available for future grant under the Plan. Shares subject to an Award that are transferred to or retained by the Company to pay the tax and/or exercise price of an Award will become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan and, for the elimination of doubt, the number of Shares of equal value to such cash payment shall become available for future grant or sale under the Plan. Notwithstanding the foregoing provisions of this Section 3(b), subject to adjustment provided in Section 14 hereof, the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in Section 3(a) above, plus, to the extent allowable under Section 422 of the Code, any Shares that become available for issuance under this Section 3(b).

 

 

c)

Share Reserve. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan.

 

4. Administration of the Plan.

 

a)

Procedure.

 

(i)

Multiple Administrative Bodies. Different Committees may be established with respect to different groups of Service Providers; in that event, the Committee established with respect to a group of Service Providers shall administer the Plan with respect to Awards granted to members of such group.

 

(ii)

Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3.

 

(iii)

Other Administration. Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee, which committee will be constituted to satisfy Applicable Laws.

 

b)

Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion:

 

(i)

to determine Fair Market Value;

 

(ii)

to select the Service Providers to whom Awards may be granted hereunder;

 

(iii)

to determine the terms and condition, not inconsistent with the terms of the Plan, of any Award granted hereunder;

 

(iv)

to institute an Exchange Program and to determine the terms and conditions, not inconsistent with the terms of the Plan, for (1) the surrender or cancellation of outstanding Awards in exchange for Awards of the same type, Awards of a different type, and/or cash, or (2) the reduction of the exercise price of outstanding Awards;

 

(v)

to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;

 

 

(vi)

to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws;

 

(vii)

to modify or amend each Award (subject to Section 19(c) hereof);

 

(viii)

to authorize any person to execute on behalf of the Company any instrument required to reflect or implement the grant of an Award previously granted by the Administrator;

 

(ix)

to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award pursuant to such procedures as the Administrator may determine consistent with the requirements for compliance with or exemption from the provisions of Code Section 409A; and

 

(x)

to make all other determinations deemed necessary or advisable for administering the Plan.

 

c)

Effect of Administrator’s Decision. The Administrator’s decisions, determinations, and interpretations will be final and binding on all Participants and any other holders of Awards.

 

5. Eligibility. Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units, Performance Shares, and such other cash or stock awards as the Administrator determines may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.

 

6. Stock Options.

 

a)

Limitations.

 

(i)

Each Option will be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000 (U.S.), such Options will be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted.

 

(ii)

Subject to the limits set forth in Section 3, the Administrator will have complete discretion to determine the number of Shares subject to an Option granted to any Participant.

 

 

b)

Term of Option. The Administrator will determine the term of each Option in its sole discretion; provided, however, that the term will be no more than ten (10) years from the date of grant thereof in the case of Incentive Stock Options Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement.

 

c)

Option Exercise Price and Consideration.

 

(i)

Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option will be determined by the Administrator, but will be no less than 100% of the Fair Market Value per Share on the date of grant. In addition, in the case of an Incentive Stock Option granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant. Notwithstanding the foregoing provisions of this Section 6(c), Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to the issuance or assumption of an Option in a transaction to which Section 424(a) of the Code applies in a manner consistent with said Section 424(a).

 

(ii)

Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator will fix the period within which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised.

 

(iii)

Form of Consideration. The Administrator will determine the acceptable form(s) of consideration for exercising an Option, including the method of payment, to the extent permitted by Applicable Laws including but not limited to tendering capital stock of the Company owned by a Participant, duly endorsed for transfer to the Company.

 

d)

Exercise of Option.

 

(i)

Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.

 

An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Administrator specifies from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised (together with any applicable withholding taxes). No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 14 hereof.

 

 

(ii)

Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s termination as the result of the Participant’s death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for three (3) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified by Award Agreement or by operation of this Section 6(d)(3), the Option will terminate, and the Shares covered by such Option will revert to the Plan.

 

(iii)

Disability of Participant. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of cessation (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for six (6) months following the date the Participant ceases to be a Service Provider. Unless otherwise provided by the Administrator, if on the date of cessation the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after cessation the Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.

 

(iv)

Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the Award Agreement), by the Participant’s beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Award Agreement, the Option will remain exercisable for six (6) months following Participant’s death. Unless otherwise provided by the Administrator, if at the time of death Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will continue to vest in accordance with the Award Agreement. If the Option is not so exercised within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.

 

 

7. Stock Appreciation Rights.

 

a)

Grant of Stock Appreciation Rights. Subject to the terms and conditions of the Plan, a Stock Appreciation Right may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion.

 

b)

Number of Shares. The Administrator will have complete discretion to determine the number of Stock Appreciation Rights granted to any Participant.

 

c)

Exercise Price and Other Terms. The Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted under the Plan; provided, however, that the exercise price will be not less than 100% of the Fair Market Value of a Share on the date of grant.

 

d)

Stock Appreciation Rights Agreement. Each Stock Appreciation Right grant will be evidenced by an Award Agreement that will specify the exercise price, the number of Shares with respect to which the Award is granted, the term of the Stock Appreciation Right, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine.

 

e)

Expiration of Stock Appreciation Rights. A Stock Appreciation Right granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement; provided, however, that the term will be no more than ten (10) years from the date of grant thereof. Notwithstanding the foregoing, the rules of Section 6(d) above also will apply to Stock Appreciation Rights.

 

f)

Payment of Stock Appreciation Right Amount. Upon exercise of a Stock Appreciation Right, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying:

 

(i)

The difference between the Fair Market Value of a Share on the date of exercise over the “stock appreciation right exercise price,” as defined under Treasury Regulation Section 1.409A-1(b)(i)(B)(2), i.e., the Fair Market Value of a Share on the date of grant of the Stock Appreciation Right; times

 

(ii)

The number of Shares with respect to which the Stock Appreciation Right is exercised.

 

At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in Shares of equivalent value, or in some combination thereof.

 

 

8. Restricted Stock.

 

a)

Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine.

 

b)

Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine.

 

c)

Transferability. Except as provided in this Section 8, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until such Shares become non-forfeitable at the end of the applicable Period of Restriction.

 

d)

Other Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.

 

e)

Removal of Restrictions. Except as otherwise provided in this Section 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction. The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed.

 

f)

Voting Rights. During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise in a manner not prohibited by the Award Agreement.

 

g)

Dividends and Other Distributions. During the Period of Restriction, Service Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. If any such dividends or distributions are paid in Shares, the Shares will be subject to the same restrictions on transferability and provisions for forfeiture as the Shares of Restricted Stock with respect to which they were paid.

 

h)

Return of Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan.

 

9. Restricted Stock Units.

 

a)

Grant. Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. Each Restricted Stock Unit grant will be evidenced by an Award Agreement that will specify such other terms and conditions as the Administrator, in its sole discretion, will determine in accordance with the terms and conditions of the Plan, including all terms, conditions, and restrictions related to the grant, the number of Restricted Stock Units and the form of payout, which, subject to Section 9(d) hereof, may be left to the discretion of the Administrator.

 

 

b)

Vesting Criteria and Other Terms. The Administrator will set vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. After the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any restrictions for such Restricted Stock Units. Each Award of Restricted Stock Units will be evidenced by an Award Agreement that will specify the vesting criteria, and such other terms and conditions as the Administrator, in its sole discretion will determine. The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed, subject to the prohibition on acceleration of the timing of distribution of deferred compensation subject to Section 409A of the Code, to the extent applicable to the Award.

 

c)

Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant will be entitled to receive a payout as specified in the Award Agreement.

 

d)

Form and Timing of Payment. Payment of earned Restricted Stock Units will be made as soon as practicable after the date(s) set forth in the Award Agreement, which shall satisfy the requirements of Section 409A of the Code, to the extent applicable to such Award. The Administrator, in its sole discretion, may pay earned Restricted Stock Units in cash, Shares, or a combination thereof. Shares represented by Restricted Stock Units that are fully paid in cash again will be available for grant under the Plan.

 

e)

Cancellation. On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be forfeited to the Company.

 

10. Performance Units and Performance Shares.

 

a)

Grant of Performance Units/Shares. Performance Units and Performance Shares may be granted to Service Providers at any time and from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator will have complete discretion in determining the number of Performance Units/Shares granted to each Participant.

 

b)

Value of Performance Units/Shares. Each Performance Unit will have an initial value that is established by the Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant.

 

c)

Performance Objectives and Other Terms. The Administrator will set performance objectives or other vesting provisions. The Administrator may set vesting criteria based upon the achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued employment), or any other basis determined by the Administrator in its discretion. Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specify the Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will determine.

 

 

d)

Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of Performance Units/Shares will be entitled to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been achieved. After the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such Performance Unit/Share.

 

e)

Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/Shares will be made as soon as practicable after the expiration of the applicable Performance Period or, if earlier, after the date on which a Participant’s interest in such Performance Units/Shares is no longer subject to a substantial risk of forfeiture, provided however, that in no event shall such payment be made after the later to occur of (i) December 31 of the year in which such risk of forfeiture lapses or (ii) two and one-half months after such risk of forfeiture lapses. The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof.

 

f)

Cancellation of Performance Units/Shares. On the date set forth in the Award Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan.

 

11. Leaves of Absence. Unless the Administrator provides otherwise, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. A Service Provider will not cease to be an Employee in the case of (i) any leave of absence approved by the Company, or (ii) transfers between locations of the Company or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months and one day following the commencement of such leave any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.

 

12. Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award transferable, such Award may only be transferred (i) by will, (ii) by the laws of descent and distribution, (iii) to a revocable trust, or (iv) as permitted by Rule 701 of the Securities Act of 1933, as amended.

 

 

13. Adjustments; Dissolution or Liquidation; Merger or Change in Control.

 

a)

Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Award, and the numerical Share limits set forth in Sections 3, 6, 7, 8, 9 and 10 hereof.

 

b)

Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, any corporate separation or division, including, but not limited to, a split-up, a split-off or a spin-off; a reverse merger in which the Company is the surviving entity, but the shares of Company stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or the transfer of more than fifty percent (50%) of the then outstanding voting stock of the Company to another person or entity, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. The Company, to the extent permitted by applicable law but otherwise in its sole discretion may provide for: (i) the continuation Awards by the Company (if the Company is surviving entity or its parent; (ii) the assumption of the Plan and such outstanding Awards by the surviving entity or its parent; (iii) the substitution by the surviving entity or its parent of rights with substantially the same terms for such outstanding Awards; or (iv) the cancellation of such outstanding Rights without payment of any consideration provided that in the case of this clause (iv), the Administrator will provide notice of its intention to cancel Award and offer a reasonable opportunity to exercise vested Awards.

 

c)

Change in Control. In the event of a merger or Change in Control, each outstanding Award will be treated as the Administrator determines, including, without limitation, that each Award will be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation (the “Successor Corporation”). The Administrator will not be required to treat all Awards similarly in the transaction.

 

In the event that the Successor Corporation does not assume or substitute for the Award, the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock will lapse, and, with respect to Restricted Stock Units, Performance Shares and Performance Units, all Performance Goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met. In addition, if an Option or Stock Appreciation Right is not assumed or substituted for in the event of a Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period.

 

 

For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) or, in the case of a Stock Appreciation Right upon the exercise of which the Administrator determines to settle in cash or a Performance Share or Performance Unit which the Administrator can determine to settle in cash, the fair market value of the consideration received in the merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change in Control is not solely common stock of the Successor Corporation, the Administrator may, with the consent of the Successor Corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Performance Share or Performance Unit, for each Share subject to such Award (or in the case of Performance Units, the number of implied shares determined by dividing the value of the Performance Units by the per share consideration received by holders of Common Stock in the Change in Control), to be solely common stock of the Successor Corporation equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control.

 

Notwithstanding anything in this Section 13(c) to the contrary, an Award that vests, is earned or paid-out upon the satisfaction of one or more Performance Goals will not be considered assumed if the Company or its successor modifies any of such Performance Goals without the Participant’s consent; provided, however, a modification to such Performance Goals only to reflect the Successor Corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption.

 

14. Tax Withholding

 

a)

Withholding Requirements. At any time prior to or following the delivery of any Shares or cash pursuant to an Award (or exercise thereof), the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign or other taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise thereof).

 

b)

Withholding Arrangements. The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (i) paying cash, (ii) electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the minimum amount required to be withheld, (iii) delivering to the Company already-owned Shares having a Fair Market Value equal to the amount required to be withheld, or (iv) selling a sufficient number of Shares otherwise deliverable to the Participant through such means as the Administrator may determine in its sole discretion (whether through a broker or otherwise) equal to the amount required to be withheld. The amount of the withholding requirement will be deemed to include any amount which the Administrator agrees may be withheld at the time the election is made, not to exceed the amount determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld.

 

 

15. No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company, nor will they interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws.

 

16. Date of Grant. The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant.

 

17. Term of Plan. Subject to Section 21 hereof, the Plan will become effective upon its adoption by the Board (the “Effective Date”). It will continue in effect for a term of ten (10) years unless terminated earlier under Section 18 hereof; provided, however, that such expiration shall not affect Awards then outstanding, and the terms and conditions of this Plan shall continue to apply to such Awards.

 

18. Amendment and Termination of the Plan.

 

a)

Amendment and Termination. The Administrator may at any time amend, alter, suspend, or terminate the Plan.

 

b)

Stockholder Approval. Subject to Section 21, the Company will obtain stockholder approval of the Plan and any Plan amendment to the extent necessary or desirable to comply with Applicable Laws.

 

c)

Effect of Amendment or Termination. No amendment, alteration, suspension, or termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.

 

19. Conditions Upon Issuance of Shares.

 

a)

Legal Compliance. Shares will not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance.

 

 

b)

Investment Representations. As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

 

c)

Restrictive Legends. All Award Agreements and all securities of the Company issued pursuant thereto shall bear such legends regarding restrictions on transfer and such other legends as the appropriate officer of the Company shall determine to be necessary or advisable to comply with applicable securities and other laws.

 

20. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority will not have been obtained.

 

21. Stockholder Approval. The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws, including without limitation Section 422 of the Code. In the event that stockholder approval is not obtained within twelve (12) months after the date the Plan is adopted by the Board, all Incentive Stock Options granted hereunder shall be void ab initio and of no effect. Notwithstanding any other provisions of the Plan, no Awards shall be exercisable until the date of such stockholder approval.

 

22. Notification of Election Under Section 83 of the Code. If any Service Provider shall, in connection with the acquisition of Shares under the Plan, make an election permitted under either Section 83(b) or Section 83(i) of the Code, such Service Provider shall notify the Company of such election within ten (10) days of filing notice of the election with the Internal Revenue Service and provide the Company with a copy thereof, in addition to any filing and a notification required pursuant to regulations issued under the authority of Sections 83(b) or 83(i) of the Code, as applicable. A Service Provider shall not be permitted to make a Section 83(b) election with respect to an Award of a Restricted Stock Unit.

 

23. Notification Upon Disqualifying Disposition Under Section 421(b) of the Code. Each Service Provider shall notify the Company of any disposition of Shares issued pursuant to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), within ten (10) days of such disposition.

 

24. 409A Timing Rule for Specified Employees. If at the time of a Service Provider’s separation from service, such individual is considered a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, and if any payment that such Service Provider becomes entitled to under the Plan or any Award is deemed payable on account of such individual’s separation from service, then no such payment shall be made prior to the date that is the earlier of (i) six months and one day after the individual’s separation from service, or (ii) the individual’s death.

 

 

25. Governing Law. The law of the State of Delaware shall govern all questions concerning the construction, validity, and interpretation of this Plan, without regard to such state’s conflict of laws rules, subject to the Company’s intention that the Plan satisfy the requirements of jurisdictions outside of the United States of America with respect to Awards subject to such jurisdictions.

 

26. General Provisions.

 

a)

No Rights as Stockholder. Except as specifically provided in this Plan, a Participant or a transferee of an Award shall have no rights as a stockholder with respect to any shares covered by the Award until the date of the issuance of such shares to the Participant, and no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions of other rights for which the record date is prior to the date such Stock is issued.

 

b)

Other Compensation Arrangements. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.

 

c)

Disqualifying Dispositions. Any participant who shall make a “disposition” (as defined in Section 424 of the Code) of all or any portion of an Incentive Stock Option within two (2) years from the date of grant of such Incentive Stock Option or within (1) year after the issuance of the shares of Stock acquired upon exercise of such Incentive Stock Option shall be required to immediately advise the Company in writing as to the occurrence of the sale and the price realized upon the sale of such shares of Stock.

 

d)

Regulatory Matters Each Stock Option Agreement and Stock Purchase Agreement shall provide that no shares shall be purchased or sold thereunder unless and until (i) any then applicable requirements of state or federal laws and regulatory agencies shall have been fully complied with to the satisfaction of the Company and its counsel and (ii) if required to do so by the Company, the Optionee or Offeree shall have executed and delivered to the Company a letter of investment intent in such form and containing such provisions as the Board or Committee may require.

 

e)

Delivery. Upon exercise of an Award granted under this Plan, the Company shall issue Stock or pay any amounts due within a reasonable period of time thereafter. Subject to any statutory obligations the Company may otherwise have, for purposes of this Plan, thirty days shall be considered a reasonable period of time.

 

f)

Other Provisions. The Stock Option Agreements and Stock Purchase Agreements authorized under the Plan may contain such other provisions not inconsistent with this Plan, including, without limitation, restrictions upon the exercise of the Rights, as the Administrator may deem advisable.

 

g)

Section 409A. Awards under the Plan are intended either to be exempt from the rules of Section 409A of the Code or to satisfy those rules, and the Plan and such awards shall be construed accordingly. Granted rights may be modified at any time, in the Administrator’s direction, so as to increase the likelihood of exemption from or compliance with the rules of Section 409A of the Code.

 

 

 

 

 

Exhibit 10.24

 

KAIROS PHARMA, LTD.

2355 Westwood Blvd., #139

Los Angeles CA 90064

 

[*], 2023

 

[NAME OF THE DIRECTOR CANDIDATE]

[ADDRESS OF THE DIRECTOR CANDIDATE]

 

Re: Director Offer Letter

 

Dear [Name]:

 

Kairos Pharma, Ltd. (the “Company”) thanks you in advance for providing your service as a member of its board of directors (the “Board”). We believe that your background and experience will be a significant asset to the Company, and we look forward to your participation on the Board. This letter agreement (this “Agreement”) shall constitute an agreement between you and the Company, effective [*], 2023 (the “Effective Date”), and contains all the terms and conditions relating to the services that you agree to provide to the Company.

 

1. Term. This Agreement is effective as of Effective Date. Your initial term as director following entry into this Agreement shall be for a term of one year and start on the Effective Date and continue until the annual meeting of the stockholders, subject to the provisions in Section 9 below or until your successor is duly elected and qualified. The position shall be up for re-election each year at the Company’s annual meeting of stockholders and upon re-election the terms and provisions of this Agreement shall remain in full force and effect.

 

2. Services. You shall render services as a member of the Board and as a member of one or more committees of the Board (hereinafter your “Duties”). During the term of this Agreement, you shall attend and participate in such number of meetings of the Board and any committees on which you serve as a member as regularly or specially called. You may attend and participate at each such meeting, via teleconference, video conference or in person. You shall consult with the other members of the Board as necessary via telephone, electronic mail, or other forms of correspondence.

 

3. Services for Others. You shall be free to represent or perform services for other persons during the term of this Agreement. However, you agree that you do not presently perform and do not intend to perform, during the term of this Agreement, similar Duties, consulting or other services for companies whose businesses are or would be, in any way, competitive with the Company (except for companies previously disclosed by you to the Company in writing). Should you propose to perform similar Duties, consulting or other services for any such company, you agree to notify the Company in writing in advance (specifying the name of the organization for whom you propose to perform such services) and to provide information to the Company sufficient to allow it to determine if the performance of such services would conflict with areas of interest to the Company.

 

 

4. Compensation. Assuming your material compliance with the terms of this Agreement, compensation for your services to the Company shall be as described in this section.

 

a. You will receive a $50,000 cash fee per annum, payable in equal quarterly installments, in arrears, subject to your continuing service as a member of the Board, with quarterly payments commencing 90 days after completion of the Company’ initial public offering (“IPO”). [In the case you will serve as the chair of the audit committee, you will receive an additional $10,000 cash fee.]

 

b. You will initially be granted options to purchase common stock valued at $50,000 (the “Options”), which Options will be exercisable at the per share price of the shares of common stock sold in the Company’s IPO. Such Options will be issuable under the Company’s 2023 Equity Incentive Plan and will vest annually in three substantially equal installments on the anniversary date of the grant.

 

c. You shall be reimbursed for reasonable expenses incurred by you in connection with the performance of your Duties (including travel expenses for in-person meetings).

 

5. D&O Insurance Policy. Prior to the Effective Date of this Agreement, the Company will maintain directors and officers liability insurance in a commercially reasonable amount.

 

6. No Assignment. Because of the personal nature of the services to be rendered by you, this Agreement may not be assigned by you without the prior written consent of the Company.

 

7. Confidential Information; Non-Disclosure. In consideration for your access to certain Confidential Information (as defined below) of the Company, in connection with your business relationship with the Company, you hereby represent and agree as follows:

 

a. Definition. For purposes of this Agreement the term “Confidential Information” means:

 

i. Any information which the Company possesses that has been created, discovered, or developed by or for the Company, and which has or could have commercial value or utility in the business in which the Company is engaged;

 

ii. Any information which is related to the business of the Company and is generally not known by non-Company personnel; or

 

iii. Confidential Information includes, without limitation, trade secrets and any information concerning products, processes, formulas, designs, inventions (whether or not patentable or registrable under copyright or similar laws, and whether or not reduced to practice), discoveries, concepts, ideas, improvements, techniques, methods, research, development and test results, specifications, data, know-how, software, formats, marketing plans, and analyses, business plans and analyses, strategies, forecasts, customer and supplier identities, characteristics and agreements.

 

b. Exclusions. Notwithstanding the foregoing, the term Confidential Information shall not include:

 

i. Any information which is, or otherwise becomes, generally available to the public other than as a result of a breach of the confidentiality portions of this Agreement, or any other agreement requiring confidentiality between the Company and you;

 

 

ii. Information received from a third party in rightful possession of such information who is not restricted from disclosing such information; and

 

iii. Information known by you prior to receipt of such information from the Company, which prior knowledge can be documented.

 

c. Documents. You agree that, without the express written consent of the Company, you will not remove from the Company’s premises any notes, formulas, programs, data, records, machines or any other documents or items which in any manner contain or constitute Confidential Information, nor will you make reproductions or copies of same. You shall promptly return any such documents or items, along with any reproductions or copies to the Company upon the Company’s demand, upon termination of this Agreement, or upon your termination or Resignation, as defined in Section 9 herein.

 

d. Confidentiality. You agree that you will hold in trust and confidence all Confidential Information and will not disclose to others, directly or indirectly, any Confidential Information or anything relating to such information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company. You further agree that you will not use any Confidential Information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company, and that the provisions of this paragraph (d) shall survive termination of this Agreement.

 

e. Ownership. You agree that the Company shall own all right, title, and interest (including patent rights, copyrights, trade secret rights, mask work rights, trademark rights, and all other intellectual and industrial property rights of any sort throughout the world) relating to any and all inventions (whether or not patentable), works of authorship, mask works, designations, designs, know-how, ideas and information made or conceived or reduced to practice, in whole or in part, by you during the term of this Agreement and that arise out of your Duties (collectively, “Inventions”) and you will promptly disclose and provide all Inventions to the Company. You agree to assist the Company, at its expense, to further evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce, and defend any rights assigned.

 

8. Non-Solicitation. During the term of your appointment, you shall not directly or indirectly solicit for employment any employee of the Company with whom you have had contact due to your appointment.

 

9. Termination and Resignation. Your membership on the Board may be terminated for any or no reason by a vote of the stockholders holding at least a majority of the shares of the Company’s issued and outstanding shares entitled to vote. Your membership on the Board may also be terminated for any or no reason at any meeting of the Board or by written consent of a majority of the Board at any time, or if you have been declared incompetent by an order of a court of competent jurisdiction or convicted of a felony. You may also terminate your membership on the Board for any or no reason by delivering your written notice of resignation to the Company (“Resignation”), and such Resignation shall be effective upon the time specified therein or, if no time is specified, upon receipt of the notice of Resignation by the Company. Upon the effective date of the termination or Resignation, your right to compensation hereunder will terminate subject to the Company’s obligations to pay you any compensation (including the vested portion of the Options or any other equity grant previously approved by the Board) that you have already earned and to reimburse you for approved expenses already incurred in connection with your performance of your Duties as of the effective date of such termination or Resignation. Any Options that have not vested as of the effective date of such termination or Resignation shall be forfeited and cancelled.

 

 

10. Governing Law. All questions with respect to the construction and/or enforcement of this Agreement, and the rights and obligations of the parties hereunder, shall be determined in accordance with the law of the State of Delaware applicable to agreements made and to be performed entirely in the State of Delaware.

 

11. Entire Agreement; Amendment; Waiver; Counterparts. This Agreement expresses the entire understanding with respect to the subject matter hereof and supersedes and terminates any prior oral or written agreements with respect to the subject matter hereof. Any term of this Agreement may be amended and observance of any term of this Agreement may be waived only with the written consent of the parties hereto. Waiver of any term or condition of this Agreement by any party shall not be construed as a waiver of any subsequent breach or failure of the same term or condition or waiver of any other term or condition of this Agreement. The failure of any party at any time to require performance by any other party of any provision of this Agreement shall not affect the right of any such party to require future performance of such provision or any other provision of this Agreement. This Agreement may be executed in separate counterparts each of which will be an original and all of which taken together will constitute one and the same agreement, and may be executed using facsimiles of signatures, and a facsimile of a signature shall be deemed to be the same, and equally enforceable, as an original of such signature.

 

12. Indemnification. The Company shall, to the maximum extent provided under applicable law, indemnify and hold you harmless from and against any expenses, including reasonable attorney’s fees, judgments, fines, settlements and other legally permissible amounts (“Losses”), incurred in connection with any proceeding arising out of, or related to, your performance of your Duties, other than any such Losses incurred as a result of your negligence or willful misconduct. The Company shall advance to you any expenses, including reasonable attorneys’ fees and costs of settlement, incurred in defending any such proceeding to the maximum extent permitted by applicable law. Such costs and expenses incurred by you in defense of any such proceeding shall be paid by the Company in advance of the final disposition of such proceeding promptly upon receipt by the Company of (a) written request for payment; (b) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought; and (c) an undertaking adequate under applicable law made by or on your behalf to repay the amounts so advanced if it shall ultimately be determined pursuant to any non-appealable judgment or settlement that you are not entitled to be indemnified by the Company.

 

13. Not an Employment Agreement. This Agreement is not an employment agreement and shall not be construed or interpreted to create any right of or for you to continue employment with the Company.

 

14. Acknowledgement. You accept this Agreement subject to the terms and provisions of this Agreement. You agree to accept as binding, conclusive and final all decisions or interpretations of the Board of the Company regarding any questions arising under this Agreement.

 

[Remainder of Page Intentionally Left Blank; Signature page follows]

 

 

This Agreement has been executed and delivered by the undersigned and is made effective as of the date set first set forth above.

 

	Sincerely,
	KAIROS PHARMA, LTD.
	By:
	Name:	John S. Yu, M.D.
	Title:	Chief Executive Officer

 

AGREED AND ACCEPTED:
Name: [Print name of the director candidate]

 

[Signature Page to Director Offer Letter]

 

 

Exhibit 10.25

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”) is entered into as of the ____ day of September, 2023, by and between Kairos Pharma, Ltd., a Delaware corporation (the “Company”), and John S. Yu an individual residing at the address set forth on Schedule A hereto (the “Executive”).

 

INTRODUCTION

 

WHEREAS, the Company is in the business of the development and commercialization of specialty pharmaceuticals (the “Business”);

 

WHEREAS, the Company wishes to employ the Executive under the title and capacity set forth on Schedule A hereto;

 

WHEREAS, the Executive desires to be employed by the Company in such capacity, subject to the terms of this Agreement;

 

WHEREAS, the Executive acknowledges that he will not be entitled to compensation under this Agreement until such time as the Company either completes an initial public offering (“IPO”) or otherwise becomes a publicly reporting company.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows:

 

1. Employment Period. The initial term of the Executive’s employment by the Company pursuant to this Agreement shall commence upon consummation of the Company’s IPO (the “Effective Date”) and shall continue for that period of calendar months from the Effective Date set forth on Schedule A hereto (the “Employment Period”). Thereafter, the Employment Period will automatically renew for successive periods of one (1) year each, with the terms of such Agreement to be adjusted from time to time by the Company’s board of directors (“Board”) (or committee thereof), unless either party shall have given to the other at least thirty (30) days’ prior written notice of their intention not to renew the Executive’s employment prior to the end of the Employment Period or the then applicable renewal term, as the case may be. In any event, the Employment Period may be terminated as provided herein.

 

2. Employment; Duties.

 

(a) Subject to the terms and conditions set forth herein, the Company hereby employs the Executive to act for the Company during the Employment Period in the capacity set forth on Schedule A hereto, and the Executive hereby accepts such employment. The duties and responsibilities of the Executive shall include such duties and responsibilities appropriate to such office and as are normally associated with and appropriate for such position and as the Company’s Board may from time to time reasonably assign to the Executive.

 

 

(b) Executive recognizes that during the period of Executive’s employment hereunder, Executive owes an undivided duty of loyalty to the Company, and Executive will use Executive’s good faith efforts to promote and develop the business of the Company and its subsidiaries (the Company’s subsidiaries from time to time, together with any other affiliates of the Company, the “Affiliates”). Executive shall devote a sufficient amount of Executive’s business time, attention and skills to satisfactorily fulfill the performance of Executive’s services as an executive of the Company. Recognizing and acknowledging that it is essential for the protection and enhancement of the brand name, reputation and business of the Company and the goodwill pertaining thereto, Executive shall perform the Executive’s duties under this Agreement professionally, in accordance with the applicable laws, rules and regulations and such standards, policies and procedures established by the Company and the industry from time to time.

 

(c) However, the parties agree that: (i) Executive may devote a reasonable amount of his time to civic, community, or charitable activities and may serve as a director of other corporations (provided that any such other corporation is not a competitor of the Company, as determined by the Board) and to other types of business or public activities not expressly mentioned in this paragraph and (ii) Executive may participate as a non-employee director and/or investor in other companies and projects as disclosed by Executive to, and approved by, the Board, so long as Executive’s responsibilities with respect thereto do not conflict or interfere with the faithful performance of Executive’s duties to the Company.

 

3. Place of Employment. The Executive’s services shall be performed at any location at which the Company now or hereafter has a business facility, at employee’s home office, or at any other location where Executive’s presence is necessary to perform his duties. The parties acknowledge that the Executive may be required to travel in connection with the performance of his duties hereunder.

 

4. Base Salary. The Executive shall be entitled to receive a salary from the Company during the Employment Period at a rate per year indicated on Schedule A hereto (the “Base Salary”), which Base Salary shall commence upon the Company’s completion of an IPO or upon the Company becoming a publicly reporting company under the Securities Exchange Act of 1934, as amended, whichever comes first. Once the Board has established the Base Salary, such Base Salary shall be payable in monthly installments in accordance with the Company’s customary payroll practices. The Executive’s Base Salary may be increased on each anniversary of the Effective Date, at the Board’s sole discretion.

 

5. Bonus.

 

(a) The Executive shall be eligible to receive an annual cash bonus (the “Annual Bonus”), which shall be earned by the Executive based upon the level of achievement of specific operational, financial or other milestones by the Company established by the Board in consultation with the Executive (the “Milestones”), and based upon the Executive’s performance of the Executive Duties set forth on Schedule A. The amount of the Annual Bonus, if any, and the method of payment of all or any portion of any Annual Bonus (which will be paid in cash) shall be determined by the Board in its sole discretion. If the Board determines that any portion of the Annual Bonus is to be paid in cash, such amount shall be payable in U.S. dollars within ten (10) days of the filing with the Securities and Exchange Commission of the Company’s annual report on Form 10-K.

 

 

(b) The Executive shall be eligible to participate in any other bonus or incentive program established by the Company for executives of the Company.

 

6. Other Benefits.

 

(a) Grant of Restricted Stock Units. The Executive shall be entitled to receive a number of restricted stock units (“RSUs”) as set forth on Schedule A hereto, issuable under the Company’s 2023 Equity Incentive Plan, which will vest annually in one-third increments commencing on following the date of the grant of such RSUs, in accordance with the terms of a separate Grant Agreement, a form of which is attached hereto as Exhibit A. Any additional equity awards to the Executive shall be at the option of the Board.

 

(b) Restrictions. Any and all shares of stock, options, restricted stock units and other equity awards granted to or owned by the Executive will be subject to the share ownership guidelines and insider trading and blackout policies adopted from time to time by the Board for senior executives of the Company and will also be subject to applicable holding periods and transaction reporting requirements under applicable securities laws.

 

(c) Insurance and Other Benefits. During the Employment Period, the Executive and the Executive’s dependents shall be entitled to participate in any Company insurance programs and any applicable benefit plans, as the same may be adopted and/or amended from time to time (the “Benefits”). The Executive shall be bound by all of the policies and procedures relating to Benefits established by the Company from time to time.

 

(d) Vacation; Personal Days. During the Employment Period, the Executive shall be entitled to an annual vacation of 30 working days, such duration consistent with the Company’s policies from time to time, as determined by the Board. The Executive shall be entitled to paid personal days on a basis consistent with the Company’s other senior executives, as determined by the Board.

 

(e) Expense Reimbursement. The Company shall reimburse the Executive for all reasonable business, promotional, travel and entertainment expenses (“Reimbursable Expenses”) incurred or paid by the Executive during the Employment Period in the performance of Executive’s services under this Agreement on a basis consistent with the Company’s other senior executives, as determined by the Board, provided that the Executive furnishes to the Company appropriate documentation required by the Internal Revenue Code and/or other taxing authorities in a timely fashion in connection with such expenses and shall furnish such other documentation and accounting as the Company may from time to time reasonably request.

 

 

7. Termination; Compensation Due Upon Termination of Employment. The Executive’s employment with the Company shall be entirely “at-will,” meaning that either the Executive or the Company may terminate such employment relationship by terminating this Agreement in writing delivered to the other party at any time for any reason or for no reason at all, subject, however, to the terms of this Section 7. The Executive’s right to compensation for periods after the date his employment with the Company terminates shall be determined in accordance with the provisions of paragraphs (a) through (e) below.

 

(a) Voluntary Resignation; Termination without Cause.

 

(i) Voluntary Resignation. The Executive may terminate his employment at any time upon thirty (30) days prior written notice to the Company. In the event of the Executive’s voluntary termination of employment other than for Good Reason (as defined below), the Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 4 or 5, except as otherwise required by this Agreement or by applicable law, to provide the benefits described in Section 6 for periods after the date on which the Executive’s employment with the Company terminates due to the Executive’s voluntary resignation, except for the payment of the Executive’s Base Salary accrued through the date of such resignation.

 

(ii) Termination without Cause.

 

(A) If the Executive’s employment is terminated by the Company without Cause (as defined below): (1) the Company shall continue to pay the Executive the Base Salary (at the rate in effect on the date the Executive’s employment is terminated) until the end of the Severance Period (as defined below), (y) with respect to the Annual Bonus, to the extent the Milestones are achieved or, in the absence of Milestones, the Board has, in its sole discretion, otherwise determined an amount for the Executive’s bonus for the current Employment Period, pay the Executive a pro rata portion of the Annual Bonus for the year of the Employment Period on the date such Annual Bonus would have been payable to the Executive had the Executive remained employed by the Company, and (z) pay any other accrued compensation and Benefits; and (2) any of the Executive’s unvested RSUs as set forth on Schedule A attached hereto shall automatically vest upon the Executive’s termination without Cause. The Executive shall have no further rights under this Agreement or otherwise to receive any other compensation or benefits after such termination of employment.

 

(B) If, following a termination of employment without Cause, the Executive breaches the provisions of Sections 8, 9 or 10 hereof, the Executive shall not be eligible, as of the date of such breach, for the payments and benefits described in Section 7(a)(ii)(A) above, and any and all obligations and agreements of the Company with respect to such payments shall thereupon cease.

 

 

(b) Discharge for Cause. Upon written notice to the Executive, the Company may terminate the Executive’s employment for “Cause” if any of the following events shall occur:

 

(i) any act or omission that constitutes a material breach by the Executive of any of his obligations under this Agreement;

 

(ii) the willful and continued failure or refusal of the Executive to satisfactorily perform the duties reasonably required of him as an employee of the Company;

 

(iii) the Executive’s conviction of, or plea of nolo contendere to, (i) any felony or (ii) a crime involving dishonesty or moral turpitude or which could reflect negatively upon the Company or otherwise impair or impede its operations;

 

(iv) the Executive’s engaging in any misconduct, negligence, act of dishonesty (including, without limitation, theft or embezzlement), violence, threat of violence or any activity that could result in any violation of federal securities laws, in each case, that is injurious to the Company or any of its Affiliates;

 

(v) the Executive’s material breach of a written policy of the Company or the rules of any governmental or regulatory body applicable to the Company;

 

(vi) the Executive’s refusal to follow the directions of the Board, unless such directions are, in the written opinion of legal counsel, illegal or in violation of applicable regulations;

 

(vii) any other willful misconduct by the Executive which is materially injurious to the financial condition or business reputation of the Company or any of its Affiliates, or

 

(viii) the Executive’s breach of his obligations under Section 8, 9 or 10 hereof.

 

In the event Executive is terminated for Cause, the Company shall have no obligation to make payments to Executive in accordance with the provisions of Sections 4 or 5, or, except as otherwise required by law, to provide the benefits described in Section 6, for periods after the Executive’s employment with the Company is terminated on account of the Executive’s discharge for Cause except for the Executive’s then applicable Base Salary accrued through the date of such termination.

 

(c) Disability. The Company shall have the right, but shall not be obligated to, terminate the Executive’s employment hereunder in the event the Executive becomes disabled such that he is unable to discharge his duties to the Company for a period of ninety (90) consecutive days or one hundred twenty (120) days in any one hundred eighty (180) consecutive day period (unless longer periods are not required under applicable local labor regulations) (a “Permanent Disability”). In the event of a termination of employment due to a Permanent Disability, the Company shall be obligated to continue to make payments to the Executive in an amount equal to the then applicable Base Salary for the Severance Period (as defined below), payable in the form of salary continuation for the applicable Severance Period after the Executive’s employment with the Company is terminated due to a Permanent Disability. A determination of a Permanent Disability shall be made by a physician satisfactory to both the Executive and the Company; provided, however, that if the Executive and the Company do not agree on a physician, the Executive and the Company shall each select a physician and those two physicians together shall select a third physician, whose determination as to a Permanent Disability shall be binding on all parties.

 

 

(d) Death. The Executive’s employment hereunder shall terminate upon the death of the Executive. The Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 4 or 5, or, except as otherwise required by law or the terms of any applicable benefit plan, to provide the benefits described in Section 6 for periods after the date of the Executive’s death except for then applicable Base Salary earned and accrued through the date of death, payable to the Executive’s beneficiary, as the Executive shall have indicated in writing to the Company (or if no such beneficiary has been designated, to Executive’s estate).

 

(e) Termination for Good Reason. The Executive may terminate this Agreement at any time for Good Reason. In the event of termination under this paragraph (e), the Company shall pay to the Executive severance in an amount equal to the Executive’s then applicable Base Salary for a period equal to the number of months set forth on Schedule A hereto (the “Severance Period”), subject to the Executive’s continued compliance with Sections 8, 9 and 10 of this Agreement, payable in the form of salary continuation for the applicable Severance Period following the Executive’s termination, and subject to the Company’s regular payroll practices and required withholdings. Such severance shall be reduced by any cash remuneration paid to the Executive because of the Executive’s employment or self-employment during the Severance Period. The Executive shall continue to receive all Benefits (either through the Company or an Affiliate) during the Severance Period. The Executive shall have no further rights under this Agreement or otherwise to receive any other compensation or benefits after such resignation. For the purposes of this Agreement, “Good Reason” shall mean any of the following (without Executive’s express written consent):

 

(i) the assignment to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed on the Effective Date;

 

(ii) removal of the Executive from his position as indicated on Schedule A hereto, or the assignment to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed under this Agreement, within twelve (12) months after a Change of Control (as defined below);

 

(iii) a reduction by the Company in the Executive’s then applicable Base Salary or other compensation, unless said reduction is pari passu with other senior executives of the Company;

 

 

(iv) the taking of any action by the Company that would, directly or indirectly, materially reduce the Executive’s benefits, unless said reductions are pari passu with other senior executives of the Company; or

 

(v) a breach by the Company of any material term of this Agreement that is not cured by the Company within thirty (30) days following receipt by the Company of written notice thereof.

 

For purposes of this Agreement, “Change of Control” shall mean the occurrence of any one or more of the following: (i) the accumulation, whether directly, indirectly, beneficially or of record, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of 50% or more of the shares of the outstanding equity securities of the Company, (ii) a merger or consolidation of the Company in which the Company does not survive as an independent company or upon the consummation of which the holders of the Company’s outstanding equity securities prior to such merger or consolidation own less than 50% of the outstanding equity securities of the Company after such merger or consolidation, or (iii) a sale of all or substantially all of the assets of the Company; provided, however, that the following acquisitions shall not constitute a Change of Control for the purposes of this Agreement: (A) any acquisitions of common stock or securities convertible into common stock directly from the Company, or (B) any acquisition of common stock or securities convertible into common stock by any employee benefit plan (or related trust) sponsored by or maintained by the Company.

 

(f) Notice of Termination. Any termination of employment by the Company or the Executive shall be communicated by a written “Notice of Termination” to the other party hereto given in accordance with Section 16 of this Agreement. In the event of a termination by the Company for Cause, the Notice of Termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) specify the date of termination, which date shall be the date of such notice. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

(g) Resignation of Executive Officer. The termination of the Executive’s employment for any reason will constitute the Executive’s resignation from (i) any director, officer, or employee position the Executive has with the Company or any of its Affiliates, and (ii) all fiduciary positions (including as a trustee) the Executive holds with respect to any employee benefit plans or trusts established by the Company. The Executive agrees that this Agreement shall serve as written notice of resignation in this circumstance, unless otherwise required by any plan or applicable law.

 

 

8. Non-Competition; Non-Solicitation.

 

(a) For the duration of the Employment Period and, unless the Company terminates the Executive’s employment without Cause, during the Severance Period (the “Non-compete Period”), the Executive shall not, directly or indirectly, except as specifically provided in the last sentence of Section 2(c) hereof, engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend any credit to, or render services or advice to, any business, firm, corporation, partnership, association, joint venture or other entity that engages or conducts any business the same as or substantially similar to the Business or any other business engaged in or proposed to be engaged in or conducted by the Company and/or any of its Affiliates during the Employment Period, or then included in the future strategic plan of the Company and/or any of its Affiliates, anywhere within North America; provided, however, that the Executive may own less than 5% in the aggregate of the outstanding shares of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise), other than any such enterprise with which the Company competes or is currently engaged in a joint venture, if such securities are of a class listed on any national or regional securities exchange or have been registered under Section 12(b) or (g) of the Exchange Act.

 

(b) During the Employment Period and for a period of twelve (12) months following termination of the Executive’s employment with the Company, the Executive shall not:

 

(i) solicit or hire, or attempt to recruit, persuade, solicit or hire, any employee, or independent contractor of, or consultant to, the Company, or its Affiliates, to leave the employment (or independent contractor relationship) thereof, whether or not any such employee or independent contractor is party to an employment agreement; or

 

(ii) attempt in any manner to solicit or accept from any customer or client of the Company or any of its Affiliates, with whom the Company or any of its Affiliates had significant contact during the term of this Agreement, business of the kind or competitive with the business done by the Company or any of its Affiliates with such customer or to persuade or attempt to persuade any such customer to cease to do business or to reduce the amount of business which such customer has customarily done or is reasonably expected to do with the Company or any of its Affiliates or if any such customer elects to move its business to a person other than the Company or any of its Affiliates, provide any services (of the kind or competitive with the Business of the Company or any of its Affiliates) for such customer, or have any discussions regarding any such service with such customer, on behalf of such other person.

 

(c) The Executive recognizes and agrees that because a violation by the Executive of his obligations under this Section will cause irreparable harm to the Company that would be difficult to quantify and for which money damages would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any such violation, without the necessity of posting a bond. The Non-compete Period will be extended by the duration of any violation by the Executive of any of his obligations under this Section.

 

 

(d) The Executive expressly agrees that the character, duration, and scope of the covenant not to compete are reasonable in light of the circumstances as they exist at the date upon which this Agreement has been executed. However, should a determination nonetheless be made by a court of competent jurisdiction at a later date that the character, duration or geographical scope of the covenant not to compete is unreasonable in light of the circumstances as they then exist, then it is the intention of the Executive, on the one hand, and the Company, on the other, that the covenant not to compete shall be construed by the court in such a manner as to impose only those restrictions on the conduct of the Executive which are reasonable in light of the circumstances as they then exist and necessary to assure the Company of the intended benefit of the covenant not to compete.

 

9. Confidentiality.

 

(a) The Executive understands that the Company and/or its Affiliates, from time to time, may impart to the Executive confidential information, whether such information is written, oral, electronic, or graphic.

 

(b) For purposes of this Agreement, “Confidential Information” means information, which is used in the business of the Company or its Affiliates and (i) is proprietary to, about or created by the Company or its Affiliates, (ii) gives the Company or its Affiliates some competitive business advantage or the opportunity of obtaining such advantage or the disclosure of which could be detrimental to the interests of the Company or its Affiliates, (iii) is designated as Confidential Information by the Company or its Affiliates, is known by the Executive to be considered confidential by the Company or its Affiliates, or from all the relevant circumstances should reasonably be assumed by the Executive to be confidential and proprietary to the Company or its Affiliates, or (iv) is not generally known by non-Company personnel. Such Confidential Information includes, without limitation, the following types of information and other information of a similar nature (whether or not reduced to writing or designated as confidential):

 

(i) internal personnel and financial information of the Company or its Affiliates, vendor information (including vendor characteristics, services, prices, lists and agreements), purchasing and internal cost information, internal service and operational manuals, and the manner and methods of conducting the business of the Company or its Affiliates;

 

(ii) marketing and development plans, price and cost data, price and fee amounts, pricing and billing policies, bidding, quoting procedures, marketing techniques, forecasts and forecast assumptions and volumes, and future plans and potential strategies of the Company or its Affiliates which have been or are being discussed;

 

 

(iii) names of customers and their representatives, contracts (including their contents and parties), customer services, and the type, quantity, specifications and content of products and services purchased, leased, licensed or received by customers of the Company or its Affiliates; and

 

(iv) confidential and proprietary information provided to the Company or its Affiliates by any actual or potential customer, government agency or other third party (including businesses, consultants and other entities and individuals).

 

The Executive hereby acknowledges the Company’s exclusive ownership of such Confidential Information.

 

(c) The Executive agrees as follows: (1) only to use the Confidential Information to provide services to the Company and its Affiliates; (2) only to communicate the Confidential Information to fellow employees, agents and representatives on a need-to-know basis; and (3) not to otherwise disclose or use any Confidential Information, except as may be required by law or otherwise authorized by the Board. Upon demand by the Company or upon termination of the Executive’s employment, the Executive will deliver to the Company all manuals, photographs, recordings and any other instrument or device by which, through which or on which Confidential Information has been recorded and/or preserved, which are in the Executive’s possession, custody or control.

 

10. Executive’s Representation. The Executive hereby represents that the Executive’s entry into this Agreement and performance of the services hereunder will not violate the terms or conditions of any other agreement to which the Executive is a party.

 

11. Governing Law/Venue/Jurisdiction. This Agreement and any disputes or controversies arising hereunder shall be construed and enforced in accordance with and governed by the internal laws of the State of California without regard to the conflicts of laws principles thereof. Venue and jurisdiction of any suite or cause of action arising under this Agreement shall lie exclusively in the County of Los Angeles, California or the U.S. District court for the Central District of California.

 

12. Public Company Obligations; Indemnification.

 

(a) Executive acknowledges that the Company intends to become a publicly reporting company whose shares of common stock will be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and whose common stock will be registered under the Exchange Act, and that, after the Company becomes a publicly reporting company, this Agreement will be subject to the public filing requirements of the Exchange Act. In addition, both parties acknowledge that the Executive’s compensation and perquisites (each as determined by the rules of the US Securities and Exchange Commission (the “SEC”) or any other regulatory body or exchange having jurisdiction) (which may include benefits or regular or occasional aid/assistance, such as recreation, club memberships, meals, education for his family, vehicle, lodging or clothing, occasional bonuses or anything else he receives, during the Employment Period and any renewals thereof, in cash or in kind) paid or payable or received or receivable under this Agreement or otherwise, and his transactions and other dealings with the Company, may be required to be publicly disclosed.

 

 

(b) Executive acknowledges and agrees that the applicable insider trading rules, transaction reporting rules, limitations on disclosure of non-public information and other requirements set forth in the Securities Act, the Exchange Act and rules and regulations promulgated by the SEC may apply to this Agreement and Executive’s employment with the Company.

 

(c) Executive (on behalf of himself, as well as the Executive’s executors, heirs, administrators and assigns) absolutely and unconditionally agrees to indemnify and hold harmless the Company and all of its past, present and future affiliates, executors, heirs, administrators, shareholders, employees, officers, directors, attorneys, accountants, agents, representatives, predecessors, successors and assigns from any and all claims, debts, demands, accounts, judgments, causes of action, equitable relief, damages, costs, charges, complaints, obligations, controversies, actions, suits, proceedings, expenses, responsibilities and liabilities of every kind and character whatsoever (including, but not limited to, reasonable attorneys’ fees and costs) in the event of Executive’s breach of any obligation of Executive under the Securities Act, the Exchange Act, any rules promulgated by the SEC and any other applicable federal, state or foreign laws, rules, regulations or orders.

 

13. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersedes and cancels any and all previous agreements, both written and oral, regarding the subject matter hereof between the parties hereto. This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto.

 

14. Notices. All notices, requests, demands and other communications called for or contemplated hereunder shall be in writing and shall be deemed to have been given when delivered to the party to whom addressed or when sent by telecopy (if promptly confirmed by registered or certified mail, return receipt requested, prepaid and addressed) to the parties, their successors in interest, or their assignees at the following addresses, or at such other addresses as the parties may designate by written notice in the manner aforesaid:

 

	(a)	to the Company at:
		Kairos Pharma, Ltd.
		2355 Westwood Blvd., #139
		Los Angeles CA 90064
		(310) 948-2356
		Attn: Chief Executive Officer
		Email: john.yu@cshs.org
		with a copy to:
		Michelman & Robinson LLP
		605 Third Avenue
		30th Floor
		New York, NY 10158
		Attn: Megan J. Penick, Esq.
		Email: mpenick@mrllp.com
	(b)	to the Executive as set forth on Schedule A hereto.

 

 

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided for in this Section, be deemed given upon facsimile confirmation, (iii) if delivered by mail in the manner described above to the address as provided for in this Section, be deemed given on the earlier of the third business day following mailing or upon receipt and (iv) if delivered by overnight courier to the address as provided in this Section, be deemed given on the earlier of the first business day following the date sent by such overnight courier or upon receipt (in each case regardless of whether such notice, request or other communication is received by any other person to whom a copy of such notice is to be delivered pursuant to this Section). Either party may, by notice given to the other party in accordance with this Section, designate another address or person for receipt of notices hereunder.

 

15. Severability. If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those as to which it is invalid or unenforceable, shall be considered severable and shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended and given such interpretation as to achieve the economic intent of this Agreement.

 

16. Waiver. The failure of any party to insist in any one instance or more upon strict performance of any of the terms and conditions hereof, or to exercise any right or privilege herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to remain in full force and effect. Any waiver by any party of any violation of, breach of or default under any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other provision of this Agreement.

 

17. Successors and Assigns. This Agreement shall be binding upon the Company and any successors and assigns of the Company. Neither this Agreement nor any right or obligation hereunder may be assigned by the Executive. The Company may assign this Agreement and its right and obligations hereunder, in whole or in part.

 

18. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Additionally, a facsimile counterpart of this Agreement shall have the same effect as an originally executed counterpart.

 

19. Headings. Headings in this Agreement are for reference purposes only and shall not be deemed to have any substantive effect.

 

20. Opportunity to Seek Advice. The Executive acknowledges and confirms that the Executive has had the opportunity to seek such legal, financial, and other advice and representation as the Executive has deemed appropriate in connection with this Agreement, that the Executive is fully aware of its legal effect, and that Executive has entered into it freely based on the Executive’s judgment and not on any representations or promises other than those contained in this Agreement.

 

21. Withholding and Payroll Practices. All salary, severance payments, bonuses or benefits payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law and shall be paid in the ordinary course pursuant to the Company’s then existing payroll practices.

 

[The next page is the signature page.]

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

	Kairos Pharma, Ltd.
	By:
	Name:	John S. Yu, M.D.
	Title:	Chief Executive Officer and Chairman of the Board of Directors

 

		EXECUTIVE:
		John S. Yu

 

 

Schedule A

 

1.	Employment Period: 12 months.
2.	Employment
	a. Title: Chief Executive Officer and Chairman of the Board of Directors
	b. Executive Duties:
	In his capacity as Chief Executive Officer, the Executive shall perform such services, consistent with his office, including, but not limited to business planning, budgeting, managing and implementing all of the operational activities of the Company, and such other duties as shall be assigned to him by the Board of Directors of the Company from time to time, devoting such time and effort and performing all of the functions of the offices held by him, as directed by the Board of Directors from time to time.
4.	Base Salary: $175,000 per year, commence upon the Company’s completion of its IPO.
5(a).	Target Bonus: Cash or stock bonus in such amounts as to be determined by the Board of Directors or compensation committee of the Board of Directors.
6.	Initial Restricted Stock Grant: 14,000 Restricted Stock Units issuable under the Company’s 2023 Equity Incentive Plan, vesting annually over three years in one-third increments commencing on the first anniversary date of the grant of Restricted Stock Units, in accordance with the terms of the Restricted Stock Unit Grant Agreement.
7(e).	Severance Period: Six months.
14(b).	Executive Contact Information:
[*]

 

 

Exhibit A

 

Form of Grant Agreement

 

 

Exhibit 10.26

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”) is entered into as of the ____ day of September, 2023, by and between Kairos Pharma, Ltd., a Delaware corporation (the “Company”), and Doug Samuelson, an individual residing at the address set forth on Schedule A hereto (the “Executive”).

 

INTRODUCTION

 

WHEREAS, the Company is in the business of the development and commercialization of specialty pharmaceuticals (the “Business”);

 

WHEREAS, the Company wishes to employ the Executive under the title and capacity set forth on Schedule A hereto;

 

WHEREAS, the Executive desires to be employed by the Company in such capacity, subject to the terms of this Agreement; and

 

WHEREAS, the Executive acknowledges that he will not be entitled to compensation under this Agreement until such time as the Company either completes an initial public offering or otherwise becomes a publicly reporting company.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows:

 

1. Employment Period. The initial term of the Executive’s employment by the Company pursuant to this Agreement shall commence upon the consummation of the Company’s IPO (the “Effective Date”) and shall continue for that period of calendar months from the Effective Date set forth on Schedule A hereto (the “Employment Period”). Thereafter, the Employment Period will automatically renew for successive periods of one (1) year each, with the terms of such Agreement to be adjusted from time to time by the Company’s board of directors (the “Board”) (or a committee thereof), unless either party shall have given to the other at least thirty (30) days’ prior written notice of their intention not to renew the Executive’s employment prior to the end of the Employment Period or the then applicable renewal term, as the case may be. In any event, the Employment Period may be terminated as provided herein.

 

2. Employment; Duties.

 

(a) Subject to the terms and conditions set forth herein, the Company hereby employs the Executive to act for the Company during the Employment Period in the capacity set forth on Schedule A hereto, and the Executive hereby accepts such employment. The duties and responsibilities of the Executive shall include such duties and responsibilities appropriate to such office and as are normally associated with and appropriate for such position and as the Company’s board of directors (the “Board”) may from time to time reasonably assign to the Executive.

 

 

(b) Executive recognizes that during the period of Executive’s employment hereunder, Executive owes an undivided duty of loyalty to the Company, and Executive will use Executive’s good faith efforts to promote and develop the business of the Company and its subsidiaries (the Company’s subsidiaries from time to time, together with any other affiliates of the Company, the “Affiliates”). Executive shall devote a sufficient amount of Executive’s business time, attention and skills to satisfactorily fulfill the performance of Executive’s services as an executive of the Company. Recognizing and acknowledging that it is essential for the protection and enhancement of the brand name, reputation and business of the Company and the goodwill pertaining thereto, Executive shall perform the Executive’s duties under this Agreement professionally, in accordance with the applicable laws, rules and regulations and such standards, policies and procedures established by the Company and the industry from time to time.

 

(c) However, the parties agree that: (i) Executive may devote a reasonable amount of his time to civic, community, or charitable activities and may serve as a director of other corporations (provided that any such other corporation is not a competitor of the Company, as determined by the Board) and to other types of business or public activities not expressly mentioned in this paragraph and (ii) Executive may participate as a director and/or investor in, or perform services for, other companies and projects as disclosed by Executive to, and approved by, the Board, so long as Executive’s responsibilities with respect thereto do not conflict or interfere with the faithful performance of Executive’s duties to the Company.

 

3. Place of Employment. The Executive’s services shall be performed at any location at which the Company now or hereafter has a business facility, at employee’s home office, or at any other location where Executive’s presence is necessary to perform his duties. The parties acknowledge that the Executive may be required to travel in connection with the performance of his duties hereunder.

 

4. Base Salary. The Executive shall be entitled to receive a salary from the Company during the Employment Period at a rate per year indicated on Schedule A hereto (the “Base Salary”), which Base Salary shall commence upon the Company’s completion of a cross-over round of financing, an initial public offering (“IPO”) or upon the Company becoming a publicly reporting company under the Securities Exchange Act of 1934, as amended, whichever comes first. Once the Board has established the Base Salary, such Base Salary shall be payable in monthly installments in accordance with the Company’s customary payroll practices. The Executive’s Base Salary may be increased on each anniversary of the Effective Date, at the Board’s sole discretion.

 

5. Bonus.

 

(a) The Executive shall be eligible to receive an annual cash bonus (the “Annual Bonus”), which shall be earned by the Executive based upon the level of achievement of specific operational, financial or other milestones by the Company established by the Board in consultation with the Executive (the “Milestones”) and based upon the Executive’s performance of the Executive Duties set forth on Schedule A. The amount of the Annual Bonus, if any, and the method of payment of all or any portion of any Annual Bonus (which will be paid in cash) shall be determined by the Board in its sole discretion. If the Board determines that any portion of the Annual Bonus is to be paid in cash, such amount shall be payable in U.S. dollars within ten (10) days of the filing with the Securities and Exchange Commission of the Company’s annual report on Form 10-K.

 

(b) The Executive shall be eligible to participate in any other bonus or incentive program established by the Company for executives of the Company.

 

 

6. Other Benefits.

 

(a) Annual Grant of Restricted Stock Units. The Executive shall be entitled to receive a number of restricted stock units (“RSUs”) on an annual basis as set forth on Schedule A hereto, which RSUs are issuable under the Company’s 2023 Equity Incentive Plan and will vest annually in one-third increments commencing on the first anniversary date of the grant of such RSUs, in accordance with the terms of a separate Grant Agreement, a form of which is attached hereto as Exhibit A. Any additional equity awards to the Executive shall be at the option of the Board.

 

(b) Invoice Payment in Restricted Stock Units. The Executive shall receive compensation for work performed to date following presentation by Executive of invoices for such services (the “Invoices”), which Invoice payment shall be made to Executive in the form of RSUs, which RSUs will calculated at 1.2x the total amount of the Invoices divided by the Company’s IPO per share price.

 

(c) Change of Control. In the event of a Change of Control (as defined below), Executive shall be entitled to receive five years’ worth of RSUs following such Change of Control, with all such RSUs to vest immediately upon the Change of Control transaction.

 

(d) Restrictions. Any and all shares of stock, options, restricted stock units and other equity awards granted to or owned by the Executive will be subject to the share ownership guidelines and insider trading and blackout policies adopted from time to time by the Board for senior executives of the Company and will also be subject to applicable holding periods and transaction reporting requirements under applicable securities laws.

 

(e) Insurance and Other Benefits. During the Employment Period, the Executive and the Executive’s dependents shall be entitled to participate in any Company insurance programs and any applicable benefit plans, as the same may be adopted and/or amended from time to time (the “Benefits”). The Executive shall be bound by all of the policies and procedures relating to Benefits established by the Company from time to time.

 

(f) Vacation; Personal Days. During the Employment Period, the Executive shall be entitled to an annual vacation of 30 working days, such duration consistent with the Company’s policies from time to time, as determined by the Board. The Executive shall be entitled to paid personal days on a basis consistent with the Company’s other senior executives, as determined by the Board.

 

(g) Expense Reimbursement. The Company shall reimburse the Executive for all reasonable business, promotional, travel and entertainment expenses (“Reimbursable Expenses”) incurred or paid by the Executive during the Employment Period in the performance of Executive’s services under this Agreement on a basis consistent with the Company’s other senior executives, as determined by the Board, provided that the Executive furnishes to the Company appropriate documentation required by the Internal Revenue Code and/or other taxing authorities in a timely fashion in connection with such expenses and shall furnish such other documentation and accounting as the Company may from time to time reasonably request.

 

 

7. Termination; Compensation Due Upon Termination of Employment. The Executive’s employment with the Company shall be entirely “at-will,” meaning that either the Executive or the Company may terminate such employment relationship by terminating this Agreement in writing delivered to the other party at any time for any reason or for no reason at all, subject, however, to the terms of this Section 7. The Executive’s right to compensation for periods after the date his employment with the Company terminates shall be determined in accordance with the provisions of paragraphs (a) through (e) below.

 

(a) Voluntary Resignation; Termination without Cause.

 

(i) Voluntary Resignation. The Executive may terminate his employment at any time upon thirty (30) days prior written notice to the Company. In the event of the Executive’s voluntary termination of employment other than for Good Reason (as defined below), the Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 4 or 5, except as otherwise required by this Agreement or by applicable law, to provide the benefits described in Section 6 for periods after the date on which the Executive’s employment with the Company terminates due to the Executive’s voluntary resignation, except for the payment of the Executive’s Base Salary accrued through the date of such resignation.

 

(ii) Termination without Cause.

 

(A) If the Executive’s employment is terminated by the Company without Cause (as defined below): (1) the Company shall continue to pay the Executive the Base Salary (at the rate in effect on the date the Executive’s employment is terminated) until the end of the Severance Period (as defined below), (y) with respect to the Annual Bonus, to the extent the Milestones are achieved or, in the absence of Milestones, the Board has, in its sole discretion, otherwise determined an amount for the Executive’s bonus for the current Employment Period, pay the Executive a pro rata portion of the Annual Bonus for the year of the Employment Period on the date such Annual Bonus would have been payable to the Executive had the Executive remained employed by the Company, and (z) pay any other accrued compensation and Benefits; and (2) any of the Executive’s unvested RSUs as set forth on Schedule A attached hereto shall automatically vest upon the Executive’s termination without Cause. The Executive shall have no further rights under this Agreement or otherwise to receive any other compensation or benefits after such termination of employment.

 

(B) If, following a termination of employment without Cause, the Executive breaches the provisions of Sections 8, 9 or 10 hereof, the Executive shall not be eligible, as of the date of such breach, for the payments and benefits described in Section 7(a)(ii)(A) above, and any and all obligations and agreements of the Company with respect to such payments shall thereupon cease.

 

 

(b) Discharge for Cause. Upon written notice to the Executive, the Company may terminate the Executive’s employment for “Cause” if any of the following events shall occur:

 

(i) any act or omission that constitutes a material breach by the Executive of any of his obligations under this Agreement;

 

(ii) the willful and continued failure or refusal of the Executive to satisfactorily perform the duties reasonably required of him as an employee of the Company;

 

(iii) the Executive’s conviction of, or plea of nolo contendere to, (i) any felony or (ii) a crime involving dishonesty or moral turpitude or which could reflect negatively upon the Company or otherwise impair or impede its operations;

 

(iv) the Executive’s engaging in any misconduct, negligence, act of dishonesty (including, without limitation, theft or embezzlement), violence, threat of violence or any activity that could result in any violation of federal securities laws, in each case, that is injurious to the Company or any of its Affiliates;

 

(v) the Executive’s material breach of a written policy of the Company or the rules of any governmental or regulatory body applicable to the Company;

 

(vi) the Executive’s refusal to follow the directions of the Board, unless such directions are, in the written opinion of legal counsel, illegal or in violation of applicable regulations;

 

(vii) any other willful misconduct by the Executive which is materially injurious to the financial condition or business reputation of the Company or any of its Affiliates, or

 

(viii) the Executive’s breach of his obligations under Section 8, 9 or 10 hereof.

 

In the event Executive is terminated for Cause, the Company shall have no obligation to make payments to Executive in accordance with the provisions of Sections 4 or 5, or, except as otherwise required by law, to provide the benefits described in Section 6, for periods after the Executive’s employment with the Company is terminated on account of the Executive’s discharge for Cause except for the Executive’s then applicable Base Salary accrued through the date of such termination.

 

 

(c) Disability. The Company shall have the right, but shall not be obligated to, terminate the Executive’s employment hereunder in the event the Executive becomes disabled such that he is unable to discharge his duties to the Company for a period of ninety (90) consecutive days or one hundred twenty (120) days in any one hundred eighty (180) consecutive day period (unless longer periods are not required under applicable local labor regulations) (a “Permanent Disability”). In the event of a termination of employment due to a Permanent Disability, the Company shall be obligated to continue to make payments to the Executive in an amount equal to the then applicable Base Salary for the Severance Period (as defined below), payable in the form of salary continuation for the applicable Severance Period after the Executive’s employment with the Company is terminated due to a Permanent Disability. A determination of a Permanent Disability shall be made by a physician satisfactory to both the Executive and the Company; provided, however, that if the Executive and the Company do not agree on a physician, the Executive and the Company shall each select a physician and those two physicians together shall select a third physician, whose determination as to a Permanent Disability shall be binding on all parties.

 

(d) Death. The Executive’s employment hereunder shall terminate upon the death of the Executive. The Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 4 or 5, or, except as otherwise required by law or the terms of any applicable benefit plan, to provide the benefits described in Section 6 for periods after the date of the Executive’s death except for then applicable Base Salary earned and accrued through the date of death, payable to the Executive’s beneficiary, as the Executive shall have indicated in writing to the Company (or if no such beneficiary has been designated, to Executive’s estate).

 

(e) Termination for Good Reason. The Executive may terminate this Agreement at any time for Good Reason. In the event of termination under this paragraph (e), the Company shall pay to the Executive severance in an amount equal to the Executive’s then applicable Base Salary for a period equal to the number of months set forth on Schedule A hereto (the “Severance Period”), subject to the Executive’s continued compliance with Sections 8, 9 and 10 of this Agreement, payable in the form of salary continuation for the applicable Severance Period following the Executive’s termination, and subject to the Company’s regular payroll practices and required withholdings. Such severance shall be reduced by any cash remuneration paid to the Executive because of the Executive’s employment or self-employment during the Severance Period. The Executive shall continue to receive all Benefits (either through the Company or an Affiliate) during the Severance Period. The Executive shall have no further rights under this Agreement or otherwise to receive any other compensation or benefits after such resignation. For the purposes of this Agreement, “Good Reason” shall mean any of the following (without Executive’s express written consent):

 

(i) the assignment to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed on the Effective Date;

 

(ii) removal of the Executive from his position as indicated on Schedule A hereto, or the assignment to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed under this Agreement, within twelve (12) months after a Change of Control (as defined below);

 

(iii) a reduction by the Company in the Executive’s then applicable Base Salary or other compensation, unless said reduction is pari passu with other senior executives of the Company;

 

(iv) the taking of any action by the Company that would, directly or indirectly, materially reduce the Executive’s benefits, unless said reductions are pari passu with other senior executives of the Company; or

 

 

(v) a breach by the Company of any material term of this Agreement that is not cured by the Company within thirty (30) days following receipt by the Company of written notice thereof.

 

For purposes of this Agreement, “Change of Control” shall mean the occurrence of any one or more of the following: (i) the accumulation, whether directly, indirectly, beneficially or of record, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of 50% or more of the shares of the outstanding equity securities of the Company; (ii) a merger or consolidation of the Company in which the Company does not survive as an independent company or upon the consummation of which the holders of the Company’s outstanding equity securities prior to such merger or consolidation own less than 50% of the outstanding equity securities of the Company after such merger or consolidation; (iv) a sale of all or substantially all of the assets of the Company; provided, however, that the following acquisitions shall not constitute a Change of Control for the purposes of this Agreement: (A) any acquisitions of common stock or securities convertible into common stock directly from the Company, or (B) any acquisition of common stock or securities convertible into common stock by any employee benefit plan (or related trust) sponsored by or maintained by the Company.

 

(f) Notice of Termination. Any termination of employment by the Company or the Executive shall be communicated by a written “Notice of Termination” to the other party hereto given in accordance with Section 16 of this Agreement. In the event of a termination by the Company for Cause, the Notice of Termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) specify the date of termination, which date shall be the date of such notice. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

(g) Resignation of Executive Officer. The termination of the Executive’s employment for any reason will constitute the Executive’s resignation from (i) any director, officer, or employee position the Executive has with the Company or any of its Affiliates, and (ii) all fiduciary positions (including as a trustee) the Executive holds with respect to any employee benefit plans or trusts established by the Company. The Executive agrees that this Agreement shall serve as written notice of resignation in this circumstance, unless otherwise required by any plan or applicable law.

 

 

8. Non-Competition; Non-Solicitation.

 

(a) For the duration of the Employment Period and, unless the Company terminates the Executive’s employment without Cause, during the Severance Period (the “Non-compete Period”), the Executive shall not, directly or indirectly, except as specifically provided in the last sentence of Section 2(c) hereof, engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing, or control of, lend any credit to, any business, firm, corporation, partnership, association, joint venture or other entity that engages or conducts any business the same as or substantially similar to the Business or any other business engaged in or proposed to be engaged in or conducted by the Company and/or any of its Affiliates during the Employment Period, or then included in the future strategic plan of the Company and/or any of its Affiliates, anywhere within North America; provided, however, that the Executive may own less than 5% in the aggregate of the outstanding shares of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise), other than any such enterprise with which the Company competes or is currently engaged in a joint venture, if such securities are of a class listed on any national or regional securities exchange or have been registered under Section 12(b) or (g) of the Exchange Act.

 

(b) During the Employment Period and for a period of twelve (12) months following termination of the Executive’s employment with the Company, the Executive shall not:

 

(i) solicit or hire, or attempt to recruit, persuade, solicit or hire, any employee, or independent contractor of, or consultant to, the Company, or its Affiliates, to leave the employment (or independent contractor relationship) thereof, whether or not any such employee or independent contractor is party to an employment agreement; or

 

(ii) attempt in any manner to solicit or accept from any customer or client of the Company or any of its Affiliates, with whom the Company or any of its Affiliates had significant contact during the term of this Agreement, business of the kind or competitive with the business done by the Company or any of its Affiliates with such customer or to persuade or attempt to persuade any such customer to cease to do business or to reduce the amount of business which such customer has customarily done or is reasonably expected to do with the Company or any of its Affiliates or if any such customer elects to move its business to a person other than the Company or any of its Affiliates, provide any services (of the kind or competitive with the Business of the Company or any of its Affiliates) for such customer, or have any discussions regarding any such service with such customer, on behalf of such other person.

 

 

(c) The Executive recognizes and agrees that because a violation by the Executive of his obligations under this Section will cause irreparable harm to the Company that would be difficult to quantify and for which money damages would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any such violation, without the necessity of posting a bond. The Non-compete Period will be extended by the duration of any violation by the Executive of any of his obligations under this Section.

 

(d) The Executive expressly agrees that the character, duration, and scope of the covenant not to compete are reasonable in light of the circumstances as they exist at the date upon which this Agreement has been executed. However, should a determination nonetheless be made by a court of competent jurisdiction at a later date that the character, duration or geographical scope of the covenant not to compete is unreasonable in light of the circumstances as they then exist, then it is the intention of the Executive, on the one hand, and the Company, on the other, that the covenant not to compete shall be construed by the court in such a manner as to impose only those restrictions on the conduct of the Executive which are reasonable in light of the circumstances as they then exist and necessary to assure the Company of the intended benefit of the covenant not to compete.

 

9. Confidentiality.

 

(a) The Executive understands that the Company and/or its Affiliates, from time to time, may impart to the Executive confidential information, whether such information is written, oral, electronic, or graphic.

 

(b) For purposes of this Agreement, “Confidential Information” means information, which is used in the business of the Company or its Affiliates and (i) is proprietary to, about or created by the Company or its Affiliates, (ii) gives the Company or its Affiliates some competitive business advantage or the opportunity of obtaining such advantage or the disclosure of which could be detrimental to the interests of the Company or its Affiliates, (iii) is designated as Confidential Information by the Company or its Affiliates, is known by the Executive to be considered confidential by the Company or its Affiliates, or from all the relevant circumstances should reasonably be assumed by the Executive to be confidential and proprietary to the Company or its Affiliates, or (iv) is not generally known by non-Company personnel. Such Confidential Information includes, without limitation, the following types of information and other information of a similar nature (whether or not reduced to writing or designated as confidential):

 

(i) internal personnel and financial information of the Company or its Affiliates, vendor information (including vendor characteristics, services, prices, lists and agreements), purchasing and internal cost information, internal service and operational manuals, and the manner and methods of conducting the business of the Company or its Affiliates;

 

(ii) marketing and development plans, price and cost data, price and fee amounts, pricing and billing policies, bidding, quoting procedures, marketing techniques, forecasts and forecast assumptions and volumes, and future plans and potential strategies of the Company or its Affiliates which have been or are being discussed;

 

 

(iii) names of customers and their representatives, contracts (including their contents and parties), customer services, and the type, quantity, specifications and content of products and services purchased, leased, licensed or received by customers of the Company or its Affiliates; and

 

(iv) confidential and proprietary information provided to the Company or its Affiliates by any actual or potential customer, government agency or other third party (including businesses, consultants and other entities and individuals).

 

The Executive hereby acknowledges the Company’s exclusive ownership of such Confidential Information.

 

(c) The Executive agrees as follows: (1) only to use the Confidential Information to provide services to the Company and its Affiliates; (2) only to communicate the Confidential Information to fellow employees, agents and representatives on a need-to-know basis; and (3) not to otherwise disclose or use any Confidential Information, except as may be required by law or otherwise authorized by the Board. Upon demand by the Company or upon termination of the Executive’s employment, the Executive will deliver to the Company all manuals, photographs, recordings and any other instrument or device by which, through which or on which Confidential Information has been recorded and/or preserved, which are in the Executive’s possession, custody or control.

 

10. Executive’s Representation. The Executive hereby represents that the Executive’s entry into this Agreement and performance of the services hereunder will not violate the terms or conditions of any other agreement to which the Executive is a party.

 

11. Governing Law/Venue/Jurisdiction. This Agreement and any disputes or controversies arising hereunder shall be construed and enforced in accordance with and governed by the internal laws of the State of California without regard to the conflicts of laws principles thereof. Venue and jurisdiction of any suite or cause of action arising under this Agreement shall lie exclusively in the County of Los Angeles, California or the U.S. District court for the Central District of California.

 

12. Public Company Obligations; Indemnification.

 

(a) Executive acknowledges that the Company intends to become a publicly reporting company whose shares of common stock will be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and whose common stock will be registered under the Exchange Act, and that, after the Company becomes a publicly reporting company, this Agreement will be subject to the public filing requirements of the Exchange Act. In addition, both parties acknowledge that the Executive’s compensation and perquisites (each as determined by the rules of the US Securities and Exchange Commission (the “SEC”) or any other regulatory body or exchange having jurisdiction) (which may include benefits or regular or occasional aid/assistance, such as recreation, club memberships, meals, education for his family, vehicle, lodging or clothing, occasional bonuses or anything else he receives, during the Employment Period and any renewals thereof, in cash or in kind) paid or payable or received or receivable under this Agreement or otherwise, and his transactions and other dealings with the Company, may be required to be publicly disclosed.

 

 

(b) Executive acknowledges and agrees that the applicable insider trading rules, transaction reporting rules, limitations on disclosure of non-public information and other requirements set forth in the Securities Act, the Exchange Act and rules and regulations promulgated by the SEC may apply to this Agreement and Executive’s employment with the Company.

 

(c) Executive (on behalf of himself, as well as the Executive’s executors, heirs, administrators and assigns) absolutely and unconditionally agrees to indemnify and hold harmless the Company and all of its past, present and future affiliates, executors, heirs, administrators, shareholders, employees, officers, directors, attorneys, accountants, agents, representatives, predecessors, successors and assigns from any and all claims, debts, demands, accounts, judgments, causes of action, equitable relief, damages, costs, charges, complaints, obligations, controversies, actions, suits, proceedings, expenses, responsibilities and liabilities of every kind and character whatsoever (including, but not limited to, reasonable attorneys’ fees and costs) in the event of Executive’s breach of any obligation of Executive under the Securities Act, the Exchange Act, any rules promulgated by the SEC and any other applicable federal, state or foreign laws, rules, regulations or orders.

 

13. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersedes and cancels any and all previous agreements, both written and oral, regarding the subject matter hereof between the parties hereto. This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto.

 

14. Notices. All notices, requests, demands and other communications called for or contemplated hereunder shall be in writing and shall be deemed to have been given when delivered to the party to whom addressed or when sent by telecopy (if promptly confirmed by registered or certified mail, return receipt requested, prepaid and addressed) to the parties, their successors in interest, or their assignees at the following addresses, or at such other addresses as the parties may designate by written notice in the manner aforesaid:

 

(a) to the Company at:

 

Kairos Pharma, Ltd.

2355 Westwood Blvd., #139

Los Angeles CA 90064

(310) 948-2356

Attn: Chief Executive Officer

Email: john.yu@cshs.org

 

 

with a copy to:

 

Michelman & Robinson LLP

605 Third Avenue

30th Floor

New York, NY 10158

Attn: Megan J. Penick, Esq.

Email: mpenick@mrllp.com

 

(b) to the Executive as set forth on Schedule A hereto.

 

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided for in this Section, be deemed given upon facsimile confirmation, (iii) if delivered by mail in the manner described above to the address as provided for in this Section, be deemed given on the earlier of the third business day following mailing or upon receipt and (iv) if delivered by overnight courier to the address as provided in this Section, be deemed given on the earlier of the first business day following the date sent by such overnight courier or upon receipt (in each case regardless of whether such notice, request or other communication is received by any other person to whom a copy of such notice is to be delivered pursuant to this Section). Either party may, by notice given to the other party in accordance with this Section, designate another address or person for receipt of notices hereunder.

 

15. Severability. If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those as to which it is invalid or unenforceable, shall be considered severable and shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended and given such interpretation as to achieve the economic intent of this Agreement.

 

 

16. Waiver. The failure of any party to insist in any one instance or more upon strict performance of any of the terms and conditions hereof, or to exercise any right or privilege herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to remain in full force and effect. Any waiver by any party of any violation of, breach of or default under any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other provision of this Agreement.

 

17. Successors and Assigns. This Agreement shall be binding upon the Company and any successors and assigns of the Company. Neither this Agreement nor any right or obligation hereunder may be assigned by the Executive. The Company may assign this Agreement and its right and obligations hereunder, in whole or in part.

 

18. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Additionally, a facsimile counterpart of this Agreement shall have the same effect as an originally executed counterpart.

 

19. Headings. Headings in this Agreement are for reference purposes only and shall not be deemed to have any substantive effect.

 

20. Opportunity to Seek Advice. The Executive acknowledges and confirms that the Executive has had the opportunity to seek such legal, financial, and other advice and representation as the Executive has deemed appropriate in connection with this Agreement, that the Executive is fully aware of its legal effect, and that Executive has entered into it freely based on the Executive’s judgment and not on any representations or promises other than those contained in this Agreement.

 

21. Withholding and Payroll Practices. All salary, severance payments, bonuses or benefits payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law and shall be paid in the ordinary course pursuant to the Company’s then existing payroll practices.

 

[The next page is the signature page.]

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

	Kairos Pharma, Ltd.
	By:
	Name:	John S. Yu, M.D.
	Title:	Chief Executive Officer

 

	EXECUTIVE:
	Doug Samuelson

 

 

Schedule A

 

1.	Employment Period: 12 months

 

2.	Employment

 

a.

Title: Chief Financial Officer

 

b.

Executive Duties:

 

In his capacity as Chief Financial Officer, the Executive shall perform such services, consistent with his office, including, but not limited to business planning, budgeting, managing and implementing all of the financial activities of the Company, and such other duties as shall be assigned to him by the Board of Directors of the Company from time to time, devoting such time and effort and performing all of the functions of the offices held by him, as directed by the Board of Directors from time to time.

 

3.

Base Salary: $50,000 per year, commencing upon the Company’s completion of its IPO.   Target Bonus: Cash or stock bonus in such amounts as to be determined by the Board of Directors or compensation committee of the Board of Directors.

 

5(a).

Annual Restricted Stock Grant: 50,000 Restricted Stock Units (the “RSU Annual Grant”), issuable annually on the anniversary date of the Company’s consummation of its IPO, which RSUs are issuable under the Company’s 2023 Equity Incentive Plan. Each RSU Annual Grant will vest annually in 12 months increment on the anniversary date of the grant, in accordance with the terms of the Restricted Stock Unit Grant Agreement and subject to accelerated vesting upon a Change of Control.

 

6(e).

Severance Period: Six months; however, in the event of a Change of Control, as defined within the Agreement, Executive shall also receive a total 250,000 RSUs, all of which shall be fully vested upon issuance and shall be inclusive of all RSUs received as an RSU Annual Grant.

 

14(b).

Executive Contact Information:

 

[*]

 

 

Exhibit A

 

Form of Grant Agreement

 

 

 

Exhibit 10.27

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”) is entered into as of the ____ day of September, 2023, by and between Kairos Pharma, Ltd., a Delaware corporation (the “Company”), and Neil Bhowmick an individual residing at the address set forth on Schedule A hereto (the “Executive”).

 

INTRODUCTION

 

WHEREAS, the Company is in the business of the development and commercialization of specialty pharmaceuticals (the “Business”);

 

WHEREAS, the Company wishes to employ the Executive under the title and capacity set forth on Schedule A hereto;

 

WHEREAS, the Executive desires to be employed by the Company in such capacity, subject to the terms of this Agreement;

 

WHEREAS, the Executive acknowledges that he will not be entitled to compensation under this Agreement until such time as the Company either completes an initial public offering (“IPO”) or otherwise becomes a publicly reporting company.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows:

 

1. Employment Period. The initial term of the Executive’s employment by the Company pursuant to this Agreement shall commence upon consummation of the Company’s IPO (the “Effective Date”) and shall continue for that period of calendar months from the Effective Date set forth on Schedule A hereto (the “Employment Period”). Thereafter, the Employment Period will automatically renew for successive periods of one (1) year each, with the terms of such Agreement to be adjusted from time to time by the Company’s board of directors (the “Board”) (or a committee thereof), unless either party shall have given to the other at least thirty (30) days’ prior written notice of their intention not to renew the Executive’s employment prior to the end of the Employment Period or the then applicable renewal term, as the case may be. In any event, the Employment Period may be terminated as provided herein.

 

2. Employment; Duties.

 

(a) Subject to the terms and conditions set forth herein, the Company hereby employs the Executive to act for the Company during the Employment Period in the capacity set forth on Schedule A hereto, and the Executive hereby accepts such employment. The duties and responsibilities of the Executive shall include such duties and responsibilities appropriate to such office and as are normally associated with and appropriate for such position and as the Company’s the Board may from time to time reasonably assign to the Executive.

 

 

(b) Executive recognizes that during the period of Executive’s employment hereunder, Executive owes an undivided duty of loyalty to the Company, and Executive will use Executive’s good faith efforts to promote and develop the business of the Company and its subsidiaries (the Company’s subsidiaries from time to time, together with any other affiliates of the Company, the “Affiliates”). Executive shall devote a sufficient amount of Executive’s business time, attention and skills to satisfactorily fulfill the performance of Executive’s services as an executive of the Company. Recognizing and acknowledging that it is essential for the protection and enhancement of the brand name, reputation and business of the Company and the goodwill pertaining thereto, Executive shall perform the Executive’s duties under this Agreement professionally, in accordance with the applicable laws, rules and regulations and such standards, policies and procedures established by the Company and the industry from time to time.

 

(c) However, the parties agree that: (i) Executive may devote a reasonable amount of his time to civic, community, or charitable activities and may serve as a director of other corporations (provided that any such other corporation is not a competitor of the Company, as determined by the Board) and to other types of business or public activities not expressly mentioned in this paragraph and (ii) Executive may participate as a non-employee director and/or investor in other companies and projects as disclosed by Executive to, and approved by, the Board, so long as Executive’s responsibilities with respect thereto do not conflict or interfere with the faithful performance of Executive’s duties to the Company.

 

3. Place of Employment. The Executive’s services shall be performed at any location at which the Company now or hereafter has a business facility, at employee’s home office, or at any other location where Executive’s presence is necessary to perform his duties. The parties acknowledge that the Executive may be required to travel in connection with the performance of his duties hereunder.

 

4. Base Salary. The Executive shall be entitled to receive a salary from the Company during the Employment Period at a rate per year indicated on Schedule A hereto (the “Base Salary”), which Base Salary shall commence upon the Company’s IPO or upon the Company becoming a publicly reporting company under the Securities Exchange Act of 1934, as amended, whichever comes first. Once the Board has established the Base Salary, such Base Salary shall be payable in monthly installments in accordance with the Company’s customary payroll practices. The Executive’s Base Salary may be increased on each anniversary of the Effective Date, at the Board’s sole discretion.

 

5. Bonus.

 

(a) The Executive shall be eligible to receive an annual cash bonus (the “Annual Bonus”), which shall be earned by the Executive based upon the level of achievement of specific operational, financial or other milestones by the Company, as may be established from time to time by the Board in consultation with Executive (the “Milestones”), and based upon the Executive’s performance of the Executive Duties set forth on Schedule A. The amount of the Annual Bonus, if any, and the method of payment of all or any portion of any Annual Bonus (which will be paid in cash) shall be determined by the Board in its sole discretion. If the Board determines that any portion of the Annual Bonus is to be paid in cash, such amount shall be payable in U.S. dollars within ten (10) days of the filing with the Securities and Exchange Commission of the Company’s annual report on Form 10-K.

 

 

(b) The Executive shall be eligible to participate in any other bonus or incentive program established by the Company for executives of the Company.

 

6. Other Benefits.

 

(a) Grant of Restricted Stock Units. The Executive shall be entitled to receive a number of restricted stock units (“RSUs”) as set forth on Schedule A hereto, issuable under the Company’s 2023 Equity Incentive Plan, which will annually in one-third increments over a period of three years following the date of the grant of such RSUs, in accordance with the terms of a separate Grant Agreement, a form of which is attached hereto as Exhibit A. Any additional equity awards to the Executive shall be at the option of the Board.

 

(b) Restrictions. Any and all shares of stock, options, restricted stock units and other equity awards granted to or owned by the Executive will be subject to the share ownership guidelines and insider trading and blackout policies adopted from time to time by the Board for senior executives of the Company and will also be subject to applicable holding periods and transaction reporting requirements under applicable securities laws.

 

(c) Insurance and Other Benefits. During the Employment Period, the Executive and the Executive’s dependents shall be entitled to participate in any Company insurance programs and any applicable benefit plans, as the same may be adopted and/or amended from time to time (the “Benefits”). The Executive shall be bound by all of the policies and procedures relating to Benefits established by the Company from time to time.

 

(d) Vacation; Personal Days. During the Employment Period, the Executive shall be entitled to an annual vacation of 30 working days, such duration consistent with the Company’s policies from time to time, as determined by the Board. The Executive shall be entitled to paid personal days on a basis consistent with the Company’s other senior executives, as determined by the Board.

 

(e) Expense Reimbursement. The Company shall reimburse the Executive for all reasonable business, promotional, travel and entertainment expenses (“Reimbursable Expenses”) incurred or paid by the Executive during the Employment Period in the performance of Executive’s services under this Agreement on a basis consistent with the Company’s other senior executives, as determined by the Board, provided that the Executive furnishes to the Company appropriate documentation required by the Internal Revenue Code and/or other taxing authorities in a timely fashion in connection with such expenses and shall furnish such other documentation and accounting as the Company may from time to time reasonably request.

 

 

7. Termination; Compensation Due Upon Termination of Employment. The Executive’s employment with the Company shall be entirely “at-will,” meaning that either the Executive or the Company may terminate such employment relationship by terminating this Agreement in writing delivered to the other party at any time for any reason or for no reason at all, subject, however, to the terms of this Section 7. The Executive’s right to compensation for periods after the date his employment with the Company terminates shall be determined in accordance with the provisions of paragraphs (a) through (e) below.

 

(a) Voluntary Resignation; Termination without Cause.

 

(i) Voluntary Resignation. The Executive may terminate his employment at any time upon thirty (30) days prior written notice to the Company. In the event of the Executive’s voluntary termination of employment other than for Good Reason (as defined below), the Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 4 or 5, except as otherwise required by this Agreement or by applicable law, to provide the benefits described in Section 6 for periods after the date on which the Executive’s employment with the Company terminates due to the Executive’s voluntary resignation, except for the payment of the Executive’s Base Salary accrued through the date of such resignation.

 

(ii) Termination without Cause.

 

(A) If the Executive’s employment is terminated by the Company without Cause (as defined below): (1) the Company shall continue to pay the Executive the Base Salary (at the rate in effect on the date the Executive’s employment is terminated) until the end of the Severance Period (as defined below), (y) with respect to the Annual Bonus, to the extent the Milestones are achieved or, in the absence of Milestones, the Board has, in its sole discretion, otherwise determined an amount for the Executive’s bonus for the current Employment Period, pay the Executive a pro rata portion of the Annual Bonus for the year of the Employment Period on the date such Annual Bonus would have been payable to the Executive had the Executive remained employed by the Company, and (z) pay any other accrued compensation and Benefits; and (2) any of the Executive’s unvested RSUs as set forth on Schedule A attached hereto shall automatically vest upon the Executive’s termination without Cause. The Executive shall have no further rights under this Agreement or otherwise to receive any other compensation or benefits after such termination of employment.

 

(B) If, following a termination of employment without Cause, the Executive breaches the provisions of Sections 8, 9 or 10 hereof, the Executive shall not be eligible, as of the date of such breach, for the payments and benefits described in Section 7(a)(ii)(A) above, and any and all obligations and agreements of the Company with respect to such payments shall thereupon cease.

 

 

(b) Discharge for Cause. Upon written notice to the Executive, the Company may terminate the Executive’s employment for “Cause” if any of the following events shall occur:

 

(i) any act or omission that constitutes a material breach by the Executive of any of his obligations under this Agreement;

 

(ii) the willful and continued failure or refusal of the Executive to satisfactorily perform the duties reasonably required of him as an employee of the Company;

 

(iii) the Executive’s conviction of, or plea of nolo contendere to, (i) any felony or (ii) a crime involving dishonesty or moral turpitude or which could reflect negatively upon the Company or otherwise impair or impede its operations;

 

(iv) the Executive’s engaging in any misconduct, negligence, act of dishonesty (including, without limitation, theft or embezzlement), violence, threat of violence or any activity that could result in any violation of federal securities laws, in each case, that is injurious to the Company or any of its Affiliates;

 

(v) the Executive’s material breach of a written policy of the Company or the rules of any governmental or regulatory body applicable to the Company;

 

(vi) the Executive’s refusal to follow the directions of the Board, unless such directions are, in the written opinion of legal counsel, illegal or in violation of applicable regulations;

 

(vii) any other willful misconduct by the Executive which is materially injurious to the financial condition or business reputation of the Company or any of its Affiliates, or

 

(viii) the Executive’s breach of his obligations under Section 8, 9 or 10 hereof.

 

In the event Executive is terminated for Cause, the Company shall have no obligation to make payments to Executive in accordance with the provisions of Sections 4 or 5, or, except as otherwise required by law, to provide the benefits described in Section 6, for periods after the Executive’s employment with the Company is terminated on account of the Executive’s discharge for Cause except for the Executive’s then applicable Base Salary accrued through the date of such termination.

 

(c) Disability. The Company shall have the right, but shall not be obligated to, terminate the Executive’s employment hereunder in the event the Executive becomes disabled such that he is unable to discharge his duties to the Company for a period of ninety (90) consecutive days or one hundred twenty (120) days in any one hundred eighty (180) consecutive day period (unless longer periods are not required under applicable local labor regulations) (a “Permanent Disability”). In the event of a termination of employment due to a Permanent Disability, the Company shall be obligated to continue to make payments to the Executive in an amount equal to the then applicable Base Salary for the Severance Period (as defined below), payable in the form of salary continuation for the applicable Severance Period after the Executive’s employment with the Company is terminated due to a Permanent Disability. A determination of a Permanent Disability shall be made by a physician satisfactory to both the Executive and the Company; provided, however, that if the Executive and the Company do not agree on a physician, the Executive and the Company shall each select a physician and those two physicians together shall select a third physician, whose determination as to a Permanent Disability shall be binding on all parties.

 

 

(d) Death. The Executive’s employment hereunder shall terminate upon the death of the Executive. The Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 4 or 5, or, except as otherwise required by law or the terms of any applicable benefit plan, to provide the benefits described in Section 6 for periods after the date of the Executive’s death except for then applicable Base Salary earned and accrued through the date of death, payable to the Executive’s beneficiary, as the Executive shall have indicated in writing to the Company (or if no such beneficiary has been designated, to Executive’s estate).

 

(e) Termination for Good Reason. The Executive may terminate this Agreement at any time for Good Reason. In the event of termination under this paragraph (e), the Company shall pay to the Executive severance in an amount equal to the Executive’s then applicable Base Salary for a period equal to the number of months set forth on Schedule A hereto (the “Severance Period”), subject to the Executive’s continued compliance with Sections 8, 9 and 10 of this Agreement, payable in the form of salary continuation for the applicable Severance Period following the Executive’s termination, and subject to the Company’s regular payroll practices and required withholdings. Such severance shall be reduced by any cash remuneration paid to the Executive because of the Executive’s employment or self-employment during the Severance Period. The Executive shall continue to receive all Benefits (either through the Company or an Affiliate) during the Severance Period. The Executive shall have no further rights under this Agreement or otherwise to receive any other compensation or benefits after such resignation. For the purposes of this Agreement, “Good Reason” shall mean any of the following (without Executive’s express written consent):

 

(i) the assignment to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed on the Effective Date;

 

(ii) removal of the Executive from his position as indicated on Schedule A hereto, or the assignment to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed under this Agreement, within twelve (12) months after a Change of Control (as defined below);

 

 

(iii) a reduction by the Company in the Executive’s then applicable Base Salary or other compensation, unless said reduction is pari passu with other senior executives of the Company;

 

(iv) the taking of any action by the Company that would, directly or indirectly, materially reduce the Executive’s benefits, unless said reductions are pari passu with other senior executives of the Company; or

 

(v) a breach by the Company of any material term of this Agreement that is not cured by the Company within thirty (30) days following receipt by the Company of written notice thereof.

 

For purposes of this Agreement, “Change of Control” shall mean the occurrence of any one or more of the following: (i) the accumulation, whether directly, indirectly, beneficially or of record, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of 50% or more of the shares of the outstanding equity securities of the Company, (ii) a merger or consolidation of the Company in which the Company does not survive as an independent company or upon the consummation of which the holders of the Company’s outstanding equity securities prior to such merger or consolidation own less than 50% of the outstanding equity securities of the Company after such merger or consolidation, or (iii) a sale of all or substantially all of the assets of the Company; provided, however, that the following acquisitions shall not constitute a Change of Control for the purposes of this Agreement: (A) any acquisitions of common stock or securities convertible into common stock directly from the Company, or (B) any acquisition of common stock or securities convertible into common stock by any employee benefit plan (or related trust) sponsored by or maintained by the Company.

 

(f) Notice of Termination. Any termination of employment by the Company or the Executive shall be communicated by a written “Notice of Termination” to the other party hereto given in accordance with Section 16 of this Agreement. In the event of a termination by the Company for Cause, the Notice of Termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) specify the date of termination, which date shall be the date of such notice. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

(g) Resignation of Executive Officer. The termination of the Executive’s employment for any reason will constitute the Executive’s resignation from (i) any director, officer, or employee position the Executive has with the Company or any of its Affiliates, and (ii) all fiduciary positions (including as a trustee) the Executive holds with respect to any employee benefit plans or trusts established by the Company. The Executive agrees that this Agreement shall serve as written notice of resignation in this circumstance, unless otherwise required by any plan or applicable law.

 

 

8. Non-Competition; Non-Solicitation.

 

(a) For the duration of the Employment Period and, unless the Company terminates the Executive’s employment without Cause, during the Severance Period (the “Non-compete Period”), the Executive shall not, directly or indirectly, except as specifically provided in the last sentence of Section 2(c) hereof, engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend any credit to, or render services or advice to, any business, firm, corporation, partnership, association, joint venture or other entity that engages or conducts any business the same as or substantially similar to the Business or any other business engaged in or proposed to be engaged in or conducted by the Company and/or any of its Affiliates during the Employment Period, or then included in the future strategic plan of the Company and/or any of its Affiliates, anywhere within North America; provided, however, that the Executive may own less than 5% in the aggregate of the outstanding shares of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise), other than any such enterprise with which the Company competes or is currently engaged in a joint venture, if such securities are of a class listed on any national or regional securities exchange or have been registered under Section 12(b) or (g) of the Exchange Act.

 

(b) During the Employment Period and for a period of twelve (12) months following termination of the Executive’s employment with the Company, the Executive shall not:

 

(i) solicit or hire, or attempt to recruit, persuade, solicit or hire, any employee, or independent contractor of, or consultant to, the Company, or its Affiliates, to leave the employment (or independent contractor relationship) thereof, whether or not any such employee or independent contractor is party to an employment agreement; or

 

(ii) attempt in any manner to solicit or accept from any customer or client of the Company or any of its Affiliates, with whom the Company or any of its Affiliates had significant contact during the term of this Agreement, business of the kind or competitive with the business done by the Company or any of its Affiliates with such customer or to persuade or attempt to persuade any such customer to cease to do business or to reduce the amount of business which such customer has customarily done or is reasonably expected to do with the Company or any of its Affiliates or if any such customer elects to move its business to a person other than the Company or any of its Affiliates, provide any services (of the kind or competitive with the Business of the Company or any of its Affiliates) for such customer, or have any discussions regarding any such service with such customer, on behalf of such other person.

 

 

(c) The Executive recognizes and agrees that because a violation by the Executive of his obligations under this Section will cause irreparable harm to the Company that would be difficult to quantify and for which money damages would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any such violation, without the necessity of posting a bond. The Non-compete Period will be extended by the duration of any violation by the Executive of any of his obligations under this Section.

 

(d) The Executive expressly agrees that the character, duration, and scope of the covenant not to compete are reasonable in light of the circumstances as they exist at the date upon which this Agreement has been executed. However, should a determination nonetheless be made by a court of competent jurisdiction at a later date that the character, duration or geographical scope of the covenant not to compete is unreasonable in light of the circumstances as they then exist, then it is the intention of the Executive, on the one hand, and the Company, on the other, that the covenant not to compete shall be construed by the court in such a manner as to impose only those restrictions on the conduct of the Executive which are reasonable in light of the circumstances as they then exist and necessary to assure the Company of the intended benefit of the covenant not to compete.

 

9. Confidentiality.

 

(a) The Executive understands that the Company and/or its Affiliates, from time to time, may impart to the Executive confidential information, whether such information is written, oral, electronic, or graphic.

 

(b) For purposes of this Agreement, “Confidential Information” means information, which is used in the business of the Company or its Affiliates and (i) is proprietary to, about or created by the Company or its Affiliates, (ii) gives the Company or its Affiliates some competitive business advantage or the opportunity of obtaining such advantage or the disclosure of which could be detrimental to the interests of the Company or its Affiliates, (iii) is designated as Confidential Information by the Company or its Affiliates, is known by the Executive to be considered confidential by the Company or its Affiliates, or from all the relevant circumstances should reasonably be assumed by the Executive to be confidential and proprietary to the Company or its Affiliates, or (iv) is not generally known by non-Company personnel. Such Confidential Information includes, without limitation, the following types of information and other information of a similar nature (whether or not reduced to writing or designated as confidential):

 

(i) internal personnel and financial information of the Company or its Affiliates, vendor information (including vendor characteristics, services, prices, lists and agreements), purchasing and internal cost information, internal service and operational manuals, and the manner and methods of conducting the business of the Company or its Affiliates;

 

(ii) marketing and development plans, price and cost data, price and fee amounts, pricing and billing policies, bidding, quoting procedures, marketing techniques, forecasts and forecast assumptions and volumes, and future plans and potential strategies of the Company or its Affiliates which have been or are being discussed;

 

 

(iii) names of customers and their representatives, contracts (including their contents and parties), customer services, and the type, quantity, specifications and content of products and services purchased, leased, licensed or received by customers of the Company or its Affiliates; and

 

(iv) confidential and proprietary information provided to the Company or its Affiliates by any actual or potential customer, government agency or other third party (including businesses, consultants and other entities and individuals).

 

The Executive hereby acknowledges the Company’s exclusive ownership of such Confidential Information.

 

(c) The Executive agrees as follows: (1) only to use the Confidential Information to provide services to the Company and its Affiliates; (2) only to communicate the Confidential Information to fellow employees, agents and representatives on a need-to-know basis; and (3) not to otherwise disclose or use any Confidential Information, except as may be required by law or otherwise authorized by the Board. Upon demand by the Company or upon termination of the Executive’s employment, the Executive will deliver to the Company all manuals, photographs, recordings and any other instrument or device by which, through which or on which Confidential Information has been recorded and/or preserved, which are in the Executive’s possession, custody or control.

 

10. Executive’s Representation. The Executive hereby represents that the Executive’s entry into this Agreement and performance of the services hereunder will not violate the terms or conditions of any other agreement to which the Executive is a party.

 

11. Governing Law/Venue/Jurisdiction. This Agreement and any disputes or controversies arising hereunder shall be construed and enforced in accordance with and governed by the internal laws of the State of California without regard to the conflicts of laws principles thereof. Venue and jurisdiction of any suite or cause of action arising under this Agreement shall lie exclusively in the County of Los Angeles, California or the U.S. District court for the Central District of California.

 

12. Public Company Obligations; Indemnification.

 

(a) Executive acknowledges that the Company intends to become a publicly reporting company whose shares of common stock will be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and whose common stock will be registered under the Exchange Act, and that, after the Company becomes a publicly reporting company, this Agreement will be subject to the public filing requirements of the Exchange Act. In addition, both parties acknowledge that the Executive’s compensation and perquisites (each as determined by the rules of the US Securities and Exchange Commission (the “SEC”) or any other regulatory body or exchange having jurisdiction) (which may include benefits or regular or occasional aid/assistance, such as recreation, club memberships, meals, education for his family, vehicle, lodging or clothing, occasional bonuses or anything else he receives, during the Employment Period and any renewals thereof, in cash or in kind) paid or payable or received or receivable under this Agreement or otherwise, and his transactions and other dealings with the Company, may be required to be publicly disclosed.

 

 

(b) Executive acknowledges and agrees that the applicable insider trading rules, transaction reporting rules, limitations on disclosure of non-public information and other requirements set forth in the Securities Act, the Exchange Act and rules and regulations promulgated by the SEC may apply to this Agreement and Executive’s employment with the Company.

 

(c) Executive (on behalf of himself, as well as the Executive’s executors, heirs, administrators and assigns) absolutely and unconditionally agrees to indemnify and hold harmless the Company and all of its past, present and future affiliates, executors, heirs, administrators, shareholders, employees, officers, directors, attorneys, accountants, agents, representatives, predecessors, successors and assigns from any and all claims, debts, demands, accounts, judgments, causes of action, equitable relief, damages, costs, charges, complaints, obligations, controversies, actions, suits, proceedings, expenses, responsibilities and liabilities of every kind and character whatsoever (including, but not limited to, reasonable attorneys’ fees and costs) in the event of Executive’s breach of any obligation of Executive under the Securities Act, the Exchange Act, any rules promulgated by the SEC and any other applicable federal, state or foreign laws, rules, regulations or orders.

 

13. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersedes and cancels any and all previous agreements, both written and oral, regarding the subject matter hereof between the parties hereto. This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto.

 

14. Notices. All notices, requests, demands and other communications called for or contemplated hereunder shall be in writing and shall be deemed to have been given when delivered to the party to whom addressed or when sent by telecopy (if promptly confirmed by registered or certified mail, return receipt requested, prepaid and addressed) to the parties, their successors in interest, or their assignees at the following addresses, or at such other addresses as the parties may designate by written notice in the manner aforesaid:

 

	(a)	to the Company at:
		Kairos Pharma, Ltd.
		2355 Westwood Blvd., #139
		Los Angeles CA 90064
		(310) 948-2356
		Attn: Chief Executive Officer
		Email: john.yu@cshs.org
		with a copy to:
		Michelman & Robinson LLP
		605 Third Avenue
		30th Floor
		New York, NY 10158
		Attn: Megan J. Penick, Esq.
		Email: mpenick@mrllp.com
	(b)	to the Executive as set forth on Schedule A hereto.

 

 

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided for in this Section, be deemed given upon facsimile confirmation, (iii) if delivered by mail in the manner described above to the address as provided for in this Section, be deemed given on the earlier of the third business day following mailing or upon receipt and (iv) if delivered by overnight courier to the address as provided in this Section, be deemed given on the earlier of the first business day following the date sent by such overnight courier or upon receipt (in each case regardless of whether such notice, request or other communication is received by any other person to whom a copy of such notice is to be delivered pursuant to this Section). Either party may, by notice given to the other party in accordance with this Section, designate another address or person for receipt of notices hereunder.

 

15. Severability. If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those as to which it is invalid or unenforceable, shall be considered severable and shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended and given such interpretation as to achieve the economic intent of this Agreement.

 

16. Waiver. The failure of any party to insist in any one instance or more upon strict performance of any of the terms and conditions hereof, or to exercise any right or privilege herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to remain in full force and effect. Any waiver by any party of any violation of, breach of or default under any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other provision of this Agreement.

 

17. Successors and Assigns. This Agreement shall be binding upon the Company and any successors and assigns of the Company. Neither this Agreement nor any right or obligation hereunder may be assigned by the Executive. The Company may assign this Agreement and its right and obligations hereunder, in whole or in part.

 

18. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Additionally, a facsimile counterpart of this Agreement shall have the same effect as an originally executed counterpart.

 

19. Headings. Headings in this Agreement are for reference purposes only and shall not be deemed to have any substantive effect.

 

20. Opportunity to Seek Advice. The Executive acknowledges and confirms that the Executive has had the opportunity to seek such legal, financial, and other advice and representation as the Executive has deemed appropriate in connection with this Agreement, that the Executive is fully aware of its legal effect, and that Executive has entered into it freely based on the Executive’s judgment and not on any representations or promises other than those contained in this Agreement.

 

21. Withholding and Payroll Practices. All salary, severance payments, bonuses or benefits payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law and shall be paid in the ordinary course pursuant to the Company’s then existing payroll practices.

 

[The next page is the signature page.]

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

	Kairos Pharma, Ltd.
	By:
	Name:	John S. Yu, M.D.
	Title:	Chief Executive Officer

 

		EXECUTIVE:
		Neil Bhowmick

 

 

Schedule A

 

1.	Employment Period: 12 months
2.	Employment

 

	a.	Title: Chief Scientific Officer
	b.	Executive Duties:

  

	In his capacity as Chief Scientific Officer, the Executive shall perform such services, consistent with his office, including scientific-related activities of the Company, and such other duties as shall be assigned to him by the Board of Directors of the Company from time to time, devoting such time and effort and performing all of the functions of the offices held by him, as directed by the Board of Directors from time to time.
4.	Base Salary: $100,000 per year, commence upon the Company’s completion of its IPO.
5(a).	Target Bonus: Bonus in cash or stock compensation as may be determined at the discretion of the Board of Directors or a committee thereof.
6.	Initial Restricted Stock Grant: 14,000 Restricted Stock Units issuable under the Company’s 2023 Equity Incentive Plan, vesting annually over a period of three years in substantially equal installments, in accordance with the terms of the Restricted Stock Unit Grant Agreement.
6(e).	Severance Period: six months
14(b).	Executive Contact Information:
[*]

 

 

Exhibit A

 

Form of Grant Agreement

 

 

Exhibit 10.28

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”) is entered into as of the ____ day of September, 2023, by and between Kairos Pharma, Ltd., a Delaware corporation (the “Company”), and Ramachandran Murali an individual residing at the address set forth on Schedule A hereto (the “Executive”).

 

INTRODUCTION

 

WHEREAS, the Company is in the business of the development and commercialization of specialty pharmaceuticals (the “Business”);

 

WHEREAS, the Company wishes to employ the Executive under the title and capacity set forth on Schedule A hereto;

 

WHEREAS, the Executive desires to be employed by the Company in such capacity, subject to the terms of this Agreement;

 

WHEREAS, the Executive acknowledges that he will not be entitled to compensation under this Agreement until such time as the Company either completes an initial public offering (“IPO”) or otherwise becomes a publicly reporting company.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows:

 

1. Employment Period. The initial term of the Executive’s employment by the Company pursuant to this Agreement shall commence upon consummation of the Company’s IPO (the “Effective Date”) and shall continue for that period of calendar months from the Effective Date set forth on Schedule A hereto (the “Employment Period”). Thereafter, the Employment Period will automatically renew for successive periods of one (1) year each, with the terms of such Agreement to be adjusted from time to time by the Company’s board of directors (the “Board”) (or committee thereof), unless either party shall have given to the other at least thirty (30) days’ prior written notice of their intention not to renew the Executive’s employment prior to the end of the Employment Period or the then applicable renewal term, as the case may be. In any event, the Employment Period may be terminated as provided herein.

 

2. Employment; Duties.

 

(a) Subject to the terms and conditions set forth herein, the Company hereby employs the Executive to act for the Company during the Employment Period in the capacity set forth on Schedule A hereto, and the Executive hereby accepts such employment. The duties and responsibilities of the Executive shall include such duties and responsibilities appropriate to such office and as are normally associated with and appropriate for such position and as the Company’s Board may from time to time reasonably assign to the Executive.

 

 

(b) Executive recognizes that during the period of Executive’s employment hereunder, Executive owes an undivided duty of loyalty to the Company, and Executive will use Executive’s good faith efforts to promote and develop the business of the Company and its subsidiaries (the Company’s subsidiaries from time to time, together with any other affiliates of the Company, the “Affiliates”). Executive shall devote a sufficient amount of Executive’s business time, attention and skills to satisfactorily fulfill the performance of Executive’s services as an executive of the Company. Recognizing and acknowledging that it is essential for the protection and enhancement of the brand name, reputation and business of the Company and the goodwill pertaining thereto, Executive shall perform the Executive’s duties under this Agreement professionally, in accordance with the applicable laws, rules and regulations and such standards, policies and procedures established by the Company and the industry from time to time.

 

(c) However, the parties agree that: (i) Executive may devote a reasonable amount of his time to civic, community, or charitable activities and may serve as a director of other corporations (provided that any such other corporation is not a competitor of the Company, as determined by the Board) and to other types of business or public activities not expressly mentioned in this paragraph and (ii) Executive may participate as a non-employee director and/or investor in other companies and projects as disclosed by Executive to, and approved by, the Board, so long as Executive’s responsibilities with respect thereto do not conflict or interfere with the faithful performance of Executive’s duties to the Company.

 

3. Place of Employment. The Executive’s services shall be performed at any location at which the Company now or hereafter has a business facility, at employee’s home office, or at any other location where Executive’s presence is necessary to perform his duties. The parties acknowledge that the Executive may be required to travel in connection with the performance of his duties hereunder.

 

4. Base Salary. The Executive shall be entitled to receive a salary from the Company during the Employment Period at a rate per year indicated on Schedule A hereto (the “Base Salary”), which Base Salary shall commence upon the Company’s IPO or upon the Company becoming a publicly reporting company under the Securities Exchange Act of 1934, as amended, whichever comes first. Once the Board has established the Base Salary, such Base Salary shall be payable in monthly installments in accordance with the Company’s customary payroll practices. The Executive’s Base Salary may be increased on each anniversary of the Effective Date, at the Board’s sole discretion.

 

5. Bonus.

 

(a) The Executive shall be eligible to receive an annual cash bonus (the “Annual Bonus”), which shall be earned by the Executive based upon the level of achievement of specific operational, financial or other milestones by the Company, as may be established by the Board in consultation with the Executive (the “Milestones”), and based upon the Executive’s performance of the Executive Duties set forth on Schedule A. The amount of the Annual Bonus, if any, and the method of payment of all or any portion of any Annual Bonus (which will be paid in cash) shall be determined by the Board in its sole discretion. If the Board determines that any portion of the Annual Bonus is to be paid in cash, such amount shall be payable in U.S. dollars within ten (10) days of the filing with the Securities and Exchange Commission of the Company’s annual report on Form 10-K.

 

 

(b) The Executive shall be eligible to participate in any other bonus or incentive program established by the Company for executives of the Company.

 

6. Other Benefits.

 

(a) Grant of Restricted Stock Units. The Executive shall be entitled to receive a number of restricted stock units (“RSUs”) as set forth on Schedule A hereto, issuable under the Company’s 2023 Equity Incentive Plan, which will vest annually over a three year period one-third increments commencing on following the date of the grant of such RSUs, in accordance with the terms of a separate Grant Agreement, a form of which is attached hereto as Exhibit A. Any additional equity awards to the Executive shall be at the option of the Board.

 

(b) Restrictions. Any and all shares of stock, options, restricted stock units and other equity awards granted to or owned by the Executive will be subject to the share ownership guidelines and insider trading and blackout policies adopted from time to time by the Board for senior executives of the Company and will also be subject to applicable holding periods and transaction reporting requirements under applicable securities laws.

 

(c) Insurance and Other Benefits. During the Employment Period, the Executive and the Executive’s dependents shall be entitled to participate in any Company insurance programs and any applicable benefit plans, as the same may be adopted and/or amended from time to time (the “Benefits”). The Executive shall be bound by all of the policies and procedures relating to Benefits established by the Company from time to time.

 

(d) Vacation; Personal Days. During the Employment Period, the Executive shall be entitled to an annual vacation of 30 working days, such duration consistent with the Company’s policies from time to time, as determined by the Board. The Executive shall be entitled to paid personal days on a basis consistent with the Company’s other senior executives, as determined by the Board.

 

(e) Expense Reimbursement. The Company shall reimburse the Executive for all reasonable business, promotional, travel and entertainment expenses (“Reimbursable Expenses”) incurred or paid by the Executive during the Employment Period in the performance of Executive’s services under this Agreement on a basis consistent with the Company’s other senior executives, as determined by the Board, provided that the Executive furnishes to the Company appropriate documentation required by the Internal Revenue Code and/or other taxing authorities in a timely fashion in connection with such expenses and shall furnish such other documentation and accounting as the Company may from time to time reasonably request.

 

 

7. Termination; Compensation Due Upon Termination of Employment. The Executive’s employment with the Company shall be entirely “at-will,” meaning that either the Executive or the Company may terminate such employment relationship by terminating this Agreement in writing delivered to the other party at any time for any reason or for no reason at all, subject, however, to the terms of this Section 7. The Executive’s right to compensation for periods after the date his employment with the Company terminates shall be determined in accordance with the provisions of paragraphs (a) through (e) below.

 

(a) Voluntary Resignation; Termination without Cause.

 

(i) Voluntary Resignation. The Executive may terminate his employment at any time upon thirty (30) days prior written notice to the Company. In the event of the Executive’s voluntary termination of employment other than for Good Reason (as defined below), the Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 4 or 5, except as otherwise required by this Agreement or by applicable law, to provide the benefits described in Section 6 for periods after the date on which the Executive’s employment with the Company terminates due to the Executive’s voluntary resignation, except for the payment of the Executive’s Base Salary accrued through the date of such resignation.

 

(ii) Termination without Cause.

 

(A) If the Executive’s employment is terminated by the Company without Cause (as defined below): (1) the Company shall continue to pay the Executive the Base Salary (at the rate in effect on the date the Executive’s employment is terminated) until the end of the Severance Period (as defined below), (y) with respect to the Annual Bonus, to the extent the Milestones are achieved or, in the absence of Milestones, the Board has, in its sole discretion, otherwise determined an amount for the Executive’s bonus for the current Employment Period, pay the Executive a pro rata portion of the Annual Bonus for the year of the Employment Period on the date such Annual Bonus would have been payable to the Executive had the Executive remained employed by the Company, and (z) pay any other accrued compensation and Benefits; and (2) any of the Executive’s unvested RSUs as set forth on Schedule A attached hereto shall automatically vest upon the Executive’s termination without Cause. The Executive shall have no further rights under this Agreement or otherwise to receive any other compensation or benefits after such termination of employment.

 

(B) If, following a termination of employment without Cause, the Executive breaches the provisions of Sections 8, 9 or 10 hereof, the Executive shall not be eligible, as of the date of such breach, for the payments and benefits described in Section 7(a)(ii)(A) above, and any and all obligations and agreements of the Company with respect to such payments shall thereupon cease.

 

 

(b) Discharge for Cause. Upon written notice to the Executive, the Company may terminate the Executive’s employment for “Cause” if any of the following events shall occur:

 

(i) any act or omission that constitutes a material breach by the Executive of any of his obligations under this Agreement;

 

(ii) the willful and continued failure or refusal of the Executive to satisfactorily perform the duties reasonably required of him as an employee of the Company;

 

(iii) the Executive’s conviction of, or plea of nolo contendere to, (i) any felony or (ii) a crime involving dishonesty or moral turpitude or which could reflect negatively upon the Company or otherwise impair or impede its operations;

 

(iv) the Executive’s engaging in any misconduct, negligence, act of dishonesty (including, without limitation, theft or embezzlement), violence, threat of violence or any activity that could result in any violation of federal securities laws, in each case, that is injurious to the Company or any of its Affiliates;

 

(v) the Executive’s material breach of a written policy of the Company or the rules of any governmental or regulatory body applicable to the Company;

 

(vi) the Executive’s refusal to follow the directions of the Board, unless such directions are, in the written opinion of legal counsel, illegal or in violation of applicable regulations;

 

(vii) any other willful misconduct by the Executive which is materially injurious to the financial condition or business reputation of the Company or any of its Affiliates, or

 

(viii) the Executive’s breach of his obligations under Section 8, 9 or 10 hereof.

 

In the event Executive is terminated for Cause, the Company shall have no obligation to make payments to Executive in accordance with the provisions of Sections 4 or 5, or, except as otherwise required by law, to provide the benefits described in Section 6, for periods after the Executive’s employment with the Company is terminated on account of the Executive’s discharge for Cause except for the Executive’s then applicable Base Salary accrued through the date of such termination.

 

(c) Disability. The Company shall have the right, but shall not be obligated to, terminate the Executive’s employment hereunder in the event the Executive becomes disabled such that he is unable to discharge his duties to the Company for a period of ninety (90) consecutive days or one hundred twenty (120) days in any one hundred eighty (180) consecutive day period (unless longer periods are not required under applicable local labor regulations) (a “Permanent Disability”). In the event of a termination of employment due to a Permanent Disability, the Company shall be obligated to continue to make payments to the Executive in an amount equal to the then applicable Base Salary for the Severance Period (as defined below), payable in the form of salary continuation for the applicable Severance Period after the Executive’s employment with the Company is terminated due to a Permanent Disability. A determination of a Permanent Disability shall be made by a physician satisfactory to both the Executive and the Company; provided, however, that if the Executive and the Company do not agree on a physician, the Executive and the Company shall each select a physician and those two physicians together shall select a third physician, whose determination as to a Permanent Disability shall be binding on all parties.

 

 

(d) Death. The Executive’s employment hereunder shall terminate upon the death of the Executive. The Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 4 or 5, or, except as otherwise required by law or the terms of any applicable benefit plan, to provide the benefits described in Section 6 for periods after the date of the Executive’s death except for then applicable Base Salary earned and accrued through the date of death, payable to the Executive’s beneficiary, as the Executive shall have indicated in writing to the Company (or if no such beneficiary has been designated, to Executive’s estate).

 

(e) Termination for Good Reason. The Executive may terminate this Agreement at any time for Good Reason. In the event of termination under this paragraph (e), the Company shall pay to the Executive severance in an amount equal to the Executive’s then applicable Base Salary for a period equal to the number of months set forth on Schedule A hereto (the “Severance Period”), subject to the Executive’s continued compliance with Sections 8, 9 and 10 of this Agreement, payable in the form of salary continuation for the applicable Severance Period following the Executive’s termination, and subject to the Company’s regular payroll practices and required withholdings. Such severance shall be reduced by any cash remuneration paid to the Executive because of the Executive’s employment or self-employment during the Severance Period. The Executive shall continue to receive all Benefits (either through the Company or an Affiliate) during the Severance Period. The Executive shall have no further rights under this Agreement or otherwise to receive any other compensation or benefits after such resignation. For the purposes of this Agreement, “Good Reason” shall mean any of the following (without Executive’s express written consent):

 

(i) the assignment to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed on the Effective Date;

 

(ii) removal of the Executive from his position as indicated on Schedule A hereto, or the assignment to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed under this Agreement, within twelve (12) months after a Change of Control (as defined below);

 

(iii) a reduction by the Company in the Executive’s then applicable Base Salary or other compensation, unless said reduction is pari passu with other senior executives of the Company;

 

 

(iv) the taking of any action by the Company that would, directly or indirectly, materially reduce the Executive’s benefits, unless said reductions are pari passu with other senior executives of the Company; or

 

(v) a breach by the Company of any material term of this Agreement that is not cured by the Company within thirty (30) days following receipt by the Company of written notice thereof.

 

For purposes of this Agreement, “Change of Control” shall mean the occurrence of any one or more of the following: (i) the accumulation, whether directly, indirectly, beneficially or of record, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of 50% or more of the shares of the outstanding equity securities of the Company, (ii) a merger or consolidation of the Company in which the Company does not survive as an independent company or upon the consummation of which the holders of the Company’s outstanding equity securities prior to such merger or consolidation own less than 50% of the outstanding equity securities of the Company after such merger or consolidation, or (iii) a sale of all or substantially all of the assets of the Company; provided, however, that the following acquisitions shall not constitute a Change of Control for the purposes of this Agreement: (A) any acquisitions of common stock or securities convertible into common stock directly from the Company, or (B) any acquisition of common stock or securities convertible into common stock by any employee benefit plan (or related trust) sponsored by or maintained by the Company.

 

(f) Notice of Termination. Any termination of employment by the Company or the Executive shall be communicated by a written “Notice of Termination” to the other party hereto given in accordance with Section 16 of this Agreement. In the event of a termination by the Company for Cause, the Notice of Termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) specify the date of termination, which date shall be the date of such notice. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

(g) Resignation of Executive Officer. The termination of the Executive’s employment for any reason will constitute the Executive’s resignation from (i) any director, officer, or employee position the Executive has with the Company or any of its Affiliates, and (ii) all fiduciary positions (including as a trustee) the Executive holds with respect to any employee benefit plans or trusts established by the Company. The Executive agrees that this Agreement shall serve as written notice of resignation in this circumstance, unless otherwise required by any plan or applicable law.

 

 

8. Non-Competition; Non-Solicitation.

 

(a) For the duration of the Employment Period and, unless the Company terminates the Executive’s employment without Cause, during the Severance Period (the “Non-compete Period”), the Executive shall not, directly or indirectly, except as specifically provided in the last sentence of Section 2(c) hereof, engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend any credit to, or render services or advice to, any business, firm, corporation, partnership, association, joint venture or other entity that engages or conducts any business the same as or substantially similar to the Business or any other business engaged in or proposed to be engaged in or conducted by the Company and/or any of its Affiliates during the Employment Period, or then included in the future strategic plan of the Company and/or any of its Affiliates, anywhere within North America; provided, however, that the Executive may own less than 5% in the aggregate of the outstanding shares of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise), other than any such enterprise with which the Company competes or is currently engaged in a joint venture, if such securities are of a class listed on any national or regional securities exchange or have been registered under Section 12(b) or (g) of the Exchange Act.

 

(b) During the Employment Period and for a period of twelve (12) months following termination of the Executive’s employment with the Company, the Executive shall not:

 

(i) solicit or hire, or attempt to recruit, persuade, solicit or hire, any employee, or independent contractor of, or consultant to, the Company, or its Affiliates, to leave the employment (or independent contractor relationship) thereof, whether or not any such employee or independent contractor is party to an employment agreement; or

 

(ii) attempt in any manner to solicit or accept from any customer or client of the Company or any of its Affiliates, with whom the Company or any of its Affiliates had significant contact during the term of this Agreement, business of the kind or competitive with the business done by the Company or any of its Affiliates with such customer or to persuade or attempt to persuade any such customer to cease to do business or to reduce the amount of business which such customer has customarily done or is reasonably expected to do with the Company or any of its Affiliates or if any such customer elects to move its business to a person other than the Company or any of its Affiliates, provide any services (of the kind or competitive with the Business of the Company or any of its Affiliates) for such customer, or have any discussions regarding any such service with such customer, on behalf of such other person.

 

(c) The Executive recognizes and agrees that because a violation by the Executive of his obligations under this Section will cause irreparable harm to the Company that would be difficult to quantify and for which money damages would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any such violation, without the necessity of posting a bond. The Non-compete Period will be extended by the duration of any violation by the Executive of any of his obligations under this Section.

 

 

(d) The Executive expressly agrees that the character, duration, and scope of the covenant not to compete are reasonable in light of the circumstances as they exist at the date upon which this Agreement has been executed. However, should a determination nonetheless be made by a court of competent jurisdiction at a later date that the character, duration or geographical scope of the covenant not to compete is unreasonable in light of the circumstances as they then exist, then it is the intention of the Executive, on the one hand, and the Company, on the other, that the covenant not to compete shall be construed by the court in such a manner as to impose only those restrictions on the conduct of the Executive which are reasonable in light of the circumstances as they then exist and necessary to assure the Company of the intended benefit of the covenant not to compete.

 

9. Confidentiality.

 

(a) The Executive understands that the Company and/or its Affiliates, from time to time, may impart to the Executive confidential information, whether such information is written, oral, electronic, or graphic.

 

(b) For purposes of this Agreement, “Confidential Information” means information, which is used in the business of the Company or its Affiliates and (i) is proprietary to, about or created by the Company or its Affiliates, (ii) gives the Company or its Affiliates some competitive business advantage or the opportunity of obtaining such advantage or the disclosure of which could be detrimental to the interests of the Company or its Affiliates, (iii) is designated as Confidential Information by the Company or its Affiliates, is known by the Executive to be considered confidential by the Company or its Affiliates, or from all the relevant circumstances should reasonably be assumed by the Executive to be confidential and proprietary to the Company or its Affiliates, or (iv) is not generally known by non-Company personnel. Such Confidential Information includes, without limitation, the following types of information and other information of a similar nature (whether or not reduced to writing or designated as confidential):

 

(i) internal personnel and financial information of the Company or its Affiliates, vendor information (including vendor characteristics, services, prices, lists and agreements), purchasing and internal cost information, internal service and operational manuals, and the manner and methods of conducting the business of the Company or its Affiliates;

 

(ii) marketing and development plans, price and cost data, price and fee amounts, pricing and billing policies, bidding, quoting procedures, marketing techniques, forecasts and forecast assumptions and volumes, and future plans and potential strategies of the Company or its Affiliates which have been or are being discussed;

 

 

(iii) names of customers and their representatives, contracts (including their contents and parties), customer services, and the type, quantity, specifications and content of products and services purchased, leased, licensed or received by customers of the Company or its Affiliates; and

 

(iv) confidential and proprietary information provided to the Company or its Affiliates by any actual or potential customer, government agency or other third party (including businesses, consultants and other entities and individuals).

 

The Executive hereby acknowledges the Company’s exclusive ownership of such Confidential Information.

 

(c) The Executive agrees as follows: (1) only to use the Confidential Information to provide services to the Company and its Affiliates; (2) only to communicate the Confidential Information to fellow employees, agents and representatives on a need-to-know basis; and (3) not to otherwise disclose or use any Confidential Information, except as may be required by law or otherwise authorized by the Board. Upon demand by the Company or upon termination of the Executive’s employment, the Executive will deliver to the Company all manuals, photographs, recordings and any other instrument or device by which, through which or on which Confidential Information has been recorded and/or preserved, which are in the Executive’s possession, custody or control.

 

10. Executive’s Representation. The Executive hereby represents that the Executive’s entry into this Agreement and performance of the services hereunder will not violate the terms or conditions of any other agreement to which the Executive is a party.

 

11. Governing Law/Venue/Jurisdiction. This Agreement and any disputes or controversies arising hereunder shall be construed and enforced in accordance with and governed by the internal laws of the State of California without regard to the conflicts of laws principles thereof. Venue and jurisdiction of any suite or cause of action arising under this Agreement shall lie exclusively in the County of Los Angeles, California or the U.S. District court for the Central District of California.

 

12. Public Company Obligations; Indemnification.

 

(a) Executive acknowledges that the Company intends to become a publicly reporting company whose shares of common stock will be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and whose common stock will be registered under the Exchange Act, and that, after the Company becomes a publicly reporting company, this Agreement will be subject to the public filing requirements of the Exchange Act. In addition, both parties acknowledge that the Executive’s compensation and perquisites (each as determined by the rules of the US Securities and Exchange Commission (the “SEC”) or any other regulatory body or exchange having jurisdiction) (which may include benefits or regular or occasional aid/assistance, such as recreation, club memberships, meals, education for his family, vehicle, lodging or clothing, occasional bonuses or anything else he receives, during the Employment Period and any renewals thereof, in cash or in kind) paid or payable or received or receivable under this Agreement or otherwise, and his transactions and other dealings with the Company, may be required to be publicly disclosed.

 

 

(b) Executive acknowledges and agrees that the applicable insider trading rules, transaction reporting rules, limitations on disclosure of non-public information and other requirements set forth in the Securities Act, the Exchange Act and rules and regulations promulgated by the SEC may apply to this Agreement and Executive’s employment with the Company.

 

(c) Executive (on behalf of himself, as well as the Executive’s executors, heirs, administrators and assigns) absolutely and unconditionally agrees to indemnify and hold harmless the Company and all of its past, present and future affiliates, executors, heirs, administrators, shareholders, employees, officers, directors, attorneys, accountants, agents, representatives, predecessors, successors and assigns from any and all claims, debts, demands, accounts, judgments, causes of action, equitable relief, damages, costs, charges, complaints, obligations, controversies, actions, suits, proceedings, expenses, responsibilities and liabilities of every kind and character whatsoever (including, but not limited to, reasonable attorneys’ fees and costs) in the event of Executive’s breach of any obligation of Executive under the Securities Act, the Exchange Act, any rules promulgated by the SEC and any other applicable federal, state or foreign laws, rules, regulations or orders.

 

13. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersedes and cancels any and all previous agreements, both written and oral, regarding the subject matter hereof between the parties hereto. This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto.

 

14. Notices. All notices, requests, demands and other communications called for or contemplated hereunder shall be in writing and shall be deemed to have been given when delivered to the party to whom addressed or when sent by telecopy (if promptly confirmed by registered or certified mail, return receipt requested, prepaid and addressed) to the parties, their successors in interest, or their assignees at the following addresses, or at such other addresses as the parties may designate by written notice in the manner aforesaid:

 

	(a)	to the Company at:
		Kairos Pharma, Ltd.
		2355 Westwood Blvd., #139
		Los Angeles CA 90064
		(310) 948-2356
		Attn: Chief Executive Officer
		Email: john.yu@cshs.org
		with a copy to:
		Michelman & Robinson LLP
		605 Third Avenue, 30th Floor
		New York, NY 10158
		Attn: Megan J. Penick, Esq.
		Email: mpenick@mrllp.com

 

 

(b) to the Executive as set forth on Schedule A hereto.

 

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided for in this Section, be deemed given upon facsimile confirmation, (iii) if delivered by mail in the manner described above to the address as provided for in this Section, be deemed given on the earlier of the third business day following mailing or upon receipt and (iv) if delivered by overnight courier to the address as provided in this Section, be deemed given on the earlier of the first business day following the date sent by such overnight courier or upon receipt (in each case regardless of whether such notice, request or other communication is received by any other person to whom a copy of such notice is to be delivered pursuant to this Section). Either party may, by notice given to the other party in accordance with this Section, designate another address or person for receipt of notices hereunder.

 

15. Severability. If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those as to which it is invalid or unenforceable, shall be considered severable and shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended and given such interpretation as to achieve the economic intent of this Agreement.

 

16. Waiver. The failure of any party to insist in any one instance or more upon strict performance of any of the terms and conditions hereof, or to exercise any right or privilege herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to remain in full force and effect. Any waiver by any party of any violation of, breach of or default under any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other provision of this Agreement.

 

17. Successors and Assigns. This Agreement shall be binding upon the Company and any successors and assigns of the Company. Neither this Agreement nor any right or obligation hereunder may be assigned by the Executive. The Company may assign this Agreement and its right and obligations hereunder, in whole or in part.

 

18. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Additionally, a facsimile counterpart of this Agreement shall have the same effect as an originally executed counterpart.

 

19. Headings. Headings in this Agreement are for reference purposes only and shall not be deemed to have any substantive effect.

 

20. Opportunity to Seek Advice. The Executive acknowledges and confirms that the Executive has had the opportunity to seek such legal, financial, and other advice and representation as the Executive has deemed appropriate in connection with this Agreement, that the Executive is fully aware of its legal effect, and that Executive has entered into it freely based on the Executive’s judgment and not on any representations or promises other than those contained in this Agreement.

 

21. Withholding and Payroll Practices. All salary, severance payments, bonuses or benefits payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law and shall be paid in the ordinary course pursuant to the Company’s then existing payroll practices.

 

[The next page is the signature page.]

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

	Kairos Pharma, Ltd.
	By:
	Name:	John S. Yu, M.D.
	Title:	Chief Executive Officer

 

	EXECUTIVE:
	Ramachandran Murali

 

 

Schedule A

 

1.	Employment Period: 12 months
2.	Employment

 

	a.	Title: Vice President of Research and Development
	b.	Executive Duties:

 

In his capacity as Vice President of Research and Development , the Executive shall perform such services, consistent with his office, including research and development related activities of the Company, and such other duties as shall be assigned to him by the Board of Directors of the Company from time to time, devoting such time and effort and performing all of the functions of the offices held by him, as directed by the Board of Directors from time to time.

 

4.	Base Salary: $80,000 per year, commence upon the Company’s completion of its IPO. Target Bonus: At the discretion of the Board of Directors or a committee thereof.
5(a).	Initial Restricted Stock Grant: 14,000,000 Restricted Stock Units issuable under the Company’s 2023 Equity Incentive Plan, vesting annually in one-third increments commencing on the first anniversary date of the grant of Restricted Stock Units, in accordance with the terms of the Restricted Stock Unit Grant Agreement.
6(e).	Severance Period: Six months
13(b).	Executive Contact Information:

 

[*]

 

 

Exhibit A

 

Form of Grant Agreement

 

 

Exhibit 10.29

 

KAIROS PHARMA, LTD.

 

FORM OF INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (the “Agreement”), dated as of [_____], is by and between Kairos Pharma, Ltd., a Delaware corporation (the “Company”) and [_____] (the “Indemnitee”).

 

WHEREAS, Indemnitee is an officer or director of the Company;

 

WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies;

 

WHEREAS, the board of directors of the Company (the “Board”) has determined that enhancing the ability of the Company to retain and attract as directors and officers the most capable persons is in the best interests of the Company and that the Company therefore should seek to assure such persons that indemnification and insurance coverage is available; and

 

WHEREAS, in recognition of the need to provide Indemnitee with substantial protection against personal liability, in order to procure Indemnitee’s continued service as an officer or director of the Company and to enhance Indemnitee’s ability to serve the Company in an effective manner, and in order to provide such protection pursuant to express contract rights (intended to be enforceable irrespective of, among other things, any amendment to the Company’s certificate of incorporation or bylaws (collectively, the “Governing Documents”), any change in the composition of the Board or any change in control or business combination transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of, and the advancement of Expenses (as defined in Section 1(f) [Definitions] below) to, Indemnitee as set forth in this Agreement, and for the continued coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policy.

 

NOW, THEREFORE, in consideration of the foregoing and the Indemnitee’s agreement to continue to provide services to the Company, the parties agree as follows:

 

1.Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

 

(a) “Beneficial Owner” has the meaning given to the term “beneficial owner” in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

(b) “Change in Control” means the occurrence after the date of this Agreement of any of the following events:

(i) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of the voting power of the Company’s then outstanding Voting Securities unless the change in relative Beneficial Ownership of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors;

 

(ii) the consummation of a reorganization, merger or consolidation, unless immediately following such reorganization, merger or consolidation, all of the Beneficial Owners of the Voting Securities of the Company immediately prior to such transaction beneficially own, directly or indirectly, more than 60% of the combined voting power of the outstanding Voting Securities of the entity resulting from such transaction;

 

(iii) during any period of two consecutive years, not including any period prior to the execution of this Agreement, individuals who at the beginning of such period constituted the Board (including for this purpose any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved) cease for any reason to constitute at least a majority of the Board; or

 

 

(iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets;

 

provided, however, that the occurrence of any of the following will not be deemed to result in a Change in Control:

 

I.

the replacement or appointment of a successor trustee for a trust that is a Class B stockholder of the Company; or

 

II.

a transfer of shares of stock among any of the trusts that are Class B stockholders of the Company, including any transfer to a beneficiary or trustee of such trust, whether as a result of the dissolution of a trust, consolidation of one or more trusts, or otherwise.

 

(c) “Claim” means:

 

(i) any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, arbitrative, investigative or other, and whether made pursuant to federal, state or other law; or

 

(ii) any inquiry, hearing or investigation that the Indemnitee determines might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism.

 

(d) “Delaware Court” shall have the meaning ascribed to it in Section 9(e) [Selection of Independent Counsel for Standard of Conduct Determination] below.

 

(e) “Disinterested Director” means a director of the Company who is not and was not a party to the Claim in respect of which indemnification is sought by Indemnitee.

 

(f) “Expenses” means any and all expenses, including attorneys’ and experts’ fees, court costs, transcript costs, travel expenses, duplicating, printing and binding costs, telephone charges, and all other costs and expenses incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Claim, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 5 only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

 

(g) “Expense Advance” means any payment of Expenses advanced to Indemnitee by the Company pursuant to Section 4 or Section 5 hereof.

 

(h) “Indemnifiable Event” means any event or occurrence, whether occurring on or after the date of this Agreement, related to the fact that Indemnitee is or was a director, officer, employee or agent of the Company or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent of any other corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise (collectively with the Company, “Enterprise”) or by reason of an action or inaction by Indemnitee in any such capacity (whether or not serving in such capacity at the time any Loss is incurred for which indemnification can be provided under this Agreement).

 

 

(i) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently performs, nor in the past five (5) years has performed, as certified in writing by such Independent Counsel, services for either: (i) the Company or Indemnitee, or any of their affiliates (other than in connection with matters concerning Indemnitee under this Agreement or of other indemnitees under similar agreements) or (ii) any other party to the Claim giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

 

(j) “Losses” means any and all Expenses, damages, losses, liabilities, judgments, fines, penalties (whether civil, criminal or other), ERISA excise taxes, amounts paid or payable in settlement, including any interest, assessments, and all other charges paid or payable in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim.

 

(k) “Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity and includes the meaning set forth in Sections 13(d) [Non-Exclusivity] and 14(d) of the Exchange Act.

 

(l) “Standard of Conduct Determination” shall have the meaning ascribed to it in Section 9(b) [Standard of Conduct] below.

 

(m) “Voting Securities” means any securities of the Company that vote generally in the election of directors.

 

2. Services to the Company. Indemnitee agrees to serve as a director or officer of the Company for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders [his/her] resignation or is no longer serving in such capacity. This Agreement shall not be deemed an employment agreement between the Company (or any of its subsidiaries or Enterprise) and Indemnitee. Indemnitee specifically acknowledges that [his/her] service to the Company or any of its subsidiaries or Enterprise is at will and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment agreement between Indemnitee and the Company (or any of its subsidiaries or Enterprise), other applicable formal severance policies duly adopted by the Board or, with respect to service as a director or officer of the Company, by the Company’s Governing Documents or Delaware law.

 

3. Indemnification. Subject to Section 9 and Section 10 of this Agreement, the Company shall indemnify Indemnitee, to the fullest extent permitted by the laws of the State of Delaware in effect on the date hereof, or as such laws may from time to time hereafter be amended to increase the scope of such permitted indemnification, against any and all Losses if Indemnitee was or is or becomes a party to or participant in, or is threatened to be made a party to or participant in, any Claim by reason of or arising in part out of an Indemnifiable Event, including, without limitation, Claims brought by or in the right of the Company, Claims brought by third parties, and Claims in which the Indemnitee is solely a witness.

 

4. Advancement of Expenses. Indemnitee shall have the right to advancement by the Company, prior to the final disposition of any Claim by final adjudication to which there are no further rights of appeal, of any and all Expenses actually and reasonably paid or incurred by Indemnitee in connection with any Claim arising out of an Indemnifiable Event. Indemnitee’s right to such advancement is not subject to the satisfaction of any standard of conduct. Without limiting the generality or effect of the foregoing, within thirty (30) days after any request by Indemnitee, the Company shall, in accordance with such request, (a) pay such Expenses on behalf of Indemnitee, (b) advance to Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimburse Indemnitee for such Expenses. In connection with any request for Expense Advances, Indemnitee shall not be required to provide any documentation or information to the extent that the provision thereof would undermine or otherwise jeopardize attorney-client privilege. Execution and delivery to the Company of this Agreement by Indemnitee constitutes an undertaking by the Indemnitee to repay any amounts paid, advanced or reimbursed by the Company pursuant to this Section 4 in respect of Expenses relating to, arising out of or resulting from any Claim in respect of which it shall be determined, pursuant to Section 9, following the final disposition of such Claim, that Indemnitee is not entitled to indemnification hereunder. No other form of undertaking shall be required other than the execution of this Agreement. Indemnitee’s obligation to reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged thereon.

 

 

5. Indemnification for Expenses in Enforcing Rights. To the fullest extent allowable under applicable law, the Company shall also indemnify against, and, if requested by Indemnitee, shall advance to Indemnitee subject to and in accordance with Section 4, any Expenses actually and reasonably paid or incurred by Indemnitee in connection with any action or proceeding by Indemnitee for (a) indemnification or reimbursement or advance payment of Expenses by the Company under any provision of this Agreement, or under any other agreement or provision of the Governing Documents now or hereafter in effect relating to Claims relating to Indemnifiable Events, and/or (b) recovery under any directors’ and officers’ liability insurance policies maintained by the Company. However, in the event that Indemnitee is ultimately determined not to be entitled to such indemnification or insurance recovery, as the case may be, then all amounts advanced under this Section 5 shall be repaid. Indemnitee shall be required to reimburse the Company in the event that a final judicial determination is made that such action brought by Indemnitee was frivolous or not made in good faith.

 

6. Partial Indemnity. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of any Losses in respect of a Claim related to an Indemnifiable Event but not for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

 

7. Notification and Defense of Claims.

 

(a) Notification of Claims. Indemnitee shall notify the Company in writing as soon as practicable of any Claim which could relate to an Indemnifiable Event or for which Indemnitee could seek Expense Advances, including a brief description (based upon information then available to Indemnitee) of the nature of, and the facts underlying, such Claim. The failure by Indemnitee to timely notify the Company hereunder shall not relieve the Company from any liability hereunder, unless such failure materially prejudices the Company. If at the time of the receipt of such notice, the Company has directors’ and officers’ liability insurance in effect under which coverage for Claims related to Indemnifiable Events is potentially available, the Company shall give prompt written notice to the applicable insurers in accordance with the procedures set forth in the applicable policies. The Company shall provide to Indemnitee a copy of such notice delivered to the applicable insurers, and copies of all subsequent correspondence between the Company and such insurers regarding the Claim, in each case substantially concurrently with the delivery or receipt thereof by the Company.

 

(b) Defense of Claims. The Company shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event at its own expense and, except as otherwise provided below, to the extent the Company so wishes, it may assume the defense thereof with counsel reasonably satisfactory to Indemnitee. After notice from the Company to Indemnitee of its election to assume the defense of any such Claim, the Company shall not be liable to Indemnitee under this Agreement or otherwise for any Expenses subsequently directly incurred by Indemnitee in connection with Indemnitee’s defense of such Claim other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ its own legal counsel in such Claim, but all Expenses related to such counsel incurred after notice from the Company of its assumption of the defense shall be at Indemnitee’s own expense; provided, however, that if (i) Indemnitee’s employment of its own legal counsel has been authorized by the Company, (ii) Indemnitee has reasonably determined that there may be a conflict of interest between Indemnitee and the Company in the defense of such Claim, (iii) after a Change in Control, Indemnitee’s employment of its own counsel has been approved by the Independent Counsel or (iv) the Company shall not in fact have employed counsel to assume the defense of such Claim, then Indemnitee shall be entitled to retain its own separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any such Claim) and all Expenses related to such separate counsel shall be borne by the Company.

 

8. Procedure upon Application for Indemnification. In order to obtain indemnification pursuant to this Agreement, Indemnitee shall submit to the Company a written request therefor, including in such request such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of the Claim. Indemnification shall be made insofar as the Company determines Indemnitee is entitled to indemnification in accordance with Section 9 below.

 

 

9. Determination of Right to Indemnification.

 

(a) Mandatory Indemnification; Indemnification as a Witness.

 

(i) To the extent that Indemnitee shall have been successful on the merits or otherwise in defense of any Claim relating to an Indemnifiable Event or any portion thereof or in defense of any issue or matter therein, including without limitation dismissal without prejudice, Indemnitee shall be indemnified against all Losses relating to such Claim in accordance with Section 3 to the fullest extent allowable by law.

 

(ii) To the extent that Indemnitee’s involvement in a Claim relating to an Indemnifiable Event is to prepare to serve and serve as a witness, and not as a party, the Indemnitee shall be indemnified against all Losses incurred in connection therewith to the fullest extent allowable by law.

 

(b) Standard of Conduct. To the extent that the provisions of Section 9(a) [Mandatory Indemnification; Indemnification as a Witness] are inapplicable to a Claim related to an Indemnifiable Event that shall have been finally disposed of, any determination of whether Indemnitee has satisfied any applicable standard of conduct under Delaware law that is a legally required condition to indemnification of Indemnitee hereunder against Losses relating to such Claim and any determination that Expense Advances must be repaid to the Company (a “Standard of Conduct Determination”) shall be made as follows:

 

(i) if no Change in Control has occurred, (A) by a majority vote of the Disinterested Directors, even if less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum or (C) if there are no such Disinterested Directors, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee; and

 

(ii) if a Change in Control shall have occurred, (A) if the Indemnitee so requests in writing, by a majority vote of the Disinterested Directors, even if less than a quorum of the Board or (B) otherwise, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee.

 

The Company shall indemnify and hold harmless Indemnitee against and, if requested by Indemnitee, shall reimburse Indemnitee for, or advance to Indemnitee, within thirty (30) days of such request, any and all Expenses incurred by Indemnitee in cooperating with the person or persons making such Standard of Conduct Determination.

 

(c) Making the Standard of Conduct Determination. The Company shall use its reasonable best efforts to cause any Standard of Conduct Determination required under Section 9(b) [Standard of Conduct] to be made as promptly as practicable. If the person or persons designated to make the Standard of Conduct Determination under Section 9(b) [Standard of Conduct] shall not have made a determination within thirty (30) days after the later of (A) receipt by the Company of a written request from Indemnitee for indemnification pursuant to Section 8 (the date of such receipt being the “Notification Date”) and (B) the selection of an Independent Counsel, if such determination is to be made by Independent Counsel, then Indemnitee shall be deemed to have satisfied the applicable standard of conduct; provided that such thirty (30) day period may be extended for a reasonable time, not to exceed an additional fifteen (15) days, if the person or persons making such determination in good faith requires such additional time to obtain or evaluate information relating thereto. Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of any Claim.

 

 

(d) Payment of Indemnification. If, in regard to any Losses:

 

(i) Indemnitee shall be entitled to indemnification pursuant to Section 9(a) [Mandatory Indemnification; Indemnification as a Witness];

 

(ii) no Standard Conduct Determination is legally required as a condition to indemnification of Indemnitee hereunder; or

 

(iii) Indemnitee has been determined or deemed pursuant to Section 9(b) [Standard of Conduct] or Section 9(c) [Making the Standard of Conduct Determination] to have satisfied the Standard of Conduct Determination, then the Company shall pay to Indemnitee, within five (5) days after the later of (A) the Notification Date or (B) the earliest date on which the applicable criterion specified in clause (i), (ii) or (iii) is satisfied, an amount equal to such Losses.

 

(e) Selection of Independent Counsel for Standard of Conduct Determination. If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 9.1(b)(i) [Definitions], the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to Indemnitee advising [him/her] of the identity of the Independent Counsel so selected. If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 9.1(b)(ii) [Definitions], the Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either case, Indemnitee or the Company, as applicable, may, within five (5) days after receiving written notice of selection from the other, deliver to the other a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not satisfy the criteria set forth in the definition of “Independent Counsel” in Section 1(i) [Definitions], and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person or firm so selected shall act as Independent Counsel. If such written objection is properly and timely made and substantiated, (i) the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit; and (ii) the non-objecting party may, at its option, select an alternative Independent Counsel and give written notice to the other party advising such other party of the identity of the alternative Independent Counsel so selected, in which case the provisions of the two immediately preceding sentences, the introductory clause of this sentence and numbered clause (i) of this sentence shall apply to such subsequent selection and notice. If applicable, the provisions of clause (ii) of the immediately preceding sentence shall apply to successive alternative selections. If no Independent Counsel that is permitted under the foregoing provisions of this Section 9(e) [Selection of Independent Counsel for Standard of Conduct Determination] to make the Standard of Conduct Determination shall have been selected within fifteen (15) days after the Company gives its initial notice pursuant to the first sentence of this Section 9(e) [Selection of Independent Counsel for Standard of Conduct Determination] or Indemnitee gives its initial notice pursuant to the second sentence of this Section 9(e) [Selection of Independent Counsel for Standard of Conduct Determination], as the case may be, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware (“Delaware Court”) to resolve any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or to appoint as Independent Counsel a person to be selected by the Court or such other person as the Court shall designate, and the person or firm with respect to whom all objections are so resolved or the person or firm so appointed will act as Independent Counsel. In all events, the Company shall pay all of the reasonable fees and expenses of the Independent Counsel incurred in connection with the Independent Counsel’s determination pursuant to Section 9(b) [Standard of Conduct].

 

 

(f) Presumptions and Defenses.

 

(i) Indemnitee’s Entitlement to Indemnification. In making any Standard of Conduct Determination, the person or persons making such determination shall presume that Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the Company shall have the burden of proof to overcome that presumption and establish that Indemnitee is not so entitled. Any Standard of Conduct Determination that is adverse to Indemnitee may be challenged by the Indemnitee in the Delaware Court. No determination by the Company (including by its directors or any Independent Counsel) that Indemnitee has not satisfied any applicable standard of conduct may be used as a defense to any legal proceedings brought by Indemnitee to secure indemnification or reimbursement or advance payment of Expenses by the Company hereunder or create a presumption that Indemnitee has not met any applicable standard of conduct.

 

(ii) No Other Presumptions. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, will not create a presumption that Indemnitee did not meet any applicable standard of conduct or have any particular belief, or that indemnification hereunder is otherwise not permitted.

 

(iii) Defense to Indemnification and Burden of Proof. It shall be a defense to any action brought by Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for Losses incurred in defending against a Claim related to an Indemnifiable Event in advance of its final disposition) that it is not permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed. In connection with any such action or any related Standard of Conduct Determination, the burden of proving such a defense or that the Indemnitee did not satisfy the applicable standard of conduct shall be on the Company.

 

10. Exclusions from Indemnification. Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated to:

 

(a) indemnify or advance funds to Indemnitee for Expenses or Losses with respect to proceedings initiated by Indemnitee, including any proceedings against the Company or its directors, officers, employees or other indemnitees and not by way of defense, except:

 

(i) proceedings referenced in Section 5 above (unless a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous); or

 

(ii) where the Company has joined in or the Board has consented to the initiation of such proceedings;

 

(b) indemnify Indemnitee if a final decision by a court of competent jurisdiction determines that such indemnification is prohibited by applicable law; or

 

(c) indemnify Indemnitee for the disgorgement of profits arising from the purchase or sale by Indemnitee of securities of the Company in violation of Section 16(b) of the Exchange Act, or any similar successor statute.

 

11. Settlement of Claims. The Company shall not be liable to Indemnitee under this Agreement for any amounts paid in settlement of any threatened or pending Claim related to an Indemnifiable Event effected without the Company’s prior written consent, which shall not be unreasonably withheld. The Company shall not settle any Claim related to an Indemnifiable Event in any manner that would impose any Losses on the Indemnitee without the Indemnitee’s prior written consent.

 

12. Duration. All agreements and obligations of the Company contained herein shall continue during the period that Indemnitee is a director or officer of the Company (or is serving at the request of the Company as a director, officer, employee, member, trustee or agent of another Enterprise) and shall continue thereafter (i) so long as Indemnitee may be subject to any possible Claim relating to an Indemnifiable Event (including any rights of appeal thereto) and (ii) throughout the pendency of any proceeding (including any rights of appeal thereto) commenced by Indemnitee to enforce or interpret his or her rights under this Agreement, even if, in either case, he or she may have ceased to serve in such capacity at the time of any such Claim or proceeding.

 

 

13. Non-Exclusivity. The rights of Indemnitee hereunder will be in addition to any other rights Indemnitee may have under the Governing Documents, the General Corporation Law of the State of Delaware, any other contract or otherwise (collectively, “Other Indemnity Provisions”); provided, however, that (a) to the extent that Indemnitee otherwise would have any greater right to indemnification under any Other Indemnity Provision, Indemnitee will be deemed to have such greater right hereunder and (b) to the extent that any change is made to any Other Indemnity Provision which permits any greater right to indemnification than that provided under this Agreement as of the date hereof, Indemnitee will be deemed to have such greater right hereunder. The Company will not adopt any amendment to any of the Governing Documents the effect of which would be to deny, diminish or encumber Indemnitee’s right to indemnification under this Agreement or any Other Indemnity Provision.

 

14. Liability Insurance. For the duration of Indemnitee’s service as a [director/officer] of the Company, and thereafter for so long as Indemnitee shall be subject to any pending Claim relating to an Indemnifiable Event, the Company shall use commercially reasonable efforts (taking into account the scope and amount of coverage available relative to the cost thereof) to continue to maintain in effect policies of directors’ and officers’ liability insurance providing coverage that is at least substantially comparable in scope and amount to that provided by corporations of similar size and similarly situated to the Company in the Company’s industry. In all policies of directors’ and officers’ liability insurance maintained by the Company, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company’s directors, if Indemnitee is a director, or of the Company’s officers, if Indemnitee is an officer (and not a director) by such policy. Upon request, the Company will provide to Indemnitee copies of all directors’ and officers’ liability insurance applications, binders, policies, declarations, endorsements and other related materials.

 

15. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment to Indemnitee in respect of any Losses to the extent Indemnitee has otherwise received payment under any insurance policy, the Governing Documents, Other Indemnity Provisions or otherwise of the amounts otherwise indemnifiable by the Company hereunder.

 

16. Subrogation. In the event of payment to Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee. Indemnitee shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

 

17. Amendments. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be binding unless in the form of a writing signed by the party against whom enforcement of the waiver is sought, and no such waiver shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.

 

18. Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part of the business and/or assets of the Company, by written agreement in form and substances satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

19. Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any portion thereof) are held by a court of competent jurisdiction to be invalid, illegal, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

 

 

20. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed, by postage prepaid, certified or registered mail:

 

(a) if to Indemnitee, to the address set forth on the signature page hereto.

 

(b) if to the Company, to:

 

Kairos Pharma, Ltd.

Attn: Chief Executive Officer

2355 Westwood Blvd., #139

Los Angeles CA 90064

 

Notice of change of address shall be effective only when given in accordance with this Section. All notices complying with this Section shall be deemed to have been received on the date of hand delivery or on the third business day after mailing.

 

21. Governing Law and Forum. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effect to its principles of conflicts of laws. The Company and Indemnitee hereby irrevocably and unconditionally: (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court and not in any other state or federal court in the United States, (b) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement and (c) waive, and agree not to plead or make, any claim that the Delaware Court lacks venue or that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

 

22. Headings. The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.

 

23. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original, but all of which together shall constitute one and the same Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

	Kairos Pharma, Ltd.
	By:
	Name:
	Title:
	INDEMNITEE
	Name:
	Address:

 

 

 

 

 

Exhibit 21.1

 

Kairos Pharma, Ltd., a Delaware corporation

 

List of Subsidiaries:

 

1.

Enviro Therapeutics, Inc., a California corporation.

 

 

 

Exhibit 23.1

 

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT

 

We consent to the inclusion in this Registration Statement of Kairos Pharma, Ltd. on Form S-1 of our report dated June 27, 2023 which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, with respect to our audits of the consolidated financial statements of Kairos Pharma, Ltd. as of December 31, 2022 and 2021 and for the years ended December 31, 2022 and 2021, which report appears in the Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading “Experts” in such Prospectus.

 

 

Marcum LLP

Los Angeles, CA

September 29, 2023

 

Marcum llp / 777 S. Figueroa Street / Suite 2900 / Los Angeles, CA 90017 / Phone 310.432.7400 / marcumllp.com

 

 

 

Exhibit 99.1

 

CONSENT OF DIRECTOR NOMINEE

 

Pursuant to Rule 438 of Regulation C promulgated under the Securities Act of 1933, as amended (the “Securities Act”), I hereby consent to being named as a person who will be appointed to the Board of Directors of Kairos Pharma, Ltd. (the “Company”), and to all other references to me, in the Company’s Registration Statement on Form S-1 filed with the U.S. Securities and Exchange Commission under the Securities Act, and any and all amendments (including post-effective amendments) to such Registration Statement and in any registration statement for the same securities offering filed pursuant to Rule 462(b) under the Securities Act and any and all amendments (including post-effective amendments) thereto (collectively, the “Registration Statement”). I also consent to the filing of this consent as an exhibit to the Registration Statement.

 

Dated: May 2, 2023
/s/ Rosemary Mazanet
Rosemary Mazanet, M.D., Ph.D.

 

 

 

 

Exhibit 99.2

 

CONSENT OF DIRECTOR NOMINEE

 

Pursuant to Rule 438 of Regulation C promulgated under the Securities Act of 1933, as amended (the “Securities Act”), I hereby consent to being named as a person who will be appointed to the Board of Directors of Kairos Pharma, Ltd. (the “Company”), and to all other references to me, in the Company’s Registration Statement on Form S-1 filed with the U.S. Securities and Exchange Commission under the Securities Act, and any and all amendments (including post-effective amendments) to such Registration Statement and in any registration statement for the same securities offering filed pursuant to Rule 462(b) under the Securities Act and any and all amendments (including post-effective amendments) thereto (collectively, the “Registration Statement”). I also consent to the filing of this consent as an exhibit to the Registration Statement.

 

Dated: May 2, 2023
/s/ Hansoo Michael Keyoung
Hansoo Michael Keyoung, M.D., Ph.D.

 

 

 

 

Exhibit 107

 

Calculation of Filing Fee Tables

 

FORM S-1

 

(Form Type)

 

(Exact Name of Registrant as Specified in its Charter)

Table 1: Newly Registered and Carry Forward Securities

 

 

Security Type

Security Class Title

Fee Calculation or Carry Forward Rule

Amount Registered

Proposed Maximum Offering Price Per Unit

Maximum Aggregate Offering Price(1)

Fee Rate

Amount of Registration Fee

Newly Registered Securities

Fees to Be Paid

0.0001102

Fees to Be Paid

—

Fees to Be Paid

0.0001102

Carry Forward Securities

Carry Forward Securities

Total Offering Amounts

Total Fees Previously Paid

Total Fee Offsets

Net Fee Due

 

(1)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended (the “Securities Act”).

 

(2)

 

(3)

 

(4)

 

(5)