Canton Strategic Holdings, Inc 10-Q for FY2024 Q3
Canton Strategic Holdings, Inc. (CNTN)
About this 10-Q
Canton Strategic Holdings, Inc filed this 10-Q on November 7, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $3.8M
- compared with a net loss of $1.82M a year earlier
- Diluted EPS
- -$2.45
- compared with -$39.42 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
For the transition period from ________ to _________
Commission
file number
(Exact name of registrant as specified in charter)
(State or jurisdiction of Incorporation or organization) |
I.R.S. Employer Identification No. |
| (Address of principal executive offices) | (Zip code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition 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 | ☐ |
| ☒ | 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 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No
Number of common shares outstanding as of November 5, 2024 was .
TABLE OF CONTENTS
| 2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:
| ● | our projected financial position and estimated cash burn rate; | |
| ● | our estimates regarding expenses, future revenues and capital requirements; | |
| ● | our ability to continue as a going concern; | |
| ● | our need to raise substantial additional capital to fund our operation; | |
| ● | the success, cost and timing of our clinical trials; | |
| ● | our dependence on third parties in the conduct of our clinical trials; | |
| ● | our ability to obtain the necessary regulatory approvals to market and commercialize our product candidates; | |
| ● | the impact of a health epidemic, on our business, our clinical trials, our research programs, healthcare systems or the global economy as a whole; | |
| ● | the potential that results of pre-clinical and clinical trials indicate our current product candidates or any future product candidates we may seek to develop are unsafe or ineffective; | |
| ● | the results of market research conducted by us or others; | |
| ● | our ability to obtain and maintain intellectual property protection for our current and future product candidates; | |
| ● | our ability to protect our intellectual property rights and the potential for us to incur substantial costs from lawsuits to enforce or protect our intellectual property rights; | |
| ● | the possibility that a third party may claim we or our third-party licensors have infringed, misappropriated or otherwise violated their intellectual property rights and that we may incur substantial costs and be required to devote substantial time defending against claims against us; | |
| ● | our reliance on third-party suppliers and manufacturers; | |
| ● | the success of competing therapies and products that are or become available; | |
| ● | our ability to expand our organization to accommodate potential growth and our ability to retain and attract key personnel; |
| 3 |
| ● | the potential for us to incur substantial costs resulting from product liability lawsuits against us and the potential for these product liability lawsuits to cause us to limit our commercialization of our product candidates; | |
| ● | market acceptance of our product candidates, the size and growth of the potential markets for our current product candidates and any future product candidates we may seek to develop, and our ability to serve those markets; and | |
| ● | the successful development of our commercialization capabilities, including sales and marketing capabilities. |
All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.
This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.
| 4 |
THARIMMUNE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2024 | December 31, | |||||||
| (Unaudited) | 2023 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Insurance premium financing liability | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (see Note 5) | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $ par value, shares authorized, shares issued and outstanding as of September 30, 2024 and December 31, 2023 | ||||||||
| Common stock, $par value, shares Authorized, shares and shares issued and shares and shares outstanding as of September 30, 2024 and December 31, 2023, respectively* | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Treasury stock, at cost, shares held in treasury as of September 30, 2024 and December 31, 2023 | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-1 |
THARIMMUNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ||||||||||||||||
| Total other income, net | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share: | ||||||||||||||||
| Basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of common shares outstanding*: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
| * |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-2 |
THARIMMUNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(UNAUDITED)
| Common Stock | Additional Paid-in | Accumulated | Treasury Stock | |||||||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Shares | Amount | Total | ||||||||||||||||||||||
| For the three months ended September 30, 2023: | ||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
| Stock issuance pursuant to services agreement | - | |||||||||||||||||||||||||||
| Net loss | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
| For the nine months ended September 30, 2023: | ||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
| Stock issuance pursuant to services agreement | - | |||||||||||||||||||||||||||
| Public offering, net of issuance costs of $ | - | |||||||||||||||||||||||||||
| Net loss | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
| For the three months ended September 30, 2024: | ||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
| Issuance costs related to Form S-3 Registration Statement | - | ( |
) | - | ( |
) | ||||||||||||||||||||||
| Cashless exercise of pre-funded warrants | ( |
) | - | |||||||||||||||||||||||||
| Net loss | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
| For the nine months ended September 30, 2024: | ||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
| Stock issuance pursuant to services agreement | - | |||||||||||||||||||||||||||
| Private investment in public equity offering, net of issuance costs of $ | - | |||||||||||||||||||||||||||
| Issuance costs related to Form S-3 Registration Statement | - | ( |
) | - | ( |
) | ||||||||||||||||||||||
| Cashless exercise of pre-funded warrants | ( | ) | - | |||||||||||||||||||||||||
| Net loss | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-3 |
THARIMMUNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation | ||||||||
| Stock issuance pursuant to services agreement | ||||||||
| Increase in operating assets: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Increase (decrease) in operating liabilities: | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock upon private investment in public equity offering | ||||||||
| Proceeds from issuance of common stock upon public offering, net of underwriting discounts and issuance costs | ||||||||
| Payment of deferred offering costs | ( | ) | ( | ) | ||||
| Proceeds from insurance premium financing liability | ||||||||
| Repayment of insurance premium financing liability | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Issuance of common stock: | ||||||||
| Prepaid marketing and investor related consulting services | $ | $ | ||||||
| Research and development service licensing agreement intangible license asset | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-4 |
THARIMMUNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 – Description of Business and Liquidity
Nature of Operations
Tharimmune, Inc. (formerly, Hillstream BioPharma, Inc.) (“Tharimmune” or the “Company”) was incorporated on March 28, 2017, as a Delaware C-corporation. At September 30, 2024, Tharimmune had one wholly-owned subsidiary: Hillstream Oncology, Inc. (“Hillstream Oncology”), formerly, HB Pharma Corp.
Tharimmune is a clinical-stage biotechnology company developing therapeutic candidates in rare, inflammatory, and oncologic conditions with high unmet need. On November 3, 2023, the Company entered into a patent license agreement (the “Avior License Agreement”) with Avior Inc. d/b/a Avior Bio, LLC (“Avior”) pursuant to which it received an exclusive sublicensable right and license to Licensed Patent Rights and Licensed Technology to, among other things, Develop, have Developed, make, have made, use, sell, import, export and commercialize TH104 and TH103) and to practice the Licensed Technology in connection with the foregoing, throughout the world (each as defined in the Avior License Agreement. In February 2023, the U.S. Food and Drug Administration (“FDA”) approved an investigational new drug (“IND”) application for TH104. TH104 has a dual mechanism of action by affecting multiple receptors, known to suppress chronic, debilitating pruritis or “uncontrollable itching.” With respect to TH104, the Company intends to first seek approval for the treatment of moderate to severe chronic pruritis in patients with primary biliary cholangitis (“PBC”), an orphan rare form of liver disease with no known cure in which more than 70% of patients suffer from debilitating chronic pruritic, and with respect to TH103, it intends to develop the product candidate and potentially file an IND after discussion with regulators.
On September 11, 2024, Tharimmune entered into a Patent License Agreement (the “Intract Agreement”) with Intract Pharma Limited (“Intract”), pursuant to which, the Company exclusively licensed INT-023/TH023, an oral anti-Tumor Necrosis Factor-alpha (TNF-α) monoclonal antibody infliximab. Infliximab is a purified, recombinant DNA-derived chimeric IgG monoclonal antibody protein that contains both murine and human components that inhibit tumor TNF-α. Under the terms of the Agreement, the Company licensed global development and commercialization rights (outside of South Korea) to Intract’s Soteria® and Phloral® delivery platform along with an existing supply agreement for infliximab to be used in the oral product development program.
The Company is also developing an early-stage pipeline of novel therapeutic candidates targeting validated high value immuno-oncology (“IO”) targets including human epidermal growth factor (“EGF”) receptor 2 (“HER2”), human EGF receptor 3 (“HER3”) and programmed cell death protein 1 (“PD-1”). The Company is developing antibodies including bispecific antibodies, antibody drug conjugates (“ADCs”) and small molecular weight bovine-derived Picobodies™ or antibody “knob” domains which have the potential to target and bind more tightly to “undruggable” epitopes better than full sized antibodies. The Company is advancing TH3215, a bispecific against both HER2 and HER3 antibody which targets a novel “bridging epitope” encompassing multiple domains of the HER2 extracellular domain (“ECD”) as well as ligand-dependent and independent blocking of the ECD of HER3 into IND-enabling studies in 2024. In addition, the Company anticipates that TH0059, a HER2/HER3 bispecific ADC (“bsADC”), and TH1940, a PD-1 Picobody, will progress to enter IND-enabling studies in 2025.
Name Change
On September 21, 2023, Hillstream BioPharma, Inc. filed a Certificate of Amendment (the “Amendment”) to its Certificate of Incorporation, as amended (the “Certificate of Incorporation”), with the Secretary of State of the State of Delaware pursuant to which it changed its name to Tharimmune, Inc. effective as of September 25, 2023. The name change became effective with The Nasdaq Capital Market on September 25, 2023 and the Company’s common stock has since traded on The Nasdaq Capital Market under the new name and new ticker symbol, “THAR.”
| F-5 |
In addition, on May 23, 2024, HB Pharma Corp. filed a Certificate of Amendment to its Certificate of Incorporation, as amended, with the Secretary of State of the State of Delaware pursuant to which it changed its name to Hillstream Oncology, Inc. effective as of May 23, 2024.
Liquidity and Going Concern
The
accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern,
which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. During
the nine months ended September 30, 2024, the Company incurred operating losses in the amount of approximately $
Based on the Company’s limited operating history, recurring negative cash flows from operations, current plans and available resources, the Company will need substantial additional funding to support future operating activities. The Company has concluded that the prevailing conditions and ongoing liquidity risks faced raise substantial doubt about the Company’s ability to continue as a going concern for at least one year following the date these consolidated financial statements are issued. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
The Company may seek to raise additional funding through the sale of additional equity or debt securities, enter into strategic partnerships, grants, or other arrangements or a combination of the foregoing to support its future operations, however, there can be no assurance that the Company will be able to obtain additional capital on terms acceptable to the Company, on a timely basis or at all. The failure to obtain sufficient additional funding could adversely affect the Company’s ability to achieve its business objectives and product development timelines and may result in the Company delaying or terminating clinical trial activities which could have a material adverse effect on the Company’s results of operations.
Other Risks and Uncertainties
There can be no assurance that the Company’s products, if approved, will be accepted in the marketplace, nor can there be any assurance that any future products can be developed or manufactured at an acceptable cost and with appropriate performance characteristics, or that such products will be successfully marketed, if at all. The Company is subject to risks common to biopharmaceutical companies including, but not limited to, the development of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, product liability, uncertainty of market acceptance of products and the need to obtain additional financing. The Company is dependent on third party suppliers. The Company’s products require approval or clearance from the FDA prior to commencing commercial sales in the United States. Approvals or clearances are also required in foreign jurisdictions in which the Company may license or sell its products. There can be no assurance that the Company’s products will receive all of the required approvals or clearances.
| F-6 |
Letter of Intent
On
September 30, 2024, the Company entered into a nonbinding, exclusive letter of intent (the “LOI”) with Intract pursuant to
which the Company will acquire all outstanding shares of common stock of privately-held Intract in exchange for newly issued restricted
common stock. Under the terms of the LOI, following the execution of a definitive agreement and the closing of the merger, Intract shareholders
will own % of the total equity in the Company, with Intract becoming a wholly owned subsidiary.
During the three and nine months ended September 30, 2024, the Company paid an exclusivity fee of $
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
These accompanying unaudited condensed consolidated interim financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. These condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary for a fair statement of the balance sheet, operating results, and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Operating results for the nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024 or any other future period. Certain information and footnote disclosure normally included in the annual financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the SEC’s rules and regulations for interim reporting. The Company’s financial position, results of operations, and cash flows are presented in U.S. Dollars. These condensed consolidated financial statements and related notes should be read in conjunction with the audited financial statements and related notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 23, 2024. The Company operates in one segment.
Reverse Stock Splits
On
November 17, 2023, the Company effectuated a reverse split of shares of its common stock at a ratio of
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Tharimmune and its wholly-owned subsidiaries, HB and Farrington Therapeutics LLC. All significant intercompany balances and transactions have been eliminated in consolidation. On February 27, 2023, the Company filed a Certificate of Cancellation with the Delaware Secretary of State with respect to Farrington Therapeutics LLC.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. Areas of the condensed consolidated financial statements where estimates may have the most significant effect include research and development expense recognition, valuation of common shares and share-based compensation, allowances of deferred tax assets, valuation of debt related instruments, and cash flow assumptions regarding going concern considerations. Although management believes the estimates that have been used are reasonable, actual results could vary from the estimates that were used.
| F-7 |
Concentration of Credit Risk
The
Company maintains cash balances with various financial institutions. Account balances at these institutions are insured by the Federal
Deposit Insurance Corporation up to $
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents, if any, are stated at cost and consist primarily of money market accounts.
Research and Development
Research and development costs are expensed as incurred. Research and development expenses include personnel costs associated with research and development activities, including third-party contractors to perform research, conduct clinical trials, and manufacture drug supplies and materials. The Company accrues for costs incurred by external service providers, including contract research organizations and clinical investigators, based on its estimates of service performed and costs incurred. These estimates include the level of services performed by third parties, patient enrollment in clinical trials, administrative costs incurred by third parties, and other indicators of the services completed.
The Company recognizes compensation costs resulting from the issuance of stock-based awards to employees, non-employees, and directors as an expense in the condensed consolidated statements of operations over the requisite service period based on a measurement of fair value for each stock-based award. The fair value of each option grant to employees, non-employees, and directors is estimated as of the date of grant using the Black-Scholes option-pricing model, net of actual forfeitures. The fair value is amortized as compensation cost on the straight-line basis over the requisite service period of the awards, which is generally the vesting period.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Prior to January 12, 2022, the Company was a private company and the Company’s common stock has only been publicly traded since that date. As a result, the Company has lacked company-specific historical and implied volatility information. Therefore, it has estimated its expected stock volatility based on the historical data regarding the volatility of a publicly traded set of peer companies. The expected term of stock options granted was between five and seven years. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.
Fair Value Measurements
The Company applies Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
| F-8 |
The carrying value of the Company’s cash, prepaid expenses, accounts payable, and accrued expenses approximate fair value because of the short-term maturity of these financial instruments.
The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy are described below:
| Level 1 Inputs: Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. | |
| Level 2 Inputs: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for assets or liabilities recently traded in active markets, with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals, as well as quoted prices for identical or similar assets or liabilities in markets that are not active. | |
| Level 3 Inputs: Unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities, that reflect the reporting entity’s own assumptions. |
Deferred Offering Costs
Deferred
offering costs consists primarily of legal, accounting, underwriters’ fees, printing, and filing fees that are incurred prior to
an offering of the Company’s common stock and are initially capitalized and then subsequently reclassified to additional paid-in
capital upon completion of the offering. If an offering is not completed, any associated offering costs will be expensed immediately
upon termination of the offering. At September 30, 2024, the Company incurred $
Insurance Premium Financing Liability
In
January 2023, the Company entered into an insurance premium financing agreement for $
In
January 2024, the Company entered into an insurance premium financing agreement for $
Retirement Plan
The
Company has a 401(k) defined contribution plan which covers all employees that meet the plan’s eligibility requirements. Eligible
employees may contribute a percentage of their salary subject to certain limitations. The Company makes a discretionary match which is
currently equal to 3% of employee contributions. Total company contributions to the plan were $
| F-9 |
Income Taxes
The Company accounts for income taxes using the asset-and-liability method in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.
Deferred income taxes are recognized for the tax effect of temporary differences between the financial statement carrying amount of assets and liabilities and the amounts used for income tax purposes and for certain changes in valuation allowances. Valuation allowances are recorded to reduce certain deferred tax assets when, in management’s estimation, it is more-likely-than-not that a tax benefit will not be realized. A full valuation allowance has been recognized for all periods since it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized in future periods.
The Company follows the guidance in FASB ASC Subtopic 740-10 in assessing uncertain tax positions. The standard applies to all tax positions and clarifies the recognition of tax benefits in the financial statements by providing for a two-step approach of recognition and measurement. The first step involves assessing whether the tax position is more-likely-than-not to be sustained upon examination based upon its technical merits. The second step involves measurement of the amount to be recognized. Tax positions that meet the more-likely-than-not threshold are measured at the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate finalization with the taxing authority. The Company recognizes the impact of an uncertain income tax position in the financial statements if it believes that the position is more-likely-than-not to be sustained by the relevant taxing authority. The Company will recognize interest and penalties related to tax positions in income tax expense. At September 30, 2024 and December 31, 2023, the Company had no unrecognized uncertain income tax positions, and therefore no amounts have been recognized in the condensed consolidated financial statements.
The Company reports loss per share in accordance with FASB ASC Subtopic 260-10, Earnings Per Share, which provides for calculation of basic and diluted earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. The calculation of diluted net earnings (loss) per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive.
Potentially
dilutive securities not included in the computation of loss per share for the nine months ended September 30, 2024 and 2023 included
options to purchase and shares of common stock, respectively. Other potentially dilutive securities also not included in
the computation of loss per share for the nine months ended September 30, 2024 and 2023 included warrants to purchase shares of the
Company’s common stock related to the IPO and warrants to purchase an additional and shares of the Company’s common
stock issued in the May and November Offerings, respectively. Additional other potentially dilutive securities also not included in the
computation of loss per share for the nine months ended September 30, 2024 included warrants to purchase an additional shares
of the Company’s common stock issued in the PIPE Offering and warrants to purchase shares of the Company’s common
stock issued to the placement agents in the PIPE Offering. All common share amounts as of September 30, 2024 and December 31, 2023 and
per share amounts for the three and nine months ended September 30, 2024 and 2023 have been retroactively adjusted to reflect a
| F-10 |
Recently Adopted Accounting Pronouncements
The Company has evaluated all recent accounting pronouncements that were required to be adopted and believes that other than the following, none of them will have a material effect on the Company’s financial position, results of operations, or cash flows.
The FASB issued Accounting Standards Update (“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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), to reduce complexity in applying U.S. GAAP to certain financial instruments with characteristics of liabilities and equity. The guidance in ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in ASC Subtopic 470-20 applies to convertible instruments for which the embedded conversion features are not required to be bifurcated from the host contract and accounted for as derivatives. In addition, the amendments revise the scope exception from derivative accounting in ASC Subtopic 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring separate accounting from the host contract. The amendments in ASU 2020-06 further revise the guidance in FASB ASC Topic 260, Earnings Per Share, to require entities to calculate diluted earnings per share (“EPS”) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. The amendments in ASU 2020-06 are effective for public entities that meet the definition of an SEC filer, excluding smaller reporting companies as defined by the SEC for fiscal years beginning after December 15, 2021. For all other entities, including the Company, the amendments are effective for fiscal years beginning after December 15, 2023. The Company adopted this guidance effective January 1, 2024 and the adoption of ASU 2020-06 did not have a material impact on its condensed consolidated financial statements.
Note 3 – Common Stock
Pursuant
to an amendment to the Company’s Certificate of Incorporation filed in April 2019, the Company increased the number of authorized
shares of common stock to shares. On November 17, 2023, the Company effectuated a reverse split of shares of its common stock
at a ratio of
On
February 16, 2022, the Company entered into an agreement for marketing and investor related consulting services. Pursuant to the agreement,
compensation includes a monthly fee and an upfront issuance of shares of the Company’s common stock. On the effective date of February
16, 2022, the Company issued shares of its common stock with a per share value of $ and a total value of $
On
March 17, 2023, the Company filed a Registration Statement on Form S-3 with the SEC using a “shelf” registration process
pursuant to which, the Company may sell, from time to time in one or more offerings, shares of common stock and preferred stock, various
series of debt securities and/or warrants to purchase any of such securities, either individually or as units comprised of a combination
of one or more of the other securities in one or more offerings up to a total dollar amount of $
On
May 2, 2023, the Company closed a public offering pursuant to which it issued shares of its common stock at a public offering
price of $ per share. The gross proceeds to the Company from the May Offering were approximately $
| F-11 |
On July 26, 2023, pursuant to the research and development collaboration and license agreement with Applied Biomedical Science Institute (“ABSI”), further described in Note 5 to the condensed consolidated financial statements, the Company issued shares of its common stock with a per share value of $, representing total compensation expense of $ (as calculated based on the trailing 10-day average closing value of the Company’s common stock prior to the agreement date).
On
November 30, 2023, the Company closed a public offering pursuant to which it issued shares of its common stock at a public offering
price of $ per share and pre-funded warrants to purchase up to
On
January 24, 2024, pursuant to a corporate advisory consulting agreement, the Company issued shares of its common stock with a per
share value of $, representing total compensation expense of $
On
June 7, 2024, the Company entered into an At the Market Offering Agreement (the “ATM Agreement”) with Rodman & Renshaw
LLC (the “ATM Sales Manager”) under which the Company may sell, from time to time through the ATM Sales Manager, shares of
common stock in one or more offerings up to a total dollar amount of $
On
June 21, 2024, the Company closed a private placement offering with certain accredited investors of $
Incentive Plans and Options
Under the Company’s 2017 Stock Incentive Plan (the “2017 Plan”) the Company may grant incentive stock options, non-statutory stock options, rights to purchase common stock, stock appreciation rights, restricted stock, performance shares, and performance units to employees, directors, and consultants of the Company and its affiliates. Up to shares of the Company’s common stock may be issued pursuant to the 2017 Plan.
| F-12 |
The Company has granted options to acquire shares of common stock at $ per share under the 2017 Plan, and options to acquire shares of common stock remain available for issuance. At both September 30, 2024 and December 31, 2023, there were options outstanding to acquire shares of common stock. As of September 30, 2024 and December 31, 2023, all such options were fully vested, and the weighted average remaining contractual life for such options was approximately and years, respectively.
In July 2019, the Company authorized an additional plan, the 2019 Stock Incentive Plan (the “2019 Plan”). Under the 2019 Plan, the Company may grant incentive stock options, non-statutory stock options, rights to purchase common stock, stock appreciation rights, restricted stock, performance shares, and performance units to employees, directors, and consultants of the Company and its affiliates. At both September 30, 2024 and December 31, 2023, a total of shares were authorized for issuance under the 2019 Plan.
As of both September 30, 2024 and December 31, 2023, the Company has granted options to acquire shares of common stock under the 2019 Plan and shares of common stock remain available for issuance under the 2019 Plan. There are stock options outstanding to acquire shares of common stock with a weighted-average exercise price of $ at both September 30, 2024 and December 31, 2023 and weighted average contractual terms of years and years at September 30, 2024 and December 31, 2023, respectively.
On August 17, 2023, the Company authorized a new plan, the Tharimmune, Inc. 2023 Omnibus Incentive Plan (the “2023 Plan”). Under the Company’s 2023 Plan, the Company may grant incentive stock options, non-statutory stock options, rights to purchase common stock, stock appreciation rights, restricted stock, performance shares, and performance units to employees, directors, and consultants of the Company and its affiliates. Initially, options to purchase up to shares of the Company’s common stock were able to be issued pursuant to the 2023 Plan. Under an amendment to the 2023 Plan by vote of the Company’s stockholders on May 14, 2024, an amended total of up to options to purchase shares of the Company’s common stock may be issued pursuant to the 2023 Plan. In addition, under the amendment, an “evergreen” provision was added to automatically increase the number of shares available under the 2023 Plan on January 1 annually, beginning January 1, 2025 and ending January 1, 2033, equal to the lesser of five percent of the shares of Common Stock outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year or such lesser number of shares of the Company’s Common Stock as determined by the Board of Directors.
During the three and nine months ended September 30, 2024, the Company granted options to acquire shares of common stock under the 2023 Plan. At September 30, 2024 and December 31, 2023, and shares of common stock remain available for issuance under the amended and initial 2023 Plan, respectively. There are stock options outstanding to acquire and shares of common stock with a weighted-average exercise price of $ and $ at September 30, 2024 and December 31, 2023, respectively, and weighted-average contractual terms of years and years at September 30, 2024 and December 31, 2023, respectively.
Schedule of Stock Option Activity
| Weighted | Weighted | |||||||||
| Shares | Average | Average | ||||||||
| Underlying | Exercise | Contractual | ||||||||
| Options | Price | Terms | ||||||||
| Outstanding at December 31, 2023 | $ | years | ||||||||
| Granted | $ | years | ||||||||
| Outstanding at September 30, 2024 | $ | years | ||||||||
| Exercisable options at September 30, 2024 | $ | years | ||||||||
| Vested and expected to vest at September 30, 2024 | $ | years | ||||||||
| F-13 |
The fair value of stock option awards is estimated at the date of grant using the Black-Scholes option-pricing model. The estimated fair value of each stock option is then expensed over the requisite service period, which is generally the vesting period (ranging between immediate vesting and four years). The determination of fair value using the Black-Scholes model is affected by the Company’s share price as well as assumptions regarding a number of complex and subjective variables, including expected price volatility, expected life, risk-free interest rate and forfeitures. Forfeitures are accounted for as they occur.
Schedule of Options Weighted Average Assumptions
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2024 | 2023* | 2024 | 2023 | |||||||||||||
| Expected volatility | % | N/A | % | % | ||||||||||||
| Risk-free interest rate | % | N/A | % | % | ||||||||||||
| Expected dividend yield | % | N/A | % | % | ||||||||||||
| Expected life of options in years | N/A | |||||||||||||||
| Estimated fair value of options granted | $ | N/A | $ | $ | ||||||||||||
| * | No stock options were granted during the three months ended September 30, 2023. |
The weighted-average grant date fair value of stock options granted during the three and nine months ended September 30, 2024 was $. The weighted-average fair value of stock options vested during the three and nine months ended September 30, 2024 was approximately $ and $, respectively. The weighted-average grant date fair value of stock options granted during the nine months ended September 30, 2023 was $. The weighted-average fair value of stock options vested during the three and nine months ended September 30, 2023 was approximately $ and $, respectively.
Schedule of Stock-Based Compensation Expense
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| General and administrative | ||||||||||||||||
| Total stock-based compensation | $ | $ | $ | $ | ||||||||||||
As of September 30, 2024, the total unrecognized compensation expense related to non-vested options was approximately $ and is expected to be recognized over the remaining weighted-average service period of approximately years.
Warrants
In
connection with the IPO, the Company issued warrants to purchase such number of shares of the Company’s common stock equal to 5%
of the total shares of common stock issued in the IPO, or
| F-14 |
In
connection with the May Offering as described in Note 3 to the consolidated financial statements, the Company issued warrants to designees
of the underwriter (the “Representative’s Warrants”) to purchase
In
connection with the November Offering as described in Note 3 to the consolidated financial statements, the Company issued pre-funded
warrants to purchase
In
connection with the PIPE Offering as described in Note 3 to the consolidated financial statements, the Company issued Pre-Funded Warrants
to purchase
Terms of the warrants outstanding at September 30, 2024 are as follows:
Schedule of Warrants
| Initial | Expiration | Exercise | Warrants | Warrants | Warrants | |||||||||||||||
| Issuance Date | Exercise Date | Date | Price | Issued | Exercised | Outstanding | ||||||||||||||
| $ | ||||||||||||||||||||
| $ | ||||||||||||||||||||
| N/A | $ | |||||||||||||||||||
| N/A | $ | |||||||||||||||||||
| $ | ||||||||||||||||||||
| N/A | $ | |||||||||||||||||||
| $ | ||||||||||||||||||||
| $ | ||||||||||||||||||||
| F-15 |
Note 5 – Commitments and Contingencies
Small Molecule Analogues
On
December 30, 2019,
Research Collaboration and Product License Agreement with Minotaur Therapeutics, Inc. (“Minotaur”) and Commercial License Agreement with Taurus Biosciences, LLC (“Taurus”)
The Company has entered into a research collaboration and product license agreement with Minotaur (as amended, the “Minotaur Agreement”) and a commercial license agreement with Taurus (the “Taurus Agreement”) for use of certain technology, including OmniAb antibodies, to advance Picobodies against novel, unreachable, and undruggable epitopes in high-value validated targets starting with PD-1. The Minotaur Agreement and Taurus Agreement are for the development of proprietary targeted biologics, including TH 1940, against PD-1. It is anticipated that the Company will collaborate with Minotaur under the license from Taurus to discover, develop, and advance biotherapeutics against high-value validated IO targets starting with PD-1.
The
Minotaur Agreement included an up-front payment of $
Research and Development Collaboration and License Agreement with Applied Biomedical Science Institute
On July 5, 2023 (the “ABSI Effective Date”), the Company entered into a Research and Development Collaboration and License Agreement (the “ABSI Agreement”) with ABSI pursuant to which ABSI granted the Company an exclusive royalty-bearing, sublicensable license to the ABSI Patents (as defined in the ABSI Agreement) and a non-exclusive, royalty-bearing, sublicensable license to the ABSI Know-How (as defined in the ABSI Agreement) to Exploit (as defined in the ABSI Agreement) the ABSI Products (as defined in the ABSI Agreement) for the treatment, diagnosis, prediction, detection or prevention of disease in humans and animals worldwide (the “Territory”).
| F-16 |
Pursuant to the ABSI Agreement, the parties shall form a committee to manage the preclinical, investigational new drug enabling studies and such other activities as shall lead to the initiation of a Phase 1 clinical trial of the ABSI Product. The parties will collaborate on a Target-by-Target basis to identify and evaluate ABSI Products directed against such Target (as defined below) with a view to identifying or generating suitable Products (as defined in the ABSI Agreement) for the Company to Exploit. “Target” means ErB2 (Her2) and ErbB3. Upon completion of the Discovery Timeline (as defined in the ABSI Agreement) for a Target, subject to the terms and conditions of ABSI Agreement, the Company shall exclusively own any ABSI Products against such Target. In the event the committee determines that the discovery activities are unsuccessful with respect to a Target, the Company may propose an additional target, which, upon approval by ABSI, shall replace a failed Target.
Pursuant
to the ABSI Agreement: (i) the Company issued ABSI shares of its common stock which is equal to $
On a Product-by-Product basis, upon the expiration of the last Royalty Term of such Product in the Territory, licenses granted to the Company with respect to such Product shall be deemed non-exclusive, fully paid, royalty-free, perpetual and irrevocable. The ABSI Agreement shall expire upon the expiration of the last Royalty Term of the last Product, unless such agreement is terminated earlier pursuant to its terms. The ABSI Agreement may also be terminated (i) by either the Company or ABSI for (A) a material breach of the ABSI Agreement or (B) bankruptcy, (ii) ABSI may terminate the ABSI Agreement upon the commencement of a Challenge Proceeding (as defined in the ABSI Agreement) or (iii) the Company may terminate the ABSI Agreement at any time upon 90 days prior written notice to ABSI. Upon termination or expiration of the ABSI Agreement other than as a result of a bankruptcy or Challenge Proceeding, all licenses granted to the Company pursuant to such agreement will terminate and all rights under such licenses shall revert to ABSI.
On
March 11, 2024, the Company entered into an addendum to the ABSI Agreement to fund research services with quarterly payments of $
| F-17 |
Avior Patent License Agreement
On
November 3, 2023 (the “Avior Effective Date”), the Company entered into the Avior Patent License Agreement with Avior pursuant
to which the Company received an exclusive sublicensable right and license to Licensed Patent Rights and Licensed Technology to, among
other things, Develop, have Developed, make, have made, use, sell, import, export and commercialize TH104 and TH103 and to practice the
Licensed Technology in connection with the foregoing, throughout the world. Pursuant to the Avior Patent License Agreement, the Company
shall pay Avior a mid-six digit up front license fee within ten days of the Avior Effective Date and an additional mid six-digit license
fee which shall be paid in four equal installments within ten days of the end of each fiscal quarter following the Avior Effective Date.
In addition, the Company shall pay Avior a high single digit percentage of any upfront payments received by it as a result of the grant
of any sublicenses with respect to TH104. The Company shall also pay Avior milestone payments in the aggregate amount of $
During
the three and nine months ended September 30, 2024, the Company paid license fees of $
Enkefalos License Agreement
On
June 17, 2024 (the “Enkefalos Effective Date”), the Company signed a letter of intent to enter into the Enkefalos License
Agreement with Enkefalos Biosciences Inc. pursuant to which the Company is licensing the global rights in all fields of use for the products
related to the compounds knows as cyclotides to deliver HER2 antibodies across the blood-brain barrier and all associated know-how, technology,
intellectual property and related information and constructs, and any associated authorized generic rights and all related assets (collectively,
the “Products” referred to in this letter as ENBI-01) from Enkefalos Biosciences, Inc. Pursuant to the Enkefalos License
Agreement,
During
the nine months ended September 30, 2024, the Company incurred license fees of $
| F-18 |
Intract Patent License Agreement
On
September 11, 2024, the Company entered into a patent license agreement (the “Intract Agreement”) with Intract. Pursuant
to the Intract Agreement, the Company exclusively licensed INT-023/TH023, an oral anti-Tumor Necrosis Factor-alpha (TNF-α) monoclonal
antibody infliximab. Under the terms of the Intract Agreement, the Company licensed global development and commercialization rights (outside
of South Korea) to Intract’s Soteria® and Phloral® delivery platform along with an existing supply agreement for infliximab
to be used in the oral product development program. Pursuant to the Intract Agreement, the Company paid Intract an up-front license fee
of $
During
the three and nine months ended September 30, 2024, the Company incurred fees of $
Employment Agreements
On
June 1, 2021, the Company entered into an Amended and Restated Employment Agreement with the Company’s CEO, as amended periodically
(the “Amended and Restated Employment Agreement”). The term of the Amended and Restated Employment Agreement commenced upon
the closing of the Company’s IPO in January 2022 and continues for a period of five years and automatically renews for successive
one-year periods at the end of each term unless either party provides written notice of their intent not to renew at least 60 days prior
to the expiration of the then effective term. Pursuant to the Amended and Restated Employment Agreement, the CEO will receive an annual
base salary of $
On January 1, 2023, in lieu of half of his 2023 salary, the CEO was issued options to purchase up to shares of the Company’s common stock at an exercise price of $ per share, which options vested immediately on the date of grant.
| F-19 |
On
July 6, 2023, the Company entered into an amended and restated employment agreement (the “CEO Employment Agreement”) with
the CEO. The Employment Agreement has the same terms as the COO Employment Agreement (as defined below) except, the CEO shall (i) receive
a base salary of $
In
connection with the appointment of the Company’s Chief Operating Officer, on July 11, 2023 (the “Effective Date”),
the Company entered into an employment agreement (the “COO Employment Agreement”) with the COO. The COO Employment Agreement
shall continue for a period of five years and, thereafter, shall automatically renew for successive one-year terms unless either party
provides the other party with written notice of non-renewal at least 60 days prior to the last day of the then-current term. Pursuant
to the COO Employment Agreement, the COO shall: (i) receive a base salary of $
Note 6 – Subsequent Events
There were no material subsequent events that required recognition or additional disclosure in these condensed consolidated financial statements.
| F-20 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited interim condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as may be amended, supplemented, or superseded from time to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.
Throughout this Quarterly Report on Form 10-Q, references to “we,” “our,” “us,” the “Company,” or “Tharimmune,” refer to Tharimmune, Inc. (formerly, Hillstream BioPharma, Inc.), individually, or as the context requires, collectively with its subsidiaries.
Overview
Tharimmune is a clinical-stage biotechnology company developing therapeutic candidates in immunology and inflammation with high unmet need. On November 3, 2023, we entered into a patent license agreement (the “Avior License Agreement”) with Avior Inc. d/b/a Avior Bio, LLC (“Avior”) pursuant to which we received an exclusive sublicensable right and license to Licensed Patent Rights and Licensed Technology to, among other things, Develop, have Developed, make, have made, use, sell, import, export and commercialize TH104 and TH103 and to practice the Licensed Technology in connection with the foregoing, throughout the world, each as defined in the Avior License Agreement. In February 2023, the U.S. Food and Drug Administration (“FDA”) approved an investigational new drug (“IND”) application for TH104. TH104 has a dual mechanism of action by affecting multiple receptors, known to suppress chronic, debilitating pruritis or “uncontrollable itching.” With respect to TH104, we intend to first seek approval for the treatment of moderate-to-severe chronic pruritis in patients with primary biliary cholangitis (“PBC”), an orphan rare form of liver disease with no known cure in which more than 70% of patients suffer from debilitating chronic pruritic. The Company expects to obtain topline data in a Phase 2 trial with TH104 in Q4 2025 and with respect to TH103, we intend to develop the product candidate and potentially file an IND.
On September 11, 2024, we entered into a Patent License Agreement (the “Intract Agreement”) with Intract Pharma Limited (“Intract”), pursuant to which, we exclusively licensed INT-023/TH023, an oral anti-Tumor Necrosis Factor-alpha (TNF-α) monoclonal antibody infliximab. Infliximab is a purified, recombinant DNA-derived chimeric IgG monoclonal antibody protein that contains both murine and human components that inhibit tumor TNF-α. Under the terms of the Intract Agreement, we licensed global development and commercialization rights (outside of South Korea) to Intract’s Soteria® and Phloral® delivery platform along with an existing supply agreement for infliximab to be used in the oral product development program.
We are also developing an early-stage pipeline of novel therapeutic candidates targeting validated high value immuno-oncology (“IO”) targets including human epidermal growth factor (“EGF”) receptor 2 (“HER2”), human EGF receptor 3 (“HER3”) and programmed cell death protein 1 (“PD-1”). We are developing antibodies including bispecific antibodies, antibody drug conjugates (“ADCs”) and small molecular weight bovine-derived Picobodies™ or antibody “knob” domains which have the potential to target and bind more tightly to “undruggable” epitopes better than full sized antibodies. We are advancing TH3215, a bispecific against both HER2 and HER3 antibody which targets a novel “bridging epitope” encompassing multiple domains of the HER2 extracellular domain (“ECD”) as well as ligand-dependent and independent blocking of the ECD of HER3 into IND-enabling studies in 2025. In addition, we anticipate that TH0059, a HER2/HER3 bispecific ADC (“bsADC”), and TH1940, a PD-1 Picobody, will progress to enter IND-enabling studies in 2025.
| 5 |
The critical components of our business strategy to achieve our goals include:
| ● | Develop TH104 as a transmucosal buccal film product for the treatment of moderate-to-severe chronic pruritis in PBC and other inflammatory diseases; | |
| ● | Develop TH023 by obtaining regulatory authorization to initiate a first-in-human bioavailability clinical trial and pursue an IND through the US FDA; | |
| ● | Create a preclinical and clinical path forward for, TH1940, a novel PD-1 knob-domain antibody fragment with nolve binding differentiation compared to full length antibodies for IO vulnerable tumors; | |
| ● | Continue to advance pre-clinical candidate selection activities against HER2/HER3 receptors with various antibody formats, including TH3215 designed for multiple solid tumor types; | |
| ● | Effectively create a development strategy for TH0059 as a bispecific ADC specifically targeted to both HER2 and HER3 receptors in high unmet need standard-of-care resistant tumors with a high capacity to metastasize | |
| ● | Hasten the discovery of next generation multi-specific (bi- and tri) antibodies with binding capabilities to novel epitopes of combinations of HER2, HER3, PD-1, PD-L1, TROP2 with and without toxin delivery capacity to multiple high unmet need rare cancers and other validated immunology and metabolic targets, including glucose-dependent insulinotropic peptide (GIP) | |
| ● | Pursue strategic collaboration opportunities including potential M & A transactions to maximize the value of our pipeline to bring novel therapies to patients suffering from high unmet need conditions |
Applied Biomedical Research Institute Research and Development Collaboration and License Agreement
On July 5, 2023 (the “ABSI Effective Date”), we entered into a Research and Development Collaboration and License Agreement (the “ABSI Agreement”) with Applied Biomedical Science Institute (“ABSI”) pursuant to which ABSI granted us an exclusive royalty-bearing, sublicensable license to the ABSI Patents and a non-exclusive, royalty-bearing, sublicensable license to the ABSI Know-How to Exploit the ABSI Products for the treatment, diagnosis, prediction, detection or prevention of disease in humans and animals worldwide (the “Territory”). Pursuant to the ABSI Agreement, the parties shall form a committee to manage the preclinical, IND- enabling studies and such other activities as shall lead to the initiation of a Phase 1 clinical trial of the ABSI Product. The parties will collaborate on a Target-by-Target basis to identify and evaluate ABSI Products directed against such Target with a view to identifying or generating suitable Products for our Company to Exploit. “Target” means ErB2 (Her2) and ErbB3. Upon completion of the Discovery Timeline for a Target, subject to the terms and conditions of ABSI Agreement, we shall exclusively own any ABSI Products against such Target. In the event the committee determines that the discovery activities are unsuccessful with respect to a Target, we may propose an additional target, which, upon approval by ABSI, shall replace a failed Target, each capitalized term as defined in the ABSI Agreement.
As part of the ABSI Agreement, on July 26, 2023, we issued 1,674 shares of our common stock with a per share value of $149.34, representing total compensation expense of $250,000.
On March 11, 2024, we entered into an addendum to the ABSI Agreement to fund research services with quarterly payments of $50,000 beginning March 18, 2024 with subsequent payments due on the 18th of each calendar quarter.
| 6 |
Avior Patent License Agreement
On November 3, 2023 (the “Avior Effective Date”), we entered into the Avior Patent License Agreement with Avior pursuant to which we received an exclusive sublicensable right and license to Licensed Patent Rights and Licensed Technology to, among other things, develop, have developed, make, have made, use, sell, import, export and commercialize TH104 and TH103 and to practice the Licensed Technology in connection with the foregoing throughout the world. Pursuant to the Avior Patent License Agreement, we paid Avior a mid-six digit up front license fee within ten days of the Avior Effective Date and an additional mid-six digit license fee which shall be paid in four equal installments within ten days of the end of each fiscal quarter following the Avior Effective Date. In addition, we shall pay Avior a high single digit percentage of any upfront payments received by us as a result of the grant of any sublicenses with respect to TH104. We shall also pay Avior milestone payments in the aggregate amount of $24.25 million upon the occurrence of various development milestones (the “Development Milestone Payments”). Furthermore, we shall pay Avior certain fees based upon sales milestones. The payments for such sales milestones range from the low seven digits to the low eight digits with higher sales being subject to higher fees. Finally, we shall pay Avior royalties based on net sales. Such royalties range from low single digit percentages to mid-single digit percentages with higher sales being subject to lower percentages. The Avior Patent License Agreement shall expire upon the expiration of the final payment obligation due to Avior as set forth in such agreement. Upon the expiration of the Avior Patent License Agreement, we shall have a fully paid-up, irrevocable, freely transferable and sublicensable worldwide license to the Licensed Patent Rights and Licensed Technology to Develop, have Developed, make, have made, use, have used sell, offer for sale, have sold, import, have imported, export, have exported, commercialize or have commercialized any and all Licensed Products and to practice the Licensed Technology worldwide. Pursuant to the Avior Patent License Agreement, we may terminate the agreement at any time without cause, upon 30 days’ prior written notice to Avior along with payment of the next unpaid Development Milestone Payment, if any. Furthermore, either we or Avior may terminate the Avior Patent License Agreement (i) on written notice to the other party if the other party materially breaches any provision of the Avior Patent License Agreement and fails to cure such breach within 30 days after the breaching party receives written notice thereof or (ii) on written notice in the event that either party (A) becomes insolvent or admits its inability to pay its debts generally as they become due; (B) becomes subject, voluntarily or involuntarily, to any proceeding under any domestic or foreign bankruptcy or insolvency law, which is not fully dismissed or vacated within 60 days; (C) is dissolved or liquidated or takes any corporate action for such purpose; (D) makes a general assignment for the benefit of creditors; or (E) has a receiver, trustee, custodian or similar agent appointed by order of any court of competent jurisdiction to take charge of or sell any material portion of its property or business. Upon termination of the Avior Patent License Agreement, the license granted pursuant to such agreement shall terminate and all rights in the Licensed Patent Rights and Licensed Products shall revert back to Avior.
Enkefalos License Agreement
On June 17, 2024 (the “Enkefalos Effective Date”), we signed a letter of intent (the “Enkefelos LOI”) to enter into the Enkefalos License Agreement with Enkefalos Biosciences Inc. pursuant to which we are licensing the global rights in all fields of use for the products related to the compounds knows as cyclotides to deliver HER2 antibodies across the blood-brain barrier and all associated know-how, technology, intellectual property and related information and constructs, and any associated authorized generic rights and all related assets (collectively, the “Products” referred to in this letter as ENBI-01) from Enkefalos Biosciences, Inc. Pursuant to the Enkefalos License Agreement, we paid Enkefalos an upfront license fee of $150,000 upon signing of the Enkefalos LOI and an additional $150,000 license fee to be paid 6 months after the Enkefalos Effective Date. In addition, we shall pay Enkefalos a $50,000 annual license fee and milestone payments in the aggregate amount of up to $8,500,000 upon the occurrence of various development milestones (the “Enkefalos Development Milestone Payments”). Furthermore, we shall pay Enkefalos royalties based on net sales. Such royalties range from low-single digit percentages to mid-single digit percentages with higher sales being subject to lower percentages. The Enkefalos License Agreement shall expire upon the expiration of the final payment obligation due to Enkefalos as set forth in such agreement. Upon the expiration of the Enkefalos Patent License Agreement, we shall have a fully paid, irrevocable, freely transferable and sublicensable worldwide license to the Licensed Patent Rights and Licensed Technology to Develop, have Developed, make, have made, use, have used sell, offer for sale, have sold, import, have imported, export, have exported, commercialize or have commercialized any and all Licensed Products and to practice the Licensed Technology worldwide. Pursuant to the Enkefalos License Agreement, either the Company or Enkefalos may terminate the Enkefalos License Agreement on written notice to the other party. Upon termination of the Enkefalos License Agreement, the license granted pursuant to such agreement shall terminate and all rights in the Licensed Patent Rights and Licensed Products shall revert back to Enkefalos.
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Intract Patent License Agreement
On September 11, 2024 (the “Intract Effective Date”), we entered into a Patent License Agreement (the “Intract Agreement”) with Intract Pharma Limited, (“Intract”), pursuant to which the Company exclusively licensed INT-023/TH023, an oral anti-Tumor Necrosis Factor-alpha (TNF-α) monoclonal antibody infliximab. Under the terms of the Intract Agreement, we licensed global development and commercialization rights (outside of South Korea) to Intract’s Soteria® and Phloral® delivery platform along with an existing supply agreement for infliximab to be used in the oral product development program. Pursuant to the Intract Agreement, Intract recieved a mid-six digit upfront paymentis eligible to receive additional payments upon an equity financing of the Company and is eligible for future development, regulatory and commercial milestones, as well as mid-single digit royalties based on net product sales. Under the terms of the Intract Agreement, we retain a right of first refusal to continue development and commercialization after a Phase 2 clinical trial and have the option to exercise the license to Intract’s platform for up to four additional targets. The term of the Intract Agreement expires upon the final payment obligation of the Company under the Intract Agreement. In addition, the Intract Agreement may be terminated by us at any time upon 90 days written notice to Intract. Either party may terminate the Intract Agreement if the other party materially breaches any provision of the Intract Agreement and fails to cure such breach within thirty (30) days after the breaching party receives written notice thereof. In addition, either party may terminate the Intract Agreement on written notice in the event that either party declare: (a) becomes insolvent or admits inability to pay its debts generally as they become due; (b) becomes subject, voluntarily or involuntarily, to any proceeding under any domestic or foreign bankruptcy or insolvency law, which is not fully dismissed or vacated within sixty (60) days; (c) is dissolved or liquidated or takes any corporate action for such purpose; (d) makes a general assignment for the benefit of creditors; or (e) has a receiver, trustee, custodian or similar agent appointed by order of any court of competent jurisdiction to take charge of or sell any material portion of its property or business.
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Recent Developments
On June 17, 2024, we entered into a securities purchase agreement with certain accredited investors for the issuance and sale in a private placement (the “PIPE Offering”), consisting of an offering of shares of our common stock and/or pre-funded warrants to acquire shares of our common stock and warrants to acquire shares of our common stock, with net proceeds of approximately $1.8 million. See Note 3 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for details regarding these offerings.
We signed a manufacturing agreement for clinical trial supply with regards to TH104 and the upcoming Phase 2 clinical trial on July 25, 2024 with a contract manufacturing organization located in North Carolina. The development work includes both TH104 active product and corresponding placebo batches expected to be released for clinical packaging by the end of the year.
On September 30, 2024, we entered into a nonbinding, exclusive letter of intent (the “LOI”) with Intract pursuant to which we will acquire all outstanding shares of common stock of the privately-held Intract for newly issued restricted common stock. Intract is a biopharmaceutical company incorporated in England and Wales developing disruptive delivery solutions for oral biologics. Under the terms of the LOI, following the execution of a definitive agreement and the closing of the merger, Intract shareholders will own 49% of the total equity in the combined entity, which will be named Tharimmune, Inc., with Intract becoming a wholly owned subsidiary. We believe the merger and business combination will form a best-in-class, transformative oral biologics company and the synergies between our clinical-stage assets and Intract’s delivery platform will drive pipeline growth. During the three and nine months ended September 30, 2024, we paid a $75,000 exclusivity fee to enter into the LOI agreement.
Components of Results of Operations
Revenue
We have not recognized revenue since inception.
Research and Development Expenses
Research and development expenses include personnel costs associated with research and development activities, including third-party contractors to perform research, conduct clinical trials, and manufacture drug supplies and materials as well as stock-based compensation for our research and development personnel. Research and development expenses are charged to operations as incurred.
We accrue costs incurred by external service providers, including contract research organizations and clinical investigators, based on estimates of service performed and costs incurred. These estimates include the level of services performed by third parties, patient enrollment in clinical trials, administrative costs incurred by third parties, and other indicators of the services completed. Based on the timing of amounts invoiced by service providers, we may also record payments made to those providers as prepaid expenses that will be recognized as expense in future periods as the related services are rendered.
We have incurred research and development expenses related to the development of HSB-1216, which has been deprioritized. We expect that our research and development expenses will increase as we plan for and commence our clinical trials of TH3215 and TH1940.
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We cannot determine with certainty the duration and costs of future clinical trials of our product candidates, TH3215 and TH1940, or any other product candidates we may develop or if, when or to what extent we will generate revenue from the commercialization and sale of any of our product candidates for which we obtain marketing approval. We may never succeed in obtaining marketing approval for any of our product candidates. The duration, costs and timing of clinical trials and development of our current and future product candidates will depend on a variety of factors, including:
| ● | the scope, rate of progress, expense and results of clinical trials of our current product candidates, as well as of any future clinical trials of our future product candidates and other research and development activities that we may conduct; |
| ● | uncertainties in clinical trial design and patient enrollment rates; |
| ● | the actual probability of success for our product candidates, including their safety and efficacy, early clinical data, competition, manufacturing capability and commercial viability; |
| ● | significant and changing government regulations and regulatory guidance; and |
| ● | the timing and receipt of any marketing approvals. |
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to slower than expected patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.
General and Administrative Expenses
General and administrative expenses consist primarily of compensation and consulting related expenses, including stock-based compensation for our general and administrative personnel. General and administrative expenses also include professional fees and other corporate expenses, including legal fees relating to corporate matters; professional fees for accounting, auditing, tax, and consulting services; insurance costs; travel expenses and other operating costs that are not specifically attributable to research activities.
We expect that our general and administrative expenses will increase in the future as we increase our personnel headcount to support our continued research activities and development of our product candidates. We also incur expenses associated with being a public company, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq, directors and officers insurance expenses, corporate governance expenses, investor relations activities and other administrative and professional services.
Interest Income
Interest income consists of interest income from funds held in our cash accounts.
Results of Operations
Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023
Three Months Ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| Condensed Consolidated Statements of Operations Data: | ||||||||||||
| Operating expenses: | ||||||||||||
| Research and development | $ | 2,281,827 | $ | 488,177 | $ | 1,793,650 | ||||||
| General and administrative | 1,583,744 | 1,356,893 | 226,851 | |||||||||
| Total operating expenses | 3,865,571 | 1,845,070 | 2,020,501 | |||||||||
| Other income (expense): | ||||||||||||
| Interest expense | (3,009 | ) | (3,496 | ) | 487 | |||||||
| Interest income | 72,728 | 28,451 | 44,277 | |||||||||
| Total other income (expense) | 69,719 | 24,955 | 44,764 | |||||||||
| Net loss | $ | (3,795,852 | ) | $ | (1,820,115 | ) | $ | (1,975,737 | ) | |||
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Research and Development Expenses
Research and development expenses increased by $1.8 million, or 367%, to $2.3 million for the three months ended September 30, 2024 from $0.5 million for the three months ended September 30, 2023. The increase was primarily the result of an increase in clinical trial expenses of approximately $0.5 million due to completion of our Phase 1 clinical trial in TH104, an increase of $1.1 million in license fees, and an increase of $0.2 million in pre-clinical expenses.
General and Administrative Expenses
General and administrative expenses increased by $0.2 million, or 17%, to $1.6 million for the three months ended September 30, 2024 from $1.4 million for the three months ended September 30, 2023. The change in general and administrative expenses was primarily due to an increase of $0.1 million in personnel costs, an increase of $0.1 million in investor relations and an increase of $0.1 million in professional fees. These increases were offset by a decrease of $0.1 million in insurance.
Interest Expense
Interest expense decreased by $487, or 14%, to $3,009 for the three months ended September 30, 2024 from $3,496 for the three months ended September 30, 2023. The decrease in interest expense was primarily related to the decrease in D&O insurance premium financing liability.
Interest Income
Interest income increased by $44,277, or 156%, to $72,728 for the three months ended September 30, 2024 from $28,451 for the three months ended September 30, 2023. The increase in interest income was primarily due to the increase in cash from the November 2023 Offering and the June 2024 PIPE Offering.
Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023
Nine Months Ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| Condensed Consolidated Statements of Operations Data: | ||||||||||||
| Operating expenses: | ||||||||||||
| Research and development | $ | 4,306,638 | $ | 2,566,910 | $ | 1,739,728 | ||||||
| General and administrative | 4,279,690 | 4,357,154 | (77,464 | ) | ||||||||
| Total operating expenses | 8,586,328 | 6,924,064 | 1,662,264 | |||||||||
| Other income (expense): | ||||||||||||
| Interest expense | (12,926 | ) | (16,151 | ) | 3,225 | |||||||
| Interest income | 222,236 | 94,898 | 127,338 | |||||||||
| Total other income (expense) | 209,310 | 78,747 | 130,563 | |||||||||
| Net loss | $ | (8,377,018 | ) | $ | (6,845,317 | ) | $ | (1,531,701 | ) | |||
Research and Development Expenses
Research and development expenses increased by $1.7 million, or 68%, to $4.3 million for the nine months ended September 30, 2024 from $2.6 million for nine months ended September 30, 2023. The increase was primarily the result of an increase in clinical trial expenses of approximately $0.9 million due to completion of our Phase 1 clinical trial in TH104 and an increase of $1.5 million in license fees. These increases were offset by a decrease of $0.5 million in pre-clinical expenses and a decrease of $0.1 million in stock-based compensation expense related to our research and development personnel.
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General and Administrative Expenses
General and administrative expenses decreased by less than $0.1 million, or 2%, to $4.3 million for the nine months ended September 30, 2024 from $4.4 million for the nine months ended September 30, 2023. The change in general and administrative expenses was primarily due to a decrease of $0.4 million in investor relations, a decrease of $0.3 million in insurance, a decrease of $0.1 million in professional fees, and a decrease of $0.1 million in stock-based compensation expense related to our general and administrative personnel. These decreases were offset by an increase in wages of $0.7 million and an increase of $0.1 million in director remuneration.
Interest Expense
Interest expense decreased by $3,225, or 20%, to $12,926 for the nine months ended September 30, 2024 from $16,151 for the nine months ended September 30, 2023. The decrease in interest expense was primarily related to the decrease in D&O insurance premium financing liability.
Interest Income
Interest income increased by $127,338, or 134%, to $222,236 for the nine months ended September 30, 2024 from $94,898 for nine months ended September 30, 2023. The increase in interest income was primarily due to the increase in cash from the November 2023 Offering and the June 2024 PIPE Offering.
Liquidity and Capital Resources
The accompanying condensed consolidated financial statements have been prepared on the basis that we are a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. For the nine months ended September 30, 2024, we incurred operating losses of approximately $8.6 million, expended approximately $7.9 million in cash in operating activities, and had an accumulated deficit of approximately $33.1 million as of September 30, 2024. We have financed our working capital requirements through September 30, 2024 primarily through the issuance of common stock in various public and private offerings. During the year ended December 31, 2023, we received gross proceeds of approximately $13.6 million through public offerings of our common stock in the May Offering and November Offering which generated net proceeds to us of approximately $2.1 million and $9.7 million, respectively. In addition, on June 7, 2024, we filed a Registration Statement on Form S-3 with the SEC using a “shelf” registration process pursuant to which, under an At the Market Offering Agreement (the “ATM Agreement”), we may sell, from time to time through the applicable sales manager, shares of common stock in one or more offerings up to a total dollar amount of $1.65 million. Further, on June 17, 2024, we entered into a securities purchase agreement with certain accredited investors as a part of the PIPE Offering, consisting of an offering of shares of our common stock and/or pre-funded warrants to acquire shares of our common stock and warrants to acquire shares of our common stock, with net proceeds of approximately $1.8 million. See Note 3 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for details regarding these offerings.
Based on our limited operating history, recurring negative cash flows from operations, current plans and available resources, we will need substantial additional funding to support future operating activities. We have concluded that the prevailing conditions and ongoing liquidity risks faced by us raise substantial doubt about our ability to continue as a going concern for at least one year following the date these condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q are issued. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.
We may seek to raise additional funding through the sale of additional equity or debt securities, enter into strategic partnerships, grants or other arrangements or a combination of the foregoing to support our future operations; however, there can be no assurance that we will be able to obtain additional capital on terms acceptable to us, on a timely basis, or at all. The failure to obtain sufficient additional funding could adversely affect our ability to achieve our business objectives and product development timelines and may result in delaying or terminating clinical trial activities which could have a material adverse effect on our results of operations.
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Cash Flow Activities for the Nine Months Ended September 30, 2024 and 2023
The following table sets forth a summary of our cash flows for the periods presented.
| Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (7,868,344 | ) | $ | (5,884,679 | ) | ||
| Net cash provided by financing activities | 1,707,229 | 2,063,206 | ||||||
| Net decrease in cash | $ | (6,161,115 | ) | $ | (3,821,473 | ) | ||
Cash Flows from Operating Activities
Cash used in operating activities for the nine months ended September 30, 2024 was $7.9 million which consisted of net loss of $8.4 million and non-cash stock-based compensation of $0.5 million, offset by increases in prepaid and other current assets of $0.4 million and operating liabilities of $0.3 million.
Cash used in operating activities for the nine months ended September 30, 2023 was $5.9 million which consisted of net loss of $6.8 million and an increase of $0.1 million in prepaid expenses and other current assets, partially offset by non-cash stock-based compensation of $0.6 million, $0.3 million of non-cash stock issuance pursuant to a services agreement and an increase of $0.2 million in accounts payable.
Cash Flows from Financing Activities
Cash provided by financing activities for the nine months ended September 30, 2024 was $1.7 million. The net increase in financing activities was due to proceeds from the PIPE Offering of $2.1 million and insurance premium financing liability of $0.4 million, offset by payments of deferred offering costs of $0.5 million and repayments of insurance premium financing liability of $0.3 million.
Cash provided by financing activities for the nine months ended September 30, 2023 was $2.1 million. The net increase in financing activities was from net cash proceeds of $2.3 million from the issuance of our common stock in connection with a public offering and $0.7 million in proceeds received from insurance premium financing liability offset by deferred offering costs of $0.3 million and $0.6 million in repayments of insurance premium financing liability.
Reverse Stock Split
On May 24, 2024, the Company effectuated an additional reverse split of shares of its common stock at a ratio of 1-for-15 pursuant to an amendment to the Company’s Certificate of Incorporation, as amended, filed with the Delaware Secretary of State and approved by the Company’s board of directors and stockholders. The par value of the Company’s common stock was not adjusted as a result of the reverse split. All issued and outstanding common stock share and per share amounts contained in the accompanying condensed consolidated financial statements have been retroactively adjusted to reflect the reverse split for all periods presented.
Critical Accounting Policies and Use of Estimates
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. Estimates are used in the following areas, among others: research and development expense recognition, stock-based compensation, allowances of deferred tax assets, and cash flow assumptions regarding going concern considerations. Although management believes the estimates that have been used are reasonable, actual results could vary from the estimates that were used.
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Critical Accounting Policies
Research and development
Research and development costs are expensed as incurred. Research and development expenses include personnel costs associated with research and development activities, including third-party contractors to perform research, conduct clinical trials and manufacture drug supplies and materials. We accrue for costs incurred by external service providers, including contract research organizations and clinical investigators, based on our estimates of service performed and costs incurred. These estimates include the level of services performed by third parties, patient enrollment in clinical trials, administrative costs incurred by third parties, and other indicators of the services completed.
Stock-based compensation
Stock-based compensation represents the cost related to stock-based awards granted to our employees, directors, consultants, and affiliates. We measure stock-based compensation costs at the grant date, based on the estimated fair value of the award and recognize the cost over the requisite service period.
We recognize compensation costs resulting from the issuance of stock-based awards to employees, non-employees and directors as an expense in the condensed consolidated statements of operations over the requisite service period based on a measurement of fair value for each stock-based award. The fair value of each option grant to employees, non-employees and directors is estimated as of the date of grant using the Black-Scholes option-pricing model, net of actual forfeitures. The fair value is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Prior to January 12, 2022, we were a private company and our common stock has only been publicly traded since that date. As a result, we lack company-specific historical and implied volatility information. Therefore, we have estimated our expected stock price volatility based on the historical volatility of a publicly traded set of peer companies. The expected term of stock options granted was between five and seven years. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.
Recently Issued and Adopted Accounting Standards
See Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act (the “JOBS Act”) was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
We have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for complying with new or revised accounting standards.
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Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including, without limitation, (i) providing an auditor’s attestation report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended, and (ii) complying with the requirement adopted by the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on financial statements. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our IPO; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our principal executive officer and principal financial officer evaluated the effectiveness of our “disclosure controls and procedures” as of September 30, 2024, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures” as defined in Rules 13a-15© and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is accumulated and communicated to a company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of September 30, 2024, our Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.
Changes in Internal Control
There were no significant changes in our internal control over financial reporting that occurred during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedure, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedure relative to their costs.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.
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ITEM 1A. RISK FACTORS.
Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on February 23, 2024 (“Annual Report”). There have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in our Annual Report which could materially affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
During
the fiscal quarter ended September 30, 2024, none of the Company’s directors or executive officer
ITEM 6. EXHIBITS.
| * | Filed herewith. |
| ** | Furnished herewith. |
# Pursuant to Item 601(b)(10) of Regulation S-K, certain confidential portions of this exhibit were omitted by means of marking such portions with an asterisk because such information is both not material and is the type that the Company treats as private or confidential.
| 16 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| THARIMMUNE, INC. | ||
| Date: November 7, 2024 | By: | /s/ Randy Milby |
| Randy Milby | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November 7, 2024 | By: | /s/ Thomas Hess |
| Thomas Hess | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
| 17 |
Exhibit 10.1
[*] Certain information in this document has been omitted from this exhibit because it is both (i) not material and (ii) is the type of information that the company treats as private or confidential.
PATENT LICENSE AGREEMENT
This Patent License Agreement (this “Agreement”) is entered into as of September 11, 2024 (the “Effective Date”) by and between Intract Pharma Limited, a company incorporated in England and Wales, whose registered office address is at London Bioscience Innovation Centre, 2 Royal College Street, London NW1 0NH (“Licensor”), and Tharimmune, Inc., a Delaware corporation with a place of business at 1200 Route 22 East, Suite 2000, Bridgewater, New Jersey, USA 08807 (“Licensee”). Licensor and Licensee are each hereafter referred to individually as a “Party” and together as the “Parties”.
WHEREAS, Licensor is the owner of or otherwise controls certain proprietary Licensed Patents and Licensed Technology (each as defined below); and
WHEREAS, Licensee desires to obtain an exclusive license from Licensor under such Licensed Patents and Licensed Technology to develop and commercialize Licensed Products (as defined below); and
WHEREAS, Licensor desires to grant such license to Licensee on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in the Agreement with an initial capital letter, the terms defined in this Article 1 shall have the meanings specified below.
“Affiliate” shall mean any corporation, firm, limited liability company, partnership or other entity which directly controls, is controlled by or is under common control with a Party to this Agreement. For purposes of this Section, “control” means ownership, directly or indirectly through one or more Affiliates, of fifty percent (50%) or more of the shares of stock entitled to vote for the election of directors, in the case of a corporation, or fifty percent (50%) or more of the equity interests in the case of any other type of legal entity, status as a general partner in any partnership, or any other arrangement whereby a Party controls or has the right to control the Board of Directors or equivalent governing body of a corporation or other entity.
“API” means the active pharmaceutical ingredient known as infliximab.
“BLA” shall mean a biologics license application (as defined in Title 21 of the United States Code of Federal Regulations, as amended from time to time) filed with the FDA seeking Regulatory Approval to market and sell any Licensed Product in the United States for a particular indication within the Field.
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“Books and Records” shall mean all books, files, papers, agreements, correspondence, databases, data, records, manuals and other documentation information systems, programs, software, documents and records (regardless of medium, whether in physical or electronic format and stored in computer memory or other storage device).
“Commercially Reasonable Efforts” shall mean the activities and degree of effort that Licensee would reasonably use for developing and commercializing a new biotechnology products or service which is of similar market potential as the applicable Licensed Product, and considering the relevant stage of development or commercialization to achieve that objective if acting in its own interest having regard to the market potential of the product or service and taking into account efficacy, safety, patent and regulatory exclusivity, competitive market conditions, the likely expenditure and duration and the potential profitability of the product or service in light of pricing and reimbursement issues, the proprietary position of the Licensed Product, the cost of goods and availability of capacity to manufacture and supply the Licensed Product at commercial scale, the profitability of the applicable Licensed Product, and other relevant factors including, without limitation, technical, legal, scientific or medical factors. In relation to commercialization, Commercially Reasonable Efforts shall be determined on a Licensed Product-by-Licensed Product basis and a Licensed Service-by-Licensed Service basis (as applicable) and on a country-by-country basis and it is anticipated that the degree of effort required may be different for different Licensed Products and Licensed Services and different in different countries and may change over time, reflecting changes in the market potential of the Licensed Product or Licensed Service as development progresses.
“Confidential Information” shall mean with respect to a Party (as the “Receiving Party”), all non-public information of the other Party (as the “Disclosing Party”) which is disclosed to the Receiving Party or any of its employees, consultants, Affiliates, licensees or sublicensees, or otherwise made available to or accessed by the Receiving Party hereunder, and which is marked as, or that by its nature or the circumstances of disclosure should reasonably be understood to be confidential, except to the extent that the Receiving Party can demonstrate by written record or other suitable physical evidence that such information: (a) as of the date of disclosure is known to the Receiving Party or its Affiliates other than by virtue of a prior confidential disclosure to such Party or its Affiliates; (b) as of the date of disclosure is in, or subsequently enters, the public domain, through no fault or omission of the Receiving Party; (c) is obtained from a Third Party having a lawful right to make such disclosure free from any obligation of confidentiality to the Disclosing Party; or (d) is independently developed by or for the Receiving Party without reference to, or reliance upon, any Confidential Information of the Disclosing Party.
“Control” or “Controlled” shall mean with respect to any Patent Rights or Technology, the possession by a Party of the ability to grant a license or sublicense of such Patent Rights, or Technology as provided for herein without violating the terms of any arrangement or agreements between such Party and any Third Party or requiring such Party to make undue payment to any Third Party.
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“Development” and “Develop” shall mean, with respect to any Licensed Product, all activities with respect to such Licensed Product relating to research and development in connection with seeking, obtaining and/or maintaining any Regulatory Approval for such Licensed Product in the Licensed Field in the Territory, including without limitation, all pre-clinical research and development activities, all preclinical and clinical trials, toxicology testing, statistical analysis and publication and presentation of study results with respect to Licensed Product, all activities relating to developing the ability to manufacture any Licensed Product or any component thereof (including, without limitation, process development work), and all other activities relating to seeking, obtaining and/or maintaining any Regulatory Approvals from the FDA and/or any other Regulatory Authority.
“Drug Approval Application” shall mean any application for Regulatory Approval (including pricing and reimbursement approvals) required prior to any commercial sale or use of a Licensed Product in any country or jurisdiction in the Territory, including, without limitation, (a) any BLA, NDA or MAA filed with the FDA or any other Regulatory Authority, and (b) any equivalent application filed with any other Regulatory Authority for Regulatory Approval (including pricing and reimbursement approvals) required prior to any commercial sale or use of a Licensed Product in any country or jurisdiction in the Territory.
“First Commercial Sale” shall mean, on a country-by-country basis, the date of the first arm’s length transaction, transfer or disposition for value to a Third Party of a Licensed Product by or on behalf of Licensee or any Affiliate or Sublicensee of Licensee in such country.
“FDA” shall mean the United States Food and Drug Administration and any successor agency or authority thereto.
“Governmental Entity” means any federal, foreign, state, county, municipal, provincial or local governmental authority, court, judicial body, arbitration tribunal, government or self-regulatory organization, commission, tribunal or organization, or any regulatory, administrative or other agency, or any political or other subdivision, department, commission, board, bureau, branch, division, ministry, or instrumentality of any of the foregoing.
“IND” shall mean an investigational new drug application (as defined in Title 21 of the United States Code of Federal Regulations, as amended from time to time) filed or to be filed with the FDA with regard to any Licensed Product.
“Improvements” means any enhancement, invention or discovery created, identified, conceived, made or reduced to practice by Licensee, which constitutes an improvement to the subject matter of the Licensed Patent Rights or Licensed Technology.
“Licensed Field” shall mean all fields of use for oral administration of infliximab.
“Licensed Patent Rights” means all Patent Rights in the Field which are Controlled by Licensor as of the Effective Date or become Controlled by Licensor during the Term of this Agreement (as defined below), to the extent necessary or useful for the manufacture, use or sale of the Licensed Products. The Licensed Patent Rights as of the Effective Date are listed in Exhibit A, attached hereto and made a part hereof. Exhibit A shall be updated by Licensor by written notice to Licensee on a semi-annual basis during the Term to include any additional patents and patent applications not previously listed; however, the inclusion or exclusion of a patent or patent application from Exhibit A is not to be deemed a conclusive indication of whether that patent or application is or should be considered a “Licensed Patent Right” for purposes of this Agreement.
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“Licensed Product” shall mean any orally administered product using the API, in any dosage or formulation, targeting Tumor Necrosis Alpha (TNF), the manufacture, use, sale of which would, absent the license granted to Licensee hereunder, infringe any Valid Claim included in the Licensed Patent Rights.
“Licensed Technology” shall mean and include all Technology, whether or not patentable, including but not limited to formulations, techniques and materials, which is Controlled by Licensor as of the Effective Date or becomes Controlled by Licensor during the Term of this Agreement and (a) is related to any patent or patent application included in the Licensed Patent Rights or (b) is necessary or useful for Licensee to practice the licenses granted to it hereunder.
“MAA” shall mean an application filed with the relevant Regulatory Authorities in Europe seeking Regulatory Approval to market and sell any Licensed Product in Europe or any country or territory therein for a particular indication within the Field.
“NDA” shall mean a new drug application (as defined in Title 21 of the United States Code of Federal Regulations, as amended from time to time) filed with the FDA seeking Regulatory Approval to market and sell any Licensed Product in the United States for a particular indication within the Field.
“Net Sales” shall mean the gross invoiced sales price for all Licensed Products sold by Licensee or its Affiliates or Sublicensees to Third Parties throughout the Territory during each calendar quarter, less the following amounts incurred or paid by Licensee or its Affiliates or Sublicensees during such calendar quarter with respect to sales of Licensed Products regardless of the calendar quarter in which such sales were made:
(a) any tax, tariff, duty or governmental charge levied on the sales, transfer, transportation or delivery of a Licensed Product (including any tax such as a value added or similar tax or government charge) borne by the seller thereof, other than franchise or income tax;
(b) trade, cash and quantity discounts or rebates, including discounts or rebates to governmental or managed care organizations;
(c) credits or allowances for rejection of, and for uncollectible amounts on, or return of previously sold Licensed Products (including Medicare and similar types of rebates);
(d) any charges for insurance, freight, and other transportation costs related to the delivery of Licensed Product to the extent included in the gross invoiced sales price;
(e) amounts paid as distribution fees to Third Parties;
(f) any import or export duties or their equivalent borne by the seller; and
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(g) sales to government organizations, charitable non-governmental organizations, indigent programs and sales of Licensed Product at a loss or for materially reduced profit margins.
“Net Sales” shall not include sales or transfers between Licensee and its Affiliates or Sublicensees, unless the Licensed Product is consumed by the Affiliate or Sublicensee.
“Patent Rights” shall mean the rights and interests in and to issued patents and pending patent applications (including inventor’s certificates and utility models) in any country or jurisdiction within the Territory, including all provisionals, substitutions, continuations, continuations-in-part, divisionals, supplementary protection certificates, renewals, all letters patent granted thereon, and all reissues, reexaminations, extensions, confirmations, revalidations, registrations, patents of addition thereof, PCTs and foreign counterparts, Controlled by a Party.
“Person” means any individual, corporation, partnership, joint venture, limited liability company, trust, unincorporated organization or governmental entity.
“Qualified Equity Financing” shall mean a bona fide transaction or series of transactions following the date of this Agreement with the principal purpose of raising capital, pursuant to which Licensee issues and sells equity securities at a fixed valuation to fund the Development of Licensed Product.
“Regulatory Approval” shall mean any and all approvals (including pricing and reimbursement approvals), product and establishment licenses, registrations or authorizations of any kind of the FDA or any other Regulatory Authority necessary for the development, pre-clinical and/or human clinical testing, manufacture, quality testing, supply, use, storage, importation, export, transport, marketing and sale of a Licensed Product (or any component thereof) for use in the Field in any country or other jurisdiction in the Territory. “Regulatory Approval” shall include, without limitation, any BLA, NDA, MAA or other Drug Approval Application.
“Regulatory Authorities” shall mean any applicable supranational, national, federal, state or local regulatory agency, department, bureau or other Governmental Entity of any country or jurisdiction in the Territory having responsibility in such country or jurisdiction for any Regulatory Approvals of any kind in such country or jurisdiction, and any successor agency or authority thereto.
“Regulatory Documentation” shall mean all applications, registrations, licenses, authorization and approvals (including all Regulatory Approvals), all correspondence submitted to or received from the FDA or any other Regulatory Authority (including minutes and official contact reports relating to any communications with the FDA or any other Regulatory Authority) and all supporting documents and data contained in any of the foregoing (including any INDs or foreign equivalents, any manufacturing facility validation and/or licensure, any Drug Approval Applications, orphan drug applications, and any other documents related to Regulatory Approvals) in Licensor’s possession or control.
“Sublicensee” shall mean any Third Party to whom Licensee grants a sublicense of some or all of the rights granted to Licensee under this Agreement.
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“Target Product” shall mean any orally administered product using the API, in any dosage or formulation, targeting any of the following: Tumor Necrosis Alpha (TNF).
“Technology” shall mean and include any and all ideas, inventions, discoveries, Confidential Information, biologic materials, data, results, formulae, designs, specifications, methods, processes, formulations, techniques, ideas, know-how, technical information (including, without limitation, structural and functional information), process information, pre-clinical information, clinical information, research and development, results, analysis, studies, CMC data, drug master files, compositions, designs, drawings, business and marketing plans and proposals, works of authorship, data collections, and any and all proprietary biological, chemical, pharmacological, toxicological, pre-clinical, clinical, assay, control and manufacturing data and materials and other forms of technology (whether or not embodied in any tangible form and including all tangible embodiments of the foregoing, such as instruction manuals, laboratory notebooks, prototypes, samples, studies and summaries), whether patentable or not.
“Territory” shall mean all countries and jurisdictions of the world, except for South Korea.
“Third Party” shall mean any Person other than Licensee, Licensor and their respective Affiliates.
“Valid Claim” shall mean a claim in an issued, unexpired patent within the Licensed Patent Rights that (a) has not been finally cancelled, withdrawn, abandoned or rejected by any administrative agency or other body of competent jurisdiction, (b) has not been revoked, held invalid, or declared unpatentable or unenforceable in a decision of a court or other body of competent jurisdiction that is unappealable or unappealed within the time allowed for appeal, (c) has not been rendered unenforceable through disclaimer or otherwise, and (d) is not lost through an interference proceeding.
ARTICLE II
GRANT OF RIGHTS
Section 2.1 Grant of License. Licensor hereby grants to Licensee an exclusive (including as to Licensor), transferable (in accordance with Section 11.9), royalty-bearing license, including the right to grant sublicenses in accordance with Section 2.2, under the Licensed Patent Rights and Licensed Technology, to Develop, have Developed, make, have made, use, have used, sell, offer for sale, have sold, import, have imported, export, have exported, commercialize and have commercialized Licensed Products and to practice the Licensed Technology in the Territory, for any and all uses within the Licensed Field, subject to the terms and conditions of this Agreement.
Section 2.2 Right to Sublicense. Licensee shall have the right to grant sublicenses to any Sublicensee to all or any portion of its rights under the license granted pursuant to Section 2.1; provided, the terms of any sublicense agreements shall not contradict the terms of this Agreement and shall include or otherwise substantively incorporate all terms and conditions of this Agreement that the applicable Sublicensee is required to be subject to, including, without limitation, Section 2.1, Section 2.4, Section 4.2, Section 4.3, and Section 4.5 through Section 4.7 and ARTICLE VI and ARTICLE IX. Licensee shall provide Licensor with a full and complete copy of each such Sublicense Agreement and any amendments thereto within thirty (30) days of execution thereof by Licensee.
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Section 2.3 Right of First Negotiation. Licensor shall notify Licensee in writing of any Target Product it has developed and filed for any Patent Right(s) with respect to, promptly following a determination by Licensor, according to its prudent scientific and business judgment, that it is viable to proceed with clinical trials with respect to such Target Product. Licensor shall grant Licensee an exclusive option to elect to obtain an exclusive license under Licensor’s interest in the Target Product (for each such Target Product, the “Option”). Such Option shall be in effect for a period of ninety (90) days from the date of disclosure of the Target Product pursuant to this Section 2.3 (the “Option Period”). Licensee may exercise the Option by providing written notice to Licensor within the Option Period of its intent to exercise such Option, at which time the Parties shall in good faith negotiate an agreement for the exclusive license of such Target Product, which agreement shall contain commercially reasonable terms and conditions or which may be an amendment this Agreement. Upon expiration of the Option Period, if Licensor and Licensee have not entered into a definitive agreement for the Target Product despite good faith negotiations, Licensor may license such Target Product to a Third Party on terms materially more favorable to Licensor than those offered to Licensee without first re-offering to Licensee; provided, however, that if the financial compensation offered by such Third Party is within 10% of the total compensation last offered by Licensee, when considered as a whole, Licensor shall first offer a license to such Target Product to Licensee on terms no less favorable than those offered to such Third Party before licensing such Target Product to such Third Party, and Licensee shall have the right to accept such offer within forty-five (45) days of receipt. If Licensee does not accept such offer, Licensor may license the Target Product to such Third Party on the same terms. Licensor shall not license such Target Product to any Third Party on terms less favorable to Licensor than those offered to Licensee without first re-offering to Licensee.
Section 2.4 Retained Rights. Subject to the other terms of this Agreement, Licensor retains the right to use the Licensed Technology and practice the Licensed Patent Rights to Develop, have Developed, make, have made, use, have used, sell have sold, offer for sale, import, have imported, export, have exported, commercialize and have commercialized any product that is not related to a Licensed Product; provided, however, that Licensor, its Affiliates and sublicensees shall not, during the Term, Develop, have Developed, make, have made, use, have used, sell have sold, offer for sale, import, have imported, export, have exported, commercialize or have commercialized any product containing the API that competes with the Licensed Product, including through different modes of administration or dosage strengths.
ARTICLE III
DEVELOPMENT AND COMMERCIALIZATION
Section 3.1 Development and Commercialization. From and after the Effective Date, Licensee shall have full control and authority over the Development and commercialization of Licensed Products in the Licensed Field in the Territory, including without limitation, (a) all pre-clinical Development activities (including any pharmaceutical development work on formulations or process development relating to any Licensed Product), (b) all activities related to human clinical trials (including all clinical studies), (c) all activities relating to manufacture and supply of all Licensed Products (including all required process development and scale up work with respect thereto), (d) all marketing, promotion, sales, distribution, import and export activities relating to any Licensed Product, and (e) all activities relating to any regulatory filings, registrations, applications and Regulatory Approvals relating to any of the foregoing (including any INDs or foreign equivalents, any manufacturing facility validation and/or licensure, any Drug Approval Applications and any other Regulatory Approvals). Licensee shall own all data, results and all other information arising from any such activities under this Agreement, including without limitation, all regulatory filings, registrations, applications and Regulatory Approvals relating to Licensed Products (including any INDs or foreign equivalents, any Drug Approval Applications and any other Regulatory Approvals), and all of the foregoing information, documentation and materials (collectively, “Development IP”) shall be considered Confidential Information and Technology solely owned by Licensee.
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Section 3.2 Regulatory Activities; FDA Communications. Licensee shall have the right to direct and control all Regulatory Activities following the Effective Date. Without limiting the foregoing, Licensee shall be responsible for communicating with Regulatory Authorities regarding the Licensed Products and Licensor shall not initiate contact with any Regulatory Authorities or respond to any Regulatory Authority inquiries regarding the Licensed Products without Licensee’s prior written consent except as expressly contemplated herein. Licensor shall cooperate with and provide assistance to Licensee with respect to communications with Regulatory Authorities and with responding to all requests for information from, and with making all required filings with, Regulatory Authorities in respect of the Licensed Products, including the Licensed Product IND (as defined below).
Section 3.3 Licensee’s Diligence Obligations. Within thirty (30) days of each anniversary of the Commencement Date, Licensee shall provide Licensor with an updated business plan for developing and commercializing Licensed Products. Within thirty (30) days of each anniversary of the Commencement Date, Licensee shall provide licensor with a written report setting out a reasonable summary on a Licensed Product-by-Licensed Product basis, Licensed Service-by-License Service basis and country-by-country basis:
3.3.1 the activities carried out by Licensee Vendors in the development and commercialization of Licensed Products over the previous twelve (12) months including any research and development activities (including details of preclinical work, stage of development, indications, platform development), the commencement of clinical studies, completion/cessation of clinical studies, filing of applications for Regulatory Approval, the grant, refusal and withdrawal of Regulatory Approvals, material regulatory activities, any First Commercial Sale in a country and/or withdrawal of a Licensed Product from sale or supply in a country, and all other material commercial activities relevant to the Licensed Technology (including details of any collaborations, licenses and other partnerships); and
3.3.2 the activities and timetable planned by all Licensee Vendors for the development and commercialization of Licensed Products for the following 12 months including details of all the specific development activities.
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Section 3.4 Diligence Remediation Plan.
3.4.1 If Licensor considers at any time during the period of this Agreement that Licensee has materially failed to comply with its obligations to exercise Commercially Reasonable Efforts as set out in Section 3.3, Licensor may deliver a remediation notice to Licensee, and the Parties shall discuss the alleged failure and shall in good faith seek to agree, within thirty (30) business days from the date of Licensor’s remediation notice, whether any action needs to be taken by Licensee or the actions that Licensee needs to take to remedy such failure.
3.4.2 If Licensee does not agree that it has materially failed to comply with its Commercially Reasonable Efforts obligation as per Section 3.3 and/or the Parties cannot agree on the actions that the Licensee needs to take within the timeframe, either Party may submit the matter to arbitration in accordance with Section 11.5.
3.4.3 Within sixty (60) days of the remediation steps having been agreed by the Parties or otherwise any determination of an arbitrator, Licensee shall submit a plan for remediation of the failure (“Remediation Plan”). If Licensee does not submit a Remediation Plan within such timeframe, Licensor shall have the right to notify Licensee that the exclusive license granted under Section 2.1 is to become non-exclusive and from the date of that notice, the license shall become non-exclusive.
3.4.4 Licensor shall notify Licensee within twenty (20) business cays of receipt of the Remediation Plan, of:
(a) its approval of the Remediation Plan (and it shall not unreasonably withhold or delay its approval); or
(b) its rejection of the Remediation Plan and where it so rejects then it shall provide its reasons and propose reasonable amendments to the Remediation Plan that are required by Licensor before approval will be given. Following the rejection the Remediation Plan by Licensor, the Parties shall in good faith discuss and agree on amendments to the Remediation Plan whereupon Licensor shall provide its approval of the Remediation Plan.
3.4.5 Upon Licensor’s approval of the Remediation Plan, Licensee shall promptly start work on the actions set out in the Remediation Plan.
3.4.6 If Licensee fails to implement or successfully complete the Remediation Plan by the required completion date in the Remediation Plan, Licensor shall have the right in its sole discretion to:
(a) grant Licensee a further period of time in which to implement and successfully complete the Remediation Plan; and/or
(b) notify Licensee that the exclusive license granted under Section 2.1 is to become non-exclusive if the failure is not rectified within thirty (30) days, and from the date that is thirty (30) days of that notice, the license shall be non-exclusive if the failure is not rectified within such time period.
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3.4.7 If Licensor grants Licensee a further period of time in which to implement and successfully complete the Remediation Plan pursuant to the foregoing, but Licensee fails to implement or successfully complete the Remediation Plan by the end of such extension period then Licensor shall have the right in its sole discretion to terminate this Agreement.
3.4.8 Licensor shall not unreasonably withhold its consent to any revision in such time periods whenever requested in writing by Licensee and supported by evidence of technical difficulties or reasonable delays in clinical development, clinical studies or regulatory processes.
ARTICLE IV
PAYMENTS AND ROYALTIES
Section 4.1 License Fee. In consideration of the grant of the license described in Section 2.1 hereof, Licensee will pay Licensor:
(a) $400,000 payable within fifteen (15) days of execution of this Agreement the (“Upfront License Fee”); and
(b) Upon closing of a Qualified Equity Financing by Licensee (the “Success Fee”):
(i) $*, payable over ninety (90) days from the closing date of the Qualified Equity Financing, in three (3) equal monthly installments of $* each, if the amount raised is $* or less; or
(ii) $*, payable over ninety (90) days from the closing date of the Qualified Equity Financing, in three (3) equal monthly installments of $ * each, if the amount raised is more than $*.
The Upfront License Fee, Success Fee and the Milestone Payments set forth below are subject to forfeiture and/or repayment pursuant to the indemnification provisions set forth in ARTICLE IX below.
Section 4.2 Milestone Payments.
4.2.1 Development Milestone Payments. As a material inducement for Licensor to enter into this Agreement, Licensee shall pay to Licensor the Development Milestone Payments, if any, pursuant to Exhibit B hereto (the “Development Milestone Payments”).
4.2.2 Sales Milestone Payments. As a material inducement for Licensor to enter into this Agreement, Licensee shall pay to Licensor the Sales Milestone Payments, if any, pursuant to Exhibit C hereto based on Net Sales of Licensed Products (the “Sales Milestone Payments”, and, together with the Development Milestone Payments, the “Milestone Payments”).
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4.2.3 One Milestone Payment. It is hereby acknowledged and agreed that any Milestone Payment shall be made only once, with respect to the first achievement of the relevant milestone for the first Licensed Product, regardless of how many times such milestones are achieved by Licensed Products and regardless of how many times a particular Licensed Product achieves such milestones. Notwithstanding the foregoing, for milestones 1, 2, 3, and 4 of Exhibit B, certain Development Milestone Payments would be payable one additional time for achieving such milestones with respect to any Second Licensed Product, and for the avoidance of doubt, the total Development Milestone Payments that could become payable for such milestones under this Agreement in any such event is * dollar ($*) in the aggregate. For purposes of this Agreement, a “Second Licensed Product” shall mean a Licensed Product using Licensor’s next generation mAb delivery platform that shows at least two-fold or higher PK of the API in any relevant preclinical animal model (rodent and/or large animal) compared to the first developed Licensed Product. The positive preclinical PK data will be discussed between the Parties the status of the Licensed Product as a Second Licensed Product will be mutually agreed by the Parties.
Section 4.3 Royalties. In further consideration of the grant of the license by Licensor hereunder, Licensee shall pay to Licensor the royalties, if any, pursuant to Exhibit D hereto based on Net Sales of Licensed Product.
Section 4.4 Sublicense Revenue. In further consideration of the grant of the license by Licensor hereunder, Licensee shall pay to Licensor *% of any upfront payments (“Upfront Payments”) received by Licensee from the grant by Licensee of a sublicense of the Licensed Patent Rights to Develop, have Developed, make, have made, use have used sell, offer for sale, have sold import, have imported, export, have exported, commercialize or have commercialized Licensed Product. Notwithstanding the foregoing, Upfront Payments shall not include (a) purchases of Licensee’s equity or debt securities (to the extent not in excess of the fair market value thereof), (b) advances for the post-license execution performance of research, development, or commercialization activities or patent prosecution or maintenance (to the extent such amount does not exceed the actual cost or amount thereof), (c) issuances of a licensee’s equity securities (to the extent Licensee pays monetary consideration therefor), or (d) amounts paid for purchases of tangible goods or other assets. Any payments under this Section 4.4 shall be creditable against other payments due to Licensor hereunder.
Section 4.5 Payment Terms. Unless otherwise expressly provided in an Exhibit hereto, Licensee shall make any milestone and royalty payments owed to Licensor hereunder in arrears, within forty-five (45) days from the end of each calendar year in which the Net Sales giving rise to such payments are received by Licensee, or with respect to Milestone Payments, within forty-five (45) days of the date when the applicable milestone was achieved.
Section 4.6 Accounting. All payments hereunder shall be made in United States dollars. Conversion of foreign currency to United States dollars shall be made at the conversion rate existing in the United States (as reported in The Wall Street Journal) on the last business day of the quarter immediately preceding the applicable calendar quarter. If The Wall Street Journal ceases to be published, then the rate of exchange to be used shall be that reported in such other business publication of national circulation in the United States as the Parties reasonably agree.
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Section 4.7 Tax Withholding; Restrictions on Payment. All payments hereunder shall be made free and clear of any taxes, duties, levies, fees or charges, except for withholding taxes (to the extent applicable). Licensee shall make any applicable withholding payments due on behalf of Licensor and shall provide Licensor upon request with such written documentation regarding any such payment as available to Licensee relating to an application by Licensor for a foreign tax credit for such payment with the United States Internal Revenue Service. If by law, regulations or fiscal policy of a particular country in the Territory, remittance of royalties in United States Dollars is restricted or forbidden, written notice thereof shall promptly be given to Licensor, and payment of the royalty shall be made by the deposit thereof in local currency to the credit of Licensor in a recognized banking institution reasonably designated by Licensor by written notice to Licensee. When in any country in the Territory the law or regulations prohibit both the transmittal and the deposit of royalties on sales in such country, royalty payments shall be suspended for as long as such prohibition is in effect and as soon as such prohibition ceases to be in effect, all royalties that Licensee would have been under an obligation to transmit or deposit but for the prohibition shall forthwith be deposited or transmitted, to the extent allowable.
ARTICLE V
FILING, PROSECUTION AND MAINTENANCE OF PATENT RIGHTS
Section 5.1 Rights to IND and IND Maintenance. Licensor hereby irrevocably transfers and assigns to Licensee all right, title and interest in and to: (a) any IND and foreign equivalents related to the Licensed Products and (b) all data and information underlying such IND and foreign equivalents (including without limitation pre-clinical data, stability data and process data) (collectively, the “Licensed Product IND”). In connection with such transfer, Licensor shall: (i) submit or file all documents and information required to be submitted by Licensor, as the current owner of the Licensed Product IND; (ii) promptly after the Effective Date, provide to Licensee a complete copy of the Licensed Product IND, including all supplements, amendments thereto and reports and records that are required to be submitted or kept under applicable law and all communications with the applicable Regulatory Authority regarding the Licensed Product IND; and (iii) take all other actions imposed upon a current owner of an IND to transfer the Licensed Product IND to Licensee. In addition, Licensor shall provide to Licensee all data and information necessary for Licensee to comply with all requirements and obligations of the applicable Regulatory Authority with respect to the maintenance of the Licensed Product IND. Without limiting the generality of the foregoing, Licensor shall: (x) promptly communicate and deliver to Licensee all information that is necessary or reasonably useful in Licensee’s reasonable discretion for the maintenance of the Licensed Product IND; (y) provide such technical assistance as may be reasonably requested by Licensee from time to time, including without limitation relating to test methods, specifications, and impurity/degradation product identification; and (z) execute and/or deliver such documents, reports, and certificates (including, without limitation, any certificates of analysis) and take such action, as Licensee may reasonably request, to assist Licensee with the maintenance of the Licensed Product IND.
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Section 5.2 Patent Filing, Prosecution and Maintenance. Except as provided herein, Licensor shall be responsible for preparing, filing, prosecuting, obtaining and maintaining, at its sole cost, expense and discretion, and using patent counsel selected by Licensor, all Licensed Patent Rights. Licensor will keep Licensor reasonably informed of the status of such filing, prosecution and maintenance. Notwithstanding the foregoing, Licensee shall be responsible for preparing, filing, prosecuting, obtaining and maintaining, at its sole cost, expense and discretion, and using patent counsel selected by Licensee, Licensed Patent Rights with respect to Licensed Products. Licensee will keep Licensor reasonably informed of the status of such filing, prosecution and maintenance.
Section 5.3 Notice of Infringement. If either Party learns of any actual, alleged or threatened infringement by a Third Party of any Licensed Patent Rights under this Agreement, such Party shall promptly notify the other Party and shall provide such other Party with available evidence of such infringement.
Section 5.4 Infringement of Patent Rights. Licensee shall have the first right (but not the obligation), at its own expense and with legal counsel of its own choice, to bring suit (or take other appropriate legal action) against any actual, alleged or threatened infringement of the Licensed Patent Rights with respect to Licensed Products. Licensor shall have the right, at its own expense, to be represented in any such action by Licensee by counsel of Licensor’s own choice; provided, however, that under no circumstances shall the foregoing affect the right of Licensee to control the suit as described in the first sentence of this Section 5.4. If Licensee does not file any action or proceeding against a material infringement within six (6) months after the later of (a) Licensor’s notice to Licensee under Section 5.3 above or (b) Licensee’s notice to Licensor under Section 5.3 above, then Licensor shall have the right (but not the obligation), at its own expense, to bring suit (or take other appropriate legal action) against such actual, alleged or threatened infringement, with legal counsel of its own choice, but shall not be permitted to settle any such suit without the prior consent of Licensee, which consent shall not be unreasonably withheld. In the event that Licensee undertakes the enforcement and/or defense of the Licensed Patent Rights, Licensee may withhold royalties and other amounts otherwise due Licensor hereunder after notification of infringement and apply the same toward reimbursement of its expenses, including reasonable attorneys’ fees, in connection therewith. Any damages, monetary awards or other amounts recovered, whether by judgment or settlement, pursuant to any suit, proceeding or other legal action taken under this Section 5.4, shall applied as follows:
(a) First, to reimburse the Parties for their respective costs and expenses (including reasonable attorneys’ fees and costs) incurred in prosecuting such enforcement action;
(b) Second, to Licensee in reimbursement for lost sales (net of royalties) associated with Licensed Products and to Licensor in reimbursement for lost royalties owing hereunder based on such lost sales;
(c) Third, any amounts remaining shall be allocated as follows: (i) if Licensee is the Party bringing such suit or proceeding or taking such other legal action, one hundred percent (100%) to Licensee, (ii) if Licensor is the Party bringing such suit or proceeding or taking such other legal action, one hundred percent (100%) to Licensor, or (iii) if the suit or proceeding is brought jointly, fifty percent (50%) to each Party. In the event the damages remaining after the deduction of the expenses described in subsection (i) are not sufficient to cover the allocations to Licensee and Licensor in subsection (ii), the damages remaining after reimbursement of the expenses described in subsection (i) shall be allocated to Licensee.
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If a Party brings any such action or proceeding hereunder, the other Party agrees to be joined as party plaintiff if necessary to prosecute such action or proceeding, and to give the Party bringing such action or proceeding reasonable assistance and authority to file and prosecute the suit; provided, however, that neither Party shall be required to transfer any right, title or interest in or to any property to the other Party or any Third Party to confer standing on a Party hereunder.
ARTICLE VI
CONFIDENTIAL INFORMATION
Section 6.1 Limited Disclosure and Use. Licensor and Licensee each agree that during the term of this Agreement and for five (5) years thereafter, it will keep confidential all Confidential Information of the other Party. The Receiving Party shall not use Confidential Information of the Disclosing Party for any purpose whatsoever other than for the performance of its obligations and exercise of any rights granted to it or reserved by it hereunder. The Receiving Party shall not disclose or transfer the Disclosing Party’s Confidential Information to any Third Parties under any circumstance without prior written approval from the other Party (such approval not to be unreasonably withheld), except as otherwise expressly permitted by this Agreement. Notwithstanding the foregoing, the Receiving Party may disclose Confidential Information (a) to its Affiliates and Sublicensees, and its and its Affiliates’ and Sublicensees’ officers, employees, consultants, contractors, suppliers and agents, as needed to carry out its rights and responsibilities under this Agreement, provided that such Persons are bound by confidentiality obligations with respect to such information that are at least as stringent as those provided under this Section and (b) to the extent such disclosure is reasonably necessary to (i) file and prosecute patent applications and/or maintain patents which are filed or prosecuted in accordance with the provisions of this Agreement, (ii) file, prosecute or defend litigation in accordance with the provisions of this Agreement, (iii) file and maintain any Drug Approval Application, and (iv) comply with applicable laws, regulations or court orders; provided, however, that if a Party is required to make any such disclosure of the other Party’s Confidential Information in connection with any of the foregoing, it will give reasonable advance notice to the other Party of such disclosure requirement to the extent legally permitted and will use reasonable efforts to assist such other Party in efforts to secure confidential treatment of such information required to be disclosed.
Section 6.2 Publicity. Neither Party may publicly disclose the existence or terms or any other matter of fact regarding this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed; provided, however, that either Party may make such a disclosure (a) to the extent required by law or by the requirements of any nationally recognized securities exchange, quotation system or over-the-counter market on which such Party has its securities listed or traded, or (b) to any investors, prospective investors, lenders and other potential financing sources who are obligated to keep such information confidential. In the event that such disclosure is required as aforesaid, the disclosing Party shall make reasonable efforts to provide the other Party with notice beforehand and to coordinate with the other Party with respect to the wording and timing of any such disclosure.
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Section 6.3 Use of Name. Neither Party shall employ or use the name of the other Party in any promotional materials or advertising without the prior express written permission of the other Party.
Section 6.4 Return of Confidential Information. Each Party will return all the Confidential Information disclosed or transferred to it by the other Party pursuant to this Agreement, including all copies and extracts of documents and all manifestations in whatever form, within sixty (60) days of a request from the other Party or, if earlier, the termination or expiration of this Agreement; provided however, that a Party may retain (a) any Confidential Information of the other Party relating to any license which expressly survives such termination and (b) one (1) copy of all other Confidential Information in inactive archives solely for the purpose of establishing the contents thereof.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.1 Mutual Representations and Warranties. Each Party represents and warrants to the other that:
(a) Authorization. The execution and delivery of this Agreement and the performance of the transactions contemplated hereby have been duly authorized by all appropriate corporate action.
(b) Validity and Enforceability. This Agreement is a legal and valid obligation binding upon such Party and enforceable in accordance with its terms, and the execution, delivery, consummation and performance of this Agreement by such Party does not and shall not: (a) violate any provision of law applicable to such Party, (b) violate or result in a breach of or constitute (with or without due notice or the passage of time, or both) a default under any agreement, instrument or understanding to which such Party is a party or by which it is bound, or (c) require the consent, approval or authorization of any Governmental Entity, including any Regulatory Authority, or other Third Party.
(c) Rights and Authority. Such Party has the full right and legal capacity to enter into this Agreement and to grant the rights granted to the other Party hereunder without the necessity of obtaining any consent or approval that has not already been obtained or otherwise violating the rights of any Third Party.
(d) Compliance with Law; Regulatory.
(i) Such Party is, and has been, in compliance in all material respects with all applicable laws in the jurisdictions in which such Party conducts business including, as applicable, (A) the requirement for and the terms of all necessary regulatory permits, (B) establishment registration, (C) payment of all establishment fees, (D) Good Clinical Practices, (E) Good Manufacturing Practices, and (F) recordkeeping and reporting requirements. Such Party is not in default with respect to any order, writ, judgment, award, injunction or decree of any Governmental Entity or arbitrator applicable to it, or, with respect to Licensor, any of Licensed Patent Rights, Licensed Technology or Licensed Products.
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(ii) Such Party has not received any written notice or communication from any Governmental Entity of any actual or threatened investigation, inquiry, or administrative, judicial or regulatory action, hearing, or enforcement proceeding against such Party regarding any violation of applicable law. Such Party has no knowledge of any material obligation arising under an investigation, inquiry, or administrative, judicial or regulatory action, hearing, or enforcement proceeding by or on behalf of the FDA or any other Regulatory Authority.
(iii) In the last five (5) years, such Party has not been party to any corporate integrity agreement, monitoring agreement, consent decree, settlement order or other similar written agreement, in each case, entered into with or imposed by the FDA or any other Regulatory Authority. Neither such Party nor any of its officers, employees or agents, or, to such Party’s knowledge, any manufacturer, distributor, or other entity in such Party’s supply chain, has been or is currently disqualified or debarred, suspended, proposed for debarment or suspension, deemed non-responsible, or otherwise excluded from the award of contracts or from participating in any Federal healthcare programs by any Federal agency. Neither such Party nor, to such Party’s knowledge, any of its officers, employees, or agents has made an untrue statement of a material fact or a fraudulent statement to the FDA or any other Regulatory Authority or failed to disclose a material fact required to be disclosed to the FDA or any other Regulatory Authority, in each of the foregoing cases on behalf of such Party.
(e) No Debarment. No officer, employee or agent of such Party is or has been, or has been threatened to be: (i) debarred under FDA proceedings under 21 U.S.C. § 335a; (ii) disqualified under FDA investigator disqualification proceedings; (iii) subject to the FDA’s Application Integrity Policy; or (iv) subject to any enforcement proceeding arising from material false statements to the FDA pursuant to 18 U.S.C. § 1001.
(f) Anti-Bribery. Neither such Party nor any of its managers, directors, officers, agents and employees have: (i) used any corporate funds of such Party for unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity; (ii) made any unlawful payments to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds or violated any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any other U.S. or foreign laws concerning corrupt payments applicable to its business; or (iii) made or received any other payment, contribution, gift, bribe, rebate, payoff or kick-back prohibited under any applicable law. Neither such Party nor any of its managers, directors, officers, stockholders, agents and employees is or has been the subject of any investigation, inquiry or enforcement proceeding by any Governmental Entity regarding any offense or alleged offense under anti-bribery, anti-corruption or anti-fraud law in any jurisdiction and, no such investigation, inquiry or proceedings have been threatened.
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Section 7.2 Licensor Representations and Warranties. Licensor represents and warrants to Licensee that:
(a) Compliance with Law; Regulatory.
(i) Licensor has not received, at any time during the five (5) years prior to the date of this Agreement, any written notice from any Governmental Entity regarding any actual, alleged, or potential violation of, or failure to comply with, any law applicable to Licensor in any material respect that in any way relates or may have an effect on any of Licensed Patent Rights, Licensed Technology or Licensed Products.
(ii) Licensor holds all material registrations, reports, documents, permits or notices required to be filed, maintained or furnished under all applicable local, state and federal laws and regulations of the relevant Governmental Entity(ies) in the jurisdictions in which Licensor performed any clinical trials involving the Licensed Products (“Permits”). All Permits are in full force and effect in all material respects and no suspension, revocation, cancellation or withdrawal of such Permits is threatened and there is no reasonable basis for believing that such Permits will not be renewable upon expiration or will be suspended, revoked, cancelled or withdrawn.
(b) Intellectual Property.
(i) Licensor is the sole and exclusive legal and beneficial owner, or exclusive licensee, of the entire right, title, and interest in and to the Licensed Patent Rights and Licensed Technology, and is the record owner of all patent applications and issued patents that are Licensed Patents Rights. Licensor has not granted and will not grant any licenses or other contingent or non-contingent right, title or interest under or relating to Licensed Patent Rights.
(ii) To the best of Licensor’s knowledge, the Licensed Patent Rights have been properly filed and prosecuted and Licensor is not aware of any Third Party patent, patent application or other intellectual property rights that would be infringed (A) by practicing any process or method or by making, using or selling any composition which is claimed or disclosed in, or which constitutes, the Licensed Patent Rights or Licensed Technology, or (B) by making, using, offering for sale, selling or importing Licensed Products. Licensor is not aware of any infringement or misappropriation by a Third Party of the Licensed Technology.
(iii) No proceedings (including for opposition, cancelation, revocation or rectification) are pending or, to the knowledge of Licensor, threatened against Licensor or its Affiliates by any Person with respect to the ownership, validity, enforceability, scope, infringement, registration or use of the Licensed Patent Rights or Licensed Technology and all such intellectual property is subsisting, valid and enforceable and constitutes all of the intellectual property used or held for use by Licensor necessary to Develop, manufacture, commercialize, distribute, and sell, and otherwise commercialize and exploit Licensed Products in the Territory. To the extent that any Licensed Patent Right or Licensed Technology has been developed, created, conceived or reduced to practice by any Third Parties, Licensor has obtained ownership of all such intellectual property. Licensor is not obligated to pay to any Person any royalties, licensing fees, commissions or other amounts in connection with the Licensed Patent Rights or Licensed Technology.
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(c) Litigation. There are no (i) proceedings pending or, to the knowledge of Licensor, threatened against Licensor or any of its assets related to the Licensed Patent Rights or Licensed Technology, (ii) unsatisfied judgments of any kind against Licensor or any of its assets related to the Licensed Patent Rights or Licensed Technology, or (iii) any outstanding judgment, order, or decree of any court or Governmental Entity to which Licensor is subject related to the Licensed Patent Rights or Licensed Technology.
(d) Title. Licensor has good and marketable title to all of the Transferred Materials (as defined below), free and clear of all liens and encumbrances.
(e) Sufficiency of Assets. The Licensed Patent Rights and Licensed Technology, together with the Transferred Materials, constitute all of the assets (including all Intellectual Property Rights), taken as a whole, as are sufficient or necessary or reasonably useful to make, have made, use, have used, sell, offer for sale, have sold, import, have imported, Develop, have Developed, commercialize, and have commercialized the Licensed Products.
ARTICLE VIII
TECHNOLOGY AND MATERIAL TRANSFER; INTELLECTUAL PROPERTY
Section 8.1 Material Transfer. As of the Effective Date, Licensor hereby irrevocably transfers and assigns to Licensee, free and clear of all liens and encumbrances, all of its right, title and interest in and to (a) the Licensed Product IND and all Regulatory Documentation and correspondence with the FDA and other Regulatory Authorities in the Territory, including tracking files, meeting minutes and strategy materials; and (b) all of Licensor’s Books and Records that embody or relate to the Licensed Products, including studies, reports, publications, correspondence and other similar documents and records, whether in electronic form or otherwise (collectively, the “Transferred Materials”). Promptly following the Effective Date, Licensor will deliver to Licensee (i) the Transferred Materials and (ii) all pre-clinical and clinical data and information and other tangible Licensed Technology, including all data in the Drug Master File (DMF) and Active Substance Master File (ASMF) for the API.
Section 8.2 Technology Transfer. Without limiting Section 8.1, in order to enable Licensee to exercise its rights in the Licensed Patent Rights and Licensed Technology, Licensor will promptly provide to Licensee all necessary cooperation and assistance reasonably requested by Licensee in connection with transferring any Licensed Patent Rights, Licensed Technology and the Licensed Product IND. The foregoing may include providing Licensee access to Licensor’s personnel in order for Licensee to ask questions and causing its employees to furnish to Licensee such information as Licensee may reasonably request from time to time. In any event, the technology transfer shall be completed within sixty (60) days after the Effective Date hereof.
Section 8.3 Intellectual Property. Licensee shall be the sole and exclusive owner of (a) the Licensed Product IND; (b) the Development IP and (c) any and all Improvements or other derivatives of the Licensed Patent Rights or Licensed Technology, and all Patent Rights or other intellectual property rights therein.
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ARTICLE IX
INDEMNIFICATION
Section 9.1 By Licensee. Licensee shall indemnify, defend and hold harmless Licensor, its Affiliates and their respective directors, officers, employees, stockholders and agents and their respective successors, heirs and assigns (the “Licensor Indemnitees”) from and against any liability, damage, loss or expense (including reasonable attorneys’ fees and expenses of litigation) incurred by or imposed upon such Licensor Indemnitees, or any of them, in connection with any Third Party claims, suits, actions, demands or judgments, including, without limitation, personal injury and product liability matters, to the extent arising out of (a) the Development, manufacture, use, sale, offer for sale or importation of any Licensed Product in the Territory by Licensor, its Affiliates or Sublicensees; or (b) the gross negligence or willful misconduct on the part of Licensee or any Affiliate or Sublicensee in the performance of this Agreement, in each case except to the extent of Licensor’s responsibility therefor under Section 9.2 below.
Section 9.2 Licensor Indemnity. Licensor shall indemnify, defend and hold harmless Licensee, its Affiliates and their respective directors, officers, employees, and agents, and their respective successors, heirs and assigns (the “Licensee Indemnitees”), from and against any liability, damage, loss or expense (including reasonable attorneys’ fees and expenses of litigation) incurred by or imposed upon such Licensee Indemnitees, or any of them, in connection with any Third Party claims, suits, actions, demands or judgments, including, without limitation, personal injury and product liability matters, to the extent arising out of (a) any actions or omissions of Licensor under this Agreement; or (b) any material breach of this Agreement by Licensor.
Section 9.3 Indemnification Procedures. In the event that a Party (as the “Indemnified Party”) is seeking indemnification under this ARTICLE IX from a Party (the “Indemnifying Party”), the Indemnified Party shall promptly notify the Indemnifying Party of such claim upon the Indemnified Party receiving notice of the claim; provided, any failure to so notify the Indemnifying Party shall not release the Indemnifying Party of its obligation to indemnify the Indemnified Party hereunder, except to the extent the Indemnifying Party is materially prejudiced by such failure. The Indemnified Party shall permit the Indemnifying Party to assume direction and control of the defense of the claim and shall reasonably cooperate as requested (at the expense of the Indemnifying Party) in the defense of the claim; provided, the Indemnifying Party may not settle any claim without the prior written consent of the Indemnified Party, which consent shall not be withheld or delayed unreasonably, unless such settlement involves only the payment of monetary damages, contains a release in favor of the Indemnified Party, and does not admit any fault or wrongdoing on the part of the Indemnified Party. The Indemnified Party shall have the right to participate in the defense of any claim with counsel of its own choosing, at its expense.
Section 9.4 Offset Rights. Licensee shall have the right to reduce any amount due and payable to Licensor by Licensee or any of its Affiliates hereunder, including with respect to any deferred payments, milestones, royalties or license fees, by any or all amounts owed by Licensor hereunder, including as Licensor Indemnitee (each such amount, an “Offset Amount”), without limitation to any of Licensee’s other rights pursuant to this Agreement or law.
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ARTICLE X
TERM; TERMINATION
Section 10.1 Term. The term of this Agreement (“Term”) shall expire upon the expiration of the final payment obligation under ARTICLE IV above. Upon the expiration of the Term of this Agreement, Licensee shall have a fully paid-up, irrevocable, freely transferable and sublicensable license in the Territory under the Licensed Patent Rights and Licensed Technology, to Develop, have Developed, make, have made, use, have used, sell, have sold, offer for sale, import, have imported, export, have exported, commercialize and have commercialized any and all Licensed Products and to practice the Licensed Technology in the Territory.
Section 10.2 Termination.
10.2.1 Voluntary Termination. Licensee shall have the right to terminate this Agreement at any time upon * days’ written notice to Licensor.
10.2.2 Termination for Breach. Either Party may terminate this Agreement if the other Party materially breaches any provision of this Agreement and fails to cure such breach within thirty (30) days after the breaching Party receives written notice thereof, which notice shall describe such breach in reasonable detail.
10.2.3 Termination for Bankruptcy. Either Party may terminate this Agreement on written notice in the event that either Party: (a) becomes insolvent or admits inability to pay its debts generally as they become due; (b) becomes subject, voluntarily or involuntarily, to any proceeding under any domestic or foreign bankruptcy or insolvency law, which is not fully dismissed or vacated within sixty (60) days; (c) is dissolved or liquidated or takes any corporate action for such purpose; (d) makes a general assignment for the benefit of creditors; or (e) has a receiver, trustee, custodian or similar agent appointed by order of any court of competent jurisdiction to take charge of or sell any material portion of its property or business.
Section 10.3 Effects of Termination.
10.3.1 Termination for Licensee Breach. Upon any termination of this Agreement by Licensor under Section 10.2.2, as of the effective date of such termination all relevant licenses and sublicenses granted by Licensor to Licensee hereunder shall terminate automatically. Notwithstanding the foregoing, (a) no such termination of this Agreement shall be construed as a termination of any valid sublicense of any Sublicensee hereunder, and thereafter each such Sublicensee shall be considered a direct licensee of Licensor, provided that (i) such Sublicensee is then in full compliance with all terms and conditions of its sublicense, (ii) all accrued payments obligations to Licensor have been paid, and (iii) such Sublicensee agrees in writing to assume all applicable obligations of Licensee under this Agreement.
10.3.2 Termination for Licensor Breach. Upon any termination of this Agreement by Licensee under Section 10.2.2, as of the effective date of such termination, Licensee thereafter automatically shall have a fully sublicensable and transferable, fully paid up (subject to the remainder of this Section), exclusive license in the Territory under the Licensed Patent Rights and Licensed Technology, to Develop, have Developed, make, have made, use, have used, sell, have sold, offer for sale, import, have imported, export, have exported, commercialize and have commercialized any and all Licensed Products and to practice the Licensed Technology in the Territory, provided that Licensee shall pay, for the remainder of any Royalty Term (as defined in Exhibit C), in lieu of any payments including Milestone Payments or royalties it would otherwise owe to Licensor under this Agreement, a royalty equal to one half (1/2) of the royalty rate that would otherwise apply with respect to the Licensed Product.
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10.3.3 Wind Down. Upon termination of this Agreement for any reason other than by Licensee under Section 10.2.2, Licensee and its Affiliates and Sublicensees shall have the right to sell or otherwise dispose of all Licensed Products then on hand, with royalties to be paid to Licensor on all Net Sales of such Licensed Products as provided for in this Agreement
Section 10.4 Remedies. Except as otherwise expressly set forth in this Agreement, the termination provisions of this ARTICLE IX are in addition to any other relief and remedies available to either Party at law.
Section 10.5 Surviving Provisions. Any provision of this Agreement which, by its express terms or nature and context, is intended to survive termination or expiration of this Agreement, will survive any such termination or expiration, including, without limitation: ARTICLE I, ARTICLE III, ARTICLE V, ARTICLE VI, ARTICLE IX, Section 10.3, Section 10.4, Section 10.5 and ARTICLE XI.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Section 365(n). All licenses granted under this Agreement are deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of right to “intellectual property” as defined in Section 101 of such Code. The Parties agree that Licensee may fully exercise all of its rights and elections under the U.S. Bankruptcy Code, regardless of whether either Party files for bankruptcy in the United States or other jurisdiction. The Parties further agree that, in the event Licensee elects to retain its rights as a licensee under such Code, Licensee shall be entitled to complete access to any technology licensed to it hereunder and all embodiments of such technology. Such embodiments of the technology shall be delivered to Licensee not later than: (a) the commencement of bankruptcy proceedings against Licensor, upon written request, unless Licensor elects to perform its obligations under the Agreement, or (b) upon the rejection of this Agreement by or on behalf of Licensee, upon written request.
Section 11.2 Notices. All notices, requests and other communications hereunder shall be in writing, shall be addressed to the receiving Party’s address set forth above or to such other address as a Party may designate by notice hereunder. Notices will be deemed given (a) five (5) business days after the date of mailing if sent by registered or certified U.S. mail, postage prepaid, return receipt requested; (b) when transmitted if sent by electronic mail (only if receipt is verified by the receiving Party); or (c) when delivered personally or sent by express courier service.
Section 11.3 Language. This Agreement has been prepared in the English language and the English language shall control its interpretation.
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Section 11.4 Governing Law. This Agreement will be construed, interpreted and applied in accordance with the laws of the State of Delaware (excluding its conflicts of law principles).
Section 11.5 Arbitration. Any dispute, controversy or claim initiated by either Party arising out of, resulting from or relating to this Agreement, or the performance by either Party of its obligations under this Agreement (other than bona fide Third Party actions or proceedings filed or instituted in an action or proceeding by a Third Party against a Party), whether before or after termination of this Agreement, shall be finally resolved by binding arbitration. The arbitration shall be submitted to the International Court of Arbitration of the International Chamber of Commerce (“ICC”) and shall be finally settled under the Rules of Arbitration of the ICC. The place and location of the arbitration shall be New York, New York, USA. There shall only be one arbitrator who shall be mutually selected by both Parties. If the Parties are unable to agree, then the International Court of Arbitration shall choose the arbitrator. The language to be used in the arbitral proceeding shall be English. The arbitrator shall have no authority to issue an award that is contrary to the express terms of this Agreement or the laws of the State of Delaware or applicable United States federal law, and the award may be vacated or corrected on appeal to a court of competent jurisdiction for any such error. The arbitrator shall be specifically empowered to allocate between the Parties the costs of arbitration, as well as reasonable attorneys’ fees and costs, in such equitable manner as the arbitrator may determine. The arbitrator shall have the authority to determine issues of arbitrability and to award compensatory damages, but they shall not have authority to award punitive or exemplary damages. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award and an order of enforcement, as the case may be. In no event shall a demand for arbitration be made after the date when institution of a legal or equitable proceeding based upon such claim, dispute or other matter in question would be barred by the applicable statute of limitations. Notwithstanding the foregoing, either Party shall have the right, without waiving any right or remedy available to such party under this Agreement or otherwise, to seek and obtain from any court of competent jurisdiction any interim or provisional relief that is necessary or desirable to protect the rights or property of such Party, pending the selection of the arbitrator hereunder or pending the arbitrator’s determination of any dispute, controversy or claim hereunder.
Section 11.6 Entire Agreement. This Agreement, including all schedules and exhibits hereto, is the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior representations, understandings and agreements between the Parties with respect to the subject matter hereof. No modification of this Agreement shall be effective unless in writing with specific reference to this Agreement and signed by the Parties.
Section 11.7 Waiver. The terms or conditions of this Agreement may be waived only by a written instrument executed by the Party waiving compliance. The failure of either Party at any time or times to require performance of any provision hereof shall in no manner affect its rights at a later time to enforce the same. No waiver by either Party of any condition or term shall be deemed as a continuing waiver of such condition or term or of another condition or term.
Section 11.8 Headings. Section and subsection headings are inserted for convenience of reference only and do not form part of this Agreement.
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Section 11.9 Assignment. Neither this Agreement nor any right or obligation hereunder may be assigned, delegated or otherwise transferred, in whole or part, by either Party without the prior express written consent of the other; provided, however, that either Party may, without the written consent of the other, assign this Agreement and its rights and delegate its obligations hereunder to its Affiliates, or in connection with the transfer or sale of all or substantially all of such Party’s assets or business related to this Agreement, or in the event of its merger, consolidation, change in control or similar transaction. Any permitted assignee shall assume all obligations of its assignor under this Agreement. Any purported assignment in violation of this Section shall be void. The terms and conditions of this Agreement shall be binding upon and inure to the benefit of the permitted successors and assigns of the Parties.
Section 11.10 Expenses. Each Party will bear its respective expenses and legal fees incurred with respect to this Agreement, and the transactions contemplated hereby.
Section 11.11 Equitable Remedies. In the event of any actual or threatened breach by Licensor of this Agreement, Licensee will, without limiting its other rights or remedies available to it, be entitled to immediate injunctive and other equitable relief, without posting bond or other security and without the necessity of showing actual monetary damages.
Section 11.12 Force Majeure. Neither Party shall be liable for failure of or delay in performing obligations set forth in this Agreement, and neither shall be deemed in breach of its obligations, to the extent such failure or delay is due to natural disasters or any causes beyond the reasonable control of such Party. In event of such force majeure, the Party affected thereby shall use reasonable efforts to cure or overcome the same and resume performance of its obligations hereunder.
Section 11.13 Construction. The Parties hereto acknowledge and agree that: (a) each Party and its counsel reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision; (b) the rule of construction to the effect that any ambiguities are resolved against the drafting Party shall not be employed in the interpretation of this Agreement; and (c) the terms and provisions of this Agreement shall be construed fairly as to all Parties hereto and not in favor of or against any Party, regardless of which Party was generally responsible for the preparation of this Agreement.
Section 11.14 Severability. If any provision(s) of this Agreement are found by any court of competent jurisdiction to be unenforceable, it is the intention of the Parties that the remainder of this Agreement shall not be affected thereby. The Parties hereto covenant and agree to renegotiate any such term, covenant or application thereof in good faith in order to provide a reasonably acceptable alternative to the term, covenant or condition of this Agreement or the application thereof that is invalid, illegal or unenforceable, it being the intent of the Parties that the basic purposes of this Agreement are to be effectuated.
Section 11.15 Relationship of the Parties. Nothing in this Agreement is intended or shall be deemed to constitute a partner, agency, employer-employee, or joint venture relationship between the Parties.
Section 11.16 Further Assurances. Each Party agrees to execute, acknowledge and deliver such further instructions, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.
Section 11.17 Counterparts. This Agreement may be executed in one or more counterparts, including counterparts by email, facsimile, portable document format (.pdf) or any electronic signature complying with the U.S. federal ESIGN Act of 2000 (including DocuSign). Each counterpart so executed shall be deemed to be an original, and all such counterparts shall be construed together and shall constitute one agreement.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives as of the date first set forth above.
| LICENSOR: | LICENSEE: | |||
| Intract Pharma Limited | Tharimmune, Inc. | |||
| By: | By: | |||
| Name: | Vipul Yadav | Name: | Randy Milby | |
| Title: | CEO | Title: | CEO | |
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Exhibit A
Licensed Patent Rights
Part A: The Patents
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Exhibit B
Development Milestone Payments
Upon the completion of each applicable event set forth below (each, a “Development Milestone Event”, and together, the “Development Milestone Events”), Licensee shall pay to Licensor the payment amount and in the manner as set forth opposite each such Development Milestone Event (each, a “Development Milestone Payment”, and together, the “Development Milestone Payments”).
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| 6. | ||
| 7. |
For purposes of this Exhibit B, the term below shall have the following meaning:
“Change in Control” shall mean (a) any consolidation or merger of Licensee with or into any other corporation or entity, or any other corporate reorganization or similar transaction, in which the holders of outstanding voting securities of Licensee immediately prior to such consolidation, merger, reorganization or similar transaction hold, directly or indirectly, less than fifty percent (50%) of the outstanding voting securities of Licensee or of the surviving or resulting entity (or the power to direct or cause the direction of the management and policies of the surviving or resulting entity) immediately after such consolidation, merger, reorganization or similar transaction; or (b) any transaction or series of related transactions as a result of which the holders of outstanding voting securities of Licensee immediately prior to such transaction or transactions hold, directly or indirectly, less than fifty percent (50%) of the outstanding voting securities of Licensee (or the power to direct or cause the direction of the management and policies of Licensee) immediately after such transaction or transactions.
| -1- |
Exhibit C
Sales Milestone Payments
Upon the first completion of each event set forth below only (each, a “Sales Milestone Event”, and together, the “Sales Milestone Events”), Licensee shall pay to Licensor the payment amount set forth opposite such Sales Milestone Event (each, a “Sales Milestone Payment”, and together, the “Sales Milestone Payments”).
*
| -2- |
Exhibit D
Royalties
Licensee shall pay to Licensor, at the end of each calendar year during the Royalty Term (as defined below), the following royalties based on the Net Sales of Licensee in such calendar year:
*
“Royalty Term” shall mean, with respect to each Licensed Product, the period starting on the date hereof and ending, on a country-by-country basis, on the date which the last Valid Claim of an issued patent included in the Licensed Patent Rights covering such Licensed Product expires in such country.
*
| -1- |
Exhibit 31.1
Certification of Chief Executive Officer of Tharimmune, Inc.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Randy Milby, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Tharimmune, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 7, 2024 | /s/ Randy Milby |
| Randy Milby | |
| Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
Certification of Chief Financial Officer of Tharimmune, Inc.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Thomas Hess, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Tharimmune, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 7, 2024 | /s/ Thomas Hess |
| Thomas Hess | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Randy Milby, Chief Executive Officer of Tharimmune, Inc. (the “Company”), hereby certifies that based on the undersigned’s knowledge:
| 1. | The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 7, 2024 | /s/ Randy Milby |
| Randy Milby | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 32.2
Certification of Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Thomas Hess, Chief Financial Officer of Tharimmune, Inc. (the “Company”), hereby certifies that based on the undersigned’s knowledge:
| 1. | The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 7, 2024 | /s/ Thomas Hess |
| Thomas Hess | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |