Commitments and Contingencies

Commitments

The Company has entered into various agreements related to its business activities. The following is a summary of the Company’s commitments:

On December 18, 2014, the Company entered into a consulting agreement (the "2014 Agreement") with Torreya Partners LLP ("Torreya"), a financial advisory firm, under which Torreya agreed to provide financial advisory services with regard to a licensing agreement. The Company is also required to pay an additional fee equivalent to 3.75% of all amounts received by the Company in excess of $3.0 million, in perpetuity. Total fees incurred by the Company to this consultant pursuant to this agreement during the fiscal year ended July 31, 2017 amounted to approximately $963.6 thousand.

On April 25, 2016, the Company entered into a consulting agreement with Torreya, under which Torreya agreed to provide financial advisory services for financing activities. In exchange for these services, the Company is required to pay a fee on all funding received by the Company as a result of assistance provided by the consultant. Torreya’s fee will be equal to 5% of gross funding received by the Company up to $20 million plus 3.5% of any proceeds received in excess of $20 million. Total fees incurred by the Company to this consultant pursuant to this agreement during the fiscal year ended July 31, 2017 amounted to $687.5 thousand. As of July 31, 2017, the Company had recorded an accrued liability of approximately $928.5 thousand relating to fees owed to Torreya.

On September 8, 2017, the Company and Torreya entered into the Supplemental Engagement Letter to provide financial advisory services with respect to the licensing of the intellectual and property rights to develop and commercialize certain products with Adapt Pharma Operations Limited, an Ireland based pharmaceutical company ("Adapt"). The revised engagement amends total consideration as follows: (i) an aggregate of $300 thousand in cash payments to be paid by the Company to Torreya in three equal installments over a 16-month period; (ii) shares of Common Stock, equal to an aggregate value of $300 thousand, to be issued by the Company to Torreya in three equal installments over a 16-month period; (iii) if the Earn Out Milestone Payment is paid under the SWK Purchase Agreement, approximately $140.6 thousand, or 3.75% of the Earn Out Milestone Payment (as defined in the SWK Purchase Agreement), shall be paid by the Company to Torreya within 15 days of the date that the Earn Out Milestone (as defined in the SWK Purchase Agreement) has been paid to the Company; (iv) once SWK has received the Capped Royalty Amount, if the Earn Out Milestone Payment (as defined in the SWK Agreement) is paid, Torreya shall receive 3.375% of the Total Consideration (as defined in the 2014 Agreement) received thereafter or 3.5625% of the Total Consideration received thereafter if no generic version of NARCAN is commercialized prior to the sixth anniversary of the Closing Date (as defined in the SWK Agreement) as per the terms of the SWK Agreement; and (v) once SWK has received the Capped Royalty Amount, if the Earn Out Milestone Payment has not been paid, Torreya shall receive 3.45525% of the Total Consideration received thereafter or 3.602625% of the Total Consideration received thereafter if no generic version of NARCAN® is commercialized prior to the sixth anniversary of the Closing Date as per the terms of the SWK Purchase Agreement. Payments made by the Company in the form of shares of Common Stock will be a defined number of shares calculated based upon the average closing price of the Common Stock for the ten trading days prior to the relevant date for the payment.

On September 23, 2017, the Company issued 3,283 shares of its Common Stock to Torreya as payment for $100 thousand of fees owed by the Company to Torreya. The Company valued these shares at $40.58 per share, or approximately $133 thousand in the aggregate, which represents the closing price of the Company's Common Stock on September 22, 2017. The Company also paid Torreya approximately $240.6 thousand in cash in September 2017 as payment for fees owed. On December 22, 2017, the Company issued 3,455 shares as payment for $100 thousand of fees owed by the Company to Torreya. The Company valued these shares at $24.95 per share, or approximately $81 thousand in the aggregate, which represents the closing price of the Company's Common Stock on December 22, 2017. The Company also paid Torreya $100 thousand in cash in December 2017 as payment for fees owed.

Both the $200 thousand of fees paid via the issuance of Common Stock and the $340.6 thousand of fees paid in cash had been recorded as accrued liabilities as of July 31, 2017.

During the five-month period ended December 31, 2017, the Company incurred approximately $439 thousand in aggregate fees related to Torreya. As of December 31, 2017, the Company had an accrued liability of $639 thousand owed to Torreya.

During the year ended December 31, 2018, the Company incurred approximately $447 thousand in aggregate fees related to Torreya. In addition during December 2018 the Company paid Torreya $100 thousand in cash and issued 6,498 shares of Common Stock representing a total of $200 thousand of fees owed by the Company to Torreya which had been recorded as accrued liability as of December 31, 2017. As of December 31, 2018 the Company has an accrued liability of $151 thousand owed to Torreya.

On November 19, 2015, the Company issued 14,327 shares of unregistered Common Stock upon the execution of a binding letter of intent to agree to negotiate and enter into an exclusive license agreement and collaboration agreement (“LOI”) with a pharmaceutical company with certain desirable proprietary information. The shares issued in this transaction were valued using the stock price at issuance date and amounted to approximately $120.3 thousand. Pursuant to the LOI, the Company is obligated to issue up to an additional 92,634 shares of unregistered Common Stock upon the occurrence of various milestones. A total of 3,582 shares had been issued as of July 31, 2016 due to achievement of certain milestones. On November 10, 2016, the Company issued an additional 14,327 shares of the unregistered Common Stock pursuant to the LOI. The shares issued in this transaction were valued using the stock price at issuance date and amounted to approximately $85.1 thousand. On March 16, 2017, the Company issued an additional 10,745 shares of unregistered Common Stock pursuant to the LOI. The Company was obligated to issue these shares upon the one year anniversary of receipt by the Company of a milestone payment from Adapt for the first commercial sale of the Company’s product, NARCAN®, in the U.S. The shares issued on March 16, 2017 were valued on the date of issuance using the March 16, 2017 closing price of the Company’s Common Stock of $7.75 per share, which resulted in an aggregate value of approximately $83.3 thousand. The Company expensed the entire $83.3 thousand as non-cash expense during the fiscal year ended July 31, 2017. There were no share issuances, nor any expenses incurred, by the Company in relation to this LOI during the five months ended December 31, 2017.

As of March 31, 2018, the Company was required to issue an additional 37,866 shares of its unregistered Common Stock pursuant to the LOI. The Company was obligated to issue these shares on the receipt of cumulative royalty payments of $2 million from Adapt and milestone payments from Adapt with respect to first achieving the milestones of the first $30 million, $40 million, $55 million and $75 million of Net NARCAN® Sales. The shares that were issuable as of March 31, 2018, were valued using the March 29, 2018 closing stock price of the Company's Common Stock of $19.18 per share, which resulted in an aggregate value of approximately $726 thousand. On April 19, 2018 the Company issued 37,866 shares of Common Stock. For the year ended December 31, 2018 the Company recorded total non-cash expense of $776 thousand, of which $726 thousand was recorded to research and development expense and $50 thousand was recorded to loss on settlement of liability in other expense.

In October 2016, the Company in-licensed a heroin vaccine from Walter Reed Army Institute of Research ("WRAIR"). In consideration for the license the Company agreed to pay a royalty of 3% of net sales if the Company commercializes the vaccine, or 4% if the vaccine is sublicensed. In addition, the Company agreed to pay a minimum annual royalty of $10 thousand, as well as fixed payments of up to approximately $715.7 thousand if all of the specified milestones are met. During the five months ended December 31, 2017, the Company paid $60 thousand in cash to WRAIR, of which $50 thousand was a non-recurring "execution" fee and the remaining $10 thousand was the minimum annual royalty for the period of September 2017 through August 2018. The $10 thousand minimum annual royalty was recorded as a prepaid expense and is being expensed at the rate of $833 per month, beginning in September 2017 and ending in August 2018.

The Company has a Sublease with Standish Management, LLC to sublease office space on a month-to-month basis, located at 201 Santa Monica Boulevard, Suite 500, Santa Monica, CA 90401, which is the Company's headquarters. The Company also has an Office Service Agreement to lease office space at 83 Baker Street, London, England, W1U 6AG. Effective May 31, 2018 either party is able to terminate the Office Service Agreement by providing three months advance written notice of termination. During the year ended December 31, 2018, the five months ended December 31, 2017, and the year ended July 31, 2017 the Company incurred approximately $321 thousand, $150 thousand, and $123 thousand, respectively of rent expense.

On June 1, 2017 (the “LYL Effective Date”), the Company entered into an amendment with LYL (the “LYL Amendment”) to the Amended and Restated Consulting Agreement, dated October 25, 2016 and effective as of July 17, 2013 (the “LYL Agreement”). Pursuant to the LYL Amendment, LYL granted the Company certain buyback provisions that have expired as of December 31, 2018. In consideration for LYL entering into the LYL Amendment, upon the Company's receipt after the LYL Effective Date of at least $3 million from (i) SWK under the SWK Purchase Agreement and/or (ii) Adapt under the Adapt Agreement, fifty percent of all actual amounts received by the Company from SWK will be used in determining the Net Profit (as defined in the LYL Agreement).

On June 22, 2017, the Company entered into a license agreement (the "License Agreement") and a related supply agreement (the “Supply Agreement”) with Aegis Therapeutics LLC ("Aegis") pursuant to which the Company was granted an exclusive license (the “License”) to Aegis’ proprietary chemically synthesizable delivery enhancement and stabilization agents, including, but not limited to, Aegis’ Intravail® absorption enhancement agents, ProTek® and HydroGel® (collectively, the “Technology”) to exploit (a) the Compounds (as such are defined in the License Agreement) and (b) a product containing a Compound and formulated using the Technology (“Aegis Product”), in each case of (a) and (b) for any and all purposes. The License Agreement restricts the Company's ability to manufacture any Aegis excipients included in the Technology (“Excipients”), except for certain instances of supply failure, supply shortage or termination of the Supply Agreement, and the Company shall obtain all supply of such Excipients from Aegis under the Supply Agreement. The License Agreement also restricts Aegis’s ability to compete with the Company worldwide with respect to the Exploitation (as defined in the License Agreement) of any therapeutic containing a Compound or derivative or active metabolite of a Compound without the Company's prior written consent. The effective date of the License Agreement and the Supply Agreement is January 1, 2017.

As consideration for the grant of the License, the Company paid Aegis two immaterial upfront payments, of which the Company paid 50% by issuing the Company's Common Stock to Aegis, with the number of shares issued equal to 75% of the average closing price of the Company's Common Stock over the 20 trading days preceding the date of payment. The License Agreement also provides for (A) additional developmental milestone payments for each Product containing a different Compound equal to up to an aggregate of $1.8 million, (B) additional commercialization milestone payments for each Aegis Product containing a different Compound equal to up to an aggregate of $5.0 million, and (C) single low digit royalties on the Annual Net Sales (as defined in the License Agreement) of all Aegis Products during the Royalty Term (as defined in the License Agreement) according to a tiered royalty rate based on Annual Net Sales of the Aegis Products by the Company, the Company's sublicensees and affiliates. The Company shall also pay to Aegis a sublicense fee based on a sublicense rate negotiated in good faith by the parties. The License Agreement contains customary representations and warranties, ownership, patent rights, confidentiality, indemnification and insurance provisions. The License Agreement shall expire upon the expiration of the Company's obligation to pay royalties under such License Agreement; provided, however, that the Company shall have the right to terminate the License granted on a product-by-product or country-by-country basis upon 30 days’ prior written notice to Aegis.

Under the terms of the Supply Agreement, Aegis shall deliver to the Company any preclinical, clinical and commercial supply of the Excipients, which Aegis sources from various contract manufacturers. The Supply Agreement has a term of 20 years but shall terminate automatically in the event of expiration or termination of the License Agreement or at any time upon the written agreement of both parties. The Supply Agreement contains customary provisions relating to pricing for such materials, forecasts, delivery, inspection, indemnification, insurance and representations, warranties and covenants. The Supply Agreement includes technology transfer provisions for the transfer of all materials and know-how specific to the manufacturing of the Excipients that is necessary or useful for the Company to manufacture such Excipients. The Company does not have the right to manufacture such Excipients except in the event that Aegis is unable to supply and sell any portion of the material to the Company (subject to a 60-day cure period).

For the year ended December 31, 2018, the five months ended December 31, 2017 and the year ended July 31, 2017, the Company recorded $350 thousand, $150 thousand and $200 thousand, respectively in expense associated with the License Agreement.

On July 14, 2017, Renaissance Lakewood, LLC (“Renaissance”) and the Company entered into a Research and Development Agreement (the “Renaissance Agreement”). Under the Renaissance Agreement, Renaissance will perform product development work on a naltrexone multi-dose nasal product for the treatment of alcohol use disorder pursuant to the terms set forth in a proposal agreed upon by the parties. The Company will bear the costs of all development services, including all raw materials and packaging components, in connection with the performance of the development work under the Renaissance Agreement and in accordance with financials agreed upon through the proposal. Renaissance will conduct quality control and testing, including non-stability, stability, in-use, raw material, and packaging component testing as part of the services provided to the Company under the Renaissance Agreement. The Company will own all formulations provided to Renaissance and any formulations developed in connection with the Renaissance Agreement. Renaissance will own all know-how developed in connection with the performance of the services that is not solely related to a product. The Company has the right to seek patent protection on any invention or know-how that relates solely to a product developed under the Renaissance Agreement or any our formulation, excluding general manufacturing or product development know-how of Renaissance. The Renaissance Agreement is effective until terminated by either party in accordance with its terms. The Company or Renaissance may terminate the project under a proposal to the Renaissance Agreement due to unforeseen circumstances in the development. The Renaissance Agreement may be terminated by the Company, with or without cause, upon 45 days written notice. There are also mutual customary termination provisions relating to uncured breaches of material provisions. See Note 6 - Prepaid Expenses and Other Current Assets.

On September 5, 2017, the Company accepted, effective September 11, 2017 (the “Separation Date”), the resignation of Kevin Pollack as (i) the Company’s Chief Financial Officer, Treasurer and Secretary, and (ii) a director of Opiant Pharmaceuticals UK Limited, a wholly owned subsidiary of the Company. On September 5, 2017, the Company and Mr. Pollack entered into a Separation Agreement and General Release (the “Separation Agreement”), with such agreement becoming effective on September 12, 2017 (the "Separation Agreement Effective Date"), which represented the date on which Mr. Pollack's seven-day revocation period expired.

Pursuant to the terms of the Separation Agreement, Mr. Pollack received (i) a payment equal to approximately $1.13 million relating to certain accrued obligations, payable in a cash lump sum within three business days following the Separation Agreement Effective Date; and (ii) a separation payment equal to approximately $1.44 million, payable in one or two installments in accordance with the terms set forth therein. Mr. Pollack also retained previously granted options to purchase, in the aggregate, 948,000 shares of Common Stock of the Company, which options are fully vested and exercisable. Except as set forth in the Separation Agreement, all other options held by Mr. Pollack were forfeited. Additionally, for a period of no more than 12 months following the Separation Date, Mr. Pollack will cooperate as an adviser with the Company in connection with matters arising out of Mr. Pollack’s service with the Company, in accordance with the terms set forth in the Separation Agreement.

During the five months ended December 31, 2017, the Company paid Mr. Pollack approximately $1.61 million in cash pursuant to the terms of the Separation Agreement. In addition, as of December 31, 2017, the Company has recorded an accrued liability of approximately $962 thousand. During September 2018, the Company made the final payment due to Mr. Pollack.

On September 7, 2018, the Company entered into a Development Agreement ("Development Agreement") and an Agreement for Reimbursement of Capital Expenditure and Service Fees ("Reimbursement Agreement") with Aesica Queenborough Limited ("Aesica"), a wholly owned subsidiary of Consort Medical plc, related to the Company’s product OPNT003 (intranasal nalmefene), a potent long acting opioid antagonist for the treatment of opioid overdose. As part of the Development Agreement, Aesica and Bespak, wholly owned subsidiaries of Consort, will supply the Company with clinical samples and registration batches for the purpose of performing clinical studies and obtaining regulatory approvals. Further, as part of the Development Agreement, the Company and Aesica agreed that, upon approval by the U.S. FDA, Aesica and Bespak will manufacture and supply the commercial device for the Company upon mutually agreed terms. Under the terms of the Reimbursement Agreement, the Company has agreed to reimburse Aesica for certain service, tooling, equipment and facility alteration expenses incurred by Aesica under certain circumstances, including termination of the Development Agreement and the failure to complete a definitive manufacturing and supply agreement.

Contingencies

The Company may be subject to various legal proceedings and claims that arise in the ordinary course of business. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. There is significant judgment required in both the probability determination and as to whether an exposure can be reasonably estimated. If any legal matter, that may arise, were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s would reflect any potential claim in the consolidated financial statements for that reporting period.