Licenses and Supply Agreements

12 Months Ended

Dec. 31, 2023

Licenses And Supply Agreements

Licenses and Supply Agreements

7. Licenses and Supply Agreements

Forte Animal Health, Inc.

On July 8, 2021, the Company amended the license agreement (the “Amended License Agreement”) with Forte Animal Health Inc. (“Forte”), a related party, dated February 27, 2020.

Under the Amended License Agreement, the Company granted Forte an exclusive license to develop and commercialize pharmaceutical products consisting of Lodonal and MENK for use in veterinary applications for all indications world-wide. Milestone payments and royalties are defined in the agreement based on development and royalties are based on sales during the license period.

The initial license fee included the assignment of certain Company defaulted notes and other vendor and employee obligations. During the second quarter of 2022, these debtors associated with the assigned obligations completed the assignment of $1,775,275 in notes payable, $264,790 of accrued interest and $1,125,086 in other vendor and employee obligations to Forte. The Company recognized a non-cash gain upon the assignment of these obligations.

In connection with the amended license agreement, Forte issued 2,235,000 of its outstanding stock to the Company, representing 15% of the issued and outstanding shares of Forte. The Company has not recognized a minority interest in the balance sheet as of December 31, 2022 as Forte is in the start-up phase of its business and has no earnings from operations to date.

Forte has agreed to make payments to the Company in connection with this agreement as follows:

● Initial License Fee, upon the assignment of certain Company Notes Payable.

● Development Milestone Payments upon the occurrence of the identified events, one-time, non-creditable, non-refundable milestone payments of $100,000 will be earned by the Company upon: (1) a successful MUMS designation and (2) upon a successful conditional approval.

● Commercial Milestone Payments upon reaching the mutually agreed aggregate net sales. Forte will pay one-time, non-creditable, non-refundable milestone payments to be negotiated and addressed in a separate Amendment later.

● Royalties during the royalty term (generally 15 years from the first sale of a product in a country), royalties on annual net sales as follows:

Annual Sales of Royalty Qualifying Licensed Products	Royalty Rate
<$500,000,000		2	%
500,000,000 to < $1,000,000,000		4	%
> $1,000,000,000)		6	%

Cytocom

On May 13, 2020, the Company and Cytocom entered into an Amendment to The Second Amendment to The License Agreement (“Third Amendment”) that was effective December 31, 2018. The sublicense provides Cytocom with the Company’s previously licensed rights for LDN and MENK in Emerging Markets.

Original terms for consideration for the sublicense were not finalized until August 12, 2020, at which time Cytocom and the Company signed a letter agreement in which Cytocom agreed to assume a combination of defaulted notes plus certain other liabilities. Such terms were amended, and the Company agreed to transfer all the rights, title, and interest to Cytocom in technology licensed from Penn State Research Foundation (“PSU”) in exchange for Cytocom assuming all past due and future obligations under the PSU license. While the Company formalized the agreement to assign all outstanding liabilities due to PSU, a vendor of the Company, PSU did not consent to the assignment of the payables to Cytocom. As of December 31, 2021, the Company had no outstanding accounts payable balances due to Penn State University.

On July 20, 2021, Cytocom and the Company agreed to modify the terms of the original sublicense. The renegotiated terms are presented below. The assignment of the Notes and associated accrued interest and penalties in default was fully executed in the third quarter of 2020 with the transfer of the notes upon the creditors’ signoff. The Company recognized a gain upon the assignment of these notes in the third quarter of 2020. Cytocom has not completed the assumption of the remaining liabilities.

Cytocom and the Company are actively engaged in negotiations to modify the terms of the original sublicense.

Consideration for License to Cytocom as of December 31, 2022

Consideration / Assumption of:
Notes and associated accrued interest in default	$	3,302,209
Accounts payable and accruals		230,000
Past Due Employee Obligations		1,110,567
Total anticipated Consideration	$	4,642,776
Recognized through December 31, 2020		(3,302,209	)
To Be Recognized upon Execution	$	1,340,567

As of December 31, 2023, the Notes transaction has not been fully executed. The Notes in default have been assigned and the transfer signed off by the creditors, but Cytocom still has not completed the assumption of the agreed upon obligations. Until the transaction is completed Cytocom (Statera) does not have clear title and interest to the Immune technology.

In March 2023, the Company and Cytocom negotiated an amendment to the licensing agreement (“Third License Amendment”) which has been submitted to the board of directors of Cytocom for approval. The Third License Amendment:

● Restates the licensing arrangement between the Company and Cytocom and grants the Company manufacturing, distribution and marketing rights for LDN and MENK, in humans for all indications except Crohn’s Disease (worldwide), and animals (US only).

● Grants the Company the right grant sublicenses to third parties for the manufacturing, distribution and marketing of these products.

● Updates the royalty rates as follows:

Annual Sales of Royalty Qualifying Licensed Products	Royalty Rate
<$500,000,000		2	%
500,000,000 to < $1,000,000,000		4	%
> $1,000,000,000)		6	%

As of December 31, 2023, the Notes transaction and Third License Amendment have not been fully executed. The Notes in default have been assigned and the transfer signed off by the creditors, but Cytocom still has not completed the assumption of the agreed upon obligations. Until the transaction is completed, Cytocom (now, Statera Biopharma, Inc.) does not have a clear title and interest to our Company’s technology.

TaiwanJ Pharmaceuticals Co. Ltd.

On September 30, 2022, the Company entered into an Intellectual Property License Agreement (the “Agreement”) with TaiwanJ Pharmaceuticals Co. Ltd., a Taiwanese corporation (“TaiwanJ”), pursuant to which TaiwanJ granted the Company an exclusive, royalty-bearing license, including the right to grant sublicenses, to commercialize and sell TaiwanJ’s pharmaceutical products including naltrexone, or any other small molecule composition that either alone or in combination can be formulated and used in humans to show anti-fibrotic, immune-modulating, and/or anti-inflammatory effects for the treatments of various diseases, (the “Products”).

The Company also received a non-exclusive worldwide right to make, manufacture, and receive technical manufacturing assistance from TaiwanJ for the creation of the Products. The only territories excluded from the scope of the Agreement are any countries or territories in Asia, and any countries or territories barred or sanctioned by the United States government. We did not have any relationship with TaiwanJ prior to entering into the Agreement.

The term of this Agreement is to be perpetual, but termination of the Agreement may occur upon (i) the Company providing sixty (60) days prior written notice to TaiwanJ of termination, (ii) termination of the agreement for a material breach of the agreement, and failure to cure that breach within ninety (90) days after receiving notice of such breach, (iii) the dissolution of the Company, or (iv) upon bankruptcy of either party, upon receiving sixty (60) days’ notice by Registered Mail.

The Company may grant sublicenses under the Agreement. Upon the granting of any such sublicense, the Company will pay TaiwanJ royalties based on the stage of development of the Products. The Company will pay a royalty of 30% of the cash proceeds received from any sublicense if the sublicense occurs before completing a clinical trial, 10% if the sublicence occurs after completing any trial, and 5% if sublicense occurs after any new drug application (“NDA”) submission.

Pursuant to the terms of the license in the Agreement, the Company shall adhere to a plan of development and attain certain milestones. As part of the Development Plan, the Company shall (i) use commercially reasonable efforts and cause its sublicenses to use commercially reasonable efforts to develop licensed Products, (ii) begin commercial sales of the Products in a country no less than eight (8) months after the first registration of the Products in that same country, and (iii) following commercialization, the Company must keep the Products reasonably available to the public.

In consideration for the license, the Company will provide (i) a non-refundable cash payment of $500,000 within ninety (90) days of September 30, 2022, (ii) a non-refundable cash payment of $500,000 at the earliest of either the National Agency for Food and Drug Administration and Control (“NAFDAC”) approval for JKB-122 in Africa for any indication, or the enrollment of the first patient in a Food and Drug Administration (“FDA”) trail for Crohn’s Disease, (iii) 250,000 shares of common stock of the Company within sixty (60) days of September 30, 2022, (iv) an annual payment of $100,000 each anniversary of the date of the agreement until the Company gains regulatory approval in Africa, (v) milestone payments (described below), and (vi) royalties on net sales. The 250,000 shares of common stock represent approximately 0.32% of the currently outstanding common stock of the Company.

The Company will be required to pay one-time payments and issuances of equity for the achievement of each of four milestones in the commercialization and development of the Products. In addition to the milestone payments, if there is any year that the Company is not required to pay a Milestone Payment, the Company will pay a royalty percentage payment based on the total net sales due within sixty (60) days after the end of each calendar quarter (the “Royalty Payment”).

If the Company fails to make any of the above-described payments upon their designated due date, the payment amount will bear the lower of (i) 1.5% interest per month or (ii) the maximum rate allowed by law, to be compounded quarterly. The interest will accrue beginning on the first day after the payment is due.

TaiwanJ will maintain, protect, and defend all patent-related intellectual property and the Company will reimburse TaiwanJ for any expenses related to intellectual property patent payments that exclusively benefit the Company. If either the Company or TaiwanJ becomes aware of any possible or actual infringement of any patent rights, then each party will notify the other, and provide it with details of such an infringement.

Both the Company and TaiwanJ are limited in liability to the total amounts paid under this Agreement for any damages arising from negligence, strict liability, or any other equitable theory. Further, both the Company and TaiwanJ agree to indemnify and hold harmless each other, and their respective agents, for any claims or costs arising from this Agreement or any sublicenses for any cause of action relating to any product, process, service made, used, or sold pursuant to this Agreement.

On January 19, 2023, the Company’s board of directors voted to issue an additional 250,000 shares of common stock to TaiwanJ. These shares were issued as a result of the Company’s delay in paying the required $500,000 up front license agreement fee.

On March 26, 2023, the Company paid $150,000 of the non-refundable up-front payment.

On April 13, 2023, the Company issued a note payable to TaiwanJ in the amount of $250,000, in order to reduce the balance of the up-front payment to $100,000. The note earns interest at 18.0% and matured on May 30, 2023. The note is currently in default.