Commitments and Contingencies	6 Months Ended
Jun. 30, 2024
Commitments and Contingencies [Abstract]
Commitments and Contingencies	Note 5. Commitments and Contingencies Litigation From time to time the Company is subject to claims by third parties under various legal disputes. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash flows. On March 12, 2021, the Company and its former Chief Executive Officer, Anthony P. Mack (together, the “Defendants”), were named as defendants in a complaint (the “Complaint”) filed by the Plaintiffs in the Court of Chancery of the State of Delaware captioned Sorrento Therapeutics, Inc. and Scilex Pharmaceuticals Inc. v. Anthony Mack and Virpax Pharmaceuticals, Inc., Case No. 2021-0210-PAF (the “Action”). In the Complaint, Plaintiffs alleged (i) Mr. Mack breached a Restrictive Covenants Agreement, dated as of November 8, 2016, between himself and Sorrento (the “Restrictive Covenants Agreement”), (ii) the Company tortiously interfered with the Restrictive Covenants Agreement, and (iii) the Company tortiously interfered with Scilex’s relationship with Mr. Mack. On May 7, 2021, Plaintiffs filed an Amended Complaint asserting the same three causes of action. On September 28, 2021, Plaintiffs filed a Second Amended Complaint asserting the same three causes of action as the prior complaints, as well as claims in which Plaintiffs alleged (i) Mr. Mack breached an Employment, Proprietary Information and Inventions Agreement, dated as of October 25, 2016, between himself and Sorrento (the “Employment Agreement”), (ii) the Company tortiously interfered with the Employment Agreement, (iii) Mr. Mack breached his fiduciary duties to Scilex, and (iv) the Company aided and abetted Mr. Mack’s alleged breach of fiduciary duties to Scilex. On April 1, 2022, Plaintiffs filed a Third Amended Complaint. The Third Amended Complaint asserted the same causes of action as the Second Amended Complaint, as well as claims for (i) misappropriation of trade secrets by Defendants under Delaware law, and (ii) misappropriation of trade secrets by Defendants under California law. On April 18, 2022, Defendants filed answers to the Third Amended Complaint. Trial was held before Vice Chancellor Paul Fiorvanti from September 12 through September 14, 2022. In March 2023, the Company collected $1,250,000 in reimbursement of legal costs pursuant to the Company’s directors’ and officers’ insurance policy, and recorded it as a reduction of general and administrative expense on the condensed consolidated statements of operations. No further reimbursements are permitted from the insurance policy with respect to the litigation. On September 1, 2023, the Chancery Court issued a memorandum opinion addressing liability in the Action and found in favor of Plaintiffs on all but three counts, which the Court found were waived. The Chancery Court found it proper to attribute Mr. Mack’s knowledge and actions to the Company, which Mr. Mack used to effectuate the tortious interference and breach of fiduciary duty. The Chancery Court found that Mr. Mack breached the Restrictive Covenants Agreement he entered into with Sorrento by developing Epoladerm^TM the Company is liable for tortious interference with contract; Plaintiffs were deemed to have waived their claims for breach of Mr. Mack’s Employment Agreement and for tortious interference with prospective economic advantage; Mr. Mack breached his fiduciary duty of loyalty to Scilex; the Company aided and abetted Mr. Mack’s breach of fiduciary duty; and Mr. Mack misappropriated certain Scilex trade secrets. The Court, however, stated that the question of an appropriate remedy must await further briefing. On October 18, 2023, in accordance with the Chancery Court’s supplemental briefing schedule, Plaintiffs filed their supplemental brief requesting the following relief: an injunction, in the first instance, enjoining Mr. Mack from having any relationship with Virpax for a period of 18 months and 27 days; enjoining Virpax from further developing or marketing Epoladerm for a period of 18 months and 27 days; alternatively, if these two injunction requests were not granted, Plaintiffs requested a judgement of joint and several liability against Mr. Mack and Virpax of $14,684,833. In addition to these requests for injunctive relief (or in, the alternative, damages), Plaintiffs sought a constructive trust over the revenues of Epoladerm, Probudur^TM and Envelta^TM, or, in the alternative to a constructive trust, a royalty of 5 per cent of net sales of Epoladerm, 8-11 percent of net sales of Probudur and 7.5 percent of net sales of Envelta. In addition to the requests for injunctive relief, imposition of a constructive trust and/or royalties, Plaintiffs also requested additional damages, jointly and severally, against Mr. Mack and Virpax as follows: $1.3 million for misuse of Scilex resources, $6.7 million for misappropriation of trade secrets, $13.4 million for exemplary damage (trade secrets damage x2) and attorney’s fees in an unspecified amount. Finally, Plaintiffs sought injunctive relief, enjoining Mr. Mack and Virpax from further accessing Scilex’s trade secrets; requiring Mr. Mack and Virpax to return Scilex’s trade secrets to Plaintiffs; and enjoining Mr. Mack and Virpax from marketing or selling any products derived from or incorporating Scilex’s trade secrets. On November 29, 2023, in accordance with the Chancery Court’s supplemental briefing schedule, Defendants filed their supplement brief on damages rebutting Plaintiffs’ damages analysis. Throughout the brief, Defendants argued Plaintiffs failed to meet their burden to prove damages, and as such, should be precluded from any damages award. However, given the Court’s instruction, Defendants proffered a reasonable damages analysis as follows. As for the injunctive relief requested against Mr. Mack, the Company took no position, as the request was directed to Mr. Mack personally. Concerning Plaintiffs’ request for an injunction against further development of Epoladerm for a period of 18 months and 27 days, Defendants opposed this request, arguing lack of irreparable harm, given Plaintiffs’ request for money damages. Defendants also argued a constructive trust is inappropriate, given Plaintiffs failed to articulate the parameters of such relief and, additionally, the lack of sales for the drug candidates preclude such relief. In terms of the money damages related to the three drug candidates, Defendants proffered a reasonable royalty rate of 1-3% of the net profits of the drug candidates, as opposed to lump sum damages, as such rate would alleviate the speculative nature of the damages requested by Plaintiffs. As for the misappropriation of trade secrets request of $6.7 million, given the Court found only 5 of the proffered 1,182 documents were trade secrets, Defendants contend Plaintiffs should receive no monetary damages (given the reasonable royalty would encompass use of these documents and, alternatively, Defendants would return such documents). However, if the Court were to award damages, such damages should be pro rata for the documents, or roughly $28,382. And, finally, Defendants opposed the request for attorneys’ fees and exemplary damages. On December 21, 2023, Plaintiffs filed their reply brief on damages, generally reasserting their prior arguments on damages and rebutting Defendants’ arguments. Plaintiffs also asserted they supported their damages claims with sufficient evidence. On February 29, 2024, the Plaintiffs and the Company entered into a Settlement Agreement to fully resolve all claims by the Plaintiffs against the Company related to the Action, subject to the entry by the United States Bankruptcy Court for the Southern District of Texas, which is handling the Sorrento bankruptcy filing (the “Bankruptcy Court”), of an order approving the Settlement Agreement (the “Settlement Order”). On March 1, 2024, the Plaintiffs filed a motion to approve the Settlement Agreement and grant the related relief with the Bankruptcy Court. On March 14, 2024, the Bankruptcy Court entered an order approving the Settlement Agreement and on March 20, 2024 the Plaintiffs filed a Stipulation of Dismissal with the Chancery Court dismissing the Action. As settlement consideration, the Company agreed to pay Sorrento and Scilex a total cash payment of $6 million, of which $3.5 million was paid two business days after the date that the Settlement Order was entered by the Bankruptcy Court (the “Effective Date”), which payment was made on March 18, 2024 and the remaining $2.5 million was paid on July 8, 2024. Additionally, the Company agreed to pay to Plaintiffs royalties of 6% of annual net sales of products developed from drug candidates Epoladerm, Probudur and Envelta until the earlier of the expiration of the last-to-expire valid patent claim of such product and the expiration of any period of regulatory exclusivity for such product. Pursuant to the Settlement Agreement, each of the Plaintiffs and the Company provided mutual releases of all claims as of the Effective Date, whether known or unknown, arising from any allegations set forth in the Action. Plaintiffs’ release relates to claims against the Company only. Plaintiffs’ release as to the Company was effective upon the Company’s initial payment of $3.5 million, and the Company’s release of the Plaintiffs was effective on the Effective Date. The Plaintiffs can still pursue claims against Mr. Mack. The Company’s Bylaws require the Company to “indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a director or officer of the Corporation, or, while a director or officer of the Corporation.” Such indemnification, however, is limited to circumstances where the covered person “acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation….” Mr. Mack may attempt to claim he is entitled to indemnification, should the Court find him liable for damages in the Action. Given the findings in the Memorandum Opinion issued in the Action, the Company believes it has a strong position that Mr. Mack would not be entitled to indemnification. There is a risk, however, that a Court could find he is entitled to such indemnification. Additionally, per Section 7.6 of the Bylaws, the Company has been advancing Mr. Mack’s attorneys’ fees and costs for the Action. It is likely Mr. Mack will contend he is still entitled to advancement of any fees and/or costs for the Action going forward and may seek judicial intervention. However, as per the Bylaws, Mr. Mack is only entitled to advancement of expenses for indemnifiable actions. As noted above, given the Memorandum Opinion in the Action, the Company believes that it has a strong position that Mr. Mack is not entitled to indemnification, and therefore, not entitled to advancement of expenses. However, there is a risk that a Court could find that Mr. Mack is entitled to such advancement. Further, Mr. Mack may attempt to seek damages from the Company based on the Court’s final judgment on damages under the theory of joint and several liability and seek contribution from the Company for any monetary judgment. The Court is aware that Plaintiffs have settled with the Company and that the Settlement Agreement fully releases the Company from any claims or damages, the Plaintiff has against the Company, related to the Action. Given the Settlement Agreement does not release Mr. Mack from liability related to the Action, the Court has requested supplemental briefing as to whether the Court can dismiss the Company from the lawsuit, as well as any claims Mr. Mack has against the Company arising from the Action. While the Company believes that any damages assessed may be awarded against Mr. Mack alone, Plaintiffs cannot seek additional damages from Virpax. However, there is a risk that Mr. Mack will still seek contribution from the Company for any damages claim arising from the Action and, there is a risk that the Court will rule in Mr. Mack’s favor. Any such amounts for indemnification, contribution or other amounts awarded by the Court in Mr. Mack’s favor could be significant. No further reimbursements are permitted from our insurance policy with respect to the litigation. Accordingly, if Mr. Mack was successful in seeking indemnification from us, we would have to pay such amounts in cash which would further reduce our cash position. As of December 31, 2023, the Company had accrued $6.0 million with respect to the litigation. After the initial payment of $3.5 million to the Plaintiffs, as of June 30, 2024, the Company had an accrual of $2.5 million with respect to the litigation, which was paid as of July 8, 2024. Global Macroeconomic Environment The global macroeconomic environment could be negatively affected by, among other things, resurgence of COVID-19 or other pandemics or epidemics, instability in global economic markets, increased U.S. trade tariffs and trade disputes with other countries, instability in the global credit markets, supply chain weaknesses, instability in the geopolitical environment as a result of the withdrawal of the United Kingdom from the European Union, the Russian invasion of Ukraine, the war in the Middle East, other political tensions, and foreign governmental debt concerns. Such challenges have caused, and may continue to cause, uncertainty and instability in local economies and in global financial markets. As a result, the Company and its third party CMOs, and CROs have in the past and may in the future face disruptions in procuring items that are essential to the Company’s research and development activities, including, for example, medical and laboratory supplies used in the Company’s preclinical studies that are sourced from abroad or for which there are shortages, or potential difficulties recruiting patients, and may cause delays and difficulties with ongoing and planned preclinical and clinical trials. In addition, the licensor of Probudur that is conducting the development work for Probudur is located in Israel and could be impacted by the current Middle East crisis which could disrupt the development of Probudur. The extent to which the Company’s financial condition, liquidity or results of operations are impacted is uncertain, and may negatively impact the Company’s results of operations, financial condition, and liquidity the remainder of 2024 and potentially beyond. Anthony Mack Resignation On November 15, 2023, the Company accepted the resignation of Anthony P. Mack as Chief Executive Officer (“CEO”) and Chair of the Board of Directors (the “Board”) of the Company effective November 17, 2023. The resignation was not related to any disagreement with the Company on any matter relating to its operations, policies or practices. The Company was negotiating a separation agreement with Mr. Mack and has recorded estimated separation compensation related to the separation agreement of $711,000 which is included in accounts payable and accrued expenses as of June 30, 2024 and December 31, 2023. While the Company believes this estimated expense related to the separation agreement to be reasonably possible, actual results may materially vary from these estimates. As part of the consideration for the separation agreement, Mr. Mack will be expected to release, discharge and waive any rights to indemnification, and/or contribution related to the Action. The accrual does not include any amounts that the Company may be required to pay for indemnification claims or contribution that he may seek against the Company and such claims may be significant.

Commitments and Contingencies

6 Months Ended

Jun. 30, 2024

Commitments and Contingencies [Abstract]

Note 5. Commitments and Contingencies

Litigation

From time to time the Company is subject to claims by third parties under various legal disputes. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash flows.

On March 12, 2021, the Company and its former Chief Executive Officer, Anthony P. Mack (together, the “Defendants”), were named as defendants in a complaint (the “Complaint”) filed by the Plaintiffs in the Court of Chancery of the State of Delaware captioned Sorrento Therapeutics, Inc. and Scilex Pharmaceuticals Inc. v. Anthony Mack and Virpax Pharmaceuticals, Inc., Case No. 2021-0210-PAF (the “Action”). In the Complaint, Plaintiffs alleged (i) Mr. Mack breached a Restrictive Covenants Agreement, dated as of November 8, 2016, between himself and Sorrento (the “Restrictive Covenants Agreement”), (ii) the Company tortiously interfered with the Restrictive Covenants Agreement, and (iii) the Company tortiously interfered with Scilex’s relationship with Mr. Mack. On May 7, 2021, Plaintiffs filed an Amended Complaint asserting the same three causes of action. On September 28, 2021, Plaintiffs filed a Second Amended Complaint asserting the same three causes of action as the prior complaints, as well as claims in which Plaintiffs alleged (i) Mr. Mack breached an Employment, Proprietary Information and Inventions Agreement, dated as of October 25, 2016, between himself and Sorrento (the “Employment Agreement”), (ii) the Company tortiously interfered with the Employment Agreement, (iii) Mr. Mack breached his fiduciary duties to Scilex, and (iv) the Company aided and abetted Mr. Mack’s alleged breach of fiduciary duties to Scilex. On April 1, 2022, Plaintiffs filed a Third Amended Complaint. The Third Amended Complaint asserted the same causes of action as the Second Amended Complaint, as well as claims for (i) misappropriation of trade secrets by Defendants under Delaware law, and (ii) misappropriation of trade secrets by Defendants under California law. On April 18, 2022, Defendants filed answers to the Third Amended Complaint. Trial was held before Vice Chancellor Paul Fiorvanti from September 12 through September 14, 2022.

In March 2023, the Company collected $1,250,000 in reimbursement of legal costs pursuant to the Company’s directors’ and officers’ insurance policy, and recorded it as a reduction of general and administrative expense on the condensed consolidated statements of operations. No further reimbursements are permitted from the insurance policy with respect to the litigation.

On September 1, 2023, the Chancery Court issued a memorandum opinion addressing liability in the Action and found in favor of Plaintiffs on all but three counts, which the Court found were waived. The Chancery Court found it proper to attribute Mr. Mack’s knowledge and actions to the Company, which Mr. Mack used to effectuate the tortious interference and breach of fiduciary duty. The Chancery Court found that Mr. Mack breached the Restrictive Covenants Agreement he entered into with Sorrento by developing Epoladerm^TM the Company is liable for tortious interference with contract; Plaintiffs were deemed to have waived their claims for breach of Mr. Mack’s Employment Agreement and for tortious interference with prospective economic advantage; Mr. Mack breached his fiduciary duty of loyalty to Scilex; the Company aided and abetted Mr. Mack’s breach of fiduciary duty; and Mr. Mack misappropriated certain Scilex trade secrets. The Court, however, stated that the question of an appropriate remedy must await further briefing.

On October 18, 2023, in accordance with the Chancery Court’s supplemental briefing schedule, Plaintiffs filed their supplemental brief requesting the following relief: an injunction, in the first instance, enjoining Mr. Mack from having any relationship with Virpax for a period of 18 months and 27 days; enjoining Virpax from further developing or marketing Epoladerm for a period of 18 months and 27 days; alternatively, if these two injunction requests were not granted, Plaintiffs requested a judgement of joint and several liability against Mr. Mack and Virpax of $14,684,833. In addition to these requests for injunctive relief (or in, the alternative, damages), Plaintiffs sought a constructive trust over the revenues of Epoladerm, Probudur^TM and Envelta^TM, or, in the alternative to a constructive trust, a royalty of 5 per cent of net sales of Epoladerm, 8-11 percent of net sales of Probudur and 7.5 percent of net sales of Envelta. In addition to the requests for injunctive relief, imposition of a constructive trust and/or royalties, Plaintiffs also requested additional damages, jointly and severally, against Mr. Mack and Virpax as follows: $1.3 million for misuse of Scilex resources, $6.7 million for misappropriation of trade secrets, $13.4 million for exemplary damage (trade secrets damage x2) and attorney’s fees in an unspecified amount. Finally, Plaintiffs sought injunctive relief, enjoining Mr. Mack and Virpax from further accessing Scilex’s trade secrets; requiring Mr. Mack and Virpax to return Scilex’s trade secrets to Plaintiffs; and enjoining Mr. Mack and Virpax from marketing or selling any products derived from or incorporating Scilex’s trade secrets.

On November 29, 2023, in accordance with the Chancery Court’s supplemental briefing schedule, Defendants filed their supplement brief on damages rebutting Plaintiffs’ damages analysis. Throughout the brief, Defendants argued Plaintiffs failed to meet their burden to prove damages, and as such, should be precluded from any damages award. However, given the Court’s instruction, Defendants proffered a reasonable damages analysis as follows. As for the injunctive relief requested against Mr. Mack, the Company took no position, as the request was directed to Mr. Mack personally. Concerning Plaintiffs’ request for an injunction against further development of Epoladerm for a period of 18 months and 27 days, Defendants opposed this request, arguing lack of irreparable harm, given Plaintiffs’ request for money damages. Defendants also argued a constructive trust is inappropriate, given Plaintiffs failed to articulate the parameters of such relief and, additionally, the lack of sales for the drug candidates preclude such relief. In terms of the money damages related to the three drug candidates, Defendants proffered a reasonable royalty rate of 1-3% of the net profits of the drug candidates, as opposed to lump sum damages, as such rate would alleviate the speculative nature of the damages requested by Plaintiffs. As for the misappropriation of trade secrets request of $6.7 million, given the Court found only 5 of the proffered 1,182 documents were trade secrets, Defendants contend Plaintiffs should receive no monetary damages (given the reasonable royalty would encompass use of these documents and, alternatively, Defendants would return such documents). However, if the Court were to award damages, such damages should be pro rata for the documents, or roughly $28,382. And, finally, Defendants opposed the request for attorneys’ fees and exemplary damages.

On December 21, 2023, Plaintiffs filed their reply brief on damages, generally reasserting their prior arguments on damages and rebutting Defendants’ arguments. Plaintiffs also asserted they supported their damages claims with sufficient evidence.

On February 29, 2024, the Plaintiffs and the Company entered into a Settlement Agreement to fully resolve all claims by the Plaintiffs against the Company related to the Action, subject to the entry by the United States Bankruptcy Court for the Southern District of Texas, which is handling the Sorrento bankruptcy filing (the “Bankruptcy Court”), of an order approving the Settlement Agreement (the “Settlement Order”). On March 1, 2024, the Plaintiffs filed a motion to approve the Settlement Agreement and grant the related relief with the Bankruptcy Court. On March 14, 2024, the Bankruptcy Court entered an order approving the Settlement Agreement and on March 20, 2024 the Plaintiffs filed a Stipulation of Dismissal with the Chancery Court dismissing the Action.

As settlement consideration, the Company agreed to pay Sorrento and Scilex a total cash payment of $6 million, of which $3.5 million was paid two business days after the date that the Settlement Order was entered by the Bankruptcy Court (the “Effective Date”), which payment was made on March 18, 2024 and the remaining $2.5 million was paid on July 8, 2024. Additionally, the Company agreed to pay to Plaintiffs royalties of 6% of annual net sales of products developed from drug candidates Epoladerm, Probudur and Envelta until the earlier of the expiration of the last-to-expire valid patent claim of such product and the expiration of any period of regulatory exclusivity for such product.

Pursuant to the Settlement Agreement, each of the Plaintiffs and the Company provided mutual releases of all claims as of the Effective Date, whether known or unknown, arising from any allegations set forth in the Action. Plaintiffs’ release relates to claims against the Company only. Plaintiffs’ release as to the Company was effective upon the Company’s initial payment of $3.5 million, and the Company’s release of the Plaintiffs was effective on the Effective Date.

The Plaintiffs can still pursue claims against Mr. Mack. The Company’s Bylaws require the Company to “indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a director or officer of the Corporation, or, while a director or officer of the Corporation.” Such indemnification, however, is limited to circumstances where the covered person “acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation….” Mr. Mack may attempt to claim he is entitled to indemnification, should the Court find him liable for damages in the Action. Given the findings in the Memorandum Opinion issued in the Action, the Company believes it has a strong position that Mr. Mack would not be entitled to indemnification. There is a risk, however, that a Court could find he is entitled to such indemnification. Additionally, per Section 7.6 of the Bylaws, the Company has been advancing Mr. Mack’s attorneys’ fees and costs for the Action. It is likely Mr. Mack will contend he is still entitled to advancement of any fees and/or costs for the Action going forward and may seek judicial intervention. However, as per the Bylaws, Mr. Mack is only entitled to advancement of expenses for indemnifiable actions. As noted above, given the Memorandum Opinion in the Action, the Company believes that it has a strong position that Mr. Mack is not entitled to indemnification, and therefore, not entitled to advancement of expenses. However, there is a risk that a Court could find that Mr. Mack is entitled to such advancement. Further, Mr. Mack may attempt to seek damages from the Company based on the Court’s final judgment on damages under the theory of joint and several liability and seek contribution from the Company for any monetary judgment.

The Court is aware that Plaintiffs have settled with the Company and that the Settlement Agreement fully releases the Company from any claims or damages, the Plaintiff has against the Company, related to the Action. Given the Settlement Agreement does not release Mr. Mack from liability related to the Action, the Court has requested supplemental briefing as to whether the Court can dismiss the Company from the lawsuit, as well as any claims Mr. Mack has against the Company arising from the Action. While the Company believes that any damages assessed may be awarded against Mr. Mack alone, Plaintiffs cannot seek additional damages from Virpax. However, there is a risk that Mr. Mack will still seek contribution from the Company for any damages claim arising from the Action and, there is a risk that the Court will rule in Mr. Mack’s favor. Any such amounts for indemnification, contribution or other amounts awarded by the Court in Mr. Mack’s favor could be significant.

No further reimbursements are permitted from our insurance policy with respect to the litigation. Accordingly, if Mr. Mack was successful in seeking indemnification from us, we would have to pay such amounts in cash which would further reduce our cash position.

As of December 31, 2023, the Company had accrued $6.0 million with respect to the litigation. After the initial payment of $3.5 million to the Plaintiffs, as of June 30, 2024, the Company had an accrual of $2.5 million with respect to the litigation, which was paid as of July 8, 2024.

Global Macroeconomic Environment

The global macroeconomic environment could be negatively affected by, among other things, resurgence of COVID-19 or other pandemics or epidemics, instability in global economic markets, increased U.S. trade tariffs and trade disputes with other countries, instability in the global credit markets, supply chain weaknesses, instability in the geopolitical environment as a result of the withdrawal of the United Kingdom from the European Union, the Russian invasion of Ukraine, the war in the Middle East, other political tensions, and foreign governmental debt concerns. Such challenges have caused, and may continue to cause, uncertainty and instability in local economies and in global financial markets. As a result, the Company and its third party CMOs, and CROs have in the past and may in the future face disruptions in procuring items that are essential to the Company’s research and development activities, including, for example, medical and laboratory supplies used in the Company’s preclinical studies that are sourced from abroad or for which there are shortages, or potential difficulties recruiting patients, and may cause delays and difficulties with ongoing and planned preclinical and clinical trials. In addition, the licensor of Probudur that is conducting the development work for Probudur is located in Israel and could be impacted by the current Middle East crisis which could disrupt the development of Probudur. The extent to which the Company’s financial condition, liquidity or results of operations are impacted is uncertain, and may negatively impact the Company’s results of operations, financial condition, and liquidity the remainder of 2024 and potentially beyond.

Anthony Mack Resignation

On November 15, 2023, the Company accepted the resignation of Anthony P. Mack as Chief Executive Officer (“CEO”) and Chair of the Board of Directors (the “Board”) of the Company effective November 17, 2023. The resignation was not related to any disagreement with the Company on any matter relating to its operations, policies or practices. The Company was negotiating a separation agreement with Mr. Mack and has recorded estimated separation compensation related to the separation agreement of $711,000 which is included in accounts payable and accrued expenses as of June 30, 2024 and December 31, 2023. While the Company believes this estimated expense related to the separation agreement to be reasonably possible, actual results may materially vary from these estimates. As part of the consideration for the separation agreement, Mr. Mack will be expected to release, discharge and waive any rights to indemnification, and/or contribution related to the Action. The accrual does not include any amounts that the Company may be required to pay for indemnification claims or contribution that he may seek against the Company and such claims may be significant.