NOTE 8 – COMMITMENTS AND CONTINGENCIES

The Company acquires assets still in development and enters into license agreements with third parties that often require milestone and royalty payments to the third-party contingent upon the occurrence of certain future events linked to the success of the asset in development. Milestone payments may be required, contingent upon the successful achievement of an important point in the development lifecycle of the pharmaceutical product (e.g., approval of the product for marketing by a regulatory agency). If required by the license agreements, the Company may have to make royalty payments based upon a percentage of the sales of the pharmaceutical products if regulatory approval for marketing is obtained.

Office Lease

The Company determines whether an arrangement is, or contains, a lease at inception of the agreement. Prior to May 1, 2019, the Company generally accounted for operating lease payments by charging them to expense as incurred. Beginning on May 1, 2019, operating leases that have commenced are included in other assets and accrued expenses in the condensed consolidated balance sheet. Classification of operating lease liabilities as either current or noncurrent is based on the expected timing of payments due pursuant to the Company’s obligations under the lease. The Company concluded that as of May 1, 2019, the lease liability and the ROU are immaterial to the condensed consolidated balance sheet; therefore, no amount was included in the condensed consolidated balance sheet.

The Company leases office space related to the administrative activities and at January 31, 2020, the remaining term of the lease is seven months.

The following table presents the minimum lease payments as of January 31, 2020.

Material Agreements

The Company’s material agreements are identified and summarized in Note 1 – Nature of Business – Company Background and Material Agreements.

Service Agreements

The Company has entered into several service agreements, with both independent and related parties, pursuant to which services will be provided over the next four to twenty-four months related to the Company’s planned IND filing. The services include regulatory affairs strategy, advice and completion of the IND submission to the FDA, container closure integrity testing of the clinical trial product syringes over the course of two years, a two year stability study and the preparation of angiography guidelines for implantation of the encapsulated cells for use in the Company’s planned clinical trial in LAPC. The total cost of such service agreements is estimated to be approximately $220,000, of which the related party portion will be $40,000.

Compensation Agreements

The Company entered into executive compensation agreements with its three executive officers in March 2015, each of which was amended in December 2015. The amendments provided that each executive compensation agreement has a term of two years with annual extensions thereafter unless the Company or the officer provides written notification of termination at least ninety days prior to the end of the term or subsequent extensions. The Company entered into a DLA with a new Board member in April 2015 which continues in effect until the member is no longer on the Board.

In March 2017, the Company amended the executive compensation agreements with its three executive officers. The term for each agreement is two years from an effective date of January 1, 2017. At the same time, the Company amended the compensation agreement with the Board member referenced above. It continues in effect until the member is no longer on the Board.

The Company has four independent directors. Each director receives the same compensation: (i) $12,500 in cash for each calendar quarter of service on the Board; (ii) 500,000 fully-paid, non-assessable shares of restricted Common Stock (“Shares”) annually; and (iii) a five-year option to purchase 500,000 Shares annually at an exercise price equal to the fair market value of the Shares on the date of grant. The Shares and the options fully vest on the date of the grants.