| Agreements | Mayoly Agreement During
the three months ended September 30, 2019 and 2018, the Company charged $0 and $96,119, respectively, to Mayoly under the JDLA
that was in effect during both periods. During the nine months ended September 30, 2019 and 2018, the Company charged $403,020
and $621,724, respectively, to Mayoly under the JDLA that was in effect during both periods. On
March 27, 2019, the Company entered into the Mayoly APA pursuant to which the Company purchased substantially all rights, title
and interest in and to MS1819-SD, see Recent Developments above. INRA Agreement In
February 2006, Mayoly and INRA TRANSFERT, on behalf of INRA and CNRS (French government research centers), entered into a Usage
and Cross-Licensing Agreement granting Mayoly exclusive worldwide rights to exploit Yarrowia lipolytica and other lipase proteins
based on their patents for use in humans. The INRA Agreement provides for the payment by Mayoly of royalties on net sales, subject
to Mayoly’s right to terminate such obligation upon the payment of a lump sum specified in the agreement. Upon execution
of the Mayoly APA, all rights, obligations and interests under the INRA Agreement were transferred to the Company. TransChem
Sublicense On
August 7, 2017, the Company entered into a Sublicense Agreement with TransChem, Inc. (“TransChem” “Licensed Patents” “Sublicense Agreement” Employment
Agreements James
Sapirstein Effective
October 8, 2019, the Company entered into an employment agreement with Mr. Sapirstein to serve as its President and Chief Executive
Officer for a term of three years, subject to further renewal upon agreement of the parties. The employment agreement with Mr.
Sapirstein provides for a base salary of $450,000 per year. In addition to the base salary, Mr. Sapirstein is eligible to receive
(i) a bonus of up to 40% of his base salary on an annual basis, based on certain milestones that are yet to be determined; (ii)
1% of net fees received by the Company upon entering into license agreements with any third-party with respect to any product
current in development or upon the sale of all or substantially all assets of the Company; (iii) a grant of 200,000 restricted
shares of the Company’s common stock which are subject to vest as follows (a) 100,000 upon the first commercial sale of
MS1819 in the United States, and (b) 100,000 upon the total market capitalization of the Company exceeding $1.0 billion for 20
consecutive trading days; (iv) a grant of 300,000 10-year stock options to purchase shares of the Company’s common stock
which are subject to vest as follows (a) 50,000 upon the Company initiating its next Phase II clinical trial in the United States
for MS1819, (b) 50,000 upon the Company completing its next or subsequent Phase II clinical trial in the United States for MS1819,
(c) 100,000 upon the Company initiating a Phase III clinical trial in the United States for MS1819, and (d) 100,000 upon the Company
initiating a Phase I clinical trial in the United States for any product other than MS1819. Mr. Sapirstein is entitled to receive
20 days of paid vacation, participate in full employee health benefits and receive reimbursement for all reasonable expenses incurred
in connection with his services to the Company. In
the event that Mr. Sapirstein’s employment is terminated by the Company for Cause, as defined in his employment agreement,
or by Mr. Sapirstein voluntarily, then will not be entitled to receive any payments beyond amounts already earned, and any unvested
equity awards will terminate. In the event that Mr. Sapirstein’s employment is terminated as a result of an Involuntary
Termination Other than for Cause, as defined in the Agreement, Mr. Sapirstein will be entitled to receive the following compensation:
(i) severance in the form of continuation of his salary (at the Base Salary rate in effect at the time of termination, but prior
to any reduction triggering Good Reason) for a period of 12 months following the termination date; (ii) payment of Executive’s
premiums to cover COBRA for a period of 12 months following the termination date; and (iii) a prorated annual bonus. Johan
(Thijs) Spoor On
January 3, 2016, the Company entered into an employment agreement with its former President and Chief Executive Officer, Johan
Spoor. The employment agreement provided for a term expiring January 2, 2019. Although Mr. Spoor’s employment agreement
has expired, he remained employed as the Company’s President and Chief Executive Officer under the terms of his prior employment
agreement until his resignation on October 8, 2019. As previously reported on the Company’s Current Report on Form 8-K filed
October 11, 2019, Mr. Spoor resigned from his position as the Company’s President and Chief Executive Officer effective
October 8, 2019. Mr. Spoor continues to serve as a director on the Board of the Company. Mr.
Spoor was paid a base salary of $425,000 per year. At the sole discretion of the Board or the Compensation Committee of the Board,
following each calendar year of employment, Mr. Spoor was eligible to receive an additional cash bonus based on his attainment
of certain financial, clinical development, and/or business milestones to be established annually by the Board or the Compensation
Committee. Mr.
Spoor was originally entitled to 380,000 10-year stock options pursuant to the 2014 Plan. In the first quarter of 2017, 100,000
options having a value of $386,900 were granted and expensed. On September 29, 2017, Mr. Spoor was granted 100,000 shares of restricted
common stock subject to vesting conditions as follows: (i) 75% upon FDA acceptance of a U.S. IND application for MS1819-SD, and
(ii) 25% upon the Company completing a Phase IIa clinical trial for MS1819-SD, in satisfaction of the Company’s obligation
to issue the additional 280,000 options to Mr. Spoor described above, with an estimated fair value at the grant date of $425,000.
All of these shares vested during 2018. $106,250 was expensed in the second quarter of 2018 and $318,750 was expensed in the fourth
quarter of 2018 due to the Company completing both milestones. On
June 28, 2018, Mr. Spoor was granted 200,000 shares of restricted common stock subject to vesting conditions as follows: (i) 50%
shall vest in three equal installments beginning one year from the date of issuance, and (ii) the remaining 50% shall vest as
follows: one-third shall vest upon U.S. acceptance of IND for MS1819-SD, one-third upon the first dosing of a CF patient with
MS1819-SD anywhere in the world, and the remaining one-third upon enrollment of the first 30 patients in a CF trial. These restricted
shares had an estimated fair value at the grant date of $608,000 to be expensed when the above milestones are probable. 8,333
shares with a fair value of $25,332 vested and was expensed in the three months ended September 30, 2019 due to being earned over
that time. 25,000 shares with a fair value of $76,000 vested and was expensed in the nine months ended September 30, 2019 due
to being earned over that time. 33,333 shares with a fair value of $101,332 vested and was expensed in the nine months ended September
30, 2019 due to the first dosing of CF patients with MS1819-SD anywhere in the world. On
June 28, 2018, the Board approved a 2017 annual incentive bonus pursuant to his employment agreement in the amount of $212,500. On
June 13, 2019, Mr. Spoor was granted stock options to purchase 150,000 shares of the Company’s common stock, issuable pursuant
to the 2014 Plan, that vest upon the completion of enrollment of the next trial of MS 1819-SD in the U.S. These options had an
estimated fair value at the grant date of $151,950 to be expensed when the above milestone is probable. On
June 29, 2019, the Board approved a 2018 annual incentive bonus pursuant to his employment agreement in the amount of $255,000
that is included in accrued expenses at September 30, 2019. Mr.
Spoor received no additional or severance compensation and all unvested options and restricted shares of common stock were cancelled
as a result of Mr. Spoor’s resignation. Maged
Shenouda On
September 26, 2017, the Company entered into an employment agreement with Maged Shenouda, pursuant to which Mr. Shenouda served
as the Company’s Chief Financial Officer. Mr. Shenouda’s employment agreement provided for the issuance of stock options
to purchase 100,000 shares of the Company’s common stock, issuable pursuant to the 2014 Plan. These options vested as follows
so long as Mr. Shenouda served as either Executive Vice-President of Corporate Development or as Chief Financial Officer (i) 75%
upon FDA acceptance of a U.S. IND application for MS1819-SD, and (ii) 25% upon the Company completing a Phase IIa clinical trial
for MS1819-SD. The option is exercisable for $4.39 per share and will expire on September 25, 2027. All of these shares vested
in 2018. Due to the Company completing both milestones, $84,125 was expensed in the second quarter of 2018 and $252,375 was expensed
in the fourth quarter of 2018. On
June 28, 2018, Mr. Shenouda was granted stock options to purchase 100,000 shares of the Company’s common stock, issuable
pursuant to the 2014 Plan, subject to vesting conditions as follows: (i) 50% upon U.S. acceptance of an IND for MS1819-SD, and
(ii) 50% upon the first CF patient doses with MS1819-SD anywhere in the world. These options had an estimated fair value at the
grant date of $207,300 to be expensed when the above milestones are probable. 50,000 of these options having a fair value
of $103,650 vested and was expensed in 2018 due to the FDA acceptance of the Company’s IND application for MS1819-SD. The
remaining 50,000 options having a fair value of $103,650 vested and was expensed in the nine months ended September 30, 2019 due
to the first dosing of CF patients with MS1819-SD anywhere in the world. On
June 28, 2018, the Board approved a 2017 annual incentive bonus pursuant to his employment agreement in the amount of $82,500. On
June 13, 2019, Mr. Shenouda was granted stock options to purchase 100,000 shares of the Company’s common stock, issuable
pursuant to the 2014 Plan, that vest upon the completion of enrollment of the next trial of MS 1819-SD in the U.S. These options
had an estimated fair value at the grant date of $101,300 to be expensed when the above milestone is probable. On
June 28, 2019, the Board approved a 2018 annual incentive bonus pursuant to his employment agreement in the amount of $100,000
that is included in accrued expenses at September 30, 2019. As
previously reported on the Company’s Current Report on Form 8-K filed November 1, 2019, Mr. Shenouda resigned from his position
as the Company’s Chief Financial Officer effective November 30, 2019. Mr. Shenouda’s resignation was not due to any
disagreements with respect to the Company’s operations, policies or plans and he received no additional or severance compensation
in connection with his resignation. All options and restricted shares of common stock not otherwise exercised or vested will be
cancelled effective upon the effective date of Mr. Shenouda’s resignation. Dr.
James E. Pennington On
May 28, 2018, the Company entered into an employment agreement with Dr. Pennington to serve as the Company’s Chief Medical
Officer. The employment agreement with Dr. Pennington provides for a base annual salary of $250,000. In addition to his salary,
Dr. Pennington is eligible to receive an annual milestone bonus, awarded at the sole discretion of the Board based on his attainment
of certain financial, clinical development, and/or business milestones established annually by the Board or Compensation Committee.
The employment agreement is terminable by either party at any time. In the event of termination by the Company other than for
cause, Dr. Pennington is entitled to three months’ severance payable over such period. In the event of termination by the
Company other than for cause in connection with a Change of Control, Dr. Pennington will receive six months’ severance payable
over such period. On
June 28, 2018, Mr. Pennington was granted stock options to purchase 75,000 shares of the Company’s common stock, issuable
pursuant to the 2014 Plan, subject to vesting conditions as follows: (i) 50% upon U.S. acceptance of an IND for MS1819-SD, and
(ii) 50% upon the first CF patient doses with MS1819-SD anywhere in the world. These options had an estimated fair value at the
grant date of $155,475 to be expensed when the above milestones are probable. 37,500 of these options vested and $77,738 was expensed
in 2018 due to the FDA acceptance of the Company’s IND application for MS1819-SD in 2018. 37,500 of these options having
a fair value of $77,738 vested and was expensed in the nine months ended September 30, 2019 due to the first dosing of CF patients
with MS1819-SD anywhere in the world. On
June 13, 2019, Mr. Pennington was granted stock options to purchase 110,000 shares of the Company’s common stock, issuable
pursuant to the 2014 Plan, that vest upon the completion of enrollment of the next trial of MS 1819-SD in the U.S. These options
had an estimated fair value at the grant date of $111,430 to be expensed when the above milestone is probable. On
June 13, 2019, the Board approved a 2018 annual incentive bonus pursuant to his employment agreement in the amount of $75,000
that was paid in the third quarter of 2019. |
