UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One) 

  x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2015

 

OR

 

  ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE TRANSITION PERIOD FROM                      TO                     

 

Commission File Number: 000-52153

 

ARNO THERAPEUTICS, INC.

(Exact Name Of Registrant As Specified In Its Charter)

 

Delaware 52-2286452
(State of Incorporation) (I.R.S. Employer Identification No.)

 

200 Route 31 North, Suite 104, Flemington, New Jersey 08822

(Address of principal executive offices)(Zip Code)

 

(862) 703-7170

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  x  Yes  ¨  No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ¨ Accelerated filer ¨
       
Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨  No  x

 

As of November 11, 2015, there were 20,408,616 shares of common stock, par value $0.0001 per share, of Arno Therapeutics, Inc. issued and outstanding.

 

   
 

 

Index

 

    Page
     
PART I FINANCIAL INFORMATION 4
     
Item 1. Financial Statements (unaudited) 4
     
  Condensed Balance Sheets 4
     
  Condensed Statements of Operations 5
     
  Condensed Statement of Stockholders’ Deficit 6
     
  Condensed Statements of Cash Flows 7
     
  Notes to Condensed Financial Statements 8
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
     
Item 4. Controls and Procedures 25
     
PART II OTHER INFORMATION 26
     
Item 1. Legal Proceedings 26
     
Item 1A. Risk Factors 26
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
     
Item 3. Defaults Upon Senior Securities 26
     
Item 4. Mine Safety Disclosures 26
     
Item 5. Other Information 26
     
Item 6. Exhibits 27
     
  Signatures 28
     
  Index to Exhibits Filed with this Report 29

 

2 

 

 

References to “the Company,” “we”, “us” or “our” in this Quarterly Report on Form 10-Q refer to Arno Therapeutics, Inc., a Delaware corporation, unless the context indicates otherwise.

 

Forward-Looking Statements

 

This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The forward-looking statements are only predictions and provide our current expectations or forecasts of future events and financial performance and may be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “will” or “should” or, in each case, their negative, or other variations or comparable terminology, though the absence of these words does not necessarily mean that a statement is not forward-looking. Forward-looking statements include all matters that are not historical facts and include, without limitation, statements concerning our business strategy, outlook, objectives, future milestones, plans, intentions, goals, future financial conditions, our research and development programs and planning for and timing of any clinical trials, the possibility, timing and outcome of submitting regulatory filings for our product candidates under development, research and development of particular drug products, the development of financial, clinical, manufacturing and marketing plans related to the potential approval and commercialization of our drug products, and the period of time for which our existing resources will enable us to fund our operations.

 

Forward-looking statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements.  Examples of the risks and uncertainties include, but are not limited to:

 

  · the risk that recurring losses, negative cash flows and the inability to raise additional capital could threaten our ability to continue as a going concern;
  · the risk that we may not successfully develop and market our product candidates, and even if we do, we may not become profitable;
  · risks relating to the progress of our research and development;
  · risks relating to significant, time-consuming and costly research and development efforts, including pre-clinical studies, clinical trials and testing, and the risk that clinical trials of our product candidates may be delayed, halted or fail;
  · risks relating to the rigorous regulatory approval process required for any products that we may develop independently, with our development partners or in connection with any collaboration arrangements;
  · the risk that changes in the national or international political and regulatory environment may make it more difficult to gain FDA or other regulatory approval of our drug product candidates;
  · risks that the FDA or other regulatory authorities may not accept any applications we file;
  · risks that the FDA or other regulatory authorities may withhold or delay consideration of any applications that we file or limit such applications to particular indications or apply other label limitations;
  · risks that, after acceptance and review of applications that we file, the FDA or other regulatory authorities will not approve the marketing and sale of our drug product candidates;
  · risks relating to our drug manufacturing operations, including those of our third-party suppliers and contract manufacturers;
  · risks relating to the ability of our development partners and third-party suppliers of materials, drug substance and related components to provide us with adequate supplies and expertise to support manufacture of drug product for initiation and completion of our clinical studies; and
  · risks relating to the transfer of our manufacturing technology to third-party contract manufacturers.

 

Other risks that may affect forward-looking statements contained in this report are described under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2014. These risks, including those described above, could cause our actual results to differ materially from those described in the forward-looking statements. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document. The risks discussed in this report should be considered in evaluating our prospects and future performance. 

 

3 

 

 

PART I — FINANCIAL INFORMATION

Item 1.       Financial Statements.

 

ARNO THERAPEUTICS, INC.

CONDENSED BALANCE SHEETS

 

   September 30, 2015
(Unaudited)		   December 31, 2014 
ASSETS          
Current assets          
Cash and cash equivalents  $123,272   $7,948,436 
Prepaid expenses and other current assets   251,170    258,046 
           
Total current assets   374,442    8,206,482 
           
Property and equipment, net   24,908    30,730 
Security deposit   10,455    10,455 
           
Total assets  $409,805   $8,247,667 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
Current liabilities          
Accounts payable  $1,175,294   $742,448 
Accrued expenses and other current liabilities   983,460    1,410,293 
Capital lease obligation- short term   3,713    3,322 
Deferred rent   1,389    1,048 
           
Total current liabilities   2,163,856    2,157,111 
           
Capital lease obligation- long term   5,087    7,923 
Derivative liabilities   3,485,437    6,671,524 
           
Total liabilities   5,654,380    8,836,558 
           
COMMITMENTS AND CONTINGENCIES          
           
STOCKHOLDERS' DEFICIT          
Preferred stock, $0.0001 par value, 35,000,000 shares authorized, none issued and outstanding   -    - 
Common stock, $0.0001 par value, 500,000,000 shares authorized, 20,408,616 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively   5,469    5,469 
Additional paid-in capital   84,049,919    81,192,630 
Accumulated deficit   (89,299,963)   (81,786,990)
           
Total stockholders' deficit   (5,244,575)   (588,891)
           
Total liabilities and stockholders' deficit  $409,805   $8,247,667 

 

See accompanying notes to the unaudited condensed financial statements.

 

4 

 

 

ARNO THERAPEUTICS, INC.

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
   2015   2014   2015   2014 
                 
Operating expenses:                    
Research and development  $1,792,758   $3,756,428   $6,915,408   $12,274,542 
General and administrative   1,082,031    1,919,070    3,800,865    5,328,227 
                     
Total operating expenses   2,874,789    5,675,498    10,716,273    17,602,769 
                     
Loss from operations   (2,874,789)   (5,675,498)   (10,716,273)   (17,602,769)
                     
Other income/(expense):                    
Interest income   530    10,087    7,625    34,947 
Interest expense   (349)   -    (1,139)   - 
Other income   2,195,301    5,824,847    3,196,814    20,775,450 
                     
Total other income/(expense)   2,195,482    5,834,934    3,203,300    20,810,397 
                     
Net income/(loss)  $(679,307)  $159,436   $(7,512,973)  $3,207,628 
                     
Net income/(loss) per share - basic  $(0.03)  $0.01   $(0.37)  $0.16 
                     
Weighted-average shares outstanding- basic   20,408,616    20,376,573    20,408,616    20,372,435 
                     
Net income/(loss) per share - diluted  $(0.03)  $0.01   $(0.37)  $0.13 
                     
Weighted-average shares outstanding- diluted   20,408,616    24,801,853    20,408,616    24,804,617 

 

See accompanying notes to the unaudited condensed financial statements.

 

5 

 

 

ARNO THERAPEUTICS, INC.

CONDENSED STATEMENT OF STOCKHOLDERS’ DEFICIT

(unaudited)

 

                   ADDITIONAL       TOTAL 
   PREFERRED STOCK   COMMON STOCK   PAID-IN   ACCUMULATED   STOCKHOLDERS' 
   SHARES   AMOUNT   SHARES   AMOUNT   CAPITAL   DEFICIT   DEFICIT 
                             
Balance at January 1, 2015   -    -    20,408,616   $5,469   $81,192,630   $(81,786,990)  $(588,891)
                                    
Net loss   -    -    -    -    -    (7,512,973)   (7,512,973)
                                    
Stock based compensation for services   -    -    -    -    2,857,289   -    2,857,289 
                                    
Balance at September 30, 2015   -    -    20,408,616   $5,469   $84,049,919   $(89,299,963)  $(5,244,575)

 

See accompanying notes to the unaudited condensed financial statements.

 

6 

 

 

ARNO THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

 

   Nine Months Ended September 30, 
   2015   2014 
         
Cash flows from operating activities:          
Net income/(loss)  $(7,512,973)  $3,207,628 
           
Adjustment to reconcile net income/(loss) to net cash and          
cash equivalents used in operating activities:          
Depreciation and amortization   5,822    9,536 
Stock-based compensation   2,857,289    3,502,079 
Change in fair value of derivative liability   (3,186,087)   (20,778,271)
           
Changes in operating assets and liabilities:          
Prepaid expenses and other current assets   6,876    (91,397)
Accounts payable   432,846    (1,736,017)
Accrued expenses   (426,833)   740,012 
Deferred rent   341    (5,062)
Due to related party   -    (26,039)
Net cash used in operating activities   (7,822,719)   (15,177,531)
           
Cash flows from investing activities:          
Purchase of property and equipment   -    (20,097)
Net cash used in investing activities   -    (20,097)
           
Cash flows from financing activities:          
Payment of capital lease obligation   (2,445)   - 
Net cash provided by financing activities   (2,445)   - 
           
Net decrease in cash and cash equivalents   (7,825,164)   (15,197,628)
Cash and cash equivalents at beginning of period   7,948,436    26,774,203 
           
Cash and cash equivalents at end of period  $123,272   $11,576,575 
           
Supplemental schedule of cash flows information:          
           
Cash paid for interest  $1,139   $- 

 

See accompanying notes to the unaudited condensed financial statements.

 

7 

 

 

ARNO THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

 

1. DESCRIPTION OF BUSINESS

 

Arno Therapeutics, Inc. (“Arno” or the “Company”) is developing innovative drug candidates intended to treat patients with cancer and other life threatening diseases. The Company was incorporated in Delaware in March 2000, at which time its name was Laurier International, Inc. (“Laurier”). Pursuant to an Agreement and Plan of Merger dated March 6, 2008 (as amended, the “Merger Agreement”), by and among the Company, Arno Therapeutics, Inc., a Delaware corporation formed on August 1, 2005 (“Old Arno”), and Laurier Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Laurier Acquisition”), on June 3, 2008, Laurier Acquisition merged with and into Old Arno, with Old Arno remaining as the surviving corporation and a wholly-owned subsidiary of Laurier. Immediately following this merger, Old Arno merged with and into Laurier and Laurier’s name was changed to Arno Therapeutics, Inc. These two merger transactions are hereinafter collectively referred to as the “Merger.” Immediately following the Merger, the former stockholders of Old Arno collectively held 95% of the outstanding common stock of Laurier, assuming the issuance of all shares issuable upon the exercise of outstanding options and warrants, and all of the officers and directors of Old Arno in office immediately prior to the Merger were appointed as the officers and directors of Laurier immediately following the Merger. Further, Laurier was a non-operating shell company prior to the Merger. The merger of a private operating company into a non-operating public shell corporation with nominal net assets is considered to be a capital transaction in substance, rather than a business combination, for accounting purposes. Accordingly, the Company treated this transaction as a capital transaction without recording goodwill or adjusting any of its other assets or liabilities. All costs incurred in connection with the Merger have been expensed. Upon completion of the Merger, the Company adopted Old Arno’s business plan.

 

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The Company has not yet generated any revenue from the sale of products and, through September 30, 2015, its efforts have been principally devoted to developing its licensed technologies and raising capital. The Company has experienced negative cash flows from operating activities since its inception and has an accumulated deficit of approximately $89.3 million at September 30, 2015. The Company expects to incur substantial and increasing losses and to have negative net cash flows from operating activities as it enhances its technology portfolio and engages in further research and development activities, particularly from conducting clinical trials, manufacturing activities and pre-clinical studies.

 

The accompanying unaudited Condensed Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q adopted under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of Arno’s management, the accompanying Condensed Financial Statements contain all adjustments (consisting of normal recurring accruals and adjustments) necessary to present fairly the financial position, results of operations and cash flows of the Company at the dates and for the periods indicated. The interim results for the periods ended September 30, 2015 are not necessarily indicative of results for the full 2015 fiscal year or any other future interim periods.

  

These unaudited Condensed Financial Statements have been prepared by management and should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission.

  

The preparation of financial statements in conformity with generally accepted accounting principles requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates and assumptions principally relate to services performed by third parties but not yet invoiced, estimates of the fair value and forfeiture rates of stock options issued to employees and consultants, and estimates of the probability in the fair value of derivative liabilities. Actual results could differ from those estimates.

   

Research and Development

 

Research and development costs are charged to expense as incurred. Research and development includes employee costs, fees associated with operational consultants, contract clinical research organizations, contract manufacturing organizations, clinical site fees, contract laboratory research organizations, contract central testing laboratories, licensing activities, and allocated office, insurance, depreciation, and facilities expenses. The Company accrues for costs incurred as the services are being provided by monitoring the status of the study and the invoices received from its external service providers. The Company adjusts its accruals when actual costs become known. Costs related to the acquisition of technology rights for which development work is still in process are charged to operations as incurred and considered a component of research and development expense.

 

8 

 

 

Warrant Liability

 

The Company accounts for the warrants issued in connection with the 2013, 2012 and 2010 Purchase Agreements (see Note 7) in accordance with the guidance on Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, which provides that the Company classify the warrant instrument as a liability at its fair value and adjusts the instrument to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized as a component of other income or expense. The fair value of warrants issued by the Company, in connection with private placements of securities, has been estimated using a Monte Carlo simulation model and, in doing so, the Company’s management utilized a third-party valuation report. The Monte Carlo simulation is a generally accepted statistical method used to generate a defined number of stock price paths in order to develop a reasonable estimate of the range of the Company’s future expected stock prices and minimizes standard error.

 

Recent Accounting Pronouncements

 

In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-15, “Presentation of Financial Statements-Going Concern (Topic 205-40)”. Under the standard, management is required to evaluate for each annual and interim reporting period whether it is probable that the entity will not be able to meet its obligations as they become due within one year after the date that financial statements are issued, or are available to be issued, where applicable.  ASU 2014-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. Accordingly, the standard is effective for the Company on January 1, 2017. The Company will be evaluating the impact, if any, that the standard will have on its financial condition, results of operations, and disclosures in the near future.

  

3. LIQUIDITY AND CAPITAL RESOURCES

 

Cash resources as of September 30, 2015 were approximately $0.1 million, compared to approximately $7.9 million as of December 31, 2014. In addition, the Company has negative net working capital of approximately $1.7 million as of September 30, 2015 and for the nine months ended September 30, 2015, negative cash flow from operating activities of $7.8 million. The Company expects negative cash flows from operations to continue for the foreseeable future. Subsequent to September 30, 2015, the Company issued unsecured convertible promissory notes (see Note 9) in the principal amount of $2.1 million. Including the proceeds received from the convertible notes, the Company believes that it has sufficient capital to fund its operations through December 2015 for the current plan of expenditure on continuing development of the Company’s current product candidates. Further, beyond funding our basic corporate activities, the Company requires substantial additional funds to support our continued research and development activities, and the anticipated costs of preclinical studies and clinical trials, regulatory approvals and eventual commercialization. The Company’s continued operations will depend on its ability to raise additional funds through various potential sources, such as equity and debt financing, or to license its product candidates to another pharmaceutical or biotechnology company. The Company cannot assure that it will be able to secure such additional financing, or if available, that it will be sufficient to meet its needs. If the Company fails to obtain the necessary additional capital when needed, the Company may be required to delay, reduce the scope of, or eliminate one or more of the Company’s research or development programs. In addition, the Company could be forced to discontinue product development, reduce or forego attractive business opportunities and even cease operations altogether.

 

The success of the Company depends on its ability to develop new products to the point of regulatory approval and subsequent revenue generation and, accordingly, to raise enough capital to finance these developmental efforts. Management plans to raise additional capital either by selling shares of the Company’s stock or other securities, issuing debt or by licensing one or more of the Company’s products to finance the continued operating and capital requirements of the Company. Amounts raised will be used to further develop the Company’s product candidates, acquire rights to additional product candidates and for other working capital purposes. While the Company will extend its best efforts to raise additional capital to fund all management can provide no assurances that the Company will be successful in raising sufficient funds.

 

In addition, to the extent that the Company raises additional funds by issuing shares of its common stock or other securities convertible or exchangeable for shares of common stock, stockholders will experience dilution, which may be significant. In the event the Company raises additional capital through debt financings, the Company may incur significant interest expense and become subject to covenants in the related transaction documentation that may affect the manner in which the Company conducts its business. To the extent that the Company raises additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to its technologies or product candidates, or grant licenses on terms that may not be favorable to the Company. Any or all of the foregoing may have a material adverse effect on the Company’s business and financial performance. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements do not include any adjustments that might result from the inability of the Company to continue as a going concern.

 

4. BASIC AND DILUTED INCOME/(LOSS) PER SHARE

 

Basic net income/(loss) per share is calculated based on the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is calculated based on the weighted-average number of shares of common stock and other dilutive securities outstanding during the period. The potential dilutive shares of common stock resulting from the assumed exercise of stock options and warrants are determined under the treasury stock method.

 

9 

 

 

The following table is a reconciliation of the numerator and denominator used in the calculation of basic and diluted net income/(loss) per share:

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
   2015   2014   2015   2014 
                 
Numerator:                    
Net income/(loss)  $(679,307)  $159,436   $(7,512,973)  $3,207,628 
                     
Denominator:                    
Weighted-average shares of common stock outstanding used in the calculation of basic net income/(loss) per share   20,408,616    20,376,573    20,408,616    20,372,435 
                     
Effect of dilutive securities:                    
                     
Warrants to purchase common stock   -    4,425,280    -    4,432,182 
                     
Weighted-average shares of common stock outstanding used in the calculation of diluted net income/(loss) per share   20,408,616    24,801,853    20,408,616    24,804,617 

 

For all periods presented, potentially dilutive securities are excluded from the computation of fully diluted net income/(loss) per share if their effect is anti-dilutive. For the three and nine months ended September 30, 2015, the Company has 4,455,231 warrants to purchase common stock that are potentially dilutive securities. The aggregate number of common equivalent shares (related to options and warrants) that have been excluded from the computations of diluted net income/(loss) per common share at September 30, 2015 and 2014 were 30,707,113 and 50,740,369, respectively, as their exercise prices are greater than the fair market price per common share as of September 30, 2015 and 2014, respectively.

 

5. INTANGIBLE ASSETS AND INTELLECTUAL PROPERTY

 

License Agreements

 

Onapristone License Agreement

 

The Company’s rights to onapristone are governed by a license agreement with Invivis Pharmaceuticals, Inc. (“Invivis”), dated February 13, 2012. Under this agreement, the Company holds an exclusive, royalty-bearing license for the rights to commercialize onapristone for all therapeutic uses. The license agreement provides the Company with worldwide rights to develop and commercialize onapristone with the exception of the commercialization rights in France; provided that the Company has an option to acquire French commercial rights from Invivis upon notice to Invivis together with additional consideration.

 

The onapristone license agreement provides the Company with exclusive, worldwide rights to a United States patent that relates to assays for predictive biomarkers for anti-progestin efficacy. The Company intends to expand its patent portfolio by filing additional patent applications covering the use of onapristone and/or a companion diagnostic product. This patent is scheduled to expire in 2031.

 

The Company made a one-time cash payment of $500,000 to Invivis upon execution of the license agreement on February 13, 2012. Additionally, Invivis will receive performance-based cash payments of up to an aggregate of $15.1 million upon successful completion of clinical and regulatory milestones relating to onapristone, which milestones include the marketing approval of onapristone in multiple indications in the United States or the European Union as well as Japan. The first milestone was due upon the dosing of the first patient in a pharmacokinetic study and was achieved during August 2013 and the Company made a $150,000 payment to Invivis during October 2013. The Company made its next milestone payment of $100,000 to Invivis upon the dosing of the first subject in the first Company-sponsored Phase I clinical trial of onapristone in January 2014. A milestone payment of $350,000 for the enrollment of the first patient in a Phase II clinical trial sponsored by Arno was paid in July 2015. In addition, the Company will pay Invivis low single digit sales royalties based on net sales of onapristone by the Company or any of its sublicensees. Pursuant to a separate services agreement which expired in April 2014, Invivis provided the Company with certain clinical development support services, which includes the assignment of up to two full-time employees to perform such services, in exchange for a monthly cash payment of approximately $70,833. Effective April 1, 2014, the Company renewed the services agreement for a period of one year for a monthly cash payment of $50,000 and certain other performance based milestones. The services agreement was not renewed upon its expiration on April 1, 2015.

 

10 

 

 

Under the license agreement with Invivis, the Company also agreed to indemnify and hold Invivis and its affiliates harmless from any and all claims arising out of or in connection with the production, manufacture, sale, use, lease, consumption or advertisement of onapristone, provided however, that the Company shall have no obligation to indemnify Invivis for claims that (a) any patent rights infringe third party intellectual property, (b) arise out of the gross negligence or willful misconduct of Invivis, or (c) result from a breach of any representation, warranty, or confidentiality obligation of Invivis under the license agreement. The license agreement will terminate upon the later of (i) the last to expire valid claim contained in the patent rights, and (ii) February 13, 2032. In general, Invivis may terminate the license agreement at any time upon a material breach by the Company to the extent the Company fails to cure any such breach within 90 days after receiving notice of such breach or in the event the Company files for bankruptcy. The Company may terminate the agreement for any reason upon 90 days’ prior written notice.

 

University of Minnesota License

 

In February 2014, the Company entered into an Exclusive Patent License Agreement with the Regents of the University of Minnesota (the “University”), pursuant to which Arno was granted an exclusive, worldwide, royalty-bearing license for the rights to develop and commercialize technology embodied by certain patent applications relating to a gene expression signature derived from archived breast cancer tissue samples. The Company plans to develop and commercialize this technology as part of the onapristone companion diagnostic development program.

 

The license agreement requires the Company to use commercially reasonable efforts to commercialize the licensed technology as soon as practicable, and includes several performance milestones relating to the development and commercialization of the technology to be achieved by specified dates. Under the terms of the agreement, Arno made a small one-time cash payment and reimbursed the University for past patent expenses it has incurred. The agreement also provides for royalties to be paid to the University on net sales of “Licensed Products” (as defined in the agreement) at a rate in the low-single digits, which royalty obligation terminates on a licensed product-by-licensed product and country-by-country basis upon the first date when there is no longer a valid claim under a licensed patent or patent application covering such licensed product in the country where the licensed product is made or sold.

 

The term of the license agreement continues until the last date on which there is any active licensed patent or pending patent application. The University may terminate the agreement earlier upon certain Arno breaches that remain uncured for a period specified in the agreement. The University may also terminate the agreement if Arno voluntarily files for bankruptcy or similar proceeding, or if a petition for an involuntary bankruptcy proceeding is filed and is not released for 60 days. The agreement may be immediately terminated upon notice to Arno if the Company commences or maintains a proceeding in which it asserts that the licensed patents are invalid or unenforceable. Arno may terminate the agreement at any time and for any reason upon 90 days’ written notice.

 

The license agreement further provides that the Company will indemnify and hold the University and its affiliates harmless from any and all suits, actions, claims, liabilities, demands, damages, losses or expenses relating to Arno’s exercise of its rights under the agreement, including the right to commercialize the licensed technology. The University is required to indemnify Arno with respect to claims relating to or resulting from its breach of the agreement.

 

AR-12 and AR-42 License Agreements

 

The Company’s rights to both AR-12 and AR-42 are governed by separate license agreements with The Ohio State University Research Foundation (“Ohio State”) entered into in January 2008. Pursuant to each of these agreements, Ohio State granted the Company exclusive, worldwide, royalty-bearing licenses to commercialize certain patent applications, know-how and improvements relating to AR-12 and AR-42 for all therapeutic uses.

 

In 2008, pursuant to the Company’s license agreements for AR-12 and AR-42, the Company made one-time cash payments to Ohio State in the aggregate amount of $450,000 and reimbursed it for past patent expenses. Additionally, the Company is required to make performance-based cash payments upon successful completion of clinical and regulatory milestones relating to AR-12 and AR-42 in the United States, Europe and Japan. The license agreements for AR-12 and AR-42 provide for aggregate potential milestone payments of up to $6.1 million for AR-12, of which $5.0 million is due only after marketing approval in the United States, Europe and Japan, and $5.1 million for AR-42, of which $4.0 million is due only after marketing approval in the United States, Europe and Japan.  In September 2009, the Company paid Ohio State a milestone payment upon the commencement of the first Company-sponsored Phase I clinical study of AR-12.  The first milestone payment for AR-42 will be due when the first patient is dosed in the first Company-sponsored clinical trial, which is not expected to occur in 2015. Pursuant to the license agreements for AR-12 and AR-42, the Company must pay Ohio State royalties on net sales of licensed products at rates in the low-single digits. To the extent the Company enters into a sublicensing agreement relating to either or both of AR-12 or AR-42, the Company will be required to pay Ohio State a portion of all non-royalty income received from such sublicensee. The Company does not expect to be required to make any milestone payments under these license agreements during 2015.

  

The license agreements with Ohio State further provide that the Company will indemnify Ohio State from any and all claims arising out of the death of or injury to any person or persons or out of any damage to property, or resulting from the production, manufacture, sale, use, lease, consumption or advertisement of either AR-12 or AR-42, except to the extent that any such claim arises out of the gross negligence or willful misconduct of Ohio State. The license agreements for AR-12 and AR-42 each expire on the later of (i) the expiration of the last valid claim contained in any licensed patent and (ii) 20 years after the effective date of the license. Ohio State will generally be able to terminate either license upon the Company’s breach of the terms of the license to the extent the Company fails to cure any such breach within 90 days after receiving notice of such breach or the Company files for bankruptcy. The Company may terminate either license upon 90 days prior written notice.

 

11 

 

 

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The Company defines fair value as the amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale. The fair value estimates presented in the table below are based on information available to the Company as of September 30, 2015.

 

The accounting standard regarding fair value measurements discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

  • Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

  • Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

  • Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

 

The Company has determined the fair value of certain liabilities using the market approach. The following table presents the Company’s fair value hierarchy for these liabilities measured at fair value on a recurring basis as of September 30, 2015:

 

       Quoted Market         
       Prices in Active   Significant Other   Significant Other 
   Fair Value   Markets   Observable Inputs   Unobservable Inputs 
   September 30, 2015   (Level 1)   (Level 2)   (Level 3) 
                 
Liabilities:                    
Warrant liability - 2012 Series A  $2,115,080   $-   $-   $2,115,080 
Warrant liability - 2012 placement agent   13,904    -    -    13,904 
Warrant liability - 2013 Series D   1,351,201    -    -    1,351,201 
Warrant liability - 2013 placement agent   5,252    -    -    5,252 
Total  $3,485,437   $-   $-   $3,485,437 

 

The following table presents the Company’s fair value hierarchy for these liabilities measured at fair value on a recurring basis as of December 31, 2014:

 

       Quoted Market         
   Fair Value   Prices in
Active
Markets		   Significant Other
Observable Inputs		   Significant
Other
Unobservable
Inputs		 
   Dec 31, 2014   (Level 1)   (Level 2)   (Level 3) 
                 
Liabilities:                    
Warrant liability - 2010 Class B  $28,066   $-   $-   $28,066 
Warrant liability - 2012 Series A&B   3,520,319    -    -    3,520,319 
Warrant liability - 2012 placement agent   67,246    -    -    67,246 
Warrant liability - 2013 Series D&E   3,036,986    -    -    3,036,986 
Warrant liability - 2013 placement agent   18,907    -    -    18,907 
                     
Total  $6,671,524   $-   $-   $6,671,524 

 

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The following table provides a summary of changes in fair value of the Company’s liabilities, as well as the portion of gains included in income attributable to unrealized appreciation that relate to those liabilities held at September 30, 2015:

 

Fair Value Measurement Using Significant Unobservable Inputs (Level 3)

 

   Total           2013           2012     
   Warrant   2013   2013   Placement   2012   2012   Placement   2010 
   Liability   Series E   Series D   Agent   Series B   Series A   Agent   Class B 
                                         
Balance at January 1, 2014  $35,864,881   $5,855,206   $12,482,527   $98,080   $2,816,676   $13,887,307   $362,633   $362,452 
Total gains or losses:                                        
Unrealized appreciation   (29,193,357)   (5,829,469)   (9,471,278)   (79,173)   (2,804,295)   (10,379,369)   (295,387)   (334,386)
Balance at December 31, 2014  $6,671,524   $25,737   $3,011,249   $18,907   $12,381   $3,507,938   $67,246   $28,066 
Total gains or losses:                                        
Unrealized appreciation   (3,186,087)   (25,737)   (1,660,048)   (13,655)   (12,381)   (1,392,858)   (53,342)   (28,066)
Balance at September 30, 2015  $3,485,437   $-   $1,351,201   $5,252   $-   $2,115,080   $13,904   $- 
                                         
Value per Warrant  $0.143   $-   $0.105   $0.080   $-   $0.205   $0.049   $- 

 

 

7. STOCKHOLDERS’ EQUITY

 

Common Stock

  

As of September 30, 2015, the Company had 20,408,616 shares of common stock issued and outstanding and approximately 35,162,344 shares of common stock reserved for issuance upon the exercise of outstanding options and warrants.

 

Warrants

 

In accordance with the 2010 sale and issuance of Series A preferred stock, the Company issued two-and-one-half-year “Class A” warrants to purchase an aggregate of 152,740 shares of Series A Preferred Stock at an initial exercise price of $8.00 per share (the “2010 Class A Warrants”) and five-year Class B warrants to purchase an aggregate of 801,885 shares of Series A Preferred Stock at an initial exercise price of $9.20 per share (the “2010 Class B Warrants,” and together with the 2010 Class A Warrants, the “2010 Warrants”). Upon the automatic conversion of the Series A Preferred Stock in January 2011, the 2010 Warrants automatically converted to the right to purchase an equal number of shares of common stock. The terms of the warrants contain an anti-dilutive price adjustment provision, such that, in the event the Company issues common shares at a price below the current exercise price of the 2010 Warrants, the exercise price will be decreased pursuant to a customary “weighted-average” formula. In accordance with this provision and as a result of the issuances made pursuant to the 2012 Purchase Agreement and 2013 Purchase Agreement, the exercise price of the 2010 Class B warrants has been adjusted to $3.55 per share. Because of this anti-dilution provision and the inherent uncertainty as to the probability of future common share issuances, the Black-Scholes option pricing model the Company uses for valuing stock options could not be used.  Management used a Monte Carlo simulation model and, in doing so, utilized a third-party valuation report to determine the warrant liability to be approximately zero at December 31, 2014. The Monte Carlo simulation is a generally accepted statistical method used to generate a defined number of stock price paths in order to develop a reasonable estimate of the range of the Company’s future expected stock prices and minimizes standard error. This valuation is revised on a quarterly basis until the warrants are exercised or they expire, with the changes in fair value recorded in other income (expense) on the statement of operations. The 2010 Class A warrants, representing the right to purchase an aggregate of 152,740 shares of common stock, expired unexercised during the year ended December 31, 2013, and the Class B warrants, representing the right to purchase an aggregate of 801,885 shares of common stock, expired unexercised during September 2015.

 

13 

 

 

Pursuant to the 2012 Purchase Agreement for the sale and issuance of 8% Senior Convertible Debentures, the Company issued five-year Series A warrants to purchase an aggregate of approximately 6,190,500 shares of common stock at an initial exercise price of $4.00 per share and 18-month Series B warrants (together with the Series A warrant, the “2012 Warrants”) to purchase an aggregate of approximately 6,190,500 shares of common stock at an initial exercise price of $2.40 per share. The terms of the 2012 Warrants contain a “full-ratchet” anti-dilutive price adjustment provision. In accordance with such full-ratchet anti-dilution provision, in the event that the Company sells or issues additional shares of common stock, including securities convertible or exchangeable for common stock (subject to customary exceptions), at a per share price less than the applicable 2012 Warrant exercise price, such warrant exercise price will be reduced to an amount equal to the issuance price of such subsequently issued shares; after such time as the Company has raised at least $12 million in additional equity financing, the 2012 Warrants are subject to further anti-dilution protection based on a weighted-average formula. Further, the anti-dilution provisions of the 2012 Warrants provide that, in addition to a reduction in the applicable exercise price, the number of shares purchasable thereunder is increased such that the aggregate exercise price of the warrants (exercise price per share multiplied by total number of shares underlying the warrants) remained unchanged. In accordance with the terms of this anti-dilution provision and as a result of the Company’s issuances under the 2013 Purchase Agreement, the exercise price of the Series A warrants was reduced to $2.40 per share and the aggregate number of shares underlying such warrants was increased to 10,317,464 shares. The 2012 Warrants also contain a provision that may require the Company to repurchase such warrants from their holders in connection with a sale of the Company or similar transactions. As a result of such anti-dilution and repurchase provisions, the Company is required to record the fair value of the 2012 Warrants as a liability on the accompanying balance sheet. Because of this anti-dilution provision and the inherent uncertainty as to the probability of future common share issuances, the Black-Scholes option pricing model the Company uses for valuing stock options could not be used.  Management used a Monte Carlo simulation model and, in doing so, utilized a third-party valuation report to determine the warrant liability to be approximately $2.1 million and $3.5 million at September 30, 2015 and December 31, 2014, respectively. The Debentures were converted to common stock in 2013. At the time of the conversion of the Debentures, the expiration date of the 2012 Series B Warrants was extended to October 31, 2014, and was thereafter further extended to January 31, 2015. The 2012 Series B warrants, representing the right to purchase an aggregate of approximately 6,190,500 shares of common stock, expired unexercised on January 31, 2015.

 

In connection with the sale of the Debentures and 2012 Warrants, the Company engaged Maxim Group LLC, or Maxim, to serve as placement agent. In consideration for its services, the Company paid Maxim a placement fee of $1,035,000. In addition, the Company issued to an affiliate of Maxim 7,500 shares of common stock and five-year warrants to purchase an additional 283,750 shares of common stock at an initial exercise price of $2.64 per share. The warrants issued to Maxim are in substantially the same form as the 2012 Warrants issued to the investors, except that they do not include certain anti-dilution provisions contained in the investors’ 2012 Warrants. However, the placement warrants do contain a provision that could require the Company to repurchase the warrants from the holder in connection with a sale of the Company or similar transaction. As a result of such repurchase provision, the Company is required to record the fair value of such warrants as a liability on the accompanying balance sheet. Management used a Monte Carlo simulation model and, in doing so, utilized a third-party valuation report to determine the warrant liability to be approximately $0.0 million and $0.1 million at September 30, 2015 and December 31, 2014, respectively.

 

Under the terms of the 2013 Purchase Agreement for the issuance and sale of common stock, each Purchaser received Series D and Series E Warrants and had the option to elect to receive a Series C Warrant in lieu of a Share in connection with each Unit it purchased. The Series C Warrants have a five-year term and are exercisable at an initial exercise price of $0.01 per share. The Series D Warrants have a five-year term and are exercisable at an initial exercise price of $4.00 per share, subject to adjustment for stock splits, combinations, recapitalization events and certain dilutive issuances (as described below). The Series E Warrants were initially exercisable until October 31, 2014, which exercise date was subsequently extended by the Company to January 31, 2015. The initial exercise price of the Series E Warrants was $2.40 per share, subject to adjustment for stock splits, combinations, recapitalization events and certain dilutive issuances (as described below). The applicable exercise price of the Series D Warrants and Series E Warrants (but not the Series C Warrants) is subject to a weighted-average price adjustment in the event the Company makes future issuances of common stock or rights to acquire common stock (subject to certain exceptions) at a per share price less than the applicable warrant exercise price. The 2013 Warrants also contain a provision that may require the Company to repurchase such warrants from their holders in connection with a sale of the Company or similar transactions. As a result of such anti-dilution and repurchase provisions, the Company is required to record the fair value of the 2013 Warrants as a liability on the accompanying balance sheet. Because of this anti-dilution provision and the inherent uncertainty as to the probability of future common share issuances, the Black-Scholes option pricing model the Company uses for valuing stock options could not be used.  Management used a Monte Carlo simulation model and, in doing so, utilized a third-party valuation report to determine the warrant liability for the Series D to be approximately $1.4 million at September 30, 2015 and approximately $3.0 million at December 31, 2014 for the Series D and Series E Warrants. The 2013 Series E warrants, representing the right to purchase an aggregate of 12,868,585 shares of common stock, expired unexercised on January 31, 2015.

 

The 2013 Warrants are required to be exercised for cash, provided that if during the term of the Warrants there is not an effective registration statement under the Securities Act covering the resale of the shares issuable upon exercise of the Warrants, then the Warrants may be exercised on a cashless (net exercise) basis.

  

14 

 

 

Below is a table that summarizes all outstanding warrants to purchase shares of the Company’s common stock as of September 30, 2015:

 

Grant Date  Warrants Issued   Exercise Price   Weighted
Average
Exercise Price		   Expiration
Date		  Exercised   Warrants
Outstanding		 
                             
11/26/2012   8,822,887   $2.40   $2.40   11/26/2017   -    8,822,887 
11/26/2012   261,250   $2.64   $2.64   11/26/2017   -    261,250 
12/18/2012   1,494,577   $2.40   $2.40   12/18/2017   -    1,494,577 
12/18/2012   22,500   $2.64   $2.64   12/18/2017   -    22,500 
10/29/2013   4,455,231   $0.01   $0.01   10/29/2018   -    4,455,231 
10/29/2013   12,868,585   $4.00   $4.00   10/29/2018   -    12,868,585 
10/29/2013   65,650   $2.64   $2.64   10/29/2018   -    65,650 
    27,990,680        $2.76       -    27,990,680 

 

8. STOCK OPTION PLAN

 

The Company’s 2005 Stock Option Plan (the “Plan”) was originally adopted by the Board of Directors of Old Arno in August 2005, and was assumed by the Company on June 3, 2008 in connection with the Merger. After giving effect to the Merger, there were initially 373,831 shares of the Company’s common stock reserved for issuance under the Plan. On April 25, 2011, the Company’s Board of Directors (the “Board”) approved an amendment to the Plan to increase the number of shares of common stock issuable under the Plan to 875,000 shares. On January 14, 2013, the Board approved an amendment to the Plan to increase the number of shares of common stock issuable under the Plan to 945,276 shares. On October 7, 2013, the Board adopted an amendment to the Plan, as amended that increased the number of shares of common stock authorized for issuance thereunder from 945,276 to 11,155,295. Under the Plan, incentives may be granted to officers, employees, directors, consultants, and advisors. Incentives under the Plan may be granted in any one or a combination of the following forms: (a) incentive stock options and non-statutory stock options, (b) stock appreciation rights, (c) stock awards, (d) restricted stock and (e) performance shares.

 

The Plan is administered by the Board, or a committee appointed by the Board, which determines recipients and types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule. The term of stock options granted under the Plan cannot exceed 10 years. Options shall not have an exercise price less than the fair market value of the Company’s common stock on the grant date, and generally vest over a period of three to four years.

 

As of September 30, 2015, there are 3,943,651 shares available for future grants and awards under the Plan, which covers stock options, warrants and restricted stock awards.

  

The Company issued the following stock options during the three and nine month periods ended September 30, 2015 and 2014, respectively:

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
   2015   2014   2015   2014 
                     
Options granted   -    -    -    2,186,957 

 

The Company estimated the fair value of each option award granted using the Black-Scholes option-pricing model. The following assumptions were used for the nine months ended September 30, 2014 as no options were granted in 2015 and the three months ended September 30, 2014: 

 

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   Three Months Ended September 30,   Nine Months Ended September 30, 
   2015   2014   2015   2014 
                 
Expected volatility   N/A    N/A    N/A    92%
Expected term   N/A    N/A    N/A    6 years 
Dividend yield   N/A    N/A    N/A    0.0%
Risk- free interest rate   N/A    N/A    N/A    1.57% - 1.58%
Stock price   N/A    N/A    N/A    $2.23 - $2.90 
Forfeiture rate   N/A    N/A    N/A    0.0%

 

A summary of the status of the options issued under the Plan at September 30, 2015, and information with respect to the changes in options outstanding, is as follows:  

 

   Number of
Shares		   Weighted-
Average
Exercise Price		   Aggregate
Intrinsic
Value		 
             
Options outstanding at December 31, 2014   7,339,118   $2.59   $- 
Granted   -    -    - 
Exercised   -    -    - 
Cancelled   (167,454)  $2.78    - 
Options outstanding at September 30, 2015   7,171,664   $2.59   $- 
                
Options vested and expected to vest at September 30, 2015   7,171,664   $2.59   $- 
                
Exercisable at September 30, 2015   4,456,031   $2.70   $- 
                
Shares available for grant under the 2005 Plan   3,943,651           

 

The following table summarizes information about stock options outstanding at September 30, 2015:

 

    Outstanding   Exercisable 
Exercise Price   Number of
Shares		   Weighted-
Average
Remaining
Contractual
Life (Years)		   Weighted-
Average
Exercise
Price		   Number
of Shares		   Weighted-
Average
Exercise Price		 
                            
$0.85    136,785    9.10   $0.85    37,995   $0.85 
$1.30    100,000    9.02   $1.30    -   $1.30 
$2.23    223,445    8.40   $2.23    97,757   $2.23 
$2.40    5,188,107    7.44   $2.40    3,387,298   $2.40 
$2.90    1,420,944    8.31   $2.90    830,598   $2.90 
$8.00    65,000    4.82   $8.00    65,000   $8.00 
$19.38    37,383    2.53   $19.38    37,383   $19.38 
                            
Total    7,171,664    7.64   $2.59    4,456,031   $2.70 

 

16 

 

 

Stock-based compensation costs under the Plan for the three and nine month periods ended September 30, 2015 and 2014 are as follows:

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
   2015   2014   2015   2014 
                 
Research and development  $275,429   $209,411   $830,180   $756,997 
General and administrative   658,900    874,639    2,027,109    2,745,082 
                     
Total  $934,329   $1,084,050   $2,857,289   $3,502,079 

 

The fair value of options vested under the Plan was approximately $935,446 and $1,101,685 for the three months ended September 30, 2015 and 2014, and $3,590,708 and $3,018,414 for the nine months ended September 30, 2015 and 2014, respectively.

 

At September 30, 2015, total unrecognized estimated compensation cost related to stock options granted prior to that date was approximately $4,709,724 which is expected to be recognized over a weighted-average vesting period of 2.1 years. This unrecognized estimated employee compensation cost does not include any estimate for forfeitures of performance-based stock options.

 

Common stock, stock options or other equity instruments issued to non-employees (including consultants and all members of the Company’s Scientific Advisory Board) as consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued (unless the fair value of the consideration received can be more reliably measured). The fair value of stock options is determined using the Black-Scholes option-pricing model and is expensed as the underlying options vest. The fair value of any options issued to non-employees is recorded as expense over the applicable service periods.

 

9. SUBSEQUENT EVENTS

 

On October 21, 2015, the Company entered into a Convertible Note Purchase Agreement (the “Note Purchase Agreement”) with certain accredited investors pursuant to which it sold an aggregate principal amount of $2.1 million of its Unsecured Convertible Promissory Notes (the “Notes”) for an aggregate original issue price of $2.1 million.

 

The Notes, which have a maturity date of October 21, 2016, bear interest at the rate of six percent per annum. The Company may not prepay the Notes prior to December 31, 2015, and thereafter may do so only after providing each holder 10 business days’ notice. Upon an “Event of Default” under the Notes, the holders may declare the entire outstanding principal and accrued interest due and immediately payable. As defined under the Notes, an Event of Default includes the Company’s failure to pay any principal, interest or other amount owing under the Notes when due and its commencement of a bankruptcy or similar insolvency proceeding.

 

The principal and accrued interest under the Notes may be converted any time after December 31, 2015, at the election of the holder into shares of the Company’s common stock at a per share price equal to the average closing price of the Company’s common stock during the 50 trading days immediately preceding conversion. If not sooner converted by the holders or otherwise repaid by the Company, the principal and accrued interest owing under the Notes will automatically convert upon the Company’s completion of a “Qualified Financing.” For purposes of the Notes, a Qualified Financing means the Company’s issuance or sale of shares or units of its equity securities for the principal purpose of raising capital, in a single transaction or a series of related transactions, in each case occurring prior to the maturity date, and that results in the Company having received aggregate gross proceeds of at least $3.5 million (including the proceeds from the satisfaction of the indebtedness resulting from the conversion of the Notes). In the case of a Qualified Financing, the outstanding principal and accrued interest will convert into the identical securities sold to the investors in the Qualified Financing and on the same terms.

 

The purchasers of the Notes included several officers and directors of the Company, or entities affiliated with officers and directors of the Company. All such officers and directors made such investment on the same terms as all other purchasers under the Note Purchase Agreement. 

 

17 

 

 

Item 2.           Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Overview

 

We are focused on developing innovative products for the treatment of cancer and other life threatening diseases. We currently have exclusive worldwide rights to three innovative clinical stage compounds with unique mechanisms of action that have the potential to be first-in-class therapeutics.

 

The following is a summary of our product development pipeline:

 

  • Onapristone – We are currently developing onapristone, an oral anti-progestin hormone blocker that has been shown to have considerable anti-tumor activity in patients with breast cancer. Onapristone appears to have a unique ability to block the activation of the progesterone receptor and inhibit tumor growth. In connection with the development of onapristone, we have engaged Leica Biosystems to develop an immunohistochemistry based diagnostic test to identify tumors with the activated form of the progesterone receptor (APR), which is intended to identify patients more likely to benefit from treatment with onapristone.

 

In December 2014, we enrolled the first patient in the expansion phase of our ongoing Phase I/II clinical trial evaluating onapristone in women with progesterone receptor (PR) expressing tumors. The protocol was subsequently amended to include a formal Phase II study which will include up to 29 patients with recurrent or metastatic endometrioid tumors that have been shown to express APR, and who have received no more than one prior chemotherapy and no prior hormone therapy. All patients in the Phase II component of the study will receive 50mg of extended release onapristone twice daily, the dose determined by an independent data review committee to be safely administered to patients based on the results of the Phase I component of this study. The study protocol provides that if at least two of the first 10 patients have a confirmed response by RECIST 1.1 criteria, an additional 19 patients will be enrolled, for a total of 29 patients. The study incorporates a diagnostic test targeting women with tumors expressing APR, which is intended to select those patients more likely to respond to onapristone treatment. At present, this study is being conducted at multiple sites in France with plans to open additional sites in the United States as soon as practicable.

 

In addition, in April 2014, we enrolled the first patient in a Phase I/II clinical trial of onapristone in men with advanced castration-resistant prostate cancer, or CRPC, after failure of abiraterone or enzalutamide. This study is currently being conducted at three sites in the United Kingdom, led by the Royal Marsden NHS Foundation Trust in London. The randomized, open-label trial is designed to evaluate the safety and anti-cancer activity of onapristone in the defined patient population. The phase I component of the study evaluated onapristone extended-release tablet formulations in five dose levels (10-50 mg, twice daily) in patients with prostate cancer and has completed enrollment. The protocol has been amended to study the combination of onapristone plus abiraterone in a Phase I setting with an expansion phase. In addition, the protocol also includes a Phase II cohort of patients that will be enrolled to gain additional understanding of the onapristone as a potential treatment in men with CRPC. The phase II aspect of the study includes; a component that will evaluate the combination of onapristone plus abiraterone acetate in men who have had evidence of progression of disease while on abiraterone acetate. These subjects will be selected for inclusion in the study based on a positive expression of PR in their prostate cancer or evidence of the T878A androgen receptor mutation. Another component of this Phase II aspect of the study will further evaluate the safety profile and potential anti-cancer activity of single agent onapristone in men with advanced CRPC after failure of abiraterone or enzalutamide. In accordance with the study protocol, study subjects will be evaluated for whether their tumors express APR, which may help identify patients who are more likely to respond to onapristone. Enrollment of patients under the amended study protocol is expected to begin during the fourth quarter of 2015 and will include approximately 60 additional patients.

 

  • AR-12 and analogues– AR-12 was initially being developed as an orally available agent which demonstrated to inhibit multiple different kinase targets. We believe AR-12 may also cause malignant cell death through the induction of stress in the endoplasmic reticulum and recent work has demonstrated that AR-12 inhibits various molecular protein chaperones including GRP78, HSP70, HSP90 and HSP27. We have completed a Phase I clinical trial of AR-12 in adult patients with advanced or recurrent solid tumors or lymphoma using the original non optimized formulation of AR-12. Subsequently, an improved formulation of AR-12 that has been shown to substantially increase bioavailability in preclinical models has been developed. Based on additional pre-clinical research conducted on AR-12, we are currently pursuing various opportunities with the potential for securing non-dilutive funding, via government and philanthropic agency grants and contracts, for further research into the potential use of AR-12 as an anti-microbial agent. In April 2015, the EMA granted two orphan drug designations for AR-12 for the treatment of cryptococcosis and tularaemia. Cryptococcosis is an infectious disease of the lungs caused by the fungus Cryptococcus neoformans and is one of the most common life-threatening fungal infections in people with AIDS. Tularaemia is an infection which can be spread from animals to humans that is caused by the bacterium Francisella tularensis and is a Category A Priority Pathogen on the National Institute of Allergy and Infectious Disease (NIAID) list of Biodefense and Emerging Infectious Diseases. A CRADA is in place with the U.S. Army Medical Research Institute of Infectious Diseases (USAMRIID) for the evaluation of AR-12 and four analogues against pathogens of biodefense interests. Other analogues of AR-12 such as AR-13 are being investigated for activity against certain microbial pathogens through a number of collaborations.  

 

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  • AR-42 – AR-42 is being developed as an orally available, broad spectrum inhibitor of both histone and non-histone deacetylation proteins, or Pan-DAC, which play an important role in the regulation of gene expression, cell growth and survival. AR-42 recently completed an investigator-initiated dose escalation clinical study with an expansion phase in adult subjects with relapsed or refractory hematological malignancies (multiple myeloma, chronic lymphocytic leukemia (CLL), or lymphoma) and solid tumors. The recommended Phase II dose, or RP2D, in patients with hematological malignancies has been determined and the expansion phase of the program has been completed. The protocol has been amended to include a separate solid tumor dose escalation cohort and expansion phase. The solid tumor component of the study has been completed. We also supported an investigator initiated Phase I study of AR-42 in combination with decitabine in patients with hematological malignancies that was initiated during the third quarter of 2013. The FDA has granted two orphan drug designations for AR-42 for the treatment of meningioma and the treatment of schwannoma of the central nervous system. Meningioma and schwannoma are rare, benign tumors that can present in different locations within the brain and the spinal cord and may cause substantial morbidity for those affected individuals. Additionally, AR-42 has been granted three orphan drug designations by the European Medicines Agency, or EMA, for the treatment of neurofibromatosis type 2 (NF2), the treatment of meningioma and the treatment of schwannoma. NF2 is a rare genetic disorder characterized by the growth of noncancerous tumors in the brain and spinal cord, juvenile cataracts, and neurofibromas of the skin. Additional investigator sponsored clinical trials of AR-42 are currently underway or being planned.

  

We have no product sales to date and we will not generate any product revenue until we receive approval from the FDA or equivalent foreign regulatory bodies to begin selling our pharmaceutical product candidates. Developing pharmaceutical products is a lengthy and very expensive process. Assuming we do not encounter any unforeseen safety or other issues during the course of developing our product candidates, we do not expect to complete the development of a product candidate for several years, if ever. To date, almost all of our development expenses have been incurred on each of our product candidates: Onapristone, AR-12, AR-42 and AR-67 (a compound we are no longer developing). As we proceed with the clinical development of our product candidates, primarily focusing our resources on onapristone, our research and development expenses will further increase. To the extent we are successful in acquiring additional product candidates for our development pipeline, our need to finance further research and development will continue increasing. Accordingly, our success depends not only on the safety and efficacy of our product candidates, but also on our ability to finance the development of the products. To date, our major sources of working capital have been proceeds from private and public sales of our common and preferred stock and debt financings.

 

Research and development, or R&D, expenses consist primarily of salaries and related personnel costs, fees paid to consultants and outside service providers for pre-clinical, clinical, and manufacturing development, legal expenses resulting from intellectual property prosecution, costs related to obtaining and maintaining our product license agreements, contractual review, and other expenses relating to the design, development, testing, and enhancement of our product candidates. We expense our R&D costs as they are incurred.

 

General and administrative, or G&A, expenses consist primarily of salaries and related expenses for executive, finance and other administrative personnel, accounting, legal and other professional fees, business development expenses, rent, business insurance and other corporate expenses.

 

Our results include non-cash compensation expense as a result of the issuance of stock options. We expense the fair value of stock options over the vesting period. When more precise pricing data is unavailable, we determine the fair value of stock options using the Black-Scholes option-pricing model. The terms and vesting schedules for share-based awards vary by type of grant and the employment status of the grantee. Generally, the awards vest based upon time-based or performance-based conditions. Performance-based conditions generally include the attainment of goals related to our financial performance and product development. Stock-based compensation expense is included in the respective categories of expense in the statements of operations. We expect to record additional non-cash compensation expense in the future, which may be significant.

  

Results of Operations

 

General and Administrative Expenses. G&A expenses for each of the three month periods ended September 30, 2015 and 2014 were approximately $1.1 million and $1.9 million, respectively. The decrease of approximately $0.8 million for the third quarter of 2015 over the same period in 2014 is primarily the result of decreased non-cash compensation expense in 2015 of approximately $0.2 million, reduced spending on professional fees of $0.1 million and lower severance of $0.4 million related to the departure of the Company’s previous CEO in 2014.

 

G&A expenses for each of the nine month periods ended September 30, 2015 and 2014 were approximately $3.8 million and $5.3 million, respectively. The decrease of approximately $1.5 million for the first nine months of 2015 over the same period in 2014 is primarily the result of decreased non-cash compensation expense in 2015 of approximately $0.7 million and reduced spending on professional fees of $0.2 million and lower severance of $0.4 million related to the departure of the Company’s previous CEO in 2014.

  

Research and Development Expenses. R&D expenses for the three month periods ended September 30, 2015 and 2014 were approximately $1.8 million and $3.8 million, respectively. The decrease of approximately $2.0 million for the third quarter of 2015 compared to the same period in 2014 is primarily due to a decrease in spending for our lead product candidate, onapristone. Total direct onapristone development costs for the quarter ended September 30, 2015 were approximately $1.0 million compared to approximately $3.0 million for the quarter ended September 30, 2014. This decrease of approximately $2.0 million over the same period of 2014 is primarily due to decreased spending on pre-clinical and non-clinical research activities that supported the initiation of the Phase I/II clinical trials and companion diagnostic development program in 2014.

 

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R&D expenses for the nine month periods ended September 30, 2015 and 2014 were approximately $6.9 million and $12.3 million, respectively. The decrease of approximately $5.4 million for the first nine months of 2015 compared to the same period in 2014 is primarily due to a decrease in spending for our lead product candidate, onapristone. Total direct onapristone development costs for the nine months ended September 30, 2015 were approximately $4.5 million compared to approximately $9.8 million for the nine months ended September 30, 2014. This decrease of approximately $5.3 million over the same period of 2014 is primarily due to decreased spending on pre-clinical and non-clinical research activities that supported the initiation of the Phase I/II clinical trials and companion diagnostic development program in 2014.

  

The following table summarizes our R&D expenses incurred for preclinical support, contract manufacturing of clinical supplies, clinical trial services provided by third parties and milestone payments for in-licensed technology for each of our product candidates for the three and nine month periods ended September 30, 2015 and 2014, as well as the cumulative amounts since we began development of each product candidate through September 30, 2015. The table also summarizes unallocated costs, which consist of personnel, facilities and other costs not directly allocable to specific development programs (the amounts stated are expressed in thousands):

 

   Three Months Ended September 30,   Nine Months Ended September 30,   Cumulative
amounts during		 
   2015   2014   2015   2014   development 
                     
Onapristone  $1,021   $2,988   $4,459   $9,813   $30,438 
AR-12   315    211    634    403    11,817 
AR-42   48    11    180    (13)   5,583 
AR-67   4    7    63    19    8,216 
Unallocated R&D   405    539    1,579    2,053    16,023 
Total  $1,793   $3,756   $6,915   $12,275   $72,077 

 

Our expenditures on current and future clinical development programs are expected to be substantial and to increase particularly in relation to our available capital resources. For example, in fiscal year 2015, we plan to incur total external development costs of approximately $6.0 million, $0.7 million and $0.2 million on onapristone, AR-12 and AR-42, respectively, including amounts already incurred through September 30, 2015. However, these planned expenditures are subject to many uncertainties, including the availability of necessary capital, the results of clinical trials and whether we develop any of our drug candidates with a partner or independently. As a result of such uncertainties, it is very difficult to accurately predict the duration and completion costs of our research and development projects or whether, when and to what extent we will generate revenues from the commercialization and sale of any of our product candidates. The duration and cost of clinical trials may vary significantly over the life of a project as a result of unanticipated events arising during clinical development and a variety of factors, including:

 

  • the number of trials and studies in a clinical program;
  • the number of patients who participate in the trials;
  • the number of sites included in the trials;
  • the rates of patient recruitment and enrollment;
  • the duration of patient treatment and follow-up;
  • the costs of manufacturing our drug candidates; and
  • the costs, requirements, timing of, and ability to secure regulatory approvals.

 

Interest Income. Interest income for the three months ended September 30, 2015 and 2014 was $530 and $10,087 respectively. The decrease in interest income compared to the same period in 2014 is primarily due to lower average cash balances held during 2015 compared to the same period of 2014.

 

Interest income for the nine months ended September 30, 2015 and 2014 was $7,625 and $34,947 respectively. The decrease in interest income compared to the same period in 2014 is primarily due to lower average cash balances held during 2015 compared to the same period of 2014.

 

Other Income. Other income for the three months ended September 30, 2015 was approximately $2.2 million compared to other income of approximately $5.8 million for the three months ended September 30, 2014. The change in 2015 over 2014 is related to noncash adjustments to the warrant liability primarily driven by our decreased stock price, the expiration of certain warrants and reduced amount of time until the remaining warrants expire.

 

Other income for the nine months ended September 30, 2015 was approximately $3.2 million compared to other income of approximately $20.8 million for the nine months ended September 30, 2014. The change in 2015 over 2014 is related to noncash adjustments to the warrant liability primarily driven by our decreased stock price, the expiration of certain warrants and reduced amount of time until the remaining warrants expire.

 

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Liquidity and Capital Resources

 

The following table summarizes our liquidity and capital resources as of September 30, 2015 and December 31, 2014 and our net changes in cash and cash equivalents for the nine months ended September 30, 2015 and 2014 (the amounts stated are expressed in thousands):

 

   September 30,   December 31, 
Liquidity and capital resources  2015   2014 
         
Cash and cash equivalents  $123   $7,948 
Working capital   (1,789)   6,049 
Stockholders' deficit   (5,245)   (589)

 

   Nine Months Ended September 30, 
Cash flow data  2015   2014 
         
Cash used in:          
Operating activities  $(7,823)  $(15,177)
Investing activities   -    (20)
Financing activities   (2)   - 
Net decrease in cash and cash equivalents  $(7,825)  $(15,197)

 

Our total cash resources as of September 30, 2015 were approximately $0.1 million compared to approximately $7.9 million as of December 31, 2014. As of September 30, 2015, we had approximately $5.7 million in liabilities (of which approximately $3.5 million represented non-cash derivative liabilities), and a deficit of approximately $1.7 million of net working capital. We realized net loss of approximately $7.5 million and had negative cash flow from operating activities of $7.8 million for the nine months ended September 30, 2015. As we continue to develop our product candidates, we expect to incur substantial and increasing losses, which will continue to generate negative net cash flows from operating activities as we expand our technology portfolio and engage in further research and development activities, particularly the conduct of additional pre-clinical studies and clinical trials.

 

In October 2015, we received gross proceeds of $2.1 million from our sale and issuance of Unsecured Convertible Promissory Notes (the “Notes”) pursuant to a note purchase agreement among us and several purchasers identified in such agreement. The Notes, which have a maturity date of October 21, 2016, bear interest at the rate of six percent per annum. We may not prepay the Notes prior to December 31, 2015, and thereafter may do so only after providing each holder 10 business days’ notice. Upon an “Event of Default” under the Notes, the holders may declare the entire outstanding principal and accrued interest due and immediately payable. As defined under the Notes, an Event of Default includes our failure to pay any principal, interest or other amount owing under the Notes when due and its commencement of a bankruptcy or similar insolvency proceeding. The principal and accrued interest under the Notes may be converted any time after December 31, 2015, at the election of the holder into shares of our common stock at a per share price equal to the average closing price of our common stock during the 50 trading days immediately preceding conversion. If not sooner converted by the holders or otherwise repaid by us, the principal and accrued interest owing under the Notes will automatically convert upon our completion of a “Qualified Financing.” For purposes of the Notes, a Qualified Financing means the issuance or sale by us of shares or units of our equity securities for the principal purpose of raising capital, in a single transaction or a series of related transactions, in each case occurring prior to the maturity date, and that results in us having received aggregate gross proceeds of at least $3.5 million (including the proceeds from the satisfaction of the indebtedness resulting from the conversion of the Notes). In the case of a Qualified Financing, the outstanding principal and accrued interest under the Notes will convert into the identical securities sold to the investors in the Qualified Financing and on the same terms.

 

From inception through September 30, 2015, we have financed our operations through private sales of our equity and debt securities.  As we have not generated any revenue from operations to date, and we do not expect to generate revenue for several years, if ever, we will need to raise substantial additional capital in order to continue to fund our research and development, including our long-term plans for clinical trials and new product development, as well as to fund operations generally. We are seeking to raise additional funds through various potential sources, such as equity and debt financings, or through strategic collaborations and license agreements.  We can give no assurances that we will be able to secure such additional sources of funds to support our operations, or if such funds are available to us, that such additional financing will be sufficient to meet our needs. 

  

Based on our current development plans, we believe our existing cash resources, including the $2.1 million proceeds from the sale of the Notes in October 2015 are sufficient to fund our operations through approximately December 2015. However, based on the various options for future clinical studies of onapristone, AR-12 and AR-42, our projected cash needs are difficult to predict. In addition, there are other factors which may also cause our actual cash requirements to vary materially, including changes in the focus and direction of our research and development programs; the acquisition and pursuit of development of new product candidates; competitive and technical advances; costs of commercializing any of the product candidates; and costs of filing, prosecuting, defending and enforcing any patent claims and any other intellectual property rights. If we are unable to raise additional funds when needed, we may not be able to continue development and regulatory approval of our products, and we could be required to delay, scale back or eliminate some or all of our research and development programs and we may need to wind down our operations altogether. Each of these alternatives would likely have a material adverse effect on our business and may result in a loss of your entire investment in our common stock.

 

The actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. These factors include the following:

 

  · the progress and results of our research activities;
  · the costs of hiring additional full-time personnel;
  · the number and scope of our research programs;
  · the progress and results of our pre-clinical and clinical development activities;

 

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  • the costs and timing of manufacturing our drug candidates;
  • the progress of the development efforts of parties with whom we have entered into research and development agreements;
  • our ability to maintain current research and development programs and to establish new research and development and licensing arrangements;
  • the cost involved in prosecuting and enforcing patent claims and other intellectual property rights; and
  • the cost and timing of regulatory approvals.

 

We have based our estimates on assumptions that may prove to be wrong. We may need to obtain additional funds sooner than planned or in greater amounts than we currently anticipate. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements do not include any adjustments that might result from the inability of the Company to continue as a going concern.

 

License Agreement Commitments

 

Onapristone License Agreement

 

Our rights to onapristone are governed by a license agreement with Invivis dated February 13, 2012. Under this agreement, we hold an exclusive, royalty-bearing license for the rights to commercialize onapristone for all therapeutic uses. The license agreement provides us with worldwide commercial rights to onapristone with the exception of France, although under the license agreement we have an option to acquire French commercial rights from Invivis by providing notice to Invivis and making a cash payment.

 

The onapristone license agreement provides us with exclusive, worldwide rights to a U.S. patent that relates to assays for predictive biomarkers for anti-progestin efficacy. We intend to expand our patent portfolio by filing additional patent applications covering the use and manufacture of onapristone and/or a companion diagnostic product. This patent is scheduled to expire in 2031.

 

We made a one-time cash payment of $500,000 to Invivis upon execution of the license agreement on February 13, 2012. Additionally, Invivis will receive performance-based cash payments of up to an aggregate of $15.1 million upon successful completion of clinical and regulatory milestones relating to onapristone, which milestones include the marketing approval of onapristone in multiple indications in the United States or the European Union as well as Japan. We made the first milestone payment to Invivis upon the dosing of the first subject in the first Company-sponsored Phase I clinical trial of onapristone, which occurred in January 2014. An additional milestone payment of $350,000 for the enrollment of the first patient enrolled in the first Company-sponsored Phase II clinical trial of onapristone was paid in July 2015. In addition, we will pay Invivis low single digit sales royalties based on net sales of onapristone by us or any of our sublicensees. Pursuant to a separate services agreement, Invivis provided us with certain clinical development support services through April 1, 2015, in exchange for a monthly cash payment.

 

 Under the license agreement with Invivis, we also agreed to indemnify and hold Invivis and its affiliates harmless from any and all claims arising out of or in connection with the production, manufacture, sale, use, lease, consumption or advertisement of onapristone, provided, however, that we shall have no obligation to indemnify Invivis for claims that (a) any patent rights infringe third party intellectual property, (b) arise out of the gross negligence or willful misconduct of Invivis, or (c) result from a breach of any representation, warranty, or confidentiality obligation of Invivis under the license agreement. The license agreement will terminate upon the later of (i) the last to expire valid claim contained in the patent rights, and (ii) February 13, 2032. In general, Invivis may terminate the license agreement at any time upon a material breach by us to the extent we fail to cure any such breach within 90 days after receiving notice of such breach or in the event we file for bankruptcy. We may terminate the agreement for any reason upon 90 days’ prior written notice.

 

University of Minnesota License

 

In February 2014, we entered into an Exclusive Patent License Agreement with the Regents of the University of Minnesota, or UM, pursuant to which we were granted an exclusive, worldwide, royalty-bearing license for the rights to develop and commercialize technology embodied by certain patent applications relating to a gene expression signature derived from archived breast cancer tissue samples. We plan to develop and commercialize this technology as part of our companion diagnostic development program as a tool to identify progesterone-stimulated pathway activation, which in turn may identify patients who would be more likely to benefit from treatment with onapristone.

 

The license agreement requires us to use commercially reasonable efforts to commercialize the licensed technology as soon as practicable, and includes several performance milestones relating to the development and commercialization of the technology to be achieved by us at specified dates. Under the terms of the agreement, we made a small one-time cash payment and reimbursed UM for past patent expenses it has incurred. The agreement also provides that we will pay royalties to UM on net sales of “Licensed Products” (as defined in the agreement) at a rate in the low-single digits, which royalty obligation terminates on a licensed product-by-licensed product and country-by-country basis upon the first date when there is no longer a valid claim under a licensed patent or patent application covering such licensed product in the country where the licensed product is made or sold.

 

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The term of the license agreement continues until the last date on which there is any active licensed patent or pending patent application. UM may terminate the agreement earlier upon a breach by us of one or more of our obligations that remains uncured for a period specified in the agreement. UM may also terminate the agreement if we voluntarily file for bankruptcy or similar proceeding, or if a petition for an involuntary bankruptcy proceeding is filed and is not released for 60 days. The agreement may be immediately terminated upon notice to us if we commence or maintain a proceeding in which we assert that the licensed patents are invalid or unenforceable. We may terminate the agreement at any time and for any reason upon 90 days’ written notice.

 

The license agreement further provides that we will indemnify and hold UM and its affiliates harmless from any and all suits, actions, claims, liabilities, demands, damages, losses or expenses relating to our exercise of our rights under the agreement, including our right to commercialize the licensed technology. UM is required to indemnify us with respect to claims relating to or resulting from its breach of the agreement.

 

AR-12 and AR-42 License Agreements

 

Our rights to AR-12 and AR-42 are governed by separate license agreements with The Ohio State University Research Foundation, or Ohio State, entered into in January 2008. Pursuant to each of these agreements, we have exclusive, worldwide, royalty-bearing licenses for the rights to commercialize technologies embodied by certain issued patents, patent applications, know-how and improvements relating to AR-12 and AR-42 for all therapeutic uses.

  

Under our license agreement for AR-12, we have exclusive, worldwide rights to seven issued U.S. patent and three pending U.S. patent applications that relate to AR-12, AR-12 analogs, and particular uses of AR-12 according to our business plan. The issued patents include composition of matter claims. The issued patents are currently scheduled to expire in 2024. If the pending patent applications issue, the latest of the issued patent or patents would be scheduled to expire in 2034. In 2014, we filed a provisional patent application directed to methods of using AR-12 that, if issued, would expire in 2035. In addition, Arno has exclusive rights to a pending US and international patent application directed to AR-12 formulations which, if issued, would expire in 2034.

 

Under our license agreement for AR-42, we have exclusive, worldwide rights to one issued and two pending U.S. patent applications that relate to AR-42 and particular uses of AR-42 according to our business plan. If one of the pending patent applications issues, the issued patent or patents would be scheduled to expire in 2024. If the other pending patent application issues, it would be scheduled to expire in 2034.

 

In 2008, pursuant to our license agreements for AR-12 and AR-42, we made one-time cash payments to Ohio State in the aggregate amount of $450,000 and reimbursed it for past patent expenses. Additionally, we are required to make performance-based cash payments upon successful completion of clinical and regulatory milestones relating to AR-12 and AR-42 in the U.S., Europe and Japan. The license agreements for AR-12 and AR-42 provide for aggregate potential milestone payments of up to $6.1 million for AR-12, of which $5.0 million is due only after marketing approval in the United States, Europe and Japan, and $5.1 million for AR-42, of which $4.0 million is due only after marketing approval in the United States, Europe and Japan. In September 2009, we paid Ohio State a milestone payment upon the commencement of the Phase I clinical study of AR-12. Pursuant to the license agreements for AR-12 and AR-42, we must pay Ohio State royalties on net sales of licensed products at rates in the low-single digits. To the extent we enter into a sublicensing agreement relating to either or both of AR-12 or AR-42, we will be required to pay Ohio State a portion of all non-royalty income received from such sublicensee.

 

The license agreements with Ohio State further provide that we will indemnify Ohio State from any and all claims arising out of the death of or injury to any person or persons or out of any damage to property, or resulting from the production, manufacture, sale, use, lease, consumption or advertisement of either AR-12 or AR-42, except to the extent that any such claim arises out of the gross negligence or willful misconduct of Ohio State. The license agreements for AR-12 and AR-42, respectively, expire on the later of (i) the expiration of the last valid claim contained in any licensed patent and (ii) 20 years after the effective date of the license. Ohio State will generally be able to terminate either license upon our breach of the terms of the license to the extent we fail to cure any such breach within 90 days after receiving notice of such breach or our bankruptcy. We may terminate either license upon 90 days prior written notice.

 

Off -Balance Sheet Arrangements

 

There were no off-balance sheet arrangements as of September 30, 2015.

 

Critical Accounting Policies and Estimates

 

Our financial statements are prepared in accordance with generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis, including research and development and clinical trial accruals, and stock-based compensation estimates. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. We believe the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of our financial statements and accompanying notes.

 

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Research and Development Expenses and Accruals

 

R&D expenses consist primarily of salaries and related personnel costs, fees paid to consultants and outside service providers for pre-clinical, clinical, and manufacturing development, legal expenses resulting from intellectual property prosecution, costs related to obtaining and maintaining our product licenses, contractual review, and other expenses relating to the design, development, testing, and enhancement of our product candidates. Amounts due under such arrangements may be either fixed fee or fee for service, and may include upfront payments, monthly payments, and payments upon the completion of milestones or receipt of deliverables.

   

Our cost accruals for clinical trials and other R&D activities are based on estimates of the services received and efforts expended pursuant to contracts with numerous clinical trial centers and clinical research organizations, or CROs, clinical study sites, laboratories, consultants, or other clinical trial vendors that perform the activities. Related contracts vary significantly in length, and may be for a fixed amount, a variable amount based on actual costs incurred, capped at a certain limit, or for a combination of these elements. Activity levels are monitored through close communication with the CROs and other clinical trial vendors, including detailed invoice and task completion review, analysis of expenses against budgeted amounts, analysis of work performed against approved contract budgets and payment schedules, and recognition of any changes in scope of the services to be performed. Certain CROs and significant clinical trial vendors provide an estimate of costs incurred but not invoiced at the end of each quarter for each individual trial. The estimates are reviewed and discussed with the CRO or vendor as necessary, and are included in R&D expenses for the related period. For clinical study sites, which are paid periodically on a per-subject basis to the institutions performing the clinical study, we accrue an estimated amount based on subject screening and enrollment in each quarter. All estimates may differ significantly from the actual amount subsequently invoiced, which may occur several months after the related services were performed.

 

In the normal course of business we contract with third parties to perform various R&D activities in the on-going development of our product candidates. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events, the successful enrollment of patients, and the completion of portions of the clinical trial or similar conditions. The objective of our accrual policy is to match the recording of expenses in our financial statements to the actual services received and efforts expended. As such, expense accruals related to clinical trials and other R&D activities are recognized based on our estimate of the degree of completion of the event or events specified in the specific contract.

 

No adjustments for material changes in estimates have been recognized in any period presented.

 

Stock-Based Compensation

 

Our results include non-cash compensation expense as a result of the issuance of stock, stock options and warrants. We have issued stock options to employees, directors, consultants and Scientific Advisory Board members under our 2005 Stock Option Plan, as amended.

 

We expense the fair value of employee stock-based compensation over the vesting period. When more precise pricing data is unavailable, we determine the fair value of stock options using the Black-Scholes option-pricing model. This valuation model requires us to make assumptions and judgments about the variables used in the calculation. These variables and assumptions include the weighted-average period of time that the options granted are expected to be outstanding, the volatility of our common stock, the risk-free interest rate and the estimated rate of forfeitures of unvested stock options.

 

Stock options or other equity instruments to non-employees (including consultants and all members of our Scientific Advisory Board) issued as consideration for goods or services received by us are accounted for based on the fair value of the equity instruments issued (unless the fair value of the consideration received can be more reliably measured). The fair value of stock options is determined using the Black-Scholes option-pricing model. The fair value of any options issued to non-employees is recorded as expense over the applicable service periods.

 

The terms and vesting schedules for share-based awards vary by type of grant and the employment status of the grantee. Generally, the awards vest based upon time-based or performance-based conditions. Performance-based conditions generally include the attainment of goals related to our financial and development performance. Stock-based compensation expense is included in the respective categories of expense in the Statements of Operations. We expect to record additional non-cash compensation expense in the future, which may be significant.

  

Warrant Liability

 

We account for the warrants issued in connection with the 2013 private placement, the 2012 private placement and the 2010 private placement in accordance with the guidance on Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, which provides that we classify the warrant instrument as a liability at its fair value and adjust the instrument to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized as a component of other income or expense. The fair value of warrants issued by us, in connection with private placements of securities, has been estimated using a Monte Carlo simulation model. The Monte Carlo simulation is a generally accepted statistical method used to generate a defined number of stock price paths in order to develop a reasonable estimate of the range of our future expected stock prices and minimizes standard error.  

 

24 

 

 

Recent Accounting Pronouncements

 

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements-Going Concern (Topic 205-40)”. Under the standard, management is required to evaluate for each annual and interim reporting period whether it is probable that the entity will not be able to meet its obligations as they become due within one year after the date that financial statements are issued, or are available to be issued, where applicable.  ASU 2014-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. Accordingly, the standard is effective for the Company on January 1, 2017. We will be evaluating the impact, if any, that the standard will have on our financial condition, results of operations, and disclosures in the near future.

 

Item 3.           Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

Item 4.           Controls and Procedures.

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Principal Executive Officer and also the Acting Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

As required by Commission Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and also the Acting Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our Principal Executive Officer and also the Acting Principal Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

 

There has been no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

25 

 

 

PART II — OTHER INFORMATION

 

Item 1.           Legal Proceedings.

 

We are not involved in any pending legal proceedings.

 

Item 1A.        Risk Factors.

 

An investment in our common stock involves significant risk. You should carefully consider the information described in the following risk factor, together with the other information appearing elsewhere in this report, before making an investment decision regarding our common stock. You should also consider the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2014 (“2014 Annual Report”) under the caption “Item 1A. Risk Factors.”  If any of the risks described below or in our 2014 Annual Report actually occur, our business, financial conditions, results of operation and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose all or a part of your investment in our common stock.  Moreover, the risks described below and in our 2014 Annual Report are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business, operating results, prospects or financial condition.

 

We currently have no product revenues and need substantial additional funding in order to continue our business operations and the further development of our product candidates. If we are unable to obtain such additional capital, we will be forced to delay, reduce or eliminate our product development programs and may be forced to cease our operations altogether.

 

We are in immediate need of additional capital to fund our operations. As of September 30, 2015, we had approximately $0.1 million in cash and cash resources, and negative net working capital of approximately $1.7 million. During the year ended December 31, 2014 and the nine months ended September 30, 2015, we had negative cash flow from operating activities of $18.8 million and $7.8 million, respectively, and we expect our negative cash flows from operations to continue for the foreseeable future. Including the proceeds received from the sale of convertible debt in October 2015, we believe that we have sufficient capital to fund our operations through approximately December 2015 for the current plan of expenditure on continuing development of the current product candidates. Further, beyond funding our basic corporate activities, we require substantial additional funds to support our continued research and development activities, and the anticipated costs of preclinical studies and clinical trials, regulatory approvals and eventual commercialization.

 

Since we do not currently generate any revenue from operations, nor do we expect to for the foreseeable future, the most likely sources of such additional capital include private placements of our equity securities, including our common stock or securities convertible into or exchangeable for our common stock, debt financing or funds from a potential strategic licensing or collaboration transaction in which we would license or otherwise relinquish the rights to one or more of our product candidates. To the extent that we raise additional capital by issuing equity securities, our stockholders will likely experience dilution, which may be significant depending on the number of shares we may issue and the price per share. If we raise additional funds through collaborations and licensing arrangements, it may be necessary to relinquish some rights to our technologies, product candidates or products, or grant licenses on terms that are not favorable to us. If we raise additional funds by incurring debt, we could incur significant interest expense and become subject to restrictive covenants that could affect the manner in which we conduct our business.

 

We currently have no committed sources of additional capital and our access to capital funding is always uncertain. Despite our ability to secure adequate capital in the past, there is no assurance that additional equity or debt financing will be available to us when needed, on acceptable terms or even at all. If we fail to obtain the necessary additional capital when needed, we may be required to delay, reduce the scope of, or eliminate one or more of our research or development programs. In addition, we could be forced to discontinue product development, reduce or forego attractive business opportunities and even cease our operations altogether. 

 

Item 2.           Unregistered Sales of Securities and Use of Proceeds.

 

Not applicable.

 

Item 3.           Defaults Upon Senior Securities.

 

Not applicable.

 

Item 4.           Mine Safety Disclosures.

 

Not applicable.

 

Item 5.           Other Information.

 

On July 9, 2015, the Company and The Ohio State Innovation Foundation (formerly, the Ohio State Research Foundation) (“Ohio State”) entered into an amendment, dated effective as of May 15, 2015 (the “Amendment”), to the parties’ License Agreement dated January 3, 2008 (the “AR-12 License”), pursuant to which the Company was granted an exclusive license to certain patents and other technology relating to its AR-12 product candidate. The purpose of the Amendment was to clarify the scope of AR-12 analogs covered by the license grant in the original AR-12 License.  In addition, the Amendment provides the Company with a first right to negotiate an exclusive license to patents and other technology relating to compounds related to AR-12 held by Ohio State. The foregoing description is qualified in its entirety by the Amendment, which is filed with this Quarterly Report as Exhibit 10.1 and incorporated herein by reference.

  

26 

 

 

Item 6.           Exhibits.

 

Exhibit No.   Exhibit Description
     
10.1   Amendment No. 2, dated as of May 15, 2015, to License Agreement between Arno Therapeutics, Inc. and The Ohio State Innovation Foundation (formerly, The Ohio State Research Foundation), entered into on July 9, 2015.*
     
31.1   Certification of Principal Executive Officer and Principal Financial Officer pursuant to Securities Exchange Act Rule 13a-15(e)/15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1   Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101   The following financial information from Arno Therapeutics, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015, formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Balance Sheets as of September 30, 2015 and December 31, 2014, (ii) Condensed Statements of Operations for the three and nine months ended September 30, 2015 and September 30, 2014 (iii) Condensed Statement of Stockholders’ Deficit for the period from January 1, 2015 through September 30, 2015, (iv) Condensed Statements of Cash Flows for the nine months ended September 30, 2015 and September 30, 2014, and (v) Notes to Condensed Financial Statements.

 

 

* Confidential treatment has been requested for certain portions omitted from this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

27 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  ARNO THERAPEUTICS, INC.
     
Date: November 16, 2015 By: /s/ Alexander A. Zukiwski
    Chief Executive Officer
    (Principal Executive Officer and Principal Financial Officer)

 

28 

 

 

INDEX TO EXHIBITS FILED WITH THIS REPORT

 

Exhibit No.   Exhibit Description
     
10.1   Amendment No. 2, dated as of May 15, 2015, to License Agreement between Arno Therapeutics, Inc. and The Ohio State Innovation Foundation (formerly, The Ohio State Research Foundation), entered into on July 9, 2015.*
     
31.1   Certification of Principal Executive Officer and Principal Financial Officer pursuant to Securities Exchange Act Rule 13a-15(e)/15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1   Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101   The following financial information from Arno Therapeutics, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015, formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Balance Sheets as of September 30, 2015 and December 31, 2014, (ii) Condensed Statements of Operations for the three and nine months ended September 30, 2015 and September 30, 2014 (iii) Condensed Statement of Stockholders’ Deficit for the period from January 1, 2015 through September 30, 2015, (iv) Condensed Statements of Cash Flows for the nine months ended September 30, 2015 and September 30, 2014, and (v) Notes to Condensed Financial Statements.

 

 

* Confidential treatment has been requested for certain portions omitted from this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

29 



EXHIBIT 10.1

 

AMENDMENT NO. 2 TO JANUARY 3, 2008 LICENSE AGREEMENT

 

This Amendment No. 2 (hereinafter the “Amendment No. 2”), entered into on May 15, 2015 (the “Amendment No. 2 Effective Date”) modifies and amends the License Agreement dated January 3, 2008 (the “Agreement”), by and between Arno Therapeutics, Inc. located at 200 Route 31 North, Suite 104, Flemington, New Jersey 08822 (“Company”) and Ohio State Innovation Foundation (“OSIF”) having an address at 1524 N. High Street, Columbus, Ohio 43201.

 

BACKGROUND

 

OSIF and Company desire to amend the Agreement in order to modify the specific terms of the Agreement to: (i) delete and replace definition of “IMPROVEMENTS” and insert a structure-based definition of “ANALOGS” to include all permutations of “X”, “Ar”, and “R” groups claimed in patents and patent applications listed in Appendix A, as amended herein; (ii) Update Appendix A to include new patent applications and patents directed toward ANALOGS and OSU TechID 2013-135, “Novel p21 Activated Kinase Inhibitors”; (iii) Grant certain first rights to Licensor’s rights in the field of “Aryl-pyrazole inventions” made by the Inventor; (iv) document resolution of dispute between OSIF and Company; and (v) delete and replace definition of Net Sales to better address altruistic sales for third world indications in developing countries.

 

NOW THEREFORE, in consideration of the promises and of the mutual covenants and agreements herein set forth, the parties hereto agree as follows:

 

1. Section 1.9 “IMPROVEMENTS” of the Agreement is hereby deleted in its entirety and replaced with the following:

 

1.9 “IMPROVEMENTS” shall mean Licensor’s rights in PATENT RIGHTS to:

(a) the composition of matter of LICENSED PRODUCTS or ANALOGS made by the INVENTOR and formulations thereof,

(b) improved methods of manufacture and production techniques of LICENSED PRODUCTS or ANALOGS,

(c) therapeutic indications and developments intended to enhance the safety and efficacy of the LICENSED PRODUCTS or ANALOGS,

(d) methods of use, dosing, or administration of LICENSED PRODUCTS or ANALOGS, and

(e) ANALOGS in patents and patent applications claiming priority to U.S. Provisional Patent Applications 61/677,251 and 61/820,956 or resulting from a national stage filing from WO 2014/022382 for all fields of use outside of prevention, treatment, or amelioration of a disease caused by a mycobacterium.

 

 

2. Section 1.27 is added to the Agreement as follows:

 

1.27 “ANALOG(S)” means any composition-of-matter (and racemates, polymorphs, and pharmaceutically acceptable salts, co-crystals thereof) having the following structure:

 

 

  1

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

 

 

Macintosh HD:private:var:folders:5w:76ymbpkd1lj638s2f0920ksm0000gn:T:TemporaryItems:US08039502-20111018-C00078.png

  

where:

X is selected from: alkyl or haloalkyl, including but not limited to CF3;

 

Ar is selected from: phenyl, biphenyl, naphthyl, anthryl, phenanthryl, fluorenyl, wherein Ar is optionally substituted with one or more substituents at any suitable position, including but not limited to and

 

  Macintosh HD:private:var:folders:5w:76ymbpkd1lj638s2f0920ksm0000gn:T:TemporaryItems:US08741944-20140603-C00079.png  and  Macintosh HD:private:var:folders:5w:76ymbpkd1lj638s2f0920ksm0000gn:T:TemporaryItems:US08445483-20130521-C00073.png;  

 

 

R is selected from: —CN, —CH2CN, —CH2CH2CN, —CH2CH2CH2CN, -NH2

  

 

igure US07576116-20090818-C00057

  

 

 

amioacetamide, guanidine, -NH-CO-(CH2)x>1-NH2

 

  2

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

Macintosh HD:private:var:folders:5w:76ymbpkd1lj638s2f0920ksm0000gn:T:TemporaryItems:US08039502-20111018-C00080.png;

 

 

R’ is selected from: SO2CH2CH2NH2, or SO2NH2 or an amino acid attached through the α-carboxyl group selected from the group consisting of L-Lys, D-Lys, β-Ala, L-Leu, L-Ile, Phe, Asn, Glu and Gyl;

 

R’’ is selected from: -H, methyl, ethyl, allyl, CH2CH2OH, CH2CN, CH2CH2CN, CH2CONH2, and

 

  

Macintosh HD:private:var:folders:5w:76ymbpkd1lj638s2f0920ksm0000gn:T:TemporaryItems:US08039502-20111018-C00081.png.

 

  

3. Appendix A is hereby deleted in its entirety and replaced with Appendix A of this Amendment No. 2.

 

4. Section 1.28 is added to the Agreement as follows:

 

1.28 “ARYL-PYRAZOLE INVENTIONS” shall mean, collectively, any and all inventions owned or controlled by LICENSOR or under obligation of assignment to LICENSOR that: (i) are not subject to any rights of a third party (other than the rights held by the U.S. Government as described in Section 2.5 of the License Agreement) in existence as of the Effective Date or the date of disclosure of such invention to LICENSOR or The Ohio State University’s Office of Technology Commercialization (“TCO”); (iii) name as an inventor at least one of any of the inventors listed on any patent and patent application listed in Appendix A, or are submitted by TCO or LICENSOR to LICENSEE for consideration; and (iv) are directed toward any compositions of matter (or use or synthesis thereof or formulations containing) that are not ANALOGS or LICENSED PRODUCTS under the January 3, 2008 License Agreement (as amended), such compositions of matter having a structure as follows:

 

  3

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

 

Macintosh HD:private:var:folders:5w:76ymbpkd1lj638s2f0920ksm0000gn:T:TemporaryItems:US08039502-20111018-C00078.png.

 

 

5. Section 2.7 is added to the Agreement as follows:

 

2.7 LICENSOR hereby grants to LICENSEE a right of first review and first option to obtain an exclusive license, on the terms of the Patent &Technology License Agreement attached hereto as Appendix B, to ARYL-PYRAZOLE INVENTIONS to make, have made, use, offer for sale, sell, import, export and otherwise exploit products and services. LICENSOR agrees to promptly disclose each invention disclosure form describing ARYL-PYRAZOLE INVENTIONS (each invention disclosure form for ARYL-PYRAZOLE INVENTIONS individually referred to as an “A-P IDF”) to LICENSEE. LICENSEE agrees to review and share its perspectives and feedback on inventions described in each A-P IDF following disclosure to LICENSEE (including an initial indication of interest in LICENSEE’s licensing of such invention(s) described in the A-P IDF) within forty five (45) days after the disclosure to LICENSEE (such thirty (45) days referred to hereinafter as “Review Period”). Upon written notice by LICENSEE, before expiration of the Review Period for a particular ARYL-PYRAZOLE INVENTION, to LICENSOR of LICENSEE’s interest in licensing one of such ARYL-PYRAZOLE INVENTIONS, LICENSEE and LICENSOR shall have ninety (90) days from the end of the Review Period for that ARYL-PYRAZOLE INVENTION to negotiate in good faith a license agreement to that ARYL-PYRAZOLE INVENTION (“Negotiation Period”) on the terms of the Patent &Technology License Agreement attached hereto as Appendix B. The parties acknowledge that any such license agreement to a particular ARYL-PYRAZOLE INVENTION may differ in form and terms from the present Agreement. In the event that LICENSEE does not obtain a license with respect to a particular ARYL-PYRAZOLE INVENTION during the Negotiation Period, LICENSOR shall not have any further obligation to LICENSEE with respect to that particular ARYL-PYRAZOLE INVENTION and LICENSOR may license such particular ARYL-PYRAZOLE INVENTION to any third party after expiration of the Negotiation Period.

 

6. Appendix B is added to the Agreement with Appendix B of this Amendment No. 2.

 

7. Section 1.18 “NET SALES” is deleted in its entirety and replaced with the following:

 

1.18 “NET SALES” means the GROSS CONSIDERATION received by LICENSEE, AFFILIATES, and SUBLICENSEES from the SALE of LICENSED PRODUCTS, less the following items directly attributable to the SALE of such LICENSED PRODUCTS that are specifically identified on the invoice for such SALE and borne by the LICENSEE, AFFILIATES, or SUBLICENSEES as the seller:

(a) discounts, returns and allowances actually granted to customers;

(b) commissions actually paid to third-party distributors and other third-party sales agencies;

(c) sales, value added, use and other taxes and government charges actually paid, excluding income taxes;

(d) import and export duties actually paid;

(e) bad debt deductions actually written off during the accounting period;

(d) freight, transport, packing and transit insurance charges actually paid or allowed; and

(e) other amounts actually refunded, allowed or credited due to rejections or returns, but not exceeding the original invoiced amount.

 

  4

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

8. Section 1.29 is added to the Agreement as follows:

1.29 “GROSS CONSIDERATION” means all cash and non-cash consideration (e.g., securities).

 

9. Section 1.30 is added to the Agreement as follows:

1.30 “SALE” means any transfer or other disposition of LICENSED PRODUCTS or LICENSED PROCESSES for which consideration is received by LICENSEE, its AFFILIATES or SUBLICENSEES. A SALE of LICENSED PRODUCTS or LICENSED PROCESSES will be deemed completed at the time LICENSEE or its AFFILIATE or its SUBLICENSEE receives such consideration.

 

10. The parties additionally agree as follows:

A dispute has arisen between Ohio State Innovation Foundation (“OSIF”) and Arno Therapeutics, Inc. (“Arno”) regarding the interpretation of the term IMPROVEMENTS and the scope of PATENT RIGHTS licensed under the License Agreement for Case No. 04021, “A Novel Class of PDK-1/Akt Signaling Inhibitors” (the “Dispute”), which the parties now wish to resolve and settle. The parties have agreed upon a revised definition of IMPROVEMENTS, as well as clarified the scope of the existing PATENT RIGHTS and defined a framework that identifies the scope of IMPROVEMENTS that comprises the PATENT RIGHTS as well as the optional PATENT RIGHTS in which Arno has the right of first look at certain other enhancements to the PATENT RIGHTS that are not classified as IMPROVEMENTS.

As a result of the parties’ resolution of the Dispute, each party hereby releases the other party (and any of their the parents, subsidiaries, agents, affiliates, assigns, employees, owners, and successors-in-interest) from any and all claims, demands, liabilities, and causes of action, asserted or unasserted, arising out of any act, error, omission, representation, agreement, circumstance or event arising from or associated with the Dispute that arose prior to the date hereof, or otherwise occurring between OSIF and Arno prior to the date hereof, as they relate to the Dispute, whether such claims are relate to the PATENT RIGHTS or IMPROVEMENTS, or are founded upon breach of contract, tort, breach of duties of good faith and fair dealing, or breach of any other state or federal statutes or common law, or any other related theory.

The parties further agree and acknowledge that these releases shall not extend to any obligation arising from the License Agreement, nor shall they release any payment obligations set forth therein not related to the Dispute.

Notwithstanding anything to the contrary herein, LICENSOR warrants and represents that, to LICENSOR’s actual knowledge, the following have been disclosed to LICENSEE:

(1)all patents and patent applications corresponding to LICENSED INFORMATION and PATENT RIGHTS, IMPROVEMENTS, ANALOGS, as amended, to LICENSOR’s actual knowledge, are either: (i) included in Appendix A, as amended, or (ii) identified in Section 1.9(e) of this Agreement, and
(2)all patents and patent applications corresponding to ARYL-PYRAZOLE INVENTIONS as of the Effective Date of this Amendment.

 

To the extent any additional inventions, patents, and patent applications that correspond to PATENT RIGHTS, IMPROVEMENTS, ANALOGS, and ARYL-PYRAZOLE INVENTIONS are discovered after the Effective Date of this Amendment, the LICENSE AGREEMENT, as amended, shall apply to any such rights.

Each party acknowledges that it is executing this release entirely upon its own volition, individual judgment, belief and knowledge; that this release is made without reliance upon any statement or representation of any party or any person not herein expressed; that no promise, inducement or agreement, not herein expressed, has been made to it; that this release contains, and is, the entire agreement and understanding between the parties referred to above, whether specifically named or not; and that the terms of this release are contractual and not mere recitals.

The parties acknowledge they may hereafter discover new facts different from or in addition to those they now know or believe to be true, but they agree to assume the risk of the possible discovery of additional facts, and agree that this release will be and shall remain effective in all respects regardless of the discovery of additional facts with respect to their claims arising out of the Dispute.

 

  5

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

Except as amended above, the terms and conditions of the Agreement remain in full force and effect.

 

A facsimile or electronically scanned signature will be deemed sufficient evidence of a Party’s execution of this Amendment. If this Amendment is executed first by OSIF and is not executed by Company and received by OSIF within fifteen (15) days of the date of signature set forth under OSIF’s signature below, then this Amendment shall be null and void and of no further effect.

 

AGREED:

  

 

OHIO STATE INNOVATION FOUNDATION

 

By: /s/ Stan Micek

Name: Stan Micek

Title: President

Date: 09 JUL 15

 

 

 

 

  

ARNO THERAPEUTICS

 

By: /s/ Alexander Zukiwski

Name: Alexander Zukiwski

Title: CEO

Date: July 9, 2015

 

 

 

 

  6

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

Appendix A

 

Title of Application/Patent Tech ID Application Type Filing Date Serial No. Grant No. Grant Date Country Status
 
PDK-1/AKT SIGNALING INHIBITORS 2004-021 EPC 10/4/2004 4816902.3 1696907 4/17/2013 Austria Issued 
PDK-1/AKT SIGNALING INHIBITORS 2004-021 EPC 10/4/2004 4816902.3 1696907 4/17/2013 Belgium Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 PCT  10/04/2004  2566846  2566846  08/28/2012  Canada  Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 PCT  10/04/2004  200480036007.3  ZL200480036007.3 6/16/2010 China  Issued 
PDK-1/AKT SIGNALING INHIBITORS 2004-021 EPC 10/4/2004 4816902.3 1696907 4/17/2013 Denmark Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 PCT  10/04/2004  04816902.3  1696907 4/17/2013 Europe  Inactive 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 EPC 10/04/2004  04816902.3  1696907 4/17/2013 Finland Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 EPC 10/04/2004  04816902.3  1696907 4/17/2013 France Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 EPC 10/04/2004  04816902.3  1696907 4/17/2013 Germany Issued 
PDK-1/AKT SIGNALING INHIBITORS 2004-021 EPC 10/4/2004 4816902.3 1696907 4/17/2013 Hungary Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 PCT  10/04/2004  1131/CHENP/2006      India  Patent Pending 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 EPC 10/04/2004  04816902.3  1696907 4/17/2013 Ireland Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 EPC 10/04/2004  04816902.3  1696907 4/17/2013 Italy Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 PCT  10/04/2004  2006-534245  4745971 05/20/2011  Japan  Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 PCT  10/04/2004  10-2006-7008622  1217427 12/24/2012 Korea, South  Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 EPC 10/04/2004  04816902.3  1696907 4/17/2013 Luxembourg Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 EPC 10/04/2004  04816902.3  1696907 4/17/2013 Monaco Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 EPC 10/04/2004  04816902.3  1696907 4/17/2013 Netherlands Issued 

 

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

 

 

PDK-1/AKT Signaling Inhibitors  2004-021 PCT  10/04/2004  PCT/US2004/032723      PCT (Not Applicable)  Inactive 
PDK-1/AKT Signaling Inhibitors  2004-021 PCT  10/04/2004  200602174-5  120,841  07/31/2007  Singapore  Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 EPC 10/04/2004  04816902.3  1696907 4/17/2013 Slovenia Abandoned 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 EPC 10/04/2004  04816902.3  1696907 4/17/2013 Spain Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 EPC 10/04/2004  04816902.3  1696907 4/17/2013 Sweden Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 EPC 10/04/2004  04816902.3  1696907 4/17/2013 Switzerland Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 EPC 10/04/2004  04816902.3  1696907 4/17/2013 United Kingdom Issued 
PDK-1/AKT Signaling Inhibitors  2004-021 Utility  10/04/2004  10/957,925      United States of America  Abandoned 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 Provisional  10/08/2003  60/509,814      United States of America  Expired 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 Continuation Application  09/28/2007  11/864,612  7,576,116  08/18/2009  United States of America  Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 Divisional  05/12/2008  12/118,788  8,541,460 9/24/2013 United States of America  Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 Divisional  06/02/2009  12/476,772  8,546,441 10/1/2013 United States of America  Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 Utility  09/23/2010  12/888,687  8,080,574  12/20/2011  United States of America  Issued 
PDK-1/AKT SIGNALING INHIBITORS  2004-021 Divisional  12/19/2011  13/329,646      United States of America  Abandoned 
 
Novel small-molecule autophagy-inducing agents as anti-infective agents against intracellular pathogens  2007-088 Provisional  07/24/2007  60/951,672      United States of America  Expired
Anti-infective agents against itracellular pathogens  2007-088 Provisional  07/26/2007  60/952,158      United States of America  Expired

 

 

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

 

Anti-infective agents against itracellular pathogens  2007-088 Utility 07/24/2008  12/179,134  8,039,502  10/18/2011  United States of America  Issued 
ANTI-INFECTIVE AGENTS AGAINST INTRACELLULAR PATHOGENS (D1)  2007-088 Divisional  10/07/2011  13/267,943  8,445,483 5/21/2013 United States of America  Issued 
ANTI-INFECTIVE AGENTS AGAINST INTRACELLULAR PATHOGENS (D2)  2007-088 Divisional  4/24/2013 13/869,386 8,741,944 4/24/2013 United States of America  Issued 
 
Anti-Francisella Agents 2009-077 Priority 4/22/2009 12/428,035     United States of America Abandoned
Anti-Francisella Agents 2009-077 ORD 5/25/2010 10005407.1 2246332 3/18/2013 Europe Inactive
Anti-Francisella Agents 2009-077 EPC 5/25/2010 10005407.1 2246332 3/18/2013 Germany Issued
Anti-Francisella Agents 2009-077 EPC 5/25/2010 10005407.1 2246332 3/18/2013 Italy Issued
Anti-Francisella Agents 2009-077 EPC 5/25/2010 10005407.1 2246332 3/18/2013 Spain Issued
Anti-Francisella Agents 2009-077 EPC 5/25/2010 10005407.1 2246332 3/18/2013 Switzerland Issued
Anti-Francisella Agents 2009-077 EPC 5/25/2010 10005407.1 2246332 3/18/2013 United Kingdom Issued
Anti-Francisella Agents 2009-077 Divisional 9/12/2012 13/610,967 8,580,827 11/12/2013 United States of America Issued
                 
Anti-Staphylococcal Celecoxib Derivatives 2011-039 Provisional 11/1/2010 61/408,680     United States of America Expired
Anti-Staphylococcal Celecoxib Derivatives 2011-039 PCT 10/31/2011 PCT/US11/058501     PCT Inactive
Anti-Staphylococcal Celecoxib Derivatives 2011-039 PCT 6/1/2013 11838597     Europe Published
Anti-Staphylococcal Celecoxib Derivatives 2011-039 PCT 5/1/2013 13/882,897     United States of America Allowed
                 

 

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

 

Anticancer Multikinase Inhibitors 2013-135 Provisional 3/29/2003 61/806,518     United States of America Expired
Anticancer P21-Activated Kinase Inhibitors 2013-135 Utility 3/31/2014 14/230,689     United States of America Published
                 
The following are included in the definition of PATENT RIGHTS to the extent these cover ANALOGS claiming priority to US Provisional Patent Applications 61/677,251 and 61/820,956 or resulting from a national stage filing from WO2014/022382 for all fields of use outside of prevention, treatment or amelioriation of a disease caused by a mycobacterium:
Antibacterial Protein Kinase Inhibitors 2013-339 Provisional 7/30/2012 61/677,251     United States of America Expired
Antibacterial Protein Kinase Inhibitors 2013-339 Provisional 5/8/2013 61/820,956     United States of America Expired
Antibacterial Protein Kinase Inhibitors 2013-339 PCT 7/30/2013 PCT/US2013/052706     PCT Inactive
Antibacterial Protein Kinase Inhibitors 2013-339 PCT 2/17/2015 2013296619     Australia Pending
Antibacterial Protein Kinase Inhibitors 2013-339 PCT 3/2/2015 BR1120150020780     Brazil Pending
Antibacterial Protein Kinase Inhibitors 2013-339 PCT awaiting filing date awaiting serial no.     Canada Pending
Antibacterial Protein Kinase Inhibitors 2013-339 PCT awaiting filing date awaiting serial no.     China Pending
Antibacterial Protein Kinase Inhibitors 2013-339 PCT 2/4/2015 13825373.7     Europe Pending
Antibacterial Protein Kinase Inhibitors 2013-339 PCT 1/29/2015 awaiting serial no.     Japan Pending
Antibacterial Protein Kinase Inhibitors 2013-339 PCT 2/10/2015 10-2015-7003562     South Korea Pending
Antibacterial Protein Kinase Inhibitors 2013-339 PCT 1/29/2015 14/418,250     United States of America Pending
                 

  

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

APPENDIX B

PATENT & Technology LICENSE AGREEMENT

AGT. No. ____________

 

This Patent & Technology License Agreement (“PTLA”) is by and between the Licensor and the Licensee identified below (collectively, “Parties”, or singly, “Party”).

 

Licensor owns, controls and/or has the right to sublicense the Licensed Subject Matter (defined in Exhibit A). Licensee desires to secure the right and license to use, develop, manufacture, market, and commercialize the Licensed Subject Matter. Licensor desires to have the Licensed Subject Matter developed and used for the benefit of Licensee, the inventors, Licensor, and the public.

 

NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, the Parties hereby agree as follows:

 

The Terms and Conditions of this PTLA attached hereto as Exhibit A are incorporated herein by reference in their entirety (the “Terms and Conditions”). In the event of a conflict between provisions of this PTLA and the Terms and Conditions, the provisions in this PTLA shall govern. Unless defined in this PTLA, capitalized terms used in this PTLA shall have the meanings given to them in the Terms and Conditions. The section numbers used in the left hand column in the table below correspond to the section numbers in the Terms and Conditions.

 

1.                                                                                  Definitions
  Effective Date [to be determined by the parties prior to execution]
Licensor Ohio State Innovation Foundation, with an address at 1524 North High Street, Columbus, OH 43201.

Licensee 

 Arno Therapeutics, a Delaware corporation, with its principal place of business at 200 Route 31 North, Suite 104, Flemington, New Jersey 08822
Territory Worldwide

Field of Use

 

Field of Use: All fields

 

Patent Rights/Technology Rights [to be determined by the parties prior to execution]

App. No./

Date of Filing

 Title Inventor(s) Jointly Owned? (Y/N; if Y, with whom?) Prosecution Counsel

[App number] [Filing date]

[Tech ID] 

 [Title of patent or Technology] [Inventor name(s)]

¨ Yes,

w/ [whom] 

¨ No

 [Law firm]
[App number] [Filing date] [Tech ID] [Title of patent or Technology] [Inventor name(s)]

¨ Yes,

w/[whom]

¨ No

 

 [Law firm]
             

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   Page 1 of 25
 

 

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Diligence Milestones, Fees and Deadlines

 

 

2.4, 3

 

 Milestone Events Milestone Fees   Due by the Quarterly Payment Deadline for the Contract Quarter in which the milestone events are achieved. Deadlines
1. [***] [***]

[***]

2. [***] [***]

[***]

 

3. [***] [***]

To be determined by the parties prior to execution

4. [***] [***]  
5. [***] [***]  
6. [***] [***]  
  7. [***] [***]  
  8. [***] [***]  

Compensation
3 Patent expenses due upon Effective Date Current estimated amount. Licensee’s obligations to pay all past and future patent expenses pursuant to Section 6 (Patent Expenses and Prosecution) will not be limited by such amount.

Based on invoices received and approved as of: [Date]

 

$To be determined by the parties prior to execution
3 Upfront Fee $[***] due upon Effective Date
3 License Maintenance Fees

$[***] due on 30 days after first anniversary of Effective Date

$[***] due on each anniversary of Effective Date thereafter.

 

Amounts paid as License Maintenance Fees shall be credited against any Milestone Fees due in the same Contract Year as the Contract Year when the License Maintenance Fee is paid. No License Maintenance Fees shall be due for Contract Years following the Contract Year when First Sale occurs.

 

 

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   Page 2 of 25
 

 

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3 Sublicense Fees

For Sublicense Agreements executed on or before the first anniversary of the Effective Date, [***]% of Non-Royalty Sublicensing Consideration, due on or before the Quarterly Payment Deadline for the Contract Quarter.

 

For Sublicense Agreements executed after the first anniversary of the Effective Date and on or before the fourth anniversary of the Effective Date, [***]% of Non-Royalty Sublicensing Consideration, due on or before the Quarterly Payment Deadline for the Contract Quarter.

 

For Sublicense Agreements executed after the fourth anniversary of the Effective Date, [***]% of Non-Royalty Sublicensing Consideration, due on or before the Quarterly Payment Deadline for the Contract Quarter.

 

3.1 Running royalty rate (applies to Sales by Licensee, Affiliates and Sublicensees) (a) Licensed Products and Licensed Processes covered by the Patent Rights [***]%

(b) Licensed Products and Licensed Processes not covered by the Patent Rights

 

 

 N/A
3.1 Minimum Annual Royalties

$[***] for Contract Year ending December 31 of the Contract Year following the Contract Year when First Sale occurs,

 

$[***] per Contract Year thereafter

 

18.                                                                           Notices
  Licensee Contacts   Licensor Contacts

Contact for Notice:

Attn: [Name]

[Address]

Fax: [Fax number]

Phone: [Phone number]

E-mail: [E-mail]

  

Accounting contact:

Attn: [Name]

[Address]

Fax: [Fax number]

Phone: [Phone number]

E-mail: [E-mail]

  

Patent prosecution contact:

Attn: [Name]

[Address] 

Fax: [Fax number]

Phone: [Phone number]

E-mail: [E-mail]

 

 

 

  

Contact for Notice:

Attn: President

1524 N. High Street
Columbus, OH 43201

Fax: 614-292-8907

Phone: 614-292-1315

E-mail: innovation@osu.edu

  

Payment and reporting contact:

Checks payable to “Ohio State Innovation Foundation”

Attn: Accounting/Compliance

1524 N. High Street
Columbus, OH 43201 

Fax: 614-292-8907

Phone: 614-292-1315 

E-mail: tcocompliance@osu.edu

 

OSIF Patent Coordinator

1524 N. High Street
Columbus, OH 43201

Fax: 614-292-8907

Phone: 614-292-1315

E-mail: tcoip@osu.edu

 

 

Patent prosecution contact:

Attn: [Name]

[Address]

Fax: [Fax number]

Phone: [Phone number]

E-mail: [E-mail]

 

  

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   Page 3 of 25
 

 

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20. Special Provision. The Parties hereby agree to the following special provisions (if any) set forth in this Section 20 with respect to this PTLA.

 

20.1 Definitions of FDA, IND, Phase I Clinical Trial, Phase II Clinical Trial, Phase III Clinical Trial, NDA

 

“FDA” shall mean the United States Food and Drug Administration or successor entity.

 

“IND” shall mean an investigational new drug application filed with the FDA or corresponding regulatory agency outside of the U.S. prior to the commencement of human clinical trials in the United States pursuant to 21 C.F.R. § 312(a) or pursuant to corresponding regulations outside of the U.S..

 

“NDA” shall mean an application for FDA approval or approval of corresponding regulatory agency outside of the U.S. to market a new drug filed with the FDA pursuant to 21 C.F.R. § 312(a) or pursuant to corresponding regulations outside of the U.S..

 

“Phase I Clinical Trial” shall mean the initial introduction of an investigational new drug into humans, the principal purpose of which is to determine the metabolism and pharmacologic actions of the drug in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness, in compliance with 21 C.F.R. § 312(a).

 

“Phase II Clinical Trial” shall mean controlled human clinical studies conducted to evaluate the effectiveness of a drug for a particular indication or indications in patients with the disease or condition under study and to determine the common short-term side effects and risks associated with the drug in compliance with 21 C.F.R. § 312(a).

 

“Phase III Clinical Trial” shall mean expanded controlled and uncontrolled human clinical trials pursuant to a randomized study with endpoints agreed upon by regulatory bodies for regulatory approval performed after Phase II Clinical Trials evidence suggesting effectiveness of a drug has been obtained, and is intended to gather the additional information about effectiveness and safety that is needed to evaluate the overall benefit-risk relationship of a drug and to provide an adequate basis for physician labeling, as in compliance with 21 C.F.R. § 312(a).

 

21. No Other Promises and Agreements; Representation by Counsel. Licensee expressly represents and warrants and does hereby state and represent that no promise or agreement which is not herein expressed has been made to Licensee in executing this PTLA except those explicitly set forth herein and in the Terms and Conditions, and that Licensee is not relying upon any statement or representation of Licensor or its representatives. Licensee is relying on Licensee’s own judgment and has had the opportunity to be represented by legal counsel. Licensee hereby represents and warrants that Licensee understands and agrees to all terms and conditions set forth in this PTLA and said Terms and Conditions.

  

22. Deadline for Execution by Licensee. If this PTLA is executed first by the Licensor and is not executed by the Licensee and received by the Licensor at the address and in the manner set forth in Section 18 of the Terms and Conditions within thirty (30) days of the date of signature set forth under the Licensor’s signature below, then this PTLA shall be null and void and of no further effect.

 

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   Page 4 of 25
 

 

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IN WITNESS WHEREOF, the Parties hereto have caused their duly authorized representatives to execute this PTLA.

 

LICENSOR: OHIO STATE INNOVATION FOUNDATION LICENSEE: ARNO THERAPEUTICS
BY: BY:
NAME:   NAME:
TITLE:   TITLE:
DATE: DATE:

 

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Licensor: Ohio State Innovation Foundation   Page 5 of 25
 

 

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EXHIBIT A

Terms and Conditions of the PTLA

 

These Terms and Conditions of the PTLA (“Terms and Conditions”) are incorporated by reference into the PTLA to which they are attached. All Section references in these Terms and Conditions shall be references to provisions in these Terms and Conditions unless explicitly stated otherwise.

 

1.Definitions.

  

“Affiliate” means any business entity more than 50% owned by Licensee, any business entity which owns more than 50% of Licensee, or any business entity that is more than 50% owned by a business entity that owns more than 50% of Licensee.

  

“Agreement” means collectively (i) these Terms and Conditions and (ii) the PTLA.

  

“Confidential Information” means all information that is of a confidential and proprietary nature to Licensor or Licensee and provided by one Party (“Discloser”) to the other Party (“Recipient”) under the Agreement.

  

“Contract Quarter” means the three-month periods ending on March 31, June 30, September 30, and December 31 of each Contract Year.

  

“Contract Year” means the 12-month period ending on December 31.

  

“Effective Date”, “Field of Use”, “Inventors” (or singly, “Inventor”), “Licensee”, “Licensor”, “Prosecution Counsel”, and “Territory” mean, respectively, the date indicated as the Effective Date, the field indicated as the Field of Use, the inventor(s) identified in the definition of Patent Rights/Technology Rights, the Party identified as the Licensee, the Party identified as the Licensor, the law firm or attorney who is handling the prosecution of the Patent Rights, and the territory, all as identified in Section 1 of the PTLA.

  

“Government” means any agency, department or other unit of the United States of America or the State of Ohio.

  

“Gross Consideration” means all cash and non-cash consideration (e.g., securities).

  

“Licensed Process” means a method, procedure, process, performance of a service, or other subject matter: (i) whose practice, use, sale, or offer for sale is covered in whole or in part by a Valid Claim of the Patent Rights; and/or (ii) that uses, incorporates, is made with, is created from, is derived or developed from the use of, or practices any (a) Technology Rights, (b) Licensed Products, and/or (c) modifications of, enhancements to, and/or derivatives of the Technology Rights or Licensed Products.

 

“Licensed Product” means any product, apparatus, kit, portion, part, or component thereof: (i) whose manufacture, use, sale, offer for sale or import is covered in whole or in part by a Valid Claim of the Patent Rights; (ii) that uses, incorporates, is made with, is created from, or is derived or developed from the use of, any Technology Rights; (iii) that is made by using a Licensed Process or another Licensed Product; and/or (iv) that is derived or developed from a Licensed Process or another Licensed Product.

  

“Licensed Subject Matter” means Patent Rights and/or Technology Rights.

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
  Page 6 of 25  
 

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

“Milestone Fees” means all fees identified as Milestone Fees in Sections 2.4 and 3 of the PTLA.

  

“Net Sales” means the Gross Consideration received by Licensee, Affiliates, and Sublicensees from the Sale of Licensed Products and Licensed Processes, less the following items directly attributable to the Sale of such Licensed Products that are specifically identified on the invoice for such Sale and borne by the Licensee, Affiliates, or Sublicensees as the seller: (a) discounts and rebates actually granted; (b) sales, value added, use and other taxes and government charges actually paid, excluding income taxes; (c) import and export duties actually paid; (d) freight, transport, packing and transit insurance charges actually paid or allowed; and (e) other amounts actually refunded, allowed or credited due to rejections or returns, but not exceeding the original invoiced amount.

 

“Non-Royalty Sublicensing Consideration" means the Gross Consideration received by the Licensee or its Affiliate directly or indirectly, from any Sublicensee that is not an earned royalty, including but not limited to any fixed fee, option fee, distribution fee, license fee, maintenance fee, milestone payment, unearned portion of any minimum royalty payment, equity, joint marketing fee, intellectual property cross license, research and development funding in excess of Licensee’s cost of performing such research and development, and any other property, consideration or thing of value given or exchanged for a Sublicense Agreement regardless of how the Licensee and Sublicensee characterize such payments or consideration.

 

“PTLA” means the particular Patent & Technology License Agreement to which these Terms and Conditions are attached and incorporated into by reference.

 

“Patent Rights” means the Licensor’s rights in: (a) the patents and patent applications listed in Section 1 of the PTLA; (b) all provisional patent applications filed within one year of any provisional application listed in Section 1 of the PTLA that can be included in a priority claim in a non-provisional application claiming priority to any non-provisional application listed in Section 1 of the PTLA; (c) all non-provisional patent applications that claim priority to any of the provisional applications listed in Section 1 of the PTLA to the extent the claims of such non-provisional applications are entitled to claim priority to such provisional applications; (d) all divisional(s), continuation(s) and continuations-in-part (excluding new matter and claims containing new matter) of the non-provisional patent applications identified in (a) and (b) and (c) above, to the extent that claims of such continuations-in-part are entitled to claim priority to at least one of the patent applications identified in (a) or (b) or (c) above; (e) all reissues, reexaminations, extensions, and foreign counterparts of any of the patents or patent applications identified in (a), (b), (c) or (d), above; and (f) any patents that issue with respect to any of the patent applications listed in (a), (b) , (c), (d) or (e), above.

  

“Quarterly Payment Deadline” means the day that is thirty (30) days after the last day of any particular Contract Quarter.

  

“Sell, Sale or Sold” means any transfer or other disposition of Licensed Products or Licensed Processes for which consideration is received by Licensee, its Affiliates or Sublicensees. A Sale of Licensed Products or Licensed Processes will be deemed completed at the time Licensee or its Affiliate or its Sublicensee receives such consideration.

 

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
  Page 7 of 25  
 

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

“Sublicense Agreement” means any agreement or arrangement pursuant to which Licensee (or an Affiliate or Sublicensee) grants to any third party any of the license or sublicense rights granted to the Licensee under the Agreement.

 

“Sublicense Fee” means the fee specified in Section 3 of the PTLA.

  

“Sublicensee” means any entity that enters into an agreement or arrangement with Licensee, or receives a sublicense grant from Licensee under the Licensed Subject Matter, to manufacture, have manufactured, offer for sale, sell, lease, use, practice, and/or import the Licensed Product and/or Licensed Process.

  

“Technology Rights” means Licensor’s rights in technical information, know-how, processes, procedures, compositions, devices, methods, formulas, protocols, techniques, designs, drawings or data created before the Effective Date by Inventors while employed at The Ohio State University (“OSU”) and within the Field of Use which are not covered by Patent Rights, but which are either (1) directly related to the Tech ID listed in Section 1 of the PTLA or (2) necessary or used for practicing inventions claimed in patents and/or patent applications listed in the definition of Patent Rights whether outstanding, expired or abandoned.

  

“Valid Claim” means any issued claim of the Patent Rights that has not expired, or been finally held as invalid or unenforceable by a court or administrative body of competent jurisdiction from which no appeal can be or is taken, as well as any pending claim of the Patent Rights that has not been finally and conclusively rejected from which no appeal can be or is taken.

 

2.License Grant and Commercialization.

  

2.1Grant.

 

(a)Licensor grants to Licensee a royalty-bearing exclusive license under Patent Rights to make, have made, distribute, have distributed, use, offer for Sale, Sell, lease, loan and/or import Licensed Products and Licensed Processes in the Field of Use in the Territory.

  

(b)Licensor grants to Licensee a royalty-bearing nonexclusive sublicense under Technology Rights to make, have made, distribute, have distributed, use, offer for Sale, Sell, lease, loan and/or import Licensed Products and Licensed Processes in the Field of Use in the Territory.

  

(c)This grant is subject to: (1) the payment by Licensee to Licensor of all consideration required under the Agreement; (2) any rights of, or obligations to, the Government; and (3) rights retained by Licensor to (i) publish the scientific findings from research related to the Licensed Subject Matter, (ii) use the Licensed Subject Matter for teaching, research, education, and other educationally-related purposes, and (iii) grant rights to, and transfer material embodiments of, the Licensed Subject Matter to other academic institutions or non-profit research institutions under a material transfer agreement substantially similar to the agreement of Attachment [x] (“Material Transfer Agreement”) for the purposes identified in clauses (i) and (ii) above provided that any such Transferee agrees to be bound by the applicable terms and conditions of this Agreement and shall indicate that Licensor is a third-party beneficiary of the Material Transfer Agreement.

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
  Page 8 of 25  
 

 

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(d)Licensor reserves all rights not expressly granted in the Agreement including, but not limited to, any other licenses, implied or otherwise, to any patents or other rights of Licensor, regardless of whether such patents or other rights are dominant or subordinate to any rights expressly granted in the Agreement, or are required to exploit any rights expressly granted in the Agreement.

 

2.2Affiliates. Licensee may extend the license granted herein to any Affiliate provided that the Affiliate agrees in writing to be bound by the Agreement to the same extent as Licensee.  For the sake of clarity, any specific reference to “Licensee” herein shall include such Affiliate regardless of whether a specific reference to an “Affiliate” is made in such provision. Licensee agrees to deliver such written agreement to Licensor within thirty (30) calendar days following execution.

 

2.3Sublicensing. Licensee has the right to grant Sublicense Agreements under the Licensed Subject Matter consistent with the terms of the Agreement, subject to the following:

 

(a)A Sublicense Agreement shall not exceed the scope and rights granted to Licensee hereunder. Sublicensee must agree in writing to be bound by the applicable terms and conditions of this Agreement and shall indicate that Licensor is a third party beneficiary of the Sublicense Agreement.

  

(b)Licensee shall deliver to Licensor a copy of each Sublicense Agreement granted by Licensee, Affiliate or Sublicensee, and any modification or termination thereof, within thirty (30) days following the applicable execution, modification, or termination of such Sublicense Agreement.

  

(c)Notwithstanding any such Sublicense Agreement, Licensee will remain primarily liable to Licensor for all of the Licensee’s duties and obligations contained in the Agreement. Each Sublicense Agreement will contain a right of termination by Licensee in the event that the Sublicensee breaches the payment or reporting obligations affecting Licensor or any other terms and conditions of the Sublicense Agreement that would constitute a breach of the Agreement if such acts were performed by Licensee.

  

2.4Diligent Commercialization. Licensee by itself or through its Affiliates and Sublicensees will use diligent and commercially reasonable efforts to commercialize Licensed Products and/or Licensed Processes in the Field of Use within the Territory. Without limiting the foregoing, Licensee will: (a) maintain a bona fide, funded, ongoing and active research, development, manufacturing, marketing, and sales program to diligently make, have made, use, sell, and have sold Licensed Products and/or Licensed Processes that are commercially available to the public as soon as commercially practicable, and (b) fulfill the milestone events specified in Section 2.4 of the PTLA by the deadlines indicated therein. If the obligations under this Section 2.4 are not fulfilled, Licensor may treat such failure as a breach in accordance with Section 7.3(b); provided, however, that if Licensee anticipates missing a milestone date and it has used and is using diligent and commercially reasonable efforts to commercialize Licensed Products and/or Licensed Processes in the Field of Use within the Territory, the parties shall negotiate in good faith reasonably appropriate extensions or other accommodations to the applicable milestone to enable Licensee to achieve such milestone, taking into consideration, Licensee’s active engagement in assessing drugability with respect to a Licensed Product and, after IND filing for a Licensed Product, Licensee’s ongoing engagement of pre-clinical and clinical development for Licensed Products which shall be evidenced by conducting at least one of the following activities in each year starting from the date of IND filing:

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
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(i) having expended at least five hundred thousand dollars ($500,000) for development of a Licensed Product;
(ii) having manufactured a Licensed Product suitable for clinical trials under an approved IND;
(iii) having responded in full to all regulatory requests/issues relating to a Phase I, II or III Clinical Trial of a Licensed Product;
(iv) having prepared documents for NDA filing with respect to a Licensed Product;
(v) having filed an NDA for a Licensed Product;
(vi) following NDA filing, having actively pursued NDA approval for a Licensed Product;
(vii) following NDA approval of Licensed Product, having launched or sold a Licensed Product in the United States or another major market country.

 

3.Compensation. In consideration of rights granted to Licensee, Licensee will pay Licensor all of the fees and royalties set forth in the PTLA and in accordance with these Terms and Conditions. Each payment will reference the PTLA number and will be sent to Licensor’s payment and accounting contact in Section 18 of the PTLA.

  

3.1Royalties. Licensee will pay running royalties on Net Sales in each Contract Quarter on or before the Quarterly Payment Deadline for such Contract Quarter at the rate set forth in Section 3.1 of the PTLA. If royalties paid to Licensor do not reach the minimum royalty amounts stated in Section 3.1 of the PTLA in the stated period, then thirty (30) days after the end of such period, Licensee will pay Licensor an additional amount equal to the difference between the stated minimum royalty amount and the actual royalties paid to Licensor.

 

4.Reports and Plans.

  

4.1Reports. Utilizing the report forms in Appendix 1, Licensee will provide to Licensor’s payment and reporting contact the following reports, including but not limited to: (a) the milestone report; (b) annual written progress report on January 31; (c) commercial development report; and (d) quarterly payment and royalty report.

 

5.Payment, Records, and Audits.

  

5.1Payments. All amounts referred to in the PTLA are expressed in U.S. dollars without deductions for taxes, assessments, fees, or charges of any kind. Each payment will reference the agreement number set forth at the beginning of the PTLA. All payments to Licensor will be made in U.S. dollars by check or wire transfer (Licensee to pay all wire or other transfer fees) payable to the payee identified in Section 18 and sent to the payment and reporting contact in Section 18. Licensee may not make any tax withholdings from payments to Licensor.  

  

5.2Sales Outside the U.S. If any currency conversion shall be required in connection with the calculation of payments hereunder, such conversion shall be made using the rate used by Licensee for its financial reporting purposes in accordance with U.S. Generally Accepted Accounting Principles (or foreign equivalent).

  

5.3Late Payments. Amounts that are not paid when due will accrue a late charge from the due date until paid, at a rate equal to [***]% per month (or the maximum allowed by law, if less).

  

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
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5.4Records. For a period of six (6) years after the Contract Quarter to which the records pertain, Licensee agrees that it and its Affiliates and Sublicensees each will keep complete and accurate records of their Sales, Net Sales, royalty payment calculations, Milestone Fees, and Non-Royalty Sublicensing Consideration in sufficient detail to enable such payments to be determined and audited.

  

5.5Auditing. Licensee and its Affiliates will permit Licensor or its representatives, at Licensor’s expense, to periodically examine books, ledgers, and records during regular business hours, at Licensee’s or its Affiliate’s place of business, on at least thirty (30) days advance notice, to the extent necessary to verify any payment or report required under the Agreement. For each Sublicensee, Licensee shall obtain such audit rights for Licensor and itself. If Licensee conducts an audit of the Sublicensee’s records, Licensee will furnish to Licensor a copy of the findings from such audit. No more than one audit of Licensee, each Affiliate, and each Sublicensee shall be conducted under this Section 5.5 in any calendar year. If any amounts due Licensor have been underpaid, then Licensee shall immediately pay Licensor the amount of such underpayment plus accrued interest due in accordance with Section 5.3. If the amount of underpayment is equal to or greater than [***]% of the total amount due for the records so examined, Licensee will pay the cost of such audit. Such audits may, at Licensor’s sole discretion, consist of a self-audit conducted by Licensee at Licensee’s expense and certified in writing by an authorized officer of Licensee.

 

6.Patent Expenses and Prosecution.

  

6.1Patent Expenses. Licensee shall pay Licensor for all past patent expenses as set forth in Section 3 of the PTLA. Licensee shall pay any additional past patent expenses as well as all future patent expenses incurred by Licensor regarding the Patent Rights within forty-five (45) days after Licensee’s receipt of an invoice from Licensor. Patent expense payment delinquencies (whether owed directly to Prosecution Counsel or to Licensor) will be considered a payment default under Section 7.3(a).

 

6.2Direction of Prosecution. Licensor shall control the preparation, prosecution and maintenance of the Patent Rights jointly with. Licensee using Prosecution Counsel mutually acceptable to Licensor for the preparation, prosecution and maintenance of the Patent Rights. Licensor will provide or have provided copies of all material documents received by Prosecution Counsel from patent offices regarding the Patent Rights and the material documents prepared by Prosecution Counsel for submission to patent offices be provided to Licensee for review and comment prior to filing to the extent practicable under the circumstances.

  

6.3Ownership. All patent applications and patents will be in the name of Licensor (and any co-owner identified in Section 1 of the PTLA) and owned by Licensor (and such co-owner, if any).

  

6.4Foreign Filings. In addition to the U.S., the Patent Rights shall, subject to applicable bar dates, be pursued in such foreign countries as Licensee so designates in writing to Licensor in sufficient time to reasonably enable the preparation of such additional filings, and in those foreign countries in which Licensor has filed applications prior to the Effective Date. If Licensee does not choose to pursue patent rights in a particular foreign country and Licensor chooses to do so, Licensee shall so notify Licensor and thereafter said patent application or patent shall no longer be included in the Patent Rights and Licensee shall have no further rights thereto. Licensor shall have the right to make alternative arrangements with Licensee for upfront payment of foreign patent expenses.

  

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
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6.5Withdrawal from Paying Patent Costs. If at any time Licensee wishes to cease paying for any costs for a particular Patent Right or for patent prosecution in a particular jurisdiction, Licensee must give Licensor at least ninety (90) days prior written notice and Licensee will continue to be obligated to pay for the patent costs which reasonably accrue during said notice period. Thereafter, said patent application or patent shall no longer be included in the Patent Rights and Licensee shall have no further rights thereto.

  

7.Term and Termination.

  

7.1Term. Unless earlier terminated as provided herein, the term of the Agreement will commence on the Effective Date and continue until the last date of expiration or termination of the Patent Rights or, if Technology Rights are licensed and no Patent Rights are applicable, for a term of twenty (20) years.

  

7.2Termination by Licensee. Licensee, at its option, may terminate the Agreement by providing Licensor written notice of termination and such termination will become effective ninety (90) days after receipt of such notice by Licensor; except that if Licensee provides Licensor written notice of termination before the first anniversary of the Effective Date, such termination will become effective thirty (30) days after receipt of such notice by Licensor.

 

7.3Termination by Licensor. Licensor, at its option, may immediately terminate the Agreement, or any part of Licensed Subject Matter, or any part of Field of Use, or any part of Territory, or the exclusive nature of the license grant, upon delivery of written notice to Licensee of Licensor’s decision to terminate, if any of the following occur:

  

(a)Licensee becomes in arrears in any payments due under the Agreement, and Licensee fails to make the required payment within fifteen (15)) days after delivery of written notice from Licensor; or

  

(b)Licensee is in breach of any non-payment provision of the Agreement, and does not cure such breach within forty (40) days after delivery of written notice from Licensor; or

  

(c)Licensee or its Affiliate or Sublicensee initiates any proceeding or action to challenge the validity, enforceability, or scope of one or more of the Patent Rights, or assist a third party in pursuing such a proceeding or action.

  

7.4Other Conditions of Termination. The Agreement will terminate:

 

(a)Immediately, without the necessity of any action being taken by Licensor or Licensee, (i) if Licensee files a bankruptcy action or becomes bankrupt or insolvent, or (ii) Licensee’s Board of Directors elects to liquidate its assets or dissolve its business, or (iii) Licensee ceases its business operations, or (iv) Licensee makes an assignment for the benefit of creditors, or (v) if the business or assets of Licensee are otherwise placed in the hands of a receiver, assignee or trustee, whether by voluntary act of Licensee or otherwise; or

  

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
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(b)At any time by mutual written agreement between Licensee and Licensor.

  

7.5Effect of Termination. If the Agreement is terminated for any reason:

 

(a)All Sublicenses that are granted by Licensee pursuant to this Agreement, where the Sublicensee is in compliance with its Sublicense Agreement as of the date of such termination, will remain in effect and will be assigned to Licensor, except that Licensor will not be bound to perform any duties or obligations set forth in any Sublicenses that extend beyond the duties and obligations of Licensor set forth in this Agreement; and

  

(b)Licensee shall cease making, having made, distributing, having distributed, using, selling, offering to sell, leasing, loaning and importing any Licensed Products and performing Licensed Processes by the effective date of termination; and

 

(c)Licensee shall tender payment of all accrued royalties and other payments due to Licensor as of the effective date of termination within thirty (30) business days after the effective date of termination; and

 

(d)Licensee shall tender payment of all unreimbursed patent expenses, including those scheduled in Sections 3 and 20 of the PTLA and those expenses payable under Section 6 of these Terms and Conditions within thirty (30) business days after the effective date of termination; and

 

(e)Nothing in the Agreement will be construed to release either Party from any obligation that matured prior to the effective date of termination; and

  

(f)The provisions of Sections 8 (Confidentiality), 9.4 (Cooperation), 11 (Representations and Disclaimers), 12 (Limit of Liability), 13 (Indemnification), 14 (Insurance), 17 (Use of Name), 18 (Notices), and 19 (General Provisions) will survive any termination or expiration of the Agreement. In addition, the provisions of Sections 3 (Compensation), 4 (Reports and Plans), 5 (Payment, Records and Audits), and 6.1 (Patent Expenses) shall survive with respect to all activities and payment obligations accruing prior to the termination or expiration of the Agreement.

  

8.Confidentiality. Recipient will use best efforts to safeguard the confidentiality of the Confidential Information and will not provide any Confidential Information to third parties without Discloser’s prior written consent. Recipient will permit its employees to have access to the Confidential Information only on a need-to-know basis, and then only on the basis of a clear understanding by these individuals of the obligations hereunder. Recipient is under no obligation for any Confidential Information which: (a) it can demonstrate by written records was previously known to it; (b) is now, or becomes in the future, public knowledge other than through its own acts or omissions; (c) it independently develops by those not having access to the Confidential Information and which can be proven through verifiable records; (d) it lawfully obtains from a source independent of the Discloser; or (e) is required by applicable law to be disclosed. Notwithstanding the foregoing, the existence of the Agreement shall not be considered Confidential Information. Subject to the exclusions listed above, the Parties’ confidentiality obligations under the Agreement will survive termination of the Agreement and will continue for a period of three (3) years thereafter.

 

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
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9.Infringement and Litigation.

  

9.1Notification. If either Licensor’s designated office for technology commercialization or Licensee becomes aware of any infringement or potential infringement of Patent Rights, each Party shall promptly notify the other of such in writing.

  

9.2Licensee’s Enforcement Rights. Licensee shall have the first right, but not the obligation, to enforce the Patent Rights against any infringement by a third party in the Field in the Territory, within a period of six (6) months from notice of such infringement.  Licensee shall be responsible for payment of [***]fees and expenses associated with such enforcement incurred by Licensee and incurred by Licensor in providing cooperation or joining as a party as provided in Section 9.4.  [***] percent ([***]%) of any monetary recovery for actual damages or punitive damages, in excess of Licensee’s documented, third-party expenses in enforcing the Patent Rights and amounts actually reimbursed by Licensee to Licensor under this Section 9.2, shall be shared with Licensor.

  

9.3Licensor’s Enforcement Rights. If Licensee does not file suit within six (6) months after a written request by Licensor to initiate an infringement action, or earlier if Licensee provides written notice to Licensor that Licensee will not initiate infringement action, then Licensor shall have the right, at its sole discretion, to bring suit to enforce any Patent Right licensed hereunder against the infringing activities, with Licensor retaining all recoveries from such enforcement.

  

9.4Cooperation between Licensor and Licensee. In any infringement suit or dispute, the Parties agree to cooperate fully with each other in a reasonable manner. If it is necessary to name Licensor as a party in such action, then Licensee must first obtain Licensor’s prior written permission, which permission shall not be unreasonably withheld, provided that Licensor shall have reasonable prior input on choice of counsel on any matter where such counsel represents Licensor.

  

10.Export Compliance. Licensee and Licensor shall observe all applicable United States and foreign laws and regulations with respect to the research, development, manufacture, marketing and transfer of Licensed Products and related technical data, including, without limitation, the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulation. Licensee hereby represents and covenants that Licensee: (a) is neither a national of, nor controlled by a national of, any country to which the United States prohibits the export or re-export of goods, services, or technology; (b) is not a person specifically designated as ineligible to export from the United States or deal in U.S.-origin goods, services, or technologies; (c) shall not export or re-export, directly or indirectly, any goods, services, or technology to any country or person (including juridical persons) to which the United States prohibits the export of goods, technology or services; and (d) in the event that a United States government license or authorization is required for an export or re-export of goods, services, or technology (including technical information acquired from Licensor under this Agreement and/or any products created by using such technical information or any part thereof), shall obtain any necessary United States government license or other authorization prior to undertaking the export or re-export. Licensee and Licensor shall include a provision in its agreements, substantially similar to this Section 10, with its Sublicensees, third party persons or entities who receive or purchase a Licensed Product, requiring that these parties comply with all then-current applicable export laws and regulations and other applicable laws and regulations.

 

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
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INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

11.Representations and Disclaimers.

  

11.1Licensor Representations. Except for the rights, if any, of the Government, Licensor represents and warrants to Licensee that to the knowledge of Licensor’s designated office for technology commercialization: (a) Licensor is the owner or agent of the entire right, title, and interest in and to Patent Rights (other than the right, title and interest of any joint owner identified in Section 1 of the PTLA) and has taken all reasonable steps necessary to perfect its ownership in and to Patent Rights;); (b) Licensor has the right to grant the license and sublicense hereunder;, (c) Licensor has not knowingly granted and will not knowingly grant licenses or other rights under the Patent Rights that are in conflict with the terms and conditions in the Agreement, and (d) Licensor has disclosed any applicable Government Rights in the Patent Rights to Licensee.

  

11.2Government Rights. Licensee understands that Licensed Subject Matter may have been developed under a funding agreement with Government and, if so, that Government may have certain rights relative thereto. The Agreement is made subject to the Government’s rights under any such agreement and under any applicable Government law or regulation. To the extent that there is a conflict between any such agreement, such applicable law or regulation and the Agreement, the terms of such Government agreement, and applicable law or regulation, shall prevail.

  

11.3Licensor Disclaimers. EXCEPT AS SPECIFICALLY SET FORTH IN SECTION 11.1, LICENSEE UNDERSTANDS AND AGREES THAT LICENSOR MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, AS TO THE LICENSED PRODUCTS OR LICENSED PROCESSES OR AS TO THE OPERABILITY OR FITNESS FOR ANY USE OR PARTICULAR PURPOSE, MERCHANTABILITY, SAFETY, EFFICACY, APPROVABILITY BY REGULATORY AUTHORITIES, TIME AND COST OF DEVELOPMENT, PATENTABILITY, NONINFRINGEMENT, AND/OR BREADTH OF PATENT RIGHTS. LICENSOR MAKES NO REPRESENTATION AS TO WHETHER ANY CLAIM OR PATENT WITHIN PATENT RIGHTS IS VALID, OR AS TO WHETHER THERE ARE ANY PATENTS NOW HELD, OR WHICH WILL BE HELD, BY OTHERS OR BY LICENSOR THAT MIGHT BE REQUIRED FOR USE OF PATENT RIGHTS IN THE FIELD OF USE. NOTHING IN THE AGREEMENT WILL BE CONSTRUED AS CONFERRING BY IMPLICATION, ESTOPPEL OR OTHERWISE ANY LICENSE OR RIGHTS TO ANY PATENTS OR TECHNOLOGY OF LICENSOR OTHER THAN THE PATENT RIGHTS, WHETHER SUCH PATENTS ARE DOMINANT OR SUBORDINATE TO THE PATENT RIGHTS, OR THE TECHNOLOGY RIGHTS SPECIFICALLY DESCRIBED HEREIN.

  

11.4Licensee Representation. By execution of the Agreement, Licensee represents, acknowledges, covenants and agrees that: (a) Licensee has not been induced in any way by Licensor or its employees to enter into the Agreement; (b) Licensee has been given an opportunity to conduct sufficient due diligence with respect to all items and issues pertaining to this Section 11 (Representations and Disclaimers) and all other matters pertaining to the Agreement; (c) Licensee has adequate knowledge and expertise, or has utilized knowledgeable and expert consultants, to adequately conduct the due diligence; and (d) Licensee accepts all risks inherent herein. Licensee represents that it is a duly organized, validly existing entity of the form indicated in Section 1 of the PTLA, and is in good standing under the laws of its jurisdiction of organization as indicated in Section 1 of the PTLA, and has all necessary corporate or other appropriate power and authority to execute, deliver and perform its obligations hereunder.

 

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
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12.Limit of Liability. IN NO EVENT SHALL LICENSOR, OSU, OR THEIR INVENTORS, OFFICERS, EMPLOYEES, STUDENTS, TRUSTEES, AGENTS OR AFFILIATED ENTERPRISES, BE LIABLE FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL, EXEMPLARY, OR PUNITIVE DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF PROFITS OR REVENUE) ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT OR ITS SUBJECT MATTER, REGARDLESS OF WHETHER ANY SUCH PARTY KNOWS OR SHOULD KNOW OF THE POSSIBILITY OF SUCH DAMAGES. OTHER THAN FOR CLAIMS AGAINST LICENSEE FOR INDEMNIFICATION (SECTION 13), CLAIMS AGAINST LICENSOR FOR LICENSOR REPRESENTATIONS (11.1), OR FOR CLAIMS AGAINST LICENSOR FOR MISUSE OR MISAPPROPRIATION OR INFRINGEMENT OF LICENSEE’S INTELLECTUAL PROPERTY RIGHTS, LICENSEE WILL NOT BE LIABLE TO LICENSOR FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF PROFITS OR REVENUE) ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT OR ITS SUBJECT MATTER, REGARDLESS OF WHETHER LICENSEE KNOWS OR SHOULD HAVE KNOWN OF THE POSSIBILITY OF SUCH DAMAGES.

  

13.Indemnification Obligation. Licensee agrees to hold harmless, defend and indemnify Licensor, OSU, their affiliates, and their officers, employees, students, inventors, trustees, agents, and consultants (“Indemnified Parties”) from and against any liabilities, damages, causes of action, suits, judgments, liens, penalties, fines, losses, costs and expenses (including, without limitation, reasonable attorneys’ fees and other expenses of litigation) (collectively “Liabilities”) resulting from claims or demands brought by third parties against an Indemnified Party on account of any injury or death of persons, damage to property, or any other damage or loss arising out of or in connection with the Agreement or the exercise or practice by or under authority of Licensee, its Affiliates or their Sublicensees, or third party person or entity who purchases a Licensed Product, of the rights granted hereunder. Licensee shall have no responsibility or obligation under this section for any Liabilities to the extent caused by the gross negligence or willful misconduct by Licensor.

  

14.Insurance Requirements. Prior to any Licensed Product or Licensed Process being used or Sold (including for the purpose of obtaining regulatory approval) by an Affiliate or by a Sublicensee, and for a period of five years after the Agreement expires or is terminated, Licensee shall, at its sole cost and expense, procure and maintain commercial general liability insurance in commercially reasonable and appropriate amounts for the Licensed Product or Licensed Process being used or Sold. Licensee shall use commercially reasonable efforts to have Licensor, its affiliates, its officers, and employees named as additional insureds. Such commercial general liability insurance shall provide, without limitation: (a) product liability coverage; (b) broad form contractual liability coverage for Licensee’s indemnification under the Agreement; and (c) coverage for litigation costs. Upon request by Licensor, Licensee shall provide Licensor with written evidence of such insurance. Additionally, Licensee shall provide Licensor with advance written notice of at least sixty (60) days prior to Licensee cancelling, not renewing, or materially changing such insurance.

  

15.Assignment. This Agreement is not assignable or otherwise transferable (including by operation of law, merger or other business combination) by Licensee without the prior written consent of Licensor, which consent will not be unreasonably withheld. For any permitted assignment or transfer to be effective, (a) Licensee must be in good standing under this Agreement, and (b) the assignee must assume in writing (a copy of which shall be promptly provided to Licensor) all of Licensee’s interests, rights, duties and obligations under the Agreement and agree to comply with all terms and conditions of the Agreement as if assignee were an original Party to the Agreement.

 

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
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16.Patent Markings. Licensee agrees that all Licensed Products Sold by Licensee, Affiliates, and Sublicensees will be marked in accordance with each country’s patent marking laws, including Title 35, U.S. Code, in the United States.

 

17.Use of Name. Licensee will not use the name, trademarks or other marks of Licensor or OSU without the advance written consent of Licensor and OSU. Licensor and OSU may use Licensee’s name and logo for annual reports, brochures, website and internal reports without prior consent.

 

18.Notices. Any notice or other communication of the Parties required or permitted to be given or made under the Agreement will be in writing and will be deemed effective when sent in a manner that provides confirmation or acknowledgement of delivery and received at the address set forth in Section 18 of the PTLA (or as changed by written notice pursuant to this Section 18). Notices required under the Agreement may be delivered via E-mail provided such notice is confirmed in writing as indicated. Late payment notices are sufficiently delivered via E-mail only.

 

19.General Provisions.

 

19.1Binding Effect. The Agreement is binding upon and inures to the benefit of the Parties hereto, their respective executors, administrators, heirs, permitted assigns, and permitted successors in interest.

 

19.2Construction of Agreement. Both Parties agree that any ambiguity in the Agreement shall not be construed more favorably toward one Party than the other Party, regardless of which Party primarily drafted the Agreement.

 

19.3Counterparts and Signatures. The Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. A Party may evidence its execution and delivery of the Agreement by transmission of a signed copy of the Agreement via facsimile or email.

 

19.4Compliance with Laws. Licensee will comply with all applicable federal, state and local laws and regulations.

 

19.5Governing Law; Jurisdiction. The Agreement will be construed and enforced in accordance with laws of the State of Ohio, without regard to choice of law and conflicts of law principles. The Parties agree that any claim or cause of action regarding this Agreement shall be brought in a court of competent jurisdiction in Ohio and this is the parties’ sole and exclusive process for seeking a remedy for any and all claims and causes of action regarding this Agreement.

 

19.6Modification. Any modification of the Agreement will be effective only if it is in writing and signed by duly authorized representatives of both Parties.

 

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
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19.7Severability. If any provision hereof is held to be invalid, illegal or unenforceable in any jurisdiction, the Parties hereto shall negotiate in good faith a valid, legal and enforceable substitute provision that most nearly reflects the original intent of the Parties, and all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be construed in order to carry out the intentions of the Parties hereto as nearly as may be possible. Such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such other provisions in any other jurisdiction, so long as the essential essence of the Agreement remains enforceable.

 

19.8Third Party Beneficiaries. Nothing in the Agreement, express or implied, is intended to confer any benefits, rights or remedies on any entity, other than the Parties, OSU, and their permitted successors and assigns. However, if there is a joint owner of any Patent Rights identified in Section 1 of the PTLA (other than Licensee), then Licensee hereby agrees that the following provisions of these Terms and Conditions extend to the benefit of the co-owner identified therein (excluding the Licensee to the extent it is a co-owner) as if such co-owner was identified in each reference to the Licensor: the retained rights under Section 2.1(d); Section 11.3 (Licensor Disclaimers); Section 12 (Limit of Liability); Section 13 (Indemnification); Section 14.1 (Insurance Requirements); Section 17 (Use of Name); and Section 19.10 (Sovereign Immunity, if applicable).

 

19.9Waiver. Neither Party will be deemed to have waived any of its rights under the Agreement unless the waiver is in writing and signed by such Party. No delay or omission of a Party in exercising or enforcing a right or remedy under the Agreement shall operate as a waiver thereof.

 

19.10Sovereign Immunity. Nothing in the Agreement shall be deemed or treated as any waiver of OSU’s sovereign immunity.

 

19.11Cross Default.  In the event that Licensee is a party to any other agreement with Licensor, a default by Licensee of this or any other agreement shall be deemed a default under all other agreements with Licensor and OSU.

 

19.12Entire Agreement. The agreement constitutes the entire agreement between the parties regarding the subject matter hereof, and supersedes all prior written or verbal agreements, representations and understandings relative to such matters.

 

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
  Page 18 of 25  
 

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

Appendix 1A

 

MILESTONE REPORT

 

 

Licensee: ______________________________ Agreement No: ___________________________
Inventor: ______________________________ Licensor Tech ID No: _______________________
Period Covered From: ____________________ Through: ________________________________
Prepared By: ___________________________ Date: ___________________________________
Approved By: __________________________ Date: ___________________________________

  

Milestone Events

 

Milestone Fees

Due by the Quarterly
Payment Deadline for the
Contract Quarter in which the
milestone events are achieved

 

 Deadlines Date Completed
1.                                  $                                                                  
2.                                 $                                                                  
3.                                 $                                                                  
4.                                 $                                                                  
5.                                 $                                                                  

 

 

I certify that this report is accurate and complete: ________________________________________

 

Description of Milestone Activities:

 

1.

 

2.

 

3.

 

Please return one copy of this form along with your report to the following address:

 

Ohio State Innovation Foundation
Attn: Compliance

 

Technology Commercialization Office
1524 North High Street

 

Columbus, OH 43201

 

  

If you have questions, please call (614) 292-1315, send a fax to (614) 292-8907 (Attn: Compliance), or send an email to tcocompliance@osu.edu. Thank you for your prompt attention.

 

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
  Page 19 of 25  
 

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

Appendix 1B

 

ANNUAL REPORT

 

Page 1

  

   
Licensee: ______________________________ Agreement No: ___________________________
Inventor: ______________________________ Licensor Tech ID No: _______________________
Period Covered From: ____________________ Through: ________________________________
Prepared By: ___________________________ Date: ___________________________________
Approved By: __________________________ Date: ___________________________________

  

 

ANNUAL REPORT FOR THE PERIOD

 

 

 

 

An annual report is due on ______________________ covering the status of all patent prosecution, commercial development, and licensing activities relating to the invention(s) covered by the above Agreement. (Please refer to the Agreement paragraph ___________).

 

 

Government regulations (Bayh-Dole) require reporting of any request to waive standard U.S. manufacturing requirements. Have you requested such a waiver from a government agency?

 

¨  Yes   ¨  No

If yes, please attach additional information and give the agency name, date requested, and/or date granted.

 

Submitted By: ____________________________

Title: ___________________________________

Email: ___________________________________

 

Date: ____________________

Phone: ___________________

 

 

Please return one copy of this form along with your report to the following address:

 

Ohio State Innovation Foundation
Attn: Compliance

 

Technology Commercialization Office
1524 North High Street

 

Columbus, OH 43201

 

 

If you have questions, please call (614) 292-1315, send a fax to (614) 292-8907 (Attn: Compliance), or send an email to tcocompliance @osu.edu. Thank you for your prompt attention.

 

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
  Page 20 of 25  
 

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

Appendix 1B

ANNUAL REPORT

Page 2

 

For the Period:_________________

 

Patent Activity

 

 

License/Sublicense Activity

 

Description of Commercial Development (see attached form)

 

Management
Title Name Since (Date)
CEO    
COO    
CFO    
CTO/CMO    

 

Please return one copy of this form along with your report to the following address:

 

Ohio State Innovation Foundation
Attn: Compliance

 

Technology Commercialization Office
1524 North High Street

 

Columbus, OH 43201

 

If you have questions, please call (614) 292-1315, send a fax to (614) 292-8907 (Attn: Compliance), or send an email to tcocompliance @osu.edu. Thank you for your prompt attention.

 

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
  Page 21 of 25  
 

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

Appendix 1B

ANNUAL REPORT

 

Page 3

 

For the Period:_________________

 

Description of any Key Other Events

 

 

 

 

 

 

 

Please return one copy of this form along with your report to the following address:

 

Ohio State Innovation Foundation
Attn: Compliance

 

Technology Commercialization Office
1524 North High Street

 

Columbus, OH 43201

 

If you have questions, please call (614) 292-1315, send a fax to (614) 292-8907 (Attn: Compliance), or send an email to tcocompliance @osu.edu. Thank you for your prompt attention.

  

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
  Page 22 of 25  
 

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

Appendix 1B

ANNUAL REPORT

Page 4

For the Period:_________________

COMMERCIAL DEVELOPMENT REPORT

Please select the type of product in development, check its current state of development, and complete the fields for the other information in the box. If you have additional information, please attach it to the end of this form.

 

 

Therapeutic Products Date ? Discovery _________________ ? Pre-Clinical _________________ ? Phase I Clinical Trials _________________ ? Phase II Clinical Trials _________________ ? Phase III Clinical Trials _________________ ? NDA Submitted _________________ ? Selling Licensed Products _________________ ? Other: _________________ _________________ Drug in Development (brand name, if applicable): Hardware/Engineering Products Date ? Research _________________ ? Functioning Prototype _________________ ? Beta Testing _________________ ? Pilot Manufacturing Run _________________ ? Safety Tested _________________ _________________ ? Selling Licensed Products _________________ ? Other: _________________ _________________ Product in Development (brand name, if applicable): __________________________________________________ Market Addressed: _________________________________ Software Date ? In Development _________________ ? Alpha Testing _________________ ? Beta Testing _________________ _________________ ? Selling Licensed Products _________________ ? Other: _________________ _________________ Tool in Development (brand name, if applicable): _________________________________________ Application: _____________________________________Copyright/Trademarked Products Date ? Functioning Prototype _________________ ? Alpha Testing _________________ ? Beta Testing _________________ _________________ ? Selling Licensed Products _________________ ? Other: _________________ _________________ Product in Development (brand name, if applicable): __________________________________________ Market Addressed: _______________________________ Plant Products Date ? Discovery _________________ ? Gvt. Approval Applied For _________________ ? Gvt. Approval Received _________________ _________________ ? Selling Licensed Products _________________ ? Other: _________________ _________________ Product in Development (brand name, if applicable): __________________________________________________ Field of Product: _________________________________Medical Devices/Diagnostics Date ? Research _________________ ? Pre-Clinical _________________ ? 510(k)/CE Mark Submitted _________________ ? PMA _________________ _________________ ? Selling Licensed Products _________________ ? Other: _________________ _________________ Device/Diagnostic in Development (brand name, if applicable): __________________________________________________ Medical Field: _____________________________________ Please return one copy of this form along with your report to the following address: Ohio State Innovation Foundation Attn: Compliance Technology Commercialization Office 1524 North High Street Columbus, OH 43201If you have questions, please call (614) 292-1315, send a fax to (614) 292-8907 (Attn: Compliance), or send an email to tcocompliance@osu.edu. Thank you for your prompt attention.

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
  Page 23 of 25  
 

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

Appendix 1C

 

ROYALTY REPORT

Page 1

   
Licensee: ______________________________ Agreement No: ___________________________
Inventor: ______________________________ Licensor Tech ID No: _______________________
Period Covered From: ____________________ Through: ________________________________
Prepared By: ___________________________ Date: ___________________________________
Approved By: __________________________ Date: ___________________________________

 

If license covers several major product lines, please prepare a separate report for each line. Then combine all product lines into a summary report.

 

Report Type:

¨    Single Product Line Report: ___________________________________________________________________

¨    Multiproduct Summary Report: ________________________________________________________________
Page 1 of ____ pages

 

Product Line Details: Line: _______________________ Trade Name: _______________________
    Pages: ______________________

  

Report Currency: ¨   U.S. Dollars ¨   Other: __________________________

  Country Gross Consideration Allowances Net Sales1 Royalty Rate Royalty Amount Royalty Paid Last Year Next Year Royalty Forecast2
1. Total Q1                                                                                                                                                                                                                
                                                                                                                                                                                                               
                                                                                                                                                                                                               
2. Total Q2                                                                                                                                                                                                                
                                                                                                                                                                                                               
                                                                                                                                                                                                               
3. Total Q3                                                                                                                                                                                                                
                                                                                                                                                                                                               
                                                                                                                                                                                                               
4. Total Q4                                                                                                                                                                                                                
               
                                                                                                                                                                                                               
5. Total FY _                                                                                                                                                                                                                
6. Minimum Annual Royalty                                                                                                                                                                                                                
7. Annual Royalty3 for FY__                                                                                                                                                                                                                
8. Amount Paid-to-Date4                                                                                                                                                                                                                
9. Amount Payable5                                                                                                                                                                                                                

 

Total Royalty: ________________ Conversion Rate: _________ Royalty in U.S. Dollars: _______________

 

1 means the Gross Consideration paid to, received by, or given to Licensee, Affiliates, and Sublicensees from the Sale of Licensed Products and Licensed Processes, less the following items directly attributable to the Sale of such Licensed Products that are specifically identified on the invoice for such Sale and borne by the Licensee, Affiliates, or Sublicensees as the seller: (a) discounts and rebates actually granted; (b) sales, value added, use and other taxes and government charges actually paid, excluding income taxes; (c) import and export duties actually paid; (d) freight, transport, packing and transit insurance charges actually paid or allowed; and (e) other amounts actually refunded, allowed or credited due to rejections or returns, but not exceeding the original invoiced amount.

 

2 The royalty forecast is non-binding and is for OSIF’s internal planning purposes only

 

3 (greater of line 5 or 6)

 

4 (lines 1+2+3)

 

5 (line 7 - line 8)

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
  Page 24 of 25  
 

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

Appendix 1C

 

ROYALTY REPORT

 

Page 2

 

 

Any other consideration due Licensor during this Royalty Period:

 

Milestones: ________________________  
   
Minimum Royalties: _________________ Sublicense Payments: __________________

 

 

 

 

On a separate page, please indicate the reason for returns or adjustments if significant. Also note any unusual occurrences that affect royalty

amounts during this period. To assist OSIF’s forecasting, please comment on any significant expected trends in sales volume.

  

 

 

 

I certify that this report is accurate and complete: ________________________________________

 

 

Please return one copy of this form along with your report to the following address:

 

Ohio State Innovation Foundation
Attn: Compliance

 

Technology Commercialization Office
1524 North High Street

 

Columbus, OH 43201

 

If you have questions, please call (614) 292-1315, send a fax to (614) 292-8907 (Attn: Compliance), or send an email to tcocompliance @osu.edu. Thank you for your prompt attention.

 

{00258124-1}Licensee: Arno Therapeutics, Inc. CONFIDENTIAL Exclusive License (Non-Equity)
Licensor: Ohio State Innovation Foundation   EXHIBIT A
  Page 25 of 25  
 

 

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

 

 

 



 

EXHIBIT 31.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

 

I, Alexander A. Zukiwski, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Arno Therapeutics, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. I have disclosed based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 16, 2015

 

/s/ Alexander A. Zukiwski  
Name: Alexander A. Zukiwski  

Title: Chief Executive Officer

(Principal Executive Officer and

Acting Principal Financial and Accounting Officer)

  

 

   



 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Arno Therapeutics, Inc. (the “ Company ”) hereby certifies, to such officer’s knowledge, that:

 

(1) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period September 30, 2015 (the “ Report ”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

 

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 16, 2015

 

/s/ Alexander A. Zukiwski  
Name: Alexander A. Zukiwski  

Title: Chief Executive Officer

(Principal Executive Officer and

Acting Principal Financial and Accounting Officer)

  

 

   

 

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