UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended July 31,
2015
OR
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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: 000-55330
LIGHTLAKE THERAPEUTICS INC.
(Exact name of Registrant as specified in
its charter)
Nevada |
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46-4744124 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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445 Park Avenue, 9th Floor, New York, NY |
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10022 |
(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number:
(212) 829-5546
Securities registered pursuant to Section 12(b)
of the Act: None
Securities registered pursuant to Section 12(g)
of the Act: Common Stock, par value $0.001
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
¨
No þ
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
¨ No
þ
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 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 þ
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 (§232. 405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ
No ¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter)
is not contained herein, and will not be contained herein, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
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” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer ¨ |
Accelerated filer ¨ |
Non-accelerated filer ¨ |
Smaller reporting company þ |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨
No þ
The aggregate market value of the voting
and non-voting common equity held by non-affiliates (1,713,629) computed by reference to the price at which the common stock was
last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most
recently completed second fiscal quarter, January 30, 2015 ($3.58), was $6,134,791.82.
As of October 20, 2015, the registrant
had 1,871,791 shares of common stock issued and outstanding.
TABLE
OF CONTENTS
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report
on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of the Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because
they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,”
“estimate,” “intend,” “could,” “should,” “would,” “may,”
“seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,”
“forecast,” “potential,” “continue” negatives thereof or similar expressions. These forward-looking
statements are found at various places throughout this Report and include information concerning possible or assumed future results
of our operations; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements
regarding future operations, future cash needs, business plans and future financial results, and any other statements that are
not historical facts.
From time to time,
forward-looking statements also are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases, in our
presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included
in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out
to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about
future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could
cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of
these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur
to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning
other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in this Report.
Except to the
extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new
information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
For discussion
of factors that we believe could cause our actual results to differ materially from expected and historical results see “Item
1A — Risk Factors” below.
PART I
Item 1. Business.
Our Company
Lightlake Therapeutics Inc. (“Lightlake”
or the “Company”) is a specialty pharmaceutical company developing opioid antagonist treatments for substance use,
addictive and eating disorders. The Company was incorporated in the State of Nevada on June 21, 2005, as Madrona Ventures, Inc.
and on September 16, 2009, the Company changed its name to Lightlake Therapeutics Inc. The Company’s fiscal year end is
July 31. The Company’s strategy is to develop treatments for substance use, addictive and eating disorders based on the
Company’s expertise using opioid antagonists. The Company has been developing a treatment for reversing opioid overdoses
in collaboration with the National Institute on Drug Abuse (“NIDA”), part of the National Institutes of Health (“NIH”).
The Company also is developing a new approach for the treatment of overweight and obese patients with Binge Eating Disorder.
In December 2014, Lightlake effected a
one-for-one hundred reverse stock split of its common stock (the “1:100 Reverse Stock Split”) which decreased the number
of common shares issued and outstanding from approximately 182.0 million shares to approximately 1.82 million shares as of December
29, 2015. Unless otherwise noted, all shares amounts listed in this Report been retroactively adjusted for the 1:100 Reverse Stock
Split as if such stock splits occurred prior to the issuance of such shares.
Lightlake has been focused on developing:
(i) a treatment to reverse opioid overdoses, (ii) a treatment for overweight and obese patients with Binge Eating Disorder, which
is thought to be the most common eating disorder in the United States today, and (iii) a treatment for Cocaine Use Disorder.
To date, Lightlake has carried out operations
to utilize the patent and patent applications, including European Patent EP1681057B1 and US Patent Application 11/031,534, which
were acquired on August 24, 2009 from Dr. David Sinclair. The Company was informed on October 15, 2010, that the US Patent application
was approved. These patents are related to a method for treating eating disorders by repeatedly administering naloxone in a dosage
sufficient to block the effects of opiate agonists to a subject suffering from an eating disorder caused by one or more related
problem responses (the “Sinclair Method”). The Sinclair Method was developed by Dr. David Sinclair and originally intended
for the treatment of alcohol dependency. In 1990, Dr. Sinclair discovered that the opioid antagonist naltrexone, when used correctly
in the presence of drinking alcohol, resulted in a 78% success rate, with patients abstaining from alcohol or consuming it at safe
levels. H. Lundbeck A/S’s Selincro (nalmefene), was recently approved in Europe, and the treatment regimen is based on Dr.
Sinclair’s work.
In 1989, Dr. Sinclair patented his "Method
for Treating Alcohol Drinking Responses,” also known as the “Sinclair Method,” and in 1994, the FDA approved
the use of naltrexone as a treatment for alcohol dependency. Since then, this form of treatment has been used by medical practices
around the globe as an effective treatment for alcoholism. As stated above, the Company continues to explore various medical applications
of this method. The Company aims to broaden its product pipeline, and anticipates commencing further trials based on its existing,
as well as potential patents that relate to the use of opioid antagonists.
Principal Products or Services and Markets
Opioid Overdose Reversal
Naloxone is a medicine currently available
through injection that can rapidly reverse the overdose of prescription and illicit opioids. Lightlake’s new intranasal delivery
system of naloxone could widely expand its availability and use in preventing opioid overdose deaths.
On April 24, 2013, Lightlake announced
that it had signed a collaboration agreement with the Division of Pharmacotherapies and Medical Consequences of Drug Abuse (“DPMCDA”)
of NIDA, part of the NIH, to co-develop a treatment for the reversal of opioid overdoses. Under the terms of the agreement, the
DPMCDA of NIDA agreed to sponsor a Phase I clinical study designed to evaluate the pharmacokinetic properties of the Company’s
product candidate in 14 healthy volunteer subjects. Assuming successful completion of this study, NIDA planned to file an investigational
new drug application (“IND”) for a final larger study. The goal of the collaboration was to establish a clinical development
plan and regulatory pathway that would potentially result in FDA approval and commercialization of a new pharmaceutical treatment
that effectively reverses opioid overdoses.
On September 23, 2013, Lightlake commenced
a two-week patient trial for the treatment to reverse opioid overdoses in collaboration with NIDA. This study was designed to evaluate
the pharmacokinetic properties of the Company's intranasal naloxone application for the novel intranasal naloxone application.
On December 3, 2013, Lightlake announced
that the initial findings of its clinical trial with NIDA supported the Company’s intranasal delivery of naloxone as a promising
innovative treatment for reversing opioid overdoses. Initial data from the study showed that the Company’s naloxone nasal
spray potentially can be delivered into the blood stream at least as quickly as the injection process currently used by hospitals,
first responders, and others treating opioid overdoses.
On March 14, 2014, Lightlake filed US Provisional
Application No. 61/953,379. This application addresses delivery devices and methods of treating opioid overdoses through the administration
of intranasal naloxone.
On May 15, 2014, Lightlake entered into
an agreement and subsequently received funding from an individual investor in the amount of $300,000 for use by the Company for
any purpose. In exchange for this funding, the Company agreed to provide the investor with a 1.5% interest in the net profit as
related to the Company’s treatment to reverse opioid overdoses. Net profit is defined as the pre-tax profit generated from
the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including
but not limited to an allocation of Company overhead. The investor also has rights with respect to its 1.5% interest if the treatment
is sold or the Company is sold. If the product is not introduced to the market and not approved for marketing within 24 months,
the investor will have a 60 day option to receive 37,500 shares of common stock in lieu of the 1.5% interest in the product.
On July 9, 2014, Lightlake announced that
it signed an agreement with a commercial contract manufacturer to commence production of its naloxone-based opioid overdose reversal
treatment. The Company expected that this manufacturer would be able to provide sufficient manufacturing capacity at cGMP production
facilities to enable commercialization of the Company’s treatment on a global scale.
On July 9, 2014, Lightlake filed US Provisional
Application No. 62/022,268 with respect to the Company’s treating opioid overdoses through the administration of intranasal
naloxone.
On July 22, 2014, Lightlake received a
$3,000,000 commitment, from which the Company has the right to make capital calls, from a foundation for the research, development,
marketing, commercialization, and any other activities connected to the Company’s treatment to reverse opioid overdoses,
certain operating expenses, and any other purpose consistent with the goals of the foundation. In exchange for funds invested
by the foundation the Company agreed to provide the foundation with pro-rata share up to a 6.0% interest in the net profit as
related to the Company’s treatment to reverse opioid overdoses. Net profit is defined as the pre-tax profit generated from
the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including
but not limited to an allocation of Company overhead. The foundation also has rights with respect to its up to 6.0% interest if
the treatment is sold or the Company is sold. Additionally, the Company may buyback interests from the foundation within two and
one half years or after two and a half years of the initial investment at a price of two times or three and a half times, respectively,
the relevant investment amount represented by the interests to be bought back. If the product is not approved by the U.S. Food
and Drug Administration or an equivalent body in Europe for marketing and is not actually marketed within 24 months the foundation
will have a 60 day option to receive shares of the Company’s common stock in lieu of the interest in the treatment at a
rate of 10 shares for every dollar of its investment. On July 28, 2014 the Company received an initial investment of $111,470
from the foundation in exchange for a 0.22294% interest. On August 13, 2014, September 8, 2014, November 13, 2014, and February
17, 2015, the Company made capital calls of $422,344 $444,530, $1,033,614, and $988,043, respectively, from the foundation in
exchange for 0.844687%, 0.888906%, 2.067228%, and 1.976085% interests, respectively, in the net profit as related to the Company’s
treatment to reverse opioid overdoses.
On July 23, 2014, Lightlake announced that
it filed an IND with respect to its naloxone-based opioid overdose reversal nasal spray. The Company also announced that it received
an additional commitment from NIDA to fund a second study with respect to the Company’s nasal spray.
On September 9, 2014, Lightlake entered
into an agreement and subsequently received funding from an individual investor in the amount of $500,000 for use by the Company
for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 0.98% interest in the net profit
as related to the Company’s treatment to reverse opioid overdoses. Net profit includes the pre-tax profit received by the
Company derived from the sale of the product after the deduction of all expenses incurred by and payments made by the Company
in connection with the product, including but not limited to an allocation of Company overhead. The investor also has rights with
respect to its 0.98% interest if the treatment is sold or the Company is sold. Additionally, the Company may buyback interests
from the investor within two and one half years or after two and a half years of the investment at a price of two times or three
and a half times, respectively, the relevant investment amount represented by the interests to be bought back. If the product
is not introduced to the market and not approved by the FDA or an equivalent body in Europe and not marketed within 24 months
the investor will have a 60 day option to receive 50,000 shares of common stock in lieu of the interest in the product.
On October 31, 2014, the Company entered
into an agreement and subsequently received funding from an individual investor in the amount of $500,000 for use by the Company
for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 0.98% interest in the net profit
as related to the Company’s treatment to reverse opioid overdoses. Net profit includes the pre-tax profit received by the
Company derived from the sale of the product after the deduction of all expenses incurred by and payments made by the Company in
connection with the product, including but not limited to an allocation of Company overhead. The investor also has rights with
respect to its 0.98% interest if the treatment is sold or the Company is sold. Additionally, the Company may buyback the interest
from the investor within two and one half years or after two and a half years but no later than four years of the investment at
a price of two times or three and a half times, respectively, of the investment amount. If the product is not introduced to the
market and not approved by the FDA or an equivalent body in Europe and not marketed within 24 months the investor will have a 60
day option to receive 50,000 shares of common stock in lieu of the interest in the product.
On December 4, 2014, Lightlake announced
that the Company has begun a trial designed to evaluate its intranasal naloxone application for opioid overdose. The trial was
conducted in partnership with NIDA.
On December 15, 2014, Lightlake and Adapt
Pharma Operations Limited, a wholly owned subsidiary of Adapt Pharma Limited (“Adapt”), an Ireland-based pharmaceutical
company, entered into a license agreement (the “Adapt Agreement”). Pursuant to the agreement Adapt has received from
the Company a global license to develop and commercialize the Company’s intranasal naloxone opioid overdose reversal treatment.
In exchange for licensing its treatment to Adapt, the Company could receive potential development and sales milestone payments
of more than $55 million, plus up to double-digit royalties. The Adapt Agreement provided for an upfront and nonrefundable payment
of $500,000, and monthly payments for up to one year for participation in joint development committee calls and the
production and submission of an initial development plan. The Adapt Agreement also required the Company to contribute $2,500,000
of development, regulatory, and commercialization costs, some of which was credited for costs incurred by the Company prior to
the execution of the Adapt Agreement.
On February 17, 2015, Lightlake announced
that Adapt received Fast Track designation by the FDA.
On April 22, 2015, Lightlake announced
that Adapt successfully completed a clinical study of intranasal naloxone. The pharmacokinetic study compared intranasal naloxone
with an injectable formulation of naloxone. The study met its objectives and demonstrated the intranasal formulation of naloxone
delivered the targeted naloxone dose as expected.
On June 3, 2015, Lightlake announced that
Adapt commenced a rolling submission of a New Drug Application (“NDA”) to the FDA for a nasal spray formulation of
naloxone, a drug intended to treat opioid overdose. A rolling submission allows completed portions of the NDA to be submitted
and reviewed by the FDA on an ongoing basis.
On July 29, 2015, Lightlake announced that
Adapt has submitted a NDA to the FDA for Narcan® (naloxone) Nasal Spray, an investigational drug intended to treat opioid overdose.
Binge Eating Disorder
Lightlake is developing a treatment for
Binge Eating Disorder derived from the “Sinclair Method.” Patients suffering from Binge Eating Disorder typically exhibit
a lack of control eating foods typically high in sugar, fat, or salt, and are able to override the feeling of fullness. When these
patients eat foods with high levels of sugar, salt, or fat, the opioidergic system is activated, which causes the firing of the
neurons that release endorphins. The endorphins then bind to opioid receptors on other neurons and activate these opioid receptors,
which reinforces addictive behavior. By blocking these opioid receptors with an opioid antagonist, the effect these endorphins
have each time these foods are eaten is counteracted.
Lightlake considers naloxone an optimal
opioid antagonist to address Binge Eating Disorder as naloxone remains in the brain for two hours, which is the duration of a typical
binge. Long-lasting opioid antagonists like naltrexone and nalmefene are sufficient for treating alcoholism and drug addiction,
but the short-acting opioid antagonist naloxone works to selectively remove only unhealthy eating responses. Moreover, the Company
believes that its treatment is well-suited for treating Binge Eating Disorder as it is unlikely to be used in a truly chronic manner.
The Company expects that patients will only administer the treatment when they have the urge to binge eat, and the Company expects
that they will require less of the spray over time as they regain control of their eating habits.
In November 2009, Lightlake’s clinical
trial team in Helsinki, Finland was granted ethical approval to begin screening subjects for the Phase II clinical trials of the
opioid antagonist-based nasal spray treatment for Binge Eating Disorder.
On May 6, 2010, Lightlake was granted ethical
approval for the Phase II trials. A preliminary meeting with the FIMEA Regulatory Authority was held on May 7, 2010 and their
requirements for approval were obtained. Moreover, these trials were supervised under the direction of trial coordinator Professor
Hannu Eero Rafael Alho, Professor of Addiction Medicine at the University of Helsinki. Crown CRO, a Finnish research organization
provided the external validation for the Phase II trial.
In 2011, Lightlake commenced a randomized
double-blind placebo controlled Phase II trial investigating the use of naloxone intranasally as a treatment for Binge Eating Disorder.
The Company randomly selected 138 patients meeting the criteria for Binge Eating Disorder from over 900 applicants, of which 298
of these applicants had gene samples analyzed, and 127 patients enrolled in the trial. Each patient was randomized to take either
intranasal naloxone or a placebo nasal spray. The Company contracted the Phase II trial operations to Lightlake Sinclair of Helsinki,
Finland.
In April 2012, Lightlake completed a Phase
II clinical trial in Helsinki, Finland to investigate the use of the opioid antagonist naloxone delivered intranasally as a treatment
for Binge Eating Disorder. The Company’s approach was unique, through using a single agent with known safety, delivered intranasally,
in response to behavioral stimuli, and selectively addressing a subset of obese and overweight patients which was thought to represent
up to 25% of this total patient cohort. The Company believed that its approach could deliver successful outcomes in a challenging
area that recently encountered several failures.
On August 8, 2012, Lightlake announced
the final data from the Phase II trial investigating the use of naloxone intranasally as a treatment for Binge Eating Disorder.
Results from this study have been very encouraging, whereby patients receiving naloxone demonstrated a significant reduction over
placebo in reducing bingeing. In addition, the patients receiving the naloxone nasal spray lost weight in the second half of the
study and it would appear that patients with the highest BMI tended to reduce their bingeing the most.
On May 23, 2013, Lightlake presented the
results of the Company’s Phase II clinical trial of its nasal spray treatment for Binge Eating Disorder at the American Psychiatric
Association (“APA”) Annual Meeting in San Francisco. Binge Eating Disorder has been added to the fifth edition of the
APA’s Diagnostic and Statistical Manual of Mental Disorders (“DSM-5”), which was launched at the APA Annual Meeting.
DSM-5 is used by clinicians and researchers to diagnose and classify mental disorders in order to improve diagnoses, treatment,
and research. This manual is the product of more than 10 years of effort by hundreds of international experts in all aspects of
mental health. DSM-5 diagnostic criteria are concise and explicit, intended to facilitate an objective assessment of symptom presentations
in a variety of clinical settings from inpatient to primary care. Binge Eating Disorder is defined in the DSM-5 chapter on Feeding
and Eating Disorders as a diagnosis for individuals who experience persistent, recurrent episodes of overeating, marked by loss
of control and significant clinical distress. The chapter also includes changes in the requirements for diagnosis of Anorexia Nervosa
and Bulimia Nervosa, two potential additional indications for the Company’s treatment.
On December 17, 2013, the Company entered
into an agreement and subsequently received additional funding totaling $250,000 for use by the Company for any purpose. In exchange
for this funding, the Company agreed to provide the investor with a 0.5% interest in the net profit as related to the Company’s
Binge Eating Disorder treatment. Net profit is defined as the pre-tax profit generated from the product after the deduction of
all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation
of Company overhead. The investor also has rights with respect to its 0.5% interest if the treatment is sold or the Company is
sold. If the product is not approved by the U.S. Food and Drug Administration within 36 months the investor will have a 60 day
option to receive 31,250 shares of common stock in lieu of the 0.5% interest in the product.
On September 17, 2014, Lightlake entered
into an agreement and subsequently received funding totaling $500,000 for use by the Company for any purpose. In exchange for this
funding, the Company agreed to provide the investor with a 1.0% interest in the Company’s Binge Eating Disorder treatment
product and pay the investor 1.0% of the net profit generated from this treatment in perpetuity. Net profit is defined as the pre-tax
profit generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection
with the product, including but not limited to an allocation of Company overhead. If the product is not approved by the FDA within
36 months the investor will have a sixty day option to receive 62,500 shares of common stock in lieu of the 1.0% interest in the
product.
On July 20, 2015, Lightlake entered into
an agreement and subsequently received additional funding totaling $250,000 for use by the Company for any purpose. In exchange
for this funding, the Company agreed to provide the investor with a 0.5% interest in the Company’s Binge Eating Disorder
treatment product and pay the investor 0.5% of the net profit generated from this treatment in perpetuity. Net profit is defined
as the pre-tax profit generated from the product after the deduction of all expenses incurred by and payments made by the Company
in connection with the product, including but not limited to an allocation of Company overhead. If the product is not approved
by the FDA within 36 months the investor will have a sixty day option to receive 25,000 shares of common stock in lieu of the 0.5%
interest in the product.
Lightlake now aims to collaborate with
other parties to progress its drug development program for Binge Eating Disorder.
Cocaine Use Disorder
Lightlake is developing a treatment for
Cocaine Use Disorder (CocUD). There are approximately 1.5 million current cocaine users in the U.S., as reported by The Substance
Abuse and Mental Health Services Administration (SAMHSA).
Cocaine is often used in a binge pattern.
Taking the drug repeatedly within a relatively short period of time, at increasingly higher doses, can easily lead to addiction,
a chronic relapsing disease caused by changes in the brain and characterized by uncontrollable drug-seeking no matter the consequences.
Cocaine is a strong central nervous system stimulant that increases levels of the neurotransmitter dopamine in brain circuits regulating
pleasure and movement, with the opioidergic system strongly linked to the dopamine reward circuitry.
Any route of administration can lead to
absorption of toxic amounts of cocaine. Most seriously, in the short-term cocaine users can suffer from heart attacks, strokes,
and convulsions, which can result in sudden death. Repeated use of cocaine can lead to long-term harmful changes in the brain and
other parts of the body, including decreases in appetite, weight loss, and malnourishment. Snorting cocaine can lead to loss of
sense of smell and difficulty in swallowing, ingesting cocaine can cause severe bowel gangrene due to reduced blood flow, and injecting
cocaine can lead to puncture marks called “tracks” and possible allergic reactions. Cocaine users are also at high
risk of contracting HIV and viral hepatitis from sharing contaminated needles and engaging in risky sexual behaviors.
The extraordinary cost of cocaine addiction,
financially, medically and socially, is directly related to the stubborn clinical problem of relapse. Relapse rates have remained
discouragingly high for decades: up to 80% of addicted individuals relapse within six months of treatment. Finding effective interventions,
psychosocial or pharmacologic, has proven difficult. However, important advances in clinical neuroscience of addiction have put
this goal within reach.
Lightlake has planned a study to help progress
a potential treatment for Cocaine Use Disorder.
General
Information
Lightlake was incorporated in the State
of Nevada on June 21, 2005, as Madrona Ventures, Inc. and on September 16, 2009, the Company changed its name to Lightlake Therapeutics
Inc. The Company’s fiscal year end is July 31 and the Company is a Development Stage Company. The Company is a
specialty pharmaceutical company developing opioid antagonist treatments for substance use, addictive and eating disorders.
During the fiscal year ended July 31,
2015, Lightlake carried out operations to utilize the patent and patent applications, including European Patent EP1681057B1 and
US Patent Application 11/031,534, which were acquired on August 24, 2009 from Dr. David Sinclair. The Company has successfully
commenced and completed a Phase II Binge Eating Disorder trial. The Company also has collaborated with NIDA, part of the NIH,
with respect to developing a treatment to reverse opioid overdoses.
On October 15, 2010, Lightlake was informed
by the Examiner at the US Patent office that the Company’s US patent application, 11/031,534, was approved, and that the
Company’s US patent would be granted. On March 22, 2011, the Company’s patent was officially issued—the
patent number is: 7,910,599.
On December 1, 2014, Lightlake and Aegis
Therapeutics, LLC (“Aegis”), entered into a Material Transfer, Option and Research License Agreement (the “Aegis
Agreement”) that provides the Company with an exclusive royalty-free research license for a period of time to Aegis’
proprietary delivery enhancement and stabilization agents, including Aegis’ ProTek® and Intravail® technologies (collectively,
the “Technology”) to enable the Company to conduct a feasibility study of opioid antagonists when used with the Technology.
During this period of time, the Company may also evaluate its interest in having an exclusive license to the Technology for use
with opioid antagonists to treat, diagnose, predict, detect or prevent any disease, disorder, state, condition or malady in humans
(the “Possible License”). Aegis has granted the Company an exclusive option to obtain the Possible License for a certain
period after the study is completed. In consideration of the license granted to the Company pursuant to the Aegis Agreement, the
Company is required to pay to Aegis a nonrefundable study fee.
On February 9, 2015, Lightlake announced
that Arvind Agrawal joined the Company as Executive Vice President, Medical Affairs, effective, January 2015. Mr. Agrawal previously
has been Head of Medical Affairs New Products at Mundipharma International, where he made significant advances towards the development
of a novel treatment for opioid addiction. He also worked as European Clinical and Scientific Affairs Director at Reckitt Benckiser
Pharmaceuticals, where he developed strategies leading to positive clinical, political, and legislative changes for the treatment
of opioid dependence. His earlier professional experience was with AstraZeneca plc, GlaxoSmithKline plc, SmithKline Beecham plc,
and Wellcome Pharmaceuticals, where he held various senior management positions in medical affairs and clinical development, and
helped to launch the pharmaceutical blockbusters Crestor (rosuvastatin) and Avandia (rosiglitazone). Mr. Agrawal holds an MSc in
Human & Applied Physiology from King's College, University of London. He is also the Managing Director of Ekagra Ltd, a pharmaceutical
medical affairs consultancy in the UK.
Lightlake has not attained profitable operations
and is dependent upon generating sufficient revenues and/or obtaining sufficient financing. The Company anticipates if revenues
are not sufficient then additional funding will be required in the form of debt financing and/or equity financing from the sale
of the Company’s Common Stock and/or in the form of financing from the sale of interests in the Company’s prospective
products. However, the Company may not be able to generate sufficient revenues or raise sufficient funding to fund the Company’s
operations.
Lightlake has not had a bankruptcy, receivership
or similar proceeding. Lightlake has not had material reclassifications, mergers, consolidations, or purchase or sale of a significant
amount of assets not in the ordinary course of business. Lightlake is required to comply with all regulations, rules and directives
of governmental authorities and agencies applicable to the clinical testing and manufacturing and sale of pharmaceutical products.
Employees
As of July 31, 2015, Lightlake has four
employees. In addition, the Company has numerous outside consultants that are not on the Company’s payroll.
ITEM 1A. RISK FACTORS
Lightlake has generated limited revenue
to date and expects to incur significant operating losses for the foreseeable future.
Lightlake was incorporated on June 21,
2005. The Company operates as a specialty pharmaceutical company developing opioid antagonist treatments for substance use, addictive
and eating disorders. The Company has generated limited revenues from inception through the date of this report. The likelihood
of success must be considered in light of the problems, expenses, difficulties, complications, and delays encountered in connection
with the clinical trials that will be conducted and on the development of new solutions to common addictions and related disorders.
These potential problems include, but are not limited to, unanticipated problems relating to the clinical trials, changes in the
regulatory and competitive landscape, and additional costs and expenses that may exceed current budget estimates for the completion
of the trials. Prior to completion of any Phase III clinical trials with respect to treating obesity and eating disorders, the
Company anticipates that the Company will incur increased operating expenses. The Company expects to incur significant losses into
the foreseeable future. The Company recognizes that if the Company is unable to generate funding or sufficient revenues, the Company
will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood
that the Company will prove successful. If the Company is unsuccessful in addressing these risks, then the Company will most likely
fail.
Lightlake may not succeed in completing
the development of its products, commercializing its products, and generating significant revenues.
Since commencing operations, Lightlake
has focused on the research and development of using naloxone to: (i) reverse opioid overdoses, (ii) treat overweight and obese
patients with Binge Eating Disorder; and (iii) treat Cocaine Use Disorder. The Company’s products have generated limited
revenues. The Company’s ability to generate significant revenues and achieve profitability depends on the Company’s
ability to successfully complete the development of its products, obtain market approval, and generate significant revenues. On
December 15, 2014, the Company and Adapt entered into the Adapt Agreement that provides Adapt with a global license to develop
and commercialize the Company’s intranasal naloxone opioid overdose reversal treatment. The loss for any reason of Adapt
as a key partner could have a significant and adverse impact on the Company’s business. If the Company is unable to retain
Adapt as a partner on commercially acceptable terms, the Company may not be able to commercialize the Company’s products
as planned and the Company may experience delays in or suspension of the Company’s marketing launch of the Company’s
products.
The future success of Lightlake’s
business cannot be determined at this time, and the Company does not anticipate generating revenues from product sales for the
foreseeable future. Notwithstanding the foregoing, the Company expects to generate revenues from the treatment using naloxone to
reverse opioid overdoses, for which the Company is dependent on many factors, including the performance of the Company’s
licensing partner Adapt. In addition, the Company has no experience in commercializing its treatments on its own and faces a number
of challenges with respect to its commercialization efforts, including, among others, that:
| • | the Company may not have adequate financial or other resources
to complete the development of its products; |
| • | the Company may not be able to manufacture its products
in commercial quantities, at an adequate quality, or at an acceptable cost; |
| • | the Company may not be able to establish adequate sales,
marketing, and distribution channels; |
| • | healthcare professionals and patients may not accept the
Company’s treatments; |
• the Company may not be aware
of possible complications from the continued use of its products since the Company has limited clinical experience with respect
to the actual use of its products;
• technological breakthroughs
in reversing opioid overdoses, treating overweight and obese patients with Binge Eating Disorder, and treating Cocaine Use Disorder
may reduce the demand for the Company’s products;
• changes in the market for
reversing opioid overdoses, treating overweight and obese patients with Binge Eating Disorder, and treating Cocaine Use Disorder,
new alliances between existing market participants, and the entrance of new market participants may interfere with the Company’s
market penetration efforts;
• third-party payors may not
agree to reimburse patients for any or all of the purchase price of the Company’s products, which may adversely affect patients’
willingness to purchase the Company’s products;
| • | uncertainty as to market demand may result in inefficient
pricing of the Company’s products; |
| • | the Company may face third-party claims of intellectual
property infringement; |
• the Company may fail to obtain
or maintain regulatory approvals for its products in the Company’s target markets or may face adverse regulatory or legal
actions relating to its products even if regulatory approval is obtained; and
• the Company is dependent
upon the results of clinical studies relating to its products and the products of its competitors.
If Lightlake is unable to meet any one
or more of these challenges successfully, the Company’s ability to effectively commercialize its products could be limited,
which in turn could have a material adverse effect on its business, financial condition, and results of operations.
Given Lightlake’s limited revenue
and cash flow, the Company may need to raise additional capital, which may be unavailable to the Company or, even if consummated,
may cause dilution or place significant restrictions on the Company’s ability to operate.
Since Lightlake may be unable to generate
sufficient revenue or cash flow to fund its operations for the foreseeable future, the Company may need to seek additional equity
or debt financing to provide the capital required to maintain or expand its operations. The Company may also need additional funding
to continue the development of its products, increase its sales and marketing capabilities, promote brand identity, or develop
or acquire complementary companies, technologies and assets, as well as for working capital requirements and other operating and
general corporate purposes.
Lightlake does not currently have any arrangements
or credit facilities in place as a source of funds, and there can be no assurance that the Company will be able to raise sufficient
additional capital if needed on acceptable terms, or at all. If such financing is not available on satisfactory terms, or is not
available at all, the Company may be required to delay, scale back, or eliminate the development of business opportunities and
its ability to achieve its business objectives, its competitiveness, and its operations and financial condition may be materially
adversely affected. The Company’s inability to fund its business could thus lead to the loss of your investment.
If Lightlake raises additional capital
by issuing equity securities and/or equity-linked securities, the percentage ownership of the Company’s existing stockholders
may be reduced, and accordingly these stockholders may experience substantial dilution. The Company may also issue equity securities
and/or equity-linked securities that provide for rights, preferences, and privileges senior to those of its Common Stock. Given
the Company’s need for cash and that equity and equity-linked issuances are very common types of fundraising for companies
like the Company, the risk of dilution is particularly significant for stockholders of the Company.
Debt financing, if obtained, may involve
agreements that include liens on Lightlake’s assets and covenants limiting or restricting the Company’s ability to
take specific actions such as incurring additional debt. Debt financing could also be required to be repaid regardless of the Company’s
operating results.
If Lightlake raises additional funds through
collaborations and licensing arrangements, the Company may be required to relinquish some rights to its products, or to grant licenses
on terms that are not favorable to the Company.
Lightlake has no experience as a
company in obtaining regulatory approval for, or commercializing, any product candidate.
As
a company, Lightlake has never obtained regulatory approval for, or commercialized, any product candidate. It is possible that
the FDA may conclude after review of the Company’s data from clinical studies that the data is insufficient to obtain regulatory
approval. The FDA may also conclude that the Company has not met the requirements to obtain regulatory approval for its treatments.
If the FDA does not accept or approve the Company’s treatments, it may require that the Company conduct additional clinical,
preclinical, or manufacturing validation studies, which may be costly, and submit that data before it will reconsider the Company’s
application. Depending on the extent of these or any other FDA required studies, approval of any NDA or other application that
the Company submits may be significantly delayed, possibly for several years, or may require the Company to expend more resources
than it has available. Any delay in obtaining, or an inability to obtain, regulatory approvals would prevent the Company from
commercializing its products, generating significant revenues in the case of the Company’s treatment using naloxone to reverse
opioid overdoses, or generating any revenues at all in the case of the Company’s other treatments, and achieving and sustaining
profitability. It is also possible that additional studies, if performed and completed, may not be considered sufficient by the
FDA to approve any NDA the Company submits. The Company faces similar risks for any approval in a foreign jurisdiction.
Lightlake’s current and future
operations substantially depend on the Company’s management team and the Company’s ability to hire other key personnel,
the loss of any of whom could disrupt the Company’s business operations.
Lightlake’s business depends and
will continue to depend in substantial part on the continued service of Dr. Roger Crystal and Kevin Pollack. The loss of the services
of either of these individuals would significantly impede implementation and execution of the Company’s business strategy
and may result in the failure to reach its goals. The Company does not carry key person life insurance on any of its management,
which would leave the Company uncompensated for the loss of any of its management.
In addition, although Dr. Crystal devotes
35 hours per week to his work for Lightlake, he has a job as part of the management team, albeit not as an executive officer, of
a private company to which he also devotes 35 hours per week. Dr. Crystal will abide by the doctrine of corporate opportunity,
and will only take for himself a business opportunity if: (1) the opportunity is offered to Dr. Crystal in his individual capacity
and not in his capacity as an officer and director of the Company; (2) the opportunity is not essential to the Company; (3) the
Company has no interest or expectancy with regard to the opportunity; and (4) Dr. Crystal has not employed the resources of the
Company in pursuing or exploiting the opportunity.
Lightlake’s future viability and
ability to achieve sales and profits will also depend on the Company’s ability to attract, train, retain, and motivate highly
qualified personnel in the diverse areas required for continuing its operations. There is a risk that the Company will be unable
to attract, train, retain, or motivate qualified personnel, both near term or in the future, and the Company’s failure to
do so may severely damage its prospects.
Lightlake’s independent auditor
has issued an audit opinion for the Company which includes a statement describing the Company’s going concern status. The
Company’s financial status creates a doubt whether the Company will continue as a going concern.
Based on Lightlake’s financial history
since inception, the Company’s independent registered public accounting firm has expressed substantial doubt as to the Company’s
ability to continue as a going concern. The Company has generated limited revenue to date.
Lightlake’s products may have
undesirable side effects which may delay or prevent marketing approval, or, if approval is received, require it to be taken off
the market, require it to include safety warnings or otherwise limit sales of the product.
Unforeseen side effects from Lightlake’s
products could arise either during clinical development or, if approved, after the Company’s products has been marketed.
This could cause regulatory approvals for, or market acceptance of, the Company’s products harder and more costly to obtain.
To date, no serious adverse events have
been attributed to Lightlake’s products. The results of the Company’s planned or any future clinical trials may show
that the Company’s products causes undesirable or unacceptable side effects, which could interrupt, delay or halt clinical
trials, and result in delay of, or failure to obtain, marketing approval from the FDA and other regulatory authorities, or result
in marketing approval from the FDA and other regulatory authorities with restrictive label warnings.
If Lightlake’s products receive marketing
approval and the Company or others later identify undesirable or unacceptable side effects caused by the use of the Company’s
products:
• regulatory authorities may withdraw
their approval of the products, which would force the Company to remove its products from the market;
• regulatory authorities may require
the addition of labeling statements, specific warnings, a contraindication, or field alerts to physicians, pharmacies, and others;
• the Company may be required to change
instructions regarding the way the products are administered, conduct additional clinical trials, or change the labeling of the
products;
• the Company may be subject to limitations
on how it may promote the products;
• sales of the products may decrease
significantly;
• the Company may be subject to litigation
or product liability claims; and
• the Company’s reputation may
suffer.
Any of these events could prevent Lightlake
or its potential future collaborators from achieving or maintaining market acceptance of the Company’s products or could
substantially increase commercialization costs and expenses, which in turn could delay or prevent the Company from generating significant
revenues from the sale of its products.
Lightlake currently has no marketing
and sales organization and has no experience as a company in marketing pharmaceutical products. If the Company is unable to establish
its own marketing and sales capabilities, or enter into agreements with third parties, to market and sell its products after they
are approved, the Company may not be able to generate product revenues.
Lightlake does not have a sales organization
for the marketing, sales, and distribution of any pharmaceutical products. In order to commercialize the Company’s products
or any other product candidate the Company may develop or acquire in the future, the Company must develop these capabilities on
its own or make arrangements with third parties for the marketing, sales, and distribution of its products. The establishment and
development of the Company’s own sales force would be expensive and time consuming and could delay any product launch, and
the Company cannot be certain that it would be able to successfully develop this capability. As a result, the Company may seek
one or more licensing partners to handle some or all of the sales and marketing of its products in the U.S. and elsewhere. There
also may be certain markets within the U.S. for the Company’s products for which the Company may seek a co-promotion arrangement.
However, the Company may not be able to enter into arrangements with third parties to sell its products on favorable terms or at
all. In the event the Company is unable to develop its own marketing and sales force or collaborate with a third-party marketing
and sales organization, the Company would not be able to commercialize its products or any other product candidates that it develops,
which would negatively impact its ability to generate product revenues. Furthermore, whether the Company commercializes products
on its own or relies on a third party to do so, the Company’s ability to generate revenue would be dependent on the effectiveness
of the sales force. In addition, to the extent the Company relies on third parties to commercialize its approved products, the
Company would likely receive less revenues than if the Company commercialized these products itself.
Lightlake relies heavily on the Adapt
Agreement and Adapt to develop and commercialize its intranasal naloxone opioid overdose reversal treatment.
On December 15, 2014, Lightlake and Adapt
entered into the Adapt Agreement that provides Adapt with a global license to develop and commercialize the Company’s intranasal
naloxone opioid overdose reversal treatment. The Company may be unable to establish or maintain this relationship on a commercially
reasonable basis, if at all. In addition, Adapt may have similar or more established relationships with the Company’s competitors
or larger customers. Moreover, the loss for any reason of Adapt as a key partner could have a significant and adverse impact on
the Company’s business. If the Company is unable to retain Adapt as a partner on commercially acceptable terms, the Company
may not be able to commercialize its products as planned and it may experience delays in or suspension of its marketing launch
of its products. The same could apply to other product candidates the Company may develop or acquire in the future. The Company’s
dependence upon third parties may adversely affect the Company’s ability to generate profits or acceptable profit margins
and the Company’s ability to develop and deliver such products on a timely and competitive basis.
Lightlake is exposed to product liability,
non-clinical and clinical liability risks which could place a substantial financial burden upon the Company, should lawsuits be
filed against the Company.
Lightlake’s business exposes the
Company to potential product liability and other liability risks that are inherent in the testing, manufacturing, and marketing
of pharmaceutical formulations and products. The Company expects that such claims are likely to be asserted against it at some
point. In addition, the use in the Company’s clinical trials of pharmaceutical formulations and products and the subsequent
sale of these formulations or products by the Company or its potential collaborators may cause the Company to bear a portion of
or all product liability risks. The Company currently does not have adequate insurance coverage relating to personal injury, product
liability, medical expenses, and office premises. However, any claim under any existing insurance policies or future insurance
policies may be subject to certain exceptions, and may not be honored fully, in part, in a timely manner, or at all, and may not
cover the full extent of liability the Company may actually face. Therefore, a successful liability claim or series of claims brought
against the Company could have a material adverse effect on its business, financial condition, and results of operations.
Risks Related to Lightlake’s Common Stock
The trading in Lightlake’s
shares is regulated by Securities and Exchange Commission rule 15g-9 which established the definition of a “penny stock.”
Although Lightlake’s shares are currently
traded at a price higher than $5.00, the Company’s shares have frequently traded in the past at a price lower than $5.00.
If the Company’s share price goes below $5.00, the shares will be defined as a “Penny Stock” under the Securities
and Exchange Act of 1934, as amended (the “Exchange Act”) and rules of the Commission. Penny stocks generally are equity
securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted
on the NASDAQ system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in
the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market
value of each penny stock held in the customer’s account. The broker-dealer must also make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.
These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security
that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage
broker-dealers from effecting transactions in the Company’s securities, which could severely limit the market price and liquidity
of the Company’s securities. These requirements may restrict the ability of broker-dealers to sell the Company’s common
stock and may affect your ability to resell Company’s common stock.
Lightlake will incur ongoing costs and
expenses for SEC reporting and compliance. Without sufficient revenue the Company may not be able to remain in compliance, making
it difficult for investors to sell their shares, if at all.
Lightlake’s shares are quoted on
the OTCQB Market under the symbol “LLTP.” To be eligible for quotation, issuers must remain current in their filings
with the SEC. In order for the Company to remain in compliance the Company will require cash to cover the cost of these filings,
which could comprise a substantial portion of the Company’s available cash resources. If the Company is unable to remain
in compliance it may be difficult for the Company’s stockholders to resell any shares, if at all.
Lightlake does not anticipate declaring
any cash dividends on its Common Stock.
Lightlake currently intends to retain any future earnings for
use in the operation and expansion of its business. Accordingly, the Company does not expect to pay any dividends in the foreseeable
future, but will review this policy as circumstances dictate.
As an “emerging growth company”
under applicable law, Lightlake is subject to lessened disclosure requirements, which could leave its stockholders without information
or rights available to stockholders of more mature companies.
For as long as Lightlake remains an “emerging
growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (which is referred to herein as the JOBS Act),
the Company has elected to take advantage of certain exemptions from various reporting requirements that are applicable to other
public companies that are not “emerging growth companies” including, but not limited to:
• not being required to comply with
the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
• taking advantage of an extension
of time to comply with new or revised financial accounting standards;
• reduced disclosure obligations regarding
executive compensation in the Company’s periodic reports and proxy statements; and
• exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously
approved.
Lightlake expects to take advantage of
these reporting exemptions until it is no longer an “emerging growth company.” Because of these lessened regulatory
requirements, the Company’s stockholders would be left without information or rights available to stockholders of more mature
companies.
Because Lightlake has elected to
use the extended transition period for complying with new or revised accounting standards for an “emerging growth company”
its financial statements may not be comparable to companies that comply with public company effective dates.
Lightlake has elected to use the extended
transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election
allows the Company to delay the adoption of new or revised accounting standards that have different effective dates for public
and private companies until those standards apply to private companies. As a result of this election, the Company’s financial
statements may not be comparable to companies that comply with public company effective dates, and thus investors may have difficulty
evaluating or comparing the Company’s business, performance or prospects in comparison to other public companies, which may
have a negative impact on the value and liquidity of the Company’s Common Stock.
Lightlake will incur ongoing costs
and expenses for SEC reporting and compliance. Without significant revenue the Company may not be able to remain in compliance,
making it difficult for investors to sell their shares, if at all.
Lightlake’s shares are quoted on
the OTCQB Market under the symbol “LLTP.” To be eligible for quotation, issuers must remain current in their
filings with the SEC. In order for the Company to remain in compliance the Company will require cash to cover the cost of these
filings, which could comprise a substantial portion of the Company’s available cash resources. If the Company is unable to
remain in compliance it may be difficult for the Company’s shareholders to resell any shares, if at all.
Item 1B. Unresolved Staff Comments.
This information is not required for smaller reporting companies.
Item 2. Properties.
Lightlake does not currently own any physical
property. The Company leases space on the 9th Floor of 445 Park Avenue, New York, NY 10022 for approximately $600 per month. The
lease expires on January 31, 2016. Lightlake currently has no investment policies as they pertain to real estate, real estate interests,
or real estate mortgages.
Item 3. Legal Proceedings.
Lightlake is currently not involved in
any litigation that the Company believes could have a materially adverse effect on the Company’s financial condition or results
of operations. There is no action, suit, proceeding, inquiry, or investigation before or by any court, public board, government
agency, self-regulatory organization, or body pending or, to the knowledge of the executive officers of the Company or any of the
Company’s subsidiaries, threatened against or affecting the Company, the Company’s common stock, any of the Company’s
subsidiaries or the Company’s or the Company’s subsidiaries’ officers or directors in their capacities as such,
in which an adverse decision could have a material adverse effect.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant’s
Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Since April 2007, Lightlake’s common
stock has been listed for quotation on the OTCQB under the symbol “LLTP”.
Price Range of Common Stock
The following table shows, for the periods
indicated, the high and low bid prices per share of Lightlake’s common stock as reported by the OTCQB quotation service.
The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.
| |
High | | |
Low | |
Fiscal Year 2014 | |
| | | |
| | |
First quarter ended October 31, 2013 | |
$ | 11.29 | | |
$ | 2.80 | |
Second quarter ended January 31, 2014 | |
$ | 7.00 | | |
$ | 3.30 | |
Third quarter ended April 30, 2014 | |
$ | 6.00 | | |
$ | 3.10 | |
Fourth quarter ended July 31, 2014 | |
$ | 6.10 | | |
$ | 1.97 | |
Fiscal Year 2015 | |
| | | |
| | |
First quarter ended October 31, 2014 | |
$ | 6.10 | | |
$ | 3.20 | |
Second quarter ended January 31, 2015 | |
$ | 6.00 | | |
$ | 3.16 | |
Third quarter ended April 30, 2015 | |
$ | 10.99 | | |
$ | 3.43 | |
Fourth quarter ended July 31, 2015 | |
$ | 8.10 | | |
$ | 6.09 | |
Approximate Number of Equity Security Holders
As
of October 20, 2015, there were approximately 100 stockholders
of record. Because shares of Lightlake’s common stock are held by depositaries, brokers and other nominees, the number of
beneficial holders of the Company’s shares is substantially larger than the number of stockholders of record.
Dividends
There are no restrictions in Lightlake’s
articles of incorporation or bylaws that prevent the Company from declaring dividends. The Nevada Revised Statutes, however, do
prohibit the Company from declaring dividends where, after giving effect to the distribution of the dividend:
|
1. |
Lightlake would not be able to pay the Company’s debts as they become due in the usual course of business; or |
|
2. |
Lightlake’s total assets would be less than the sum of the Company’s total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution. |
Lightlake has not declared any dividends,
and the Company does not plan to declare any dividends in the foreseeable future.
Unregistered Sales of Equity Securities
Stock
Options
On August 2, 2014, Lightlake granted 30,000
cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have a term
of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted
in a fair market value of $173,999 which have been fully recognized as expense for the year ended July 31, 2015.
On November 12, 2014, Lightlake granted
30,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have
a term of 5 years and vest over 3 years. The Company has valued these options using the Black-Scholes option pricing model which
resulted in a fair market value of $188,825, of which $103,951 has been fully recognized as expense for the year ended July 31,
2015.
On November 12, 2014, Lightlake granted
20,000 cashless stock options with an exercise price of $15.00 per share to a consultant for services rendered. These options have
a term of 5 years and vest over three years. The Company has valued these options using the Black-Scholes option pricing model
which resulted in a fair market value of $127,150, of which $67,984 has been fully recognized as expense for the year ended July
31, 2015.
On January 9, 2015, Lightlake granted 15,000
cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have a term
of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted
in a fair market value of $65,163 which have been fully recognized as expense for the year ended July 31, 2015.
On January 25, 2015, Lightlake granted
10,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have
a term of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which
resulted in a fair market value of $36,169 which have been fully recognized as expense for the year ended July 31, 2015.
On March 19, 2015, Lightlake granted 48,000
cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have a term
of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted
in a fair market value of $282,227 which have been fully recognized as expense for the year ended July 31, 2015.
On March 19, 2015, Lightlake granted 32,000
cashless stock options with an exercise price of $15.00 per share to a consultant for services rendered. These options have a term
of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted
in a fair market value of $186,655 which have been fully recognized as expense for the year ended July 31, 2015.
On July 15, 2015, Lightlake granted 10,000
cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have a term
of 3 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted
in a fair market value of $55,043 which have been fully recognized as expense for the year ended July 31, 2015.
On December 16, 2014, Lightlake issued
38,800 stock warrants with an exercise price of $8.00 per share to a consultant for services rendered. These warrants have a term
of 10 years and vested immediately. The Company has valued these warrants using the Black-Scholes option pricing model which resulted
in a fair market value of $144,724 which have been fully recognized as expense for the year ended July 31, 2015.
On March 19, 2015, Lightlake issued 45,000 stock warrants with an exercise price of $10.00 per share to
a consultant for services rendered. These warrants have a term of 5 years and vested immediately. The Company has valued these
warrants using the Black-Scholes option pricing model which resulted in a fair market value of $264,588 which have been fully recognized
as expense for the year ended July 31, 2015.
These
shares and options were issued in reliance on the exemption under Section 4(2) of the Securities Act. These shares of Lightlake’s
common stock qualified for exemption under Section 4(2) since the issuance shares by the Company did not involve a public offering.
The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, manner of the offering and number of shares offered. The Company did not undertake an offering
in which the Company sold a high number of shares to a high number of investors. In addition, the investors had the necessary investment
intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such shares
are restricted pursuant to Rule 144 of the Act. This restriction ensures that these shares would not be immediately redistributed
into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, the Company
has met the requirements to qualify for exemption under Section 4(2) of the Securities Act for this transaction.
Securities
Authorized for Issuance under Equity Compensation Plans
Lightlake does
not have in effect any compensation plans under which the Company’s equity securities are authorized for issuance.
Item 6. Selected
Financial Data.
Lightlake is not required to provide the
information required by this Item because the Company is a smaller reporting company.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The
following discussion and analysis of the results of operations and financial condition for the fiscal years ended July 31, 2015
and 2014 and should be read in conjunction with Lightlake’s financial statements, and the notes to those financial statements
that are included elsewhere in this Report.
Results of Operations
Lightlake
had $1,550,000 of revenue during
the year ended July 31, 2015. The Company recognized $800,000 of revenue derived from the Adapt Agreement. The Company also recognized
$750,000 from investments in treatments that were classified
as deferred revenue as of July 31, 2014. Lightlake
did not have any revenues during the year ended July 31, 2014 and
had generated no revenue from inception through July 31, 2014 as the Company was devoting substantially all of its efforts on establishing
the business and its planned principal operations had not commenced.
General
and Administrative Expenses
Lightlake’s
general and administrative expenses were incurred in the amounts of $6,034,520 and $10,838,760 for the years ended July 31, 2015
and 2014, respectively. The difference in the year over year change of $4,804,240 was primarily due to a reduction in administrative
compensation as the Company recorded $1,729,216 of stock-based compensation during the year ended July 31, 2015 as compared to
$9,003,582 during the year ended July 31, 2014. This was partially offset by increases in professional fees, consulting costs,
and non-stock based officer’s compensation.
Research and Development
Lightlake spent $2,414,973 and $464,609
during the years ended July 31, 2015 and 2014, respectively. The year over year increase is primarily due to increased spending
on research and development of the Company’s opioid overdose reversal treatment.
Interest Expense
During the years ended July 31, 2015 and
2014, Lightlake’s interest expense decreased from $160,303 to $28,232. This decrease was due to a reduction in obligations
connected to outstanding debt.
Net Loss
The comparable net loss for the year ended
July 31, 2015, as compared to the net loss for the year ended July 31, 2014 was $7,037,873 and $11,482,818, respectively. This
reduction of net loss was due primarily to a reduction in operating expenses and stock-based compensation, partially offset by
an increase in research and development expenses.
Lightlake has not attained profitable operations
and is dependent upon generating sufficient revenues and/or obtaining financing to pursue its objectives and further certain planned
initiatives. In their report on the Company’s financial statements at July 31, 2015 and July 31, 2014, the Company’s
auditors raised substantial doubt about the Company’s ability to continue as a going concern.
Liquidity and Capital Resources
Lightlake’s cash balance at July
31, 2015, was $434,217 together with $8,874,520 of outstanding liabilities. The Company’s management believes that the Company’s
current cash balance will not be sufficient to fund the Company’s operations for the next twelve months. As a result, the
Company will need to generate sufficient revenues and/or seek additional funding in the near future. The Company currently does
not have a specific plan of how it will obtain such funding; however, the Company anticipates that additional funding will be in
the form of debt financing and/or equity financing from the sale of the Company’s common stock and/or in the form of financing
from the sale of interests in the Company’s prospective products. Such funds may also be derived pursuant to the terms of
the Adapt Agreement.
During the year ended July 31, 2015, Lightlake
received $4,638,530 in funding in exchange for interests in the Company’s opioid overdose reversal treatment and Binge Eating
Disorder treatments. This investment increased the cash position of the Company. As stated above, the Company expects to continue
to issue debt and/or equity and/or sell interests in the Company’s prospective products to sustain the implementation of
the Company’s business plan unless sufficient revenues are generated. During the year ended July 31, 2014, the Company received
funding amounting to $661,470. Additionally, during the year ended July 31, 2014, the Company received a commitment for $3,000,000
of investment.
At this time, Lightlake cannot provide
investors with any assurance that it will be able to generate sufficient revenues and/or obtain sufficient funding from debt financing
and/or the sale of its common stock and/or the sale of interests in the Company’s prospective products to meet its obligations
over the next twelve months. The Company does not have any arrangements in place for any future financing. The Company may also
seek to obtain short-term loans from its officers and directors to meet its short-term funding needs. The Company has no material
commitments for capital expenditures as of July 31, 2015 other than obligations with respect to the Adapt Agreement.
The financial position of Lightlake at
the year ended July 31, 2015 showed an increase in assets from July 31, 2014 of $300,657 to $487,795, respectively. This was due
primarily to an increase in the Company’s cash position, which was the due to revenues and an increase in funding during
the year. The liabilities at July 31, 2015 increased to $8,874,520 from $3,378,725 at July 31, 2014. This increase was partially
the result of an increase in Company’s investment into its opioid overdose reversal treatment program and Binge Eating Disorder
treatments of $3,888,530 and an increase in the accrued officers’ salaries of $1,712,409.
Going Concern
Lightlake’s independent auditor has
issued an audit opinion, which includes a statement expressing substantial doubt as to the Company’s ability to continue
as a going concern.
Lightlake has incurred significant losses,
a working capital deficit as of July 31, 2015 of $3,107,160 and is dependent on generating sufficient revenues and/or obtaining
adequate capital to fund operating losses until it becomes profitable. If the Company is unable to generate sufficient revenues
and/or obtain the necessary funding it could cease operations. This raises substantial doubt about the Company’s ability
to continue as a going concern.
Plan
Of Operation
During the next year, Lightlake aims to
broaden the Company’s product pipeline, and anticipates commencing further trials based on the Company’s existing as
well as potential patents.
Lightlake has been focused on establishing
a clinical development plan and regulatory pathway that could potentially result in FDA approval and commercialization of the Company’s
opioid overdose reversal treatment. On December 4, 2014, Lightlake announced that the Company has begun a trial designed to evaluate
its intranasal naloxone application for opioid overdose. The trial was conducted in partnership with NIDA. On December 15, 2014,
Lightlake and Adapt entered into the Adapt Agreement. Pursuant to the agreement Adapt has received from the Company a global license
to develop and commercialize the Company’s intranasal naloxone opioid overdose reversal treatment. In exchange for licensing
its treatment to Adapt, the Company could receive potential development and sales milestone payments of more than $55 million,
plus up to double-digit royalties. On February 17, 2015, Lightlake announced that Adapt received Fast Track designation by the
FDA. On April 22, 2015, Lightlake announced that Adapt successfully completed a clinical study of intranasal naloxone. On June
3, 2015, Lightlake announced that Adapt commenced a rolling submission of a NDA to the FDA for a nasal spray formulation of naloxone,
a drug intended to treat opioid overdose. On July 29, 2015, Lightlake announced that Adapt has submitted a NDA to the FDA for Narcan®
(naloxone) Nasal Spray, an investigational drug intended to treat opioid overdose.
Lightlake also aims to collaborate with
other parties to progress the Company’s drug development program for Binge Eating Disorder.
Lightlake also has planned a study to help
progress a potential treatment for Cocaine Use Disorder.
At this time, Lightlake cannot provide
investors with any assurance that the Company will be able to generate sufficient revenues and/or obtain sufficient funding to
meet the Company’s obligations over the next twelve months. The Company anticipates that if revenues are not sufficient then
additional funding will be required in the form of debt financing and/or equity financing from the sale of the Company’s
common stock and/or in the form of financing from the sale of interests in the Company’s prospective products. The Company
does not have any arrangements in place for any future funding. The Company may also seek to obtain short-term loans from the Company’s
officers and directors to meet the Company’s short-term funding needs. The Company has no material commitments for capital
expenditures as of July 31, 2015.
Critical Accounting Policies and Estimates
Lightlake believes that the following critical
policies affect the Company’s more significant judgments and estimates used in preparation of the Company’s consolidated
financial statements.
Lightlake prepares its financial statements
in conformity with generally accepted accounting principles in the United States of America. These principals require management
to 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
period. Management believes that these estimates are reasonable and have been discussed with the Company’s board of directors;
however, actual results could differ from those estimates.
Lightlake issues restricted stock to consultants
for various services and employees for compensation. Cost for these transactions are measured at the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is measurable more reliably measurable. The value of the
common stock is measured at the earlier of: (i) the date at which a firm commitment for performance by the counterparty to earn
the equity instruments is reached or (ii) the date at which the counterparty's performance is complete.
Lightlake issues options and warrants to
consultants, directors, and officers as compensation for services. These options and warrants are valued using the Black-Scholes
model, which focuses on the current stock price and the volatility of moves to predict the likelihood of future stock moves. This
method of valuation is typically used to accurately price stock options and warrants based on the price of the underlying stock.
Long-lived assets such as property, equipment
and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may
not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the
asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent
appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an
impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are
not available, Lightlake estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk
associated with the recovery of the assets. The Company did not recognize any impairment losses for any periods presented.
Fair value estimates used in preparation
of the consolidated financial statements are based upon certain market assumptions and pertinent information available to management.
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial
instruments include cash, accounts payable and due to related parties. Fair values were assumed to approximate carrying values
for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they
are receivable or payable on demand.
Revenue Recognition
We recognize revenues from nonrefundable,
up-front license fees related to collaboration agreements, on a straight-line basis over the contracted or estimated period of
performance. The period of performance over which the revenues are recognized is typically the period over which the research and/or
development is expected to occur or manufacturing services are expected to be provided. When the period of performance is based
on the period over which research and/or development is expected to occur, we are required to make estimates regarding drug development
and commercialization timelines. Because of the many risks and uncertainties associated with the development of drug candidates,
these estimates regarding the period of performance may change.
In addition, we evaluate each arrangement
to determine whether or not it qualifies as a multiple-deliverable revenue arrangement under ASC 605-25. If one or more of the
deliverables have a standalone value, then the arrangement would be separated into multiple units of accounting. This normally
occurs when the R&D services could contractually and feasibly be provided by other vendors or if the customer could perform
the remaining R&D itself, and when the Company has no further obligations and the right has been conveyed. When the deliverables
cannot be separated, any initial payment received is treated like an advance payment for the services and recognized over the
performance period, as determined based on all of the items in the arrangement. This period is usually the expected research and
development period.
Licensing Agreements
On December 15, 2014, Lightlake entered
into the Adapt Agreement with Adapt Pharma Operations Limited. Pursuant to the Adapt Agreement the Company provided a global license
to develop and commercialize the Company’s intranasal naloxone opioid overdose reversal treatment. In exchange for licensing
its treatment, the Company received a nonrefundable, upfront license fee of $500,000 in December 2014. The Company is also to
receive a monthly fee for up to one year, for participation in joint development committee calls and the production and submission
of an initial development plan. The initial development plan was completed and submitted in May 2015. Management evaluated the
deliverables of this arrangement and determined that the licensing deliverable has a standalone value and therefore, the payment
was recognized as revenue.
Lightlake
could also receive additional payments upon reaching various sales and regulatory milestones. In addition, pursuant to the Adapt
Agreement, the Company is required to contribute $2,500,000 of development, regulatory, and commercialization costs, some of which
was credited for costs incurred by the Company prior to the execution of the Adapt Agreement. At July 31, 2015, the Company had
contributed $2,341,419 of which $204,908 is unpaid and reported in accounts payable and accrued liabilities in the balance sheets.
Lightlake recognizes revenue for fees related
to participation in the initial development plan and joint development committee calls as revenue once the fee is received and
the Company has performed the required services for the period.
Treatment Investments
With respect to investments in interests
in Lightlake’s treatments, if an agreement provides an option that allows the investor in the treatment to convert an interest
in a treatment into shares of common stock of the Company, then revenue is deferred until such time that the option expires or
milestones are achieved that eliminate the investor’s right to exercise the option. Upon expiration of the exercise option,
the deliverables of the arrangement are reviewed and evaluated under ASC 605.In the event the investor chooses to convert interests
into shares of common stock, that transaction will be accounted for similar to a sale of shares of common stock for cash.
Off-Balance Sheet Arrangements
Lightlake has no off-balance sheet arrangements
as of July 31, 2015 and 2014.
Recent Accounting
Pronouncements
Lightlake has
reviewed accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in
future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles
and does not believe that any new or modified principles will have a material impact on the Company’s reported financial
position or operations in the near term. The applicability of any standard is subject to the formal review of the Company’s
financial management and certain standards are under consideration. Those standards have been addressed in the notes to the audited
financial statement and in this, the Company’s Annual Report, filed on Form 10-K for the period ended July 31, 2015.
Item 7A. Quantitative
and Qualitative Disclosures About Market Risk
Lightlake is not
required to provide the information required by this Item because the Company is a smaller reporting company.
Item
8. Financial Statements.
Lightlake
Therapeutics Inc.
Index to Financial Statements
July 31, 2015 and 2014
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors of
Lightlake Therapeutics Inc.
We have audited the accompanying balance sheets
of Lightlake Therapeutics Inc. as of July 31, 2015 and 2014 and the related statements of operations, stockholders’
deficit, and cash flows for each of the years then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Lightlake Therapeutics Inc. as of July 31, 2015 and 2014
and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered
losses from operations and has a working capital deficit, which raises substantial doubt about its ability to continue as a going
concern. Management's plans regarding these matters also are described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ MaloneBailey, LLP |
|
www.malone-bailey.com
|
|
Houston, Texas |
|
October 26, 2015 |
|
Lightlake Therapeutics Inc.
Balance Sheets
As of July 31, 2015 and 2014
| |
July 31, | | |
July 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Assets | |
| | | |
| | |
Current assets | |
| | | |
| | |
Cash and cash equivalents | |
$ | 434,217 | | |
$ | 254,770 | |
Prepaid insurance | |
| 33,143 | | |
| 24,079 | |
Total current assets | |
| 467,360 | | |
| 278,849 | |
| |
| | | |
| | |
Other assets | |
| | | |
| | |
Patents and patent applications (net of accumulated amortization of
$7,015 at July 31, 2015 and $5,642 at July 31, 2014) | |
| 20,435 | | |
| 21,808 | |
| |
| | | |
| | |
Total assets | |
$ | 487,795 | | |
$ | 300,657 | |
| |
| | | |
| | |
Liabilities and Stockholders' Deficit | |
| | | |
| | |
Liabilities | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 315,460 | | |
$ | 200,604 | |
Accrued salaries and wages | |
| 3,129,060 | | |
| 1,416,651 | |
Due to related parties | |
| 130,000 | | |
| 350,000 | |
Total current liabilities | |
| 3,574,520 | | |
| 1,967,255 | |
| |
| | | |
| | |
Deferred revenue | |
| 5,300,000 | | |
| 1,411,470 | |
Total liabilities | |
| 8,874,520 | | |
| 3,378,725 | |
| |
| | | |
| | |
Stockholders' deficit | |
| | | |
| | |
Common stock; par value $0.001; 1,000,000,000 shares authorized; | |
| | | |
| | |
1,841,866 shares issued
and outstanding at July 31, 2015 and 1,782,073 shares issued and outstanding at July 31, 2014 | |
| 1,842 | | |
| 1,782 | |
Additional paid-in capital | |
| 44,982,519 | | |
| 43,253,363 | |
Accumulated deficit | |
| (53,371,086 | ) | |
| (46,333,213 | ) |
Total stockholders' deficit | |
| (8,386,725 | ) | |
| (3,078,068 | ) |
Total liabilities and stockholders' deficit | |
$ | 487,795 | | |
$ | 300,657 | |
The accompanying notes are an integral part
of these financial statements.
Lightlake Therapeutics Inc.
Statements of Operations
For the years ended July 31, 2015 and 2014
| |
For the | |
| |
Year Ended | |
| |
July 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Revenue | |
$ | 1,550,000 | | |
$ | - | |
| |
| | | |
| | |
Operating expenses | |
| | | |
| | |
General and administrative | |
| 6,034,520 | | |
| 10,838,760 | |
Research and development | |
| 2,414,973 | | |
| 464,609 | |
Total operating expenses | |
| 8,449,493 | | |
| 11,303,369 | |
| |
| | | |
| | |
Loss from operations | |
| (6,899,493 | ) | |
| (11,303,369 | ) |
| |
| | | |
| | |
Other income (expense) | |
| | | |
| | |
Interest expense | |
| (28,232 | ) | |
| (160,303 | ) |
Change in derivative | |
| - | | |
| (27,067 | ) |
Loss on foreign exchange | |
| (110,148 | ) | |
| (12,730 | ) |
Gain on debt settlement/forgiveness | |
| - | | |
| 20,651 | |
Total other income (expense) | |
| (138,380 | ) | |
| (179,449 | ) |
| |
| | | |
| | |
Loss before provision for income taxes | |
| (7,037,873 | ) | |
| (11,482,818 | ) |
| |
| | | |
| | |
Provision for income taxes | |
| - | | |
| - | |
| |
| | | |
| | |
Net loss | |
$ | (7,037,873 | ) | |
$ | (11,482,818 | ) |
| |
| | | |
| | |
Loss per common share: | |
| | | |
| | |
Basic and diluted | |
$ | (3.88 | ) | |
$ | (6.57 | ) |
Weighted average common shares outstanding | |
| | | |
| | |
Basic and diluted | |
| 1,813,069 | | |
| 1,747,881 | |
The accompanying notes are an integral part
of these financial statements.
Lightlake Therapeutics Inc.
Statements of Stockholders' Deficit
For the years ended July 31, 2015 and 2014
| |
| | |
| | |
Additional | | |
| | |
| |
| |
Common Stock | | |
Paid In | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Total | |
| |
| | |
| | |
| | |
| | |
| |
Balance at July 31, 2013 | |
| 1,647,001 | | |
$ | 1,647 | | |
$ | 33,858,732 | | |
$ | (34,850,395 | ) | |
| (990,016 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Derivative liability | |
| - | | |
| - | | |
| (337,413 | ) | |
| - | | |
| (337,413 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Settlement of derivative liability | |
| - | | |
| - | | |
| 506,574 | | |
| - | | |
| 506,574 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Conversion of convertible note to common stock | |
| 3,333 | | |
| 3 | | |
| 8,053 | | |
| - | | |
| 8,056 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Stock issued for services | |
| 41,867 | | |
| 42 | | |
| 213,925 | | |
| - | | |
| 213,967 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Stock issued due to exercise of warrants | |
| 89,872 | | |
| 90 | | |
| (90 | ) | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Stock based compensation from issuance of stock options | |
| - | | |
| - | | |
| 8,283,582 | | |
| - | | |
| 8,283,582 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Stock based compensation from issuance of warrants | |
| - | | |
| - | | |
| 720,000 | | |
| - | | |
| 720,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| - | | |
| - | | |
| - | | |
| (11,482,818 | ) | |
| (11,482,818 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at July 31, 2014 | |
| 1,782,073 | | |
$ | 1,782 | | |
$ | 43,253,363 | | |
$ | (46,333,213 | ) | |
$ | (3,078,068 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Stock issued for services | |
| 59,793 | | |
| 60 | | |
| 311,605 | | |
| - | | |
| 311,665 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Stock based compensation from issuance of stock options | |
| - | | |
| - | | |
| 1,008,239 | | |
| - | | |
| 1,008,239 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Stock based compensation from issuance of warrants | |
| - | | |
| - | | |
| 409,312 | | |
| - | | |
| 409,312 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| - | | |
| - | | |
| - | | |
| (7,037,873 | ) | |
| (7,037,873 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at July 31, 2015 | |
| 1,841,866 | | |
$ | 1,842 | | |
$ | 44,982,519 | | |
$ | (53,371,086 | ) | |
$ | (8,386,725 | ) |
The accompanying notes are an integral part
of these financial statements.
Lightlake Therapeutics Inc.
Statements of Cash Flows
For the years ended July 31, 2015 and 2014
| |
For the | |
| |
Year Ended | |
| |
July 31, | | |
July 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Cash flows provided by (used in) operating activities | |
| | | |
| | |
Net loss | |
$ | (7,037,873 | ) | |
$ | (11,482,818 | ) |
Adjustments to reconcile net loss to net cash used by operating
activities: | |
| | | |
| | |
Amortization | |
| 1,373 | | |
| 1,372 | |
Issuance of common stock for services | |
| 311,665 | | |
| 213,967 | |
Stock based compensation from issuance of options | |
| 1,008,239 | | |
| 8,283,582 | |
Stock based compensation from issuance of warrants | |
| 409,312 | | |
| 720,000 | |
Accreted interest on debt discounts | |
| - | | |
| 132,428 | |
Gain on debt settlement/forgiveness | |
| - | | |
| (20,651 | ) |
Change in derivative | |
| - | | |
| 27,067 | |
| |
| | | |
| | |
Changes in assets and liabilities: | |
| | | |
| | |
Increase in prepaid insurance | |
| (9,064 | ) | |
| (2,829 | ) |
Decrease in deferred revenue | |
| (750,000 | ) | |
| - | |
Increase in accounts payable | |
| 114,856 | | |
| 159,837 | |
Increase in accrued salaries and wages | |
| 1,712,409 | | |
| 962,722 | |
Net cash used in operating activities | |
| (4,239,083 | ) | |
| (1,005,323 | ) |
| |
| | | |
| | |
Cash flows provided by (used in) financing activities | |
| | | |
| | |
Payments to related parties on notes payable | |
| (220,000 | ) | |
| - | |
Investment received in exchange for royalty agreement | |
| 4,638,530 | | |
| 661,470 | |
Net cash provided by financing activities | |
| 4,418,530 | | |
| 661,470 | |
| |
| | | |
| | |
Net increase (decrease) in cash and cash equivalents | |
| 179,447 | | |
| (343,853 | ) |
Cash and cash equivalents, beginning of period | |
| 254,770 | | |
| 598,623 | |
Cash and cash equivalents, end of period | |
$ | 434,217 | | |
$ | 254,770 | |
| |
| | | |
| | |
Supplemental disclosure | |
| | | |
| | |
Interest paid during the period | |
$ | - | | |
$ | - | |
Taxes paid during the period | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Non-Cash Transactions | |
| | | |
| | |
Conversion of debt to equity | |
$ | - | | |
$ | 8,056 | |
Debt discounts attributable to derivative valuation | |
$ | - | | |
$ | 132,428 | |
Settlement of derivative liability | |
$ | - | | |
$ | 506,574 | |
Cashless exercise of warrants | |
$ | - | | |
$ | 8,987 | |
Derivative liability | |
$ | - | | |
$ | 337,413 | |
The accompanying notes are an integral part of these financial
statements.
Lightlake Therapeutics Inc.
Notes to Financial Statements
For the years ended July 31, 2015 and 2014
| 1. | Organization
and Basis of Presentation |
Lightlake Therapeutics Inc. (“Lightlake”,
“we”, “our”, the “Company”) was originally incorporated in the State of Nevada on June 21,
2005. On September 16, 2009, the Company changed its name to Lightlake Therapeutics Inc. The Company is a specialty pharmaceutical
company developing opioid antagonist treatments for substance use, addictive and eating disorders, including a treatment to reverse
opioid overdoses. The Company’s fiscal year end is July 31.
Reverse Stock Split
In December 2014, Lightlake effected
a one-for-one hundred reverse stock split of its common stock (the “1:100 Reverse Stock Split”) which decreased the
number of common shares issued and outstanding from approximately 182.7 million shares to approximately 1.827 million shares as
of March 12, 2015. Unless otherwise noted, impacted amounts included in the financial statements and notes thereto have been retroactively
adjusted for the stock splits as if such stock splits occurred on the first day of the first period presented. Impacted amounts
include but are not limited to shares of common stock issued and outstanding, stock options, shares reserved, exercise prices of
warrants or options, and loss per share. There was no impact on preferred or common stock authorized resulting from the 1:100 Reverse
Stock Split.
The accompanying financial statements
have been prepared assuming Lightlake will continue as a going concern, which contemplates the realization of assets and the liquidation
of liabilities in the normal course of business. However, the Company has incurred significant losses, a working capital deficit
as of July 31, 2015 of $3,107,160 and is dependent on generating sufficient revenues and/or obtaining adequate capital to fund
operating losses until it becomes profitable. If the Company is unable to generate sufficient revenues and/or obtain the necessary
funding it could cease operations as a new enterprise. This raises substantial doubt about the Company’s ability to continue
as a going concern. These financial statements do not include any adjustments that might result from this uncertainty.
|
3. |
Summary of Significant Accounting Policies |
Basis of Presentation and
Use of Estimates
Lightlake prepares its financial
statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which
require management to 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 reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Lightlake considers all highly
liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents
were $434,217 and $254,770 at July 31, 2015 and 2014, respectively. The Company maintains cash balances at financial institutions
insured up to $250,000 by the Federal Deposit Insurance Corporation. Balances in the UK are insured up to £85,000 by the
Financial Services Compensation Scheme (UK Equivalent). The cash balances exceeded these insured amounts during the year.
Long-Lived Assets
Lightlake follows ASC 360, Property,
Plant, and Equipment, for its fixed assets. Property and equipment is stated at cost less accumulated depreciation. Depreciation
is computed by the straight-line method over estimated useful lives (3 to 7 years). The Company’s capitalizes all asset purchases
greater than $500 having a useful life greater than one year.
Lightlake Therapeutics Inc.
Notes to Financial Statements
For the years ended July 31, 2015 and 2014
Lightlake follows ASC 350, Intangibles
– Goodwill and Other for its intellectual property asset. Intellectual property consists of patents which are stated
at their fair value acquisition cost. Amortization is calculated by the straight line method over their estimated useful lives
(20 years).
Long-lived assets such as property
and equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying
value may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair
value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets,
if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from
its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of
the asset. When fair values are not available, Lightlake estimates fair value using the expected future cash flows discounted
at a rate commensurate with the risk associated with the recovery of the assets. The Company did not recognize any impairment
losses for any years presented.
Earnings (Loss) per Share
Lightlake follows ASC 260, Earnings
per Share. Basic earnings (loss) per share is computed by dividing the net income (loss) available to common shareholders by
the weighted-average number of common shares outstanding during the respective period presented in the Company’s accompanying
financial statements.
Fully diluted earnings (loss)
per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of
common stock equivalents (primarily outstanding options and warrants).
Common stock equivalents represent
the dilutive effect of the assumed exercise of outstanding stock options and warrants, using the treasury stock method, at either
the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents
are considered dilutive based upon Lightlake’s net loss position at the calculation date.
Common stock equivalents have
not been included in the calculation of dilutive earnings (loss) per share as the result would be anti-dilutive. At July 31 2015,
potentially dilutive common stock equivalents are approximately 4,496,052 (2014 – 3,184,523) which consist of options and
warrants.
Research and Development Costs
Lightlake follows ASC 730, Research
and Development, and expenses all research and development costs as incurred for which there is no alternative future use.
These costs also include the expensing of employee compensation and employee stock based compensation.
Foreign Currency Translation
Lightlake’s
functional and reporting currency is the United States dollar. Occasional transactions may occur in British Pounds and management
has adopted ASC 830, Foreign Currency Translation Matters. Monetary assets and liabilities denominated in foreign currencies
are translated using the exchange rate prevailing at the balance sheet date.
Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in
the determination of income.
Stock-Based Compensation
ASC 718 Compensation –
Stock Compensation prescribes accounting and reporting standards for all share-based payment transactions in which employee
services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity
instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including
grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values.
That expense is recognized over the period during which an employee is required to provide services in exchange for the award,
known as the requisite service period (usually the vesting period).
Lightlake Therapeutics Inc.
Notes to Financial Statements
For the years ended July 31, 2015 and 2014
Lightlake accounts for stock-based
compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity – Based Payments
to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever
is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based
payment transaction is determined at the earlier of performance commitment date or performance completion date.
Lightlake had stock-based compensation
of $1,729,216 and $9,217,549 for the years ended July 31, 2015 and 2014, respectively.
Fair Value of Financial Instruments
ASC 820 Fair Value Measurements
and Disclosures defines fair value as the exchange price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market
participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s
own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable
inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The three levels of the fair
value hierarchy are described below:
Level 1 - Unadjusted quoted prices
in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 - Inputs other than quoted
prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted
prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets
that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and
inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 - Inputs that are both
significant to the fair value measurement and unobservable.
The carrying value of certain
on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These
financial instruments include cash, accounts payable, and due to related parties. The fair value of Lightlake’s convertible
note payable is estimated based on current rates that would be available for debt of similar terms which is not significantly different
from its stated value.
As of July 31, 2014, the convertible
note was converted into equity and the derivative warrants were either exchanged for common stock or no longer required derivative
treatment as a result of note conversion into equity. Consequently, at July 31, 2014, derivative liabilities have a balance of
zero. The derivative instruments were marked to market at settlement dates and the corresponding value of the derivative liabilities
of $506,574 was credited to additional paid in capital.
As of July 31, 2015 and 2014
Lightlake did not have any financial liabilities measured and recorded at fair value on the Company’s balance sheets on a
recurring basis.
The following table provides a summary of the changes in fair value, including net transfers in and/or out, of
the derivative financial instruments, measured at fair value on a recurring basis using significant unobservable inputs:
Lightlake Therapeutics Inc.
Notes to Financial Statements
For the years ended July 31, 2015 and 2014
Balance at July 31, 2013 | |
$ | 9,666 | |
Fair value of warrant derivative liabilities at issuance | |
| 469,841 | |
Settlement of derivative liability | |
| (506,574 | ) |
Unrealized derivative loss included in other expense | |
| 27,067 | |
Balance at July 31, 2015 and 2014 | |
$ | - | |
The fair value of the derivative
liabilities are calculated at inception and Lightlake records a derivative liability for the calculated value. Changes in the fair
value of the derivative liabilities are recorded in other income (expense) in the statements of operations.
The derivative warrants were
valued using the Black-Scholes option pricing model using the following assumptions:
| |
At settlement
dates | |
Market value of stock on measurement
date | |
| $
0.043-$0.05 | |
Risk-free interest rate | |
| 0.77-0.96 | % |
Dividend yield | |
| 0 | % |
Volatility factor | |
| 169-217 | % |
Term | |
| 2.8-3.9
years | |
Related Parties
Lightlake follows ASC 850,
Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. Related
party balance as of July 31, 2015 amount to $130,000 (2014 - $350,000), and was comprised of loans to the Company. (See Note 4)
Revenue Recognition
We recognize revenues from nonrefundable,
up-front license fees related to collaboration agreements, on a straight-line basis over the contracted or estimated period of
performance. The period of performance over which the revenues are recognized is typically the period over which the research and/or
development is expected to occur or manufacturing services are expected to be provided. When the period of performance is based
on the period over which research and/or development is expected to occur, we are required to make estimates regarding drug development
and commercialization timelines. Because of the many risks and uncertainties associated with the development of drug candidates,
these estimates regarding the period of performance may change.
In addition, we evaluate each arrangement to determine whether or not it qualifies as a multiple-deliverable
revenue arrangement under ASC 605-25. If one or more of the deliverables have a standalone value, then the arrangement would be
separated into multiple units of accounting. This normally occurs when the R&D services could contractually and feasibly be
provided by other vendors or if the customer could perform the remaining R&D itself, and when the Company has no further obligations
and the right has been conveyed. When the deliverables cannot be separated, any initial payment received is treated like an advance
payment for the services and recognized over the performance period, as determined based on all of the items in the arrangement.
This period is usually the expected research and development period.
Licensing Agreement
On December 15, 2014, Lightlake
entered into a licensing agreement with Adapt Pharma Operations Limited. Pursuant to the license agreement the Company provided
a global license to develop and commercialize the Company’s intranasal naloxone opioid overdose reversal treatment. In exchange
for licensing its treatment, the Company received a nonrefundable, upfront license fee of $500,000 in December 2014. The Company
is also to receive a monthly fee for up to one year, for participation in joint development committee calls and the production
and submission of an initial development plan. The initial development plan was completed and submitted in May 2015. Management
evaluated the deliverables of this arrangement and determined that the licensing deliverable has a standalone value and therefore,
the payment was recognized as revenue.
Lightlake
could also receive additional payments upon reaching various sales and regulatory milestones. In addition, pursuant to the licensing
agreement, the Company is required to contribute $2,500,000 of development, regulatory, and commercialization costs, some of which
was credited for costs incurred by the Company prior to the execution of the agreement with Adapt Pharma Operations Limited. At
July 31, 2015, the Company had contributed $2,341,419 of which $204,908 is unpaid and reported in accounts payable and accrued
liabilities in the balance sheets.
Lightlake Therapeutics Inc.
Notes to Financial Statements
For the years ended July 31, 2015 and 2014
Lightlake recognizes revenue
for fees related to participation in the initial development plan and joint development calls as revenue once the fee is received
and the Company has performed the required services for the period.
Treatment Investments
With respect to investments
in interests in treatments, if an agreement provides an option that allows the investor in the treatment to convert an interest
in a treatment into shares of common stock of Lightlake, then revenue is deferred until such time that the option expires or milestones
are achieved that eliminate the investor’s right to exercise the option. Upon expiration of the exercise option, the deliverables
of the arrangement are reviewed and evaluated under ASC 605. In the event the investor chooses to convert interests into shares
of common stock, that transaction will be accounted for similar to a sale of shares of common stock for cash.
Recently Issued Accounting
Pronouncements
In August 2014, Lightlake elected
to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial
Reporting Requirements. The adoption of this ASU allows the Company to remove the inception to date information and all references
to development stage.
Lightlake has implemented all
new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are
any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.
|
4. |
Related Party Transactions |
At
July 31, 2015, Lightlake had loans outstanding with its three directors (two of which are officers), in the total amount of $130,000
(July 31, 2014 - $350,000). During the year ended July 31, 2015, $220,000 of the principal amount was repaid. In December 2014,
the agreements were amended to extend the maturity date to April 30, 2016 and increase the annual interest rate to 14.5%, which
includes a penalty rate of 8.5% due to non-payment of the required repayment amounts.
The loans are unsecured.
On April 16, 2013, Lightlake
entered into an agreement and subsequently received funding in the amount of $600,000 for the research, development, marketing
and commercialization of a product relating to a treatment for opioid addiction. In exchange for this funding, the Company agreed
to pay the investor 6.0% of the net profit generated from the product in perpetuity. Net profit is defined as the pre-tax profit
generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection with
the product, including but not limited to an allocation of Company overhead. If the product is not introduced to the market and
not approved for marketing within 24 months, the investor will have a sixty day option to receive 75,000 shares of common stock
in lieu of the 6.0% interest in the product. During the year ended July 31, 2015, the Company recognized $600,000 as revenue because
the option to receive the shares of common stock expired unexercised, and the research and development work related to the product
was completed as of July 31, 2015.
On May 30, 2013, Lightlake entered
into an agreement and subsequently received additional funding totaling $150,000 for the research, development, marketing and commercialization
of a product relating to a treatment for opioid addiction. In exchange for this funding, the Company agreed to pay the investor
1.50% of the net profit generated from the product in perpetuity. Net profit is defined as the pre-tax profit generated from the
product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including
but not limited to an allocation of Company overhead. If the product is not introduced to the market and not approved for marketing
within 24 months, the investor will have a sixty day option to receive 18,750 shares of common stock in lieu of the 1.50% interest
in the product. During the year ended July 31, 2015, the Company recognized $150,000 as revenue because the option to receive shares
of common stock expired unexercised, and the research and development work related to the product was completed as of July 31,
2015.
Lightlake Therapeutics Inc.
Notes to Financial Statements
For the years ended July 31, 2015 and 2014
On December 17, 2013, Lightlake
entered into an agreement and subsequently received additional funding totaling $250,000 for use by the Company for any purpose.
In exchange for this funding, the Company agreed to provide the investor with a 0.5% interest in the Company’s Binge Eating
Disorder treatment product and pay the investor 0.5% of the net profit generated from this treatment in perpetuity. Net profit
is defined as the pre-tax profit generated from the product after the deduction of all expenses incurred by and payments made by
the Company in connection with the product, including but not limited to an allocation of Company overhead. If the product is not
approved by the U.S. Food and Drug Administration within 36 months the investor will have a sixty day option to receive 31,250
shares of common stock in lieu of the 0.5% interest in the product.
On May 15, 2014, Lightlake entered
into an agreement and subsequently received funding from an individual investor in the amount of $300,000 for use by the Company
for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 1.5% interest in the Net Profit
as related to the Company’s treatment to reverse opioid overdoses. Net profit is defined as the pre-tax profit generated
from the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product,
including but not limited to an allocation of Company overhead. The investor also has rights with respect to its 1.5% interest
if the treatment is sold or the Company is sold. If the product is not approved by the U.S. Food and Drug Administration within
24 months the investor will have a 60 day option to receive 37,500 shares of common stock in lieu of the 1.5% interest in the product.
On
July 22, 2014, Lightlake received a $3,000,000 commitment, from which the Company has the right to make capital calls, from a foundation
for the research, development, marketing, commercialization, and any other activities connected to the Company’s treatment
to reverse opioid overdoses, certain operating expenses, and any other purpose consistent with the goals of the foundation. In
exchange for funds invested by the foundation the Company agreed to provide the foundation with pro-rata share up to a 6.0% interest
in the Net Profit as related to the Company’s treatment to reverse opioid overdoses. Net profit is defined as the pre-tax
profit generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection
with the product, including but not limited to an allocation of Company overhead. The foundation also has rights with respect to
its 6.0 % interest if the treatment is sold or the Company
is sold. Additionally, the Company may buyback interests from the foundation within two and one half years or after two and a half
years of the initial investment at a price of two times or three and a half times, respectively, the relevant investment amount
represented by the interests to be bought back. If the product is not approved by the U.S. Food and Drug Administration or an equivalent
body in Europe for marketing and is not actually marketed within 24 months the foundation will have a 60 day option to receive
shares of the Company’s common stock in lieu of the interest in the treatment at a rate of 10 shares for every dollar of
its investment. On July 28, 2014 the Company received an initial investment of $111,470 from the foundation in exchange for a 0.22294%
interest. On August 13, 2014, September 8, 2014, November 13, 2014, and February 17, 2015, the Company made capital calls of $422,344
$444,530, $1,033,614, and $988,043, respectively, from the foundation in exchange for 0.844687%, 0.888906%, 2.067228%, and 1.976085%
interests, respectively, in the Net Profit as related to the Company’s treatment to reverse opioid overdoses.
Lightlake Therapeutics Inc.
Notes to Financial Statements
For the years ended July 31, 2015 and 2014
On September 9, 2014, Lightlake
entered into an agreement and subsequently received funding from an individual investor in the amount of $500,000 for use by the
Company for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 0.98% interest in the
Net Profit as related to the Company’s treatment to reverse opioid overdoses. Net Profit includes the pre-tax profit received
by the Company derived from the sale of the product after the deduction of all expenses incurred by and payments made by the Company
in connection with the product, including but not limited to an allocation of Company overhead. The investor also has rights with
respect to its 0.98% interest if the treatment is sold or the Company is sold. Additionally, the Company may buyback interests
from the investor within two and one half years or after two and a half years of the investment at a price of two times or three
and a half times, respectively, the relevant investment amount represented by the interests to be bought back. If the product is
not introduced to the market and not approved by the U.S. Food and Drug Administration or an equivalent body in Europe and not
marketed within 24 months, the investor will have a 60 day option to receive 50,000 shares of common stock in lieu of the interest
in the product.
On September 17, 2014, Lightlake
entered into an agreement and subsequently received funding totaling $500,000 for use by the Company for any purpose. In exchange
for this funding, the Company agreed to provide the investor with a 1.0% interest in the Company’s Binge Eating Disorder
treatment product and pay the investor 1.0% of the Net Profit generated from this treatment in perpetuity. Net Profit includes
the pre-tax profit generated from the product after the deduction of all expenses incurred by and payments made by the Company
in connection with the product, including but not limited to an allocation of Company overhead. If the product is not approved
by the U.S. Food and Drug Administration within 36 months, the investor will have a sixty day option to receive 62,500 shares of
common stock in lieu of the 1.0% interest in the product.
On October 31, 2014, Lightlake
entered into an agreement and subsequently received funding from an individual investor in the amount of $500,000 for use by the
Company for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 0.98% interest in the
Net Profit as related to the Company’s treatment to reverse opioid overdoses. Net Profit includes the pre-tax profit received
by the Company derived from the sale of the product after the deduction of all expenses incurred by and payments made by the Company
in connection with the product, including but not limited to an allocation of Company overhead. The investor also has rights with
respect to its 0.98% interest if the treatment is sold or the Company is sold. Additionally, the Company may buyback the interest
from the investor within two and one half years or after two and a half years but no later than four years of the investment at
a price of two times or three and a half times, respectively, of the investment amount. If the product is not introduced to the
market and not approved by the FDA or an equivalent body in Europe and not marketed within 24 months, the investor will have a
60 day option to receive 50,000 shares of common stock in lieu of the interest in the product.
On July 20, 2015, Lightlake entered
into an agreement and subsequently received funding from an individual investor in the amount of $250,000 for use by the Company
for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 0.50% interest in the Net Profit
as related to the Company’s treatment of binge eating disorder. Net Profit includes the pre-tax profit received by the Company
derived from the sale of the product after the deduction of all expenses incurred by and payments made by the Company in connection
with the product, including but not limited to an allocation of Company overhead. The investor also has rights with respect to
its 0.50% interest if the treatment is sold or the Company is sold. If the product is not introduced to the market and not approved
by the FDA or an equivalent body in Europe and not marketed within 36 months, the investor will have a 60 day option to receive
25,000 shares of common stock in lieu of the interest in the product.
Common Stock
On November 26, 2014, Lightlake
amended its articles of incorporation to increase its authorized capital stock from 200,000,000 common shares to 1,000,000,000
common shares.
During the year ended July
31, 2015
In August 2014, Lightlake issued
7,846 shares to consultants for services rendered. The shares have a fair value of $44,723 based on stock prices at issuance dates.
Lightlake Therapeutics Inc.
Notes to Financial Statements
For the years ended July 31, 2015 and 2014
In December 2014, Lightlake issued
24,015 shares to a company for services rendered. The shares have a fair value of $91,258 based on the stock prices at issuance
dates.
In January 2015, Lightlake issued
a total of 5,000 shares to two consultants for services rendered. The shares have a fair value of $19,720 based on the stock prices
at issuance dates.
In March 2015, Lightlake issued
a total of 20,900 shares to two companies and a consultant for services rendered. The shares have a fair value of $141,130 based
on the stock prices at issuance dates.
In April 2015, Lightlake issued
1,232 shares to a consultant for services rendered. The shares have a fair value of $8,994 based on the stock prices at issuance
dates.
In July, 2015, Lightlake issued
800 shares to a consultant for services rendered. The shares have a fair value of $5,840 based on the stock prices at the date
performance by the consultant was complete.
During the year ended July
31, 2014
On August 12, 2013, Lightlake
issued 3,750 shares in exchange for services rendered. The shares issued in this transaction were valued at market and amounted
to $15,000.
On August 28, 2013, Lightlake
issued 5,000 shares in exchange for services rendered. The shares issued in this transaction were valued at market and amounted
to $35,000.
On September 18, 2013, Lightlake
issued 3,750 shares in exchange for services rendered. The shares issued in this transaction were valued at market and amounted
to $22,500.
On October 21, 2013, Lightlake
issued 2,259 shares in exchange for services rendered. The shares issued in this transaction were valued at market and amounted
to $9,036.
On October 25, 2013, Lightlake
issued 3,346 shares in exchange for services rendered. The shares issued in this transaction were valued at market and amounted
to $13,382.
On October 31, 2013, Lightlake
issued 3,750 shares in exchange for services rendered. The shares issued in this transaction were valued at market and amounted
to $15,750.
In November 2013, Lightlake issued
12,500 shares in exchange for services rendered. The shares issued were valued at market and amounted to $66,500.
On December 23, 2013, Lightlake
issued 3,750 shares in exchange for services rendered. The shares issued in this transaction were valued at market and amounted
to $21,750.
On January 23, 2014, Lightlake
issued 3,333 shares in settlement of a convertible note payable in the amount of $25,000 and accrued interest of $3,707. This transaction
resulted in a gain on the extinguishment of the debt in the amount of $20,651.
On April 7, 2014, Lightlake issued
3,762 shares in exchange for services rendered. The shares issued in this transaction were valued at market and amounted to $15,049.
During the year ended July 31,
2014, Lightlake issued 89,872 shares as a result of the cashless exercise of 888,452 warrants.
Stock Options
Lightlake Therapeutics Inc.
Notes to Financial Statements
For the years ended July 31, 2015 and 2014
As required by the Stock Compensation
Topic, ASC 718, Lightlake measures and recognizes compensation expense for all share based payment awards made to the officers
and directors based on estimated fair values at the grant date and over the requisite service period. Stock option expense recognized
for the years ended July 31, 2015 and 2014 was $1,008,239 and $8,283,582, respectively.
On August 1, 2013, Lightlake
granted its executive officers cashless stock options to purchase a total of 375,000 shares of its common stock at exercise prices
ranging from $10.00 to $20.00 per share. These options vested immediately and expire in ten years on July 31, 2023. The Company
has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $1,068,750 which
has been fully recognized as expense for the year ended July 31, 2014.
On November 1, 2013, Lightlake granted its executive
officers cashless stock options to purchase a total of 225,000 shares of its common stock at exercise prices ranging from $6.00
to $10.00 per share.
These options vested immediately
and expire in ten years on October 31, 2023. Lightlake has valued these options using the Black-Scholes option pricing model which
resulted in a fair market value of $985,500 which has been fully recognized as expense for the year ended July 31, 2014.
On December 31, 2013, Lightlake
granted its executive officers cashless stock options to purchase a total of 665,000 shares of its common stock at exercise prices
ranging from $6.00 to $10.00 per share. These options vested immediately and expire in ten years on December 30, 2023. The Company
has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $3,591,000 which
has been fully recognized as expense for the year ended July 31, 2014.
On June 15, 2014, Lightlake granted
its executive officers and a director cashless stock options to purchase a total of 1,075,000 shares of its common stock at exercise
prices ranging from $5.00 to $8.00 per share. These options vest immediately and expire in ten years on June 14, 2024. These options
may only be exercised between the following dates: (i) the first to occur of: (A) the commencement of the next trial with respect
to the opioid overdose reversal treatment; (B) the entrance into a distribution, licensing, royalty, partnership, collaboration,
or other significant transaction with respect to the opioid overdose reversal treatment; or (C) the filing of a New Drug Application
with the U.S. Food and Drug Administration with respect to the opioid overdose reversal treatment; and (ii) the Expiration Date.
The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $2,580,000
which has been fully recognized as expense for the year ended July 31, 2014.
On June 24, 2014, Lightlake granted
30,000 cashless stock options to an outside consultant to purchase its common stock at an exercise price of $5.00 per share. These
options vest immediately and expire in seven years on June 23, 2021. The Company has valued these options using the Black-Scholes
option pricing model which resulted in a fair market value of $69,000 of which $34,500 has been recognized as expense for the year
ended July 31, 2014, and $34,500 has been recognized as expense for the year ended July 31, 2015.
On June 11, 2014, Lightlake issued
a total of 240,000 warrants with a strike price of $10.00 per share to a consultant in exchange for consulting and other strategic
advisory services, including clinical strategy and intellectual property strategy. These warrants expire in ten years on June 10,
2024. Additionally, upon the achievement of certain milestones the consultant will be granted up to an additional 225,400 warrants
with strike prices from $12.50 to $25.00 per share.
On August 2, 2014, Lightlake
granted 30,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options
have a term of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model
which resulted in a fair market value of $173,999 which have been fully recognized as expense for the year ended July 31, 2015.
Lightlake Therapeutics Inc.
Notes to Financial Statements
For the years ended July 31, 2015 and 2014
On November 12, 2014, Lightlake
granted 30,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options
have a term of 5 years and vest over 3 years. The Company has valued these options using the Black-Scholes option pricing model
which resulted in a fair market value of $188,825, of which $103,951 has been fully recognized as expense for the year ended July
31, 2015.
On November 12, 2014, Lightlake
granted 20,000 cashless stock options with an exercise price of $15.00 per share to a consultant for services rendered. These options
have a term of 5 years and vest over three years. The Company has valued these options using the Black-Scholes option pricing model
which resulted in a fair market value of $127,150, of which $67,984 has been fully recognized as expense for the year ended July
31, 2015.
On January 9, 2015, Lightlake
granted 15,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options
have a term of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model
which resulted in a fair market value of $65,163 which have been fully recognized as expense for the year ended July 31, 2015.
On January 25, 2015, Lightlake
granted 10,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options
have a term of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model
which resulted in a fair market value of $36,169 which have been fully recognized as expense for the year ended July 31, 2015.
On March 19, 2015, Lightlake
granted 48,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options
have a term of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model
which resulted in a fair market value of $282,227 which have been fully recognized as expense for the year ended July 31, 2015.
On March 19, 2015, Lightlake
granted 32,000 cashless stock options with an exercise price of $15.00 per share to a consultant for services rendered. These options
have a term of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model
which resulted in a fair market value of $186,655 which have been fully recognized as expense for the year ended July 31, 2015.
On July, 2015, Lightlake granted
10,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have
a term of 3 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which
resulted in a fair market value of $55,043 which have been fully recognized as expense for the year ended July 31, 2015.
Lightlake also recognized stock
based compensation expense of $37,048 in connection with vested options granted in prior periods.
The assumptions used in the valuation
for all of the options granted for the year ended July 31, 2015 were as follows:
Market value of stock on measurement date | |
| $
3.75 to 7.30 | | |
| $
2.40 to 5.40 | |
Risk-free interest rate | |
| 1.00
to 1.73 | % | |
| 2.19-2.99 | % |
Dividend yield | |
| 0 | % | |
| 0 | % |
Volatility factor | |
| 147
to 407 | % | |
| 418-459 | % |
Term | |
| 3
to 5 years | | |
| 7-10
years | |
Lightlake Therapeutics Inc.
Notes to Financial Statements
For the years ended July 31, 2015 and 2014
Stock option activity for year ended July 31, 2015
is presented in the table below:
| |
Number of Shares | | |
Weighted- average Exercise Price | | |
Weighted- average Remaining Contractual Term
(years) | | |
Aggregate Intrinsic Value | |
Outstanding at July 31, 2014 | |
| 3,047,500 | | |
| 9.00 | | |
| 8.56 | | |
| | |
Granted | |
| 195,000 | | |
| 11.33 | | |
| | | |
| | |
Forfeited/expired/cancelled | |
| (85,000 | ) | |
| 11.21 | | |
| | | |
| | |
Outstanding at July 31, 2015 | |
| 3,157,500 | | |
| 9.42 | | |
| 7.58 | | |
$ | 1,569,000 | |
Exercisable at July 31, 2015 | |
| 2,743,750 | | |
| 8.88 | | |
| 8.11 | | |
$ | 1,569,000 | |
A summary of the status of Lightlake’s non-vested
options as of July 31, 2015 and changes during the year ended July 31, 2015 are presented below:
Non-vested options | |
Number of
Options | | |
Weighted Average Grant Date Fair Value | |
| |
| | |
| |
Non-vested at July 31, 2014 | |
| 17,500 | | |
$ | 3.11 | |
| |
| | | |
| | |
Granted | |
| 195,000 | | |
| 5.09 | |
Vested | |
| (175,000 | ) | |
| 5.06 | |
| |
| | | |
| | |
Non-vested at July 31, 2015 | |
| 37,500 | | |
$ | 3.85 | |
At July 31, 2015, there was $135,640
of unrecognized compensation costs related to non-vested stock options.
Warrants
On December 16, 2014, Lightlake
issued 38,800 stock warrants with an exercise price of $8.00 per share to a consultant for services rendered. These warrants have
a term of 10 years and vested immediately. The Company has valued these warrants using the Black-Scholes option pricing model which
resulted in a fair market value of $144,724 which have been fully recognized as expense for the year ended July 31, 2015.
On
March 19, 2015, Lightlake issued 45,000 stock warrants with an exercise price of $10.00 per share to a consultant for services
rendered. These warrants have a term of 5 years and vested
immediately. The Company has valued these warrants using the Black-Scholes option pricing model which resulted in a fair market
value of $264,588 which have been fully recognized as expense for the year ended July 31, 2015.
Warrant activity for the year ended July 31, 2015
is presented in the table below:
| |
Number of Shares | | |
Weighted- average Exercise Price | | |
Weighted- average Remaining Contractual Term (years) | | |
Aggregate Intrinsic Value | |
Outstanding at July 31, 2014 | |
| 1,254,752 | | |
$ | 20.00 | | |
| 4.33 | | |
$ | - | |
Issued | |
| 83,800 | | |
| 9.07 | | |
| - | | |
| - | |
Exercised | |
| - | | |
| | | |
| - | | |
| - | |
Outstanding at July 31, 2015 | |
| 1,338,552 | | |
$ | 19.53 | | |
| 3.55 | | |
$ | - | |
Exercisable at July 31, 2015 | |
| 613,552 | | |
$ | 24.88 | | |
| 4.89 | | |
$ | - | |
Lightlake Therapeutics Inc.
Notes to Financial Statements
For the years ended July 31, 2015 and 2014
| 7. | Settlement
of Convertible Note Payable |
On January 23, 2014, Lightlake
entered into a settlement of a convertible note payable in the amount of $25,000 and accrued interest of $3,707 through the issuance
of 3,333 shares of common stock. This transaction resulted in a gain on the extinguishment of the debt in the amount of $20,651.
Lightlake provides for income
taxes asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the
differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences
are expected to reverse. This method requires the reduction of deferred tax assets by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
Lightlake has net operating loss
(NOL) carry forwards that were derived solely from operating losses from prior years. These amounts can be carried forward to offset
future taxable income for a period of 20 years for each tax year’s loss. These NOL carry forwards begin to expire in 2026.
No provision was made for federal income taxes as the Company has significant net operating losses. The income tax period for 2015
is open for examination by taxing authorities.
The provision for income taxes
differs from the amounts which would be provided by applying the statutory federal income tax rate to the net loss before provision
for income taxes for the following reasons:
| |
July 31, 2015 | | |
July 31, 2014 | |
| |
| | |
| |
Income tax expense at statutory rate | |
$ | (2,070,422 | ) | |
$ | (5,527,011 | ) |
| |
| | | |
| | |
Valuation allowance | |
| 2,070,422 | | |
| 5,527,011 | |
| |
| | | |
| | |
Income tax expense per books | |
$ | - | | |
$ | - | |
Net deferred tax assets consist
of the following components as of:
| |
July 31, 2015 | | |
July 31, 2014 | |
| |
| | |
| |
Net operating loss carryover at statutory rate | |
$ | (16,040,239 | ) | |
$ | (13,969,817 | ) |
| |
| | | |
| | |
Valuation allowance | |
| 16,040,239 | | |
| 13,969,817 | |
| |
| | | |
| | |
Net deferred tax asset | |
$ | - | | |
$ | .- | |
Lightlake had no uncertain tax
positions at July 31, 2015 or July 31, 2014.
Lightlake Therapeutics Inc.
Notes to Financial Statements
For the years ended July 31, 2015 and 2014
| a) |
On September 22, 2015, Lightlake received a $1,600,000 commitment from a foundation, from which the Company
has the right to make capital calls, for the research, development, any other activities connected to the Company’s opioid
antagonist treatments for addictions and related disorders that materially rely on certain studies funded by the foundation’s
investment, certain operating expenses, and any other purpose consistent with the goals of the foundation. In exchange for funds
invested by the foundation the Company agreed to provide the foundation with pro-rata share up to a 2.1333% interest in the Net
Profit as related to the Company’s opioid antagonist treatments for addictions and related disorders that materially rely
on certain studies funded by the foundation’s investment. Net profit is defined as any
pre-tax revenue received by the Company that was derived from the sale of the products less any and all expenses incurred by and
payments made by the Company in connection with the products, including but not limited to an allocation of Company overhead. The
foundation also has rights with respect to its up to 2.1333% interest if the products are sold or the Company is sold. Additionally,
the Company may buyback interests from the foundation within two and one half years or after two and a half years of the initial
investment at a price of two times or three and a half times, respectively, the relevant investment amount represented by the interests
to be bought back. If a product is not introduced to the market within 36 months the foundation will have a 60 day option to receive
shares of the Company’s common stock in lieu of the interest in the product at a rate of one-tenth of a share for every dollar
of its investment. On October 6, 2015, the Company received $618,000 from the foundation in exchange for a 0.824% interest in the
Company’s products covered by the commitment agreement. The Company will defer recording revenue until such time as
the option expires or milestones are achieved that eliminate the investor’s right to exercise the option. Upon expiration
of the exercise option, the deliverables of the arrangement will be reviewed and evaluated
under ASC 605. In the event the investor chooses to convert interests into shares of common stock, that transaction will be accounted
for similar to a sale of shares of common stock for cash.
|
| b) | During
September 2015 and October 2015, the Company received loans from each of its three executive officers, all of who are directors,
totaling $151,191. The loans bear interest at 6% per annum until January 31, 2016. After January 31, 2016, a penalty of 4% shall
be added such that the loans bear interest at 10% per annum. The loans are unsecured and are due on January 31, 2016 unless the
Company receives specified funding. If the Company receives the specified funding the loans become due 10 business days after
the funding. If the loans are not repaid by January 31, 2016, the maturity date of the loans shall be changed to May 31, 2016.
|
| c) |
On
September 1, 2015, Lightlake entered into an agreement with a consultant with significant regulatory experience that contributed
to the progression of the Company’s opioid overdose reversal treatment through the providing of significant strategic advice
and other value-add. The agreement provides for payment of $50,000 and 10,000 shares of common stock to the consultant. In addition,
the consultant may receive other cash amounts including payments of up to $535,000 upon the Company’s receipt of certain
milestone payments pursuant to the agreement with Adapt Pharma Operations Limited. The agreement also provides that the consultant
is entitled to 1.0% of the net profit, as defined in the agreement that the Company receives from Adapt Pharma Operations Limited
with respect to the treatment, excluding certain amounts received by the Company from Adapt Pharma Operations Limited. So long
as the consultant continues to provide services to the Company pursuant to the agreement, the consultant is entitled to 0.5% of
the net profit, as defined in the agreement, that the Company receives from Adapt Pharma Operations Limited with respect to the
treatment, excluding certain amounts received by the Company from Adapt Pharma Operations Limited, and other cash compensation.
Subsequent to July 31, 2015, the Company issued 10,000 shares to the consultant.
|
| d) | On October 6, 2015, the Company entered into an amendment to an agreement to use certain technology owned
by Aegis Therapeutics, LLC. This amendment had an effective date of May 19, 2015 and allowed the Company to evaluate Aegis’
Technology until August 17, 2015. The amendment also provided an opportunity for the Company to elect to further extend the period
of time during which the Company could evaluate Aegis’ Technology until February 13, 2016. In exchange for electing to further
extend this period of time, the Company paid Aegis $75,000 and issued 13,697 shares of the Company’s common stock.
|
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
On October 30, 2013, Lightlake dismissed
Messineo & Co., CPAs, LLC, as the Company’s independent registered public accounting firm. There were no disagreements
between Messineo & Co., CPAs, LLC and the Company on a matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure. On the same date, the Company’s board of directors appointed MaloneBailey, LLP as the Company’s
independent registered public accounting firm.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and
Procedures
Under the supervision and with the participation
of Lightlake’s management, including the Company’s principal executive officer and the principal financial officer,
the Company has conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls
and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the
period covered by this report. Based on this evaluation, the Company’s principal executive officer and principal financial
officer concluded as of the evaluation date that the Company’s disclosure controls and procedures were not effective due
to material weaknesses indicated below.
Management's Annual Report on Internal
Control Over Financial Reporting
Lightlake’s management is responsible
for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act, for the Company.
Internal control over financial reporting
includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of Lightlake’s assets; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s
management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the Company’s assets that could have a material effect on the financial statements.
Lightlake’s management recognizes
that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal
control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material
misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes
in conditions or due to deterioration in the degree of compliance with the Company’s established policies and procedures.
A material weakness is a significant deficiency,
or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement
of the annual or interim financial statements will not be prevented or detected.
Under the supervision and with the participation
of Lightlake’s Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness
of the Company’s internal control over financial reporting, as of the evaluation date, based on the framework set forth in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based
on its evaluation under this framework, management concluded that the Company’s internal control over financial reporting
was not effective as of July 31, 2015.
Lightlake’s management assessed the
effectiveness of the Company's internal control over financial reporting as of July 31, 2015 and identified the following material
weaknesses:
|
a) |
Lack of audit committee and one outside director on the Company’s board of directors. Lightlake does not have a functioning audit committee and the Company has one outside director on the Company’s board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures. |
|
b) |
Lack of proper segregation of duties due to limited personnel. |
|
c) |
Lack of a formal review process related to financial reporting that includes multiple levels of review. |
Lightlake’s management is committed
to improving the Company’s internal controls and will (1) continue to use third party specialists to address shortfalls in
staffing and to assist the Company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations
of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel, and (3) may
consider appointing outside directors and audit committee members in the future.
Lightlake’s management, including
the Company’s Chief Executive Officer and Chief Financial Officer, have discussed the material weakness noted above with
the Company’s independent registered public accounting firm. Due to the nature of this material weakness, there is a more
than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that
would not be prevented or detected.
This Annual Report does not include an
attestation report of Lightlake’s registered public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary
rules of the SEC that permit the Company to provide only management's report in this annual report.
Changes in Internal Controls over Financial
Reporting
There were no significant changes in Lightlake’s
internal controls or in other factors that could significantly affect these controls subsequent to the evaluation date.
Item 9B. Other Information.
Reference is made
to the disclosure set forth under the caption Unregistered Sales of Equity Securities in Item 5 of this Annual
Report on Form 10-K, which is incorporated by reference herein.
PART III
Item 10. Directors, Executive
Officers and Corporate Governance.
Lightlake’s directors, executive
officers, and key employees are listed below. The number of directors is determined by the Company’s board of directors.
All of the Company’s directors hold office until the next annual meeting of the board or until their successors have been
duly elected and qualified. The Company’s officers are elected by the Company’s board of directors and their terms
of office are, except to the extent governed by employment contract, at the discretion of the Company’s board of directors.
NAME |
|
AGE |
|
POSITION |
|
|
|
|
|
Dr. Michael Sinclair |
|
72 |
|
Executive Chairman, Chairman of the Board |
Dr. Roger Crystal |
|
39 |
|
Chief Executive Officer, President, Director |
Kevin Pollack |
|
45 |
|
Chief Financial Officer, Treasurer, Secretary, Director |
Geoffrey Wolf |
|
62 |
|
Director |
Set
forth below is a brief description of the background and business experience of Lightlake’s executive officers and directors
for the past five years.
Dr. Michael Sinclair has been the Executive
Chairman and Director of Lightlake since November 29, 2010. Dr. Sinclair qualified as a physician in 1967, specializing in psychiatry.
In 1971, he founded Nestor Plc., which grew to become, at the time, the UK’s largest domiciliary and institutional provider
of care personnel. Dr. Sinclair was also Chief Executive of Nestor's parent company, which was sold in 1978. From 1978
to 1980, Dr. Sinclair served as President (International) of INA Healthcare Group (subsequently CIGNA) and its Hospital Affiliates
Inc. subsidiary. In 1982, Dr. Sinclair entered the Homecare Industry in the United States as Executive Chairman of Kimberly
Quality Care; he was instrumental in growing KQC from one office in Nashville to a business with a turnover of $1 billion, becoming
the US market leader with 400 offices and 75,000 care givers. Subsequently, Dr. Sinclair became Chairman of Lifetime Corporation,
a NYSE-listed company and at the time, the parent company of KQC. In 1997, Dr. Sinclair led the purchase of Nursefinders,
a major US nursing personnel business, on behalf of US fund Atlantic Medical, a fund Dr. Sinclair founded and served as Managing
Partner. Dr. Sinclair is Chairman of Advanced Oncotherapy, PLC.
Dr.
Sinclair’s qualifications to serve on Lightlake’s board of directors include his medical and management experience.
Dr.
Roger Crystal has been Chief Executive Officer and Director of Lightlake since September 23, 2009. Dr. Crystal began his career
as a surgeon in the UK at University College Hospital London, becoming a member of the Royal College of Surgeons of England. He
specialized in ENT surgery at St Mary’s Hospital, part of Imperial College Healthcare, London. He holds degrees in Medicine
and Physiology, and was an Honorary Research Fellow at University College London. He is the author of a number of peer-reviewed
scientific articles. Dr. Crystal also completed an MBA at London Business School. He has worked in investment banking at Goldman
Sachs, healthcare strategy management consulting at A.T. Kearney, and has held various leadership roles at GE Healthcare.
Dr.
Crystal’s qualifications to serve on Lightlake’s board of directors include his knowledge of the healthcare industry.
Kevin Pollack has been Chief Financial
Officer and Director of Lightlake since November 26, 2012 and April 17, 2012, respectively. Mr. Pollack has served as a director
and audit committee member of MagneGas Corporation (NASDAQ:MNGA), the developer of a technology that converts liquid waste into
a hydrogen-based metal working fuel and natural gas alternative, since June 21, 2012. Additionally, Mr. Pollack has served as a
director and chair of the audit committee of Pressure Biosciences, Inc. (OTCQB: PBIO), a life sciences company involved in pressure
cycling technology, since July 3, 2012. Mr. Pollack serves as President of Short Hills Capital LLC, where he has provided a range
of services. Previously, Mr. Pollack worked in asset management at Paragon Capital, focusing primarily on United States-listed
companies, and as an investment banker at Banc of America Securities LLC, focusing on corporate finance and mergers and acquisitions.
Mr. Pollack started his career at Sidley Austin LLP (formerly Brown & Wood LLP) as a securities attorney focusing on corporate
finance and on mergers and acquisitions. Mr. Pollack graduated magna cum laude from The Wharton School of the University
of Pennsylvania and received a dual JD/MBA from Vanderbilt University, where he graduated with Beta Gamma Sigma honors.
Mr.
Pollack’s qualifications to serve on Lightlake’s board of directors include his financial and management experience,
including his experience with other public companies.
Geoffrey Wolf has been a Director of Lightlake
since December 31, 2012. Mr. Wolf resides in Switzerland. During 2008 to 2012, Mr. Wolf managed Vector Assets S.A., an asset management
company, which controlled companies in the mining, oil and gas, pharmaceuticals, hospitality and real estate industries. Since
2013, Mr. Wolf has been managing GTL Investments Limited, an asset management company, which controls companies in the mining,
oil and gas, pharmaceuticals, hospitality and real estate industries. He received a business degree from Middlesex University in
1976.
Mr.
Wolf’s qualifications to serve on Lightlake’s board of directors include his financial and management experience.
Involvement in Certain Legal Proceedings
To the best of Lightlake’s knowledge,
none of the Company’s directors or executive officers has, during the past ten years:
|
● |
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
|
● |
had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; |
|
● |
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; |
|
● |
been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
|
● |
been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
|
● |
been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Except as set forth in Lightlake’s
discussion below in “Certain Relationships and Related Transactions,” none of the Company’s directors or executive
officers has been involved in any transactions with the Company or any of the Company’s directors, executive officers, affiliates,
or associates which are required to be disclosed pursuant to the rules and regulations of the Commission.
Term of Office
Lightlake’s directors are appointed
for a one-year term to hold office until the next annual general meeting of the Company’s shareholders or until removed from
office in accordance with the Company’s bylaws. The Company’s officers are appointed by the Company’s board of
directors and hold office until removed by the Company’s board of directors.
Code of Ethics
Lightlake does not currently have a code
of ethics, and because the Company has only limited business operations and only three officers and four directors, the Company
believes that a code of ethics would have limited utility. The Company intends to adopt such a code of ethics as the Company’s
business operations expand and the Company has more directors, officers, and employees.
Director Independence
Pursuant to Rule
5605 of The NASDAQ Stock Market one of the definitions of an independent director is a person other than an executive officer or
employee of a company. Lightlake’s board of directors has reviewed the materiality of any relationship that each of the directors
has with the Company, either directly or indirectly. Based on this review, the Company’s board of directors has determined
that the only independent director is Mr. Geoffrey Wolf.
Corporate Governance
For reasons similar
to those described above, Lightlake does not have a nominating nor audit committee of the board of directors. The Company’s
board of directors consists of four directors. The Company receives limited revenues. At such time that the Company has a larger
board of directors and generates significant revenues, the Company plans to propose creating committees of its board of directors,
including both a nominating and an audit committee. Accordingly, the Company does not have an audit committee financial expert.
Board of Directors and Director
Nominees
Since Lightlake’s
board of Directors has one independent director, the decisions of the board regarding director nominees are made by persons who
have an interest in the outcome of the determination. The board will consider candidates for directors proposed by security holders,
although no formal procedures for submitting candidates have been adopted. Unless otherwise determined, at any time not less than
10 days prior to the next annual shareholder meeting at which a slate of director nominees is adopted, the board will accept written
submissions from proposed nominees that include the name, address, and telephone number of the proposed nominee; a brief statement
of the nominee’s qualifications to serve as a director; and a statement as to why the security holder submitting the proposed
nominee believes that the nomination would be in the best interests of the Company’s security holders. If the proposed nominee
is not the same person as the security holder submitting the name of the nominee, a letter from the nominee agreeing to the submission
of his or her name for consideration should be provided at the time of submission. The letter should be accompanied by a résumé
supporting the nominee’s qualifications to serve on the board, as well as a list of references.
The board identifies
director nominees through a combination of referrals from different people, including management, existing board members and security
holders. Once a candidate has been identified, the board reviews the individual’s experience and background and may discuss
the proposed nominee with the source of the recommendation. If the board believes it to be appropriate, board members may meet
with the proposed nominee before making a final determination whether to include the proposed nominee as a member of the slate
of director nominees submitted to security holders for election to the board.
Section 16(a) Beneficial Ownership
Reporting Compliance
Under Section 16(a) of the Exchange Act, our directors and
certain of our officers, and persons holding more than 10 percent of our common stock are required to file forms reporting their
beneficial ownership of our common stock and subsequent changes in that ownership with the United States Securities and Exchange
Commission.
Based solely upon a review of copies of such forms filed on
Forms 3, 4, and 5, and amendments thereto furnished to us, we believe that as of July 31, 2015, our executive officers, directors
and greater than 10 percent beneficial owners have complied on a timely basis with all Section 16(a) filing requirements, with
the exception of our officers, directors and greater than 10 percent beneficial owners listed in the table below:
Name |
|
Number of
Late Reports |
|
Number and Description of Transactions Not Reported on a
Timely Basis |
|
|
|
|
|
Dr. Roger Crystal |
|
1 |
|
Dr. Crystal did not file the initial Form 3 required by the Company filing a Form 8-A on December 10, 2014. |
Mr. Kevin Pollack |
|
1 |
|
Mr. Pollack voluntarily filed a Form 3 in December 2012 and a Form 4 in January 2013. Mr. Pollack did not file the initial Form 4 required by the Company filing a Form 8-A on December 10, 2014. |
Dr. Michael Sinclair |
|
1 |
|
Dr. Sinclair voluntarily filed a Form 3 in May 2012, a Form 4 in May 2012, and a Form 4 in January 2013. Dr. Sinclair did not file the initial Form 4 required by the Company filing a Form 8-A on December 10, 2014 |
Mr. Geoffrey Wolf |
|
1 |
|
Mr. Wolf did not file the initial Form 3 required by the Company filing a Form 8-A on December 10, 2014. |
Item 11. Executive Compensation.
Summary Compensation Table
The following summary compensation table
sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by Lightlake during the years
ended July 31, 2015, and 2014 in all capacities for the accounts of the Company’s executives, including the Chairman, Chief
Executive Officer, and Chief Financial Officer.
Name and principal position | |
Year | | |
Salary($)(1) | | |
Bonus($) | | |
Stock Award(s)($) | | |
Option
awards ($) | | |
All Other Compensation($) | | |
Total ($) | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Dr. Roger Crystal | |
| 2015 | | |
| 567,892 | | |
| 820,000 | | |
| -0- | | |
| -0- | | |
| -0- | | |
| 1,387,892 | |
CEO | |
| 2014 | | |
| 402,083 | | |
| 50,000 | | |
| -0- | | |
| 4,961,650 | | |
| -0- | | |
| 5,413,733 | |
Kevin Pollack, | |
| 2015 | | |
| 541,598 | | |
| 767,500 | | |
| -0- | | |
| -0- | | |
| -0- | | |
| 1,309,098 | |
CFO | |
| 2014 | | |
| 366,667 | | |
| 40,000 | | |
| -0- | | |
| 4,311,650 | | |
| -0- | | |
| 4,718,317 | |
Dr. Michael Sinclair | |
| 2015 | | |
| 355,918 | | |
| 193,000 | | |
| -0- | | |
| -0- | | |
| -0- | | |
| 548,918 | |
Chairman | |
| 2014 | | |
| 314,583 | | |
| 10,000 | | |
| -0- | | |
| 3,030,050 | | |
| -0- | | |
| 3,354,633 | |
|
(1) |
During the fiscal year ended July 31, 2015, less than 50% of salaries were paid to each of Dr. Roger Crystal, Kevin Pollack, and Dr. Michael Sinclair and less than 12% of bonus compensation was paid to each of Dr. Roger Crystal, Kevin Pollack, and Dr. Michael Sinclair. The remaining amounts have been accrued and are owed. Per the description below, stock options are owed to Dr. Roger Crystal, Kevin Pollack, and Dr. Michael Sinclair, but they have not been disclosed in the Summary Compensation Table because they were not actually issued as of July 31, 2015. |
Director Compensation
The following
table provides information for 2015 regarding all compensation awarded to, earned by or paid to each person who served as a non-employee
director during the fiscal year ended July 31, 2015. With respect to the fiscal year ended July 31, 2015, other than as set forth
in the table, Lightlake has not paid any fees to or, except for reasonable expenses for attending board and committee meetings,
reimbursed any expenses of directors, made any equity or non-equity awards to directors, or paid any other compensation to directors.
Name | |
Fees Earned or Paid in Cash ($) | | |
Stock Awards ($) | | |
Option Awards ($) | | |
Non-Equity Incentive Plan Compensation ($) | | |
Nonqualified Deferred Compensation Earnings ($) | | |
All Other Compensation ($) | | |
Total ($) | |
Geoffrey Wolf | |
| -0- | | |
| -0- | | |
| -0- | | |
| -0- | | |
| -0- | | |
| -0- | | |
| -0- | |
Employment Agreements
As previously disclosed in Lightlake’s
Current Report on Form 8-K filed on February 25, 2014 with the Securities and Exchange Commission (the “Employment Agreements
8-K”), on December 31, 2013, the Company amended its employment agreements with Dr. Michael Sinclair, the Company’s
Executive Chairman (the “Sinclair Amendment”), Dr. Roger Crystal, the Company’s Chief Executive Officer (the
“Crystal Amendment”), and Mr. Kevin Pollack, the Company’s Chief Financial Officer (the “Pollack Amendment”).
The Sinclair Amendment
The Sinclair Amendment amends the amended
employment agreement between the Company and Dr. Sinclair dated December 31, 2012. The Sinclair Amendment extends the term of Dr.
Sinclair’s employment until December 31, 2015.
From
January 1, 2014 until December 31, 2014, Dr. Sinclair will receive a base salary of $325,000, subject to adjustment in accordance
with the Sinclair Amendment. Notwithstanding the foregoing, between January 1, 2014 and December 31, 2014, Dr. Sinclair shall not
actually receive more than $175,000 of the total cash compensation earned by Dr. Sinclair between January 1, 2014 and December
31, 2014 unless either: (a) there is a Change in Control (as defined in the Sinclair Amendment); (b) a termination event as set
forth in Paragraph 7 of the Sinclair Amendment; or (c) a majority of the board of directors approves the receipt of cash compensation
by Dr. Sinclair from the Company in excess of $175,000 between January 1, 2014 and December 31, 2014, in which case a majority
of the board of directors shall determine the amount of such payment of cash compensation by the Company to Dr. Sinclair, but in
no event shall such amount be in excess of the total amounts owed by the Company to Dr. Sinclair at such time. All amounts earned
by Dr. Sinclair between January 1, 2014 and December 31, 2014 in excess of the amounts actually paid to Dr. Sinclair shall accrue
and be owed by the Company to Dr. Sinclair. From January 1, 2015 until December 31, 2015, Dr. Sinclair will receive a base salary
of $350,000. Throughout the term of the Sinclair Amendment Dr. Sinclair will have certain incentive bonus opportunities pursuant
to certain objectives as outlined in the Sinclair Amendment. Moreover, the Company agreed to grant upon execution of the Sinclair
Amendment 7,500,000 stock options exercisable at $0.06 per share which expire ten years from the options grant date, 3,000,000
stock options exercisable at $0.08 per share which expire ten years from the options grant date and 3,000,000 stock options exercisable
at $0.10 per share which expire ten years from the options grant date. The Sinclair Amendment also provides for the Company to
issue each year additional stock options of no less than three percent (3%) of the amount of shares issued and outstanding on a
fully diluted basis as of December 15, 2014 and 2015. As of July 31, 2015, the Company did not actually issue Dr. Sinclair the
aforementioned additional stock options.
The Crystal
Amendment
The Crystal Amendment amends the amended
employment agreement between the Company and Dr. Crystal dated December 31, 2012. The Crystal Amendment extends the term of Dr.
Crystal’s employment until December 31, 2015.
From
January 1, 2014 until December 31, 2014, Dr. Crystal will receive a base salary of $475,000, subject to adjustment in accordance
with the Crystal Amendment. Notwithstanding the foregoing, between January 1, 2014 and December 31, 2014, Dr. Crystal shall not
actually receive more than $330,000 of the total cash compensation earned by Dr. Crystal between January 1, 2014 and December 31,
2014 unless either: (a) there is a Change in Control (as defined in the Crystal Amendment); (b) a termination event as set forth
in Paragraph 7 of the Crystal Amendment; or (c) a majority of the board of directors approves the receipt of cash compensation
by Dr. Crystal from the Company in excess of $330,000 between January 1, 2014 and December 31, 2014, in which case a majority of
the board of directors shall determine the amount of such payment of cash compensation by the Company to Dr. Crystal, but in no
event shall such amount be in excess of the total amounts owed by the Company to Dr. Crystal at such time. All amounts earned by
Dr. Crystal between January 1, 2014 and December 31, 2014 in excess of the amounts actually paid to Dr. Crystal shall accrue and
be owed by the Company to Dr. Crystal. Between January 1, 2014 and December 31, 2014, the Company shall pay Dr. Crystal no less
than $330,000 of the total cash compensation earned by Dr. Crystal between January 1, 2014 and December 31, 2014. From January
1, 2015 until December 31, 2015, Dr. Crystal will receive a base salary of $593,750. Throughout the term of the Crystal Amendment
Dr. Crystal will have certain incentive bonus opportunities pursuant to certain objectives as outlined in the Crystal Amendment.
Moreover, the Company agreed to grant upon execution of the Crystal Amendment 7,500,000 stock options exercisable at $0.06 per
share which expire ten years from the options grant date, 10,000,000 stock options exercisable at $0.08 per share which expire
ten years from the options grant date and 10,000,000 stock options exercisable at $0.10 per share which expire ten years from the
options grant date. The Crystal Amendment also provides for the Company to issue each year additional stock options of no less
than six percent (6%) of the amount of shares issued and outstanding on a fully diluted basis as of December 15, 2014 and 2015.
As of July 31, 2015, the Company did not actually issue Dr. Crystal the aforementioned additional stock options.
The Pollack
Amendment
The Pollack Amendment
amends the amended employment agreement between the Company and Mr. Pollack dated December 31, 2012. The Pollack Amendment extends
the term of Mr. Pollack’s employment until December 31, 2015.
From
January 1, 2014 until December 31, 2014, Mr. Pollack will receive a base salary of $450,000, subject to adjustment in accordance
with the Pollack Amendment. Notwithstanding the foregoing, between January 1, 2014 and December 31, 2014, Mr. Pollack shall not
actually receive more than $300,000 of the total cash compensation earned by Mr. Pollack between January 1, 2014 and December 31,
2014 unless either: (a) there is a Change in Control (as defined in the Pollack Amendment); (b) a termination event as set forth
in Paragraph 7 of the Pollack Amendment; or (c) a majority of the board of directors approves the receipt of cash compensation
by Mr. Pollack from the Company in excess of $300,000 between January 1, 2014 and December 31, 2014, in which case a majority of
the board of directors shall determine the amount of such payment of cash compensation by the Company to Mr. Pollack, but in no
event shall such amount be in excess of the total amounts owed by the Company to Mr. Pollack at such time. All amounts earned by
Mr. Pollack between January 1, 2014 and December 31, 2014 in excess of the amounts actually paid to Mr. Pollack shall accrue and
be owed by the Company to Mr. Pollack. Between January 1, 2014 and December 31, 2014, the Company shall pay Mr. Pollack no less
than $300,000 of the total cash compensation earned by Mr. Pollack between January 1, 2014 and December 31, 2014. From January
1, 2015 until December 31, 2015, Mr. Pollack will receive a base salary of $562,500. Throughout the term of the Pollack Amendment
Mr. Pollack will have certain incentive bonus opportunities pursuant to certain objectives as outlined in the Pollack Amendment.
Moreover, the Company agreed to grant upon execution of the Pollack Amendment 7,500,000 stock options exercisable at $0.06 per
share which expire ten years from the options grant date, 9,000,000 stock options exercisable at $0.08 per share which expire ten
years from the options grant date and 9,000,000 stock options exercisable at $0.10 per share which expire ten years from the options
grant date. The Pollack Amendment also provides for the Company to issue each year additional stock options of no less than six
percent (6%) of the amount of shares issued and outstanding on a fully diluted basis as of December 15, 2014 and 2015. As of July
31, 2015, the Company did not actually issue Mr. Pollack the aforementioned additional stock options.
The foregoing
descriptions of the Sinclair Amendment, Crystal Amendment, and Pollack Amendment (collectively, the “Amendments”)
are qualified in its entirety by reference to the full text of the Amendments, copies of which were filed as Exhibit
10.1, Exhibit 10.2, and Exhibit 10.3, respectively, to the Employment Agreements 8-K and is incorporated by reference herein.
Lightlake has
an agreement with Geoffrey Wolf, a director of the Company, which provides for the grant of 3,500,000 stock options exercisable
at $0.15 per share which terminate five years from their grant date. The director agreement also provides warrants to purchase
34,500,000 shares of common stock exercisable at $0.15 per share with a 5 year termination date. All of the options and warrants
may only be exercised between the following dates: (i) the date on which the Company’s price per share has traded at or
above US$0.30 for at least three (3) trading days out of any ten (10) consecutive trading days; and (ii) five years from the grant
date. The director agreement has a one-year term limit and can be renewed by mutual agreement.
Item 12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain
information regarding Lightlake’s shares of common stock beneficially owned as of October 20, 2015, for (i) each stockholder
known to be the beneficial owner of 5% or more of the Company’s outstanding shares of common stock, (ii) each named executive
officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any
shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which
such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants.
Unless otherwise indicated, voting and investment power relating to the shares shown in the table for the Company’s directors
and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.
For purposes of this table, a person or
group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right
to acquire within 60 days of October 20, 2015. For purposes of computing the percentage of outstanding shares of Lightlake’s
common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire
within 60 days of October 20, 2015 is deemed to be outstanding, but is not deemed
to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares
listed as beneficially owned does not constitute an admission of beneficial ownership. Unless otherwise specified, the address
of each of the persons set forth below is care of the company at the address of: 445 Park Avenue, 9th Fl, New York,
NY 10022.
The
following table sets forth information on the ownership of Lightlake Therapeutics Inc. voting securities by officers, directors,
and major shareholders as well as those who own beneficially more than five percent of Lightlake’s common stock as of the
date of this report:
Name of Beneficial Owner and Address |
|
Amount and
Nature of
Beneficial
Ownership of
Common
Stock |
|
|
Percent
of
Common
Stock (1) |
|
5% Shareholders |
|
|
|
|
|
|
|
|
None. |
|
|
- |
|
|
|
|
% |
Directors and
Executive Officers |
|
|
|
|
|
|
|
|
Kevin Pollack |
|
|
1,080,000 |
(2) |
|
|
36.59 |
% |
Dr. Roger Crystal |
|
|
1,087,500 |
(3) |
|
|
36.81 |
% |
Dr. Michael Sinclair |
|
|
1,095,220 |
(4) |
|
|
37.65 |
% |
Geoffrey Wolf |
|
|
690,800 |
(5) |
|
|
27.48 |
% |
All directors and officers as a group (4 people) |
|
|
3,953,520 |
(6) |
|
|
69.19 |
% |
|
(1) |
As of October 20, 2015, there were 1,871,791 shares
issued and outstanding. Shares of common stock subject to options or warrants currently exercisable or expected to be exercisable
with the passage of time, are deemed outstanding for purposes of computing the percentage of the person holding such options or
warrants, but are not deemed outstanding for purposes of computing the percentage of any other person.
|
|
(2) |
This amount includes: (1) 55,000 shares of common stock issuable upon the exercise of warrants and (2) 1,025,000 shares of common stock issuable upon the exercise of stock options. |
|
(3) |
This amount includes: (1) 40,000 shares of common stock issuable upon the exercise of warrants and (2) 1,042,500 shares of common stock issuable upon the exercise of stock options. |
|
(4) |
This amount includes: (1) 285,000 shares of common stock issuable upon the exercise of warrants; (2) 752,500 shares of common stock issuable upon exercise of stock options; (3) 12,000 shares owned in total by two different pension funds for the benefit of Dr. Sinclair’s family for each of which Dr. Sinclair serves as one of three trustees; and (4) 5,000 shares owned by Proton Therapy USA which is an entity jointly owned by Dr. Sinclair and his son. |
|
(5) |
This amount includes: (1) 345,000 shares of common stock issuable upon the exercise of warrants and (2) 160,000 shares of common stock issuable upon exercise of stock options. 137,000 shares are issuable upon the exercise of warrants held by GTL Investments Limited, of which Geoffrey Wolf is an asset manager. |
|
(6) |
This amount includes an aggregate of 862,000 shares of common stock issuable upon exercise of warrants and 2,980,000 shares of common stock issuable upon exercise of stock options. |
Item 13. Certain Relationships and Related Transactions,
and Director Independence.
The
following are the related party transactions in which Lightlake has engaged since August 1, 2014:
Lightlake uses office space provided by
an officer of the Company free of charge.
At July 31, 2015, Lightlake had loans outstanding
with each of its three executive officers, all of who are directors, in the total amount of $130,000 (July 31, 2014 - $350,000).
In December, 2012, the Company borrowed $350,000. These notes accrued interest at 6.0% per year and were due December, 2013. These
notes were amended on December 16, 2013 to extend the final maturity date to January 6, 2015 and increase the interest rate to
8.5% per annum. During the year ended July 31, 2015, $220,000 of the principal amount was repaid. In December 2014, the agreements
were amended to extend the maturity date to April 30, 2016 and increase the annual interest rate to 14.5%, which includes a penalty
rate of 8.5% due to non-payment of the required repayment amounts. The loans are unsecured.
During September 2015 and October 2015,
the Company received loans from each of its three executive officers, all of who are directors, totaling $151,191. The loans bear
interest at 6% per annum until January 31, 2016. After January 31, 2016, a penalty of 4% shall be added such that the loans bear
interest at 10% per annum. The loans are unsecured and are due on January 31, 2016 unless the Company receives specified funding.
If the Company receives the specified funding the loans become due 10 business days after the funding. If the loans are not repaid
by January 31, 2016, the maturity date of the loans shall be changed to May 31, 2016.
Director Independence
Because Lightlake’s common stock
is not currently listed on a national securities exchange, the Company has used the definition of “independence” of
The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director”
is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion
of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
|
● |
the director is, or at any time during the past three years was, an employee of the company; |
|
● |
the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service); |
|
● |
a family member of the director is, or at any time during the past three years was, an executive officer of the company; |
|
● |
the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions); |
|
● |
the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or |
|
● |
the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit. |
Based on the rule listed above, Lightlake’s board of directors
determined that the Company’s only independent director is Mr. Geoffrey Wolf.
Lightlake does not currently have a separately designated audit,
nominating, or compensation committee.
Item 14. Principal Accounting
Fees and Services.
The total fees charged to Lightlake for
audit services were $26,500, for audit-related services during the year ended July 31, 2015.
The total fees charged to Lightlake for
audit services were $25,000 during the year ended July 31, 2014.
Lightlake does not have an audit committee.
The Company’s board of directors pre-approves all services provided by the Company’s independent auditors.
PART IV
Item
15. Exhibits, Financial Statement Schedules.
Exhibit |
|
|
|
Incorporated by Reference |
|
Filed or
Furnished |
|
Number |
|
Exhibit Description |
|
Form |
|
Exhibit |
|
Filing Date |
|
Herewith |
|
3.1 |
|
Articles of Incorporation filed June 21, 2005, as amended August 10, 2009 and September 16, 2009. |
|
8-K |
|
3.1 |
|
9/4/2014 |
|
|
|
3.2 |
|
Certificate of Amendment to Articles of Incorporation, filed November 26, 2014. |
|
8-K |
|
3.1 |
|
12/01/2014 |
|
|
|
3.3 |
|
Certificate of Amendment to Articles of Incorporation, filed December 19, 2014. |
|
8-K |
|
3.1 |
|
12/29/2014 |
|
|
|
3.4 |
|
Bylaws. |
|
SB-2 |
|
3.2 |
|
01/11/2007 |
|
|
|
10.1+ |
|
License Agreement between Lightlake Therapeutics Inc. and Adapt Pharma Operations Limited, dated as of December 15, 2014. |
|
|
|
|
|
|
|
X |
|
10.2+ |
|
Material Transfer, Option and Research License Agreement between Lightlake Therapeutics Inc. and Aegis Therapeutics, LLC, dated as of December 1, 2014, as amended December 16, 2014. |
|
|
|
|
|
|
|
X |
|
10.3 |
|
Amendment No. 2 to the Material Transfer, Option and Research License Agreement, effective May 19, 2015. |
|
|
|
|
|
|
|
X |
|
10.4 |
|
U.S. Patent Application |
|
10-K |
|
10.6 |
|
10/15/2009 |
|
|
|
10.5 |
|
European Patent. |
|
10-K |
|
10.7 |
|
10/15/2009 |
|
|
|
10.6* |
|
Michael Sinclair Employment Agreement, dated December 31, 2012. |
|
10-K |
|
10.8 |
|
10/29/2013 |
|
|
|
10.7* |
|
Roger Crystal Employment Agreement, dated December 31, 2012. |
|
10-K |
|
10.9 |
|
10/29/2013 |
|
|
|
10.8* |
|
Kevin Pollack Employment Agreement, dated December 31, 2012. |
|
10-K |
|
10.10 |
|
10/29/2013 |
|
|
|
10.9 |
|
Geoffrey Wolf Director Agreement, dated December 31, 2012. |
|
10-K |
|
10.11 |
|
10/29/2013 |
|
|
|
10.10* |
|
Michael Sinclair Amended Employment Agreement, dated December 31, 2013. |
|
8-K |
|
10.1 |
|
02/25/2014 |
|
|
|
10.11* |
|
Roger Crystal Amended Employment Agreement, dated December 31, 2013. |
|
8-K |
|
10.2 |
|
02/25/2014 |
|
|
|
10.12* |
|
Kevin Pollack Amended Employment Agreement, dated December 31, 2013. |
|
8-K |
|
10.3 |
|
02/25/2014 |
|
|
|
21.1 |
|
Subsidiaries of the Registrant – None. |
|
|
|
|
|
|
|
X |
|
31.1 |
|
Certification of Principal Executive Officer, pursuant to 18 U. S. C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
X |
|
31.2 |
|
Certification of Principal Financial Officer, pursuant to 18 U. S. C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
X |
|
32.1** |
|
Certification of Principal Executive Officer, pursuant to 18 U. S. C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
X |
|
32.2** |
|
Certification of Principal Financial Officer, pursuant to 18 U. S. C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
X |
|
101.INS |
|
XBRL Instance. |
|
|
|
|
|
|
|
X |
|
101.XSD |
|
XBRL Schema. |
|
|
|
|
|
|
|
X |
|
101.PRE |
|
XBRL Presentation. |
|
|
|
|
|
|
|
X |
|
101.CAL |
|
XBRL Calculation. |
|
|
|
|
|
|
|
X |
|
101.DEF |
|
XBRL Definition. |
|
|
|
|
|
|
|
X |
|
101.LAB |
|
XBRL Label. |
|
|
|
|
|
|
|
X |
|
+ Confidential Treatment Requested. Confidential Materials omitted
and filed separately with the Securities and Exchange Commission. Lightlake is again attaching Exhibits 10.1 and 10.2 to this Report,
because, after receiving comments from the SEC Staff regarding the revised confidential treatment application filed in June in
connection with the amended Exhibits filed with the Quarterly Report on Form 10-Q for the period ended April 30, 2015, there have
been changes in the amount of materials omitted.
* Indicates a management contract or compensatory plan or arrangement,
as required by Item 15(a) (3) of Form 10-K.
** In accordance with SEC Release 33-8238, Exhibits 32.1 and
32.2 are being furnished and not filed.
SIGNATURES
In accordance with Section 13 or 15(d)
of the Securities Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
/s/ Kevin A. Pollack |
|
October 26, 2015
|
|
Kevin A. Pollack, Chief Financial Officer |
|
Date |
|
In accordance with the Exchange Act, this
report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on October 26,
2015.
By: |
/s/ Dr.
Roger Crystal |
|
Director & Chief Executive Officer |
|
Dr. Roger Crystal |
|
(Principal Executive Officer) |
|
|
|
|
By: |
/s/ Kevin A. Pollack |
|
Director & Chief Financial Officer |
|
Kevin A. Pollack |
|
(Principal Financial and Accounting Officer) |
By: |
/s/ Dr. Michael Sinclair |
|
Director |
|
Dr. Michael Sinclair |
|
|
Exhibit 10.1
LICENSE AGREEMENT
between
LIGHTLAKE
THERAPEUTICS INC.
and
ADAPT PHARMA OPERATIONS LIMITED
Dated as of December 15, 2014
LICENSE AGREEMENT
This License Agreement (the “Agreement”)
is made and entered into effective as of December 15, 2014 (the “Effective Date”) by and between Lightlake
Therapeutics Inc., a Nevada corporation (“Lightlake”), and Adapt Pharma Operations Limited, an Irish limited
company (“Adapt”). Lightlake and Adapt are sometimes referred to herein individually as a “Party”
and collectively as the “Parties”.
Recitals
WHEREAS, Lightlake owns or Controls
certain intellectual property relating to the use of intranasal naloxone for a treatment to reverse opioid overdoses; and
WHEREAS, Lightlake wishes to license
to Adapt, and Adapt wishes to license from Lightlake, through the license grants contemplated herein, such intellectual property
rights to develop and commercialize Products (as defined below) in accordance with the terms and conditions set forth below.
NOW, THEREFORE, in consideration
of the premises and the mutual promises and conditions hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, do hereby agree as follows:
ARTICLE 1
DEFINITIONS
Unless otherwise specifically provided herein,
the following terms shall have the following meanings:
1.1 “Adapt”
has the meaning set forth in the preamble hereto.
1.2 “Adapt
Applied Know-How” means all Information Controlled by Adapt or any of its Affiliates as of the Effective Date
or during the Term (other than as a result of the licenses granted by Lightlake to Adapt under this Agreement) and incorporated
by Adapt in any Product prior to any termination of this Agreement (provided, however, that such Information is necessary or reasonably
useful for the Development, manufacture or Commercialization of any Product).
1.3 “Adapt
Applied Patents” means all of the Patents Controlled by Adapt or any of its Affiliates as of the Effective Date
or during the Term (other than as a result of the licenses granted by Lightlake to Adapt under this Agreement) that claim any Adapt
Applied Know-How or claim or cover a Product.
Confidential
Treatment Requested by Lightlake Therapeutics Inc.
IRS Employer
Identification No. 46-4744124
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treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***”
1.4 “Affiliate”
means, with respect to a Party, any Person that, directly or indirectly, through one or more intermediaries, controls, is controlled
by or is under common control with such Party. For purposes of this definition, “control” and, with correlative
meanings, the terms “controlled by” and “under common control with”, means (i) the possession, directly
or indirectly, of the power to direct the management or policies of a business entity, whether through the ownership of voting
securities, by contract relating to voting rights or corporate governance, or otherwise; or (ii) the ownership, directly or
indirectly, of more than fifty percent (50%) of the voting securities or other ownership interest of a business entity (or, with
respect to a limited partnership or other similar entity, its general partner or controlling entity). The Parties acknowledge
that in the case of certain entities organized under the laws of certain countries outside of the United States, the maximum percentage
ownership permitted by law for a foreign investor may be less than fifty percent (50%), and that in such case such lower percentage
shall be substituted in the preceding sentence, provided that such foreign investor has the power to direct the management
or policies of such entity.
1.5 “Applicable
Law” means federal, state, local, national and supra-national laws, statutes, rules, and regulations, including
any rules, regulations, guidelines, or other requirements of the Regulatory Authorities, major national securities exchanges or
major securities listing organizations, that may be in effect from time to time during the Term and applicable to a particular
activity.
1.6 “***
REDACTED ***Unit Dose Device” means that certain nasal unit-dose spray device sold by *** REDACTED *** Inc.
or its Affiliates.
1.7 “Business
Day” means a day other than a Saturday or Sunday on which banking institutions in New York, New York and Ireland are
open for business.
1.8 “Calendar
Quarter” means each successive period of three (3) calendar months commencing on January 1, April 1, July 1 and October
1, except that the first Calendar Quarter of the Term shall commence on the Effective Date and end on the day immediately prior
to the first to occur of January 1, April 1, July 1 or October 1 after the Effective Date, and the last Calendar Quarter shall
end on the last day of the Term.
1.9 “Calendar
Year” means each successive period of twelve (12) calendar months commencing on January 1 and ending on December 31,
except that the first Calendar Year of the Term shall commence on the Effective Date and end on December 31 of the year in which
the Effective Date occurs and the last Calendar Year of the Term shall commence on January 1 of the year in which the Term ends
and end on the last day of the Term.
1.10 “Change
in Control” means with respect to a Party: (1) the sale of all or substantially all of such Party’s assets or business
relating to this Agreement; (2) a merger, reorganization or consolidation involving such Party in which the holders of voting securities
of such Party outstanding immediately prior thereto cease to hold voting securities that represent at least fifty percent (50%)
of the combined voting power of the surviving entity immediately after such merger, reorganization or consolidation; or (3) a person
or entity, or group of persons or entities, acting in concert acquire more than fifty percent (50%) of the voting equity securities
or management control of such Party.
Confidential
Treatment Requested by Lightlake Therapeutics Inc.
IRS Employer
Identification No. 46-4744124
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treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***”
1.11 “Commercial
Sublicensee” means a Sublicensee to whom Adapt has granted a right to offer for sale, have sold or sell one or more Products
in all or a portion of the Territory including exclusive distributors, but excluding (i) Persons who Manufacture Product(s) or
any element thereof and sell such Product(s) only to or at the direction of Adapt, Sublicensees or any of their respective Affiliates,
(ii) wholesalers, (iii) pharmacies, (iv) Persons comprising the First Responder Market, (v) any Person performing third party logistics
or warehousing services on behalf of Adapt or its Affiliates or Sublicensees, and (v) any other Person to whom Adapt has not relinquished
material control over commercial decision-making in respect of the applicable Products and where such Person does not have any
obligation to make an upfront, milestone or royalty payment with respect to the applicable Products.
1.12 “Commercialization”
means any and all activities directed to the preparation for sale of, offering for sale of, or sale of a Product, including
activities related to marketing, promoting, distributing, and importing such Product, and interacting with Regulatory Authorities
regarding any of the foregoing. When used as a verb, “to Commercialize” and “Commercializing”
means to engage in Commercialization, and “Commercialized” has a corresponding meaning.
1.13 “Commercialization
Costs” means the out-of-pocket costs and expenses incurred by Adapt or its Affiliates directly attributable to, or reasonably
allocable to, the Commercialization of a Product. Commercialization Costs for a Product shall include, preparation of
promotional, advertising, communication, medical, and educational materials relating to the Product and other Product literature
and selling materials, activities directed to marketing of the Product, including purchase of market data, development and conduct
of market research, advertising, public relations, public affairs and other communications with Third Parties regarding the Product;
development and conduct of sales force training (including materials, programs and travel to and attendance at training programs)
for medical representatives responsible for promoting the Product; and development and maintenance of sales bulletins, call reporting
and other monitoring/tracking, sales force targeting, validation and alignment programs and documentation.
1.14 “Commercially
Reasonable Efforts” means, with respect to the objective that is the subject of such efforts, such reasonable,
good faith efforts and resources as a similarly-situated (including in relation to size and personnel and other resources) company
within the pharmaceutical industry would normally use to accomplish a similar objective under similar circumstances, it being understood
and agreed that, with respect to the Development and Commercialization of a Product by Adapt, such efforts shall take into account
the Product’s safety and efficacy, its cost to Develop, the competitiveness of alternative products marketed by or being
developed by Third Parties and the nature and extent of market exclusivity (including Patent coverage and regulatory exclusivity),
the likelihood of obtaining Regulatory Approval, the expected or actual pricing, reimbursement and formulary status, the Product’s
expected or actual profitability, including the amounts of marketing and promotional expenditures with respect to such Product
and all other relevant factors with respect to the market for the Product, on a country-by-country basis.
Confidential
Treatment Requested by Lightlake Therapeutics Inc.
IRS Employer
Identification No. 46-4744124
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treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***”
1.15 “Confidential
Information” means any technical, business, or other information or data provided orally, visually, in writing or other
form by or on behalf of one Party to the other Party in connection with this Agreement (including any information provided under
either that certain Mutual Non-Disclosure Agreement between the Parties dated May 1, 2014 or that certain Three-Way Confidential
Disclosure Agreement among Lightlake, Adapt Pharma Operations Limited and *** REDACTED four words*** dated August 13, 2014 collectively,
(“Existing CDAs”), including information relating to the terms of this Agreement, any Product (including the
Regulatory Documentation), any Exploitation of any Product, any know-how with respect thereto developed by or on behalf of the
disclosing Party or its Affiliates (including Lightlake Know-How and Adapt Applied Know-How, as applicable), or the scientific,
regulatory or business affairs or other activities of either Party. Notwithstanding the foregoing, (i) all non-clinical,
clinical, technical, chemical, safety, and scientific data and information and other results, and results of test method development
and stability testing, toxicology, formulation, process development, manufacturing scale-up, qualification and validation, quality
assurance/quality control activities and statistical analysis, including relevant laboratory notebook information, screening data,
and synthesis schemes, including descriptions in any form, data and other Information relating to or resulting from the conduct
of Development of Products after the Effective Date, or relating to or resulting from the pharmacokinetics study in respect of
a Product commenced or commissioned by or at the direction of Lightlake prior to the Effective Date (the “Pharmacokinetic
Data”), shall be Confidential Information of Adapt and (ii) subject to the foregoing clause (i), Joint Know-How shall
be deemed to be the Confidential Information of both Parties.
1.16 “Control”
means, with respect to any item of Information, Regulatory Documentation, material, Patent, or other property right existing
on or after the Effective Date and during the Term, possession of the right, whether directly or indirectly, and whether by ownership,
license or otherwise (other than by operation of the license and other grants in Section 4.1 or 4.2), to grant a
license, sublicense or other right (including the right to reference Regulatory Documentation) to or under such Information, Regulatory
Documentation, material, Patent, or other property right as provided for herein without violating the terms of any agreement or
other arrangement with any Third Party.
1.17 “Development”
means all activities related to research, pre-clinical and other non-clinical testing, test method development and stability testing,
toxicology, formulation, process development, manufacturing scale-up, qualification and validation, quality assurance/quality control,
clinical studies, statistical analysis and report writing, the preparation and submission of Drug Approval Applications, regulatory
affairs with respect to the foregoing and all other activities necessary or reasonably useful or otherwise requested or required
by a Regulatory Authority as a condition or in support of obtaining or maintaining a Regulatory Approval. When used
as a verb, “Develop” means to engage in Development.
1.18 “Development
Costs” means the out-of-pocket costs and expenses incurred by a Party or its Affiliates directly attributable to, or
reasonably allocable to, the Development of a Product, including costs and expenses associated with obtaining and/or Manufacturing
product and materials utilized in clinical trials, submission batches or in connection with process validation, scale-up or otherwise
required for purposes of obtaining Regulatory Approval.
Confidential
Treatment Requested by Lightlake Therapeutics Inc.
IRS Employer
Identification No. 46-4744124
Confidential
treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***”
1.19 “Development
Data” means all non-clinical, clinical, technical, chemical, safety, and scientific data and information and other results,
including relevant laboratory notebook information, screening data, and synthesis schemes, including descriptions in any form,
data and other information, in each case, that is generated by or resulting from or in connection with the conduct of Development
of Products, to the extent that the same are Controlled by or in Adapt’s or its Affiliates’ or Adapt’s Commercial
Sublicensees’ possession, and may be disclosed to Lightlake without violating any obligation under Applicable Law.
1.20 “Dollars”
or “$” means United States Dollars.
1.21 “Drug
Approval Application” means a New Drug Application (an “NDA”) as defined in the FFDCA, or any corresponding
foreign application, including, with respect to the European Union, a Marketing Authorization Application (a “MAA”)
filed with the EMA or with the applicable Regulatory Authority of a country in Europe with respect to the mutual recognition or
any other national approval procedure.
1.22 “Effective
Date” means the effective date of this Agreement as set forth in the preamble hereto.
1.23 “EMA”
means the European Medicines Agency and any successor agency or authority having substantially the same function.
1.24 “Existing
Inventory Supply” means Lightlake’s existing inventory of naloxone, excipients, devices and packaging set forth
on Schedule 1.24 to be transferred to Adapt in accordance with Section 3.6.1 and the Initial Development Plan.
1.25 “Exploit”
means to make, have made, import, use, sell, or offer for sale, including to research, Develop, Commercialize, Manufacture, have
Manufactured, obtain Regulatory Approval for, hold, or keep (whether for disposal or otherwise), have used, export, transport,
distribute, promote, market, or have sold or otherwise dispose of on a worldwide basis. “Exploitation”
shall mean the act of Exploiting.
1.26 “FDA”
means the United States Food and Drug Administration and any successor agency(ies) or authority having substantially the same
function.
1.27 “FFDCA”
means the United States Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §301 et seq., as amended from time to time,
together with any rules, regulations and requirements promulgated thereunder (including all additions, supplements, extensions,
and modifications thereto).
1.28 “First
Commercial Sale” means, with respect to a Product and a country, the first sale by Adapt, its Affiliate or its Commercial
Sublicensee to a Third Party for monetary value of such Product in such country after Regulatory Approval for such Product has
been obtained in such country; provided, however, no sale comprising the Limited Purdue Sales shall be deemed a “First Commercial
Sale” for purposes hereof.
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treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***”
1.29 “First
Responder Market” means governmental agencies, non-profit institutions and medical directors that prescribe on behalf
of an organization for use by fire, police, emergency medical personnel, military or similar personnel that act as first responders,
but excluding hospitals and clinics and any Person acquiring Products through retail channels.
1.30 “Generic
Product” means, with respect to a Product, any intranasal product in an intranasal device that (i) is sold by a
Third Party that is not a licensee or a Commercial Sublicensee of Adapt or its Affiliates, under an Abbreviated New Drug Application
(ANDA), or any of such Third Party’s direct or indirect licensees or sublicensees; (ii) contains naloxone as the primary
active ingredient; and (iii) is approved in reliance, in whole or in part, on the prior approval of such Product. A
Product licensed or produced by Adapt or its Affiliates or Commercial Sublicensees (i.e., an authorized generic product) will not
constitute a Generic Product.
1.31 “IND”
means an application filed with a Regulatory Authority for authorization to commence human clinical studies, including (a) an Investigational
New Drug Application as defined in the FFDCA or any successor application or procedure filed with the FDA, (b) any equivalent of
a United States IND in other countries or regulatory jurisdictions, and (c) all supplements, amendments, variations, extensions
and renewals thereof that may be filed with respect to the foregoing.
1.32 “Information”
means all technical, scientific, and other know-how and information, trade secrets, knowledge, technology, means, methods, processes,
practices, formulae, instructions, skills, techniques, procedures, experiences, ideas, technical assistance, designs, drawings,
assembly procedures, computer programs, apparatuses, specifications, data, results and other material, including: biological, chemical,
pharmacological, toxicological, pharmaceutical, physical and analytical, pre-clinical, clinical, safety, manufacturing and quality
control data and information, including study designs and protocols, assays, biological methodology, other data relating to Development,
all data, information and materials relating to Commercialization, including customer lists (both actual and target customers),
any market studies and competitive data; in each case (whether or not confidential, proprietary, patented or patentable) in written,
electronic or any other form now known or hereafter developed.
1.33 “Initial
Development Plan” means the initial Development Plan (including the Development budget) attached hereto as Schedule
1.33 covering the initial Development activities, as the same may be amended from time to time in accordance with the terms
hereof.
1.34 “Invention”
means any writing, invention, discovery, improvement, technology, Information or other Know-How (in each case, whether patented
or not) that is not existing as of the Effective Date and is invented under this Agreement during the Term.
1.35 “LIBOR”
means the London Interbank Offered Rate for deposits in United States Dollars having a maturity of one month published by the British
Bankers’ Association, as adjusted from time to time on the first London business day of each month.
Confidential
Treatment Requested by Lightlake Therapeutics Inc.
IRS Employer
Identification No. 46-4744124
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treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***”
1.36 “Liens”
means any and all liens, encumbrances, charges, security interests, options, claims, mortgages, pledges, or agreements, obligations,
understandings or arrangements or other restrictions on title or transfer of any nature whatsoever.
1.37 “Lightlake”
has the meaning set forth in the preamble hereto.
1.38 “Lightlake
Know-How” means all Information Controlled by Lightlake or any of its Affiliates as of the Effective Date or at any time
during the Term (subject to Section 11.3.2) that is not generally known and is necessary or reasonably useful for
the Development, manufacture, or Commercialization of a Product, but excluding any Information to the extent covered or claimed
by published Lightlake Patents or Joint Patents or any Joint Know-How.
1.39 “Lightlake
Patents” means all of the Patents Controlled by Lightlake or any of its Affiliates as of the Effective Date or at any
time during the Term (subject to Section 11.3.2) that claim or disclose the Development, Manufacture, or Commercialization
of a Product, but excluding any Joint Patents, and excluding the Product Specific Patents.
1.40 “Limited
Purdue Sales” means the sale of such number of units of Product(s) that Adapt is obligated to sell to or at the direction
of Purdue pursuant to the Purdue Agreement, up to either (i) such number of units having an aggregate fair market value of fifty
thousand dollars or (ii) an aggregate of 2,500 units (of two doses each), which ever is greater. For clarity, sales
of Products to Purdue in excess of the foregoing number of units shall not be included in Limited Purdue Sales.
1.41 “MAA”
has the meaning set forth in the definition of “Drug Approval Application.”
1.42 “Major
Market” means each of France, Germany, Italy, Spain or United Kingdom.
1.43 “Manufacture”
or “Manufacturing” means all activities related to the production, manufacture, processing, filling, finishing,
packaging, labeling, shipping and holding of a Product or any intermediate thereof, including clinical and commercial manufacture.
1.44 “NDA”
has the meaning set forth in the definition of “Drug Approval Application.”
1.45 “Net
Sales” means, with respect to a Product for any period, the total amount billed or invoiced on sales of such Product
during such period by Adapt, its Affiliates, or Sublicensees to Third Parties, less the following normal and customary bona-fide
deductions and allowances actually taken:
1.45.1 trade,
cash and quantity discounts;
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1.45.2 price
reductions, refunds or rebates, retroactive or otherwise, imposed by, negotiated with or otherwise paid (whether in cash or trade)
to governmental authorities or third party payors;
1.45.3 taxes
on sales (such as sales, value added, or use taxes) and customs and excise duties and other duties related to sale, in each case,
to the extent such taxes are included in the gross amount invoiced;
1.45.4 wholesale
and distribution fees, deductions and prompt pay discounts;
1.45.5 bad
debts not exceeding five percent (5%) of the value of the sales of Product during the then-current Calendar Year, provided that
any recovery of bad debts shall be deemed a sale for purposes of this definition of “Net Sales”;
1.45.6 amounts
repaid, deducted or credited by reason of rejections, defects, recalls or returns, or because of retroactive price reductions,
including rebates or wholesaler charge backs; and
1.45.7 freight,
insurance, and other transportation charges to the extent added to the sale price and set forth separately as such in the total
amount invoiced.
Notwithstanding the foregoing, Net Sales shall not include (i)
transfers or dispositions for charitable, pre-clinical, clinical, regulatory, or governmental purposes or (ii) sales or transfers
comprising the Limited Purdue Sales. To the extent that Adapt, its Affiliate or any Commercial Sublicensee sells a Product,
on an arms-length basis, to any Sublicensee who is not an Affiliate of such selling Person for resale, only the initial sale of
such Product by Adapt, its Affiliate, or its Commercial Sublicensee shall constitute a sale for purposes of determining Net Sales. Except
as contemplated by the immediately foregoing sentence, Net sales shall not include sales between or among Adapt, its Affiliates,
or Sublicensees. Net Sales shall be calculated in accordance with the standard internal policies and procedures of Adapt,
its Affiliates, or Sublicensees, which must be in accordance with United States Generally Accepted Accounting Principles or International
Financial Reporting Standards as applicable. If Adapt (or any of its Affiliates or Sublicensees) for a given Product
sells such Product to a Third Party (including distributors) who also purchases other products or services from any such entity,
then Adapt agrees not to, and shall require its Affiliates and Sublicensees not to, (a) bundle or include the Product as part of
any multiple product offering or (b) discount or price the Product, in the case of either of the foregoing clauses (a) or (b),
in a manner that is reasonably likely to disadvantage such Product in order to benefit sales or prices of other products offered
for sale by Adapt or its Affiliates or Sublicensees to such customer.
1.46 “NIDA”
means The Division of Pharmacotherapies and Medical Consequences of Drug Abuse of the National Institute on Drug Abuse.
1.47 “NIDA
Agreement” means that certain Clinical Trial Agreement, dated January 31, 2013, between Lightlake and NIDA.
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1.48 “Party”
and “Parties” has the meaning set forth in the preamble hereto.
1.49 “Patents”
means (i) all national, regional and international patents and patent applications, including provisional patent applications;
(ii) all patent applications filed either from such patents, patent applications or provisional applications or from an application
claiming priority from either of these, including divisionals, continuations, continuations-in-part, provisionals, converted provisionals
and continued prosecution applications; (iii) any and all patents that have issued or in the future issue from the foregoing
patent applications ((i) and (ii)), including utility models, petty patents and design patents and certificates of invention; (iv) any
and all extensions or restorations by existing or future extension or restoration mechanisms, including revalidations, reissues,
re-examinations and extensions (including any supplementary protection certificates and the like) of the foregoing patents or patent
applications ((i), (ii), and (iii)); and (v) any similar rights, including so-called pipeline protection or any importation,
revalidation, confirmation or introduction patent or registration patent or patent of additions to any of such foregoing patent
applications and patents.
1.50 “Person”
means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated association, foundation, joint venture or other similar
entity or organization, including a government or political subdivision, department or agency of a government.
1.51 “Product”
means any pharmaceutical product or medical device, whether prescription or over-the-counter, marketed for a treatment of opioid
overdose containing naloxone, alone or in combination with one or more other active or inactive ingredients, in any intranasal
form, presentation, strength or delivery systems; provided, however, that “Product” shall not refer to
any product Controlled, developed, manufactured, marketed, sold, offered for sale, exported, or imported directly or indirectly
by a Sublicensee if such Sublicensee’s rights in respect of such product were obtained or developed independently of any
sublicense or right granted by Adapt hereunder.
1.52 “Product
Specific Patents” means those Patents set forth on Schedule 1.52.
1.53 “Product
Trademarks” means the Trademark(s) to be used by Adapt or its Affiliates or its or their respective Sublicensees for
the Commercialization of Products and any registrations thereof or any pending applications relating thereto (excluding, in any
event, any trademarks, service marks, names or logos that include any corporate name or logo of the Parties or their Affiliates).
1.54 “Purdue”
means Purdue Pharma LP or such Affiliate of Purdue Pharma LP that is the initial party to the Purdue Agreement, or any assignee
or successor to such Person’s rights or obligations under the Purdue Agreement.
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1.55 “Purdue
Agreement” means the license agreement to be entered into by Lightlake or Adapt or one of their Affiliates with Purdue
Pharma LP based upon the term sheet between Lightlake and Purdue Pharma LP dated September 24, 2014.
1.56 “Regulatory
Approval” means, with respect to a country or other jurisdiction, any and all approvals (including Drug Approval Applications),
licenses, registrations, or authorizations of any Regulatory Authority necessary to commercially distribute, sell, offer for sale,
market, import or use a Product in such country or other jurisdiction, including, where applicable, (i) pricing or reimbursement
approval in such country or other jurisdiction, (ii) pre- and post-approval marketing authorizations (including any prerequisite
Manufacturing approval or authorization related thereto), and (iii) labeling approval.
1.57 “Regulatory
Authority” means any applicable supra-national, federal, national, regional, state, provincial, or local governmental
or regulatory agencies, departments, bureaus, commissions, councils, or other government entities (e.g., the FDA and EMA) regulating
or otherwise exercising authority with respect to activities contemplated in this Agreement, including the Exploitation of Products.
1.58 “Regulatory
Costs” means the out-of-pocket costs and expenses incurred by a Party or its Affiliates in connection with the preparation,
obtaining or maintaining of Regulatory Documentation and Regulatory Approvals for the Product, including any filing fees that are
consistent, if applicable, with the Development Plan.
1.59 “Regulatory
Documentation” means all (i) applications (including all INDs and Drug Approval Applications), registrations, licenses,
authorizations, and approvals (including Regulatory Approvals); (ii) correspondence and reports submitted to or received from
Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory Authority)
and all supporting documents with respect thereto, including all regulatory drug lists, advertising and promotion documents, adverse
event files, and complaint files; and (iii) clinical and other data contained or relied upon in any of the foregoing, in each
case ((i), (ii), and (iii)) relating to a Product.
1.60 “Senior
Officer” means, with respect to Lightlake, its Chief Executive Officer or his/her designee or his/her designee, and with
respect to Adapt, its Chief Executive Officer or Chief Operating Officer or his/her designee.
1.61 “Sublicensee”
means a Person, other than an Affiliate, that is granted a sublicense by Adapt under a license granted in Section 4.1
or a right by Adapt, its Affiliates or Commercial Sublicensees to sell a Product, offer a Product for sale, or have a Product sold
(each such sublicense or right, a “Sublicense”).
1.62 “Third
Party” means any Person other than Lightlake, Adapt and their respective Affiliates.
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1.63 “Trademark”
means any word, name, symbol, color, designation or device or any combination thereof that functions as a source identifier,
including any trademark, trade dress, brand mark, service mark, trade name, brand name, logo or business symbol, whether or not
registered.
1.64 “United
States” or “U.S.” means the United States of America and its territories and possessions (including
the District of Columbia and Puerto Rico).
Additional Definitions. The
following terms have the meanings set forth in the corresponding Sections of this Agreement:
Term |
|
Section |
“Adapt Indemnitees” |
|
9.2 |
“Annual Net Sales Milestone Threshold” |
|
5.3.1 |
“Annual Net Sales-Based Milestone Table” |
|
5.3.1 |
“Annual Net Sales-Based Milestone Payment” |
|
5.3.1 |
“Annual Net Sales-Based Milestone Payment Date” |
|
5.3.1 |
“Audit Arbitrator” |
|
5.13.2 |
“Breaching Party” |
|
10.3 |
“Competing Product” |
|
4.6 |
“Core IP” |
|
5.5 |
“Default Notice” |
|
10.3 |
“Development Plan” |
|
3.1 |
“Follow-On Product” |
|
5.2.5 |
“Force Majeure” |
|
11.1 |
“First Product” |
|
5.2.6 |
“Generic Competition” |
|
5.4.2 |
“Indemnification Claim Notice” |
|
9.3 |
“Indemnified Party” |
|
9.3 |
“Initial First Responder Sales” |
|
5.4.1 |
“Joint Development Committee” or “JDC” |
|
2.1 |
“Joint Know-How” |
|
6.1.2 |
“Joint Patents” |
|
6.1.2 |
“Joint Intellectual Property Rights” |
|
6.1.2 |
“Lightlake Cost Cap” |
|
3.8.1 |
“Lightlake Indemnitees” |
|
9.1 |
“Losses” |
|
9.1 |
“Non-Breaching Party” |
|
10.3 |
“Payment” |
|
5.8 |
“Pharmacokinetic Data” |
|
1.15 |
“Reconciliation Development Payment” |
|
5.11.2 |
“Recovery” |
|
6.4.3(d) |
“ROFN” |
|
4.3.3 |
“Sublicense” |
|
1.61 |
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Term |
|
Section |
“Target Filing Date” |
|
3.2.3 |
“Term” |
|
10.1 |
“Third Party Claims” |
|
9.1 |
ARTICLE 2
JOINT DEVELOPMENT COMMITTEE
2.1 Formation. Within
fifteen (15) days after the Effective Date, the Parties shall establish a joint development committee (the “Joint Development
Committee” or “JDC”). The JDC shall consist of relevant representatives from each of the
Parties, each with the requisite experience and seniority to enable such person to make decisions on behalf of the Parties with
respect to the issues falling within the jurisdiction of the JDC. Each Party shall be entitled to appoint up to two
(2) representatives to the JDC. From time to time, each Party may substitute one (1) or more of its representatives
to the JDC on written notice to the other Party. Adapt shall designate from its representatives the chairperson for
the JDC. From time to time, Adapt may change the representative who will serve as chairperson on written notice to Lightlake.
2.2 Specific
Responsibilities. The JDC shall meet monthly in person or by phone for the purpose of facilitating the transition
of Development of the Product from Lightlake to Adapt. At least seven (7) days prior to each meeting, each Party shall
circulate an agenda of items that such Party wishes to cover in such meeting. In particular, the JDC shall:
2.2.1 review
and serve as a forum for discussing the Initial Development Plan, and review amendments thereto;
2.2.2 oversee
any transition activities under the Initial Development Plan;
2.2.3 serve
as a forum for discussing strategies for obtaining Regulatory Approvals for Products; and
2.2.4 perform
such other functions as are set forth herein or as the Parties may mutually agree in writing, except where in conflict with any
provision of this Agreement.
2.3 Disbandment. Upon
the *** REDACTED ***anniversary of the Effective Date, the JDC shall have no further responsibilities or authority under this Agreement
and will be considered dissolved by the Parties.
2.4 Decision
Making. If the JDC cannot, or does not, reach consensus on an issue at a particular meeting, Adapt shall make the
decision; provided; however, that Adapt may not exercise its decision making authority in a manner that would increase Lightlake’s
full-time employee obligations under the Initial Development Plan, significantly modify the types of activities that Lightlake
would have to perform under the Initial Development Plan, extend Lightlake’s period of performance more than *** REDACTED
***months after the Effective Date or increase the Lightlake Cost Cap.
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2.5 Limitations
on JDC Authority. Each Party shall retain the rights, powers, and discretion granted to it under this Agreement
and no such rights, powers, or discretion shall be delegated to or vested in the JDC unless such delegation or vesting of rights
is expressly provided for in this Agreement or the Parties expressly so agree in writing. The JDC shall not have the
power to amend, modify, or waive compliance with this Agreement, which may only be amended or modified as provided in Section
11.9 or compliance with which may only be waived as provided in Section 11.11.
ARTICLE 3
DEVELOPMENT, REGULATORY AND COMMERCIALIZATION ACTIVITIES
3.1 Development
Plan.
3.1.1
Development Plan Delivery. By no later than November 1st of each Calendar Year during the Term after the
Calendar Year in which the Initial Development Plan was delivered until First Commercial Sale of a Product in the United States,
Adapt shall prepare a written development plan that describes generally the material Development activities to be undertaken by
or on behalf of Adapt with respect to Products in the next Calendar Year (each, a “Development Plan”), and each
such Development Plan shall be provided to Lightlake and Adapt shall consider any comments of Lightlake in good faith. The
Initial Development Plan shall serve as the Development Plan for the first full Calendar Year of this Agreement and the period
from the Effective Date through the end of the initial partial Calendar Year. Without limiting the generality of the
foregoing, each Development Plan shall set forth, among other things and to the extent relevant based on the stage of Development,
the following with respect to the Products then under Development:
(a) any
preclinical studies, toxicology studies and other clinical studies with respect to Products;
(b) regulatory
plans and other elements of obtaining and maintaining Regulatory Approvals for Products;
(c) the
plans and timeline for preparing the necessary Regulatory Documentation and for obtaining Regulatory Approval for Products.
3.1.2 Development
Plan Amendments. Adapt may amend any Development Plan at any time, subject to providing Lightlake an opportunity
to discuss any proposed revisions prior to making such amendment and, during the first twelve (12) months following the Effective
Date, by submitting such amendment to the JDC prior to such amendment becoming effective; provided, however, that no such amendment
to any Development Plan may provide for an increase in Lightlake’s full-time employee obligations under the Initial Development
Plan, significantly modify the types of activities that Lightlake would have to perform under the Initial Development Plan, extend
Lightlake’s period of performance more than twelve (12) months after the Effective Date or increase the Lightlake Cost Cap.
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3.2 Development.
3.2.1 Ongoing
Development. The Parties acknowledge and agree that additional Development will be required to obtain Regulatory
Approvals for Products. After the Effective Date, as between the Parties, except as set forth in the Initial Development
Plan (as the same may be amended in accordance with Section 3.1.2) and Section 3.8.1, Adapt shall be solely responsible
for Development of the Products.
3.2.2 General
Diligence. Adapt shall use Commercially Reasonable Efforts to complete the activities associated with the
Development of the initial Product for the United States that are contemplated by the Development Plan then in effect (other than
any such activities to be undertaken by Lightlake). Adapt shall, and shall cause its Affiliates to, comply
with all Applicable Law with respect to Products.
3.2.3 Specific
Diligence Requirement. Without limiting the foregoing, if Adapt has not filed an NDA in respect of a Product on
or before the Target Filing Date, Adapt shall be deemed to be in material breach of this Agreement unless:
(a) Adapt
shall have theretofore completed those tasks in relation to the Development of a Product contemplated on Schedule 3.2.3(a)
hereto; or
(b) the
aggregate amount of Development Costs, Regulatory Costs and Commercialization Costs theretofore incurred by Adapt and Lightlake
after the Effective Date, together with the costs and expenses set forth on Schedule 3.8.2 hereto, shall equal or exceed
$5 million; or
(c) prior
to such time, a Third Party files a Drug Approval Application in the United States for an intranasal product for the treatment
of opioid overdose and, either (i) such product has the same dosage form as the Product being developed by Adapt or (ii) such product
is deemed by the FDA to be, or otherwise becomes, the reference drug for purposes of any NDA that would be filed under Section
505(b)(2) of the FFDCA in respect of the Product being developed by Adapt; or
(d) any
other circumstances that the Parties have separately agreed in writing will constitute exceptions pursuant to this Section 3.2.3
occur or exist.
For clarity, if any of the circumstances contemplated
by clauses (a) through (c) above exist, Adapt shall not be deemed to be in breach of this Agreement by virtue of its failure to
file an NDA for a Product on or prior to the Target Filing Date, but shall remain subject to the obligation to use Commercially
Reasonable Efforts in respect of the Development of the initial Product, as set forth above in Section 3.2.2. In
the event that none of the circumstances contemplated above exist, but Adapt notifies and provides reasonable evidence to Lightlake
that such inability to file on or prior to the Target Filing Date is due to variables outside of Adapt’s reasonable control,
Adapt may request that Lightlake consent to an extension of such Target Filing Date and Lightlake shall not unreasonably withhold,
delay or condition such requested extension. “Target Filing Date” means the date specified in the
Initial Development Plan as the date by which Adapt shall file an NDA in respect of a Product or such later date as Lightlake may
consent to in accordance with the immediately preceding sentence, provided that in the event of (i) a delay in the Development
of a Product that is caused by a Third Party and outside the reasonable control of Adapt or (ii) a Force Majeure, then (in either
case, clause (i) or (ii)) the Target Filing Date shall automatically be extended by the actual amount of delay caused by a Third
Party or the duration of the Force Majeure, respectively. For clarity, Adapt shall not be in material breach of its
Development Obligations under this Agreement, including by virtue of this Section 3.2.3, if the Target Filing Date has been
extended pursuant to this paragraph of Section 3.2.3 unless Adapt fails to file an NDA in respect of a Product on or before
the revised Target Filing Date.
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3.2.4 Development
Costs. Except as otherwise provided in Section 3.8.1, Adapt shall be responsible for all costs and
expenses in connection with the Development of Products.
3.2.5 Interactions
with Third Parties. Except as otherwise expressly contemplated by this Agreement or the Development Plan, or as
expressly agreed between the Parties, as between the Parties, Adapt shall be solely responsible for and shall control, all interactions
with Third Parties regarding the Development, Manufacturing and Commercialization of the Products.
3.3 Regulatory
Matters.
3.3.1 Regulatory
Activities.
(a) As
between the Parties, Adapt shall be responsible for preparing, obtaining, and maintaining Drug Approval Applications (including
the setting of the overall regulatory strategy therefor), other Regulatory Approvals and other submissions, and for conducting
communications with the Regulatory Authorities, for Products (which shall include filings of or with respect to INDs and other
filings or communications with the Regulatory Authorities), in each case in accordance with the terms of this Agreement and otherwise
in Adapt’s sole discretion. All Regulatory Approvals applied for or received after the Effective Date relating
to Products shall be owned by and held in the name of, Adapt. At Adapt’s request, Lightlake shall transfer ownership
of the IND in respect of the initial Product to Adapt at no cost and shall take such action as is necessary to confirm such transfer
with the FDA.
(b) Adapt
shall notify Lightlake promptly (but in no event later than forty-eight (48) hours) following its determination that any event,
incident, or circumstance has occurred that may result in the need for a recall, market suspension, or market withdrawal of a Product,
and shall include in such notice the reasoning behind such determination, and any supporting facts. Adapt (or its Sublicensee)
shall have the right to make the final determination whether to voluntarily implement any such recall, market suspension, or market
withdrawal. If a recall, market suspension or market withdrawal is mandated by a Regulatory Authority, Adapt (or its
Sublicensee) shall initiate such a recall, market suspension or market withdrawal in compliance with Applicable Law. For
all recalls, market suspensions, or market withdrawals undertaken, Adapt (or its Sublicensee) shall be solely responsible for the
execution and all costs thereof.
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3.3.2 Regulatory
Costs. Except as otherwise provided in Section 3.8.1, Adapt shall be responsible for all costs and
expenses in connection with the Development of, and obtaining and maintaining Regulatory Approvals for, Products.
3.3.3 Rights
of Reference and Access to Data.
(a) Adapt
shall have the right to cross-reference Lightlake’s or its Affiliate’s Regulatory Approvals and Regulatory Documentation
related to Products, and to access such Regulatory Approvals and Regulatory Documentation and any data and know-how therein and
use such data and know-how, in each case in connection with the performance of its obligations and exercise of its rights under
this Agreement. Lightlake hereby grants to Adapt a “Right of Reference,” as that term is defined in 21 C.F.R.
§ 314.3(b) in the United States, or an equivalent right of access/reference in any other jurisdiction, to any data, including
Lightlake’s or its Affiliates’ Regulatory Approvals and Regulatory Documentation, that relate to a Product for use
by Adapt to Develop and Commercialize Products pursuant to this Agreement. Lightlake or such Affiliate shall provide
a signed statement to this effect, if requested by Adapt, in accordance with 21 C.F.R. § 314.50(g)(3) or the equivalent as
required in any other jurisdiction or otherwise provide appropriate notification of such right of Adapt to the applicable Regulatory
Authority.
(b) Upon
and subject to the Parties’ mutual written agreement upon commercially reasonable terms, Adapt shall (a) grant Lightlake
the right to cross-reference Adapt’s or its Affiliate’s or Commercial Sublicensee’s Regulatory Approvals and
Regulatory Documentation related to Products, and to access such Regulatory Approvals and Regulatory Documentation and any data
and know-how therein and use such data and know-how, in each case in connection with the development, manufacture, use, and/or
commercialization of intranasal products containing naloxone (other than Products) and (b) grant Lightlake a “Right of Reference,”
as that term is defined in 21 C.F.R. § 314.3(b) in the United States, or an equivalent right of access/reference in any other
jurisdiction, to any data, including Adapt’s or its Affiliates’ or Commercial Sublicensee’s Regulatory Approvals
and Regulatory Documentation, that relate to a Product for use by Lightlake to development, manufacture, use, and/or commercialization
of intranasal products containing naloxone (other than Products). For the sake of clarity, this Section 3.3(b)
shall be of no force or effect unless and until the Parties agree in writing on the terms of such foregoing rights. Notwithstanding
the foregoing, Adapt shall promptly provide Lightlake the Pharmacokinetic Data upon it becoming available, provided that Lightlake
shall not have a right to use such data or reference such data for any purpose other than with respect to its indemnification obligations
under this Agreement.
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3.4 Records;
Reports. Adapt shall maintain records in reasonable detail and in good scientific manner appropriate for patent
and regulatory purposes, and in compliance with Applicable Law, which shall be materially complete and accurate and shall properly
reflect all material work done and results achieved in the performance of its Development activities in respect of the Products. Following
the first anniversary of the Effective Date, Adapt and Lightlake shall meet at least once and up to twice per annum, at such times
as the Parties shall reasonably agree to discuss the then-ongoing Development and Commercialization activities that (i) Adapt is
undertaking with respect to Products and (ii) Lightlake is undertaking in respect of other products containing naloxone. At
each such meeting, (x) Adapt shall update Lightlake on the material developments in respect of its Development and Commercialization
of Products and discuss in good faith any suggestions or questions Lightlake may have and Lightlake shall be permitted to retain
a copy of Adapt’s presentation materials, subject to Article 7 hereof and (y) Lightlake shall update Adapt on the material
developments in Lightlake’s and its other licensees’ efforts to Develop and Commercialize such other naloxone products,
subject to Article 7 hereof.
3.5 Commercialization.
3.5.1 In
General. Except as otherwise provided in Section 3.8.1, Adapt (itself or through its Affiliates or
Sublicensees) shall be solely responsible for Commercialization of Products at Adapt’s own cost and expense, in accordance
with the terms of this Agreement and otherwise in Adapt’s sole discretion.
3.5.2 Diligence. Once
a Product receives all requisite Regulatory Approvals in a particular country necessary to Commercialize such Product in such country,
Adapt shall use Commercially Reasonable Efforts to Commercialize such Product in such country. Adapt shall Commercialize
Products in accordance with Applicable Law. Without limiting any of the foregoing, on a Product-by-Product basis, Adapt
shall use Commercially Reasonable Efforts to achieve First Commercial Sale of a Product in the United States within nine (9) months
after the date on which Adapt is notified by the FDA that an NDA in respect of such Product has received approval.
3.5.3 Booking
of Sales; Distribution. As between the Parties, Adapt shall invoice and book sales, establish all terms of
sale (including pricing and discounts) and warehousing, and distribute the Products and perform or cause to be performed all related
services. As between the Parties, Adapt shall handle all returns, recalls, or withdrawals, order processing, invoicing,
collection, distribution, and inventory management with respect to the Products.
3.5.4 Product
Trademarks. Adapt shall have the sole right to determine, in its sole discretion, the Product Trademarks
to be used with respect to the Exploitation of Products on a worldwide basis. As between the Parties, all such Product
Trademarks shall be owned by Adapt.
3.6 Supply
of Products.
3.6.1 Assignment
of Existing Inventory. Subject to Section 3.8.3, Lightlake hereby sells and assigns to Adapt all of its right,
title, and interest in and to the Existing Inventory Supply. Lightlake shall not be entitled to any additional payment
for such Existing Inventory. Promptly following the Effective Date, Lightlake shall deliver or have delivered such supply
to Adapt FCA (Incoterms 2010) the facility designated by Adapt.
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3.6.2 Supply
of Products. Except as set forth in Section 3.6.1, as between the Parties, subject to Section
3.8.1, Adapt shall have the sole responsibility for, at its expense, Manufacturing (or having Manufactured) and obtaining supply
of naloxone (including all excipients) and devices (including packaging) for pre-clinical and clinical purposes and for commercial
sale of Products by Adapt and its Affiliates and Commercial Sublicensees. Adapt shall use Commercially Reasonable Efforts
to ensure that any agreement pursuant to which Adapt contracts with Third Parties for the supply of the device utilized by the
Products and of finished Products may be assigned to Lightlake without such Third Party’s consent in the event that this
Agreement is terminated.
3.7 Subcontracting;
Assigned Contracts. Either Party may subcontract with a Third Party to perform any or all of its obligations
hereunder, provided that (i) no such permitted subcontracting shall relieve a subcontracting Party of any liability
or obligation hereunder except to the extent satisfactorily performed by such subcontractor, and (ii) the Party engaging such
subcontractor shall ensure that the agreement pursuant to which the subcontracting Party engages such subcontractor (A) does
not conflict with any material term of this Agreement, and (B) contains terms obligating such subcontractor to comply with
obligations of confidentiality and non-use consistent with those set forth in this Agreement. Promptly after the Effective
Date, Lightlake shall use commercially reasonable efforts to assign to Adapt, and for Adapt to assume from Lightlake all of Lightlake’s
right, title, and interest in and to the Third Party contracts set forth on Schedule 3.7 (the “Assigned Contracts”),
including (a) by obtaining from each Third Party counterparty thereto a consent in the form attached hereto as Exhibit A
and (b) entering into one or more assignment and assumption agreements substantially in the form attached hereto as Exhibit
B. In addition, as soon as practicable following the Effective Date (1) the Parties shall meet with NIDA to discuss
the transition of the Development of the initial Product to Adapt as contemplated herein and (2) *** REDACTED One Sentence of 65
Words***.
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3.8 Sharing
of Development Costs, Regulatory Costs and Commercialization Costs.
3.8.1 Cost
Sharing. Lightlake shall bear fifty percent (50%) of all Development Costs and Adapt shall bear fifty percent
(50%) of all Development Costs (whether incurred by Lightlake or Adapt or their respective Affiliates, Sublicensees or subcontractors)
incurred after the Effective Date in accordance with the Development Plan in connection with the Development of Products using
the *** REDACTED *** Unit Dose Device and Lightlake shall bear fifty percent (50%) of all Regulatory Costs and Commercialization
Costs incurred by Adapt and Adapt shall bear fifty percent (50%) of all Regulatory Costs and Commercialization Costs incurred by
Adapt (whether incurred by Adapt or its Affiliates, Sublicensees or subcontractors), in connection with the Development
and Commercialization of the Product using the *** REDACTED *** Unit Dose Device until such time as Lightlake has incurred Development
Costs, Regulatory Costs and Commercialization Costs of Two Million Five Hundred Thousand Dollars ($2,500,000) (the “Lightlake
Cost Cap”). After the Lightlake Cost Cap has been reached, Adapt shall be responsible for one hundred percent
(100%) of all Development Costs, Regulatory Costs and Commercialization Costs. For clarity, Lightlake shall not have
any obligation to bear any Development Costs, Regulatory Costs or Commercialization Costs in connection with the Development or
Commercialization of a Product using a drug delivery device other than the *** REDACTED ***Unit Dose Device; provided, however,
in the event that Adapt determines, in good faith, that the Product cannot be further Developed using the *** REDACTED ***Unit
Dose Device, whether due to a technical failure or failure of any clinical study using such device, then Adapt may proceed with
Development using another device and the foregoing cost sharing provisions shall apply to the Development Costs, Regulatory Costs
and Commercialization Costs associated with such alternate Product as well. Notwithstanding the foregoing, Development
Costs incurred by Lightlake (or its Affiliates, Sublicensees or subcontractors) shall only be shared and credited towards the Lightlake
Cost Cap in accordance with this Section 3.8.1 to the extent the same are either (a) contemplated in the Initial Development
Plan or a subsequent Development Plan and are expressly approved in advance by Adapt, or are set forth on Schedule 3.8.2
or (b) paid by Lightlake after the Effective Date to suppliers and/or vendors, including their affiliates, whose names are listed
on Schedule 3.8.2, other than *** REDACTED two words ***, for activities related exclusively to the Product where such activities
commenced before the Effective Date; provided, however, that the aggregate amount contemplated by this clause (b) shall not exceed
$150,000.
3.8.2 Crediting
of Certain Costs. The Parties agree that the costs and expenses incurred by Lightlake prior to the Effective Date
in respect of the Development of the initial Product that are specified on Schedule 3.8.2 hereto shall be credited as Lightlake’s
payment of Development Costs in accordance with Section 3.8.1 and count towards the Lightlake Cost Cap. For clarity,
if Adapt and its Affiliates and Sublicensees fail to incur Development Costs in excess of the amount credited hereunder for Lightlake’s
share of the Development Costs, Lightlake shall not be entitled to any payment from Adapt for such excess amounts.
3.8.3 Payment
and Reimbursement of Costs. To the extent that either Party is entitled to a reimbursement of costs described in
Section 3.8.1, such costs will be reconciled and paid in accordance with Section 5.11.
3.8.4 General. Each
Party shall maintain current and accurate records of all costs and expenses incurred by it for which it seeks reimbursement from
the other Party pursuant to Section 3.8.1.
ARTICLE 4
TRANSFER AND ASSIGNMENT; GRANT OF RIGHTS
4.1 Grants
to Adapt. Subject to the terms and conditions of this Agreement, Lightlake hereby grants to Adapt an exclusive
(including with regard to Lightlake) worldwide license, with the right to grant sublicenses in accordance with Section 4.4,
under the Lightlake Patents, the Product Specific Patents, the Lightlake Know-How, and Lightlake’s interests in the Joint
Patents and the Joint Know-How, to Exploit Products.
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4.2 Grants
to Lightlake.
4.2.1 Adapt
hereby grants to Lightlake a non-exclusive, royalty-free license, without the right to grant sublicenses, under the Adapt Applied
Patents, the Adapt Applied Know-How, and Adapt’s interests in the Joint Patents and the Joint Know-How solely for purposes
of performing its obligations as set forth in, and subject to, this Agreement.
4.2.2 Upon
and subject to agreement of commercially reasonable terms, Adapt shall grant to Lightlake a non-exclusive, royalty-free, worldwide
license, with the right to grant sublicenses, under the Adapt Applied Patents, the Adapt Applied Know-How and Development
Data to Develop, Manufacture and Commercialize products containing naloxone other than a Product. For the sake of clarity,
this Section 4.2.2 shall be of no force or effect unless and until the Parties agree in writing on the terms of such foregoing
rights.
4.3 Sublicenses.
4.3.1 Right
to Grant Sublicenses. Adapt shall have the right to grant Sublicenses (through multiple tiers of Sublicensees). Adapt
shall cause each Sublicensee to comply with the applicable terms and conditions of this Agreement. Adapt shall remain
responsible for the performance of its Affiliates and Sublicensees that are granted Sublicenses as permitted herein, and the grant
of any such Sublicense shall not relieve Adapt of its obligations under this Agreement. With respect to any such Sublicense,
Adapt shall ensure that the agreement pursuant to which it grants such Sublicense (i) does not conflict with the terms and conditions
of this Agreement and (ii) contains terms obligating the Sublicensee to comply with confidentiality and non-use provisions consistent
with those set forth in this Agreement. With respect to any such Sublicense to a Commercial Sublicensee, Adapt shall
use Commercially Reasonable Efforts to ensure that the agreement pursuant to which it grants such Sublicense contains (A) terms
obligating such Commercial Sublicensee to permit Lightlake rights of inspection, access, and audit substantially similar to those
provided to Lightlake in this Agreement and (B) terms relating to intellectual property and data ownership consistent with those
set forth in this Agreement. With respect to any such Sublicense to a Commercial Sublicensee, Adapt shall ensure that
the agreement pursuant to which it grants such sublicense contains an exclusivity provision consistent with that contained in Section
4.6.2. A copy of any Sublicense agreement with a Commercial Sublicensee executed by Adapt shall be provided to Lightlake
within fourteen (14) days after its execution; provided that the financial terms of any such Sublicense agreement may be
redacted to the extent not pertinent to an understanding of a Party’s obligations or benefits under this Agreement.
4.3.2 Termination
of Sublicenses. In the event of termination of this Agreement, in whole or in part, any sublicense granted by Adapt
pursuant to this Section 4.3 shall automatically be deemed to terminate to the same extent as the license or other rights
granted by Lightlake to Adapt in Section 4.2, and the other terms and conditions of this Agreement, terminate.
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4.3.3 Right
of First Negotiation. Notwithstanding anything to the contrary in this Agreement, in the event Lightlake elects
to license, sublicense or sell (except in connection with a license or sale of all or substantially all of the assets of Lightlake),
in one transaction or a series of related transactions, a controlling interest with respect to any product containing naloxone,
Lightlake shall promptly provide notice to Adapt of such election and Lightlake hereby grants to Adapt a right of first
negotiation to license or acquire such rights (“ROFN”). Adapt may exercise each ROFN upon notice
to Lightlake within fifteen (15) Business Days from the date upon which Adapt receives written notice from Lightlake. In
the event that Adapt elects to exercise a ROFN, the Parties shall enter into good faith negotiations for a commercially reasonable
licensing or asset sale agreement. If the Parties, in good faith negotiations, are unable to reach agreement within
seventy (70) days after the date upon which Adapt exercised the ROFN, then Lightlake will be free to enter an agreement for such
rights with a Third Party.
4.4 Retention
of Rights; Limitations Applicable to License Grants.
4.4.1 Retained
Rights of Lightlake. Except as expressly set forth in this Agreement, and without limitation to any rights
granted or reserved to Lightlake pursuant to any other term or condition of this Agreement, Lightlake hereby expressly retains,
on behalf of itself and its Affiliates (and on behalf of its licensees, sublicensees and contractors):
(a) non-exclusive
rights in and to the Lightlake Patents, the Lightlake Know-How, Lightlake’s interests in and to Joint Patents and Joint Know-How,
in each case solely to perform its obligations under this Agreement; and
(b)
all right, title, and interest in and to the Lightlake Patents, the Lightlake Know-How, Lightlake’s interests in and to Joint
Patents and Joint Know-How, in each case to develop and obtain and maintain regulatory approvals for, and to manufacture, commercialize
and otherwise exploit any compound or product other than Products or Competing Products.
4.4.2 No
Other Rights Granted by Lightlake. Except as expressly provided herein and without limiting the foregoing,
Lightlake grants no other right or license, including any rights or licenses to the Lightlake Patents, the Lightlake Know-How,
the Regulatory Documentation, or any other Patent or intellectual property rights not otherwise expressly granted herein.
4.5 Transfer
of Lightlake Know-How. As soon as practicable after the Effective Date, Lightlake shall provide to Adapt (which
can be in the form of copies and electronic files) all material Lightlake Know-How existing as of the Effective Date, to the extent
such Lightlake Know-How has not theretofore been provided to Adapt and is reasonably required by or useful to Adapt for the exercise
of its rights or the performance of its obligations under this Agreement.
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4.6 Exclusivity.
4.6.1 During
the Term and for a period of one year following the Term, other than as contemplated by this Agreement, neither Party shall, and
each Party shall cause its Affiliates not to and shall use Commercially Reasonable Efforts to cause its directors, officers and
employees not to, (i) directly or indirectly, develop, commercialize or manufacture any product containing naloxone as the active
ingredient for the treatment of opioid overdose in an intranasal form (“Competing Product”) in any country or
other jurisdiction, or (ii) license, authorize, appoint, or otherwise enable any Third Party to directly or indirectly, develop,
commercialize or manufacture any Competing Product in any country or other jurisdiction.
4.6.2 During
the term of any agreement pursuant to which a Commercial Sublicensee is granted a Sublicense to sell a Product or have a Product
sold, other than as contemplated by this Agreement, each Party shall cause its Commercial Sublicensees not to (i) directly or indirectly,
develop, commercialize or manufacture any Competing Product in any country or other jurisdiction in which such Commercial Sublicensee
has been granted a Sublicense to sell a Product or have a Product sold, or (ii) license, authorize, appoint, or otherwise
enable any Third Party to directly or indirectly, develop, commercialize or manufacture any Competing Product in any such country
or other jurisdiction in which such Commercial Sublicensee has been granted a Sublicense to sell a Product or have a Product sold.
4.7 Compliance
with Law. Adapt shall conduct, or cause to be conducted, the Development, Commercialization, Manufacture and Exploitation
of Products in compliance with all Applicable Laws.
ARTICLE 5
PAYMENTS AND RECORDS
5.1 Upfront
Payment. Within one (1) Business Days after the Effective Date, Adapt shall pay Lightlake an upfront amount equal
to Five Hundred Thousand Dollars ($500,000). Such payment shall be nonrefundable and noncreditable against any other
payments due hereunder.
5.2 Regulatory
Milestones. In partial consideration of the rights granted by Lightlake to Adapt hereunder and subject to the terms
and conditions set forth in this Agreement, Adapt shall pay to Lightlake a milestone payment within thirty (30) days after the
achievement of each of the following milestones:
5.2.1 Adapt’s
first receipt of notice from the FDA that an NDA in respect of a Product has received approval, *** REDACTED ***Dollars($*** REDACTED
***);
5.2.2 First
Commercial Sale of a Product in the United States, *** REDACTED ***Dollars($*** REDACTED ***);
5.2.3 First
Commercial Sale of a Product in any country or territory outside the United States after receipt of all requisite Regulatory Approvals
in such country, *** REDACTED ***Dollars($*** REDACTED ***);
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5.2.4 First
Commercial Sale of a Product in any three (3) countries comprising the Major Markets, *** REDACTED ***Dollars ($*** REDACTED ***);
5.2.5 First
Commercial Sale of a Product in the United States using an intranasal delivery device other than a unit dose delivery device (a
“Follow-On Product”), *** REDACTED ***Dollars ($*** REDACTED ***);
5.2.6 First
Commercial Sale of a Follow-On Product in the United States, provided, that (i) a Product using a unit dose delivery device in
the United States (“First Product”) has received Regulatory Approval, and the use of the Follow-On Product has
an improved naloxone bioavailability profile relative to the First Product and (ii) Patents covering or claiming the Follow-On
Product are listed in the FDA’s Approved Drug Products with Therapeutic Equivalent Evaluations (or successor thereto) with
respect to such Follow-On Product, *** REDACTED ***Dollars ($*** REDACTED ***);
Each milestone payment in this Section 5.2 shall be payable
only upon the first achievement of such milestone and no amounts shall be due for subsequent or repeated achievements of such milestone,
whether for the same or a different Product. The maximum aggregate amount payable by Adapt pursuant to this Section
5.2 is Seven Million Five Hundred Thousand Dollars ($7,500,000).
5.3 Sales-Based
Milestones.
5.3.1 In
partial consideration of the license rights granted by Lightlake to Adapt hereunder, in the event that the aggregate of all Net
Sales in a given Calendar Year exceeds a threshold (each, an “Annual Net Sales Milestone Threshold”) set forth
in the left-hand column of the table immediately below for such Calendar Year (the “Annual Net Sales-Based Milestone Table”),
Adapt shall pay to Lightlake a milestone payment (each, an “Annual Net Sales-Based Milestone Payment”) in the
corresponding amount set forth in the right-hand column of the Annual Net Sales-Based Milestone Table. In the event
that in a given Calendar Year more than one Annual Net Sales Milestone Threshold is exceeded, Adapt shall pay to Lightlake a separate
Annual Net Sales-Based Milestone Payment with respect to each Annual Net Sales Milestone Threshold that is exceeded in such Calendar
Year. Each such milestone payment shall be due within sixty (60) days after the end of the Calendar Quarter in such
Calendar Year in which such milestone was achieved (each, an “Annual Net Sales-Based Milestone Payment Date”).
Threshold Annual Net Sales Levels |
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*** REDACTED *** |
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*** REDACTED *** |
5.3.2 Notwithstanding
anything contained in Section5.3.1, each milestone payment in this Section 5.3 shall be payable only upon the first
achievement of such milestone in a given Calendar Year, and no amounts shall be due for subsequent or repeated achievements of
such milestone in subsequent Calendar Years. The maximum aggregate amount payable by Adapt pursuant to this Section
5.3 is Forty-Eight Million Dollars ($48,000,000).
5.4 Royalties.
5.4.1 Royalty
Rates. As further consideration for the rights granted to Adapt hereunder, subject to Section 5.4.2, commencing
upon the First Commercial Sale, Adapt shall pay to Lightlake a royalty on Net Sales during each Calendar Year at the following
rates:
Net Sales of all Products |
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*** REDACTED *** |
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*** REDACTED *** |
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*** REDACTED *** |
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*** REDACTED *** |
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*** REDACTED *** |
5.4.2 Royalty
on Certain Pre-Approval Net Sales. As further consideration for the rights granted to Adapt hereunder, Adapt
shall pay to Lightlake a royalty of *** REDACTED *** percent (*** REDACTED ***%)of Net Sales of the First Product to the First
Responder Market that are made prior to the First Commercial Sale and prior to Regulatory Approval of the First Product, up to
aggregate Net Sales of *** REDACTED ***Dollars ($*** REDACTED ***) (i.e., the maximum royalty payable pursuant to this Section
5.4.2 shall equal $ *** REDACTED ***). If royalties are paid under this Section 5.4.2 in the Calendar Year
of or before the First Product receives Regulatory Approval, then the initial royalties contemplated by Section 5.4.1 shall
be payable only for that portion of aggregate Net Sales during such Calendar Year that exceeds such Net Sales to the First Responder
Market.
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5.4.3 Generic
Reduction. Notwithstanding anything to the contrary in Section 5.4.1, in the event that in any country during
a Calendar Quarter there is Generic Competition, the royalties payable to Lightlake for the Net Sales of such Product in such country
shall be reduced to *** REDACTED ***(*** REDACTED ***%) percent for such Calendar Quarter. “Generic Competition”
means, either (i) on a country-by-country and Product-by-Product (with different strengths or presentations of Products being regarded
as separate Products for purposes hereof) basis, the unit volume of a Product sold in a country in any Calendar Quarter is less
than *** REDACTED *** percent (*** REDACTED ***%) of the unit volume of such Product sold in such country in the last full Calendar
Quarter immediately preceding the date on which a Generic Product in respect of such Product was first launched in such country
or (ii) on a country-by-country and Product-by-Product (with different strengths of Products being regarded as separate Products
for purposes hereof) basis, in the event that there is an authorized generic version of a Product sold by Adapt or its Affiliate
or Commercial Sublicensee in a country, the aggregate Net Sales of such Product and such authorized generic version of such Product
in any Calendar Quarter are less than *** REDACTED ***percent (*** REDACTED ***%) of the aggregate Net Sales thereof in the last
full Calendar Quarter immediately preceding the date on which a Generic Product in respect of such Product was first launched in
such country.
5.5 Third
Party Royalties. If, during the Term, Adapt elects, in its sole discretion, to seek a license under any Patent of
a Third Party that (i) Adapt reasonably determines would be infringed by the Exploitation, in any part of the Territory, of any
Product then under Development or being Commercialized by Adapt, its Affiliates or its Sublicensees, or that Adapt determines could
be listed in the FDA’s Orange Book in respect of one or more Products (including Products in Development), or that claims
an invention that Adapt determines could facilitate the Development of one or more new Product(s) (any of the foregoing, “Core
IP”) or (ii) that Adapt otherwise determines is necessary or desirable for Adapt, its Affiliates or Sublicensees to Exploit
the Products, then, in either case, Adapt shall be solely responsible for the negotiation and execution of the corresponding license
agreement. Any amounts due under any such Third Party license agreement will be borne by Adapt; provided, however, that
Adapt shall be entitled to deduct up to *** REDACTED ***percent (*** REDACTED ***%) of the upfront payment, milestones or royalties
paid to such Third Party (on account of rights relating to Products) from the Regulatory Milestones payable by Adapt pursuant to
Section 5.2, the Sales-Based Milestones payable by Adapt pursuant to Section 5.3 and the royalties payable by Adapt
pursuant to Section 5.4. To the extent that, in any Calendar Quarter with respect to a royalty payment or with
respect to milestone payment in the event of a milestone, Adapt was not able to deduct the entire amount of the above percentage
of any and all amounts paid to such Third Party in such Calendar Quarter or from such regulatory or sales-based milestone payment,
Adapt shall be entitled to carry forward such remaining amounts and deduct them from the royalties due in subsequent Calendar Quarters
or a subsequent regulatory or sales-based milestone payment; provided that in no event shall reductions pursuant to this Section
5.5 result in royalties on Product of less than (x) *** REDACTED *** percent (*** REDACTED ***%) of Net Sales in any Calendar
Quarter in the case of reductions associated with Core IP or (y) *** REDACTED ***percent (*** REDACTED ***%) of Net Sales in any
Calendar Quarter in the case of reductions associated with any other license contemplated by this Section 5.5.
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5.6 Royalty
Payments and Reports. Adapt shall calculate all amounts payable to Lightlake pursuant to Section 5.4 at the
end of each Calendar Quarter, which amounts shall be converted to Dollars, in accordance with Section 5.7. Adapt
shall pay to Lightlake the royalty amounts due with respect to a given Calendar Quarter within forty-five (45) days after the end
of such Calendar Quarter. Each payment of royalties due to Lightlake shall be accompanied by a statement of the amount
of gross sales and Net Sales of each Product in each country during the applicable Calendar Quarter (including such amounts expressed
in local currency and as converted to Dollars) and a calculation of the amount of royalty payment due on such Net Sales for such
Calendar Quarter.
5.7 Mode
of Payment; Offsets. All payments to either Party under this Agreement shall be made by deposit of Dollars
in the requisite amount to such bank account as the receiving Party may from time to time designate by notice to the paying Party. For
the purpose of calculating any sums due under, or otherwise reimbursable pursuant to, this Agreement (including the calculation
of Net Sales expressed in currencies other than Dollars), a Party shall convert any amount expressed in a foreign currency into
Dollar equivalents using its, the simple average of prior month-end Exchange Rate and current month-end Exchange Rate based on
9:00 AM Central Time Bloomberg screen on the penultimate Business Day of the corresponding month. The “Exchange
Rate” means, with respect to a Business Day, the spot bid rate for X currencies and spot ask rate for non-X currencies for
the conversion of the applicable country’s or other jurisdiction’s currency to Dollars as reported at 9:00 AM Central
Time Bloomberg screen on the penultimate Business Day. Adapt shall not have the right to offset, set off or deduct any
amounts from or against the amounts due to Lightlake hereunder any amounts owing by Lightlake to Adapt hereunder.
5.8 Taxes. The
milestones and royalties payable by Adapt to Lightlake pursuant to this Agreement (each, a “Payment”) shall
be paid free and clear of any and all taxes, except for any withholding taxes required by Applicable Law. Where any
sum due to be paid to either Party hereunder is subject to any withholding or similar tax, the Parties shall use their commercially
reasonable efforts to do all such acts and things and to sign all such documents as will enable them to take advantage of any applicable
double taxation agreement or treaty. In the event there is no applicable double taxation agreement or treaty, or if
an applicable double taxation agreement or treaty reduces but does not eliminate such withholding or similar tax, the payor shall
pay such withholding or similar tax to the appropriate government authority, deduct the amount paid from the amount due to payee
and secure and send to payee the best available evidence of such payment.
5.9 Interest
on Late Payments. If any payment due to either Party under this Agreement is not paid when due, then such
paying Party shall pay interest thereon (before and after any judgment) at an annual rate (but with interest accruing on a daily
basis) of three percent above LIBOR, such interest to run from the date on which payment of such sum became due until payment thereof
in full together with such interest.
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5.10 Funding
under the Initial Development Plan. In consideration for Lightlake’s performance of its obligations under
the Initial Development Plan, upon the terms and conditions contained herein, for the shorter of the Term or the first (12) months
after the Effective Date, Adapt shall pay to Lightlake *** REDACTED *** Dollars ($*** REDACTED ***) per month plus the reasonable
and documented out-of-pocket costs and expenses incurred by Lightlake in delivering reasonably requested transition support in
accordance with the Initial Development Plan payable no later than fifteen days after the start of each such month and with respect
to out-of-pocket expenses, payable no later than thirty days after the receipt of an invoice from Lightlake. Payments
made under this Section 5.10 shall not be considered Development Costs, Regulatory Costs or Commercialization Costs for
purposes of Section 3.8.
5.11 Development
Costs; Regulatory Costs and Commercialization Costs.
5.11.1 Report
of Development Costs, Regulatory Costs and Commercialization Costs. Within thirty (30) days following the end of
each calendar month beginning with the Effective Date and ending with the month in which the Lightlake Cost Cap has been reached,
Lightlake shall prepare and deliver to Adapt a report detailing its Development Costs for the preceding month, and Adapt shall,
within fifteen (15) days thereafter, prepare and deliver to Lightlake a report (i) detailing Adapt’s Development Costs, Regulatory
Costs and Commercialization Costs incurred during such preceding month, (ii) setting forth a reconciliation of the amounts for
which each Party is responsible pursuant to Section 3.8.1, and (iii) indicating the amount in Dollars due to Lightlake or
Adapt, as applicable for such calendar month (each, a “Reconciliation Development Payment”). Each
Party shall provide such additional detail regarding its reported costs as the other Party shall reasonably request.
5.11.2 Reconciliation
Payments. Within fifteen (15) days after Adapt delivers each of its monthly reports pursuant to Section 5.11.1,
the Party to whom a Reconciliation Development Payment is due shall issue an invoice to the other Party for the Reconciliation
Development Payment, which invoice shall be due and payable within fifteen (15) days thereafter.
5.12 Financial
Records. Adapt shall, and shall cause its Affiliates to, keep complete and accurate books and records pertaining
to Net Sales of Products, and any other records reasonably required to be maintained with respect to each Party’s obligations
under this Agreement, and each Party shall maintain complete and accurate records in sufficient detail to permit the other Party
to confirm the accuracy of all Development Costs, Regulatory Costs and Commercialization Costs invoiced by one Party to the other
Party pursuant to Section 5.11.2 in sufficient detail to calculate all amounts payable hereunder and to verify compliance
with its obligations under this Agreement. Such books and records shall be retained by a Party and its Affiliates until
the later of (i) three (3) years after the end of the period to which such books and records pertain, and (ii) the expiration
of the applicable tax statute of limitations (or any extensions thereof), or for such longer period as may be required by Applicable
Law.
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5.13 Audit.
5.13.1 Audit. At
the request of a Party, the other Party shall, and shall cause its Affiliates to, permit an independent auditor designated by auditing
Party and reasonably acceptable to the audited Party, at reasonable times and upon reasonable notice, to audit the books
and records maintained pursuant to Section 5.12 to ensure the accuracy of all reports and payments made hereunder; provided,
however, that such audit right may be exercised no more than once in any Calendar Year; provided, that once the reports and payments
for any particular period have been audited hereunder, such reports and payments shall not be the subject of any future audit absent
fraud; provided, further, that the reports and payments made in any particular Calendar Year shall be subject to audit only until
the end of the third Calendar Year following the Calendar Year in which such reports or payments were made. Except as
provided below, the cost of this audit shall be borne by the auditing Party, unless the audit reveals a discrepancy in favor of
the audited Party of more than five percent (5%) from the reported amounts for the audited Party, in which case the audited Party
shall bear the cost of the audit. Unless disputed pursuant to Section 5.13.2, if such audit concludes that (x) additional
amounts were owed by the audited Party, the audited Party shall pay the additional amounts, with interest from the date
originally due as provided in Section 5.9, or (y) excess payments were made by audited Party, the auditing Party shall
reimburse such excess payments, in either case ((x) or (y)), within sixty (60) days after the date on which such audit is completed
by the auditing Party. The audited Party may require the accounting firm to sign a customary non-disclosure agreement
before providing the accounting firm access to the audited Party’s facilities or records. Upon completion of the
audit, the accounting firm shall provide both Parties a written report disclosing whether the reports submitted by the audited
Party are correct or incorrect, whether the calculations set forth in the reports submitted by the audited Party are correct or
incorrect, and, in each case, the specific details concerning any discrepancies. No other information shall be provided
to the auditing Party.
5.13.2 Audit
Dispute. In the event of a dispute with respect to any audit under Section 5.13.1, Lightlake and Adapt shall
work in good faith to resolve the disagreement. If the Parties are unable to reach a mutually acceptable resolution
of any such dispute within thirty (30) days, the dispute shall be submitted for resolution to a certified public accounting firm
jointly selected by each Party’s certified public accountants or to such other Person as the Parties shall mutually agree
(the “Audit Arbitrator”). The decision of the Audit Arbitrator shall be final and the costs
of such arbitration as well as the initial audit shall be borne between the Parties in inverse proportion to Party’s positions
with respect to such dispute, as determined by the Audit Arbitrator. Not later than ten (10) days after such decision and in accordance
with such decision, the audited Party shall pay the additional amounts, with interest from the date originally due as provided
in Section 5.9, or the auditing Party shall reimburse the excess payments, as applicable.
5.13.3 Confidentiality. The
auditing Party shall treat all information subject to review under this Section 5.13 in accordance with the confidentiality
provisions of Article 7 and the Parties shall cause the Audit Arbitrator to enter into a reasonably acceptable confidentiality
agreement with the auditing Party obligating such firm to retain all such financial information in confidence pursuant
to such confidentiality agreement.
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5.14 No
Other Compensation. Each Party hereby agrees that the terms of this Agreement fully define all consideration, compensation
and benefits, monetary or otherwise, to be paid, granted or delivered by one Party to the other Party in connection with the transactions
contemplated herein. Neither Party previously has paid or entered into any other commitment to pay, whether orally or in writing,
any of the other Party’s employees, independent contractors or agents, directly or indirectly, any consideration, compensation
or benefits, monetary or otherwise, in connection with the transaction contemplated herein.
ARTICLE 6
INTELLECTUAL PROPERTY
6.1 Ownership
of Intellectual Property.
6.1.1 Ownership
of Technology. As between the Parties, each Party shall own and retain all right, title, and interest in
and to any and all Inventions and Information that are conceived, discovered, developed, or otherwise made solely by or on behalf
of such Party (or its Affiliates or Sublicensees) under or in connection with this Agreement, whether or not patented or patentable,
and any and all Patents and other intellectual property rights with respect thereto.
6.1.2 Ownership
of Joint Patents and Joint Know-How. As between the Parties, the Parties shall each own an equal, undivided
interest in any and all (i) Inventions and Information that are conceived, discovered, developed or otherwise made jointly
by or on behalf of Lightlake or its Affiliates, on the one hand, and Adapt or its Affiliates or Sublicensees, on the other hand,
in connection with the work conducted under or in connection with this Agreement, whether or not patented or patentable (the “Joint
Know-How”), and (ii) Patents (the “Joint Patents”) and other intellectual property rights
with respect to the Inventions and Information described in clause (i) (together with Joint Know-How and Joint Patents, the “Joint
Intellectual Property Rights”). Each Party shall promptly disclose to the other Party in writing, and shall
cause its Affiliates, (and in the case of Adapt, its Sublicensees) to so disclose, the development, making, conception or reduction
to practice of any Joint Know-How or Joint Patents. Subject to the licenses and rights of reference granted under Sections
4.1 and 4.2, and each Party’s exclusivity obligations in Section 4.5, each Party shall have the right to
Exploit the Joint Intellectual Property Rights without a duty of seeking consent or accounting to the other Party.
6.1.3 United
States Law. The determination of whether Information and Inventions are conceived, discovered, developed,
or otherwise made by a Party for the purpose of allocating proprietary rights (including Patent, copyright or other intellectual
property rights) therein, shall, for purposes of this Agreement, be made in accordance with Applicable Law in the United States
as such law exists as of the Effective Date irrespective of where such conception, discovery, development or making occurs.
6.1.4 Assignment
Obligation. Each Party shall cause all Persons who perform activities for such Party under this Agreement
to be under an obligation to assign their rights in any Inventions resulting therefrom to such Party.
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6.2 Maintenance
and Prosecution of Lightlake Patents.
6.2.1 Lightlake
Right. As between the Parties, Lightlake shall have the first right, but not the obligation, to prepare, file, prosecute
(including any reissues, re-examinations, post-grant proceedings, requests for patent term extensions, supplementary protection
certificates, interferences, derivation proceedings, supplemental examinations and defense of oppositions) and maintain the Lightlake
Patents. Lightlake shall keep Adapt informed with regard to the filing, prosecution and maintenance of Lightlake Patents,
including by providing Adapt with (i) copies of material communications to and from any patent authorities regarding Lightlake
Patents, and (ii) drafts of any material filings or responses to be made to such patent authorities regarding Lightlake Patents
sufficiently in advance of submitting such filings or responses so as to allow a reasonable opportunity for Adapt to review and
comment thereon. Lightlake shall not be bound by, but shall consider in good faith, the comments of Adapt with respect
to such Lightlake drafts and with respect to strategies for filing and prosecuting the Lightlake Patents. If Adapt fails
to provide its comments with respect to such filing and prosecution of Lightlake Patents reasonably in advance of the deadline
for filing or otherwise responding to the patent authorities, Lightlake shall be free to act without consideration of Adapt’s
comments.
6.2.2 Adapt
Right. In the event that Lightlake intends not to prepare, file, prosecute, or maintain a Lightlake Patent, Lightlake
shall provide reasonable prior written notice to Adapt of such intention (which notice shall, in any event, be given no later than
ten (10) days prior to the next deadline for any action that may be taken with respect to such Patent), and Adapt shall thereupon
have the option, in its sole discretion and at its sole cost, to assume the control and direction of the preparation, filing, prosecution,
and maintenance of such Patent on Lightlake’s behalf with respect to claims covering Products.
6.2.3 Costs. Subject
to Section 6.2.2, the costs of prosecution and maintenance of the Lightlake Patents shall be initially borne by the Party
conducting such prosecution and maintenance.
6.3 Maintenance
and Prosecution of Product Specific Patents, Adapt Applied Patents and Joint Patents.
6.3.1 Adapt
Right. Adapt shall have the first right, but not the obligation, to prepare, file, prosecute (including any reissues,
re-examinations, post-grant proceedings, requests for patent term extensions, supplementary protection certificates, interferences,
derivation proceedings, supplemental examinations and defense of oppositions) and maintain the Adapt Applied Patents, the Product
Specific Patents and Joint Patents worldwide, at Adapt’s cost. Adapt shall keep Lightlake informed with regard
to the filing, prosecution and maintenance of Adapt Applied Patents, Product Specific Patents and Joint Patents, including by providing
Lightlake with (i) copies of material communications to and from any patent authorities regarding Adapt Applied Patents, the Product
Specific Patents and Joint Patents, and (ii) drafts of any material filings or responses to be made to such patent authorities
regarding Adapt Applied Patents and Joint Patents sufficiently in advance of submitting such filings or responses so as to allow
a reasonable opportunity for Lightlake to review and comment thereon. Adapt shall not be bound by, but shall consider
in good faith, the comments of Lightlake with respect to such Adapt drafts and with respect to strategies for filing and prosecuting
the Adapt Applied Patents, the Product Specific Patents and the Joint Patents. If Lightlake fails to provide its comments
with respect to such filing and prosecution of Adapt Applied Patents, Product Specific Patents or Joint Patents reasonably in advance
of the deadline for filing or otherwise responding to the patent authorities, Adapt shall be free to act without consideration
of Lightlake’s comments.
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6.3.2 Lightlake
Right. In the event that Adapt intends not to prosecute or maintain a Adapt Applied Patent, Product Specific Patent
or a Joint Patent in any country in the world, Adapt shall provide reasonable prior written notice to Lightlake of such intention
(which notice shall, in any event, be given no later than ten (10) days prior to the next deadline for any action that may be taken
with respect to such Adapt Applied Patent or Joint Patent), and Lightlake shall thereupon have the option, in its sole discretion
and at its sole cost, to assume the control and direction of the prosecution and maintenance of such Adapt Applied Patent, Product
Specific Patent or Joint Patent in such country on Adapt’s behalf.
6.3.3 Costs. Subject
to Section 6.3.2, the costs of prosecution and maintenance of the Adapt Applied Patent, Product Specific Patent or a Joint
Patent shall be borne by the Party conducting such prosecution and maintenance.
6.4 Infringement
by Third Parties.
6.4.1 Notice. Each
Party shall promptly give the other written notice if it reasonably believes that any Lightlake Patent, Lightlake Know-How, Adapt
Applied Patent, Adapt Applied Know-How, Product Specific Patent, Joint Invention or Joint Patent is being infringed or misappropriated
by a Third Party, and shall provide the other Party with all available evidence supporting such belief.
6.4.2 Products. In
the event of an actual or suspected infringement or misappropriation of any Lightlake Patent, Lightlake Know-How, Adapt Applied
Patent, Adapt Applied Know-How, Product Specific Patent, Joint Invention or Joint Patent by a Third Party that is conducting the
manufacture, use, sale, offer for sale or import of a Product or a product which may compete with a Product, the following shall
apply:
(a) The
Party first becoming aware of such actual or suspected infringement shall promptly notify the other Party. Adapt shall
have the first right, but not the obligation, to institute and prosecute an action or proceeding to abate such infringement or
misappropriation and to resolve such matter by settlement or otherwise.
(b) Adapt
agrees to notify Lightlake of its intention to bring an action or proceeding and to keep Lightlake informed of material developments
in the prosecution or settlement of such action or proceeding. Adapt shall be responsible for all costs and expenses
of any action or proceeding that Adapt initiates and maintains. Subject to Section 6.4.3(a), Lightlake shall
cooperate fully in any such action or proceeding at its expense by executing and making available such documents as Adapt may reasonably
request. Lightlake may be represented by counsel of its choice in any such action or proceeding, at Lightlake’s
expense, acting in an advisory but not controlling capacity. Subject to Section 6.4.3, the prosecution, settlement,
or abandonment of any infringement action or proceeding brought by Adapt shall be at Adapt’s sole discretion.
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(c) If
Adapt fails or elects not to exercise such first right within sixty (60) days of evidence of an actual infringement, Lightlake
shall have the right, at its discretion, to institute and prosecute an action or proceeding to abate such infringement and to resolve
such matter by settlement or otherwise. Lightlake shall keep Adapt informed of material developments in the prosecution
or settlement of such action or proceeding. Lightlake shall be responsible for all costs and expenses of any action
or proceeding that Lightlake initiates. Adapt shall cooperate fully by joining as a party plaintiff if required to do
so by law to maintain such action and by executing and making available such documents as Lightlake may reasonably request. Adapt
may be represented by counsel in any such action or proceeding at its own expense. The prosecution, settlement, or abandonment
of any infringement action or proceeding brought by Lightlake shall be at Lightlake’s sole discretion; provided, that Lightlake
may not enter into any settlement that requires Adapt or its Affiliates or Sublicensees to pay any sum of money, subjects Adapt
or its Affiliates or Sublicensees to any injunctive relief or other equitable remedies, or otherwise adversely affects Adapt’s
rights or interests in the applicable Lightlake Patent, Lightlake Know-How, Adapt Applied Patent, Adapt Applied Know-How, Product
Specific Patent, Joint Invention or Joint Patent or with respect to a Product without Adapt’s written consent, which consent
shall not be unreasonably withheld.
6.4.3 Cooperation;
Damages.
(a) If
one Party brings any suit, action or proceeding under Section 6.4.2, the other Party agrees to be joined as party plaintiff
if necessary to prosecute the suit, action or proceeding and to give the first Party reasonable authority to file and prosecute
the suit, action or proceeding at the first Party’s cost; provided, however, that neither Party will be required to transfer
any right, title or interest in or to any property to the other Party or any other party to confer standing on a Party hereunder.
(b) The
Party not pursuing the suit, action or proceeding hereunder will provide reasonable assistance to the other Party, including by
providing access to relevant documents and other evidence and making its employees available, subject to the other Party’s
reimbursement of any out-of-pocket costs and expenses incurred by the non-enforcing or defending Party in providing such assistance.
(c) Adapt
shall not, without the prior written consent of Lightlake (in its sole discretion), enter into any compromise or settlement relating
to any claim, suit or action that it brought under Section 6.4.2 involving a Lightlake Patent that admits the invalidity
or unenforceability of such Lightlake Patent or requires Lightlake to pay any sum of money, or otherwise adversely affects the
rights of Lightlake with respect to such Lightlake Patents or Lightlake’s rights hereunder (including the rights to receive
payments).
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(d) Any
settlements, damages or other monetary awards (a “Recovery”) recovered pursuant to a suit, action or proceeding
brought pursuant to Section 6.4.2 will be allocated first to the costs and expenses of the Party taking such action, and
second, to the costs and expenses (if any) of the other Party, with any remaining amounts (if any) to be allocated as follows:
(i) to the extent that such Recovery is a payment for lost sales of Product, any remaining amount will be paid to Adapt but will
be considered Net Sales for such Product during the Calendar Quarter in which such amounts are received solely for the purposes
of calculating royalties pursuant to Section 5.4 and (ii) in the event such Recovery relates to the Product generally, all
remaining amounts shall be payable to the Party taking such action.
6.4.4 Other
Infringement and Defense of Lightlake Patents. For clarity, with respect to any and all infringement or defense
of any Lightlake Patent with respect to products other than Products, subject to Section 6.6, Lightlake (or its designee)
shall have the sole and exclusive right to bring an appropriate suit or other action against any Person engaged in such infringement
or defense of any such Lightlake Patents in its sole discretion and Adapt shall have no rights with respect thereto.
6.5 Patent
Listings. Adapt shall have the sole right to make all filings with Regulatory Authorities with respect to Product
Specific Patents, Adapt Applied Patents and Lightlake Patents (subject to Section 6.6) and Joint Patents in relation to the Product,
including as required or allowed (i) in the United States, in the FDA’s Orange Book, and (ii) outside the United States,
under the national implementations of Article 10.1(a)(iii) of Directive 2001/EC/83 or other international equivalents; provided
that Adapt shall consult with Lightlake prior to making any such filing and consider Lightlake’s comments on such filing
in good faith.
6.6 Coordination
In Respect of Lightlake Patents. Notwithstanding anything herein, in the event that a Party reasonably believes,
in its sole discretion, that there is a risk that any enforcement action or proceeding in respect of any Lightlake Patent, or any
listing of a Lightlake Patent in the FDA’s Orange Book, in respect of a Product or any other product, would restrict the
scope, or adversely affect the enforceability or validity, of such Lightlake Patent in relation to such Party’s rights in
such Lightlake Patent, no listing, suit, action, proceeding or strategic decision (including decisions concerning jurisdiction,
venue, joinder, causes of action (including patent infringement claims and enforcement actions), claims, defenses, substantive
motions, claim construction, tutorials, experts, covenants-not-to-sue, dismissal, settlement, trial and/or appeal) may be made
by the Party controlling (or having the right to control) such action or proceeding or listing without first notifying the other
Party of such intended action, consulting in good faith with the other Party with respect thereto and reasonably considering the
other Party’s views with respect to such action and, in the case of Adapt, its Affiliates and Sublicensees, without the prior
written consent of Lightlake, which consent shall not be unreasonably withheld, conditioned, or delayed.
6.7 Patent
Marking. Adapt shall mark the Product marketed and sold by Adapt (or its Affiliate or distributor) hereunder with
appropriate patent numbers or indicia at Lightlake’s request.
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ARTICLE 7
CONFIDENTIALITY AND NON-DISCLOSURE
7.1 Confidentiality
Obligations. At all times during the Term and for a period of ten (10) years following termination or expiration
hereof in its entirety, each Party shall, and shall cause its Affiliates, and its and their respective officers, directors, employees
and agents to, keep confidential and not publish or otherwise disclose to a Third Party and not use, directly or indirectly, for
any purpose, any Confidential Information furnished or otherwise made known to it, directly or indirectly, by the other Party,
except to the extent such disclosure or use is expressly permitted by the terms of this Agreement or is reasonably necessary or
useful for the performance of a Party’s obligations, or the exercise of a Party’s rights, under this Agreement. Confidential
Information disclosed under the Existing CDAs shall be considered Confidential Information disclosed under this Agreement and subject
to the terms and conditions of this Agreement. Notwithstanding the foregoing, but to the extent the receiving Party
can demonstrate by documentation or other competent proof, the confidentiality and non-use obligations under this Section 7.1
with respect to any Confidential Information shall not include any information that:
7.1.1 has
been published by a Third Party or is or hereafter becomes part of the public domain by public use, publication, general knowledge
or the like through no wrongful act, fault or negligence on the part of the receiving Party;
7.1.2 has
been in the receiving Party’s possession prior to disclosure by the disclosing Party without any obligation of confidentiality
with respect to such information; provided that the foregoing exception shall not apply with respect to Joint Know-How;
7.1.3 is
subsequently received by the receiving Party from a Third Party without restriction and without breach of any agreement between
such Third Party and the disclosing Party; or
7.1.4 has
been independently developed by or for the receiving Party without reference to, or use or disclosure of the disclosing Party’s
Confidential Information; provided that the foregoing exception shall not apply with respect to Joint Know-How.
Specific aspects or details of Confidential
Information shall not be deemed to be within the public domain or in the possession of the receiving Party merely because the Confidential
Information is embraced by more general information in the public domain or in the possession of the receiving Party. Further,
any combination of Confidential Information shall not be considered in the public domain or in the possession of the receiving
Party merely because individual elements of such Confidential Information are in the public domain or in the possession of the
receiving Party unless the combination and its principles are in the public domain or in the possession of the receiving Party. Joint
Know-How shall be considered the Confidential Information of both Parties.
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7.2 Permitted
Disclosures. Each Party may disclose Confidential Information to the extent that such disclosure is:
7.2.1 in
the reasonable opinion of the receiving Party’s legal counsel, required to be disclosed pursuant to Applicable Law or made
in response to a valid order of a court of competent jurisdiction or other supra-national, federal, national, regional, state,
provincial and local governmental or regulatory body of competent jurisdiction, including by reason of filing with securities regulators;
provided, however, that the receiving Party, to the extent practicable and legally permissible, shall first have given prompt written
notice (and to the extent practicable and legally permissible, at least five (5) Business Days’ notice) to the disclosing
Party and given the disclosing Party a reasonable opportunity to take whatever action it deems necessary to protect its Confidential
Information (for example, quash such order or to obtain a protective order or confidential treatment requiring that the Confidential
Information and documents that are the subject of such order be held in confidence by such court or regulatory body or, if disclosed,
be used only for the purposes for which the order was issued). In the event that no protective order or other remedy
is sought or obtained, or the disclosing Party waives compliance with the terms of this Agreement, receiving Party shall furnish
only that portion of Confidential Information which receiving Party is advised by counsel is legally required to be disclosed;
7.2.2 made
by or on behalf of the receiving Party to Regulatory Authorities as required in connection with any filing, application or request
for Regulatory Approval in accordance with the terms of this Agreement; provided, however, that reasonable measures
shall be taken to assure confidential treatment of such information to the extent practicable and consistent with Applicable Law;
7.2.3 made
to its (actual or potential) Sublicensees, other Persons who have been granted rights to Exploit Products in accordance with this
Agreement, acquirers, financing sources, investors or permitted assignees under Section 11.3 and to their financial and
legal advisors who have a need to know such Confidential Information in connection with any such sublicense, financing, investment,
acquisition or assignment; provided that any such recipient of such Confidential Information agrees to be bound by the confidentiality
and non-use restrictions contemplated hereby; provided, further that the Party making such disclosure shall remain responsible
for any failure by any such Person to treat such Confidential Information as required under this Article 7.
7.2.4 made
to its or its Affiliates’ financial and legal advisors who have a need to know such Confidential Information, and in the
case of Lightlake, any Person who holds or will hold in the future any interest in any of Lightlake’s products, and, in each
case, are either under professional codes of conduct giving rise to expectations of confidentiality and non-use or under written
agreements of confidentiality and non-use, in each case, at least as restrictive as those set forth in this Agreement; provided
that the receiving Party shall remain responsible for any failure by such financial and legal advisors and other Persons contemplated
by this Section 7.2.4, to treat such Confidential Information as required under this Article 7.
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7.3 Use
of Name. Except as expressly provided herein, neither Party shall mention or otherwise use the name, logo, or Trademark
of the other Party or any of its Affiliates (or any abbreviation or adaptation thereof) in any publication, press release, marketing
and promotional material, or other form of publicity without the prior written approval of such other Party in each instance. The
restrictions imposed by this Section 7.3 shall not prohibit either Party from making any disclosure identifying the other
Party that are permitted pursuant to Section 7.2 or Section 7.4.
7.4 Public
Announcements. The Parties have agreed upon the content of press releases which shall be issued substantially in the form attached
hereto as Schedule 7.4, the release of which the Parties shall coordinate in order to accomplish such release promptly upon
execution of this Agreement. Except as contemplated by Section 7.5 or as otherwise agreed by the Parties, neither Party
shall issue any other public announcement, press release, or other public disclosure regarding this Agreement or its subject matter
without the other Party’s prior written consent, except for any such disclosure that is, in the opinion of the disclosing
Party’s counsel, required by Applicable Law or the rules of a stock exchange on which the securities of the disclosing Party
are listed or for information which has previously been made public. In the event a Party is, in the opinion of its
counsel, required by Applicable Law or the rules of a stock exchange on which its securities are listed to make such a public disclosure,
such Party shall submit the proposed disclosure in writing to the other Party as far in advance as reasonably practicable (and
in no event less than three (3) Business Days prior to the anticipated date of disclosure) so as to provide a reasonable opportunity
to comment thereon and such required Party shall consider all comments from such other Party in good faith.
7.5 Publications.
Each Party recognizes that the publication of papers regarding results of and other information regarding activities under this
Agreement may be beneficial to the Development and Commercialization of Products. Accordingly, Adapt and its Affiliates
and Sublicensees shall have the right to publish or present or permit the publication or presenting of papers and presentations
that contain clinical data regarding, or pertain to results of clinical testing of, Products (each, a “Publication”);
provided, however, that such publications do not contain the Confidential Information of Lightlake and Lightlake shall be provided
with a copy of any such Publication in advance of public publication or presentation thereof and Adapt shall consider
in good faith any comments Lightlake may have with respect thereto. For clarity, Lightlake Confidential Information
shall include all Lightlake Information existing on the Effective Date other than the Pharmacokinetics Data.
7.6 Return
of Confidential Information. Upon the effective date of the termination of this Agreement for any reason,
either Party may request in writing, and the other Party shall either, with respect to Confidential Information to which such first
Party does not retain rights under the surviving provisions of this Agreement: (i) promptly destroy all copies of such Confidential
Information in the possession of the other Party and confirm such destruction in writing to the requesting Party; or (ii) promptly
deliver to the requesting Party, at the other Party’s expense, all copies of such Confidential Information in the possession
of the other Party; provided, however, the other Party shall be permitted to retain one (1) copy of such Confidential Information
for the sole purpose of performing any continuing obligations hereunder or for archival purposes. Notwithstanding the
foregoing, such other Party also shall be permitted to retain such additional copies of or any computer records or files containing
such Confidential Information that have been created solely by such Party’s automatic archiving and back-up procedures, to
the extent created and retained in a manner consistent with such other Party’s standard archiving and back-up procedures,
but not for any other use or purpose.
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7.7 Survival. All
Confidential Information shall continue to be subject to the terms of this Agreement for the period set forth in Section 7.1.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
8.1 Mutual
Representations and Warranties. Lightlake and Adapt each represents and warrants to the other, as of the Effective
Date, and covenants, as follows:
8.1.1 Organization. It
is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization, and has all requisite
power and authority, corporate or otherwise, to execute, deliver, and perform this Agreement.
8.1.2 Authorization. The
execution and delivery of this Agreement and the performance by it of its obligations contemplated hereby have been duly authorized
by all necessary corporate action, and do not violate (i) such Party’s charter documents, bylaws, or other organizational
documents, (ii) in any material respect, any agreement, instrument, or contractual obligation to which such Party is bound,
(iii) any requirement of any Applicable Law, or (iv) any order, writ, judgment, injunction, decree, determination, or
award of any court or governmental agency presently in effect applicable to such Party.
8.1.3 Binding
Agreement. This Agreement is a legal, valid, and binding obligation of such Party enforceable against it in accordance
with its terms and conditions, subject to the effects of bankruptcy, insolvency, or other laws of general application affecting
the enforcement of creditor rights, judicial principles affecting the availability of specific performance, and general principles
of equity (whether enforceability is considered a proceeding at law or equity).
8.1.4 Consents
and Approvals. No consent, approval, waiver, order or authorization of, or registration, declaration or filing with,
any Third Party is required in connection with the execution, delivery and performance of this Agreement by such Party or the performance
by such Party of its obligations contemplated hereby or thereby.
8.1.5 No
Inconsistent Obligation. It is not under any obligation, contractual or otherwise, to any Person that conflicts
with or is inconsistent in any material respect with the terms of this Agreement, or that would impede the diligent and complete
fulfillment of its obligations hereunder.
8.2 Additional
Representations and Warranties of Lightlake. Lightlake further represents and warrants to Adapt, as of the Effective
Date, and covenants, as follows:
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8.2.1 Lightlake
has the right to grant the licenses specified herein.
8.2.2 Lightlake
is the sole and exclusive owner of the entire right, title and interest in the Product Specific Patents and the Lightlake Know-How. Such
rights are not subject to any Liens in favor of, or claims of ownership by, any Third Party. True and correct copies
of the complete file wrapper and other documents and materials relating to the prosecution, defense, maintenance, validity and
enforceability of the Product Specific Patents, as amended through the date hereof, have been provided to Adapt prior to the date
first above written. No Lightlake Patents exist as of the date hereof.
8.2.3 The
Product Specific Patents are being diligently prosecuted in each country in respect of which applications have been made in the
respective patent offices in accordance with all Applicable Laws and regulations. The Product Specific Patents have
been filed and maintained properly and correctly and all applicable fees have been paid on or before the due date for payment.
8.2.4 To
Lightlake’s knowledge, the Exploitation by Adapt and its Affiliates and Sublicensees hereunder of the Products will not infringe
any Patent or other intellectual property or proprietary right of any Person.
8.2.5 The
conception, development and reduction to practice of the Product Specific Patents and Lightlake Know-How existing as of the Effective
Date have not constituted or involved the misappropriation of trade secrets or other rights or property of any Person. There
are no claims, judgments or settlements against or amounts with respect thereto owed by Lightlake or any of its Affiliates relating
to the existing Regulatory Filings, the Product Specific Patents or the Lightlake Know-How.
8.2.6 Lightlake
Controls all Information, other than Identifiable Private Information (as defined in the NIDA Agreement), generated in relation
to the Development activities contemplated by the NIDA Agreement.
8.2.7 To
its knowledge, Lightlake has conducted, and its contractors and consultants have conducted, all Development with respect to the
Product that it has conducted prior to the Effective Date in accordance with good laboratory practice and good clinical practices,
as applicable and defined by the FDA, and Applicable Law.
8.2.8 Neither
Lightlake nor any of its Affiliates, nor any of its or its Affiliates’ directors or officers has been debarred or is subject
to debarment and neither Lightlake nor any of its Affiliates will use in any capacity, in connection with the services to be performed
under this Agreement, any Person who has been debarred pursuant to Section 306 of the FFDCA or who is the subject of a conviction
described in such section. Lightlake shall inform Licensee in writing immediately if it or any Person who is performing
services hereunder is debarred or is the subject of a conviction described in Section 306 or if any action, suit, claim, investigation
or legal or administrative proceeding is pending or, to the best of Lightlake’s knowledge, is threatened, relating to the
debarment or conviction of Lightlake or any Person performing services on behalf of Lightlake hereunder.
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8.2.9 To
Lightlake’s knowledge, no Person is infringing or threatening to infringe the Product Specific Patents or misappropriating
or threatening to misappropriate the Lightlake Know-How.
8.2.10 Schedule
8.2.10 hereto includes a list of all agreements with Third Parties related to the Products, including agreements related to
the Development and Manufacture of the Products, in each case, that are in effect as of the Effective Date or that have post-termination
obligations (other than solely obligations to keep information confidential or to restrict use thereof after termination) for Lightlake
or the Third Party that are in effect as of the Effective Date (collectively, the “Relevant Contracts”). Lightlake
has disclosed and made available to Adapt full and complete copies of all such Relevant Contracts to Adapt. Lightlake
represents and warrants to Adapt that each Relevant Contract is a legal, valid, binding and enforceable agreement of Lightlake
or one of its Affiliates, as applicable, and is in full force and effect, and neither Lightlake nor any of its Affiliates or, any
other party thereto is in default or breach under the terms of, or has provided any notice of any intention to terminate or modify,
any such Relevant Contract, and, no event or circumstance has occurred that, with notice or lapse of time or both, would constitute
a breach thereof or a default thereunder or would result in a termination, modification, acceleration or vesting of any rights
or obligations or loss of benefits thereunder.
8.2.11 Lightlake
has made available to Adapt all material Regulatory Documentation owned or possessed by Lightlake regarding or related to the Products. Lightlake
has prepared, maintained or retained all material Regulatory Documentation required to be maintained or reported pursuant to and
in accordance with the applicable requirements of good laboratory practices and good clinical practices, as applicable, as defined
by the FDA, to the extent required, and Applicable Law, and such Regulatory Documentation does not contain any materially false
or misleading statements.
8.2.12 Lightlake has
disclosed to Adapt all material information known to Lightlake and its Affiliates with respect to the Products, including with
respect to the safety and efficacy thereof.
8.3 DISCLAIMER
OF WARRANTIES. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH HEREIN, NEITHER PARTY MAKES ANY REPRESENTATIONS OR GRANTS
ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND EACH PARTY SPECIFICALLY
DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY,
OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL
PROPERTY RIGHTS OF THIRD PARTIES.
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ARTICLE 9
INDEMNITY
9.1 Indemnification
of Lightlake. Adapt shall indemnify Lightlake, its Affiliates and its and their respective directors, officers,
employees, and agents (“Lightlake Indemnitees”), and defend and save each of them harmless, from and against
any and all losses, damages, liabilities, penalties, costs, and expenses (including attorneys’ fees and expenses) (collectively,
“Losses”) in connection with any and all suits, investigations, claims, or demands of Third Parties (collectively,
“Third Party Claims”) incurred by or rendered against the Lightlake Indemnitees arising from or occurring as
a result of: (i) the breach by Adapt of this Agreement, (ii) the gross negligence or willful misconduct on the part of
Adapt or its Affiliates or Sublicensees or its or their distributors or contractors or its or their respective directors, officers,
employees, and agents in performing its or their obligations under this Agreement, or (iii) the Exploitation by Adapt or any of
its Affiliates or Sublicensees or its or their distributors or contractors of any Product, or (iv) the breach of an Assigned Agreement
by any of Adapt or its Affiliates or Sublicensees or subcontractors or any of their successors or assigns after the Effective Date,
except (in each case) to the extent Lightlake has an obligation to indemnify Adapt Indemnities pursuant to Section 9.2 for
such Losses and Third Party Claims.
9.2 Indemnification
of Adapt. Lightlake shall indemnify Adapt, its Affiliates and its and their respective directors, officers,
employees, and agents (the “Adapt Indemnitees”), and defend and save each of them harmless, from and against
any and all Losses in connection with any and all Third Party Claims incurred by or rendered against the Adapt Indemnitees arising
from or occurring as a result of: (i) the breach by Lightlake of this Agreement, (ii) the gross negligence or willful misconduct
on the part of Lightlake or its Affiliates or its or their respective directors, officers, employees, and agents in performing
its obligations under this Agreement, (iii) any claim by any current or former Lightlake shareholder, investor or contributor that
any Adapt Indemnitee or any Sublicensee owes such Person any compensation in relation to the Exploitation of the Products or the
rights granted hereunder, or (iv) the pharmacokinetics study ongoing as of the Effective Date in respect of a Product, or (v) Lightlake’s
or its Affiliate’s or subcontractor’s violation of any Applicable Law, breach of any Relevant Contract, or gross negligence
or willful misconduct, in relation to the Exploitation of Products prior to the Effective Date, except (in each case) to the extent
Adapt has an obligation to indemnify Lightlake Indemnities pursuant to Section 9.1 for such Losses and Third Party Claims.
9.3 Notice
of Claim. All indemnification claims in respect of a Party, its Affiliates, or their respective directors, officers,
employees and agents shall be made solely by such Party to this Agreement (the “Indemnified Party”). The
Indemnified Party shall give the indemnifying Party prompt written notice (an “Indemnification Claim Notice”)
of any Losses or discovery of fact upon which such Indemnified Party intends to base a request for indemnification under this Article
9, but in no event shall the indemnifying Party be liable for any Losses that result from any delay in providing such notice. Each
Indemnification Claim Notice must contain a description of the claim and the nature and amount of such Loss (to the extent that
the nature and amount of such Loss is known at such time). The Indemnified Party shall furnish promptly to the indemnifying
Party copies of all papers and official documents received in respect of any Losses and Third Party Claims.
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9.4 Control
of Defense.
9.4.1 In
General. Except as otherwise contemplated by Article 6, at its option, the indemnifying Party may
assume the defense of any Third Party Claim by giving written notice to the Indemnified Party within thirty (30) days after the
indemnifying Party’s receipt of an Indemnification Claim Notice. The assumption of the defense of a Third Party
Claim by the indemnifying Party shall not be construed as an acknowledgment that the indemnifying Party is liable to indemnify
the Indemnified Party in respect of the Third Party Claim, nor shall it constitute a waiver by the indemnifying Party of any defenses
it may assert against the Indemnified Party’s claim for indemnification. Upon assuming the defense of a Third
Party Claim, the indemnifying Party may appoint as lead counsel in the defense of the Third Party Claim any legal counsel selected
by the indemnifying Party. In the event the indemnifying Party assumes the defense of a Third Party Claim, the Indemnified
Party shall immediately deliver to the indemnifying Party all original notices and documents (including court papers) received
by the Indemnified Party in connection with the Third Party Claim. Should the indemnifying Party assume the defense
of a Third Party Claim, except as provided in Section 9.4.2, the indemnifying Party shall not be liable to the Indemnified
Party for any legal expenses subsequently incurred by such Indemnified Party in connection with the analysis, defense or settlement
of the Third Party Claim unless specifically requested in writing by the indemnifying Party. In the event that it is
ultimately determined that the indemnifying Party is not obligated to indemnify, defend or hold harmless the Indemnified Party
from and against the Third Party Claim, the Indemnified Party shall reimburse the indemnifying Party for any and all costs and
expenses (including attorneys’ fees and costs of suit) and any Losses incurred by the indemnifying Party in its defense of
the Third Party Claim.
9.4.2 Right
to Participate in Defense. Without limiting Section 9.4.1, any Indemnified Party shall be entitled to participate
in, but not control, the defense of such Third Party Claim and to employ counsel of its choice for such purpose; provided,
however, that such employment shall be at the Indemnified Party’s own expense unless (i) the employment thereof
has been specifically authorized by the indemnifying Party in writing, (ii) the indemnifying Party has failed to assume the defense
and employ counsel in accordance with Section 9.4.1 (in which case the Indemnified Party shall control the defense), or
(iii) the interests of the Indemnified Party and the indemnifying Party with respect to such Third Party Claim are sufficiently
adverse to prohibit the representation by the same counsel of both Parties under Applicable Law or ethical rules.
9.4.3 Settlement. Except
as otherwise contemplated by Article 6, with respect to any Losses relating solely to the payment of money damages in connection
with a Third Party Claim and that shall not result in the Indemnified Party’s becoming subject to injunctive or other relief,
and as to which the indemnifying Party shall have acknowledged in writing the obligation to indemnify the Indemnified Party hereunder,
the indemnifying Party shall have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise
dispose of such Loss, on such terms as the indemnifying Party, in its sole discretion, shall deem appropriate. With
respect to all other Losses in connection with Third Party Claims, where the indemnifying Party has assumed the defense of the
Third Party Claim in accordance with Section 9.4.1, the indemnifying Party shall have authority to consent to the entry
of any judgment, enter into any settlement or otherwise dispose of such Loss; provided it obtains the prior written consent
of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed). If the indemnifying
Party does not assume and conduct the defense of a Third Party Claim as provided above, the Indemnified Party may defend against
such Third Party Claim; provided that the Indemnified Party shall not settle any Third Party Claim without the prior written
consent of the indemnifying Party, not to be unreasonably withheld, conditioned or delayed.
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9.4.4 Cooperation. Regardless
of whether the indemnifying Party chooses to defend or prosecute any Third Party Claim, the Indemnified Party shall, and shall
cause each indemnitee to, cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony,
provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested
in connection therewith. Such cooperation shall include access during normal business hours afforded to the indemnifying
Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third
Party Claim, and making Indemnified Parties and other employees and agents available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder, and the indemnifying Party shall reimburse the Indemnified
Party for all its reasonable out-of-pocket expenses in connection therewith.
9.4.5 Expenses. Except
as provided above, the costs and expenses, including fees and disbursements of counsel, incurred by the Indemnified Party in connection
with any Third Party Claim shall be reimbursed on a Calendar Quarter basis by the indemnifying Party, without prejudice to the
indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject to refund in the
event the indemnifying Party is ultimately held not to be obligated to indemnify the Indemnified Party.
9.5 Special,
Indirect, and Other Losses. EXCEPT IN THE EVENT OF A PARTY’S BREACH OF ITS OBLIGATIONS UNDER ARTICLE 7,
AND EXCEPT TO THE EXTENT ANY SUCH DAMAGES ARE REQUIRED TO BE PAID TO A THIRD PARTY AS PART OF A CLAIM FOR WHICH A PARTY PROVIDES
INDEMNIFICATION UNDER THIS ARTICLE 9, NEITHER PARTY NOR ANY OF ITS AFFILIATES SHALL BE LIABLE FOR INDIRECT, INCIDENTAL,
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS OR BUSINESS INTERRUPTION, HOWEVER CAUSED AND ON
ANY THEORY OF LIABILITY, WHETHER IN CONTRACT, TORT, NEGLIGENCE, BREACH OF STATUTORY DUTY OR OTHERWISE IN CONNECTION WITH OR ARISING
IN ANY WAY OUT OF THE TERMS OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH
DAMAGE.
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9.6 Insurance. Adapt
shall maintain insurance, including clinical trials insurance and product liability insurance, which is consistent with normal
business practices of similarly situated companies at all times during which the Product is being clinically tested in human subjects
or commercially distributed or sold, as applicable, by Adapt pursuant to this Agreement, and the clinical trials insurance coverage
shall, prior to the First Commercial Sale of a Product, in no event be less than Five Million Dollars ($5,000,000) per loss occurrence
and Five Million Dollars ($5,000,000) in the aggregate, and product liability insurance coverage shall, after such First Commercial
Sale, in no event be less than Ten Million Dollars ($10,000,000) per loss occurrence and Ten Million Dollars ($10,000,000) in the
aggregate. It is understood that such insurance shall not be construed to create a limit of Adapt’s liability
with respect to its indemnification obligations under this Article 9. Notwithstanding the foregoing, Adapt shall have no
obligation to maintain any insurance covering the pharmacokinetics study ongoing as of the Effective Date in respect of a Product
or any liabilities relating thereto.
ARTICLE 10
TERM AND TERMINATION
10.1 Term. This
Agreement shall commence on the Effective Date and, unless earlier terminated in accordance herewith, shall continue in force and
effect until terminated in accordance with this Article 10 (such period, the “Term”).
10.2 Adapt
Termination for Convenience. Adapt shall have the right to terminate this Agreement in its sole discretion,
either in its entirety or in respect of one or more countries, at any time by providing sixty (60) days prior written notice to
Lightlake.
10.3 Termination
for Material Breach. If either Party (the “Non-Breaching Party”) believes that the other Party
(the “Breaching Party”) has materially breached one or more of its obligations under this Agreement, then the
Non-Breaching Party may deliver notice of such material breach to the Breaching Party specifying the nature of the alleged breach
in reasonable detail (a “Default Notice”). Thereafter, the Non-Breaching Party shall have the right
to terminate this Agreement if the breach asserted in such Default Notice has not been cured within sixty (60) days after such
Default Notice. Notwithstanding the foregoing, (i) if such material breach, by its nature, cannot be remedied within
such sixty (60) day cure period, but can be remedied over a longer period not expected to exceed one hundred and fifty (150) days,
then such sixty (60) day period shall be extended for up to an additional ninety (90) days provided that the Breaching Party provides
the Non-Breaching Party with a reasonable written plan for curing such material breach and uses Commercially Reasonable Efforts
to cure such material breach in accordance with such written plan and (ii) if such material breach cannot be cured, but the effects
of such material breach are not such that the Non-Breaching Party would be deprived of the material benefits the Non-Breaching
Party would reasonably be expected to derive from this Agreement in the absence of such material breach, then the Non-Breaching
Party shall not be entitled to terminate this Agreement on the basis of such material breach unless the Breaching Party has previously
committed a substantially similar material breach of this Agreement. For clarity, a breach of Section 3.2.3 of
this Agreement shall not, notwithstanding anything herein, fall within the exception in subpart (ii) of the immediately preceding
sentence.
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10.4 Additional
Termination by Lightlake for Patent Challenge. In the event that Adapt or any of its Affiliates or Commercial
Sublicensees, institutes, prosecutes, or otherwise participates in (or knowingly and intentionally aids any Third Party in instituting,
prosecuting, or participating in), at law or in equity or before any administrative or regulatory body, including the U.S. Patent
and Trademark Office or its foreign counterparts, any claim, demand, action, or cause of action for declaratory relief, damages,
or any other remedy, or for an enjoinment, injunction, or any other equitable remedy, including any interference, re-examination,
opposition, or any similar proceeding, alleging that any claim in a Lightlake Patent is invalid, unenforceable, or otherwise not
patentable or would not be infringed by Adapt’s activities absent the rights and licenses granted hereunder, Lightlake shall
have the right to terminate this Agreement in its entirety, including the rights of any Sublicensees, upon written notice to Adapt,
unless Adapt withdraws or terminates the same, or terminates its agreement with such or Commercial Sublicensee, within ten (10)
days after receipt of notice from Lightlake referencing this Section 10.4.
10.5 Termination
for Insolvency. In the event that either Party (i) files for protection under bankruptcy or insolvency
laws, (ii) makes an assignment for the benefit of creditors, (iii) appoints or suffers appointment of a receiver or trustee
over substantially all of its property that is not discharged within ninety (90) days after such filing, (iv) proposes a written
agreement of composition or extension of its debts, (v) proposes or is a party to any dissolution or liquidation, (vi) files
a petition under any bankruptcy or insolvency act or has any such petition filed against that is not discharged within sixty (60)
days of the filing thereof, then the other Party may terminate this Agreement in its entirety effective immediately upon written
notice to such Party.
10.6 Effects
of Termination. In the event of a termination of this Agreement in its entirety by Lightlake pursuant to
Sections 10.3 and 10.4 or by Adapt pursuant to Section 10.2:
10.6.1 all
rights and licenses granted by Lightlake hereunder shall immediately terminate;
10.6.2 Adapt
shall, and hereby does effective as of the effective date of termination, grant Lightlake an exclusive license, with the right
to grant multiple tiers of sublicenses, under the Adapt Applied Patents, Adapt Applied Know-How, and Adapt’s rights under
the Joint Patents and Joint Know-How to Exploit Products;
10.6.3 Adapt
shall, and hereby does, effective as of the effective date of termination, assign to Lightlake at Adapt’s expense, all of
its right, title, and interest in and to all Regulatory Approvals applicable to any Product, and all Regulatory Documentation specific
to such Regulatory Approvals then owned by Adapt or any of its Affiliates, and shall use Commercially Reasonable Efforts to cause
any and all Sublicensees to assign to Lightlake any such Regulatory Approvals and related Regulatory Documentation then owned by
such Sublicensee;
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10.6.4 Adapt
shall, and hereby does effective as of the effective date of termination, grant Lightlake an exclusive, license and right of reference,
with the right to grant multiple tiers of sublicenses and further rights of reference, under all Regulatory Documentation (including
any Regulatory Approvals) then owned or Controlled by Adapt or any of its Affiliates that are not assigned to Lightlake pursuant
to Section 10.6.3 above that are necessary or useful for Lightlake or any of its Affiliates or sublicensees to Exploit any
Product and any improvement to any of the foregoing, as such Regulatory Documentation exists as of the effective date of such termination
of this Agreement and Adapt shall use Commercially Reasonable Efforts to cause its Commercial Sublicensees to grant comparable
rights under all Regulatory Documentation (including any Regulatory Approvals) then owned or Controlled by such Commercial Sublicensees;
10.6.5 at
Lightlake’s request, assign to Lightlake all right, title, and interest of Adapt in each Product Trademark at Adapt’s
expense; and
10.6.6 at
Lightlake’s request, assign to Lightlake all right, title, and interest in and to the Development Data that Adapt is not
precluded from disclosing or assigning to Lightlake pursuant to the terms of any applicable agreement with a Third Party; provided,
however, that Adapt shall use Commercially Reasonable Efforts (which shall not include any obligation to expend money) to obtain
the consent of the applicable Third Party for such disclosure and/or assignment in the event that Adapt is so precluded.
10.7 Transition
Assistance.
10.7.1 In
the event of a termination of this Agreement in its entirety by Lightlake pursuant to Sections 10.3 and 10.4 or by
Adapt pursuant to Section 10.2, Adapt shall:
(a) cooperate
with Lightlake and notify the applicable Regulatory Authorities and take any other action reasonably necessary to effect
the transfer of the Regulatory Documentation set forth in Section 10.6.3;
(b) unless
expressly prohibited by any Regulatory Authority, at Lightlake’s written request, transfer control to Lightlake of all clinical
studies being conducted by Adapt as of the effective date of termination and continue to conduct such clinical studies, at Adapt’s
cost, for up to six (6) weeks to enable such transfer to be completed without interruption of any such clinical study except if
this Agreement is terminated by Adapt pursuant to Section 10.3; in which case such expense shall be borne by Lightlake;
provided that (A) Lightlake shall not have any obligation to continue any clinical study unless required by Applicable Law,
and (B) with respect to each clinical study for which such transfer is expressly prohibited by the applicable Regulatory Authority,
if any, Adapt shall continue to conduct such clinical study to completion, at Adapt’s cost; except if this Agreement is terminated
by Adapt pursuant to Section 10.3; in which case such cost shall be borne by Lightlake;
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(c) at
Lightlake’s request, assign (or cause its Affiliates to assign) to Lightlake any or all agreements with any Third Party with
respect to the conduct of pre-clinical development activities or clinical studies for the Products, including agreements with contract
research organizations, clinical sites, and investigators, unless, with respect to any such agreement, such agreement expressly
prohibits such assignment, in which case Adapt shall cooperate with Lightlake in reasonable respects to secure the consent of the
applicable Third Party to such assignment; and Lightlake shall assume all ongoing obligations under all such contracts so assigned;
(d) at
Lightlake’s written request, Adapt shall assign to Lightlake any Third Party contracts for the Manufacture of Products that
may be assigned without the counterparty’s consent or, in the case of any such contract that cannot be so assigned without
consent, Adapt shall use Commercially Reasonable Efforts (which shall not include any obligation to expend money) to obtain any
requisite consent for such assignment and shall assign such contract to Lightlake upon receipt of such consent, and, in the case
of each such assignment, Lightlake shall assume all of Adapt’s obligations under the relevant contract, except to the extent
that the same relate to any breach of such contract by Adapt; and
(e) Adapt
shall duly execute and deliver, or cause to be duly executed and delivered, such instruments and shall do and cause to be done
such acts and things, including the filing of such assignments, agreements, documents, and instruments, as may be necessary under,
or as Lightlake may reasonably request in connection with, or to carry out more effectively the purpose of, or to better assure
and confirm unto Lightlake its rights under, this Section 10.7.1 and Section 10.6.
10.8 Post-Termination
Royalties.
10.8.1 As
further consideration for the licenses, assignments and transfers set forth in Section 10.6 and Section10.7, following
termination of this Agreement by Lightlake pursuant to Section 10.3 or 10.4 or by Adapt pursuant to Section 10.2,
until Adapt has recouped one-hundred percent (100%) (i) of the Development Costs which were incurred by it in Developing the Products
in accordance with the Initial Development Plan or any subsequent Development Plan (excluding costs borne by Lightlake in accordance
with Section 3.8.1) and such Development Costs were borne by Adapt prior to the effective date of termination, (ii) the
upfront payments paid to Lightlake pursuant to Section 5.1, (iii) the Regulatory Milestones paid to Lightlake pursuant to
Section 5.2, (iv) the Sales-Based Milestones paid to Lightlake pursuant to Section 5.3, (iv) and any upfront license
payments and milestones paid to Third Parties pursuant to Section 5.5, Lightlake shall pay to Adapt a royalty of *** REDACTED
***percent (*** REDACTED ***%) Net Sales of Product. Sections 5.4.2, 5.5, 5.6, 5.7, 5.8,
5.9, 5.12, 5.13.1 and 5.13.2 shall apply to Lightlake with respect to the Net Sales by Lightlake
of Products mutatis mutandis, except that all references in the definition of Net Sales to Adapt shall deemed to refer to
Lightlake.
10.8.2 In
the event of a termination by Adapt pursuant to Section 10.3, Adapt shall continue to pay Lightlake royalties subject to
and in accordance with Sections 5.4, and 5.5; provided, however, that each royalty rate contemplated by Sections
5.4.1 and 5.4.2 shall be reduced by *** REDACTED ***% for all royalties owing after the effective date of termination.
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10.9 Remedies. Except
as otherwise expressly provided herein, termination of this Agreement (either in its entirety or with respect to one or more country(ies))
or other jurisdiction(s) in accordance with the provisions hereof shall not limit remedies that may otherwise be available in law
or equity.
10.10 Accrued
Rights; Surviving Obligations. Termination or expiration of this Agreement for any reason shall be without prejudice
to any rights that shall have accrued to the benefit of a Party prior to such termination or expiration. Such termination
or expiration shall not relieve a Party from obligations that are expressly indicated to survive the termination or expiration
of this Agreement. Without limiting the foregoing, (i) Section 10.9 and this Section 10.10 and Articles
7, 9 and 11 of this Agreement shall survive the termination or expiration of this Agreement for any reason, (ii)
Sections 3.2.5, 3.3.1(a), 3.3.3(a), 4.1, 4.3.1, 4.3.2, 6.2, 6.3.1, the
second sentence of Section 6.4.2(a), Sections 6.4.3(a), 6.4.3(b), 6.5 and 6.6 shall survive
any termination of this Agreement other than a termination by Lightlake pursuant to Section 10.3 or Section 10.4
hereof or a termination by Adapt pursuant to Section 10.2 hereof, (iii) Sections 5.4 through 5.9 and Section
10.8.2 shall survive a termination by Adapt pursuant to Section 10.3 hereof, (iv) Article 5 shall survive a termination
by Adapt pursuant to Section 10.5 hereof and (v) Sections 10.6, 10.7 and 10.8.1 shall survive any termination
of this Agreement by Lightlake pursuant to Section 10.3 or Section 10.4 hereof. With respect to any Sections
that survive in accordance with this Section 10.10, the corresponding definitions shall appropriately survive (e.g. the
definition of “Term” shall continue with respect to the above noted Sections and usage in other definitions).
ARTICLE 11
MISCELLANEOUS
11.1 Force
Majeure. Neither Party shall be held liable or responsible to the other Party or be deemed to have defaulted
under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement when such failure
or delay is caused by or results from fires, floods, earthquakes, hurricanes, embargoes, shortages, epidemics, quarantines, war,
acts of war (whether war be declared or not), terrorist acts, insurrections, riots, civil commotion, acts of God or acts, omissions,
or delays in acting by any Governmental Authority (except to the extent such delay results from the breach by the non-performing
Party or any of its Affiliates of any term or condition of this Agreement) or similar events beyond the reasonable control of the
non-performing Party (a “Force Majeure”). The non-performing Party shall notify the other Party of
such force majeure within thirty (30) days after such occurrence by giving written notice to the other Party stating the nature
of the event, its anticipated duration, and any action being taken to avoid or minimize its effect. The suspension of
performance shall be of no greater scope and no longer duration than is necessary and the non-performing Party shall use Commercially
Reasonable Efforts to remedy its inability to perform.
11.2 Export
Control. This Agreement is made subject to any restrictions concerning the export of products or technical
information from the United States or other countries that may be imposed on the Parties from time to time. Each Party
agrees that it will not export, directly or indirectly, any technical information acquired from the other Party under this Agreement
or any products using such technical information to a location or in a manner that at the time of export requires an export license
or other governmental approval, without first obtaining the written consent to do so from the appropriate agency or other governmental
entity in accordance with Applicable Law.
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11.3 Assignment.
11.3.1 Without
the prior written consent of Lightlake, Adapt shall not assign, delegate, or otherwise dispose of, whether voluntarily, involuntarily,
by operation of law or otherwise, this Agreement or any of its rights or duties hereunder; provided, however, that Adapt
may make such an assignment without Lightlake’s prior written consent to its Affiliate or to a successor, whether in a merger,
sale of stock, sale of assets or any other transaction, of all or substantially all the assets or business of Adapt or substantially
all of the assets or business of Adapt to which this Agreement relates. With respect to an assignment to an Affiliate,
Adapt shall remain responsible for the performance by such Affiliate of the rights and obligations hereunder. Without
the prior written consent of Adapt, Lightlake shall not assign, delegate, or otherwise dispose of, whether voluntarily, involuntarily,
by operation of law or otherwise, this Agreement or any of its rights or duties hereunder; provided, however, that Lightlake
may make such an assignment without Adapt’s prior written consent to its Affiliate or to a successor, whether in a merger,
sale of stock, sale of assets or any other transaction, of all or substantially all the assets or business of Lightlake or substantially
all of the assets or business of Lightlake to which this Agreement relates. With respect to an assignment to an Affiliate,
Lightlake shall remain responsible for the performance by such Affiliate of the rights and obligations hereunder.
Any attempted assignment or delegation in violation of this Section 11.3 shall be void and of no effect. All
validly assigned and delegated rights and obligations of the Parties hereunder shall be binding upon and inure to the benefit of
and be enforceable by and against the successors and permitted assigns of Lightlake or Adapt, as the case may be. The
permitted assignee or permitted transferee shall assume all obligations of its assignor or transferor under this Agreement.
11.3.2 All
rights to Information, materials and intellectual property: (i) controlled by a Third Party permitted assignee of a Party,
which Information, materials and intellectual property were controlled by such assignee immediately prior to such assignment; or
(ii) controlled by an Affiliate of a Party who becomes an Affiliate through any Change in Control of or a merger, acquisition
(whether of all of the stock or all or substantially all of the assets of a Person or any operating or business division of a Person)
or similar transaction by or with the Party, which Information, materials and intellectual property were controlled by such Affiliate
immediately prior thereto, in each case ((i) and (ii)), shall be automatically excluded from the rights licensed or granted to
the other Party under this Agreement.
11.4 Severability. If
any provision of this Agreement is held to be illegal, invalid, or unenforceable under any present or future law, and if the rights
or obligations of either Party under this Agreement will not be materially and adversely affected thereby, (i) such provision
shall be fully severable, (ii) this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part hereof, (iii) the remaining provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance herefrom, and (iv) in
lieu of such illegal, invalid, or unenforceable provision, there shall be added automatically as a part of this Agreement a legal,
valid, and enforceable provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and
reasonably acceptable to the Parties. To the fullest extent permitted by Applicable Law, each Party hereby waives any
provision of law that would render any provision hereof illegal, invalid, or unenforceable in any respect.
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11.5 Governing
Law. This Agreement or the performance, enforcement, breach or termination hereof shall be interpreted, governed
by and construed in accordance with the laws of New York, United States, excluding any conflicts or choice of law rule or principle
that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction; provided,
that all questions concerning the construction or effect of patent applications and patents shall be determined in accordance with
the laws of the country or other jurisdiction in which the particular patent application or patent has been filed or granted, as
the case may be. The Parties agree to exclude the application to this Agreement of the United Nations Convention on
Contracts for the International Sale of Goods.
11.6 Dispute
Resolution. In the event of any dispute between or among the Parties relating to this Agreement, the Parties will
each designate one senior executive to meet and use good faith efforts to attempt to resolve the dispute. If the representatives
are unable to resolve the dispute within thirty (30) days following written notice of the dispute from one Party to another, then
the Parties shall be free to pursue any remedies available to them at law or in equity.
11.7 Submission
to Jurisdiction; Waiver of Jury Trial.
11.7.1 SUBJECT
TO SECTION 11.6, IN THE EVENT ANY PARTY TO THIS AGREEMENT COMMENCES ANY LITIGATION, PROCEEDING OR OTHER LEGAL ACTION IN
CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN,
WITH RESPECT TO ANY OF THE MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, THE PARTIES TO THIS AGREEMENT HEREBY (A) AGREE
THAT ANY LITIGATION, PROCEEDING OR OTHER LEGAL ACTION SHALL BE INSTITUTED IN A COURT OF COMPETENT JURISDICTION LOCATED WITHIN THE
BOROUGH OF MANHATTAN, CITY OF NEW YORK, WHETHER A STATE OR FEDERAL COURT; (B) AGREE THAT IN THE EVENT OF ANY SUCH LITIGATION, PROCEEDING
OR ACTION, SUCH PARTIES WILL CONSENT AND SUBMIT TO PERSONAL JURISDICTION IN ANY SUCH COURT DESCRIBED IN CLAUSE (A) OF THIS SECTION
11.7 AND TO SERVICE OF PROCESS UPON THEM IN ACCORDANCE WITH THE RULES AND STATUTES GOVERNING SERVICE OF PROCESS (IT BEING UNDERSTOOD
THAT NOTHING IN THIS SECTION 11.7 SHALL BE DEEMED TO PREVENT ANY PARTY FROM SEEKING TO REMOVE ANY ACTION TO A FEDERAL COURT
IN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK); (C) AGREE TO WAIVE TO THE FULL EXTENT PERMITTED BY LAW ANY OBJECTION THAT THEY
MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH LITIGATION, PROCEEDING OR ACTION IN ANY SUCH COURT OR THAT ANY SUCH LITIGATION,
PROCEEDING OR ACTION WAS BROUGHT IN AN INCONVENIENT FORUM; (D) DESIGNATE, APPOINT AND DIRECT CT CORPORATION SYSTEM AS ITS AUTHORIZED
AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS AND DOCUMENTS IN ANY LEGAL PROCEEDING IN THE STATE OF NEW YORK; (E)
AGREE TO NOTIFY THE OTHER PARTIES TO THIS AGREEMENT IMMEDIATELY IF SUCH AGENT SHALL REFUSE TO ACT, OR BE PREVENTED FROM ACTING,
AS AGENT AND, IN SUCH EVENT, PROMPTLY TO DESIGNATE ANOTHER AGENT IN THE STATE OF NEW YORK, SATISFACTORY TO BOTH PARTIES, TO SERVE
IN PLACE OF SUCH AGENT AND DELIVER TO THE OTHER PARTY WRITTEN EVIDENCE OF SUCH SUBSTITUTE AGENT’S ACCEPTANCE OF SUCH DESIGNATION;
(F) AGREE AS AN ALTERNATIVE METHOD OF SERVICE TO SERVICE OF PROCESS IN ANY LEGAL PROCEEDING BY MAILING OF COPIES THEREOF TO SUCH
PARTY AT ITS ADDRESS SET FORTH IN SECTION 11.8 FOR COMMUNICATIONS TO SUCH PARTY; (G) AGREE THAT ANY SERVICE MADE AS PROVIDED
HEREIN SHALL BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (H) AGREE THAT NOTHING HEREIN SHALL AFFECT THE RIGHTS OF ANY
PARTY TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
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11.7.2 EACH
PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT (INCLUDING ANY SUCH ACTION INVOLVING THE FINANCING SOURCES). EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.7.
11.8 Notices.
11.8.1 Notice
Requirements. Any notice, request, demand, waiver, consent, approval, or other communication permitted or required
under this Agreement shall be in writing, shall refer specifically to this Agreement and shall be deemed given only if (i) delivered
by hand or sent by facsimile transmission (with transmission confirmed), (ii) by internationally recognized overnight delivery
service that maintains records of delivery, addressed to the Parties at their respective addresses specified in Section 11.8.2
or (iii) to such other address as the Party to whom notice is to be given may have provided to the other Party in accordance with
this Section 11.8.1. Such Notice shall be deemed to have been given as of the date delivered by hand or transmitted
by facsimile (with transmission confirmed) or on the second Business Day (at the place of delivery) after deposit with an internationally
recognized overnight delivery service. Any notice delivered by facsimile shall be confirmed by a hard copy delivered
as soon as practicable thereafter. This Section 11.8.1 is not intended to govern the day-to-day business communications
necessary between the Parties in performing their obligations under the terms of this Agreement.
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11.8.2 Address
for Notice.
If to Adapt, to:
Adapt Pharma Operations Limited
42 Fitzwilliam Square
Dublin 2, Ireland
Attention: Chief Financial Officer
with a copy (which shall not
constitute notice) to:
Mayer Brown LLP
1675 Broadway
New York, NY 10019
Attention: Reb D. Wheeler
Facsimile: 1-212-849-5914
If to Lightlake, to:
Lightlake Therapeutics
96-98 Baker Street, First Floor
London, England W1U 6TJ
Attention: CEO
Facsimile: +44(0)207 034 1943
with a copy (which shall not
constitute notice) to:
Morgan, Lewis & Bockius LLP
502 Carnegie Center
Princeton, New Jersey 08540
Attention: David G. Glazer
Facsimile: 1-609-919-6701
11.9 Entire
Agreement; Amendments. This Agreement, together with the Schedules attached hereto sets forth and constitutes
the entire agreement and understanding between the Parties with respect to the subject matter hereof and all prior agreements,
understandings, promises, and representations, whether written or oral, with respect thereto are superseded hereby (including the
Existing CDAs). Each Party confirms that it is not relying on any representations or warranties of the other Party except
as specifically set forth in this Agreement. No amendment, modification, release, or discharge shall be binding upon
the Parties unless in writing and duly executed by authorized representatives of both Parties.
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11.10 English
Language. This Agreement shall be written and executed in, and all other communications under or in connection
with this Agreement shall be in, the English language. Any translation into any other language shall not be an official
version thereof, and in the event of any conflict in interpretation between the English version and such translation, the English
version shall control.
11.11 Waiver
and Non-Exclusion of Remedies. Any term or condition of this Agreement may be waived at any time by the Party
that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the Party waiving such term or condition. The waiver by either Party hereto of any right hereunder
or of the failure to perform or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of
any other breach or failure by such other Party whether of a similar nature or otherwise. The rights and remedies provided
herein are cumulative and do not exclude any other right or remedy provided by Applicable Law or otherwise available except as
expressly set forth herein.
11.12 No
Benefit to Third Parties. Covenants and agreements set forth in this Agreement are for the sole benefit of
the Parties hereto and their successors and permitted assigns, and they shall not be construed as conferring any rights on any
other Persons.
11.13 Further
Assurance. Each Party shall duly execute and deliver, or cause to be duly executed and delivered, such further
instruments and do and cause to be done such further acts and things, including the filing of such assignments, agreements, documents,
and instruments, as may be necessary or as the other Party may reasonably request in connection with this Agreement or to carry
out more effectively the provisions and purposes hereof, or to better assure and confirm unto such other Party its rights and remedies
under this Agreement.
11.14 Relationship
of the Parties. It is expressly agreed that Lightlake, on the one hand, and Adapt, on the other hand, shall
be independent contractors and that the relationship between the two Parties shall not constitute a partnership, joint venture,
or agency. Neither Lightlake, on the one hand, nor Adapt, on the other hand, shall have the authority to make any statements,
representations, or commitments of any kind, or to take any action, which shall be binding on the other, without the prior written
consent of the other Party to do so. All persons employed by a Party shall be employees of such Party and not of the
other Party and all costs and obligations incurred by reason of any such employment shall be for the account and expense of such
Party.
Confidential
Treatment Requested by Lightlake Therapeutics Inc.
IRS Employer
Identification No. 46-4744124
Confidential
treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***”
11.15 Rights
in Bankruptcy. All rights and licenses granted under or pursuant to this Agreement by Adapt or Lightlake
are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of right to “intellectual
property” as defined under Section 101 of the U.S. Bankruptcy Code. The Parties agree that the Parties, as licensees
of such rights under this Agreement, shall retain and may fully exercise all of their rights and elections under the U.S. Bankruptcy
Code. The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against either
Party under the U.S. Bankruptcy Code, the Party hereto that is not a Party to such proceeding shall be entitled to a complete duplicate
of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property, which,
if not already in the non-subject Party’s possession, shall be promptly delivered to it (i) upon any such commencement of
a bankruptcy proceeding upon the non-subject Party’s written request therefor, unless the Party subject to such proceeding
elects to continue to perform all of its obligations under this Agreement or (ii) if not delivered under (i) above, following the
rejection of this Agreement by or on behalf of the Party subject to such proceeding upon written request therefor by the non-subject
Party.
11.16 Counterparts;
Facsimile Execution. This Agreement may be executed in two (2) or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be
executed by facsimile or electronically transmitted signatures and such signatures shall be deemed to bind each Party hereto as
if they were original signatures.
11.17 References. Unless
otherwise specified, (i) references in this Agreement to any Article, Section or Schedule shall mean references to such Article,
Section or Schedule of this Agreement, (ii) references in any Section to any clause are references to such clause of such
Section, and (iii) references to any agreement, instrument, or other document in this Agreement refer to such agreement, instrument,
or other document as originally executed or, if subsequently amended, replaced, or supplemented from time to time, as so amended,
replaced, or supplemented and in effect at the relevant time of reference thereto.
11.18 Construction. Except
where the context otherwise requires, wherever used, the singular shall include the plural, the plural the singular, the use of
any gender shall be applicable to all genders and the word “or” is used in the inclusive sense (and/or). Whenever
this Agreement refers to a number of days, unless otherwise specified, such number refers to days. The captions of this
Agreement are for convenience of reference only and in no way define, describe, extend, or limit the scope or intent of this Agreement
or the intent of any provision contained in this Agreement. The term “including,” “include,”
or “includes” as used herein shall mean including, without limiting the generality of any description preceding such
term. The language of this Agreement shall be deemed to be the language mutually chosen by the Parties and no rule of
strict construction shall be applied against either Party hereto. Each Party represents that it has been represented
by legal counsel in connection with this Agreement and acknowledges that it has participated in the drafting hereof. In
interpreting and applying the terms and provisions of this Agreement, the Parties agree that no presumption will apply against
the Party which drafted such terms and provisions.
[SIGNATURE PAGE FOLLOWS.]
THIS AGREEMENT IS EXECUTED by the authorized representatives
of the Parties as of the Effective Date.
LIGHTLAKE THERAPEUTICS INC. |
|
ADAPT PHARMA OPERATIONS LIMITED |
By: |
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By: |
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/s/ |
Roger Crystal |
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/s/ |
Seamus Mulligan |
Name: Roger Crystal |
|
Name: Seamus Mulligan |
Title: Chief Executive Officer |
|
Title: CEO |
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Exhibit 10.2
MATERIAL TRANSFER, OPTION AND RESEARCH
LICENSE AGREEMENT
This Material Transfer,
Option and Research License Agreement (the “Agreement”) dated as of December 1st, 2014 (the “Effective
Date”), is entered into between Aegis Therapeutics, LLC (“Aegis”),
having a place of business at 11770 Bernardo Plaza Court, Suite 353, San Diego, CA 92128, and Lightlake
Therapeutics, Inc. (“Lightlake”), having a place of business at 96-98 Baker Street, First Floor,
London, UK, W1U 6TJ.
WHEREAS, Aegis
is the owner of certain Technology; and
WHEREAS, Lightlake
has requested that Aegis transfer and Aegis wishes to transfer to Lightlake the Technology for the purpose of enabling Lightlake
to conduct a feasibility study of the Compound and, potentially, the Additional Compounds, used with the Technology.
Now,
therefore, in consideration of the mutual benefits in furthering the interests of the parties, it is hereby agreed as
follows:
“Additional Compounds”
mean naltrexone and nalmephene/ nalmefene.
“Compound”
means naloxone or Additional Compounds and any metabolite, salt, ester, hydrate, anhydride, solvate, isomer, enantiomer, free
acid form, free base form, crystalline form, co-crystalline form, complexes, amorphous form, pro-drug (including ester pro-drug)
form, racemate, polymorph, chelate, isomer, tautomer, or optically active form of the foregoing.
“Field” means
treatment, diagnosis, prediction, detection or prevention of any disease, disorder, state, condition or malady in humans.
“Intellectual Property”
means all discoveries, inventions, improvements, developments, procedures, processes, formulations, know-how, trade secrets, formulae,
trademarks, service marks, trade dress, designs, logos, packaging, proprietary information, technical information, techniques,
works of authorship, drawings, models, manuals and systems, whether or not patentable or copyrightable or otherwise registerable,
and all rights and applications or registrations derived or derivable therefrom.
“Representatives”
means, for a party, its directors, officers, employees, advisors or agents.
“Study” means
the feasibility study to be performed by Lightlake as described in Attachment A.
“Technology”
means all drug delivery and stabilization technologies and associated Intellectual Property owned or controlled by Aegis, including
without limitation (a) Aegis’ drug delivery technology known as Intravail® delivery enhancement agents (alkylsaccharide
surfactants and formulations thereof as described in US Patent No. 5,661,130) and ProTek® stabilization technologies (alkylsaccharide
surfactants and formulations thereof as described in US Patent 8,226,949 and US Patent Application numbers 11/474,055, 11/937,966,
12/050,038 and US06/024577); (b) any substances or formulations, which constitute an unmodified form or functional sub-unit of
the technology set forth in sub-clause (a) above, for example but not by way of limitation, formulations at concentrations not
specifically disclosed in US Patent No. 5,661,130 or mixtures of different alkylglycosides; or (c) any substances or formulations
which constitute a modified form of the technology set forth in sub-clause (a) above but still contains/incorporates alkylglycosides
having chemical compositions or concentrations that may differ from those disclosed in US Patent No. 5,661,130 and 8,226,949 or
US Patent Application numbers 11/474,055, 11/937,966, 12/050,038 and US06/024577 or which may be used individually or in combination,
or in combination with other materials not specified in US Patent No. 5,661,130 and 8,226,949 or US Patent Application numbers
11/474,055, 11/937,966, 12/050,038 and US06/024577.
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
| B. | GENERAL TERMS, TECHNOLOGY TRANSFER and RESEARCH
LICENSE |
| B.1 | In partial consideration for Aegis entering into this Agreement, Lightlake shall pay Aegis a one-time
upfront, noncreditable fee of $150,000 (the “Study Fee”). Lightlake may elect to pay up to 50% of the Study
Fee, or Extension Fee, by issuing to Aegis shares of Lightlake’s common stock subject to the following: |
| B.2 | There must be a public market for Lightlake's shares and Lightlake must be current with all statutory
filings |
| B.3 | The shares shall be issued pursuant to Rule 144 of the Securities Act of 1933; |
| B.4 | The number of shares to be issued shall be calculated to 75% of the average closing price for the
previous 20 trading days; |
| B.5 | After the statutory holding period has been satisfied, Lightlake’s legal counsel shall provide
a legal opinion so that the shares can be sold in accordance with Rule 144 of the Securities Act of 1933.. |
All cash payments shall be wired
to the following Aegis bank account within 15 days of execution of this Agreement:
|
Bank Name: |
***REDACTED*** |
|
|
Account Name: |
Aegis Therapeutics, LLC |
|
|
Routing Number: |
***REDACTED*** |
|
|
Account Number: |
***REDACTED*** |
|
| B.6 | In partial consideration for the fee specified in Section B.1 above, Aegis agrees to: |
| a. | provide Intravail® and/or ProTek® excipients (individually and collectively “Aegis
Material”) to Lightlake to conduct the Study on the Compound and Additional Compounds in accordance with Attachment A; |
| b. | provide Lightlake with technical support in accordance with Attachment A in connection with the
Study on the Compound and Additional Compounds; and |
| c. | perform the other activities delegated to it in Attachment A. |
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
| B.7 | In partial consideration for the fee specified in Section B.1 above: |
| a. | Aegis hereby grants to Lightlake an exclusive royalty-free research license to the Technology for
a period beginning on the Effective Date and ending 150 days after Lightlake’s receipt of the Aegis Materials (the “Compound
Research Period”) for the sole purpose of (i) conducting the Study with the Compound and such other activities as described
herein and (ii) evaluating Lightlake’s interest in licensing the Technology in the Field for the Compound (the “Compound
Purpose”). The Technology may not be used in clinical trials involving human subjects without the written permission
of Aegis. During the Compound Research Term, Lightlake may provide the Technology to contract research or service organizations
to perform the Studies or activities contemplated in Attachment A, provided that such organizations have confidentiality obligations
at least as protective as those set forth in this Agreement. The Compound Research Period may be extended for an additional 180
days (to a total of 330 days) by Lightlake (the “First Extension”), in its sole discretion, making a non-refundable
payment of $150,000 (the “First Extension Fee”) prior to expiration of this Agreement. There may be a second
extension of the Contract Research Period for a further 180 days (total of 510 days) by Lightlake, (the “Second Extension”)
in its sole discretion, making another non-refundable payment of $150,000 (the “Second Extension Fee”) prior
to expiration of the First Extension. Lightlake may elect to pay up to 50% of both Study Fee extensions by issuing to Aegis shares
of Lightlake’s common stock subject to the provisions of Section B.1 of this Agreement. In the event that Lightlake exercises
the Lightlake Option prior to the Second Extension, then First Extension Fee shall be fully creditable against the Upfront License
Fee (as defined in Attachment B) provided that the definitive License Agreement has been executed during the 120 day period following
exercise of the Lightlake Option. In the event that Lightlake exercises the Lightlake Option subsequent to the Second Extension,
then only the Second Extension Fee shall be fully creditable against the Upfront License Fee (as defined in Attachment B) provided
that the definitive License Agreement has been executed during the 120 day period following exercise of the Lightlake Option. |
| b. | During the Term of this Agreement Aegis hereby grants to Lightlake a right of first refusal and
option to add any, or all, of the compounds included under Additional Compounds to the Agreement (the “Additional Compound
Option”). Except as permitted by this section, Aegis shall not sell, license, offer for sale, offer for license or agree
to sell or license any Aegis Technology relating to the Additional Compound to any third party during the Term of this Agreement.
The following sets forth the procedure whereby Lightlake may exercise the Additional Compound Option. |
i. In the event that Aegis is
approached by a third party interested in licensing the Additional Compound(s), Aegis shall provide a written notice to Lightlake
specifying the specific compound(s) (the “Aegis Notice”).
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
ii. Lightlake shall as soon
as possible, but in no event longer than twenty (20) business days of receipt of the Aegis Notice, provide a written notice to
Aegis whether Lightlake intends to exercise the Additional Compound Option. In the event that Lightlake does not does exercise
the Additional Compound Option or fails to deliver to Aegis its intent to exercise such option within the twenty (20) business
day period, then Aegis shall be free to grant such licenses to any other third party covering such Additional Compound(s) and such
compound(s) shall be removed for the definition of Additional Compound.
iii. In the event Lightlake
exercises the Additional Compound Option, then Lightlake must pursue Commercially Reasonable Efforts within sixty (60) business
days to pursue development of such Additional Compound(s) as contemplated in Attachment A. “Commercially Reasonable Efforts”
shall mean that level of effort that a biotechnology or pharmaceutical company of comparable size and capabilities would normally
apply in the United States and the EU, as applicable, in pursuing the development of a pharmaceutical product with a similar efficacy
and safety profile to the Product (taking into account at all times the relevant patent, medical/scientific, technical, regulatory,
development cost, market potential, or commercial profile of same), subject to intervening Regulatory Authority actions or requests,
new legislation, any breach of the Aegis’ obligations under this Agreement or any other third-party action not within the
reasonable control of Lightlake.
iv. Without limiting the foregoing
right of first refusal, Lightlake may in its sole discretion elect to affirmatively exercise the Additional Compound Option with
respect to any available Additional Compound at any time by written notice to Aegis.
| B.8 | In consideration of Aegis providing the Technology to Lightlake under the terms described under
B.2 above, Lightlake shall provide copies of the test results from the Study to Aegis in accordance with Attachment A. Such results
shall be deemed Lightlake Confidential Information and Lightlake hereby grants to Aegis a co-exclusive license with Lightlake,
to use such data for the purposes of this Agreement. Notwithstanding the foregoing, nothing in this Agreement requires Lightlake
to complete the Study. |
| C. | NON-DISCLOSURE RESTRICTIONS |
| C.1 | All non-public information belonging to Aegis or Lightlake disclosed during the course of the Study
or arising out of the Study will be deemed Confidential Information subject to the Mutual Confidentiality Agreement dated November
13, 2013 between Aegis and Lightlake (the “NDA”); provided however, that (a) in addition to the right to use
the Confidential Information as permitted under the NDA, the party receiving the Confidential Information shall have the right
to use same for the purposes of performing its obligations under this Agreement, and (b) the term of the NDA therein shall be deemed
amended and extended to coincide with the term of this Agreement (Section F.1, Term and Termination) plus ten (10) years. |
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
| C.2 | For greater clarity, Lightlake and Aegis Confidential Information shall include information, trade
secret, know how, formulations, methods and results generated in its conduct of the Study The existence of, and the terms and conditions
of, this Agreement are Confidential Information of both parties. |
| D. | INTELLECTUAL PROPERTY, LIMITED PERMITTED USE, OPTION |
| D.1 | Intellectual Property Related To Compound and Additional Compounds |
| D.1.a. | As between Aegis and Lightlake, the Compound and Additional Compounds, and any Intellectual Property
related thereto, is the property of Lightlake and: |
i.
Aegis shall not (and shall not attempt or purport to) file or prosecute in any country any patent application which claims
or uses or purports to claim or use solely the Compound or Additional Compounds, or any information or other materials directly
or indirectly derived therefrom, without the prior express written consent of Lightlake;.
ii. if the Study results in
an invention related solely to Compound, regardless of whether it may be commercially useful, Aegis agrees to promptly disclose
such invention to Lightlake. Inventorship of any such invention shall be determined in accordance with the U.S. Patent Law. Aegis
shall promptly supply Lightlake with a copy of the disclosure for Lightlake evaluation purposes. Lightlake shall have the sole
right to determine what, if any, patent applications should be filed.
| D.1.b. | This Agreement shall not be construed to grant any license or other rights to Aegis in any Intellectual
Property or Confidential Information of Lightlake. No rights are provided to Aegis under any patents, patent applications, trade
secrets or other proprietary rights of Lightlake. In particular, no rights are provided to use the Compound and any patents or
intellectual property of any kind to Lightlake for profit-making, commercial or research purposes, including but not limited to
sale of the Compound, use in manufacturing, provision of a service to a third party in exchange for consideration, or use in research
or consulting by a commercial or not for-profit entity. |
| D.2 | Intellectual
Property Related To Technology |
| D.2.a. | As between Aegis and Lightlake, the Technology is the property of Aegis and, unless otherwise agreed
to in writing by Aegis, is to be used by Lightlake only as authorized under this Agreement. Lightlake shall use the Technology,
and any information and other materials directly or indirectly derived therefrom, solely for the Purpose, and they shall not be
used for any other purpose whatsoever. Lightlake shall not (and shall not attempt or purport to) file or prosecute in any country
any patent application which claims or uses or purports to claim or use the Technology, or any information or other materials directly
or indirectly derived therefrom, without the prior express written consent of Aegis. |
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
| D.2.b. | Except for contract research or service organizations performing work under the direction of Lightlake,
provided such work is conducted under a confidentiality agreement with the terms and conditions consistent with those described
under Section C of this Agreement, Lightlake shall not transfer the Technology to anyone who does not work under its direct supervision
without the prior written consent of Aegis, which shall not be unreasonably withheld. |
| D.2.c. | Except for the Lightlake Option under Section D.4, (i) this Agreement shall not be construed
to grant any license or other rights to Lightlake in any Intellectual Property or Confidential Information of Aegis other than
the license set forth above, (ii) no other rights are provided to Lightlake under any patents, patent applications, trade
secrets or other proprietary rights of Aegis, and (iii) in particular, no rights are provided, other than the right to use
same for the sole Purpose set forth above, to use the Technology and any related patents or intellectual property of any kind of
Aegis for profit-making, commercial or research purposes, including but not limited to sale of the Technology, use in manufacturing,
provision of a service to a third party in exchange for consideration, or use in research or consulting by a commercial or not
for-profit entity. |
| D.2.d. | If the Study results in an invention related solely to Technology, regardless of whether it may
be commercially useful, Lightlake agrees to promptly disclose such invention to Aegis. Inventorship of any such invention shall
be determined in accordance with the U.S. Patent Law. Lightlake shall promptly supply Aegis with a copy of the disclosure for Aegis’
evaluation purposes. Aegis shall have the right to determine what, if any, patent applications should be filed. Aegis also retains
full ownership of the Technology as defined above and sole licensing rights. |
| D.2.e. | The provision of the Technology to Lightlake shall not alter any preexisting right of Aegis in
the Technology. |
| D.2.f. | Lightlake shall use the Technology in compliance with all applicable statutes and regulations including,
for example, those relating to research involving the use of animals. |
| D.2.g. | Notwithstanding the preceding limitations on Lightlake’s use and ownership of the Technology,
nothing in this Agreement shall be construed as limiting Lightlake’s right to own and use technology related to delivery
of the Compound that is developed independently by Lightlake and without reliance on any Aegis Technology. |
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
| D.3 | Intellectual Property Created Under this Agreement |
| D.3.a. | In the event that an invention arises from the conduct of the Study hereunder, that embodies the
Compound and Technology, including without limitation any invention relating to the use of Technology for administering or stabilizing
the Compound (the “Joint Invention”), regardless of whether it may be commercially useful, Lightlake agrees to promptly
disclose such invention to Aegis. Inventorship of any such Joint Invention shall be determined in accordance with the U.S. Patent
Law. Ownership of any such Joint Invention shall be deemed to be solely that of Aegis. |
| D.3.b. | In the event that the Joint Inventions have applications for compounds other than the Compound
(“Dual Inventions”), regardless of whether it may be commercially useful, Aegis shall have the sole right to determine
what, if any, patent applications should be filed. Inventorship for Dual Inventions shall be determined in accordance with the
patent laws of the United States (Title 35, United States Code). Aegis retains full ownership of the Dual Invention as defined
above and sole licensing rights. |
D.4.a.
Aegis hereby grants to Lightlake an exclusive option (the “Lightlake Option”), to obtain an exclusive
(even as to Aegis), worldwide, royalty-bearing license (with the right to grant sublicenses through multiple tiers) under Aegis’s
interests in the Technology and any Joint Invention (including under any resulting patents) (the “Subject Invention”)
to the Technology to research, develop, make, have made, use, sell, offer for sale, and import products containing the Compound
or an Additional Compound in the Field (the “License Agreement”). Lightlake may exercise such Lightlake Option
with respect to the Compounds by written notice to Aegis within 90 days of the completion of the Study for the Compounds. Lightlake
may also separately exercise such Lightlake Option with respect to the Additional Compounds by written notice to Aegis within 90
days the completion of the Study for the Additional Compounds. The License Agreement shall include the terms set forth in Attachment
B and shall supersede any restrictions on use of the Technology contained in this Agreement. The parties shall use commercially
reasonable efforts and shall work in good faith to negotiate and execute the definitive License Agreement during the 120 day periods
following exercise of the Lightlake Option with respect to the Compound and the Additional Compounds (the “Negotiation
Periods”). Such Negotiation Periods may be extended by mutual agreement of the Parties.
| D.4.b. | If such option or license is not concluded within the Negotiation Period, except as set forth below,
neither party will have any further obligations to the other with respect to such Subject Invention. In the event that the parties
are unable to finalize the License Agreement despite good faith negotiations in accordance with Section D.4.a during the Term,
then Aegis shall be free to offer exclusive or non-exclusive licenses to the Joint Invention provided that for a period of twelve
(12) months after the termination of the negotiations, Aegis shall not offer such a license to any third party under financial
terms materially different from those offered to Lightlake without first offering those same terms to Lightlake. |
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
| E.1.a | Each party represents and warrants to the other party that such party (i) is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is organized; (ii) has the requisite power and authority
and the legal right to enter into this Agreement and to perform its obligations hereunder; and (iii) has obtained all necessary
consents, approvals and authorizations of all governmental authorities and other persons or entities required to be obtained by
such party in connection with this Agreement. Each party represents that this Agreement does not conflict with any other right
or obligation provided under any other agreement or obligation that such party has with any third party. |
| E.1.b | Any Technology, Compound or Additional Compound delivered pursuant to this Agreement is understood
to be experimental in nature and may have hazardous properties. EXCEPT AS SET FORTH IN SECTION E.1.a, NEITHER AEGIS NOR Lightlake
MAKES ANY REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESSED OR IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. |
| F.1 | This Agreement will begin on the Effective Date and terminate on the earliest of the following
dates: (a) expiration of the Lightlake Negotiation Periods, or (b) on 30 days written notice by Lightlake (the “Term”). |
| F.2 | If a party has materially breached any of its obligations hereunder, and such material breach shall
continue for 30 days after written notice of such breach was provided to the breaching party by the nonbreaching party, the nonbreaching
party shall have the right at its option to terminate this Agreement effective at the end of such 30 day period. |
| F.3 | On termination of this Agreement, Lightlake will discontinue its use of the Technology as defined
in this Agreement and will, upon direction of Aegis, return or destroy any remaining Technology. |
| F.4 | The rights and obligations of the parties, which by intent or meaning have validity beyond termination
(including, but not limited to, rights with respect to intellectual property, confidentiality, exclusivity, indemnification and
liability limitations) shall survive the termination of this Agreement. |
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
| G.1 | Neither party may assign or otherwise transfer this Agreement, whether voluntarily, by operation
of law or otherwise, without the prior written consent of the other party; provided, however, that a party may, without such consent,
assign this Agreement and its rights and obligations hereunder in connection with the transfer or sale of all or substantially
all of its business to which this Agreement relates, or in the event of its merger or consolidation or change in control or similar
transaction. Any permitted assignee shall assume all obligations of its assignor under this Agreement. Any purported assignment
or transfer of this Agreement in violation of this section shall be void. |
| G.2 | This Agreement represents the entire agreement between the parties regarding the subject matter
hereof and, with the exception of the NDA, shall supersede all previous communications, representations, understandings and agreements,
whether oral or written, by or between the parties with respect to the subject matter hereof. |
| G.3 | No change, modification, extension, termination or waiver of this Agreement, or any of the provisions
herein contained, shall be valid unless made in writing and signed by duly authorized representatives of the parties. |
| G.4 | Lightlake use of Technology shall be at its own risk. Lightlake shall hold harmless and indemnify
Aegis against any and all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and costs) of every
kind to the extent resulting from claims or demands brought by third parties (“Claims”) against Aegis arising
from the use by Lightlake of the Technology, except to the extent due to the negligence, gross negligence, bad faith or intentional
or willful misconduct by Aegis or its Representatives. |
| G.5 | Aegis agrees to defend, indemnify and hold harmless Lightlake and its Representatives from and
against any and Claims arising out of or resulting from (a) the negligence, gross negligence, bad faith or intentional or willful
misconduct of Aegis or Representatives, (b) breach of any of Aegis’ representations, warranties, covenants or agreements
contained herein, and (c) the actual or alleged infringement, misappropriation or violation of a third party’s Intellectual
Property by Lightlake’s use, practice or other exploitation of the Technology. |
| G.6 | NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY IN ANY MANNER, UNDER ANY THEORY
OF LIABILITY, WHETHER IN CONTRACT, TORT (INCLUDING WITHOUT LIMITATION NEGLIGENCE), INDEMNITY, BREACH OF WARRANTY OR OTHER THEORY,
FOR ANY INDIRECT, CONSEQUENTIAL, INCIDENTAL, EXEMPLARY, PUNITIVE, STATUTORY OR SPECIAL DAMAGES, INCLUDING LOST PROFITS AND LOSS
OF DATA, REGARDLESS OF WHETHER SUCH PARTY WAS ADVISED OF OR WAS AWARE OF THE POSSIBILITY OF SUCH DAMAGES. |
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
| G.7 | This Agreement shall be governed by and construed in accordance with the laws of the State of New
York, U.S.A., without regard to the conflicts of law principles thereof. |
| G.8 | The waiver by any party hereto of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach. In the event that individual provisions of this Agreement become wholly or
partially invalid as evidenced by a ruling of a court of competent jurisdiction, the effectiveness of the remaining provisions
shall not be affected, to the extent severable. The parties undertake in good faith to replace an invalid provision by a valid
one which most closely corresponds with the economic intention of the invalid provision. |
| G.9 | Nothing in this Agreement shall operate to or be construed or interpreted as to render the parties
as other than independent contractors, nor shall anything in this Agreement operate or be construed or interpreted as to render
any party, or any of such party’s Representatives, to be employees, agents, associates, joint ventures or partners of the
other party. |
| G.10 | Any notice, requests, delivery, approval or consent required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered in person or sent by overnight courier
or registered mail to the party to whom it is directed at its address shown below or such other address as such party shall have
last given by notice to the other party. Any such notice, requests, delivery, approval or consent shall be deemed received on the
date of facsimile or hand delivery, two (2) business days after deposit with an overnight courier or five (5) business days after
the date of the registration receipt provided by the applicable postal authority. |
If to Aegis:
Aegis Therapeutics, LLC
11770 Bernardo Plaza Court, Suite
353
San Diego, CA 92128
Attn: Chief Executive Officer
If to Lightlake:
Lightlake Therapeutics Inc,
96-98 Baker Street, First Floor,
London,
United Kingdom, W1U 6TJ
Attn: Chief Executive Officer
or Chairman
| G.11 | The headings contained in this Agreement do not form a substantive part of this Agreement and shall
not be construed to limit or otherwise modify its provisions. |
| G.12 | This Agreement may be executed in counterparts, including via facsimile or .PDF file, each of which
shall be deemed an original and both of which together shall constitute one and the same instrument. |
[Signature Page Follows]
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
IN
WITNESS WHEREOF, the parties have entered into this Agreement as of the Effective Date.
AGREED: |
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Aegis Therapeutics, LLC |
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Name: |
Ralph R. Barry |
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Title: |
Chief Business Officer |
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Signature: |
S/Ralph R. Barry |
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Lightlake Therapeutics, Inc. |
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Authorized Official: |
Dr. Roger Crystal |
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Title: |
CEO |
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Signature: |
S/Roger Crystal |
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| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
Attachment A – The Study
One or more Intravail® delivery enhancement
and/or ProTek® stabilization agents will be used solely for testing of Compound or Additional Compounds, as the case may be,
as follows:
List of Aegis Activities
| 1. | Aegis will supply sufficient quantities of Intravail(R) or ProTek(R) to Lightlake in order to conduct the Study for both the
Compounds and the Additional Compounds as reasonably requested by Lightlake. |
| 2. | Aegis will provide such reasonable and necessary technical support including formulation advice as may be requested by Lightlake. |
List of Lightlake Activities
| 2. | Lightlake or Lightlake designated contract research organization will formulate Compound or Additional Compounds, as the case
may be, with excipients comprising but not limited to those defined as Technology. |
Initial Study Outline.
Further studies potentially to be added
Objective
*** ONE SENTENCE REDACTED ***
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
Drug
*** ONE SENTENCE REDACTED ***
Study Design
*** ONE SENTENCE REDACTED ***
Subjects
*** ONE SENTENCE REDACTED ***
Output Data
*** ONE SENTENCE REDACTED ***
Attachment B – License
Agreement Terms
Commercial License Agreement to be attached once finalized between
parties under terms and conditions to be negotiated in good faith by the Parties within sixty (60) days of the Effective Date of
this Agreement.
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
AMENDMENT NO. 1
TO
THE Material Transfer, Option and Research License Agreement EFFECTIVE AS OF December 1, 2014
WHEREAS, Aegis
Therapeutics, LLC, (“Aegis”) and Lightlake Therapeutics,
Inc. (“Lightlake”) have previously entered into the Material Transfer, Option and Research License
Agreement dated as of December 1, 2014 (the “Agreement”); and
WHEREAS, the
Parties wish to amend that Agreement effective December 16, 2014 (the “Amendment Effective Date”).
NOW, THEREFORE,
in consideration of, among other things, the premises, representations, respective covenants and agreements contained herein, each
party hereby agrees to the following:
| 1. | Attachment B of the Agreement shall be deleted in its entirety and replaced with Exhibit 1 of this
Amendment No. 1. |
| 2. | All other terms and conditions of the Agreement shall remain in full force and effect. |
| 3. | This Agreement may be executed in counterparts, each of which shall be deemed to be an original
and together shall be deemed to be one and the same agreement. A facsimile copy of this Agreement bearing the signature (original
or facsimile version) of both parties shall be binding on the parties. |
IN WITNESS WHEREOF,
the parties have caused this Amendment No. 1 to the Agreement to be executed by their respective
duly authorized officers as of the Amendment Effective Date.
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Aegis Therapeutics, LLC |
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By: |
/s/ Ralph R. Barry |
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Ralph R. Barry |
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Chief Business Officer |
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Lightlake Therapeutics, Inc. |
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By: |
/s/ Roger Crystal |
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Dr. Roger Crystal |
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Chief Executive Officer |
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
Exhibit 1
Attachment B – License Agreement
Terms and Conditions
License: |
The license to be granted by Aegis
Therapeutics, LLC (“Aegis”) to Lightlake Therapeutics,
Inc. (“Lightlake”) is a royalty-bearing license under
all applicable patent and other proprietary rights of Aegis, including without limitation rights under the Technology and Aegis’s
interest in the New Inventions and Joint Inventions (collectively, “Aegis IP Rights”) to develop, make, have made,
use, sell, offer to sell, import and export (or otherwise commercialize and exploit) the Products in the Field in the Territory.
Subject to the Right of First Refusal and
Option below, Aegis shall not license to any third party, and hereby grants an exclusive option to Lightlake to license, the Aegis
IP Rights to develop, make, have made, use, sell, offer to sell, import and export (or otherwise commercialize and exploit) naloxone
for treatment or prevention of opioid overdose (“Opioid Field”) in the Territory.
Notwithstanding the above license to manufacture
the Excipient, Lightlake will covenant and agree to not exercise such right to make or have made Excipient for so long as Aegis
remains in compliance with the terms of the Supply Agreement. If the Supply Agreement becomes terminated in accordance with its
terms, or if Lightlake exercises its right to terminate Aegis’ exclusive right to supply Excipient, then Lightlake may exercise
its license right to make or have made Excipient, which license right shall automatically extend to any contract manufacturer engaged
by Lightlake, any of its Affiliates and/or any sublicensee to manufacture Excipient.
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Excipient: |
Aegis’s proprietary chemically synthesizable Excipient(s), including without limitation the Intravail® excipients. |
Product(s): |
Pharmaceutical formulations containing the Compound as an active ingredient and the Excipient. |
Compound: |
Naloxone or Option Compound and any metabolite, salt, ester, hydrate, anhydride, solvate, isomer, enantiomer, free acid form, free base form, crystalline form, co-crystalline form, complexes, amorphous form, pro-drug (including ester pro-drug) form, racemate, polymorph, chelate, isomer, tautomer, or optically active form of the foregoing. |
Option Compound |
Naltrexone and nalmephene/ nalmefene. |
Field: |
Treatment or prevention of any disease,
disorder, state, condition or malady in humans except in the Opioid Field, provided that upon election of Lightlake in writing
and payment of the Option Fee, the “Field” shall include the Opioid Field.
The Option Fee shall mean one hundred thousand
dollars ($100,000) and agreement by Lightlake that by expansion of the Field to include Opioid Field, that Products for the Opioid
Field in the Territory using the Aegis IP Rights shall be subject to the same monetary obligations as other Products in the Field
(i.e. Option Field milestones, royalties under terms and conditions to be negotiated in good faith by the parties).
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| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
Territory: |
Worldwide |
License Fee: |
Lightlake shall pay to Aegis a nonrefundable
and noncreditable license fee of $300,000 on the effective date of the license agreement.
Lightlake may elect to pay up to 50% of
the License Fee by issuing to Aegis shares of Lightlake’s common stock subject to the following:
a.
There must be a public market for Lightlake's shares and Lightlake must be current with all statutory filings
b.
The shares shall be issued pursuant to Rule 144 of the Securities Act of 1933;
c.
The number of shares to be issued shall be calculated to 75% of the average closing price for the previous 20 trading days;
d.
After the statutory holding period has been satisfied, Lightlake’s legal counsel shall provide a legal opinion so
that the shares can be sold in accordance with Rule 144 of the Securities Act of 1933.
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Milestones: |
Lightlake will pay to Aegis the following development milestones for the Products: |
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Milestone |
Compound |
Each
Option Compound(s) |
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Successful completion of the first human study. |
$ 300,000 |
$ 250,000 |
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Successful completion of the first Phase II |
$ 750,000 |
$ 500,000 |
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Successful completion of the first Phase III |
$ 1,200,000 |
$ 1,000,000 |
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Approval of the first NDA or its equivalent |
$ 4,000,000 |
$ 3,000,000 |
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Beginning on the first anniversary of the
effective date of the license agreement and through the first Product approval by Lightlake, Lightlake shall be required to make
minimum quarterly nonrefundable payments (“Quarterly Payments”) to Aegis in the amount of $25,000. These Quarterly
Payments would be fully creditable and treated as a prepayment against future milestones or royalties and are required in order
to maintain the license.
If, at the time when any milestone payment listed above is due, Lightlake has not paid all other milestone
payments (if any) previously listed above, then at such time Lightlake shall pay all such unpaid milestone payments (other than
product approval milestones).
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| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
Right
of First Refusal and Option |
Provided that the license agreement has
not been terminated, during the first two (2) year period beginning on the Effective Date, Aegis grants Lightlake a right of first
refusal and option to add any, or all, of the compounds included under Option Compound or the Opioid Field to the license agreement
(the “Lightlake Option”). Except as permitted by this section, Aegis shall not sell, license, offer for sale,
offer for license or agree to sell or license any Aegis Technology relating to the Option Compound to any third party during the
first two (2) year period beginning on the Effective Date.
The following sets forth the procedure
whereby Lightlake may exercise the Lightlake Option.
1. In
the event that Aegis is approached by a third party interested in licensing the Option Compound(s) or the Opioid Field, Aegis
shall provide a written notice to Lightlake specifying the specific compound(s) or the Opioid Field (the “Aegis Notice”).
2. Lightlake shall as soon as possible, but in no event longer than forty (40) days of receipt of the Aegis Notice, provide
a written notice to Aegis whether Lightlake intends to exercise the Lightlake Option. In the event that Lightlake does not does
exercise the Lightlake Option or fails to deliver to Aegis its intent to exercise such option within the forty (40) day period,
then Aegis shall be free to grant such licenses to any other third party covering such Option Compound(s) or the Opioid Field for
a period of up to twelve (12) months thereafter (the “Third Party Negotiation Period”).
3. In the event Lightlake exercises the Lightlake Option, then as partial consideration for the grant to Lightlake of the rights
under the license agreement for each Option Compound Lightlake shall pay to Aegis a nonrefundable and noncreditable license issuance
fee of Two-Hundred and Fifty Thousand U.S. dollars (U.S. $250,000). Lightlake may elect to pay up to 50% of the Option Fee by issuing
to Aegis shares of Lightlake’s common stock subject to the procedures for the License Fee payment in the form of Lightlake
shares. In the event that Lightlake exercises the Lightlake Option specific to the Opioid Field then Lightlake shall pay to Aegis
the Option Fee.
4.
In the event Lightlake does not exercise the Lightlake Option and the other interested third party either: (i) does not
license within the Third Party Negotiation Period, under either feasibility or commercial licenses, the Option Compound; or (ii)
the license pertaining to such Option Compound that has been exclusively licensed has been subsequently terminated, or prior to
the end of the Third Party Negotiation Period negotiations with the interested third party licensee are terminated as determined
in Aegis’ sole discretion, then Aegis shall within thirty (30) days of such termination provide written notice to Lightlake
that the Option Compound remains available. Any subsequent inquiry by the same or any other third party interested in licensing
such Option Compound shall again be subject to the requirements of this section.
5. Without
limiting the foregoing right of first refusal, Lightlake may in its sole discretion elect to affirmatively exercise the Lightlake
Option with respect to any available Option Compound at any time by written notice to Aegis, in which case the same license issuance
fees specified in subsection 3 shall apply.
|
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
Royalties: |
During the Royalty Term, Lightlake shall pay to Aegis royalties on annual Net Sales of Products, on a country-by-country and Product-by-Product, in an amount equal to the applicable rate set forth in the table below, times the annual Net Sales of Products by Lightlake, its sublicensees and their respective Affiliates: |
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Annual Net Sales (U.S. $) |
Royalty Rate |
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Aggregate Annual Net Sales during a Calendar Year less than or equal to Fifty Million Dollars (U.S. $50,000,000) |
2.0% |
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Aggregate Annual Net Sales during a Calendar Year greater than Fifty Million Dollars (U.S. $50,000,000) and less than or equal to Two Hundred and Fifty Million Dollars (U.S. $250,000,000) |
3.0% |
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Aggregate Annual Net Sales during a Calendar Year greater than Two Hundred and Fifty Million Dollars (U.S. $ 250,000,000 and less than or equal to Five Hundred Million Dollars (U.S. $500,000,000) |
4.0% |
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Aggregate Annual Net Sales during a Calendar Year greater than Five Hundred Million Dollars (U.S. 500,000,000) |
5.0% |
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The royalty percentage then applicable
to Net Sales of any Product made in any country in the Territory shall be reduced by fifty percent (50%) if at the time of the
sale of such Product in such country, the use, manufacture, offer for sale, sale and import of such Product in such county is not
covered by a Valid Claim.
These royalties will be reduced by up to
50% in any payment period for the costs associated with the license of additional technology by Lightlake, its affiliates or sublicensees
in order for Lightlake to use the Aegis Enhancement Agent for the development or commercialization of the Product but only for
sales in the country where the third party patent rights are valid.
If the level of competition, patent protection
or general commercial environment affects in any material respect the commercial viability of a Product at the then applicable
royalty rate due to Aegis from Lightlake for any country(ies) within the Territory, upon written request from Lightlake, Aegis
will negotiate in good faith with Lightlake to endeavor to reach mutual agreement on a reduction to such royalty rate for the applicable
Product and applicable country(ies).
“Royalty Term” shall
mean, with respect to a Product in a country, a period which is the longer of: (a) if the manufacture, use or sale of such
Product in such country is covered by a Valid Claim, the term for which such Valid Claim remains in effect, and (b) fifteen
(15) years from the date of the First Commercial Sale of such Product in such country.
“Valid Claim” shall
mean, on a country-by-country basis, either (a) a claim of an issued and unexpired patent in any Aegis IP Rights or the Product
(excluding any patent owned by Lightlake covering solely a Compound), which has not been held permanently revoked, unenforceable
or invalid by a decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the
time allowed for appeal, or which has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise,
or (b) a claim of a pending patent application in any Aegis IP Rights or the Product (excluding any pending patent application
owned by Lightlake), which claim was filed in good faith and has not been abandoned or finally disallowed without the possibility
of appeal or refiling of such application, and in any event has not been pending for more than seven (7) years.
“Net Sales” shall mean, with respect to any
Product, the invoiced sales price of such Product by Lightlake, its sublicensees and their respective Affiliates billed to independent
customers who are not Affiliates, less (a) credits, allowances, discounts and rebates to, and chargebacks from the account
of, such independent customers for spoiled, damaged, outdated, rejected or returned Product; (b) actual freight and insurance
costs incurred in transporting such Product to such customers; (c) cash, quantity and trade discounts and other price reductions;
(d) sales, use, value-added and other direct taxes incurred; and (e) customs duties, surcharges and other governmental
charges incurred in connection with the exportation or importation of such Product. Sales between or among Lightlake and its Affiliates
or sublicensees shall be excluded from the computation of Net Sales except where such Affiliates or sublicensees are end users
of the Product, but Net Sales shall include the subsequent final sales to third parties by such Affiliates or sublicensees. |
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
Maximum Reductions: |
Notwithstanding anything other to the contrary, the provisions which allow for a reduction, credit or offset from the regularly scheduled payment rate or amount (e.g., royalties and milestone payments) shall not be used cumulatively to result in more than a fifty percent (50%) reduction in the regularly scheduled payment; but any unused reduction, credit or offset, as a result of this fifty percent (50%) floor, may be carried forward and used subsequently in the future as a reduction, credit or offset against a later accruing payment obligation, but still subject to the same fifty percent (50%) floor as set forth above. |
Disclosure of Technology: |
Aegis will cooperate with Lightlake in the disclosure of any Aegis technology or know-how that would aid Lightlake in the development or manufacture of the Products. |
Right to Sublicense: |
Lightlake shall have the right to grant sublicenses to third parties without the prior consent of Aegis. Any sublicense granted by Lightlake shall be consistent with Lightlake’ obligations under the license agreement with Aegis. At Lightlake’s option Aegis will accept a percentage, to be negotiated in good faith by the Parties, of any sublicense revenue received by Lightlake to avoid royalty stacking issues. |
Intellectual Property |
It is the intent of the Parties that Aegis
shall own all rights to the Aegis Intravail® Technology and the Aegis Know-how. Aegis shall also own any improvements
to the Aegis Intravail® Technology or the Aegis Know-how that may be developed by Lightlake. Aegis shall be free
to license its own technology, including any Lightlake improvements, to others on such terms and conditions as it sees fit. Aegis’
rights shall only be limited by the License granted under the license agreement and as described above regarding commercialization
of a Product.
Ownership of Intellectual Property:
Notwithstanding United States laws regarding inventorship, the Parties agree any patentable new inventions, innovations, developments
or discoveries resulting from the activities under the license agreement (“New Inventions”) regardless of whether any
such New Inventions are made solely by a party or jointly by both parties, and all patent and other intellectual property rights
in any of the New Inventions, shall be owned as follows:
(a)
Lightlake shall remain the sole owner of all rights in the Compound, the Lightlake Know-how and all existing patents and
patent applications relating to the use of such technology.
(b)
Aegis shall remain the sole owner of all rights in the Aegis Intravail® Technology, the Aegis Know-how and
all existing patents and patent applications relating to the use of such technology.
(c)
All New Inventions covering Products, including without limitation any invention relating to the use of the Aegis Intravail®
Technology or the Aegis Know-how that are invented in whole or in part by Lightlake (a “Joint Invention”), regardless
of whether it may be commercially useful, shall be owned solely by Aegis. Nothing herein shall affect the right of Lightlake to
invent and seek intellectual property protection for inventions that do not comprise Aegis Intravail® Technology.
(d)
Nothing herein shall affect the ability of Aegis to develop and license intellectual property relating to Aegis Intravail®
Technology or any New Invention that is not a Joint Invention.
(e)
In the event a patent application on a New Invention includes at least one claim incorporating limitations that comprise
Aegis Intravail® Technology, the New Invention shall be considered a Joint Invention.
|
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
Patent Costs |
Subsequent to the effective date of the license agreement, Lightlake shall reimburse Aegis for actual costs incurred by Aegis under the Aegis Patent Rights that are specific only to the Compound(s) and/or Product(s) including but not limited to all divisionals, continuations, continuations-in-part, reissues, renewals, extensions or additions to any such patents and patent applications. |
Due Diligence and Rights Reversion |
The definitive license agreement shall
include mutually agreed upon due diligence obligations for the development and commercialization of the Product.
In the event Lightlake does not pursue
Commercially Reasonable Efforts to Exploit a Product, then Aegis will have the right to terminate the license granted, whereupon
Lightlake shall assign and transfer exclusively to Aegis (even as to Lightlake) all data and intellectual property that relates
solely to such Product, at Aegis’ expense. Said termination will occur upon Aegis delivering to Lightlake a written notice
of termination, unless Lightlake responds within sixty (60) days after receipt of said notice with evidence which demonstrates
that Lightlake (or its Affiliate as sublicensee) is using Commercially Reasonable Efforts to Exploit a Product. Aegis’ rights
to terminated under this Section shall not begin until two (2) years after the Effective Date.
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Clinical Trials |
Lightlake shall furnish to Aegis a copy of the clinical protocol and the related patient informed consent form for any clinical trial study, which involves an Excipient or the Aegis Technology; and Aegis shall be entitled to share such documents with the Aegis insurance carriers to the extent required to comply with its contractual obligations to such entities. Aegis agrees that any personally identifiable information or protected health information, which comes into Aegis’ possession under the license agreement will be protected and acted on in accordance with applicable data protection legislation, such as the Health Insurance Portability and Accountability Act of 1996 as well as all other applicable laws and regulations.” |
Excipient Toxicity Studies. |
*** REDACTED ONE PARAGRAPH*** |
Public Filings |
The confidentiality obligations of the License and Supply Agreements shall include provisions that in the event a party is required to make public filings or disclosures that will include information or details considered to be confidential by the other party, they parties shall use reasonable best efforts to obtain confidential treatment of such information. |
Other Terms: |
The definitive license agreement shall include final terms and customary representations, warranties, covenants and indemnity provisions. |
| Confidential Treatment Requested by Lightlake Therapeutics Inc. IRS Employer Identification No. 46-4744124 Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***” | |
Supply
Agreement Terms and Conditions
The Parties will also
use good faith efforts to promptly enter into a Supply Agreement with the following financial terms:
Material for Preclinical
Use. Aegis hereby agrees to supply and sell to Lightlake
up *** REDACTED *** grams of GMP Material for Lightlake’ use in preclinical
studies at no charge. If additional quantities of GMP Material are needed for preclinical studies, the Parties will negotiate in
good faith pricing for such materials.
Material for Clinical and
Commercial Use. Aegis hereby agrees to supply and sell to Lightlake
quantities of GMP Material for use by Lightlake in its clinical trials and for later
commercial sales, in accordance with the following price schedule:
Grams |
Order Lead
Time |
Cost per
Gram |
Total |
Approximate
Doses
@.125% |
Approximate
Cost per Dose |
*** REDACTED *** |
*** REDACTED *** |
*** REDACTED *** |
*** REDACTED *** |
*** REDACTED *** |
*** REDACTED *** |
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*** REDACTED *** |
*** REDACTED *** |
*** REDACTED *** |
*** REDACTED *** |
*** REDACTED *** |
*** REDACTED *** |
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*** REDACTED *** |
*** REDACTED *** |
*** REDACTED *** |
*** REDACTED *** |
*** REDACTED *** |
*** REDACTED *** |
|
|
|
|
|
|
*** REDACTED *** |
*** REDACTED *** |
*** REDACTED *** |
*** REDACTED *** |
*** REDACTED *** |
*** REDACTED *** |
*** REDACTED ***
*** REDACTED *** |
|
| a. | Said prices shall be subject to the Producer Price Index (“PPI”) escalation. |
| b. | Each Order shall be for a delivery date and a single shipment destination (e.g., a single Order
cannot be for two or more different delivery dates or two or more different shipment destinations). The price per gram is based
upon the number of grams of Material in the Order. |
| c. | The quantities set forth in the table above are fixed lot sizes. Any request for a quantity other
than as set forth above (e.g., *** REDACTED ***grams, or *** REDACTED ***grams), shall be subject to good faith negotiations
between the parties as to price and lead time. |
In the event that Aegis
is unable or unwilling to provide the GMP Material in accordance with FDA GMP guidelines and with the specifications contained
in the Supply Agreement, which specifications shall be negotiated in good faith, Lightlake
may at its election obtain the GMP Materials from other third party suppliers or may manufacture the GMP Material itself.
Exhibit 10.3
Confidential
AMENDMENT
NO. 2
TO
THE MATERIAL TRANSFER, OPTION AND RESEARCH LICENSE AGREEMENT
EFFECTIVE
AS OF DECEMBER 1, 2014
WHEREAS,
Aegis Therapeutics,
LLC, (“Aegis”)
and Lightlake Therapeutics Inc.
(“Lightlake”) have
previously entered into the Material Transfer, Option and Research License Agreement dated as of December 1, 2014, as amended
on December 16, 2014 (the “Agreement”);
and
WHEREAS,
the Parties wish to amend that Agreement effective May 19, 2015 (the “Amendment
Effective Date”).
NOW,
THEREFORE, in consideration of, among other things, the premises, representations, respective covenants and agreements
contained herein, each party hereby agrees to the following:
| 1. | Section B.3.a shall be deleted in its entirety and replaced with the following (the words in italics, bolded and underlined
represent the new language): |
“Aegis
hereby grants to Lightlake an exclusive royalty-free research license to the Technology for a period beginning on the Effective
Date and ending August 17, 2015
(the “Compound Research Period”)
for the sole purpose of (i) conducting the Study with the Compound and such other activities as described herein and (ii)
evaluating Lightlake’s interest in licensing the Technology in the Field for the Compound (the “Compound
Purpose”). The Technology may not be used in clinical trials involving human subjects without the written
permission of Aegis. During the Compound Research Term, Lightlake may provide the Technology to contract research or service organizations
to perform the Studies or activities contemplated in Attachment A, provided that such organizations have confidentiality obligations
at least as protective as those set forth in this Agreement. The Compound Research Period may be extended through
February 13, 2016 by Lightlake (the “First
Extension”), in its sole discretion, making a non-refundable payment of $150,000 (the “First
Extension Fee”) prior to October
13, 2015. There may be a second extension of the Contract Research Period through
August 11, 2016 by Lightlake, (the “Second
Extension”) in its sole discretion, making another non-refundable payment of $150,000 (the “Second
Extension Fee”) prior to February
13, 2016. Lightlake may elect to pay up to 50% of both Study Fee extensions by issuing to Aegis
shares of Lightlake’s common stock subject to the provisions of Section B.1 of this Agreement with the measurement date
for determining the number of shares to be issued set as August
17, 2015 for the First Extension. In the event that Lightlake exercises the Lightlake Option prior to the Second
Extension, then First Extension Fee shall be fully creditable against the Upfront License Fee (as defined in Attachment B) provided
that the definitive License Agreement has been executed during the 120 day period following exercise of the Lightlake Option.
In the event that Lightlake exercises the Lightlake Option subsequent to the Second Extension, then only the Second Extension
Fee shall be fully creditable against the Upfront License Fee (as defined in Attachment B) provided that the definitive License
Agreement has been executed during the 120 day period following exercise of the Lightlake Option.
| 2. | All other terms and conditions of the Agreement shall
remain in full force and effect. |
Confidential
| 3. | This Agreement may be executed in counterparts, each of which shall be deemed to be an original and together shall be deemed
to be one and the same agreement. A facsimile copy of this Agreement bearing the signature (original or facsimile version) of both
parties shall be binding on the parties. |
IN
WITNESS WHEREOF, the parties have caused this Amendment No. 2 to the Agreement to be executed by their respective duly
authorized officers as of the Amendment Effective Date.
|
Aegis Therapeutics, LLC |
|
|
|
By: |
/s/ Ralph R. Barry |
|
|
Ralph R. Barry |
|
|
Chief Business Officer |
|
|
|
|
Lightlake Therapeutics Inc. |
|
|
|
|
By: |
/s/ Kevin A. Pollack |
|
|
Kevin A. Pollack |
|
|
Chief Financial Officer |
EXHIBIT 31.1
CERTIFICATION PURSUANT TO RULE 13A-14
OR 15D-14 OF THE
SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Dr. Roger Crystal, Chief Executive Officer
of Lightlake Therapeutics Inc., certify that:
1. I have reviewed this
Annual Report on Form 10-K of Lightlake 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. The registrant's other
certifying officer(s) and I are 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 me 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. The registrant's other
certifying officer(s) and I have disclosed, based on our 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: October 26, 2015
|
By: |
/s/ Dr. Roger Crystal |
|
|
Dr. Roger Crystal |
|
|
Chief Executive Officer |
|
EXHIBIT 31.2
CERTIFICATION PURSUANT TO RULE 13A-14
OR 15D-14 OF THE
SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Kevin Pollack, Chief Financial Officer
of Lightlake Therapeutics Inc., certify that:
1. I have reviewed this
Annual Report on Form 10-K of Lightlake 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. The registrant's other
certifying officer(s) and I are 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:
|
e) |
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 me by others within those entities, particularly during the period in which this report is being prepared; |
|
f) |
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; |
|
g) |
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 |
|
h) |
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. The registrant's other
certifying officer(s) and I have disclosed, based on our 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):
|
c) |
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 |
|
d) |
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: October 26, 2015 |
|
|
|
|
By: |
/s/ Kevin A. Pollack |
|
|
Kevin A. Pollack |
|
|
Chief Financial 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
In connection with the Annual Report on
Form 10-K of Lightlake Therapeutics Inc. (the “Company") for the year ended July 31, 2015, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), Dr. Roger Crystal, as Chief Executive Officer of the Company,
hereby certifies, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; 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: October 26, 2015
|
By: |
/s/ Dr. Roger Crystal |
|
|
Dr. Roger Crystal |
|
|
Chief Executive Officer |
|
This certification accompanies each Report
pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of
2002, be deemed filed by the Company for purposes of ss.18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement
required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and
Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Annual Report on
Form 10-K of Lightlake Therapeutics Inc. (the “Company") for the year ended July 31, 2015, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), Kevin Pollack as Chief Financial Officer of the Company, hereby
certifies, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; 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: October 26, 2015
|
By: |
/s/ Kevin A. Pollack |
|
|
Kevin A. Pollack |
|
|
Chief Financial Officer |
|
This certification accompanies each Report
pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of
2002, be deemed filed by the Company for purposes of ss.18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement
required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and
Exchange Commission or its staff upon request.
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