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Investment in Surface Pharmaceuticals, Inc. and Agreements - Related Party Transactions

3 Months Ended

Mar. 31, 2019

Investments, Debt and Equity Securities [Abstract]

Investment in Surface Pharmaceuticals Inc. and Agreements - Related Party Transactions

NOTE 5. INVESTMENT IN SURFACE PHARMACEUTICALS, INC. AND AGREEMENTS - RELATED PARTY TRANSACTIONS

In 2017 and amended in April 2018, the Company entered into two asset purchase and license agreements (the “Surface License Agreements”) with Surface. Pursuant to the terms of the Surface License Agreements, the Company assigned and licensed to Surface certain intellectual property and related rights to develop, formulate, make, sell, and sub-license formulations of certain topical eye drop formulations that utilize a proprietary delivery vehicle and a proprietary doxycycline capsule (collectively, the “Surface Products”). Surface is required to make royalty payments to the Company of four to six percent (4%-6%) of net sales of the Surface Products while any patent rights remain outstanding.

In January 2018, the Company and Surface entered into an amended Management Services Agreement (the “Surface MSA”), whereby the Company provided to Surface certain administrative services and support, including bookkeeping, web services and human resources related activities, and Surface paid the Company a monthly amount of $10. The Surface MSA was terminated effective July 31, 2018.

As of March 31, 2019, the Company was due $50 from Surface for reimbursable expenses and amounts due under the Surface MSA and included in prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.

As of March 31, 2019, the Company owned 3,500,000 shares of Surface common stock (approximately 30% issued and outstanding equity interests). The Company’s director, Richard L. Lindstrom and the Company’s Chief Executive Officer, Mark L. Baum, are directors of Surface. In addition, the Company’s Chief Financial Officer, Andrew R. Boll, was a director of Surface and resigned as a director of Surface concurrent with the sale of the Surface Series A Stock. Several employees and a director of the Company (including Mr. Baum, Dr. Lindstrom and Mr. Boll) entered into consulting agreements and provided consulting services to Surface. Surface is required to make royalty payments to Dr. Lindstrom of three percent (3%) of net sales of certain Surface products while certain patent rights remain outstanding. Dr. Lindstrom is also a principal of Flying L Partners, an affiliate of the funding investor.

The unaudited condensed results of operations information of Surface is summarized below:

	For the
	Three Months Ended
	March 31, 2019
Revenues, net	$	-
Loss from operations		812
Net loss	$	(812	)

The unaudited condensed balance sheet information of Surface is summarized below:

	March 31,
	2019
Current assets	$	18,742
Non current assets		49
Total assets	$	18,791

Total liabilities	$	396
Total stockholders’ equity		18,395
Total liabilities and stockholders’ equity	$	18,791