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Related Party Transactions
9 Months Ended
Sep. 30, 2018
Related Party Transactions [Abstract]  
Related Party Transactions

Note 10 — Related Party Transactions

 

Imprimis

 

Imprimis was issued 3,500,000 shares of the Company’s common stock at the formation of the Company at the $0.001 par value per share price as the paid-in-capital contribution from Imprimis. The Company and Imprimis signed licensing agreements for two products developed by Imprimis whereby Imprimis assigned the product rights to the Company. The Company will pay Imprimis a $50 milestone payment upon patent approval for each product and a royalty fee at a rate of six percent on the net sales of those two products. On December 26, 2017, one of the products had its patent approved and a $50 milestone fee was recognized as R&D expense by the Company in 2017 and paid to Imprimis in January 2018. In July 2018, the Company determined the patent-approved product was not viable for its portfolio of product opportunities and Imprimis paid the Company $50 to cancel the licensing agreement for the one product and retain the product rights at Imprimis.

 

As part of the early start-up for the Company’s pharmaceutical business, key executives at Imprimis received 1,500,000 shares of restricted common stock in the Company for consulting services and certain Imprimis managers also received options to purchase 130,000 shares of common stock from the Company (20,000 of these options were forfeited in 2018). The restricted stock and stock options vested 100% after one year on April 30, 2018. The Company recorded stock-based compensation expense of $970 and $856 for the Imprimis restricted common stock and $51 and $70 for Imprimis stock options, respectively, for the periods ended September 30, 2018 and 2017 as a component of its general and administrative expenses.

 

Additionally, the Chief Executive Officer of Imprimis is a member of the Company’s board of directors.

 

Chief Executive Officer

 

The CEO has a partial interest in several companies that the Company is working with for product development and potential marketing if the products are approved by the FDA as detailed below.

 

The Company acquired the exclusive rights to sell the EM-100 product in the United States pursuant to a sales and marketing agreement (the “Eyemax Agreement”) dated August 11, 2017 between the Company and Eyemax LLC, an entity affiliated with the CEO (“Eyemax”). The Company also holds a right of first refusal to obtain the exclusive license rights for geographic areas outside of the United States. Pursuant to the Eyemax Agreement, the Company is responsible for all costs of testing and FDA approval of the product, other than the FDA filing fee which will be paid by Eyemax. The Company is also responsible for commercializing the product in the United States at its expense. The Company paid Eyemax $250 upon execution of the Eyemax Agreement, which was recorded as a component of research and development expense and will pay Eyemax $250 upon FDA approval and $500 upon the first commercial sale of the product. The Company will also pay Eyemax a royalty of 10% on the net sales of all products. The Eyemax Agreement is for an initial term of 10 years from the date of the Eyemax Agreement, subject to successive two-year renewals unless the Company elects to terminate the Eyemax Agreement. There were no amounts due under the terms of the Eyemax Agreement as of December 31, 2017 and September 30, 2018.

 

The Company acquired the exclusive rights to sell the DS-100 product in the United States pursuant to an exclusive development and supply agreement (the “Andersen Agreement”) dated July 9, 2017 between the Company and Andersen Pharma, LLC, an entity affiliated with the CEO (“Andersen”). The Company also holds an option to purchase the DS-100 product and all related intellectual property and government approvals at a price of one dollar. Pursuant to the Andersen Agreement, Andersen is responsible for obtaining FDA approval at its expense and manufacturing the product for sale to the Company at its cost. The Company is responsible for commercializing the product in the United States at its expense. The Company paid Andersen $750 upon execution of the Andersen Agreement, which was recorded as a component of research and development expense and will pay Andersen $750 upon successful completion of three registration batches of product, $750 upon submission of an NDA and $750 upon FDA approval. The Company will also pay Andersen 50% of the net profit from the sale of the product. The Andersen Agreement is for an initial term of five years from the first commercial sale of the product, subject to successive two-year renewals unless either party elects to terminate the Andersen Agreement. There were no amounts due under the terms of the Andersen Agreement as of December 31, 2017 or September 30, 2018. The aforementioned option to purchase the product and all related intellectual property and government approvals was considered to represent variable interest in the affiliated entity. The affiliated entity was not considered to be a variable interest entity.

 

The Company acquired the DS-200 product and all related intellectual property and government approvals pursuant to an asset purchase agreement (the “Selenix Agreement”) dated June 23, 2017 between the Company and Selenix LLC, an entity affiliated with the CEO (“Selenix”). Pursuant to the Selenix Agreement, the Company paid Selenix $1,500, which was recorded as a component of research and development expense and has agreed to pay $1,500 upon submission of the NDA and $1,000 upon FDA approval. The Company has also agreed to pay Selenix 50% of the net profit from the sale of the product for the first 10 years following the date of the Selenix Agreement. There were no amounts due under the terms of the Selenix Agreement as of December 31, 2017 or September 30, 2018 (unaudited).