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Related Party Transactions
 9 Months Ended
Sep. 30, 2023
Related Party Transactions [Abstract]  
Related Party Transactions

6. Related Party Transactions

 

Related party transactions include transactions with the Company’s officers, directors and affiliates.

 

Employment Agreements with Officers

 

During July and August 2020, the Company entered into one-year employment agreements with each of its executive officers at that time, consisting of Dr. John S. Kovach, Eric J. Forman, Dr. James S. Miser, and Robert N. Weingarten, payable monthly, as described below. These employment agreements were automatically renewable for additional one-year periods unless terminated by either party upon 60 days written notice prior to the end of the applicable one-year period, or by death, or by termination for cause. These employment agreements were automatically renewed for additional one-year periods in July and August 2021, 2022 and 2023.

 

The Company entered into an employment agreement with Dr. Kovach dated July 15, 2020, effective October 1, 2020, to provide for Dr. Kovach to continue to act as the Company’s President, Chief Executive Officer and Chief Scientific Officer, with an annual salary of $250,000. During the three months ended September 30, 2023 and 2022, the Company paid $62,500 and $62,500, respectively, to Dr. Kovach under this employment agreement, and during the nine months ended September 30, 2023 and 2022, the Company paid $187,500 and $187,500, respectively, to Dr. Kovach under this employment agreement, which costs are included in general and administrative costs in the Company’s consolidated statements of operations for such periods. The employment agreement with Dr. Kovach terminated upon his death on October 5, 2023.

 

 

The Company entered into an employment agreement with Dr. James S. Miser, M.D., effective August 1, 2020 to act as the Company’s Chief Medical Officer, with an annual salary of $150,000. Effective May 1, 2021, Dr. Miser’s annual salary was increased to $175,000. Dr. Miser is required to devote at least 50% of his business time to the Company’s activities. During the three months ended September 30, 2023 and 2022, the Company paid $43,750 and $43,750, respectively, to Dr. Miser under this employment agreement, and during the nine months ended September 30, 2023 and 2022, the Company paid $131,250 and $131,250, respectively, to Dr. Miser under this employment agreement, which costs are included in general and administrative costs in the Company’s consolidated statements of operations for such periods.

 

The Company entered into an employment agreement with Eric J. Forman effective July 15, 2020, as amended on August 12, 2020, to act as the Company’s Chief Administrative Officer, with an annual salary of $120,000. Mr. Forman is the son-in-law of Gil Schwartzberg (deceased), a former member of the Company’s Board of Directors who died on October 30, 2022 and was a significant stockholder of and consultant to the Company, and is the son of Dr. Stephen Forman, a member of the Company’s Board of Directors. Julie Forman, the wife of Mr. Forman and the daughter of Gil Schwartzberg, is Vice President of Morgan Stanley Wealth Management, at which firm the Company’s cash is on deposit and with which the Company maintains a continuing banking relationship. Effective May 1, 2021, Mr. Forman’s annual salary was increased to $175,000. Additionally, effective November 6, 2022, Mr. Forman was promoted to Vice President and Chief Operating Officer with an annual salary of $200,000. Effective October 1, 2022, Mr. Forman has been provided a monthly office rent allowance, pursuant to which Mr. Forman was paid $7,323 and $11,436, respectively, for the three months and nine months ended September 30, 2023. During the three months ended September 30, 2023 and 2022, the Company paid $50,000 and $43,750, respectively, to Mr. Forman under this employment agreement, and during the nine months ended September 30, 2023 and 2022, the Company paid $150,000 and $131,250, respectively, to Mr. Forman under this employment agreement, which costs are included in general and administrative costs in the Company’s consolidated statements of operations for such periods.

 

The Company entered into an employment agreement with Robert N. Weingarten effective August 12, 2020 to act as the Company’s Vice President and Chief Financial Officer, with an annual salary of $120,000. Effective May 1, 2021, Mr. Weingarten’s annual salary was increased to $175,000. During the three months ended September 30, 2023 and 2022, the Company paid $43,750 and $43,750, respectively, to Mr. Weingarten under this employment agreement, and during the nine months ended September 30, 2023 and 2022, the Company paid $131,250 and $131,250, respectively, to Mr. Weingarten under this employment agreement, which costs are included in general and administrative costs in the Company’s consolidated statements of operations for such periods.

 

The Company entered into an employment agreement with Bastiaan van der Baan effective September 26, 2023, to act as the Company’s President and Chief Executive Officer and as Vice Chairman of the Board of Directors with an annual salary of $150,000. The term of the employment agreement is for three years and is automatically renewable for additional one-year periods unless terminated by either party, subject to early termination as described in the employment agreement. Under the employment agreement, Mr. van der Baan’s annual salary may be increased from time to time at the sole discretion of the Board of Directors. In addition, Mr. van der Baan will be eligible to receive an annual bonus as determined in the sole discretion of the Board of Directors. During the three months and nine months ended September 30, 2023, the Company paid $1,667 to Mr. van der Baan under this employment agreement, which costs are included in general and administrative costs in the Company’s consolidated statements of operations for such periods. Mr. Van der Baan was appointed as Chairman of the Board of Directors upon the death of Dr. Kovach on October 5, 2023.

 

Appointment of Dr. René Bernards to the Board of Directors

 

Effective as of June 15, 2022, Dr. René Bernards was appointed to the Company’s Board of Directors as an independent director. Dr. Bernards is a leader in the field of molecular carcinogenesis and is employed by the Netherlands Cancer Institute in Amsterdam. As a new director, in lieu of a grant of stock options, Dr. Bernards received a one-time cash board fee of $100,000, which was paid upon his appointment to the Board of Directors, and an annual cash board fee of $40,000, payable quarterly.

 

Previously, on October 8, 2021, the Company had entered into a Development Collaboration Agreement (subsequently amended and extended) with the Netherlands Cancer Institute, Amsterdam, one of the world’s leading comprehensive cancer centers, and Oncode Institute, Utrecht, a major independent cancer research center, to identify the most promising drugs to be combined with LB-100, and potentially LB-100 analogues, to be used to treat a range of cancers, as well as to identify the specific molecular mechanisms underlying the identified combinations (see Note 9).

 

 

Compensatory Arrangements for Members of the Board of Directors

 

Effective April 9, 2021, the Board of Directors approved a comprehensive cash and equity compensation program for the independent members of the Board of Directors and committee members. Effective May 25, 2022, the Board of Directors approved an amendment to the program. Officers who also serve on the Board of Directors are not compensated separately for their service on the Board of Directors.

 

Cash compensation for independent directors, payable quarterly, is as follows:

 

Base director compensation - $20,000 per year

Chairman of audit committee – additional $10,000 per year

Chairman of any other committees – additional $5,000 per year

Member of audit committee – additional $5,000 per year

Member of any other committees – additional $2,500 per year

 

Equity compensation for independent directors is as follows:

 

Appointment of new independent directors – The Company grants options to purchase 25,000 shares of common stock, exercisable for a period of five years, at the closing market price on the date of grant, vesting 50% on the grant date and the remaining 50% vesting 12.5% on the last day of each calendar quarter beginning in the quarter immediately subsequent to the date of the grant until fully vested, subject to continued service. At the discretion of the Board of Directors, for a nominee to the Board of Directors who is restricted by their respective institution or employer from receiving equity-based compensation, in lieu of the grant of such stock options, the Company may elect to pay a one-time cash fee of $100,000 to such director, payable upfront.

 

Annual grant of options to independent directors – Effective on the last business day of the month of June, the Company grants options to purchase 10,000 shares of common stock, exercisable for a period of five years, at the closing market price on the date of grant, vesting 12.5% on the last day of each calendar quarter beginning in the quarter immediately subsequent to the date of grant until fully vested, subject to continued service. If any director has served for less than 12 full calendar months on the grant date, the amount of such stock option grant shall be prorated based on the length of service of such director. At the discretion of the Board of Directors, for a nominee to the Board of Directors who is restricted by their respective institution or employer from receiving equity-based compensation, in lieu of the grant of such stock options, the Company may elect to pay an annual cash fee of $40,000 to such director, payable quarterly.

 

Total cash compensation paid to independent directors was $42,228 and $53,324, respectively, for the three months ended September 30, 2023 and 2022. Total cash compensation paid to independent directors was $127,229 and $221,510, respectively, for the nine months ended September 30, 2023 and 2022.

 

Stock-based compensation granted to members of the Company’s Board of Directors, officers and affiliates is described at Note 7.

 

A summary of related party costs, including compensation under employment and consulting agreements and fees paid to non-officer directors for their services on the Board of Directors, for the three months and nine months ended September 30, 2023 and 2022, is presented below.

 

   2023   2022   2023   2022 
  

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

 
   2023   2022   2023   2022 
                 
Related party costs:                    
Cash-based  $243,895   $247,074   $728,896   $802,760 
Stock-based   112,106    396,883    669,146    1,160,649 
Total  $356,001   $643,957   $1,398,042   $1,963,409