Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

Commitments and Contingencies
9 Months Ended
Sep. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

9. Commitments and Contingencies




In the ordinary course of business, the Company enters into non-cancellable leases to purchase equipment and for its facilities, including related party leases (see Note 10 – Transactions with Related Parties). Leases are accounted for as operating leases or finance leases, in accordance with ASC 842, Leases.


Operating Leases


The Company leases office space in Miami, Florida and research and development laboratory space in Bothell, Washington under operating leases that expire on August 31, 2024 and January 31, 2024, respectively. For operating leases, the weighted average discount rate is 6.8% and the weighted average remaining lease term is 0.6 years.


The following table summarizes the Company’s maturities of operating lease liabilities, by year and in aggregate, as of September 30, 2023 (table in thousands):


Schedule of Maturities of Operating Lease Liabilities

2023 (excluding the nine months ended September 30, 2023)   $ 62  
2024     58  
2025     -  
Thereafter     -  
Total operating lease payments     120  
Less: present value discount     (2 )
Total operating lease liabilities   $ 118  


As of September 30, 2023, the total operating lease liability of $117 is classified as a current operating lease liability.


The operating lease liabilities summarized above do not include variable common area maintenance (the “CAM”) charges, which are contractual liabilities under the Company’s Bothell, Washington lease. CAM charges for the Bothell, Washington facility are calculated annually based on actual common expenses for the building incurred by the lessor and proportionately billed to tenants based on leased square footage. For the nine months ended September 30, 2023 and 2022, approximately $76,000 and $ 69,000 of CAM was included in general and administrative operating expenses on the condensed consolidated statements of operations, respectively.


The minimum lease payments above include the amounts that would be paid if the Company maintains its Bothell lease for the five-year term, starting February 2019.


On September 1, 2021, the Company entered into a three-year lease extension with a limited liability company controlled by Dr. Phillip Frost, a director and a principal stockholder of the Company. On an annualized basis, straight-line rent expense is approximately $62,000, including fixed and estimable fees and taxes.


For the nine months ended September 30, 2023 and 2022, operating lease expense, excluding short-term leases, finance leases and CAM charges, totaled approximately $175,000 and $ 175,000, respectively, of which $47,000 for each period was to a related party.



Finance Leases


In April 2020, the Company entered into lease agreements to acquire lab equipment with 36 monthly payments of $2,000 payable through March 31, 2023. The final payment under the lease agreement was made in March 2023. The Company is in contact with the lessor to transfer title of the equipment to the Company.


The leased lab equipment is depreciable over five years and is presented net of accumulated depreciation on the condensed consolidated balance sheets under property and equipment. As of September 30, 2023, total right-of-use lab equipment net of depreciation recognized under finance leases is $0.00 and depreciation expense for the nine months ended September 30, 2023 was $4,000. As of December 31, 2022, total right-of-use assets lab equipment exchanged for finance lease liabilities was $194,000 and accumulated depreciation for lab equipment under finance leases was $158,000. The remaining lab equipment under the finance lease terminated on March 31, 2023, and due to the leased equipment’s remaining 25 months of useful life, it was transferred to fixed assets at book value of $32,000, and continues to depreciate.


Phase 2a Clinical Trial


On August 3, 2022 the Company engaged hVIVO, a subsidiary of London-based Open Orphan plc (AIM: ORPH), a rapidly growing specialist contract research organization (“CRO”), to conduct a Phase 2a clinical trial with the Company’s novel, broad-spectrum, orally administered antiviral influenza candidate. The Company prepaid a reservation fee of $1.7 million upon execution of the agreement and during 2023 the Company expensed $442,000 leaving a balance of $1,277,000 in prepaid and other expenses at September 30, 2023. In addition, the Company incurred additional costs of $942,000 on this agreement during the period for total expenses of approximately $1,384,000 during the nine months ended September 30, 2023.


The total estimated cost of the agreement (including the reservation fee) is approximately $7.2 million.




From time to time, the Company is a party to, or otherwise involved in, legal proceedings arising in the normal course of business. As of the date of this report, except as described below, the Company is not aware of any proceedings, threatened or pending, against it which, if determined adversely, would have a material effect on its business, results of operations, cash flows or financial position.


Liberty Insurance Underwriters Inc. (“Liberty”) filed suit against us in federal court in Delaware seeking a declaratory judgment that there was no insurance coverage for any settlement, judgment, or defense costs in the class and derivative litigation, that the monies totaling approximately $1 million it paid to the Company in connection with the SEC investigation were not covered by insurance, and for recoupment of the monies already paid. We retained counsel to defend us which has filed an answer to the complaint denying its material allegations, as well as a counterclaim against Liberty for breach of contract, declaratory judgment, bad faith and violation of the Washington State Consumer Protection Act, alleging among other things that Liberty wrongfully denied the Company’s claims for coverage of the class and derivative litigations, and seeking money damages. On June 7, 2022, the court filed a Stipulation and Order for Entry of Judgment in the amount of $1,359,064 in favor of Liberty (the “Judgment”) following summary judgment granted by the court to Liberty on all but one of the matters at issue in the case. The Company filed an appeal in July 2022 and paid $1.6 million into the registry of the court (the “Deposit”) which stayed execution of the Judgment and the $1.6 million was expensed by the Company in 2022. On March 29, 2023, the Third Circuit ruled in favor of the Company on the appeal, thereby vacating the trial court’s prior grant of summary judgment in favor of Liberty. As a result of this ruling, the case has been remanded to the District Court for trial on the merits of the Company’s coverage claims for defense and settlement costs. On July 18, 2023 the District Court issued an order establishing deadlines for certain pre-trial matters and setting a trial date of December 4, 2023 for the new trial. The Court had ordered the return of the $1.6 million. On August 8, 2023, the Company received $1.6 million as refunded by the registry of the court and reflected the recovery of the funds in its statement of operations for the three and nine months ended September 30, 2023.