Annual report pursuant to Section 13 and 15(d)

Subsequent Events

Subsequent Events
12 Months Ended
Dec. 31, 2021
Subsequent Events  
Subsequent Events

9. Subsequent Events

On January 3, 2022, the Company entered into a three-year employment agreement with Steven A. Shallcross (the “Employment Agreement”), who has served as the Company’s Chief Executive Officer since December 6, 2018 and as the Company’s Chief Financial Officer since June 1, 2015, to continue to serve as the Chief Executive Officer and Chief Financial Officer of the Company. The Employment Agreement replaced the prior employment agreement with the Company that Mr. Shallcross entered into on December 6, 2018, as amended December 5, 2019. Pursuant to the Employment Agreement, Mr. Shallcross is entitled to an annual base salary of $585,000 and an annual cash performance bonus of up to fifty percent (50%) of his annual base salary as well as discretionary annual equity awards pursuant to the Company’s incentive plans. The annual bonus will be based upon the assessment of the Board of Mr. Shallcross’s performance. The Employment Agreement also includes confidentiality obligations and inventions assignments by Mr. Shallcross and non-solicitation and non-competition provisions.

On March 10, 2022, the Company completed the acquisition of all the outstanding shares of VCN (the “VCN Shares”) from the shareholders of VCN. VCN is a private, clinical-stage biopharmaceutical company developing new oncolytic adenoviruses for the treatment of cancer. VCN’s lead product candidate, VCN-01, is being studied in clinical trials for pancreatic cancer and retinoblastoma. VCN-01 is designed to be administered systemically, intratumorally or intravitreally, either as a monotherapy or in combination with standard of care, to treat a wide variety of cancer indications. VCN-01 is designed to replicate selectively and aggressively within tumor cells, and to degrade the tumor stroma barrier that serves as a significant physical and immunosuppressive barrier to cancer treatment, Degrading the tumor stroma has been shown to improve access to the tumor by the virus and additional therapies such as chemo- and immuno-therapies. Importantly, degrading the stroma exposes tumor antigens, turning “cold” tumors “hot” and enabling a sustained anti-tumor immune response. VCN has the rights to four exclusive patents for proprietary technologies, as well as technologies developed in collaboration with the Virotherapy Group of the Catalan Institute of Oncology (ICO-IDIBELL), with a number of additional patents pending. As consideration for the purchase of the VCN Shares, the Comany paid $4,700,000 to Grifols Innovation and New Technologies Limited the owner of approximately 86% of the equity of VCN, and issued to the remaining sellers and certain key employees and consultants of VCN the closing Shares, representing 19.99% of the outstanding shares of the Company’s common stock on December 14, 2021, the date of the Purchase Agreement. In addition to the consideration described above, under the terms of the Purchase Agreement, the Company assumed up to $2,400,000 of existing liabilities of VCN and has agreed to make cash payments to Grifols upon the achievement of certain clinical and commercialization milestones, as described below. In connection with the Acquisition, prior to the closing the Company loaned VCN $425,000 to help finance the costs of certain of VCN’s research and development activities and, at the Closing, VCN and Grifols entered into a sublease agreement for the sublease by VCN of the laboratory and office space currently occupied by it as well as a transitional services agreement. As a Purchase Agreement post-Closing covenant, Synthetic has agreed to commit to fund VCN’s research and development programs, including but not limited to VCN01 PDAC phase 2 trial, VCN01 RB pivotal trial and necessary G&A within a budgetary plan of approximately $27.8 million.

Milestone Payments

US$3MM upon VCN-01 US IND Safe to Proceed pancreatic ductal adenocarcinoma (“PDAC”, or other first indication)

US$2.75MM upon VCN-01 US IND Safe to Proceed – retinoblastoma (“RB”, or other second indication)

US$3.25MM upon VCN-01 US first patient dosed– PDAC (or other first indication) after receipt of VCN-01 US IND Safe to Proceed for PDAC being informed

US$3.25MM upon VCN-01 US first patient dosed – RB (or other second indication) after receipt of VCN-01 US IND Safe to Proceed for RB being informed

US$6MM upon VCN-01 US Phase 2 trial meets the primary endpoint or if a Phase 2 trial is not conducted and only a Phase 3 trial is conducted then upon a Phase 3 being initiated – PDAC (or other first indication)

US$8MM upon VCN-01 Pivotal Trial meeting the primary endpoint or upon BLA Submission – RB (or other second indication)

US$12MM upon VCN-01 US Phase 3 trial meeting the primary endpoint or upon BLA Submission – PDAC (or other first indication)

US$16MM upon VCN-01 BLA Approval – PDAC (or other first indication)

US$16MM upon VCN-01 BLA Approval – RB (or other second indication)