UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

  x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended July 31, 2015

 

OR

 

  ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

 

Commission file number: 000-55330

 

LIGHTLAKE THERAPEUTICS INC.

(Exact name of Registrant as specified in its charter)

 

Nevada   46-4744124
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
     
445 Park Avenue, 9th Floor, New York, NY   10022
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number:

(212) 829-5546

 

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  ¨    No  þ

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  ¨    No  þ

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ   No  ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232. 405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  þ   No  ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained herein, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  ¨ Accelerated filer  ¨
Non-accelerated filer  ¨ Smaller reporting company  þ

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  ¨    No  þ

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates (1,713,629) computed by reference to the price at which the common stock was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, January 30, 2015 ($3.58), was $6,134,791.82.

 

As of October 20, 2015, the registrant had 1,871,791 shares of common stock issued and outstanding.

   

 

 

 

TABLE OF CONTENTS 

 

    Page
PART I  
Item 1. Description of Business 3
Item 1A. Risk Factors 10
Item 2. Description of Property 16
Item 3. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Securities Holders 17
     
PART II  
Item 5. Market for Common Equity and Related Stockholder Matters 17
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19
Item 8. Financial Statements 23
Item 9. Changes In and Disagreements With Accountants on Financial Disclosure 42
Item 9A. Controls and Procedures 42
     
PART III  
Item 10. Directors and Executive Officers 44
Item 11. Executive Compensation 46
Item 12. Security Ownership of Certain Beneficial Owners and Management 49
Item 13. Certain Relationships and Related Transactions 50
Item 14. Principal Accountant Fees and Services 51
     
PART IV  
Item 15. Exhibits 52
     
SIGNATURES 53

 

 2 

 

  

 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of the Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cash needs, business plans and future financial results, and any other statements that are not historical facts.

 

From time to time, forward-looking statements also are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

 

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

 

For discussion of factors that we believe could cause our actual results to differ materially from expected and historical results see “Item 1A — Risk Factors” below.

 

PART I

 

Item 1. Business.

 

Our Company

 

Lightlake Therapeutics Inc. (“Lightlake” or the “Company”) is a specialty pharmaceutical company developing opioid antagonist treatments for substance use, addictive and eating disorders. The Company was incorporated in the State of Nevada on June 21, 2005, as Madrona Ventures, Inc. and on September 16, 2009, the Company changed its name to Lightlake Therapeutics Inc. The Company’s fiscal year end is July 31. The Company’s strategy is to develop treatments for substance use, addictive and eating disorders based on the Company’s expertise using opioid antagonists. The Company has been developing a treatment for reversing opioid overdoses in collaboration with the National Institute on Drug Abuse (“NIDA”), part of the National Institutes of Health (“NIH”). The Company also is developing a new approach for the treatment of overweight and obese patients with Binge Eating Disorder.

 

In December 2014, Lightlake effected a one-for-one hundred reverse stock split of its common stock (the “1:100 Reverse Stock Split”) which decreased the number of common shares issued and outstanding from approximately 182.0 million shares to approximately 1.82 million shares as of December 29, 2015. Unless otherwise noted, all shares amounts listed in this Report been retroactively adjusted for the 1:100 Reverse Stock Split as if such stock splits occurred prior to the issuance of such shares.

 

Lightlake has been focused on developing: (i) a treatment to reverse opioid overdoses, (ii) a treatment for overweight and obese patients with Binge Eating Disorder, which is thought to be the most common eating disorder in the United States today, and (iii) a treatment for Cocaine Use Disorder.

 

To date, Lightlake has carried out operations to utilize the patent and patent applications, including European Patent EP1681057B1 and US Patent Application 11/031,534, which were acquired on August 24, 2009 from Dr. David Sinclair. The Company was informed on October 15, 2010, that the US Patent application was approved. These patents are related to a method for treating eating disorders by repeatedly administering naloxone in a dosage sufficient to block the effects of opiate agonists to a subject suffering from an eating disorder caused by one or more related problem responses (the “Sinclair Method”). The Sinclair Method was developed by Dr. David Sinclair and originally intended for the treatment of alcohol dependency. In 1990, Dr. Sinclair discovered that the opioid antagonist naltrexone, when used correctly in the presence of drinking alcohol, resulted in a 78% success rate, with patients abstaining from alcohol or consuming it at safe levels. H. Lundbeck A/S’s Selincro (nalmefene), was recently approved in Europe, and the treatment regimen is based on Dr. Sinclair’s work.

 

 3 

 

 

In 1989, Dr. Sinclair patented his "Method for Treating Alcohol Drinking Responses,” also known as the “Sinclair Method,” and in 1994, the FDA approved the use of naltrexone as a treatment for alcohol dependency. Since then, this form of treatment has been used by medical practices around the globe as an effective treatment for alcoholism. As stated above, the Company continues to explore various medical applications of this method. The Company aims to broaden its product pipeline, and anticipates commencing further trials based on its existing, as well as potential patents that relate to the use of opioid antagonists. 

 

Principal Products or Services and Markets

 

Opioid Overdose Reversal

 

Naloxone is a medicine currently available through injection that can rapidly reverse the overdose of prescription and illicit opioids. Lightlake’s new intranasal delivery system of naloxone could widely expand its availability and use in preventing opioid overdose deaths.

 

On April 24, 2013, Lightlake announced that it had signed a collaboration agreement with the Division of Pharmacotherapies and Medical Consequences of Drug Abuse (“DPMCDA”) of NIDA, part of the NIH, to co-develop a treatment for the reversal of opioid overdoses. Under the terms of the agreement, the DPMCDA of NIDA agreed to sponsor a Phase I clinical study designed to evaluate the pharmacokinetic properties of the Company’s product candidate in 14 healthy volunteer subjects. Assuming successful completion of this study, NIDA planned to file an investigational new drug application (“IND”) for a final larger study. The goal of the collaboration was to establish a clinical development plan and regulatory pathway that would potentially result in FDA approval and commercialization of a new pharmaceutical treatment that effectively reverses opioid overdoses.

 

On September 23, 2013, Lightlake commenced a two-week patient trial for the treatment to reverse opioid overdoses in collaboration with NIDA. This study was designed to evaluate the pharmacokinetic properties of the Company's intranasal naloxone application for the novel intranasal naloxone application.

 

 4 

 

 

On December 3, 2013, Lightlake announced that the initial findings of its clinical trial with NIDA supported the Company’s intranasal delivery of naloxone as a promising innovative treatment for reversing opioid overdoses. Initial data from the study showed that the Company’s naloxone nasal spray potentially can be delivered into the blood stream at least as quickly as the injection process currently used by hospitals, first responders, and others treating opioid overdoses.

 

On March 14, 2014, Lightlake filed US Provisional Application No. 61/953,379. This application addresses delivery devices and methods of treating opioid overdoses through the administration of intranasal naloxone.

 

On May 15, 2014, Lightlake entered into an agreement and subsequently received funding from an individual investor in the amount of $300,000 for use by the Company for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 1.5% interest in the net profit as related to the Company’s treatment to reverse opioid overdoses. Net profit is defined as the pre-tax profit generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation of Company overhead. The investor also has rights with respect to its 1.5% interest if the treatment is sold or the Company is sold. If the product is not introduced to the market and not approved for marketing within 24 months, the investor will have a 60 day option to receive 37,500 shares of common stock in lieu of the 1.5% interest in the product.

 

On July 9, 2014, Lightlake announced that it signed an agreement with a commercial contract manufacturer to commence production of its naloxone-based opioid overdose reversal treatment. The Company expected that this manufacturer would be able to provide sufficient manufacturing capacity at cGMP production facilities to enable commercialization of the Company’s treatment on a global scale.

 

On July 9, 2014, Lightlake filed US Provisional Application No. 62/022,268 with respect to the Company’s treating opioid overdoses through the administration of intranasal naloxone.

 

On July 22, 2014, Lightlake received a $3,000,000 commitment, from which the Company has the right to make capital calls, from a foundation for the research, development, marketing, commercialization, and any other activities connected to the Company’s treatment to reverse opioid overdoses, certain operating expenses, and any other purpose consistent with the goals of the foundation. In exchange for funds invested by the foundation the Company agreed to provide the foundation with pro-rata share up to a 6.0% interest in the net profit as related to the Company’s treatment to reverse opioid overdoses. Net profit is defined as the pre-tax profit generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation of Company overhead. The foundation also has rights with respect to its up to 6.0% interest if the treatment is sold or the Company is sold. Additionally, the Company may buyback interests from the foundation within two and one half years or after two and a half years of the initial investment at a price of two times or three and a half times, respectively, the relevant investment amount represented by the interests to be bought back. If the product is not approved by the U.S. Food and Drug Administration or an equivalent body in Europe for marketing and is not actually marketed within 24 months the foundation will have a 60 day option to receive shares of the Company’s common stock in lieu of the interest in the treatment at a rate of 10 shares for every dollar of its investment. On July 28, 2014 the Company received an initial investment of $111,470 from the foundation in exchange for a 0.22294% interest. On August 13, 2014, September 8, 2014, November 13, 2014, and February 17, 2015, the Company made capital calls of $422,344 $444,530, $1,033,614, and $988,043, respectively, from the foundation in exchange for 0.844687%, 0.888906%, 2.067228%, and 1.976085% interests, respectively, in the net profit as related to the Company’s treatment to reverse opioid overdoses.

 

On July 23, 2014, Lightlake announced that it filed an IND with respect to its naloxone-based opioid overdose reversal nasal spray. The Company also announced that it received an additional commitment from NIDA to fund a second study with respect to the Company’s nasal spray.

 

 5 

 

 

On September 9, 2014, Lightlake entered into an agreement and subsequently received funding from an individual investor in the amount of $500,000 for use by the Company for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 0.98% interest in the net profit as related to the Company’s treatment to reverse opioid overdoses. Net profit includes the pre-tax profit received by the Company derived from the sale of the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation of Company overhead. The investor also has rights with respect to its 0.98% interest if the treatment is sold or the Company is sold. Additionally, the Company may buyback interests from the investor within two and one half years or after two and a half years of the investment at a price of two times or three and a half times, respectively, the relevant investment amount represented by the interests to be bought back. If the product is not introduced to the market and not approved by the FDA or an equivalent body in Europe and not marketed within 24 months the investor will have a 60 day option to receive 50,000 shares of common stock in lieu of the interest in the product. 

 

On October 31, 2014, the Company entered into an agreement and subsequently received funding from an individual investor in the amount of $500,000 for use by the Company for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 0.98% interest in the net profit as related to the Company’s treatment to reverse opioid overdoses. Net profit includes the pre-tax profit received by the Company derived from the sale of the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation of Company overhead. The investor also has rights with respect to its 0.98% interest if the treatment is sold or the Company is sold. Additionally, the Company may buyback the interest from the investor within two and one half years or after two and a half years but no later than four years of the investment at a price of two times or three and a half times, respectively, of the investment amount. If the product is not introduced to the market and not approved by the FDA or an equivalent body in Europe and not marketed within 24 months the investor will have a 60 day option to receive 50,000 shares of common stock in lieu of the interest in the product.

 

On December 4, 2014, Lightlake announced that the Company has begun a trial designed to evaluate its intranasal naloxone application for opioid overdose. The trial was conducted in partnership with NIDA.

 

On December 15, 2014, Lightlake and Adapt Pharma Operations Limited, a wholly owned subsidiary of Adapt Pharma Limited (“Adapt”), an Ireland-based pharmaceutical company, entered into a license agreement (the “Adapt Agreement”). Pursuant to the agreement Adapt has received from the Company a global license to develop and commercialize the Company’s intranasal naloxone opioid overdose reversal treatment. In exchange for licensing its treatment to Adapt, the Company could receive potential development and sales milestone payments of more than $55 million, plus up to double-digit royalties. The Adapt Agreement provided for an upfront and nonrefundable payment of $500,000, and monthly payments for up to one year for participation in joint development committee calls and the production and submission of an initial development plan. The Adapt Agreement also required the Company to contribute $2,500,000 of development, regulatory, and commercialization costs, some of which was credited for costs incurred by the Company prior to the execution of the Adapt Agreement. 

 

On February 17, 2015, Lightlake announced that Adapt received Fast Track designation by the FDA.

 

On April 22, 2015, Lightlake announced that Adapt successfully completed a clinical study of intranasal naloxone. The pharmacokinetic study compared intranasal naloxone with an injectable formulation of naloxone. The study met its objectives and demonstrated the intranasal formulation of naloxone delivered the targeted naloxone dose as expected.

 

On June 3, 2015, Lightlake announced that Adapt commenced a rolling submission of a New Drug Application (“NDA”) to the FDA for a nasal spray formulation of naloxone, a drug intended to treat opioid overdose. A rolling submission allows completed portions of the NDA to be submitted and reviewed by the FDA on an ongoing basis.

 

On July 29, 2015, Lightlake announced that Adapt has submitted a NDA to the FDA for Narcan® (naloxone) Nasal Spray, an investigational drug intended to treat opioid overdose.

 

Binge Eating Disorder

 

Lightlake is developing a treatment for Binge Eating Disorder derived from the “Sinclair Method.” Patients suffering from Binge Eating Disorder typically exhibit a lack of control eating foods typically high in sugar, fat, or salt, and are able to override the feeling of fullness. When these patients eat foods with high levels of sugar, salt, or fat, the opioidergic system is activated, which causes the firing of the neurons that release endorphins. The endorphins then bind to opioid receptors on other neurons and activate these opioid receptors, which reinforces addictive behavior. By blocking these opioid receptors with an opioid antagonist, the effect these endorphins have each time these foods are eaten is counteracted.

 

 6 

 

 

Lightlake considers naloxone an optimal opioid antagonist to address Binge Eating Disorder as naloxone remains in the brain for two hours, which is the duration of a typical binge. Long-lasting opioid antagonists like naltrexone and nalmefene are sufficient for treating alcoholism and drug addiction, but the short-acting opioid antagonist naloxone works to selectively remove only unhealthy eating responses. Moreover, the Company believes that its treatment is well-suited for treating Binge Eating Disorder as it is unlikely to be used in a truly chronic manner. The Company expects that patients will only administer the treatment when they have the urge to binge eat, and the Company expects that they will require less of the spray over time as they regain control of their eating habits.

 

In November 2009, Lightlake’s clinical trial team in Helsinki, Finland was granted ethical approval to begin screening subjects for the Phase II clinical trials of the opioid antagonist-based nasal spray treatment for Binge Eating Disorder.

 

On May 6, 2010, Lightlake was granted ethical approval for the Phase II trials. A preliminary meeting with the FIMEA Regulatory Authority was held on May 7, 2010 and their requirements for approval were obtained. Moreover, these trials were supervised under the direction of trial coordinator Professor Hannu Eero Rafael Alho, Professor of Addiction Medicine at the University of Helsinki. Crown CRO, a Finnish research organization provided the external validation for the Phase II trial.

 

In 2011, Lightlake commenced a randomized double-blind placebo controlled Phase II trial investigating the use of naloxone intranasally as a treatment for Binge Eating Disorder. The Company randomly selected 138 patients meeting the criteria for Binge Eating Disorder from over 900 applicants, of which 298 of these applicants had gene samples analyzed, and 127 patients enrolled in the trial. Each patient was randomized to take either intranasal naloxone or a placebo nasal spray. The Company contracted the Phase II trial operations to Lightlake Sinclair of Helsinki, Finland.

 

In April 2012, Lightlake completed a Phase II clinical trial in Helsinki, Finland to investigate the use of the opioid antagonist naloxone delivered intranasally as a treatment for Binge Eating Disorder. The Company’s approach was unique, through using a single agent with known safety, delivered intranasally, in response to behavioral stimuli, and selectively addressing a subset of obese and overweight patients which was thought to represent up to 25% of this total patient cohort. The Company believed that its approach could deliver successful outcomes in a challenging area that recently encountered several failures.

 

On August 8, 2012, Lightlake announced the final data from the Phase II trial investigating the use of naloxone intranasally as a treatment for Binge Eating Disorder. Results from this study have been very encouraging, whereby patients receiving naloxone demonstrated a significant reduction over placebo in reducing bingeing. In addition, the patients receiving the naloxone nasal spray lost weight in the second half of the study and it would appear that patients with the highest BMI tended to reduce their bingeing the most.

 

On May 23, 2013, Lightlake presented the results of the Company’s Phase II clinical trial of its nasal spray treatment for Binge Eating Disorder at the American Psychiatric Association (“APA”) Annual Meeting in San Francisco. Binge Eating Disorder has been added to the fifth edition of the APA’s Diagnostic and Statistical Manual of Mental Disorders (“DSM-5”), which was launched at the APA Annual Meeting. DSM-5 is used by clinicians and researchers to diagnose and classify mental disorders in order to improve diagnoses, treatment, and research. This manual is the product of more than 10 years of effort by hundreds of international experts in all aspects of mental health. DSM-5 diagnostic criteria are concise and explicit, intended to facilitate an objective assessment of symptom presentations in a variety of clinical settings from inpatient to primary care. Binge Eating Disorder is defined in the DSM-5 chapter on Feeding and Eating Disorders as a diagnosis for individuals who experience persistent, recurrent episodes of overeating, marked by loss of control and significant clinical distress. The chapter also includes changes in the requirements for diagnosis of Anorexia Nervosa and Bulimia Nervosa, two potential additional indications for the Company’s treatment.

 

 7 

 

 

On December 17, 2013, the Company entered into an agreement and subsequently received additional funding totaling $250,000 for use by the Company for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 0.5% interest in the net profit as related to the Company’s Binge Eating Disorder treatment. Net profit is defined as the pre-tax profit generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation of Company overhead. The investor also has rights with respect to its 0.5% interest if the treatment is sold or the Company is sold. If the product is not approved by the U.S. Food and Drug Administration within 36 months the investor will have a 60 day option to receive 31,250  shares of common stock in lieu of the 0.5% interest in the product.

 

On September 17, 2014, Lightlake entered into an agreement and subsequently received funding totaling $500,000 for use by the Company for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 1.0% interest in the Company’s Binge Eating Disorder treatment product and pay the investor 1.0% of the net profit generated from this treatment in perpetuity. Net profit is defined as the pre-tax profit generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation of Company overhead. If the product is not approved by the FDA within 36 months the investor will have a sixty day option to receive 62,500 shares of common stock in lieu of the 1.0% interest in the product.

 

On July 20, 2015, Lightlake entered into an agreement and subsequently received additional funding totaling $250,000 for use by the Company for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 0.5% interest in the Company’s Binge Eating Disorder treatment product and pay the investor 0.5% of the net profit generated from this treatment in perpetuity. Net profit is defined as the pre-tax profit generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation of Company overhead. If the product is not approved by the FDA within 36 months the investor will have a sixty day option to receive 25,000 shares of common stock in lieu of the 0.5% interest in the product.

 

Lightlake now aims to collaborate with other parties to progress its drug development program for Binge Eating Disorder.

 

Cocaine Use Disorder

 

Lightlake is developing a treatment for Cocaine Use Disorder (CocUD). There are approximately 1.5 million current cocaine users in the U.S., as reported by The Substance Abuse and Mental Health Services Administration (SAMHSA).

 

Cocaine is often used in a binge pattern. Taking the drug repeatedly within a relatively short period of time, at increasingly higher doses, can easily lead to addiction, a chronic relapsing disease caused by changes in the brain and characterized by uncontrollable drug-seeking no matter the consequences. Cocaine is a strong central nervous system stimulant that increases levels of the neurotransmitter dopamine in brain circuits regulating pleasure and movement, with the opioidergic system strongly linked to the dopamine reward circuitry.

 

Any route of administration can lead to absorption of toxic amounts of cocaine. Most seriously, in the short-term cocaine users can suffer from heart attacks, strokes, and convulsions, which can result in sudden death. Repeated use of cocaine can lead to long-term harmful changes in the brain and other parts of the body, including decreases in appetite, weight loss, and malnourishment. Snorting cocaine can lead to loss of sense of smell and difficulty in swallowing, ingesting cocaine can cause severe bowel gangrene due to reduced blood flow, and injecting cocaine can lead to puncture marks called “tracks” and possible allergic reactions. Cocaine users are also at high risk of contracting HIV and viral hepatitis from sharing contaminated needles and engaging in risky sexual behaviors.

 

The extraordinary cost of cocaine addiction, financially, medically and socially, is directly related to the stubborn clinical problem of relapse. Relapse rates have remained discouragingly high for decades: up to 80% of addicted individuals relapse within six months of treatment. Finding effective interventions, psychosocial or pharmacologic, has proven difficult. However, important advances in clinical neuroscience of addiction have put this goal within reach.

 

Lightlake has planned a study to help progress a potential treatment for Cocaine Use Disorder. 

 

 8 

 

 

General Information  

 

Lightlake was incorporated in the State of Nevada on June 21, 2005, as Madrona Ventures, Inc. and on September 16, 2009, the Company changed its name to Lightlake Therapeutics Inc. The Company’s fiscal year end is July 31 and the Company is a Development Stage Company. The Company is a specialty pharmaceutical company developing opioid antagonist treatments for substance use, addictive and eating disorders.

 

During the fiscal year ended July 31, 2015, Lightlake carried out operations to utilize the patent and patent applications, including European Patent EP1681057B1 and US Patent Application 11/031,534, which were acquired on August 24, 2009 from Dr. David Sinclair.  The Company has successfully commenced and completed a Phase II Binge Eating Disorder trial. The Company also has collaborated with NIDA, part of the NIH, with respect to developing a treatment to reverse opioid overdoses.

 

On October 15, 2010, Lightlake was informed by the Examiner at the US Patent office that the Company’s US patent application, 11/031,534, was approved, and that the Company’s US patent would be granted. On March 22, 2011, the Company’s patent was officially issued—the patent number is: 7,910,599.

  

 9 

 

 

On December 1, 2014, Lightlake and Aegis Therapeutics, LLC (“Aegis”), entered into a Material Transfer, Option and Research License Agreement (the “Aegis Agreement”) that provides the Company with an exclusive royalty-free research license for a period of time to Aegis’ proprietary delivery enhancement and stabilization agents, including Aegis’ ProTek® and Intravail® technologies (collectively, the “Technology”) to enable the Company to conduct a feasibility study of opioid antagonists when used with the Technology. During this period of time, the Company may also evaluate its interest in having an exclusive license to the Technology for use with opioid antagonists to treat, diagnose, predict, detect or prevent any disease, disorder, state, condition or malady in humans (the “Possible License”). Aegis has granted the Company an exclusive option to obtain the Possible License for a certain period after the study is completed. In consideration of the license granted to the Company pursuant to the Aegis Agreement, the Company is required to pay to Aegis a nonrefundable study fee.

 

On February 9, 2015, Lightlake announced that Arvind Agrawal joined the Company as Executive Vice President, Medical Affairs, effective, January 2015. Mr. Agrawal previously has been Head of Medical Affairs New Products at Mundipharma International, where he made significant advances towards the development of a novel treatment for opioid addiction. He also worked as European Clinical and Scientific Affairs Director at Reckitt Benckiser Pharmaceuticals, where he developed strategies leading to positive clinical, political, and legislative changes for the treatment of opioid dependence. His earlier professional experience was with AstraZeneca plc, GlaxoSmithKline plc, SmithKline Beecham plc, and Wellcome Pharmaceuticals, where he held various senior management positions in medical affairs and clinical development, and helped to launch the pharmaceutical blockbusters Crestor (rosuvastatin) and Avandia (rosiglitazone). Mr. Agrawal holds an MSc in Human & Applied Physiology from King's College, University of London. He is also the Managing Director of Ekagra Ltd, a pharmaceutical medical affairs consultancy in the UK.  

 

Lightlake has not attained profitable operations and is dependent upon generating sufficient revenues and/or obtaining sufficient financing. The Company anticipates if revenues are not sufficient then additional funding will be required in the form of debt financing and/or equity financing from the sale of the Company’s Common Stock and/or in the form of financing from the sale of interests in the Company’s prospective products. However, the Company may not be able to generate sufficient revenues or raise sufficient funding to fund the Company’s operations.

 

Lightlake has not had a bankruptcy, receivership or similar proceeding. Lightlake has not had material reclassifications, mergers, consolidations, or purchase or sale of a significant amount of assets not in the ordinary course of business. Lightlake is required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the clinical testing and manufacturing and sale of pharmaceutical products.

 

Employees

 

As of July 31, 2015, Lightlake has four employees. In addition, the Company has numerous outside consultants that are not on the Company’s payroll.

 

ITEM 1A.  RISK FACTORS

 

Lightlake has generated limited revenue to date and expects to incur significant operating losses for the foreseeable future.

 

Lightlake was incorporated on June 21, 2005. The Company operates as a specialty pharmaceutical company developing opioid antagonist treatments for substance use, addictive and eating disorders. The Company has generated limited revenues from inception through the date of this report. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications, and delays encountered in connection with the clinical trials that will be conducted and on the development of new solutions to common addictions and related disorders. These potential problems include, but are not limited to, unanticipated problems relating to the clinical trials, changes in the regulatory and competitive landscape, and additional costs and expenses that may exceed current budget estimates for the completion of the trials. Prior to completion of any Phase III clinical trials with respect to treating obesity and eating disorders, the Company anticipates that the Company will incur increased operating expenses. The Company expects to incur significant losses into the foreseeable future. The Company recognizes that if the Company is unable to generate funding or sufficient revenues, the Company will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that the Company will prove successful. If the Company is unsuccessful in addressing these risks, then the Company will most likely fail.

 

 10 

 

 

Lightlake may not succeed in completing the development of its products, commercializing its products, and generating significant revenues.

 

Since commencing operations, Lightlake has focused on the research and development of using naloxone to: (i) reverse opioid overdoses, (ii) treat overweight and obese patients with Binge Eating Disorder; and (iii) treat Cocaine Use Disorder. The Company’s products have generated limited revenues. The Company’s ability to generate significant revenues and achieve profitability depends on the Company’s ability to successfully complete the development of its products, obtain market approval, and generate significant revenues. On December 15, 2014, the Company and Adapt entered into the Adapt Agreement that provides Adapt with a global license to develop and commercialize the Company’s intranasal naloxone opioid overdose reversal treatment. The loss for any reason of Adapt as a key partner could have a significant and adverse impact on the Company’s business. If the Company is unable to retain Adapt as a partner on commercially acceptable terms, the Company may not be able to commercialize the Company’s products as planned and the Company may experience delays in or suspension of the Company’s marketing launch of the Company’s products.

 

The future success of Lightlake’s business cannot be determined at this time, and the Company does not anticipate generating revenues from product sales for the foreseeable future. Notwithstanding the foregoing, the Company expects to generate revenues from the treatment using naloxone to reverse opioid overdoses, for which the Company is dependent on many factors, including the performance of the Company’s licensing partner Adapt. In addition, the Company has no experience in commercializing its treatments on its own and faces a number of challenges with respect to its commercialization efforts, including, among others, that:

 

the Company may not have adequate financial or other resources to complete the development of its products;

 

the Company may not be able to manufacture its products in commercial quantities, at an adequate quality, or at an acceptable cost;

 

the Company may not be able to establish adequate sales, marketing, and distribution channels;

 

healthcare professionals and patients may not accept the Company’s treatments;

 

•      the Company may not be aware of possible complications from the continued use of its products since the Company has limited clinical experience with respect to the actual use of its products;

 

•      technological breakthroughs in reversing opioid overdoses, treating overweight and obese patients with Binge Eating Disorder, and treating Cocaine Use Disorder may reduce the demand for the Company’s products;

 

•      changes in the market for reversing opioid overdoses, treating overweight and obese patients with Binge Eating Disorder, and treating Cocaine Use Disorder, new alliances between existing market participants, and the entrance of new market participants may interfere with the Company’s market penetration efforts;

 

•      third-party payors may not agree to reimburse patients for any or all of the purchase price of the Company’s products, which may adversely affect patients’ willingness to purchase the Company’s products;

 

uncertainty as to market demand may result in inefficient pricing of the Company’s products;

 

 11 

 

 

 

the Company may face third-party claims of intellectual property infringement;

 

•      the Company may fail to obtain or maintain regulatory approvals for its products in the Company’s target markets or may face adverse regulatory or legal actions relating to its products even if regulatory approval is obtained; and

 

•      the Company is dependent upon the results of clinical studies relating to its products and the products of its competitors.

 

If Lightlake is unable to meet any one or more of these challenges successfully, the Company’s ability to effectively commercialize its products could be limited, which in turn could have a material adverse effect on its business, financial condition, and results of operations.

 

Given Lightlake’s limited revenue and cash flow, the Company may need to raise additional capital, which may be unavailable to the Company or, even if consummated, may cause dilution or place significant restrictions on the Company’s ability to operate.

 

Since Lightlake may be unable to generate sufficient revenue or cash flow to fund its operations for the foreseeable future, the Company may need to seek additional equity or debt financing to provide the capital required to maintain or expand its operations. The Company may also need additional funding to continue the development of its products, increase its sales and marketing capabilities, promote brand identity, or develop or acquire complementary companies, technologies and assets, as well as for working capital requirements and other operating and general corporate purposes.

 

Lightlake does not currently have any arrangements or credit facilities in place as a source of funds, and there can be no assurance that the Company will be able to raise sufficient additional capital if needed on acceptable terms, or at all. If such financing is not available on satisfactory terms, or is not available at all, the Company may be required to delay, scale back, or eliminate the development of business opportunities and its ability to achieve its business objectives, its competitiveness, and its operations and financial condition may be materially adversely affected. The Company’s inability to fund its business could thus lead to the loss of your investment.

 

If Lightlake raises additional capital by issuing equity securities and/or equity-linked securities, the percentage ownership of the Company’s existing stockholders may be reduced, and accordingly these stockholders may experience substantial dilution. The Company may also issue equity securities and/or equity-linked securities that provide for rights, preferences, and privileges senior to those of its Common Stock. Given the Company’s need for cash and that equity and equity-linked issuances are very common types of fundraising for companies like the Company, the risk of dilution is particularly significant for stockholders of the Company.

 

Debt financing, if obtained, may involve agreements that include liens on Lightlake’s assets and covenants limiting or restricting the Company’s ability to take specific actions such as incurring additional debt. Debt financing could also be required to be repaid regardless of the Company’s operating results.

 

If Lightlake raises additional funds through collaborations and licensing arrangements, the Company may be required to relinquish some rights to its products, or to grant licenses on terms that are not favorable to the Company.

 

Lightlake has no experience as a company in obtaining regulatory approval for, or commercializing, any product candidate.

 

As a company, Lightlake has never obtained regulatory approval for, or commercialized, any product candidate. It is possible that the FDA may conclude after review of the Company’s data from clinical studies that the data is insufficient to obtain regulatory approval. The FDA may also conclude that the Company has not met the requirements to obtain regulatory approval for its treatments. If the FDA does not accept or approve the Company’s treatments, it may require that the Company conduct additional clinical, preclinical, or manufacturing validation studies, which may be costly, and submit that data before it will reconsider the Company’s application. Depending on the extent of these or any other FDA required studies, approval of any NDA or other application that the Company submits may be significantly delayed, possibly for several years, or may require the Company to expend more resources than it has available. Any delay in obtaining, or an inability to obtain, regulatory approvals would prevent the Company from commercializing its products, generating significant revenues in the case of the Company’s treatment using naloxone to reverse opioid overdoses, or generating any revenues at all in the case of the Company’s other treatments, and achieving and sustaining profitability. It is also possible that additional studies, if performed and completed, may not be considered sufficient by the FDA to approve any NDA the Company submits. The Company faces similar risks for any approval in a foreign jurisdiction.

 

 12 

 

 

Lightlake’s current and future operations substantially depend on the Company’s management team and the Company’s ability to hire other key personnel, the loss of any of whom could disrupt the Company’s business operations.

 

Lightlake’s business depends and will continue to depend in substantial part on the continued service of Dr. Roger Crystal and Kevin Pollack. The loss of the services of either of these individuals would significantly impede implementation and execution of the Company’s business strategy and may result in the failure to reach its goals. The Company does not carry key person life insurance on any of its management, which would leave the Company uncompensated for the loss of any of its management.

 

In addition, although Dr. Crystal devotes 35 hours per week to his work for Lightlake, he has a job as part of the management team, albeit not as an executive officer, of a private company to which he also devotes 35 hours per week. Dr. Crystal will abide by the doctrine of corporate opportunity, and will only take for himself a business opportunity if: (1) the opportunity is offered to Dr. Crystal in his individual capacity and not in his capacity as an officer and director of the Company; (2) the opportunity is not essential to the Company; (3) the Company has no interest or expectancy with regard to the opportunity; and (4) Dr. Crystal has not employed the resources of the Company in pursuing or exploiting the opportunity.

 

Lightlake’s future viability and ability to achieve sales and profits will also depend on the Company’s ability to attract, train, retain, and motivate highly qualified personnel in the diverse areas required for continuing its operations. There is a risk that the Company will be unable to attract, train, retain, or motivate qualified personnel, both near term or in the future, and the Company’s failure to do so may severely damage its prospects.

 

Lightlake’s independent auditor has issued an audit opinion for the Company which includes a statement describing the Company’s going concern status. The Company’s financial status creates a doubt whether the Company will continue as a going concern.

 

Based on Lightlake’s financial history since inception, the Company’s independent registered public accounting firm has expressed substantial doubt as to the Company’s ability to continue as a going concern. The Company has generated limited revenue to date.

 

Lightlake’s products may have undesirable side effects which may delay or prevent marketing approval, or, if approval is received, require it to be taken off the market, require it to include safety warnings or otherwise limit sales of the product.

 

Unforeseen side effects from Lightlake’s products could arise either during clinical development or, if approved, after the Company’s products has been marketed. This could cause regulatory approvals for, or market acceptance of, the Company’s products harder and more costly to obtain.

 

To date, no serious adverse events have been attributed to Lightlake’s products. The results of the Company’s planned or any future clinical trials may show that the Company’s products causes undesirable or unacceptable side effects, which could interrupt, delay or halt clinical trials, and result in delay of, or failure to obtain, marketing approval from the FDA and other regulatory authorities, or result in marketing approval from the FDA and other regulatory authorities with restrictive label warnings.

 

 13 

 

 

If Lightlake’s products receive marketing approval and the Company or others later identify undesirable or unacceptable side effects caused by the use of the Company’s products:

 

• regulatory authorities may withdraw their approval of the products, which would force the Company to remove its products from the market;

 

• regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication, or field alerts to physicians, pharmacies, and others;

 

• the Company may be required to change instructions regarding the way the products are administered, conduct additional clinical trials, or change the labeling of the products;

 

• the Company may be subject to limitations on how it may promote the products;

 

• sales of the products may decrease significantly;

 

• the Company may be subject to litigation or product liability claims; and

 

• the Company’s reputation may suffer.

 

Any of these events could prevent Lightlake or its potential future collaborators from achieving or maintaining market acceptance of the Company’s products or could substantially increase commercialization costs and expenses, which in turn could delay or prevent the Company from generating significant revenues from the sale of its products.

 

Lightlake currently has no marketing and sales organization and has no experience as a company in marketing pharmaceutical products. If the Company is unable to establish its own marketing and sales capabilities, or enter into agreements with third parties, to market and sell its products after they are approved, the Company may not be able to generate product revenues.

 

Lightlake does not have a sales organization for the marketing, sales, and distribution of any pharmaceutical products. In order to commercialize the Company’s products or any other product candidate the Company may develop or acquire in the future, the Company must develop these capabilities on its own or make arrangements with third parties for the marketing, sales, and distribution of its products. The establishment and development of the Company’s own sales force would be expensive and time consuming and could delay any product launch, and the Company cannot be certain that it would be able to successfully develop this capability. As a result, the Company may seek one or more licensing partners to handle some or all of the sales and marketing of its products in the U.S. and elsewhere. There also may be certain markets within the U.S. for the Company’s products for which the Company may seek a co-promotion arrangement. However, the Company may not be able to enter into arrangements with third parties to sell its products on favorable terms or at all. In the event the Company is unable to develop its own marketing and sales force or collaborate with a third-party marketing and sales organization, the Company would not be able to commercialize its products or any other product candidates that it develops, which would negatively impact its ability to generate product revenues. Furthermore, whether the Company commercializes products on its own or relies on a third party to do so, the Company’s ability to generate revenue would be dependent on the effectiveness of the sales force. In addition, to the extent the Company relies on third parties to commercialize its approved products, the Company would likely receive less revenues than if the Company commercialized these products itself.

 

Lightlake relies heavily on the Adapt Agreement and Adapt to develop and commercialize its intranasal naloxone opioid overdose reversal treatment.

 

On December 15, 2014, Lightlake and Adapt entered into the Adapt Agreement that provides Adapt with a global license to develop and commercialize the Company’s intranasal naloxone opioid overdose reversal treatment. The Company may be unable to establish or maintain this relationship on a commercially reasonable basis, if at all. In addition, Adapt may have similar or more established relationships with the Company’s competitors or larger customers. Moreover, the loss for any reason of Adapt as a key partner could have a significant and adverse impact on the Company’s business. If the Company is unable to retain Adapt as a partner on commercially acceptable terms, the Company may not be able to commercialize its products as planned and it may experience delays in or suspension of its marketing launch of its products. The same could apply to other product candidates the Company may develop or acquire in the future. The Company’s dependence upon third parties may adversely affect the Company’s ability to generate profits or acceptable profit margins and the Company’s ability to develop and deliver such products on a timely and competitive basis.

 

 14 

 

 

Lightlake is exposed to product liability, non-clinical and clinical liability risks which could place a substantial financial burden upon the Company, should lawsuits be filed against the Company.

 

Lightlake’s business exposes the Company to potential product liability and other liability risks that are inherent in the testing, manufacturing, and marketing of pharmaceutical formulations and products. The Company expects that such claims are likely to be asserted against it at some point. In addition, the use in the Company’s clinical trials of pharmaceutical formulations and products and the subsequent sale of these formulations or products by the Company or its potential collaborators may cause the Company to bear a portion of or all product liability risks. The Company currently does not have adequate insurance coverage relating to personal injury, product liability, medical expenses, and office premises. However, any claim under any existing insurance policies or future insurance policies may be subject to certain exceptions, and may not be honored fully, in part, in a timely manner, or at all, and may not cover the full extent of liability the Company may actually face. Therefore, a successful liability claim or series of claims brought against the Company could have a material adverse effect on its business, financial condition, and results of operations.

 

Risks Related to Lightlake’s Common Stock

 

The trading in Lightlake’s shares is regulated by Securities and Exchange Commission rule 15g-9 which established the definition of a “penny stock.”

 

Although Lightlake’s shares are currently traded at a price higher than $5.00, the Company’s shares have frequently traded in the past at a price lower than $5.00. If the Company’s share price goes below $5.00, the shares will be defined as a “Penny Stock” under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) and rules of the Commission. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in the Company’s securities, which could severely limit the market price and liquidity of the Company’s securities. These requirements may restrict the ability of broker-dealers to sell the Company’s common stock and may affect your ability to resell Company’s common stock.

 

Lightlake will incur ongoing costs and expenses for SEC reporting and compliance. Without sufficient revenue the Company may not be able to remain in compliance, making it difficult for investors to sell their shares, if at all.

 

Lightlake’s shares are quoted on the OTCQB Market under the symbol “LLTP.” To be eligible for quotation, issuers must remain current in their filings with the SEC. In order for the Company to remain in compliance the Company will require cash to cover the cost of these filings, which could comprise a substantial portion of the Company’s available cash resources. If the Company is unable to remain in compliance it may be difficult for the Company’s stockholders to resell any shares, if at all.

 

Lightlake does not anticipate declaring any cash dividends on its Common Stock.

 

Lightlake currently intends to retain any future earnings for use in the operation and expansion of its business. Accordingly, the Company does not expect to pay any dividends in the foreseeable future, but will review this policy as circumstances dictate.

 

 15 

 

 

As an “emerging growth company” under applicable law, Lightlake is subject to lessened disclosure requirements, which could leave its stockholders without information or rights available to stockholders of more mature companies.

 

For as long as Lightlake remains an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (which is referred to herein as the JOBS Act), the Company has elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to:

 

• not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;

 

• taking advantage of an extension of time to comply with new or revised financial accounting standards;

 

• reduced disclosure obligations regarding executive compensation in the Company’s periodic reports and proxy statements; and

 

• exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

 

Lightlake expects to take advantage of these reporting exemptions until it is no longer an “emerging growth company.” Because of these lessened regulatory requirements, the Company’s stockholders would be left without information or rights available to stockholders of more mature companies.

 

Because Lightlake has elected to use the extended transition period for complying with new or revised accounting standards for an “emerging growth company” its financial statements may not be comparable to companies that comply with public company effective dates.

 

Lightlake has elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows the Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, the Company’s financial statements may not be comparable to companies that comply with public company effective dates, and thus investors may have difficulty evaluating or comparing the Company’s business, performance or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of the Company’s Common Stock.

 

Lightlake will incur ongoing costs and expenses for SEC reporting and compliance. Without significant revenue the Company may not be able to remain in compliance, making it difficult for investors to sell their shares, if at all.

 

Lightlake’s shares are quoted on the OTCQB Market under the symbol “LLTP.”  To be eligible for quotation, issuers must remain current in their filings with the SEC. In order for the Company to remain in compliance the Company will require cash to cover the cost of these filings, which could comprise a substantial portion of the Company’s available cash resources. If the Company is unable to remain in compliance it may be difficult for the Company’s shareholders to resell any shares, if at all.

 

Item 1B. Unresolved Staff Comments.

 

This information is not required for smaller reporting companies.

 

Item 2.  Properties.

 

Lightlake does not currently own any physical property. The Company leases space on the 9th Floor of 445 Park Avenue, New York, NY 10022 for approximately $600 per month. The lease expires on January 31, 2016. Lightlake currently has no investment policies as they pertain to real estate, real estate interests, or real estate mortgages.

 

 16 

 

 

Item 3.  Legal Proceedings.

 

Lightlake is currently not involved in any litigation that the Company believes could have a materially adverse effect on the Company’s financial condition or results of operations. There is no action, suit, proceeding, inquiry, or investigation before or by any court, public board, government agency, self-regulatory organization, or body pending or, to the knowledge of the executive officers of the Company or any of the Company’s subsidiaries, threatened against or affecting the Company, the Company’s common stock, any of the Company’s subsidiaries or the Company’s or the Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 4.  Mine Safety Disclosures.

 

Not applicable.

 

PART II

 

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Market Information

 

Since April 2007, Lightlake’s common stock has been listed for quotation on the OTCQB under the symbol “LLTP”.

 

Price Range of Common Stock

 

The following table shows, for the periods indicated, the high and low bid prices per share of Lightlake’s common stock as reported by the OTCQB quotation service. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.

 

   High   Low 
Fiscal Year 2014          
First quarter ended October 31, 2013  $11.29   $2.80 
Second quarter ended January 31, 2014  $7.00   $3.30 
Third quarter ended April 30, 2014  $6.00   $3.10 
Fourth quarter ended July 31, 2014  $6.10   $1.97 

 

Fiscal Year 2015          
First quarter ended October 31, 2014  $6.10   $3.20 
Second quarter ended January 31, 2015  $6.00   $3.16 
Third quarter ended April 30, 2015  $10.99   $3.43 
Fourth quarter ended July 31, 2015  $8.10   $6.09 

 

Approximate Number of Equity Security Holders

 

As of October 20, 2015, there were approximately 100 stockholders of record. Because shares of Lightlake’s common stock are held by depositaries, brokers and other nominees, the number of beneficial holders of the Company’s shares is substantially larger than the number of stockholders of record.

 

Dividends

 

There are no restrictions in Lightlake’s articles of incorporation or bylaws that prevent the Company from declaring dividends. The Nevada Revised Statutes, however, do prohibit the Company from declaring dividends where, after giving effect to the distribution of the dividend:

 

  1. Lightlake would not be able to pay the Company’s debts as they become due in the usual course of business; or

 

 17 

 

 

  2. Lightlake’s total assets would be less than the sum of the Company’s total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.

 

Lightlake has not declared any dividends, and the Company does not plan to declare any dividends in the foreseeable future.

 

Unregistered Sales of Equity Securities

 

Stock Options   

 

On August 2, 2014, Lightlake granted 30,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have a term of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $173,999 which have been fully recognized as expense for the year ended July 31, 2015.

 

On November 12, 2014, Lightlake granted 30,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have a term of 5 years and vest over 3 years. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $188,825, of which $103,951 has been fully recognized as expense for the year ended July 31, 2015.

 

On November 12, 2014, Lightlake granted 20,000 cashless stock options with an exercise price of $15.00 per share to a consultant for services rendered. These options have a term of 5 years and vest over three years. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $127,150, of which $67,984 has been fully recognized as expense for the year ended July 31, 2015.

 

On January 9, 2015, Lightlake granted 15,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have a term of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $65,163 which have been fully recognized as expense for the year ended July 31, 2015.

 

On January 25, 2015, Lightlake granted 10,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have a term of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $36,169 which have been fully recognized as expense for the year ended July 31, 2015.

 

On March 19, 2015, Lightlake granted 48,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have a term of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $282,227 which have been fully recognized as expense for the year ended July 31, 2015.

 

On March 19, 2015, Lightlake granted 32,000 cashless stock options with an exercise price of $15.00 per share to a consultant for services rendered. These options have a term of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $186,655 which have been fully recognized as expense for the year ended July 31, 2015.

 

On July 15, 2015, Lightlake granted 10,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have a term of 3 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $55,043 which have been fully recognized as expense for the year ended July 31, 2015. 

 

On December 16, 2014, Lightlake issued 38,800 stock warrants with an exercise price of $8.00 per share to a consultant for services rendered. These warrants have a term of 10 years and vested immediately. The Company has valued these warrants using the Black-Scholes option pricing model which resulted in a fair market value of $144,724 which have been fully recognized as expense for the year ended July 31, 2015.

 

On March 19, 2015, Lightlake issued 45,000 stock warrants with an exercise price of $10.00 per share to a consultant for services rendered. These warrants have a term of 5 years and vested immediately. The Company has valued these warrants using the Black-Scholes option pricing model which resulted in a fair market value of $264,588 which have been fully recognized as expense for the year ended July 31, 2015.

 

 18 

 

 

These shares and options were issued in reliance on the exemption under Section 4(2) of the Securities Act. These shares of Lightlake’s common stock qualified for exemption under Section 4(2) since the issuance shares by the Company did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. The Company did not undertake an offering in which the Company sold a high number of shares to a high number of investors. In addition, the investors had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, the Company has met the requirements to qualify for exemption under Section 4(2) of the Securities Act for this transaction.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

Lightlake does not have in effect any compensation plans under which the Company’s equity securities are authorized for issuance. 

 

Item 6. Selected Financial Data.

 

Lightlake is not required to provide the information required by this Item because the Company is a smaller reporting company. 

 

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion and analysis of the results of operations and financial condition for the fiscal years ended July 31, 2015 and 2014 and should be read in conjunction with Lightlake’s financial statements, and the notes to those financial statements that are included elsewhere in this Report.

 

Results of Operations

 

Lightlake had $1,550,000 of revenue  during the year ended July 31, 2015. The Company recognized $800,000 of revenue derived from the Adapt Agreement. The Company also recognized $750,000 from investments in treatments that were classified as deferred revenue as of July 31, 2014. Lightlake did not have any revenues during the year ended July 31, 2014 and had generated no revenue from inception through July 31, 2014 as the Company was devoting substantially all of its efforts on establishing the business and its planned principal operations had not commenced.

 

General and Administrative Expenses

 

Lightlake’s general and administrative expenses were incurred in the amounts of $6,034,520 and $10,838,760 for the years ended July 31, 2015 and 2014, respectively. The difference in the year over year change of $4,804,240 was primarily due to a reduction in administrative compensation as the Company recorded $1,729,216 of stock-based compensation during the year ended July 31, 2015 as compared to $9,003,582 during the year ended July 31, 2014. This was partially offset by increases in professional fees, consulting costs, and non-stock based officer’s compensation. 

 

Research and Development

 

Lightlake spent $2,414,973 and $464,609 during the years ended July 31, 2015 and 2014, respectively. The year over year increase is primarily due to increased spending on research and development of the Company’s opioid overdose reversal treatment.

 

Interest Expense

 

During the years ended July 31, 2015 and 2014, Lightlake’s interest expense decreased from $160,303 to $28,232. This decrease was due to a reduction in obligations connected to outstanding debt.

 

 19 

 

 

Net Loss 

 

The comparable net loss for the year ended July 31, 2015, as compared to the net loss for the year ended July 31, 2014 was $7,037,873 and $11,482,818, respectively. This reduction of net loss was due primarily to a reduction in operating expenses and stock-based compensation, partially offset by an increase in research and development expenses.

 

Lightlake has not attained profitable operations and is dependent upon generating sufficient revenues and/or obtaining financing to pursue its objectives and further certain planned initiatives. In their report on the Company’s financial statements at July 31, 2015 and July 31, 2014, the Company’s auditors raised substantial doubt about the Company’s ability to continue as a going concern.

 

Liquidity and Capital Resources

 

Lightlake’s cash balance at July 31, 2015, was $434,217 together with $8,874,520 of outstanding liabilities. The Company’s management believes that the Company’s current cash balance will not be sufficient to fund the Company’s operations for the next twelve months. As a result, the Company will need to generate sufficient revenues and/or seek additional funding in the near future. The Company currently does not have a specific plan of how it will obtain such funding; however, the Company anticipates that additional funding will be in the form of debt financing and/or equity financing from the sale of the Company’s common stock and/or in the form of financing from the sale of interests in the Company’s prospective products. Such funds may also be derived pursuant to the terms of the Adapt Agreement.

 

During the year ended July 31, 2015, Lightlake received $4,638,530 in funding in exchange for interests in the Company’s opioid overdose reversal treatment and Binge Eating Disorder treatments. This investment increased the cash position of the Company. As stated above, the Company expects to continue to issue debt and/or equity and/or sell interests in the Company’s prospective products to sustain the implementation of the Company’s business plan unless sufficient revenues are generated. During the year ended July 31, 2014, the Company received funding amounting to $661,470. Additionally, during the year ended July 31, 2014, the Company received a commitment for $3,000,000 of investment.

 

At this time, Lightlake cannot provide investors with any assurance that it will be able to generate sufficient revenues and/or obtain sufficient funding from debt financing and/or the sale of its common stock and/or the sale of interests in the Company’s prospective products to meet its obligations over the next twelve months. The Company does not have any arrangements in place for any future financing. The Company may also seek to obtain short-term loans from its officers and directors to meet its short-term funding needs. The Company has no material commitments for capital expenditures as of July 31, 2015 other than obligations with respect to the Adapt Agreement. 

 

The financial position of Lightlake at the year ended July 31, 2015 showed an increase in assets from July 31, 2014 of $300,657 to $487,795, respectively. This was due primarily to an increase in the Company’s cash position, which was the due to revenues and an increase in funding during the year. The liabilities at July 31, 2015 increased to $8,874,520 from $3,378,725 at July 31, 2014. This increase was partially the result of an increase in Company’s investment into its opioid overdose reversal treatment program and Binge Eating Disorder treatments of $3,888,530 and an increase in the accrued officers’ salaries of $1,712,409.

 

Going Concern

 

Lightlake’s independent auditor has issued an audit opinion, which includes a statement expressing substantial doubt as to the Company’s ability to continue as a going concern.

 

Lightlake has incurred significant losses, a working capital deficit as of July 31, 2015 of $3,107,160 and is dependent on generating sufficient revenues and/or obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to generate sufficient revenues and/or obtain the necessary funding it could cease operations. This raises substantial doubt about the Company’s ability to continue as a going concern.

 

 20 

 

 

 Plan Of Operation

 

During the next year, Lightlake aims to broaden the Company’s product pipeline, and anticipates commencing further trials based on the Company’s existing as well as potential patents.

 

Lightlake has been focused on establishing a clinical development plan and regulatory pathway that could potentially result in FDA approval and commercialization of the Company’s opioid overdose reversal treatment. On December 4, 2014, Lightlake announced that the Company has begun a trial designed to evaluate its intranasal naloxone application for opioid overdose. The trial was conducted in partnership with NIDA. On December 15, 2014, Lightlake and Adapt entered into the Adapt Agreement. Pursuant to the agreement Adapt has received from the Company a global license to develop and commercialize the Company’s intranasal naloxone opioid overdose reversal treatment. In exchange for licensing its treatment to Adapt, the Company could receive potential development and sales milestone payments of more than $55 million, plus up to double-digit royalties. On February 17, 2015, Lightlake announced that Adapt received Fast Track designation by the FDA. On April 22, 2015, Lightlake announced that Adapt successfully completed a clinical study of intranasal naloxone. On June 3, 2015, Lightlake announced that Adapt commenced a rolling submission of a NDA to the FDA for a nasal spray formulation of naloxone, a drug intended to treat opioid overdose. On July 29, 2015, Lightlake announced that Adapt has submitted a NDA to the FDA for Narcan® (naloxone) Nasal Spray, an investigational drug intended to treat opioid overdose.

 

Lightlake also aims to collaborate with other parties to progress the Company’s drug development program for Binge Eating Disorder.

 

Lightlake also has planned a study to help progress a potential treatment for Cocaine Use Disorder. 

 

At this time, Lightlake cannot provide investors with any assurance that the Company will be able to generate sufficient revenues and/or obtain sufficient funding to meet the Company’s obligations over the next twelve months. The Company anticipates that if revenues are not sufficient then additional funding will be required in the form of debt financing and/or equity financing from the sale of the Company’s common stock and/or in the form of financing from the sale of interests in the Company’s prospective products. The Company does not have any arrangements in place for any future funding. The Company may also seek to obtain short-term loans from the Company’s officers and directors to meet the Company’s short-term funding needs. The Company has no material commitments for capital expenditures as of July 31, 2015.

 

Critical Accounting Policies and Estimates

 

Lightlake believes that the following critical policies affect the Company’s more significant judgments and estimates used in preparation of the Company’s consolidated financial statements.

 

Lightlake prepares its financial statements in conformity with generally accepted accounting principles in the United States of America. These principals require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that these estimates are reasonable and have been discussed with the Company’s board of directors; however, actual results could differ from those estimates.

 

Lightlake issues restricted stock to consultants for various services and employees for compensation. Cost for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is measurable more reliably measurable. The value of the common stock is measured at the earlier of: (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete.

 

Lightlake issues options and warrants to consultants, directors, and officers as compensation for services. These options and warrants are valued using the Black-Scholes model, which focuses on the current stock price and the volatility of moves to predict the likelihood of future stock moves. This method of valuation is typically used to accurately price stock options and warrants based on the price of the underlying stock.

 

 21 

 

 

Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, Lightlake estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. The Company did not recognize any impairment losses for any periods presented. 

 

Fair value estimates used in preparation of the consolidated financial statements are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts payable and due to related parties. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.

 

Revenue Recognition

 

We recognize revenues from nonrefundable, up-front license fees related to collaboration agreements, on a straight-line basis over the contracted or estimated period of performance. The period of performance over which the revenues are recognized is typically the period over which the research and/or development is expected to occur or manufacturing services are expected to be provided. When the period of performance is based on the period over which research and/or development is expected to occur, we are required to make estimates regarding drug development and commercialization timelines. Because of the many risks and uncertainties associated with the development of drug candidates, these estimates regarding the period of performance may change.

 

In addition, we evaluate each arrangement to determine whether or not it qualifies as a multiple-deliverable revenue arrangement under ASC 605-25. If one or more of the deliverables have a standalone value, then the arrangement would be separated into multiple units of accounting. This normally occurs when the R&D services could contractually and feasibly be provided by other vendors or if the customer could perform the remaining R&D itself, and when the Company has no further obligations and the right has been conveyed. When the deliverables cannot be separated, any initial payment received is treated like an advance payment for the services and recognized over the performance period, as determined based on all of the items in the arrangement. This period is usually the expected research and development period.

 

Licensing Agreements

On December 15, 2014, Lightlake entered into the Adapt Agreement with Adapt Pharma Operations Limited. Pursuant to the Adapt Agreement the Company provided a global license to develop and commercialize the Company’s intranasal naloxone opioid overdose reversal treatment. In exchange for licensing its treatment, the Company received a nonrefundable, upfront license fee of $500,000 in December 2014. The Company is also to receive a monthly fee for up to one year, for participation in joint development committee calls and the production and submission of an initial development plan. The initial development plan was completed and submitted in May 2015. Management evaluated the deliverables of this arrangement and determined that the licensing deliverable has a standalone value and therefore, the payment was recognized as revenue.

 

Lightlake could also receive additional payments upon reaching various sales and regulatory milestones. In addition, pursuant to the Adapt Agreement, the Company is required to contribute $2,500,000 of development, regulatory, and commercialization costs, some of which was credited for costs incurred by the Company prior to the execution of the Adapt Agreement. At July 31, 2015, the Company had contributed $2,341,419 of which $204,908 is unpaid and reported in accounts payable and accrued liabilities in the balance sheets.  

 

Lightlake recognizes revenue for fees related to participation in the initial development plan and joint development committee calls as revenue once the fee is received and the Company has performed the required services for the period.

 

Treatment Investments

With respect to investments in interests in Lightlake’s treatments, if an agreement provides an option that allows the investor in the treatment to convert an interest in a treatment into shares of common stock of the Company, then revenue is deferred until such time that the option expires or milestones are achieved that eliminate the investor’s right to exercise the option. Upon expiration of the exercise option, the deliverables of the arrangement are reviewed and evaluated under ASC 605.In the event the investor chooses to convert interests into shares of common stock, that transaction will be accounted for similar to a sale of shares of common stock for cash.

 

 22 

 

 

Off-Balance Sheet Arrangements

 

Lightlake has no off-balance sheet arrangements as of July 31, 2015 and 2014.

 

Recent Accounting Pronouncements

 

Lightlake has reviewed accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of the Company’s financial management and certain standards are under consideration. Those standards have been addressed in the notes to the audited financial statement and in this, the Company’s Annual Report, filed on Form 10-K for the period ended July 31, 2015.

 

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

 

Lightlake is not required to provide the information required by this Item because the Company is a smaller reporting company.

 

Item 8.  Financial Statements. 

 

Lightlake Therapeutics Inc. 

Index to Financial Statements

July 31, 2015 and 2014

 

  Page
  Number
   
Report of Independent Registered Public Accounting Firm 24
   
Balance Sheets as of July 31, 2015 and 2014 25
   
Statements of Operations for the years ended July 31, 2015 and 2014 26
   
Statements of Stockholders' Deficit for the years ended July 31, 2015 and 2014 27
   
Statements of Cash Flows for the years ended July 31, 2015 and 2014 28
   
Notes to Financial Statements 29 to 41

 

 23 

 

   

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors of

Lightlake Therapeutics Inc.

 

We have audited the accompanying balance sheets of Lightlake Therapeutics Inc. as of July 31, 2015 and 2014 and the related statements of operations, stockholders’ deficit, and cash flows for each of the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lightlake Therapeutics Inc. as of July 31, 2015 and 2014 and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered losses from operations and has a working capital deficit, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding these matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ MaloneBailey, LLP  

www.malone-bailey.com

 
Houston, Texas  
October 26, 2015  

  

 24 

 

  

Lightlake Therapeutics Inc.

Balance Sheets

As of July 31, 2015 and 2014

 

   July 31,   July 31, 
   2015   2014 
         
Assets          
Current assets          
Cash and cash equivalents  $434,217   $254,770 
Prepaid insurance   33,143    24,079 
Total current assets   467,360    278,849 
           
Other assets          
Patents and patent applications (net of accumulated amortization of $7,015 at July 31, 2015 and $5,642 at July 31, 2014)   20,435    21,808 
           
Total assets  $487,795   $300,657 
           
Liabilities and Stockholders' Deficit          
Liabilities          
Current liabilities          
Accounts payable and accrued liabilities  $315,460   $200,604 
Accrued salaries and wages   3,129,060    1,416,651 
Due to related parties   130,000    350,000 
Total current liabilities   3,574,520    1,967,255 
           
Deferred revenue   5,300,000    1,411,470 
Total liabilities   8,874,520    3,378,725 
           
Stockholders' deficit          
Common stock; par value $0.001; 1,000,000,000 shares authorized;           
1,841,866 shares issued and outstanding at July 31, 2015 and 1,782,073 shares issued and outstanding at July 31, 2014   1,842    1,782 
Additional paid-in capital   44,982,519    43,253,363 
Accumulated deficit   (53,371,086)   (46,333,213)
Total stockholders' deficit   (8,386,725)   (3,078,068)
Total liabilities and stockholders' deficit  $487,795   $300,657 

 

The accompanying notes are an integral part of these financial statements.

 

 25 

 

  

Lightlake Therapeutics Inc.

Statements of Operations

For the years ended July 31, 2015 and 2014

  

   For the 
   Year Ended 
   July 31, 
   2015   2014 
         
Revenue  $1,550,000   $- 
           
Operating expenses          
General and administrative   6,034,520    10,838,760 
Research and development   2,414,973    464,609 
Total operating expenses   8,449,493    11,303,369 
           
Loss from operations   (6,899,493)   (11,303,369)
           
Other income (expense)          
Interest expense   (28,232)   (160,303)
Change in derivative   -    (27,067)
Loss on foreign exchange   (110,148)   (12,730)
Gain on debt settlement/forgiveness   -    20,651 
Total other income (expense)   (138,380)   (179,449)
           
Loss before provision for income taxes   (7,037,873)   (11,482,818)
           
Provision for income taxes   -    - 
           
Net loss  $(7,037,873)  $(11,482,818)
           
Loss per common share:          
Basic and diluted  $(3.88)  $(6.57)
Weighted average common shares outstanding          
Basic and diluted   1,813,069    1,747,881 

 

The accompanying notes are an integral part of these financial statements.

 

 

 26 

 

  

Lightlake Therapeutics Inc.

Statements of Stockholders' Deficit

For the years ended July 31, 2015 and 2014

  

           Additional         
   Common Stock   Paid In   Accumulated     
   Shares   Amount   Capital   Deficit   Total 
                     
Balance at July 31, 2013   1,647,001   $1,647   $33,858,732   $(34,850,395)   (990,016)
                          
Derivative liability   -    -    (337,413)   -    (337,413)
                          
Settlement of derivative liability   -    -    506,574    -    506,574 
                          
Conversion of convertible note to common stock   3,333    3    8,053    -    8,056 
                          
Stock issued for services   41,867    42    213,925    -    213,967 
                          
Stock issued due to exercise of warrants   89,872    90    (90)   -    - 
                          
Stock based compensation from issuance of stock options   -    -    8,283,582    -    8,283,582 
                          
Stock based compensation from issuance of warrants   -    -    720,000    -    720,000 
                          
Net loss   -    -    -    (11,482,818)   (11,482,818)
                          
Balance at July 31, 2014   1,782,073   $1,782   $43,253,363   $(46,333,213)  $(3,078,068)
                          
Stock issued for services   59,793    60    311,605    -    311,665 
                          
Stock based compensation from issuance of stock options   -    -    1,008,239    -    1,008,239 
                          
Stock based compensation from issuance of warrants   -    -    409,312    -    409,312 
                          
Net loss   -    -    -    (7,037,873)   (7,037,873)
                          
Balance at July 31, 2015   1,841,866   $1,842   $44,982,519   $(53,371,086)  $(8,386,725)

 

The accompanying notes are an integral part of these financial statements.

 

 27 

 

  

Lightlake Therapeutics Inc.

 

Statements of Cash Flows

For the years ended July 31, 2015 and 2014

 

   For the 
   Year Ended 
   July 31,   July 31, 
   2015   2014 
         
Cash flows provided by (used in) operating activities          
Net loss  $(7,037,873)  $(11,482,818)
Adjustments to reconcile net loss to net cash used by operating activities:          
Amortization   1,373    1,372 
Issuance of common stock for services   311,665    213,967 
Stock based compensation from issuance of options   1,008,239    8,283,582 
Stock based compensation from issuance of warrants   409,312    720,000 
Accreted interest on debt discounts   -    132,428 
Gain on debt settlement/forgiveness   -    (20,651)
Change in derivative   -    27,067 
           
Changes in assets and liabilities:          
Increase in prepaid insurance   (9,064)   (2,829)
Decrease in deferred revenue   (750,000)   - 
Increase in accounts payable   114,856    159,837 
Increase in accrued salaries and wages   1,712,409    962,722 
Net cash used in operating activities   (4,239,083)   (1,005,323)
           
Cash flows provided by (used in) financing activities          
Payments to related parties on notes payable   (220,000)   - 
Investment received in exchange for royalty agreement   4,638,530    661,470 
Net cash provided by financing activities   4,418,530    661,470 
           
Net increase (decrease) in cash and cash equivalents   179,447    (343,853)
Cash and cash equivalents, beginning of period   254,770    598,623 
Cash and cash equivalents, end of period  $434,217   $254,770 
           
Supplemental disclosure          
Interest paid during the period  $-   $- 
Taxes paid during the period  $-   $- 
           
Non-Cash Transactions          
Conversion of debt to equity  $-   $8,056 
Debt discounts attributable to derivative valuation  $-   $132,428 
Settlement of derivative liability  $-   $506,574 
Cashless exercise of warrants  $-   $8,987 
Derivative liability  $-   $337,413 

 

The accompanying notes are an integral part of these financial statements.

 

 28 

 

  

Lightlake Therapeutics Inc.

 

Notes to Financial Statements

For the years ended July 31, 2015 and 2014

  

1.Organization and Basis of Presentation

 

Lightlake Therapeutics Inc. (“Lightlake”, “we”, “our”, the “Company”) was originally incorporated in the State of Nevada on June 21, 2005. On September 16, 2009, the Company changed its name to Lightlake Therapeutics Inc. The Company is a specialty pharmaceutical company developing opioid antagonist treatments for substance use, addictive and eating disorders, including a treatment to reverse opioid overdoses. The Company’s fiscal year end is July 31.

 

Reverse Stock Split

In December 2014, Lightlake effected a one-for-one hundred reverse stock split of its common stock (the “1:100 Reverse Stock Split”) which decreased the number of common shares issued and outstanding from approximately 182.7 million shares to approximately 1.827 million shares as of March 12, 2015. Unless otherwise noted, impacted amounts included in the financial statements and notes thereto have been retroactively adjusted for the stock splits as if such stock splits occurred on the first day of the first period presented. Impacted amounts include but are not limited to shares of common stock issued and outstanding, stock options, shares reserved, exercise prices of warrants or options, and loss per share. There was no impact on preferred or common stock authorized resulting from the 1:100 Reverse Stock Split.

 

  2. Going Concern

 

The accompanying financial statements have been prepared assuming Lightlake will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. However, the Company has incurred significant losses, a working capital deficit as of July 31, 2015 of $3,107,160 and is dependent on generating sufficient revenues and/or obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to generate sufficient revenues and/or obtain the necessary funding it could cease operations as a new enterprise. This raises substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments that might result from this uncertainty.

 

  3. Summary of Significant Accounting Policies

 

Basis of Presentation and Use of Estimates

Lightlake prepares its financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

Lightlake considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents were $434,217 and $254,770 at July 31, 2015 and 2014, respectively. The Company maintains cash balances at financial institutions insured up to $250,000 by the Federal Deposit Insurance Corporation. Balances in the UK are insured up to £85,000 by the Financial Services Compensation Scheme (UK Equivalent). The cash balances exceeded these insured amounts during the year.

  

Long-Lived Assets

Lightlake follows ASC 360, Property, Plant, and Equipment, for its fixed assets. Property and equipment is stated at cost less accumulated depreciation. Depreciation is computed by the straight-line method over estimated useful lives (3 to 7 years). The Company’s capitalizes all asset purchases greater than $500 having a useful life greater than one year.

 

 29 

 

 

Lightlake Therapeutics Inc.

 

Notes to Financial Statements

For the years ended July 31, 2015 and 2014

  

Lightlake follows ASC 350, Intangibles – Goodwill and Other for its intellectual property asset. Intellectual property consists of patents which are stated at their fair value acquisition cost. Amortization is calculated by the straight line method over their estimated useful lives (20 years).  

 

Long-lived assets such as property and equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, Lightlake estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. The Company did not recognize any impairment losses for any years presented.

 

Earnings (Loss) per Share

Lightlake follows ASC 260, Earnings per Share. Basic earnings (loss) per share is computed by dividing the net income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the respective period presented in the Company’s accompanying financial statements.

 

Fully diluted earnings (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of common stock equivalents (primarily outstanding options and warrants).

 

Common stock equivalents represent the dilutive effect of the assumed exercise of outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon Lightlake’s net loss position at the calculation date.

 

Common stock equivalents have not been included in the calculation of dilutive earnings (loss) per share as the result would be anti-dilutive. At July 31 2015, potentially dilutive common stock equivalents are approximately 4,496,052 (2014 – 3,184,523) which consist of options and warrants.

 

Research and Development Costs

Lightlake follows ASC 730, Research and Development, and expenses all research and development costs as incurred for which there is no alternative future use. These costs also include the expensing of employee compensation and employee stock based compensation.

 

Foreign Currency Translation

Lightlake’s functional and reporting currency is the United States dollar. Occasional transactions may occur in British Pounds and management has adopted ASC 830, Foreign Currency Translation Matters. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date.  Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

 

Stock-Based Compensation

ASC 718 Compensation – Stock Compensation prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

 

 30 

 

  

Lightlake Therapeutics Inc.

 

Notes to Financial Statements

For the years ended July 31, 2015 and 2014

 

Lightlake accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity – Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.

 

Lightlake had stock-based compensation of $1,729,216 and $9,217,549 for the years ended July 31, 2015 and 2014, respectively.

 

Fair Value of Financial Instruments

ASC 820 Fair Value Measurements and Disclosures defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

 

The three levels of the fair value hierarchy are described below:

 

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

 

The carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, accounts payable, and due to related parties. The fair value of Lightlake’s convertible note payable is estimated based on current rates that would be available for debt of similar terms which is not significantly different from its stated value.

 

As of July 31, 2014, the convertible note was converted into equity and the derivative warrants were either exchanged for common stock or no longer required derivative treatment as a result of note conversion into equity. Consequently, at July 31, 2014, derivative liabilities have a balance of zero. The derivative instruments were marked to market at settlement dates and the corresponding value of the derivative liabilities of $506,574 was credited to additional paid in capital.

 

As of July 31, 2015 and 2014 Lightlake did not have any financial liabilities measured and recorded at fair value on the Company’s balance sheets on a recurring basis.

 

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis using significant unobservable inputs:

 

 31 

 

  

Lightlake Therapeutics Inc.

 

Notes to Financial Statements

For the years ended July 31, 2015 and 2014

 

Balance at July 31, 2013  $9,666 
Fair value of warrant derivative liabilities at issuance   469,841 
Settlement of derivative liability   (506,574)
Unrealized derivative loss included in other expense   27,067 
Balance at July 31, 2015 and 2014  $- 

 

The fair value of the derivative liabilities are calculated at inception and Lightlake records a derivative liability for the calculated value. Changes in the fair value of the derivative liabilities are recorded in other income (expense) in the statements of operations.

 

The derivative warrants were valued using the Black-Scholes option pricing model using the following assumptions:

 

 

   At settlement 
dates
 
Market value of stock on measurement date    $ 0.043-$0.05 
Risk-free interest rate    0.77-0.96
Dividend yield   0%
Volatility factor    169-217%
Term    2.8-3.9 years 

 

Related Parties

Lightlake follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. Related party balance as of July 31, 2015 amount to $130,000 (2014 - $350,000), and was comprised of loans to the Company. (See Note 4)

 

Revenue Recognition

 

We recognize revenues from nonrefundable, up-front license fees related to collaboration agreements, on a straight-line basis over the contracted or estimated period of performance. The period of performance over which the revenues are recognized is typically the period over which the research and/or development is expected to occur or manufacturing services are expected to be provided. When the period of performance is based on the period over which research and/or development is expected to occur, we are required to make estimates regarding drug development and commercialization timelines. Because of the many risks and uncertainties associated with the development of drug candidates, these estimates regarding the period of performance may change.

 

In addition, we evaluate each arrangement to determine whether or not it qualifies as a multiple-deliverable revenue arrangement under ASC 605-25. If one or more of the deliverables have a standalone value, then the arrangement would be separated into multiple units of accounting. This normally occurs when the R&D services could contractually and feasibly be provided by other vendors or if the customer could perform the remaining R&D itself, and when the Company has no further obligations and the right has been conveyed. When the deliverables cannot be separated, any initial payment received is treated like an advance payment for the services and recognized over the performance period, as determined based on all of the items in the arrangement. This period is usually the expected research and development period.

 

Licensing Agreement

On December 15, 2014, Lightlake entered into a licensing agreement with Adapt Pharma Operations Limited. Pursuant to the license agreement the Company provided a global license to develop and commercialize the Company’s intranasal naloxone opioid overdose reversal treatment. In exchange for licensing its treatment, the Company received a nonrefundable, upfront license fee of $500,000 in December 2014. The Company is also to receive a monthly fee for up to one year, for participation in joint development committee calls and the production and submission of an initial development plan. The initial development plan was completed and submitted in May 2015. Management evaluated the deliverables of this arrangement and determined that the licensing deliverable has a standalone value and therefore, the payment was recognized as revenue.

 

Lightlake could also receive additional payments upon reaching various sales and regulatory milestones. In addition, pursuant to the licensing agreement, the Company is required to contribute $2,500,000 of development, regulatory, and commercialization costs, some of which was credited for costs incurred by the Company prior to the execution of the agreement with Adapt Pharma Operations Limited. At July 31, 2015, the Company had contributed $2,341,419 of which $204,908 is unpaid and reported in accounts payable and accrued liabilities in the balance sheets.  

 

 32 

 

  

Lightlake Therapeutics Inc.

 

Notes to Financial Statements

For the years ended July 31, 2015 and 2014

  

Lightlake recognizes revenue for fees related to participation in the initial development plan and joint development calls as revenue once the fee is received and the Company has performed the required services for the period.

 

Treatment Investments

With respect to investments in interests in treatments, if an agreement provides an option that allows the investor in the treatment to convert an interest in a treatment into shares of common stock of Lightlake, then revenue is deferred until such time that the option expires or milestones are achieved that eliminate the investor’s right to exercise the option. Upon expiration of the exercise option, the deliverables of the arrangement are reviewed and evaluated under ASC 605. In the event the investor chooses to convert interests into shares of common stock, that transaction will be accounted for similar to a sale of shares of common stock for cash. 

 

Recently Issued Accounting Pronouncements

In August 2014, Lightlake elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the Company to remove the inception to date information and all references to development stage.

 

Lightlake has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

  4. Related Party Transactions

 

At July 31, 2015, Lightlake had loans outstanding with its three directors (two of which are officers), in the total amount of $130,000 (July 31, 2014 - $350,000). During the year ended July 31, 2015, $220,000 of the principal amount was repaid. In December 2014, the agreements were amended to extend the maturity date to April 30, 2016 and increase the annual interest rate to 14.5%, which includes a penalty rate of 8.5% due to non-payment of the required repayment amounts.  The loans are unsecured.

 

  5. Deferred Revenue

 

On April 16, 2013, Lightlake entered into an agreement and subsequently received funding in the amount of $600,000 for the research, development, marketing and commercialization of a product relating to a treatment for opioid addiction. In exchange for this funding, the Company agreed to pay the investor 6.0% of the net profit generated from the product in perpetuity. Net profit is defined as the pre-tax profit generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation of Company overhead. If the product is not introduced to the market and not approved for marketing within 24 months, the investor will have a sixty day option to receive 75,000 shares of common stock in lieu of the 6.0% interest in the product. During the year ended July 31, 2015, the Company recognized $600,000 as revenue because the option to receive the shares of common stock expired unexercised, and the research and development work related to the product was completed as of July 31, 2015.

 

On May 30, 2013, Lightlake entered into an agreement and subsequently received additional funding totaling $150,000 for the research, development, marketing and commercialization of a product relating to a treatment for opioid addiction. In exchange for this funding, the Company agreed to pay the investor 1.50% of the net profit generated from the product in perpetuity. Net profit is defined as the pre-tax profit generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation of Company overhead. If the product is not introduced to the market and not approved for marketing within 24 months, the investor will have a sixty day option to receive 18,750 shares of common stock in lieu of the 1.50% interest in the product. During the year ended July 31, 2015, the Company recognized $150,000 as revenue because the option to receive shares of common stock expired unexercised, and the research and development work related to the product was completed as of July 31, 2015.

 

 33 

 

  

Lightlake Therapeutics Inc.

 

Notes to Financial Statements

For the years ended July 31, 2015 and 2014

  

On December 17, 2013, Lightlake entered into an agreement and subsequently received additional funding totaling $250,000 for use by the Company for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 0.5% interest in the Company’s Binge Eating Disorder treatment product and pay the investor 0.5% of the net profit generated from this treatment in perpetuity. Net profit is defined as the pre-tax profit generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation of Company overhead. If the product is not approved by the U.S. Food and Drug Administration within 36 months the investor will have a sixty day option to receive 31,250 shares of common stock in lieu of the 0.5% interest in the product.

 

On May 15, 2014, Lightlake entered into an agreement and subsequently received funding from an individual investor in the amount of $300,000 for use by the Company for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 1.5% interest in the Net Profit as related to the Company’s treatment to reverse opioid overdoses. Net profit is defined as the pre-tax profit generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation of Company overhead. The investor also has rights with respect to its 1.5% interest if the treatment is sold or the Company is sold. If the product is not approved by the U.S. Food and Drug Administration within 24 months the investor will have a 60 day option to receive 37,500 shares of common stock in lieu of the 1.5% interest in the product.

 

On July 22, 2014, Lightlake received a $3,000,000 commitment, from which the Company has the right to make capital calls, from a foundation for the research, development, marketing, commercialization, and any other activities connected to the Company’s treatment to reverse opioid overdoses, certain operating expenses, and any other purpose consistent with the goals of the foundation. In exchange for funds invested by the foundation the Company agreed to provide the foundation with pro-rata share up to a 6.0% interest in the Net Profit as related to the Company’s treatment to reverse opioid overdoses. Net profit is defined as the pre-tax profit generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation of Company overhead. The foundation also has rights with respect to its 6.0 % interest if the treatment is sold or the Company is sold. Additionally, the Company may buyback interests from the foundation within two and one half years or after two and a half years of the initial investment at a price of two times or three and a half times, respectively, the relevant investment amount represented by the interests to be bought back. If the product is not approved by the U.S. Food and Drug Administration or an equivalent body in Europe for marketing and is not actually marketed within 24 months the foundation will have a 60 day option to receive shares of the Company’s common stock in lieu of the interest in the treatment at a rate of 10 shares for every dollar of its investment. On July 28, 2014 the Company received an initial investment of $111,470 from the foundation in exchange for a 0.22294% interest. On August 13, 2014, September 8, 2014, November 13, 2014, and February 17, 2015, the Company made capital calls of $422,344 $444,530, $1,033,614, and $988,043, respectively, from the foundation in exchange for 0.844687%, 0.888906%, 2.067228%, and 1.976085% interests, respectively, in the Net Profit as related to the Company’s treatment to reverse opioid overdoses.

  

 34 

 

  

Lightlake Therapeutics Inc.

 

Notes to Financial Statements

For the years ended July 31, 2015 and 2014

  

On September 9, 2014, Lightlake entered into an agreement and subsequently received funding from an individual investor in the amount of $500,000 for use by the Company for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 0.98% interest in the Net Profit as related to the Company’s treatment to reverse opioid overdoses. Net Profit includes the pre-tax profit received by the Company derived from the sale of the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation of Company overhead. The investor also has rights with respect to its 0.98% interest if the treatment is sold or the Company is sold. Additionally, the Company may buyback interests from the investor within two and one half years or after two and a half years of the investment at a price of two times or three and a half times, respectively, the relevant investment amount represented by the interests to be bought back. If the product is not introduced to the market and not approved by the U.S. Food and Drug Administration or an equivalent body in Europe and not marketed within 24 months, the investor will have a 60 day option to receive 50,000 shares of common stock in lieu of the interest in the product.

 

On September 17, 2014, Lightlake entered into an agreement and subsequently received funding totaling $500,000 for use by the Company for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 1.0% interest in the Company’s Binge Eating Disorder treatment product and pay the investor 1.0% of the Net Profit generated from this treatment in perpetuity. Net Profit includes the pre-tax profit generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation of Company overhead. If the product is not approved by the U.S. Food and Drug Administration within 36 months, the investor will have a sixty day option to receive 62,500 shares of common stock in lieu of the 1.0% interest in the product.

 

On October 31, 2014, Lightlake entered into an agreement and subsequently received funding from an individual investor in the amount of $500,000 for use by the Company for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 0.98% interest in the Net Profit as related to the Company’s treatment to reverse opioid overdoses. Net Profit includes the pre-tax profit received by the Company derived from the sale of the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation of Company overhead. The investor also has rights with respect to its 0.98% interest if the treatment is sold or the Company is sold. Additionally, the Company may buyback the interest from the investor within two and one half years or after two and a half years but no later than four years of the investment at a price of two times or three and a half times, respectively, of the investment amount. If the product is not introduced to the market and not approved by the FDA or an equivalent body in Europe and not marketed within 24 months, the investor will have a 60 day option to receive 50,000 shares of common stock in lieu of the interest in the product.

 

On July 20, 2015, Lightlake entered into an agreement and subsequently received funding from an individual investor in the amount of $250,000 for use by the Company for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 0.50% interest in the Net Profit as related to the Company’s treatment of binge eating disorder. Net Profit includes the pre-tax profit received by the Company derived from the sale of the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation of Company overhead. The investor also has rights with respect to its 0.50% interest if the treatment is sold or the Company is sold. If the product is not introduced to the market and not approved by the FDA or an equivalent body in Europe and not marketed within 36 months, the investor will have a 60 day option to receive 25,000 shares of common stock in lieu of the interest in the product.

 

  6. Stockholders’ Equity

 

Common Stock

 

On November 26, 2014, Lightlake amended its articles of incorporation to increase its authorized capital stock from 200,000,000 common shares to 1,000,000,000 common shares.

 

During the year ended July 31, 2015

 

In August 2014, Lightlake issued 7,846 shares to consultants for services rendered. The shares have a fair value of $44,723 based on stock prices at issuance dates.

 

 35 

 

  

Lightlake Therapeutics Inc.

 

Notes to Financial Statements

For the years ended July 31, 2015 and 2014

 

In December 2014, Lightlake issued 24,015 shares to a company for services rendered. The shares have a fair value of $91,258 based on the stock prices at issuance dates.

 

In January 2015, Lightlake issued a total of 5,000 shares to two consultants for services rendered. The shares have a fair value of $19,720 based on the stock prices at issuance dates.

 

In March 2015, Lightlake issued a total of 20,900 shares to two companies and a consultant for services rendered. The shares have a fair value of $141,130 based on the stock prices at issuance dates.

 

In April 2015, Lightlake issued 1,232 shares to a consultant for services rendered. The shares have a fair value of $8,994 based on the stock prices at issuance dates.

 

In July, 2015, Lightlake issued 800 shares to a consultant for services rendered. The shares have a fair value of $5,840 based on the stock prices at the date performance by the consultant was complete.

 

During the year ended July 31, 2014

 

On August 12, 2013, Lightlake issued 3,750 shares in exchange for services rendered. The shares issued in this transaction were valued at market and amounted to $15,000.

 

On August 28, 2013, Lightlake issued 5,000 shares in exchange for services rendered. The shares issued in this transaction were valued at market and amounted to $35,000.

 

On September 18, 2013, Lightlake issued 3,750 shares in exchange for services rendered. The shares issued in this transaction were valued at market and amounted to $22,500.

 

On October 21, 2013, Lightlake issued 2,259 shares in exchange for services rendered. The shares issued in this transaction were valued at market and amounted to $9,036.

 

On October 25, 2013, Lightlake issued 3,346 shares in exchange for services rendered. The shares issued in this transaction were valued at market and amounted to $13,382.

 

On October 31, 2013, Lightlake issued 3,750 shares in exchange for services rendered. The shares issued in this transaction were valued at market and amounted to $15,750.

 

In November 2013, Lightlake issued 12,500 shares in exchange for services rendered. The shares issued were valued at market and amounted to $66,500.

 

On December 23, 2013, Lightlake issued 3,750 shares in exchange for services rendered. The shares issued in this transaction were valued at market and amounted to $21,750.

 

On January 23, 2014, Lightlake issued 3,333 shares in settlement of a convertible note payable in the amount of $25,000 and accrued interest of $3,707. This transaction resulted in a gain on the extinguishment of the debt in the amount of $20,651.

 

On April 7, 2014, Lightlake issued 3,762 shares in exchange for services rendered. The shares issued in this transaction were valued at market and amounted to $15,049.

 

During the year ended July 31, 2014, Lightlake issued 89,872 shares as a result of the cashless exercise of 888,452 warrants.

 

Stock Options

 

 36 

 

  

Lightlake Therapeutics Inc.

 

Notes to Financial Statements

For the years ended July 31, 2015 and 2014

 

As required by the Stock Compensation Topic, ASC 718, Lightlake measures and recognizes compensation expense for all share based payment awards made to the officers and directors based on estimated fair values at the grant date and over the requisite service period. Stock option expense recognized for the years ended July 31, 2015 and 2014 was $1,008,239 and $8,283,582, respectively.

 

On August 1, 2013, Lightlake granted its executive officers cashless stock options to purchase a total of 375,000 shares of its common stock at exercise prices ranging from $10.00 to $20.00 per share. These options vested immediately and expire in ten years on July 31, 2023. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $1,068,750 which has been fully recognized as expense for the year ended July 31, 2014.

 

On November 1, 2013, Lightlake granted its executive officers cashless stock options to purchase a total of 225,000 shares of its common stock at exercise prices ranging from $6.00 to $10.00 per share.

 

These options vested immediately and expire in ten years on October 31, 2023. Lightlake has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $985,500 which has been fully recognized as expense for the year ended July 31, 2014.

 

On December 31, 2013, Lightlake granted its executive officers cashless stock options to purchase a total of 665,000 shares of its common stock at exercise prices ranging from $6.00 to $10.00 per share. These options vested immediately and expire in ten years on December 30, 2023. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $3,591,000 which has been fully recognized as expense for the year ended July 31, 2014.

 

On June 15, 2014, Lightlake granted its executive officers and a director cashless stock options to purchase a total of 1,075,000 shares of its common stock at exercise prices ranging from $5.00 to $8.00 per share. These options vest immediately and expire in ten years on June 14, 2024. These options may only be exercised between the following dates: (i) the first to occur of: (A) the commencement of the next trial with respect to the opioid overdose reversal treatment; (B) the entrance into a distribution, licensing, royalty, partnership, collaboration, or other significant transaction with respect to the opioid overdose reversal treatment; or (C) the filing of a New Drug Application with the U.S. Food and Drug Administration with respect to the opioid overdose reversal treatment; and (ii) the Expiration Date. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $2,580,000 which has been fully recognized as expense for the year ended July 31, 2014.

 

On June 24, 2014, Lightlake granted 30,000 cashless stock options to an outside consultant to purchase its common stock at an exercise price of $5.00 per share. These options vest immediately and expire in seven years on June 23, 2021. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $69,000 of which $34,500 has been recognized as expense for the year ended July 31, 2014, and $34,500 has been recognized as expense for the year ended July 31, 2015.

 

On June 11, 2014, Lightlake issued a total of 240,000 warrants with a strike price of $10.00 per share to a consultant in exchange for consulting and other strategic advisory services, including clinical strategy and intellectual property strategy. These warrants expire in ten years on June 10, 2024. Additionally, upon the achievement of certain milestones the consultant will be granted up to an additional 225,400 warrants with strike prices from $12.50 to $25.00 per share.

 

On August 2, 2014, Lightlake granted 30,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have a term of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $173,999 which have been fully recognized as expense for the year ended July 31, 2015.

 

 37 

 

  

Lightlake Therapeutics Inc.

 

Notes to Financial Statements

For the years ended July 31, 2015 and 2014

 

On November 12, 2014, Lightlake granted 30,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have a term of 5 years and vest over 3 years. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $188,825, of which $103,951 has been fully recognized as expense for the year ended July 31, 2015.

 

On November 12, 2014, Lightlake granted 20,000 cashless stock options with an exercise price of $15.00 per share to a consultant for services rendered. These options have a term of 5 years and vest over three years. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $127,150, of which $67,984 has been fully recognized as expense for the year ended July 31, 2015.

 

On January 9, 2015, Lightlake granted 15,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have a term of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $65,163 which have been fully recognized as expense for the year ended July 31, 2015.

 

On January 25, 2015, Lightlake granted 10,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have a term of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $36,169 which have been fully recognized as expense for the year ended July 31, 2015.

 

On March 19, 2015, Lightlake granted 48,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have a term of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $282,227 which have been fully recognized as expense for the year ended July 31, 2015.

 

On March 19, 2015, Lightlake granted 32,000 cashless stock options with an exercise price of $15.00 per share to a consultant for services rendered. These options have a term of 5 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $186,655 which have been fully recognized as expense for the year ended July 31, 2015.

 

On July, 2015, Lightlake granted 10,000 cashless stock options with an exercise price of $10.00 per share to a consultant for services rendered. These options have a term of 3 years and vested immediately. The Company has valued these options using the Black-Scholes option pricing model which resulted in a fair market value of $55,043 which have been fully recognized as expense for the year ended July 31, 2015.

 

Lightlake also recognized stock based compensation expense of $37,048 in connection with vested options granted in prior periods.

 

The assumptions used in the valuation for all of the options granted for the year ended July 31, 2015 were as follows:

 

Market value of stock on measurement date    $ 3.75 to 7.30    $ 2.40 to 5.40 
Risk-free interest rate    1.00 to 1.73%    2.19-2.99%
Dividend yield   0%   0%
Volatility factor    147 to 407%    418-459%
Term    3 to 5 years     7-10 years 

 

 38 

 

  

Lightlake Therapeutics Inc.

 

Notes to Financial Statements

For the years ended July 31, 2015 and 2014

 

Stock option activity for year ended July 31, 2015 is presented in the table below:

 

   Number of
Shares
   Weighted-
average
Exercise
Price
   Weighted-
average
Remaining
Contractual
Term
(years)
   Aggregate
Intrinsic
Value
 
Outstanding at July 31, 2014   3,047,500    9.00    8.56      
Granted   195,000    11.33           
Forfeited/expired/cancelled   (85,000)   11.21           
Outstanding at July 31, 2015   3,157,500    9.42    7.58   $1,569,000 
Exercisable at July 31, 2015   2,743,750    8.88    8.11   $1,569,000 

 

A summary of the status of Lightlake’s non-vested options as of July 31, 2015 and changes during the year ended July 31, 2015 are presented below:

 

Non-vested options  Number of
Options
   Weighted Average
Grant Date
Fair Value
 
         
Non-vested at July 31, 2014   17,500   $3.11 
           
Granted   195,000    5.09 
Vested   (175,000)   5.06 
           
Non-vested at July 31, 2015   37,500   $3.85 

 

At July 31, 2015, there was $135,640 of unrecognized compensation costs related to non-vested stock options.

 

Warrants

 

On December 16, 2014, Lightlake issued 38,800 stock warrants with an exercise price of $8.00 per share to a consultant for services rendered. These warrants have a term of 10 years and vested immediately. The Company has valued these warrants using the Black-Scholes option pricing model which resulted in a fair market value of $144,724 which have been fully recognized as expense for the year ended July 31, 2015.

 

On March 19, 2015, Lightlake issued 45,000 stock warrants with an exercise price of $10.00 per share to a consultant for services rendered. These warrants have a term of 5 years  and vested immediately. The Company has valued these warrants using the Black-Scholes option pricing model which resulted in a fair market value of $264,588 which have been fully recognized as expense for the year ended July 31, 2015.

 

Warrant activity for the year ended July 31, 2015 is presented in the table below:

 

   Number of
Shares
   Weighted- 
average 
Exercise 
Price
   Weighted-
average
Remaining
Contractual
Term (years)
   Aggregate 
Intrinsic 
Value
 
Outstanding at July 31, 2014   1,254,752   $20.00    4.33   $- 
Issued   83,800    9.07    -    - 
Exercised   -         -    - 
Outstanding at July 31, 2015   1,338,552   $19.53    3.55   $- 
Exercisable at July 31, 2015   613,552   $24.88    4.89   $- 

 

 39 

 

  

Lightlake Therapeutics Inc.

 

Notes to Financial Statements

For the years ended July 31, 2015 and 2014

 

7.Settlement of Convertible Note Payable

 

On January 23, 2014, Lightlake entered into a settlement of a convertible note payable in the amount of $25,000 and accrued interest of $3,707 through the issuance of 3,333 shares of common stock. This transaction resulted in a gain on the extinguishment of the debt in the amount of $20,651.

 

8.Income Taxes

 

Lightlake provides for income taxes asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. This method requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

 

Lightlake has net operating loss (NOL) carry forwards that were derived solely from operating losses from prior years. These amounts can be carried forward to offset future taxable income for a period of 20 years for each tax year’s loss. These NOL carry forwards begin to expire in 2026. No provision was made for federal income taxes as the Company has significant net operating losses. The income tax period for 2015 is open for examination by taxing authorities.

 

The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate to the net loss before provision for income taxes for the following reasons:

 

   July 31, 2015   July 31, 2014 
         
Income tax expense at statutory rate  $(2,070,422)  $(5,527,011)
           
Valuation allowance   2,070,422    5,527,011 
           
Income tax expense per books  $-   $- 

 

Net deferred tax assets consist of the following components as of:

 

   July 31, 2015   July 31, 2014 
         
Net operating loss carryover at statutory rate  $(16,040,239)  $(13,969,817)
           
Valuation allowance   16,040,239    13,969,817 
           
Net deferred tax asset  $-   $.- 

 

Lightlake had no uncertain tax positions at July 31, 2015 or July 31, 2014.

  

 40 

 

 

Lightlake Therapeutics Inc.

 

Notes to Financial Statements

For the years ended July 31, 2015 and 2014

 

9.Subsequent Events

 

a)

On September 22, 2015, Lightlake received a $1,600,000 commitment from a foundation, from which the Company has the right to make capital calls, for the research, development, any other activities connected to the Company’s opioid antagonist treatments for addictions and related disorders that materially rely on certain studies funded by the foundation’s investment, certain operating expenses, and any other purpose consistent with the goals of the foundation. In exchange for funds invested by the foundation the Company agreed to provide the foundation with pro-rata share up to a 2.1333% interest in the Net Profit as related to the Company’s opioid antagonist treatments for addictions and related disorders that materially rely on certain studies funded by the foundation’s investment. Net profit is defined as any pre-tax revenue received by the Company that was derived from the sale of the products less any and all expenses incurred by and payments made by the Company in connection with the products, including but not limited to an allocation of Company overhead. The foundation also has rights with respect to its up to 2.1333% interest if the products are sold or the Company is sold. Additionally, the Company may buyback interests from the foundation within two and one half years or after two and a half years of the initial investment at a price of two times or three and a half times, respectively, the relevant investment amount represented by the interests to be bought back. If a product is not introduced to the market within 36 months the foundation will have a 60 day option to receive shares of the Company’s common stock in lieu of the interest in the product at a rate of one-tenth of a share for every dollar of its investment. On October 6, 2015, the Company received $618,000 from the foundation in exchange for a 0.824% interest in the Company’s products covered by the commitment agreement.  The Company will defer recording revenue until such time as the option expires or milestones are achieved that eliminate the investor’s right to exercise the option. Upon expiration of the exercise option, the deliverables of the arrangement will be reviewed and evaluated under ASC 605. In the event the investor chooses to convert interests into shares of common stock, that transaction will be accounted for similar to a sale of shares of common stock for cash.

 

b)

During September 2015 and October 2015, the Company received loans from each of its three executive officers, all of who are directors, totaling $151,191. The loans bear interest at 6% per annum until January 31, 2016. After January 31, 2016, a penalty of 4% shall be added such that the loans bear interest at 10% per annum. The loans are unsecured and are due on January 31, 2016 unless the Company receives specified funding. If the Company receives the specified funding the loans become due 10 business days after the funding. If the loans are not repaid by January 31, 2016, the maturity date of the loans shall be changed to May 31, 2016. 

 

c)

On September 1, 2015, Lightlake entered into an agreement with a consultant with significant regulatory experience that contributed to the progression of the Company’s opioid overdose reversal treatment through the providing of significant strategic advice and other value-add. The agreement provides for payment of $50,000 and 10,000 shares of common stock to the consultant. In addition, the consultant may receive other cash amounts including payments of up to $535,000 upon the Company’s receipt of certain milestone payments pursuant to the agreement with Adapt Pharma Operations Limited. The agreement also provides that the consultant is entitled to 1.0% of the net profit, as defined in the agreement that the Company receives from Adapt Pharma Operations Limited with respect to the treatment, excluding certain amounts received by the Company from Adapt Pharma Operations Limited. So long as the consultant continues to provide services to the Company pursuant to the agreement, the consultant is entitled to 0.5% of the net profit, as defined in the agreement, that the Company receives from Adapt Pharma Operations Limited with respect to the treatment, excluding certain amounts received by the Company from Adapt Pharma Operations Limited, and other cash compensation. Subsequent to July 31, 2015, the Company issued 10,000 shares to the consultant.

 

d)

On October 6, 2015, the Company entered into an amendment to an agreement to use certain technology owned by Aegis Therapeutics, LLC. This amendment had an effective date of May 19, 2015 and allowed the Company to evaluate Aegis’ Technology until August 17, 2015. The amendment also provided an opportunity for the Company to elect to further extend the period of time during which the Company could evaluate Aegis’ Technology until February 13, 2016. In exchange for electing to further extend this period of time, the Company paid Aegis $75,000 and issued 13,697 shares of the Company’s common stock. 

  

 41 

 

  

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

On October 30, 2013, Lightlake dismissed Messineo & Co., CPAs, LLC, as the Company’s independent registered public accounting firm. There were no disagreements between Messineo & Co., CPAs, LLC and the Company on a matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. On the same date, the Company’s board of directors appointed MaloneBailey, LLP as the Company’s independent registered public accounting firm.

 

Item 9A.  Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of Lightlake’s management, including the Company’s principal executive officer and the principal financial officer, the Company has conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded as of the evaluation date that the Company’s disclosure controls and procedures were not effective due to material weaknesses indicated below.

 

Management's Annual Report on Internal Control Over Financial Reporting

 

Lightlake’s management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the Company.

 

Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of Lightlake’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

 

 42 

 

 

Lightlake’s management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with the Company’s established policies and procedures.

 

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

 

Under the supervision and with the participation of Lightlake’s Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting, as of the evaluation date, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under this framework, management concluded that the Company’s internal control over financial reporting was not effective as of July 31, 2015.

 

Lightlake’s management assessed the effectiveness of the Company's internal control over financial reporting as of July 31, 2015 and identified the following material weaknesses: 

 

  a) Lack of audit committee and one outside director on the Company’s board of directors. Lightlake does not have a functioning audit committee and the Company has one outside director on the Company’s board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.

  b) Lack of proper segregation of duties due to limited personnel.

  c) Lack of a formal review process related to financial reporting that includes multiple levels of review.

 

Lightlake’s management is committed to improving the Company’s internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel, and (3) may consider appointing outside directors and audit committee members in the future.

 

Lightlake’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, have discussed the material weakness noted above with the Company’s independent registered public accounting firm. Due to the nature of this material weakness, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.

 

This Annual Report does not include an attestation report of Lightlake’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this annual report.

 

Changes in Internal Controls over Financial Reporting

 

There were no significant changes in Lightlake’s internal controls or in other factors that could significantly affect these controls subsequent to the evaluation date.

 

Item 9B. Other Information.

 

Reference is made to the disclosure set forth under the caption Unregistered Sales of Equity Securities in Item 5 of this Annual Report on Form 10-K, which is incorporated by reference herein. 

 

 43 

 

 

PART III

 

Item 10.  Directors, Executive Officers and Corporate Governance.

 

Lightlake’s directors, executive officers, and key employees are listed below. The number of directors is determined by the Company’s board of directors. All of the Company’s directors hold office until the next annual meeting of the board or until their successors have been duly elected and qualified. The Company’s officers are elected by the Company’s board of directors and their terms of office are, except to the extent governed by employment contract, at the discretion of the Company’s board of directors.

 

NAME   AGE   POSITION
         
Dr. Michael Sinclair   72   Executive Chairman, Chairman of the Board
Dr. Roger Crystal   39   Chief Executive Officer, President, Director
Kevin Pollack   45   Chief Financial Officer, Treasurer, Secretary, Director
Geoffrey Wolf   62   Director

 

Set forth below is a brief description of the background and business experience of Lightlake’s executive officers and directors for the past five years.

 

Dr. Michael Sinclair has been the Executive Chairman and Director of Lightlake since November 29, 2010. Dr. Sinclair qualified as a physician in 1967, specializing in psychiatry. In 1971, he founded Nestor Plc., which grew to become, at the time, the UK’s largest domiciliary and institutional provider of care personnel. Dr. Sinclair was also Chief Executive of Nestor's parent company, which was sold in 1978. From 1978 to 1980, Dr. Sinclair served as President (International) of INA Healthcare Group (subsequently CIGNA) and its Hospital Affiliates Inc. subsidiary. In 1982, Dr. Sinclair entered the Homecare Industry in the United States as Executive Chairman of Kimberly Quality Care; he was instrumental in growing KQC from one office in Nashville to a business with a turnover of $1 billion, becoming the US market leader with 400 offices and 75,000 care givers. Subsequently, Dr. Sinclair became Chairman of Lifetime Corporation, a NYSE-listed company and at the time, the parent company of KQC. In 1997, Dr. Sinclair led the purchase of Nursefinders, a major US nursing personnel business, on behalf of US fund Atlantic Medical, a fund Dr. Sinclair founded and served as Managing Partner. Dr. Sinclair is Chairman of Advanced Oncotherapy, PLC.

 

Dr. Sinclair’s qualifications to serve on Lightlake’s board of directors include his medical and management experience. 

 

Dr. Roger Crystal has been Chief Executive Officer and Director of Lightlake since September 23, 2009. Dr. Crystal began his career as a surgeon in the UK at University College Hospital London, becoming a member of the Royal College of Surgeons of England. He specialized in ENT surgery at St Mary’s Hospital, part of Imperial College Healthcare, London. He holds degrees in Medicine and Physiology, and was an Honorary Research Fellow at University College London. He is the author of a number of peer-reviewed scientific articles. Dr. Crystal also completed an MBA at London Business School. He has worked in investment banking at Goldman Sachs, healthcare strategy management consulting at A.T. Kearney, and has held various leadership roles at GE Healthcare.

 

Dr. Crystal’s qualifications to serve on Lightlake’s board of directors include his knowledge of the healthcare industry.

 

Kevin Pollack has been Chief Financial Officer and Director of Lightlake since November 26, 2012 and April 17, 2012, respectively. Mr. Pollack has served as a director and audit committee member of MagneGas Corporation (NASDAQ:MNGA), the developer of a technology that converts liquid waste into a hydrogen-based metal working fuel and natural gas alternative, since June 21, 2012. Additionally, Mr. Pollack has served as a director and chair of the audit committee of Pressure Biosciences, Inc. (OTCQB: PBIO), a life sciences company involved in pressure cycling technology, since July 3, 2012. Mr. Pollack serves as President of Short Hills Capital LLC, where he has provided a range of services. Previously, Mr. Pollack worked in asset management at Paragon Capital, focusing primarily on United States-listed companies, and as an investment banker at Banc of America Securities LLC, focusing on corporate finance and mergers and acquisitions. Mr. Pollack started his career at Sidley Austin LLP (formerly Brown & Wood LLP) as a securities attorney focusing on corporate finance and on mergers and acquisitions. Mr. Pollack graduated magna cum laude from The Wharton School of the University of Pennsylvania and received a dual JD/MBA from Vanderbilt University, where he graduated with Beta Gamma Sigma honors.

 

 44 

 

 

Mr. Pollack’s qualifications to serve on Lightlake’s board of directors include his financial and management experience, including his experience with other public companies.

 

Geoffrey Wolf has been a Director of Lightlake since December 31, 2012. Mr. Wolf resides in Switzerland. During 2008 to 2012, Mr. Wolf managed Vector Assets S.A., an asset management company, which controlled companies in the mining, oil and gas, pharmaceuticals, hospitality and real estate industries. Since 2013, Mr. Wolf has been managing GTL Investments Limited, an asset management company, which controls companies in the mining, oil and gas, pharmaceuticals, hospitality and real estate industries. He received a business degree from Middlesex University in 1976.

 

Mr. Wolf’s qualifications to serve on Lightlake’s board of directors include his financial and management experience.

 

Involvement in Certain Legal Proceedings

 

To the best of Lightlake’s knowledge, none of the Company’s directors or executive officers has, during the past ten years:

 

  been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

  had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

  been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

  been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

  been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

  been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Except as set forth in Lightlake’s discussion below in “Certain Relationships and Related Transactions,” none of the Company’s directors or executive officers has been involved in any transactions with the Company or any of the Company’s directors, executive officers, affiliates, or associates which are required to be disclosed pursuant to the rules and regulations of the Commission. 

 

Term of Office

 

Lightlake’s directors are appointed for a one-year term to hold office until the next annual general meeting of the Company’s shareholders or until removed from office in accordance with the Company’s bylaws. The Company’s officers are appointed by the Company’s board of directors and hold office until removed by the Company’s board of directors.

 

 45 

 

 

Code of Ethics

 

Lightlake does not currently have a code of ethics, and because the Company has only limited business operations and only three officers and four directors, the Company believes that a code of ethics would have limited utility. The Company intends to adopt such a code of ethics as the Company’s business operations expand and the Company has more directors, officers, and employees.

 

Director Independence

 

Pursuant to Rule 5605 of The NASDAQ Stock Market one of the definitions of an independent director is a person other than an executive officer or employee of a company. Lightlake’s board of directors has reviewed the materiality of any relationship that each of the directors has with the Company, either directly or indirectly. Based on this review, the Company’s board of directors has determined that the only independent director is Mr. Geoffrey Wolf.

 

Corporate Governance

 

For reasons similar to those described above, Lightlake does not have a nominating nor audit committee of the board of directors. The Company’s board of directors consists of four directors. The Company receives limited revenues. At such time that the Company has a larger board of directors and generates significant revenues, the Company plans to propose creating committees of its board of directors, including both a nominating and an audit committee. Accordingly, the Company does not have an audit committee financial expert.

 

Board of Directors and Director Nominees

 

Since Lightlake’s board of Directors has one independent director, the decisions of the board regarding director nominees are made by persons who have an interest in the outcome of the determination. The board will consider candidates for directors proposed by security holders, although no formal procedures for submitting candidates have been adopted. Unless otherwise determined, at any time not less than 10 days prior to the next annual shareholder meeting at which a slate of director nominees is adopted, the board will accept written submissions from proposed nominees that include the name, address, and telephone number of the proposed nominee; a brief statement of the nominee’s qualifications to serve as a director; and a statement as to why the security holder submitting the proposed nominee believes that the nomination would be in the best interests of the Company’s security holders. If the proposed nominee is not the same person as the security holder submitting the name of the nominee, a letter from the nominee agreeing to the submission of his or her name for consideration should be provided at the time of submission. The letter should be accompanied by a résumé supporting the nominee’s qualifications to serve on the board, as well as a list of references.

 

The board identifies director nominees through a combination of referrals from different people, including management, existing board members and security holders. Once a candidate has been identified, the board reviews the individual’s experience and background and may discuss the proposed nominee with the source of the recommendation. If the board believes it to be appropriate, board members may meet with the proposed nominee before making a final determination whether to include the proposed nominee as a member of the slate of director nominees submitted to security holders for election to the board.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Under Section 16(a) of the Exchange Act, our directors and certain of our officers, and persons holding more than 10 percent of our common stock are required to file forms reporting their beneficial ownership of our common stock and subsequent changes in that ownership with the United States Securities and Exchange Commission.

 

Based solely upon a review of copies of such forms filed on Forms 3, 4, and 5, and amendments thereto furnished to us, we believe that as of July 31, 2015, our executive officers, directors and greater than 10 percent beneficial owners have complied on a timely basis with all Section 16(a) filing requirements, with the exception of our officers, directors and greater than 10 percent beneficial owners listed in the table below: 

  

Name   Number of
Late Reports
  Number and Description of Transactions Not Reported on a
Timely Basis
         
Dr. Roger Crystal   1   Dr. Crystal did not file the initial Form 3 required by the Company filing a Form 8-A on December 10, 2014.
Mr. Kevin Pollack   1   Mr. Pollack voluntarily filed a Form 3 in December 2012 and a Form 4 in January 2013. Mr. Pollack did not file the initial Form 4 required by the Company filing a Form 8-A on December 10, 2014.
Dr. Michael Sinclair   1   Dr. Sinclair voluntarily filed a Form 3 in May 2012, a Form 4 in May 2012, and a Form 4 in January 2013. Dr. Sinclair did not file the initial Form 4 required by the Company filing a Form 8-A on December 10, 2014
Mr. Geoffrey Wolf   1   Mr. Wolf did not file the initial Form 3 required by the Company filing a Form 8-A on December 10, 2014.

 

Item 11.  Executive Compensation.

 

Summary Compensation Table

 

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by Lightlake during the years ended July 31, 2015, and 2014 in all capacities for the accounts of the Company’s executives, including the Chairman, Chief Executive Officer, and Chief Financial Officer.

 

 46 

 

 

Name and
principal
position
  Year   Salary($)(1)   Bonus($)   Stock
Award(s)($)
   Option
awards 
($)
   All Other
Compensation($)
   Total 
($)
 
                             
Dr. Roger Crystal   2015     567,892    820,000    -0-    -0-    -0-    1,387,892 
CEO   2014     402,083    50,000    -0-    4,961,650    -0-    5,413,733 
Kevin Pollack,   2015     541,598    767,500    -0-    -0-    -0-    1,309,098 
CFO   2014     366,667    40,000    -0-    4,311,650    -0-    4,718,317 
Dr. Michael Sinclair   2015     355,918    193,000    -0-    -0-    -0-    548,918 
Chairman   2014     314,583    10,000    -0-    3,030,050    -0-    3,354,633 

 

  (1) During the fiscal year ended July 31, 2015, less than 50% of salaries were paid to each of Dr. Roger Crystal, Kevin Pollack, and Dr. Michael Sinclair and less than 12% of bonus compensation was paid to each of Dr. Roger Crystal, Kevin Pollack, and Dr. Michael Sinclair. The remaining amounts have been accrued and are owed. Per the description below, stock options are owed to Dr. Roger Crystal, Kevin Pollack, and Dr. Michael Sinclair, but they have not been disclosed in the Summary Compensation Table because they were not actually issued as of July 31, 2015. 

  

Director Compensation

 

The following table provides information for 2015 regarding all compensation awarded to, earned by or paid to each person who served as a non-employee director during the fiscal year ended July 31, 2015. With respect to the fiscal year ended July 31, 2015, other than as set forth in the table, Lightlake has not paid any fees to or, except for reasonable expenses for attending board and committee meetings, reimbursed any expenses of directors, made any equity or non-equity awards to directors, or paid any other compensation to directors.

 

Name  Fees 
Earned
or Paid 
in 
Cash 
($)
   Stock 
Awards 
($)
   Option 
Awards 
($)
   Non-Equity 
Incentive Plan 
Compensation 
($)
   Nonqualified 
Deferred 
Compensation 
Earnings 
($)
   All Other 
Compensation 
($)
   Total 
($)
 
Geoffrey Wolf   -0-    -0-    -0-    -0-    -0-    -0-    -0- 

 

Employment Agreements

  

As previously disclosed in Lightlake’s Current Report on Form 8-K filed on February 25, 2014 with the Securities and Exchange Commission (the “Employment Agreements 8-K”), on December 31, 2013, the Company amended its employment agreements with Dr. Michael Sinclair, the Company’s Executive Chairman (the “Sinclair Amendment”), Dr. Roger Crystal, the Company’s Chief Executive Officer (the “Crystal Amendment”), and Mr. Kevin Pollack, the Company’s Chief Financial Officer (the “Pollack Amendment”).

 

The Sinclair Amendment

 

The Sinclair Amendment amends the amended employment agreement between the Company and Dr. Sinclair dated December 31, 2012. The Sinclair Amendment extends the term of Dr. Sinclair’s employment until December 31, 2015. 

 

 47 

 

 

From January 1, 2014 until December 31, 2014, Dr. Sinclair will receive a base salary of $325,000, subject to adjustment in accordance with the Sinclair Amendment. Notwithstanding the foregoing, between January 1, 2014 and December 31, 2014, Dr. Sinclair shall not actually receive more than $175,000 of the total cash compensation earned by Dr. Sinclair between January 1, 2014 and December 31, 2014 unless either: (a) there is a Change in Control (as defined in the Sinclair Amendment); (b) a termination event as set forth in Paragraph 7 of the Sinclair Amendment; or (c) a majority of the board of directors approves the receipt of cash compensation by Dr. Sinclair from the Company in excess of $175,000 between January 1, 2014 and December 31, 2014, in which case a majority of the board of directors shall determine the amount of such payment of cash compensation by the Company to Dr. Sinclair, but in no event shall such amount be in excess of the total amounts owed by the Company to Dr. Sinclair at such time. All amounts earned by Dr. Sinclair between January 1, 2014 and December 31, 2014 in excess of the amounts actually paid to Dr. Sinclair shall accrue and be owed by the Company to Dr. Sinclair. From January 1, 2015 until December 31, 2015, Dr. Sinclair will receive a base salary of $350,000. Throughout the term of the Sinclair Amendment Dr. Sinclair will have certain incentive bonus opportunities pursuant to certain objectives as outlined in the Sinclair Amendment. Moreover, the Company agreed to grant upon execution of the Sinclair Amendment 7,500,000 stock options exercisable at $0.06 per share which expire ten years from the options grant date, 3,000,000 stock options exercisable at $0.08 per share which expire ten years from the options grant date and 3,000,000 stock options exercisable at $0.10 per share which expire ten years from the options grant date. The Sinclair Amendment also provides for the Company to issue each year additional stock options of no less than three percent (3%) of the amount of shares issued and outstanding on a fully diluted basis as of December 15, 2014 and 2015. As of July 31, 2015, the Company did not actually issue Dr. Sinclair the aforementioned additional stock options. 

 

The Crystal Amendment

 

The Crystal Amendment amends the amended employment agreement between the Company and Dr. Crystal dated December 31, 2012. The Crystal Amendment extends the term of Dr. Crystal’s employment until December 31, 2015.

 

From January 1, 2014 until December 31, 2014, Dr. Crystal will receive a base salary of $475,000, subject to adjustment in accordance with the Crystal Amendment. Notwithstanding the foregoing, between January 1, 2014 and December 31, 2014, Dr. Crystal shall not actually receive more than $330,000 of the total cash compensation earned by Dr. Crystal between January 1, 2014 and December 31, 2014 unless either: (a) there is a Change in Control (as defined in the Crystal Amendment); (b) a termination event as set forth in Paragraph 7 of the Crystal Amendment; or (c) a majority of the board of directors approves the receipt of cash compensation by Dr. Crystal from the Company in excess of $330,000 between January 1, 2014 and December 31, 2014, in which case a majority of the board of directors shall determine the amount of such payment of cash compensation by the Company to Dr. Crystal, but in no event shall such amount be in excess of the total amounts owed by the Company to Dr. Crystal at such time. All amounts earned by Dr. Crystal between January 1, 2014 and December 31, 2014 in excess of the amounts actually paid to Dr. Crystal shall accrue and be owed by the Company to Dr. Crystal. Between January 1, 2014 and December 31, 2014, the Company shall pay Dr. Crystal no less than $330,000 of the total cash compensation earned by Dr. Crystal between January 1, 2014 and December 31, 2014. From January 1, 2015 until December 31, 2015, Dr. Crystal will receive a base salary of $593,750. Throughout the term of the Crystal Amendment Dr. Crystal will have certain incentive bonus opportunities pursuant to certain objectives as outlined in the Crystal Amendment. Moreover, the Company agreed to grant upon execution of the Crystal Amendment 7,500,000 stock options exercisable at $0.06 per share which expire ten years from the options grant date, 10,000,000 stock options exercisable at $0.08 per share which expire ten years from the options grant date and 10,000,000 stock options exercisable at $0.10 per share which expire ten years from the options grant date. The Crystal Amendment also provides for the Company to issue each year additional stock options of no less than six percent (6%) of the amount of shares issued and outstanding on a fully diluted basis as of December 15, 2014 and 2015. As of July 31, 2015, the Company did not actually issue Dr. Crystal the aforementioned additional stock options. 

 

The Pollack Amendment

 

The Pollack Amendment amends the amended employment agreement between the Company and Mr. Pollack dated December 31, 2012. The Pollack Amendment extends the term of Mr. Pollack’s employment until December 31, 2015.

 

 48 

 

 

From January 1, 2014 until December 31, 2014, Mr. Pollack will receive a base salary of $450,000, subject to adjustment in accordance with the Pollack Amendment. Notwithstanding the foregoing, between January 1, 2014 and December 31, 2014, Mr. Pollack shall not actually receive more than $300,000 of the total cash compensation earned by Mr. Pollack between January 1, 2014 and December 31, 2014 unless either: (a) there is a Change in Control (as defined in the Pollack Amendment); (b) a termination event as set forth in Paragraph 7 of the Pollack Amendment; or (c) a majority of the board of directors approves the receipt of cash compensation by Mr. Pollack from the Company in excess of $300,000 between January 1, 2014 and December 31, 2014, in which case a majority of the board of directors shall determine the amount of such payment of cash compensation by the Company to Mr. Pollack, but in no event shall such amount be in excess of the total amounts owed by the Company to Mr. Pollack at such time. All amounts earned by Mr. Pollack between January 1, 2014 and December 31, 2014 in excess of the amounts actually paid to Mr. Pollack shall accrue and be owed by the Company to Mr. Pollack. Between January 1, 2014 and December 31, 2014, the Company shall pay Mr. Pollack no less than $300,000 of the total cash compensation earned by Mr. Pollack between January 1, 2014 and December 31, 2014. From January 1, 2015 until December 31, 2015, Mr. Pollack will receive a base salary of $562,500. Throughout the term of the Pollack Amendment Mr. Pollack will have certain incentive bonus opportunities pursuant to certain objectives as outlined in the Pollack Amendment. Moreover, the Company agreed to grant upon execution of the Pollack Amendment 7,500,000 stock options exercisable at $0.06 per share which expire ten years from the options grant date, 9,000,000 stock options exercisable at $0.08 per share which expire ten years from the options grant date and 9,000,000 stock options exercisable at $0.10 per share which expire ten years from the options grant date. The Pollack Amendment also provides for the Company to issue each year additional stock options of no less than six percent (6%) of the amount of shares issued and outstanding on a fully diluted basis as of December 15, 2014 and 2015. As of July 31, 2015, the Company did not actually issue Mr. Pollack the aforementioned additional stock options. 

 

 The foregoing descriptions of the Sinclair Amendment, Crystal Amendment, and Pollack Amendment  (collectively, the “Amendments”) are qualified in its entirety by reference to the full text of the Amendments, copies of which were filed as Exhibit 10.1, Exhibit 10.2, and Exhibit 10.3, respectively, to the Employment Agreements 8-K and is incorporated by reference herein.

 

Lightlake has an agreement with Geoffrey Wolf, a director of the Company, which provides for the grant of 3,500,000 stock options exercisable at $0.15 per share which terminate five years from their grant date. The director agreement also provides warrants to purchase 34,500,000 shares of common stock exercisable at $0.15 per share with a 5 year termination date. All of the options and warrants may only be exercised between the following dates: (i) the date on which the Company’s price per share has traded at or above US$0.30 for at least three (3) trading days out of any ten (10) consecutive trading days; and (ii) five years from the grant date. The director agreement has a one-year term limit and can be renewed by mutual agreement.

 

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth certain information regarding Lightlake’s shares of common stock beneficially owned as of October 20, 2015, for (i) each stockholder known to be the beneficial owner of 5% or more of the Company’s outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for the Company’s directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.

 

For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of October 20, 2015. For purposes of computing the percentage of outstanding shares of Lightlake’s common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of October 20, 2015 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership. Unless otherwise specified, the address of each of the persons set forth below is care of the company at the address of: 445 Park Avenue, 9th Fl, New York, NY 10022. 

 

 49 

 

 

The following table sets forth information on the ownership of Lightlake Therapeutics Inc. voting securities by officers, directors, and major shareholders as well as those who own beneficially more than five percent of Lightlake’s common stock as of the date of this report: 

 

Name of Beneficial Owner and Address   Amount and
Nature of
Beneficial
Ownership of
Common
Stock
    Percent
of 
Common
Stock (1)
 
5% Shareholders                
 None.     -       %
Directors and
Executive Officers
               
Kevin Pollack     1,080,000 (2)     36.59 %
Dr. Roger Crystal     1,087,500 (3)     36.81 %
Dr. Michael Sinclair     1,095,220 (4)     37.65 %
Geoffrey Wolf     690,800 (5)     27.48 %
All directors and officers as a group (4 people)     3,953,520 (6)     69.19 %

 

  (1)

As of October 20, 2015, there were 1,871,791 shares issued and outstanding. Shares of common stock subject to options or warrants currently exercisable or expected to be exercisable with the passage of time, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person.

 

  (2) This amount includes: (1) 55,000 shares of common stock issuable upon the exercise of warrants and (2) 1,025,000 shares of common stock issuable upon the exercise of stock options.

 

  (3) This amount includes: (1) 40,000 shares of common stock issuable upon the exercise of warrants and (2) 1,042,500 shares of common stock issuable upon the exercise of stock options.

 

  (4) This amount includes: (1) 285,000 shares of common stock issuable upon the exercise of warrants; (2) 752,500 shares of common stock issuable upon exercise of stock options; (3) 12,000 shares owned in total by two different pension funds for the benefit of Dr. Sinclair’s family for each of which Dr. Sinclair serves as one of three trustees; and (4) 5,000 shares owned by Proton Therapy USA which is an entity jointly owned by Dr. Sinclair and his son.

 

  (5) This amount includes: (1) 345,000 shares of common stock issuable upon the exercise of warrants and (2) 160,000 shares of common stock issuable upon exercise of stock options. 137,000 shares are issuable upon the exercise of warrants held by GTL Investments Limited, of which Geoffrey Wolf is an asset manager.

 

  (6) This amount includes an aggregate of 862,000 shares of common stock issuable upon exercise of warrants and 2,980,000 shares of common stock issuable upon exercise of stock options.

 

Item 13.  Certain Relationships and Related Transactions, and Director Independence.

 

The following are the related party transactions in which Lightlake has engaged since August 1, 2014: 

   

Lightlake uses office space provided by an officer of the Company free of charge.

 

At July 31, 2015, Lightlake had loans outstanding with each of its three executive officers, all of who are directors, in the total amount of $130,000 (July 31, 2014 - $350,000). In December, 2012, the Company borrowed $350,000. These notes accrued interest at 6.0% per year and were due December, 2013. These notes were amended on December 16, 2013 to extend the final maturity date to January 6, 2015 and increase the interest rate to 8.5% per annum. During the year ended July 31, 2015, $220,000 of the principal amount was repaid. In December 2014, the agreements were amended to extend the maturity date to April 30, 2016 and increase the annual interest rate to 14.5%, which includes a penalty rate of 8.5% due to non-payment of the required repayment amounts. The loans are unsecured.

 

During September 2015 and October 2015, the Company received loans from each of its three executive officers, all of who are directors, totaling $151,191. The loans bear interest at 6% per annum until January 31, 2016. After January 31, 2016, a penalty of 4% shall be added such that the loans bear interest at 10% per annum. The loans are unsecured and are due on January 31, 2016 unless the Company receives specified funding. If the Company receives the specified funding the loans become due 10 business days after the funding. If the loans are not repaid by January 31, 2016, the maturity date of the loans shall be changed to May 31, 2016.

 

 50 

 

 

Director Independence

 

Because Lightlake’s common stock is not currently listed on a national securities exchange, the Company has used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:

 

the director is, or at any time during the past three years was, an employee of the company;

 

the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);

 

a family member of the director is, or at any time during the past three years was, an executive officer of the company;

 

the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);

 

the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or

 

the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

 

Based on the rule listed above, Lightlake’s board of directors determined that the Company’s only independent director is Mr. Geoffrey Wolf.

 

Lightlake does not currently have a separately designated audit, nominating, or compensation committee.

  

Item 14.  Principal Accounting Fees and Services.

 

The total fees charged to Lightlake for audit services were $26,500, for audit-related services during the year ended July 31, 2015.

 

The total fees charged to Lightlake for audit services were $25,000 during the year ended July 31, 2014.

 

Lightlake does not have an audit committee. The Company’s board of directors pre-approves all services provided by the Company’s independent auditors. 

 

 51 

 

 

PART IV

 

Item 15.  Exhibits, Financial Statement Schedules.

 

 Exhibit       Incorporated by Reference   Filed or
Furnished
 
 Number   Exhibit Description   Form   Exhibit   Filing Date   Herewith  
3.1   Articles of Incorporation filed June 21, 2005, as amended August 10, 2009 and September 16, 2009.   8-K   3.1   9/4/2014      
3.2   Certificate of Amendment to Articles of Incorporation, filed November 26, 2014.   8-K   3.1   12/01/2014      
3.3   Certificate of Amendment to Articles of Incorporation, filed December 19, 2014.   8-K   3.1   12/29/2014      
3.4   Bylaws.   SB-2   3.2   01/11/2007      
10.1+   License Agreement between Lightlake Therapeutics Inc. and Adapt Pharma Operations Limited, dated as of December 15, 2014.               X  
10.2+   Material Transfer, Option and Research License Agreement between Lightlake Therapeutics Inc. and Aegis Therapeutics, LLC, dated as of December 1, 2014, as amended December 16, 2014.               X  
10.3   Amendment No. 2 to the Material Transfer, Option and Research License Agreement, effective May 19, 2015.               X  
10.4   U.S. Patent Application   10-K   10.6   10/15/2009      
10.5   European Patent.   10-K   10.7   10/15/2009      
10.6*   Michael Sinclair Employment Agreement, dated December 31, 2012.   10-K   10.8   10/29/2013      
10.7*   Roger Crystal Employment Agreement, dated December 31, 2012.   10-K   10.9   10/29/2013      
10.8*   Kevin Pollack Employment Agreement, dated December 31, 2012.   10-K   10.10   10/29/2013      
10.9   Geoffrey Wolf Director Agreement, dated December 31, 2012.   10-K   10.11   10/29/2013      
10.10*   Michael Sinclair Amended Employment Agreement, dated December 31, 2013.   8-K   10.1   02/25/2014      
10.11*   Roger Crystal Amended Employment Agreement, dated December 31, 2013.   8-K   10.2   02/25/2014      
10.12*   Kevin Pollack Amended Employment Agreement, dated December 31, 2013.   8-K   10.3   02/25/2014      
21.1   Subsidiaries of the Registrant – None.               X  
31.1   Certification of Principal Executive Officer, pursuant to 18 U. S. C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.               X  
31.2   Certification of Principal Financial Officer, pursuant to 18 U. S. C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.               X  
32.1**   Certification of Principal Executive Officer, pursuant to 18 U. S. C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.               X  
32.2**   Certification of Principal Financial Officer, pursuant to 18 U. S. C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.               X  
101.INS   XBRL Instance.               X  
101.XSD   XBRL Schema.               X  
101.PRE   XBRL Presentation.               X  
101.CAL   XBRL Calculation.               X  
101.DEF   XBRL Definition.               X  
101.LAB   XBRL Label.               X  

  

 

+ Confidential Treatment Requested. Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Lightlake is again attaching Exhibits 10.1 and 10.2 to this Report, because, after receiving comments from the SEC Staff regarding the revised confidential treatment application filed in June in connection with the amended Exhibits filed with the Quarterly Report on Form 10-Q for the period ended April 30, 2015, there have been changes in the amount of materials omitted.

 

* Indicates a management contract or compensatory plan or arrangement, as required by Item 15(a) (3) of Form 10-K.

 

** In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

 

 52 

 

  

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Securities Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

/s/ Kevin A. Pollack  

October 26, 2015

 
Kevin A. Pollack, Chief Financial Officer   Date  

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on October 26, 2015.

 

By: /s/ Dr. Roger Crystal   Director & Chief Executive Officer
  Dr. Roger Crystal   (Principal Executive Officer)
       
By: /s/ Kevin A. Pollack   Director & Chief Financial Officer
  Kevin A. Pollack   (Principal Financial and Accounting Officer)

 

By: /s/ Dr. Michael Sinclair   Director
  Dr. Michael Sinclair    

 

 53 

 

 

Exhibit 10.1

 

LICENSE AGREEMENT

 

between

 

LIGHTLAKE THERAPEUTICS INC.

 

and

 

ADAPT PHARMA OPERATIONS LIMITED

 

Dated as of December 15, 2014

 

 

 

 

LICENSE AGREEMENT

 

This License Agreement (the “Agreement”) is made and entered into effective as of December 15, 2014 (the “Effective Date”) by and between Lightlake Therapeutics Inc., a Nevada corporation (“Lightlake”), and Adapt Pharma Operations Limited, an Irish limited company (“Adapt”).  Lightlake and Adapt are sometimes referred to herein individually as a “Party” and collectively as the “Parties”.

 

Recitals

 

WHEREAS, Lightlake owns or Controls certain intellectual property relating to the use of intranasal naloxone for a treatment to reverse opioid overdoses; and

 

WHEREAS, Lightlake wishes to license to Adapt, and Adapt wishes to license from Lightlake, through the license grants contemplated herein, such intellectual property rights to develop and commercialize Products (as defined below) in accordance with the terms and conditions set forth below.

 

NOW, THEREFORE, in consideration of the premises and the mutual promises and conditions hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, do hereby agree as follows:

 

ARTICLE 1
DEFINITIONS

 

Unless otherwise specifically provided herein, the following terms shall have the following meanings:

 

1.1           Adapt has the meaning set forth in the preamble hereto.

 

1.2           Adapt Applied Know-How means all Information Controlled by Adapt or any of its Affiliates as of the Effective Date or during the Term (other than as a result of the licenses granted by Lightlake to Adapt under this Agreement) and incorporated by Adapt in any Product prior to any termination of this Agreement (provided, however, that such Information is necessary or reasonably useful for the Development, manufacture or Commercialization of any Product).

 

1.3           Adapt Applied Patents means all of the Patents Controlled by Adapt or any of its Affiliates as of the Effective Date or during the Term (other than as a result of the licenses granted by Lightlake to Adapt under this Agreement) that claim any Adapt Applied Know-How or claim or cover a Product.

 

2
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

1.4           Affiliate means, with respect to a Party, any Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such Party.  For purposes of this definition, “control” and, with correlative meanings, the terms “controlled by” and “under common control with”, means (i) the possession, directly or indirectly, of the power to direct the management or policies of a business entity, whether through the ownership of voting securities, by contract relating to voting rights or corporate governance, or otherwise; or (ii) the ownership, directly or indirectly, of more than fifty percent (50%) of the voting securities or other ownership interest of a business entity (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity).  The Parties acknowledge that in the case of certain entities organized under the laws of certain countries outside of the United States, the maximum percentage ownership permitted by law for a foreign investor may be less than fifty percent (50%), and that in such case such lower percentage shall be substituted in the preceding sentence, provided that such foreign investor has the power to direct the management or policies of such entity.  

 

1.5           Applicable Law means federal, state, local, national and supra-national laws, statutes, rules, and regulations, including any rules, regulations, guidelines, or other requirements of the Regulatory Authorities, major national securities exchanges or major securities listing organizations, that may be in effect from time to time during the Term and applicable to a particular activity.

 

1.6           “*** REDACTED ***Unit Dose Device means that certain nasal unit-dose spray device sold by *** REDACTED *** Inc. or its Affiliates.

 

1.7           Business Day” means a day other than a Saturday or Sunday on which banking institutions in New York, New York and Ireland are open for business.

 

1.8           Calendar Quarter” means each successive period of three (3) calendar months commencing on January 1, April 1, July 1 and October 1, except that the first Calendar Quarter of the Term shall commence on the Effective Date and end on the day immediately prior to the first to occur of January 1, April 1, July 1 or October 1 after the Effective Date, and the last Calendar Quarter shall end on the last day of the Term.

 

1.9           Calendar Year” means each successive period of twelve (12) calendar months commencing on January 1 and ending on December 31, except that the first Calendar Year of the Term shall commence on the Effective Date and end on December 31 of the year in which the Effective Date occurs and the last Calendar Year of the Term shall commence on January 1 of the year in which the Term ends and end on the last day of the Term.

 

1.10         Change in Control” means with respect to a Party: (1) the sale of all or substantially all of such Party’s assets or business relating to this Agreement; (2) a merger, reorganization or consolidation involving such Party in which the holders of voting securities of such Party outstanding immediately prior thereto cease to hold voting securities that represent at least fifty percent (50%) of the combined voting power of the surviving entity immediately after such merger, reorganization or consolidation; or (3) a person or entity, or group of persons or entities, acting in concert acquire more than fifty percent (50%) of the voting equity securities or management control of such Party.

 

3
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

1.11         Commercial Sublicensee” means a Sublicensee to whom Adapt has granted a right to offer for sale, have sold or sell one or more Products in all or a portion of the Territory including exclusive distributors, but excluding (i) Persons who Manufacture Product(s) or any element thereof and sell such Product(s) only to or at the direction of Adapt, Sublicensees or any of their respective Affiliates, (ii) wholesalers, (iii) pharmacies, (iv) Persons comprising the First Responder Market, (v) any Person performing third party logistics or warehousing services on behalf of Adapt or its Affiliates or Sublicensees, and (v) any other Person to whom Adapt has not relinquished material control over commercial decision-making in respect of the applicable Products and where such Person does not have any obligation to make an upfront, milestone or royalty payment with respect to the applicable Products.

 

1.12         Commercialization means any and all activities directed to the preparation for sale of, offering for sale of, or sale of a Product, including activities related to marketing, promoting, distributing, and importing such Product, and interacting with Regulatory Authorities regarding any of the foregoing.  When used as a verb, “to Commercialize” and “Commercializing” means to engage in Commercialization, and “Commercialized” has a corresponding meaning.

 

1.13         Commercialization Costs” means the out-of-pocket costs and expenses incurred by Adapt or its Affiliates directly attributable to, or reasonably allocable to, the Commercialization of a Product.  Commercialization Costs for a Product shall include, preparation of promotional, advertising, communication, medical, and educational materials relating to the Product and other Product literature and selling materials, activities directed to marketing of the Product, including purchase of market data, development and conduct of market research, advertising, public relations, public affairs and other communications with Third Parties regarding the Product; development and conduct of sales force training (including materials, programs and travel to and attendance at training programs) for medical representatives responsible for promoting the Product; and development and maintenance of sales bulletins, call reporting and other monitoring/tracking, sales force targeting, validation and alignment programs and documentation.

 

1.14         Commercially Reasonable Efforts means, with respect to the objective that is the subject of such efforts, such reasonable, good faith efforts and resources as a similarly-situated (including in relation to size and personnel and other resources) company within the pharmaceutical industry would normally use to accomplish a similar objective under similar circumstances, it being understood and agreed that, with respect to the Development and Commercialization of a Product by Adapt, such efforts shall take into account the Product’s safety and efficacy, its cost to Develop, the competitiveness of alternative products marketed by or being developed by Third Parties and the nature and extent of market exclusivity (including Patent coverage and regulatory exclusivity), the likelihood of obtaining Regulatory Approval, the expected or actual pricing, reimbursement and formulary status, the Product’s expected or actual profitability, including the amounts of marketing and promotional expenditures with respect to such Product and all other relevant factors with respect to the market for the Product, on a country-by-country basis.  

 

4
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

1.15         Confidential Information” means any technical, business, or other information or data provided orally, visually, in writing or other form by or on behalf of one Party to the other Party in connection with this Agreement (including any information provided under either that certain Mutual Non-Disclosure Agreement between the Parties dated May 1, 2014 or that certain Three-Way Confidential Disclosure Agreement among Lightlake, Adapt Pharma Operations Limited and *** REDACTED four words*** dated August 13, 2014 collectively, (“Existing CDAs”), including information relating to the terms of this Agreement, any Product (including the Regulatory Documentation), any Exploitation of any Product, any know-how with respect thereto developed by or on behalf of the disclosing Party or its Affiliates (including Lightlake Know-How and Adapt Applied Know-How, as applicable), or the scientific, regulatory or business affairs or other activities of either Party.  Notwithstanding the foregoing, (i) all non-clinical, clinical, technical, chemical, safety, and scientific data and information and other results, and results of test method development and stability testing, toxicology, formulation, process development, manufacturing scale-up, qualification and validation, quality assurance/quality control activities and statistical analysis, including relevant laboratory notebook information, screening data, and synthesis schemes, including descriptions in any form, data and other Information relating to or resulting from the conduct of Development of Products after the Effective Date, or relating to or resulting from the pharmacokinetics study in respect of a Product commenced or commissioned by or at the direction of Lightlake prior to the Effective Date (the “Pharmacokinetic Data”), shall be Confidential Information of Adapt and (ii) subject to the foregoing clause (i), Joint Know-How shall be deemed to be the Confidential Information of both Parties.

 

1.16         Control” means, with respect to any item of Information, Regulatory Documentation, material, Patent, or other property right existing on or after the Effective Date and during the Term, possession of the right, whether directly or indirectly, and whether by ownership, license or otherwise (other than by operation of the license and other grants in Section 4.1 or 4.2), to grant a license, sublicense or other right (including the right to reference Regulatory Documentation) to or under such Information, Regulatory Documentation, material, Patent, or other property right as provided for herein without violating the terms of any agreement or other arrangement with any Third Party.

 

1.17         Development” means all activities related to research, pre-clinical and other non-clinical testing, test method development and stability testing, toxicology, formulation, process development, manufacturing scale-up, qualification and validation, quality assurance/quality control, clinical studies, statistical analysis and report writing, the preparation and submission of Drug Approval Applications, regulatory affairs with respect to the foregoing and all other activities necessary or reasonably useful or otherwise requested or required by a Regulatory Authority as a condition or in support of obtaining or maintaining a Regulatory Approval.  When used as a verb, “Develop” means to engage in Development.

 

1.18         Development Costs” means the out-of-pocket costs and expenses incurred by a Party or its Affiliates directly attributable to, or reasonably allocable to, the Development of a Product, including costs and expenses associated with obtaining and/or Manufacturing product and materials utilized in clinical trials, submission batches or in connection with process validation, scale-up or otherwise required for purposes of obtaining Regulatory Approval.

 

5
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

1.19         Development Data” means all non-clinical, clinical, technical, chemical, safety, and scientific data and information and other results, including relevant laboratory notebook information, screening data, and synthesis schemes, including descriptions in any form, data and other information, in each case, that is generated by or resulting from or in connection with the conduct of Development of Products, to the extent that the same are Controlled by or in Adapt’s or its Affiliates’ or Adapt’s Commercial Sublicensees’ possession, and may be disclosed to Lightlake without violating any obligation under Applicable Law.

 

1.20         Dollars” or “$” means United States Dollars.

 

1.21         Drug Approval Application” means a New Drug Application (an “NDA”) as defined in the FFDCA, or any corresponding foreign application, including, with respect to the European Union, a Marketing Authorization Application (a “MAA”) filed with the EMA or with the applicable Regulatory Authority of a country in Europe with respect to the mutual recognition or any other national approval procedure.

 

1.22         Effective Date means the effective date of this Agreement as set forth in the preamble hereto.

 

1.23         EMA means the European Medicines Agency and any successor agency or authority having substantially the same function.

 

1.24         Existing Inventory Supply” means Lightlake’s existing inventory of naloxone, excipients, devices and packaging set forth on Schedule 1.24 to be transferred to Adapt in accordance with Section 3.6.1 and the Initial Development Plan.

 

1.25         Exploit” means to make, have made, import, use, sell, or offer for sale, including to research, Develop, Commercialize, Manufacture, have Manufactured, obtain Regulatory Approval for, hold, or keep (whether for disposal or otherwise), have used, export, transport, distribute, promote, market, or have sold or otherwise dispose of on a worldwide basis.  “Exploitation” shall mean the act of Exploiting.

 

1.26         FDA means the United States Food and Drug Administration and any successor agency(ies) or authority having substantially the same function.

 

1.27         FFDCA means the United States Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §301 et seq., as amended from time to time, together with any rules, regulations and requirements promulgated thereunder (including all additions, supplements, extensions, and modifications thereto).

 

1.28         First Commercial Sale” means, with respect to a Product and a country, the first sale by Adapt, its Affiliate or its Commercial Sublicensee to a Third Party for monetary value of such Product in such country after Regulatory Approval for such Product has been obtained in such country; provided, however, no sale comprising the Limited Purdue Sales shall be deemed a “First Commercial Sale” for purposes hereof.

 

6
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

1.29         First Responder Market” means governmental agencies, non-profit institutions and medical directors that prescribe on behalf of an organization for use by fire, police, emergency medical personnel, military or similar personnel that act as first responders, but excluding hospitals and clinics and any Person acquiring Products through retail channels.

 

1.30         Generic Product” means, with respect to a Product, any intranasal product in an intranasal device that (i) is sold by a Third Party that is not a licensee or a Commercial Sublicensee of Adapt or its Affiliates, under an Abbreviated New Drug Application (ANDA), or any of such Third Party’s direct or indirect licensees or sublicensees; (ii) contains naloxone as the primary active ingredient; and (iii) is approved in reliance, in whole or in part, on the prior approval of such Product.  A Product licensed or produced by Adapt or its Affiliates or Commercial Sublicensees (i.e., an authorized generic product) will not constitute a Generic Product.

 

1.31         IND” means an application filed with a Regulatory Authority for authorization to commence human clinical studies, including (a) an Investigational New Drug Application as defined in the FFDCA or any successor application or procedure filed with the FDA, (b) any equivalent of a United States IND in other countries or regulatory jurisdictions, and (c) all supplements, amendments, variations, extensions and renewals thereof that may be filed with respect to the foregoing.

 

1.32         Information” means all technical, scientific, and other know-how and information, trade secrets, knowledge, technology, means, methods, processes, practices, formulae, instructions, skills, techniques, procedures, experiences, ideas, technical assistance, designs, drawings, assembly procedures, computer programs, apparatuses, specifications, data, results and other material, including: biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, pre-clinical, clinical, safety, manufacturing and quality control data and information, including study designs and protocols, assays, biological methodology, other data relating to Development, all data, information and materials relating to Commercialization, including customer lists (both actual and target customers), any market studies and competitive data; in each case (whether or not confidential, proprietary, patented or patentable) in written, electronic or any other form now known or hereafter developed.

 

1.33         Initial Development Plan” means the initial Development Plan (including the Development budget) attached hereto as Schedule 1.33 covering the initial Development activities, as the same may be amended from time to time in accordance with the terms hereof.

 

1.34         Invention” means any writing, invention, discovery, improvement, technology, Information or other Know-How (in each case, whether patented or not) that is not existing as of the Effective Date and is invented under this Agreement during the Term.

 

1.35         LIBOR” means the London Interbank Offered Rate for deposits in United States Dollars having a maturity of one month published by the British Bankers’ Association, as adjusted from time to time on the first London business day of each month.

 

7
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

1.36         Liens” means any and all liens, encumbrances, charges, security interests, options, claims, mortgages, pledges, or agreements, obligations, understandings or arrangements or other restrictions on title or transfer of any nature whatsoever.

 

1.37         Lightlake” has the meaning set forth in the preamble hereto.

 

1.38         Lightlake Know-How” means all Information Controlled by Lightlake or any of its Affiliates as of the Effective Date or at any time during the Term (subject to Section 11.3.2) that is not generally known and is necessary or reasonably useful for the Development, manufacture, or Commercialization of a Product, but excluding any Information to the extent covered or claimed by published Lightlake Patents or Joint Patents or any Joint Know-How.

 

1.39         Lightlake Patents” means all of the Patents Controlled by Lightlake or any of its Affiliates as of the Effective Date or at any time during the Term (subject to Section 11.3.2) that claim or disclose the Development, Manufacture, or Commercialization of a Product, but excluding any Joint Patents, and excluding the Product Specific Patents.

 

1.40         Limited Purdue Sales” means the sale of such number of units of Product(s) that Adapt is obligated to sell to or at the direction of Purdue pursuant to the Purdue Agreement, up to either (i) such number of units having an aggregate fair market value of fifty thousand dollars or (ii) an aggregate of 2,500 units (of two doses each), which ever is greater.  For clarity, sales of Products to Purdue in excess of the foregoing number of units shall not be included in Limited Purdue Sales.  

 

1.41         MAA has the meaning set forth in the definition of “Drug Approval Application.”

 

1.42         Major Market” means each of France, Germany, Italy, Spain or United Kingdom.

 

1.43         Manufacture” or “Manufacturing” means all activities related to the production, manufacture, processing, filling, finishing, packaging, labeling, shipping and holding of a Product or any intermediate thereof, including clinical and commercial manufacture.

 

1.44         NDA has the meaning set forth in the definition of “Drug Approval Application.”

 

1.45         Net Sales” means, with respect to a Product for any period, the total amount billed or invoiced on sales of such Product during such period by Adapt, its Affiliates, or Sublicensees to Third Parties, less the following normal and customary bona-fide deductions and allowances actually taken:

 

1.45.1         trade, cash and quantity discounts;

 

8
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

1.45.2         price reductions, refunds or rebates, retroactive or otherwise, imposed by, negotiated with or otherwise paid (whether in cash or trade) to governmental authorities or third party payors;

 

1.45.3         taxes on sales (such as sales, value added, or use taxes) and customs and excise duties and other duties related to sale, in each case, to the extent such taxes are included in the gross amount invoiced;

 

1.45.4         wholesale and distribution fees, deductions and prompt pay discounts;

 

1.45.5         bad debts not exceeding five percent (5%) of the value of the sales of Product during the then-current Calendar Year, provided that any recovery of bad debts shall be deemed a sale for purposes of this definition of “Net Sales”;

 

1.45.6         amounts repaid, deducted or credited by reason of rejections, defects, recalls or returns, or because of retroactive price reductions, including rebates or wholesaler charge backs; and

 

1.45.7         freight, insurance, and other transportation charges to the extent added to the sale price and set forth separately as such in the total amount invoiced.

 

Notwithstanding the foregoing, Net Sales shall not include (i) transfers or dispositions for charitable, pre-clinical, clinical, regulatory, or governmental purposes or (ii) sales or transfers comprising the Limited Purdue Sales.  To the extent that Adapt, its Affiliate or any Commercial Sublicensee sells a Product, on an arms-length basis, to any Sublicensee who is not an Affiliate of such selling Person for resale, only the initial sale of such Product by Adapt, its Affiliate, or its Commercial Sublicensee shall constitute a sale for purposes of determining Net Sales.  Except as contemplated by the immediately foregoing sentence, Net sales shall not include sales between or among Adapt, its Affiliates, or Sublicensees.  Net Sales shall be calculated in accordance with the standard internal policies and procedures of Adapt, its Affiliates, or Sublicensees, which must be in accordance with United States Generally Accepted Accounting Principles or International Financial Reporting Standards as applicable.  If Adapt (or any of its Affiliates or Sublicensees) for a given Product sells such Product to a Third Party (including distributors) who also purchases other products or services from any such entity, then Adapt agrees not to, and shall require its Affiliates and Sublicensees not to, (a) bundle or include the Product as part of any multiple product offering or (b) discount or price the Product, in the case of either of the foregoing clauses (a) or (b), in a manner that is reasonably likely to disadvantage such Product in order to benefit sales or prices of other products offered for sale by Adapt or its Affiliates or Sublicensees to such customer.

 

1.46         “NIDA” means The Division of Pharmacotherapies and Medical Consequences of Drug Abuse of the National Institute on Drug Abuse.

 

1.47         “NIDA Agreement” means that certain Clinical Trial Agreement, dated January 31, 2013, between Lightlake and NIDA.

 

9
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

1.48         Party and Parties has the meaning set forth in the preamble hereto.

 

1.49         Patents” means (i) all national, regional and international patents and patent applications, including provisional patent applications; (ii) all patent applications filed either from such patents, patent applications or provisional applications or from an application claiming priority from either of these, including divisionals, continuations, continuations-in-part, provisionals, converted provisionals and continued prosecution applications; (iii) any and all patents that have issued or in the future issue from the foregoing patent applications ((i) and (ii)), including utility models, petty patents and design patents and certificates of invention; (iv) any and all extensions or restorations by existing or future extension or restoration mechanisms, including revalidations, reissues, re-examinations and extensions (including any supplementary protection certificates and the like) of the foregoing patents or patent applications ((i), (ii), and (iii)); and (v) any similar rights, including so-called pipeline protection or any importation, revalidation, confirmation or introduction patent or registration patent or patent of additions to any of such foregoing patent applications and patents.

 

1.50         Person means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, foundation, joint venture or other similar entity or organization, including a government or political subdivision, department or agency of a government.

 

1.51         Product means any pharmaceutical product or medical device, whether prescription or over-the-counter, marketed for a treatment of opioid overdose containing naloxone, alone or in combination with one or more other active or inactive ingredients, in any intranasal form, presentation, strength or delivery systems; provided, however, that “Product” shall not refer to any product Controlled, developed, manufactured, marketed, sold, offered for sale, exported, or imported directly or indirectly by a Sublicensee if such Sublicensee’s rights in respect of such product were obtained or developed independently of any sublicense or right granted by Adapt hereunder.

 

1.52         Product Specific Patents” means those Patents set forth on Schedule 1.52.

 

1.53         Product Trademarks” means the Trademark(s) to be used by Adapt or its Affiliates or its or their respective Sublicensees for the Commercialization of Products and any registrations thereof or any pending applications relating thereto (excluding, in any event, any trademarks, service marks, names or logos that include any corporate name or logo of the Parties or their Affiliates).

 

1.54         “Purdue” means Purdue Pharma LP or such Affiliate of Purdue Pharma LP that is the initial party to the Purdue Agreement, or any assignee or successor to such Person’s rights or obligations under the Purdue Agreement.

 

10
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

1.55         “Purdue Agreement” means the license agreement to be entered into by Lightlake or Adapt or one of their Affiliates with Purdue Pharma LP based upon the term sheet between Lightlake and Purdue Pharma LP dated September 24, 2014.  

 

1.56         Regulatory Approval” means, with respect to a country or other jurisdiction, any and all approvals (including Drug Approval Applications), licenses, registrations, or authorizations of any Regulatory Authority necessary to commercially distribute, sell, offer for sale, market, import or use a Product in such country or other jurisdiction, including, where applicable, (i) pricing or reimbursement approval in such country or other jurisdiction, (ii) pre- and post-approval marketing authorizations (including any prerequisite Manufacturing approval or authorization related thereto), and (iii) labeling approval.

 

1.57         Regulatory Authority” means any applicable supra-national, federal, national, regional, state, provincial, or local governmental or regulatory agencies, departments, bureaus, commissions, councils, or other government entities (e.g., the FDA and EMA) regulating or otherwise exercising authority with respect to activities contemplated in this Agreement, including the Exploitation of Products.

 

1.58         Regulatory Costs” means the out-of-pocket costs and expenses incurred by a Party or its Affiliates in connection with the preparation, obtaining or maintaining of Regulatory Documentation and Regulatory Approvals for the Product, including any filing fees that are consistent, if applicable, with the Development Plan.

 

1.59         Regulatory Documentation” means all (i) applications (including all INDs and Drug Approval Applications), registrations, licenses, authorizations, and approvals (including Regulatory Approvals); (ii) correspondence and reports submitted to or received from Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory Authority) and all supporting documents with respect thereto, including all regulatory drug lists, advertising and promotion documents, adverse event files, and complaint files; and (iii) clinical and other data contained or relied upon in any of the foregoing, in each case ((i), (ii), and (iii)) relating to a Product.

 

1.60         Senior Officer” means, with respect to Lightlake, its Chief Executive Officer or his/her designee or his/her designee, and with respect to Adapt, its Chief Executive Officer or Chief Operating Officer or his/her designee.

 

1.61         Sublicensee means a Person, other than an Affiliate, that is granted a sublicense by Adapt under a license granted in Section 4.1 or a right by Adapt, its Affiliates or Commercial Sublicensees to sell a Product, offer a Product for sale, or have a Product sold (each such sublicense or right, a “Sublicense”).

 

1.62         Third Party means any Person other than Lightlake, Adapt and their respective Affiliates.

 

11
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

1.63         Trademark means any word, name, symbol, color, designation or device or any combination thereof that functions as a source identifier, including any trademark, trade dress, brand mark, service mark, trade name, brand name, logo or business symbol, whether or not registered.

 

1.64         United States” or “U.S.” means the United States of America and its territories and possessions (including the District of Columbia and Puerto Rico).

 

Additional Definitions.  The following terms have the meanings set forth in the corresponding Sections of this Agreement:

 

Term   Section
“Adapt Indemnitees”   9.2
“Annual Net Sales Milestone Threshold”   5.3.1
“Annual Net Sales-Based Milestone Table”   5.3.1
“Annual Net Sales-Based Milestone Payment”   5.3.1
“Annual Net Sales-Based Milestone Payment Date”   5.3.1
“Audit Arbitrator”   5.13.2
“Breaching Party”   10.3
“Competing Product”   4.6
“Core IP”   5.5
“Default Notice”   10.3
“Development Plan”   3.1
“Follow-On Product”   5.2.5
“Force Majeure”   11.1
“First Product”   5.2.6
“Generic Competition”   5.4.2
“Indemnification Claim Notice”   9.3
“Indemnified Party”   9.3
“Initial First Responder Sales”   5.4.1
“Joint Development Committee” or “JDC”   2.1
“Joint Know-How”   6.1.2
“Joint Patents”   6.1.2
“Joint Intellectual Property Rights”   6.1.2
“Lightlake Cost Cap”   3.8.1
“Lightlake Indemnitees”   9.1
“Losses”   9.1
“Non-Breaching Party”   10.3
“Payment”   5.8
“Pharmacokinetic Data”   1.15
“Reconciliation Development Payment”   5.11.2
“Recovery”   6.4.3(d)
“ROFN”   4.3.3
“Sublicense”   1.61

 

12
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

Term   Section
“Target Filing Date”   3.2.3
“Term”   10.1
“Third Party Claims”   9.1

 

ARTICLE 2
JOINT DEVELOPMENT COMMITTEE

 

2.1           Formation.  Within fifteen (15) days after the Effective Date, the Parties shall establish a joint development committee (the “Joint Development Committee” or “JDC”).  The JDC shall consist of relevant representatives from each of the Parties, each with the requisite experience and seniority to enable such person to make decisions on behalf of the Parties with respect to the issues falling within the jurisdiction of the JDC.   Each Party shall be entitled to appoint up to two (2) representatives to the JDC.  From time to time, each Party may substitute one (1) or more of its representatives to the JDC on written notice to the other Party.  Adapt shall designate from its representatives the chairperson for the JDC.  From time to time, Adapt may change the representative who will serve as chairperson on written notice to Lightlake.

 

2.2           Specific Responsibilities.  The JDC shall meet monthly in person or by phone for the purpose of facilitating the transition of Development of the Product from Lightlake to Adapt.  At least seven (7) days prior to each meeting, each Party shall circulate an agenda of items that such Party wishes to cover in such meeting. In particular, the JDC shall:  

 

2.2.1           review and serve as a forum for discussing the Initial Development Plan, and review amendments thereto;

 

2.2.2           oversee any transition activities under the Initial Development Plan;

 

2.2.3           serve as a forum for discussing strategies for obtaining Regulatory Approvals for Products; and

 

2.2.4           perform such other functions as are set forth herein or as the Parties may mutually agree in writing, except where in conflict with any provision of this Agreement.

 

2.3           Disbandment.  Upon the *** REDACTED ***anniversary of the Effective Date, the JDC shall have no further responsibilities or authority under this Agreement and will be considered dissolved by the Parties.

 

2.4           Decision Making.   If the JDC cannot, or does not, reach consensus on an issue at a particular meeting, Adapt shall make the decision; provided; however, that Adapt may not exercise its decision making authority in a manner that would increase Lightlake’s full-time employee obligations under the Initial Development Plan, significantly modify the types of activities that Lightlake would have to perform under the Initial Development Plan, extend Lightlake’s period of performance more than *** REDACTED ***months after the Effective Date or increase the Lightlake Cost Cap.  

 

13
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

2.5           Limitations on JDC Authority.  Each Party shall retain the rights, powers, and discretion granted to it under this Agreement and no such rights, powers, or discretion shall be delegated to or vested in the JDC unless such delegation or vesting of rights is expressly provided for in this Agreement or the Parties expressly so agree in writing.  The JDC shall not have the power to amend, modify, or waive compliance with this Agreement, which may only be amended or modified as provided in Section 11.9 or compliance with which may only be waived as provided in Section 11.11.

 

ARTICLE 3
DEVELOPMENT, REGULATORY AND COMMERCIALIZATION ACTIVITIES

 

3.1           Development Plan.

 

3.1.1            Development Plan Delivery.  By no later than November 1st of each Calendar Year during the Term after the Calendar Year in which the Initial Development Plan was delivered until First Commercial Sale of a Product in the United States, Adapt shall prepare a written development plan that describes generally the material Development activities to be undertaken by or on behalf of Adapt with respect to Products in the next Calendar Year (each, a “Development Plan”), and each such Development Plan shall be provided to Lightlake and Adapt shall consider any comments of Lightlake in good faith.  The Initial Development Plan shall serve as the Development Plan for the first full Calendar Year of this Agreement and the period from the Effective Date through the end of the initial partial Calendar Year.  Without limiting the generality of the foregoing, each Development Plan shall set forth, among other things and to the extent relevant based on the stage of Development, the following with respect to the Products then under Development:

 

(a)          any preclinical studies, toxicology studies and other clinical studies with respect to Products;

 

(b)          regulatory plans and other elements of obtaining and maintaining Regulatory Approvals for Products;

 

(c)          the plans and timeline for preparing the necessary Regulatory Documentation and for obtaining Regulatory Approval for Products.

 

3.1.2           Development Plan Amendments.  Adapt may amend any Development Plan at any time, subject to providing Lightlake an opportunity to discuss any proposed revisions prior to making such amendment and, during the first twelve (12) months following the Effective Date, by submitting such amendment to the JDC prior to such amendment becoming effective; provided, however, that no such amendment to any Development Plan may provide for an increase in Lightlake’s full-time employee obligations under the Initial Development Plan, significantly modify the types of activities that Lightlake would have to perform under the Initial Development Plan, extend Lightlake’s period of performance more than twelve (12) months after the Effective Date or increase the Lightlake Cost Cap.

 

14
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

3.2           Development.

 

3.2.1           Ongoing Development.  The Parties acknowledge and agree that additional Development will be required to obtain Regulatory Approvals for Products.  After the Effective Date, as between the Parties, except as set forth in the Initial Development Plan (as the same may be amended in accordance with Section 3.1.2) and Section 3.8.1, Adapt shall be solely responsible for Development of the Products.

 

3.2.2           General Diligence.  Adapt shall use Commercially Reasonable Efforts to complete the activities associated with the Development of the initial Product for the United States that are contemplated by the Development Plan then in effect (other than any such activities to be undertaken by Lightlake).  Adapt shall, and shall cause its Affiliates to, comply with all Applicable Law with respect to Products.  

 

3.2.3           Specific Diligence Requirement.  Without limiting the foregoing, if Adapt has not filed an NDA in respect of a Product on or before the Target Filing Date, Adapt shall be deemed to be in material breach of this Agreement unless:

 

(a)          Adapt shall have theretofore completed those tasks in relation to the Development of a Product contemplated on Schedule 3.2.3(a) hereto; or

 

(b)          the aggregate amount of Development Costs, Regulatory Costs and Commercialization Costs theretofore incurred by Adapt and Lightlake after the Effective Date, together with the costs and expenses set forth on Schedule 3.8.2 hereto, shall equal or exceed $5 million; or

 

(c)          prior to such time, a Third Party files a Drug Approval Application in the United States for an intranasal product for the treatment of opioid overdose and, either (i) such product has the same dosage form as the Product being developed by Adapt or (ii) such product is deemed by the FDA to be, or otherwise becomes, the reference drug for purposes of any NDA that would be filed under Section 505(b)(2) of the FFDCA in respect of the Product being developed by Adapt; or  

 

(d)          any other circumstances that the Parties have separately agreed in writing will constitute exceptions pursuant to this Section 3.2.3 occur or exist.  

 

For clarity, if any of the circumstances contemplated by clauses (a) through (c) above exist, Adapt shall not be deemed to be in breach of this Agreement by virtue of its failure to file an NDA for a Product on or prior to the Target Filing Date, but shall remain subject to the obligation to use Commercially Reasonable Efforts in respect of the Development of the initial Product, as set forth above in Section 3.2.2.  In the event that none of the circumstances contemplated above exist, but Adapt notifies and provides reasonable evidence to Lightlake that such inability to file on or prior to the Target Filing Date is due to variables outside of Adapt’s reasonable control, Adapt may request that Lightlake consent to an extension of such Target Filing Date and Lightlake shall not unreasonably withhold, delay or condition such requested extension.  “Target Filing Date” means the date specified in the Initial Development Plan as the date by which Adapt shall file an NDA in respect of a Product or such later date as Lightlake may consent to in accordance with the immediately preceding sentence, provided that in the event of (i) a delay in the Development of a Product that is caused by a Third Party and outside the reasonable control of Adapt or (ii) a Force Majeure, then (in either case, clause (i) or (ii)) the Target Filing Date shall automatically be extended by the actual amount of delay caused by a Third Party or the duration of the Force Majeure, respectively.  For clarity, Adapt shall not be in material breach of its Development Obligations under this Agreement, including by virtue of this Section 3.2.3, if the Target Filing Date has been extended pursuant to this paragraph of Section 3.2.3 unless Adapt fails to file an NDA in respect of a Product on or before the revised Target Filing Date.  

 

15
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

3.2.4           Development Costs.  Except as otherwise provided in Section 3.8.1, Adapt shall be responsible for all costs and expenses in connection with the Development of Products.

 

3.2.5           Interactions with Third Parties.   Except as otherwise expressly contemplated by this Agreement or the Development Plan, or as expressly agreed between the Parties, as between the Parties, Adapt shall be solely responsible for and shall control, all interactions with Third Parties regarding the Development, Manufacturing and Commercialization of the Products.

 

3.3           Regulatory Matters.

 

3.3.1           Regulatory Activities.

 

(a)          As between the Parties, Adapt shall be responsible for preparing, obtaining, and maintaining Drug Approval Applications (including the setting of the overall regulatory strategy therefor), other Regulatory Approvals and other submissions, and for conducting communications with the Regulatory Authorities, for Products (which shall include filings of or with respect to INDs and other filings or communications with the Regulatory Authorities), in each case in accordance with the terms of this Agreement and otherwise in Adapt’s sole discretion.  All Regulatory Approvals applied for or received after the Effective Date relating to Products shall be owned by and held in the name of, Adapt.  At Adapt’s request, Lightlake shall transfer ownership of the IND in respect of the initial Product to Adapt at no cost and shall take such action as is necessary to confirm such transfer with the FDA.

 

(b)          Adapt shall notify Lightlake promptly (but in no event later than forty-eight (48) hours) following its determination that any event, incident, or circumstance has occurred that may result in the need for a recall, market suspension, or market withdrawal of a Product, and shall include in such notice the reasoning behind such determination, and any supporting facts.  Adapt (or its Sublicensee) shall have the right to make the final determination whether to voluntarily implement any such recall, market suspension, or market withdrawal.  If a recall, market suspension or market withdrawal is mandated by a Regulatory Authority, Adapt (or its Sublicensee) shall initiate such a recall, market suspension or market withdrawal in compliance with Applicable Law.  For all recalls, market suspensions, or market withdrawals undertaken, Adapt (or its Sublicensee) shall be solely responsible for the execution and all costs thereof.

 

16
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

3.3.2           Regulatory Costs.  Except as otherwise provided in Section 3.8.1, Adapt shall be responsible for all costs and expenses in connection with the Development of, and obtaining and maintaining Regulatory Approvals for, Products.

 

3.3.3           Rights of Reference and Access to Data.  

 

(a)          Adapt shall have the right to cross-reference Lightlake’s or its Affiliate’s Regulatory Approvals and Regulatory Documentation related to Products, and to access such Regulatory Approvals and Regulatory Documentation and any data and know-how therein and use such data and know-how, in each case in connection with the performance of its obligations and exercise of its rights under this Agreement.  Lightlake hereby grants to Adapt a “Right of Reference,” as that term is defined in 21 C.F.R. § 314.3(b) in the United States, or an equivalent right of access/reference in any other jurisdiction, to any data, including Lightlake’s or its Affiliates’ Regulatory Approvals and Regulatory Documentation, that relate to a Product for use by Adapt to Develop and Commercialize Products pursuant to this Agreement.  Lightlake or such Affiliate shall provide a signed statement to this effect, if requested by Adapt, in accordance with 21 C.F.R. § 314.50(g)(3) or the equivalent as required in any other jurisdiction or otherwise provide appropriate notification of such right of Adapt to the applicable Regulatory Authority.

 

(b)          Upon and subject to the Parties’ mutual written agreement upon commercially reasonable terms, Adapt shall (a) grant Lightlake the right to cross-reference Adapt’s or its Affiliate’s or Commercial Sublicensee’s Regulatory Approvals and Regulatory Documentation related to Products, and to access such Regulatory Approvals and Regulatory Documentation and any data and know-how therein and use such data and know-how, in each case in connection with the development, manufacture, use, and/or commercialization of intranasal products containing naloxone (other than Products) and (b) grant Lightlake a “Right of Reference,” as that term is defined in 21 C.F.R. § 314.3(b) in the United States, or an equivalent right of access/reference in any other jurisdiction, to any data, including Adapt’s or its Affiliates’ or Commercial Sublicensee’s Regulatory Approvals and Regulatory Documentation, that relate to a Product for use by Lightlake to development, manufacture, use, and/or commercialization of intranasal products containing naloxone (other than Products).  For the sake of clarity, this Section 3.3(b) shall be of no force or effect unless and until the Parties agree in writing on the terms of such foregoing rights. Notwithstanding the foregoing, Adapt shall promptly provide Lightlake the Pharmacokinetic Data upon it becoming available, provided that Lightlake shall not have a right to use such data or reference such data for any purpose other than with respect to its indemnification obligations under this Agreement.

 

17
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

3.4           Records; Reports.  Adapt shall maintain records in reasonable detail and in good scientific manner appropriate for patent and regulatory purposes, and in compliance with Applicable Law, which shall be materially complete and accurate and shall properly reflect all material work done and results achieved in the performance of its Development activities in respect of the Products.  Following the first anniversary of the Effective Date, Adapt and Lightlake shall meet at least once and up to twice per annum, at such times as the Parties shall reasonably agree to discuss the then-ongoing Development and Commercialization activities that (i) Adapt is undertaking with respect to Products and (ii) Lightlake is undertaking in respect of other products containing naloxone.  At each such meeting, (x) Adapt shall update Lightlake on the material developments in respect of its Development and Commercialization of Products and discuss in good faith any suggestions or questions Lightlake may have and Lightlake shall be permitted to retain a copy of Adapt’s presentation materials, subject to Article 7 hereof and (y) Lightlake shall update Adapt on the material developments in Lightlake’s and its other licensees’ efforts to Develop and Commercialize such other naloxone products, subject to Article 7 hereof.

 

3.5           Commercialization.

 

3.5.1           In General.  Except as otherwise provided in Section 3.8.1, Adapt (itself or through its Affiliates or Sublicensees) shall be solely responsible for Commercialization of Products at Adapt’s own cost and expense, in accordance with the terms of this Agreement and otherwise in Adapt’s sole discretion.

 

3.5.2           Diligence.  Once a Product receives all requisite Regulatory Approvals in a particular country necessary to Commercialize such Product in such country, Adapt shall use Commercially Reasonable Efforts to Commercialize such Product in such country.  Adapt shall Commercialize Products in accordance with Applicable Law.  Without limiting any of the foregoing, on a Product-by-Product basis, Adapt shall use Commercially Reasonable Efforts to achieve First Commercial Sale of a Product in the United States within nine (9) months after the date on which Adapt is notified by the FDA that an NDA in respect of such Product has received approval.

 

3.5.3           Booking of Sales; Distribution.  As between the Parties, Adapt shall invoice and book sales, establish all terms of sale (including pricing and discounts) and warehousing, and distribute the Products and perform or cause to be performed all related services.  As between the Parties, Adapt shall handle all returns, recalls, or withdrawals, order processing, invoicing, collection, distribution, and inventory management with respect to the Products.

 

3.5.4           Product Trademarks.  Adapt shall have the sole right to determine, in its sole discretion, the Product Trademarks to be used with respect to the Exploitation of Products on a worldwide basis.  As between the Parties, all such Product Trademarks shall be owned by Adapt.

 

3.6           Supply of Products.

 

3.6.1           Assignment of Existing Inventory.  Subject to Section 3.8.3, Lightlake hereby sells and assigns to Adapt all of its right, title, and interest in and to the Existing Inventory Supply.  Lightlake shall not be entitled to any additional payment for such Existing Inventory.  Promptly following the Effective Date, Lightlake shall deliver or have delivered such supply to Adapt FCA (Incoterms 2010) the facility designated by Adapt.

 

18
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

3.6.2           Supply of Products.  Except as set forth in Section 3.6.1, as between the Parties, subject to Section 3.8.1, Adapt shall have the sole responsibility for, at its expense, Manufacturing (or having Manufactured) and obtaining supply of naloxone (including all excipients) and devices (including packaging) for pre-clinical and clinical purposes and for commercial sale of Products by Adapt and its Affiliates and Commercial Sublicensees.  Adapt shall use Commercially Reasonable Efforts to ensure that any agreement pursuant to which Adapt contracts with Third Parties for the supply of the device utilized by the Products and of finished Products may be assigned to Lightlake without such Third Party’s consent in the event that this Agreement is terminated.

 

3.7           Subcontracting; Assigned Contracts.  Either Party may subcontract with a Third Party to perform any or all of its obligations hereunder, provided that (i) no such permitted subcontracting shall relieve a subcontracting Party of any liability or obligation hereunder except to the extent satisfactorily performed by such subcontractor, and (ii) the Party engaging such subcontractor shall ensure that the agreement pursuant to which the subcontracting Party engages such subcontractor (A) does not conflict with any material term of this Agreement, and (B) contains terms obligating such subcontractor to comply with obligations of confidentiality and non-use consistent with those set forth in this Agreement.  Promptly after the Effective Date, Lightlake shall use commercially reasonable efforts to assign to Adapt, and for Adapt to assume from Lightlake all of Lightlake’s right, title, and interest in and to the Third Party contracts set forth on Schedule 3.7 (the “Assigned Contracts”), including (a) by obtaining from each Third Party counterparty thereto a consent in the form attached hereto as Exhibit A and (b) entering into one or more assignment and assumption agreements substantially in the form attached hereto as Exhibit B.  In addition, as soon as practicable following the Effective Date (1) the Parties shall meet with NIDA to discuss the transition of the Development of the initial Product to Adapt as contemplated herein and (2) *** REDACTED One Sentence of 65 Words***.  

 

19
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

3.8           Sharing of Development Costs, Regulatory Costs and Commercialization Costs.

 

3.8.1           Cost Sharing.  Lightlake shall bear fifty percent (50%) of all Development Costs and Adapt shall bear fifty percent (50%) of all Development Costs (whether incurred by Lightlake or Adapt or their respective Affiliates, Sublicensees or subcontractors) incurred after the Effective Date in accordance with the Development Plan in connection with the Development of Products using the *** REDACTED *** Unit Dose Device and Lightlake shall bear fifty percent (50%) of all Regulatory Costs and Commercialization Costs incurred by Adapt and Adapt shall bear fifty percent (50%) of all Regulatory Costs and Commercialization Costs incurred by Adapt (whether incurred by Adapt or  its Affiliates, Sublicensees or subcontractors), in connection with the Development and Commercialization of the Product using the *** REDACTED *** Unit Dose Device until such time as Lightlake has incurred Development Costs, Regulatory Costs and Commercialization Costs of Two Million Five Hundred Thousand Dollars ($2,500,000) (the “Lightlake Cost Cap”).  After the Lightlake Cost Cap has been reached, Adapt shall be responsible for one hundred percent (100%) of all Development Costs, Regulatory Costs and Commercialization Costs.  For clarity, Lightlake shall not have any obligation to bear any Development Costs, Regulatory Costs or Commercialization Costs in connection with the Development or Commercialization of a Product using a drug delivery device other than the *** REDACTED ***Unit Dose Device; provided, however, in the event that Adapt determines, in good faith, that the Product cannot be further Developed using the *** REDACTED ***Unit Dose Device, whether due to a technical failure or failure of any clinical study using such device, then Adapt may proceed with Development using another device and the foregoing cost sharing provisions shall apply to the Development Costs, Regulatory Costs and Commercialization Costs associated with such alternate Product as well.  Notwithstanding the foregoing, Development Costs incurred by Lightlake (or its Affiliates, Sublicensees or subcontractors) shall only be shared and credited towards the Lightlake Cost Cap in accordance with this Section 3.8.1 to the extent the same are either (a) contemplated in the Initial Development Plan or a subsequent Development Plan and are expressly approved in advance by Adapt, or are set forth on Schedule 3.8.2 or (b) paid by Lightlake after the Effective Date to suppliers and/or vendors, including their affiliates, whose names are listed on Schedule 3.8.2, other than *** REDACTED two words ***, for activities related exclusively to the Product where such activities commenced before the Effective Date; provided, however, that the aggregate amount contemplated by this clause (b) shall not exceed $150,000.

 

3.8.2           Crediting of Certain Costs.  The Parties agree that the costs and expenses incurred by Lightlake prior to the Effective Date in respect of the Development of the initial Product that are specified on Schedule 3.8.2 hereto shall be credited as Lightlake’s payment of Development Costs in accordance with Section 3.8.1 and count towards the Lightlake Cost Cap.  For clarity, if Adapt and its Affiliates and Sublicensees fail to incur Development Costs in excess of the amount credited hereunder for Lightlake’s share of the Development Costs, Lightlake shall not be entitled to any payment from Adapt for such excess amounts.  

 

3.8.3           Payment and Reimbursement of Costs.  To the extent that either Party is entitled to a reimbursement of costs described in Section 3.8.1, such costs will be reconciled and paid in accordance with Section 5.11.

 

3.8.4           General.  Each Party shall maintain current and accurate records of all costs and expenses incurred by it for which it seeks reimbursement from the other Party pursuant to Section 3.8.1.

 

ARTICLE 4
TRANSFER AND ASSIGNMENT; GRANT OF RIGHTS

 

4.1           Grants to Adapt.  Subject to the terms and conditions of this Agreement, Lightlake hereby grants to Adapt an exclusive (including with regard to Lightlake) worldwide license, with the right to grant sublicenses in accordance with Section 4.4, under the Lightlake Patents, the Product Specific Patents, the Lightlake Know-How, and Lightlake’s interests in the Joint Patents and the Joint Know-How, to Exploit Products.

 

20
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

4.2           Grants to Lightlake.  

 

4.2.1           Adapt hereby grants to Lightlake a non-exclusive, royalty-free license, without the right to grant sublicenses, under the Adapt Applied Patents, the Adapt Applied Know-How, and Adapt’s interests in the Joint Patents and the Joint Know-How solely for purposes of performing its obligations as set forth in, and subject to, this Agreement.

 

4.2.2           Upon and subject to agreement of commercially reasonable terms, Adapt shall grant to Lightlake a non-exclusive, royalty-free, worldwide license, with the right to grant sublicenses, under the Adapt Applied Patents, the Adapt Applied Know-How and  Development Data to Develop, Manufacture and Commercialize products containing naloxone other than a Product.  For the sake of clarity, this Section 4.2.2 shall be of no force or effect unless and until the Parties agree in writing on the terms of such foregoing rights.  

 

4.3           Sublicenses.

 

4.3.1           Right to Grant Sublicenses.  Adapt shall have the right to grant Sublicenses (through multiple tiers of Sublicensees).  Adapt shall cause each Sublicensee to comply with the applicable terms and conditions of this Agreement.  Adapt shall remain responsible for the performance of its Affiliates and Sublicensees that are granted Sublicenses as permitted herein, and the grant of any such Sublicense shall not relieve Adapt of its obligations under this Agreement.  With respect to any such Sublicense, Adapt shall ensure that the agreement pursuant to which it grants such Sublicense (i) does not conflict with the terms and conditions of this Agreement and (ii) contains terms obligating the Sublicensee to comply with confidentiality and non-use provisions consistent with those set forth in this Agreement.  With respect to any such Sublicense to a Commercial Sublicensee, Adapt shall use Commercially Reasonable Efforts to ensure that the agreement pursuant to which it grants such Sublicense contains (A) terms obligating such Commercial Sublicensee to permit Lightlake rights of inspection, access, and audit substantially similar to those provided to Lightlake in this Agreement and (B) terms relating to intellectual property and data ownership consistent with those set forth in this Agreement.  With respect to any such Sublicense to a Commercial Sublicensee, Adapt shall ensure that the agreement pursuant to which it grants such sublicense contains an exclusivity provision consistent with that contained in Section 4.6.2.  A copy of any Sublicense agreement with a Commercial Sublicensee executed by Adapt shall be provided to Lightlake within fourteen (14) days after its execution; provided that the financial terms of any such Sublicense agreement may be redacted to the extent not pertinent to an understanding of a Party’s obligations or benefits under this Agreement.  

 

4.3.2           Termination of Sublicenses.  In the event of termination of this Agreement, in whole or in part, any sublicense granted by Adapt pursuant to this Section 4.3 shall automatically be deemed to terminate to the same extent as the license or other rights granted by Lightlake to Adapt in Section 4.2, and the other terms and conditions of this Agreement, terminate.

 

21
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

4.3.3           Right of First Negotiation.  Notwithstanding anything to the contrary in this Agreement, in the event Lightlake elects to license, sublicense or sell (except in connection with a license or sale of all or substantially all of the assets of Lightlake), in one transaction or a series of related transactions, a controlling interest with respect to any product containing naloxone, Lightlake shall promptly provide notice to Adapt of such election and  Lightlake hereby grants to Adapt a right of first negotiation to license or acquire such rights (“ROFN”).  Adapt may exercise each ROFN upon notice to Lightlake within fifteen (15) Business Days from the date upon which Adapt receives written notice from Lightlake.  In the event that Adapt elects to exercise a ROFN, the Parties shall enter into good faith negotiations for a commercially reasonable licensing or asset sale agreement.  If the Parties, in good faith negotiations, are unable to reach agreement within seventy (70) days after the date upon which Adapt exercised the ROFN, then Lightlake will be free to enter an agreement for such rights with a Third Party.  

 

4.4           Retention of Rights; Limitations Applicable to License Grants.

 

4.4.1           Retained Rights of Lightlake.  Except as expressly set forth in this Agreement, and without limitation to any rights granted or reserved to Lightlake pursuant to any other term or condition of this Agreement, Lightlake hereby expressly retains, on behalf of itself and its Affiliates (and on behalf of its licensees, sublicensees and contractors):

 

(a)          non-exclusive rights in and to the Lightlake Patents, the Lightlake Know-How, Lightlake’s interests in and to Joint Patents and Joint Know-How, in each case solely to perform its obligations under this Agreement; and

 

(b)           all right, title, and interest in and to the Lightlake Patents, the Lightlake Know-How, Lightlake’s interests in and to Joint Patents and Joint Know-How, in each case to develop and obtain and maintain regulatory approvals for, and to manufacture, commercialize and otherwise exploit any compound or product other than Products or Competing Products.

 

4.4.2           No Other Rights Granted by Lightlake.  Except as expressly provided herein and without limiting the foregoing, Lightlake grants no other right or license, including any rights or licenses to the Lightlake Patents, the Lightlake Know-How, the Regulatory Documentation, or any other Patent or intellectual property rights not otherwise expressly granted herein.

 

4.5           Transfer of Lightlake Know-How.  As soon as practicable after the Effective Date, Lightlake shall provide to Adapt (which can be in the form of copies and electronic files) all material Lightlake Know-How existing as of the Effective Date, to the extent such Lightlake Know-How has not theretofore been provided to Adapt and is reasonably required by or useful to Adapt for the exercise of its rights or the performance of its obligations under this Agreement.

 

22
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

4.6           Exclusivity.  

 

4.6.1           During the Term and for a period of one year following the Term, other than as contemplated by this Agreement, neither Party shall, and each Party shall cause its Affiliates not to and shall use Commercially Reasonable Efforts to cause its directors, officers and employees not to, (i) directly or indirectly, develop, commercialize or manufacture any product containing naloxone as the active ingredient for the treatment of opioid overdose in an intranasal form (“Competing Product”) in any country or other jurisdiction, or (ii) license, authorize, appoint, or otherwise enable any Third Party to directly or indirectly, develop, commercialize or manufacture any Competing Product in any country or other jurisdiction.

 

4.6.2           During the term of any agreement pursuant to which a Commercial Sublicensee is granted a Sublicense to sell a Product or have a Product sold, other than as contemplated by this Agreement, each Party shall cause its Commercial Sublicensees not to (i) directly or indirectly, develop, commercialize or manufacture any Competing Product in any country or other jurisdiction in which such Commercial Sublicensee has been granted a Sublicense to sell a Product or have a Product sold, or (ii) license, authorize, appoint, or otherwise enable any Third Party to directly or indirectly, develop, commercialize or manufacture any Competing Product in any such country or other jurisdiction in which such Commercial Sublicensee has been granted a Sublicense to sell a Product or have a Product sold.

 

4.7           Compliance with Law.  Adapt shall conduct, or cause to be conducted, the Development, Commercialization, Manufacture and Exploitation of Products in compliance with all Applicable Laws.

 

ARTICLE 5
PAYMENTS AND RECORDS

 

5.1           Upfront Payment.  Within one (1) Business Days after the Effective Date, Adapt shall pay Lightlake an upfront amount equal to Five Hundred Thousand Dollars ($500,000).  Such payment shall be nonrefundable and noncreditable against any other payments due hereunder.

 

5.2           Regulatory Milestones.  In partial consideration of the rights granted by Lightlake to Adapt hereunder and subject to the terms and conditions set forth in this Agreement, Adapt shall pay to Lightlake a milestone payment within thirty (30) days after the achievement of each of the following milestones:

 

5.2.1           Adapt’s first receipt of notice from the FDA that an NDA in respect of a Product has received approval, *** REDACTED ***Dollars($*** REDACTED ***);

 

5.2.2           First Commercial Sale of a Product in the United States, *** REDACTED ***Dollars($*** REDACTED ***);

 

5.2.3           First Commercial Sale of a Product in any country or territory outside the United States after receipt of all requisite Regulatory Approvals in such country, *** REDACTED ***Dollars($*** REDACTED ***);

 

23
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

5.2.4           First Commercial Sale of a Product in any three (3) countries comprising the Major Markets, *** REDACTED ***Dollars ($*** REDACTED ***);

 

5.2.5           First Commercial Sale of a Product in the United States using an intranasal delivery device other than a unit dose delivery device (a “Follow-On Product”), *** REDACTED ***Dollars ($*** REDACTED ***);

 

5.2.6           First Commercial Sale of a Follow-On Product in the United States, provided, that (i) a Product using a unit dose delivery device in the United States (“First Product”) has received Regulatory Approval, and the use of the Follow-On Product has an improved naloxone bioavailability profile relative to the First Product and (ii) Patents covering or claiming the Follow-On Product are listed in the FDA’s Approved Drug Products with Therapeutic Equivalent Evaluations (or successor thereto) with respect to such Follow-On Product, *** REDACTED ***Dollars ($*** REDACTED ***);

 

Each milestone payment in this Section 5.2 shall be payable only upon the first achievement of such milestone and no amounts shall be due for subsequent or repeated achievements of such milestone, whether for the same or a different Product.  The maximum aggregate amount payable by Adapt pursuant to this Section 5.2 is Seven Million Five Hundred Thousand Dollars ($7,500,000).

 

5.3           Sales-Based Milestones.  

 

5.3.1           In partial consideration of the license rights granted by Lightlake to Adapt hereunder, in the event that the aggregate of all Net Sales in a given Calendar Year exceeds a threshold (each, an “Annual Net Sales Milestone Threshold”) set forth in the left-hand column of the table immediately below for such Calendar Year (the “Annual Net Sales-Based Milestone Table”), Adapt shall pay to Lightlake a milestone payment (each, an “Annual Net Sales-Based Milestone Payment”) in the corresponding amount set forth in the right-hand column of the Annual Net Sales-Based Milestone Table.  In the event that in a given Calendar Year more than one Annual Net Sales Milestone Threshold is exceeded, Adapt shall pay to Lightlake a separate Annual Net Sales-Based Milestone Payment with respect to each Annual Net Sales Milestone Threshold that is exceeded in such Calendar Year.  Each such milestone payment shall be due within sixty (60) days after the end of the Calendar Quarter in such Calendar Year in which such milestone was achieved (each, an “Annual Net Sales-Based Milestone Payment Date”).

 

Threshold Annual Net Sales Levels   Payment Amount
*** REDACTED ***   *** REDACTED ***
     
*** REDACTED ***   *** REDACTED ***
     
*** REDACTED ***   *** REDACTED ***
     

 

24
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

Threshold Annual Net Sales Levels   Payment Amount
*** REDACTED ***   *** REDACTED ***
     
*** REDACTED ***   *** REDACTED ***

 

 

5.3.2           Notwithstanding anything contained in Section5.3.1, each milestone payment in this Section 5.3 shall be payable only upon the first achievement of such milestone in a given Calendar Year, and no amounts shall be due for subsequent or repeated achievements of such milestone in subsequent Calendar Years.  The maximum aggregate amount payable by Adapt pursuant to this Section 5.3 is Forty-Eight Million Dollars ($48,000,000).

 

5.4           Royalties.

 

5.4.1           Royalty Rates.  As further consideration for the rights granted to Adapt hereunder, subject to Section 5.4.2, commencing upon the First Commercial Sale, Adapt shall pay to Lightlake a royalty on Net Sales during each Calendar Year at the following rates:

 

Net Sales of all Products   Royalty Rate
*** REDACTED ***   *** REDACTED ***
     
*** REDACTED ***   *** REDACTED ***
     
*** REDACTED ***   *** REDACTED ***
     
*** REDACTED ***   *** REDACTED ***
     
*** REDACTED ***   *** REDACTED ***

 

5.4.2           Royalty on Certain Pre-Approval Net Sales.  As further consideration for the rights granted to Adapt hereunder, Adapt shall pay to Lightlake a royalty of *** REDACTED *** percent (*** REDACTED ***%)of Net Sales of the First Product to the First Responder Market that are made prior to the First Commercial Sale and prior to Regulatory Approval of the First Product, up to aggregate Net Sales of *** REDACTED ***Dollars ($*** REDACTED ***) (i.e., the maximum royalty payable pursuant to this Section 5.4.2 shall equal $ *** REDACTED ***).  If royalties are paid under this Section 5.4.2 in the Calendar Year of or before the First Product receives Regulatory Approval, then the initial royalties contemplated by Section 5.4.1 shall be payable only for that portion of aggregate Net Sales during such Calendar Year that exceeds such Net Sales to the First Responder Market.

 

25
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

5.4.3           Generic Reduction.  Notwithstanding anything to the contrary in Section 5.4.1, in the event that in any country during a Calendar Quarter there is Generic Competition, the royalties payable to Lightlake for the Net Sales of such Product in such country shall be reduced to *** REDACTED ***(*** REDACTED ***%) percent for such Calendar Quarter.  “Generic Competition” means, either (i) on a country-by-country and Product-by-Product (with different strengths or presentations of Products being regarded as separate Products for purposes hereof) basis, the unit volume of a Product sold in a country in any Calendar Quarter is less than *** REDACTED *** percent (*** REDACTED ***%) of the unit volume of such Product sold in such country in the last full Calendar Quarter immediately preceding the date on which a Generic Product in respect of such Product was first launched in such country or (ii) on a country-by-country and Product-by-Product (with different strengths of Products being regarded as separate Products for purposes hereof) basis, in the event that there is an authorized generic version of a Product sold by Adapt or its Affiliate or Commercial Sublicensee in a country, the aggregate Net Sales of such Product and such authorized generic version of such Product in any Calendar Quarter are less than *** REDACTED ***percent (*** REDACTED ***%) of the aggregate Net Sales thereof in the last full Calendar Quarter immediately preceding the date on which a Generic Product in respect of such Product was first launched in such country.  

 

5.5           Third Party Royalties.  If, during the Term, Adapt elects, in its sole discretion, to seek a license under any Patent of a Third Party that (i) Adapt reasonably determines would be infringed by the Exploitation, in any part of the Territory, of any Product then under Development or being Commercialized by Adapt, its Affiliates or its Sublicensees, or that Adapt determines could be listed in the FDA’s Orange Book in respect of one or more Products (including Products in Development), or that claims an invention that Adapt determines could facilitate the Development of one or more new Product(s) (any of the foregoing, “Core IP”) or (ii) that Adapt otherwise determines is necessary or desirable for Adapt, its Affiliates or Sublicensees to Exploit the Products, then, in either case, Adapt shall be solely responsible for the negotiation and execution of the corresponding license agreement.  Any amounts due under any such Third Party license agreement will be borne by Adapt; provided, however, that Adapt shall be entitled to deduct up to *** REDACTED ***percent (*** REDACTED ***%) of the upfront payment, milestones or royalties paid to such Third Party (on account of rights relating to Products) from the Regulatory Milestones payable by Adapt pursuant to Section 5.2, the Sales-Based Milestones payable by Adapt pursuant to Section 5.3 and the royalties payable by Adapt pursuant to Section 5.4.  To the extent that, in any Calendar Quarter with respect to a royalty payment or with respect to milestone payment in the event of a milestone, Adapt was not able to deduct the entire amount of the above percentage of any and all amounts paid to such Third Party in such Calendar Quarter or from such regulatory or sales-based milestone payment, Adapt shall be entitled to carry forward such remaining amounts and deduct them from the royalties due in subsequent Calendar Quarters or a subsequent regulatory or sales-based milestone payment; provided that in no event shall reductions pursuant to this Section 5.5 result in royalties on Product of less than (x) *** REDACTED *** percent (*** REDACTED ***%) of Net Sales in any Calendar Quarter in the case of reductions associated with Core IP or (y) *** REDACTED ***percent (*** REDACTED ***%) of Net Sales in any Calendar Quarter in the case of reductions associated with any other license contemplated by this Section 5.5.

 

26
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

5.6           Royalty Payments and Reports.  Adapt shall calculate all amounts payable to Lightlake pursuant to Section 5.4 at the end of each Calendar Quarter, which amounts shall be converted to Dollars, in accordance with Section 5.7.  Adapt shall pay to Lightlake the royalty amounts due with respect to a given Calendar Quarter within forty-five (45) days after the end of such Calendar Quarter.  Each payment of royalties due to Lightlake shall be accompanied by a statement of the amount of gross sales and Net Sales of each Product in each country during the applicable Calendar Quarter (including such amounts expressed in local currency and as converted to Dollars) and a calculation of the amount of royalty payment due on such Net Sales for such Calendar Quarter.

 

5.7           Mode of Payment; Offsets.  All payments to either Party under this Agreement shall be made by deposit of Dollars in the requisite amount to such bank account as the receiving Party may from time to time designate by notice to the paying Party.  For the purpose of calculating any sums due under, or otherwise reimbursable pursuant to, this Agreement (including the calculation of Net Sales expressed in currencies other than Dollars), a Party shall convert any amount expressed in a foreign currency into Dollar equivalents using its, the simple average of prior month-end Exchange Rate and current month-end Exchange Rate based on 9:00 AM Central Time Bloomberg screen on the penultimate Business Day of the corresponding month.  The “Exchange Rate” means, with respect to a Business Day, the spot bid rate for X currencies and spot ask rate for non-X currencies for the conversion of the applicable country’s or other jurisdiction’s currency to Dollars as reported at 9:00 AM Central Time Bloomberg screen on the penultimate Business Day.  Adapt shall not have the right to offset, set off or deduct any amounts from or against the amounts due to Lightlake hereunder any amounts owing by Lightlake to Adapt hereunder.

 

5.8           Taxes.  The milestones and royalties payable by Adapt to Lightlake pursuant to this Agreement (each, a “Payment”) shall be paid free and clear of any and all taxes, except for any withholding taxes required by Applicable Law.  Where any sum due to be paid to either Party hereunder is subject to any withholding or similar tax, the Parties shall use their commercially reasonable efforts to do all such acts and things and to sign all such documents as will enable them to take advantage of any applicable double taxation agreement or treaty.  In the event there is no applicable double taxation agreement or treaty, or if an applicable double taxation agreement or treaty reduces but does not eliminate such withholding or similar tax, the payor shall pay such withholding or similar tax to the appropriate government authority, deduct the amount paid from the amount due to payee and secure and send to payee the best available evidence of such payment.  

 

5.9           Interest on Late Payments.  If any payment due to either Party under this Agreement is not paid when due, then such paying Party shall pay interest thereon (before and after any judgment) at an annual rate (but with interest accruing on a daily basis) of three percent above LIBOR, such interest to run from the date on which payment of such sum became due until payment thereof in full together with such interest.  

 

27
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

5.10         Funding under the Initial Development Plan.  In consideration for Lightlake’s performance of its obligations under the Initial Development Plan, upon the terms and conditions contained herein, for the shorter of the Term or the first (12) months after the Effective Date, Adapt shall pay to Lightlake *** REDACTED *** Dollars ($*** REDACTED ***) per month plus the reasonable and documented out-of-pocket costs and expenses incurred by Lightlake in delivering reasonably requested transition support in accordance with the Initial Development Plan payable no later than fifteen days after the start of each such month and with respect to out-of-pocket expenses, payable no later than thirty days after the receipt of an invoice from Lightlake.  Payments made under this Section 5.10 shall not be considered Development Costs, Regulatory Costs or Commercialization Costs for purposes of Section 3.8.

 

5.11         Development Costs; Regulatory Costs and Commercialization Costs.

 

5.11.1         Report of Development Costs, Regulatory Costs and Commercialization Costs.  Within thirty (30) days following the end of each calendar month beginning with the Effective Date and ending with the month in which the Lightlake Cost Cap has been reached, Lightlake shall prepare and deliver to Adapt a report detailing its Development Costs for the preceding month, and Adapt shall, within fifteen (15) days thereafter, prepare and deliver to Lightlake a report (i) detailing Adapt’s Development Costs, Regulatory Costs and Commercialization Costs incurred during such preceding month, (ii) setting forth a reconciliation of the amounts for which each Party is responsible pursuant to Section 3.8.1, and (iii) indicating the amount in Dollars due to Lightlake or Adapt, as applicable for such calendar month (each, a “Reconciliation Development Payment”).  Each Party shall provide such additional detail regarding its reported costs as the other Party shall reasonably request.

 

5.11.2         Reconciliation Payments.  Within fifteen (15) days after Adapt delivers each of its monthly reports pursuant to Section 5.11.1, the Party to whom a Reconciliation Development Payment is due shall issue an invoice to the other Party for the Reconciliation Development Payment, which invoice shall be due and payable within fifteen (15) days thereafter.

 

5.12         Financial Records.  Adapt shall, and shall cause its Affiliates to, keep complete and accurate books and records pertaining to Net Sales of Products, and any other records reasonably required to be maintained with respect to each Party’s obligations under this Agreement, and each Party shall maintain complete and accurate records in sufficient detail to permit the other Party to confirm the accuracy of all Development Costs, Regulatory Costs and Commercialization Costs invoiced by one Party to the other Party pursuant to Section 5.11.2 in sufficient detail to calculate all amounts payable hereunder and to verify compliance with its obligations under this Agreement.  Such books and records shall be retained by a Party and its Affiliates until the later of (i) three (3) years after the end of the period to which such books and records pertain, and (ii) the expiration of the applicable tax statute of limitations (or any extensions thereof), or for such longer period as may be required by Applicable Law.

 

28
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

5.13         Audit.

 

5.13.1         Audit.  At the request of a Party, the other Party shall, and shall cause its Affiliates to, permit an independent auditor designated by auditing Party and reasonably acceptable to  the audited Party, at reasonable times and upon reasonable notice, to audit the books and records maintained pursuant to Section 5.12 to ensure the accuracy of all reports and payments made hereunder; provided, however, that such audit right may be exercised no more than once in any Calendar Year; provided, that once the reports and payments for any particular period have been audited hereunder, such reports and payments shall not be the subject of any future audit absent fraud; provided, further, that the reports and payments made in any particular Calendar Year shall be subject to audit only until the end of the third Calendar Year following the Calendar Year in which such reports or payments were made.  Except as provided below, the cost of this audit shall be borne by the auditing Party, unless the audit reveals a discrepancy in favor of the audited Party of more than five percent (5%) from the reported amounts for the audited Party, in which case the audited Party shall bear the cost of the audit.  Unless disputed pursuant to Section 5.13.2, if such audit concludes that (x) additional amounts were owed by  the audited Party, the audited Party shall pay the additional amounts, with interest from the date originally due as provided in Section 5.9, or (y) excess payments were made by audited Party, the auditing Party shall reimburse such excess payments, in either case ((x) or (y)), within sixty (60) days after the date on which such audit is completed by the auditing Party.  The audited Party may require the accounting firm to sign a customary non-disclosure agreement before providing the accounting firm access to the audited Party’s facilities or records.  Upon completion of the audit, the accounting firm shall provide both Parties a written report disclosing whether the reports submitted by the audited Party are correct or incorrect, whether the calculations set forth in the reports submitted by the audited Party are correct or incorrect, and, in each case, the specific details concerning any discrepancies.  No other information shall be provided to the auditing Party.

 

5.13.2         Audit Dispute.  In the event of a dispute with respect to any audit under Section 5.13.1, Lightlake and Adapt shall work in good faith to resolve the disagreement.  If the Parties are unable to reach a mutually acceptable resolution of any such dispute within thirty (30) days, the dispute shall be submitted for resolution to a certified public accounting firm jointly selected by each Party’s certified public accountants or to such other Person as the Parties shall mutually agree (the “Audit Arbitrator”).  The decision of the Audit Arbitrator shall be final and the costs of such arbitration as well as the initial audit shall be borne between the Parties in inverse proportion to Party’s positions with respect to such dispute, as determined by the Audit Arbitrator. Not later than ten (10) days after such decision and in accordance with such decision, the audited Party shall pay the additional amounts, with interest from the date originally due as provided in Section 5.9, or the auditing Party shall reimburse the excess payments, as applicable.

 

5.13.3         Confidentiality.  The auditing Party shall treat all information subject to review under this Section 5.13 in accordance with the confidentiality provisions of Article 7 and the Parties shall cause the Audit Arbitrator to enter into a reasonably acceptable confidentiality agreement with  the auditing Party obligating such firm to retain all such financial information in confidence pursuant to such confidentiality agreement.

 

29
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

5.14         No Other Compensation.  Each Party hereby agrees that the terms of this Agreement fully define all consideration, compensation and benefits, monetary or otherwise, to be paid, granted or delivered by one Party to the other Party in connection with the transactions contemplated herein. Neither Party previously has paid or entered into any other commitment to pay, whether orally or in writing, any of the other Party’s employees, independent contractors or agents, directly or indirectly, any consideration, compensation or benefits, monetary or otherwise, in connection with the transaction contemplated herein.

 

ARTICLE 6
INTELLECTUAL PROPERTY

 

6.1           Ownership of Intellectual Property.

 

6.1.1           Ownership of Technology.  As between the Parties, each Party shall own and retain all right, title, and interest in and to any and all Inventions and Information that are conceived, discovered, developed, or otherwise made solely by or on behalf of such Party (or its Affiliates or Sublicensees) under or in connection with this Agreement, whether or not patented or patentable, and any and all Patents and other intellectual property rights with respect thereto.

 

6.1.2           Ownership of Joint Patents and Joint Know-How.  As between the Parties, the Parties shall each own an equal, undivided interest in any and all (i) Inventions and Information that are conceived, discovered, developed or otherwise made jointly by or on behalf of Lightlake or its Affiliates, on the one hand, and Adapt or its Affiliates or Sublicensees, on the other hand, in connection with the work conducted under or in connection with this Agreement, whether or not patented or patentable (the “Joint Know-How”), and (ii) Patents (the “Joint Patents”) and other intellectual property rights with respect to the Inventions and Information described in clause (i) (together with Joint Know-How and Joint Patents, the “Joint Intellectual Property Rights”).  Each Party shall promptly disclose to the other Party in writing, and shall cause its Affiliates, (and in the case of Adapt, its Sublicensees) to so disclose, the development, making, conception or reduction to practice of any Joint Know-How or Joint Patents.  Subject to the licenses and rights of reference granted under Sections 4.1 and 4.2, and each Party’s exclusivity obligations in Section 4.5, each Party shall have the right to Exploit the Joint Intellectual Property Rights without a duty of seeking consent or accounting to the other Party.

 

6.1.3           United States Law.  The determination of whether Information and Inventions are conceived, discovered, developed, or otherwise made by a Party for the purpose of allocating proprietary rights (including Patent, copyright or other intellectual property rights) therein, shall, for purposes of this Agreement, be made in accordance with Applicable Law in the United States as such law exists as of the Effective Date irrespective of where such conception, discovery, development or making occurs.  

 

6.1.4           Assignment Obligation.  Each Party shall cause all Persons who perform activities for such Party under this Agreement to be under an obligation to assign their rights in any Inventions resulting therefrom to such Party.

 

30
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

6.2           Maintenance and Prosecution of Lightlake Patents.

 

6.2.1           Lightlake Right.  As between the Parties, Lightlake shall have the first right, but not the obligation, to prepare, file, prosecute (including any reissues, re-examinations, post-grant proceedings, requests for patent term extensions, supplementary protection certificates, interferences, derivation proceedings, supplemental examinations and defense of oppositions) and maintain the Lightlake Patents.  Lightlake shall keep Adapt informed with regard to the filing, prosecution and maintenance of Lightlake Patents, including by providing Adapt with (i) copies of material communications to and from any patent authorities regarding Lightlake Patents, and (ii) drafts of any material filings or responses to be made to such patent authorities regarding Lightlake Patents sufficiently in advance of submitting such filings or responses so as to allow a reasonable opportunity for Adapt to review and comment thereon.  Lightlake shall not be bound by, but shall consider in good faith, the comments of Adapt with respect to such Lightlake drafts and with respect to strategies for filing and prosecuting the Lightlake Patents.  If Adapt fails to provide its comments with respect to such filing and prosecution of Lightlake Patents reasonably in advance of the deadline for filing or otherwise responding to the patent authorities, Lightlake shall be free to act without consideration of Adapt’s comments.

 

6.2.2           Adapt Right.  In the event that Lightlake intends not to prepare, file, prosecute, or maintain a Lightlake Patent, Lightlake shall provide reasonable prior written notice to Adapt of such intention (which notice shall, in any event, be given no later than ten (10) days prior to the next deadline for any action that may be taken with respect to such Patent), and Adapt shall thereupon have the option, in its sole discretion and at its sole cost, to assume the control and direction of the preparation, filing, prosecution, and maintenance of such Patent on Lightlake’s behalf with respect to claims covering Products.

 

6.2.3           Costs.  Subject to Section 6.2.2, the costs of prosecution and maintenance of the Lightlake Patents shall be initially borne by the Party conducting such prosecution and maintenance.

 

6.3           Maintenance and Prosecution of Product Specific Patents, Adapt Applied Patents and Joint Patents.

 

6.3.1           Adapt Right.  Adapt shall have the first right, but not the obligation, to prepare, file, prosecute (including any reissues, re-examinations, post-grant proceedings, requests for patent term extensions, supplementary protection certificates, interferences, derivation proceedings, supplemental examinations and defense of oppositions) and maintain the Adapt Applied Patents, the Product Specific Patents and Joint Patents worldwide, at Adapt’s cost.  Adapt shall keep Lightlake informed with regard to the filing, prosecution and maintenance of Adapt Applied Patents, Product Specific Patents and Joint Patents, including by providing Lightlake with (i) copies of material communications to and from any patent authorities regarding Adapt Applied Patents, the Product Specific Patents and Joint Patents, and (ii) drafts of any material filings or responses to be made to such patent authorities regarding Adapt Applied Patents and Joint Patents sufficiently in advance of submitting such filings or responses so as to allow a reasonable opportunity for Lightlake to review and comment thereon.  Adapt shall not be bound by, but shall consider in good faith, the comments of Lightlake with respect to such Adapt drafts and with respect to strategies for filing and prosecuting the Adapt Applied Patents, the Product Specific Patents and the Joint Patents.  If Lightlake fails to provide its comments with respect to such filing and prosecution of Adapt Applied Patents, Product Specific Patents or Joint Patents reasonably in advance of the deadline for filing or otherwise responding to the patent authorities, Adapt shall be free to act without consideration of Lightlake’s comments.

 

31
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

6.3.2           Lightlake Right.  In the event that Adapt intends not to prosecute or maintain a Adapt Applied Patent, Product Specific Patent or a Joint Patent in any country in the world, Adapt shall provide reasonable prior written notice to Lightlake of such intention (which notice shall, in any event, be given no later than ten (10) days prior to the next deadline for any action that may be taken with respect to such Adapt Applied Patent or Joint Patent), and Lightlake shall thereupon have the option, in its sole discretion and at its sole cost, to assume the control and direction of the prosecution and maintenance of such Adapt Applied Patent, Product Specific Patent or Joint Patent in such country on Adapt’s behalf.

 

6.3.3           Costs.  Subject to Section 6.3.2, the costs of prosecution and maintenance of the Adapt Applied Patent, Product Specific Patent or a Joint Patent shall be borne by the Party conducting such prosecution and maintenance.

 

6.4           Infringement by Third Parties.

 

6.4.1           Notice.  Each Party shall promptly give the other written notice if it reasonably believes that any Lightlake Patent, Lightlake Know-How, Adapt Applied Patent, Adapt Applied Know-How, Product Specific Patent, Joint Invention or Joint Patent is being infringed or misappropriated by a Third Party, and shall provide the other Party with all available evidence supporting such belief.

 

6.4.2           Products.  In the event of an actual or suspected infringement or misappropriation of any Lightlake Patent, Lightlake Know-How, Adapt Applied Patent, Adapt Applied Know-How, Product Specific Patent, Joint Invention or Joint Patent by a Third Party that is conducting the manufacture, use, sale, offer for sale or import of a Product or a product which may compete with a Product, the following shall apply:

 

(a)          The Party first becoming aware of such actual or suspected infringement shall promptly notify the other Party.  Adapt shall have the first right, but not the obligation, to institute and prosecute an action or proceeding to abate such infringement or misappropriation and to resolve such matter by settlement or otherwise.

 

(b)          Adapt agrees to notify Lightlake of its intention to bring an action or proceeding and to keep Lightlake informed of material developments in the prosecution or settlement of such action or proceeding.  Adapt shall be responsible for all costs and expenses of any action or proceeding that Adapt initiates and maintains. Subject to Section 6.4.3(a), Lightlake shall cooperate fully in any such action or proceeding at its expense by executing and making available such documents as Adapt may reasonably request.  Lightlake may be represented by counsel of its choice in any such action or proceeding, at Lightlake’s expense, acting in an advisory but not controlling capacity.  Subject to Section 6.4.3, the prosecution, settlement, or abandonment of any infringement action or proceeding brought by Adapt shall be at Adapt’s sole discretion.

 

32
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

(c)          If Adapt fails or elects not to exercise such first right within sixty (60) days of evidence of an actual infringement, Lightlake shall have the right, at its discretion, to institute and prosecute an action or proceeding to abate such infringement and to resolve such matter by settlement or otherwise.  Lightlake shall keep Adapt informed of material developments in the prosecution or settlement of such action or proceeding.  Lightlake shall be responsible for all costs and expenses of any action or proceeding that Lightlake initiates.  Adapt shall cooperate fully by joining as a party plaintiff if required to do so by law to maintain such action and by executing and making available such documents as Lightlake may reasonably request.  Adapt may be represented by counsel in any such action or proceeding at its own expense.  The prosecution, settlement, or abandonment of any infringement action or proceeding brought by Lightlake shall be at Lightlake’s sole discretion; provided, that Lightlake may not enter into any settlement that requires Adapt or its Affiliates or Sublicensees to pay any sum of money, subjects Adapt or its Affiliates or Sublicensees to any injunctive relief or other equitable remedies, or otherwise adversely affects Adapt’s rights or interests in the applicable Lightlake Patent, Lightlake Know-How, Adapt Applied Patent, Adapt Applied Know-How, Product Specific Patent, Joint Invention or Joint Patent or with respect to a Product without Adapt’s written consent, which consent shall not be unreasonably withheld.

 

6.4.3           Cooperation; Damages.  

 

(a)          If one Party brings any suit, action or proceeding under Section 6.4.2, the other Party agrees to be joined as party plaintiff if necessary to prosecute the suit, action or proceeding and to give the first Party reasonable authority to file and prosecute the suit, action or proceeding at the first Party’s cost; provided, however, that neither Party will be required to transfer any right, title or interest in or to any property to the other Party or any other party to confer standing on a Party hereunder.

 

(b)          The Party not pursuing the suit, action or proceeding hereunder will provide reasonable assistance to the other Party, including by providing access to relevant documents and other evidence and making its employees available, subject to the other Party’s reimbursement of any out-of-pocket costs and expenses incurred by the non-enforcing or defending Party in providing such assistance.

 

(c)          Adapt shall not, without the prior written consent of Lightlake (in its sole discretion), enter into any compromise or settlement relating to any claim, suit or action that it brought under Section 6.4.2 involving a Lightlake Patent that admits the invalidity or unenforceability of such Lightlake Patent or requires Lightlake to pay any sum of money, or otherwise adversely affects the rights of Lightlake with respect to such Lightlake Patents or Lightlake’s rights hereunder (including the rights to receive payments).  

 

33
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

(d)          Any settlements, damages or other monetary awards (a “Recovery”) recovered pursuant to a suit, action or proceeding brought pursuant to Section 6.4.2 will be allocated first to the costs and expenses of the Party taking such action, and second, to the costs and expenses (if any) of the other Party, with any remaining amounts (if any) to be allocated as follows: (i) to the extent that such Recovery is a payment for lost sales of Product, any remaining amount will be paid to Adapt but will be considered Net Sales for such Product during the Calendar Quarter in which such amounts are received solely for the purposes of calculating royalties pursuant to Section 5.4 and (ii) in the event such Recovery relates to the Product generally, all remaining amounts shall be payable to the Party taking such action.

 

6.4.4           Other Infringement and Defense of Lightlake Patents.  For clarity, with respect to any and all infringement or defense of any Lightlake Patent with respect to products other than Products, subject to Section 6.6, Lightlake (or its designee) shall have the sole and exclusive right to bring an appropriate suit or other action against any Person engaged in such infringement or defense of any such Lightlake Patents in its sole discretion and Adapt shall have no rights with respect thereto.  

 

6.5           Patent Listings.  Adapt shall have the sole right to make all filings with Regulatory Authorities with respect to Product Specific Patents, Adapt Applied Patents and Lightlake Patents (subject to Section 6.6) and Joint Patents in relation to the Product, including as required or allowed (i) in the United States, in the FDA’s Orange Book, and (ii) outside the United States, under the national implementations of Article 10.1(a)(iii) of Directive 2001/EC/83 or other international equivalents; provided that Adapt shall consult with Lightlake prior to making any such filing and consider Lightlake’s comments on such filing in good faith.

 

6.6           Coordination In Respect of Lightlake Patents.  Notwithstanding anything herein, in the event that a Party reasonably believes, in its sole discretion, that there is a risk that any enforcement action or proceeding in respect of any Lightlake Patent, or any listing of a Lightlake Patent in the FDA’s Orange Book, in respect of a Product or any other product, would restrict the scope, or adversely affect the enforceability or validity, of such Lightlake Patent in relation to such Party’s rights in such Lightlake Patent, no listing, suit, action, proceeding or strategic decision (including decisions concerning jurisdiction, venue, joinder, causes of action (including patent infringement claims and enforcement actions), claims, defenses, substantive motions, claim construction, tutorials, experts, covenants-not-to-sue, dismissal, settlement, trial and/or appeal) may be made by the Party controlling (or having the right to control) such action or proceeding or listing without first notifying the other Party of such intended action, consulting in good faith with the other Party with respect thereto and reasonably considering the other Party’s views with respect to such action and, in the case of Adapt, its Affiliates and Sublicensees, without the prior written consent of Lightlake, which consent shall not be unreasonably withheld, conditioned, or delayed.  

 

6.7           Patent Marking.  Adapt shall mark the Product marketed and sold by Adapt (or its Affiliate or distributor) hereunder with appropriate patent numbers or indicia at Lightlake’s request.

 

34
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

ARTICLE 7
CONFIDENTIALITY AND NON-DISCLOSURE

 

7.1           Confidentiality Obligations.  At all times during the Term and for a period of ten (10) years following termination or expiration hereof in its entirety, each Party shall, and shall cause its Affiliates, and its and their respective officers, directors, employees and agents to, keep confidential and not publish or otherwise disclose to a Third Party and not use, directly or indirectly, for any purpose, any Confidential Information furnished or otherwise made known to it, directly or indirectly, by the other Party, except to the extent such disclosure or use is expressly permitted by the terms of this Agreement or is reasonably necessary or useful for the performance of a Party’s obligations, or the exercise of a Party’s rights, under this Agreement.  Confidential Information disclosed under the Existing CDAs shall be considered Confidential Information disclosed under this Agreement and subject to the terms and conditions of this Agreement.  Notwithstanding the foregoing, but to the extent the receiving Party can demonstrate by documentation or other competent proof, the confidentiality and non-use obligations under this Section 7.1 with respect to any Confidential Information shall not include any information that:

 

7.1.1           has been published by a Third Party or is or hereafter becomes part of the public domain by public use, publication, general knowledge or the like through no wrongful act, fault or negligence on the part of the receiving Party;

 

7.1.2           has been in the receiving Party’s possession prior to disclosure by the disclosing Party without any obligation of confidentiality with respect to such information; provided that the foregoing exception shall not apply with respect to Joint Know-How;

 

7.1.3           is subsequently received by the receiving Party from a Third Party without restriction and without breach of any agreement between such Third Party and the disclosing Party; or

 

7.1.4           has been independently developed by or for the receiving Party without reference to, or use or disclosure of the disclosing Party’s Confidential Information; provided that the foregoing exception shall not apply with respect to Joint Know-How.

 

Specific aspects or details of Confidential Information shall not be deemed to be within the public domain or in the possession of the receiving Party merely because the Confidential Information is embraced by more general information in the public domain or in the possession of the receiving Party.  Further, any combination of Confidential Information shall not be considered in the public domain or in the possession of the receiving Party merely because individual elements of such Confidential Information are in the public domain or in the possession of the receiving Party unless the combination and its principles are in the public domain or in the possession of the receiving Party.  Joint Know-How shall be considered the Confidential Information of both Parties.

 

35
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

7.2           Permitted Disclosures.  Each Party may disclose Confidential Information to the extent that such disclosure is:

 

7.2.1           in the reasonable opinion of the receiving Party’s legal counsel, required to be disclosed pursuant to Applicable Law or made in response to a valid order of a court of competent jurisdiction or other supra-national, federal, national, regional, state, provincial and local governmental or regulatory body of competent jurisdiction, including by reason of filing with securities regulators; provided, however, that the receiving Party, to the extent practicable and legally permissible, shall first have given prompt written notice (and to the extent practicable and legally permissible, at least five (5) Business Days’ notice) to the disclosing Party and given the disclosing Party a reasonable opportunity to take whatever action it deems necessary to protect its Confidential Information (for example, quash such order or to obtain a protective order or confidential treatment requiring that the Confidential Information and documents that are the subject of such order be held in confidence by such court or regulatory body or, if disclosed, be used only for the purposes for which the order was issued).  In the event that no protective order or other remedy is sought or obtained, or the disclosing Party waives compliance with the terms of this Agreement, receiving Party shall furnish only that portion of Confidential Information which receiving Party is advised by counsel is legally required to be disclosed;

 

7.2.2           made by or on behalf of the receiving Party to Regulatory Authorities as required in connection with any filing, application or request for Regulatory Approval in accordance with the terms of this Agreement; provided, however, that reasonable measures shall be taken to assure confidential treatment of such information to the extent practicable and consistent with Applicable Law;

 

7.2.3           made to its (actual or potential) Sublicensees, other Persons who have been granted rights to Exploit Products in accordance with this Agreement, acquirers, financing sources, investors or permitted assignees under Section 11.3 and to their financial and legal advisors who have a need to know such Confidential Information in connection with any such sublicense, financing, investment, acquisition or assignment; provided that any such recipient of such Confidential Information agrees to be bound by the confidentiality and non-use restrictions contemplated hereby; provided, further that the Party making such disclosure shall remain responsible for any failure by any such Person to treat such Confidential Information as required under this Article 7.

 

7.2.4           made to its or its Affiliates’ financial and legal advisors who have a need to know such Confidential Information, and in the case of Lightlake, any Person who holds or will hold in the future any interest in any of Lightlake’s products, and, in each case, are either under professional codes of conduct giving rise to expectations of confidentiality and non-use or under written agreements of confidentiality and non-use, in each case, at least as restrictive as those set forth in this Agreement; provided that the receiving Party shall remain responsible for any failure by such financial and legal advisors and other Persons contemplated by this Section 7.2.4, to treat such Confidential Information as required under this Article 7.

 

36
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

7.3           Use of Name.  Except as expressly provided herein, neither Party shall mention or otherwise use the name, logo, or Trademark of the other Party or any of its Affiliates (or any abbreviation or adaptation thereof) in any publication, press release, marketing and promotional material, or other form of publicity without the prior written approval of such other Party in each instance.  The restrictions imposed by this Section 7.3 shall not prohibit either Party from making any disclosure identifying the other Party that are permitted pursuant to Section 7.2 or Section 7.4.

 

7.4           Public Announcements. The Parties have agreed upon the content of press releases which shall be issued substantially in the form attached hereto as Schedule 7.4, the release of which the Parties shall coordinate in order to accomplish such release promptly upon execution of this Agreement. Except as contemplated by Section 7.5 or as otherwise agreed by the Parties, neither Party shall issue any other public announcement, press release, or other public disclosure regarding this Agreement or its subject matter without the other Party’s prior written consent, except for any such disclosure that is, in the opinion of the disclosing Party’s counsel, required by Applicable Law or the rules of a stock exchange on which the securities of the disclosing Party are listed or for information which has previously been made public.  In the event a Party is, in the opinion of its counsel, required by Applicable Law or the rules of a stock exchange on which its securities are listed to make such a public disclosure, such Party shall submit the proposed disclosure in writing to the other Party as far in advance as reasonably practicable (and in no event less than three (3) Business Days prior to the anticipated date of disclosure) so as to provide a reasonable opportunity to comment thereon and such required Party shall consider all comments from such other Party in good faith.  

 

7.5           Publications. Each Party recognizes that the publication of papers regarding results of and other information regarding activities under this Agreement may be beneficial to the Development and Commercialization of Products.  Accordingly, Adapt and its Affiliates and Sublicensees shall have the right to publish or present or permit the publication or presenting of papers and presentations that contain clinical data regarding, or pertain to results of clinical testing of, Products (each, a “Publication”); provided, however, that such publications do not contain the Confidential Information of Lightlake and Lightlake shall be provided with a copy of any such Publication in advance of public publication or presentation thereof  and Adapt shall consider in good faith any comments Lightlake may have with respect thereto.  For clarity, Lightlake Confidential Information shall include all Lightlake Information existing on the Effective Date other than the Pharmacokinetics Data.  

 

7.6           Return of Confidential Information.  Upon the effective date of the termination of this Agreement for any reason, either Party may request in writing, and the other Party shall either, with respect to Confidential Information to which such first Party does not retain rights under the surviving provisions of this Agreement: (i) promptly destroy all copies of such Confidential Information in the possession of the other Party and confirm such destruction in writing to the requesting Party; or (ii) promptly deliver to the requesting Party, at the other Party’s expense, all copies of such Confidential Information in the possession of the other Party; provided, however, the other Party shall be permitted to retain one (1) copy of such Confidential Information for the sole purpose of performing any continuing obligations hereunder or for archival purposes.  Notwithstanding the foregoing, such other Party also shall be permitted to retain such additional copies of or any computer records or files containing such Confidential Information that have been created solely by such Party’s automatic archiving and back-up procedures, to the extent created and retained in a manner consistent with such other Party’s standard archiving and back-up procedures, but not for any other use or purpose.  

 

37
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

7.7           Survival.  All Confidential Information shall continue to be subject to the terms of this Agreement for the period set forth in Section 7.1.

 

ARTICLE 8
REPRESENTATIONS AND WARRANTIES

 

8.1           Mutual Representations and Warranties.  Lightlake and Adapt each represents and warrants to the other, as of the Effective Date, and covenants, as follows:

 

8.1.1           Organization.  It is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization, and has all requisite power and authority, corporate or otherwise, to execute, deliver, and perform this Agreement.

 

8.1.2           Authorization.  The execution and delivery of this Agreement and the performance by it of its obligations contemplated hereby have been duly authorized by all necessary corporate action, and do not violate (i) such Party’s charter documents, bylaws, or other organizational documents, (ii) in any material respect, any agreement, instrument, or contractual obligation to which such Party is bound, (iii) any requirement of any Applicable Law, or (iv) any order, writ, judgment, injunction, decree, determination, or award of any court or governmental agency presently in effect applicable to such Party.

 

8.1.3           Binding Agreement.  This Agreement is a legal, valid, and binding obligation of such Party enforceable against it in accordance with its terms and conditions, subject to the effects of bankruptcy, insolvency, or other laws of general application affecting the enforcement of creditor rights, judicial principles affecting the availability of specific performance, and general principles of equity (whether enforceability is considered a proceeding at law or equity).

 

8.1.4           Consents and Approvals.  No consent, approval, waiver, order or authorization of, or registration, declaration or filing with, any Third Party is required in connection with the execution, delivery and performance of this Agreement by such Party or the performance by such Party of its obligations contemplated hereby or thereby.

 

8.1.5           No Inconsistent Obligation.  It is not under any obligation, contractual or otherwise, to any Person that conflicts with or is inconsistent in any material respect with the terms of this Agreement, or that would impede the diligent and complete fulfillment of its obligations hereunder.

 

8.2           Additional Representations and Warranties of Lightlake.  Lightlake further represents and warrants to Adapt, as of the Effective Date, and covenants, as follows:

 

38
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

8.2.1           Lightlake has the right to grant the licenses specified herein.

 

8.2.2           Lightlake is the sole and exclusive owner of the entire right, title and interest in the Product Specific Patents and the Lightlake Know-How.  Such rights are not subject to any Liens in favor of, or claims of ownership by, any Third Party.  True and correct copies of the complete file wrapper and other documents and materials relating to the prosecution, defense, maintenance, validity and enforceability of the Product Specific Patents, as amended through the date hereof, have been provided to Adapt prior to the date first above written.  No Lightlake Patents exist as of the date hereof.

 

8.2.3           The Product Specific Patents are being diligently prosecuted in each country in respect of which applications have been made in the respective patent offices in accordance with all Applicable Laws and regulations.  The Product Specific Patents have been filed and maintained properly and correctly and all applicable fees have been paid on or before the due date for payment.

 

8.2.4           To Lightlake’s knowledge, the Exploitation by Adapt and its Affiliates and Sublicensees hereunder of the Products will not infringe any Patent or other intellectual property or proprietary right of any Person.

 

8.2.5           The conception, development and reduction to practice of the Product Specific Patents and Lightlake Know-How existing as of the Effective Date have not constituted or involved the misappropriation of trade secrets or other rights or property of any Person.  There are no claims, judgments or settlements against or amounts with respect thereto owed by Lightlake or any of its Affiliates relating to the existing Regulatory Filings, the Product Specific Patents or the Lightlake Know-How.  

 

8.2.6           Lightlake Controls all Information, other than Identifiable Private Information (as defined in the NIDA Agreement), generated in relation to the Development activities contemplated by the NIDA Agreement.

 

8.2.7           To its knowledge, Lightlake has conducted, and its contractors and consultants have conducted, all Development with respect to the Product that it has conducted prior to the Effective Date in accordance with good laboratory practice and good clinical practices, as applicable and defined by the FDA, and Applicable Law.  

 

8.2.8           Neither Lightlake nor any of its Affiliates, nor any of its or its Affiliates’ directors or officers has been debarred or is subject to debarment and neither Lightlake nor any of its Affiliates will use in any capacity, in connection with the services to be performed under this Agreement, any Person who has been debarred pursuant to Section 306 of the FFDCA or who is the subject of a conviction described in such section.  Lightlake shall inform Licensee in writing immediately if it or any Person who is performing services hereunder is debarred or is the subject of a conviction described in Section 306 or if any action, suit, claim, investigation or legal or administrative proceeding is pending or, to the best of Lightlake’s knowledge, is threatened, relating to the debarment or conviction of Lightlake or any Person performing services on behalf of Lightlake hereunder.

 

39
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

8.2.9           To Lightlake’s knowledge, no Person is infringing or threatening to infringe the Product Specific Patents or misappropriating or threatening to misappropriate the Lightlake Know-How.

 

8.2.10         Schedule 8.2.10 hereto includes a list of all agreements with Third Parties related to the Products, including agreements related to the Development and Manufacture of the Products, in each case, that are in effect as of the Effective Date or that have post-termination obligations (other than solely obligations to keep information confidential or to restrict use thereof after termination) for Lightlake or the Third Party that are in effect as of the Effective Date (collectively, the “Relevant Contracts”).  Lightlake has disclosed and made available to Adapt full and complete copies of all such Relevant Contracts to Adapt.  Lightlake represents and warrants to Adapt that each Relevant Contract is a legal, valid, binding and enforceable agreement of Lightlake or one of its Affiliates, as applicable, and is in full force and effect, and neither Lightlake nor any of its Affiliates or, any other party thereto is in default or breach under the terms of, or has provided any notice of any intention to terminate or modify, any such Relevant Contract, and, no event or circumstance has occurred that, with notice or lapse of time or both, would constitute a breach thereof or a default thereunder or would result in a termination, modification, acceleration or vesting of any rights or obligations or loss of benefits thereunder.

 

8.2.11         Lightlake has made available to Adapt all material Regulatory Documentation owned or possessed by Lightlake regarding or related to the Products.  Lightlake has prepared, maintained or retained all material Regulatory Documentation required to be maintained or reported pursuant to and in accordance with the applicable requirements of good laboratory practices and good clinical practices, as applicable, as defined by the FDA, to the extent required, and Applicable Law, and such Regulatory Documentation does not contain any materially false or misleading statements.

 

8.2.12         Lightlake  has disclosed to Adapt all material information known to Lightlake and its Affiliates with respect to the Products, including with respect to the safety and efficacy thereof.

 

8.3           DISCLAIMER OF WARRANTIES.  EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH HEREIN, NEITHER PARTY MAKES ANY REPRESENTATIONS OR GRANTS ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

 

40
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

ARTICLE 9
INDEMNITY

 

9.1           Indemnification of Lightlake.  Adapt shall indemnify Lightlake, its Affiliates and its and their respective directors, officers, employees, and agents (“Lightlake Indemnitees”), and defend and save each of them harmless, from and against any and all losses, damages, liabilities, penalties, costs, and expenses (including attorneys’ fees and expenses) (collectively, “Losses”) in connection with any and all suits, investigations, claims, or demands of Third Parties (collectively, “Third Party Claims”) incurred by or rendered against the Lightlake Indemnitees arising from or occurring as a result of: (i) the breach by Adapt of this Agreement, (ii) the gross negligence or willful misconduct on the part of Adapt or its Affiliates or Sublicensees or its or their distributors or contractors or its or their respective directors, officers, employees, and agents in performing its or their obligations under this Agreement, or (iii) the Exploitation by Adapt or any of its Affiliates or Sublicensees or its or their distributors or contractors of any Product, or (iv) the breach of an Assigned Agreement by any of Adapt or its Affiliates or Sublicensees or subcontractors or any of their successors or assigns after the Effective Date, except (in each case) to the extent Lightlake has an obligation to indemnify Adapt Indemnities pursuant to Section 9.2 for such Losses and Third Party Claims.

 

9.2           Indemnification of Adapt.  Lightlake shall indemnify Adapt, its Affiliates and its and their respective directors, officers, employees, and agents (the “Adapt Indemnitees”), and defend and save each of them harmless, from and against any and all Losses in connection with any and all Third Party Claims incurred by or rendered against the Adapt Indemnitees arising from or occurring as a result of: (i) the breach by Lightlake of this Agreement, (ii) the gross negligence or willful misconduct on the part of Lightlake or its Affiliates or its or their respective directors, officers, employees, and agents in performing its obligations under this Agreement, (iii) any claim by any current or former Lightlake shareholder, investor or contributor that any Adapt Indemnitee or any Sublicensee owes such Person any compensation in relation to the Exploitation of the Products or the rights granted hereunder, or (iv) the pharmacokinetics study ongoing as of the Effective Date in respect of a Product, or (v) Lightlake’s or its Affiliate’s or subcontractor’s violation of any Applicable Law, breach of any Relevant Contract, or gross negligence or willful misconduct, in relation to the Exploitation of Products prior to the Effective Date, except (in each case) to the extent Adapt has an obligation to indemnify Lightlake Indemnities pursuant to Section 9.1 for such Losses and Third Party Claims.  

 

9.3           Notice of Claim.  All indemnification claims in respect of a Party, its Affiliates, or their respective directors, officers, employees and agents shall be made solely by such Party to this Agreement (the “Indemnified Party”).  The Indemnified Party shall give the indemnifying Party prompt written notice (an “Indemnification Claim Notice”) of any Losses or discovery of fact upon which such Indemnified Party intends to base a request for indemnification under this Article 9, but in no event shall the indemnifying Party be liable for any Losses that result from any delay in providing such notice.  Each Indemnification Claim Notice must contain a description of the claim and the nature and amount of such Loss (to the extent that the nature and amount of such Loss is known at such time).  The Indemnified Party shall furnish promptly to the indemnifying Party copies of all papers and official documents received in respect of any Losses and Third Party Claims.

 

41
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

9.4           Control of Defense.

 

9.4.1           In General.  Except as otherwise contemplated by Article 6, at its option, the indemnifying Party may assume the defense of any Third Party Claim by giving written notice to the Indemnified Party within thirty (30) days after the indemnifying Party’s receipt of an Indemnification Claim Notice.  The assumption of the defense of a Third Party Claim by the indemnifying Party shall not be construed as an acknowledgment that the indemnifying Party is liable to indemnify the Indemnified Party in respect of the Third Party Claim, nor shall it constitute a waiver by the indemnifying Party of any defenses it may assert against the Indemnified Party’s claim for indemnification.  Upon assuming the defense of a Third Party Claim, the indemnifying Party may appoint as lead counsel in the defense of the Third Party Claim any legal counsel selected by the indemnifying Party.  In the event the indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party shall immediately deliver to the indemnifying Party all original notices and documents (including court papers) received by the Indemnified Party in connection with the Third Party Claim.  Should the indemnifying Party assume the defense of a Third Party Claim, except as provided in Section 9.4.2, the indemnifying Party shall not be liable to the Indemnified Party for any legal expenses subsequently incurred by such Indemnified Party in connection with the analysis, defense or settlement of the Third Party Claim unless specifically requested in writing by the indemnifying Party.  In the event that it is ultimately determined that the indemnifying Party is not obligated to indemnify, defend or hold harmless the Indemnified Party from and against the Third Party Claim, the Indemnified Party shall reimburse the indemnifying Party for any and all costs and expenses (including attorneys’ fees and costs of suit) and any Losses incurred by the indemnifying Party in its defense of the Third Party Claim.

 

9.4.2           Right to Participate in Defense.  Without limiting Section 9.4.1, any Indemnified Party shall be entitled to participate in, but not control, the defense of such Third Party Claim and to employ counsel of its choice for such purpose; provided, however, that such employment shall be at the Indemnified Party’s own expense unless (i) the employment thereof has been specifically authorized by the indemnifying Party in writing, (ii) the indemnifying Party has failed to assume the defense and employ counsel in accordance with Section 9.4.1 (in which case the Indemnified Party shall control the defense), or (iii) the interests of the Indemnified Party and the indemnifying Party with respect to such Third Party Claim are sufficiently adverse to prohibit the representation by the same counsel of both Parties under Applicable Law or ethical rules.

 

9.4.3           Settlement.  Except as otherwise contemplated by Article 6, with respect to any Losses relating solely to the payment of money damages in connection with a Third Party Claim and that shall not result in the Indemnified Party’s becoming subject to injunctive or other relief, and as to which the indemnifying Party shall have acknowledged in writing the obligation to indemnify the Indemnified Party hereunder, the indemnifying Party shall have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss, on such terms as the indemnifying Party, in its sole discretion, shall deem appropriate.  With respect to all other Losses in connection with Third Party Claims, where the indemnifying Party has assumed the defense of the Third Party Claim in accordance with Section 9.4.1, the indemnifying Party shall have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss; provided it obtains the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed).  If the indemnifying Party does not assume and conduct the defense of a Third Party Claim as provided above, the Indemnified Party may defend against such Third Party Claim; provided that the Indemnified Party shall not settle any Third Party Claim without the prior written consent of the indemnifying Party, not to be unreasonably withheld, conditioned or delayed.

 

42
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

9.4.4           Cooperation.  Regardless of whether the indemnifying Party chooses to defend or prosecute any Third Party Claim, the Indemnified Party shall, and shall cause each indemnitee to, cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith.  Such cooperation shall include access during normal business hours afforded to the indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party Claim, and making Indemnified Parties and other employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder, and the indemnifying Party shall reimburse the Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith.

 

9.4.5           Expenses.  Except as provided above, the costs and expenses, including fees and disbursements of counsel, incurred by the Indemnified Party in connection with any Third Party Claim shall be reimbursed on a Calendar Quarter basis by the indemnifying Party, without prejudice to the indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject to refund in the event the indemnifying Party is ultimately held not to be obligated to indemnify the Indemnified Party.

 

9.5           Special, Indirect, and Other Losses.  EXCEPT IN THE EVENT OF A PARTY’S BREACH OF ITS OBLIGATIONS UNDER ARTICLE 7, AND EXCEPT TO THE EXTENT ANY SUCH DAMAGES ARE REQUIRED TO BE PAID TO A THIRD PARTY AS PART OF A CLAIM FOR WHICH A PARTY PROVIDES INDEMNIFICATION UNDER THIS ARTICLE 9, NEITHER PARTY NOR ANY OF ITS AFFILIATES SHALL BE LIABLE FOR INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS OR BUSINESS INTERRUPTION, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER IN CONTRACT, TORT, NEGLIGENCE, BREACH OF STATUTORY DUTY OR OTHERWISE IN CONNECTION WITH OR ARISING IN ANY WAY OUT OF THE TERMS OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.

 

43
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

9.6           Insurance.  Adapt shall maintain insurance, including clinical trials insurance and product liability insurance, which is consistent with normal business practices of similarly situated companies at all times during which the Product is being clinically tested in human subjects or commercially distributed or sold, as applicable, by Adapt pursuant to this Agreement, and the clinical trials insurance coverage shall, prior to the First Commercial Sale of a Product, in no event be less than Five Million Dollars ($5,000,000) per loss occurrence and Five Million Dollars ($5,000,000) in the aggregate, and product liability insurance coverage shall, after such First Commercial Sale, in no event be less than Ten Million Dollars ($10,000,000) per loss occurrence and Ten Million Dollars ($10,000,000) in the aggregate.  It is understood that such insurance shall not be construed to create a limit of Adapt’s liability with respect to its indemnification obligations under this Article 9. Notwithstanding the foregoing, Adapt shall have no obligation to maintain any insurance covering the pharmacokinetics study ongoing as of the Effective Date in respect of a Product or any liabilities relating thereto.

 

ARTICLE 10
TERM AND TERMINATION

 

10.1         Term.  This Agreement shall commence on the Effective Date and, unless earlier terminated in accordance herewith, shall continue in force and effect until terminated in accordance with this Article 10 (such period, the “Term”).  

 

10.2         Adapt Termination for Convenience.  Adapt shall have the right to terminate this Agreement in its sole discretion, either in its entirety or in respect of one or more countries, at any time by providing sixty (60) days prior written notice to Lightlake.

 

10.3         Termination for Material Breach.  If either Party (the “Non-Breaching Party”) believes that the other Party (the “Breaching Party”) has materially breached one or more of its obligations under this Agreement, then the Non-Breaching Party may deliver notice of such material breach to the Breaching Party specifying the nature of the alleged breach in reasonable detail (a “Default Notice”).  Thereafter, the Non-Breaching Party shall have the right to terminate this Agreement if the breach asserted in such Default Notice has not been cured within sixty (60) days after such Default Notice.  Notwithstanding the foregoing, (i) if such material breach, by its nature, cannot be remedied within such sixty (60) day cure period, but can be remedied over a longer period not expected to exceed one hundred and fifty (150) days, then such sixty (60) day period shall be extended for up to an additional ninety (90) days provided that the Breaching Party provides the Non-Breaching Party with a reasonable written plan for curing such material breach and uses Commercially Reasonable Efforts to cure such material breach in accordance with such written plan and (ii) if such material breach cannot be cured, but the effects of such material breach are not such that the Non-Breaching Party would be deprived of the material benefits the Non-Breaching Party would reasonably be expected to derive from this Agreement in the absence of such material breach, then the Non-Breaching Party shall not be entitled to terminate this Agreement on the basis of such material breach unless the Breaching Party has previously committed a substantially similar material breach of this Agreement.  For clarity, a breach of Section 3.2.3 of this Agreement shall not, notwithstanding anything herein, fall within the exception in subpart (ii) of the immediately preceding sentence.

 

44
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

10.4         Additional Termination by Lightlake for Patent Challenge.  In the event that Adapt or any of its Affiliates or Commercial Sublicensees, institutes, prosecutes, or otherwise participates in (or knowingly and intentionally aids any Third Party in instituting, prosecuting, or participating in), at law or in equity or before any administrative or regulatory body, including the U.S. Patent and Trademark Office or its foreign counterparts, any claim, demand, action, or cause of action for declaratory relief, damages, or any other remedy, or for an enjoinment, injunction, or any other equitable remedy, including any interference, re-examination, opposition, or any similar proceeding, alleging that any claim in a Lightlake Patent is invalid, unenforceable, or otherwise not patentable or would not be infringed by Adapt’s activities absent the rights and licenses granted hereunder, Lightlake shall have the right to terminate this Agreement in its entirety, including the rights of any Sublicensees, upon written notice to Adapt, unless Adapt withdraws or terminates the same, or terminates its agreement with such or Commercial Sublicensee, within ten (10) days after receipt of notice from Lightlake referencing this Section 10.4.

 

10.5         Termination for Insolvency.  In the event that either Party (i) files for protection under bankruptcy or insolvency laws, (ii) makes an assignment for the benefit of creditors, (iii) appoints or suffers appointment of a receiver or trustee over substantially all of its property that is not discharged within ninety (90) days after such filing, (iv) proposes a written agreement of composition or extension of its debts, (v) proposes or is a party to any dissolution or liquidation, (vi) files a petition under any bankruptcy or insolvency act or has any such petition filed against that is not discharged within sixty (60) days of the filing thereof, then the other Party may terminate this Agreement in its entirety effective immediately upon written notice to such Party.

 

10.6         Effects of Termination.  In the event of a termination of this Agreement in its entirety by Lightlake pursuant to Sections 10.3 and 10.4 or by Adapt pursuant to Section 10.2:

 

10.6.1           all rights and licenses granted by Lightlake hereunder shall immediately terminate;

 

10.6.2           Adapt shall, and hereby does effective as of the effective date of termination, grant Lightlake an exclusive license, with the right to grant multiple tiers of sublicenses, under the Adapt Applied Patents, Adapt Applied Know-How, and Adapt’s rights under the Joint Patents and Joint Know-How to Exploit Products;

 

10.6.3           Adapt shall, and hereby does, effective as of the effective date of termination, assign to Lightlake at Adapt’s expense, all of its right, title, and interest in and to all Regulatory Approvals applicable to any Product, and all Regulatory Documentation specific to such Regulatory Approvals then owned by Adapt or any of its Affiliates, and shall use Commercially Reasonable Efforts to cause any and all Sublicensees to assign to Lightlake any such Regulatory Approvals and related Regulatory Documentation then owned by such Sublicensee;

 

45
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

10.6.4           Adapt shall, and hereby does effective as of the effective date of termination, grant Lightlake an exclusive, license and right of reference, with the right to grant multiple tiers of sublicenses and further rights of reference, under all Regulatory Documentation (including any Regulatory Approvals) then owned or Controlled by Adapt or any of its Affiliates that are not assigned to Lightlake pursuant to Section 10.6.3 above that are necessary or useful for Lightlake or any of its Affiliates or sublicensees to Exploit any Product and any improvement to any of the foregoing, as such Regulatory Documentation exists as of the effective date of such termination of this Agreement and Adapt shall use Commercially Reasonable Efforts to cause its Commercial Sublicensees to grant comparable rights under all Regulatory Documentation (including any Regulatory Approvals) then owned or Controlled by such Commercial Sublicensees;

 

10.6.5           at Lightlake’s request, assign to Lightlake all right, title, and interest of Adapt in each Product Trademark at Adapt’s expense; and

 

10.6.6           at Lightlake’s request, assign to Lightlake all right, title, and interest in and to the Development Data that Adapt is not precluded from disclosing or assigning to Lightlake pursuant to the terms of any applicable agreement with a Third Party; provided, however, that Adapt shall use Commercially Reasonable Efforts (which shall not include any obligation to expend money) to obtain the consent of the applicable Third Party for such disclosure and/or assignment in the event that Adapt is so precluded.

 

10.7         Transition Assistance.  

 

10.7.1           In the event of a termination of this Agreement in its entirety by Lightlake pursuant to Sections 10.3 and 10.4 or by Adapt pursuant to Section 10.2, Adapt shall:

 

(a)          cooperate with Lightlake and  notify the applicable Regulatory Authorities and take any other action reasonably necessary to effect the transfer of the Regulatory Documentation set forth in Section 10.6.3;

 

(b)          unless expressly prohibited by any Regulatory Authority, at Lightlake’s written request, transfer control to Lightlake of all clinical studies being conducted by Adapt as of the effective date of termination and continue to conduct such clinical studies, at Adapt’s cost, for up to six (6) weeks to enable such transfer to be completed without interruption of any such clinical study except if this Agreement is terminated by Adapt pursuant to Section 10.3; in which case such expense shall be borne by Lightlake; provided that (A) Lightlake shall not have any obligation to continue any clinical study unless required by Applicable Law, and (B) with respect to each clinical study for which such transfer is expressly prohibited by the applicable Regulatory Authority, if any, Adapt shall continue to conduct such clinical study to completion, at Adapt’s cost; except if this Agreement is terminated by Adapt pursuant to Section 10.3; in which case such cost shall be borne by Lightlake;

 

46
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

(c)          at Lightlake’s request, assign (or cause its Affiliates to assign) to Lightlake any or all agreements with any Third Party with respect to the conduct of pre-clinical development activities or clinical studies for the Products, including agreements with contract research organizations, clinical sites, and investigators, unless, with respect to any such agreement, such agreement expressly prohibits such assignment, in which case Adapt shall cooperate with Lightlake in reasonable respects to secure the consent of the applicable Third Party to such assignment; and Lightlake shall assume all ongoing obligations under all such contracts so assigned;

 

(d)          at Lightlake’s written request, Adapt shall assign to Lightlake any Third Party contracts for the Manufacture of Products that may be assigned without the counterparty’s consent or, in the case of any such contract that cannot be so assigned without consent, Adapt shall use Commercially Reasonable Efforts (which shall not include any obligation to expend money) to obtain any requisite consent for such assignment and shall assign such contract to Lightlake upon receipt of such consent, and, in the case of each such assignment, Lightlake shall assume all of Adapt’s obligations under the relevant contract, except to the extent that the same relate to any breach of such contract by Adapt; and

 

(e)          Adapt shall duly execute and deliver, or cause to be duly executed and delivered, such instruments and shall do and cause to be done such acts and things, including the filing of such assignments, agreements, documents, and instruments, as may be necessary under, or as Lightlake may reasonably request in connection with, or to carry out more effectively the purpose of, or to better assure and confirm unto Lightlake its rights under, this Section 10.7.1 and Section 10.6.

 

10.8         Post-Termination Royalties.  

 

10.8.1           As further consideration for the licenses, assignments and transfers set forth in Section 10.6 and Section10.7, following termination of this Agreement by Lightlake pursuant to Section 10.3 or 10.4 or by Adapt pursuant to Section 10.2, until Adapt has recouped one-hundred percent (100%) (i) of the Development Costs which were incurred by it in Developing the Products in accordance with the Initial Development Plan or any subsequent Development Plan (excluding costs borne by Lightlake in accordance with Section 3.8.1) and such Development Costs were borne by Adapt prior to the effective date of termination, (ii) the upfront payments paid to Lightlake pursuant to Section 5.1, (iii) the Regulatory Milestones paid to Lightlake pursuant to Section 5.2, (iv) the Sales-Based Milestones paid to Lightlake pursuant to Section 5.3, (iv) and any upfront license payments and milestones paid to Third Parties pursuant to Section 5.5, Lightlake shall pay to Adapt a royalty of *** REDACTED ***percent (*** REDACTED ***%) Net Sales of Product.  Sections 5.4.2, 5.5, 5.6, 5.7, 5.8, 5.9, 5.12, 5.13.1 and 5.13.2  shall apply to Lightlake with respect to the Net Sales by Lightlake of Products mutatis mutandis, except that all references in the definition of Net Sales to Adapt shall deemed to refer to Lightlake.

 

10.8.2           In the event of a termination by Adapt pursuant to Section 10.3, Adapt shall continue to pay Lightlake royalties subject to and in accordance with Sections 5.4, and 5.5; provided, however, that each royalty rate contemplated by Sections 5.4.1 and 5.4.2 shall be reduced by *** REDACTED ***% for all royalties owing after the effective date of termination.

 

47
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

10.9         Remedies.  Except as otherwise expressly provided herein, termination of this Agreement (either in its entirety or with respect to one or more country(ies)) or other jurisdiction(s) in accordance with the provisions hereof shall not limit remedies that may otherwise be available in law or equity.

 

10.10         Accrued Rights; Surviving Obligations.  Termination or expiration of this Agreement for any reason shall be without prejudice to any rights that shall have accrued to the benefit of a Party prior to such termination or expiration.  Such termination or expiration shall not relieve a Party from obligations that are expressly indicated to survive the termination or expiration of this Agreement.  Without limiting the foregoing, (i) Section 10.9 and this Section 10.10 and Articles 7, 9 and 11 of this Agreement shall survive the termination or expiration of this Agreement for any reason, (ii) Sections 3.2.5, 3.3.1(a), 3.3.3(a), 4.1, 4.3.1, 4.3.2, 6.2, 6.3.1, the second sentence of Section 6.4.2(a), Sections 6.4.3(a), 6.4.3(b), 6.5 and 6.6 shall survive any termination of this Agreement other than a termination by Lightlake pursuant to Section 10.3 or Section 10.4 hereof or a termination by Adapt pursuant to Section 10.2 hereof, (iii) Sections 5.4 through 5.9 and Section 10.8.2 shall survive a termination by Adapt pursuant to Section 10.3 hereof, (iv) Article 5 shall survive a termination by Adapt pursuant to Section 10.5 hereof and (v) Sections 10.6, 10.7 and 10.8.1 shall survive any termination of this Agreement by Lightlake pursuant to Section 10.3 or Section 10.4 hereof.  With respect to any Sections that survive in accordance with this Section 10.10, the corresponding definitions shall appropriately survive (e.g. the definition of “Term” shall continue with respect to the above noted Sections and usage in other definitions).  

 

ARTICLE 11
MISCELLANEOUS

 

11.1         Force Majeure.  Neither Party shall be held liable or responsible to the other Party or be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement when such failure or delay is caused by or results from fires, floods, earthquakes, hurricanes, embargoes, shortages, epidemics, quarantines, war, acts of war (whether war be declared or not), terrorist acts, insurrections, riots, civil commotion, acts of God or acts, omissions, or delays in acting by any Governmental Authority (except to the extent such delay results from the breach by the non-performing Party or any of its Affiliates of any term or condition of this Agreement) or similar events beyond the reasonable control of the non-performing Party (a “Force Majeure”).  The non-performing Party shall notify the other Party of such force majeure within thirty (30) days after such occurrence by giving written notice to the other Party stating the nature of the event, its anticipated duration, and any action being taken to avoid or minimize its effect.  The suspension of performance shall be of no greater scope and no longer duration than is necessary and the non-performing Party shall use Commercially Reasonable Efforts to remedy its inability to perform.

 

11.2         Export Control.  This Agreement is made subject to any restrictions concerning the export of products or technical information from the United States or other countries that may be imposed on the Parties from time to time.  Each Party agrees that it will not export, directly or indirectly, any technical information acquired from the other Party under this Agreement or any products using such technical information to a location or in a manner that at the time of export requires an export license or other governmental approval, without first obtaining the written consent to do so from the appropriate agency or other governmental entity in accordance with Applicable Law.

 

48
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

11.3         Assignment.

 

11.3.1           Without the prior written consent of Lightlake, Adapt shall not assign, delegate, or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this Agreement or any of its rights or duties hereunder; provided, however, that Adapt may make such an assignment without Lightlake’s prior written consent to its Affiliate or to a successor, whether in a merger, sale of stock, sale of assets or any other transaction, of all or substantially all the assets or business of Adapt or substantially all of the assets or business of Adapt to which this Agreement relates.  With respect to an assignment to an Affiliate, Adapt shall remain responsible for the performance by such Affiliate of the rights and obligations hereunder.  Without the prior written consent of Adapt, Lightlake shall not assign, delegate, or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this Agreement or any of its rights or duties hereunder; provided, however, that Lightlake may make such an assignment without Adapt’s prior written consent to its Affiliate or to a successor, whether in a merger, sale of stock, sale of assets or any other transaction, of all or substantially all the assets or business of Lightlake or substantially all of the assets or business of Lightlake to which this Agreement relates.  With respect to an assignment to an Affiliate, Lightlake shall remain responsible for the performance by such Affiliate of the rights and obligations hereunder.   Any attempted assignment or delegation in violation of this Section 11.3 shall be void and of no effect.  All validly assigned and delegated rights and obligations of the Parties hereunder shall be binding upon and inure to the benefit of and be enforceable by and against the successors and permitted assigns of Lightlake or Adapt, as the case may be.  The permitted assignee or permitted transferee shall assume all obligations of its assignor or transferor under this Agreement.

 

11.3.2           All rights to Information, materials and intellectual property: (i) controlled by a Third Party permitted assignee of a Party, which Information, materials and intellectual property were controlled by such assignee immediately prior to such assignment; or (ii) controlled by an Affiliate of a Party who becomes an Affiliate through any Change in Control of or a merger, acquisition (whether of all of the stock or all or substantially all of the assets of a Person or any operating or business division of a Person) or similar transaction by or with the Party, which Information, materials and intellectual property were controlled by such Affiliate immediately prior thereto, in each case ((i) and (ii)), shall be automatically excluded from the rights licensed or granted to the other Party under this Agreement.

 

11.4         Severability.  If any provision of this Agreement is held to be illegal, invalid, or unenforceable under any present or future law, and if the rights or obligations of either Party under this Agreement will not be materially and adversely affected thereby, (i) such provision shall be fully severable, (ii) this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof, (iii) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance herefrom, and (iv) in lieu of such illegal, invalid, or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid, and enforceable provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and reasonably acceptable to the Parties.  To the fullest extent permitted by Applicable Law, each Party hereby waives any provision of law that would render any provision hereof illegal, invalid, or unenforceable in any respect.

 

49
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

11.5         Governing Law.  This Agreement or the performance, enforcement, breach or termination hereof shall be interpreted, governed by and construed in accordance with the laws of New York, United States, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction; provided, that all questions concerning the construction or effect of patent applications and patents shall be determined in accordance with the laws of the country or other jurisdiction in which the particular patent application or patent has been filed or granted, as the case may be.  The Parties agree to exclude the application to this Agreement of the United Nations Convention on Contracts for the International Sale of Goods.

 

11.6         Dispute Resolution.  In the event of any dispute between or among the Parties relating to this Agreement, the Parties will each designate one senior executive to meet and use good faith efforts to attempt to resolve the dispute.  If the representatives are unable to resolve the dispute within thirty (30) days following written notice of the dispute from one Party to another, then the Parties shall be free to pursue any remedies available to them at law or in equity.

 

11.7         Submission to Jurisdiction; Waiver of Jury Trial.  

 

11.7.1           SUBJECT TO SECTION 11.6, IN THE EVENT ANY PARTY TO THIS AGREEMENT COMMENCES ANY LITIGATION, PROCEEDING OR OTHER LEGAL ACTION IN CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, WITH RESPECT TO ANY OF THE MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, THE PARTIES TO THIS AGREEMENT HEREBY (A) AGREE THAT ANY LITIGATION, PROCEEDING OR OTHER LEGAL ACTION SHALL BE INSTITUTED IN A COURT OF COMPETENT JURISDICTION LOCATED WITHIN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK, WHETHER A STATE OR FEDERAL COURT; (B) AGREE THAT IN THE EVENT OF ANY SUCH LITIGATION, PROCEEDING OR ACTION, SUCH PARTIES WILL CONSENT AND SUBMIT TO PERSONAL JURISDICTION IN ANY SUCH COURT DESCRIBED IN CLAUSE (A) OF THIS SECTION 11.7 AND TO SERVICE OF PROCESS UPON THEM IN ACCORDANCE WITH THE RULES AND STATUTES GOVERNING SERVICE OF PROCESS (IT BEING UNDERSTOOD THAT NOTHING IN THIS SECTION 11.7 SHALL BE DEEMED TO PREVENT ANY PARTY FROM SEEKING TO REMOVE ANY ACTION TO A FEDERAL COURT IN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK); (C) AGREE TO WAIVE TO THE FULL EXTENT PERMITTED BY LAW ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH LITIGATION, PROCEEDING OR ACTION IN ANY SUCH COURT OR THAT ANY SUCH LITIGATION, PROCEEDING OR ACTION WAS BROUGHT IN AN INCONVENIENT FORUM; (D) DESIGNATE, APPOINT AND DIRECT CT CORPORATION SYSTEM AS ITS AUTHORIZED AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS AND DOCUMENTS IN ANY LEGAL PROCEEDING IN THE STATE OF NEW YORK; (E) AGREE TO NOTIFY THE OTHER PARTIES TO THIS AGREEMENT IMMEDIATELY IF SUCH AGENT SHALL REFUSE TO ACT, OR BE PREVENTED FROM ACTING, AS AGENT AND, IN SUCH EVENT, PROMPTLY TO DESIGNATE ANOTHER AGENT IN THE STATE OF NEW YORK, SATISFACTORY TO BOTH PARTIES, TO SERVE IN PLACE OF SUCH AGENT AND DELIVER TO THE OTHER PARTY WRITTEN EVIDENCE OF SUCH SUBSTITUTE AGENT’S ACCEPTANCE OF SUCH DESIGNATION; (F) AGREE AS AN ALTERNATIVE METHOD OF SERVICE TO SERVICE OF PROCESS IN ANY LEGAL PROCEEDING BY MAILING OF COPIES THEREOF TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 11.8 FOR COMMUNICATIONS TO SUCH PARTY; (G) AGREE THAT ANY SERVICE MADE AS PROVIDED HEREIN SHALL BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (H) AGREE THAT NOTHING HEREIN SHALL AFFECT THE RIGHTS OF ANY PARTY TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

 

50
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

11.7.2           EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (INCLUDING ANY SUCH ACTION INVOLVING THE FINANCING SOURCES).  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.7.

 

11.8         Notices.

 

11.8.1           Notice Requirements.  Any notice, request, demand, waiver, consent, approval, or other communication permitted or required under this Agreement shall be in writing, shall refer specifically to this Agreement and shall be deemed given only if (i) delivered by hand or sent by facsimile transmission (with transmission confirmed), (ii) by internationally recognized overnight delivery service that maintains records of delivery, addressed to the Parties at their respective addresses specified in Section 11.8.2 or (iii) to such other address as the Party to whom notice is to be given may have provided to the other Party in accordance with this Section 11.8.1.  Such Notice shall be deemed to have been given as of the date delivered by hand or transmitted by facsimile (with transmission confirmed) or on the second Business Day (at the place of delivery) after deposit with an internationally recognized overnight delivery service.  Any notice delivered by facsimile shall be confirmed by a hard copy delivered as soon as practicable thereafter.  This Section 11.8.1 is not intended to govern the day-to-day business communications necessary between the Parties in performing their obligations under the terms of this Agreement.

 

51
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

11.8.2    Address for Notice.

 

If to Adapt, to:  

 

Adapt Pharma Operations Limited

42 Fitzwilliam Square

Dublin 2, Ireland

Attention: Chief Financial Officer

 

with a copy (which shall not constitute notice) to:

 

Mayer Brown LLP

1675 Broadway

New York, NY 10019

Attention: Reb D. Wheeler

Facsimile: 1-212-849-5914

 

If to Lightlake, to:

 

Lightlake Therapeutics

96-98 Baker Street, First Floor

London, England W1U 6TJ

Attention: CEO

Facsimile: +44(0)207 034 1943

 

with a copy (which shall not constitute notice) to:

 

Morgan, Lewis & Bockius LLP
502 Carnegie Center

Princeton, New Jersey 08540

Attention: David G. Glazer

Facsimile:  1-609-919-6701

 

11.9         Entire Agreement; Amendments.  This Agreement, together with the Schedules attached hereto sets forth and constitutes the entire agreement and understanding between the Parties with respect to the subject matter hereof and all prior agreements, understandings, promises, and representations, whether written or oral, with respect thereto are superseded hereby (including the Existing CDAs).  Each Party confirms that it is not relying on any representations or warranties of the other Party except as specifically set forth in this Agreement.  No amendment, modification, release, or discharge shall be binding upon the Parties unless in writing and duly executed by authorized representatives of both Parties.

 

52
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

11.10         English Language.  This Agreement shall be written and executed in, and all other communications under or in connection with this Agreement shall be in, the English language.  Any translation into any other language shall not be an official version thereof, and in the event of any conflict in interpretation between the English version and such translation, the English version shall control.

 

11.11         Waiver and Non-Exclusion of Remedies.  Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition.  The waiver by either Party hereto of any right hereunder or of the failure to perform or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by such other Party whether of a similar nature or otherwise.  The rights and remedies provided herein are cumulative and do not exclude any other right or remedy provided by Applicable Law or otherwise available except as expressly set forth herein.

 

11.12         No Benefit to Third Parties.  Covenants and agreements set forth in this Agreement are for the sole benefit of the Parties hereto and their successors and permitted assigns, and they shall not be construed as conferring any rights on any other Persons.

 

11.13         Further Assurance.  Each Party shall duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts and things, including the filing of such assignments, agreements, documents, and instruments, as may be necessary or as the other Party may reasonably request in connection with this Agreement or to carry out more effectively the provisions and purposes hereof, or to better assure and confirm unto such other Party its rights and remedies under this Agreement.

 

11.14         Relationship of the Parties.  It is expressly agreed that Lightlake, on the one hand, and Adapt, on the other hand, shall be independent contractors and that the relationship between the two Parties shall not constitute a partnership, joint venture, or agency.  Neither Lightlake, on the one hand, nor Adapt, on the other hand, shall have the authority to make any statements, representations, or commitments of any kind, or to take any action, which shall be binding on the other, without the prior written consent of the other Party to do so.  All persons employed by a Party shall be employees of such Party and not of the other Party and all costs and obligations incurred by reason of any such employment shall be for the account and expense of such Party.

 

53
 

 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

11.15         Rights in Bankruptcy.  All rights and licenses granted under or pursuant to this Agreement by Adapt or Lightlake are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of right to “intellectual property” as defined under Section 101 of the U.S. Bankruptcy Code.  The Parties agree that the Parties, as licensees of such rights under this Agreement, shall retain and may fully exercise all of their rights and elections under the U.S. Bankruptcy Code.  The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against either Party under the U.S. Bankruptcy Code, the Party hereto that is not a Party to such proceeding shall be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property, which, if not already in the non-subject Party’s possession, shall be promptly delivered to it (i) upon any such commencement of a bankruptcy proceeding upon the non-subject Party’s written request therefor, unless the Party subject to such proceeding elects to continue to perform all of its obligations under this Agreement or (ii) if not delivered under (i) above, following the rejection of this Agreement by or on behalf of the Party subject to such proceeding upon written request therefor by the non-subject Party.

 

11.16         Counterparts; Facsimile Execution.  This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may be executed by facsimile or electronically transmitted signatures and such signatures shall be deemed to bind each Party hereto as if they were original signatures.

 

11.17         References.  Unless otherwise specified, (i) references in this Agreement to any Article, Section or Schedule shall mean references to such Article, Section or Schedule of this Agreement, (ii) references in any Section to any clause are references to such clause of such Section, and (iii) references to any agreement, instrument, or other document in this Agreement refer to such agreement, instrument, or other document as originally executed or, if subsequently amended, replaced, or supplemented from time to time, as so amended, replaced, or supplemented and in effect at the relevant time of reference thereto.

 

11.18         Construction.  Except where the context otherwise requires, wherever used, the singular shall include the plural, the plural the singular, the use of any gender shall be applicable to all genders and the word “or” is used in the inclusive sense (and/or).  Whenever this Agreement refers to a number of days, unless otherwise specified, such number refers to days.  The captions of this Agreement are for convenience of reference only and in no way define, describe, extend, or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement.  The term “including,” “include,” or “includes” as used herein shall mean including, without limiting the generality of any description preceding such term.  The language of this Agreement shall be deemed to be the language mutually chosen by the Parties and no rule of strict construction shall be applied against either Party hereto.  Each Party represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has participated in the drafting hereof.  In interpreting and applying the terms and provisions of this Agreement, the Parties agree that no presumption will apply against the Party which drafted such terms and provisions.

 

[SIGNATURE PAGE FOLLOWS.]

 

54
 

 

THIS AGREEMENT IS EXECUTED by the authorized representatives of the Parties as of the Effective Date.

  

LIGHTLAKE THERAPEUTICS INC.   ADAPT PHARMA OPERATIONS LIMITED
By:   By:
     
/s/  Roger Crystal   /s/  Seamus Mulligan
Name: Roger Crystal   Name: Seamus Mulligan
Title: Chief Executive Officer   Title: CEO
                                                                 

 

 

 

 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 

 

  

Exhibit 10.2

 

MATERIAL TRANSFER, OPTION AND RESEARCH LICENSE AGREEMENT

 

This Material Transfer, Option and Research License Agreement (the “Agreement”) dated as of December 1st, 2014 (the “Effective Date”), is entered into between Aegis Therapeutics, LLC (“Aegis”), having a place of business at 11770 Bernardo Plaza Court, Suite 353, San Diego, CA 92128, and Lightlake Therapeutics, Inc. (“Lightlake”), having a place of business at 96-98 Baker Street, First Floor, London, UK, W1U 6TJ.

 

WHEREAS, Aegis is the owner of certain Technology; and

 

WHEREAS, Lightlake has requested that Aegis transfer and Aegis wishes to transfer to Lightlake the Technology for the purpose of enabling Lightlake to conduct a feasibility study of the Compound and, potentially, the Additional Compounds, used with the Technology.

 

Now, therefore, in consideration of the mutual benefits in furthering the interests of the parties, it is hereby agreed as follows:

 

 

A.DEFINITIONS

 

Additional Compounds” mean naltrexone and nalmephene/ nalmefene.

 

Compound means naloxone or Additional Compounds and any metabolite, salt, ester, hydrate, anhydride, solvate, isomer, enantiomer, free acid form, free base form, crystalline form, co-crystalline form, complexes, amorphous form, pro-drug (including ester pro-drug) form, racemate, polymorph, chelate, isomer, tautomer, or optically active form of the foregoing.

 

Field” means treatment, diagnosis, prediction, detection or prevention of any disease, disorder, state, condition or malady in humans.

 

Intellectual Property” means all discoveries, inventions, improvements, developments, procedures, processes, formulations, know-how, trade secrets, formulae, trademarks, service marks, trade dress, designs, logos, packaging, proprietary information, technical information, techniques, works of authorship, drawings, models, manuals and systems, whether or not patentable or copyrightable or otherwise registerable, and all rights and applications or registrations derived or derivable therefrom.

 

Representatives” means, for a party, its directors, officers, employees, advisors or agents.

 

Study” means the feasibility study to be performed by Lightlake as described in Attachment A.

 

Technology means all drug delivery and stabilization technologies and associated Intellectual Property owned or controlled by Aegis, including without limitation (a) Aegis’ drug delivery technology known as Intravail® delivery enhancement agents (alkylsaccharide surfactants and formulations thereof as described in US Patent No. 5,661,130) and ProTek® stabilization technologies (alkylsaccharide surfactants and formulations thereof as described in US Patent 8,226,949 and US Patent Application numbers 11/474,055, 11/937,966, 12/050,038 and US06/024577); (b) any substances or formulations, which constitute an unmodified form or functional sub-unit of the technology set forth in sub-clause (a) above, for example but not by way of limitation, formulations at concentrations not specifically disclosed in US Patent No. 5,661,130 or mixtures of different alkylglycosides; or (c) any substances or formulations which constitute a modified form of the technology set forth in sub-clause (a) above but still contains/incorporates alkylglycosides having chemical compositions or concentrations that may differ from those disclosed in US Patent No. 5,661,130 and 8,226,949 or US Patent Application numbers 11/474,055, 11/937,966, 12/050,038 and US06/024577 or which may be used individually or in combination, or in combination with other materials not specified in US Patent No. 5,661,130 and 8,226,949 or US Patent Application numbers 11/474,055, 11/937,966, 12/050,038 and US06/024577.

 

   
 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

 

B.GENERAL TERMS, TECHNOLOGY TRANSFER and RESEARCH LICENSE

 

B.1In partial consideration for Aegis entering into this Agreement, Lightlake shall pay Aegis a one-time upfront, noncreditable fee of $150,000 (the “Study Fee”). Lightlake may elect to pay up to 50% of the Study Fee, or Extension Fee, by issuing to Aegis shares of Lightlake’s common stock subject to the following:

 

B.2There must be a public market for Lightlake's shares and Lightlake must be current with all statutory filings

 

B.3The shares shall be issued pursuant to Rule 144 of the Securities Act of 1933;

 

B.4The number of shares to be issued shall be calculated to 75% of the average closing price for the previous 20 trading days;

 

B.5After the statutory holding period has been satisfied, Lightlake’s legal counsel shall provide a legal opinion so that the shares can be sold in accordance with Rule 144 of the Securities Act of 1933..

 

All cash payments shall be wired to the following Aegis bank account within 15 days of execution of this Agreement:

 

  Bank Name: ***REDACTED***  
  Account Name: Aegis Therapeutics, LLC  
  Routing Number: ***REDACTED***  
  Account Number: ***REDACTED***  

 

B.6In partial consideration for the fee specified in Section B.1 above, Aegis agrees to:

 

a.provide Intravail® and/or ProTek® excipients (individually and collectively “Aegis Material”) to Lightlake to conduct the Study on the Compound and Additional Compounds in accordance with Attachment A;

 

b.provide Lightlake with technical support in accordance with Attachment A in connection with the Study on the Compound and Additional Compounds; and

 

c.perform the other activities delegated to it in Attachment A.

 

   
 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

  

B.7In partial consideration for the fee specified in Section B.1 above:

 

a.Aegis hereby grants to Lightlake an exclusive royalty-free research license to the Technology for a period beginning on the Effective Date and ending 150 days after Lightlake’s receipt of the Aegis Materials (the “Compound Research Period”) for the sole purpose of (i) conducting the Study with the Compound and such other activities as described herein and (ii) evaluating Lightlake’s interest in licensing the Technology in the Field for the Compound (the “Compound Purpose”). The Technology may not be used in clinical trials involving human subjects without the written permission of Aegis. During the Compound Research Term, Lightlake may provide the Technology to contract research or service organizations to perform the Studies or activities contemplated in Attachment A, provided that such organizations have confidentiality obligations at least as protective as those set forth in this Agreement. The Compound Research Period may be extended for an additional 180 days (to a total of 330 days) by Lightlake (the “First Extension”), in its sole discretion, making a non-refundable payment of $150,000 (the “First Extension Fee”) prior to expiration of this Agreement. There may be a second extension of the Contract Research Period for a further 180 days (total of 510 days) by Lightlake, (the “Second Extension”) in its sole discretion, making another non-refundable payment of $150,000 (the “Second Extension Fee”) prior to expiration of the First Extension. Lightlake may elect to pay up to 50% of both Study Fee extensions by issuing to Aegis shares of Lightlake’s common stock subject to the provisions of Section B.1 of this Agreement. In the event that Lightlake exercises the Lightlake Option prior to the Second Extension, then First Extension Fee shall be fully creditable against the Upfront License Fee (as defined in Attachment B) provided that the definitive License Agreement has been executed during the 120 day period following exercise of the Lightlake Option. In the event that Lightlake exercises the Lightlake Option subsequent to the Second Extension, then only the Second Extension Fee shall be fully creditable against the Upfront License Fee (as defined in Attachment B) provided that the definitive License Agreement has been executed during the 120 day period following exercise of the Lightlake Option.

 

b.During the Term of this Agreement Aegis hereby grants to Lightlake a right of first refusal and option to add any, or all, of the compounds included under Additional Compounds to the Agreement (the “Additional Compound Option”). Except as permitted by this section, Aegis shall not sell, license, offer for sale, offer for license or agree to sell or license any Aegis Technology relating to the Additional Compound to any third party during the Term of this Agreement. The following sets forth the procedure whereby Lightlake may exercise the Additional Compound Option.

 

                                                              i.      In the event that Aegis is approached by a third party interested in licensing the Additional Compound(s), Aegis shall provide a written notice to Lightlake specifying the specific compound(s) (the “Aegis Notice”).

 

   
 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

  

                                                            ii.      Lightlake shall as soon as possible, but in no event longer than twenty (20) business days of receipt of the Aegis Notice, provide a written notice to Aegis whether Lightlake intends to exercise the Additional Compound Option. In the event that Lightlake does not does exercise the Additional Compound Option or fails to deliver to Aegis its intent to exercise such option within the twenty (20) business day period, then Aegis shall be free to grant such licenses to any other third party covering such Additional Compound(s) and such compound(s) shall be removed for the definition of Additional Compound.

 

                                                          iii.      In the event Lightlake exercises the Additional Compound Option, then Lightlake must pursue Commercially Reasonable Efforts within sixty (60) business days to pursue development of such Additional Compound(s) as contemplated in Attachment A. “Commercially Reasonable Efforts” shall mean that level of effort that a biotechnology or pharmaceutical company of comparable size and capabilities would normally apply in the United States and the EU, as applicable, in pursuing the development of a pharmaceutical product with a similar efficacy and safety profile to the Product (taking into account at all times the relevant patent, medical/scientific, technical, regulatory, development cost, market potential, or commercial profile of same), subject to intervening Regulatory Authority actions or requests, new legislation, any breach of the Aegis’ obligations under this Agreement or any other third-party action not within the reasonable control of Lightlake.

 

                                                          iv.      Without limiting the foregoing right of first refusal, Lightlake may in its sole discretion elect to affirmatively exercise the Additional Compound Option with respect to any available Additional Compound at any time by written notice to Aegis.

  

B.8In consideration of Aegis providing the Technology to Lightlake under the terms described under B.2 above, Lightlake shall provide copies of the test results from the Study to Aegis in accordance with Attachment A. Such results shall be deemed Lightlake Confidential Information and Lightlake hereby grants to Aegis a co-exclusive license with Lightlake, to use such data for the purposes of this Agreement. Notwithstanding the foregoing, nothing in this Agreement requires Lightlake to complete the Study.

 

C.NON-DISCLOSURE RESTRICTIONS

 

C.1All non-public information belonging to Aegis or Lightlake disclosed during the course of the Study or arising out of the Study will be deemed Confidential Information subject to the Mutual Confidentiality Agreement dated November 13, 2013 between Aegis and Lightlake (the “NDA”); provided however, that (a) in addition to the right to use the Confidential Information as permitted under the NDA, the party receiving the Confidential Information shall have the right to use same for the purposes of performing its obligations under this Agreement, and (b) the term of the NDA therein shall be deemed amended and extended to coincide with the term of this Agreement (Section F.1, Term and Termination) plus ten (10) years.

 

   
 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

  

C.2For greater clarity, Lightlake and Aegis Confidential Information shall include information, trade secret, know how, formulations, methods and results generated in its conduct of the Study The existence of, and the terms and conditions of, this Agreement are Confidential Information of both parties.

 

D.INTELLECTUAL PROPERTY, LIMITED PERMITTED USE, OPTION

 

D.1Intellectual Property Related To Compound and Additional Compounds

 

D.1.a.As between Aegis and Lightlake, the Compound and Additional Compounds, and any Intellectual Property related thereto, is the property of Lightlake and:

 

                                                                       i.            Aegis shall not (and shall not attempt or purport to) file or prosecute in any country any patent application which claims or uses or purports to claim or use solely the Compound or Additional Compounds, or any information or other materials directly or indirectly derived therefrom, without the prior express written consent of Lightlake;.

 

                                                                           ii.      if the Study results in an invention related solely to Compound, regardless of whether it may be commercially useful, Aegis agrees to promptly disclose such invention to Lightlake. Inventorship of any such invention shall be determined in accordance with the U.S. Patent Law. Aegis shall promptly supply Lightlake with a copy of the disclosure for Lightlake evaluation purposes. Lightlake shall have the sole right to determine what, if any, patent applications should be filed.

 

D.1.b.This Agreement shall not be construed to grant any license or other rights to Aegis in any Intellectual Property or Confidential Information of Lightlake. No rights are provided to Aegis under any patents, patent applications, trade secrets or other proprietary rights of Lightlake. In particular, no rights are provided to use the Compound and any patents or intellectual property of any kind to Lightlake for profit-making, commercial or research purposes, including but not limited to sale of the Compound, use in manufacturing, provision of a service to a third party in exchange for consideration, or use in research or consulting by a commercial or not for-profit entity.

 

D.2 Intellectual Property Related To Technology

 

D.2.a.As between Aegis and Lightlake, the Technology is the property of Aegis and, unless otherwise agreed to in writing by Aegis, is to be used by Lightlake only as authorized under this Agreement. Lightlake shall use the Technology, and any information and other materials directly or indirectly derived therefrom, solely for the Purpose, and they shall not be used for any other purpose whatsoever. Lightlake shall not (and shall not attempt or purport to) file or prosecute in any country any patent application which claims or uses or purports to claim or use the Technology, or any information or other materials directly or indirectly derived therefrom, without the prior express written consent of Aegis.

 

   
 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

  

D.2.b.Except for contract research or service organizations performing work under the direction of Lightlake, provided such work is conducted under a confidentiality agreement with the terms and conditions consistent with those described under Section C of this Agreement, Lightlake shall not transfer the Technology to anyone who does not work under its direct supervision without the prior written consent of Aegis, which shall not be unreasonably withheld.

 

D.2.c.Except for the Lightlake Option under Section D.4, (i) this Agreement shall not be construed to grant any license or other rights to Lightlake in any Intellectual Property or Confidential Information of Aegis other than the license set forth above, (ii) no other rights are provided to Lightlake under any patents, patent applications, trade secrets or other proprietary rights of Aegis, and (iii) in particular, no rights are provided, other than the right to use same for the sole Purpose set forth above, to use the Technology and any related patents or intellectual property of any kind of Aegis for profit-making, commercial or research purposes, including but not limited to sale of the Technology, use in manufacturing, provision of a service to a third party in exchange for consideration, or use in research or consulting by a commercial or not for-profit entity.

 

D.2.d.If the Study results in an invention related solely to Technology, regardless of whether it may be commercially useful, Lightlake agrees to promptly disclose such invention to Aegis. Inventorship of any such invention shall be determined in accordance with the U.S. Patent Law. Lightlake shall promptly supply Aegis with a copy of the disclosure for Aegis’ evaluation purposes. Aegis shall have the right to determine what, if any, patent applications should be filed. Aegis also retains full ownership of the Technology as defined above and sole licensing rights.

 

D.2.e.The provision of the Technology to Lightlake shall not alter any preexisting right of Aegis in the Technology.

 

D.2.f.Lightlake shall use the Technology in compliance with all applicable statutes and regulations including, for example, those relating to research involving the use of animals.

 

D.2.g.Notwithstanding the preceding limitations on Lightlake’s use and ownership of the Technology, nothing in this Agreement shall be construed as limiting Lightlake’s right to own and use technology related to delivery of the Compound that is developed independently by Lightlake and without reliance on any Aegis Technology.

 

   
 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

  

D.3Intellectual Property Created Under this Agreement

 

D.3.a.In the event that an invention arises from the conduct of the Study hereunder, that embodies the Compound and Technology, including without limitation any invention relating to the use of Technology for administering or stabilizing the Compound (the “Joint Invention”), regardless of whether it may be commercially useful, Lightlake agrees to promptly disclose such invention to Aegis. Inventorship of any such Joint Invention shall be determined in accordance with the U.S. Patent Law. Ownership of any such Joint Invention shall be deemed to be solely that of Aegis.

 

D.3.b.In the event that the Joint Inventions have applications for compounds other than the Compound (“Dual Inventions”), regardless of whether it may be commercially useful, Aegis shall have the sole right to determine what, if any, patent applications should be filed. Inventorship for Dual Inventions shall be determined in accordance with the patent laws of the United States (Title 35, United States Code). Aegis retains full ownership of the Dual Invention as defined above and sole licensing rights.

 

D.4License Option

 

D.4.a.     Aegis hereby grants to Lightlake an exclusive option (the “Lightlake Option”), to obtain an exclusive (even as to Aegis), worldwide, royalty-bearing license (with the right to grant sublicenses through multiple tiers) under Aegis’s interests in the Technology and any Joint Invention (including under any resulting patents) (the “Subject Invention”) to the Technology to research, develop, make, have made, use, sell, offer for sale, and import products containing the Compound or an Additional Compound in the Field (the “License Agreement”). Lightlake may exercise such Lightlake Option with respect to the Compounds by written notice to Aegis within 90 days of the completion of the Study for the Compounds. Lightlake may also separately exercise such Lightlake Option with respect to the Additional Compounds by written notice to Aegis within 90 days the completion of the Study for the Additional Compounds. The License Agreement shall include the terms set forth in Attachment B and shall supersede any restrictions on use of the Technology contained in this Agreement. The parties shall use commercially reasonable efforts and shall work in good faith to negotiate and execute the definitive License Agreement during the 120 day periods following exercise of the Lightlake Option with respect to the Compound and the Additional Compounds (the “Negotiation Periods”). Such Negotiation Periods may be extended by mutual agreement of the Parties.

 

D.4.b.If such option or license is not concluded within the Negotiation Period, except as set forth below, neither party will have any further obligations to the other with respect to such Subject Invention. In the event that the parties are unable to finalize the License Agreement despite good faith negotiations in accordance with Section D.4.a during the Term, then Aegis shall be free to offer exclusive or non-exclusive licenses to the Joint Invention provided that for a period of twelve (12) months after the termination of the negotiations, Aegis shall not offer such a license to any third party under financial terms materially different from those offered to Lightlake without first offering those same terms to Lightlake.

 

   
 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

  

E.WARRANTIES

 

E.1.aEach party represents and warrants to the other party that such party (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized; (ii) has the requisite power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder; and (iii) has obtained all necessary consents, approvals and authorizations of all governmental authorities and other persons or entities required to be obtained by such party in connection with this Agreement. Each party represents that this Agreement does not conflict with any other right or obligation provided under any other agreement or obligation that such party has with any third party.

 

E.1.bAny Technology, Compound or Additional Compound delivered pursuant to this Agreement is understood to be experimental in nature and may have hazardous properties. EXCEPT AS SET FORTH IN SECTION E.1.a, NEITHER AEGIS NOR Lightlake MAKES ANY REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESSED OR IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

F.TERM AND TERMINATION

 

F.1This Agreement will begin on the Effective Date and terminate on the earliest of the following dates: (a) expiration of the Lightlake Negotiation Periods, or (b) on 30 days written notice by Lightlake (the “Term”).

 

F.2If a party has materially breached any of its obligations hereunder, and such material breach shall continue for 30 days after written notice of such breach was provided to the breaching party by the nonbreaching party, the nonbreaching party shall have the right at its option to terminate this Agreement effective at the end of such 30 day period.

 

F.3On termination of this Agreement, Lightlake will discontinue its use of the Technology as defined in this Agreement and will, upon direction of Aegis, return or destroy any remaining Technology.

 

F.4The rights and obligations of the parties, which by intent or meaning have validity beyond termination (including, but not limited to, rights with respect to intellectual property, confidentiality, exclusivity, indemnification and liability limitations) shall survive the termination of this Agreement.

 

   
 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

  

G.MISCELLANEOUS

 

G.1Neither party may assign or otherwise transfer this Agreement, whether voluntarily, by operation of law or otherwise, without the prior written consent of the other party; provided, however, that a party may, without such consent, assign this Agreement and its rights and obligations hereunder in connection with the transfer or sale of all or substantially all of its business to which this Agreement relates, or in the event of its merger or consolidation or change in control or similar transaction. Any permitted assignee shall assume all obligations of its assignor under this Agreement. Any purported assignment or transfer of this Agreement in violation of this section shall be void.

 

G.2This Agreement represents the entire agreement between the parties regarding the subject matter hereof and, with the exception of the NDA, shall supersede all previous communications, representations, understandings and agreements, whether oral or written, by or between the parties with respect to the subject matter hereof.

 

G.3No change, modification, extension, termination or waiver of this Agreement, or any of the provisions herein contained, shall be valid unless made in writing and signed by duly authorized representatives of the parties.

 

G.4Lightlake use of Technology shall be at its own risk. Lightlake shall hold harmless and indemnify Aegis against any and all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and costs) of every kind to the extent resulting from claims or demands brought by third parties (“Claims”) against Aegis arising from the use by Lightlake of the Technology, except to the extent due to the negligence, gross negligence, bad faith or intentional or willful misconduct by Aegis or its Representatives.

 

G.5Aegis agrees to defend, indemnify and hold harmless Lightlake and its Representatives from and against any and Claims arising out of or resulting from (a) the negligence, gross negligence, bad faith or intentional or willful misconduct of Aegis or Representatives, (b) breach of any of Aegis’ representations, warranties, covenants or agreements contained herein, and (c) the actual or alleged infringement, misappropriation or violation of a third party’s Intellectual Property by Lightlake’s use, practice or other exploitation of the Technology.

 

G.6NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY IN ANY MANNER, UNDER ANY THEORY OF LIABILITY, WHETHER IN CONTRACT, TORT (INCLUDING WITHOUT LIMITATION NEGLIGENCE), INDEMNITY, BREACH OF WARRANTY OR OTHER THEORY, FOR ANY INDIRECT, CONSEQUENTIAL, INCIDENTAL, EXEMPLARY, PUNITIVE, STATUTORY OR SPECIAL DAMAGES, INCLUDING LOST PROFITS AND LOSS OF DATA, REGARDLESS OF WHETHER SUCH PARTY WAS ADVISED OF OR WAS AWARE OF THE POSSIBILITY OF SUCH DAMAGES.

 

   
 

Confidential Treatment Requested by Lightlake Therapeutics Inc.

IRS Employer Identification No. 46-4744124

Confidential treatment requested with respect to certain portions hereof denoted with “*** REDACTED ***

 

  

G.7This Agreement shall be governed by and construed in accordance with the laws of the State of New York, U.S.A., without regard to the conflicts of law principles thereof.

 

G.8The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. In the event that individual provisions of this Agreement become wholly or partially invalid as evidenced by a ruling of a court of competent jurisdiction, the effectiveness of the remaining provisions shall not be affected, to the extent severable. The parties undertake in good faith to replace an invalid provision by a valid one which most closely corresponds with the economic intention of the invalid provision.

 

G.9Nothing in this Agreement shall operate to or be construed or interpreted as to render the parties as other than independent contractors, nor shall anything in this Agreement operate or be construed or interpreted as to render any party, or any of such party’s Representatives, to be employees, agents, associates, joint ventures or partners of the other party.

 

G.10Any notice, requests, delivery, approval or consent required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered in person or sent by overnight courier or registered mail to the party to whom it is directed at its address shown below or such other address as such party shall have last given by notice to the other party. Any such notice, requests, delivery, approval or consent shall be deemed received on the date of facsimile or hand delivery, two (2) business days after deposit with an overnight courier or five (5) business days after the date of the registration receipt provided by the applicable postal authority.

 

If to Aegis:

 

Aegis Therapeutics, LLC

11770 Bernardo Plaza Court, Suite 353

San Diego, CA 92128

Attn: Chief Executive Officer

 

If to Lightlake:

 

Lightlake Therapeutics Inc,

96-98 Baker Street, First Floor,

London,

United Kingdom, W1U 6TJ

Attn: Chief Executive Officer or Chairman

 

G.11The headings contained in this Agreement do not form a substantive part of this Agreement and shall not be construed to limit or otherwise modify its provisions.

 

G.12This Agreement may be executed in counterparts, including via facsimile or .PDF file, each of which shall be deemed an original and both of which together shall constitute one and the same instrument.