Note 17. Related Party Transactions

The Board’s Audit Committee, composed of independent directors, or the full Board, reviews and approves all related party transactions. The terms and amounts described below are not necessarily indicative of the terms and amounts described below that would have been incurred had comparable transactions been entered into with independent parties.

On July 12, 2018, the Company announced certain leadership changes in connection with the strategic expansion and entry into certain cancer and immunologic indications. In connection with such leadership changes and effective July 11, 2018, Denis R. Burger, Ph.D. and A. Bruce Montgomery, M.D., resigned as members the Board. Dr. Burger also resigned as Chief Science Officer of the Company, which was not an executive officer position. On July 10, 2018, in connection with the resignations of Dr. Burger and Dr. Montgomery, the Board determined to accelerate the vesting of all outstanding and unvested stock options held by Dr. Burger and Dr. Montgomery. Upon the effectiveness of their resignations, stock options covering 0.5 million shares and 0.1 million shares, held by Dr. Burger and Dr. Montgomery, respectively, became fully vested. The stock options retained their exercise period through their respective expiration dates and the terms of the stock options remained otherwise unchanged.

On November 16, 2018, the Company closed its acquisition of ProstaGene assets. In connection with the closing of the acquisition, the Company hired Richard Pestell, M.D., as its Chief Medical Officer. Prior to the acquisition Dr. Pestell was the holder of approximately 77.2% of the outstanding equity interests in ProstaGene and consequently held an indirect interest in (i) approximately 8.6 million of approximately 13.3 million shares of the Company’s common stock and (ii) approximately 4.2 million of 5.4 million shares of common stock, in each case held in escrow for the benefit of ProstaGene and its members, which were subject to being released ratably every six months over the eighteen-month period following the closing date and forfeiture to satisfy certain indemnity obligations of ProstaGene. In addition, as specified in a Stock Restriction Agreement between Dr. Pestell and the Company, approximately 8.3 million restricted shares of common stock previously distributed to Dr. Pestell in the ProstaGene acquisition are currently the subject of litigation. See Note 8 and 10.

As specified in a Confidential Information, Inventions and Noncompetition Agreement between the Company and Dr. Pestell, which was entered into on the closing date of the ProstaGene acquisition, the Company obtained the right to participate in the development and license of certain intellectual property created by Dr. Pestell, in connection with Dr. Pestell’s then ongoing research obligations to outside academic institutions. The Company also obtained the right to work with Dr. Pestell to manage any potential conflict between the Company’s clinical development activities and such ongoing research obligations.

On December 10, 2018, Anthony D. Caracciolo resigned as the Chairman of the Board of Directors, but remained a director and Scott A. Kelly, M.D., was appointed Chairman of the Board. On December 19, 2018, the Compensation Committee of the Board approved an amendment to certain compensation arrangements for Mr. Caracciolo, pursuant to which his employment with the Company was extended through April 16, 2019, at a salary reduced from $16,667 to $5,000 per month, with continuing benefits. In addition, the Compensation Committee approved an extension to a total of 10 years of the term of certain previously awarded stock options covering an aggregate of 0.15 million shares of the Company’s common stock, provided that such stock options were out-of-the-money on the date of such extension. These arrangements were conditioned upon Mr. Caracciolo’s agreement to resign from the Board upon identification by the Company of an appropriately qualified candidate to fill the vacancy. Mr. Caracciolo’s resignation was effective January 10, 2019. These arrangements were not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

On January 8, 2019, Argonne Trading LLC (“Argonne”), participated in the private placement of convertible promissory notes. See Note 5. Michael A. Klump, the manager of Argonne, was a director of the Company at the time of investment.

Argonne purchased a convertible promissory note, in the aggregate principal amount of $0.5 million bearing interest at an annual rate of 10% and received a warrant covering 0.5 million shares of common stock at an exercise price of $0.30 per share. The terms and conditions of the Argonne investment were identical to those offered to all other investors in the offering and the investment was approved by the Board’s Audit Committee.

On May 8, 2019, Dr. David F. Welch entered into exercise agreements for warrants beneficially owned by him, covering an aggregate of approximately 1.7 million shares of common stock and approximately 0.8 million additional shares. Additionally, Michael A. Klump entered into exercise agreements for warrants beneficially owned by him, covering an aggregate of approximately 3.6 million shares of common stock and approximately 1.8 million additional shares. Dr. Welch and Mr. Klump were members of the Board at the time of exercise and participated on terms identical to those applicable to other investors. See Note 12.

On July 15, 2019, the Company entered into consulting agreements with two of its directors, Scott A. Kelly, M.D. in the capacity of non-executive Chief Science Officer, and David F. Welch, Ph.D., in the capacity of non-executive interim Strategy Advisor. Dr. Kelly’s agreement terminated on April 9, 2020 when he became the Company’s Chief Medical Officer as a full-time employee. On September 12, 2019, the Company and Dr. Welch agreed to amend his consulting agreement to eliminate any cash compensation (including previously earned entitlements) thereunder and in October 2019, the consulting agreement between Dr. Welch and the Company was terminated. The Company has issued stock options as compensation pursuant to the agreements, as follows: to Dr. Kelly for 0.75 million shares at an exercise price of $0.385 per share on September 12, 2019, and 0.2 million shares at an exercise price of $0.39 per share on October 7, 2019; and options to Dr. Welch for 0.25 million shares at an exercise price of $0.385 per share on September 12, 2019, and 0.2 million shares at an exercise price of $0.39 per share on October 7, 2019. The options granted on September 12, 2019 vested immediately upon issuance and have a 10-year term. The options issued on October 7, 2019 vested in four equal quarterly installments beginning on the grant date and have a 10-year term.

On June 12, 2019, the Company concluded a warrant tender offer (the “June 2019 Warrant Tender Offer”) for certain outstanding series of eligible warrants, offering the holders of such warrants the opportunity to amend and exercise their warrants at a reduced exercise price equal to the lower of (i) their respective existing exercise price or (ii) $0.40 per share. As an inducement to holders to participate in the June 2019 Warrant Tender Offer, the Company offered to issue to participating holders shares of common stock equal to an additional 50% of the number of shares issuable upon exercise of the eligible warrants (collectively, the “Additional Shares”). Dr. Kelly validly tendered warrants beneficially owned by him, covering an aggregate of 50,000 shares, and received 25,000 Additional Shares. Dr. Kelly participated on terms identical to those applicable to other holders in the June 2019 Warrant Tender Offer.

On July 31, 2019, the Company concluded an additional warrant tender offer on terms identical to the June 2019 Warrant Tender Offer (the “July 2019 Warrant Tender Offer”). See Note 12. Dr. Welch tendered warrants beneficially owned by him, covering an aggregate of 1.0 million shares, and received 0.5 million Additional Shares. Dr. Welch participated on terms identical to those applicable to other holders in the July 2019 Warrant Tender Offer. See Note 12.

On September 30, 2019, an entity controlled by Dr. Welch exchanged a 2019 Short-term Convertible Note in the principal amount of $1.0 million and accrued but unpaid interest of $75,343, for an exchange note in the principal amount of $1.1 million and a warrant to purchase 1.0 million shares of common stock. The entity controlled by Dr. Welch participated on similar terms to the other holders in the exchange. See Note 5.

On October 8, 2019, an entity controlled by then director, Michael Klump, exchanged a 2019 Short-term Convertible Note in the principal amount of $0.5 million and accrued but unpaid interest of $37,397, for an exchange note in the principal amount of approximately $0.5 million and a warrant to purchase 0.5 million shares of common stock. The entity controlled by Mr. Klump participated on similar terms to the other holders in the exchange. See Note 5.

On December 13, 2019, Jordan Naydenov, a director of the Company, participated in a registered direct equity offering. Mr. Naydenov purchased approximately 0.8 million shares of common stock and received warrants covering approximately 0.6 million shares. The terms and conditions of Mr. Naydenov’s $0.25 million investment were identical to those offered to other investors in this offering. See Note 12.

On December 23, 2019, an entity controlled by Dr. Welch participated in a registered direct equity offering. The entity controlled by Dr. Welch purchased approximately 1.6 million shares of common stock and received warrants covering approximately 0.8 million shares. The terms and conditions of the $0.5 million investment made by the entity controlled by Dr. Welch were identical to those offered to other investors in the offering. See Note 12.

On January 31, 2020, an entity controlled by Dr. Welch participated in the January 31, 2020 offering of Series D Preferred Stock. The entity controlled by Dr. Welch purchased 1,000 shares and received warrants covering 0.5 million shares of common stock. The terms and conditions of the $1.0 million investment made by the entity controlled by Dr. Welch were identical to those offered to other investors in this offering. See Note 12.

On February 26, 2020, an entity controlled by Dr. Welch entered into a private warrant exchange in which the entity purchased shares of common stock for $0.18 per share as compared to the stated exercise price of the warrants of $0.30 per share. The entity purchased approximately 1.8 million shares of common stock, and received 0.2 million additional shares as an inducement to exercise its warrants, for a total of approximately 2.0 million shares. The terms and conditions of the approximate $0.33 million investment made by the entity were identical to those offered to other investors in this offering. See Note 12.

On November 17, 2020, the Company conducted a private equity offering, in which Christopher Recknor, M.D., who was a non-executive at the time of the offering, purchased unregistered shares of common stock for $1.50 per share. Pursuant to the offering, the Company sold approximately 0.7 million shares to Dr. Recknor for aggregate proceeds of $1.0 million. The transaction was approved by the Board. See Note 12.

On March 11, 2021, the Company appointed Christopher Recknor, its former Vice President, Clinical Operations, as its Chief Operating Officer (“COO”). The Center for Advanced Research & Education, LLC (“CARE”), owned by Dr. Christopher Recknor’s spouse, Julie Recknor, Ph.D., (and owned by Dr. Christopher Recknor until March 11, 2021) is one of several clinical locations for the Company’s ongoing NASH and COVID-19 long-hauler clinical trials, and was a clinical location for the Company’s completed Phase 2b/3 mild-to-moderate and severe-to-critical COVID-19 clinical trials. Dr. Julie Recknor serves as the Site Director of CARE and manages its day-to-day operations. The Company entered into a Clinical Trial Agreement (“CTA”) with CARE for each of the foregoing clinical trials. Each CTA was negotiated in the ordinary course of business by Amarex, the Company’s clinical research organization, prior to Dr. Christopher Recknor’s appointment as COO, and the operational and financial terms of the CTAs with CARE are comparable to the terms available to unrelated clinical locations. Dr. Christopher Recknor was not involved in the Company’s decision to choose CARE as a clinical location for its ongoing trials, and he is not involved in patient treatment at the CARE site. During the fiscal year ended May 31, 2020, the Company made no payments to CARE, as it had not yet received any services under the CTA in effect prior to that date. As of May 31, 2021, the Company had approximately $0.9 million in accounts payable due to CARE and made payments of approximately $0.9 million to CARE during the fiscal year ended May 31, 2021. In July 2021, the Company entered into an amendment to the previously approved CTA with CARE, wherein such amendment provided for the additional recording of patient information giving rise to an approximate increase of less than $0.1 million.