NOTE 18 — SUBSEQUENT EVENTS

Repayment of Kingsbrook Promissory Note

On March 3, 2021, the Company repaid the Kingsbrook promissory note in cash for an aggregate of $166,313, which included the principal of $150,000 and accrued interest of $16,313.

Extension of the Loan Agreements

On February 10, 2021, the Company entered into amended loan agreements to modify the terms of certain loan agreements in the aggregate principal amount of $412,716, previously entered into with Sir Marc Feldman and Dr. Lawrence Steinman, the Co-Executive Chairmen of the Board of Directors. The loan agreements were extended and modified to be paid back at the Company’s discretion, either by 1) repayment in cash, or 2) by converting the outstanding amounts into shares of common stock at the same price per share as the next financing transaction.

On April 12, 2021, the Company entered into amended loan agreements with such individuals, which extended the date of all of their outstanding loan agreements, to September 30, 2021 (see Note 12 – Loans Payable). The loan agreements were extended and modified to mature at the earlier of (a) a Form S-1 financing; or (b) September 30, 2021.

Convertible Debt Conversions

From January 15, 2021 to February 5, 2021, the holders of the Company’s convertible promissory notes converted an aggregate of $1,340,183, which included accrued interest of $105,850, owed under such convertible notes into an aggregate of 467,123 shares of common stock, pursuant to the terms of such notes, as amended, at conversion prices of between $2.45 and $3.29 per share.

On March 8, 2021, the holders of the Company’s convertible bridge notes, which were issued in December 27, 2019 and January 3, 2020 to various purchasers, converted an aggregate of $432,384, which included accrued interest of $66,633 owed under such convertible bridge notes, into an aggregate of 158,383 shares of common stock pursuant to the terms of such notes, as amended, at a conversion price of $2.73 per share.

Default on Convertible Notes

On February 3, 2021, there was an event of default in connection with the Alpha Capital convertible note (the “Alpha Capital Note”), which resulted in an increase in the settlement value of the Alpha Capital Note. The additional liability is accounted for as a bifurcated derivative. The holder of the Alpha Convertible Note has alleged that the default event described in Note 13, Convertible Notes Payable also applies to the $300,000 of principal that was converted on February 4, 2021, which would result in an additional increase to the settlement amount of the Alpha Convertible Note. The Company is in discussions with the noteholder regarding this dispute.

Stock Option Issuances

On February 25, 2021, the Company awarded options to two of its officers to purchase 1,580,000 shares of the Company’s common stock, which have a term of 10 years, and an exercise price of $4.43 per share (the closing sales price on the date the Board of Directors approved the grant (February 26, 2021)). The options are subject to the Company’s 2020 Omnibus Incentive Plan and vest at the rate of (a) 1/5th of such options upon the grant date; and (b) 4/5th of such options vesting ratably on a monthly basis over the following 36 months on the last day of each calendar month; provided, however, that such options vest immediately upon officers’ deaths or disabilities, terminations without cause or terminations for good reason, a change in control of the Company or upon a sale of the Company.

Sale of Common Stock in Private Offering

On February 19, 2021, the Company entered into a Securities Purchase Agreement with certain purchasers (the “Purchasers”), pursuant to which the Company agreed to sell an aggregate of 2,564,000 shares of common stock (the “Shares”) and warrants to purchase up to an aggregate of 2,564,000 shares of common stock (the “PIPE Warrants”), at a combined purchase price of $4.55 per share and PIPE Warrant (the “Private Offering”). The Private Offering closed on February 23, 2021. Aggregate gross proceeds from the Private Offering were approximately $11.7 million. Net proceeds to the Company from the Private Offering, after deducting the placement agent fees and estimated offering expenses payable by the Company, were $10.7 million. The placement agent fees and offering expenses were accounted for as a reduction of additional paid in capital.

The PIPE Warrants have an exercise price equal to $5.00 per share, are immediately exercisable and are subject to customary anti-dilution adjustments for stock splits or dividends or other similar transactions. However, the exercise price of the PIPE Warrants will not be subject to adjustment as a result of subsequent equity issuances at effective prices lower than the then-current exercise price. The PIPE Warrants are exercisable for 5 years following the closing date. The PIPE Warrants are subject to a provision prohibiting the exercise of such Warrants to the extent that, after giving effect to such exercise, the holder of such Warrant (together with the holder’s affiliates, and any other persons acting as a group together with the holder or any of the holder’s affiliates), would beneficially own in excess of 4.99% of the Company’s outstanding common stock (which may be increased to 9.99% on a holder by holder basis, with 61 days prior written consent of the applicable holder). The PIPE Warrants did not meet the requirements for equity classification due to the existence of a tender offer provision that could potentially result in cash settlement of the PIPE Warrants that didn’t meet the limited exception in the case of a change-in-control. Accordingly, the Company reclassified the $7,294,836 fair value of the PIPE Warrants, which was determined using the Black-Scholes option pricing model, from additional paid-in-capital to derivative liabilities. The following assumptions were used to value the PIPE Warrants at issuance:

In connection with the Private Offering, the Company also entered into a Registration Rights Agreement, dated as of February 23, 2021, with the Purchasers (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) on or prior to April 24, 2021 to register the resale of the Shares and the shares of common stock issuable upon exercise of the PIPE Warrants (the “Warrant Shares”), and to cause such registration statement to be declared effective on or prior to June 23, 2021 (or, in the event of a “full review” by the SEC, August 22, 2021). The Company is currently in default of the terms of the Registration Rights Agreement as the registration statement to register the Shares and Warrant Shares was not filed by April 24, 2021. As a result of this default, the Company is required to pay damages to the Purchasers in the aggregate amount of $174,993 each month beginning on April 24, 2021, and until such date that the registration statement is filed with the SEC.

Consulting Agreement

On February 25, 2021, the Company entered into a consultancy agreement (the “Consulting Agreement”) with Prof. Jagdeep Nanchahal, our Chairman of our Clinical Advisory Committee, dated February 22, 2021, and effective December 1, 2020.

On March 31, 2021, subsequently thereafter, the Consulting Agreement was amended to include CBR Pharma, a corporation incorporated and registered in England and Wales, and an indirect wholly-owned subsidiary of the Company, as a party thereto. In addition, the Company agreed to pay the consultant 15,000 British Pounds (GBP) per month (approximately $20,800) during the term of the agreement, increasing to GBP 23,000 per month (approximately $32,000) on the date (a) of publication of the data from the phase 2b clinical trial for Dupuytren’s disease (RIDD) and (b) the date that the Company has successfully raised over $15 million in capital. The Company also agreed to pay the consultant a bonus (“Bonus 1”) in the sum of 100,000 GPB upon submission of the Dupuytren’s disease clinical trial data for publication in a peer-reviewed journal. In addition, for prior work performed, including completion of the recruitment to the RIDD (Dupuytren’s) trial, the Company agreed to pay the consultant GBP 434,673 (approximately $605,000) (“Bonus 2”). At the election of the consultant, Bonus 2 shall be paid at least 50% (fifty percent) or more, as the consultant elects, in shares of the Company’s common stock, at a share price of $3.00 per share, or the share price on the date of the grant, whichever is lower, with the remainder paid in GBP. Bonus 2 shall be deemed earned and payable upon the Company raising a minimum of $15 million in additional funding, through the sale of debt or equity, after December 1, 2020 (the “Vesting Date”) and shall not be accrued, due or payable prior to such Vesting Date. Bonus 2 shall be payable by the Company within 30 calendar days of the Vesting Date. Finally, the consultant shall receive another one-time bonus (“Bonus 3”) of GBP 5,000 (approximately $7,000) on enrollment of the first patient to the phase 2 frozen shoulder trial, and another one-time bonus (“Bonus 4”) of GBP 5,000 (approximately $7,000) for enrollment of the first patient to the phase 2 delirium/POCD trial.

The Consulting Agreement has an initial term of three years, and renews thereafter for additional three-year terms, until terminated as provided in the agreement. The Consulting Agreement can be terminated by either party with 12 months prior written notice (provided the Company’s right to terminate the agreement may only be exercised if the consultant fails to perform his required duties under the Consulting Agreement), or by the Company immediately under certain conditions specified in the Consulting Agreement if (a) the consultant fails or neglects efficiently and diligently to perform the services or is guilty of any breach of its or his obligations under the agreement (including any consent granted under it); (b) the consultant is guilty of any fraud or dishonesty or acts in a manner (whether in the performance of the services or otherwise) which, in the reasonable opinion of the Company, has brought or is likely to bring the consultant, the Company or any of its affiliates into disrepute or is convicted of an arrestable offence (other than a road traffic offence for which a non-custodial penalty is imposed); or (c) the consultant becomes bankrupt or makes any arrangement or composition with his creditors. If the Consulting Agreement is terminated by the Company for any reason other than cause, the consultant is entitled to a lump sum payment of 12 months of his fee as at the date of termination.

On March 31, 2021, in satisfaction of amounts owed to the consultant for 50% of Bonus 2, the Company issued 100,699 shares of the Company’s common stock to the Consultant. Additionally, on April 15, 2021, in satisfaction of amounts owed to the consultant for an additional 19% of Bonus 2, the Company issued 37,715 of the Company’s common stock. The remainder of Bonus 2 will be due to the Consultant at such time as the Company has raised $15 million, which obligation was waived by the Company in connection with the issuance of the shares described above.

Employment Agreements of Chief Executive Officer

On February 25, 2021, the Company entered into an amended agreement with the Chief Executive Officer (“CEO”) (the “A&R Agreement”), dated February 24, 2021, and effective November 6, 2020. Pursuant to the A&R Agreement, the CEO agreed to serve as an officer of the Company. The agreement replaced his prior agreement with the Company. The A&R Agreement has a term of three years, and is automatically renewable thereafter for additional one-year periods, unless either party provides the other at least 90 days written notice of their intent to not renew the agreement. The CEO’s annual base salary under the agreement will initially be $450,000 per year. The annual salary is also subject to automatic 5% yearly increases.

The CEO is also eligible to receive an annual bonus, with a target bonus equal to 45% of his then-current base salary, based upon the Company’s achievement of performance and management objectives as set and approved by the Board of Directors and/or Compensation Committee in consultation with the CEO. At the CEO’s option, the annual bonus can be paid in cash or the equivalent value of the Company’s common stock or a combination. thereof. The Board of Directors, as recommended by the Compensation Committee, may also award the CEO bonuses from time to time (in stock, options, cash, or other forms of consideration) in its discretion. Under the A&R Agreement, the CEO is also eligible to participate in any stock option plans and receive other equity awards, as determined by the Board of Directors from time to time.

The agreement can be terminated any time by the Company for cause (subject to the cure provisions of the agreement), or without cause (with 60 days prior written notice to the CEO), by the CEO for good reason (as described in the agreement, and subject to the cure provisions of the agreement), or by the CEO without good reason. The agreement also expires automatically at the end of the initial term or any renewal term if either party provides notice of non-renewal as discussed above.

In the event the A&R Agreement is terminated without cause by the Company, or by the CEO for good reason, the Company agreed to pay him the lesser of 18 months of salary or the remaining term of the agreement, the payment of any accrued bonus from the prior year, his pro rata portion of any current year’s bonus and health insurance premiums for the same period that he is to receive severance payments (as discussed above).

The A&R Agreement contains standard and customary invention assignment, indemnification, confidentiality and non-solicitation provisions, which remain in effect for a period of 24 months following the termination of his agreement.

Employment Agreement for Chief Financial Officer

On February 25, 2021, the Company entered into an employment agreement (the “Employment Agreement”) dated February 24, 2021, and effective November 6, 2020, which agreement was amended and corrected on March 1, 2021, to be effective as of the effective date of the original agreement (which amendment and correction is retroactively updated in the discussion of the agreement), with the Company’s Interim Chief Financial Officer (“CFO”). Pursuant to the agreement, the CFO agreed to serve as an officer of the Company; and the Company agreed to pay the CFO $300,000 per year. Such salary is to be increased to a mutually determined amount upon the closing of a new financing, and shall also be increased on a yearly basis.

Under the agreement, the CFO is eligible to receive an annual bonus, in a targeted amount of 30% of his then salary, based upon the Company’s achievement of performance and management objectives as set and approved by the CEO, in consultation with the CFO. The bonus amount is subject to adjustment. The Board of Directors, as recommended by the Compensation Committee of the Company (and/or the Compensation Committee), may also award the CFO bonuses from time to time (in stock, options, cash, or other forms of consideration) in its discretion. Under the Employment Agreement, the CFO is also eligible to participate in any stock option plans and receive other equity awards, as determined by the Board of Directors from time to time. As of December 31, 2020, the Company recorded $15,750 of accrued bonus payable to the CFO.

The agreement can be terminated any time by the Company with or without cause with 60 days prior written notice and may be terminated by the CFO at any time with 60 days prior written notice. The agreement may also be terminated by the Company with six days’ notice in the event the agreement is terminated for cause under certain circumstances. Upon the termination of the CFO’s agreement by the Company without cause or by the CFO for good reason, the Company agreed to pay him three months of severance pay.

The agreement contains standard and customary invention assignment, indemnification, confidentiality and non-solicitation provisions, which remain in effect for a period of 24 months following the termination of his agreement.

Officer’s and Director’s Compensation

On March 31, 2021, the Board of Directors of the Company approved the issuance of 67,802 shares of restricted common stock to certain directors and officers under the Company’s 2020 Omnibus Incentive Plan, which amounts represented 50% of the amounts currently owed to such persons in consideration for services rendered. The shares issued were valued at the closing sales price on March 29, 2021, the last closing sales price prior to the date such issuance was approved by the Board of Directors.

On March 5, 2021, in consideration for the fees earned as members of the Board of Directors of the Company and in satisfaction of amounts owed in accrued directors’ fees, the Company issued 4,604 shares of the Company’s common stock, which are fully-paid and non-assessable upon issuance.

KCSA Settlement Agreement

On March 12, 2021, the Company agreed it was in the Company’s best interest to enter into a settlement agreement with Kanan Corbin Schupak & Aronow, Inc. (“KCSA”) in connection with outstanding obligations in the aggregate of approximately $58,962 due for services rendered to CBR Pharma and Katexco. Thereupon the Company issued KCSA 8,675 shares of the Company’s restricted common stock in satisfaction of the terms of the settlement.

AGP Warrants

On March 12, 2021, the Company issued a warrant to AGP (the “AGP Warrant”) to purchase up to an aggregate of 63,658 shares of the Company’s common stock at a purchase price of $5.28 per share, subject to adjustment, and limited at any given time not to exceed a beneficial ownership of 4.99% of the total number of issued and outstanding shares of the Company’s common stock. The AGP Warrant is exercisable at any time on or after May 2, 2021 and on or prior to May 2, 2024. This issuance satisfies the Company’s obligation to AGP, as discussed in Note 11 – Derivative Liabilities.

The newly issued AGP Warrant did not meet the requirements for equity classification due to the existence of a tender offer provision that could potentially result in cash settlement of the AGP Warrant that did not meet the limited exception in the case of a change-in-control. Accordingly, the AGP Warrant will continue to be liability-classified.

C&H Capital Inc. Consulting Agreement

On March 19, 2021, in satisfaction of accrued issuable equity owed to C&H Capital Inc. (“C&H Capital”) for services rendered related to investor relations and strategic planning, the Company issued 14,195 of shares of the Company’s restricted common stock to C&H Capital.

Effective March 15, 2021, the Company entered into an amendment to the consulting agreement with C&H Capital. Pursuant to the amendment, as compensation for investor relations and strategic planning services, the Company issued 1,815 shares of the Company’s common stock which vest monthly over a one-year period to C&H Capital and the initial agreement with C&H Capital was terminated.

Cantor Fitzgerald & Co. Litigation

On April 4, 2021, the Company received a court summons in connection with the alleged breach of the Settlement Agreement pursuant to which CF&CO is currently pursuing litigation. The Company plans to file a response with the court pursuant to an extension that was granted to file an answer.

EarlyBird Settlement Agreement

On April 23, 2021, the Company settled the amounts due pursuant to a certain finder agreement entered into with EarlyBird on October 17, 2017 (the “Finder Agreement”). The Company’s Board of Directors determined it was in the best interests to settle all claims which had been made or could be made with respect to the Finder Agreement and entered into a settlement agreement (the “Settlement Agreement”). Pursuant to the Settlement Agreement, the Company paid EarlyBird a cash payment of $275,000 and issued 225,000 shares of the Company’s restricted common stock to EarlyBird.

Larsen Consulting Agreement

On April 29, 2021, the Company entered into a consulting agreement with Glenn Larsen, the former Chief Executive Officer of 180 Therapeutics LP, to act in the capacity as negotiator for the licensing of four patents. In consideration for services provided, the Company agreed to compensate the consultant with $50,000 of its restricted common stock which vests upon the Company entering into a licensing transaction with the assistance of the consultant.

Application for Forgiveness of the PPP Loan

On May 19, 2021, the Company applied for loan forgiveness for the amount of $51,051 in connection to amounts borrowed by Katexco under the PPP. The result of the application has not yet been determined.

Legal Action

On May 17, 2021, Tyche Capital LLC (“Tyche”) filed a counterclaim against the Company alleging that it was the Company, rather than Tyche, that had breached the Guarantee and Commitment Agreement entered into between KBL and Tyche on July 25, 2019.  Tyche also filed a Third Party Complaint against six third-party defendants, including three members of the Company's management, Sir Marc Feldman, Dr. James Woody, and Ozan Pamir, claiming that they allegedly breached fiduciary duties to Tyche with regards to the Guarantee and Commitment Agreement.  The Company denies all of such claims, as do the three individual members of the Company's management, and will vigorously defend against all of Tyche's claims.

University of Oxford Agreement

On May 24, 2021, CannUK entered into another research agreement with Oxford (the “Fifth Oxford Agreement”), pursuant to which CannUK will sponsor work at the University of Oxford to conduct a multi-centre, randomised, double blind, parallel group, feasibility study of anti-TNF injection for the treatment of adults with frozen shoulder during the pain-predominant phase.

CannUK, as the sponsor, agreed to make the following payments to Oxford: