Exhibit 10.18
 
MEMORANDUM OF UNDERSTANDING
 
This binding Memorandum of Understanding (“MOU”), dated as of July 14, 2014, by
and among MetaStat, Inc., a Nevada corporation with offices at 8 Hillside Drive,
Suite 207, Montclair, New Jersey (“MetaStat” or the “Licensor”), MetaStat
BioMedical, Inc., a Delaware corporation and a wholly-owned subsidiary of
MetaStat (the “Subsidiary”), and Northstar Beacon, LLC, a Delaware limited
liability company (“NORTHSTAR”), which is entering into this MOU with the
express understanding and agreement among all the Parties (as defined below)
that NORTHSTAR will be assigning all of its right, title and interest in this
MOU to ASET Therapeutics, LLC, a California limited liability company with
offices at 1350 Treat Blvd., Suite 400, Walnut Creek, CA 94597 (“ASET”), which
has not yet been formed (for purposes hereof, all references to the “Licensee”
herein shall refer to NORTHSTAR and, upon its assignment of rights hereunder to
ASET, shall refer to ASET, and NORTHSTAR, ASET, MetaStat (or the Licensor) and
the Subsidiary, shall be collectively referred to herein as the “Parties”), sets
forth certain understandings, rights and obligations of the Parties with respect
to the proposed acquisition by Licensee of certain assets of Licensor and the
grant by Licensor to Licensee of an exclusive assignment and/or license of
certain of Licensor’s therapeutic assets (collectively, the “Assets”).
 
1.                      Assets; Scope of Assignment/License Agreement; Type of
License; Licensed Technology.
 
(a)                       The Assets shall include an assignment and/or
sublicense of all rights and obligations under MetaStat’s existing Therapeutic
License Agreement with the Massachusetts Institute of Technology and its David
H. Koch Institute for Integrative Cancer Research at MIT and its Department of
Biology, Albert Einstein College of Medicine of Yeshiva University, and
Montefiore Medical Center as of December 7, 2013 (the “Alternative Splicing
Therapeutic License Agreement”). Notwithstanding the foregoing to the contrary,
the License Agreement (as defined below) shall provide that MetaStat shall have
the right of first refusal to commercialize any companion diagnostic or
biomarker arising from the work performed by ASET under the License Agreement
(the “Companion Diagnostics”), pursuant to a royalty-free, worldwide, exclusive
sublicense on industry standard terms. At ASET’s request, the Parties shall
negotiate in good faith and on commercially reasonable terms a sublicense to the
Licensee relating to the Companion Diagnostics developed for ASE Targets in all
fields, worldwide.
 
(b)                       The assignment and/or sublicense agreement (the
“License Agreement”) shall cover the assignment and/or license of technology for
developing alternative splicing platform and intellectual property for
therapeutics and Companion Diagnostic use pursuant to the Alternative Splicing
Therapeutic License Agreement.
 
(c)                       The License Agreement shall include an exclusive
sublicense, with the right to sublicense through multiple tiers, to the MIT ASE
and patent WO 2012/116248 A1, combined with the release of the principals of
Licensee from existing non-compete agreements allowing Licensee (and its
principals) freedom to operate in discovery and development of ASE therapeutics
and the discovery and use of Companion Diagnostics for ASE targets pursuant to
the Alternative Splicing Therapeutic License Agreement.
 
(d)                       The assigned and/or licensed technology (the “Licensed
Technology”) shall include:
 
(i)                      Alternative Splicing Event (“ASE”) technology based on
International Patent Application WO 2012/116248 A1 entitled "Alternatively
Spliced mRNA Isoforms as Prognostic and Therapeutic Tools for Metastatic Breast
Cancer and Other Invasive/Metastatic Cancers"; and
 
(ii)                      Technology and know-how stemming from all ASE
discovery work carried out in MetaStat company labs at SUNY Stony Brook from
September 2013 through the date of execution of the definitive License
Agreement.
 
         (e)           The Parties agree that the structure relating to the
transfer of the Assets as contemplated by this MOU may be modified to satisfy
the intent of the Parties to have the Licensee acquire the Assets as
contemplated herein.
 
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2. Field of Use; Territory; Term of License.
 
(a)           Field of Use: Make, use and sell all therapeutic compounds, all
ASE targets for therapeutic use and drug discovery in all fields, worldwide; and
make and use all Companion Diagnostics developed for ASE targets in all fields,
worldwide.
 
(b)           The territory shall be worldwide and the term of the License
Agreement shall be equal to the life of the patents, including any extensions
thereto.
 
3. Performance Obligations of Licensee.

 
    (a)           The Licensee shall use its best efforts to:
 
(i)       Increase its existing capitalization with $1.25 million in new equity,
the proceeds of which shall be invested as set forth herein in MetaStat's next
equity or equity-linked financing based on the terms previously provided by
MetaStat to ASET (the “Subsequent Financing”);

(ii)      Establish drug discovery capabilities within twelve (12) months from
execution of the License Agreement;

(iii)     Increase its capitalization by raising an additional $2.75 million
(excluding the $1 million preferred equity investment in ASET by MetaStat and
any proceeds received by ASET from the sale of MetaStat securities) in equity
financing for the drug discovery platform within two (2) years of the execution
of the License Agreement;
 
(iv)     Have an ASE program ready for first clinical trial use by the date that
is forty-eight (48) months from execution of the License Agreement; and

(v)     Provide annual reports on the development and commercialization of the
Licensed Technology and, upon commencement of sales, royalty reports to
Licensor, which reports shall be due by December 31st of each calendar year.
 
      (b)           With respect to the Companion Diagnostics, the Licensee
shall use its best efforts to:

(i)       Promote, market and commercially develop the products and exploit the
technology effectively;

(ii)      Conduct basic research to develop possible target Companion
Diagnostics for the field of use;

(iii)     Make available the exclusive cross-licensing rights for Licensee’s
Companion Diagnostics programs pursuant to a royalty-free, worldwide, exclusive
sublicense; and

(iv)     Provide annual reports on the development and commercialization of the
Licensed Technology and, upon commencement of sales, royalties reports to
Licensor, which reports shall be due by December 31st of each calendar year.

 
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4. Performance Obligations of Licensor.  The Licensor shall:
 
(a) Sign confidentiality and non-compete agreements with Licensee concurrently
with the execution of the License Agreement.
 
(b) Within 120 days following the date hereof, Licensor shall make a $1 million
preferred stock equity investment in exchange for a 20% equity interest (on a
fully diluted, as converted basis) in ASET for use in developing the ASE
therapeutics platform and drug discovery programs.  MetaStat shall maintain its
20% equity ownership in ASET until such time that ASET raises an aggregate of
$4,000,000 in equity or in a financing in which ASET issues securities
convertible into equity (including the $1 million received from Licensor, but
excluding any proceeds received by ASET from the sale of MetaStat
securities).  After such time, MetaStat shall be diluted proportionately with
all other equity holders of ASET.  The preferred stock shall contain standard
anti-dilution  protection provisions (including as stated above).
 
5. Payment Schedule.  Payments due to Licensor hereunder shall be paid within
ninety (90) days of receipt of non-contingent funds.  Royalty payments shall be
due every 31st of March.  Penalty for late payments is one percent (1%) per
month.
 
6. Patent Management; Patent Infringements; Improvements.
 
(a) The Licensee  shall be responsible for management of the patents which are
the subject of the Licensed Technology.
 
(b) The Licensee shall be responsible for all necessary actions to mitigate or
address infringement of any patents which are the subject of the Licensed
Technology; provided, however, that any costs incurred by Licensee in defending,
prosecuting, mitigating or addressing any claims with respect to any patent that
is the subject of the Licensed Technology shall be borne equally by the Licensor
and the Licensee.  It shall be the Licensee’s decision to take action or not in
case of infringement of patents.  Any compensation received for infringement of
Licensee’s patent rights belongs to Licensee.
 
(c) The Licensor may continue research of the ASE Companion Diagnostic
technology, including making any improvement or adaptation to the technology,
without the consent of Licensee.  Licensor will notify Licensee prior to seeking
any patent protection for such improvements but will retain full ownership of
any intellectual property arising from such improvements consistent with any
agreements between Licensor and Licensee.  Subject to the terms herein, Licensor
grants Licensee an exclusive sublicense, with the right to sublicense through
multiple tiers, to the improvements.
 
7. Board Representation; Lock-up Agreement; CEO Oversight Role; Other Matters.
 
(a) So long as MetaStat owns at least ten percent (10%) of the outstanding
equity interests of ASET (on a fully diluted, as converted basis), MetaStat
shall have the right to designate one member of ASET’s board of directors or
similar governing body.  The initial board of ASET shall consist of no more than
five (5) members.  Any such member designated by MetaStat shall be reasonably
acceptable to ASET.
 
(b) NORTHSTAR hereby agrees that, without the prior consent of MetaStat, neither
NORTHSTAR nor its affiliates will sell, transfer or otherwise dispose of any
securities of MetaStat (either currently held or acquired in the Subsequent
Financing or any other financing) for a period of one (1) year following the
date of the License Agreement.
 
(c) MetaStat’s current chief executive officer shall provide an oversight
function to ASET for six months following the execution of the License
Agreement; it being expressly understood, however, that such function shall not
include decision making authority.

 
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(d) To assist in a smooth transition at MetaStat, Dr. David Epstein shall
continue to serve as a director of MetaStat for six (6) months following
execution of the License Agreement (subject to an additional six (6) month
extension in the event that MetaStat has not found a suitable replacement), it
being expressly understood, however, that (A) the non-compete provision of Dr.
Epstein’s current advisory agreement (the “Advisory Agreement”) will be waived
following the execution of the License Agreement solely with respect to the
transactions contemplated hereby and (B) all necessary corporate and board
authorizations of MetaStat are given to permit Dr. Epstein to serve as director
of Licensee at the same time.  Following the execution of the License Agreement,
Dr. Epstein shall no longer be entitled pursuant to the Advisory Agreement to
any advisory fees and any performance shares that have not vested pursuant to
the terms thereto as of such date shall be cancelled.  Notwithstanding the
foregoing to the contrary, Dr. Epstein shall be entitled to (i) any accrued but
unpaid advisory fees owed to him prior to the execution of the License Agreement
and (ii) director compensation pursuant to his role as a member of MetaStat’s
board of directors on substantially the same terms as other similarly situated
members of the board of directors as solely determined by MetaStat’s
compensation committee.
 
(e) ASET shall grant to MetaStat the right to participate in all future
financings of ASET in which ASET issues equity or securities convertible into
equity up to an amount that permits MetaStat to maintain its twenty percent
(20%) equity ownership interest in ASET (on a fully diluted, as converted
basis); provided, however, in the event MetaStat does not make a minimum
investment in a future financing of ASET equal to at least the lesser of (i)
$250,000 and (ii) an amount required to maintain its twenty percent (20%) equity
ownership interest in ASET (on a fully diluted, as converted basis), this
participation right shall terminate.

8.           Financial Obligations of Licensee.

(a)           Promptly upon execution of this MOU, NORTHSTAR shall invest
$250,000 in the Subsequent Financing.

(b)           Promptly upon execution of the License Agreement, NORTHSTAR (or
its affiliates)  shall invest an additional $250,000 in the Subsequent Financing
and shall invest an additional $750,000 in the Subsequent Financing (or a
separate financing on substantially similar terms) within 90 days of the date
thereof, but in no event later than 120 days following the execution of this
MOU.  In the event NORTHSTAR (or its affiliates) does not invest an aggregate of
$1.25 million in MetaStat by the end of such 120 day period, the License
Agreement shall terminate and the Assets shall automatically revert back to
MetaStat and Dr. Epstein shall again be subject to the same non-compete
agreement currently contained in his Advisory Agreement with MetaStat.

(c)           In consideration for the sale by Licensor of all of the equipment
located at Stony Brook (which are part of the Assets), Licensee shall issue to
Licensor a promissory note in the principal amount of $100,000 (it being
understood, however, that such amount represents the value for all such
equipment and in the event that Licensee determines that it does not need all
such equipment, then the Licensee shall have the right to sell or dispose of
such equipment and keep any proceeds therefrom).
 
  (d)           The financial obligations of the Licensee under the License
Agreement are as follows:
 
(i)           Milestone payments (one-time payment) received by Licensee from
Licensed Technology:
 
 
(A)
Ten (10%) percent of any first industry corporate milestone payment.

 
 
(B)
Sublicensing Revenue (on a product-by-product basis) from Licensed Technology:
ten percent (10%) of net Licensee payment less pro-rata development and ASET
therapeutics costs.

 
 
(C)
Proceeds from Sale of Licensed Technology: ten percent (10%) percent of net
proceeds  received by Licensee upon sale of the ASE drug discovery Technology
business to a third party.

 
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(D)
Upon a sale or sublicense of any product derived from the Licensed Technology,
MetaStat shall earn a milestone payment equal to ten percent of the sales
proceeds or license fee received by Licensee (less any ASET costs).

(ii)           Annual Royalties from Licensed Technology: one percent (1%) of
the net Licensee sales amount but in no event less than 0.75% of gross sales.

(iii)           It is expressly agreed and understood that the above payments
assume that the fees or milestone payments are generated by the sale or license
of exclusively the Licensed Technology and in the event that the Licensed
Technology is combined with any technology that is not the Licensed Technology,
then the payments due to Licensor hereunder shall be reduced pro-rata to reflect
the relative proportion that the Licensed Technology bears to the total licensed
product being sold or licensed.

 
(e)           With respect to the Companion Diagnostics, the financial
obligations of the Licensee are as follows:

(i)           For Products Developed Outside Licensor:  Annual Royalties from
Licensed Technology: one percent (1%) of the net Licensee sales amount but in no
event less than 0.75% of gross sales.
 
9.           Break-Up Fee; Failure to Enter into License Agreement.
 
(a)           The Parties intend for this MOU to be binding and NORTHSTAR has
agreed to make the initial equity investment in MetaStat under Section 8(a)
above in reliance upon the occurrence of a mutual execution of the License
Agreement within the time periods provided herein.  Accordingly, prior to
entering into the License Agreement, in the event MetaStat’s board of directors
(i) determines to pursue and fund its therapeutics program on its own, or (ii)
breaches Section 11(b) hereof, MetaStat shall promptly pay to the Licensee a
break-up fee in cash in immediately available funds in an amount equal to
$1,350,000.
 
 (b)           In the event the Parties fail to enter into the License Agreement
within forty-five (45) days of the date hereof after a reasonable good-faith
negotiation by the Parties, ASET shall be entitled, at its sole option, to
rescind all or a portion of its equity investment in MetaStat; provided,
however, in the event the Parties are in the process of good faith negotiations
at the end of such forty-five (45) day period, MetaStat shall have the right to
extend the period to finalize negotiation and execute the License Agreement for
an additional forty-five (45) days, and ASET shall not be entitled to rescind
all or a portion of its equity investment in MetaStat until the expiration of
such additional forty-five (45) day period.  In the event that any such
extension is granted hereunder, then the 90 day period set forth in Section 8(b)
shall also be extended by the same number of days.
 
10.           Continuation of SUNY Stony Brook operations.   MetaStat shall pay
for all on-going operations and expenses at SUNY Stony Brook from the date
hereof until the date of funding of MetaStat’s $1,000,000 preferred equity
investment in ASET, subject to a cap of $50,000 per full calendar month;
provided, however, that all payments made by MetaStat pursuant to this Section
10 shall be credited towards MetaStat’s $1,000,000 preferred equity investment
in ASET.  In the event of the failure to sign the License Agreement, MetaStat
alone shall be liable for all costs incurred in operating the lab at SUNY Stony
Brook.
 
11.           Other Matters; General Provisions.
 
(a)           Following execution of this MOU, the Parties will allow each other
to conduct such due diligence relating to the Assets as the Parties deem
necessary or desirable in order to effectuate the transactions contemplated
hereby.

 
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(b)           Until the date that is forty-five (45) days following the date
hereof, MetaStat, nor any of its officers, employees, directors, representatives
or affiliates shall directly or indirectly solicit, initiate, entertain or
accept any inquiries or proposals from, discuss or negotiate with, or consider
the merits of any unsolicited inquiries or proposals from, any person or entity
relating to any transaction involving the sale or transfer of the Assets,
including in connection with a merger or other business
combination.  Notwithstanding the immediately preceding sentence, in the event
the Parties are in the process of good faith negotiations at the end of such
forty-five (45) day period, and the Parties agree to extend the period to
execute the License Agreement, then these non-solicit provisions will remain in
force  until the License Agreement is signed and executed or this MOU is
terminated.
 
(c)           The License Agreement shall contain any provisions required
pursuant to the terms of the existing Alternative Splicing Therapeutic License
Agreement.
 
(d)           The prior written consent of the licensors under the Alternative
Splicing Therapeutic License Agreement shall have been obtained prior to the
execution of the License Agreement.
 
(e)           The License Agreement shall contain a provision requiring the
prior written consent of the Licensor with respect to any transfer or
collateralization of the Assets, such consent not to be unreasonably withheld.
 
(f)           The Parties shall use their best efforts to execute the License
Agreement and consummate the transactions contemplated hereby on commercially
reasonable terms within 45 days of the date hereof; provided, however, in the
event the Parties are in the process of good faith negotiations at the end of
such forty-five (45) day period, MetaStat shall have the right to extend the
period to finalize negotiation and execute the License Agreement for an
additional forty-five (45) days.
 
(g)           Each Party agrees to pay its own legal fees and expenses incurred
by such  Party in connection with the preparation, negotiation and execution of
the License Agreement and related transaction documents.
 
(h)           In the event that any one or more of the provisions of this MOU
shall be held invalid, illegal or unenforceable in any respect, or the validity,
legality and enforceability of any one or more of the provisions contained
herein shall be held to be excessively broad as to duration, activity or
subject, such provision shall be construed by limiting and reducing such
provision so as to be enforceable to the maximum extent compatible with
applicable law.
 
(i)           This MOU and the documents and instruments and other agreements
specifically referred to herein or delivered pursuant hereto: (i) constitute the
entire agreement among the Parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the Parties with respect to the subject matter hereof; (ii) are not intended to
confer upon any other person any rights or remedies hereunder, except as
specifically provided in this MOU; and (iii) shall not be assigned by operation
of law or otherwise except as otherwise specifically provided, including as
specifically provided in the first paragraph of this MOU.  No representations,
warranties, inducements, promises or agreements, oral or written, by or among
the Parties not contained herein shall be of any force of effect.  The MOU and
its rights and obligations hereunder may not be assigned without the explicit
prior written consent of the other Party, which may be withheld for any reason
or no reason.
 
(j)           This MOU shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the laws that might otherwise
govern under applicable principles of conflicts of law. Each of the Parties
hereto irrevocably consents to the exclusive jurisdiction of the federal court
for the Southern District of New York and the New York State Supreme Court
located in New York County, New York, in connection with any matter based upon
or arising out of this MOU or the matters contemplated herein, and also agrees
that process may be served upon them in any manner authorized by the laws of the
State of New York for such persons and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction and
such process.

 
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(k)           This MOU may be executed in several counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same agreement.  Delivery by fax or electronic image of an executed
counterpart of a signature page to the MOU shall be effective as delivery of an
original executed counterpart of this MOU.
 

[signature page follows]

 
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The parties have executed this MOU as of the date first above written.
 

  METASTAT, INC.           By:  /s/ Oscar L. Bronsther           Oscar L.
Bronsther M.D., Chief Executive Officer          
 
METASTAT BIOMEDICAL, INC.
          By: /s/ Oscar L. Bronsther          Oscar L. Bronsther M.D., Chief
Executive Officer          
 
NORTHSTAR BEACON, LLC
          By:  /s/ David M. Epstein           David M. Epstein, Ph.D.