a) Finance Lease Obligations

 

In 2015, the Company entered into an equipment finance lease to purchase three Tecan machines (automated liquid handling robots) for €550,454 Euros that matured in May 2020. As of June 30, 2020, the balance payable was $nil.

 

In 2016, the Company entered into a real estate finance lease with ING Asset Finance Belgium S.A. (“ING”) to purchase a property located in Belgium for €1.12 million Euros, maturing in May 2031. As of June 30, 2020, the balance payable was $619,808.

 

In 2018, the Company entered into a finance lease with BNP Paribas leasing solutions to purchase a freezer for the Belgium facility for €25,000 Euros, maturing in January 2022. The leased equipment is amortized on a straight-line basis over 5 years. As of June 30, 2020, the balance payable was $15,255.

 

The following is a schedule showing the future minimum lease payments under finance leases by years and the present value of the minimum payments as of June 30, 2020.

 

2020 - remaining		$	34,997
2021		$	69,993
2022		$	61,839
2023		$	60,427
2024		$	60,426
Greater than 5 years		$	445,634
Total		$	733,316
Less: Amount representing interest		$	(98,253	)
Present value of minimum lease payments		$	635,063

   

b) Operating Lease Right-of-Use Obligations

 

As all the existing leases subject to the new lease standard ASC 842 "Leases" were previously classified as operating leases by the Company, they were similarly classified as operating leases under the new standard. The Company has determined that the identified operating leases did not contain non-lease components and require no further allocation of the total lease cost. Additionally, the agreements in place did not contain information to determine the rate implicit in the leases, so we used our incremental borrowing rate as the discount rate. Our weighted average discount rate is 4.47% and the weighted average remaining lease term is 19 months.

 

As of June 30, 2020, operating lease right-of-use assets and liabilities arising from operating leases were $234,095 and $242,011, respectively. During the six months ended June 30, 2020, cash paid for amounts included for the measurement of lease liabilities was $116,541 and the Company recorded operating lease expense of $117,357.

 

The following is a schedule showing the future minimum lease payments under operating leases by years and the present value of the minimum payments as of June 30, 2020.

 

2020 - remaining		$	121,708
2021		$	77,664
2022		$	34,500
2023		$	16,886
2024		$	1,056
Total Operating Lease Obligations		$	251,814
Less: Amount representing interest		$	(9,803	)
Present Value of minimum lease payments		$	242,011

 

The Company’s office space leases are short term and the Company has elected under the short-term recognition exemption not to recognize them on the balance sheet. During the six months ended June 30, 2020, $10,737 was recognized in short-term lease costs associated with office space leases. The annual payments remaining for short-term office leases were as follows:

 

2020 - remaining		$	1,740
Total Operating Lease Obligations		$	1,740

 

c) Grants Repayable

 

In 2010, the Company entered into an agreement with the Walloon Region government in Belgium for a colorectal cancer research grant for €1.05 million Euros. Per the terms of the agreement, €314,406 Euros of the grant is to be repaid, by instalments over the period from June 30, 2014 to June 30, 2023. In the event that the Company receives revenue from products or services as defined in the agreement, it is due to pay a 6% royalty on such revenue to the Walloon Region. The maximum amount payable to the Walloon Region, in respect of the aggregate of the amount repayable of €314,406 Euros and the 6% royalty on revenue, is equal to twice the amount of funding received. As of June 30, 2020, the grant balance repayable was $137,519.

 

In 2018, the Company entered into an agreement with the Walloon Region government in Belgium for a colorectal cancer research grant for €605,000 Euros. Per the terms of the agreement, €181,500 Euros of the grant is to be repaid by instalments over 12 years commencing in 2020. In the event that the Company receives revenue from products or services as defined in the agreement, it is due to pay a 3.53% royalty on such revenue to the Walloon Region. The maximum amount payable to the Walloon Region, in respect of the aggregate of the amount repayable of €181,500 Euros and the 3.53% royalty on revenue, is equal to the amount of funding received. As of June 30, 2020, the grant balance repayable was $203,908.

 

As of June 30, 2020, the total grant balance repayable was $341,427 and the payments remaining were as follows:

 

2020 - remaining		$	52,915
2021		$	50,001
2022		$	47,298
2023		$	48,468
2024		$	20,391
Greater than 5 years		$	122,354
Total Grants Repayable		$	341,427

 

d) Long-Term Debt

 

In 2016, the Company entered into a 7-year loan agreement with Namur Invest for €440,000 Euros with a fixed interest rate of 4.85%, maturing in December 2023. As of June 30, 2020, the principal balance payable was $285,383.

 

In 2016, the Company entered into a 15-year loan agreement with ING for €270,000 Euros with a fixed interest rate of 2.62%, maturing in December 2031. As of June 30, 2020, the principal balance payable was $243,940.

 

In 2017, the Company entered into a 4-year loan agreement with Namur Invest for €350,000 Euros with a fixed interest rate of 4.00%, maturing in June 2021.As of June 30, 2020, the principal balance payable was $118,008.

 

In 2017, the Company entered into a 7-year loan agreement with SOFINEX for up to €1 million Euros with a fixed interest rate of 4.50%, maturing in September 2024.As of June 30, 2020, €1 million Euros has been drawn down under this agreement and the principal balance payable was $1,067,291. 

 

In 2018, the Company entered into a 4-year loan agreement with Namur Innovation and Growth for €500,000 Euros with a fixed interest rate of 4.00%, maturing in June 2022. As of June 30, 2020, the principal balance payable was $330,568.

 

In 2019, the Company entered into a 4-year loan agreement with Namur Innovation and Growth for €500,000 Euros with a fixed interest rate of 4.80%, maturing in September 2023. As of June 30, 2020, the principal balance payable was $561,732.

 

As of June 30, 2020, the total balance for long-term debt payable was $2,606,922 and the payments remaining were as follows:

 

2020 - remaining		$	479,678
2021		$	742,694
2022		$	623,184
2023		$	526,943
2024		$	328,193
Greater than 5 years		$	180,377
Total		$	2,881,069
Less: Amount representing interest		$	(274,147	)
Total Long-Term Debt		$	2,606,922

 

e) Collaborative Agreement Obligations

 

In 2015, the Company entered into a research sponsorship agreement with DKFZ in Germany for a 3-year period for €338,984 Euros.As of June 30, 2020, $84,260 is still to be paid by the Company under this agreement.

 

In 2016, the Company entered into a research co-operation agreement with DKFZ in Germany for a 5-year period for €400,000 Euros.As of June 30, 2020, $224,693 is still to be paid by the Company under this agreement.

 

In 2016, the Company entered into a collaborative research agreement with Munich University in Germany for a 3-year period for €360,000 Euros.As of June 30, 2020, $110,099 is still to be paid by the Company under this agreement.

 

In 2017, the Company entered into a clinical study research agreement with the University of Michigan for a 3-year period for up to $3 million. This agreement was amended in February 2020 to redefine a new clinical study. Pursuant to the terms of the amendment, the parties acknowledged that, although not fully-completed, the requirements of the original clinical study had been satisfied, including any and all payment obligations by the Company. Further, the Amendment provided that a new clinical study would be undertaken at no additional cost to the Company. As of June 30, 2020, up to $138,000 is still accrued by the Company for any additional expenses for the new clinical study.

 

In 2018, the Company entered into a research collaboration agreement with the University of Taiwan for a 3-year period for a cost to the Company of up to $2.55 million payable over such period. As of June 30, 2020, $1.28 million is still to be paid by the Company under this agreement.

 

In 2019, the Company entered into a research collaboration agreement with the University of Taiwan for a 2-year period to collect a total of 1,200 samples for a cost to the Company of up to $320,000 payable over such period. As of June 30, 2020, $160,000 is still to be paid by the Company under this agreement.

 

In 2019, the Company entered into a funded sponsored research agreement with the Texas A&M University System ("TAMU") in consideration for the license granted to the Company for a 5-year period for a cost to the Company of up to $400,000 payable over such period. As of June 30, 2020, $345,443 is still to be paid by the Company under this agreement. 

 

In 2019, the Company entered into a lyophilization study and a CE marking project including GMP validation and documentation with Biomerica Inc. for $160,000. As of June 30, 2020, $54,663 is still to be paid by the Company under this agreement.

 

As of June 30, 2020, the total amount to be paid for future research and collaboration commitments was approximately $2.39 million and the annual payments remaining were as follows:

 

2020 - remaining		$	1,098,624
2021 - 2024		$	1,293,534
Total Collaborative Agreement Obligations		$	2,392,158

 

f) Other Commitments

 

Volition Vet

 

On August 7, 2019, the Company entered into a consulting services agreement with Novis Animal Solutions LLC, to provide chief executive officer services for Volition Vet in exchange for payment of consultancy fees and a potential equity interest of up to 5% in Volition Vet upon achievement of revenue milestones. The term of the contract is perpetual and terminable on 2 months’ written notice from either party. As of June 30, 2020, Novis Animal Solutions LLC has no equity interest in Volition Vet.

 

On October 25, 2019, the Company entered into an agreement with TAMU for provision of in kind services of personnel, animal samples and laboratories equipment in exchange for a non-controlling interest of 7.5% in Volition Vet and for a further 5%, effective October 25, 2020, giving them in total a 12.5% equity interest as of such date. As of June 30, 2020, TAMU has a 7.5 % equity interest in Volition Vet.

 

Volition Germany

 

On January 10, 2020, the Company, through its wholly-owned subsidiary Belgian Volition, acquired an epigenetic reagent company, Octamer GmbH ("Octamer"), based in Munich, Germany, and hired its founder for his expertise and knowledge to be passed to Company personnel. On March 9, 2020, Octamer was renamed to Volition Germany GmbH (or “Volition Germany”).

 

Upon considering the definition of a business, as defined in ASC 805 "Business Combinations," paragraph 805-10-20, which is an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return, the Company has determined that this did not constitute a business. This is primarily due to the fact that additional inputs are needed in the form of training personnel further to produce outputs. Accordingly, the Company has treated this transaction as the hiring of a member of management and acquisition of assets.

 

The Company agreed to terms of the transaction on December 13, 2019 and closed on January 10, 2020. Pursuant to the transaction agreement, the Company purchased all outstanding shares of Octamer. In exchange, the Company agreed to issue 73,263 newly-issued restricted shares of Company common stock valued at $333,969 (based on the $4.56 per share volume weighted trading price for the five days prior to December 13, 2019), committed to pay approximately €350,000 Euros, subject to adjustments, and agreed to pay off certain Octamer expenses leading up to the agreement (representing net liabilities of $6,535). At closing, the Company issued 73,263 restricted shares of Company common stock, paid an adjusted amount of approximately $357,000 (€321,736 Euros) and recorded a holdback liability of $55,404 (€50,000 Euros) to be paid after the holdback period of 9 months following the closing (subject to offset for breaches of representations and warranties).  

 

In connection with the transaction agreement, the Company also entered into a 2-year Managing Director’s agreement with the founder of Octamer for a payment of €288,000 Euros payable in equal monthly installments over such 2-year period and a royalty agreement with the founder providing for the payment of royalties in the amount of 6% of net sales of Octamer’s nucleosomes as reagents to pharmaceutical companies for use in the development, manufacture and screening of molecules for use as therapeutic drugs for a period of 5 years post-closing.

 

The Company recorded approximately $753,000 in compensation expense as a result of cash paid, holdback liability, stock issued and assumption of expenses. As of June 30, 2020, $242,667 is still to be paid by the Company under the Managing Director’s agreement, and $88 is payable under the 6% royalty agreement.

 

g) Legal Proceedings

 

There are no legal proceedings which the Company believes will have a material adverse effect on its financial position.