Commitments and Contingencies |
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| Commitments and Contingencies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Note 8 - Commitments and Contingencies |
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 September 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 September 30, 2020, the balance payable was $635,130.
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 September 30, 2020, the balance payable was $13,575.
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 September 30, 2020.
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 4.48% and the weighted average remaining lease term is 24 months.
As of September 30, 2020, operating lease right-of-use assets and liabilities arising from operating leases were $257,903 and $266,101, respectively. During the nine months ended September 30, 2020, cash paid for amounts included for the measurement of lease liabilities was $184,769 and the Company recorded operating lease expense of $185,077.
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 September 30, 2020.
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 nine months ended September 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:
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 installments 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 September 30, 2020, the grant balance repayable was $102,473.
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 installments 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 September 30, 2020, the grant balance repayable was $212,786.
As of September 30, 2020, the total grant balance repayable was $315,259 and the payments remaining were as follows:
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 September 30, 2020, the principal balance payable was $284,741.
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 September 30, 2020, the principal balance payable was $249,887.
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 September 30, 2020, the principal balance payable was $102,962.
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 September 30, 2020, €1 million Euros has been drawn down under this agreement and the principal balance payable was $1,055,139.
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 September 30, 2020, the principal balance payable was $317,254.
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 September 30, 2020, the principal balance payable was $586,189.
As of September 30, 2020, the total balance for long-term debt payable was $2,596,172 and the payments remaining were as follows:
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 September 30, 2020, $87,928 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 September 30, 2020, $234,475 is still to be paid by the Company under this agreement.
In 2017, the Company entered into a collaborative research agreement with Munich University in Germany for a 3-year period for€360,000 Euros. As of September 30, 2020, $0 is still to be paid by the Company under this agreement.
In 2017, the Company entered into a clinical study research agreement with the Universityof 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 September 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 September 30, 2020, $892,500 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 September 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 (“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 September 30, 2020, $329,986 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 September 30, 2020, $54,663 is still to be paid by the Company under this agreement.
On September 16, 2020, the Company entered into a research agreement for the bioinformatic analysis of cell-free DNA fragments from whole-genome sequencing with the Hebrew University of Jerusalem for 6 months for a cost to the Company of €54,879 Euros. As of September 30, 2020, $64,338 is still to be paid by the Company under this agreement.
As of September 30, 2020, the total amount to be paid for future research and collaboration commitments was approximately $1.96 million and the annual payments remaining were as follows:
f) Other Commitments
Volition Vet
On August 15, 2020, the Company entered into a consulting services agreement with Novis Animal Solutions LLC ("Novis"), to provide chief commercial officer services for Volition Vet in exchange for; payment of consultancy fees, 5% sales commission on third party sales capped at $20,000 per quarter and a potential equity interest of up to 2% in Volition Vet upon achievement of revenue milestones. The agreement superceded the existing consulting services agreement between the parties dated August 7, 2019 which terminated and is of no further effect. The term of the contract is perpetual and terminable on 2 months’ written notice from either party. As of September 30, 2020, Novis 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 laboratory equipment in exchange for a non-controlling interest of 7.5% in Volition Vet, with an additional 5%, vesting a year from the date of the agreement, giving TAMU in aggregate, a 12.5% equity interest as of such date. As of September 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, described below, rather than accounting for the transaction as a business combination.
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 to continue to manage Volition Germany 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 Volition Germany’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 September 30, 2020, $211,028 is still to be paid by the Company under the Managing Director’s agreement and $229 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. |