License Agreement
Effective March 15, 2018, the Company entered into an exclusive worldwide license agreement with UCL Business, PLC (UCL
Business), to develop up to eight programs using certain ocular gene therapy technology. Under the terms of the agreement, the Company has agreed to pay UCL Business certain sales milestone payments, if achieved, in the aggregate amount of
£39.8 million, or approximately $51.9 million using the exchange rate at September 30, 2018, and royalties on net sales, as defined upon commercialization. Additionally, the Company is responsible for all patent prosecution and
maintenance costs incurred and has also agreed to pay UCL Business an annual maintenance fee of £50,000, or approximately $66,000, until the first commercial sale of a product. The agreement will terminate upon the later of (i) the last
valid claim in a relevant product, (ii) the expiration of regulatory exclusivity to all licensed products, or (iii) the 10
th
anniversary of the first commercial sale of a product.
The Company did not incur any research and development expenses under the agreement during the three-month and nine-month periods ended
September 30, 2018 and 2017.
Leases
December 2016 Lease
Effective December 15, 2016, the Company entered into a
non-cancellable
operating lease with ARE,
expiring on October 31, 2032, for laboratory and office facilities in New York. ARE is an entity that is under common control by an entity that is a minority shareholder of the Company and whose CEO is a director of the Company. The lease
provided for monthly base rent, including rent escalations, property management fees and rent holidays, plus operating expenses during the lease term. The Company recorded monthly rent expense on a straight-line basis from December 15, 2016
through October 31, 2032. On October 26, 2017, the lease was amended, whereby the lease would terminate on March 31, 2018 and only base rent and management fees in the aggregate amount of $563,507 would be due from November 1,
2017 through March 31, 2018. Under the amendment, the Company issued a note to ARE in the amount of $1,442,009, removed the balance of the deferred rent and accrued the future rent payments, all of which were recorded as rent expense at the
time of the amendment, in accordance with ASC 420, Exit and Disposal Activities, as the Company had a cease use date as of the date of the amendment. The balance of deferred lease obligation, representing the difference between cash rent paid and
straight-line rent expense, was $0 as of December 31, 2017 and September 30, 2018.
Total rent expense under this operating lease
was $0 and $390,903 for the three-month periods ended September 30, 2018 and 2017, respectively.
Total rent expense under this
operating lease was $0 and $1,172,709 for the nine-month periods ended September 30, 2018 and 2017, respectively.
On October 26,
2017, in connection with the amendment to the lease, the Company issued a promissory note in the amount of $1,442,009 to ARE. The note accrued interest at the rate of 5% per annum and was due on December 31, 2018. However, if the Company had
sufficient liquidity, as defined in the note, then the note, including accrued interest, would become due and payable at that time. In accordance with the sufficient liquidity provision, the Company repaid the note, plus accrued interest, in the
aggregate amount of $1,472,433 during the three-month period ended March 31, 2018.
The Company recorded interest expense of $0 and
$30,424 for the three-month and nine-month periods ended September 30, 2018.
July 2016 Lease
Effective July 1, 2016, the Company entered into a
non-cancellable
operating lease for laboratory
and related office facilities in New York with ARE. The lease provides for monthly base rent and property management fees, including rent escalations and rent holidays, plus operating expenses during the lease term, which expires on
December 31, 2021. The Company records monthly rent expense on a straight-line basis from July 1, 2016 through December 31, 2021. As of September 30, 2018 and December 31, 2017, the balance of deferred rent, representing the
difference between cash rent paid and straight-line rent expense, was $210,993 and $231,276, respectively.
Total rent expense under this
operating lease was $121,888 and $121,889 for the three-month periods ended September 30, 2018 and 2017, respectively.
Total rent
expense under this operating lease was $365,668 and $365,669 for the nine-month periods ended September 30, 2018 and 2017, respectively.
As of September 30, 2018, the aggregate future minimum rental payments under this lease are $1,795,570.
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