CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
Below we describe transactions since January 1, 2018 to which we have been or are a participant, including currently proposed transactions, in which the amount involved in the transaction exceeds $120,000 and in which any of our directors, executive officers or beneficial holders of more than 5% of any class of our capital stock, or any immediate family member of, or person sharing the household with any of these individuals, had or has a direct or indirect material interest.
Arrangement with Dr. LaBelle
Dr. LaBelle entered into a consulting agreement with us on July 6, 2017 through Cura Partners to provide consulting services not to exceed two days a week. Dr. LaBelle is entitled to receive $9,567 per month and $250 per hour for any additional work, for advisory services performed by Dr. LaBelle. During the year ended December 31, 2018, we incurred $162,929 in expenses related to this agreement.
Arrangements with Mr. Clauson
Luke Clauson, our Vice President of Research and Development and Manufacturing, is the sole owner and President of Innovative Drive Corporation (“IDC”), which performs contract engineering services for the Company. During the year ended December 31, 2018, we recognized research and development expenses of $863,555 related to services provided to the Company by IDC. As of December 31, 2018, the Company had a liability of $100,667 to IDC and no liability related to expenses incurred by Mr. Clauson.
In addition, the Company entered into a lease agreement with a company owned by Mr. Clauson on September 15, 2016 to lease approximately 1,000 square feet of space located in Reno, NV with respect to the Company’s research and development activities. The monthly base rent was $3,895 per month over the term of the lease and the security deposit was $3,895. On September 15, 2018, the Company extended the lease for an additional 2-year period with an increase of the monthly base rent and security deposit to $4,012. The Company made $40,000 of leasehold improvements related to this lease in 2017 and the Company’s rent expense for its space in Reno, NV was $47,270 for the year ended December 31, 2018.
License Agreement with Senju Pharmaceuticals Co., Ltd.
During 2015, the Company entered into a license agreement with Senju Pharmaceuticals Co., Ltd. (“Senju”) whereby the Company agreed to grant to Senju an exclusive, royalty-bearing license for its micro-dose product candidates for Asia to sublicense, develop, make, have made, manufacture, use, import, market, sell, and otherwise distribute the micro-dose product candidates. In consideration for the license, Senju agreed to pay to the Company five percent (5%) royalties for the term of the license agreement. The agreement shall continue in full force and effect, on a country-by-country basis, until the latest to occur of: (i) the tenth (10
th
) anniversary of the first commercial sale of a microdose product candidate in Asia; or (ii) the expiration of the licensed patents. As of the date of this filing, there had been no commercial sales of a micro-dose product candidate in Asia such that no royalties had been earned. Mr. Yoshida, a member of the Company’s Board of Directors, is the Executive Vice President and Chief Operating Officer at Senju and Mr. Yoshida’s family owns Senju. Senju and Mr. Yoshida collectively own greater than 5% of the Company’s common stock.
Participation in Initial Public Offering
Certain of our directors, executive officers and beneficial holders of more than 5% of our common stock, including, Drs. Eshelman, Ianchulev and LaBelle and Senju purchased an aggregate of 455,000 shares of our common stock at the public offering price of $10.00 per share in our initial public offering of January 2018.
Indemnification Agreements
Our third amended and restated certificate of incorporation and our amended and restated bylaws provide that we shall indemnify our directors and officers to the fullest extent permitted by law. We also maintain a directors’ and officers’ liability insurance policy. The policy insures directors and officers against unindemnified losses arising from certain wrongful acts in their capacities as directors and officers and reimburses us for those losses for which we have lawfully indemnified the directors and officers. The policy contains various exclusions.