General form of registration statement for all companies including face-amount certificate companies

Commitments and Contingencies

v3.19.3.a.u2
Commitments and Contingencies
3 Months Ended 12 Months Ended
Sep. 30, 2019
Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]    
Commitments and Contingencies

NOTE 7 – COMMITMENTS AND CONTINGENCIES

 

Legal Matters

 

A complaint against us, dated September 26, 2019, has been filed by Foley Shechter Ablovatskiy (“Foley Shechter”), our former counsel, seeking $150,000 for legal fees, among other fees. The Company believes these claims to be unfounded and the Company is continuing to vigorously defend itself against this lawsuit and is preparing to file an answer with the Supreme Court of the State of New York County of New York, together with counterclaims against the plaintiff, including, without limitation, malpractice claims, arising out of Foley Shechter’s grossly negligent mishandling of the matter and excessive billing. Certain amounts related to this claim are included in accounts payable and accrued expenses in the accompanying Financial Statements.

 

We have received a demand letter, dated October 10, 2019, from Regal Consulting, LLC (“Regal”), our former consultant. Notwithstanding the termination of our agreement with Regal, Regal is demanding approximately $400,000 and 60,000 shares of our common stock as payment for services that Regal purports to have performed, even though no timely invoices were sent and no descriptions of the services were ever provided. The Company is continuing to vigorously defend itself against Regal’s unsubstantiated claims and no loss contingency can be estimated at this time.

 

In addition to the above, from time to time, we may be involved in litigation in the ordinary course of business. Other than as set forth above, we are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. Other than as set forth above, to our knowledge, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or any of our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

IRS Liability

 

As part of its requirement for having a foreign operating subsidiary, the Company is required to file an informational Form 5471 to the Internal Revenue Service (the “IRS”), which is a form that explains the nature of the relationship between the foreign subsidiary and the parent company. From 2012 through the 2014, the Company did not file this form in a timely manner. As a result of the non-timely filings, the Company incurred a penalty from the IRS in the amount of $10,000 per year, or $30,000 in total, plus accrued interest, such penalty and interest having been accrued and is included in the Accrued expenses and other payable figure in the Balance Sheet. The Company recorded the penalties for all three years during the year ended June 30, 2018 and is negotiating a payment plan. The Company is current on all subsequent filings.

 

Operating Agreements

 

In November 2009, the Company entered into a commercialization agreement with the University of Bath (UK) (the “University”) whereby the Company and the University co-owned the intellectual property relating to the Company’s pro-enzyme formulations. In June 2012, the Company and the University entered into an assignment and amendment whereby the Company assumed full ownership of the intellectual property while agreeing to pay royalties of 2% of net revenues to the University. Additionally, the Company agreed to pay 5% of each and every license agreement subscribed for. The contract is cancellable at any time by either party. To date, no amounts are owed under the agreement.

 

Operating Leases

 

On May 5, 2016, the Company entered into a new five-year operating lease agreement with a Horizon Pty Ltd., a related party, of which Mr. Nathanielsz, our CEO, CFO and a director, and his wife are owners and directors, with monthly rent of $3,606 AUD or $2,472 USD, inclusive of GST (See Note 8 – Related Party Transactions).

 

ROU is summarized below:

 

    September 30, 2019  
Office lease ROU   $ 46,696  
Less accumulated reduction     (6,367 )
Balance of ROU asset as of September 30, 2019   $ 40,329  

 

Operating lease liability related to the ROU asset is summarized below:

 

    September 30, 2019  
Office lease liability   $ 46,696  
Reduction of lease liability     (5,403 )
Total     41,293  
Less: current portion     (19,132 )
Long term portion of lease liability as of September 30, 2019   $ 22,161  

 

Future Minimum lease payments under non-cancelable operating lease at September 30, 2019 are as follows:

 

Remainder Fiscal Year 2020   $ 20,036  
Year 2021     22,778  
Total     42,814  
Imputed interest     (1,521 )
Total operating lease liability   $ 41,293  

 

Amatsigroup Agreement

 

The Company entered into a Manufacturing Services Agreement (the “MSA”) and Quality Assurance Agreement (the “QAA”), each with an effective date of August 12, 2016, with Amatsigroup NV (“Amatsigroup”), formerly known as Q-Biologicals, NV, a contract manufacturing organization located in Belgium. Pursuant to the MSA, Amatsigroup produces certain drug substances and products containing certain enzymes for the Company at its facility in Belgium. The Company uses these substances and products for development purposes, including but not limited to future clinical trials. The MSA contemplates payment to Amatsigroup pursuant to a pre-determined fee schedule based on the completion of certain milestones that depend on our manufacturing requirements and final batch yield. The Company anticipates that its payments to Amatsigroup under the MSA will range between $2.5 million and $5.0 million over three years, when the finished drug product is manufactured and released for clinical trials. The Company has spent a total of $1,689,146 of costs to date under this contract of which $1,689,146 was expensed in prior years. The MSA shall continue for a term of three years unless extended by mutual agreement in writing. The Company can terminate the MSA early for any reason upon the required notice period, however, in such event, the pre-payment paid upon signing the MSA is considered non-refundable. Each party to the MSA shall have the right to terminate the MSA by written notice to the other party if the other party commits a material breach of the MSA (subject to a 30-day cure period). The QAA sets forth the parties respective obligations and responsibilities relating to the manufacturing and testing of the products under the MSA. The agreements with Amatsigroup contain certain customary representations, warranties and limitations of liabilities, and confidentiality and indemnity obligations.

 

Collaboration Agreement

 

On September 13, 2018, the Company entered into a two-year collaboration agreement with the University of Jaen (the “University”) to provide certain research services to the Company. In consideration of such services, the Company agreed to pay the University approximately 52,000 Euros ($59,508 USD) in year one and a maximum of 40,000 Euros ($45,775 USD) in year two. Additionally, in exchange for full ownership of the intellectual property the Company agreed to pay royalties of 2% of net revenues to the University.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

 

Legal Matters

 

A complaint against us, dated September 26, 2019, has been filed by Foley Shechter Ablovatskiy (“Foley Shechter”), our former counsel, seeking $150,000 for legal fees, among other fees. The Company believes these claims to be unfounded and the Company is continuing to vigorously defend itself against this lawsuit and is preparing to file an answer with the Supreme Court of the State of New York County of New York, together with counterclaims against the plaintiff, including, without limitation, malpractice claims, arising out of Foley Shechter’s grossly negligent mishandling of the matter and excessive billing. Certain amounts related to this claim are included in accounts payable and accrued expenses in the accompanying Financial Statements.

 

We have received a demand letter, dated October 10, 2019, from Regal Consulting, LLC (“Regal”), our former consultant. Notwithstanding the termination of our agreement with Regal, Regal is demanding approximately $400,000 and 60,000 shares of our common stock as payment for services that Regal purports to have performed, even though no timely invoices were sent and no descriptions of the services were ever provided. The Company is continuing to vigorously defend itself against Regal’s unsubstantiated claims and no loss contingency can be estimated at this time.

 

In addition to the above, from time to time, we may be involved in litigation in the ordinary course of business. Other than as set forth above, we are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. Other than as set forth above, to our knowledge, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or any of our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

IRS Liability

 

As part of its requirement for having a foreign operating subsidiary, the Company is required to file an informational Form 5471 to the Internal Revenue Service (the “IRS”), which is a form that explains the nature of the relationship between the foreign subsidiary and the parent company. From 2012 through the 2014, the Company did not file this form in a timely manner. As a result of the non-timely filings, the Company incurred a penalty from the IRS in the amount of $10,000 per year, or $30,000 in total, plus accrued interest. The Company recorded the penalties for all three years during the year ended June 30, 2018 and is negotiating a payment plan. The Company is current on all subsequent filings.

 

Operating Agreements

 

In November 2009, the Company entered into a commercialization agreement with the University of Bath (UK) (the “University”) whereby the Company and the University co-owned the intellectual property relating to the Company’s pro-enzyme formulations. In June 2012, the Company and the University entered into an assignment and amendment whereby the Company assumed full ownership of the intellectual property while agreeing to pay royalties of 2% of net revenues to the University. Additionally, the Company agreed to pay 5% of each and every license agreement subscribed for. The contract is cancellable at any time by either party. To date, no amounts are owed under the agreement.

 

Operating Leases

 

On May 4, 2016, the Company entered into a new five-year operating lease agreement with a Horizon Pty Ltd., a related party, of which Mr. Nathanielsz, our CEO and a director, and his wife are owners and directors, with monthly rent of $3,300 AUD or $2,325 USD, inclusive of GST (See Note 10 – Related Party Transactions).

 

Future minimum operating lease commitments consisted of the following at June 30, 2019:

 

Fiscal Year Ended June 30,   Amount
(USD)
 
2020   $ 27,756  
2021   $ 25,443  

 

Rent expense for the fiscal year ended June 30, 2019 and 2018 was $28,062 and $30,521, respectively.

 

Amatsigroup Agreement

 

The Company entered into a Manufacturing Services Agreement (the “MSA”) and Quality Assurance Agreement (the “QAA”), each with an effective date of August 12, 2016, with Amatsigroup NV (“Amatsigroup”), formerly known as Q-Biologicals, NV, a contract manufacturing organization located in Belgium. Pursuant to the MSA, Amatsigroup produces certain drug substances and products containing certain enzymes for the Company at its facility in Belgium. The Company uses these substances and products for development purposes, including but not limited to future clinical trials. The MSA contemplates payment to Amatsigroup pursuant to a pre-determined fee schedule based on the completion of certain milestones that depend on our manufacturing requirements and final batch yield. The Company anticipates that its payments to Amatsigroup under the MSA will range between $2.5 million and $5.0 million over three years, when the finished drug product is manufactured and released for clinical trials. The Company has spent a total of $1,689,146 of costs to date under this contract of which $1,639,192 was expensed in prior years and $49,854 was expensed in the year ended June 30, 2019. The MSA shall continue for a term of three years unless extended by mutual agreement in writing. The Company can terminate the MSA early for any reason upon the required notice period, however, in such event, the pre-payment paid upon signing the MSA is considered non-refundable. Each party to the MSA shall have the right to terminate the MSA by written notice to the other party if the other party commits a material breach of the MSA (subject to a 30-day cure period). The QAA sets forth the parties’ respective obligations and responsibilities relating to the manufacturing and testing of the products under the MSA. The agreements with Amatsigroup contain certain customary representations, warranties and limitations of liabilities, and confidentiality and indemnity obligations.

 

Investment Banking Agreements

 

On February 23, 2018, the Company entered into an agreement with an effective date of February 14, 2018 with a certain investment bank, pursuant to which the Company retained the investment bank as its placement agent. As of December 31, 2018, no funds have been raised pursuant to this agreement and the agreement expired on its terms.

 

On February 4, 2019, the Company entered into an agreement with a certain investment bank (the “Investment Bank”), pursuant to which the Company retained the Investment Bank as its exclusive placement agent through May 31, 2019. In the event of the closing of an offering during such period (or the tail period after, if applicable) the Investment Bank would receive a percentage of the proceeds in cash and a percentage of the shares of common stock issued by the Company in the offering as warrants. As of June 30, 2019, no funds have been raised pursuant to this agreement.

 

Collaboration Agreement

 

On September 13, 2018, the Company entered into a two-year collaboration agreement with the University of Jaén (the “University”) to provide certain research services to the Company. In consideration of such services, the Company agreed to pay the University approximately 52,000 Euros ($59,508 USD) in year one and a maximum of 40,000 Euros ($45,775 USD) in year two. Additionally, in exchange for full ownership of the intellectual property the Company agreed to pay royalties of 2% of net revenues to the University.