CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
Below we describe transactions since January 1, 2019 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, 2019, we incurred $213,521 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, 2019, we recognized research and development expenses of $851,746 related to services provided to the Company by IDC. As of December 31, 2019, the Company had a liability of $89,052 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’s rent expense for its space in Reno, NV was $48,144 for the year ended December 31, 2019.
License Agreement with Senju Pharmaceutical Co., Ltd.
During 2015, the Company entered into a license agreement with Senju Pharmaceutical 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 (10th) 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.
In April 2020, the Company entered into an amendment to the license agreement with Senju, pursuant to which, the Company can license to any third party the right to research, develop, commercialize, manufacture or use micro-dose product candidates previously licensed to Senju in China (including Hong Kong, Macao, and Taiwan) and South Korea, if such a license is executed by the Company by April 8, 2021. In consideration for the license amendment, the Company must pay Senju (a) close to a mid-double digit percentage of revenue on any lump-sum payments the Company receives from the third party, revenue (net of costs) obtained by the Company from contract research and/or development of such products in the territory, and revenue (net of costs) obtained by the Company from contract manufacture for the device of such products in the territory, the aggregate of which must be at least a high seven figure dollar amount minimum payment to Senju; and (b) a lower-double digit percentage of any sales royalty revenue the Company receives from the third party. Unless a third-party license is executed by the Company prior to April 8, 2021, the license amendment terminates on April 8, 2021, but may be terminated earlier by Senju upon the Company’s material breach of the license amendment, subject to a 60-day cure period.
Mr. Yoshida, a member of the Company’s Board of Directors until June 25, 2019, is the President of Senju and Mr. Yoshida’s family owns Senju. Senju and Mr. Yoshida collectively own greater than 5% of the Company’s common stock.