Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

v3.24.1.1.u2
Commitments and Contingencies
3 Months Ended
Mar. 31, 2024
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
13.
Commitments and Contingencies

Litigation

On April 26, 2024, the Company received a notice of a demand for arbitration with the American Arbitration Association from Pivot Holding LLC (“Pivot”), that alleges to be a successor in interest to Sphaera Pharma Pte. Ltd. (“Sphaera”), in connection with the Collaborative Research and Development Agreement dated February 29, 2012, as amended, between the Company and Sphaera. Pivot alleges breach of contract by the Company for failure to pay milestone payments and seeks damages of $1.625 million in milestone payments plus interest. The Company believes that Pivot’s claims are without merit and that the Company hasn’t owed and doesn’t owe any milestone payments to Pivot. The Company intends to vigorously dispute Pivot’s claims. The Company’s response to the demand for arbitration is due by June 17, 2024. The parties have agreed to mediate before arbitration.

Lease

On April 18, 2022, the Company entered into an operating lease agreement for office space at its new location in Lexington, Massachusetts (the "Office Lease"). On August 8, 2022, the Company commenced occupancy of the leased space. The lease runs through September 30, 2025. We have an option to extend the lease term for an additional three (3) years thereafter.

The Company accounts for the Office Lease under the provisions of ASU No. 2021-09, ASU 2018-10, and ASC 842. We recorded a right-of-use asset and a corresponding operating lease liability on the Company's condensed consolidated balance sheets upon the accounting commencement date in August 2022. The lease liability was measured at the accounting commencement date utilizing a 12% discount rate. The right-of-use asset had a balance of $193,460 at March 31, 2024. The operating lease obligations totaled $209,489 at March 31, 2024, of which $151,159 is included under current liabilities and $58,330 is included under non-current liabilities. The Company recorded lease expense of $35,296 for the three months ended March 31, 2024 included in selling, general and administrative expenses. The Company recorded lease expense relating to the Office Lease of $35,296 and other short-term

payments of $5,653 for the three months ended March 31, 2024 and lease expense relating to the Office Lease of $35,296 and short-term payments of $5,788 for the three months ended March 31, 2023 in selling, general and administrative expenses.

The Office Lease contains escalating payments during the lease period. Upon execution of the Office Lease, the Company prepaid one month of rent and a security deposit, one of which will be held in escrow and credited at the termination of the lease and the other of which will be applied to the first month’s rent.

As of March 31, 2024, a security deposit of approximately $25,000 was included in prepaid expenses and other current assets on the Company’s condensed consolidated balance sheet related to the Office Lease.

Future minimum lease payments under these leases at March 31, 2024, are presented by calendar year as follows:

 

Year

 

 

 

2024

 

$

112,837

 

2025

 

 

114,966

 

Total lease payments

 

 

227,803

 

Less: imputed interest

 

 

(18,314

)

Present value of operating lease liabilities

 

$

209,489