COMMITMENTS AND CONTINGENCIES
|9 Months Ended|
Dec. 31, 2021
|Commitments and Contingencies Disclosure [Abstract]|
|COMMITMENTS AND CONTINGENCIES||
12. COMMITMENTS AND CONTINGENCIES
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
On September 29, 2021, we entered into an agreement with PPD, Inc., a leading global contract research organization, for PPD to oversee our clinical studies investigating the Hemopurifier (the PPD Agreement). Pursuant to the PPD Agreement, PPD agreed to manage our ongoing study of the Hemopurifier for patients who are critically ill with COVID-19 (NCT04595903), with the option for the parties to agree to include additional studies under the PPD Agreement. The agreement has a five year term, but may be extended by mutual agreement. The PPD Agreement also may be terminated by Aethlon without cause upon 30 days’ prior written notice and may be terminated by either party following notice for breach or insolvency of the other party.
On October 30, 2020, we entered into a Separation Agreement with Timothy Rodell, M.D., our former Chief Executive Officer, or the Separation Agreement. Under the Separation Agreement, we agreed to pay Dr. Rodell a total cash amount of $444,729 and agreed to cover his medical insurance costs over a twelve-month period that began on November 1, 2020, all in accordance with the terms of his employment agreement with the Company. All of those contractually agreed payments have been completed as of December 31, 2021 (see Note 7).
Previous Office and Lab Leases
In September 2021, our lease of approximately 2,600 square feet of our previous executive office space at 9635 Granite Ridge Drive, Suite 100, San Diego, California 92123 expired.
Through December 31, 2021, we rented approximately 1,700 square feet of laboratory space at 11585 Sorrento Valley Road, Suite 109, San Diego, California 92121, at the rate of $6,148 per month on a one-year lease that originally was to expire on November 30, 2020. In December 2020, we entered into a short-term lease extension running from December 1, 2020 through the completion date of our construction of our new laboratory space which is adjacent to our current laboratory.
New Office and Lab Leases
In December 2020, we entered into an agreement to lease approximately 2,823 square feet of office space and 1,807 square feet of laboratory space. The agreement carries a term of 63 months and we took possession of the office space effective October 1, 2021. We took possession of the lab space effective January 1, 2022 (see Note 13).
On October 1, 2021, we recorded a $343,633 right-of-use lease asset and associated lease liability related to the office space component of the lease based on the present value of lease payments over the expected lease term of 63 months, discounted using our estimated incremental borrowing rate of 4.25%. The current monthly base rent under the office component of the lease is $6,121. As of our December 31, 2021 consolidated balance sheet, we have a right-of-use lease asset of $328,869.
During the three months ended March 31, 2022, we will record a $400,797 right-of-use lease asset and associated lease liability related to the lab space component of the lease based on the present value of lease payments over the expected lease term of 60 months, discounted using our estimated incremental borrowing rate of 4.25%. The initial monthly base rent under the lab component of the lease is $7,456.
In addition, the new lease agreement of the new office and lab required us to post a standby letter of credit in favor of the landlord in the amount of $46,726 in lieu of a security deposit. We arranged for our bank to issue the standby letter of credit in the fiscal year ended March 31, 2021 and transferred a like amount to a restricted certificate of deposit which secured the bank’s risk in issuing that letter of credit. We have classified that restricted certificate of deposit on our balance sheet as restricted cash.
Manufacturing Space Lease
In October 2021, we entered into another lease for an initial period of 58 months for (i) approximately 22,260 square feet of space located at 11588 Sorrento Valley Road, San Diego, California 92121 (the “Building”), and (ii) 2,655 square feet of space located in the Building and commonly known as Suite 18 to house our manufacturing operations. That manufacturing space is located at 11588 Sorrento Valley Road, San Diego, California 92121 and it is near our new lab and office locations. We anticipate that the landlord will complete construction on this new space in the second or third quarter of 2022 and we will take occupancy at that time. The initial base rent for the manufacturing space will be $12,080 per month.
Based on the assumptions that we used to calculate the right-of-use lease asset for the new office and lab spaces, we estimate that we will record a right- of- use lease asset of $614,240 and associated lease liability for the manufacturing space lease when we take possession of that space.
The lease for the manufacturing space also required us to post a standby letter of credit in favor of the landlord in the amount of $40,780 in lieu of a security deposit. We arranged for our bank to issue the standby letter of credit in October 2021 and transferred a like amount to a restricted certificate of deposit which secured the bank’s risk in issuing that letter of credit. We have classified that restricted certificate of deposit on our balance sheet as restricted cash.
Mobile Clean Room
In addition, we rent a mobile clean room on a short term, month-to-month basis, where we will house our manufacturing operations until our permanent manufacturing space is completed. The mobile clean room is located on leased land near our office and lab and we pay $2,000 per month for the right to locate it there. We paid approximately $119,000 in rent expense to lease the mobile clean room located on this space during the nine months ended December 31, 2021.
Overall, our rent expense, which is included in general and administrative expenses, approximated $288,000 and $144,000 for the nine month periods ended December 31, 2021 and 2020, respectively.
From time to time, claims are made against us in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages, fines, penalties or injunctions prohibiting us from selling one or more products or engaging in other activities.
The occurrence of an unfavorable outcome in any specific period could have a material adverse effect on our results of operations for that period or future periods. We are not presently a party to any pending or threatened legal proceedings.
The entire disclosure for commitments and contingencies.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef