Commitments And Contingencies |
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Commitments And Contingencies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments And Contingencies | 2. COMMITMENTS AND CONTINGENCIES
Coronavirus Aid, Relief, and Economic Security (CARES) Act and Paycheck Protection Program Loan
On May 1, 2020, the Company obtained the Paycheck Protection Program loan (the “PPP Loan”) from BBVA USA in the aggregate amount of approximately $1,006,000. The Company applied for forgiveness of the PPP Loan in March 2021, and, effective May 27, 2021, the U.S. Small Business Administration confirmed the waiver of the Company’s repayment of the PPP Loan which was recognized as a gain in other income in 2021. The Company remains subject to an audit of the PPP loan. There is no assurance that the Company will not be required to repay all or a portion of the PPP Loan, as a result of any such audit.
Loan Agreement On March 22, 2016, the Company entered into a loan agreement (as amended, the “DECD Loan Agreement”) with the State of Connecticut Department of Economic and Community Development (the “DECD”), pursuant to which the Company may borrow up to $4,000,000 from the DECD. The loan bears interest at a fixed rate of 2.0% per annum and requires equal monthly payments of principal and interest until maturity, which occurs on April 15, 2026. As security for the loan, the Company has granted the DECD a blanket security interest in the Company’s personal and intellectual property. The DECD’s security interest in the Company’s intellectual property may be subordinated to a qualified institutional lender.
The loan may be prepaid at any time without premium or penalty. An initial disbursement of $2,000,000 was made to the Company on April 15, 2016 under the DECD Loan Agreement. On December 3, 2020, the Company received a disbursement of the remaining $2,000,000 under the DECD Loan Agreement, as the Company had achieved the target employment milestone necessary to receive an additional $1,000,000 under the DECD Loan Agreement and the DECD determined to fund the remaining $1,000,000 under the DECD Loan Agreement after concluding that the required revenue target would likely have been achieved in the first quarter of 2020 in the absence of the impacts of COVID-19.
Under the terms of the DECD Loan Agreement, the Company may be eligible for forgiveness of up to $1,500,000 of the principal amount of the loan if the Company achieves certain job creation and retention milestones by December 31, 2022. Conversely, if the Company is either unable to retain 25 full-time employees with a specified average annual salary for a consecutive period or does not maintain the Company’s Connecticut operations through March 22, 2026, the DECD may require early repayment of a portion or all of the loan plus a penalty of 5% of the total funded loan. The carrying value approximates fair value, as the interest represents market prices for similar types of borrowing arrangements.
Long-term debt consisted of the following:
As of September 30, 2022, the annual amounts of future minimum principal payments due under the Company’s contractual obligation are shown in the table below. Unamortized debt issuance costs for the DECD loan were $12,000.
Accrued Liabilities
The following table describes the principal components of accrued liabilities on the Company’s condensed consolidated balance sheet as of:
Insurance Notes
During 2021, the Company entered into an insurance promissory note for the payment of insurance premiums at an interest rate of 3.74%, with an aggregate principal amount outstanding of approximately $0 and $779,000 as of September 30, 2022 and December 31, 2021, respectively. This note was payable in ten monthly installments with a maturity date of October 1, 2022 and has no financial or operational covenants.
Operating Leases The Company leases facilities to support its business. The Company’s principal facility, including the Clinical Laboratory Improvements Amendments of 1988 (“CLIA”) laboratory used by Aspira Labs, Inc., is located in Austin, Texas, and the CLIA laboratory and administrative offices are located in Trumbull, Connecticut. The Company’s Austin, Texas lease, which expires on January 31, 2023, automatic renewal or renewal option. The Company’s Texas lease has a term of 12 months. The Company recognizes the lease payments in profit and loss on a straight-line basis over the term of the lease, and variable lease payments in the period in which the obligation for the payments was incurred.
In October 2015, the Company entered into a lease agreement for the facility in Trumbull, Connecticut. The lease required initial payments for the buildout of leasehold improvements to the office space, which were approximately $596,000. In September 2020, the Company exercised the renewal option for its Trumbull, Connecticut lease. The Company’s renewed lease expires on June 30, 2026, with a renewal option. The Company is not reasonably certain that it will exercise the five-year renewal option beginning on July 1, 2026.
The expense associated with these operating leases for the three and nine months ended September 30, 2022 and 2021 is shown in the table below (in thousands).
Based on the Company’s leases as of September 30, 2022, the table below sets forth the approximate future lease payments related to operating leases with initial terms of one year or more (in thousands).
Weighted-average lease term and discount rate were as follows:
Non-cancellable Royalty Obligations The Company is a party to an amended research collaboration agreement with The Johns Hopkins University School of Medicine under which the Company licenses certain of its intellectual property directed at the discovery and validation of biomarkers in human subjects, including but not limited to clinical application of biomarkers in the understanding, diagnosis and management of human disease. Under the terms of the amended research collaboration agreement, Aspira is required to pay the greater of 4% royalties on net sales of diagnostic tests using the assigned patents or annual minimum royalties of $57,500. Royalty expense for the three months ended September 30, 2022 and 2021 totaled $82,000 and $65,000, respectively, and royalty expense for the nine months ended September 30, 2022 and 2021 totaled $236,000 and $190,000, respectively, as recorded in cost of revenue in the condensed consolidated statements of operations.
Commercial Reorganization
During the three months ended March 31, 2022, the Company executed a commercial reorganization resulting in the separation of a number of employees. The organizational changes resulted in the recording within the condensed consolidated statement of operations in sales and marketing, research and development and general and administrative expenses of one-time severance, separation, and settlement charges of approximately $1,284,000. These amounts have been partially offset by insurance reimbursement of $523,000. All charges have been settled as of September 30, 2022.
Business Agreements
On August 8, 2022, the Company entered into a sponsored research agreement with Harvard’s Dana-Farber Cancer Institute, Brigham & Women’s Hospital, and Medical University of Lodz for the generation of a multi-omic, non-invasive diagnostic aid to identify endometriosis based on circulating microRNAs and proteins. This collaboration is expected to accelerate the Company’s development and commercialization of future endometriosis products, such as EndoCheck. Under the terms of and as further described in the agreement, payments of approximately $1,252,000 have or will become due from the Company to the counterparties upon successful completion of certain deliverables in 2022 and 2023 as follows: 68% was paid in August 2022, 15% will become payable upon completion of certain deliverables estimated to occur in the fourth quarter of 2022, and 17% will become payable upon completion of certain deliverables estimated to occur in the second quarter of 2023. As of September 30, 2022 approximately $852,000 has been recorded as expense for the project.
Contingent Liabilities
From time to time, the Company is involved in legal proceedings and regulatory proceedings arising from operations. The Company establishes reserves for specific liabilities in connection with legal actions that management deems to be probable and estimable. The Company is not currently a party to any proceeding, the adverse outcome of which would have a material adverse effect on the Company’s financial position or results of operations. |