| COMMITMENTS [Text Block] | NOTE 8– COMMITMENTS
a.
Tel Hashomer Medical Research, Infrastructure and Services Ltd. On February 2, 2012, the Company’s Israeli Subsidiary entered into a licensing agreement with Tel Hashomer Medical Research, Infrastructure and Services Ltd (the “Licensor”). According to the agreement, the Israeli Subsidiary was granted a worldwide royalty bearing an exclusive license to certain information regarding a molecular and cellular approach directed at converting liver cells into functional insulin producing cells as a treatment for diabetes. As consideration for the licensed information, the Israeli Subsidiary will pay the following to the Licensor:
1)
A royalty of
3.5% of net sales;
2)
16% of all sublicensing fees received;
3)
An annual license fee of $15,000, which commenced on January 1, 2012 and shall be paid once every year thereafter (the “Annual Fee”). The Annual Fee is non-refundable, but it shall be credited each year due, against the royalty noted above, to the extent that such are payable, during that year; and
4)
Milestone payments as follows:
a)
$50,000
on the date of initiation of phase I clinical trials in human subjects;
b)
$50,000
on the date of initiation of phase II clinical trials in human subjects;
c)
$150,000
on the date of initiation of phase III clinical trials in human subjects; and
d)
$750,000
on the date of initiation of issuance of an approval for marketing of the first product by the FDA.
e)
$2,000,000, when worldwide net sales of Products have reached the amount of $150,000,000
for the first time, (The “Sales Milestone”).
As of May 31, 2015, the Israeli Subsidiary has not reached any of these milestones.
In the event of closing of an acquisition of all of the issued and outstanding share capital of the Israeli Subsidiary and/or consolidation of the Israeli Subsidiary or the Company into or with another corporation (“Exit”), the Licensor shall be entitled to choose whether to receive from the Israeli Subsidiary a one-time payment based, as applicable, on the value of either
5,563,809
shares of common stock of the Company at the time of the Exit or the value of
1,000
shares of common stock of the Israeli Subsidiary at the time of the Exit.
On May, 2014, the Israeli Subsidiary entered into a research service agreement with the Licensor. According to the agreement, the Licensor will perform a study at the facilities and use the equipment and personnel of the Chaim Sheba Medical Center (the “Hospital”), for the consideration of approximately $92,000
for a year. In May 2015, the Israeli Subsidiary renewed the research agreement for an annual consideration of approximately $110,000.
b.
Mintz, Levin, Ferris, Glovsky and Popeo, P.C.
On February 2, 2012, the Company entered into an agreement with its patent attorneys, Mintz, Levin, Ferris, Glovsky and Popeo, P.C. (“Mintz Levin”) for professional services related to patent registration. In addition to an amount of $80,000
paid to Mintz Levin, the Company issued
1,390,952
shares of common stock. The Company will pay an additional $50,000
upon consummation of certain criteria that the company will meet. As of May 31, 2015, the Company has not reached any of the milestones.
On March 27, 2013, the Company signed an agreement with Mintz Levin in which
16% of the Company’s fees will be converted to shares of common stock of the Company at market price. On July 14, 2014, $13,395
of fees incurred were converted into
25,759
shares of common stock.
c.
Pall Life Science Belgium BVBA
On May 6, 2013, the Company entered into a Process Development Agreement with Pall Life Science Belgium BVBA (formerly ATMI BVBA), a Belgian Company that is a wholly owned Subsidiary of Pall Corporation (“Pall”), a U.S. publicly-traded company. According to the agreement, Pall will provide services in cell research. The Company will use Pall’s unique technology while the Company will provide to Pall the required materials for purpose of the study. According to the agreement, the Company will pay per achieved phase, as defined in the agreement, with a total consideration of €
606,500
for all services. As of May 31, 2015, the Company received services in total value of $307,063
and provided materials on amount of $261,406.
d.
MaSTherCell SA
On July 3, 2014 (prior to the initiation of the transaction detailed in Note 4), the Company’s Belgian Subsidiary entered into a service agreement with MaSTherCell SA (“MaSTherCell”), pursuant to which MaSTherCell will conduct certain clinical tests related to diabetes treatment research. The Belgian Subsidiary will pay MaSTherCell an amount of €
962,500
with
30% payable upon the date of approval of the DGO6 grant (as defined in Note 8(f)) with the balance being invoiced monthly. Services commence upon approval of the DGO6.
The term of the service agreement will run until all work is completed or by either party providing
30
days’ written notice of termination.
On March 2, 2015, the Company acquired MaSTherCell. See also Note 4.
e.
Maryland Technology Development Corporation
On June 30, 2014, the Company’s U.S. Subsidiary entered into a grant agreement with Maryland Technology Development Corporation (“TEDCO”). TEDCO was created by the Maryland State Legislature in 1998 to facilitate the transfer and commercialization of technology from Maryland’s research universities and federal labs into the marketplace and to assist in the creation and growth of technology based businesses in all regions of the State. TEDCO is an independent organization that strives to be Maryland’s lead source for entrepreneurial business assistance and seed funding for the development of startup companies in Maryland’s innovation economy. TEDCO administers the Maryland Stem Cell Research Fund to promote State funded stem cell research and cures through financial assistance to public and private entities within the State. Under the agreement, TEDCO has agreed to give the U.S Subsidiary an amount not to exceed $406,431
(the “Grant”). The Grant will be used solely to finance the costs to conduct the research project entitled “Autologous Insulin Producing (AIP) Cells for Diabetes” during a period of two years.
On July 22, 2014, the U.S Subsidiary received an advance payment of $203,216
on account of the grant. Through May 31, 2015, the company spent all of that amount. The amount of grant that was spent through May 31, 2015 was recorded as a deduction of research and development expenses in the statement of comprehensive loss.
f.
Department De La Gestion Financiere Direction De L’analyse Financiere (“DGO6”)
On November 17, 2014, the Company's Belgian Subsidiary received the formal approval from the Walloon Region, Belgium (Service Public of Wallonia, DGO6) for a €
2.015
million support program for the research and development of a potential cure for Type 1 Diabetes. The Financial support is composed of a €
1,085,000
(
70% of budgeted costs) grant for the industrial research part of the research program and a further recoverable advance of €
930,000
(
60% of budgeted costs) of the experimental development part of the research program. The grants will be paid to the Belgian Subsidiary over a period of approximately
3
years. The grants are subject to certain conditions with respect to the Belgian Subsidiary work in the Walloon Region, the Belgian Subsidiary own investment in these projects and certain other conditions and contain a repayment provision upon attaining a favorable outcome. In addition, the DGO6 is also entitled to a royalty upon revenue being generated from any commercial application of the technology. On December 9 and 16, 2014, the Belgian Subsidiary received €
651,000
and €
558,000
under the grant, respectively. Up to May 31, 2015, an amount of $1,123,289
was recorded as deduction of research and development expenses and an amount of $415,929
paid as an advance for future services was recorded as a deffered income.
On March 20, 2012, MaSTherCell had been granted an investment grant from the DGO6 for an amount of €
1,421,000. This grant is related to the investment in the production facility with a coverage of
32% of the investment planned. A first payment of €
568,000
has been received in August 2013. The remaining part is expected to be paid by the end of 2015. See also Note 4.
g.
Leases
On April 4, 2012, MaSTherCell signed an operational lease agreement for the rent of a facility in order to build the production area. The agreement was for a period of
18
years starting on April 4, 2012 and expiring on March 20, 2030. The costs per year are €
90,000. On November 23, 2012, MaSTherCell signed another operational lease agreement for the rent of offices for a period of
15
years starting from November 23, 2012 and expiring on November 30, 2027. The costs per year are €
46,000. On February 1, 2015, MaSTherCell signed an amendment to the operational lease agreement for the rent of offices for a period of
12
years starting from February 1, 2015 and expiring on November 30, 2027. The additional costs per year are €
28,000.
On January 2015 the Israeli subsidiary signed an operational lease agreement for the rent of labs and office whic will be used for the research and development activities in Israel The costs per year are ILS
120,000.
The detail of securities granted to the banks in the context of the financial loans are described under Note 7. |
