12. Commitments and Contingencies
|12 Months Ended|
Mar. 31, 2019
|Commitments and Contingencies Disclosure [Abstract]|
|Commitments and Contingencies||
NOTE 12 – Commitments and Contingencies
On June 23, 2016, the Company entered into Amendment No. 8 to its property lease agreement, extending the lease on its Petaluma, California facility to September 30, 2024. The lease contains an early termination right for the Company effective October 31, 2019, if the landlord is unable to accommodate the Company’s growth. Pursuant to the amendment, the Company agreed to increase the lease payment from $11,072 to $11,764 per month, commencing on October 1, 2017, with annual increases thereafter through the lease term.
The Company also shares certain office and laboratory space, as well as certain laboratory equipment, in a building located at 454 North 34th Street, Seattle, Washington. The space is rented for $2,700 per month and requires a ninety-day notice for cancellation.
The Company currently rents approximately 800 square feet of sales office space in Herten, the Netherlands. The office space is rented on a month to month basis at $1,700 per month and requires a sixty-day notice for cancellation.
On May 12, 2016, the Company entered into a property lease agreement, on its Woodstock, Georgia sales office space. The initial term of the agreement was from June 1, 2016 expiring on May 31, 2018, with an option to extend for a one-year period. On May 1, 2018, the Company amended the lease term to run from June 1, 2018 to August 31, 2018. The payment is $1,300 per month. The lease was extended for two months and terminated on October 30, 2018.
On August 1, 2016, the Company entered into Amendment No. 1 to its property lease agreement in Jamison, Pennsylvania. Pursuant to the amendment, the Company extended the term of the lease to July 31, 2019. Additionally, the Company agreed to lease payments of $2,369 per month for year one, $2,431 per month for year two and $2,493 per month for year three.
On June 15, 2017, the Company entered into its property lease agreement, on its Fairfield, California office space. The initial term of the agreement is from June 15, 2017 expiring on October 31, 2019. The payment is $4,103 per month.
On October 1, 2018, the Company entered into a property lease agreement, on its Woodstock, Georgia sales office space. The initial term of the agreement was from October 1, 2018 expiring on November 30, 2023. The payment is $5,672 per month.
Minimum lease payments for non-cancelable operating leases are as follows:
Rental expense amounted to $556,000 and $507,000 for the years ended March 31, 2019 and 2018, respectively.
On occasion, the Company may be involved in legal matters arising in the ordinary course of business including matters involving proprietary technology. While management believes that such matters are currently insignificant, matters arising in the ordinary course of business for which the Company is or could become involved in litigation may have a material adverse effect on its business and financial condition of comprehensive loss.
Potential Severance Payments
As of March 31, 2019, the Company had employment agreements in place with three of its key executives. Two of the agreements provide, among other things, for the payment of up to twelve months of severance compensation for terminations under certain circumstances. At March 31, 2019, potential severance payments to key executives would be $454,000, if triggered.
Appointment of Chief Executive Officer and Interim Financial Officer
On December 11, 2018, the Company’s Board appointed Mr. Frederick (Bubba) Sandford as its Chief Executive Officer and Interim Chief Financial Officer for an initial term of nine months, subject to a mutual extension of an additional three months. Mr. Sandford was appointed as a Class III director of the Board on December 14, 2018.
In connection with Mr. Sandford’s appointment as the Company’s Chief Executive Officer and Interim Chief Financial Officer, the Company entered into an employment agreement with him, in which the Company agreed to pay him a base annual salary of $350,000 per year. The Company also agreed to pay him a performance bonus of a maximum of 60% of his base annual salary for achieving certain agreed upon targets.
In addition, pursuant to the agreement, Mr. Sandford was granted 50,000 stock options to purchase the Company’s common stock, of which 44,445 stock options were treated as an inducement grant and 5,555 stock options were from the Company’s equity incentive plan. The Company granted the options on January 10, 2019 with an exercise price of $6.453 per share, and will become 100% exercisable nine months after date of grant and have a maximum term of ten years. Upon termination, the options are exercisable for up to twelve months from the termination date and in no event later than ten years from the grant date.
The Resignation of Chief Executive Officer, President and Director and Chief Financial Officer and Secretary
On December 12, 2018, Jim Schutz and Robert Miller resigned from their positions as the Company’s Chief Executive Officer and President and Chief Financial Officer and Secretary, respectively. On the same date, Mr. Schutz also resigned from the Board.
In connection with Mr. Schutz’s resignation, the Company entered into a separation and mutual release agreement with Mr. Schutz on December 13, 2018, in which the Company agreed to pay him severance, consisting of $250,000, paid in two equal installments with the first half paid on December 14, 2018 and the second half paid on the next payroll after three months, $38,461 to compensate him for his unused paid time off, and continuation of dental, vision and health insurance until December 31, 2018. Mr. Schutz’s outstanding equity awards were accelerated to December 12, 2018 and remained exercisable until January 14, 2019. Mr. Schutz also agreed to aid with the transition for 30 calendar days. The options expired unexercised on January 14, 2019.
In connection with Mr. Miller’s resignation, the Company entered into a separation and mutual release agreement with Mr. Miller on December 13, 2018, in which the Company agreed to pay him severance, consisting of $225,000, paid in two equal installments with the first half paid on December 14, 2018 and the second half paid on the next payroll after three months, $38,461 to compensate him for his unused paid time off, and continuation of dental, vision and health insurance until December 31, 2018. Mr. Miller’s outstanding equity awards were accelerated to December 12, 2018 and remained exercisable until January 14, 2019. The options expired unexercised on January 14, 2019.
Release of Chief Operating Officer
On March 5, 2019, Marc Umscheid was released from his position as the Company’s Chief Operating Officer.
In connection with Mr. Umscheid’s release, the Company entered into a separation and mutual release agreement with Mr. Umscheid, in which the Company agreed to pay him severance, consisting of $250,000, to be paid on April 4, 2019, $14,373 to compensate him for his unused paid time off, and continuation of dental, vision and health insurance to be paid over twelve months. Mr. Umscheid has since declined the continued dental, vision and health insurance coverage. Additionally, Mr. Umscheid’s outstanding equity awards were accelerated to March 5, 2019 and will remain exercisable through the contractual term.
On January 4, 2019, the Company received a letter from the Listing Qualifications staff of The Nasdaq Stock Market LLC, notifying the Company that, for the previous 30 consecutive business days, the Company failed to comply with Nasdaq Listing Rule 5550(a)(2), which requires the Company to maintain a minimum bid price of $1.00 per share for its common stock.
In accordance with Listing Rule 5810(c)(3)(C), Nasdaq has granted the Company a period of 180 calendar days, or until July 3, 2019, to regain compliance with the Rule. The Company may regain compliance with the Rule at any time during this compliance period if the minimum bid price for its common stock is at least $1.00 for a minimum of ten consecutive business days.
The Company effected a 1-for-9 reverse stock split of its outstanding common stock effective June 19, 2019, 5:00 pm EDT in order to regain compliance with the Rule. As of June 27, 2019, Nasdaq has not made a final determination or informed the Company whether it meets the requirements under the Rule.
The letter has no effect on the listing or trading of the Company’s common stock at this time. However, there can be no assurances that the Company will be able to regain compliance with Listing Rule 5550(a)(2). In the event the Company does not regain compliance with the Listing Rule prior to the expiration of the compliance period, the Company may be eligible for additional time. To qualify, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse split, if necessary. If the Company meets these requirements, Nasdaq will inform the Company that it has been granted an additional 180 calendar days. However, if it appears to the Staff of Nasdaq that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq will provide notice that our securities will be subject to delisting.
The entire disclosure for commitments and contingencies.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef