Commitments and contingencies

12 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

7. Commitments and contingencies

Litigation

On February 3, 2016, Agilent filed a lawsuit against the Company and its Chief Executive Officer, Dr. Emily Leproust (the Complaint), in the Superior Court of California, Santa Clara County, or the Court. The Complaint also named Does 1 through 20, which are fictitious placeholder defendants. Agilent’s complaint alleged three claims against Twist and Dr. Leproust: (1) alleged breach of contract, related to the use of confidential information and alleged breach of

non-solicitation

obligations against Dr. Leproust; (2) alleged breach of a duty of loyalty against Dr. Leproust; and (3) alleged misappropriation of trade secrets under the California Uniform Trade Secrets Act, or CUTSA, against all defendants.

On December 7, 2018, the Court granted Agilent’s motion to amend its complaint, permitting Agilent to file its Second Amended Complaint. This new complaint added amended allegations against the Company and Dr. Leproust, and also new claims for breach of contract and trade secret misappropriation against two individuals: Dr. Siyuan Chen, a current Company employee and Solange Glaize, a former Company employee. The Court also set trial to begin on February 24, 2020.

On February 6, 2020, the Company, Dr. Leproust, Dr. Chen, Ms. Glaize (together, the Twist Group) and Agilent agreed to the terms of a settlement agreement (the Settlement Agreement) pursuant to which the Twist Group and Agilent each agreed to request dismissal of all claims against each other. The Settlement Agreement resolves the litigation initially commenced by the Complaint and contains no admission of liability or wrongdoing. Pursuant to the Settlement Agreement, the Company agreed to pay Agilent $22.5 million in cash within 14 days of the Settlement Agreement. This amount has been accrued in the consolidated financial statements in the three months ended December 31, 2019. In addition, the Twist Group and Agilent each agreed to release the other party from all known and unknown claims related to the claims and counterclaims alleged or that could have been alleged in such litigation or that arise from the facts and events that gave rise to such litigation. Further, Agilent agreed to grant the Company a limited

non-exclusive

license to use the trade secrets asserted by Agilent in the litigation, which extends to the Company’s supply chain, including its customers, suppliers, distributors and resellers. Agilent also agreed not to sue the Company for the infringement of any Agilent patent issued or pending as of the date of the Settlement Agreement or claim priority thereto, solely to the extent such patents claim a trade secret alleged in the litigation. There is no other covenant or release of claims for patent infringement.

The Court dismissed the case on February 14, 2020.

Indemnifications

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend the indemnified parties for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. To date, the Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has also entered into indemnification agreements with its directors and officers that may require it to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by corporate law. The Company also has directors’ and officers’ insurance.

Leases

The Company leases certain of its facilities under

non-cancellable

operating leases expiring at various dates through 2026. The Company is also responsible for utilities, maintenance, insurance, and property taxes under these leases.

Certain leases include options to renew or terminate at the Company’s discretion. The lease terms include periods covered by these options if it is reasonably certain the Company will renew or not terminate. The Company’s lease agreements do not contain any material residual value guarantees or restrictive covenants.

Supplemental balance sheet information related to the Company’s operating lease as of September 30, 2020, was the following:


(in thousands)	September 30, 2020
Assets:
Operating lease right-of-use-asset	$	33,699
Current liabilities:
Current portion of operating lease liabilities	$	6,409
Noncurrent liabilities:
Operating lease liabilities, net of current portion	$	24,837

Future minimum lease payments under all

non-cancelable

operating leases as of September 30, 2020 are as follows:


(in thousands)	Operating leases
Years ending September 30:
2021	$	6,568
2022		7,111
2023		6,753
2024		6,389
2025		6,433
Thereafter		4,907

Total minimum lease payments	$	38,161
Less: imputed interest		(6,915	)

Total operating lease liabilities	$	31,246
Less: current portion		(6,409	)

Operating lease liabilities, net of current portion	$	24,837

Operating lease expense was $7.9 million for the year ended September 30, 2020. Cash payments for amounts included in the measurement of operating lease liabilities for the year ended September 30, 2020 were $9.0 million. As of September 30, 2020, the weighted-average remaining lease term was 5.5 years and the weighted-average discount rate was 7.0%.

Rent expense was $4.9 million and $2.5 million for the years ended September 30, 2019 and 2018, respectively. Rent expense is measured based upon amortizing minimum lease payments, including rent escalations under the lease term, using the straight-line method over the term of the lease. Prepaid rent was $1.6 million as of September 30, 2019. There was no deferred rent liability as of September 30, 2019.