16.

Commitments:

Operating Leases

In February 2016, the Company entered into a non-cancellable operating lease, expiring in February 2021, for manufacturing and office facilities in London, UK. The lease provides for an additional five-year term at the Company’s option. The lease provides for monthly base rent, plus operating expenses and real estate taxes during the lease term.

Total rent expense under this operating lease was $273,430 and $279,303 for the years ended December 31, 2018 and 2017, respectively.

On October 1, 2017, the Company entered into a one-year non-cancellable operating lease, expiring in September 2018, for office and laboratory facilities in Leiden, Netherlands. The lease provides for monthly base rent plus operating expenses during the lease term. The lease provides for successive one-year extensions up to a maximum of four extensions. Total rent expense under this operating lease was $9,313 and $5,273 for the years ended December 31, 2018 and 2017, respectively.

In June 2017, the Company entered into two non-cancellable operating leases, expiring in July 2018, for office and laboratory facilities in London, UK. The lease provides for monthly base rent, rent holidays plus operating expenses and real estate taxes during the lease term. The Company records monthly rent expense on a straight-line basis from June 1, 2017 through July 23, 2018. As of December 31, 2018, the balance of deferred lease obligation, representing the difference between cash rent paid and straight-line rent expense, was $0. Total rent expense under theses operating leases was $73,846 and $85,222 for the years ended December 31, 2018 and 2017, respectively.

On July 27, 2018 the two leases for office and laboratory facilities in London, UK expired. Effective July 27, 2018, the Company entered into two new non-cancellable operating leases for the same office and laboratory facilities in London. The leases provide for annual base rent in the aggregate amount of approximately $363,000, plus operating expenses, through May 31, 2022, at which time the annual base rent will be revalued based on market rates at that time. The leases expire on May 24, 2027. Total rent expense under these operating leases was $148,561 and $0 for the years ended December 31, 2018 and 2017, respectively.

The aggregate future minimum rental payments under these operating leases are as follows:


2019	$	353,782
2020	$	350,284
2021	$	350,284
2022	$	350,284
2023	$	350,284
Thereafter	$	1,196,805


Total future rent payments	$	2,951,723

The aggregate future minimum rental payments of all leases, including those discussed in Note 15 are as follows:


2019	$	889,465
2020	$	904,716
2021	$	924,121
2022	$	350,284
2023	$	350,284
Thereafter	$	1,196,805


Total future rent payments	$	4,615,675

Service Agreements

On April 27, 2015, the Company entered into service agreements with a senior officer and a greater than 5% shareholder of the Company. Under the terms of the agreements, the employees will receive aggregate compensation of £300,000, which has been increased to a maximum aggregate amount of £410,000 per annum, or approximately $522,000 using exchange rates as of December 31, 2018. The agreements also provide for contributions to a defined contribution pension plan to be set up by the Company and a discretionary bonus. The agreements may be terminated at any time by either party by giving twelve-months’ notice, or the Company may terminate the officer’s employment effective immediately upon notice, and within 28 days making payment in lieu of notice consisting of a sum equivalent to the officer’s annual salary for the relevant period. For the years ended December 31, 2018 and 2017, the Company recorded £1,001,000 and £724,000 or approximately $1,334,000 and $933,000, respectively, using the average exchange rates during the years ended December 31, 2018 and 2017, respectively, in research and development costs under these agreements. Future obligations to be paid under these agreements equal £150,333, or approximately $192,000, using exchange rates as of December 31, 2018.

In connection with the service agreements, on April 24, 2015, the employees were awarded, under a share award agreement (the “Share Award Agreement”), an aggregate of 2,704,800 restricted Ordinary Shares and 750 B ordinary shares, which B ordinary shares have been converted into Ordinary Shares, of the Company. Under the Share Award Agreement, such shares are subject to forfeiture ratably over a period of three years if the employee’s do not remain an employee or consultant to the Company. The shares were valued at $7.76 per share and, in accordance with ASC 718, were charged to operations as share-based compensation ratably over the forfeiture period.

Employment Agreements

In February 2016, the Company entered into three-year employment agreements with certain senior officers of the Company. Under the terms of the agreements, which automatically renew for successive one-year terms, the employees will receive annual compensation in the aggregate amount of $710,000, which has been increased to a maximum aggregate amount of $1,075,000. The employment agreements also provide for an annual guaranteed cash bonus targeted at 100% of annual compensation. The agreements also provide for discretionary annual performance bonuses targeted to be not less than 50-60% of the employee’s base salary and grants of restricted stock. In January 2018 the Company’s compensation committee approved a discretionary bonus in the aggregate amount of $1,196,000. This discretionary bonus and the guaranteed bonus for 2017, in the amount of $850,000, were subject to compensation committee approval and meeting certain future funding conditions. On February 28, 2018, the funding conditions were met. The senior officers were granted their guaranteed and discretionary bonuses for the year ended December 31, 2018, in the aggregate amount of $3,415,000, which was paid in January 2019.

Additionally, the agreements provided for equity incentives of up to an aggregate maximum of 8.0% of the Company’s fully diluted outstanding shares upon the attainment of certain milestones. On March 1, 2018, a funding milestone was met. Accordingly, the employees were issued an aggregate of 3% of the fully-diluted outstanding shares of the Company as of such date. On June 7, 2018, an additional milestone was met. Accordingly, the employees were issued an aggregate of 5% of the fully-diluted outstanding shares of the Company as of such date (see Note 11).

The employees are also entitled to participate in all incentive and deferred compensation and employee benefit programs available to employees and executive officers of the Company. Future obligations to be paid under these agreements equal $1,258,750, as of December 31, 2018.

Consulting and other Agreements

Effective September 28, 2015, the Company entered into a three-year consulting agreement with a consultant to provide ongoing strategic advice and to serve on the Company’s board of directors. In connection with the agreement, the Company issued 662,910 restricted Ordinary Shares. Under the consulting agreement, such shares were subject to forfeiture ratably over a period of three years if the consultant does not remain a consultant to the Company. The shares were valued at $7.72 per share and were charged to general and administrative expenses upon the expiration of each forfeiture period. For the years ended December 31, 2018 and 2017, the Company recorded $263,970 and $351,960, respectively, in general and administrative expense under this agreement. There are no future obligations to be paid under the agreement.

Research Agreements

On April 24, 2015, the Company entered into a cooperative research and development agreement (CRADA) with the U.S. Department of Health & Human Services, as represented by the National Institute of Dental and Craniofacial Research (NIDCR) and Institute or Center of the National Institutes of Health (NIH). The CRADA provided for quarterly payments of $21,250 for three years through April 30, 2017 and a cost per patient for each patient enrolled in the Company’s xerostomia clinical trial. The CRADA was amended on March 25, 2016 to extend the term through March 25, 2021 and to extend the annual payments throughout the revised term. Research and development expenses under the CRADA for the years ended December 31, 2018 and 2017 were $111,938 and $115,374, respectively. Future obligations to be paid under the CRADA, as amended, through March 25, 2021 equal $191,250.

On March 22, 2016, the Company entered into another CRADA with the NIDCR and NIH for the treatment of Sjögren’s syndrome associated salivary hypofunction. The CRADA provides for quarterly payments of $104,500 for the first three years of the agreement plus a cost per patient for each patient enrolled in a clinical trial. The costs associated with years four and five of the Sjögren’s syndrome CRADA will be determined at a later date. Total research and development expenses under this agreement for each of the years ended December 31, 2018 and 2017 were $418,000. There are no future obligations to be paid under the agreement.

Effective December 5, 2016, the Company entered into a three-year research collaboration agreement with Cornell University. Pursuant to the agreement, Cornell University provides research and development under the direction of the Company. In connection with the agreement, in July 2017, the Company issued 25,000 Ordinary Shares to Cornell University, which were recorded as research and development expenses in the amount of $17,000. The Company amended this agreement, effective June 12, 2017, to add a second three-year research collaboration project through September 2019. The Company further amended this agreement, effective October 18, 2018 to include additional costs related to the research. Total research and development expenses under this agreement, as amended, for the years ended December 31, 2018 and 2017 were $1,625,152 and $1,029,904, respectively. Future obligations to be paid under the agreement through December 5, 2019 equal $2,002,228.

On February 14, 2017, the Company entered into a one-year research collaboration agreement with Cornell University in the amount of $679,473. On August 24, 2017, the agreement was amended to add an additional study in the amount of $182,520. Total research and development expenses under this agreement for the years ended December 31, 2018 and 2017 were $143,073 and $698,307, respectively.

License Agreements

Effective February 4, 2015, the Company entered into an exclusive worldwide license agreement with UCL Business, PLC (“UCL Business”) to develop up to eight programs using certain ocular gene therapy technology. Under the terms of the agreement, as amended, the Company will pay UCL Business certain sales milestone payments, if achieved, in the aggregate amount of £39.8 million, or approximately $50.7 million using the exchange rate at December 31, 2018, and royalties on net sales, as defined upon commercialization. Additionally, the Company is responsible for all patent prosecution and maintenance costs incurred and will also pay UCL Business an annual maintenance fee of £50,000, or approximately $64,000, until the first commercial sale of a product. The agreement will terminate upon the later of (i) the last valid claim in a relevant product, (ii) the expiration of regulatory exclusivity to all licensed products, or (iii) the 10^th anniversary of the first commercial sale of a product. Total research and development expenses under the agreement for the years ended December 31, 2018 and 2017 were $75,073 and $73,250, respectively.

Effective July 28, 2017, the Company entered into another exclusive worldwide license agreement with UCL Business for an additional program using certain ocular gene therapy technology. The Company will pay UCL Business certain milestone payments, royalties and annual maintenance fees under the same terms and conditions as the license dated February 4, 2015. Total research and development expenses under the agreement for the years ended December 31, 2018 and 2017 were $66,630 and $82,260, respectively.

Effective March 15, 2018, the Company entered into another exclusive worldwide license agreement with UCL Business for an additional program using certain ocular gene therapy technology. The Company will pay UCL Business certain milestone payments, royalties and annual maintenance fees under the same terms and conditions as the license dated February 4, 2015. Total research and development expenses under the agreement for the years ended December 31, 2018 and 2017 were $133,728 and $0, respectively.

On September 7, 2018, the Company entered into an exclusive licensing agreement with the National Institutes of Health for worldwide rights to expanded indications for use of AAV-AQP1 for treatment of xerostomia (dry mouth) and xerophthalmia (dry eye) associated with Sjögren’s syndrome. This agreement expands the Company’s original exclusive licensing agreement with the NIH for exclusive worldwide rights to AAV-AQP1 that was executed as of November 9, 2017. AAV-AQP1 is currently in Phase 1/2 development for treatment of grade 2 or 3 radiation-induced xerostomia. Total research and development expenses under the agreement for the years ended December 31, 2018 and 2017 were $50,000 and $0, respectively.

Effective January 1, 2016, the Company entered into an Agreement (“Agreement”) and Plan of Merger to acquire all of the outstanding shares of BRI-Alzan from the shareholders of BRI-Alzan. In connection with the Agreement, the Company will pay certain development milestone payments if achieved, in the aggregate amount of $4.5 million, and annual royalty payments on annual net sales following the first commercial sale of any product containing the technology acquired. Total research and development expenses under the agreement for the years ended December 31, 2018 and 2017 were $15,000 and $30,000, respectively.