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Subsequent Events | 6 Months Ended
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Dec. 31, 2018
Subsequent Events [Abstract] |
Subsequent Events [Text Block] | Note 11. Subsequent Events XOMA License Agreement On December 6, 2017, the Company entered into a license agreement (“License Agreement”) with XOMA Corporation (“XOMA”), through its wholly-owned subsidiary, XOMA (US) LLC, pursuant to which XOMA granted an exclusive global license to the Company to develop and commercialize XOMA 358 (formerly X358, now RZ358) for all indications. XOMA and the Company concurrently entered into a common stock purchase agreement (the “Purchase Agreement” and, together with the License Agreement, the “Transaction Documents”) pursuant to which the Company would issue equity securities to XOMA in connection with certain financing milestones. On March 30, 2018, XOMA and the Company amended the Transaction Documents to add terms specifying the financial responsibility for certain tasks related to the technology transfer and to adjust the number of shares issuable to XOMA under the Purchase Agreement. On January 7, 2019, the parties further amended the Transaction Documents. The License Agreement was amended to eliminate the requirement that equity securities be issued to XOMA upon the closing of a Qualified Financing (as defined in the License Agreement) and to replace it with a requirement for the Company to make five cash payments to XOMA totaling $8,500,000 on or before specified staggered future dates (the “Future Cash Payments”) upon the closing of a Qualified Financing. The Future Cash Payments are payable for $1.5 million by September 30, 2019, $1.0 million by December 31, 2019, $2.0 million by March 31, 2020, $2.0 million by June 30, 2020, and $2.0 million by September 30, 2020. As a result of this amendment to the License Agreement, during the fiscal quarter ending March 31, 2019, the Company will recognize a liability for the $8.5 million of future payments that are required. Until the Future Cash Payments are fully paid, the Company is required to pay XOMA 15 % of the net proceeds of each Future Financing (“Early Payments”) to be credited against the remaining unpaid Future Cash Payments in reverse order of their future payment date. Obligations to make the Future Cash Payments following a Qualified Financing and the obligations to make Early Payments shall end when the Future Cash Payments are fully paid for the total of $ 8.5 million. In addition to the Future Cash Payments, XOMA was entitled to receive $5,925,000 in cash upon the closing of the Series AA Financing discussed below, which consists of $5,476,000 of consideration for the license, $50,000 for a delay fee, and payment of the Company’s share of expenses of approximately $399,000 (of which a total of $449,000 is included in accounts payable and accrued expenses as of December 31, 2018). The Company will recognize an expense of $5,476,000 upon payment of the license fee for the fiscal quarter ending March 31, 2019. The Company satisfied the aggregate payment obligation of $5,925,000 on February 11 , 20 19 from a portion of the net proceeds from the Series AA Financing discussed below. In addition, the amendment to the License Agreement revised the amount the Company is required to expend on development of RZ358 and related licensed products and revised provisions with respect to the Company’s diligence efforts in conducting clinical studies. Finally, the amendment to the License Agreement eliminated XOMA’s right to appoint a member to the Company’s board of directors. Series AA Financing On January 7, 2019, the Company entered into a Purchase Agreement for Shares of Series AA Preferred Stock (the “Purchase Agreement”) with the New Investors discussed in Note 7 whereby the New Investors agreed to purchase shares of newly designated Series AA Preferred Stock (the “Series AA Shares”) for aggregate gross proceeds to the Company of $25.0 million (inclusive of the $1.5 million Exclusivity Payment (the “Series AA Financing”). On January 18, 2018, the board of directors authorized the designation of 5,000,000 shares of the Company’s preferred stock as Series AA Preferred Stock. On January 30, 2019, the Company closed the Series AA Financing and issued an aggregate of 2,500,000 Series AA Shares to the New Investors at a purchase price of $10.00 per share. A condition to closing the Series AA Financing was the resignation of a majority of the Company’s former directors and the appointment of the New Investors as directors whereby the New Investors collectively control the board of directors with two of the three members. As a result of the issuance of the Series AA Shares, the New Investors collectively own 54% of the Company’s Common Stock on an as-converted basis which resulted in a change of control. In addition, the Company granted the Purchasers a board nomination right whereby so long as the New Investors and their affiliates collectively hold at least 40% of the aggregate Series AA Shares, they shall have the right to nominate three members of the Company’s board of directors. The Series AA Shares have an effective conversion price of $ 0.22 per share of common stock whereby the shares of Series AA Preferred Stock held by the New Investors are immediately convertible, at the option of the holders, into an aggregate of approximately 113.6 million shares of the Company’s common stock. The Series AA Shares will automatically convert into shares of the Company’s common stock upon receipt of shareholder approval for an increase in the number of authorized shares of common stock to at least 500,000,000 shares. The Series AA Preferred Stock is subject to customary anti-dilution adjustments for stock dividends, stock splits and similar events. The Company agreed to use commercially reasonable efforts to, (i) prepare and file with the SEC within sixty calendar days after the closing of the Series AA Financing, a registration statement under the U.S. Securities Act of 1933, as amended (the “Registration Statement”), to permit the resale of shares of common stock issuable upon the conversion of the Series A Shares purchased in the Series AA Financing. The Company also agreed to use commercially reasonable efforts to cause the Registration Statement to be declared effective within ninety calendar days following the closing of the Series AA Financing. The Company granted each of the New Investors a call option whereby upon the earlier of (i) December 31, 2020 and (ii) such date that the Company requests the New Investors to provide additional financing, each New Investor may elect to purchase up to $10.0 million of common stock at a purchase price equal to the greater of (i) $0.29 per share or (ii) 75% of the volume weighted average closing price of the Company’s common stock during the thirty consecutive trading days prior to the date of the notice. Automatic Conversion of Promissory Notes Due to closing of the Series AA Financing for gross proceeds of $25.0 million, the Fiscal 2018 Notes converted for an aggregate of approximately $6,167,000, which consisted of the aggregate principal balance of $5,340,000 plus accrued interest through January 30, 2019 of approximately $827,000. As discussed in Note 6, the Fiscal 2018 Notes were convertible at a discount of 20% from the issuance price paid by the New Investors. Therefore, the total balance of the Fiscal 2018 Notes of $6,167,000 was exchanged for approximately 771,000 Series A Shares resulting in an effective issuance price of $8.00 per share to give effect to the 20% adjustment in the Fiscal 2018 Notes. The Series AA Shares held by the former holders of the Fiscal 2018 Notes are immediately convertible, at the option of the holders, into an aggregate of approximately 35.0 million shares of common stock. The weighted average price of the Company’s common stock on the issuance date of the Fiscal 2018 Notes was $0.58 per share compared to the effective conversion price of $0.176 per share, due to the 20% discount to the Series AA Financing terms. Accordingly, the Company expects to recognize an aggregate BCF of approximately $5.9 million as additional interest expense for the fiscal quarter ending March 31, 2019. Presented below is a summary of the total original issue price and conversion terms for all Series AA Shares outstanding as of January 30, 2019:
|  | Number |  |  | Total |  |  | Conversion |  |  | Shares of |
Holder |  | of Shares |  |  | Issue Price |  |  | Price |  |  | Common Stock |
New Investors |  |  | 2,500,000 |  |  | $ | 25,000,000 |  |  | $ | 0.22 |  |  |  | 113,636,364 |
Fiscal 2018 Note holders |  |  | 771,000 |  |  |  | 7,710,000 |  |  |  | 0.22 |  |  |  | 35,045,455 |
Total |  |  | 3,271,000 |  |  | $ | 32,710,000 |  |  |  |  |  |  |  | 148,681,818 |
Since the Company does not currently have an adequate number of authorized shares of common stock available to accommodate conversion of the Series AA Shares and all outstanding stock options and warrants, the Series AA Shares are expected to be classified as a long-term liability until such time as stockholders approve an increase in the authorized number of shares of common stock to at least 500,000, 000 shares. The holders of Series AA Preferred Stock are entitled to vote on an as converted basis with common stockholders whereby the New Investors have a majority of the votes required to increase the Company’s authorized shares of common stock. Management currently expects to schedule a special meeting of stockholders in March or April 2019 to approve the increase in the authorized shares of common stock. Headquarters Lease On January 25, 2019, the Company entered into a lease for a new headquarters location in Redwood City, California. The leased space consists of approximately 3,500 square feet of office space and provides for monthly rent of $21,000 through the expiration date in March 2022 . The Company provided a security deposit of $31,000 which is refundable upon expiration of the lease. Bend, Oregon Lease On February 7, 2019, the Company entered into a lease for ancillary office space in Bend, Oregon. The lease space consists of approximately 1,500 square feet of office space and provides for monthly rent of $2,700 through the expiration date in February 2021. The Company provided a security deposit of $3,700 which is refundable upon expiration of the lease. Contractual Obligations for Subsequent Events The table below summarizes the Company’s operating lease commitments and the payment obligations under the amended License Agreement with Xoma, for the subsequent events discussed above:
Fiscal Year Ending June 30, |  | Operating Leases |  |  | Licensing Liability |
2019 |  | $ | 112,598 |  |  | $ | - |
2020 |  |  | 274,295 |  |  |  | 6,500,000 |
2021 |  |  | 272,658 |  |  |  | 2,000,000 |
2022 |  |  | 148,643 |  |  |  | - |
|  | $ | 808,194 |  |  | $ | 8,500,000 |

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- Definition The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 855 -URI http://asc.fasb.org/topic&trid=2122774 + Details
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