Commitments and Contingencies
|12 Months Ended|
Jul. 31, 2019
|Commitments and Contingencies Disclosure [Abstract]|
|Commitments and Contingencies||
Note 10—Commitments and Contingencies
In the ordinary course of business, the Company may become a party to lawsuits involving various matters. The Company is not currently a party, and its properties are not currently subject, to any legal proceedings that, in the opinion of management, are expected to have a material adverse effect on the Company’s business, financial condition or results of operations.
The Company has entered into employment agreements with each of its executive officers and certain other key employees. Generally, the terms of these agreements provide that, if the Company terminates the officer or employee other than for cause, death or disability, or if the officer terminates his or her employment with the Company for good cause, the officer shall be entitled to receive certain severance compensation and benefits as described in each such agreement.
On November 7, 2017, the Company entered into an executive employment agreement with Daniel J. O’Connor (the “O’Connor Employment Agreement”) pursuant to which Mr. O’Connor will serve as the Chief Executive Officer (the “CEO”) of the Company through November 7, 2020, subject to extension as provided in the agreement. The agreement calls for an annual salary of $400,000 per annum, an annual performance bonus in the amount of 50% of Mr. O’Connor’s then-current annual base salary and a living allowance of up to $4,500 per month for the first 12 months of the agreement. In addition, pursuant to the O’Connor Employment Agreement, the Company granted to Mr. O’ Connor certain stock options (See Note 7).
On May 2, 2018, the Board of Directors of the Company consolidated the roles of Chief Executive Officer and President, with Daniel J. O’Connor to serve as both. Accordingly, Punit Dhillon no longer serves as President of the Company, but remained as a member of the Board of Directors. The Company and Mr. Dhillon entered into a separation agreement that triggers the compensation provisions pursuant to his Amended and Restated Executive Employment Agreement, dated November 7, 2017. As of July 31, 2019 and 2018, the Company had an accrued liability of $368,369 and $828,403, respectively, remaining under the agreement.
On July 16, 2018, the Company entered into an executive employment agreement with Sara M. Bonstein (the “Bonstein Employment Agreement”) pursuant to which Ms. Bonstein will serve as the Chief Financial Officer / Chief Operating Officer (the “CFO / COO”) of the Company through July 16, 2021, subject to extension as provided in the agreement. The agreement calls for an annual salary of $350,000 per annum, a cash signing bonus in the amount of $75,000 and an annual performance bonus in the amount of 40% of Ms. Bonstein’s then-current annual base salary. In addition, pursuant to the Bonstein Employment Agreement, the Company granted to Ms. Bonstein an award of 62,500 restricted stock units convertible into shares of the Company’s common stock. The units vest as follows: 31,250 units vested on July 16, 2018 (date of grant), and the remaining 31,250 units vest in equal quarterly installments over the 24 months following the date of grant.
On July 16, 2018, the Company and the Company’s former Chief Financial Officer entered into a separation and release agreement in connection with the former CFO’s termination of employment with the Company. Pursuant to the agreement, the Company will pay the former CFO severance compensation of $300,000, less applicable withholdings, in the form of salary continuation in accordance with the Company’s customary payroll practices. On July 16, 2018, the Company recorded a liability of $300,000 on its consolidated balance sheet, and the offsetting charge was recorded in general and administrative expense as salary expense. As of July 31, 2019 and 2018, the Company had an accrued liability of $9,364 and $300,000, respectively, remaining under the agreement.
On October 26, 2018, the Company and an employee entered into a separation and release agreement in connection with the employee’s termination of employment with the Company. Pursuant to the agreement, the Company will pay the former employee severance compensation of $415,000, less applicable withholdings, in the form of salary and bonus continuation in accordance with the Company’s customary payroll practices. In addition, the Company agreed to pay the cost of health insurance for 12 months from the date of separation and accelerate the vesting of 2,500 RSUs. On October 26, 2018, the Company recorded a liability of $451,112 on its consolidated balance sheet, and the offsetting charge was recorded in research and development expense as salary expense. As of July 31, 2019, the Company had an accrued liability of $117,271 remaining under the agreement.
On February 14, 2018, the Company entered into a lease agreement MawIt Inc., for approximately 3,100 rentable square feet located at 24 N. Main Street, Pennington, New Jersey, which serves as the Company’s New Jersey corporate headquarters. The term of the lease commenced on March 1, 2018 and was to expire on April 30, 2020. In November 2018, the Company entered into an amended lease agreement for the addition of approximately 2,800 rentable square feet. The term of the amended lease commenced on January 15, 2019 and expires on December 31, 2020. Base rent under the amended lease agreement is $11,686 per month for each of the first two months, $11,929 per month for each of the third through fifteenth months and $12,173 per month for each of the sixteenth through twenty-three months. The Company prepaid rent of approximately $60,000 as per the terms of the amended agreement. The lease agreement also requires the Company to share in certain monthly operating expenses of the premises and required the Company to pay a security deposit of $23,372.
In March 2018, the Company entered into a Lease Assignment Agreement (the “Lease Assignment Agreement”) with Vividion Therapeutics, Inc. (“Vividion”) for the Company’s 34,054 square foot location at 5820 Nancy Ridge Drive, San Diego, California, 92121 (“NR Premises”), whereby the Company assigned its Lease Agreement with ARE-SD Region No. 18, LLC (the “Landlord”) to Vividion. Under the Lease Assignment Agreement, Vividion pays directly to Landlord the base rent of $101,500 per month (based upon $2.98 per rentable square foot of the NR Premises) plus operating expenses and property management fees attributable to the NR Premises currently estimated at $43,500 per month (including an estimate for utilities) during the term of the Lease Assignment Agreement, which is the remaining term of the lease through October 2025.
While the lease and all of the related obligations were assigned to Vividion, the Company could ultimately have an obligation on the Lease Assignment Agreement if Vividion defaulted on their obligation to the Landlord after all remedies were exhausted by the Landlord with regard to Vividion’s obligations. Such an event is not considered probable and no obligation has been recorded as of July 31, 2019 and 2018.
In conjunction with the Lease Assignment Agreement, the Company and Vividion also entered into a sublease (the “Sublease”), with respect to the 12,442 square-foot location at 3565 General Atomics Court, Suite 100, San Diego, CA, 92121 leased by Vividion from Landlord which serves as the Company’s California office (the “Sublease Premise”). Under the Sublease, the Company shall pay to Vividion base rent of $49,768 per month subject to an annual 3% increase, (based upon $4.00 per rentable square foot of the Sublease Premises) plus operating expenses and property management fees attributable to the Sublease Premises currently estimated at $30,400 per month during the term of the Sublease, which extends through September 2020. The Company moved to the new location in April 2018.
At the time of the lease agreements noted above, the Company had a deferred rent liability recorded on the consolidated balance sheet of $1.1 million, of which $0.6 million is remaining as of July 31, 2019. The deferred rent liability associated with the lease/sublease are being amortized on a straight-line basis over their respective remaining term.
The Company has also entered into lease arrangements for vivarium space in San Diego, California to support the Company’s research and development department.
Total rent expense for the years ended July 31, 2019 and 2018 was approximately $0.8 million and $1.4 million, respectively.
The Company believes its current facilities are adequate to meet its current operating needs and will remain adequate for the foreseeable future.
At July 31, 2019, future minimum lease payments under the Company’s non-cancelable operating leases are as follows:
The entire disclosure for commitments and contingencies.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef