Commitments and Contingencies
|12 Months Ended|
Jul. 31, 2018
|Commitments and Contingencies Disclosure [Abstract]|
|Commitments and Contingencies||
Note 9—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 will no longer serve as President of the Company, but will remain as a member of the Board of Directors. The Company and Mr. Dhillon have 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, 2018, the Company has accrued a liability of $828,403 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 (the “CFO”) 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 625,000 restricted stock units convertible into shares of the Company’s common stock. The units vest as follows: 312,500 units vested on July 16, 2018 (date of grant), and the remaining 312,500 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, 2018, the Company made no payments against the liability.
On February 14, 2018, the Company entered into a lease agreement 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 expires on April 30, 2020. Base rent under the lease agreement is $3,079 per month for each of the first five months, $6,158 per month for each of the sixth through twelfth months and $6,286 per month for each of the thirteenth through twenty-sixth months. 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 $12,316 in February 2018 upon entering into the lease agreement.
On December 31, 2014, the Company entered into a lease agreement for approximately 34,000 rentable square feet located at 5820 Nancy Ridge Drive, San Diego, California, which serves as the Company’s California corporate headquarters and research and development laboratory. The term of the lease commenced on October 19, 2015 and expires on October 19, 2025, although the Company has an option to extend the lease for an additional five years following this expiration date, if it provides notice of such extension within 12 months prior to such expiration date. The Company also has the right to terminate the lease after the end of the 84th month following its commencement of rent payments under the lease agreement, if it provides notice of such termination at least 12 months in advance and pays certain early termination fees. Base rent under the lease agreement is approximately $90,000 per month, although the Company received a 12-month rent abatement for its first year of occupancy, and increases by 3% annually. 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 approximately $90,000 in December 2014 upon entering into the lease agreement. See Lease Assignment Agreement below.
In March 2018, the Company entered into a 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 at July 31, 2018.
In conjunction with the Lease Assignment Agreement, the Company and Vividion also entered into a Sublease, with respect to the 12,442 square-foot location leased by Vividion from Landlord. Under the Sublease, the Company shall pay to Vividion base rent of $49,768 per month (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, which is being amortized on a straight-line basis over the term of the Sublease.
Total rent expense for the years ended July 31, 2018 and 2017 was approximately $1.4 million and $1.6 million, respectively.
At July 31, 2018, 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