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Commitments and Contingencies
 6 Months Ended
Jun. 30, 2013
Commitments and Contingencies

(6) Commitments and Contingencies

The Company has or is subject to the following commitments and contingencies:

 

Employment Agreements

The Company maintains employment agreements with several executive employees. Most of these agreements provide for payments to be made under certain conditions related to a change in control of the Company and entitle the employee to wages and certain benefits payments not exceeding one calendar year from the date of termination without cause or by the employee for good reason. The agreements may be terminated at any time by the Company with or without cause upon written notice to the employee.

 

Operating Lease

On February 8, 2008, the Company entered into a lease agreement for approximately 15,000 square feet of newly constructed office facilities in Broomfield, Colorado. The office location serves as the Company’s primary business office.   In June 2011, the Company and its landlord amended the lease mutually agreeing for the Company to relocate to another suite, comprising approximately 4,500 square feet, within the same building.  The amended lease also modified the annual per square foot rate of rent.  As part of the lease amendment, the Company made a one-time payment to the landlord of $200,000 which the landlord agreed to use for the landlord’s improvements in the new leased premises. The original five year term of the Lease remained unchanged. The rent expense for the lease is being recognized on a straight-line basis over the lease term. The Company’s facility lease which would have originally expired in June 2013 was extended by a letter of extension and now expires in September 2013 at which time the Company intends to relocate to a new office facility. The remaining minimum lease payments committed under the extended lease through September 2013 are $20,000.  

Under the original lease, the Company received tenant improvement reimbursements from the landlord totaling $593,000 which were recorded as deferred rent and were amortized as reductions to rent expense. The $200,000 payment made to the landlord in conjunction with the Amendment was recorded against the existing deferred rent. The net deferred rent balance is being amortized as reductions to rent expense over the remaining term of the lease. The unamortized deferred rent balance as of June 30, 2013 was $3,000.

Rent expense under this lease for the six months ended June 30, 2013 and 2012 was $27,000 and $24,000, respectively, and was $542,000 from Inception through June 30, 2013.

Effective August, 1, 2013 the Company entered into a lease agreement for approximately 5,300 square feet of office facilities in Westminster, Colorado that will serve as the Company’s primary business office beginning October 1, 2013.  Minimum lease payments committed under this lease through September 2016 are approximately $240,000.

 

Cardiovascular Pharmacology and Engineering Consultants, LLC, or CPEC

Under the terms of its strategic license agreement with CPEC, a licensing subsidiary of Indevus Pharmaceuticals Inc. (a wholly owned subsidiary of Endo Pharmaceuticals), holding ownership rights to certain clinical trial data of Gencaro, the Company will incur milestone and royalty obligations upon the occurrence of certain events. In August 2008, the Company paid CPEC a milestone payment of $500,000 based on the July 31, 2008 submission of its NDA to the FDA. If the FDA grants marketing approval for Gencaro, the agreement provides that the Company will owe CPEC another milestone payment of $8.0 million within six months after FDA approval. The agreement also states that the Company has the obligation to make milestone payments of up to $5.0 million in the aggregate upon regulatory marketing approval in Europe and Japan. The agreement states that the Company’s royalty obligation ranges from 12.5% to 25% of revenue from the related product based on achievement of specified product sales levels, including a 5% royalty that CPEC is obligated to pay under its original license agreement for Gencaro. The Company has the right to buy down the royalties to a range of 12.5% to 17% by making a payment to CPEC within six months of regulatory approval.