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Commitments and Contingencies | 6 Months Ended
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Jun. 30, 2014
Commitments and Contingencies, |
Commitments and Contingencies | 17. Commitments and Contingencies Office Space Rental On August 1, 2011, the Company entered into a lease for 7,000 square feet of office space in Los Angeles, California expiring November 30, 2014. Initially, the lease had a fixed monthly rent of $19,326 and was subject to annual increases of 3%. The Company was not required to pay a fixed monthly rent for months two through five. Prior to this, the Company was leasing the same office space on a month-to-month basis. This property was vacated in April 2012 and the Company recorded a liability of $892,000 to cover unpaid rent and the present value of rents due for the remainder of the lease term. As of April 2013, this space was released, but the terms and conditions of the new lease were unknown, so the Company did not adjust the accrued liability as of June 30, 2013. As of June 30, 2014, the accrued liability for this lease was $892,000. On November 1, 2011, the Company entered into a lease for 3,000 square feet of office space in Santa Barbara, California for use by the Company’s operating units. This lease expires on October 31, 2014 with two additional three-year renewal terms available. The initial rent plus common area charges were $7,157 per month. This property was vacated in June 2012 and the Company recorded a liability of $229,000 to cover unpaid rent and the present value of rents due for the remainder of the lease term. As of June 2013, this space was released, but the terms and conditions of the new lease were unknown, so the Company did not adjust the accrued liability as of June 30, 2013. As of June 30, 2014, the accrued liability for this lease was $229,000. From May 2012 to May 2013, the Company was in a month-to-month lease for office space in Los Angeles, California. Rent for this facility was $2,300 per month. The Company currently operates out of a “virtual office.” However, in light of the Company’s growth plans, it intends to seek laboratory and office space in the future. The Company believes that suitable space will be available when and as needed. Contractual Obligations Set forth below is information concerning the Company’s known contractual obligations as of June 30, 2014 that are fixed and determinable by year starting with the twelve months ending June 30, 2015.
|  | Total |  | 2015 |  | 2016 |  | 2017 |  | Beyond 2017 |
Notes payable |  | $ | 915,000 |  | $ | 915,000 |  | $ | — |  | $ | — |  | $ | — |
Rent obligations |  | 1,121,495 |  | 677,738 |  | 339,958 |  | 103,799 |  | — |
Accrued board fees |  | 210,625 |  | 210,625 |  | — |  | — |  | — |
Consulting agreement |  | 150,000 |  | 150,000 |  | — |  | — |  | — |
Employee contracts |  | 3,808,014 |  | 835,000 |  | 1,538,014 |  | 1,435,000 |  | — |
Accrued interest |  | 592,609 |  | 592,609 |  | — |  | — |  | — |
Total |  | $ | 6,797,743 |  | $ | 3,380,972 |  | $ | 1,877,972 |  | $ | 1,538,799 |  | $ | — |
Employment and Severance Agreements During the six months ended June 30, 2014, the Company entered into the following employment, severance and other agreements with its executive officers: On March 5, 2014, the Company entered into an executive employment agreement with Stephen M. Simes pursuant to which Mr. Simes was appointed the Company’s Chief Executive Officer. The agreement is for an initial term of three years, subject to extension. Under the agreement, Mr. Simes is to receive an annual base salary of $425,000 with annual review and base salary increases as approved by the Company’s Board of Directors. Mr. Simes is eligible to earn an annual bonus based upon achievement of performance objectives set by the Board of Directors after consultation with Mr. Simes, with a target bonus opportunity of 60% of his annual base salary. In connection with his hiring, Mr. Simes received an initial stock option to purchase 500,000 shares of common stock at an exercise price of $2.50 per share, which option has a ten-year term and will vest and become exercisable in equal quarterly installments over the initial three-year term of his employment. In connection with the closing of the acquisitions of Paloma and VasculoMedics, the Company entered into an executive employment agreement on March 31, 2014 with David Sherris, Ph.D. pursuant to which Dr. Sherris was appointed the Company’s Chief Scientific Officer and President of the Company’s Paloma/VasculoMedics divisions. The agreement is for an initial period of three years, subject to extension. Under the agreement, Dr. Sherris is to receive an annual base salary of $345,000 and is eligible for a bonus of up to 50% of his base salary upon meeting certain milestones established by the Board of Directors upon consultation with Dr. Sherris. On May 27, 2014, the Company entered into an executive employment agreement with Phillip B. Donenberg pursuant to which Mr. Donenberg was appointed Chief Financial Officer of the Company. The agreement is for an initial term of three years, subject to extension. Under the agreement, Mr. Donenberg is to receive an annual base salary of $335,000 with annual review and base salary increases as approved by the Board of Directors. Mr. Donenberg is eligible to earn an annual bonus based upon achievement of performance objectives set by the Board of Directors after consultation with Mr. Donenberg, with a target bonus opportunity of 45% of his annual base salary. In connection with his hiring, Mr. Donenberg received an initial stock option to purchase 250,000 shares at an exercise price of $4.00 per share, which option has a ten-year term and will vest quarterly over the initial three-year term of his employment. On June 9, 2014, the Company entered into a severance agreement and general release with John Moynahan, the Company’s former Chief Financial Officer pursuant to which the Company and Mr. Moynahan agreed on the amount of back wages, unpaid expenses and a severance payment. On May 28, 2014, the Company entered into an independent contractor agreement with Mr. Moynahan pursuant to which the Company agreed to pay Mr. Monahan a consulting fee of $175 per hour. This agreement may be terminated by either party upon three days written notice. Effective as of April 29, 2014, the Company entered into a settlement agreement and release with its former Chief Financial Officer pursuant to which the parties agreed upon an amount of compensation and other monies owed to the former executive from the inception of his work through December 31, 2013. Under the agreement, the Company paid the former executive $37,500 in cash and issued him 59,250 shares of the Company’s common stock. On June 9, 2014, the Company entered into an executive employment agreement with Tim Boris pursuant to which Mr. Boris was appointed General Counsel and Vice President of Legal Affairs. The employment agreement is for an initial term of one year, subject to extension. Under the agreement, Mr. Boris is to receive an annual base salary of $235,000 and is eligible to earn a target annual bonus of up to 30% of his annual base salary. Litigation In January 2013, the Company signed a term sheet with ASC to have ASC acquire certain portions of the Company’s liabilities to Creditors for an obligation of the Company to issue shares of common stock to ASC, which shares of common stock would then be sold by ASC and the proceeds distributed to the Creditors. ASC entered into agreements in July 2013 with the Creditors to acquire $1,865,386 in liabilities of the Company and filed a complaint on July 29, 2013 with the Second Judicial Circuit Court in Leon County, Florida seeking a judgment against the Company for such amount. A court order based on this complaint was issued on October 7, 2013, resulting in the transfer of $1,865,386 in liabilities of the Company to ASC. The Company issued an initial tranche of 200,000 shares of common stock to ASC in November 2013 and a subsequent tranche of 150,000 shares of common stock in February 2014. On June 6, 2014, the Company entered into an amendment to settlement agreement and stipulation with ASC pursuant to which the Company agreed to deliver to ASC or before June 10, 2014, $1,266,401 in cash for distribution by ASC to the Creditors and an additional $300,000 in cash as a settlement fee for ASC and ASC agreed to surrender to the Company 99,332 shares of common stock. The Company paid these amounts and ASC surrendered the shares, resulting in no liability as of June 30, 2014 related to this matter. In July 2013, the Company received notice that a complaint for property damage had been filed by the Truck Insurance Exchange against the Company for $393,592 related to water damage incurred by a printing company on the ground floor of the Company’s former office space in Los Angeles. This damage is alleged to have occurred in connection with a water leak in the Company’s former office in February 2013. The Company has a dispute with its insurance carrier at that time regarding coverage for this matter and the Company intends to pursue this dispute to ensure that it had proper insurance coverage at that time. As of June 30, 2014, the Company had accrued $393,592 in connection with this matter. From time to time, the Company is subject to various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of its business. Such actions and proceedings are subject to many uncertainties and to outcomes that are not predictable with assurance and that may not be known for extended periods of time. The Company records a liability in its consolidated financial statements for costs related to claims, including future legal costs, settlements and judgments, where the Company has assessed that a loss is probable and an amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. The Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred. In the opinion of management, as of June 30, 2014, the amount of liability, if any, with respect to these matters, individually or in the aggregate, will not materially affect the Company’s consolidated results of operations, financial position or cash flows.

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