COMMITMENTS AND CONTINGENCIES
|12 Months Ended|
Jun. 30, 2019
|COMMITMENTS AND CONTINGENCIES|
|COMMITMENTS AND CONTINGENCIES||
NOTE 9 — COMMITMENTS AND CONTINGENCIES
Financial Advisory Agreement
In June 2019, the Company entered into a financial advisory agreement whereby the Company agreed to pay a fee of (i) 6.0% of up to $20.0 million of gross proceeds received from the New Investors under the call option discussed in Note 6, and (ii) 6.0% of the gross proceeds from a private placement consisting of between $20 million and $30 million of equity or equity equivalent securities. Under the financial advisory agreement, no commissions are payable for any subsequent issuances of equity or equity equivalent securities issued to the New Investors. In addition, the Company agreed to reimburse legal fees of the financial advisors up to $60,000 plus other reasonable out-of-pocket expenses. Through June 30, 2019, no securities have been issued and no fees have been incurred under the financial advisory agreement. However, as discussed in Note 13 offering costs of approximately $1.4 million were incurred under this agreement with respect to equity issuances in July and August 2019.
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 approximately $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. 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 approximately $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. The table below summarizes the Company’s operating lease commitments under these leases as of June 30, 2019 (in thousands):
As of June 30, 2019, the Company was subject to employment agreements with two executive officers that provide for aggregate annual base salaries of $840,000. In the event the Company terminates employment of the executive officers without cause, severance benefits include (i) between one and three years of base salary, (ii) 150% of annual target bonuses applicable to the terminated executive, and (iii) continuation of certain medical and dental benefits. In addition, vesting is accelerated for unvested stock options that would have otherwise vested during the period that the severance benefits are paid out.
On December 14, 2018, the Company entered into surrender agreements with its landlord, sub-landlord and sub-lessees to terminate all remaining lease and sub-lease obligations at the Company’s former Colorado facilities. In connection with this transaction, the Company was relieved of its remaining obligations under the leases and relinquished its rights under the lease and sublease agreements whereby no cash was exchanged by the parties. Accordingly, the Company recognized a net gain of approximately $168,000. This gain resulted from the elimination of net deferred rent obligations of $200,000 and the sublease security deposit of $25,000 for a total of $225,000; partially offset by forfeiture of the Company’s security deposit for $57,000 to arrive at the net gain of $168,000. As of June 30, 2019, the Company has no remaining lease commitments for its former facilities in Colorado.
The Company has a defined contribution employee benefit plan under section 401(k) of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan covers all eligible employees who are entitled to participate six months after commencement of employment. The Company matches contributions up to 4% of the participating employee’s compensation with such matching contributions vested immediately. Total contributions by the Company to the 401(k) Plan amounted to approximately $110,000 and $189,000 for the fiscal years ended June 30, 2019 and 2018, respectively.
From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of June 30, 2019, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the Company’s results of operations. At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under ASC 450, Contingencies. Legal fees are expensed as incurred.
The entire disclosure for commitments and contingencies.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef