Commitments and Contingencies
|12 Months Ended|
Dec. 31, 2015
|Commitments and Contingencies Disclosure [Abstract]|
|Commitments and Contingencies||
13. Commitments and Contingencies
Operating Lease Obligations
In October 2015, the Company entered into a 5-year lease for approximately 6,100 square feet of office space in Waltham, MA at an average annual rent of approximately $214,000. The Company took occupancy of this space in January 2016.
In November 2014, JMC entered into a two-year lease for 2,295 square feet of office space in Scottsdale, AZ at an average annual rent of approximately $39,000. JMC took occupancy of this space in November 2014.
On October 3, 2014, the Company entered into a 15-year lease for office space at 2 Gansevoort Street, in New York, NY 10014 at an average annual rent of $2.7 million. Also, on October 3, 2014, the Company entered into Desk Space Agreements which can be terminated at any time, with two related parties: OPPM and TGTX, to occupy 20% and 40%, respectively, of the New York, NY office space that requires them to pay their share of the average annual rent of $0.5 million and $1.1 million, respectively. These initial rent allocations will be adjusted periodically for each party based upon actual percentage of the office space occupied. Additionally, the Company has reserved the right to execute desk space agreements with other third parties and those arrangements will also affect the cost of the lease actually borne by the Company. The Company took possession of the space in December 2015 and commenced build out of the space. The Company expects the buildout costs to approximate $5.1 million and will share the costs with OPPM and TGTX under the Desk Space Agreement. The lease was executed to further the Company’s business strategy, which includes forming additional subsidiaries and/or affiliate companies. The lease is subject to early termination by the Company, or in circumstances including events of default, the landlord, and includes a five-year extension option in favor of the Company. At December 31, 2014, the Company paid $199,000 of prepaid rent and under the Desk Space Agreements, was reimbursed by OPPM and TGTX for their prorated share of this prepayment.
In April 2013, the Company entered into a three-year lease for approximately 1,500 square feet of office space in New York, NY at an average annual rent of approximately $122,000. The Company commenced occupancy of this space in May 2013. In March 2014, the Company made the decision to close the New York, NY office and commenced marketing the facility for sub-lease. In April 2014, the Company entered into a sub-lease arrangement for this New York, NY office for the remaining term of the lease, and in December 2014, the sub-tenant returned the space. As of December 31, 2015 the space has not been sublet. The lease expires in June 2016.
Pursuant to the Second Amendment and Agreement, dated as of December 21, 2012, by and between the Company and Ovamed (the “Manufacturing Agreement”), in December 2012, the Company entered into an Assignment and Assumption of Lease (“Assignment”) with TSO Laboratories, Inc., a wholly owned subsidiary of Ovamed, for approximately 8,700 square feet in Woburn, MA for the purpose of establishing a manufacturing facility. Total rent expense for the five-year lease term was approximately $590,000 at an average annual rate of $118,000. As of December 31, 2013, the Company had spent $373,000 in leasehold improvement costs associated with this lease. In March 2014, the Company abandoned its plans to build out the Woburn, MA manufacturing facility. As a result, the Company commenced marketing the facility for sub-lease. As of December 31, 2015, the space has not been sublet, and the company continues to seek a sub-tenant.
During the year ended December 31, 2014, the Company recognized impairment expense as a result of its decision to abandon the buildout of a manufacturing facility of approximately $0.7 million, which is included in research and development expenses. Expense related to the year ended December 31, 2014 was composed of $0.7 million related to the decision to delay manufacturing of TSO in the Woburn, MA facility, which included future rent payments of $0.3 million through the lease termination date of February 2018, offset by $0.1 million of rental income from a probable sublease, and $0.4 million related to the write-down, to its estimated net realizable value, of its long-lived assets. The Company also recognized $0.1 million in expense related to a sub-lease for the Company’s New York, NY office space effective May 1, 2014 through the termination of the lease in May 2016.
In July 2012, the Company entered into a five-year lease for approximately 3,200 square feet of office space in Burlington, MA at an average annual rent of approximately $94,000. The Company took occupancy of this space in October 2012. In January 2015, the Company exercised the early termination option, whereby reducing the term of this lease to three years. The Company paid $82,000 to exercise this option in January 2015. The Company vacated the space in October 2015.
Total future minimum lease payments under these leases are:
The Company recognizes rent expense on a straight-line basis over the non-cancellable lease term. Rent expense for the years ended December 31, 2015, 2014 and 2013 was $354,000, $354,000, and $284,000, respectively.
In accordance with its certificate of incorporation, bylaws and indemnification agreements, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity. There have been no claims to date, and the Company has director and officer insurance to address such claims. Pursuant to agreements with clinical trial sites, the Company provides indemnification to such sites in certain conditions.
In the ordinary course of business, the Company and its subsidiaries may be subject to both insured and uninsured litigation. Suits and claims may be brought against the Company by customers, suppliers, partners and/or third parties (including tort claims for personal injury arising from clinical trials of the Company’s product candidates and property damage) alleging deficiencies in performance, breach of contract, etc., and seeking resulting alleged damages.
In 2015, Ovamed GmbH (“Ovamed”) began insolvency proceedings in Germany. In connection with these proceedings, the Regional Court of Hamburg has issued a judgment against Fortress in the amount of approximately $1.0 million. We are currently evaluating the enforceability of the judgment.
The entire disclosure for commitments and contingencies.
Reference 1: http://www.xbrl.org/2003/role/presentationRef