Quarterly report pursuant to Section 13 or 15(d)

Operating Lease Obligation

v3.22.2.2
Operating Lease Obligation
3 Months Ended
Sep. 30, 2022
Operating Lease, Liability [Abstract]  
Operating Lease Obligation

15.   Operating Lease Obligation

Texas Ground Lease

As discussed above, as part of the Transaction, iBio CDMO became the tenant under the Ground Lease Agreement for the Property until 2060 upon exercise of available extensions. The base rent payable under the Ground Lease Agreement, which was $151,450 for the prior year, is 6.5% of the Fair Market Value (as defined in the Ground Lease Agreement) of the Property. The Ground Lease Agreement includes various covenants, indemnities, defaults, termination rights, and other provisions customary for lease transactions of this nature.

San Diego

On September 10, 2021, the Company entered into a lease for approximately 11,383 square feet of space in San Diego, California.  Terms of the lease include the following:

The length of term of the lease is 88 months from the lease commencement date (as defined).
The lease commencement date was estimated to be on or around January 1, 2022.
The monthly rent for the first year of the lease is $51,223 and increases approximately 3% per year.
The lease provides for a base rent abatement for months two through five in the first year of the lease.
The landlord is providing a tenant improvement allowance of $81,860 to be used for improvements as specified in the lease.
The Company is responsible for other expenses such as electric, janitorial, etc.
The Company opened an irrevocable letter of credit in the amount of $188,844 in favor of the landlord.  The letter of credit expires on October 8, 2022 and renews annually as required.

As discussed above, the lease provides for scheduled increases in base rent and scheduled rent abatements.  Rent expense is charged to operations using the straight-line method over the term of the lease which results in rent expense being charged to operations at inception of the lease in excess of required lease payments. This excess (formerly classified as deferred rent) is shown as a reduction of the operating lease ROU asset in the accompanying balance sheet.  As the Company has already started making improvements to the facility, the rent expense will be recognized.

The following tables present the components of lease expense and supplemental balance sheet information related to the operating lease obligation (in thousands).

Three Months Ended

Three Months Ended

September 30, 

September 30, 

2022

2021

Operating lease cost:

$

141

$

35

Total lease cost

$

141

$

35

 

  

 

  

Other information:

 

  

 

  

Cash paid for amounts included in the measurement lease liability:

 

  

 

  

Operating cash flows from operating lease

$

141

$

35

Operating cash flows from operating lease obligation

$

3

$

Future minimum payments under the operating lease obligation are due as follows (in thousands):

Fiscal period ending on September 30:

    

Principal

    

Imputed Interest

    

Total

2023

$

183

$

281

$

464

2024

400

235

635

2025

 

449

 

204

 

653

2026

 

504

 

170

 

674

2027

 

562

 

132

 

694

Thereafter

 

1,506

 

132

 

1,638

 

  

 

  

 

  

Total minimum lease payments

 

3,604

$

1,154

$

4,758

Less: current portion

 

(183)

 

  

 

  

Long-term portion of minimum lease obligation

$

3,421