Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

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Commitments and Contingencies
6 Months Ended
Dec. 31, 2016
Commitments and Contingencies [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 10 - COMMITMENTS AND CONTINGENCIES

 

Legal

 

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business.  Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business.  Except as disclosed below, the Company is currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on its business, financial condition, operating results, or cash flows.

 

Lawsuit Brought by a Former Officer: In 2014, Relmada dismissed with prejudice its lawsuit against Najib Babul, which had sought to compel Mr. Babul, Relmada’s former President, to account for questionable expenditures of Relmada funds made while Babul controlled the Company. Relmada’s decision to surrender its claims was informed by the fact that Babul came forward with plausible explanations for some of the expenditures, and the fact that, because Babul was a former officer and director of Relmada being sued for his conduct in office, the Company was required to advance his expenses of the litigation; hence, Relmada was paying all the lawyers and consultants on both sides of the dispute. Relmada also agreed to reinstate certain stock purchase warrants in Babul’s name, which had been cancelled during the pendency of the litigation, and offered Babul the right to exchange his shares in RTI for shares in the Company.

 

Babul has brought a second lawsuit against Relmada. Ruling on Relmada’s motion, the United States District Court for the Eastern District of Pennsylvania dismissed Babul’s claims for breach of contract and intentional infliction of emotional distress, and left intact his claims for defamation, and wrongful use of civil process. Management believes that the Company has good defenses to all of Babul’s claims, and that the outcome of the Babul litigation, even if unfavorable, would not materially affect the Company’s operations or financial position or cash flows. However, litigation is an inherently uncertain process, and there can be no assurances with respect to either the outcome or the consequences of this litigation.

 

Proceeding with Laidlaw:

On December 9, 2015, Relmada filed a lawsuit in the U.S. District Court for the District of Nevada (the “Court”) against Laidlaw & Company (UK) Ltd. and its two principals, Matthew Eitner and James Ahern (collectively, the “Defendants”), Relmada Therapeutics, Inc. v. Laidlaw & Company (UK) Ltd., et al. (Case No. 15-cv-2338) (the “Lawsuit”). The Lawsuit alleges that the press release issued by the Defendants on December 4, 2015, which was subsequently filed with the Securities and Exchange Commission (“SEC”) on Schedule 14A, contained materially misleading proxy statements regarding, among other things, Defendants’ ability to nominate directors at Relmada’s December 30, 2015 annual stockholders’ meeting (the “Meeting”), in violation of Section 14(a) of the Securities Exchange Act of 1934 and SEC Rule 14a-9. Relmada sought a temporary restraining order and preliminary injunction to enjoin the Defendants from continuing to disseminate false and misleading proxy statements.

 

On December 10, 2015, the Court issued a temporary restraining order and associated injunction to enjoin the Defendants from “continuing to disseminate false and misleading proxy materials” and require that Defendants, among other things, “immediately must retract or correct its false and misleading proxy materials” (the “Temporary Restraining Order”). The Temporary Restraining Order was set to expire on December 22, 2015, when the parties were scheduled to appear for a hearing before the Court.

 

On December 16, 2015, the Defendants filed an answer in response to the Lawsuit as well as a counterclaim against Relmada and its Board of Directors (the “Counterclaim”). The Counterclaim alleges that (i) Relmada has disseminated materially false and misleading proxy statements concerning Defendants’ previous actions and conduct, in violation of Section 14(a) of the Securities Exchange Act of 1934 and SEC Rule 14a-9, and (ii) members of Relmada’s Board of Directors breached their fiduciary duties by, among other things, approving certain changes to Relmada’s stockholder election procedures. The Counterclaim sought the dissolution of the Temporary Restraining Order and injunctive relief that would postpone the Meeting.

 

On December 22, 2015, after a hearing before the Court, the Court entered the Company’s requested preliminary injunction, ordering the Defendants to continue to comply with similar terms to the Temporary Restraining Order (the “Preliminary Injunction Order”). The Preliminary Injunction Order will remain in place pending a full trial on the merits.

 

On February 18, 2016, Relmada filed an amended complaint in connection with the Lawsuit. The amended complaint includes an additional legal claim based on the Defendants’ breach of the fiduciary duty that they owed to Relmada when the Defendants disclosed and mischaracterized confidential information that they acquired in their capacity as Relmada’s investment banker. Relmada is also seeking monetary damages arising from fees and costs that it incurred responding to the Defendants’ false and misleading proxy materials in December 2015.

 

On April 4, 2016, Laidlaw filed a motion to dismiss Relmada’s amended complaint. On April 15, 2016, Relmada filed a partial motion to dismiss the Counterclaim and Laidlaw filed a motion to transfer venue to the U.S. District Court for the Southern District of New York. Relmada’s motion to dismiss was mooted by stipulation. 

 

On September 6, 2016, Relmada moved for leave to amend the complaint for a second time to allege additional claims against Defendants, including defamation/business disparagement, defamation per se, tortious interference with prospective economic advantage, violations of sections 1962(c) and 1692(d) of the Racketeer Influenced and Corrupt Organizations Act, and violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Court granted Relmada’s motion to amend on September 27, 2016, which mooted the pending motion to dismiss the amended complaint. Shortly thereafter, on September 29, 2016, the Court granted Defendants’ motion to transfer venue to the U.S. District Court for the Southern District of New York (the “SDNY Court”). Relmada filed its second amended complaint on or about October 5, 2016, the same date on which the Lawsuit was officially transferred to the SDNY Court.

 

The SDNY Court held an initial pretrial conference on October 21, 2016 during which it set a briefing schedule for Defendants’ contemplated motion to dismiss. During the conference, Defendants’ counsel represented that Defendants have no pending counterclaims against Relmada as of that time. As of January 6, 2017, Defendants’ motion to dismiss was fully briefed and submitted to the SDNY Court for decision.

 

On April 4, 2016, Laidlaw filed a motion to dismiss Relmada’s amended complaint. On April 15, 2016, Relmada filed a partial motion to dismiss the Counterclaim and Laidlaw filed a motion to transfer venue to the U.S. District Court for the Southern District of New York. Relmada’s motion to dismiss was mooted by stipulation.

 

On September 6, 2016, Relmada moved for leave to amend the complaint for a second time to allege additional claims against Defendants, including defamation/business disparagement, defamation per se, tortious interference with prospective economic advantage, violations of sections 1962(c) and 1692(d) of the Racketeer Influenced and Corrupt Organizations Act, and violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Court granted Relmada’s motion to amend on September 27, 2016, which mooted the pending motion to dismiss the amended complaint. Shortly thereafter, on September 29, 2016, the Court granted Defendants’ motion to transfer venue to the U.S. District Court for the Southern District of New York (the “SDNY Court”). Relmada filed its second amended complaint on or about October 5, 2016, the same date on which the Lawsuit was officially transferred to the SDNY Court.

 

The SDNY Court held an initial pretrial conference on October 21, 2016 during which it set a briefing schedule for Defendants’ contemplated motion to dismiss. During the conference, Defendants’ counsel represented that Defendants have no pending counterclaims against Relmada as of that time. As of January 6, 2017, Defendants’ motion to dismiss was fully briefed and submitted to the SDNY Court for decision.

 

Leases and Sublease

 

On October 1, 2015, the Company commenced a lease with a term of seven years and three months for office space in a building in New York City. Rent expense is recognized on a straight-line basis over the term of the lease. Accordingly, rent expense recognized in excess of rent paid is reflected as a liability in the accompanying consolidated balance sheets. Rent expense for the three and six months ended December 31, 2016 was $82,461 and $164,923, respectively.

 

Contractual Obligations

 

The following tables sets forth our contractual obligations for the next five years and thereafter:

 

    Total     Less than
1 year
    1 – 2 years     3 – 5 years     More than
5 years
 
Office lease   $ 2,108,785     $ 352,172     $ 671,543     $ 1,085,070     $ -  
Note payable     110,033       110,033       -       -       -  
Total obligations   $ 2,218,818     $ 462,205     $ 671,543     $ 1085,070     $ -  

  

On March 10, 2016 and effective as of January 1, 2016, Relmada entered into an Office Space License Agreement (the “License”) with Actinium Pharmaceuticals, Inc. (“Actinium”), with whom we share two common board members, for office space located at 275 Madison Avenue, 7thFloor, New York, NY 10016 . The term of the License is three years from the effective date, with an automatic renewal provision. The cost of the License is approximately $16,620 per month for Actinium, subject to customary escalations and adjustments.

 

Letter Of Credit

 

The Company has an outstanding letter of credit of approximately $392,600 in connection with the Company’s New York City corporate office lease. The letter of credit is secured by a restricted certificate of deposit in the same amount which is included in other assets at December 31, 2016 and June 30, 2016. On the second anniversary of the lease commencement date, the letter of credit will be reduced to approximately $234,400. In October 2022, the letter of credit will be reduced to approximately $156,000.