EVFM 2017 Annual Report

F-16 The Company's practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest and/or penalties in the statements of operations for the years ended December 31, 2017, 2016, and 2015 or for the period from February 1, 2007 to December 31, 2017. 8. Commitments Operating Leases The Company entered into a non-cancelable operating lease for its facilities on January 20, 2015. The lease expires in March 2020. On January 31, 2017, the Company entered into an Eleventh Amendment to the Lease with LJ Gateway Office LLC, or LJ Gateway. Concurrent with entering into the Lease Amendment, the Company entered into a Sublease with Abacus Data Systems, Inc., or Abacus, providing for the sublease of existing office space located at Suite No. 270. This Lease Amendment also provides the Company with additional office space located at Suite No. 250, 9171 Towne Centre Drive, San Diego California, which the Company occupies as its headquarters. Upon occurrence of Abacus retaining possession of the original premises in February 2017, Abacus received rent abatement for months one, three, and four as well as a discount of 50% off the base rent for months five through nine. Abacus paid the Company a base rent of $27,768 for the second months rent and $30,317 security deposit. The base rent will increase by three percent on each annual anniversary. In February 2017, the Company recorded $353,000 of sublease liability. The Company has recorded the rental income collected or accrued under the sublease as a reduction of rent expense. Rent expense and sublease rental income under the Lease Amendment and Sublease for the year ended December 31, 2017 were $326,000 and $264,000, respectively. Rent expense were $429,927 and $388,997 for the years ended December 31, 2016 and 2015, respectively. The payments escalate over the term of the lease; however, the Company recognizes the expense on a straight-line basis over the term of the lease. In December 2017, the Company entered into the Twelfth Amendment to the Lease with LJ Gateway whereby upon the mutual execution and delivery of a new lease between LJ Gateways affiliate and Abacus and Abacus vacates Suite No. 270, LJ Gateway and the Company agree that the Lease with respect to the office space located at Suite No. 270 shall be terminated. As of December 31, 2017, the sublease had not been terminated. The following table summarizes the minimum lease payments and sublease receipts under the lease agreement. Lease Payments Sublease Receipts 2018 $ 410,848 $ 342,374 2019 431,507 352,644 2020 109,293 90,143 Total $ 951,648 $ 785,161 9. Subsequent Events Per the discussion in Note 1 Organization and Basis of Presentation, Neothetics and Private Evofem completed the Merger in accordance with the terms of the Merger Agreement whereby Merger Sub merged with and into Private Evofem, with Private Evofem surviving as a wholly owned subsidiary of Neothetics.