Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

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Commitments and Contingencies
12 Months Ended
Jul. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 9—Commitments and Contingencies

 

In the ordinary course of business, the Company may become a party to lawsuits involving various matters. The Company is not currently a party, and its properties are not currently subject, to any legal proceedings that, in the opinion of management, are expected to have a material adverse effect on the Company’s business, financial condition or results of operations.

 

Effective November 1, 2015, the Company entered into a 12-month lease agreement for office space in Campbell, California to support its legal department. The base rent under this agreement is $2,008 per month.

 

On December 31, 2014, the Company entered into a lease agreement for approximately 34,000 rentable square feet located at 5820 Nancy Ridge Drive, San Diego, California, which serves as the Company’s corporate headquarters and research and development laboratory. The term of the lease commenced on October 19, 2015 and expires on October 19, 2025, although the Company has an option to extend the lease for an additional five years following this expiration date, if it provides notice of such extension within 12 months prior to such expiration date. The Company also has the right to terminate the lease after the end of the 84th month following its commencement of rent payments under the lease agreement, if it provides notice of such termination at least 12 months in advance and pays certain early termination fees. Base rent under the lease agreement is approximately $90,000 per month, although the Company received a 12-month rent abatement for its first year of occupancy, and increases by 3% annually. The lease agreement also requires the Company to share in certain monthly operating expenses of the premises, and required the Company to pay a security deposit of approximately $90,000 in December 2014 upon entering into the lease agreement.

 

Total rent expense for the years ended July 31, 2017 and 2016 was approximately $1.6 million and $1.4 million, respectively.

 

At July 31, 2017, future minimum lease payments under the Company’s non-cancelable operating leases are as follows:

 

Year Ending July 31,   Operating Lease  
2018   $ 1,167,862  
2019     1,178,575  
2020     1,212,916  
2021     1,249,304  
2022     1,286,783  
Thereafter     4,447,478  
Total minimum payments   $ 10,542,918  

 

The Company has entered into employment agreements with each of its executive officers. Generally, the terms of each agreement provide that, if the Company terminates the officer other than for cause, death or disability, or if the officer terminates his or her employment with the Company for good cause, the officer shall be entitled to receive severance compensation equal to either six or 12 months of his or her then-current annual base salary, plus any accrued bonus, plus six or 12 months of benefits coverage.

  

On April 15, 2016, the Company and the Company’s former Chief Scientific Officer (“CSO”) entered into a separation, release and consulting agreement, pursuant to which, effective June 18, 2016, the former CSO voluntarily resigned from the Company and became a consultant of the Company. The terms of the agreement provided for no severance compensation related to the termination of employment, but did provide for a fee of $30,000 per month for consulting services. The consulting services under the agreement terminated automatically on June 18, 2017. On the date of termination of the CSO’s employment, the Company recorded a liability of $360,000 on its consolidated balance sheet, as the consulting services to be performed thereafter were not substantive, and the offsetting charge was recorded in research and development expense as other outside service fees. As of July 31, 2017, the Company had paid the entire $360,000 against the liability.

 

On December 27, 2015, the Company and the Company’s former Chief Medical Officer (“CMO”) entered into a separation and release agreement in connection with the CMO’s termination of employment with the Company. Pursuant to the agreement, the Company paid the former CMO severance compensation of $286,000, less applicable withholdings, in the form of salary continuation in accordance with the Company’s customary payroll practices. In addition, the CMO was eligible to receive a bonus for the 2015 calendar year if the Company’s Board of Directors or Compensation Committee chose to grant discretionary bonuses to the Company’s other officers; however, no such bonuses were granted from such period. On the date of termination of the CMO’s employment, the Company recorded a liability of $286,000 on its consolidated balance sheet, and the offsetting charge was recorded in research and development expense as salary expense. As of July 31, 2017, the Company had paid the entire $286,000 against the liability.