6. Commitments and Contingencies

Leases

On June 28, 2018, the Company entered into a lease for laboratory, office and manufacturing space, which will serve as the Company’s new corporate headquarters. The Company expects to obtain control and access of the facility later in 2018. The term of the lease is ten years and also provides for two options to extend the lease term for a period of seven years each. The Company is obligated to make lease payments totaling approximately $49.3 million over the initial term of the lease.

Under the lease, the Company will receive a tenant improvement allowance for the costs associated with the design, development and construction of tenant improvements for the leased facility. The Company has provided the landlord with a letter of credit in the amount of $1.0 million. The security for the letter of credit of $1.0 million is classified as restricted cash under long term assets on the balance sheet.

As of June 30, 2018, the aggregate future minimum payments under the Company’s leases are as follows:

Year ending December 31,	Future Commitments
	(In thousands)
2018 (remaining 6 months)	$	587
2019		3,344
2020		4,221
2021		4,683
2022		4,846
Thereafter		33,853
Total minimum lease payments	$	51,534

Legal Proceedings

From time to time, the Company may become involved in litigation and other legal actions. The Company estimates the range of liability related to any pending litigation where the amount and range of loss can be estimated. The Company records its best estimate of a loss when the loss is considered probable. Where a liability is probable and there is a range of estimated loss with no best estimate in the range, the Company records a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that a liability had been incurred at the date of the financial statements and (ii) the range of loss can be reasonably estimated.

In July 2015, three securities class action lawsuits were filed against the Company and certain of its officers in the United States District Court for the Northern District of California (“U.S. District Court”), each on behalf of a purported class of persons and entities who purchased or otherwise acquired the Company’s publicly traded securities between July 31, 2014 and June 15, 2015. The lawsuits asserted claims under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Securities Act of 1933, as amended (the “Securities Act”) and alleged that the defendants made materially false and misleading statements and omitted allegedly material information related to, among other things, the Phase 2a clinical trial for AVA-101, a product candidate which is no longer being developed, and the prospects of AVA-101. The complaints sought unspecified damages, attorneys’ fees and other costs.

In December 2015, a putative securities class action lawsuit was filed against the Company, the Company’s board of directors, underwriters of the Company’s January 13, 2015, follow-on public stock offering, and two of the Company’s institutional stockholders, in the Superior Court of the State of California for the County of San Mateo (“San Mateo Superior Court”). The complaint alleged that, in connection with the Company’s follow-on stock offering, the defendants violated the Securities Act by allegedly making materially false and misleading statements and by allegedly omitting material information related to the Phase 2a clinical trial for AVA- 101 and the prospects of AVA-101. The complaint sought unspecified compensatory and rescissory damages, attorneys’ fees and other costs. The plaintiff has dismissed the two institutional stockholder defendants.

On March 16, 2017, the Company reached an agreement to settle the actions. The aggregate amount of the settlement was $13.0 million, of which $1.0 million was contributed by the Company to cover its indemnification obligations to the underwriters, and the remainder of which was contributed by the Company’s insurers. The Company and the defendants have denied and continue to deny each and all the claims alleged in the actions, and the settlement did not assign or reflect any admission of fault, wrongdoing or liability as to any defendant. Notice of the settlement was provided to stockholders in the fall of 2017, and no stockholder objected to the settlement. On January 19, 2018, the San Mateo Superior Court entered a judgment and order finally approving the settlement. On February 5, 2018, the U.S. District Court entered an order dismissing the consolidated federal action with prejudice. No one appealed either order and the deadline for any such appeal has passed. The Company recorded $1.0 million as general and administrative expense during the three months ended March 31, 2017, when the amount and time of settlement became estimable and probable.