COMMITMENTS AND CONTINGENCIES

12 Months Ended

Aug. 31, 2012

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

(11)  COMMITMENTS AND CONTINGENCIES

CONTRACTUAL OBLIGATIONS WITH FORMER ENCODE STOCKHOLDERS AND UCSD RELATING TO THE ACQUISITION OF THE DR CYSTEAMINE (RP103 AND RP104) LICENSE

As a result of the merger between Raptor Therapeutics Inc. and Encode, as discussed in Note 8 above, the Encode Security Holders are eligible to receive up to an additional 559 shares of Raptor's common stock, Company Options and Company Warrants to purchase Raptor's common stock in the aggregate based on certain triggering events related to regulatory approval of RP103/RP104, an Encode product program, if completed within the five year anniversary date of the merger agreement.

Also as a result of the merger, the Company will be obligated to pay an annual maintenance fee to UCSD for the exclusive license to develop RP103/RP104 for certain indications of $15 until it begins commercial sales of any products developed pursuant to the License Agreement. In addition to the maintenance fee, the Company will be obligated to pay during the life of the License Agreement: milestone payments ranging from $20 to $750 for orphan indications and from $80 to $1,500 for non-orphan indications upon the occurrence of certain events, if ever; royalties on commercial net sales from products developed pursuant to the License Agreement ranging from 1.75% to 5.5%; a percentage of sublicense fees ranging from 25% to 50%; a percentage of sublicense royalties; and a minimum annual royalty commencing the year the Company begins commercially selling any products pursuant to the License Agreement, if ever. Under the License Agreement, the Company is obligated to fulfill predetermined milestones within a specified number of years ranging from 0.75 to 6 years from the effective date of the License Agreement, depending on the indication. In addition, the Company is obligated to, among other things, secure $1.0 million in funding prior to December 18, 2008 (which the Company has fulfilled by raising $10.0 million in its May/June 2008 private placement) and annually spend at least $200 for the development of products (which, as of its fiscal years ended August 31, 2012, 2011, 2010 and 2009 by spending approximately $20.9 million, $11.3 million, $6.2 million and $4.1 million, respectively, on such programs) pursuant to the License Agreement. Cumulatively, the Company has expensed $910 in milestone payments to UCSD based upon the initiation of clinical trials in cystinosis, Huntington's Disease and NASH and on regulatory filings in cystinosis.  In March 2012, the Company filed its MAA with the EMA, as well as its NDA with the FDA for RP103 for the potential treatment of cystinosis.  In conjunction with the achievement of MAA/NDA filing milestone, the Company paid $250 to UCSD pursuant to this license.  Future milestones of $500 and $750 will be payable if the MAA and NDA for cystinosis are approved, respectively, which the Company anticipates may occur in the first half of calendar year 2013.

To the extent that the Company fails to perform any of its obligations under the License Agreement, then UCSD may terminate the license or otherwise cause the license to become non-exclusive.

 The Company has contractual under our operating leases and other obligations related to research and development activities, purchase commitments, and licenses.  Information about these obligations as of August 31, 2012 is presented in the table below (in thousands).

	Payments Due by Period
	2013		2014		2015		2016		2017 andThereafter		Total
Operating leases	$	9	$	9	$	5	$	0	$	0	$	23
Research and development and purchase commitments		7,329		2,254		320		444		244		10,591
Total	$	7,338	$	2,263	$	325	$	444	$	244	$	10,614

We are also subject to contingent payments related to various development activities totaling approximately $18.0 million, which are due upon achievement of certain development and commercial milestones, and if they occur before certain dates in the future.

The Company maintained several contracts with drug labelers and distributors, research organizations, contract manufacturers, clinical organizations and clinical sites, primarily to assist with clinical research and clinical manufacturing for its cystinosis and HD programs and its NASH clinical collaboration. The future commitments pursuant to these agreements are included in the table above as research and development and purchase commitments.

 CAPITAL LEASE

On August 31, 2011, the Company leased a photocopier which is subject to a 39-month lease and on March 30, 2012, the Company leased another photocopier which is subject to a 39-month lease.  Future lease payment obligations under the capital leases are nominal.  Interest rate on the capital lease is 6% based on the lessor's implicit rate of return.