| Commitments and Contingencies | 15.
Commitments and Contingencies Carlsbad
Lease In
May 2019, Lineage entered into a lease for approximately 8,841 August 1, 2019 October 31, 2022 Base
rent under the Carlsbad Lease beginning on August 1, 2019 is $ 17,850 3 7,000 In
addition to base rent, Lineage will pay a pro rata portion of increases in certain expenses, including real property taxes, utilities
(to the extent not separately metered to the leased space) and the landlord’s operating expenses, over the amounts of those
expenses incurred by the landlord. As security for the performance of its obligations under the Carlsbad Lease, Lineage provided
the landlord with a security deposit of $ 17,850 Alameda
Lease In
December 2015, Lineage entered into a lease for approximately 30,795 two buildings seven years five years February 1, 2016 January 31, 2023 Base
rent under the Alameda Lease beginning on February 1, 2020 is $ 72,676 3 In
addition to base rent, Lineage will pay a pro rata portion of increases in certain expenses, including real property taxes, utilities
(to the extent not separately metered to the leased space) and the landlord’s operating expenses, over the amounts of those
expenses incurred by the landlord. As security for the performance of its obligations under the Alameda Lease, Lineage provided
the landlord with a security deposit of approximately $ 424,000 78,000 78,000 Alameda
Sublease In
April 2020, Lineage entered into a sublease with Industrial Microbes, Inc. for the usage of 10,000 April 24, 2020 January 31, 2023 Base
rent under the sublease is $ 28,00 3 As
security for the performance of its obligations under the sublease, Industrial Microbes provided Lineage with a security deposit
of $ 56,000 New
York Leased Office Space Lineage
currently pays $ 5,050 900 Cell
Cure Leases Cell
Cure leases 728.5 7,842 December 31, 2020 five years 37,882 11,000 On
January 28, 2018, Cell Cure entered into another lease agreement for an additional 934 10,054 lease that expires on December 31, 2025 five years 4,000,000 1.1 93,827 26,000 In
December 2018, Cell Cure made a $ 388,000 The
below table provides supplemental cash flow information related to leases as follows (in thousands): Schedule of Supplemental Cash Flow Information Related to Leases
Six Months Ended June 30,
2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 797 $ 670
Operating cash flows from financing leases 13 17
Financing cash flows from financing leases 17 14
Right-of-use assets obtained in exchange for lease obligations:
Operating leases 29 89
Financing leases - - Supplemental
balance sheet information related to leases is as follows (in thousands, except lease term and discount rate): Schedule of Supplemental Balance Sheet Information Related to Leases
June
30, December 31,
Operating leases
Right-of-use assets, net $ 4,077 $ 4,666
Right-of-use lease liabilities, current 1,210 1,190
Right-of-use lease liabilities, noncurrent 3,276 3,868
Total operating lease liabilities $ 4,486 $ 5,058
Financing leases
Property and equipment, gross $ 96 $ 96
Accumulated depreciation (57) (48)
Property and equipment, net $ 39 $ 48
Current liabilities 31 33
Long-term liabilities 62 77
Total finance lease liabilities $ 93 $ 110
Weighted average remaining lease term
Operating leases 3.7 4.1
Finance leases 2.9 3.4
Weighted average discount rate
Operating leases 9.1% 9.1%
Finance leases 10.2% 10.0% Future
minimum lease commitments are as follows (in thousands): Schedule of Future Minimum Lease Commitments
Operating Leases Finance Leases
Year Ending December 31,
2020 $ 800 $ 21
2021 1,539 36
2022 1,518 36
2023 400 15
2024 308 -
Thereafter 790 -
Total lease payments $ 5,355 $ 108
Less imputed interest (869) (15)
Total $ 4,486 $ 93 Research
and Option Agreement On
January 5, 2019, Lineage and Orbit Biomedical Limited (“Orbit”) entered into a Research and Option Agreement, which
was assigned by Orbit to Gyroscope Therapeutics, Limited (“Gyroscope”) and amended on January 30, 2020 and May 1,
2020 (the “Gyroscope Agreement”). As amended, the Gyroscope Agreement provides Lineage access to Gyroscope’s
vitrectomy-free subretinal injection device as a means of delivering OpRegen in Lineage’s ongoing Phase 1/2a clinical trial
through September 10, 2020 (the “Access Period”). Pursuant to the terms of the Gyroscope Agreement, Lineage paid access
fees totaling $ 2.5 1.25 1.25 2.5 0.5 0.2 0.3 Lineage
has exclusive rights to the Gyroscope technology and its injection device for the treatment of dry AMD during the term of the
Gyroscope Agreement. Litigation Lineage
is subject to various claims and contingencies in the ordinary course of its business, including those related to litigation,
business transactions, employee-related matters, and others. When Lineage is aware of a claim or potential claim, it assesses
the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably
estimated, Lineage will record a liability for the loss. If the loss is not probable or the amount of the loss cannot be reasonably
estimated, Lineage will disclose the claim if the likelihood of a potential loss is reasonably possible and the amount involved
could be material. Lineage is not aware of any claims likely to have a material adverse effect on its financial condition or results
of operations. On
February 19, 2019, a putative shareholder class action lawsuit was filed (captioned Lampe v. Asterias Biotherapeutics, Inc.
et al On
June 3, 2019, defendants filed demurrers to the Amended Complaint. On August 13, 2019, the parties submitted a stipulation to
the court seeking dismissal of the action with prejudice as to the named Plaintiffs and without prejudice as to the unnamed putative
class members, and disclosing to the court the parties’ agreement to resolve, for $ 200,000 On
October 14, 2019, another putative class action lawsuit was filed challenging the Asterias Merger. This action (captioned Ross
v. Lineage Cell Therapeutics, Inc., et al. Lineage
believes the allegations in the action lack merit and intends to vigorously defend the claims asserted. It is impossible at this
time to assess whether the outcome of this proceeding will have a material adverse effect on Lineage’s consolidated results
of operations, cash flows or financial position. Therefore, in accordance with ASC 450, Contingencies, Employment
contracts Lineage
has entered into employment agreements with certain executive officers. Under the provisions of the agreements, Lineage may be
required to incur severance obligations for matters relating to changes in control, as defined in the agreements, and involuntary
terminations. Indemnification In
the normal course of business, Lineage may provide indemnifications of varying scope under Lineage’s agreements with other
companies or consultants, typically Lineage’s clinical research organizations, investigators, clinical sites, suppliers
and others. Pursuant to these agreements, Lineage will generally agree to indemnify, hold harmless, and reimburse the indemnified
parties for losses and expenses suffered or incurred by the indemnified parties arising from claims of third parties in connection
with the use or testing of Lineage’s products and services. Indemnification provisions could also cover third party infringement
claims with respect to patent rights, copyrights, or other intellectual property pertaining to Lineage products and services.
The term of these indemnification agreements will generally continue in effect after the termination or expiration of the particular
research, development, services, or license agreement to which they relate. The potential future payments Lineage could be required
to make under these indemnification agreements will generally not be subject to any specified maximum amount. Historically, Lineage
has not been subject to any claims or demands for indemnification. Lineage also maintains various liability insurance policies
that provide Lineage with insurance against claims or demands for indemnification in specified circumstances. As a result, Lineage
believes the fair value of these indemnification agreements is minimal. Accordingly, Lineage has not recorded any liabilities
for these agreements as June 30, 2020 and December 31, 2019. Second
Amendment to Clinical Trial and Option Agreement and License Agreement with Cancer Research UK On
May 6, 2020, Lineage and its wholly owned subsidiary Asterias entered into a Second Amendment to Clinical Trial and Option Agreement
(the “CTOA Amendment”) with Cancer Research UK and Cancer Research Technology Limited (“CRT”), which amends
the Clinical Trial and Option Agreement entered into between Asterias, CRUK and CRT dated September 8, 2014, as amended September
8, 2014. Pursuant to the CTOA Amendment, Lineage assumed all obligations of Asterias and exercised early its option to acquire
data generated in the Phase 1 clinical trial of VAC2 in non-small cell lung cancer being conducted by CRUK. CRUK will continue
conducting the VAC2 study. Lineage
and CRT effectuated the option by simultaneously entering into a license agreement (the “License Agreement”) pursuant
to which Lineage agreed to pay the previously agreed signature fee of £ 1,250,000 500,000 500,000 250,000 8,000,000 22,500,000 Either
party may terminate the License Agreement for the uncured material breach of the other party. CRT may terminate the License Agreement
in the case of Lineage’s insolvency or if Lineage ceases all development and commercialization of all products under the
License Agreement. Second
Amended and Restated License Agreement On
June 15, 2017, Cell Cure entered into a Second Amended and Restated License Agreement (the “License Agreement”) with
Hadasit Medical Research Services and Development Ltd. (“Hadasit”), the commercial arm and a wholly owned subsidiary
of Hadassah Medical Organization. Pursuant to the License Agreement, Hadasit granted Cell Cure an exclusive, worldwide, royalty
bearing license (with the right to grant sublicenses) in its intellectual property portfolio of materials and technology related
to human stem cell derived photoreceptor cells and retinal pigment epithelial cells (the “Licensed IP”), to use, commercialize
and exploit any part thereof, in any manner whatsoever in the fields of the development and exploitation of: (i) human stem cell
derived photoreceptor cells, solely for use in cell therapy for the diagnosis, amelioration, prevention and treatment of eye disorders;
and (ii) human stem cell derived retinal pigment epithelial cells, solely for use in cell therapy for the diagnosis, amelioration,
prevention and treatment of eye disorders. As
consideration for the Licensed IP, Cell Cure will pay a small one-time lump sum payment, a royalty in the mid-single digits of
net sales from sales of Licensed IP by any invoicing entity, and a royalty of 21.5 Cell
Cure will pay Hadasit non-refundable milestone payments upon the recruitment of the first patient for the first Phase 2b clinical
trial, upon the enrollment of the first patient in the first Phase 3 clinical trials, upon delivery of the report for the first
Phase 3 clinical trials, upon the receipt of an NDA or marketing approval in the European Union, whichever is the first to occur,
and upon the first commercial sale in the United States or European Union, whichever is the first to occur. Such milestones, in
the aggregate, may be up to $ 3.5 The
License Agreement terminates upon the expiration of Cell Cure’s obligation to pay royalties for all licensed products, unless
earlier terminated. In addition to customary termination rights of both parties, Hadasit may terminate the License Agreement if
Cell Cure fails to continue the clinical development of the Licensed IP or fails to take actions to commercialize or sell the
Licensed IP over any consecutive 12 month period. The License Agreement also contains mutual confidentiality obligations of Cell
Cure and Hadasit, and indemnification obligations of Cell Cure. Royalty
obligations and license fees Lineage
and its subsidiaries or affiliates are parties to certain licensing agreements with research institutions, universities and other
parties for the rights to use those licenses and other intellectual property in conducting research and development activities.
These licensing agreements provide for the payment of royalties by Lineage or the applicable party to the agreement on future
product sales, if any. In addition, in order to maintain these licenses and other rights during the product development, Lineage
or the applicable party to the contract must comply with various conditions including the payment of patent related costs and
annual minimum maintenance fees. Annual minimum maintenance fees are expected to be approximately $ 30,000 60,000 5,000 33,000 Grants Under
the terms of the grant agreement between Cell Cure and Israel Innovation Authority (“IIA”) (formerly the Office of
the Chief Scientist of Israel) of the Ministry of Economy and Industry, for the development of OpRegen, Cell Cure will be required
to pay royalties on future product sales, if any, up to the amounts received from the IIA, plus interest indexed to LIBOR. Cell
Cure’s research and product development activities under the grant are subject to substantial risks and uncertainties and
performed on a best efforts basis. As a result, Cell Cure is not required to make any payments under the grant agreement unless
it successfully commercializes OpRegen. Accordingly, pursuant to ASC 730-20, the grant is considered a contract to perform research
and development services for others and grant revenue is recognized as the related research and development expenses are incurred
(see Note 2). Israeli
law pertaining to such government grants contain various conditions, including substantial penalties and restrictions on the transfer
of intellectual property, or the manufacture, or both, of products developed under the grant outside of Israel, as defined by
the IIA. |
