| Commitments and Contingencies | 14.
Commitments and Contingencies Carlsbad
Lease In
May 2019, Lineage entered into a lease for approximately 8,841 August 1, 2019 Base
rent under the Carlsbad Lease, beginning on August 1, 2021, is $ 23,959 3 August 1, 2022 7,000 In
addition to base rent, Lineage pays 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
Leases and Alameda Sublease In
December 2015, Lineage entered into leases of office and laboratory space located in two buildings 22,303 8,492 72,676 3 In addition to base rent, Lineage paid 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. 424,000 78,000 In
April 2020, Lineage entered into a sublease with Industrial Microbes, Inc. (“Industrial Microbes”) for the use of 10,000 was $ 28,000 3 On
September 11, 2020, Lineage entered into a Lease Termination Agreement with the landlord terminating the Alameda Leases effective as
of August 31, 2020 for the 1020 Atlantic Premises and September 30, 2020 for the 1010 Atlantic Premises. In
consideration for the termination of the leases, Lineage paid a termination fee of $ 130,000 Lineage
paid a separate termination fee of $ 30,000 56,000 119,000 Lineage
continues to occupy approximately 2,432 The term of the Alameda Sublease is
from October 1, 2020 January 31, 2023 14,592 3 16,000 Based
on the smaller footprint, and after taking into consideration the fees disclosed above, Lineage has reduced its contractual obligations
by approximately $ 780,000 New
York Leased Office Space Lineage
incurred costs of $ 5,050 900 Cell
Cure Leases Cell
Cure leases 728.5 7,842 December 31, 2025 option to extend the lease for five years 39,776 12,200 On
January 28, 2018, Cell Cure entered into another lease agreement for an additional 934 10,054 December 31, 2025 two five-year extension
options 4,000,000 1.1 93,827 26,000 420,000 On
November 30, 2021, Cell Cure entered into a lease agreement for an additional 133 1,432 December 31, 2025 one five year and one approximate
three-year extension options 11,880 3,757 12,494 3,951 Adoption
of ASC 842 The
below tables provide the amounts recorded in connection with the adoption of ASC 842 as of, and for the years ended December 31, 2021
and 2020, for Lineage’s operating and financing leases, as applicable. Supplemental
cash flow information related to leases was as follows (in thousands): Schedule of Supplemental Cash Flow Information Related to Leases
2021 2020
Year Ended December 31,
2021 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 935 $ 1,356
Operating cash flows from financing leases 13 20
Financing cash flows from financing leases 20 26
Right-of-use assets obtained in exchange for lease obligations:
Operating leases 213 1,047
Financing leases 39 - Supplemental
balance sheet information related to leases was as follows (in thousands, except lease term and discount rate): Schedule of Supplemental Balance Sheet Information Related to Leases
2021 2020
December 31,
2021 2020
Operating leases
Right-of-use assets, net $ 2,372 $ 2,916
Right-of-use lease liabilities, current $ 801 $ 746
Right-of-use lease liabilities, noncurrent 1,941 2,514
Total operating lease liabilities $ 2,742 $ 3,260
Financing leases
Right-of-use assets, net $ 36 $ -
Property and equipment, gross $ 79 $ 79
Accumulated depreciation (79 ) (65 )
Property and equipment, net $ - $ 14
Lease liabilities, current $ 13 $ -
Lease liabilities, noncurrent 23 -
Total finance lease liabilities $ 36 $ -
Other current liabilities $ 17 $ 16
Long-term liabilities 7 26
Total finance lease liabilities $ 24 $ 42
Weighted average remaining lease term
Operating leases 3.5 4.2
Finance leases 2.2 2.4
Weighted average discount rate
Operating leases 7.7 % 8.0 %
Finance leases 5.7 % 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,
2022 $ 1,042 $ 33
2023 583 22
2024 551 10
2025 532 -
2026 447 -
Total lease payments $ 3,155 $ 65
Less imputed interest (413 ) (5 )
Total $ 2,742 $ 60 Roche
Collaboration Agreement On
December 17, 2021, Lineage and its subsidiary, Cell Cure, entered into the Roche Agreement, wherein Lineage granted to Roche exclusive
worldwide rights to develop and commercialize RPE cell therapies, including its proprietary cell therapy known as OpRegen. Roche paid
Lineage a $ 50.0 620.0 The
OpRegen program has been supported in part with contributions made by Hadasit, the technology transfer company of Hadassah Medical Center,
and the IIA, an independent agency created to address the needs of global innovation ecosystems. A significant portion of early
development on the OpRegen program occurred at Cell Cure. Cell Cure was established by the Hadassah Medical Center, where the intellectual
property underlying the differentiation and manufacture of RPE cells originated. In addition, significant monetary support for the OpRegen
program was provided by the IIA through a series of separate research grants, beginning in 2007. Under the Encouragement of Research,
Development and Technological Innovation in the Industry Law 5744, and the regulations, guidelines, rules, procedures and benefit tracks
thereunder (collectively, the “Innovation Law”), annual research and development programs that meet specified criteria and
were approved by a committee of the IIA which were eligible for grants. The grants awarded were typically up to 50 The
terms of the grants under the Innovation Law generally require that the products developed as part of the programs under which the grants
were given be manufactured in Israel. The know-how developed thereunder may not be transferred outside of Israel unless prior written
approval is received from the IIA. Transfer of IIA-funded know-how outside of Israel is subject to approval and payment of a redemption
fee, to the IIA calculated according to the relevant formulas provided under the Innovation Law. In November 2021, an application made
by Cell Cure to the research committee of the IIA, was approved granting an exclusive license and transfer of the technological know-how
for OpRegen to Roche. Under the provisions for the redemption fee, Lineage is obligated to pay the IIA a portion of the upfront, milestone,
and royalty payments which may be received under the Agreement. Lineage is obligated to pay approximately 24.3 102.7 In
addition, pursuant to the Second Amended and Restated License Agreement, dated June 15, 2017, between Cell Cure and Hadasit, as amended,
and a certain letter agreement entered into on December 17, 2021, by and between Cell Cure and Hadasit, Cell Cure is obligated to pay
to Hadasit a sublicensing fee of 21.5% of the upfront payment (subject to certain reductions) and any milestone payments, and up to 50%
of all royalty payments (subject to a maximum payment of 5% of net sales of products) In
January 2022, Lineage received the $ 50.0
million upfront payment from Roche. Lineage made
a subsequent payment of $ 12.1
million to the IIA, pursuant to Lineage’s
obligations under the Innovation Law. Additionally, Lineage made a subsequent payment of $ 8.9
million to Hadasit, pursuant to Lineage’s
obligations under the Second Amended and Restated License Agreement. Lineage reduced the Hadasit payment by $ 1.9
million, due to a $ 8.6
million budgetary commitment under the Agreement.
Lineage
is required to pay Hadasit 21.5% of any portion of the commitment not incurred within five years after the execution of the Agreement .
Both the IIA and Hadasit payments were accrued as research and development expenses incurred, upon the execution of the Agreement within
the company’s year-end consolidated statement of operations. Unless
earlier terminated by either party, the Agreement will expire on a product-by-product and country-by-country basis upon the expiration
of all of Roche’s payment obligations under the Agreement. Roche may terminate the Agreement in its entirety, or on a product-by-product
or country-by-country basis, at any time with advance written notice. Either party may terminate the Agreement in its entirety with written
notice for the other party’s material breach if such party fails to cure the breach. Either party also may terminate the Agreement
in its entirety upon certain insolvency events involving the other party. ITI
Collaboration Agreement Under
our collaborative agreement with ITI we agreed to perform certain research, development, manufacturing, and oversight activities related
to a VAC-CMV product up to a budgeted amount of approximately $ 2.2 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 (“CRUK”) 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 1.6 500,000 500,000 250,000 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. 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 May 7, 2019, January 30, 2020, May 1, 2020 and September
4, 2020 (the “Gyroscope Agreement”). As amended, the Gyroscope Agreement provided Lineage access to Gyroscope’s vitrectomy-free
subretinal injection device (the “Orbit Device”) as a means of delivering OpRegen in Lineage’s ongoing Phase 1/2a clinical
trial through the earlier of: (i) December 1, 2020; or (ii) or treatment of three additional patients with the Orbit Device between September
4, 2020 and December 1, 2020 (the “Access Period”). Following the Access Period, Lineage also had an exclusive right to negotiate
a definitive agreement to distribute and sell the Orbit Device for the subretinal delivery of RPE cells for the treatment of dry AMD
(the “Option Period”), which was initially set to expire in February 2021. 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 0.5 Litigation
– General From
time to time, we are subject to legal proceedings and claims in the ordinary course of business. While management presently believes
that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, cash
flows, or overall trends in results of operations, legal proceedings are subject to inherent uncertainties, and unfavorable rulings or
outcomes could occur that have individually or in aggregate, a material adverse effect on our business, financial condition or operating
results. Except as described below, we are not currently subject to any pending material litigation, other than ordinary routine litigation
incidental to our business, as described above. On
October 14, 2019, a 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 limit Lineage’s financial exposure. 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 of December 31, 2021 and 2020. 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 As
part of the Asterias Merger, Lineage acquired certain royalty revenues for cash flows that were generated under certain specific patent
families that Asterias previously acquired from Geron. Asterias paid Geron a royalty for all royalty revenues received from these contracts.
Lineage continues to make royalty payments to Geron for royalties generated from these patents. |
