| Commitments and Contingencies | 14.
Commitments and Contingencies Real
Property Leases Carlsbad
Lease In
May 2019, Lineage entered into a lease for approximately 8,841 August 1, 2019 October 31, 2022 7,000 3 24,666 17,850 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. Carlsbad
Sublease In
September 2022, Lineage, as sublessee, entered into a sublease for approximately 4,500 October 1, 2022 March 31, 2024 22,500 22,500 Alameda
Leases and Alameda Sublease In
December 2015, Lineage entered into leases of office and laboratory space located in two buildings 22,303 8,492 424,000 78,000 Base
rent under the Alameda Leases beginning on February 1, 2020 was $ 72,676 3 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. In
April 2020, Lineage, as sublessor, subleased 10,000 was
$ 28,000 3 in operating expenses. On
September 11, 2020, the lease for the 1020 Atlantic Premises was terminated effective as of August 31, 2020, and the lease for the 1010
Atlantic Premises was terminated effective as of September 30, 2020. In connection with the termination of the Alameda Leases, Lineage,
as sublessee, entered into a sublease for approximately 2,432 October 1, 2020 January 31, 2023 14,592 3 16,000 Cell
Cure Leases Cell
Cure leases 728.5 7,842 December 31, 2027 option to extend the lease for five years 39,776 12,200 In
January 2018, Cell Cure entered into another lease for an additional 934 10,054 December 31, 2027 five years 93,827 26,000 420,000 In
November 2021, Cell Cure entered into a lease for an additional 133 1,432 December
31, 2027 five
years 11,880 3,757 12,494 3,951 In
August 2022, Cell Cure entered into a new lease for 300 3,229 December
31, 2027 five
years 16,350 4,800 he adjustment
to the right-of-use asset and lease liability to reflect the lease modification for the 2-year extension was $ 0.7 0.2 Supplemental
Information – Leases Supplemental
cash flow information related to leases is as follows (in thousands): Schedule
of Supplemental Cash Flow Information Related to Leases
2022 2021
Nine Months Ended September 30,
2022 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 727 $ 687
Operating cash flows from financing leases 14 12
Financing cash flows from financing leases 23 13
Right-of-use assets obtained in exchange for lease obligations:
Operating leases 1,028 32 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
September 30, 2022 December 31,
Operating leases
Right-of-use assets, net $ 2,491 $ 2,372
Right-of-use lease liabilities, current $ 543 $ 801
Right-of-use lease liabilities, noncurrent 2,216 1,941
Total operating lease liabilities $ 2,759 $ 2,742
Financing leases
Right-of-use assets, net $ 19 $ 36
Lease liabilities, current $ 13 $ 13
Lease liabilities, noncurrent 16 23
Total finance lease liabilities $ 29 $ 36
Other current liabilities $ 12 $ 17
Long-term liabilities - 7
Total finance lease liabilities $ 12 $ 24
Weighted average remaining lease term
Operating leases 5.1 3.5
Finance leases 1.6 2.2
Weighted average discount rate
Operating leases 6.6 % 7.7 %
Finance leases 5.0 % 5.7 % Future
minimum lease commitments are as follows as of September 30, 2022 (in thousands): Schedule
of Future Minimum Lease Commitments
Operating Leases Finance Leases
Year Ending December 31,
2022 $ 222 $ 7
2023 616 24
2024 595 11
2025 578 -
2026 571 -
Thereafter 689
Total lease payments $ 3,271 $ 42
Less imputed interest (512 ) (1 )
Total $ 2,759 $ 41 Collaboration
Agreements Roche
Agreement In
December 2021, Lineage entered into the Roche Agreement, wherein Lineage granted to Roche exclusive worldwide rights to develop and commercialize
RPE cell therapies, including Lineage’s proprietary cell therapy known as OpRegen, for the treatment of ocular disorders, including
GA secondary to AMD. Under
the terms of the Roche Agreement, Roche paid Lineage a $ 50.0 620.0 Unless
earlier terminated by either party, the Roche 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 or upon certain insolvency events involving
the other party. In
January 2022, Lineage received the $ 50.0 12.1 8.9 1.9 21.5 ITI
Collaboration Agreement Under
Lineage’s collaborative agreement with Immunomic Therapeutics, Inc., Lineage agreed to perform up to approximately $ 2.2 Agreements
with Hadasit and IIA The
OpRegen program was supported in part with licenses to technology obtained from Hadasit, the technology transfer company of Hadassah
Medical Center, and through a series of research grants from the IIA, an independent agency created to address the needs of global innovation
ecosystems. A subset of the intellectual property underlying OpRegen was originally generated at Hadassah Medical Center and licensed
to Cell Cure for further development. 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 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 formulas provided under the Innovation Law. In November 2021, the IIA research committee approved
an application made by Cell Cure with respect to the grant of 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 approximately 24.3 90.9 Pursuant
to the Second Amended and Restated License Agreement, dated June 15, 2017, between Cell Cure and Hadasit, and a certain letter agreement
entered into on December 17, 2021, Hadasit was entitled to, and was paid, a sublicensing fee of 21.5 50.0 50 Second
Amendment to Clinical Trial and Option Agreement and License Agreement with Cancer Research UK In
May 2020, Lineage and 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 “CRT License Agreement”) pursuant
to which Lineage agreed to pay the previously agreed signature fee of £ 1,250,000 1.6 8,000,000 22,500,000 Either
party may terminate the CRT License Agreement for the uncured material breach of the other party. CRT may terminate the CRT License Agreement
in the case of Lineage’s insolvency or if Lineage ceases all development and commercialization of all products under the CRT License
Agreement. 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. Asterias
Merger In
November 2018, Lineage, Asterias Biotherapeutics, Inc. (“Asterias”) and Patrick Merger Sub, Inc., a wholly owned subsidiary
of Lineage, entered into an Agreement and Plan of Merger (the “Merger Agreement”) whereby Lineage agreed to acquire all of
the outstanding common stock of Asterias in a stock-for-stock transaction (the “Asterias Merger”). On March 7, 2019, the
shareholders of each of Lineage and Asterias approved the Merger Agreement. On March 8, 2019, the Asterias Merger closed with Asterias
surviving as a wholly owned subsidiary of Lineage. Lineage issued 24,695,898 58,085 32.4 52.6 In
October 2019, a putative class action lawsuit was filed challenging the Asterias Merger. This action (captioned Ross v. Lineage Cell
Therapeutics, Inc., et al. In
April 2022, the parties reached an agreement in principle to settle the Asterias Merger Litigation, which would result in payment to
the putative class of approximately $ 10.7 3.5 In
accordance with ASC 450, Contingencies See
Note 15 (Subsequent Events) for an update on Asterias Merger Litigation . 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 agree to indemnify and reimburse other parties, typically Lineage’s clinical research
organizations, investigators, clinical sites, and suppliers, 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
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 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.
Generally, Lineage has not been subject to any material claims or demands for indemnification. Lineage maintains liability insurance
policies that limit its financial exposure under the indemnification agreements. Accordingly, Lineage has not recorded any liabilities
for these agreements as of September 30, 2022 or December 31, 2021. Royalty
Obligations and License Fees We
have licensing agreements with research institutions, universities and other parties providing us with certain rights to use intellectual
property in conducting research and development activities in exchange for the payment of royalties on future product sales, if any.
In addition, in order to maintain these licenses and other rights, we must comply with various conditions including the payment of patent
related costs and annual minimum maintenance fees. As
part of the Asterias Merger, Lineage acquired certain royalty revenues for cash flows generated under certain patent families that Asterias
acquired from Geron Corporation. Lineage continues to make royalty payments to Geron from royalties generated from these patents. |
