| Commitments and Contingencies | 14.
Commitments and Contingencies Real
Property Leases Carlsbad
Lease In
May 2019, Lineage entered into a lease for approximately 8,841 March 31, 2026 24,666 25,197 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. These pro-rata charges are expensed as incurred and excluded from the calculation of the ROU assets and lease
liabilities. 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 Cell
Cure Leases Cell
Cure leases 728.5 7,842 December 31, 2027 39,776 12,200 In
January 2018, Cell Cure entered into a lease for an additional 934 10,054 December 31, 2027 option to extend the lease for five years (the “January 2018 Lease”) 93,827 26,000 458,000 In
November 2021, Cell Cure entered into a lease for an additional 133 1,432 option to extend the lease for 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 option to extend the lease for five years 16,350 4,800 Supplemental
Information – Leases Supplemental
cash flow information related to leases is as follows (in thousands): Schedule
of Supplemental Cash Flow Information Related to Leases
2023 2021
Three
Months Ended March
31,
2023 2022
Cash
paid for amounts included in the measurement of lease liabilities:
Operating
cash flows from operating leases $ 315 $ 255
Operating
cash flows from financing leases 2 5
Financing
cash flows from financing leases 13 8
Right-of-use
assets obtained in exchange for lease obligations:
Operating
leases - 33
Finance
leases 79 - 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
March
31, 2023 December 31, 2022
Operating
leases
Right-of-use
assets, net $ 3,215 $ 3,517
Right-of-use
lease liabilities, current $ 912 $ 916
Right-of-use
lease liabilities, noncurrent 2,542 2,860
Total
operating lease liabilities $ 3,454 $ 3,776
Financing
leases
Right-of-use
assets, net $ 173 $ 105
Lease
liabilities, current $ 48 $ 29
Lease
liabilities, noncurrent 133 84
Total
finance lease liabilities $ 181 $ 113
Other
current liabilities $ 3 $ 7
Total
finance lease liabilities $ 184 $ 120
Weighted
average remaining lease term
Operating
leases 4.1 4.3
Finance
leases 3.6 4.1
Weighted
average discount rate
Operating
leases 6.4 % 6.3 %
Finance
leases 6.8 % 6.9 % Future
minimum lease commitments are as follows as of March 31, 2023 (in thousands): Schedule
of Future Minimum Lease Commitments
Operating
Leases Finance
Leases
Year
Ending December 31,
2023 $ 788 $ 51
2024 957 61
2025 885 51
2026 647 27
2027 685 18
Total
lease payments 3,962 208
Less
imputed interest (508 ) (24 )
Total $ 3,454 $ 184 Collaborations 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. (“ITI”), Lineage agreed to perform up to approximately
$ 2.2 1.6 0.5 0.5 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 (collectively the
“Innovation Law”), guidelines, rules, procedures and benefit tracks thereunder, 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% 91.7 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 CRUK and Cancer Research Technology (“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. 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. Other
Contingent Obligations Other
than disclosed above, we have obligations under various license agreements and grants received from government entities to make future
payments to third parties, which become due and payable on the achievement of certain development, regulatory and commercial milestones
or on the sublicense of our rights to another party. These commitments include sublicense fees, milestone payments, redemption fees and
royalties. Sublicense fees are payable to licensors or government entities when we sublicense underlying intellectual property to third
parties; the fees are based on a percentage of the license fees we receive from sublicensees. Milestone payments are due to licensors
or government entities upon the future achievement of certain development and regulatory milestones. Redemption fees due to the IIA under
the Innovation Law are due upon receipt of any milestone and royalties received under the Roche Agreement. Royalties are payable to licensors
or government entities based on a percentage of net sales of licensed products. As of March 31, 2023, we have not included these commitments
on our condensed consolidated balance sheet because the achievement and timing of these events are not fixed and determinable. 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. 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 pursuant to which Lineage agreed to acquire all of the outstanding common stock
of Asterias in a stock-for-stock transaction (the “Asterias Merger”). The Asterias Merger closed in March 2019. In
October 2019, a putative class action lawsuit was filed challenging the Asterias Merger. The lawsuit (captioned Ross v. Lineage Cell
Therapeutics, Inc., et al., C.A. No. 2019-0822) was filed in Delaware Chancery Court and named, among other defendants, Lineage, Michael
H. Mulroy, Alfred D. Kingsley, Richard T. LeBuhn and Aditya Mohanty. Messrs. Mulroy and Kingsley are members of the Lineage board of
directors and were former members of the Asterias board of directors. Messrs. LeBuhn and Mohanty were also former members of the Asterias
board of directors, and Mr. Mohanty was a former member of the Lineage board of directors and a former chief executive officer of Lineage.
The lawsuit was brought by a purported stockholder of Asterias, on behalf of a putative class of Asterias stockholders, and asserts breach
of fiduciary duty and aiding and abetting claims under Delaware law. In
April 2022, the parties reached an agreement in principle to settle the lawsuit and, in October 2022, the plaintiff, on behalf of himself
and all others similarly situated, Lineage and Messrs. Mulroy, Kingsley, LeBuhn and Mohanty entered into a Stipulation and Agreement
of Compromise and Settlement (the “Settlement Agreement”). In
February 2023, the court approved the Settlement Agreement. Pursuant to the terms of the Settlement Agreement, Lineage and certain insurers
of the defendants paid $ 10.65 7.12 3.53 Lineage
and all defendants have denied, and continue to deny, the claims alleged in the lawsuit and the settlement does not reflect or constitute
any admission, concession, presumption, proof, evidence or finding of any liability, fault, wrongdoing or injury or damages, or of any
wrongful conduct, acts or omissions on the part any defendant. Premvia
Litigation Settlement In
July 2019, the Company, along with other named defendants, was sued in the Superior Court of the State of California in a matter captioned
Gonzalez v. Aronowitz, M.D., et al 25,000 HBL
Books and Records Request On
April 17, 2023, Cell Cure Neurosciences Ltd. (“Cell Cure”), Lineage’s subsidiary, received a motion for disclosure
of documents pursuant to Section 198A of the Israeli Companies Law 5759-1999. The motion was filed in the district court in Tel
Aviv-Yafo by HBL Hadasit Bio-Holdings Ltd. (“HBL”), currently an approximately 5% shareholder of Cell Cure. According to
the motion, the requested production of documents is intended to allow HBL to examine the possibility of pursuing a derivative
action related to, among other things, the validity of an intercompany Collaboration and License Agreement (the “Intercompany
Agreement”) entered into between Lineage and Cell Cure pursuant to which Cell Cure conveyed certain rights and other assets to
Lineage, and Lineage agreed to undertake certain liabilities and obligations of Cell Cure relating to the OpRegen® program. In
its motion, HBL alleges, among other things, that Lineage, in its capacity as Cell Cure’s controlling shareholder, and members
of Cell Cure’s board of directors caused damage to Cell Cure because the Intercompany Agreement was an interested party
transaction that was not fairly priced and exploits Cell Cure’s resources for the benefit of Lineage. The motion seeks an
order to compel Cell Cure to disclose and deliver to HBL the documents described in the motion, such additional, cumulative, or
alternative relief as the court deems appropriate, and reimbursement of HBL’s expenses, including attorneys’ fees.
Lineage disputes the allegations and Cell Cure intends to oppose the motion. 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 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 March 31, 2023 or December 31, 2022. 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. |
