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Commitments and Contingencies | 6 Months Ended
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Jun. 30, 2024
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Operating Lease Obligations The Company currently leases office spaces and laboratory spaces located in Greater Los Angeles, California, Dallas, Texas, and the United Kingdom. The Company’s leased facilities have original lease terms ranging from 2 to 5 years that predominately require the Company to provide a security deposit, while certain leases provide the right for the Company to renew the lease upon the expiration of the initial lease term, and various leases have scheduled rent increases on an annual basis. The exercise of lease renewal options for the Company’s existing leases is at the Company’s sole discretion, and not included in the measurement of right of use asset or lease liability as they are not reasonably certain to be exercised. Certain leases have leasehold improvements and are being amortized over the shorter of the estimated useful life of the improvements or the remaining life of the lease. Such improvements incurred by the Company will revert to the landlord at the expiration of the lease and will be removed from Company’s condensed consolidated balance sheets. The Company’s lease costs consist of the following (in thousands):
| Three Months Ended |  | Six Months Ended
| June 30, |  | June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Operating lease cost | $ | 537 |  | $ | 307 |  | $ | 925 |  | $ | 1,516
Variable lease cost | 76 |  | 401 |  | 366 |  | 673
Total lease cost | $ | 613 |  | $ | 708 |  | $ | 1,291 |  | $ | 2,189
The following table summarizes cash flow information related to the Company’s lease obligations (in thousands):
| Three Months Ended |  | Six Months Ended
| June 30, |  | June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Cash paid for operating lease liabilities | $ | 734 |  |  | $ | 441 |  |  | $ | 1,262 |  |  | $ | 1,316 |
The following table summarizes the Company’s lease assets and liabilities (in thousands):
| June 30, 2024 |  | December 31, 2023
Operating lease right-of-use assets | $ | 1,707 |  |  | $ | 2,387 |
Current operating lease liabilities | $ | 1,669 |  |  | $ | 1,750 |
Non-current operating lease liabilities | $ | 2,020 |  |  | $ | 2,877 |
The following table summarizes other supplemental information related to the Company’s lease obligations:
| June 30, 2024 |  | December 31, 2023
Weighted-average remaining lease term (in years) | 2.18 |  | 2.60
Weighted-average discount rate | 6.75 | % |  | 6.75 | %
Future minimum lease payments under operating lease liabilities were (in thousands):
| June 30, 2024
2024 (remaining six months) | $ | 923 |
2025 | 1,818 |
2026 | 1,219 |
Total future lease payments | 3,960 |
Less: imputed interest | 271 |
Total lease liability balance | 3,689 |
Less: current portion of operating lease liabilities | 1,669 |
Total operating lease liabilities, non-current | $ | 2,020 |
During the six months ended June 30, 2024 and 2023, the Company evaluated its remaining right-of-use assets for impairment, as the Plan (as defined below in Note 10) has resulted in a cessation of use for several locations. The Company determined these assets were impaired, and has recognized an impairment loss of nil and termination gain of $0.2 million for the three months ended June 30, 2024 and 2023, respectively, and $0.2 million and $7.1 million for the six months ended June 30, 2024 and 2023 respectively, which are recorded in the line item "restructuring and impairment charges" in the condensed consolidated statements of operations and comprehensive loss. Legal Proceedings From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made and that such expenditures can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. The Company does not expect that the resolution of these matters will have a material adverse effect on its financial position, results of operations or cash flows. Debt In June 2022, the Company’s wholly owned subsidiary, Complex Therapeutics Mezzanine LLC, and the Company’s wholly owned indirect subsidiary, Complex Therapeutics LLC, entered into a mortgage construction loan and mezzanine construction loan (together, the “Loan”) secured by its Tarzana, California land and building (the “Property”). The initial principal amount of the Loan was $52.1 million, with additional future principal of up to $32.9 million to fund ongoing Property construction costs. Construction has been completed and on July 10, 2024, Complex Therapeutics LLC leased the Property to AstraZeneca Pharmaceuticals LP, as further described in Note 11. The Loan principal is payable in July 2025, with the option to extend until July 2027. As of June 30, 2024, the outstanding principal amount under the Loan was $82.8 million and unamortized debt issuance costs were $0.9 million. During the year ended December 31, 2023, $0.6 million in additional principal was paid in accordance with the Loan. The Loan is guaranteed by the Company and secured by the Property, and bears interest at the one-month Secured Overnight Financing Rate, plus 5.25% per annum. The Company discontinued capitalizing interest in June 2023 as the building was substantially complete at such time. The Loan contains customary negative and affirmative covenants that include limitations on the ability of the Company to enter into significant contracts and incur additional debt. The Company is also required to maintain consolidated net worth and liquid assets of at least $85.0 million as of June 30, 2024 and December 31, 2023 as defined in the loan agreement. As of June 30, 2024, the Company was in compliance with the covenants of the Loan. The Company is also required to maintain certain insurance coverage on the Property. In connection with the Loan, the Company entered into an interest rate swap to effectively limit its maximum interest rate, as discussed in Note 4. The net carrying amount of the liability component of the Loan was as follows (in thousands):
| June 30, 2024 |  | December 31, 2023
Principal amount | $ | 82,837 |  |  | $ | 82,837 |
Unamortized debt issuance cost | (911) |  |  | (1,410) |
Net carrying amount | $ | 81,926 |  |  | $ | 81,427 |
The following table sets forth the interest expense recognized related to the Loan (in thousands):
| Three Months Ended |  | Six Months Ended
| June 30, |  | June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Contractual interest expense | $ | 1,750 |  |  | $ | 341 |  |  | $ | 3,482 |  |  | $ | 728 |
Amortization of debt issuance cost | 249 |  |  | 249 |  |  | 498 |  |  | 498 |
Total interest expense related to the Loan | $ | 1,999 |  |  | $ | 590 |  |  | $ | 3,980 |  |  | $ | 1,226 |
Other Commitments In the normal course of business, the Company enters into contracts and various purchase agreements commitments with third-party vendors for clinical research services, products and other services from third parties for operating purposes. These agreements generally provide for termination or cancellation, other than for costs already incurred. As of June 30, 2024 and December 31, 2023, the Company had no outstanding liabilities, respectively, in commitments for employee benefits as part of the Plan. As of June 30, 2024 and December 31, 2023, the Company had $3.2 million and $3.1 million, respectively, in commitments for contract terminations as part of the Plan (see Note 10). The Company has entered into an agreement with a third-party collaborator to develop the CoStAR-TIL Collaboration Product with the aim of enrolling patients in IITs in China. Milestone payments of $2.6 million were made during the six months ended June 30, 2024 and were recorded within research and development expense in the condensed consolidated statements of operations and comprehensive loss, and upon successful completion of future milestones, the Company may be required to pay up to $3.4 million for clinical development.
Commitments and Contingencies | Commitments and Contingencies Operating Lease Obligations The Company currently leases office spaces and laboratory spaces located in Greater Los Angeles, California, Dallas, Texas, and the United Kingdom. The Company’s leased facilities have original lease terms ranging from 2 to 5 years that predominately require the Company to provide a security deposit, while certain leases provide the right for the Company to renew the lease upon the expiration of the initial lease term, and various leases have scheduled rent increases on an annual basis. The exercise of lease renewal options for the Company’s existing leases is at the Company’s sole discretion, and not included in the measurement of right of use asset or lease liability as they are not reasonably certain to be exercised. Certain leases have leasehold improvements and are being amortized over the shorter of the estimated useful life of the improvements or the remaining life of the lease. Such improvements incurred by the Company will revert to the landlord at the expiration of the lease and will be removed from Company’s condensed consolidated balance sheets. The Company’s lease costs consist of the following (in thousands):
| Three Months Ended |  | Six Months Ended
| June 30, |  | June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Operating lease cost | $ | 537 |  | $ | 307 |  | $ | 925 |  | $ | 1,516
Variable lease cost | 76 |  | 401 |  | 366 |  | 673
Total lease cost | $ | 613 |  | $ | 708 |  | $ | 1,291 |  | $ | 2,189
The following table summarizes cash flow information related to the Company’s lease obligations (in thousands):
| Three Months Ended |  | Six Months Ended
| June 30, |  | June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Cash paid for operating lease liabilities | $ | 734 |  |  | $ | 441 |  |  | $ | 1,262 |  |  | $ | 1,316 |
The following table summarizes the Company’s lease assets and liabilities (in thousands):
| June 30, 2024 |  | December 31, 2023
Operating lease right-of-use assets | $ | 1,707 |  |  | $ | 2,387 |
Current operating lease liabilities | $ | 1,669 |  |  | $ | 1,750 |
Non-current operating lease liabilities | $ | 2,020 |  |  | $ | 2,877 |
The following table summarizes other supplemental information related to the Company’s lease obligations:
| June 30, 2024 |  | December 31, 2023
Weighted-average remaining lease term (in years) | 2.18 |  | 2.60
Weighted-average discount rate | 6.75 | % |  | 6.75 | %
Future minimum lease payments under operating lease liabilities were (in thousands):
| June 30, 2024
2024 (remaining six months) | $ | 923 |
2025 | 1,818 |
2026 | 1,219 |
Total future lease payments | 3,960 |
Less: imputed interest | 271 |
Total lease liability balance | 3,689 |
Less: current portion of operating lease liabilities | 1,669 |
Total operating lease liabilities, non-current | $ | 2,020 |
During the six months ended June 30, 2024 and 2023, the Company evaluated its remaining right-of-use assets for impairment, as the Plan (as defined below in Note 10) has resulted in a cessation of use for several locations. The Company determined these assets were impaired, and has recognized an impairment loss of nil and termination gain of $0.2 million for the three months ended June 30, 2024 and 2023, respectively, and $0.2 million and $7.1 million for the six months ended June 30, 2024 and 2023 respectively, which are recorded in the line item "restructuring and impairment charges" in the condensed consolidated statements of operations and comprehensive loss. Legal Proceedings From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made and that such expenditures can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. The Company does not expect that the resolution of these matters will have a material adverse effect on its financial position, results of operations or cash flows. Debt In June 2022, the Company’s wholly owned subsidiary, Complex Therapeutics Mezzanine LLC, and the Company’s wholly owned indirect subsidiary, Complex Therapeutics LLC, entered into a mortgage construction loan and mezzanine construction loan (together, the “Loan”) secured by its Tarzana, California land and building (the “Property”). The initial principal amount of the Loan was $52.1 million, with additional future principal of up to $32.9 million to fund ongoing Property construction costs. Construction has been completed and on July 10, 2024, Complex Therapeutics LLC leased the Property to AstraZeneca Pharmaceuticals LP, as further described in Note 11. The Loan principal is payable in July 2025, with the option to extend until July 2027. As of June 30, 2024, the outstanding principal amount under the Loan was $82.8 million and unamortized debt issuance costs were $0.9 million. During the year ended December 31, 2023, $0.6 million in additional principal was paid in accordance with the Loan. The Loan is guaranteed by the Company and secured by the Property, and bears interest at the one-month Secured Overnight Financing Rate, plus 5.25% per annum. The Company discontinued capitalizing interest in June 2023 as the building was substantially complete at such time. The Loan contains customary negative and affirmative covenants that include limitations on the ability of the Company to enter into significant contracts and incur additional debt. The Company is also required to maintain consolidated net worth and liquid assets of at least $85.0 million as of June 30, 2024 and December 31, 2023 as defined in the loan agreement. As of June 30, 2024, the Company was in compliance with the covenants of the Loan. The Company is also required to maintain certain insurance coverage on the Property. In connection with the Loan, the Company entered into an interest rate swap to effectively limit its maximum interest rate, as discussed in Note 4. The net carrying amount of the liability component of the Loan was as follows (in thousands):
| June 30, 2024 |  | December 31, 2023
Principal amount | $ | 82,837 |  |  | $ | 82,837 |
Unamortized debt issuance cost | (911) |  |  | (1,410) |
Net carrying amount | $ | 81,926 |  |  | $ | 81,427 |
The following table sets forth the interest expense recognized related to the Loan (in thousands):
| Three Months Ended |  | Six Months Ended
| June 30, |  | June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Contractual interest expense | $ | 1,750 |  |  | $ | 341 |  |  | $ | 3,482 |  |  | $ | 728 |
Amortization of debt issuance cost | 249 |  |  | 249 |  |  | 498 |  |  | 498 |
Total interest expense related to the Loan | $ | 1,999 |  |  | $ | 590 |  |  | $ | 3,980 |  |  | $ | 1,226 |
Other Commitments In the normal course of business, the Company enters into contracts and various purchase agreements commitments with third-party vendors for clinical research services, products and other services from third parties for operating purposes. These agreements generally provide for termination or cancellation, other than for costs already incurred. As of June 30, 2024 and December 31, 2023, the Company had no outstanding liabilities, respectively, in commitments for employee benefits as part of the Plan. As of June 30, 2024 and December 31, 2023, the Company had $3.2 million and $3.1 million, respectively, in commitments for contract terminations as part of the Plan (see Note 10). The Company has entered into an agreement with a third-party collaborator to develop the CoStAR-TIL Collaboration Product with the aim of enrolling patients in IITs in China. Milestone payments of $2.6 million were made during the six months ended June 30, 2024 and were recorded within research and development expense in the condensed consolidated statements of operations and comprehensive loss, and upon successful completion of future milestones, the Company may be required to pay up to $3.4 million for clinical development.

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