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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Note 12. Commitments and Contingencies Bonds Payable We entered into direct financing transactions with the State of Rhode Island and received proceeds from the issuance of industrial revenue bonds totaling $5,000,000 to finance the construction of a 21,000 square-foot pilot manufacturing facility and a 3,000 square-foot cell processing facility in Rhode Island. The related lease agreements are structured such that lease payments fully fund all semiannual interest payments and annual principal payments through maturity in August 2014. In August 2014, we made the final principal and interest payment thereby extinguishing the debt and we are actively seeking to dispose these properties. Operating leases We lease various real properties under operating leases that generally require us to pay taxes, insurance, maintenance, and minimum lease payments. Some of our leases have options to renew. Operating Leases — California In December 2010, we entered into a commercial lease agreement with BMR-Gateway Boulevard LLC (BMR), as landlord, for office and research space at BMR’s Pacific Research Center in Newark, California. The initial term of the lease is approximately eleven and one-half years and includes escalating rent payments which we recognize as lease operating expense on a straight-line basis. We will pay approximately $17,869,000 in aggregate as rent over the term of the lease to BMR. Deferred rent for this facility was approximately $1,429,000 as of December 31, 2014, and approximately $1,434,000 as of December 31, 2013. In March 2013, we entered into a commercial lease agreement with Prologis, L.P. (Prologis), as landlord, for office and research space in Sunnyvale, California. The facility is for operations that support our clinical development activities. The initial term of the lease is ten years and includes escalating rent payments which we recognize as lease operating expense on a straight-line basis. We will pay approximately $3,497,000 in aggregate rent over the term of the lease. As part of the lease, Prologis has agreed to provide us financial allowances to build initial tenant improvements, subject to customary terms and conditions relating to landlord-funded tenant improvements. The tenant improvements are recorded as leasehold improvement assets and amortized over the term of the lease. The financial allowances are treated as a lease incentive and recorded as deferred rent which is amortized as reductions to lease expense over the lease term. Deferred rent for this facility was approximately $391,000 as of December 31, 2014, and December 31, 2013. Operating Leases — United Kingdom In January 2011, we amended the existing lease agreements of our wholly-owned subsidiary, Stem Cell Sciences (U.K.) Ltd, effectively reducing our leased office and lab space. The lease by its terms was extended to September 30, 2013. In October 2013, we signed a new three-year lease agreement for the leased space and expect to pay rent of approximately GBP 53,000 per annum. StemCells, Inc. is the guarantor of Stem Cell Sciences (U.K.) Ltd.’s obligations under the existing lease. The lease includes an option for early termination of the lease agreement. In December 2014, we sold our SC Proven reagent business and as part of the wind-down of our business operations in UK, sublet our leased space from January 2014 to our opted early termination date of October 2014. With the exception of the operating leases discussed above, we have not entered into any significant off balance sheet financial arrangements and have not established any special purpose entities. We have not guaranteed any debts or commitments of other entities or entered into any options on non-financial assets. The table below summarizes the components of rent expense for the fiscal year ended December 31, as follows:
|  | 2014 |  |  | 2013 |  |  | 2012 |
Rent expense |  | $ | 1,955,747 |  |  | $ | 2,612,899 |  |  | $ | 2,932,104 |
Sublease income |  |  | — |  |  |  | (53,726 | ) |  |  | (411,885 | )
Rent expense, net |  | $ | 1,955,747 |  |  | $ | 2,559,173 |  |  | $ | 2,520,219 |
Future minimum payments under all leases and loan payable at December 31, 2014 are as follows:
|  | Loan1 Payable CIRM |  |  | Loan Payable SVB |  |  | Capital Leases |  |  | Operating Leases |
2015 |  | $ | 679,166 |  |  | $ | 4,322,035 |  |  | $ | 21,591 |  |  | $ | 1,981,461 |
2016 |  |  |  |  |  |  | 1,440,678 |  |  |  | 9,454 |  |  |  | 1,968,459 |
2017 |  |  |  |  |  |  | — |  |  |  | — |  |  |  | 2,014,706 |
2018 |  |  |  |  |  |  | — |  |  |  | — |  |  |  | 2,061,260 |
2019 |  |  |  |  |  |  | — |  |  |  | — |  |  |  | 2,108,130 |
Thereafter |  |  |  |  |  |  | — |  |  |  | — |  |  |  | 6,088,780 |
Total minimum lease and loan payments |  |  | 679,166 |  |  |  | 5,762,713 |  |  |  | 31,045 |  |  | $ | 16,222,796 |
Less amounts representing interest |  |  |  |  |  |  | 240,899 |  |  |  | 1,624 |  |  |  |  |
Principal amounts of bond payable, loan payable and capital lease obligations |  |  | 679,166 |  |  |  | 5,521,814 |  |  |  | 29,421 |  |  |  |  |
Less current maturities |  |  | 679,166 |  |  |  | 4,099,319 |  |  |  | 20,191 |  |  |  |  |
Bond payable, loan payable and capital lease obligations, less current maturities |  | $ | — |  |  | $ | 1,422,495 |  |  | $ | 9,230 |  |  |  |  |
1 | An aggregate of approximately $9.2 million of principal and accrued interest under the CIRM Loan Agreement is not included. In April 2013, we entered into an agreement with the CIRM under which CIRM will provide up to approximately $19.3 million as a forgivable loan, in accordance with mutually agreed upon terms and conditions and CIRM regulations. The CIRM loan was to help fund preclinical development of our HuCNS-SC cells for Alzheimer’s disease. Between July 2013 and August 2014, we received in aggregate, approximately $9.6 million as disbursements of the loan provided under the CIRM Loan Agreement. However in December 2014, as findings under this pre-clinical study in Alzheimer’s disease did not meet pre-determined criteria for ongoing funding for this program by CIRM, we decided to wind down this pre-clinical study which had been funded in part by the CIRM loan agreement. Under the terms of the CIRM loan agreement, principal amount of approximately $8,917,000 and accrued interest of approximately $243,000 were forgiven. However, authoritative accounting guidance requires certain conditions (which includes a legal release from the creditor) to be met before a liability can be extinguished and derecognized. In February 2015, we repaid CIRM approximately $679,000 of the aggregate loan proceeds received.
Contingencies In July 2006, we filed suit against Neuralstem, Inc. in the Federal District Court for the District of Maryland, alleging that Neuralstem’s activities violate claims in four of the patents we exclusively licensed at the time from NeuroSpheres, specifically U.S. Patent No. 6,294,346 (claiming the use of human neural stem cells for drug screening), U.S. Patent No. 7,101,709 (claiming the use of human neural stem cells for screening biological agents), U.S. Patent No. 5,851,832 (claiming methods for proliferating human neural stem cells), and U.S. Patent No. 6,497,872 (claiming methods for transplanting human neural stem cells). In May 2008, we filed a second patent infringement suit against Neuralstem and its two founders, Karl Johe and Richard Garr. In this suit, which we filed in the Federal District Court for the Northern District of California, we allege that Neuralstem’s activities infringe claims in two patents we exclusively licensed at the time from NeuroSpheres, specifically U.S. Patent No. 7,361,505 (claiming composition of matter of human neural stem cells derived from any source material) and U.S. Patent No. 7,115,418 (claiming methods for proliferating human neural stem cells). In addition, we allege various state law causes of action against Neuralstem arising out of its repeated derogatory statements to the public about our patent portfolio. Also in May 2008, Neuralstem filed suit against us and NeuroSpheres in the Federal District Court for the District of Maryland seeking a declaratory judgment that the ‘505 and ‘418 patents are either invalid or are not infringed by Neuralstem and that Neuralstem has not violated California state law. In August 2008, the California court transferred our lawsuit against Neuralstem to Maryland for resolution on the merits. In July 2009, the Maryland District Court granted our motion to consolidate these two cases with the litigation we initiated against Neuralstem in 2006. Fact discovery has concluded in the cases and in December 2014, the Maryland federal court began the first phase of trial in order to address the sole question of whether we have legal standing to pursue our patent infringement claims against Neuralstem. We expect a ruling on the question of standing in the first half of 2015. In addition to the actions described above, in April 2008, we filed an opposition to Neuralstem’s European Patent No. 0 915 968 (methods of isolating, propagating and differentiating CNS stem cells), because the claimed invention is believed by us to be unpatentable over prior art, including the patents we acquired from NeuroSpheres. In December 2010, the European Patent Office ruled that all composition claims in Neuralstem’s ‘968 European patent were invalid and unpatentable over prior art including several of the NeuroSpheres patents. Neuralstem appealed this decision but subsequently withdrew its appeal with prejudice.

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