14.	Subsequent Events

Azaya Therapeutics, Inc. Assets

On February 15, 2017 (the “Closing Date”), Cytori completed the acquisition from Azaya Therapeutics, Inc. (“Azaya”) of substantially all of the assets and the assumption of certain of liabilities, pursuant to an Asset Purchase Agreement. Pursuant to the Acquisition, Cytori has acquired the rights, title and interest in and to (i) Azaya’s ATI-0918 drug candidate, a generic bioequivalent formulation of DOXIL/CAELYX, a chemotherapy drug that is a liposomal encapsulation of doxorubicin (ATI-0918); (ii) Azaya’s ATI-1123 drug candidate, a liposomal formulation of docetaxel (ATI-1123); and (iii) certain equipment, inventory and other assets necessary to develop, manufacture, test and validate ATI-0918 and ATI-1123.

Under the terms of the Purchase Agreement, at the closing of the Acquisition, the Company (i) issued 1,173,241 of shares of its common stock, par value, $0.001 per share , in Azaya’s name, (A) 879,931 of which will be delivered to Azaya promptly after the Closing, and (B) 293,310 of which will be deposited into a 15-month escrow pursuant to a standard escrow agreement; and (ii) assumed the obligation to pay approximately $2.0 million of Azaya’s existing trade payables, which payments the Company intends to make at or within thirty days after the Closing. The price per share was $1.7047, which price was equal to the volume weighted average closing price of the shares on the Nasdaq Capital Market over the ten consecutive trading days ending on the trading date immediately prior to the date of the Closing Date.

In addition, as of the Closing Date, the Company assumed obligations to: (i) pay Azaya fixed commercialization milestone payments based upon achievement of certain net sales milestones for ATI-0918; (ii) make certain earn-out payments to Azaya equal to a mid-single-digit percentage of net sales of ATI-0918; and (iii) make certain earn-out payments to Azaya equal to a low single-digit percentage of net sales of any product (each a “Patented Product”), including ATI-1123, that practices a claim in the related patent assigned by Azaya to the Company (the “ATI-1123 Patent”). Cytori’s aggregate earn-out payment obligations to Azaya from global net sales of both ATI-0918 and any Patented Product will not exceed $100.0 million (the “Earn-Out Cap”).

Further, the Purchase Agreement provides that if Cytori enters into certain assignments, licenses or other transfers of rights to a Patented Product or the ATI-1123 Patent, the Company will pay Azaya a percentage in the low to mid-teens of the consideration received by the Company, provided, that Cytori’s aggregate payment obligation to Azaya for any such assignment, license or other transfer of rights will not exceed $50.0 million.

If the Company or its successors, sublicenses or transferees sells a competing product to ATI-0918 at any time prior to satisfaction of the Earn-Out Cap, other than because ATI-0918 fails to receive marketing authorization from the European Medicines Agency within a certain period of time or fails to generate a minimum threshold of net sales within a pre-determined amount of time, then 50% of the net sales of such competing product would be deemed to be net sales of ATI-0918 under the Purchase Agreement for purposes of calculating commercialization milestone payments and earn-out payments.

Both the Company and Azaya agreed to customary representations, warranties and covenants in the Purchase Agreement. Each party also agreed to customary indemnification obligations, provided, that Azaya’s maximum liability to the Company for breaches of Azaya’s representations and warranties in the Purchase Agreement and any ancillary agreements entered into in connection therewith, is limited to $3.9 million, subject to limited exceptions.

Lease Agreement

On February 27, 2017, Cytori entered into a Lease Agreement (the “Lease”) with 6262 Lusk Investors LLC, a California limited liability company (“Landlord”), for approximately 29,499 square feet of office space for the Company’s corporate headquarters in San Diego, California. The initial term of the Lease is 63 months, and may be extended upon mutual agreement of the Company and the Landlord. The Lease is scheduled to commence on November 1, 2017 date, unless the premises are earlier occupied by the Company or the commencement date is delayed to allow for substantial completion of tenant improvements.

Under the Lease, the Company will be obligated to pay base rent as follows (in thousands):

		•	Year 1: $761;
		•	Year 2: $784;
		•	Year 3: $807;
		•	Year 4: $832;
		•	Year 5: $857;
		•	Months 61-63: $74 per month ($882 annualized base rent).

In addition to the base rent, the Company will also be obligated under the Lease to make certain payments for operating expenses, property taxes, insurance, insurance deductibles and other amounts.

In connection with the Lease, the Company issued a letter of credit, or Letter of Credit, in favor of the Landlord in the initial principal amount of $0.1 million, which Letter of Credit will increase to $0.3 million on June 1, 2017, and to $0.5 million on the commencement date. The Letter of Credit will remain in effect for the term of the Lease.

The Company has agreed to customary indemnifications of the Landlord and its affiliates arising out of the Company’s use of the rented premises, breaches of the Company’s obligations under the Lease and similar matters (except to the extent arising out of the Landlord’s gross negligence or willful misconduct).