Annual report pursuant to Section 13 and 15(d)

Leases, Other Commitments, and Contingencies

v3.19.1
Leases, Other Commitments, and Contingencies
12 Months Ended
Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]  
Leases, Other Commitments, and Contingencies

8. LEASES, OTHER COMMITMENTS, AND CONTINGENCIES

Litigation and Claims

In December 2013, the Company entered into a Research and Commercial License Agreement (the License Agreement) with a subsidiary of Bayer Aktiengesellschaft (Bayer), pursuant to which we granted Bayer a license to certain patents for the research and commercialization of certain products developed with the Company’s TALEN technology. The Company believed that Bayer breached the License Agreement by filing patent applications in violation of the License Agreement’s provisions and by failing to make a payment due under the License Agreement. Accordingly, the Company gave notice to Bayer of its termination of the License Agreement, and on March 12, 2018, the Company filed a complaint in Delaware Chancery Court alleging that it properly terminated the License Agreement for Bayer’s material breach.

On May 15, 2018, Bayer agreed to settle the lawsuit that the Company brought. Under the settlement terms, the parties agreed that the License Agreement is terminated, that Bayer will destroy any technology, related product and confidential information covered by the License Agreement, and that Bayer will permanently abandon patent applications that are based on or include data related to the covered technology. This settlement confirms that Bayer and its subsidiaries have no access to our technology or intellectual property. The settlement was filed in Delaware Chancery Court on May 15, 2018.

We are not a party to any other material pending legal proceeding.

Leases

We lease our headquarters facility, office equipment, and other items. Our headquarters lease involved the sale of land and improvements to a third party who then constructed the facility. The lease term is twenty years and we hold four five-year options to extend the lease.

Rent expense from all operating leases was $0.2 million in 2018, $0.3 million in 2017, and $0.3 million in 2016.

Sale-Leaseback of Headquarters and Lab Facility

In September 2017 we consummated a sale-leaseback transaction with a third party for our corporate headquarters and lab facility. The facility is composed of a 40,000 square-foot office and lab building, with greenhouses and outdoor research plots. We are deemed the owner for accounting purposes. The lease has a term of twenty years, with four options to extend its term for five years each, subject to there being no default under the lease terms beyond any cure period and us occupying the property at the time of extension. In 2017, we received $7 million in connection with the sale of the land and uncompleted facility in 2017.

We obtained a temporary certificate of occupancy in May 2018 and the lease commenced. Under the lease, we pay an annual base rent of eight percent of the total project cost with scheduled increases in rent of 7.5 percent on the sixth, eleventh and sixteenth anniversaries of the start of the lease commencement as well as on the first day of each renewal term. Currently, we pay an annual base rent of approximately $1.4 million. We are also responsible for all operating costs and expenses associated with the property. Beginning on the eighteenth month anniversary of the start of the lease, if the landlord decides to sell the property, we have a right of first refusal to purchase the property on the same terms offered to any third party.

Concurrent with our entering into the lease, Cellectis guaranteed all of our obligations. Cellectis’ guarantee of our obligations will terminate at the end of the second consecutive calendar year in which our tangible net worth exceeds $300 million, as determined in accordance with generally accepted accounting principles. At a point when Cellectis owns 50 percent or less of our outstanding common stock, we have agreed to indemnify Cellectis for any obligations incurred by Cellectis under its guarantee of our obligations under the lease.

 

Sale-Leaseback of Equipment

In December 2018 we consummated a sale-leaseback transaction with a third party to finance equipment. The lease has a term of four years and we may add up to $1.1 million of future equipment purchases to the financing agreement. We were required to deposit cash into a restricted account in an amount equal to the future rent payments required by the lease. At December 31, 2018 this restricted cash totaled $1.4 million.

Noncancelable future lease commitments are as follows:

 

In Thousands   

Operating

Leases

    

Capital

Leases

 

2019

   $ 47      $ 1,715 

2020

     76        1,715 

2021

     36        1,685 

2022

     31        1,659 

2023

     -        1,445 

After fiscal 2023

 

    

 

-

 

 

 

    

 

22,908 

 

 

Total noncancelable future lease commitments

 

   $

 

190

 

 

 

   $

 

31,127 

 

 

Other Commitments

As of December 31, 2018, we have committed to purchase grain from farmers at dates throughout 2019 and 2020 aggregating $12.4 million using commodity futures market prices and expected yields per acre. This amount is not recorded in the financial statements because we have not taken delivery of the grain as of that date.