Note 8—Commitments and Contingencies

Lease Commitments

On August 15, 2013, the Company entered into a lease for approximately 4,419 square feet of office space in San Diego, California to be used as its corporate headquarters. The lease commenced on September 1, 2013 once improvements were completed and has a term of 36 months from the commencement date. In addition to monthly base rent, the Company is also required to pay its proportionate share of any building operating expenses in excess of 2014 levels. In connection with entering into the lease, the Company paid a security deposit of $9,231. Monthly base rent is $9,678 during the first year of the lease and increases to $10,016 in year two and $10,367 in year three.

Future annual minimum rental payments under the leases are as follows:


Year Ending December 31,	Facilities (Operating Lease)
2015		121,596
2016		82,936

Total	$	204,532

Rent expense included in continuing operations was $149,371, and $435,573 for the years ended December 31, 2014 and 2013 respectively.

License Fees

In October 2005, the Company completed a transaction with Schering AG Group, Germany (now part of Bayer AG) and related licensors, including the University of California and New York University, for the transfer or license of certain assets and technology for potential use in treating ischemic and other cardiovascular conditions. Under the terms of the transaction, the Company paid Schering a $4 million fee, and would be required to pay a $10 million milestone payment upon the first commercial sale of each resulting product. The Company also may be obligated to pay the following future royalties to Schering: (i) 5% on net sales of an FGF-4 based product such as Generx, or (ii) 4% on net sales of other products developed based on technology transferred to Cardium by Schering. As part of the Schering transaction, the Company acquired rights and corresponding obligations under the Regents of the University of California (Regents) September 1995 agreement, as amended. The agreement as amended may be canceled by the Company at any time on 60 days’ notice, following which the Company would continue to be responsible only for obligations and liabilities accrued before termination. Under the agreement, the Company is obligated to pay (1) an annual royalty fee of 2% based on net sales of products incorporating the technology licensed under the agreement, and (2) a minimum annual royalty fee (which may be offset against the net sales-based royalty fee) $100,000 for 2010, $100,000 for 2011, $150,000 for 2012, $150,000 for 2013 and $200,000 for 2014 and thereafter, payable on February 28 of the following year. The Company incurred the minimum license fee in 2013 and 2012. As part of the Schering transaction, the Company acquired rights and corresponding obligations under the New York University March 1997 agreement, as amended. Under the agreement, the Company is obligated to pay (1) an annual royalty fee of 3% based on net sales of products incorporating the technology licensed under the agreement, and (2) a minimum annual royalty fee (which may be offset against the net sales-based royalty fee) $100,000 for 2010, $100,000 for 2011, $150,000 for 2012, $150,000 for 2013 and $200,000 for 2014 and thereafter, payable on February 28 of the following year. As part of the Schering transaction, the Company acquired rights and corresponding obligations under the New York University March 1997 Agreement as amended, under which the Company may be obligated to pay an annual fee of $50,000 per year through the completion of the first full year of sales licensed technology as well as ongoing patent expenses incurred in connection with the licensed technologies. Should licensed products under the agreement reach the stage of filing of a product license application (PLA) and PLA approval or foreign equivalent thereof, the Company may be obligated to pay up to an aggregate amount of approximately $1.8 million for each product in milestone payments. In addition, beginning in the year in which the Company completes one full year of sales of licensed products and continuing thereafter until the agreement terminates or expires, the Company may also be obligated to pay annual royalty fees equal to 3% on net sales of products incorporating the licensed technology.

Legal Proceedings

In October 2014, the Company received a complaint filed by Biorasi LLC in Broward County, Florida, seeking payments of approximately $0.5 million related to its activities in connection with the Company’s ASPIRE clinical trial conducted in the Russian Federation. The Company plans to defend the action and is awaiting a ruling on its request to dismiss; the Company has not recorded a liability for this contingency as the Company believes that the probability of an adverse outcome is remote.

As of December 31, 2014, neither Cardium nor its subsidiaries were party to any material pending legal proceeding nor was any of their property the subject of any material pending legal proceeding, except as noted above. In the course of business, however, the Company could become engaged in various intellectual property, product-related, and other matters in connection with the technology the Company develops or licenses and the products the Company develops for commercialization. To the extent the Company is not successful in defending against any adverse claims concerning its technology, business relationships or products, the Company could be compelled to seek licenses from one or more third parties who could be direct or indirect competitors and who might not make licenses available on terms that the Company finds commercially reasonable or at all, or to pays other forms of compensation or expenses. In addition, any such proceedings, even if decided in the Company’s favor, involve lengthy processes, are subject to appeals, and typically result in substantial costs and diversion of resources.