11. Commitments and Contingencies

Operating Leases

The Company leases office and research and development space under a noncancelable operating lease in Marina Del Rey, CA. The lease commenced January 1, 2012 and in April 2020, the Company amended the lease (“Lease Amendment”) which, among other things, extended the lease term through December 31, 2031. Base annual rent for calendar year 2022 under the Lease Amendment will be approximately $1.9 million, and base rent increases by 3% annually and will be $2.5 million by the end of the amended term. In addition, the Company received rent abatement for six months starting May 1, 2020, and an allowance for tenant improvements of $0.8 million to be used during calendar year of 2021. In accordance with authoritative guidance, the Company remeasured the lease liability to be $11.7 million and related right of use asset of $11.0 million as of the Lease Amendment date with an incremental borrowing rate of 12.9%.

Concurrent with the Company’s execution of the Lease Amendment, an irrevocable letter of credit in the amount of $1.2 million was delivered to the landlord. Starting on February 1, 2022, and each year thereafter the letter of credit will be reduced by 20% of the then outstanding amount.

Future minimum annual lease payments under the Company’s noncancelable operating leases as of December 31, 2020, are as follows:


	Operating
	Leases
2021	$	1,638,000
2022		1,893,000
2023		1,950,000
2024		2,008,000
2025		2,069,000
Thereafter		13,783,000
Total minimum lease payments		23,341,000
Less: amount representing interest		(10,913,000)
Present value of operating lease obligations		12,428,000
Less: current portion		(1,551,000)
Noncurrent operating lease obligations	$	10,877,000

Rent expense was $1.9 million and $1.5 million for the years ended December 31, 2020 and 2019, respectively. Total cash payments for operating leases as included in the consolidated statements of cash flows during the year ended December 31, 2020 and 2019 was $1.1 million and $1.7 million, respectively.

License Agreement

The Company entered into an exclusive license agreement with The Regents of the University of California (the “Regents”) on April 24, 2007 including amendments for the use of several patents. As part of the license agreement, the Company issued The Regents 10,540 shares of common stock.

The Company is required to pay the Regents $5,000 in annual maintenance fees and milestone fees for the first licensed product in both the Human Dental and Human Medical fields of application as follows: 1) filing of an Investigational New Drug application: $20,000; 2) completing a Phase 1 clinical trial: $50,000; 3) completing a Phase 2 clinical trial: $50,000; 4) completing a Phase 3 clinical trial: $150,000; and 5) first commercial sale of a license product: $250,000.

Total expenses incurred under the Regents license agreement was $21,000 for each of the years ended December 31, 2020 and 2019. On October 21, 2020, the Company provided the notice to the Regents to terminate the license agreement, which would become effective 90 days from the date of the termination notice.

Legal Proceedings

From time to time, the Company may be involved in disputes, including litigation, relating to claims arising out of operations in the normal course of business. Any of these claims could subject the Company to costly legal expenses and, while management generally believes that there is adequate insurance to cover many different types of liabilities, the Company’s insurance carriers may deny coverage or policy limits may be inadequate to fully satisfy any damage awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on the consolidated results of operations and financial position. Additionally, any such claims, whether or not successful, could damage the Company’s reputation and business. The Company is currently not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on its consolidated results of operations or financial position.