Commitments and Contingencies

License Agreements

In March 2007, the Company entered into an exclusive license agreement with Novosom AG (Novosom) to use certain patented LNP delivery technology for any of its DNAi drug candidates that target a region of the BCL2 gene (the Novosom License Agreement). In July 2010, the Novosom License Agreement was acquired by Marina Biotech, Inc. (Marina), but Novosom retained the right to receive all payments due from the Company under the Novosom License Agreement.

In March 2012, the Company and Marina entered into another exclusive license agreement (the Marina License Agreement) for the use of certain of Marina’s patented delivery technology, including LNP technology, for any of the Company’s current or future DNAi product candidates that target any gene. In exchange for this exclusive right, the Company paid Marina an upfront payment of $0.3 million in 2012 to be applied to the first DNAi product candidate under this agreement. The Company will be required to pay Marina milestone payments of up to an aggregate of $14.5 million for each DNAi product candidate, other than PNT2258, upon successful completion of certain clinical and regulatory milestone events relating to each DNAi product candidate identified in the Marina License Agreement. In addition, for DNAi product candidates other than PNT2258, the Company is required to pay Marina a low single-digit royalty on net sales.

In May 2013, the Company issued Novosom 2,108,870 shares of common stock with a fair market value of $0.1 million in settlement of the first milestone payment. Pursuant to the terms of the Novosom License Agreement, additional shares may have been issued if certain dilution events occurred through December 31, 2014. The Company evaluated the need to accrue an expense related to the future potential issuance of shares at December 31, 2013 and 2014, but determined that each of the terms requiring additional issuances was not likely to occur and thus the expense was not recorded. The dilution provisions expired on December 31, 2014.

In April 2014, the Company entered into a Second License Amendment and Consent to Termination Agreement with Marina pursuant to which the Novosom License Agreement (which had been transferred to Marina by Novosom in July 2010) was terminated and the obligations previously set forth in the Novosom License Agreement were restated in the Marina License Agreement. In connection therewith, in April 2014, the Company also entered into a License Payment Agreement with Novosom under which the Company agreed to pay Novosom $11.0 million in cash upon the closing of a minimum $35.0 million financing. Also, the Company agreed to pay Novosom a $3.0 million milestone payment within 30 days of regulatory authority approval of PNT2258. Upon Novosom’s receipt of the cash payment of $11.0 million, all financial obligations of the Company to Novosom were terminated, other than the aforementioned milestone payment, historic manufacturing costs and a low-single digit royalty payment on net sales of PNT2258.

The Company made the $11.0 million payment to Novosom in April 2014, upon the closing of the Series D redeemable convertible preferred stock financing and a payment of $0.1 million in July 2014 settling the obligation for the historic manufacturing costs. The April 2014 Second License Amendment and Consent to Termination Agreement serves as the second amendment to the Marina License Agreement.

As of June 30, 2015, the Company has not accrued the $3.0 million milestone payment to Novosom as regulatory authority approval is not probable of occurring.

As of June 30, 2015, the Company has not identified any product candidates that would pertain to the Marina License Agreement. Therefore, there is currently no potential expense or payment due under the Marina License Agreement.

Lease Agreements

The Company leases its Michigan facility under a short-term operating lease with a term of less than a year that provides for a fixed monthly rent for the term of the lease and also provides for certain rent adjustments covering the expenses and taxes of the facility.

In February 2015, the Company entered into an operating lease agreement to sublease office space in Vancouver, Canada. The operating lease agreement expires on February 27, 2018. Under the terms of the agreement, the Company issued a Canadian Dollar $50,000 letter of credit to the sublessor on closing, which is collateralized by a restricted deposit of $50,000.

As of June 30, 2015, the aggregate future non-cancelable minimum lease payments associated with this operating lease (based on the daily average exchange rate on June 30, 2015 quoted by the Bank of Canada) are as follows:


Years Ending December 31:	Operating Leases
	(in thousands)

2015 (remainder)	$	133
2016		319
2017		319
2018		53

Total	$	824

The total rent expense for all operating leases was $0.1 million for the three and six months ended June 30, 2015 and was $14,000 and $22,000 for the three and six months ended June 30, 2014.

Contract Research Organization Obligations

As of June 30, 2015, the aggregate future minimum payments associated with agreements the Company entered into with contract research organizations are as follows:


Years Ending December 31:	Contract Research Organization Obligations
	(in thousands)

2015 (remainder)	$	2,025
2016		5,303
2017		4,914
2018		255

Total	$	12,497

For the three and six months ended June 30, 2015, total payments made to the contract research organization related to these obligations were $0.6 million and $1.6 million.

Cumulative Dividends

Holders of the Series B, B-1, C and D redeemable convertible preferred stock are entitled to receive cumulative accruing dividends at a rate of 8.0% per year of the original issuance price of the redeemable convertible preferred stock. The accruing dividends shall accrue from day to day, whether or not declared, and shall be cumulative. The accruing dividends shall be deemed declared annually and payable upon the earliest to occur of (i) the date determined by the Board of Directors, (ii) the liquidation of the Company (including a Deemed Liquidation Event) and (iii) the conversion or redemption of at least a majority of the outstanding shares of the Series B, B-1, C and D redeemable convertible preferred stock. Since the dividends are payable upon a contingent event, the Company has not recorded them as a liability in the accompanying condensed consolidated financial statements for any of the periods presented.

At June 30, 2015, cumulative unpaid accruing dividends in arrears totaled $18.5 million and consisted of $9.3 million for the Series B, $1.7 million for the Series B-1, $1.6 million for the Series C and $5.9 million for the Series D redeemable convertible preferred stock. At December 31, 2014, cumulative unpaid accruing dividends in arrears totaled $14.4 million and consisted of $8.4 million for the Series-B, $1.5 million for the Series B-1, $1.1 for the Series C and $3.4 million for the Series D redeemable convertible preferred stock. As discussed in Note 8, the dividend rights for the Series C and Series D redeemable convertible preferred stock were amended in June 2015.