Commitments and Contingencies

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

8. Commitments and Contingencies

Lease Agreement

On April 2, 2019, the term of a sublease that AgeX entered into during March 2019 (the “AgeX Lease”) went into effect for an office and research facility (the “Alameda Facility”) comprising approximately 23,911 square feet of space in a building in an office and research park at 965 Atlantic Avenue, Alameda, California that served as AgeX’s principal offices and research laboratory.

Base monthly rent was $35,866.50 for the initial 12 months of the sublease term and then increased to $36,942.50. In addition, AgeX paid real property taxes, insurance and operating expenses pertaining to the building in which the Alameda Facility is located. The AgeX Lease expired on December 31, 2020.

In connection with the AgeX Lease, as of December 31, 2019 AgeX incurred $436,000 in tenant improvement expenses that it funded and completed in November 2019. This amount was fully amortized and written off upon lease termination as of December 31, 2020.

Subleases

During 2019, AgeX, as a sublessor, entered into sublease agreements (the “AgeX Subleases”) with unrelated parties (the “Sublessees”) to lease approximately 11,121 square feet of space at AgeX’s Alameda Facility. The first Sublessee paid AgeX $3,088.50 per month and the second Sublessee paid AgeX $15,405.40 per month for the first twelve months of the AgeX Sublease and $16,311.60 per month for the remaining duration of the AgeX Subleases. The AgeX Subleases expired on December 31, 2020.

Adoption of ASC 842

The tables below provide the amounts recorded in connection with the adoption of ASC 842 as of, and during, the year ended December 31, 2020, for the AgeX Lease. AgeX recorded a right-of-use asset of $726,000 and a right-of-use liability for the same amount for the AgeX Lease in April 2019, which is considered a noncash investing activity.

The following table presents supplemental cash flow information related to the AgeX Lease for the years ended December 31, 2020 and 2019 (in thousands):

	Year Ended December 31,
	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating lease	$	441	$	323

The following table presents supplemental balance sheet information related to the AgeX Lease as of December 31, 2020 and 2019 (in thousands, except lease term and discount rate):

	December 31,
	2020(1)			2019
Operating lease
Right-of-use asset, net	$	-		$	424
Right-of-use lease liability	$	-		$	428
Weighted average remaining lease term
Operating lease		0 years			1 year
Weighted average discount rate
Operating lease		6.0	%		6.0	%

(1) The right-of-use asset and right-of-use lease liability were fully amortized and written off as of December 31, 2020 upon termination of the AgeX Lease.

There were no future minimum lease commitments as of December 31, 2020.

Litigation – General

AgeX is subject to various claims and contingencies in the ordinary course of its business, including those related to litigation, business transactions, employee-related matters, and others. When AgeX is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, AgeX will record a liability for the loss. If the loss is not probable or the amount of the loss cannot be reasonably estimated, AgeX discloses the claim if the likelihood of a potential loss is reasonably possible and the amount involved could be material. AgeX is not aware of any claims likely to have a material adverse effect on its financial condition or results of operations.

Employment Contracts

AgeX has entered into employment contracts with certain executive officers. Under the provisions of the contracts, AgeX may be required to incur severance obligations for matters relating to changes in control, as defined, and involuntary terminations.

Indemnification

In the normal course of business, AgeX may provide indemnifications of varying scope under AgeX’s agreements with other companies or consultants, typically for AgeX’s pre-clinical programs. Pursuant to these agreements, AgeX will generally agree to indemnify, hold harmless, and reimburse the indemnified parties for losses and expenses suffered or incurred by the indemnified parties arising from claims of third parties in connection with AgeX’s pre-clinical programs. Indemnification provisions could also cover third-party infringement claims with respect to patent rights, copyrights, or other intellectual property pertaining to AgeX’s pre-clinical programs. Office and laboratory leases will also generally indemnify the lessor with respect to certain matters that may arise during the term of the lease. The term of these indemnification obligations will generally continue in effect after the termination or expiration of the particular research, development, services, license, or lease agreement to which they relate. The potential future payments AgeX could be required to make under these indemnification agreements will generally not be subject to any specified maximum amount. Historically, AgeX has not been subject to any claims or demands for indemnification. AgeX also maintains various liability insurance policies that limit AgeX’s financial exposure. As a result, AgeX believes the fair value of these indemnification agreements is minimal. Accordingly, AgeX has not recorded any liabilities for these agreements as of December 31, 2020 and 2019.

PPP Loan

On April 13, 2020, AgeX obtained a loan in the amount of $432,952 from Axos Bank (the “Bank”) under the Paycheck Protection Program (the “PPP Loan”). The PPP loan will bear interest at a rate of 1% per annum. No payments will be due on the PPP loan during a six month deferral period commencing on the date of the promissory note. Commencing one month after the expiration of the deferral period, and continuing on the same day of each month thereafter until the maturity date of the PPP loan, monthly payments of principal and interest will be due, in an amount required to fully amortize the principal amount outstanding on the PPP loan by the maturity date. The maturity date is April 13, 2022. On December 27, 2020, the Consolidated Appropriations Act, 2021 (CAA) was signed into law, retroactively allowing a deduction of the expenses that gave rise to the PPP loan forgiveness, that was previously denied under the CARES Act. California has partially adopted the federal tax treatment. On February 17, 2021, California issued an Immediate Action Agreement, allowing companies to deduct up to $150,000 in expenses covered by the PPP loan.

The principal amount of the PPP loan is subject to forgiveness under the PPP to the extent that PPP loan proceeds are used to pay expense permitted by the PPP, including payroll, rent, and utilities (collectively, “Qualifying Expenses”), during the time frame permitted by the PPP. AgeX used the PPP loan amount for Qualifying Expenses and believes that all or a substantial portion of the PPP loan may be forgiven within one year and has classified the loan as current as of December 31, 2020. On February 19, 2021, the PPP loan was forgiven in full.

Notice of Delisting

On June 1, 2020, AgeX received a letter (the “Deficiency Letter”) from the staff of the NYSE American (the “Exchange”) indicating that AgeX does not meet certain of the Exchange’s continued listing standards as set forth in Section 1003(a)(i) of the Exchange Company Guide in that AgeX has stockholders equity of less than $2,000,000 and has incurred losses from continuing operations and/or net losses during its two most recent fiscal years. Pursuant to Section 1009 of the Exchange Company Guide and as provided in the Deficiency Letter AgeX provided the Exchange staff with a plan (the “Compliance Plan”) advising the Exchange staff of action AgeX has taken and will take that would bring AgeX into compliance with the Exchange’s continued listing standards by December 1, 2021. The Exchange staff has accepted the Compliance Plan. The Exchange staff will review AgeX’s compliance with the Compliance Plan on a quarterly basis and if AgeX does not show progress consistent with the Compliance Plan or is not in compliance with the Exchange’s continued listing standards by December 1, 2021, the Exchange will commence delisting procedures. If the Exchange staff determines that AgeX is not in compliance with the Compliance Plan at any time, the Exchange staff will promptly initiate delisting proceedings.

AgeX intends to make arrangements to have its common stock quoted on the OTC Bulletin Board if its common stock is delisted from the Exchange.