10. Commitments and Contingencies

Leases

The Company is a party to three real property operating leases for the rental of office or lab space. The Company has office space in Waltham, Massachusetts of up to 4,516 square feet that is used for its corporate headquarters with a term through March 31, 2022. The Company also has office and laboratory space of approximately 3,540 square feet in Salt Lake City, Utah with a term through November 30, 2023. The Company has office space in Vienna, Austria of approximately 1,555 square feet with a term through October 31, 2023 as a result of the Panoptes acquisition effective December 18, 2020.

10. Commitments and Contingencies - (continued)

Additional right-of-use assets and lease liabilities were recorded upon the new lease agreements or extensions that were effective as of June 30, 2021.

Operating lease assets and liabilities are recognized at the lease commencement date at the present value of lease payments to be paid. Operating lease assets represent the Company’s right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments. To determine the present value of lease payments to be paid, the Company estimated incremental secured borrowing rates corresponding to the maturities of the leases. The Company estimated a rate of  10% based on prevailing financial market conditions, comparable company and credit analysis, and management judgment. The Company recognizes expense for its leases on a straight-line basis over the lease term. Operating lease expense, consisting of the reduction of the right-of-use asset and the imputed interest on the lease liability, totaled $55,188 and $106,040 for the three and six months ended June 30, 2021, respectively, and $43,195 and $86,390 and for the three and six months ended June 30, 2020, respectively.

Maturities of lease liabilities were as follows as of June 30, 2021:

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License Agreements

The Company is a party to four license agreements as described below. These license agreements require the Company to receive or pay royalties or fees to or from the licensor based on revenue or milestones related to the licensed technology.

On July 2, 2013, Panoptes entered into a patent and know-how assignment agreement with 4SC Discovery GmbH (“4SC”) transferring to Panoptes all patent rights and know-how to the compound PP-001. The Company (through its Panoptes subsidiary) is responsible for paying royalties based on a specified percentage of net sales of PP-001.

On July 2, 2013, Panoptes entered into an out-license agreement with 4SC Discovery GmbH (“4SC”) granting 4SC the exclusive worldwide right to commercialize the compound PP-001 for rheumatoid arthritis and inflammatory bowel disease, including Crohn’s Disease and Ulcerative Colitis. The Company (through its Panoptes subsidiary) is eligible to receive milestone payments totaling up to 155 million euros, upon and subject to the achievement of certain specified developmental and commercial milestones. In addition, the Company (through its Panoptes subsidiary) is eligible to receive royalties based on a specified percentage of net sales of PP-001.

On September 12, 2013, Jade entered into an agreement with Lineage Cell Therapeutics, Inc. (“Lineage”), formerly known as BioTime, Inc., granting to it the exclusive worldwide right to commercialize cross-linked thiolated carboxymethyl hyaluronic acid (“modified HA”) for ophthalmic treatments in humans.  The agreement provides for a license issue fee paid to Lineage of $50,000 and requires the Company (through its Jade subsidiary) to pay an annual fee of $30,000 and royalties to Lineage based on revenue relating to any product incorporating the modified HA technology. The agreement expires when patent protection for the modified HA technology lapses, which is expected to occur in the U.S. in 2028.

10. Commitments and Contingencies - (continued)

On September 26, 2018, the Company entered into an intellectual property licensing agreement (the “SentrX Agreement”) with SentrX, a veterinary medical device company that develops and manufactures veterinary wound care products. Under the SentrX Agreement, the Company will in-license the rights to trade-secrets and know-how related to the manufacturing of its OBG. The SentrX Agreement will enable the Company to pursue a different vendor with a larger capacity for manufacturing and an FDA-inspected facility for commercialization of a product for human use. Under the SentrX Agreement, the Company paid SentrX an upfront payment of $0.250 million recorded as intangible assets on the Consolidated Balance Sheets. SentrX is eligible to receive milestone payments totaling up to $4.750 million, upon and subject to the achievement of certain specified developmental and commercial milestones. These future milestone payments to SentrX will increase the carrying value of the intangible assets.

COVID-19

The continued spread of the COVID-19 pandemic could adversely impact the Company’s clinical studies. In addition, COVID-19 has resulted in significant governmental measures being implemented to control the spread of the virus, including quarantines, travel restrictions, and business shutdowns. COVID-19 has also caused volatility in the global financial markets and threatened a slowdown in the global economy, which could negatively affect the Company’s ability to raise additional capital on attractive terms or at all. The extent to which COVID-19 may impact the Company’s business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the emergence of new variants, and the effectiveness of actions to contain and treat COVID-19. The Company cannot presently predict the scope and severity of any potential disruptions to its business, including to ongoing and planned clinical studies. Any such shutdowns or other business interruptions could result in material and negative effects to the Company’s ability to conduct its business in the manner and on the timelines presently planned, which could have a material adverse impact on its business, results of operation, and financial condition. As of the date of this report, there have been no material adverse effects to the Company’s ongoing business operations from COVID-19.