Item 1. Legal Proceedings
Item 1. Legal Proceedings.
From time to time, the Company is a party to or otherwise involved in legal proceedings, including suits, assessments, regulatory actions and investigations generally arising out of the normal course of business. Such proceedings can be costly, time consuming, and unpredictable. Therefore, no assurance can be given on the outcome of any proceeding or the potential impact on our results of operations or financial condition.
On December 23, 2022, a lawsuit was filed by Altor BioScience, LLC and NantCell, Inc., collectively, Altor/NantCell, against the Company in U.S. District Court for the Southern District of Florida, or the Court, alleging misappropriation of trade secrets under state and federal laws, inducement of breach of contract and breach of fiduciary duty, tortious interference with contractual relations, specific performance, conversion, unjust enrichment, specific performance for assignment of patents and patent applications, constructive trust, and replevin. The complaint against the Company is based on very similar allegations as those alleged by Altor/NantCell in an arbitration commenced in December 2022 against the Company’s Founder and Chief Executive Officer, Dr. Hing C. Wong, who was formerly employed by Altor/NantCell. Altor/NantCell alleges that Dr. Wong purportedly took Altor/NantCell’s confidential and trade-secret information and used it to form and build competing products for the Company. Altor/NantCell allege that each of the provisional applications that the Company has filed for relate to the use of fusion proteins, tissue factor, and other proprietary data that were developed at Altor/NantCell, while Dr. Wong was an employee of or consultant to Altor/NantCell, and
using its resources. Altor/NantCell seeks compensatory and punitive damages, attorneys’ fees and costs, and equitable relief including an order requiring the Company to assign title and all rights to the Company’s patents and provisional applications to Altor/NantCell.
On January 31, 2023, the Company filed a motion to compel arbitration, a motion for the stay of the litigation, and a motion to dismiss the complaint (“motion to compel”), which are currently pending before the Court. On April 18, 2023, the U.S. District Court for the Southern District of Florida (the “Court”) heard oral argument on the Company’s motion to compel and ordered the parties to provide supplemental briefing by April 28, 2023. Before the Court ruled on the Company’s motion to compel, on April 26, 2023, the parties stipulated that Altor/NantCell’s action against the Company would be consolidated with the Altor/NantCell arbitration demand against Dr. Wong. On April 27, 2023, the Court approved the parties’ stipulation and ordered the parties to arbitration. On May 1, 2023, Altor/NantCell filed a demand against the Company before JAMS. On May 3, 2023, Altor/NantCell dismissed the federal court action without prejudice and the Court ordered the case dismissed without prejudice and closed the case. Altor/NantCell’s proceeding against the Company is now proceeding in arbitration before JAMS, with an arbitration hearing scheduled for May 20, 2024.
In addition, on March 26, 2024, Altor/NantCell gave notice that they are filing a complaint (the “Complaint”) against the Company in the Chancery Court of the State of Delaware for the contribution of legal fees and expenses advanced to Dr. Wong, our founder and chief executive officer, in connection with the arbitration discussed above. Prior to the filing of the Complaint, Altor/NantCell had previously sought advancement from the Company and the Company agreed to advance 50% of Dr. Wong’s legal fees going forward from December 2023. On January 8, 2024, Altor/NantCell reserved their right to pursue contribution against the Company for 50% of the amount Altor/NantCell sent for advancement of expenses for Dr. Wong. In the Complaint, Altor/NantCell seek 50% of the fees they have already advanced to Dr. Wong, a declaration that the Company has an obligation to contribute 50% of the advancement of Dr. Wong’s expenses including 50% of Dr. Wong’s expenses incurred in connection with the arbitration through final resolution of the matter, and costs and fees in bringing this action.
Although adverse decisions (or settlements) may occur in the legal proceedings described above, it is not possible to reasonably estimate the possible loss or range of loss, if any, associated therewith at this time and, as such, no accrual for these matters has been recorded within our audited financial statements included elsewhere in this Annual Report. If liability is determined, it could have a material adverse effect on the Company’s business, results of operations and financial condition.
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