Item 1. Legal Proceedings
Item 1. Legal Proceedings.
Pursuant to the terms of the License Agreement dated November 4, 2018 between the Company and Abeona Therapeutics Inc. (Abeona), as amended on November 4, 2019 (the License Agreement), Abeona was required to make a payment of $8.0 million to us no later than April 1, 2020. Abeona failed to make this payment and we therefore delivered to Abeona a written demand for payment and breach notice in April 2020. Upon expiration of the applicable cure period under the License Agreement, which occurred on May 2, 2020, the License Agreement was terminated. Upon termination, all rights and licenses granted to Abeona under the License Agreement terminated and an additional $20.0 million fee that would have otherwise been due to us in November 2020 became payable within 15 days of the termination date. We have not yet received payment for any portion of the fees due from Abeona.
In May 2020, Abeona filed a claim in arbitration alleging that we breached certain responsibilities to communicate with Abeona regarding our prosecution of licensed patents under the License Agreement. We dispute Abeona’s claim and have filed a counterclaim in arbitration for the $28.0 million total unpaid fees, plus interest, which accrues at a rate of 1.5% per month under the License Agreement. We have not recorded any liabilities related to this matter, as we believe our risk of loss is remote. Additionally, we intend to enforce the collection of all amounts owed from Abeona and, based on our evaluation of the merits of the claims, we currently expect our demand for payment in full to be upheld in arbitration. However, we have evaluated Abeona’s credit profile and financial condition and have recorded an allowance for credit losses related to the accounts receivable due from Abeona. We may ultimately receive less than the full amount we believe we are owed, and the duration of the arbitration and the timing of payment from Abeona, if any, are unpredictable. Any such adverse result or delay in payment may have a material adverse effect on our business, financial condition, results of operations or cash flows.
For more information, refer to Note 7, “License and Royalty Revenue—Abeona Therapeutics Inc.” to the accompanying unaudited consolidated financial statements.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.