The accompanying notes are an integral
part of these condensed consolidated statements.
The accompanying notes are an integral
part of these condensed consolidated statements.
The accompanying notes are an integral part
of these condensed consolidated statements.
The accompanying notes are an integral part
of these condensed consolidated statements.
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS
AND SIGNIFICANT ACCOUNTING POLICIES
Background
Abeona Therapeutics Inc., a Delaware corporation
(together with our subsidiaries, “we,” “our,” “Abeona” or the “Company”), is a
clinical-stage biopharmaceutical company developing gene and cell therapies for life-threatening rare genetic diseases. Our lead
programs include EB-101, an autologous, gene-corrected cell therapy for recessive dystrophic epidermolysis bullosa (“RDEB”),
ABO-102, an adeno-associated virus (“AAV”)-based gene therapy for Sanfilippo syndrome type A (“MPS IIIA”),
and ABO-101 an AAV-based gene therapy for Sanfilippo syndrome type B (“MPS IIIB”). We also are developing ABO-202 and
ABO-201, which are AAV-based gene therapies for the CLN1 and CLN3 forms of Batten Disease, respectively, ABO-401 for the treatment
of cystic fibrosis, and ABO-5OX for the treatment of retinal diseases. In addition, we are developing next generation AAV-based
gene therapy though our novel AIM™ vector platform programs. Our efforts since inception have been principally devoted to
research and development, resulting in significant losses.
Basis of Presentation
The condensed consolidated balance
sheets as of June 30, 2019, the condensed consolidated statements of operations and stockholders’ equity for the three and
six months ended June 30, 2019 and 2018 and the condensed consolidated statements of cash flows for the six months ended June 30,
2019 and 2018, were prepared by management without audit. In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, except as otherwise disclosed, necessary for the fair presentation of the financial position, results of
operations, and changes in financial position for such periods, have been made.
Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”) have been condensed or omitted. These interim financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2018. The
results of operations for the periods ended June 30, 2019 are not necessarily indicative of the operating results that may be expected
for a full year. The condensed consolidated balance sheets as of December 31, 2018 contain financial information taken from the
audited Abeona consolidated financial statements as of that date.
As of June 30, 2019, we had 6,926,781 options
and 1,820,686 warrants that were not included in the EPS calculation as their effect would be antidilutive. As of June 30, 2018,
we had 5,895,135 options and 2,820,687 warrants that were not included in the EPS calculation as their effect would be antidilutive.
Effective January 1, 2018, we adopted Accounting
Standards Update (“ASU”) 2014-09,
Revenue from Contracts with Customers
, as amended (ASC 606). At year-end 2018,
we determined that we should adjust the amounts originally reported for the quarters ended March 31, 2018 and June 30, 2018 to
correct for an error in the determination of the cumulative effect related to the adoption of ASC 606 as of January 1, 2018. The
adjusted amounts for March 31, 2018 reflect a $2,067,000 reduction in foundation revenues and corresponding increases in the loss
from operations and net loss of $2,067,000 and an increase in the diluted loss per share of $0.04, as compared to the originally
reported amounts. The adjusted amounts for June 30, 2018 reflect a $543,000 reduction in foundation revenues and corresponding
increases in the loss from operations and net loss of $543,000 and an increase in the diluted loss per share of $0.01, as compared
to the originally reported amounts.
Uses
and Sources of Liquidity
The financial
statements have been prepared on a going concern basis, which assumes the Company will have sufficient cash to pay its operating
expenses, as and when they become payable, for a period of at least 12 months from the date the financial report was issued.
As
of June 30, 2019, we had cash, cash equivalents and short-term investments of
$62.5
million
and net assets of
$107.2
million. For the six months ended June 30, 2019, we had cash outflows
from operations of
$30.3
million. We believe we have sufficient resources to fund our business
operations for the next 12 months. However, we have implemented a multi-faceted program to seek sufficient liquidity through at
least the end of 2020.
This
program considers the possibility of accessing additional equity funding from current or new stockholders, out-licensing technology
and/or other assets, deferring and/or eliminating planned expenditures, restructuring operations and/or reducing headcount and
sales of assets. We believe that we will be able to complete our liquidity program and will have sufficient funding to support
planned expenditure commitments and our planned level of growth, and therefore we believe it is appropriate to prepare the financial
statements on a going concern basis.
NOTE 2 – NEW ACCOUNTING STANDARD
IMPLEMENTED
In February 2016, the Financial Accounting
Standards Board (“FASB”) issued ASU 2016-02,
Leases
, as amended (“ASC 842”), which requires the
recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance.
We adopted the provisions of ASC 842 effective January 1, 2019 using the cumulative-effect adjustment transition method, which
applies the provisions of the standard as of the effective date without adjusting the comparative periods presented. As a result
of the adoption, we recorded operating lease right-of-use assets of $8.9 million and operating lease liabilities of $8.9 million.
The adoption had an immaterial impact on our net assets as of January 1, 2019. In addition, we elected the package of practical
expedients permitted under the transition guidance within the new standard, which allowed us to carry forward the historical lease
classification.
Additional information and disclosures
required by this new standard are contained in Note 8.
NOTE 3 – SHORT-TERM INVESTMENTS
The following
table summarizes the available-for-sale investments held:
Description
|
|
June 30,
2019
|
|
|
December 31,
2018
|
|
U.S. government and agency securities and treasuries
|
|
$
|
19,903,000
|
|
|
$
|
66,218,000
|
|
The amortized
cost of the available-for-sale investments is adjusted for amortization of premiums and accretion of discounts to maturity. There
were no material realized gains or losses recognized on the sale or maturity of available-for-sale investments during the three
and six months ended June 30, 2019 and 2018.
NOTE 4 – LICENSED TECHNOLOGY
On
November 4, 2018, we entered into a license agreement with REGENXBIO to obtain rights to an exclusive worldwide
license (subject to certain non-exclusive rights previously granted for MPS IIIA), with rights to sublicense, to
REGENXBIO’s NAV AAV9 vector for the development and commercialization of gene therapies for the treatment of MPS IIIA,
MPS IIIB, CLN1 Disease and CLN3 Disease. In return for these rights, REGENXBIO will receive a guaranteed $20 million upfront
payment, $10 million of which was paid on signing of the agreement on November 4, 2018 and $10 million of which will be paid
by November 4, 2019. In addition, REGENXBIO will receive a total of $100 million in annual fees, payable upon the second
through sixth anniversaries of the agreement, $20 million of which is guaranteed. REGENXBIO is also eligible to receive
potential commercial milestone payments of up to $60 million as well as royalties payable in the low double digits to
low teens on net sales of products incorporating the licensed intellectual property. The license is amortized over the life
of the patent of eight years.
On August
3, 2016, we announced that we entered into an agreement (the “EB Agreement”) with EB Research Partnership (“EBRP”)
and Epidermolysis Bullosa Medical Research Foundation (“EBMRF”) to collaborate on gene therapy treatments for EB. The
EB Agreement became effective August 3, 2016 on the execution of two licensing agreements with The Board of Trustees of Leland
Stanford Junior University (“Stanford”). On August 3, 2016, we recorded the issuance of 375,000 of our common shares
to each of EBRP and EBMRF and recorded licensed technology of $2.45 million, which was being amortized over 20 years. In connection
with an arbitration proceeding relating to the EB Agreement, on May 15, 2019, the arbitrator issued a decision in favor of the
Company requiring the Company to cancel any and all shares of its common stock issued to EBRP and EBMRF that were still in their
possession. As a result, we have recorded the return of 450,000 shares of our common stock and the reversal of the licensed technology
from our financial statements. The net of these transactions resulted in a non-cash charge to expense of $367,000.
On May
15, 2015, we acquired Abeona Therapeutics LLC, which had an exclusive license through Nationwide Children’s Hospital to the
AB-101 and AB-102 patent portfolios for developing treatments for patients with Sanfilippo Syndrome Type A and Type B. The license
is amortized over the life of the license of 20 years.
Licensed
technology consists of the following:
|
|
June 30,
2019
|
|
|
December 31,
2018
|
|
Licensed technology
|
|
$
|
42,606,000
|
|
|
$
|
44,859,000
|
|
Less accumulated amortization
|
|
|
3,841,000
|
|
|
|
1,817,000
|
|
Licensed technology, net
|
|
$
|
38,765,000
|
|
|
$
|
43,042,000
|
|
The aggregate
estimated amortization expense for intangible assets remaining as of June 30, 2019 is as follows:
2019, remainder
|
|
$
|
2,587,000
|
|
2020
|
|
|
5,167,000
|
|
2021
|
|
|
5,167,000
|
|
2022
|
|
|
5,167,000
|
|
2023
|
|
|
5,167,000
|
|
Thereafter
|
|
|
15,510,000
|
|
Total
|
|
$
|
38,765,000
|
|
Amortization
on licensed technology was $1,293,000 and
$2,638,000
for
the three and six months ended June 30, 2019, respectively, and $87,000 and
$174,000
for the
three and six months ended June 30, 2018, respectively.
NOTE 5 – RESTRICTED CASH
Restricted cash, which is reported within
other assets and restricted cash on the condensed consolidated balance sheet, consists of cash and cash equivalents held as collateral
for a corporate credit card and office space in New York. As such, the cash and cash equivalents are restricted in use.
NOTE 6 – FAIR VALUE MEASUREMENTS
We calculate the fair value of our assets
and liabilities that qualify as financial instruments and include additional information in the notes to the consolidated financial
statements when the fair value is different than the carrying value of these financial instruments. The estimated fair value of
receivables, prepaid expenses, other assets, accounts payable, accrued expenses, payable to licensor and deferred revenue approximate
their carrying amounts due to the relatively short maturity of these instruments.
U.S. GAAP defines fair value as the exchange
price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants at the measurement date. This guidance
establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy requires entities
to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure
fair value are as follows:
|
·
|
Level 1 – Quoted prices in active
markets for identical assets or liabilities.
|
|
·
|
Level 2 – Observable inputs other
than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices
for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated
by observable market data.
|
|
·
|
Level 3 – Unobservable inputs that
are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes
certain pricing models, discounted cash flow methodologies and similar valuation techniques that use significant unobservable inputs.
|
The guidance requires an entity to maximize
the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. We have segregated all financial
assets and liabilities that are measured at fair value on a recurring basis (at least annually) into the most appropriate level
within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below.
Financial assets and liabilities measured
at fair value on a recurring and non-recurring basis as of June 30, 2019 and December 31, 2018 are summarized below:
Description
|
|
June
30,
2019
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
Gains/(Losses)
|
|
Recurring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
investments
|
|
$
|
19,903,000
|
|
|
$
|
-
|
|
|
$
|
19,903,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recurring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensed
technology, net
|
|
$
|
38,765,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
38,765,000
|
|
|
$
|
(367,000
|
)
|
Goodwill
|
|
|
32,466,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,466,000
|
|
|
|
-
|
|
Description
|
|
December
31,
2018
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
Gains/(Losses)
|
|
Recurring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
investments
|
|
$
|
66,218,000
|
|
|
$
|
-
|
|
|
$
|
66,218,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recurring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensed technology, net
|
|
$
|
43,042,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
43,042,000
|
|
|
$
|
-
|
|
Goodwill
|
|
|
32,466,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,466,000
|
|
|
|
-
|
|
NOTE 7 – STOCK-BASED COMPENSATION
The following table summarizes stock-based
option compensation for the three and six months ended June 30, 2019 and 2018:
|
|
For the three months ended
June 30,
|
|
|
For the six months ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Research and development
|
|
$
|
1,009,000
|
|
|
$
|
900,000
|
|
|
$
|
2,041,000
|
|
|
$
|
1,744,000
|
|
General and administrative
|
|
|
669,000
|
|
|
|
1,773,000
|
|
|
|
1,740,000
|
|
|
|
2,829,000
|
|
Stock-based compensation expense included in operating expense
|
|
|
1,678,000
|
|
|
|
2,673,000
|
|
|
|
3,781,000
|
|
|
|
4,573,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense
|
|
|
1,678,000
|
|
|
|
2,673,000
|
|
|
|
3,781,000
|
|
|
|
4,573,000
|
|
Tax benefit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Stock-based compensation expense, net of tax
|
|
$
|
1,678,000
|
|
|
$
|
2,673,000
|
|
|
$
|
3,781,000
|
|
|
$
|
4,573,000
|
|
We estimate
the fair value of each option award on the date of grant using the Black-Scholes option valuation model. We then recognize the
grant date fair value of each option as compensation expense ratably using the straight-line attribution method over the service
period (generally the vesting period). The Black-Scholes model incorporates the following assumptions:
|
·
|
Expected volatility – we estimate the volatility of our
share price at the date of grant using a “look-back” period which coincided with the expected term, defined below.
We believe using a “look-back” period which coincides with the expected term is the most appropriate measure for determining
expected volatility.
|
|
·
|
Expected term – we estimate the expected term using the
“simplified” method, as outlined in Staff Accounting Bulletin No. 107, “Share-Based Payment.”
|
|
·
|
Risk-free interest rate – we estimate the risk-free interest
rate using the U.S. Treasury yield curve for periods equal to the expected term of the options in effect at the time of grant.
|
|
·
|
Dividends – we use an expected dividend yield of zero because
we have not declared or paid a cash dividend, nor do we have any plans to declare a dividend.
|
We used
the following weighted-average assumptions to estimate the fair value of the options granted for the periods indicated:
|
|
For the three months ended
June 30,
|
|
|
For the six months ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Expected volatility
|
|
|
108
|
%
|
|
|
109
|
%
|
|
|
108
|
%
|
|
|
109
|
%
|
Expected term
|
|
|
5 years
|
|
|
|
5 years
|
|
|
|
5 years
|
|
|
|
5 years
|
|
Risk-free interest rate
|
|
|
2.21
|
%
|
|
|
2.65
|
%
|
|
|
2.24
|
%
|
|
|
2.44
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
The following table summarizes the options
granted for the periods indicated:
|
|
For the three months ended
June 30,
|
|
|
For the six months ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Options granted
|
|
|
1,183,890
|
|
|
|
224,800
|
|
|
|
1,384,890
|
|
|
|
869,800
|
|
Weighted-average:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise price
|
|
$
|
6.86
|
|
|
$
|
16.27
|
|
|
$
|
6.84
|
|
|
$
|
14.38
|
|
Grant date fair value
|
|
$
|
5.39
|
|
|
$
|
12.87
|
|
|
$
|
5.37
|
|
|
$
|
11.36
|
|
The following table summarizes restricted
common stock compensation expense for the three and six months ended June 30, 2019 and 2018:
|
|
For the three months ended
June 30,
|
|
|
For the six months ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Research and development
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
General and administrative
|
|
|
78,000
|
|
|
|
172,000
|
|
|
|
250,000
|
|
|
|
344,000
|
|
Stock-based compensation expense included in operating expense
|
|
|
78,000
|
|
|
|
172,000
|
|
|
|
250,000
|
|
|
|
344,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense
|
|
|
78,000
|
|
|
|
172,000
|
|
|
|
250,000
|
|
|
|
344,000
|
|
Tax benefit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Stock-based compensation expense, net of tax
|
|
$
|
78,000
|
|
|
$
|
172,000
|
|
|
$
|
250,000
|
|
|
$
|
344,000
|
|
We did not grant any common stock to directors
or employees during the three and six months ended June 30, 2019 or 2018.
NOTE 8 – OPERATING LEASES
We lease
space under non-cancelable operating leases for manufacturing and laboratory facilities and administrative offices in Cleveland
as well as administrative offices in New York. The leases do not have significant rent escalation, holidays, concessions, material
residual value guarantees, material restrictive covenants or contingent rent provisions. Our leases include both lease (e.g., fixed
payments including rent, taxes, and insurance costs) and non-lease components (e.g., common-area or other maintenance costs) which
are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components
for all leases. We also lease office space in Dallas and Madrid, Spain as well as certain office equipment under operating leases,
which have a non-cancelable lease term of less than one year and therefore, we have elected the practical expedient to
exclude these short-term leases from our right-of-use assets and lease liabilities.
Most
leases include one or more options to renew. The exercise of lease renewal options is typically at our sole discretion; therefore,
the majority of renewals to extend the lease terms are not included in our right-of-use assets and lease liabilities as they are
not reasonably certain of exercise. We regularly evaluate the renewal options and when they are reasonably certain of exercise,
we include the renewal period in our lease term.
As our
leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement
date in determining the present value of the lease payments.
Components
of lease cost are as follows:
|
|
Three months ended
June 30, 2019
|
|
|
Six months ended
June 30, 2019
|
|
Operating lease cost
|
|
$
|
434,000
|
|
|
$
|
723,000
|
|
Variable lease cost
|
|
$
|
86,000
|
|
|
$
|
159,000
|
|
Short-term lease cost
|
|
$
|
34,000
|
|
|
$
|
81,000
|
|
The following
table presents information about the amount and timing of cash flows arising from operating leases as of June 30, 2019:
Maturity of lease liabilities:
|
|
|
|
|
2019, remainder
|
|
$
|
845,000
|
|
2020
|
|
|
1,699,000
|
|
2021
|
|
|
1,713,000
|
|
2022
|
|
|
1,727,000
|
|
2023
|
|
|
1,741,000
|
|
Thereafter
|
|
|
3,667,000
|
|
Total undiscounted operating lease payments
|
|
|
11,392,000
|
|
Less: imputed interest
|
|
|
2,991,000
|
|
Present value of operating lease liabilities
|
|
$
|
8,401,000
|
|
|
|
|
|
|
Balance sheet classification:
|
|
|
|
|
Current portion of lease liability
|
|
$
|
1,693,000
|
|
Long-term lease liability
|
|
|
6,708,000
|
|
Total operating lease liabilities
|
|
$
|
8,401,000
|
|
|
|
|
|
|
Other information:
|
|
|
|
|
Weighted-average remaining lease term for operating leases
|
|
|
79 months
|
|
Weighted-average discount rate for operating leases
|
|
|
9.6
|
%
|
NOTE 9 – COMMITMENTS AND CONTINGENCIES
On January
18, 2018, William Mahon, a Company stockholder, served a demand upon the Company’s board of directors (the “Board”)
pursuant to Section 220 of the Delaware General Corporation Law (the “Demand”) seeking to inspect certain of the Company’s
books and records. Generally, the Demand’s stated purpose was to investigate allegedly excessive compensation awarded to
non-employee Board members for the fiscal years 2015–2017. The Board denied the allegations in the Demand, and agreed to
provide limited books and records to Mahon. On September 17, 2018, another Company stockholder, Francisco Dos Ramos, filed a stockholder
derivative complaint in the Delaware Chancery Court (the “Dos Ramos Action”) against Steven Rouhandeh, Frank Carsten
Thiel, Mark Alvino, Stefano Buono, Stephen Howell, Richard Van Duyne, and Todd Wider as defendants, and the Company as nominal
defendant (the “Dos Ramos Defendants”). Dos Ramos generally alleges that the Board breached its fiduciary duties, were
unjustly enriched, and committed corporate waste by approving allegedly excessive compensation to non-employee Board members for
the fiscal years 2015–2017. Dos Ramos generally seeks disgorgement of the allegedly improper payments to the Board, money
damages, an order requiring corporate governance reforms, costs and attorneys’ fees. On November 28, 2018, Mahon filed a
stockholder derivative complaint (the “Mahon Action”) in the United States District Court for the District of Delaware
(the “District Court”) against Mark Ahn, Mark Alvino, Jeffrey Davis, Stephen Howell, Todd Wider, and Steven Rouhandeh,
as defendants, and the Company as a nominal defendant (“Mahon Defendants”). The allegations in the Mahon Action are
substantially similar to those set forth in his Demand, as well as those in the Dos Ramos Action. Mahon generally seeks the disgorgement
of the allegedly improper payments to the Board, a constructive trust, money damages, costs and attorneys’ fees. On December
6, 2018, Mahon and the Mahon Defendants filed a joint motion for preliminary approval of settlement, along with a stipulation of
settlement (the “Stipulation”) intending to settle all claims asserted in the Mahon Action.
On
January 8, 2019, the District Court approved the parties’ notice of settlement, enjoining all Company stockholders from
commencing or further prosecuting any claims asserted in the Mahon Action, and scheduled a settlement approval hearing for
May 1, 2019. On January 25, 2019, the Chancery Court entered an order staying the Dos Ramos Action until May 8,
2019—one week after the May 1, 2019 settlement hearing in the Mahon Action. On May 2, 2019 the District Court entered
an Order and Final Judgment approving the Stipulation. On August 6, 2019, the plaintiff in the Dos Ramos Action filed a
voluntary notice of dismissal. On August 7, 2019, the Chancery Court entered an order of dismissal.
On October
22, 2018, EB Research Partnership, Inc. (“EBRP”) served upon the Company a Request for Arbitration (the “Request”),
alleging that the Company was in breach of an Agreement executed in July 2016 (the “Agreement”) between and among the
Company, EBRP, and Epidermolysis Bullosa Medical Research Foundation (“EBMRF” and together with EBRP, “Claimants”).
EBRP alleged that Abeona had refused to lift trading restrictions on certain shares of Abeona common stock issued to EBRP, purportedly
in breach of the Agreement. On November 21, 2018, the Company filed an action in the United States District Court for the Southern
District of New York seeking a declaration that it was not required to arbitrate its dispute with EBRP on the basis that the Agreement
was void for lack of consideration. On February 4, 2019, the court granted Claimants’ motion to compel arbitration. EBMRF
was subsequently joined as a party to the arbitration. The parties submitted briefs to the arbitrator on March 18 and April 18,
2019. On May 15, 2019, the arbitrator issued a decision in favor of the Company (the “Final Award”). Specifically,
the Final Award provides that the Agreement is void for lack of consideration; that Claimants fraudulently induced Abeona to enter
into the Agreement; that Claimants cannot enforce the Agreement; that Claimants are not entitled to any relief under the Agreement;
that, in view of their status as charitable organizations, Claimants would not be required to repay to Abeona the value of Abeona
common stock they already sold; that the Company shall cancel any and all shares of Abeona common stock issued to Claimants that
were still in Claimants’ possession; and that, as the losing parties, Claimants must bear the costs and expenses of the arbitration
and Abeona’s costs and expenses.