They never paid anything on the "debt/royalties" whatever you want to call it - so it makes no difference IMO. Yes, it will lower the "current liabilities" debt total on the balance sheet- but not have any effect on cash use/cash flow that I can see since they were never paying on it anyway, IMO. It's essentially an accounting/bookkeeping entry w/ perhaps some sort of potential tax implication on the gain is all, IMO? Am already seeing "claims" this somehow generates cash-flow or something? They never paid a single payment or royalty against it according to the 10-K; so it's just an accrual gain, clean-up of carried "accrual" expense entries or whatever (need a tax attorney), the other side (Beaumont) probably writing it off as a loss/bad debt IMO (not an accountant and we don't know all the details). BHRT never has made payments on it- so it's not going to give them any cash that they didn't have as far as I can tell IMO? Just another "license" they bought or whatever, announced in some PR "deal" and then apparently never used, and/or it never amounted to anything, IMO.
What's also interesting IMO, is the 8-K today says the following, "We DID NOT use this license in ANY of our technologies."?
But you read the latest 10-K entry below and it states, "We utilize the methods under these patents in connection with our BioPace and certain other product candidates in development."
So did they use it, or didn't they? One statement says it was "used in biopace" and "certain other products" - in plain English that I'm reading, IMO?
Recent 10-K page 18/19:
Other License Agreements
In June 2000, we entered into an agreement with William Beaumont Hospital, or WBH, pursuant to which WBH granted to us a worldwide, exclusive, non-sublicenseable license to two U.S. method patents covering the inducement of human adult myocardial cell proliferation in vitro, or the WBH IP. The term of the agreement is for the life of the patents, which expire in 2015. WE UTILIZE the methods under these patents in connection with our BioPace and certain other product candidates in development. We do not have rights to patents outside the United States relating to BioPace. In addition to a payment of $55,000 we made to acquire the license, we are required to pay WBH an annual license fee of $10,000 and royalties ranging from 2% to 4% of net sales of products that are covered by the WBH IP. In order to maintain these exclusive license rights, our aggregate royalty payments in any calendar year must exceed a minimum threshold as established by the agreement. The minimum threshold was
$50,000 for 2005, $100,000 for 2006, $200,000 for 2007 and 2008. This minimum threshold will remain $200,000 for 2009 and thereafter. To the extent that our annual net sales of products covered by the WBH IP do not exceed the minimum threshold for such year, we have the option of paying any shortfall in cash to WBH by the end of the applicable year or having our license to the WBH IP become non-exclusive. In addition to the patents licensed from WBH, we purchased a U.S. patent and its corresponding Japanese filing, which are directed to biological pacemakers, by assignment from Angeion Corporation on September 1, 2000.
As of the date of this report, we have not made any payments to WBH other than the initial payment to acquire the license. Accordingly, WBH may terminate the license to the WBH IP at any time at their sole option. We are currently in negotiations with WBH to amend the terms of the license agreement. Unless earlier terminated by WBH or by either party upon the other party’s breach of the agreement, the agreement will terminate upon the expiration date of the last patent covered by the WBH Agreement. ""
It looks like it will come off the "accrued expenses" line of the balance sheet (see 10-K page F-35) -
" At December 31, 2013 and December 31, 2012, the Company’s liability under this agreement was $2,122,130 and $1,825,675, respectively, which is reflected as a component of accrued expenses on the balance sheets (see Note 5).
F-35
During the year ended December 31, 2013 and 2012, the Company incurred expenses of $210,000, $210,000 respectively, and $2,122,130 from August 12, 1999 (date of inception) to December 31, 2013. The Company has accrued interest for the past due commitment at 2% over the prime rate per the terms of the agreement. The Company has included $2,122,130 in accrued expenses as of December 31, 2013."
So all it looks like IMO is that Beaumont is terminating the agreement per the terms above as BHRT never paid them, or made any payments and thus had lost "exclusivity" and Beaumont had the right to terminate based on no payments ever received. Beaumont looking at BHRT's situation, probably also figures they never will get paid anything- so just terminate it IMO and take the accounting entry. Looks like what Cassel does among other things- debt restructuring I believe is on their web site. This move, plus the cashing out of debt for equity and other things looks interesting to me? Like they're cleaning up a bunch of "stuff" for who knows what reasons?
AI
