EXDI~~Licensing Agreement
Our business substantially depends on our licensed technology. We have entered into an exclusive licensing agreement, the “Licensing Agreement” with Digital Diagnostics Inc. (“Digital Diagnostics”)to develop, produce and commercialize certain diagnostic products, including FibriLyzer and MatriLyzer, which utilize certain intellectual property rights owned or licensed by Digital Diagnostics. The Licensing Agreement provides for Exactus BioSolutions and Digital Diagnostics to collaborate through the various steps of the product and device development process, including the development, regulatory approval, commercialization and manufacture stages. Exactus BioSolutions is required to pay Digital Diagnostics, in cash and/or stock, an initial signing payment, milestone fees triggered by the first regulatory clearance or approval of each of FibriLyzer and MatriLyzer, and various sales thresholds, and royalty payments based on the net sales of the products, calculated on a product-by-product basis. The initial signing payment is due within seven days of the effective date of the agreement, with the remaining amount due upon closing of certain of our financing transactions. In 2016, the Company paid $50,000 to Digital Diagnostics as part of the initial signing payment under the Licensing Agreement and $21,659 in legal expenses. As of December 31, 2016, the Company accrued an additional $171,033 in licensing fees due to closing a financing transaction in the fourth quarter of 2016, of which $75,000 was paid during the first quarter of 2017. The Company accrued the remaining $30,000 due for the initial signing fee during the third quarter of 2017. The Company has also accrued interest, per the Licensing Agreement, of $9,802 for the remaining balance due as of December 31, 2017. As of December 31, 2017, $134,802 remained due to Digital Diagnostics. In the first quarter of 2018, the Company paid the entire balance due to Digital Diagnostics. No milestones have been met and no milestone fees have been paid or accrued through December 31, 2017.
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The License Agreement is effective on a product-by-product and country-by-country basis until such time as neither Digital Diagnostics nor Exactus Biosolutions has any obligation to the other under the License Agreement in such country with respect to such product. The License Agreement may be terminated by Exactus BioSolutions as a whole or on a country-by-country and/or product-by-product basis, effective upon at least six (6) months written notice if regulatory approval has been obtained in the U.S. or in the EU, or upon at least three (3) months written notice if regulatory approval has not been obtained in the U.S. or in the EU. Either party may terminate the License Agreement in the event the other party materially breaches the License Agreement, or becomes insolvent.
