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RELATED PARTY TRANSACTIONS
 9 Months Ended
Sep. 30, 2023
RELATED PARTY TRANSACTIONS [Abstract]  
RELATED PARTY TRANSACTIONS
9)
RELATED PARTY TRANSACTIONS


Agreements with Factor Bioscience Inc. and Affiliates


As of September 30, 2023, the agreements below were in place related to Factor Bioscience Inc. (including its affiliates, “Factor Bioscience”) and Dr. Matthew Angel. These agreements have been deemed related party transactions, as the Company’s Chief Executive Officer, Dr. Matthew Angel, is also the Chairman and Chief Executive Officer of Factor Bioscience and a Director of Factor Limited.



In September 2022, the Company entered into a Master Services Agreement (the “MSA”) with Factor Bioscience, pursuant to which Factor Bioscience agreed to provide services to the Company as agreed between the Company and Factor Bioscience and as set forth in one or more work orders under the MSA, including the first work order included in the MSA (“WO1”). Under WO1, Factor Bioscience agreed to provide the Company with mRNA cell engineering research support services, including access to certain facilities, equipment, materials and training, and the Company agreed to pay Factor Bioscience an initial fee of $5.0 million, payable in twelve equal monthly installments of approximately $0.4 million. Of the $5.0 million, the Company allocated $3.5 million to the License Fee Obligation (as defined below). Following the initial 12-month period, the Company agreed to continue paying Factor Bioscience the monthly fee of $0.4 million until such time as WO1 is terminated. Upon entering into the MSA, the Company paid a deposit of $0.4 million, which will be applied to the last month of WO1.


The Company may terminate WO1 under the MSA on or after the second anniversary of the date of the MSA, subject to providing Factor Bioscience with 120 days’ prior notice. Factor Bioscience may terminate such work order only on and after the fourth anniversary of the date of the MSA, subject to providing the Company with 120 days’ prior notice. The MSA contains customary confidentiality provisions and representations and warranties of the parties, and the MSA may be terminated by either party upon 30 days’ prior notice, subject to any superseding termination provisions contained in a particular work order.



In connection with entering into the MSA, Factor Bioscience’s subsidiary, Factor Limited, entered into a waiver agreement (the “Waiver Agreement”) with Eterna LLC, pursuant to which Factor Limited agreed to waive payment of $3.5 million otherwise payable to it (the “License Fee Obligation”) in October 2022 by Eterna LLC under the exclusive license agreement entered into in April 2021 by and among Eterna LLC, Novellus Limited and Factor Limited, as amended in November 2022 (the “Original Factor License Agreement”). Under the terms of the Waiver Agreement, the License Fee Obligation is waived conditionally on the Company paying Factor Bioscience a minimum of $3.5 million due under the MSA.



Because the License Fee Obligation was conditionally waived until such amount has been paid under the MSA, the Company recorded a liability of $3.5 million. As of September 30, 2023, there was approximately $1.6 million of the unamortized License Fee Obligation remaining, which is recorded on the accompanying condensed consolidated balance sheet in the “due to related party” line items.


On February 20, 2023, the Company and Factor Limited entered into an exclusive license agreement (the “Exclusive Factor License Agreement”), which terminated and superseded the Original Factor License Agreement.  Subject to certain exclusive licenses or other rights granted by Factor Limited to other third parties as of the effective date of the Exclusive Factor License Agreement, Factor granted the Company the exclusive, sublicensable license under certain patents owned by Factor Limited (the “Factor Patents”). The term of the Exclusive Factor License Agreement expires on November 22, 2027, but will be automatically extended for an additional two and a half years (such period, the “Renewal Term”) if the Company receives at least $100 million in fees from sublicenses to the Factor Patents (“Sublicense Fees”) granted by the Company pursuant to the Exclusive Factor License Agreement.  The Company will pay to Factor Limited 20% of any Sublicense Fee received by the Company before the initial expiration date of such license and 30% of any Sublicense Fees received by the Company during the Renewal Term.  The Company may terminate the Exclusive Factor License Agreement upon 120 days’ written notice to Factor Limited, and both parties otherwise have additional customary termination rights.  Under the Exclusive Factor License Agreement, the Company is obligated to pay the expenses incurred by Factor Limited in preparing, filing, prosecuting and maintaining the Factor Patents and has agreed to bear all costs and expenses associated with enforcing and defending the Factor Patents in any action or proceeding arising from pursuit of sublicensing opportunities under the license granted under the Exclusive Factor License Agreement.



On July 12, 2023, The Company and Factor Limited entered into the First Amendment to the Exclusive Factor License Agreement (the “Exclusive License Agreement Amendment”), which amended the Exclusive Factor License Agreement to (i) expand the field of use of the Factor Patents to include veterinary uses, (ii) extend the Renewal Term from two and a half years to five years if the Company pays at least $6.0 million to Factor Limited from Sublicense Fees, other cash on hand or a combination of both sources of funds, (iii) reduce the Sublicense Fees payable to Factor Limited during the Renewal Term from 30% to 20%, (iv) eliminate Factor Limited’s termination rights with respect to Factor Patents that are not sublicensed, or for which an opportunity has not been identified, in each case by a certain date and (v) provide for the Company’s payment to Factor Limited of a monthly maintenance fee of approximately $0.4 million, beginning in September 2024.


In September 2022, Novellus and Eterna entered into a Second Amendment to the Limited Waiver and Assignment Agreement (the “Waiver and Assignment Agreement”) with Drs. Matthew Angel and Christopher Rohde (the “Founders”) whereby the Company agreed to be responsible for all future, reasonable and substantiated legal fees, costs, settlements and judgments incurred by the Founders, the Company or Novellus for certain claims and actions and any pending or future litigation brought against the Founders, Novellus and/or the Company by or on behalf of the Westman and Sowyrda legal matters described in Note 11 (the “Covered Claims”).  The Founders will continue to be solely responsible for any payments made to satisfy a judgement or settlement of any pending or future wage act claims.  Under the Waiver and Assignment Agreement, the Founders agreed that they are not entitled to, and waived any right to, indemnification or advancement of past, present or future legal fees, costs, judgments, settlement or other liabilities they may have been entitled to receive from the Company or Novellus in respect of the Covered Claims. The Company and the Founders will share in any recoveries up to the point at which the parties have been fully compensated for legal fees, costs and expenses incurred, with the Company retaining any excess recoveries. The Company has the sole authority to direct and control the prosecution, defense and settlement of the Covered Claims.


Exacis Asset Acquisition


On April 26, 2023, the Company entered into the Exacis Purchase Agreement to acquire the Exacis Assets, including all of Exacis’ right, title and interest in the Purchased License. The Company assumed none of Exacis’ liabilities, other than liabilities under the Purchased License that accrue subsequent to the closing date. See Note 3.


The Exacis Acquisition was deemed a related party transaction because Dr. Gregory Fiore, who was the Chief Executive Officer of Exacis, was also a member of the Company’s board of directors at the time of the Exacis Acquisition.  Additionally, Dr. Angel was Chairman of Exacis’ scientific advisory board, he is the co-founder, President, CEO, and a director of Factor Bioscience Inc., which is the parent of Factor Limited and a wholly owned subsidiary of Factor Bioscience LLC, the latter of which is the majority stockholder of Exacis.



Consulting Agreement with Dr. Fiore


In May 2023, the Company entered into a consulting agreement with Dr. Fiore, a former director of the Company, whereby Dr. Fiore agreed to provide business development consulting services to the Company for a monthly retainer of $20,000. The consulting agreement was terminable for any reason by either party upon 15 days’ written notice, and the Company terminated the consulting agreement, effective July 31, 2023.


July 2023 Financing


On July 14, 2023, the Company closed the July 2023 Financing.  Brant Binder, Richard Wagner Charles Cherington and Nicholas Singer, who were former directors of the Company, participated in the July 2023 Financing under the same terms and subject to the same conditions as all the other purchasers.  See Note 5.