Abeona Therapeutics Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

New Accounting Standards Implemented

New Accounting Standards Implemented

3 Months Ended

Mar. 31, 2018

Accounting Changes and Error Corrections [Abstract]

New Accounting Standards Implemented

(2)

New Accounting Standards Implemented

Revenue Recognition

Effective January 1, 2018, we adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, as amended (commonly referred to as ASC 606) using the modified retrospective transition method. The cumulative effect of applying the standard was an increase of $3.7 million to stockholder’s equity as of January 1, 2018. Our statement of operations for the quarterly period ended March 31, 2018 and our balance sheet as of March 31, 2018 are presented under ASC 606, while our statement of operations for the quarterly period ended March 31, 2017 and our balance sheet as of December 31, 2017 are presented under ASC 605, Revenue Recognition. See below for disclosure of the impact of the adoption of ASC 606 on our statement of operations and balance sheet for the quarterly period ended March 31, 2018, and the effect of changes made to our consolidated balance sheet as of January 1, 2018.

The table below presents the cumulative effect of the changes made to the consolidated January 1, 2018 balance sheet due to the adoption of ASC 606.

	December 31, 2017,				January 1, 2018
Balance Sheet	As Reported Under		Adjustments Due		As Adjusted
(in thousands)	ASC 605		to ASC 606		Under ASC 606

Liabilities
Current liabilities
Current portion of deferred revenue	$	3,214	$	(602)	$	2,612
Total current liabilities		3,214		(602)		2,612
Deferred revenue, net of current portion		3,061		(3,061)		-
Total liabilities		8,668		(3,663)		5,005
Stockholders’ Equity
Accumulated deficit		(359,792)		3,663		(356,129)
Total equity	$	170,098	$	-	$	170,098

The table below presents the impact of the adoption of ASC 606 on our statement of operations.

	First Quarter Ended March 31, 2018
STATEMENT OF OPERATIONS	Under		Effect of		As Reported
(in thousands except per share amounts)	ASC 605		ASC 606		Under ASC 606
Revenues
License revenues	$	151	$	(151)	$	-
Total revenues BS		2,749		(151)		2,598

Loss from operations	$	(8,465)	$	(151)	$	(8,616)
Net loss	$	(8,312)	$	(151)	$	(8,463)

Basic and diluted loss per common share	$	(0.18)	$	0.00	$	(0.18)

The table below presents the impact of the adoption of ASC 606 on our balance sheet.

	March 31, 2018
Balance Sheet	Under		Effect of		As Reported
(in thousands)	ASC 605		ASC 606		Under ASC 606
Liabilities and Stockholders’ Equity
Current liabilities
Current portion of deferred revenue	$	1,146	$	(602)	$	544
Total current liabilities		7,056		(602)		6,454
Deferred revenue, net of current portion		2,910		(2,910)		-
Total liabilities		9,966		(3,512)		6,454

Stockholders’ Equity
Accumulated deficit		(368,255)		(3,663)		(364,592)
Total stockholders’ equity	$	165,536	$	3,663	$	169,199

We received upfront cash payments for licenses of our technology in years 2008-2014. The revenue was recognized straight-line over the life of the patent. Our obligation was performed at the time the license was granted. Following the revenue recognition policies in accordance with ASC 606, we decreased the accumulated deficit by $3,663,000 as of January 1, 2018 and decreased deferred revenue by the same amount.

Royalty revenues will continue to be recognized in the period of sales. Royalties recognized in the first quarter of 2018 are $50,000.

On October 16, 2017, we announced a collaborative agreement between nine Sanfilippo foundations to provide up to approximately $13.85 million of grants to Abeona in installments for the advancement of the Company’s clinical stage gene therapies for Sanfilippo Syndrome Type A (MPS IIIA) and Sanfilippo Syndrome Type B (MPS IIIB), subject to the achievement of certain milestones. As of March 31, 2018, we received $3.1 million in grants ($2.6 million in the fourth quarter 2017 and $0.5 million in the first quarter of 2018) and recorded them as deferred revenue. $2.6 million of the $3.1 million in grants were recognized as revenue in the first quarter of 2018. Deferred revenue was $544,000 at March 31, 2018.

We recorded revenue for Foundation Grants of $2,548,000 for first quarter of 2018 and no revenues for the same period of 2017, an increase of $2,548,000. We record revenue to match expenses for the advancement of the Company’s clinical stage gene therapies for Sanfilippo Syndrome Type A (MPS IIIA) and Sanfilippo Syndrome Type B (MPS IIIB).

Restricted cash disclosure

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash requiring restricted cash and restricted cash equivalents to be included with cash and cash equivalents on the statement of cash flows when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. We adopted this standard during the first quarter of 2018. Restricted cash is now included as a component of cash, cash equivalents, and restricted cash on our unaudited condensed consolidated statements of cash flows. Restricted cash is recorded within other non-current assets in the accompanying unaudited condensed consolidated balance sheets. The inclusion of restricted cash increased beginning balances of the unaudited condensed consolidated statements of cash flows by $280,000 and $0, respectively, and the ending balances by $280,000 and $0, respectively, for the three months ended March 31, 2018 and 2017.