Annual report pursuant to Section 13 and 15(d)

Intangible Assets

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Intangible Assets
12 Months Ended
Dec. 31, 2019
Intangible Assets  
Intangible Assets

7.Intangible Assets

The Company’s intangible assets consist of the following:

    

December 31,

    

December 31,

    

2019

2018

License agreements

$

1,067

$

1,034

Less: accumulated amortization

(647)

(553)

License agreements, net

$

420

$

481

Trademarks

334

255

Patents

845

500

Less: accumulated amortization

 

(84)

 

(55)

Patents, net

$

761

$

445

Intangible assets, net

$

1,515

$

1,181

License agreements are being amortized over periods ranging from seventeen to twenty years. Patents are being amortized over periods up to twenty years. Amortization expense for 2019, 2018 and 2017 was approximately $123, $77 and $79, respectively. In January 2019, the Company rebranded its logo and product name designs, as a result the Company recorded a $104 charge related to the previous logo and product design names. This charge is recorded in the “General and Administrative” in the Statement of Operations. As of December 31, 2019, future amortization of patents and license agreements are as follows:

Year Ending December 31,

2020

137

2021

137

2022

138

2023

119

2024

47

Thereafter

603

TOTAL

1,181

License Agreements

The Company has entered into multiple license agreements with the University of Florida Research Foundation and the University of Texas at Austin (together, the “License Agreements”). Under the terms of the License Agreements, the Company acquired exclusive worldwide licenses for underlying technology used in repairing and regenerating nerves. The licensed technologies include the rights to issued patents and patents pending in the United States and international markets. The effective term of the License Agreements extends through the term of the related patents and the agreements may be terminated by the Company with 60 days prior written notice. Additionally, in the event of default, licensors may terminate an agreement if the Company fails to cure a breach after written notice. The License Agreements contain the key terms listed below:

Axogen pays royalty fees ranging from 1% to 3% under the License Agreements based on net sales of licensed products. One of the agreements also contains a minimum royalty of $13 per quarter, which may include a credit in future quarters in the same calendar year for the amount the minimum royalty exceeds the royalty fees. Also, when Axogen pays royalties to more than one licensor for sales of the same product, a royalty stack cap applies, capping total royalties at 3.75%;

If Axogen sublicenses technologies covered by the License Agreements to third parties, Axogen would pay a percentage of sublicense fees received from the third party to the licensor. Currently, Axogen does not sublicense any technologies covered by License Agreements. The Company is not considered a sub-
licensee under the License Agreements and does not owe any sub-licensee fees for its own use of the technologies;

Axogen reimburses the licensors for certain legal expenses incurred for patent prosecution and defense of the technologies covered by the License Agreements; and

Currently, under the University of Texas at Austin’s agreement, Axogen would owe a $15 milestone fee upon receiving a Phase II Small Business Innovation Research or Phase II Small Business Technology Transfer grant involving the licensed technology. The Company has not received either grant and does not owe such a milestone fee. A milestone fee to the University of Florida Research Foundation of $2 is due if Axogen receives FDA approval of its Avance Nerve Graft, a milestone fee of $25 is due upon the first commercial use of certain licensed technology to provide services to manufacture products for third parties and a milestone fee of $10 is due upon the first use to manufacture products that utilize certain technology that is not currently incorporated into Axogen products.

Royalty fees were $2,119, $1,661 and $1,195 for the years ended December 31, 2019, 2018 and 2017, respectively, and are included in sales and marketing expense on the accompanying consolidated statements of operations.