Commitments and Contingencies

6 Months Ended

Mar. 31, 2024

Commitments and Contingencies [Abstract]

Commitments and Contingencies

NOTE 4 – Commitments and Contingencies

WARF License Agreement

The Company has entered into an exclusive start-up company license agreement with the Wisconsin Alumni Research Foundation (“WARF”) for WARF’s neural probe array and thin film micro electrode technology. The Company entered into an Amended and Restated Exclusive Start-up Company License Agreement (the “WARF License”) with WARF on January 21, 2020, which amended and restated in full the prior license agreement between WARF and NeuroOne, LLC, a predecessor of the Company, dated October 1, 2014, as amended on February 22, 2017, March 30, 2019 and September 18, 2019.

The WARF License grants to the Company an exclusive license to make, use and sell, in the United States only, products that employ certain licensed patents for a neural probe array or thin-film micro electrode array and method. The Company agreed to pay WARF a royalty equal to a single-digit percentage of our product sales pursuant to the WARF License, with a minimum annual royalty payment of $50,000 for 2020, $100,000 for 2021 and $150,000 for 2022 and each calendar year thereafter that the WARF License is in effect. If the Company or any of its sublicensees contest the validity of any licensed patent, the royalty rate will be doubled during the pendency of such contest and, if the contested patent is found to be valid and would be infringed by the Company if not for the WARF License, the royalty rate will be tripled for the remaining term of the WARF License.

WARF may terminate the WARF License on 30 days’ written notice if we default on the payments of amounts due to WARF or fail to timely submit development reports, actively pursue our development plan or breach any other covenant in the WARF License and fail to remedy such default in 90 days or in the event of certain bankruptcy events involving us. WARF may also terminate the WARF License (i) on 90 days’ notice if we had failed to have commercial sales of one or more FDA-approved products under the WARF License by June 30, 2021 or (ii) if, after royalties earned on sales begin to be paid, such earned royalties cease for more than four calendar quarters. The first commercial sale occurred on December 7, 2020, prior to the June 30, 2021 deadline. The WARF License otherwise expires by its terms on the date that no valid claims on the patents licensed thereunder remain. The Company expects the latest expiration of a licensed patent to occur in 2030.

During the three months ended March 31, 2024 and 2023, $37,500 in royalty fees were incurred related to the WARF License during each of these periods. During the six months ended March 31, 2024 and 2023, $75,000 in royalty fees were incurred during each of these periods related to the WARF License, respectively. The royalty fees were reflected as a component of cost of product revenue.

Mayo Agreement

The Company has an exclusive license and development agreement with the Mayo Foundation for Medical Education and Research (“Mayo”) related to certain intellectual property and development services for thin film micro electrode technology (“Mayo Agreement”). If the Company is successful in obtaining regulatory approval, the Company is to pay royalties to Mayo based on a percentage of net sales of products of the licensed technology through the term of the Mayo Agreement, set to expire May 25, 2037.  During the three months ended March 31, 2024 and 2023, $4,146 and zero in royalty fees were incurred related to the Mayo Agreement, respectively. During the six months ended March 31, 2024 and 2023, $4,415 and $690 in royalty fees were incurred related to the Mayo Agreement, respectively. The royalty fees were reflected as a component of cost of product revenue.

Facility Leases

During the three and six months ended March 31, 2024, rent expense associated with the facility leases amounted to $43,052 and $86,105, respectively. During the three and six months ended March 31, 2023, rent expense associated with the facility leases amounted to $43,053 and $85,527, respectively.

Supplemental cash flow information related to the operating leases was as follows:

	For the Six Months Ended March 31,
	2024		2023
Cash paid for amounts included in the measurement of lease liability:
Operating cash flows from operating leases	$	68,673	$	66,493
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	—	$	97,536

Supplemental balance sheet information related to the operating leases was as follows:

	As of March 31, 2024			As of September 30, 2023
Right-of-use assets	$	110,724		$	169,059
Lease liabilities	$	121,896		$	184,400
Weighted average remaining lease term (years)		0.9			1.4
Weighted average discount rate		7.7	%		7.8	%

Maturity of the lease liabilities was as follows:

Calendar Year	As of March 31, 2024
2024	$	105,365
2025		21,227
Total lease payments		126,592
Less imputed interest		(4,696	)
Total		121,896
Short-term portion (included in other liabilities)		(121,896	)
Long-term portion	$	—

Other

In the ordinary course of business, from time to time, the Company may be subject to a broad range of claims and legal proceedings that relate to contractual allegations, patent infringement and other claims. The Company establishes accruals when applicable for matters and commitments which it believes losses are probable and can be reasonably estimated. To date, no loss contingency for such matters and potential commitments have been recorded. Although it is not possible to predict with certainty the outcome of these matters or potential commitments, the Company is of the opinion that the ultimate resolution of these matters and potential commitments will not have a material adverse effect on its results of operations or financial position.