F.

COMMITMENTS AND CONTINGENCIES

Clinical Research Agreements

Under co-development and revenue sharing agreements with Ergomed, Ergomed agreed to contribute up to $12 million towards the Company’s Phase 3 Clinical Trial in the form of discounted clinical services in exchange for a single digit percentage of milestone and royalty payments, up to a specific maximum amount. The Company accounted for the co-development and revenue sharing agreements in accordance with ASC 808 “Collaborative Arrangements”. The Company determined the payments to Ergomed are within the scope of ASC 730 “Research and Development.” Therefore, the Company records the discount on the clinical services as a credit to research and development expense on its statements of operations. Since the inception of the agreement with Ergomed, the Company has incurred research and development expenses of approximately $35.3 million for Ergomed’s services. This amount is net of Ergomed’s discount of approximately $11.7 million. During the three months ended December 31, 2021 and 2020, the Company recorded, net of Ergomed’s discount, approximately $0.2 million and $0.6 million, respectively, as research and development expense related to Ergomed’s services.

Lease Agreements

The Company leases a manufacturing facility near Baltimore, Maryland (the San Tomas lease). The building was remodeled in accordance with the Company’s specifications so that it can be used by the Company to manufacture Multikine for the Company’s Phase 3 clinical trial and sales of the drug if approved by the FDA. The lease is for a term of twenty years and requires annual base rent to escalate each year at 3%. The Company is required to pay all real estate and personal property taxes, insurance premiums, maintenance expenses, repair costs and utilities. The lease allows the Company, at its election, to extend the lease for two ten-year periods or to purchase the building at the end of the 20-year lease, which expires in October 2028. The renewal options are not included in the calculation of the right of use asset and lease liability because exercise of those options is not probable.

On December 31, 2021 and September 30, 2021, the net book value of the finance lease right of use asset is approximately $12.3 million and $12.7 million, respectively and the balance of the finance lease liability is approximately $13.5 million and $13.8 million, respectively, of which approximately $0.6 million is current in each quarter. These amounts include the San Tomas lease as well as several other smaller finance leases for office equipment. The finance right of use assets are being depreciated using the straight-line method over the underlying lease terms. Total cash paid related to finance leases during the three months ended December 31, 2021 and 2020 was approximately $0.6 million and $0.5 million, respectively, of which approximately $0.3 million was for interest in each quarter. As of December 31, 2021, the weighted average discount rate of the Company’s finance leases is 8.45% and the weighted average time to maturity is 6.8 years.

In August 2020, the Company entered into an amendment to the San Tomas lease under which the landlord agreed to allow the Company to substantially upgrade the manufacturing facility in preparation for the potential commercial production of Multikine. The project was finished and the improvements were placed in service in October 2021. Total cost was $11.1 million, of which the landlord agreed to finance $2.4 million. Approximately $1.6 million of the landlord financing was received as of December 31 2021, and the remaining balance is expected to be received in the second quarter of fiscal year 2022. The landlord financing is being repaid through increased lease payments which started in March 2021 and extend over the remaining lease term. The repayment includes a base rent which escalates at 3% each year plus interest that accrues at 13.75% per year. The Company remeasured the lease liability to account for the modified payments using a 8.45% implicit interest rate. The rate was determined using a synthetic credit rating analysis prepared by an outside valuation specialist. Additionally, this financing is considered to be a lease incentive from the landlord and has been included in the calculation of the lease liability as it is realized. The leasehold improvements are recorded in property and equipment, were deemed to be placed in service in October 2021 and are being amortized over the remaining lease term.

The Company was required to deposit the equivalent of one year of base rent in accordance with the lease. Under the landlord’s $2.4 million financing arrangement, the Company was required to deposit an additional $0.2 million in March 2021. When the Company meets the minimum cash balance required by the lease, the deposit will be returned to the Company. During the quarter ended December 31, 2021, it was determined that the Company met the minimum cash requirement and the deposits were returned in January 2022. The approximate $1.9 million deposit is included in current assets at December 31, 2021 and non-current assets at September 30, 2021.