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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Dec. 31, 2024

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

E. COMMITMENTS AND CONTINGENCIES

Clinical Research Agreements

In August 2024 the Company entered into an agreement, pursuant to which the Company engaged Ergomed Clinical Research, Inc. to provide clinical development services related to the Company’s upcoming confirmatory registration study in exchange for fees. Since the Company entered into this agreement it has incurred research and development expenses of approximately $0.7 million as of December 31, 2024.

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 III clinical trial and sales of the drug if approved by the FDA or regulators in Canada, the UK or Europe. 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 reasonably certain.

As of December 31, 2024 and September 30, 2024, respectively, the net book value of the finance lease right-of-use asset is approximately $6.9 million and $7.4 million and the balance of the finance lease liability is approximately $9.5 million and $10.0 million, of which approximately $2.1 million and $2.0 million is current. These amounts include the San Tomas lease as well as several other smaller finance leases for office equipment. During the three months ended December 31, 2024 and 2023, the finance right-of-use assets are being depreciated using a straight-line method over the underlying lease terms and depreciation expense totaled approximately $0.5 million in both periods, which is included in research and development expense on the accompanying condensed statements of operations. Total cash paid related to finance leases during the three months ended December 31, 2024 and 2023, was approximately $0.7 million for both periods, of which approximately $0.2 million was for interest. The total cash paid related to finance lease principal payments is included in cash flows from financing activities on the accompanying condensed statements of cash flows. The total cash paid related to finance lease interest expense is included in cash flows from operating activities on the accompanying condensed statements of cash flows. As of December 31, 2024, the weighted average discount rate of the Company’s finance leases is 8.46% and the weighted average remaining lease term is 3.83 years. During the three months ended December 31, 2024 and 2023, total finance lease costs were approximately $0.7 million, consisting of approximately $0.5 million of lease asset amortization and approximately $0.2 million of interest on the finance lease liabilities for both periods. Variable lease expenses, such as maintenance costs, utilities, and real property taxes are not included in right-of-use assets or lease liabilities but rather are expensed as incurred. During the three months ended December 31, 2024, there were approximately $0.3 million of variable finance lease costs, which are included in research and development expense on the accompanying condensed statements of operations.

On January 11, 2023, the Company was required to deposit approximately $2.3 million to its landlord, equivalent to one year’s rent, for falling below the stipulated cash threshold in accordance with the San Tomas lease. The amount will be included as an asset on the balance sheet until the Company meets the minimum cash balance required and the deposit is returned.

Approximate future minimum lease payments under finance leases as of December 31, 2024 are as follows:

Nine months ending September 30, 2025		$	2,065,000
Year ending September 30,
2026			2,838,000
2027			2,929,000
2028			3,021,000
2029			255,000
2030			-
Total future minimum lease obligation			11,108,000
Less imputed interest on finance lease obligations			(1,622,000	)
Net present value of financing lease obligations			9,486,000
Less net present value of financing lease obligations – current portion			(2,074,000	)
Net present value of financing lease obligations - non-current portion		$	7,412,000

The Company leases two facilities under operating leases. The lease for the Company’s office headquarters will expire on November 30, 2025. The lease for its research and development laboratory will expire on February 29, 2032. The operating leases include escalating rental payments. The Company is recognizing the related rent expense on a straight-line basis over the terms of the leases.

As of December 31, 2024 and September 30, 2024, respectively, the net book value of the operating lease right-of-use asset is approximately $1.4 million and $1.5 million and the balance of the operating lease liability is approximately $1.6 million and $1.7 million, of which approximately $0.2 million is current in both periods. During the three months ended December 31, 2024 and 2023, the Company incurred lease expense under operating leases of approximately $0.1 million in both periods, which is included in general and administrative expense on the accompanying condensed statements of operations. Total cash paid related to operating leases during the three months ended December 31, 2024 and 2023 was approximately $0.1 million for both periods. The total cash paid related to operating leases is included in cash flows from operating activities on the accompanying condensed statements of cash flows. The weighted average discount rate of the Company’s operating leases is 8.98% and the weighted average the remaining lease term is 6.81 years.

As of December 31, 2024, approximate future minimum lease payments on operating leases are as follows:

Nine months ending September 30, 2025		$	276,000
Year ending September 30,
2026			287,000
2027			277,000
2028			285,000
2029			294,000
2030			303,000
Thereafter			443,000
Total future minimum lease obligation			2,165,000
Less imputed interest on operating lease obligation			(566,000	)
Net present value of operating lease obligations			1,599,000
Less net present value of operating lease obligations - current portion			(226,000	)
Net present value of operating lease obligations - non-current portion		$	1,373,000