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Commitments and Contingencies | 12 Months Ended
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Sep. 30, 2022
Commitments and Contingencies Disclosure [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 “WARF Agreement”). 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 years ended September 30, 2022 and 2021, $137,500 and $125,000 in royalty fees were incurred related to the WARF License, respectively. and 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 years ended September 30, 2022 and 2021, $4,861 and $3,894 in royalty fees were incurred, respectively, and were reflected as a component of cost of product revenue. Legal PMT Litigation On March 29, 2018, the Company was served with a complaint filed by PMT Corporation (“PMT”), the former employer of Mark Christianson, a current Company employee, and Wade Fredrickson, a former Company employee. The complaint added the Company, NeuroOne, Inc. and Mr. Christianson to its existing lawsuit against Mr. Fredrickson in the Fourth Judicial District Court of the State of Minnesota. In the lawsuit, PMT claimed that Mr. Fredrickson and Mr. Christianson, by virtue of their work for the Company and their prior work during employment with PMT, breached their non-competition, non-solicitation and non-disclosure obligations, breached their fiduciary duty obligations, were unjustly enriched, engaged in unfair competition, engaged in a civil conspiracy, tortiously interfered with PMT’s contracts and prospective economic advantage, and breached a covenant of good faith and fair dealing. The litigation was settled on September 29, 2022. The associated legal costs associated with all of the Company’s litigation activities amounted to $663,629 and $80,356 during the years ended September 30, 2022 and 2021, respectively, and were recorded in selling, general and administrative expenses in the accompanying statements of operations. Facility Leases Headquarters Lease On October 7, 2019, the Company entered into a non-cancellable lease agreement (the “Lease”) with Biynah Cleveland, LLC, BIP Cleveland, LLC, and Edenvale Investors (together, the “Landlord”) pursuant to which the Company has agreed to lease office space located at 7599 Anagram Drive, Eden Prairie, Minnesota (the “Premises”). The Company took possession of the Premises on November 1, 2019, with the term of the Lease ending 65 months after such date, unless terminated earlier (the “Term”). The initial base rent for the Premises is $6,410 per month for the first 17 months, increasing to $7,076 per month by the end of the Term. In addition, as long as the Company is not in default under the Lease, the Company shall be entitled to an abatement of its base rent for the first 5 months. In addition, the Company will pay its pro rata share of the Landlord’s annual operating expenses associated with the premises, calculated as set forth in the Lease of which the Company is entitled to an abatement of these operating expense for the first 3 months. Los Gatos Lease In July 1, 2021, the Company entered into a non-cancellable facility lease (the “Los Gatos Lease”), pursuant to which the Company agreed to rent office space for its research and development operations located at 718 University Avenue, Suite #111, Los Gatos, California. The term of the New Lease is eighteen months. The facility space under the Los Gatos Lease is approximately 1,162 square feet. The Company took possession of the office space on July 2, 2021. The initial monthly rent under the Los Gatos Lease is approximately $4,241. On November 4, 2022, the Los Gatos Lease was extended for an additional two year term. See “Note 13 – Subsequent Events”. San Jose Lease: On December 30, 2020, the Company entered into a non-cancellable lease agreement for short term office space in San Jose, California (the “San Jose Lease”) for a three month initial term. After March 31, 2021, the San Jose Lease was cancellable upon a 30-day notice to the landlord. The Company took possession of the office space on January 1, 2021 and the San Jose Lease was terminated upon the commencement of the Los Gatos Lease discussed above. The base rent under the San Jose Lease was $504 per month. During the years ended September 30, 2022 and 2021, rent expense associated with the facility leases amounted to $170,501 and $136,826, respectively. Supplemental cash flow information related to the operating lease was as follows:
|  | For the Years Ended September 30, |
|  | 2022 |  |  | 2021 |
Cash paid for amounts included in the measurement of lease liability: |  |  |  |  |  |
Operating cash flows from operating leases |  | $ | 130,727 |  |  | $ | 70,897 |
Right-of-use assets obtained in exchange for lease obligations: |  |  |  |  |  |  |  |
Operating leases |  | $ | — |  |  | $ | 73,118 |
Supplemental balance sheet information related to the operating lease was as follows:
|  | As of September 30, |
|  | 2022 |  |  | 2021 |
Right-of-use assets |  | $ | 181,355 |  |  | $ | 288,948 |
Lease liability |  | $ | 202,895 |  |  | $ | 315,673 |
Weighted average remaining lease term (years) |  |  | 2.4 |  |  |  | 3.1 |
Weighted average discount rate |  |  | 6.9 | % |  |  | 6.7 | %
Maturity of the lease liability was as follows:
Calendar Year |  | As of September 30, 2022 |
2022 (period from October 1, 2022 to December 31, 2022) |  | $ | 32,928 |
2023 |  |  | 82,333 |
2024 |  |  | 84,391 |
2025 |  |  | 21,227 |
Total lease payments |  |  | 220,879 |
Less imputed interest |  |  | (17,984 | )
Total |  |  | 202,895 |
Short-term portion |  |  | (83,339 | )
Long-term portion |  | $ | 119,556 |

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