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Royalties Payable

9 Months Ended

Sep. 30, 2023

Note 9. Royalties Payable

LockeT Royalty

On January 9, 2023, the Company entered into an agreement with the Noteholders to forgive all accrued interest and future interest expense in exchange for a future royalty right. The Company will pay to the Noteholders a total royalty equal to approximately 12% of net sales of its LockeT, commencing upon the first commercial sale, through December 31, 2035. The remaining accrued interest for the notes not converted at closing of the Merger was paid on February 9, 2023.

An additional royalty will be paid to the inventor of the LockeT, in exchange for the assignment and all rights to LockeT, the Company will pay a 5% royalty on net sales up to $1 million in royalties, payable annually in arrears, starting with the year ending December 31, 2022. After $1 million has been paid, and if, and only if, a US patents is granted by the United States Patent and Trademark Office, then the Company will continue to pay a royalty at a rate of 2% of net sales, until total cumulative royalties of $10 million have been paid. The royalty payments will end on revenues through February 29, 2032, regardless if the total $10 million has been paid.

AMIGO System Royalty

During 2006 and 2007, Old Catheter entered into two investment grant agreements with a non-profit foundation for the purpose of funding the initial development of Old Catheter's AMIGO System receiving a total of $1.6 million from the foundation.

The agreement calls for the payment of the following sales-based royalties, by Old Catheter, to the foundation, upon successful commercialization of the AMIGO System:

Royalty Percentage		Until Royalty Payment Reaches a Total of
	4%	$	1,589,500
	2%	$	3,179,000
	1%	In perpetuity

The Company is not actively marketing and selling the AMIGO System. There was no royalty expense recorded for the three and nine months ended September 30, 2023 and 2022 in relation to the AMIGO System. The AMIGO System royalty has been earned and payment has been deferred to a future date.

See table below for roll forward of the royalties payable for the nine months ended September 30, 2023:

Balance at beginning of period	$	-
AMIGO royalty payable recognized in connection with the Merger		159
LockeT royalty payable recognized in connection with the Merger		14,022
Change in fair value of royalties payable		(5,333	)
Balance at end of period	$	8,848