Commitments and Contingencies

12 Months Ended

Sep. 30, 2022

Commitments and Contingencies.

Commitments and Contingencies

9.     Commitments and Contingencies

Selexis Commercial License Agreements

In April 2013, the Company entered into commercial license agreements with Selexis for each of the ONS-3010, ONS-1045 and ONS-1050 biosimilar product candidates (which agreements were subsequently amended on May 21,

2014). Under the terms of each commercial license agreement, the Company acquired a non-exclusive worldwide license under the Selexis Technology to use the applicable Selexis expression technology along with the resulting Selexis materials/cell lines, each developed under the research license, to manufacture and commercialize licensed and final products, with a limited right to sublicense.

The Company paid an upfront licensing fee to Selexis for each commercial license and also agreed to pay a fixed milestone payment for each licensed product. In addition, the Company is required to pay a low single-digit royalty on a final product-by-final product and country-by-country basis, based on worldwide net sales of such final products by the Company or any of the Company’s affiliates or sublicensees during the royalty term. The royalty term for each final product in each country is the period commencing from the first commercial sale of the applicable final product in the applicable country and ending on the expiration of the specified patent coverage. At any time during the term, the Company has the right to terminate its royalty payment obligation by providing written notice to Selexis and paying Selexis a royalty termination fee.

Each of the Company’s commercial agreements with Selexis will expire upon the expiration of all applicable Selexis patent rights. Either party may terminate the related agreement in the event of an uncured material breach by the other party or in the event the other party becomes subject to specified bankruptcy, winding up or similar circumstances. Either party may also terminate the related agreement under designated circumstances if the Selexis Technology infringes third-party intellectual property rights. In addition, the Company has the right to terminate each of the commercial agreements at any time at its convenience; however, with respect to the agreements relating to ONS-3010 and ONS-1045, this right is subject to the licensee’s consent pursuant to a corresponding letter the Company executed in conjunction with the standby agreement entered into between Selexis and Laboratories Liomont, S.A. de C.V. (“Liomont”) in November 2014.

The standby agreement permits Liomont to assume the license under the applicable commercial agreement for Mexico upon specified triggering events involving the Company’s bankruptcy, insolvency or similar circumstances.

Technology license

The Company entered into a technology license agreement with Selexis that will require milestone payments of $355,737 (based on an exchange rate on September 30, 2022 for converting Swiss Francs to U.S. dollars) to the licensor by the Company upon achievement of certain clinical milestones and pay a single digit royalty on net sales by the Company utilizing such technology. The Company also has the contractual right to buy out the royalty payments at a future date.

Litigation

On July 20, 2020, Liomont, filed a complaint against the Company in the U.S. District Court of the Southern District of New York alleging certain breach of contract claims under the June 25, 2014 strategic development, license and supply agreement relating to the biosimilar development program for ONS-3010 and ONS-1045 claiming $3,000,000 in damages. On March 30, 2021, the Company entered into a confidential settlement agreement with Liomont, and the complaint was dismissed on April 11, 2021. The Company agreed to make an initial settlement payment of $625,000 that was paid in April 2021; and an additional payment of $750,000, which was paid in April 2022. There are no remaining future financial obligations.

Leases

Corporate office

In March 2021, the Company assigned its Monmouth Junction, New Jersey corporate office lease to a third party and as of September 30, 2021, did not have remaining future obligations. In March 2021, the Company entered into a new three-year term corporate office lease in Iselin, New Jersey which commenced on April 23, 2021.

Equipment leases

The Company has equipment leases with terms between 12 and 36 months and has recorded those leases as finance leases. The equipment leases bear interest between 4.0% and 13.0% per annum.

Certain lease agreements contain provisions for future rent increases. Payments due under the lease contracts include minimum payments that the Company is obligated to make under the non-cancelable initial terms of the leases as the renewal terms are at the Company’s option. Lease expense is recorded as research and development or general and administrative based on the use of the leased asset.

The components of lease cost for the years ended September 30, 2022 and 2021 were as follows:

	Year ended September 30,
	2022		2021
Lease cost:
Amortization of right-of-use assets	$	—	$	—
Interest on lease liabilities		3,141		5,093
Total finance lease cost		3,141		5,093
Operating lease cost		44,867		106,879
Total lease cost	$	48,008	$	111,972

Amounts reported in the consolidated balance sheets for leases where the Company is the lessee were as follows:

	September 30,
	2022		2021
Operating leases:
Right-of-use asset	$	70,360	$	111,429
Operating lease liabilities		26,995		69,849
Finance leases:
Right-of-use asset	$	—	$	—
Financing lease liabilities		16,018		42,482
Weighted-average remaining lease term (years):
Operating leases		1.6		2.6
Finance leases		1.3		1.7
Weighted-average discount rate:
Operating leases		7.5%		7.5%
Finance leases		13.0%		9.5%

Other information related to leases for the years ended September 30, 2022 and 2021 are as follows:

	Year ended September 30,
	2022		2021
Cash paid for amounts included in the measurement of lease obligations:
Operating cash flows from finance leases	$	3,141	$	5,093
Operating cash flows from operating leases		46,652		158,708
Financing cash flows from finance leases		26,464		29,778
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	—	$	128,473

Future minimum payments under noncancelable leases at September 30, 2022 are as follows for the years ending September 30:

	Operating leases		Finance leases
2023	$	27,675	$	13,149
2024		—		4,383
Total undiscounted lease payments		27,675		17,532
Less: Imputed interest		680		1,514
Total lease obligations	$	26,995	$	16,018

Employee Benefit Plan

The Company maintains a defined contribution 401(k) plan in which employees may contribute up to 100% of their salary and bonus, subject to statutory maximum contribution amounts. The Company matches 100% of the first 3% of employee contributions. The Company assumes all administrative costs of the Plan. For the years ended September 30, 2022 and 2021, the expense relating to the matching contribution was $83,266 and $40,305, respectively.