Commitments and Contingencies

12 Months Ended

Sep. 30, 2024

Commitments and Contingencies.

Commitments and Contingencies

8.     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 $332,779 (based on an exchange rate on September 30, 2024 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 November 3, 2023, a securities class action lawsuit was filed against the Company and certain of its officers in the United States District Court for the District of New Jersey. The class action complaint alleges violations of the Securities Exchange Act of 1934, as amended, or the Exchange Act, in connection with allegedly false and misleading statements made by the Company related to the Company’s BLA during the period from August 3, 2021 through August 29, 2023. The complaint alleges, among other things, that the Company violated Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 by failing to disclose that there was an alleged lack of evidence supporting ONS-5010/LYTENAVA as a treatment for wet AMD and that the Company and/or their manufacturing partner had deficient CMC controls for ONS-5010/LYTENAVA, which remained unresolved at the time the Company’s BLA was re-submitted to the FDA and, as a result, the FDA was unlikely to approve the Company’s BLA, and that the Company’s stock price dropped when such information was disclosed. The plaintiffs in the class action complaint seek damages and interest, and an award of reasonable costs, including attorneys’ fees. Defendants’ motion to dismiss is currently pending before the court.

On October 10, 2024, certain of the company’s officers and directors were named as defendants in a shareholder derivative action filed in the District Court of the District of Delaware.  The derivative complaint alleges that defendants breached their fiduciary duties by causing and/or allowing the Company to violate federal securities laws based on the same alleged misstatements as the securities class action.  The derivative complaint also alleges defendants violated Section 14(a) of the Exchange Act, as well as claims for contribution, unjust enrichment, and waste of corporate assets.  The derivative complaint seeks unspecified damages, corporate governance reforms, restitution, contribution, attorneys’ fees, and other costs.

The pending lawsuits and any other related lawsuits are subject to inherent uncertainties, and the actual defense and disposition costs will depend upon many unknown factors. The outcome of the pending lawsuits and any other related lawsuits is necessarily uncertain. The Company could be forced to expend significant resources in the defense of the pending lawsuits and any additional lawsuits, and the Company may not prevail. In addition, the Company may incur substantial legal fees and costs in connection with such lawsuits. The Company currently is not able to estimate the possible cost to it from these matters, as the pending lawsuits are currently at an early stage, and the Company cannot be certain how long it may take to resolve the pending lawsuits or the possible amount of any damages that the Company may be required to pay. Such amounts could be material to the Company’s financial statements if it does not prevail in the defense of the pending lawsuits and any other related lawsuits, or even if it does prevail. The Company has not established any reserve for any potential liability relating to the pending lawsuits and any other related lawsuits. It is possible that the Company could, in the future, incur judgments or enter into settlements of claims for monetary damages.

Leases

Corporate office

In March 2021, the Company entered into a three-year term corporate office lease in Iselin, New Jersey that ended on April 30, 2024.

In March 2024, the Company entered into a five-year term corporate office lease for its new corporate headquarters in Iselin, New Jersey that commenced on May 1, 2024.

Equipment leases

As of September 30, 2024, all equipment leases had expired. The Company had equipment leases with terms between 12 and 36 months and had recorded those leases as finance leases. The equipment leases bore interest between 4.0% and 13.0% per annum. Payments due under the lease contracts included minimum payments that the Company was obligated to make under the non-cancelable initial terms of the leases as the renewal terms were at the Company’s option. Lease expense was 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, 2024 and 2023 were as follows:

	Year ended September 30,
	2024		2023
Lease cost:
Interest on lease liabilities	$	116	$	1,399
Total finance lease cost		116		1,399
Operating lease cost		57,973		44,867
Total lease cost	$	58,089	$	46,266

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

	September 30,
	2024		2023
Operating leases:
Right-of-use asset	$	274,645	$	26,172
Operating lease liabilities		297,829		—
Finance leases:
Right-of-use asset	$	—	$	—
Financing lease liabilities		—		4,267
Weighted-average remaining lease term (years):
Operating leases		4.6		0.6
Finance leases		—		0.3
Weighted-average discount rate:
Operating leases		9.9%		7.5%
Finance leases		—		13.0%

Other information related to leases for the years ended September 30, 2024 and 2023 are as follows:

	Year ended September 30,
	2024		2023
Cash paid for amounts included in the measurement of lease obligations:
Operating cash flows from finance leases	$	116	$	1,399
Operating cash flows from operating leases		14,514		27,675
Financing cash flows from finance leases		4,267		11,751
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	294,416	$	—

Future minimum payments under noncancelable leases at September 30, 2024 are as follows for the years ending September 30:

	Operating leases
2025	$	78,091
2026		79,954
2027		81,817
2028		83,680
2029		49,447
Total undiscounted lease payments		372,989
Less: Imputed interest		75,160
Total lease obligations	$	297,829

Employee Benefit Plan

The Company maintains a defined contribution 401(k) plan (the “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, 2024 and 2023, the expense relating to the matching contribution was $177,309 and $136,914, respectively.