Item
1.01 Entry into a Material Definitive Agreement.
WARF
License
NeuroOne
Medical Technologies Corporation (the “Company”) entered into an Amended and Restated Exclusive Start-up Company License
Agreement (the “WARF License”) with Wisconsin Alumni Research Foundation (“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 has agreed to pay
WARF a royalty equal to a single-digit percentage of its 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 if the
Company defaults on the payments of amounts due to WARF or fails to timely submit development reports, or breaches any other covenant
in the WARF License and fails to remedy such default in ninety (90) days or in the event of certain bankruptcy events involving
the Company. WARF may also terminate the WARF License on ninety (90) days’ notice if the Company fails to have commercial
sales of one or more FDA-approved products under the WARF License by June 30, 2020. The WARF License otherwise expires by its terms
(i) on the date that no valid claims on the patents licensed thereunder remain or (ii) upon the cessation for more than four (4)
calendar quarters of the payment, once begun, of earned royalties under certain sections of the WARF License. The Company expects
the latest expiration of a licensed patent to occur in 2030.
In
addition, WARF reserves the right to grant non-profit research institutions and government agencies non-exclusive licenses to
practice and use the inventions of the licensed patents for non-commercial research purposes, and the Company grants WARF a non-exclusive,
sub licensable, royalty-free right and license for non-commercial research purposes to use improvements to the licensed patents.
In the event that the Company discontinues use or commercialization of the licensed patents or improvements thereon, the Company
must grant WARF an option to obtain a non-exclusive, sub-licensable royalty-bearing license to use the improvements for commercial
purposes.
The
foregoing description of the WARF License does not purport to be complete and is qualified in its entirety by reference to the
full text of the WARF License, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated
herein by reference. The representations and warranties contained in the WARF License were made only for the purposes of the agreement
as of specific dates and may have been qualified by certain disclosures between the parties, among other limitations. The representations
and warranties were made for the purposes of allocating contractual risk between the parties to the WARF License and should not
be relied upon as a disclosure of factual information relating to the Company or WARF.
Broker
Warrants
As
previously disclosed, between November 1, 2019 and December 3, 2019, the Company entered into a subscription agreement with certain
accredited investors, pursuant to which the Company, in a private placement (the “Private Placement”), agreed to issue
and sell to such investors 13% convertible promissory notes (each, a “Note” and collectively, the “Notes”)
and warrants (each, a “Warrant” and collectively, the “Warrants”) to purchase shares of the Company’s
common stock. In connection with the Private Placement, on January 21, 2020, the Company issued to affiliates of Paulson Investment
Company, LLC (“Paulson”) warrants to purchase 259,476 shares of common stock at an exercise price of $1.87 per share,
which warrants were exercisable beginning on the date of issuance, January 21, 2020, and expire on January 21, 2030 (the “Broker
Warrants”).
Prior
to expiration, subject to the terms and conditions set forth in the Broker Warrants, the holders of such Broker Warrants may exercise
the Broker Warrants for shares of common stock by providing notice to the Company and paying the exercise price per share for
each share so exercised.
The
foregoing summary description of the Broker Warrants does not purport to be complete and is qualified in its entirety by reference
to the Form of the Broker Warrant, which is attached as Exhibit 4.1 hereto and incorporated herein by reference.
The
representations, warranties and covenants contained in the Broker Warrants were made solely for the benefit of the parties to
the Broker Warrants and may be subject to limitations agreed upon by the contracting parties. Accordingly, the Broker Warrants
are incorporated herein by reference only to provide investors with information regarding the terms of such documents and not
to provide investors with any other factual information regarding the Company or its business.