Note 9 – Commitments and Contingencies

Royalties to the IIA

The Company has received grants from the Government of the State of Israel through the Israeli National Authority for Technical Innovation (the “IIA”) for the financing of a portion of its research and development expenditures. The total amount that was received and recorded between the periods ending December 31, 2011 through 2016 was $1,332. No amounts were received during the years ended December 31, 2023 and 2022. The Company has a contingent obligation to the IIA for the total amount received along with the accumulated interest to date in the amount of $1,439 and $1,426 as of December 31, 2023 and 2022, respectively. This obligation is repaid in the form of royalties on revenues generated in any fashion with a rate that is currently at 4% (which may be increased under certain circumstances). The Company may be obligated to pay up to 100% (which may be increased under certain circumstances) of the U.S. dollar-linked value of the grants received, plus interest (which is typically calculated at the 12-month U.S. dollar LIBOR rate published at the beginning of the calendar year in which the specific grant was approved by the IIA).

Repayment of the grants is contingent upon the Company’s ongoing commercialization and generation of sales, which is subject to significant risk and uncertainty. The Company has no obligation to repay these grants if no significant sales are generated. The Company has recorded an immaterial expense for the years ended December 31, 2023 and 2022, and an immaterial liability at December 31, 2023 and 2022.

Royalty Payment Rights on Royalty Payment Rights Certificates

The Company issued certain (i) Royalty Payment Rights Certificates, as amended (“Royalty Payment Rights Certificates”) to the former holders of the Company’s shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Convertible Preferred Stock” and such holders, the “Certificate Holders”), with the right to receive certain single digit royalties for the achievement of certain commercialization milestones (the “Royalty Amount”), and (ii) Placement Agent Royalty Payment Rights Certificates dated December 22, 2016 (the “Placement Agent Payment Rights Certificates”) to Aegis Capital Corp., a New York corporation (the “Placement Agent”) or its designees, with the right to receive a payment equal to a percentage of the aggregate Royalty Amount paid to the Certificate Holders (the “Certificate Payment”).

On September 12, 2023 (the “Effective Date”), the Company, entered into an Amendment Agreement (the “Amendment Agreement”) with the holders of a majority of the Royalty Payment Rights Certificates to cancel the rights of all Certificate Holders to receive the Royalty Amounts in exchange for an aggregate of 88,221 shares of the Company’s common stock (the “Certificate Holder Securities”). As a result, the right of the holders of the Placement Agent Payment Rights Certificates to receive the Certificate Payment was also cancelled, in exchange for an aggregate of 8,821 shares (such shares, together with the Certificate Holder Securities, the “Exchange Securities”). As such, effective September 12, 2023, the Company agreed to issue a total of 97,042 shares of the Company’s common stock to settle all outstanding royalty payment obligations.

The Company measured the difference between the fair value of the shares of common stock issued and the carrying value (at a final fair value) of the royalty obligation as a gain. As the holder of a majority of the Royalty Payment Rights Certificates is considered a related party, as noted in Note 10, the Company recorded the extinguishment of the royalty obligation based on the total fair value of shares issued as well as the gain on settlement within equity as additional paid in capital as a capital transaction.

 Schedule of Extinguishment of Royalty Obligation