Ernexa Therapeutics Inc. Commitments Disclosure

 

13.	Commitments and Contingencies

 

Litigation Matters

 

The Company is involved in litigation and arbitrations from time to time in the ordinary course of business. Legal fees and other costs associated with such actions are expensed as incurred. In addition, the Company assesses the need to record a liability for litigation and contingencies. The Company reserves for costs relating to these matters when a loss is probable, and the amount can be reasonably estimated.

 

 

Donoghue v. Cherington and Ernexa

 

Dennis J. Donoghue, a security owner of the Company, initiated a lawsuit against the Company as a nominal defendant, and Charles Cherington as defendant, on October 20, 2025 in the Southern District of New York (Case No. 25-cv-8653) alleging a violation of Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78p(b) and seeking recovery of alleged short swing profits by Mr. Cherington (the “Donoghue Matter”).

 

On December 19, 2025, Mr. Donoghue, the Company and Mr. Cherington entered into a settlement agreement.

 

Novellus, Inc. v. Sowyrda et al., C.A. No. 2184CV02436-BLS2

 

On October 25, 2021 Novellus, Inc. filed a complaint in the Superior Court of Massachusetts, Suffolk County, against former Novellus, Inc. employees Paul Sowyrda and John Westman and certain other former investors in Novellus LLC (Novellus, Inc.’s former parent company prior to our acquisition of Novellus, Inc.), alleging breach of fiduciary duty, breach of contract and civil conspiracy. The Company acquired Novellus, Inc. on July 16, 2021. On May 27, 2022 Novellus, Inc. amended the complaint to withdraw all claims against all defendants except Paul Sowyrda and John Westman. Since 2022, the parties have engaged in legal proceedings relating to alleged conduct that took place before the Company acquired Novellus, Inc., including certain counterclaims against Novellus LLC, Novellus Inc., Factor Bioscience Inc., Christopher Rohde, Matthew Angel and the Company (the “Counterclaim Defendants”).

 

On July 31, 2024, Counterclaim Defendants and Sowyrda informed the Court that they had reached a settlement and requested that all claims pending between them be dismissed with prejudice, and on August 9, 2024, the Court approved the motion for approval of dismissal of all such claims with prejudice. On April 22, 2025, Counterclaim Defendants and Westman reached a confidential settlement with an effective date of April 30, 2025. Such settlement included the issuance of 20,000 shares of the Company’s common stock and a cash payment of less than $0.1 million. On May 27, 2025, Counterclaim Defendants and Westman filed stipulation of dismissal with prejudice with the Court.

 

Licensing Agreements

 

On September 24, 2024, the Company entered into the Exclusive License and Collaboration Agreement (“the Factor L&C Agreement”) with Factor Limited. The Factor L&C Agreement terminated a previous license agreement, as well as a license that the Company acquired from a third party pursuant to an asset purchase agreement in April 2023.

 

Under the Factor L&C Agreement, the Company has obtained exclusive licenses in the fields of cancer, autoimmune disorders, and rare diseases with respect to certain licensed technology and has the right to develop the licensed technology directly or enter into co-development agreements with partners who can help bring such technology to market. The Factor L&C Agreement also provides for certain services and materials to be provided by Factor Limited to facilitate the development of the licensed technology and to enable the Company to scale up production at third party facilities.

 

The initial term of the Factor L&C Agreement is one year after the effective date, and it automatically renews yearly thereafter. The Company may terminate the Factor L&C Agreement for any reason upon 90 days’ written notice to Factor Limited, and the parties otherwise have customary termination rights, including in connection with certain uncured material breaches and specified bankruptcy events.

 

Pursuant to the Factor L&C Agreement, the Company will pay Factor Limited approximately $0.2 million per month for the first twelve months, approximately $0.1 million per month for the first nine months toward patent costs, certain milestone payments, royalty payments on net sales of commercialized products and sublicensing fee payments.

 

 

Contingent Consideration

 

The Company has recorded a three-year contingent consideration liability related to an asset acquisition in April 2023. If during the three-year period since April 26, 2023, the Company’s market cap equals or exceeds $100 million for at least ten consecutive trading days, then the Company will issue to the seller shares of the Company’s common stock equal to (a) $2.0 million divided by (b) the quotient of $100 million divided by the number of the Company’s then issued and outstanding shares of common stock. If during that three-year period, the Company’s market cap equals or exceeds $200 million for at least ten consecutive trading days, then the Company will issue to the seller additional shares of the Company’s common stock equal to (a) $2.0 million divided by (b) the quotient of $200 million dividend by the number of the Company’s then issued and outstanding shares of common stock. As discussed in Note 9, the Company records the contingent consideration liability at its fair value, and as of December 31, 2025 the fair value of the liability was approximately $41,000. The contingent consideration obligation will expire on April 26,2026.

 

Retirement Savings Plan

 

The Company offers to its eligible employees a defined contribution plan, organized under Section 401(k) of the Internal Revenue Code, through its co-employment arrangement with its professional employer organization (“PEO”). Under this arrangement, the PEO serves as the plan sponsor and administrator. Eligible employees may defer up to 100% of their annual compensation or a specific amount imposed by the Internal Revenue Service, whichever is less. The Company matches employees’ contributions at a rate of 100% of the first 3% of the employee’s contribution and 50% of the next 2% of the employee’s contribution, for a maximum Company match of 4%. The Company matched less than $0.1 million towards employees’ 401k contributions for each of the years ended December 31, 2025 and 2024.