NEONC TECHNOLOGIES HOLDINGS, INC. Commitments Disclosure

Note 10 – Commitments and Contingencies

 

Line of Credit Commitment – Related Party

 

On October 11, 2024, the Company entered into a Line of Credit Agreement (“the Agreement”) with HCWG for borrowings of up to $10.0 million. Borrowings under the Line of Credit Agreement bear interest at 10.0% per annum and increases to 14% if the Agreement is extended. Interest payments are due on the first business day of each calendar month and the unpaid principal is due on October 12, 2027. No amounts have been borrowed under the facility through December 31, 2025.

 

In connection with the agreement, the Company issued HCWG five-year warrants to purchase up to 312,500 shares of our common stock at an exercise price of $12.00 per share. These warrants expire on October 23, 2029. As of December 31, 2024, there were 312,500 warrants issued, outstanding and fully vested. In March 2025, 162,500 warrants were exercised in a cashless exercise, resulting in the issuance of 162,500 shares of common stock. At December 31, 2025, there are 150,000 shares of common stock remaining available to be purchased under the warrant.

 

The fair value of the warrants on the grant date was determined using the Black-Scholes valuation model, with the following key assumptions:

 

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Fair value of common stock: $12.00

 

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Expected volatility: 86%

 

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Risk-free interest rate: 4.82%

 

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Expected Term: 2.5 years

 

The fair value of warrants at inception was $2,015,413, which was recorded as additional paid-in capital on the consolidated statements of changes in stockholders’ deficit for the year ended December 31, 2024, and as debt issuance costs on the consolidated balance sheets. The debt issuance costs are being amortized over the term of the line of credit and amounted to $671,804 and $145,097 for the years ended December 31, 2025 and 2024, respectively. At December 31, 2025 and 2024, unamortized debt issuance costs total $1,198,505 and $1,870,316, respectively, which will be amortized through October 2027.

 

Litigation

 

From time to time, the Company is involved in various disputes, claims, liens and litigation matters arising out of the normal course of business which could result in a material adverse effect on the Company’s combined financial position, results of operations or cash flows. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that liability has been incurred, and the amount of the assessment can be reasonably estimated. As of December 31, 2025 and 2024, the Company had no liabilities recorded for loss contingencies, except as below.

 

License Agreement – Orient EuroPharma Co., Ltd.

 

On November 8, 2013, the Company entered into a collaboration agreement (“Agreement”) with Orient EuroPharma Co., Ltd. (“OEP”), pursuant to which the parties will develop certain licensed products defined in the Agreement. NeOnc will license OEP the right to commercialize the Company’s drug NEO100, a highly purified form of perillyl alcohol (“Licensed Product”), in the territories specified in the license agreement (“Territory”).

 

In 2023, the Company sent notice to OEP indicating their intent to terminate the Agreement with OEP, after which OEP threatened litigation. On February 15, 2024, OEP and the Company entered into a settlement agreement whereas the Company and OEP terminated the Agreement in exchange for a payment in the amount of $4,000,000 payable by the Company to OEP within ten days of the date the Company completes its initial public offering. The settlement agreement provides for interest accruing on the unpaid balance. The Company has a litigation settlement payable of $4,170,000 and $4,000,000 in the accompanying consolidated balance sheets as of December 31, 2025 and 2024, respectively. As of the date of this filing, the Company has not paid the litigation settlement amount.

 

Other Litigation

 

On June 6, 2023, a vendor filed a complaint against the Company for breach of contract in the Central District of California. The vendor alleged that the Company improperly terminated an Intellectual Property License and Supply Agreement (“IPLSA”) and that the Company also defrauded the vendor in connection with IPLSA. This matter was settled on October 16, 2023, and the Company agreed to pay the vendor $600,000 within 5 business days of the close of the date that the Company completes an IPO or March 31, 2024, whichever occurs first. The Company has a litigation settlement payable in the accompanying consolidated balance sheets at December 31, 2025 and 2024. As of the date of this filing, the Company has not paid the litigation settlement amount.

 

On March 31, 2024, a vendor agreed to extend the payment until May 15, 2024 for payment of an additional $25,000, payable on demand. On July 25, 2024, the arbitrator granted the implementation of interest at the statutory rate on the unpaid balance commencing May 15, 2024 until paid, therefore an additional $41,250 and $85,809 of interest expense is recognized in the accompanying consolidated statements of operations during the years ended December 31, 2025 and 2024, respectively. At December 31, 2025 and December 31, 2024, an aggregate of approximately $122,059 and $41,250 of accrued interest is included in litigation settlement payable in the accompanying consolidated balance sheet.