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NON-CONSOLIDATED JOINT VENTURE AND RELATED PARTY TRANSACTIONS | 9 Months Ended
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Sep. 30, 2022
Related Party Transactions [Abstract] |
NON-CONSOLIDATED JOINT VENTURE AND RELATED PARTY TRANSACTIONS | NOTE 6 — NON-CONSOLIDATED JOINT VENTURE AND RELATED PARTY TRANSACTIONS Potential Joint Venture On September 21, 2018, the Company entered into the first of a series of agreements providing for the establishment of a joint venture agreement (the “JV Agreement”) with Wider Come Limited, a China company (“Wider”) for the purpose of marketing, sale and distribution of the Company’s proprietary devices for the treatment of (i) anxiety, depression and insomnia (“ADI”) and (ii) Alzheimer’s and dementia (“AD”) in the applicable territories. Wider has an experienced medical technology team in China and when formed, the Joint Venture will design and implement a comprehensive business model and distribution plan for our devices in China, Hong Kong, Macau and Taiwan. The Joint Venture will be formed following the completion of certain funding, clinical study, and publication milestones, which Wider has agreed to undertake but not yet completed. Following its formation, the Joint Venture will design and implement a comprehensive business model and distribution plan for our devices in China, Hong Kong, Macau and Taiwan. The first phase of distribution in China includes implementation of a sales strategy by Wider for mainland China and other territories serviced by Wider. As originally contemplated, each of the parties to the joint venture would hold a 50% interest in the equity, profits and losses, shareholder voting, management control and rights to use production capacity of the facility. The Company will provide a global exclusive technology license for ADI treatment to the JV and Wider will contribute funding for the design and execution of Company approved clinical studies, which we had estimated at the time of our initial public offering would have cost the Company approximately $4,800,000 if the clinical studies had been undertaken by us in the United States. The Company will also provide the Joint Venture (the “JV”) with a license for exclusive distribution of its technology for the treatment of ADI in additional territories. The JV, if completed, will be controlled by an equally represented Board of Directors in which neither entity has sole decision-making ability over day-to-day or significant operational decisions. As of September 30, 2022, the joint venture has not been established. On May 22, 2019, the Company entered into a supplementary agreement to the JV Agreement (the “Supplementary Agreement”). At the time of the May, 2019 Supplementary Agreement, the parties desired to expand the scope of the Joint Venture to include and address the pain management opportunities for our devices and technology. Pursuant to the Supplementary Agreement, Wider was to fund the JV within thirty days of execution of the JV Agreement with $600,000 in cash to be used for clinical trials and other activities related to pain management utilization of our devices and technology in China. Within thirty days of the funding, the Company was to issue 5% of the Company in non-diluted common stock to Wider’s shareholders. As of the date of this report the JV has yet to be formally established and therefore the $600,000 has not been funded. Further, the parties have determined not to proceed with the pain management scope of the Joint Venture and have decided to terminate the May, 2019 Supplementary Agreement. The parties may elect to proceed with a similar arrangement in the future. On April 6, 2020, the Company entered into a three-year service agreement with Wider, pursuant to which Wider agreed to perform clinical trials associated with the formation of the JV. In consideration, the Company and certain designated Wider shareholders entered into stock issuance agreements for the issuance of 450,000 shares of the Company’s common stock, and simultaneously with the execution of this service agreement, Wider contributed $200,000 to the Company. During the year ended December 31, 2020, the Company issued 150,000 shares to affiliates of Wider in satisfaction of the obligation. The fair value of the 150,000 shares issued (less the contributed $200,000 in cash) resulted in a charge to stock-based compensation of $550,000 and is recorded in selling, general and administrative expenses on the statement of operations. The remaining 300,000 shares will be issued in accordance with the following schedule upon Wider’s successful completion of the following milestones (i) 50% upon successful completion of the fourth of four clinical trials pursuant to the terms and conditions of the service agreements and (ii) 50% upon all four trials being submitted for publication in international medical journals satisfactory to the Company. As of December 31, 2021 and September 30, 2022, these milestones have not been met. In March 2022, we entered into a second supplement to the Joint Venture agreement with Wider, whereby the parties confirmed that the Joint Venture had not yet been established and is subject to further review and analysis of regulatory issues in China and the United States, trade and political issues between the two countries and potential changes in the use and market for the Company’s products and technology. Pursuant to the second supplement, the parties agreed to use their commercial efforts to complete documentation by September 30, 2022. Wider has continued its work with respect to undertaking and establishing clinical trials. In light of general economic conditions in China and the United States and the continued impact of regulatory issues in China and the United States and trade and political issues between the two counties, the parties determined to further extend the time frame to complete establishment of the joint venture to September 30, 2023 and entered into a supplement 3 to the Joint Venture Agreement to memorialize such extension. The parties intend to continue to work together to complete the establishment prior to such extended time, however, the ramifications of continued COVID pandemic, especially in China, and the China government’s regulatory approaches to the pandemic have adversely affected Wider’s ability to distribute our current products. As a result, the Joint Venture may be further delayed or we and Wider may determine to re-structure the business terms (which changes may include timing and the scope of the intended operations and trial studies) of the proposed joint venture During the nine months ended September 30, 2022 and 2021, the Company recorded $1,183,367 and $26,132 in revenue, respectively, from Wider on the unaudited condensed consolidated statements of operations. At September 30, 2022 there was $6,912 in accounts receivable attributable to Wider. During the three months ended September 30, 2022 and 2021, the Company recorded $520,000 and $26,132 in revenue, respectively, from Wider on the unaudited condensed consolidated statements of operations. U.S. Asian Consulting Group, LLC On May 9, 2018, the Company entered into a five-year consulting agreement with U.S. Asian Consulting Group, LLC (“U.S. Asian”). The two members of U.S. Asian are shareholders in the Company and include Marilyn Elson who is the Chief Financial Officer of the Company. Pursuant to the consulting agreement, U.S. Asian will provide consulting services to the Company with regards to, among other things, corporate development and financing arrangements. The Company is to pay U.S. Asian $10,000 per month for services rendered and, on October 24, 2018, the Company issued 249,750 shares of the Company’s common stock to U.S. Asian. The Company recorded consulting expenses related to the consulting agreement of $90,000 and $90,000 for the nine months ended September 30, 2022 and 2021, respectively, on the Company’s unaudited condensed consolidated statements of operations. The Company recorded consulting expenses related to the consulting agreement of $30,000 and $30,000 for the three months ended September 30, 2022 and 2021, respectively. At September 30, 2022 and December 31, 2021, U.S. Asian was owed $250,000 and $399,320, respectively, for accrued and unpaid services and expenses. With respect to the amount owed, U.S. Asian has agreed to defer payment of $250,000 until December 15, 2022. Pursuant to the consulting agreement, U.S Asian’s shares in the Company consist of an anti-dilution provision whereas U.S. Asian’s security holdings, during the term of the consulting agreement, shall remain at 10% of the Company’s total number of issued and outstanding shares of the Company’s common stock, on a fully diluted basis. In March 2021, the Company entered into an agreement with U.S. Asian pursuant to which U.S. Asian waived and relinquished any rights of protection against dilution afforded to it, provided such dilution results from a transaction that (i) imputes a pre-money valuation to the Company of not less than $7 million, (ii) raises not less than $7 million, and (iii) imputes a post-money valuation to the Company of not less than $25 million. Pursuant to the agreement, upon closing of the Initial Public Offering, the consulting agreement is extended to May 2031. In exchange for the waiver and relinquishment of such rights, the Company issued shares of the Company’s common stock in an amount sufficient for U.S. Asian (together with its owners) to own an aggregate amount of fifteen (15%) percent of the Company’s issued and outstanding shares of common stock as of the date of issuance. On June 22, 2021, the Company issued 304,570 shares of common stock in satisfaction of the waiver (See Note 8). On November 29, 2021, the Company issued an additional 217,500 shares of common stock, with a fair value of $5.00 per share, in satisfaction of the waiver (see Note 8). In August 2022 the Company issued an additional 17,699 shares of common stock in full satisfaction of the waiver. On December 22, 2021, the Company entered into a one-year agreement with Leonard Osser to serve on the Company’s Board of Advisors. The agreement may be extended for an additional one-year term upon agreement of both parties. As consideration, the Company will issue $80,000 in shares of the Company’s common stock to Mr. Osser (see Note 8 — Stockholders’ Equity (Deficit) — Shares To Be Issued). As of September 30, 2022, these shares have yet to be issued. On January 11, 2022, the Company entered into an employment agreement with Marilyn Elson to serve as Chief Financial Officer of the Company for a three-year term with an option for the Company and Ms. Elson to extend the term for an additional two years. Loan Payable – Officer On November 1, 2021, the Company received $200,000 from the Company’s Chief Executive Officer. The loan has a principal of $200,000, an interest rate of 9%, and a maturity date of the earlier of (i) October 31, 2022 or (ii) the date of the consummation of the initial public offering. Total interest expense on this note was $4,500 and $13,500 for the three and nine months ended September 30, 2022. Total interest expense on this note was $0 and $0 for the three and nine months ended September 30, 2021. There was $200,000 outstanding at September 30, 2022 and December 31, 2021, respectively. With respect to the amount owed under this loan, the Company’s Chief Executive Officer has agreed to defer payment until December 15, 2022. Promissory Notes On October 19, 2018, the Company issued an on demand promissory note payable with the Company’s Chairman of the Board for $10,000 with interest to begin accruing on January 1, 2020 at 5% per annum. On September 28, the Company’s Chairman of the Board waived the accrued interest of $2,718 which amount is reflected as Additional Paid in Capital. The note was paid in full as of September 30, 2022. Total interest expense on this note was $369 and $1,110 for the nine months ended September 30, 2022 and 2021, respectively. Total interest expense on this note was $119 and $370 for the three months ended September 30, 2022 and 2021, respectively.

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