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NON-CONSOLIDATED JOINT VENTURE AND RELATED PARTY TRANSACTIONS
 3 Months Ended
Mar. 31, 2025
Related Party Transactions [Abstract]  
NON-CONSOLIDATED JOINT VENTURE AND RELATED PARTY TRANSACTIONS

NOTE 5 — NON-CONSOLIDATED JOINT VENTURE AND RELATED PARTY TRANSACTIONS

 

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 consulting agreement was extended for an additional period of eight years upon the closing of our initial public offering. The agreement was amended effective as of July 1, 2024 to expand the services. The two members of U.S. Asian are shareholders in the Company, including Marilyn Elson who is Nexalin’s Controller.

 

Pursuant to the consulting agreement, U.S. Asian provides consulting services to the Company with regard to, among other things, corporate development, financing arrangements and international operations. The Company was paying U.S. Asian $10,000 per month for services rendered pursuant to the consulting agreement. The amended agreement calls for a monthly fee of $16,667, a onetime stock grant and a semi-annual share award equal to $100,000 with the issuance and delivery of shares to take place following the termination of the consulting agreement. The company recorded $50,000 and $0 for the three months ended March 31, 2025 and 2024, respectively, of stock compensation related to the stock grant on the Company’s unaudited condensed consolidated statements of operations and comprehensive loss. The Company recorded consulting expenses related to the consulting agreement of $50,001 and $30,000 for the three months ended March 31, 2025 and 2024, respectively, on the Company's unaudited condensed consolidated statements of operations and comprehensive loss.

 

In 2024 Leonard Osser was issued 200,000 shares of Company stock as compensation for his 2024 services on the Advisory Board. The Company recorded $20,000 of stock compensation expense for each of the three months ended March 31, 2025 and 2024 respectively.

 

Officers

 

On July 1, 2023, the Company entered into a new employment agreement with Mark White to serve as Chief Executive Officer, a new services agreement with David Owens, M.D. to serve as Chief Medical Officer and a new employment agreement with Michael Nketiah to serve as Senior Vice President, Quality, Regulatory and Clinical Affairs. Each of the foregoing agreements are governed by three-year terms and provide compensation in the form of performance-and service-based stock option awards based on the closing price of the Company’s publicly traded common stock on the applicable date of grant. On July 29, 2024, Michael Nketiah submitted his resignation effective August 16, 2024.

 

Effective September 16, 2024, the Company entered into an agreement with Ms. Carolyn Shelton to serve as Senior Vice President, Quality, Regulatory and Clinical Affairs. Under the terms of her employment agreement, Ms. Shelton is entitled to nonqualified stock option grants to purchase 90,620 shares of the Company’s common stock with an exercise price of $.6621 per share, subject to certain time and performance-based vesting conditions.

 

Under the terms of his employment agreement, Mr. White is entitled to (i) a sign-on/retention bonus consisting of a one-time lump-sum payment of $50,000 and a grant of nonqualified stock options to purchase 1,387,024 shares of the Company’s common stock with an exercise price of $.894 per share subject to certain time and performance-based vesting conditions.

 

Under the terms of his service agreement, Dr. Owens is entitled to (i) a sign-on/retention bonus consisting of a grant of nonqualified stock options to purchase 654,362 shares of the Company’s common stock with an exercise price of $.894 per share subject to certain time and performance-based vesting conditions. The 2023 performance-based milestones regarding Dr. Owen’s incentive compensation have been met for 2023, and he was awarded 271,454 nonqualified stock options with a vesting date of July 1, 2024. The 2024 performance-based milestones regarding Dr. Owen’s incentive compensation have been met for 2024, and he was awarded 271,454 nonqualified stock options with a vesting date of July 1, 2025. Dr. Owens was awarded an additional 125,000 vested options exercisable at $2.95.

 

Under the terms of his employment agreement Mr. Nketiah was entitled to nonqualified stock option grants to purchase 100,671 shares of the Company’s common stock with an exercise price of $.894 subject to certain time and performance-based vesting conditions.

 

In addition to the retention payments, stock awards and nonqualified option grants described above, Messrs. White and Nketiah are receiving cash compensation and each of Messrs. White and Nketiah are eligible for performance-based cash bonuses. The 2023 performance-based milestones regarding Mr. White’s incentive compensation have been met for 2023, and he was awarded a cash bonus of $120,000 and 313,199 nonqualified stock options with a vesting date of July 1, 2024. The 2024 performance-based milestones regarding Mr. White’s incentive compensation have been met for 2024, and he was awarded a cash bonus of $220,000 and 313,199 nonqualified stock options with a vesting date of July 1, 2025. The 2023 performance-based milestones regarding Mr. Nketiah’s incentive compensation were met for 2023, and he was awarded a cash bonus of $50,000 and 33,557 nonqualified stock options with a vesting date of July 1, 2024.

 

The reported amounts are calculated in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 718, “Compensation — Stock Compensation (“ASC 718”). ASC 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions, such as the options issued under our 2023 Plan.

 

Leases

 

Our principal executive office is located at 1776 Yorktown, Suite 550, Houston, Texas 77056. Under ASC 842 “Leases”, we have two separate sub-leases (through IIcom Strategic Inc. controlled and owned by our Chief Executive Officer) totaling approximately 4,000 square feet of office space under operating leases. Management and supporting staff are hosted at this location. Our lease costs for each of the three months ended March 31, 2025 and 2024 were $14,050 and $13,500. The initial sub-leases expired in January of 2024. The Company has entered into a new one year sublease for 4,000 square feet of office space under an operating lease. Pursuant to the sublease, the Company pays and will pay the third party landlord (not the sub landlord) all direct and indirect rent costs under the primary lease directly for the leased premises. No additional payments are made to the Chief Executive Officer or the entity controlled by him.