| Summary of Significant Accounting Policies | NOTE
3 – Summary of Significant Accounting Policies Management’s
Use of Estimates The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Segment
Information Operating
segments are components of an enterprise for which separate financial information is available and are evaluated regularly by the Company’s
chief operating decision maker in deciding how to allocate resources and assessing performance. The Company’s chief operating decision
maker is its Chief Executive Officer. The Company’s Chief Executive Officer views the Company’s operations and manages its
business in one operating segment, which is the business of development and commercialization of products related to comprehensive neuromodulation
cEEG and sEEG recording, monitoring, ablation, and brain stimulation solutions. Accordingly, the Company has a single reporting segment. Cash
and Cash Equivalents The
Company considers all highly liquid investments with an original contractual maturity on date of purchase of less than or equal to three
months to be classified and presented as cash equivalents on the condensed balance sheets. Cash equivalents are stated at cost, which
approximates fair value. The Company’s cash and cash equivalents may include demand deposit accounts with large financial institutions,
institutional money market funds, U.S. Treasury securities, and corporate notes and bonds. The Company monitors the creditworthiness
of the financial institutions, institutional money market funds, and corporations in which the Company invests its surplus funds. The
Company has experienced no credit losses from its cash and cash equivalent investments. Short-Term
Investments The
Company has periodically invested its excess cash in U.S. Treasury securities and highly rated corporate securities. The Company has
held these investments to maturity. Securities with original maturity dates of more than three months were reported as held-to-maturity
investments and were recorded at amortized cost, which approximated fair value due to the negligible risk of changes in value due to
interest rates. There were no short-term investments outstanding as of December 31, 2023 and September 30, 2023. Revenue
Recognition The
Company entered into a development and distribution agreement which has current and future revenue recognition implications. See “Note
7 – Zimmer Development Agreement.” In
determining the appropriate amount of revenue to be recognized as it fulfills its obligations under its agreements, the Company performs
the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised
goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement
of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance
obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. A performance obligation is a promise in a contract to transfer a distinct
good or service to the customer and is the unit of account in Accounting Standards Codification (“ASC”) Topic 606 (“ASC
606”). Performance obligations may include license rights, development services, and services associated with regulatory submission
and approval processes. Significant management judgment is required to determine the level of effort required under an arrangement and
the period over which the Company expects to complete its performance obligations under the arrangement. If the Company cannot reasonably
estimate when its performance obligations are either completed or become inconsequential, then revenue recognition is deferred until the
Company can reasonably make such estimates. Revenue is then recognized over the remaining estimated period of performance using the cumulative
catch-up method. Product
Revenue Revenues
from product sales are recognized when control of the promised goods or services is transferred to the Company’s customers, in
an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. At the inception
of each customer contract, performance obligations are identified and the total transaction price is allocated to the performance obligations. Cost
of Product Revenue Cost
of product revenue consists of the manufacturing and materials costs incurred by the Company’s third-party contract manufacturer
in connection with the Company’s strip and grid cortical electrodes (the “Strip/Grid Products”), depth electrodes (“sEEG
Products) and outside supplier materials costs in connection with the electrode cable assembly products (“Electrode Cable Assembly
Products”). In addition, cost of product revenue includes royalty fees incurred in connection with the Company’s license
agreements. Collaborations
Revenue As
part of the accounting for collaboration arrangements, the Company must develop assumptions that require judgment to determine the stand-alone
selling price of each performance obligation identified in the contract. The Company uses key assumptions to determine the stand-alone
selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates
and probabilities of technical and regulatory success. The Company allocates the total transaction price to each performance obligation
based on the estimated relative standalone selling prices of the promised goods or service underlying each performance obligation. Licenses
of intellectual property Milestone
payments Royalties Fair
Value of Financial Instruments The
Company’s accounting for fair value measurements of assets and liabilities that are recognized or disclosed at fair value in the
financial statements on a recurring or nonrecurring basis adheres to the Financial Accounting Standards Board (“FASB”) fair
value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements
involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
● Level 1 Inputs: Unadjusted
quoted prices in active markets for identical assets or liabilities accessible to the Company at the measurement date.
● Level 2 Inputs: Other than
quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially
the full term of the asset or liability.
● Level 3 Inputs: Unobservable
inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing
for situations in which there is little, if any, market activity for the asset or liability at the measurement date. As
of December 31, 2023 and September 30, 2023, the fair values of cash, cash equivalents, accounts receivable, inventory, prepaids and
other assets, accounts payable and accrued expenses and other liabilities approximated their carrying values because of the short-term
nature of these assets or liabilities. There
were no transfers between fair value hierarchy levels during the three months ended December 31, 2023 and 2022. Intellectual
Property The
Company has entered into two licensing agreements with major research institutions, which allow for access to certain patented
technology and know-how. Payments under those agreements are capitalized and amortized to selling, general and administrative expense
over the expected useful life of the acquired technology. Property
and Equipment Property
and equipment is recorded at cost and reduced by accumulated depreciation. Depreciation expense is recognized over the estimated useful
lives of the assets using the straight-line method. The estimated useful life for equipment and furniture ranges from three to seven
years. Tangible assets acquired for research and development activities and that have alternative use are capitalized over the useful
life of the acquired asset. Estimated useful lives are periodically reviewed, and, when appropriate, changes are made prospectively.
Software purchased for internal use consists primarily of amounts paid for perpetual licenses to third-party software providers and installation
costs. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be
performed on the recoverability of the carrying amounts. Maintenance and repairs are charged directly to expense as incurred. Impairment
of Long-Lived Assets The
Company evaluates its long-lived assets, which consist of licensed intellectual property, property and equipment and right-of-use assets
for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. The
Company assesses the recoverability of long-lived assets by determining whether or not the carrying value of such assets will be recovered
through undiscounted expected future cash flows. If the asset is considered to be impaired, the amount of any impairment is measured
as the difference between the carrying value and the fair value of the impaired asset. Accounts
Receivable and Allowances for Doubtful Accounts The
Company records a provision for doubtful accounts, when appropriate, based on historical experience and a detailed assessment of the
collectability of its accounts receivable. In estimating the allowance for doubtful accounts, the Company considers, among other factors,
the aging of the accounts receivable, its historical write-offs, the credit worthiness of each customer, and economic conditions that
could affect the collectability of the balances in the future. Account balances are charged off against the allowance when the Company
believes that it is probable that the receivable will not be recovered. Actual write-offs may be in excess of the Company’s estimated
allowance. The Company has not incurred any bad debt expense to date and no allowance for doubtful accounts has been recorded during
the periods presented. Inventory Inventory
is stated at the lower of cost (using the first-in, first-out “FIFO” method) or net realizable value. The Company calculates
inventory valuation adjustments for excess and obsolete inventory, when appropriate, based on current inventory levels, movement, expected
useful lives, and estimated future demand of the products and spare parts. The Company’s inventory is currently comprised of Strip/Grid
Products, sEEG and electrode cable assembly work-in-process and finished good product. The Strip/Grid Products and sEEG Products are
produced by a third-party contract manufacturer and the Electrode Cable Assembly Products are obtained from outside suppliers. No inventory
valuation allowance was required during the periods presented. Research
and Development Costs Research
and development costs are charged to expense as incurred. Research and development expenses comprise of costs incurred in performing
research and development activities , including compensation and benefits for research and development employees (including stock-based
compensation), overhead expenses, cost of laboratory supplies, clinical trial and related clinical manufacturing expenses, costs related
to regulatory operations, fees paid to consultants and other outside expenses. Non-refundable advance payments for goods and services
that will be used in future research and development activities are expensed when the activity is performed or when the goods have been
received, rather than when payment is made, in accordance with ASC 730, Research and Development Selling,
General and Administrative Selling,
general and administrative expenses consist primarily of personnel-related costs including stock-based compensation for personnel in
functions not directly associated with research and development activities. Other significant costs include legal and litigation costs
relating to corporate matters, intellectual property costs, professional fees for consultants assisting with regulatory, clinical, product
development, financial matters and sales and marketing in connection with the commercial sales of the Company’s products. Stock-Based
Compensation The
Company accounts for stock-based compensation in accordance with the provisions of ASC 718, Compensation — Stock Compensation
Income
Taxes Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax base and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets
are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. Net
Loss Per Share Basic
loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding
during the period. Diluted
earnings or loss per share of common stock is computed similarly to basic earnings or loss per share except the weighted average shares
outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents, if dilutive. The Company’s
warrants, stock options, and restricted stock units while outstanding are considered common stock equivalents for this purpose. Diluted
earnings or loss per share of common stock is computed utilizing the treasury method for the warrants, stock options and restricted stock
units. No incremental common stock equivalents were included in calculating diluted loss per share because such inclusion would be anti-dilutive
given the net loss reported for the three months ended December 31:
2023 2022
Warrants 5,143,293 7,103,344
Stock options 2,814,096 1,313,646
Restricted stock units 355,691 392,500
Unissued vested restricted stock units — 7,322 Recent
Accounting Pronouncements In
November 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07 - Segment Reporting (Topic 280): Improvements
to Reportable Segment Disclosures In
December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures In
June 2016, the FASB issued Accounting Standards Update 2016-13, “ Financial Instruments – Credit Losses” |
