Related Party Transactions

6 Months Ended

Jun. 30, 2023

Related Party Transactions [Abstract]

Related Party Transactions

Note 10 — Related Party Transactions

The Company originally engaged the CEO, who was also the Board Chairman and prior to the close of the IPO, sole common stockholder of the Company, pursuant to a consulting agreement commencing October 22, 2018, which called for the Company to pay for consulting services performed on a monthly basis. Upon the close of the Company’s IPO, the consulting agreement was terminated and the CEO’s employment agreement became effective. During the six months ended June 30, 2022, the Company incurred approximately $63,000 in fees under the consulting agreement, which is recognized in general and administrative expenses in the accompanying condensed statement of operations.

During 2022 the Company entered into a lease agreement that was personally guaranteed by the Company’s CEO. The lease expired on April 30, 2023 (see Note 9).

During the year ended December 31, 2022, the Company’s compensation committee approved one-time bonus awards of $140,000 and $100,000 to the Company’s CEO and Chief Business Officer (“CBO”), respectively, in recognition of their efforts in connection with the Company’s IPO. These bonuses were recognized during the six months ended June 30, 2022, as general and administrative expenses in the accompanying condensed statement of operations.

As of June 30, 2023, the Company has a receivable from related parties of approximately $325,000, net of a reserve of $422,000, of which approximately $315,000 and $10,000 consists primarily of miscellaneous payments made by the Company on the behalf of the Company’s former CEO and CBO, respectively. Subsequent to June 30, 2023, the Company’s Audit Committee completed a review of the Company’s expenses due to certain irregularities identified with regards to the related party balance. Based on the results of the review, it was determined that the Company paid and recorded within selling, general and administrative expense personal expenditures of the Company’s former CEO and an accounting employee, during 2022 and the first and second quarter of 2023. The $422,000 reserve associated with the related party receivable represents the total of the items identified as personal in nature for which the Company does not anticipate recovery from the related party. The Company concluded that the amounts are not likely to be recovered and as a result would not cause an adjustment to previously issued financial statements.

Further, the credit card misuse described above resulted in a loss on related party receivable of approximately $79,000 and $165,000 during the three and six months ended June 30, 2023, respectively, which was recorded in selling, general, and administrative expenses in the accompanying statements of operations. Subsequent to June 30, 2023, the former CEO repaid the balance of $315,000, which is net of the reserve of $422,000 on related party receivable, and the CBO repaid her balance in full.

As of December 31, 2022, the Company had a receivable from related party of approximately $36,000, consisting of miscellaneous payments made by the Company on the behalf of the Company’s CEO, and which was paid in full during the first quarter of 2023.

A former director of the Company, who currently serves on the Company’s Scientific Advisory Board, serves on the Advisory Board for the Cincinnati Children’s Hospital Medical Center Innovation Fund, which is affiliated with CHMC. The Company has an exclusive license agreement with CHMC as disclosed in Note 6. This director resigned from the Board upon the close of the IPO, and also resigned from the Scientific Advisory Board on August 28, 2023.