Item 1. Legal Proceedings
ITEM
1: LEGAL PROCEEDINGS
From
time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business.
As of the date of issuance, other than those described below, there were no pending or threatened legal proceedings that could reasonably
be expected to have a material effect on the results of the Company’s operations. There are also no proceedings in which any of
the Company’s directors, officers or affiliates is an adverse party to the Company or has a material interest adverse to the Company’s
interest. Legal fees are expensed as incurred.
On February 6, 2019, plaintiffs Ritu Bhambhani, M.D. and Sudhir Rao initiated a lawsuit against Innovative Health Solutions, Inc. and
others in the United States District Court for the District of Maryland, later as amended as the Third Amended Complaint (“Complaint”),
asserting claims under the RICO Act, as well as of fraudulent misrepresentation, intentional misrepresentation by concealment, and civil
conspiracy related to Medicare and insurance reimbursement of the Company’s NeuroStim device, seeking damages in excess of $5 million.
The Court granted the Company’s motion for summary judgment and dismissed the Complaint on June 14, 2022, and the Fourth Circuit Court
of Appeals affirmed the dismissal on June 3, 2024, with no further appeal sought by the plaintiffs.
On July 14, 2022, related entities owned or partially owned by the same plaintiffs Ritu Bhambhani, LLC; Box Hill Surgery Center, LLC;
Pain and Spine Specialists of Maryland, LLC; and SimCare ASC, LLC initiated a lawsuit against the Company and others in the United States
District Court for the District of Maryland (the “2022 Lawsuit”), asserting the same claims and seeking damages in excess
of $75,000. The Court dismissed the RICO claims on May 25, 2023, and the parties subsequently pursued mediation of the remaining claims.
On April 25, 2025, the parties reached a $750,000 settlement payable in 12 equal monthly installments beginning in January 2026, with
$375,000 remaining as of June 30, 2026.
In
January 2024, Dr. Arturo Taca asserted an interest in U.S. Patent No. 10,413,719 and sought compensation of approximately $2,000,000
based on his alleged contributions to certain neurostimulation technology. The Company disputes both the asserted ownership interest
and the related compensation claim and intends to defend the matter vigorously. Although the Company does not believe that a material
loss is probable, the matter remains in its early stages and the ultimate outcome cannot be predicted.
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