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Commitment and Contingencies
6 Months Ended
Jun. 30, 2021
Commitments and Contingencies Disclosure [Abstract]  
Commitment and Contingencies

Note 5 — Commitment and Contingencies

 

Legal Proceedings

 

In November 2020, a stockholder of the Company, on behalf of himself and other similarly situated stockholders, filed a complaint in the Delaware Court of Chancery alleging broker non-votes were not properly counted in accordance with the Company’s bylaws at the Company’s Annual Meeting of Stockholders on July 24, 2020, and, as a result, asserted certain matters deemed to have been approved were not so approved (including matters relating to the increase in the size of the 2014 Equity Plan and the ESPP). The relief sought under the complaint includes certain corrective actions by the Company, but does not seek any specific monetary damages. The Company does not believe it is clear the prior approval of these matters is invalid or otherwise ineffective. However, to avoid any uncertainty and the expense of further litigation, on January 5, 2021, the Company’s Board of Directors determined it would be advisable and in the best interests of the Company and its stockholders to re-submit these proposals to the Company’s stockholders for ratification and/or approval. In this regard, the Company held a special meeting of stockholders on March 4, 2021, at which such matters were ratified and approved. The parties have reached agreement on a proposed term sheet to settle the complaint, the terms of which do not contemplate payment of monetary damages to the putative class in the proceeding. The settlement of the complaint is pending and is subject to court approval.

 

On December 23, 2020, Benchmark Investments, Inc. filed a complaint against the Company in the U.S. District Court of the Southern District of New York alleging the registered direct offerings of shares of common stock of the Company completed in December 2020 were in violation of provisions set forth in an engagement letter between the Company and the plaintiff. The plaintiff is seeking monetary damages of up to $1.3 million. The Company disagrees with the allegations set forth in the complaint and intends to vigorously contest the complaint.

 

In the ordinary course of our business, particularly as it begins commercialization of its products, the Company may be subject to certain other legal actions and claims, including product liability, consumer, commercial, tax and governmental matters, which may arise from time to time. Except as otherwise noted herein, the Company does not believe it is currently a party to any other pending legal proceedings. Notwithstanding, legal proceedings are subject-to inherent uncertainties, and an unfavorable outcome could include monetary damages, and excessive verdicts can result from litigation, and as such, could result in a material adverse impact on the Company’s business, financial position, results of operations, and /or cash flows. Additionally, although the Company has specific insurance for certain potential risks, the Company may in the future incur judgments or enter into settlements of claims which may have a material adverse impact on the Company’s business, financial position, results of operations, and /or cash flows.

 

Patent License Agreement – Case Western Reserve University

 

The patent license agreement between the Company’s majority-owned subsidiary Lucid Diagnostics Inc. and Case Western Reserve University - the “CWRU License Agreement” - requires Lucid Diagnostics Inc. to pay a minimum annual royalty of a percentage of recognized net sales revenue resulting from the commercialization of the products and /or services developed using the CWRU License Agreement licensed intellectual property, with the minimum amount of royalty payments based on net sales of such products and services, if any. To-date, no such contractual minimum annual royalty payment has been required.

 

Additionally, the CWRU License Agreement contains each of: certain regulatory milestones with respect to FDA submissions and clearances; and a commercialization milestone with respect to a first sale of a product or service, each within a contractually proscribed period of time from the May 12, 2018 effective date of the CWRU License Agreement. If Lucid Diagnostics Inc. did not achieve one of the regulatory milestones and the commercialization milestone, then CWRU had the right, in its sole discretion, to require PAVmed Inc. to transfer to CWRU 80% of the shares of common stock of Lucid Diagnostics Inc. then held by PAVmed Inc. Lucid diagnostics Inc. has achieved the requisite milestones in accordance with the timing specified by the CWRU License Agreement.

 

Lucid Diagnostics Inc. entered into the EsoGuard Commercialization Agreement with ResearchDX Inc. (“RDx”), effective August 1, 2021, providing for RDx to license from Lucid Diagnostics Inc. its proprietary EsoGuard assay. The EsoGuard Commercialization Agreement provides for RDx to pay a minimum monthly fee to Lucid Diagnostics Inc., with such fee payment subject-to the royalty payment requirements of the CWRU License Agreement. The EsoGuard Commercial Agreement initial term is on a month-to-month basis, and may be terminated by either party thereto, with or without cause, upon forty-five (45) days prior written notice.