Commitments and Contingencies

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

9.  Commitments and Contingencies

Sales Representative Agreement

In April 2020, the Company entered into an Exclusive Sales Representative Agreement, under which the counterparty to the agreement (the “Representative”) received exclusive rights to market, promote, and distribute The Catamaran System in the United States and Puerto Rico. The agreement is for an initial period of five years, and automatically renews for an additional five years unless written notice is given by either party prior to April 27, 2023. The agreement provides for a bonus to be paid to the Representative upon an acquisition or IPO. In May 2021 the Company entered into an Amended and Restated Exclusive Sales Representative Agreement. In connection with the amended agreement, the Company paid $500 cash and issued 53,757 shares of common stock to the Representative, for which the Company recorded a combined total of approximately $880 as sales and marketing expense. In addition, the Representative received anti-dilution protections to maintain ownership of 3.0% of the fully diluted equity of the Company through the date of an initial public offering. In October, 2021, the Company issued 44,447 shares with a fair value of approximately $333 to the Representative in accordance with the anti-dilution provision. The amended agreement restructured the calculation of the bonus paid to the Representative upon an acquisition, removed the bonus payable upon an IPO, and allows the Company to terminate the amended agreement as long as the bonus paid to the Representative is at least $6,000.

In June 2021, the Company issued a $50 convertible note payable to the Chief Executive Officer of the Representative, as part of the convertible debt offering described in Note 6.

Litigation

In the normal course of business, the Company may possibly be named as a defendant in various lawsuits.

On September 2, 2021, Khalid Mentak, a former director and Chief Executive Officer of the Company filed an arbitration claim with the American Arbitration Association (“AAA”) against the Company, asserting damages in excess of $3,000, plus attorneys’ fees and other costs, for alleged unpaid wages, defamation, and other claims. The services provided by Mr. Mentak were governed by a Consulting Agreement between the Company and Key Medical Technologies, Inc (“Key Medical”), a company which Mr. Mentak served as Chief Executive Officer. The AAA proceeding was also initiated pursuant to the arbitration provision in the Consulting Agreement. The parties selected an arbitrator and the Company filed a motion to dismiss the proceeding as currently pled because the proper parties should be Key Medical and the Company, and not Mr. Mentak as an individual. The arbitrator ruled that Mr. Mentak was the real-party-in-interest and denied the motion, without prejudice to any arguments on the merits of the underlying claims. On March 1, 2022, Mr. Mentak filed a more detailed Statement of Claims, which the Company responded to on March 16, 2022. The Company also filed a cross-complaint for declaratory relief seeking to establish its rights and obligations under the Consulting Agreement with respect to the claimant and Key Medical, which was formally named a defendant in the cross complaint. The claimant objected to the cross-complaint as unnecessary. On July 21, 2022, the Company entered into a Settlement Agreement and General Release of All Claims (the “Settlement Agreement”) with Key Medical and Mr. Mentak to settle all claims and counterclaims. Pursuant to the Settlement Agreement, the Company has agreed to pay Key Medical the total sum of $1,200. The Company recorded an additional charge of $574 in the second quarter of 2022 for this settlement. The full settlement amount was fully accrued as of June 30, 2022.