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Related Party Transactions
 9 Months Ended
Sep. 30, 2021
Related Party Transactions [Abstract]  
Related Party Transactions

Note 4 — Related Party Transactions

 

Case Western Reserve University and Physician Inventors - CWRU License Agreement

 

Case Western Reserve University (“CWRU”) and each of the three physician inventors of the intellectual property licensed under the CWRU License Agreement (“Physician Inventors”) each hold equity ownership minority interests in Lucid Diagnostics Inc. The expenses incurred with respect to the CWRU License Agreement and the three Physician Inventors, as classified in the accompanying unaudited condensed consolidated statement of operations for the periods indicated are summarized as follows:

 

  

For the three months ended

September 30,

  

For the nine months ended

September 30,

 
   2021   2020   2021   2020 
Cost of Revenue                
CWRU – Royalty Fee  $10,000   $—   $10,000   $— 
                     
General and Administrative Expense                    
CWRU – License Agreement - Amendment Fee -
Milestone III		   10,000    —    10,000    — 
Stock-based compensation expense – Physician Inventors’ restricted stock awards   273,000    —    637,000    — 
                     
Research and Development Expense                    
CWRU License Agreement - reimbursement of patent legal fees   82,400    79,497    195,363    138,381 
EsoCheck devices provided to CWRU   —    —    —    14,941 
Fees - Physician Inventors’ consulting agreements   8,035    20,455    21,950    73,875 
Stock-based compensation expense – Physician Inventors’ stock options   55,455    5,750    113,584    17,250 
Total Related Party Expenses  $438,890   $105,702   $987,897   $244,447 

 

See Note 3, Patent License Agreement – Case Western Reserve University, for a discussion of: the Amended CWRU License Agreement; and the consulting agreements with the Physician Inventors; and Note 9, Stock-Based Compensation, for information regarding each of the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan and the separate PAVmed Inc. 2014 Long-Term Incentive Equity Plan, including the stock-based equity awards granted to the Physician Inventors.

 

 

Note 4 — Related Party Transactions - continued

 

PAVmed Inc. - Management Services Agreement

 

The daily operations of Lucid Diagnostics Inc. are managed by personnel employed by PAVmed Inc., for which Lucid Diagnostics Inc. incurs a service fee, referred to as the “MSA Fee”, according to the provisions of a Management Services Agreement (“MSA”) with PAVmed Inc. The MSA does not have a termination date, but may be terminated by the Lucid Diagnostics Inc. board of directors. The MSA Fee is charged on a quarterly basis and is subject-to periodic adjustment corresponding with changes in the number of PAVmed Inc. employees providing services to Lucid Diagnostics Inc., with the change in the MSA Fee approved by each of the Lucid Diagnostics Inc. and PAVmed Inc. board of directors.

 

Lucid Diagnostics Inc. recognized MSA Fee expense of $870,000 and $570,000 in the three months ended September 30, 2021 and 2020, respectively; and $2,510,000 and $1,110,000 in the nine months ended September 30, 2021 and 2020, respectively. The MSA Fee expense classification in the unaudited condensed statement of operations for the periods noted is as follows:

 

   Cost of   Commercial   General &   Research &   Total 
MSA Fee - Three Months Ended  Revenue   Operations   Administrative   Development   MSA Fee 
- March 31, 2021  $—   $323,400   $269,500   $177,100   $770,000 
- June 30, 2021   —    295,800    348,000    226,200    870,000 
- September 30, 2021   39,682    352,055    254,575    223,688    870,000 
Total - Nine Months Ended                         
September 30, 2021  $39,682   $971,255   $872,075   $626,988   $2,510,000 

 

   Cost of   Commercial   General &   Research &   Total 
MSA Fee - Three Months Ended  Revenue   Operations   Administrative   Development   MSA Fee 
- March 31, 2020  $—   $43,200   $118,800   $108,000   $270,000 
- June 30, 2020   —    56,700    118,800    94,500    270,000 
- September 30, 2020   —    148,200    245,100    176,700    570,000 
Total - Nine Months Ended                         
September 30, 2020  $—   $248,100   $482,700   $379,200   $1,110,000 

 

The classification of the MSA Fee as presented above is based on the PAVmed Inc. quarterly classification of employee salary expense. In this regard, PAVmed Inc. classifies employee salary expense as cost-of-revenue for employees engaged in service delivery under the EsoGuard Commercialization Agreement, and commercial operations for employees performing sales, marketing, and reimbursement activities and functions, general and administrative, and research and development except for those employees who are engaged in product and services engineering development and design and /or clinical trials activities, for which such employee salary is classified as research and development expense.

 

Other Related Party Transactions

 

Lucid Diagnostics Inc. previously entered into a consulting agreement with Stanley N. Lapidus, effective June 2020 with such consulting agreement providing for compensation on a contractual rate per hour for consulting services provided. In July 2021, Mr. Lapidus was appointed as Vice Chairman of the Board of Directors of Lucid Diagnostics Inc. Lucid Diagnostics Inc. recognized as general and administrative expense $7,500 and $21,000 in the three and nine months ended September 30, 2021, respectively; and $3,000 and $4,000 in the three and nine months ended September 30, 2020, respectively, in connection with the consulting agreement.