Note 7 – Commitments and Contingencies

Advisory Board

On December 4, 2019, the Company established a cannabinoid and hemp (“CBD”) Advisory Board, whose role was to provide input to management and the board of directors regarding the identification and assessment of business opportunities in the cannabinoid and hemp industry. The Company is no longer pursuing opportunities in the cannabinoid and hemp industry, and as such, the CBD Advisory Board will be disbanded during the third quarter of 2020. Each member was compensated for their initial 24 months of service with the issuance of Company stock with a fair market value of $25,000. Pursuant to the agreement, such shares, when issued, were fully vested. During the three and six months ended June 30, 2020, the Company recorded a charge of $8,333 and $50,000, respectively which is reflected in administrative expense within the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Commitments

ChubeWorkx Settlement Agreement and General Release

On August 3, 2020, the Company entered into a Settlement Agreement and General Release (the “SAGR”) with ChubeWorkx. The Company and ChubeWorkx entered into the SAGR to terminate a prior Settlement Agreement, dated August 17, 2016, by and among the Company and ChubeWorkx, pursuant to which the Company granted ChubeWorkx a security interest in substantially all of the Company’s assets, and to fully and finally settle and compromise any and all current and future claims and liabilities of any nature arising between the Company and ChubeWorkx in relation to, or otherwise connected with, the Prior Agreements, on the terms set forth in the SAGR.

As consideration for the settlement of claims pursuant to the SAGR, on August 5, 2020, the Company (i) paid to ChubeWorkx an amount equal to $300,000 and (ii) delivered to ChubeWorkx 500,000 shares of the Company’s common stock (the “Shares”). The Company granted ChubeWorkx registration rights with respect to the Shares. In the event that the Company fails to file a resale registration statement covering the Shares by August 18, 2020 (the “Filing Deadline”), or fails to cause such registration statement to be declared effective by the earlier of October 2, 2020 or 45 days after the filing of such registration statement (the “Effectiveness Deadline”), then, on each of the Filing Deadline and the Effectiveness Deadline, as the case may be, and on each monthly anniversary thereof (if the such registration statement shall not have been filed or declared effective by such date, as the case may be) until such registration statement is filed or declared effective, the Company shall pay to ChubeWorkx an amount in cash, as partial liquidated damages equal to 1.0% of the market value of the Shares.

As of the earlier to occur, following and subject to delivery and complete full effective legal transfer to ChubeWorkx of the Shares and delivery of the cash payment to ChubeWorkx in full in accordance with the provisions of the SAGR, of (i) the date that the resale registration statement covering the Shares is declared effective by the U.S. Securities and Exchange Commission and (ii) the date that all of the Shares may be resold by ChubeWorkx under Rule 144 of the Securities Act of 1933, as amended, without restriction (the “Release Date”), any and all claims, differences, and disputes of any current and/or future claims and/or liabilities arising between the Company and ChubeWorkx in relation to, or otherwise connected with, the Prior Agreements shall be deemed fully and finally settled and compromised (with the exception of any claims arising under the SAGR or the Leak-Out and Support Agreement as described below). As of the Release Date, each of the Prior Agreements will be terminated, and ChubeWorkx will automatically and irrevocably release all security interests and liens created under the Security Agreement or otherwise as security for the Company obligations under the Prior Agreements.

ChubeWorkx Leak-Out and Support Agreement

On August 3, 2020, as an inducement to enter into the SAGR, and as one of the conditions to the consummation of the transactions contemplated by the SAGR, ChubeWorkx entered into a Leak-Out and Support Agreement with the Company (the “Support Agreement”), pursuant to which ChubeWorkx agreed to vote the Shares in favor of each matter proposed and recommended for approval by the Company’s board of directors or management at every meeting of the stockholders and on any action or approval by written consent of the stockholders and (ii) limit sales of its shares of common stock issued pursuant to the SAGR per day to no more than 10% of our daily traded volume per day on the Nasdaq Capital Market and we agreed to register the resale of such shares pursuant to a registration statement.

Litigation

Watts v. Gormally, et al., No. 2:18-15992 (D.N.J.) and Chan v. Gormally, et al., No. 2:19-cv-4989 (D.N.J.)

On November 9, 2018, Cale Watts (“Watts Plaintiff”) filed a verified shareholder derivative complaint alleging violations of the Securities Exchange Act of 1934, breach of fiduciary duty, unjust enrichment, and waste of corporate assets based on alleged material weaknesses in controls, management, and documentation (the “Watts Action”). On January 14, 2019, the parties reached an agreement in principle to settle the Watts Action that included corporate reforms and a payment of attorneys’ fees of $200,000. The parties finalized a Stipulation of Settlement on March 4, 2019. On February 7, 2019, Tiffany Chan, Jasmine Henderson, and Don Danesh (“Chan Plaintiffs”) filed a verified shareholder derivative complaint alleging violations of Section 14(a) of the Exchange Act and SEC Rule 14a-9, breach of fiduciary duty, unjust enrichment, and waste of corporate assets based on the same circumstances as the Watts Action (the “Chan Action”). The Chan Action further alleged that the Company should not have settled the Watts Action because the Watts Action plaintiffs lacked standing and the settlement would cause irreparable harm to the Company and its shareholders. On March 22, 2019, the Watts Plaintiff filed a motion for preliminary approval of the proposed settlement, approving the proposed form and method of providing notice of the settlement, scheduling a hearing for final approval of the settlement (“Watts Motion for Preliminary Approval”). On April 1, 2019, the Chan Plaintiffs filed an Opposition to the Motion for Preliminary Approval and a Motion to Intervene and Stay Proceedings (“Motion to Intervene and Stay”). Subsequently, the Watts Plaintiff, Chan Plaintiffs, and Defendants reached an agreement in principle to settle the Watts and Chan Actions that included corporate reforms and a payment of attorneys’ fees of $325,000. On October 2, 2019, the Watts Plaintiff filed an Unopposed Motion for Preliminary Approval of the Settlement (the “Omnibus Motion for Preliminary Approval”). The Omnibus Motion for Preliminary Approval was granted on January 8, 2020. Plaintiffs filed their motion for final approval of the proposed settlement on May 7, 2020. The Motion for Final Approval was approved on May 28, 2020.

NovoTek Therapeutics Inc. and NovoTek Pharmaceuticals Limited v. Akers Biosciences, Inc.

On June 21, 2019, the Company received a complaint, filed by Novotek Therapeutics Inc., and Novotek Pharmaceuticals Limited (collectively, “Novotek”), Beijing-based entities, in the United States District Court for the District of New Jersey, alleging, among other things, breach of contract. Novotek is seeking, among other things, damages in the amount of $1,551,562, plus interest, disbursements and attorneys’ fees. The Company vigorously disputes the allegations in the complaint and has retained counsel to defend it. On September 16, 2019, the Company filed a partial motion to dismiss the complaint, which was fully submitted as of November 4, 2019. On June 9, 2020, the Court denied the Company’s motion. The Company’s Answer to the Complaint is currently due on September 8, 2020. The Company is not yet able to determine the amount of the Company’s exposure, if any.

Litigation, continued

Neelima Varma v. Akers Biosciences, Inc. and St. David’s Healthcare Partnership, L.P., LLP CAUSE NO: D-1-GN-19-004262

On July 25, 2019, the Company was notified that on July 23, 2019, a complaint was filed by Neelima Varma, against the Company and St. David’s Healthcare Partnership, L.P., LLP (“St. David’s”), in the district court of Travis County, Texas, alleging, among other things, negligence, gross negligence and strict product liability, breach of express warranty, breach of implied warranty and fraudulent misrepresentation and omission, with respect to a medical device which the Company had sold through one its distributors to St. David’s. Ms. Varma was seeking aggregate monetary relief from the Company and St. David’s in excess of $1,000,000. The Company carries product liability insurance. On July 29, 2020, this matter was resolved. The resolution of this matter had no significant impact on the condensed consolidated financial statements of the Company.

Douglas Carrara v. Akers Biosciences, Inc., John Does 1-10, and XYZ Corp. 1-10, Docket No. ESX-L-5272-19 (N.J. Super. Ct., Essex County):

Douglas Carrara, a former executive, sued the Company for breach of contract in connection with the termination of his employment.  In his operative Complaint, filed August 9, 2019, Carrara primarily alleged that the Company breached the terms of his employment agreement by failing to pay “severance” after terminating his employment “without cause.”  Based on this alleged breach, Carrara sought compensatory damages and damages for lost wages and benefits.  Carrara also sought punitive and/or liquidated damages and attorneys’ fees.  On August 29, 2019, the Company filed an answer to the operative complaint, denying all substantive allegations of wrongdoing.  As of July 23, 2020, the parties have resolved all material disputes. The parties are in the process of preparing the appropriate documentation to effectuate this resolution and expect to file a stipulation of dismissal with prejudice shortly. The resolution of this matter had no significant impact on the condensed consolidated financial statements of the Company.