UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended JUNEJune 30, 20212022
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from______ to______from _____ to _____
Commission File Number: 001-37685
PAVmed IncPAVMED INC..
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 47-1214177 | |
(State or Other Jurisdiction of | (IRS Employer | |
Incorporation or Organization) |
Identification No.) |
One Grand Central Place | ||
60 E. 42nd Street | ||
Suite 4600 | ||
New York, NY 10165 | 10165 | |
(Address of Principal Executive | (Zip Code) |
(212) 949-4319
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant tounder Section 12(b) of the Exchange Act:
Title of each | Trading | Name of each | ||
The Stock Market LLC | ||||
The Stock Market LLC | ||||
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,”filer” , “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large | ☐ | Accelerated | ☐ | |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)section 13(c) of the Exchange Act. Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 12, 2021,10, 2022 there were shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.
issued (with such number of shares inclusive of shares of common stock underlying granted but unvested restricted stock awards granted under the PAVmed Inc. 2014 Long-Term Incentive Equity Plan as of such date).
TABLE OF CONTENTS
i |
PART I. FINANCIAL INFORMATIONFinancial Information
Item 1. Financial Statements
PAVMED INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except number of shares and per share data)
(unaudited)data - unaudited)
June 30, 2021 | December 31, 2020 | June 30, 2022 | December 31, 2021 | |||||||||||||
Assets: | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash | $ | 43,210 | $ | 17,256 | $ | 65,153 | $ | 77,258 | ||||||||
Accounts receivable | — | 200 | ||||||||||||||
Prepaid expenses, deposits, and other current assets | 3,126 | 1,685 | 5,662 | 5,179 | ||||||||||||
Total current assets | 46,336 | 18,941 | 70,815 | 82,637 | ||||||||||||
Fixed assets, net | 2,253 | 1,585 | ||||||||||||||
Operating lease right-of-use assets | 3,205 | — | ||||||||||||||
Intangible assets, net | 4,456 | 2,029 | ||||||||||||||
Other assets | 1,035 | 837 | 1,725 | 725 | ||||||||||||
Total assets | $ | 47,371 | $ | 19,778 | $ | 82,454 | $ | 86,976 | ||||||||
Liabilities, Preferred Stock and Stockholders’ Deficit | ||||||||||||||||
Liabilities, Preferred Stock and Stockholders’ Equity | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 3,766 | $ | 2,966 | $ | 4,492 | $ | 3,299 | ||||||||
Accrued expenses and other current liabilities | 1,565 | 2,325 | 2,932 | 4,259 | ||||||||||||
CARES Act Paycheck Protection Program note payable | — | 300 | ||||||||||||||
Operating lease liabilities, current portion | 943 | — | ||||||||||||||
Senior Secured Convertible Notes - at fair value | — | 10,060 | 29,500 | — | ||||||||||||
Senior Convertible Note - at fair value | — | 4,600 | ||||||||||||||
Purchase consideration payable | 1,000 | — | ||||||||||||||
Total current liabilities | 38,867 | 7,558 | ||||||||||||||
Long-term liabilities | ||||||||||||||||
Operating lease liabilities, less current portion | 2,183 | — | ||||||||||||||
Total long-term liabilities | 2,183 | — | ||||||||||||||
Total liabilities | 5,331 | 20,251 | 41,050 | 7,558 | ||||||||||||
Commitments and contingencies (Note 5) | — | — | ||||||||||||||
Stockholders’ Equity (Deficit): | ||||||||||||||||
Preferred stock, $ par value. Authorized, shares; Series B Convertible Preferred Stock, par value $ , issued and outstanding at June 30, 2021 and shares at December 31, 2020 | 2,499 | 2,537 | ||||||||||||||
Common stock, $ and shares outstanding as of June 30, 2021 and December 31, 2020, respectively par value. Authorized, shares; | 83 | 64 | ||||||||||||||
Commitments and contingencies (Note 9) | - | |||||||||||||||
Stockholders’ Equity: | ||||||||||||||||
Preferred stock, $ | par value. Authorized, shares; Series B Convertible Preferred Stock, par value $ , issued and outstanding at June 30, 2022 and shares at December 31, 20212,554 | 2,419 | ||||||||||||||
Common stock, $ | par value. Authorized, shares; and shares outstanding as of June 30, 2022 and December 31, 2021, respectively87 | 86 | ||||||||||||||
Additional paid-in capital | 149,694 | 87,570 | 201,327 | 198,071 | ||||||||||||
Accumulated deficit | (109,325 | ) | (88,275 | ) | (181,442 | ) | (138,910 | ) | ||||||||
Treasury stock | (548 | ) | — | |||||||||||||
Total PAVmed Inc. Stockholders’ Equity | 42,951 | 1,896 | 21,978 | 61,666 | ||||||||||||
Noncontrolling interests | (911 | ) | (2,369 | ) | 19,426 | 17,752 | ||||||||||
Total Stockholders’ Equity (Deficit) | 42,040 | (473 | ) | |||||||||||||
Total Stockholders’ Equity | 41,404 | 79,418 | ||||||||||||||
Total Liabilities and Stockholders’ Equity | $ | 47,371 | $ | 19,778 | $ | 82,454 | $ | 86,976 |
See accompanying notes to the unaudited condensed consolidated financial statements.
1 |
PAVMED INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except number of shares and per share amounts)amounts - unaudited)
(unaudited)
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
Revenue | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 189 | $ | — | ||||||||||||||||
Cost of revenue | — | — | 369 | — | ||||||||||||||||||||||||||||
Gross profit (loss) | — | — | (180 | ) | — | |||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Commercial operations | 1,973 | 460 | 3,360 | 845 | ||||||||||||||||||||||||||||
Sales and marketing | 4,898 | 1,875 | 8,823 | 3,262 | ||||||||||||||||||||||||||||
General and administrative | 6,739 | 2,421 | 10,113 | 4,721 | 11,839 | 6,837 | 21,436 | 10,211 | ||||||||||||||||||||||||
Research and development | 4,258 | 2,133 | 7,573 | 4,702 | 6,740 | 4,258 | 12,671 | 7,573 | ||||||||||||||||||||||||
Total operating expenses | 12,970 | 5,014 | 21,046 | 10,268 | 23,477 | 12,970 | 42,930 | 21,046 | ||||||||||||||||||||||||
Loss from operations | (12,970 | ) | (5,014 | ) | (21,046 | ) | (10,268 | ) | (23,477 | ) | (12,970 | ) | (43,110 | ) | (21,046 | ) | ||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||
Interest expense | — | — | — | (52 | ) | (523 | ) | — | (523 | ) | — | |||||||||||||||||||||
Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note | — | 2,120 | 1,682 | (5,888 | ) | |||||||||||||||||||||||||||
Offering costs - Senior Secured Convertible Note and Senior Convertible Note | — | (200 | ) | — | (610 | ) | ||||||||||||||||||||||||||
Change in fair value - Senior Secured Convertible Note | (2,000 | ) | — | (2,000 | ) | 1,682 | ||||||||||||||||||||||||||
Loss on issue and offering costs - Senior Secured Convertible Note | (3,101 | ) | — | (3,101 | ) | — | ||||||||||||||||||||||||||
Debt extinguishments loss - Senior Secured Convertible Notes | — | (2,750 | ) | (3,715 | ) | (3,937 | ) | — | — | — | (3,715 | ) | ||||||||||||||||||||
Debt forgiveness | 300 | — | 300 | — | — | 300 | — | 300 | ||||||||||||||||||||||||
Other income (expense), net | 300 | (830 | ) | (1,733 | ) | (10,487 | ) | (5,624 | ) | 300 | (5,624 | ) | (1,733 | ) | ||||||||||||||||||
Loss before provision for income tax | (12,670 | ) | (5,844 | ) | (22,779 | ) | (20,755 | ) | (29,101 | ) | (12,670 | ) | (48,734 | ) | (22,779 | ) | ||||||||||||||||
Provision for income taxes | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Net loss before noncontrolling interests | (12,670 | ) | (5,844 | ) | (22,779 | ) | (20,755 | ) | (29,101 | ) | (12,670 | ) | (48,734 | ) | (22,779 | ) | ||||||||||||||||
Net loss attributable to the noncontrolling interests | 1,199 | 266 | 1,877 | 702 | 3,576 | 1,199 | 6,337 | 1,877 | ||||||||||||||||||||||||
Net loss attributable to PAVmed Inc. | (11,471 | ) | (5,578 | ) | (20,902 | ) | (20,053 | ) | (25,525 | ) | (11,471 | ) | (42,397 | ) | (20,902 | ) | ||||||||||||||||
Less: Series B Convertible Preferred Stock dividends earned | (74 | ) | (71 | ) | (149 | ) | (141 | ) | (70 | ) | (74 | ) | (138 | ) | (149 | ) | ||||||||||||||||
Net loss attributable to PAVmed Inc. common stockholders | $ | (11,545 | ) | $ | (5,649 | ) | $ | (21,051 | ) | $ | (20,194 | ) | $ | (25,595 | ) | $ | (11,545 | ) | $ | (42,535 | ) | $ | (21,051 | ) | ||||||||
Per share information: | ||||||||||||||||||||||||||||||||
Net loss per share attributable to PAVmed Inc. - basic and diluted | $ | (0.14 | ) | $ | (0.12 | ) | $ | (0.27 | ) | $ | (0.45 | ) | $ | (0.29 | ) | $ | (0.14 | ) | $ | (0.49 | ) | $ | (0.27 | ) | ||||||||
Net loss per share attributable to PAVmed Inc. common stockholders – basic and diluted | $ | (0.14 | ) | $ | (0.13 | ) | $ | (0.27 | ) | $ | (0.46 | ) | $ | (0.29 | ) | $ | (0.14 | ) | $ | (0.49 | ) | $ | (0.27 | ) | ||||||||
Weighted average common shares outstanding, basic and diluted | 82,235,397 | 44,780,538 | 78,117,637 | 44,140,126 | 86,957,352 | 82,235,397 | 86,689,857 | 78,117,637 |
See accompanying notes to the unaudited condensed consolidated financial statements.
2 |
PAVMED INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)
for the THREE MONTHS ENDED June 30, 2022
(in thousands except number of shares and per share data - unaudited)
Shares | Amount | Shares | Amount | Capital | Deficit | Stock | Interest | Total | ||||||||||||||||||||||||||||
PAVmed Inc. Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||||||
Series B Convertible Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Treasury | Non controlling | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Stock | Interest | Total | ||||||||||||||||||||||||||||
Balance - March 31, 2022 | 1,136,210 | $ | 2,486 | 86,911,646 | $ | 87 | $ | 199,719 | $ | (155,849 | ) | $ | (512 | ) | $ | 18,802 | $ | 64,733 | ||||||||||||||||||
Dividends declared - Series B Convertible Preferred Stock | 22,740 | 68 | — | — | — | (68 | ) | — | — | — | ||||||||||||||||||||||||||
Vest - restricted stock awards | — | — | 75,000 | — | (1 | ) | — | — | — | (1 | ) | |||||||||||||||||||||||||
Exercise - stock options | — | — | 62,500 | — | 61 | — | — | — | 61 | |||||||||||||||||||||||||||
Exercise - stock options of majority-owned subsidiary | — | — | — | — | — | — | — | 501 | 501 | |||||||||||||||||||||||||||
Impact of subsidiary equity transactions | — | — | — | — | 99 | — | — | 142 | 241 | |||||||||||||||||||||||||||
Stock-based compensation - PAVmed Inc. | — | — | — | — | 1,449 | — | — | — | 1,449 | |||||||||||||||||||||||||||
Stock-based compensation - majority-owned subsidiary | — | — | — | — | — | — | — | 3,557 | 3,557 | |||||||||||||||||||||||||||
Treasury stock | — | — | (25,935 | ) | — | — | — | (36 | ) | — | (36 | ) | ||||||||||||||||||||||||
Net loss | — | — | — | — | — | (25,525 | ) | — | (3,576 | ) | (29,101 | ) | ||||||||||||||||||||||||
Balance - June 30, 2022 | 1,158,950 | $ | 2,554 | 87,023,211 | $ | 87 | $ | 201,327 | $ | (181,442 | ) | $ | (548 | ) | $ | 19,426 | $ | 41,404 |
See accompanying notes to the unaudited condensed consolidated financial statements.
3 |
PAVMED INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)
for the SIX MONTHS ENDED June 30, 2022
(in thousands except number of shares and per share data - unaudited)
PAVmed Inc. Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||||||
Series B Convertible Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Treasury | Non controlling | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Stock | Interest | Total | ||||||||||||||||||||||||||||
Balance - December 31, 2021 | 1,113,919 | $ | 2,419 | 86,367,845 | $ | 86 | $ | 198,071 | $ | (138,910 | ) | $ | — | $ | 17,752 | $ | 79,418 | |||||||||||||||||||
Dividends declared - Series B Convertible Preferred Stock | 45,031 | 135 | — | — | — | (135 | ) | — | — | — | ||||||||||||||||||||||||||
Exercise - Series Z Warrants | — | — | 5 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Vest - restricted stock awards | — | — | 541,666 | — | (1 | ) | — | — | — | (1 | ) | |||||||||||||||||||||||||
Exercise - stock options | — | — | 299,999 | 1 | 302 | — | — | — | 303 | |||||||||||||||||||||||||||
Exercise - stock options of majority-owned subsidiary | — | — | — | — | — | — | — | 688 | 688 | |||||||||||||||||||||||||||
Purchase - Employee Stock Purchase Plan | — | — | 194,240 | — | 217 | — | — | — | 217 | |||||||||||||||||||||||||||
Impact of subsidiary equity transactions | — | — | — | — | 12 | — | — | 229 | 241 | |||||||||||||||||||||||||||
Stock-based compensation - PAVmed Inc. | — | — | — | — | 2,726 | — | — | — | 2,726 | |||||||||||||||||||||||||||
Stock-based compensation - majority-owned subsidiary | — | — | — | — | — | — | — | 7,094 | 7,094 | |||||||||||||||||||||||||||
Treasury stock | — | — | (380,544 | ) | — | — | — | (548 | ) | — | (548 | ) | ||||||||||||||||||||||||
Net loss | — | — | — | — | — | (42,397 | ) | — | (6,337 | ) | (48,734 | ) | ||||||||||||||||||||||||
Balance - June 30, 2022 | 1,158,950 | $ | 2,554 | 87,023,211 | $ | 87 | $ | 201,327 | $ | (181,442 | ) | $ | (548 | ) | $ | 19,426 | $ | 41,404 |
See accompanying notes to the unaudited condensed consolidated financial statements.
4 |
PAVMED INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)
for the THREE MONTHS ENDED June 30, 2021
(in thousands, except number of shares and per share data)
(unaudited)data - unaudited)
PAVmed Inc. Stockholders’ Deficit | ||||||||||||||||||||||||||||||||
Series B | ||||||||||||||||||||||||||||||||
Convertible | Additional | Non | ||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Paid-In | Accumulated | controlling | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Total | |||||||||||||||||||||||||
Balance at March 31, 2021 | 1,241,438 | $ | 2,587 | 81,424,744 | $ | 81 | $ | 145,396 | $ | (97,778 | ) | $ | (2,246 | ) | $ | 48,040 | ||||||||||||||||
Series B Convertible Preferred Stock dividends declared | 25,046 | 76 | — | — | — | (76 | ) | — | — | |||||||||||||||||||||||
Issue common stock – conversion Series B Convertible Preferred Stock | (80,799 | ) | (164 | ) | 80,799 | — | 164 | — | — | — | ||||||||||||||||||||||
Issue common stock – registered offerings, net | ||||||||||||||||||||||||||||||||
Issue common stock – registered offerings, net, shares | ||||||||||||||||||||||||||||||||
Issue common stock – vesting of restricted stock awards | — | — | 150,000 | — | — | — | — | — | ||||||||||||||||||||||||
Issue common stock – exercise Series Z warrants | — | — | 880,441 | 2 | 1,409 | — | — | 1,411 | ||||||||||||||||||||||||
Issue common stock upon partial conversions of Senior Secured Convertible Note | ||||||||||||||||||||||||||||||||
Issue common stock upon partial conversions of Senior Secured Convertible Note, shares | ||||||||||||||||||||||||||||||||
Issue common stock – PAVmed Inc. 2014 Equity Plan stock option exercises | — | — | 40,832 | — | 51 | — | — | 51 | ||||||||||||||||||||||||
Investment in Veris Health Inc. subsidiary | — | — | — | — | — | — | 6 | 6 | ||||||||||||||||||||||||
Stock-based compensation – PAVmed Inc. | — | — | — | — | 2,622 | — | — | 2,622 | ||||||||||||||||||||||||
Issue common stock – majority-owned subsidiary exercise of stock options | ||||||||||||||||||||||||||||||||
Issue common stock – Employee Stock Purchase Plan | ||||||||||||||||||||||||||||||||
Issue common stock – Employee Stock Purchase Plan, shares | ||||||||||||||||||||||||||||||||
Issue common stock – exercise Series S warrants | ||||||||||||||||||||||||||||||||
Issue common stock – exercise Series S warrants, shares | ||||||||||||||||||||||||||||||||
Stock-based compensation – majority-owned subsidiary | — | — | — | — | 52 | — | 2,528 | 2,580 | ||||||||||||||||||||||||
Loss | — | — | — | — | — | (11,471 | ) | (1,199 | ) | (12,670 | ) | |||||||||||||||||||||
Balance at June 30, 2021 | 1,185,685 | $ | 2,499 | 82,576,816 | $ | 83 | $ | 149,694 | $ | (109,325 | ) | $ | (911 | ) | $ | 42,040 |
See accompanying notes to the unaudited condensed consolidated financial statements.
PAVMED INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)
for the SIX MONTHS ENDED June 30, 2021
(in thousands except number of shares and per share data)
(unaudited)
PAVmed Inc. Stockholders’ Deficit | ||||||||||||||||||||||||||||||||
Series B | ||||||||||||||||||||||||||||||||
Convertible | Additional | Non | ||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Paid-In | Accumulated | controlling | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Total | |||||||||||||||||||||||||
Balance at December 31, 2020 | 1,228,075 | $ | 2,537 | 63,819,935 | $ | 64 | $ | 87,570 | $ | (88,275 | ) | $ | (2,369 | ) | $ | (473 | ) | |||||||||||||||
Series B Convertible Preferred Stock dividends declared | 49,244 | 148 | — | — | — | (148 | ) | — | — | |||||||||||||||||||||||
Issue common stock – conversion Series B Convertible Preferred Stock | (91,634 | ) | (186 | ) | 91,634 | — | 186 | — | — | — | ||||||||||||||||||||||
Issue common stock – registered offerings, net | — | — | 15,782,609 | 16 | 53,688 | — | — | 53,704 | ||||||||||||||||||||||||
Issue common stock – restricted stock awards vests | — | — | 150,000 | — | — | — | — | — | ||||||||||||||||||||||||
Issue common stock – exercise Series Z warrants | — | — | 1,740,658 | 2 | 2,783 | — | — | 2,785 | ||||||||||||||||||||||||
Issue common stock upon partial conversions of Senior Secured Convertible Note | — | — | 667,668 | 1 | 1,722 | — | — | 1,723 | ||||||||||||||||||||||||
Issue common stock – PAVmed Inc. 2014 Equity Plan stock option exercises | — | — | 120,832 | — | 131 | — | — | 131 | ||||||||||||||||||||||||
Issue common stock – Employee Stock Purchase Plan | — | — | 203,480 | — | 304 | — | — | 304 | ||||||||||||||||||||||||
Investment in Veris Health Inc. subsidiary | — | — | — | — | — | — | 6 | 6 | ||||||||||||||||||||||||
Stock-based compensation - PAVmed Inc. | — | — | — | — | 3,254 | — | — | 3,254 | ||||||||||||||||||||||||
Stock-based compensation - majority-owned subsidiary | — | — | — | — | 56 | — | 3,329 | 3,385 | ||||||||||||||||||||||||
Loss | — | — | — | — | — | (20,902 | ) | (1,877 | ) | (22,779 | ) | |||||||||||||||||||||
Balance at June 30, 2021 | 1,185,685 | $ | 2,499 | 82,576,816 | $ | 83 | $ | 149,694 | $ | (109,325 | ) | $ | (911 | ) | $ | 42,040 |
See accompanying notes to the unaudited condensed consolidated financial statements.
PAVMED INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)
for the THREE and SIX MONTHS ENDED June 30, 2020
(in thousands except number of shares and per share data)
(unaudited)
PAVmed Inc. Stockholders’ Deficit | ||||||||||||||||||||||||||||||||
Series B | ||||||||||||||||||||||||||||||||
Convertible | Additional | Non | ||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Paid-In | Accumulated | controlling | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Total | |||||||||||||||||||||||||
Balance at March 31, 2020 | 1,156,391 | $ | 2,322 | 44,133,745 | $ | 44 | $ | 50,896 | $ | (68,259 | ) | $ | (1,232 | ) | $ | (16,229 | ) | |||||||||||||||
Issue common stock – upon partial conversions of Senior Secured Convertible Note | — | — | 3,785,641 | 4 | 8,735 | — | — | 8,739 | ||||||||||||||||||||||||
Series B Convertible Preferred Stock dividends declared | 23,481 | 71 | — | — | — | (71 | ) | — | — | |||||||||||||||||||||||
Stock-based compensation - PAVmed Inc. 2014 Equity Plan | — | — | — | — | 513 | — | — | 513 | ||||||||||||||||||||||||
Stock-based compensation – majority-owned subsidiary | — | — | — | — | 3 | — | 13 | 16 | ||||||||||||||||||||||||
Loss | — | — | — | — | — | (5,578 | ) | (266 | ) | (5,844 | ) | |||||||||||||||||||||
Balance at June 30, 2020 | 1,179,872 | $ | 2,393 | 47,919,386 | $ | 48 | $ | 60,147 | $ | (73,908 | ) | $ | (1,485 | ) | $ | (12,805 | ) |
PAVmed Inc. Stockholders’ Deficit | ||||||||||||||||||||||||||||||||
Series B | ||||||||||||||||||||||||||||||||
Convertible | Additional | Non | ||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Paid-In | Accumulated | controlling | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Total | |||||||||||||||||||||||||
Balance at December 31, 2019 | 1,158,209 | $ | 2,296 | 40,478,861 | $ | 41 | $ | 47,554 | $ | (53,715 | ) | $ | (814 | ) | $ | (4,638 | ) | |||||||||||||||
Issue common stock – upon partial conversions of Senior Secured Convertible Note | — | — | 5,828,542 | 6 | 11,567 | — | — | 11,573 | ||||||||||||||||||||||||
Issue common stock – Employee Stock Purchase Plan | — | — | 154,266 | — | 126 | — | — | 126 | ||||||||||||||||||||||||
Issue common stock – exercise Series S warrants | — | — | 1,199,383 | 1 | 11 | — | — | 12 | ||||||||||||||||||||||||
Issue common stock – conversion Series B Convertible Preferred Stock | (25,000 | ) | (43 | ) | 25,000 | — | 43 | — | — | — | ||||||||||||||||||||||
Series B Convertible Preferred Stock dividends declared | 46,663 | 140 | — | — | — | (140 | ) | — | — | |||||||||||||||||||||||
Vesting of restricted stock awards | — | — | 233,334 | — | — | — | — | — | ||||||||||||||||||||||||
Stock-based compensation - PAVmed Inc. 2014 Equity Plan | — | — | — | — | 840 | — | — | 840 | ||||||||||||||||||||||||
Issue common stock – majority-owned subsidiary exercise of stock options | — | — | — | — | — | — | 5 | 5 | ||||||||||||||||||||||||
Stock-based compensation - majority-owned subsidiary | — | — | — | — | 6 | — | 26 | 32 | ||||||||||||||||||||||||
Loss | — | — | — | — | — | (20,053 | ) | (702 | ) | (20,755 | ) | |||||||||||||||||||||
Balance at June 30, 2020 | 1,179,872 | $ | 2,393 | 47,919,386 | $ | 48 | $ | 60,147 | $ | (73,908 | ) | $ | (1,485 | ) | $ | (12,805 | ) |
PAVmed Inc. Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||
Series B Convertible Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Non controlling | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Total | |||||||||||||||||||||||||
Balance - March 31, 2021 | 1,241,438 | $ | 2,587 | 81,424,744 | $ | 81 | $ | 145,396 | $ | (97,778 | ) | - | $ | (2,246 | ) | $ | 48,040 | |||||||||||||||
Dividends declared - Series B Convertible Preferred Stock | 25,046 | 76 | — | — | — | (76 | ) | — | — | |||||||||||||||||||||||
Conversions - Series B Convertible Preferred Stock | (80,799 | ) | (164 | ) | 80,799 | — | 164 | — | — | — | ||||||||||||||||||||||
Vest - restricted stock awards | — | — | 150,000 | — | — | — | - | — | — | |||||||||||||||||||||||
Exercise - Series Z warrants | — | — | 880,441 | 2 | 1,409 | — | — | 1,411 | ||||||||||||||||||||||||
Exercise - stock options | — | — | 40,832 | — | 51 | — | — | 51 | ||||||||||||||||||||||||
Stock-based compensation - PAVmed Inc. | — | — | — | — | 2,622 | — | — | 2,622 | ||||||||||||||||||||||||
Stock-based compensation - majority-owned subsidiary | — | — | — | — | 52 | — | 2,528 | 2,580 | ||||||||||||||||||||||||
Investment in Veris Health Inc. subsidiary | — | — | — | — | — | — | 6 | 6 | ||||||||||||||||||||||||
Net loss | — | — | — | — | — | (11,471 | ) | - | (1,199 | ) | (12,670 | ) | ||||||||||||||||||||
Balance - June 30, 2021 | 1,185,685 | $ | 2,499 | 82,576,816 | $ | 83 | $ | 149,694 | $ | (109,325 | ) | - | $ | (911 | ) | $ | 42,040 |
See accompanying notes to the unaudited condensed consolidated financial statements.
5 |
PAVMED INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTSSTATEMENT OF CASH FLOWSCHANGES IN EQUITY (DEFICIT)
for the SIX MONTHS ENDED June 30, 2021
(in thousands, except number of shares and per share data)
(unaudited)data - unaudited)
Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
Cash flows from operating activities | ||||||||
Net loss - before noncontrolling interest (“NCI”) | $ | (22,779 | ) | $ | (20,755 | ) | ||
Adjustments to reconcile net loss - before NCI to net cash used in operating activities | ||||||||
Depreciation expense | 22 | 9 | ||||||
Stock-based compensation | 6,639 | 872 | ||||||
Amortization expense | 6 | — | ||||||
In-process R&D charge | 133 | — | ||||||
Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note | (1,682 | ) | 5,888 | |||||
Debt extinguishment loss - Senior Secured Convertible Notes and Senior Convertible Note | 3,715 | 3,937 | ||||||
Debt forgiveness | (300 | ) | — | |||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | (1,441 | ) | (747 | ) | ||||
Accounts payable | 650 | 1,295 | ||||||
Accrued expenses and other current liabilities | (759 | ) | 155 | |||||
Net cash flows used in operating activities | (15,796 | ) | (9,346 | ) | ||||
Cash flows from investing activities | ||||||||
Purchase of equipment | (157 | ) | (44 | ) | ||||
Acquisition, net of cash acquired | (47 | ) | — | |||||
Net cash flows used in investing activities | (204 | ) | (44 | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds – issue of common stock – registered offerings | 55,016 | — | ||||||
Payment – offering costs – registered offerings | (1,312 | ) | — | |||||
Proceeds – issue of Senior Secured Convertible Notes | — | 6,300 | ||||||
Proceeds – issue of Senior Convertible Note | — | 3,700 | ||||||
Proceeds – Cares Act Paycheck Protection Program Loan | — | 300 | ||||||
Payment – repayment of Senior Convertible Note and Senior Secured Convertible Note | (14,816 | ) | — | |||||
Payment – Senior Convertible Note and Senior Secured Convertible Note – non-installment payments | (154 | ) | (192 | ) | ||||
Proceeds – exercise of Series Z warrants | 2,785 | — | ||||||
Proceeds – exercise of Series S Warrants | — | 12 | ||||||
Proceeds – issue common stock – Employee Stock Purchase Plan | 304 | 126 | ||||||
Proceeds – exercise of stock options | 131 | — | ||||||
Proceeds – exercise of stock options issued under equity incentive plan of majority owned subsidiary | — | 5 | ||||||
Net cash flows provided by financing activities | 41,954 | 10,251 | ||||||
Net increase (decrease) in cash | 25,954 | 861 | ||||||
Cash, beginning of period | 17,256 | 6,219 | ||||||
Cash, end of period | $ | 43,210 | $ | 7,080 |
Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Total | |||||||||||||||||||||||||
PAVmed Inc. Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||
Series B Convertible Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Non controlling | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Total | |||||||||||||||||||||||||
Balance - December 31, 2020 | 1,228,075 | $ | 2,537 | 63,819,935 | $ | 64 | $ | 87,570 | $ | (88,275 | ) | - | $ | (2,369 | ) | $ | (473 | ) | ||||||||||||||
Issue common stock – registered offerings, net | — | — | 15,782,609 | 16 | 53,688 | — | — | 53,704 | ||||||||||||||||||||||||
Issue common stock upon partial conversions of Senior Secured Convertible Note | — | — | 667,668 | 1 | 1,722 | — | — | 1,723 | ||||||||||||||||||||||||
Issue common stock – exercise Series Z warrants | — | — | 1,740,658 | 2 | 2,783 | — | — | 2,785 | ||||||||||||||||||||||||
Issue common stock – conversion Series B Convertible Preferred Stock | (91,634 | ) | (186 | ) | 91,634 | — | 186 | — | — | — | ||||||||||||||||||||||
Series B Convertible Preferred Stock dividends declared | 49,244 | 148 | — | — | — | (148 | ) | - | — | — | ||||||||||||||||||||||
Issue common stock - Employee Stock Purchase Plan | — | — | 203,480 | — | 304 | — | — | 304 | ||||||||||||||||||||||||
Exercise - stock options | — | — | 120,832 | — | 131 | — | — | 131 | ||||||||||||||||||||||||
Vest - restricted stock awards | — | — | 150,000 | — | — | — | — | — | ||||||||||||||||||||||||
Stock-based compensation - PAVmed Inc. | — | — | — | — | 3,254 | — | — | 3,254 | ||||||||||||||||||||||||
Stock-based compensation - majority-owned subsidiary | — | — | — | — | 56 | — | 3,329 | 3,385 | ||||||||||||||||||||||||
Investment in Veris Health Inc. subsidiary | — | — | — | — | — | — | 6 | 6 | ||||||||||||||||||||||||
Net Loss | — | — | — | — | — | (20,902 | ) | - | (1,877 | ) | (22,779 | ) | ||||||||||||||||||||
Balance - June 30, 2021 | 1,185,685 | $ | 2,499 | 82,576,816 | $ | 83 | $ | 149,694 | $ | (109,325 | ) | - | $ | (911 | ) | $ | 42,040 |
See accompanying notes to the unaudited condensed consolidated financial statements.
6 |
PAVMED INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except number of shares and per share data - unaudited)
2022 | 2021 | |||||||
Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities | ||||||||
Net loss - before noncontrolling interest (“NCI”) | $ | (48,734 | ) | $ | (22,779 | ) | ||
Adjustments to reconcile net loss - before NCI to net cash used in operating activities | ||||||||
Depreciation and amortization expense | 1,031 | 28 | ||||||
Stock-based compensation | 9,820 | 6,639 | ||||||
In-process R&D charge | — | 133 | ||||||
APA-RDx: Issue common stock of majority-owned subsidiary - settle installment payment | 239 | — | ||||||
Change in fair value - Senior Secured Convertible Note | 2,000 | (1,682 | ) | |||||
Loss upon Issuance - Senior Secured Convertible Note | 2,500 | — | ||||||
Debt extinguishment loss - Senior Secured Convertible Notes and Senior Convertible Note | — | 3,715 | ||||||
Debt forgiveness | — | (300 | ) | |||||
Non-cash lease expense | 57 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 200 | — | ||||||
Prepaid expenses and other current and non-current assets | (1,665 | ) | (1,441 | ) | ||||
Accounts payable | 1,057 | 650 | ||||||
Accrued expenses and other current liabilities | (1,326 | ) | (759 | ) | ||||
Net cash flows used in operating activities | (34,821 | ) | (15,796 | ) | ||||
Cash flows from investing activities | ||||||||
Purchase of equipment | (926 | ) | (157 | ) | ||||
Payments - Acquisitions, net of cash | (2,200 | ) | (47 | ) | ||||
Net cash flows used in investing activities | (3,126 | ) | (204 | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds – issue of common stock – registered offerings | — | 55,016 | ||||||
Payment – offering costs – registered offerings | — | (1,312 | ) | |||||
Proceeds – issue of Senior Secured Convertible Note | 25,000 | — | ||||||
Payment – repayment of Senior Convertible Note and Senior Secured Convertible Note | — | (14,816 | ) | |||||
Payment – Senior Convertible Note and Senior Secured Convertible Note – non-installment payments | — | (154 | ) | |||||
Proceeds – exercise of Series Z warrants | — | 2,785 | ||||||
Proceeds – exercise of stock options | 303 | 131 | ||||||
Proceeds – issue common stock – Employee Stock Purchase Plan | 217 | 304 | ||||||
Proceeds – exercise of stock options issued under equity plan of majority owned subsidiary | 688 | — | ||||||
Purchase Treasury Stock – payment of employee payroll tax obligation in connection with stock-based compensation | (366 | ) | — | |||||
Net cash flows provided by financing activities | 25,842 | 41,954 | ||||||
Net increase (decrease) in cash | (12,105 | ) | 25,954 | |||||
Cash, beginning of period | 77,258 | 17,256 | ||||||
Cash, end of period | $ | 65,153 | $ | 43,210 |
See accompanying notes to the unaudited condensed consolidated financial statements.
7 |
PAVMED INC.
and SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in these accompanying notes are presented in thousands, except number of shares and per-share amounts.)
Note 1 — The Company
Description of the Business
PAVmed Inc. (“PAVmed”Inc and Subsidiaries, referred to herein as “PAVmed” or the “Company”) together with is comprised of PAVmed Inc. and its majority ownedwholly-owned subsidiary and its majority-owned subsidiaries, inclusive of Lucid Diagnostics Inc. (“Lucid Diagnostics” or “LUCID”), Veris Health Inc. (“Veris Health” or “VERIS”), and Solys Diagnostics Inc. (“Solys Diagnostics” or “SOLYS”) and Veris Health, Inc. (“Veris Health” or “VERIS”) were.
The Company is organized to advance a broad pipeline of innovative medical technologies from concept to commercialization, employing a business model focused on capital efficiency and speed to market. The Company’s activities have focused on advancing the lead products towards regulatory approval and commercialization, protecting its intellectual property, and building its corporate infrastructure and management team.
The Company operatesCompany’s current operational activities are principally focused on the commercialization of EsoGuard and CarpX, while its development activities are focused on pursuing FDA approval and clearance of other lead products in one segment as a medical technology company.our product portfolio pipeline, including EsoGuard IVD, PortIO, EsoCure and digital health technologies acquired by the Company’s majority-owned subsidiary Veris Health Inc.
The ability of the Company to generate revenue depends upon the Company’s ability to successfully advance the commercialization of EsoGuard and CarpX while also completing the development and the necessary regulatory approvals of its other products and services. In this regard:
AlthoughThere are no assurances, however, the Company’s current operational activities are principally focused onCompany will be able to obtain an adequate level of financial resources required for the long-term commercialization and development of EsoGuardits products and CarpX its development activities are focused on pursuing FDA approval and clearance of other lead products in our product portfolio pipeline, including EsoGuard IVD, PortIO, DisappEAR, NextFlo, EsoCure and digital health technologies acquired by the Company’s majority-owned subsidiary Veris Health Inc. (as discussed in Note 4, Acquisition of Oncodisc Inc.).
Financial Conditionservices.
The Company has financed its operations principally through the public and private issuances of its common stock, preferred stock, common stock purchase warrants, and debt. The Company is subject to all of the risks and uncertainties typically faced by medical device and diagnostic and medical device companies that devote substantially all of their efforts to the commercialization of their initial product and services and ongoing R&Dresearch and development activities and conducting clinical trials. The Company expects to continue to experience recurring losses from operations and will continue to fund its operations with debt and equity financing transactions. Notwithstanding, however, together with the cash on-hand as of June 30, 2021,the date hereof and other debt and equity committed sources of financing, the Company expects to be able to fund its future operations and meet its financial obligations as they become due for the one year period from the date of the issue of the Company’s unaudited condensed consolidated financial statements, as included herein in the Company’sthis Quarterly Report on Form 10-Q for the period ended June 30, 2021.2022.
Note 2 — Summary of Significant Accounting Policies
Significant Accounting Policies
The Company’s significant accounting policies are as disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 20202021 as filed with the SEC on March 15, 2021,April 6, 2022, except as otherwise noted herein below.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company holds a majority ownership interest and has controlling financial interest in each of: Lucid Diagnostics Inc., Solys DiagnosticsPAVmed Inc. and Veris Health Inc., with the corresponding noncontrolling interest included as a separate component of consolidated stockholders’ equity (deficit), including the recognition in the unaudited condensed consolidated statement of the net loss attributable to the noncontrolling interest based on the respective minority interest equity ownership of each majority-owned subsidiary.
The accompanying unaudited condensed consolidated financial statementsSubsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and applicable rules and regulations of the United States Securities and Exchange Commission (“SEC”) regarding interim financial reporting. As permitted under SEC rules, certain footnotes or other financial information normally required by U.S. GAAP, and include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany transactions and balances have been condensed or omitted.eliminated in consolidation. The balance sheetCompany holds a majority-ownership interest and has controlling financial interest in each of: Lucid Diagnostics Inc., Veris Health Inc., and Solys Diagnostics Inc., with the corresponding noncontrolling interest included as a separate component of December 31, 2020 has been derived from audited consolidated financial statements at such date. The accompanyingstockholders’ equity (deficit), including the recognition in the unaudited condensed consolidated financial statements have been preparedstatement of operations of a net loss attributable to the noncontrolling interest based on the same basis as the Company’s annual consolidated financial statements, and in the opinionrespective minority-interest equity ownership of management, include all adjustments, consisting only of routine recurring adjustments, necessaryeach majority-owned subsidiary. See Note 15, Noncontrolling Interest, for a fair presentationdiscussion of each of the Company’s unaudited condensed consolidated financial information.
majority-owned subsidiaries noted above. The results ofCompany manages its operations as a single operating segment for the threepurposes of assessing performance and six months ended June 301, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other interim period or for any other future periods. The accompanying unaudited condensed consolidated financial statements and related unaudited condensed consolidated financial information should be read in conjunction with the audited consolidated financial statements and related notes thereto as of and for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K as filed with the SEC on March 15, 2021.making operating decisions.
All amounts in the accompanying unaudited notes to the unaudited condensed consolidated financial statements and these notes thereto are presented in thousands of dollars, if not otherwise noted as being presented in millions of dollars, except for the number of shares and per share amounts.
Use of Estimates
In preparing the unaudited condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and the determination of corresponding carrying value reserve, if any, and liabilities and the disclosure of contingent assets and liabilities atlosses, as of the date of the unaudited condensed consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Due to inherent uncertainty involved in makingSignificant estimates actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions. These estimates and assumptions(unaudited) condensed consolidated financial statements include those related to the estimated fair value of debt obligations, stock-based equity awards, intangible assets, and common stock purchase warrants. Other significant estimates include the estimated incremental borrowing rate, the provision or benefit for income taxes and the estimated fair value of financial instruments recognized as liabilities. In addition,corresponding valuation allowance on deferred tax assets. Additionally, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows. On an ongoing basis, the Company evaluates its estimates and assumptions. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates.
Note 2 — Summary of Significant Accounting Policies - continued
Recently AdoptedSignificant Accounting StandardsPolicies - Continued
Leases
In August 2020, theThe Company adopted FASB issued its Accounting Standards Update (“ASU”) 2020-06,ASC Topic 842, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40)Leases, (“ASU 2020-06”ASC 842”). ASU 2020-06 simplifies the accounting for certain financial instruments effective December 31, 2021, with characteristics of liabilities and equity, including convertible instruments and contracts onsuch adoption not having an entity’s own equity. The ASU2020-06 amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company’s adoption of the ASU 2020-06 guidance as of January 1, 2021, had no effect on its unaudited condensedthe Company’s consolidated financial statements.
In December 2019,All significant lease agreements and contractual agreements with embedded lease agreements are accounted for under the FASB issued ASU No. 2019-12,“Income Taxes: Simplifyingprovisions of ASC 842, wherein, if the Accounting for Income Taxes”, (“ASU 2019-12”). The guidance of ASU 2019-12 removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation, and calculating income taxes in interim periods, and adds revised guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to memberscontractual arrangement: involves the use of a consolidated group. Adoptiondistinct identified asset; provides for the right to substantially all the economic benefits from the use of the guidance of ASU 2019-12 is requiredasset throughout the contractual period; and provides for annual and interim financial statements beginning after December 15, 2020. The Company’s adoptionthe right to direct the use of the ASU 2019-12 guidanceasset. A lease agreement is accounted for as either a finance lease (generally with respect real estate) or an operating lease (generally with respect to equipment). Under both a finance lease and an operating lease, the Company recognizes as of January 1, 2021 had no effectthe lease commencement date a lease right-of-use (“ROU”) asset and a corresponding lease payment liability.
A lease ROU asset represents the Company’s right to use an underlying asset for the lease term, and the lease liability represents its contractual obligation to make lease payments. The lease ROU asset is measured at the lease commencement date as the present value of the future lease payments plus initial direct costs incurred. The Company recognizes lease expense of the amortization of the lease ROU asset for an operating lease on a straight-line basis over the lease term; and for financing leases on a straight-line basis unless another basis is more representative of the pattern of economic benefit. The operating ROU asset also includes any lease incentives received for improvements to leased property, when the improvements are lessee-owned. Improvements to leased property that are lessor-owned, the Company includes amounts the Company incurred for the improvements as ROU assets which are amortized on a straight-line basis over the life of the lease.
The lease liability is measured at the lease commencement date with the discount rate generally based on the Company’s unaudited condensed consolidated financial statements.incremental borrowing rate (to the extent the lease implicit rate is not known nor determinable), with interest expense recognized using the interest method for financing leases.
Certain leases may include options to extend or terminate the agreement. The Company does not assume renewals in determination of the lease term unless the renewals are deemed to be reasonably certain at lease commencement. As well, an option to terminate is considered unless it is reasonably certain the Company will not exercise the option. The Company elected the practical expedient to not recognize a lease ROU asset and lease payment liability for leases with a term of twelve months or less (“short-term leases”), resulting in the aggregate lease payments being recognized on a straight line basis over the lease term. The Company’s leases with a commencement date prior to January 1, 2022 were short-term leases and therefore did not require recording a ROU asset or lease liability at December 31, 2021. Additionally, the Company elected the practical expedient to not separate lease and non-lease components.
Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued
Significant Accounting Policies - Continued
Fair Value Option (“FVO”) Election
Under a Securities Purchase Agreement dated March 31, 2022, the Company issued a Senior Secured Convertible Note dated April 4, 2022 - referred to herein as the “April 2022 Senior Convertible Note” - which is accounted under the “fair value option election” as discussed below.
Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivative and Hedging, (“ASC 815”), a financial instrument containing embedded features and /or options may be required to be bifurcated from the financial instrument host and recognized as separate derivative asset or liability, with the bifurcated derivative asset or liability initially measured at estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair value as of each reporting period balance sheet date.
Alternatively, FASB ASC Topic 825, Financial Instruments, (“ASC 825”) provides for the “fair value option” (“FVO”) election. In this regard, ASC 825-10-15-4 provides for the FVO election (to the extent not otherwise prohibited by ASC 825-10-15-5) to be afforded to financial instruments, wherein the financial instrument is initially measured at estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair value as of each reporting period balance sheet date, with changes in the estimated fair value recognized as other income (expense) in the statement of operations. The estimated fair value adjustment of the April 2022 Senior Convertible Note is presented in a single line item within other income (expense) in the accompanying unaudited condensed consolidated statement of operations (as provided for by ASC 825-10-50-30(b)). Further, as required by ASC 825-10-45-5, to the extent a portion of the fair value adjustment is attributed to a change in the instrument-specific credit risk, such portion would be recognized as a component of other comprehensive income (“OCI”) (for which there was no such adjustment with respect to the April 2022 Senior Convertible Note).
See Note 10, Financial Instruments Fair Value Measurements, with respect to the FVO election; and Note 11, Debt, for a discussion of the April 2022 Senior Convertible Note.
11 |
Note 3 —Revenue from Contracts with Customers
Revenue is recognized when the satisfaction of the performance obligation occurs, which is when the delivery of product and /or the provision of service is rendered, and is measured as the amount of estimated consideration expected to be realized. In the period ended June 30, 2022, the Company recognized revenue under the EsoGuard Commercialization Agreement, dated August 1, 2021, as discussed below.
EsoGuard Commercialization Agreement
The Company, through its majority-owned subsidiary, Lucid Diagnostics Inc., entered into the EsoGuard Commercialization Agreement, dated August 1, 2021, with its Commercial Laboratory Improvements Act (“CLIA”) certified commercial laboratory service provider, ResearchDx Inc. (“RDx”), an unrelated third-party. The EsoGuard Commercialization Agreement was on a month-to-month basis, and was terminated on February 25, 2022 upon the execution of an asset purchase agreement (“APA”) dated February 25, 2022, between LucidDx Labs Inc. (a wholly-owned subsidiary of Lucid Diagnostics Inc.) and RDx, with such agreement further discussed in Note 5, Asset Purchase Agreement and Management Services Agreement,.
Revenue Recognized
In the six months ended June 30, 2022, the Company recognized total revenue of $189, under the EsoGuard Commercialization Agreement, which represents the minimum fixed monthly fee of $100 for the period January 1, 2022 to the February 25, 2022 termination date as discussed above, The monthly fee was deemed to be collectible for such period as RDx has timely paid the applicable respective monthly fee.
Cost of Revenue
The cost of revenue recognized with respect to the revenue recognized under the EsoGuard Commercialization Agreement for the period January 1, 2022 to February 25, 2022 totaled $369, inclusive of employee related costs of personnel engaged in the delivery of the administration to patients of the EsoCheck cell sample collection procedure, EsoCheck devices and EsoGuard mailers (cell sample shipping costs) distributed to medical practitioners’ locations and the Lucid Test Centers; Lucid Test Centers operating expenses, including rent expense and supplies; and royalty fees incurred under the Amended CWRU License Agreement.
12 |
Note 4 — Related Party Transactions
Case Western Reserve University and Physician Inventors - Amended CWRU License Agreement
Case Western Reserve University (“CWRU”) and each of the three physician inventors (“Physician Inventors”) of the intellectual property licensed under the amended and restated patent license agreement with CWRU, dated August 23, 2021 (the “Amended CWRU License Agreement (“Physician Inventors”Agreement”), each hold a minority equity ownership minority interestsinterest in Lucid Diagnostics Inc. The expenses incurred with respect to the Amended 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:
Schedule of Incurred Expenses of Minority Shareholders
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
General and Administrative Expense | ||||||||||||||||
Stock-based compensation expense – Physician Inventors’ restricted stock awards | 273 | — | 364 | — | ||||||||||||
Research and Development Expense | ||||||||||||||||
CWRU License Agreement - reimbursement of patent legal fees | $ | 113 | $ | 27 | $ | 113 | $ | 59 | ||||||||
EsoCheck devices provided to CWRU | — | — | — | 15 | ||||||||||||
Fees - Physician Inventors’ consulting agreements | 1 | 15 | 14 | 53 | ||||||||||||
Stock-based compensation expense – Physician Inventors’ stock options | 52 | 6 | 58 | 12 | ||||||||||||
Total Related Party Expenses | $ | 439 | $ | 48 | $ | 549 | $ | 139 |
2022 | 2021 | 2022 | 2021 | |||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Cost of Revenue | ||||||||||||||||
CWRU – Royalty Fee | $ | — | $ | — | $ | 9 | $ | — | ||||||||
General and Administrative Expense | ||||||||||||||||
Stock-based compensation expense – Physician Inventors’ restricted stock awards | 272 | 273 | 544 | 364 | ||||||||||||
Research and Development Expense | ||||||||||||||||
Amended CWRU License Agreement - reimbursement of patent legal fees | 209 | 113 | 209 | 113 | ||||||||||||
Fees - Physician Inventors’ consulting agreements | 10 | 1 | 18 | 14 | ||||||||||||
Sponsored research agreement | — | — | 3 | — | ||||||||||||
Stock-based compensation expense – Physician Inventors’ stock options | 52 | 52 | 99 | 58 | ||||||||||||
Total Related Party Expenses | $ | 543 | $ | 439 | $ | 882 | $ | 549 |
Lucid Diagnostics Inc. entered into consulting agreements with each of the three Physician Inventors, with each such consulting agreement providing for compensation on a contractual rate per hour for consulting services provided, and an expiration date of May 12, 2024, upon the agreements’ renewal effective May 12, 2021. Additionally, as discussed below, each of the Physician Inventors have been granted stock options under the PAVmed Inc. 2014 Long-Term Incentive Equity Plan, and stock options and restricted stock awards under the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan.
Under each of their respective (initial) consulting agreements with Lucid Diagnostics Inc., the three Physician Inventors were each granted stock options under the PAVmed Inc. 2014 Equity Plan, with a grant date of May 12, 2018, an exercise price of $ per share of common stock of PAVmed Inc., vesting ratably on a quarterly basis commencing June 30, 2018 and ending March 31, 2021, and a contractual period of years from the date of grant. As of March 31, 2021, such stock options were fully vested and exercisable. Subsequent to March 31, 2021, each of the Physician Inventors were granted stock options under the PAVmed Inc. 2014 Equity Plan, with a grant date of June 21, 2021, an exercise price of $ per share of common stock of PAVmed Inc., vesting ratably on a quarterly basis commencing June 30, 2021 and ending March 31, 2024, and a contractual period of ten years from the date of grant.
On March 1, 2021, restricted stock awards were granted under the Lucid Diagnostics Inc. 2018 Equity Plan to each of the three Physician Inventors, with such restricted stock awards having a single vesting date of March 1, 2023, with the fair value of such restricted stock awards recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed.
See Note 8,12, Stock-Based Compensation, for information regarding each of the “PAVmed Inc. 2014 Long-Term Incentive Equity Plan” and the separate.separate “Lucid Diagnostics Inc 2018 Long-Term Incentive Equity Plan”; and Note 11,15, Noncontrolling Interest, for a discussion of Lucid Diagnostics Inc. and the corresponding noncontrolling interests.
Other Related Party Transactions
Lucid Diagnostics Inc. previously entered into a consulting agreement with Stanley N. Lapidus, effective July 1,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 of $8 and $14 in the three and six months ended June 30, 2021 respectively, in connection with the consulting agreement.
Effective June 2021, Veris Health Inc. entered into a consulting agreement with Andrew Thoreson, M.D. which provides for compensation on a contractual rate per hour for consulting services provided. Dr. Thoreson holds a partial ownership interest in the legal entity which holds a minority interest in Veris Health Inc. Veris Health Inc. recognized general and administrative expense of $13 and $37 in the three and six months ended June 30, 2022 in connection with the consulting agreement.
Note 45 — Acquisition of Oncodisc IncAsset Purchase Agreement and Management Services Agreement
On May 28, 2021, Veris HealthAsset Purchase Agreement - ResearchDx Inc., a majority-owned subsidiary of PAVmed Inc., acquired all of the outstanding common stock of Oncodisc Inc. (“Oncodisc”) for total (gross) purchase consideration of approximately $261, consisting of: the issue of shares of common stock of Veris Health Inc., with such shares having an estimated fair value of approximately $6; and cash paid of approximately $255, inclusive of approximately $155 paid at the time of the transaction closing and the remaining balance paid subsequent to June 30, 2021. Additionally, the cash acquired was approximately $108 and liabilities assumed were approximately $50. The acquisition of Oncodisc was accounted for by Veris Health Inc as an asset acquisition. Veris Health Inc. has allocated the preliminary purchase price based upon the respective fair values as of the date of acquisition as follows:
ScheduleLucidDx Labs Inc., a wholly-owned subsidiary of Assets AcquiredLucid Diagnostics Inc., entered into an asset purchase agreement (“APA”) dated February 25, 2022, with ResearchDx, Inc. (“RDx”), an unrelated third-party - “APA-RDx”. Under the APA-RDx, LucidDx Labs Inc. acquired certain assets from RDx which were combined with LucidDx Labs Inc. purchased and Liabilities Assumedleased property and equipment to establish a Company-owned Commercial Lab Improvements Act (“CLIA”) certified, College of American Pathologists (“CAP”) accredited commercial clinical laboratory capable of performing the EsoGuard® Esophageal DNA assay, inclusive of DNA extraction, next generation sequencing (“NGS”) and specimen storage. Prior to February 25, 2022, RDx provided such laboratory services at its owned CLIA-certified, CAP-accredited clinical laboratory.
Cash acquired | $ | 108 | ||
Intangible asset - in-process research and development | 133 | |||
Intangible asset - assembled workforce | 70 | |||
Liabilities assumed | (50 | ) | ||
Total net assets acquired | $ | 261 |
The intangible asset recognized fortotal purchase price consideration payable under the in-process research and development (“IPRD”)APA-RDx is a face value of $1333,200 was determined to have no alternative future use and was recognizedcomprised of three contractually specified periodic payments. The APA-RDx is being accounted for as a current period research and development expense. Thean asset acquisition, with the recognition of an intangible asset recognized for the assembled workforce of approximately $703,200, which is included in “Other assets”“Intangible assets, net” on the accompanying unaudited condensed consolidated balance sheet, has an expected useful lifeas further discussed in Note 8, Intangible Assets, net. In the three and six months ended June 30, 2022, a total of one year, and is being recognized as a research and development expense on a ratable basis over such period, commencing$2,200 of cash was paid with respect to the periodic payments. Subsequent to June 30, 2022, in June 2021. See Note 11, Noncontrolling Interest, for a discussionJuly 2022, $1,000 of Veris Health Inc. andcash was paid with respect to the corresponding noncontrolling interests.remaining unpaid balance of the periodic payments.
Additionally, the APA-RDx requires the Company to pay a total of $3,000 to be paid as twelve (12) equal installment payments commencing May 25, 2022 and then on each three month anniversary thereof, inclusive of a final installment payment on February 25, 2025, with such installment payments recognized as current period expense as incurred. In the three and six months ended June 30, 2022, as provided for in the APA-RDx, an installment payment was settled by the issue of shares of common stock of Lucid Diagnostics Inc., with such shares having a fair value of $239 (with the fair value measured as the quoted closing price on the date the shares were issued), which was recognized as a current period expense included in general and administrative expenses in the accompanying unaudited condensed consolidated statement of operations.
The APA-RDx provides for each of an acceleration and a cancellation of the remaining unpaid installment payments, summarized as follows:
● | The payment of the remaining unpaid installment payments will be accelerated as immediately due and payable as of the date the “MSA-RDx” (as such agreement is discussed below) is either terminated by LucidDx Labs Inc. or if it is terminated by mutual agreement between LucidDx Labs Inc. and RDx. | |
● | The payment of the remaining unpaid installment payments will be cancelled if the MSA-RDx is terminated by LucidDx Labs Inc. for cause, defined as the occurrence of any one of: (i) a material breach by RDx which is not cured within thirty days of LucidDx Labs Inc. written notice; (ii) RDx becomes insolvent and /or bankrupt; or (ii) RDx fails to comply with applicable statutes, is barred from participating in federal health care programs, or by action of changes in law or regulation, or by action of judicial interpretation of law, or by judicial civil proceedings decisions. |
Management Services Agreement - Research Dx Inc
LucidDx Labs Inc. and RDx entered into a separate management services agreement (“MSA-RDx”), dated and effective February 25, 2022, with such agreement having a term of three years commencing on the agreement’s effective date, and an initial fee of $150 per quarter. The MSA-RDx provides for the cancellation of the remaining unpaid installment payments upon termination of the MSA-RDx for any reason or no reason by either party thereto.
14 |
Note 6 — Prepaid Expenses, Deposits, and Other Current Assets
Prepaid expenses and other current assets consisted of the following as of:
Schedule of Prepaid Expenses and Other Current Assets
June 30, 2022 | December 31, 2021 | |||||||
Advanced payments to service providers and suppliers | $ | 834 | $ | 808 | ||||
Prepaid insurance | 1,156 | 1,856 | ||||||
Deposits | 3,317 | 1,989 | ||||||
EsoCheck cell collection supplies | 215 | 434 | ||||||
EsoGuard mailer supplies | 65 | 59 | ||||||
CarpX devices | 75 | 33 | ||||||
Total prepaid expenses, deposits and other current assets | $ | 5,662 | $ | 5,179 |
Note 7 — Leases
During the six months ended June 30, 2022, the Company entered into additional lease agreements that have commenced and are classified as operating leases and short-term leases, including for each of: a research and development facility; a commercial clinical laboratory; additional Lucid Test Centers; and for office space.
The Company’s future lease payments as of June 30, 2022, which are presented as operating lease liabilities, current portion and operating lease liabilities, less current portion on the Company’s unaudited condensed consolidated balance sheets are as follows:
Schedule of future minimum lease payments for capital leases
2022 (remainder of year) | $ | 562 | ||
2023 | 1,175 | |||
2024 | 1,139 | |||
2025 | 272 | |||
2026 | 272 | |||
Thereafter | 132 | |||
Total lease payments | $ | 3,552 | ||
Less: imputed interest | (426 | ) | ||
Present value of lease liabilities | $ | 3,126 |
Supplemental disclosure of cash flow information related to the Company’s cash and non-cash activities with its leases are as follows:
Schedule of Supplemental Balance Sheet Information Related to Cash and Non-cash Activities with Leases
2022 | 2021 | |||||||
Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Cash paid for amounts included in the measurement of lease liabilities | ||||||||
Operating cash flows from operating leases | $ | 483 | $ | — | ||||
Non-cash investing and financing activities | ||||||||
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 3,633 | $ | — | ||||
Weighted-average remaining lease term - operating leases (in years) | 3.31 | — | ||||||
Weighted-average discount rate - operating leases | 7.875 | % | — | % |
As of June 30, 2022, the Company’s right-of-use assets from operating leases are $3,205, which are reporting in right-of-use assets - operating leases in the unaudited condensed consolidated balance sheets. As of June 30, 2022, the Company has outstanding operating lease obligations of $3,126, of which $943 is reported in operating lease liabilities, current portion and $2,183 is reporting in operating lease liabilities less current portion in the Company’s unaudited condensed consolidated balance sheets. The Company did not have operating leases as of December 31, 2021. The Company calculates its incremental borrowing rates for specific lease terms, used to discount future lease payments, as a function of the financing terms the Company would likely receive on the open market.
15 |
Note 8 — Intangible Assets, net
Intangible assets, less accumulated amortization, consisted of the following as of:
Schedule of Intangible Assets Accumulated Amortization
Estimated Useful Life | June 30, 2022 | December 31, 2021 | ||||||||
Defensive asset | 60 months | $ | 2,105 | $ | 2,105 | |||||
Laboratory licenses and certifications and laboratory information management software (“LIMSDx”) | 24 months | 3,200 | --- | |||||||
Other | 1 year | 70 | 70 | |||||||
Total Intangible assets | 5,375 | 2,175 | ||||||||
Less Accumulated Amortization | (919 | ) | (146 | ) | ||||||
Intangible Assets, net | $ | 4,456 | $ | 2,029 |
The defensive technology intangible asset was recognized by PAVmed Subsidiary Corp upon its acquisition of CapNostics, LLC, an unrelated third-party, for total purchase consideration paid on the October 5, 2021 acquisition date of approximately $2.1 million in cash. The CapNostics LLC transaction was accounted for as an asset acquisition, resulting in the recognition of the defensive technology intangible asset. The defensive technology intangible asset is being amortized on a straight-line basis over an expected useful life 60 months commencing on the acquisition date.
As noted in Note 5, Asset Purchase Agreement and Management Services Agreement, the asset purchase agreement between the Company and ResearchDx Inc. (“APA-RDx”), is being accounted as asset acquisition. The intangible assets recognized under the APA-RDx are the laboratory licenses and certifications, inclusive of inclusive of a CLIA certification, CAP accreditation, and clinical laboratory licenses for five (5) U.S. States transfer to the Company from RDx, and a laboratory information management software (“LIMSDx”) perpetual-use royalty-free license granted under the APA-RDx, with such intangible asset having a useful life of twenty-four months commencing on the APA-RDx February 25, 2022 transaction date.
Amortization expense of the intangible assets discussed above was $650 and $6 for the three month periods ended June 30, 2022 and 2021, respectively, and $773 and $6 for the six month periods ended June 30, 2022 and 2021, respectively, and is included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. As of June 30, 2022, the estimated future amortization expense associated with the Company’s identified finite-lived intangible assets for each of the five succeeding fiscal years is as follows:
Schedule of Estimated Amortization Expense for Intangible Assets
2022 (remainder of year) | $ | 1,010 | ||
2023 | 2,021 | |||
2024 | 688 | |||
2025 | 421 | |||
2026 | 316 | |||
Total | $ | 4,456 |
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Note 9 — Commitment and Contingencies
Legal Proceedings
InDelaware Court of Chancery Complaint
On November 2, 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 PAVmed Inc. 2014 Long-Term Incentive Equity Plan and the ESPP)PAVmed Inc. Employee Stock Purchase Plan). The relief sought under the complaint includes certain corrective actions by the Company, but doesdid not seek any specific monetary damages. The Company doesdid not believe it iswas clear the prior approval of these matters iswas invalid or otherwise ineffective. However, to avoid any uncertainty and the expense of further litigation, on January 5, 2021, the Company’s Boardboard of Directorsdirectors 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 sheetSettlement Term Sheet Agreement, dated January 28, 2021, to settle the complaint, the terms of which do not contemplate payment of monetary damages to the putative class in the proceeding. TheIn connection with the foregoing, on August 3, 2022, the parties agreed that plaintiff’s counsel would not seek an award from the Court in excess of $450, to be paid by the Company, upon Court approval, as compensation for the benefits conferred by the settlement, and the Company would not object to an award of up to such maximum amount. Such agreement was approved by the Company’s board of directors as of August 5, 2022.The settlement of the complaint and plaintiff’s counsel’s fee award is pending andsubject-to the approval of the Court. The settlement hearing before the Court is subject to court approval.scheduled for November 3, 2022.
Benchmark Investments, Inc. / Benchmark Investments LLC
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 Kingswood Capital Markets, a “division” of Benchmark Investments, Inc. On December 16, 2021, the plaintiff.court granted PAVmed’s motion to dismiss the case for lack of subject matter jurisdiction. On February 7, 2022, Benchmark Investments LLC, which claimed to be a successor to Benchmark Investments, Inc., filed a new complaint in the Supreme Court of the State of New York, New York County, asserting claims similar to those in the federal action, and adding to its allegations that financings conducted by the Company in January 2021 and February 2021 also violated the Company’s engagement letter with Kingswood Capital Markets. The plaintiffCompany has made a motion to dismiss this complaint for Benchmark Investments LLC’s lack of standing, which motion is seeking monetary damages of up to $1.3 million. Thepending. In any event, the Company disagrees with the allegations set forth in the complaint and intends to vigorously contest the complaint.
Other Matters
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 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.
Note 610 — Financial Instruments Fair Value Measurements
Recurring Fair Value Measurements
The fair value hierarchy table for the reporting datesdate noted is as follows:
Schedule of Financial Liabilities Measured at Fair Value on Recurring Basis
Fair Value Measurement on a Recurring Basis at Reporting Date Using(1) | ||||||||||||||||
Level-1 | Level-2 | Level-3 | ||||||||||||||
Inputs | Inputs | Inputs | Total | |||||||||||||
December 31, 2020 | ||||||||||||||||
Senior Secured Convertible Note - November 2019 | $ | — | $ | — | $ | 1,270 | $ | 1,270 | ||||||||
Senior Convertible Note - April 2020 | $ | — | $ | — | $ | 4,600 | $ | 4,600 | ||||||||
Senior Secured Convertible Note – August 2020 | $ | — | $ | — | $ | 8,790 | $ | 8,790 | ||||||||
Totals | $ | — | $ | — | $ | 14,660 | $ | 14,660 |
Fair Value Measurement on a Recurring Basis at Reporting Date Using(1) | ||||||||
Level-1 Inputs | Level-2 Inputs | Level-3 Inputs | Total | |||||
June 30, 2022 | ||||||||
Senior Secured Convertible Note - April 2022 | $ — | $ — | $ 29,500 | $ 29,500 | ||||
Totals | $ — | $ — | $ 29,500 | $ 29,500 |
(1) | As noted above, as presented in the fair value hierarchy table, Level-1 represents quoted prices in active markets for identical items, Level-2 represents significant other observable inputs, and Level-3 represents significant unobservable inputs. There were no transfers between the respective Levels during the period ended June 30, 2022. |
TheAs discussed in Note 11, Debt, the Company issued a Senior Secured Convertible Note dated August 6, 2020, theApril 4, 2022, with an initial $27.5 million face value principal (“April 2022 Senior Convertible Note”). The April 2022 Senior Convertible Note dated April 30, 2020, the Senior Secured Convertible Note (Series-A and Series-B), dated November 19, 2019, and the Senior Secured Convertible Note dated December 27, 2018, were eachis accounted for under the ASC 825-10-15-4 fair value option (“FVO”) election, wherein, each of the convertible notes werefinancial instrument is initially measured at their respectiveits issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date, with the resulting fair value adjustment recognized as other income (expense) in the unaudited condensed consolidated statement of operations.date.
There were no fair value measurements as of June 30, 2021 as each of the convertible notes were previously repaid-in-full in the three months ended March 31, 2021, as discussed herein below in Note 7, Debt. The estimated fair value of each of the convertible notes as of December 31, 2020, were computed using a Monte Carlo simulation of the present value of its cash flows using a synthetic credit rating analysis and a required rate-of-return, and were thereforefinancial instruments classified within the Level 3 category as the fair value was determined using both observable inputs and unobservable inputs. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs.
The estimated fair value of the April 2022 Senior Convertible Note as of each of April 4, 2022 and June 30, 2022, were computed using a Monte Carlo simulation of the present value of its cash flows using a synthetic credit rating analysis and a required rate-of-return, using the following assumptions:
Schedule of Fair Value Assumption Used
April 2022 SeniorConvertible Note: April 4, 2022 | April 2022 Senior Convertible Note: | |||||||
Fair Value | $ | 30,100 | $ | 29,500 | ||||
Face value principal payable | $ | 27,500 | $ | 27,500 | ||||
Required rate of return | 7.875 | % | 11.20 | % | ||||
Conversion Price | $ | 5.00 | $ | 5.00 | ||||
Value of common stock | $ | $ | ||||||
Expected term (years) | 2.00 | 1.76 | ||||||
Volatility | 115.00 | % | 130.00 | % | ||||
Risk free rate | 2.40 | % | 2.85 | % | ||||
Dividend yield | — | % | — | % |
The estimated fair values reported utilized the Company’s common stock price along with certain Level 3 inputs as(as discussed above,above), in the development of Monte Carlo simulation models, discounted cash flow analyses, and /or Black-Scholes valuation models. The estimated fair values are subjective and are affected by changes in inputs to the valuation models /analyses, including the Company’s common stock price, the Company’s dividend yield, the risk-free rates based on U.S. Treasury security yields, and certain other Level-3 inputs including, assumptions regarding the estimated volatility in the value of the Company’s common stock price. Changes in these assumptions can materially affect the estimated fair values.
Note 711 — Debt
Convertible NotesThe Company entered into a Securities Purchase Agreement (“SPA”) dated March 31, 2022, with an accredited institutional investor (“Investor”, “Lender”, and /or “Holder”), wherein, the Company agreed to sell, and the Investor agreed to purchase an aggregate of $50.0 million face value principal of debt - comprised of: an initial issuance of $27.5 million face value principal; and up to an additional $22.5 million of face value principal (upon the satisfaction of certain conditions). The debt is being issued in a registered direct offering under the Company’s effective shelf registration statement.
All ofUnder the convertible notes, as such convertible notes are discussed below, were repaid-in-full during the three months endedSPA dated March 31, 2021. The fair value and face value principal of outstanding convertible notes at December 31, 2020 were as follows:
Summary of Outstanding Debt
Contractual Maturity Date | Stated Interest Rate | Conversion Price per Share | Face Value Principal Outstanding | Fair Value | ||||||||||||||
November 2019 Senior Secured Convertible Note | September 30, 2021 | 7.875 | % | $ | 1.60 | $ | 956 | $ | 1,270 | |||||||||
April 2020 Senior Convertible Note | April 30, 2022 | 7.875 | % | $ | 5.00 | $ | 4,111 | $ | 4,600 | |||||||||
August 2020 Senior Secured Convertible Note | August 6, 2022 | 7.875 | % | $ | 5.00 | $ | 7,750 | $ | 8,790 | |||||||||
Balance - December 31, 2020 | $ | 12,817 | $ | 14,660 |
2022, the Company issued a Senior Secured Convertible Note issued Novemberdated April 4, 2019 - Series A and Series B -
(“November 20192022, referred to herein as the “April 2022 Senior Convertible Notes”)Note”, with such note having a $27.5 million face value principal, a 7.875% annual stated interest rate, a contractual conversion price of $5.00 per share of the Company’s common stock (subject to standard adjustments in the event of any stock split, stock dividend, stock combination, recapitalization or other similar transaction), and a contractual maturity date of April 4, 2024. The April 2022 Senior Convertible Note may be converted into shares of common stock of the Company at the Holder’s election, as discussed below.
The “November 2019April 2022 Senior Convertible Notes”Note proceeds were $25.0 million after deducting a $2.5 million lender fee; and additionally, the Company incurred total offering costs of approximately $601, inclusive of the payment of a total of $450 placement agent fees. The lender fee and offering costs were recognized as of the April 4, 2022 issue date as a current period expense in other income (expense) in the consolidated statement of operations.
During the period from April 4, 2022 to October 3, 2022, the Company is required to pay interest expense only (on the $27.5 million face value principal), at 7.875% per annum, computed on a 360 day year. The Company paid in cash interest expense of approximately $523 for the period April 4, 2022 to June 30, 2022; and approximately $181 subsequent to June 30, 2022 as of August 10, 2022.
Commencing October 4, 2022, and then on each of the successive first and tenth trading day of each month thereafter through to and including April 1, 2024 (each referred to as an “Installment Date”); and on the April 4, 2024 maturity date, the Company will be required to make a principal repayment of $724 together with accrued interest thereon, with such 38 payments referred to herein as the “Installment Amount”, settled in shares of common stock of the Company, subject to customary equity conditions, including minimum share price and volume thresholds, or at the election of the Company, in cash, in whole or in part.
In addition to the Installment Amount repayments, the Holder may elect to accelerate the conversion of future Installment Amount repayments, and interest thereon, subject to certain restrictions, as defined, utilizing the then current conversion price of the most recent Installment Date conversion price.
Subject to certain conditions being met or waived, from time to time, one or more additional closings may occur, for up to the remaining $22.5 million face value principal, upon five trading days’ notice given by the Company to the Investor. The Investor’s obligation to purchase the additional notes at each additional closing is subject to certain conditions set forth in the SPA dated March 31, 2022, including, among others, contractual closing requirements: minimum price and trading volume thresholds of the Company’s common stock; the maximum ratio of debt to market capitalization (as defined); and minimum market capitalization (as defined), with such requirements being waived by the Investor in its sole discretion.
Additionally, effective March 31, 2023, the Investor may by written notice elect to require the Company to issue additional notes of up to $22.5 million in face value principal, so long as in doing so it would not cause the ratio of (a) the outstanding principal amount of the April 2022 Senior Convertible Note (and any additional notes issued under the SPA dated March 31, 2022), accrued and unpaid interest thereon and accrued and unpaid late charges to (b) our average market capitalization over the prior ten trading days, to exceed 25%. If the Company does not issue the additional notes contemplated by any such written notice, or if the Investor is unable to deliver any such notice prior to March 31, 2024 as a result of the limitation described in the preceding sentence, then the Company will be obligated to pay up to a maximum of a $1.35 million a break-up fee.
19 |
Note 11 — Debt - continued
The payment of all amounts due and payable under the April 2022 Senior Convertible Note is guaranteed by the Company and its wholly-owned and majority-owned subsidiaries, except for Lucid Diagnostics Inc and its wholly-owned subsidiaries; and the obligations under the April 2022 Senior Convertible Note are secured by all of the assets of the Company and each guarantor, except only up to 9.99% of the shares of common stock of Lucid Diagnostics Inc. held by PAVmed Inc. are pledged to secure the indebtedness under the April 2022 Senior Convertible Note.
The Company is subject to certain customary affirmative and negative covenants regarding the rank of the notes, along with the incurrence of further indebtedness, the existence of liens, the repayment of indebtedness and the making of investments, the payment of cash in respect of dividends, distributions or redemptions, the transfer of assets, the maturity of other indebtedness, and transactions with affiliates, among other customary matters.
The Company is subject to financial covenants requiring: (i) a minimum of $8.0 million of available cash at all times; (ii) the ratio of (a) the outstanding principal amount of the April 2022 Senior Convertible Note, (and any additional notes issued under the SPA dated March 31, 2022), accrued and unpaid interest thereon and accrued and unpaid late charges to (b) the Company’s average market capitalization over the prior ten trading days, to not exceed 30% (the “Debt to Market Cap Ratio Test”); and (iii) the Company’s market capitalization to at no time be less than $75 million. (the “Market Cap Test” and, together with the Debt to Market Cap Ratio Test, the “Financial Tests”). The Company is currently in compliance with these financial covenants, although from time to time since the date of issuance of the April 2022 Senior Convertible Note through August 10, 2022 (including, in the case of the Debt to Market Cap Ratio Test, as of June 30, 2022), the Company was not in compliance with the Financial Tests. As of August 9, 2022, the Investor agreed to waive any such non-compliance during such aforementioned time periods, under each of the SPA dated March 31, 2022 and the April 2022 Senior Convertible Note.
In connection with the waiver dated August 9, 2022, the Company and the Investor also amended the April 2022 Senior Convertible Note to permit the Investor to convert up to $5.0 million of the face value principal of the April 2022 Senior Convertible Note at the then current conversion price as if the date of conversion were an Installment Date, i.e. a price per share of common stock equal to the lower of (i) the fixed conversion price then in effect (currently $5.00) and (ii) 82.5% of the average VWAP of the Company’s common stock for each of the two trading days with the lowest VWAP of the Company’s common stock during the ten consecutive trading day period ending and including the trading day immediately prior to the applicable conversion date, but in the case of clause (ii), not less than $ per share. As contemplated by such amendment, subsequent to June 30, 2022, on August 10, 2022, approximately $9562,882 as of December 31, 2020 was repaid-in-full as of January 5, 2021, with the remaining principal balance,repayments along with the paymentapproximately $6 of interest expense thereon, of approximately $7,were settled withthrough the issuance of shares of common stock of the Company, with such shares having a fair value of approximately $1,7235,462 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company).
Senior Convertible Note issued April 30, 2020 - (“April 2020 Senior Convertible Note”)
The “April 2020 Senior Convertible Note” unpaid outstandingfair value and face value principal of approximately $4,111 as of December 31, 2020 was repaid-in-full in March 2021, as discussed herein below. In the six months ended June 30, 2021 and 2020, approximately $52 and $54, respectively, of non-installment payments were paid in cash.
Senior Secured Convertible Note issued August 6, 2020 - (“August 2020 Senior Convertible Note”)
The “August Senior Convertible Note” unpaid outstanding face value principal of approximately $7,750 as of December 31, 2020 was repaid-in-full in March 2021, as discussed herein below. In the six months ended June 30, 2021, approximately $102 of non-installment payments were paid in cash. There were 0 such payments in the corresponding period of the prior year.
Note 7 — Debt - continued
Convertible Notes - continued
Principal Repayments - April 20202022 Senior Convertible Note and August 2020 Senior Convertible Note
On January 30, 2021, the Company paid in cash a $350 partial principal repayment of the April 2020 Senior Convertible Note; and on March 2, 2021, the Company paid in cash a total of $14,466 of principal repayments, resulting in both the April 2020 Senior Convertible Note and the August 2020 Senior Convertible Note being repaid-in-full as of such date. The Company recognized a debt extinguishment loss of approximately $2,955 in the six months ended June 30, 2021 in connection with the repayments of the April 2020 Senior Convertible Note and the August 2020 Senior Convertible Note.
A reconciliation in the fair value of debt during the six months ended June 30, 2021 is as follows:
Schedule of Senior Convertible Note Estimated Fair Value
November 2019 Senior Secured Convertible Notes | April 2020 Senior Convertible Note | August 2020 Senior Secured Convertible Note | Sum of Balance Sheet Fair Value Components | Other Income (Expense) | ||||||||||||||||
Fair Value - December 31, 2020 | $ | 1,270 | $ | 4,600 | $ | 8,790 | $ | 14,660 | - | |||||||||||
Installment repayments – common stock | (956 | ) | — | — | (956 | ) | ||||||||||||||
Non-installment payments – common stock | (7 | ) | — | — | (7 | ) | - | |||||||||||||
Non-installment payments – cash | — | (52 | ) | (102 | ) | (154 | ) | |||||||||||||
Change in fair value | (307 | ) | (437 | ) | (938 | ) | (1,682 | ) | 1,682 | |||||||||||
Principal repayments - cash | — | (4,111 | ) | (7,750 | ) | (11,861 | ) | - | ||||||||||||
Fair Value at June 30, 2021(1) | $ | — | — | $ | — | $ | — | - | ||||||||||||
Other Income (Expense) - Change in fair value - six months ended June 30, 2021(1) | $ | 1,682 |
Note 7 — Debt - continued
A reconciliation in the fair value of debt during the three and six months ended June 30, 20202022 is as follows:
December 2018 Senior Secured Convertible Note | November 2019 Senior Secured Convertible Notes | April 2020 Senior Convertible Note | Sum of Balance Sheet Fair Value Components | Other Income (Expense) | ||||||||||||||||
Fair Value - December 31, 2019 | $ | 1,700 | $ | 6,439 | $ | — | $ | 8,139 | - | |||||||||||
Face value principal – issue date | — | 7,000 | — | 7,000 | - | |||||||||||||||
Fair value adjustment – issue date | — | 2,600 | — | 2,600 | $ | (2,600 | ) | |||||||||||||
Installment repayments – common stock | (1,642 | ) | — | — | (1,642 | ) | - | |||||||||||||
Non-installment payments – common stock | (4 | ) | — | — | (4 | ) | - | |||||||||||||
Non-installment payments – cash | — | (138 | ) | — | (138 | ) | ||||||||||||||
Change in fair value | 9 | 4,699 | — | 4,708 | (4,708 | ) | ||||||||||||||
Lender Fee - November 2019 Senior Secured Convertible Note - Series B | — | — | — | — | (700 | ) | ||||||||||||||
Fair Value at March 31, 2020 | $ | 63 | $ | 20,600 | — | $ | 20,663 | - | ||||||||||||
Other Income (Expense) - Change in fair value - three months ended March 31, 2020 | - | - | - | - | $ | (8,008 | ) | |||||||||||||
Face value principal – issue date | — | — | 4,111 | 4,111 | - | |||||||||||||||
Fair value adjustment – issue date | — | — | (411 | ) | (411 | ) | 411 | |||||||||||||
Installment repayments – common stock | (50 | ) | (5,695 | ) | — | (5,745 | ) | |||||||||||||
Non-installment payments – common stock | (2 | ) | (242 | ) | — | (244 | ) | - | ||||||||||||
Non-installment payments – cash | — | — | (54 | ) | (54 | ) | ||||||||||||||
Change in fair value | (11 | ) | (2,363 | ) | 254 | (2,120 | ) | 2,120 | ||||||||||||
Lender Fee - April 2020 Senior Convertible Note | — | — | — | — | (411 | ) | ||||||||||||||
Fair Value at June 30, 2020 | $ | — | $ | 12,300 | 3,900 | $ | 16,200 | - | ||||||||||||
Other Income (Expense) - Change in fair value - three months ended June 30, 2020 | $ | 2,120 | ||||||||||||||||||
Other Income (Expense) - Change in fair value - six months ended June 30, 2020 | $ | (5,888 | ) |
Summary of Outstanding Debt
Contractual Maturity Date | Stated Interest Rate | Conversion Price per Share | Face Value Principal Outstanding | Fair Value | ||||||||||||||
April 2022 Senior Convertible Note | April 4, 2024 | 7.875 | % | $ | 5.00 | $ | 27,500 | $ | 29,500 | |||||||||
Balance as of June 30, 2022 | $ | 27,500 | $ | 29,500 |
The Company did not have convertible debt outstanding at December 31, 2021. During the six month period ended June 30, 2021, the Company recognized debt extinguishment losses of approximately $3,715, in connection with repaying-in-full all remaining convertible notes outstanding at the time.
The April 2022 Senior Convertible Notes presented above were eachNote is accounted for under the ASC 825-10-15-4 fair value option (“FVO”) election, wherein, the financial instrument is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date with the resulting fair value adjustment recognized as other income (expense) in the (unaudited) condensed consolidated statement of operations. In this regard, as provided for by ASC 825-10-50-30(b), the estimated fair value adjustment is presented as a single line item within other income (expense) in the accompanying consolidated statement of operations. See Note 6,10, Financial Instruments Fair Value Measurements, for a further discussion of fair value assumptions.
Cares Act Paycheck Protection Program Loan
On April 8, 2020 the Company entered into a loan agreement with JP Morgan Chase, N.A., and received approximately $300 of proceeds, pursuant to the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) Paycheck Protection Program (“PPP”) - the “PPP Loan”. Through the life of the PPP Loan, the Company made no principal or interest payments. The Company submitted its PPP Loan forgiveness application on April 21, 2021 and the forgiveness application was approved on June 9, 2021. Upon PPP Loan forgiveness, the Company recognized a gain of $300 in its unaudited condensed consolidated results of operations for the three and six month periods ended June 30, 2021.
Note 812 — Stock-Based Compensation
PAVmed Inc. 2014 Long-Term Incentive Equity Plan
The PAVmed Inc. 2014 Long-Term Incentive Equity Plan (the “PAVmed Inc. 2014 Equity Plan”), provides for the granting, subject is designed to approval by the compensation committeeenable PAVmed Inc. to offer employees, officers, directors, and consultants, as defined, an opportunity to acquire shares of common stock of PAVmed Inc. The types of awards that may be granted under the PAVmed Inc. board of directors, of2014 Equity Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. AsAll awards are subject to approval by the PAVmed Inc. board of June 30, 2021,directors.
A total of haswith shares of common stock of PAVmed Inc. are reserved for issuance under the PAVmed Inc. 2014 Equity Plan, shares available-for-grant of stock-based awards, with such shares available for grant as of June 30, 2022. The share reservation is not diminished by a total of PAVmed Inc. stock options previouslyand restricted stock awards granted outside the PAVmed Inc. 2014 Equity Plan.Plan as of June 30, 2022.
PAVmed Inc. 2014 Long-Term Incentive Equity Plan - Stock Options
Schedule of Summarizes Information About Stock Options
Number Stock Options | Weighted Average Exercise Price | Remaining Contractual Term (Years) | Intrinsic Value(2) | Number of Stock Options | Weighted Average Exercise Price | Remaining Contractual Term (Years) | Intrinsic Value(2) | |||||||||||||||||||||||
Outstanding stock options at December 31, 2020 | 6,798,529 | $ | 2.55 | |||||||||||||||||||||||||||
Outstanding stock options at December 31, 2021 | 8,720,198 | $ | 3.39 | $ | 3,516 | |||||||||||||||||||||||||
Granted(1) | 2,355,000 | $ | 4.59 | 4,219,350 | $ | 1.49 | ||||||||||||||||||||||||
Exercised | (120,832 | ) | $ | 1.08 | (299,999 | ) | $ | 1.01 | ||||||||||||||||||||||
Forfeited | (25,833 | ) | $ | 2.44 | (1,437,143 | ) | $ | 3.04 | ||||||||||||||||||||||
Outstanding stock options - June 30, 2021 | 9,006,864 | $ | 3.11 | $ | 29,843 | |||||||||||||||||||||||||
Vested and exercisable stock options - June 30, 2021 | 5,972,706 | $ | 2.89 | $ | 21,289 | |||||||||||||||||||||||||
Outstanding stock options at June 30, 2022(3) | 11,202,406 | $ | 2.79 | $ | 8 | |||||||||||||||||||||||||
Vested and exercisable stock options at June 30, 2022 | 5,994,046 | $ | 3.07 | $ | 1 |
(1) | Stock options granted under the PAVmed Inc. 2014 Equity Plan and those granted outside such plan generally vest ratably over twelve quarters, with the vesting commencing with the grant date |
(2) | The intrinsic value is computed as the difference between the quoted price of the PAVmed Inc. common stock on each of June 30, |
(3) | The outstanding stock options presented in the table above, are inclusive of stock options granted outside the PAVmed Inc. 2014 Equity Plan. as of June 30, 2022 and December 31, 2021. |
Note 8 — Stock-Based Compensation - continued
PAVmed Inc. 2014 Long-Term Incentive Equity Plan - Restricted Stock Awards
A total of restricted stock awards were previously granted under the PAVmed Inc. 2014 Equity Plan with suchand restricted stock awards having an aggregate fair valuegranted outside such plan are summarized as follows:
Schedule of approximately $Restricted Stock Award Activity
Number of Restricted Stock Awards | Weighted Average Grant Date Fair Value | |||||||
Unvested restricted stock awards as of December 31, 2021 | 1,666,666 | $ | 2.36 | |||||
Granted | — | — | ||||||
Vested | (541,666 | ) | 1.20 | |||||
Forfeited | (150,000 | ) | 2.04 | |||||
Unvested restricted stock awards as of June 30, 2022(1) | 975,000 | $ | 3.05 |
2,680, which was measured using the respective grant date quoted closing price per share of PAVmed Inc. common stock, with the fair value being recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period.
(1) | The unvested restricted stock awards presented in the table above, are inclusive of restricted stock awards granted outside the PAVmed Inc. 2014 Equity Plan. as of June 30, 2022 and December 31, 2021. |
The vesting of the previously granted restricted stock awards is as follows: 233,334 vested on March 15, 2020; 466,666 vesting on March 15, 2022; 450,000 vesting ratably on an annual basis over a three year period with the initial annual vesting date on May 1, 2021; and 500,000 restricted stock awards having a single vesting date of May 1, 2023. The restricted stock awards are subject to forfeiture if the requisite service period is not completed.
21 |
Note 12 — Stock-Based Compensation - continued
Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan
The Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan (the “Lucid(“Lucid Diagnostics Inc. 2018 Equity Plan”), provides for is separate and apart from the granting, subjectPAVmed Inc. 2014 Equity Plan discussed above. The Lucid Diagnostics Inc. 2018 Equity Plan is designed to approval byenable Lucid Diagnostics Inc. to offer employees, officers, directors, and consultants, as defined, an opportunity to acquire shares of common stock of Lucid Diagnostics Inc. The types of awards that may be granted under the Lucid Diagnostics Inc. board of directors, of2018 Equity Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. As of June 30, 2021,All awards are subject to approval by the Lucid Diagnostics Inc. 2018 Equity Plan hasboard of directors.
2,200,000
A total of available-for-grantare reserved for issuance under the Lucid Diagnostics Inc. 2018 Equity Plan, with shares available for grant as of stock-based awards.June 30, 2022, with the share reservation not diminished by a total of Lucid Diagnostics Inc. stock options and restricted stock awards granted outside the Lucid Diagnostics Inc. 2018 Equity Plan. shares of common stock of Lucid Diagnostics Inc.
Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan - Stock Options
Schedule of Summarizes Information About Stock Options
Number Stock Options | Weighted Average Exercise Price | Remaining Contractual Term (Years) | Number of Stock Options | Weighted Average Exercise Price | Remaining Contractual Term (Years) | |||||||||||||||||||
Outstanding stock options at December 31, 2020 | 991,667 | $ | 0.86 | |||||||||||||||||||||
Outstanding stock options at December 31, 2021 | 1,419,242 | $ | 0.73 | |||||||||||||||||||||
Granted(1) | — | $ | — | 2,107,500 | $ | 3.82 | ||||||||||||||||||
Exercised | — | $ | — | (959,389 | ) | $ | 0.72 | |||||||||||||||||
Forfeited | — | $ | — | (107,687 | ) | $ | 4.45 | |||||||||||||||||
Outstanding stock options at June 30, 2021 | 991,667 | $ | 0.85 | |||||||||||||||||||||
Vested and exercisable stock options at June 30, 2021 | 876,666 | $ | 0.83 | |||||||||||||||||||||
Outstanding stock options at June 30, 2022(2) | 2,459,666 | $ | 3.22 | |||||||||||||||||||||
Vested and exercisable stock options at June 30, 2022 | 741,869 | $ | 1.90 |
(1) | Stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan and those granted outside such plan generally vest ratably over twelve quarters, with the vesting commencing with the grant date quarter, and have a ten-year contractual term from date-of-grant. |
(2) | The outstanding stock options presented in the table above, are inclusive of stock options granted outside the Lucid Diagnostics Inc. 2018 Equity Plan. as of June 30, 2022 and December 31, 2021. |
Note 8 — Stock-Based Compensation - continued
Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan – Restricted Stock Awards
Schedule of Restricted Stock Award Activity
Number of Restricted Stock Awards | Weighted Average Grant Date Fair Value | |||||||
Unvested restricted stock awards as of December 31, 2021 | 1,940,740 | $ | 12.76 | |||||
Granted | 320,000 | 4.53 | ||||||
Vested | — | — | ||||||
Forfeited | — | — | ||||||
Unvested restricted stock awards as of June 30, 2022(1) | 2,260,740 | $ | 11.59 |
(1) | The unvested restricted stock awards presented in the table above, are inclusive of restricted stock awards granted outside the Lucid Diagnostics Inc. 2018 Equity Plan. as of June 30, 2022 and December 31, 2021. |
On March 1, 2021, a total ofJanuary 7, 2022, restricted stock awards were granted under the Lucid Diagnostics Inc.Inc 2018 Equity Plan, to employees of PAVmed Inc., a member of the board of directors of Lucid Diagnostics Inc. (who is also a member of the board of directors of PAVmed Inc.), and to each of the three physician inventors of the intellectual property licensed under the CWRU License Agreement, with such , and an aggregate grant date fair value of approximately $ million, measured as discussed below,the grant date closing price of Lucid Diagnostics Inc. common stock, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed.
In April 2021, a total of restricted stock awards were granted under the Lucid Diagnostics Inc 2018 Equity Plan, inclusive of such restricted stock awards granted to an employee of PAVmed Inc. and a consultant. with such restricted stock awards having a single vesting date in April 2023, and an aggregate grant date fair value of approximately $ million, measured as discussed below, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed.
The estimated fair value of the restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan, as discussed above, was determined using a probability-weighted average expected return methodology (“PWERM”), which involves the determination of equity value under various exit scenarios and an estimation of the return to the common stockholders under each scenario. In this regard, the Lucid Diagnostics Inc. common stock grant-date estimated fair value was based upon an analysis of future values, assuming various outcomes, based upon the probability-weighted present value of expected future investment returns, considering each of the possible future outcomes available to Lucid Diagnostics Inc.
The PWERM principally involved (i) the identification of scenarios and related probabilities; (ii) determine the equity value under each scenario; and (iii) determine the common stock shareholders’ return in each scenario. The two scenarios identified were an initial public offering (“IPO”) of Lucid Diagnostics Inc. common stock (“IPO scenario”); and, to continue on as a private company (“stay private scenario”). With respect to the IPO scenario, the valuation of the Lucid Diagnostics Inc. common stock was computed using assumptions, including dates of the IPO, to calculate an estimated pre-money valuation; and, with respect to the stay private scenario, an income approach was used, wherein a risk-adjusted discount rate is applied to projected future cash flows. A relative weighting of 75% was applied to the IPO scenario and 25% was assigned to the stay private scenario.
Note 812 — Stock-Based Compensation- continued
Consolidated Stock-Based Compensation Expense
Schedule of Stock-Based Compensation Awards Granted
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
Commercial operations expenses | $ | 298 | $ | 64 | $ | 500 | $ | 98 | ||||||||||||||||||||||||
Sales and marketing expenses | $ | 591 | $ | 298 | $ | 1,216 | $ | 500 | ||||||||||||||||||||||||
General and administrative expenses | 4,599 | 343 | 5,722 | 586 | 4,162 | 4,599 | 8,164 | 5,722 | ||||||||||||||||||||||||
Research and development expenses | 306 | 122 | 417 | 188 | 254 | 306 | 440 | 417 | ||||||||||||||||||||||||
Total stock-based compensation expenses | $ | 5,203 | $ | 529 | $ | 6,639 | $ | 872 | ||||||||||||||||||||||||
Total stock-based compensation expense | $ | 5,007 | $ | 5,203 | $ | 9,820 | $ | 6,639 |
Stock-Based Compensation Expense Recognized by Lucid Diagnostics Inc.
As noted, the consolidated stock-based compensation expense presented above is inclusive of stock-based compensation expense recognized by Lucid Diagnostics Inc., inclusive of each of: stock options granted under the PAVmed Inc. 2014 Equity Plan to the three physician inventors of the intellectual property underlying the CWRU License Agreement (“Physician Inventors”) (as discussed above in Note 3,4, Related Party Transactions); and stock options and restricted stock awards granted to employees of PAVmed Inc. and non-employee consultants under the Lucid Diagnostics Inc. 2018 Equity Plan.
The stock-based compensation expense recognized by Lucid Diagnostics Inc. for both the PAVmed Inc. 2014 Equity Plan and the Lucid Diagnostics Inc. 2018 Equity Plan, with respect to stock options and restricted stock awards as discussed above, for the periods indicated, was as follows:
Schedule of Stock-Based Compensation Expense Classified in Research and Development Expenses
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Lucid Diagnostics Inc 2018 Equity Plan – general and administrative expense | $ | 2,505 | $ | — | $ | 3,295 | $ | — | ||||||||
Lucid Diagnostics Inc 2018 Equity Plan – research and development expenses | 22 | 13 | 34 | 27 | ||||||||||||
PAVmed Inc 2014 Equity Plan - research and development expenses | 53 | 3 | 56 | 6 | ||||||||||||
Total stock-based compensation expense – recognized by Lucid Diagnostics Inc | $ | 2,580 | $ | 16 | $ | 3,385 | $ | 33 |
Note 8 — Stock-Based Compensation - continued
Consolidated Stock-Based Compensation Expense - continued
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Lucid Diagnostics Inc 2018 Equity Plan – sales and marketing expenses | $ | 215 | $ | — | $ | 480 | $ | — | ||||||||
Lucid Diagnostics Inc 2018 Equity Plan – general and administrative expenses | 3,313 | 2,505 | 6,514 | 3,295 | ||||||||||||
Lucid Diagnostics Inc 2018 Equity Plan – research and development expenses | 26 | 22 | 97 | 34 | ||||||||||||
PAVmed Inc 2014 Equity Plan - sales and marketing expenses | 161 | — | 336 | — | ||||||||||||
PAVmed Inc 2014 Equity Plan - general and administrative expenses | 77 | — | 145 | — | ||||||||||||
PAVmed Inc 2014 Equity Plan - research and development expenses | 52 | 53 | 107 | 56 | ||||||||||||
Total stock-based compensation expense – recognized by Lucid Diagnostics Inc | $ | 3,844 | $ | 2,580 | $ | 7,679 | $ | 3,385 |
Schedule of Unrecognized Compensation Expense
Unrecognized Expense | Weighted Average Remaining Service Period (Years) | |||||||
PAVmed Inc. 2014 Equity Plan | ||||||||
Stock Options | $ | 9,127 | ||||||
Restricted Stock Awards | $ | 1,510 | ||||||
Lucid Diagnostics Inc. 2018 Equity Plan | ||||||||
Stock Options | $ | 4,030 | ||||||
Restricted Stock Awards | $ | 10,873 |
Unrecognized Expense | Weighted Average Remaining Service Period | |||||||
PAVmed Inc. 2014 Equity Plan | ||||||||
Stock Options | $ | 7,595 | years | |||||
Restricted Stock Awards | $ | 2,716 | years | |||||
Lucid Diagnostics Inc. 2018 Equity Plan | ||||||||
Stock Options | $ | 25 | years | |||||
Restricted Stock Awards | $ | 16,826 | years |
23 |
Note 12 — Stock-Based Compensation - continued
Stock-based compensation expense recognized with respect to stock options granted under the PAVmed Inc. 2014 Equity Plan was based on a weighted average estimated fair value of such stock options of $ $3.32 per share during the six monthsperiods ended June 30, 20212022 and 2020,2021, respectively, calculated using the following weighted average Black-Scholes valuation model assumptions: $0.74 per share and
Six Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Expected term of stock options (in years) | ||||||||||||||||
Expected stock price volatility | 75 | % | 73 | % | % | % | ||||||||||
Risk free interest rate | 1.0 | % | 0.5 | % | % | % | ||||||||||
Expected dividend yield | 0 | % | 0 | % | % | % |
Stock-based compensation expense recognized with respect to stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan was based on a weighted average estimated fair value of such stock options of $ per share during the year ended June 30, 2022. There were no stock-based awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan during the period ended June 30, 2021. The stock-based compensation was calculated using the following weighted average Black-Scholes valuation model assumptions:
Six Months Ended June 30, | ||||
2022 | ||||
Expected term of stock options (in years) | ||||
Expected stock price volatility | % | |||
Risk free interest rate | % | |||
Expected dividend yield | % |
PAVmed Inc. Employee Stock Purchase Plan (“ESPP”)
The PAVmed Inc. Employee Stock Purchase Plan (“PAVmed Inc. ESPP”), adopted by the Company’s board of directors effective April 1, 2019, provides eligible employees the opportunity to purchase shares of PAVmed Inc. common stock through payroll deductions during six month periods, wherein the purchase price per share of common stock is the lower of 85% of the quoted closing price per share of PAVmed Inc. common stock at the beginning or end of each six month share purchase period. The PAVmed Inc. ESPP share purchase dates are March 31 and September 30. A total of shares and shares of common stock of the Company were purchased for proceeds of approximately $304217 and $126304, on the ESPP purchase dates of March 31, 2022 and 2021, and 2020, respectively.respectively under the PAVmed Inc Employee Stock Purchase Plan (“PAVmed Inc ESPP”). The PAVmed Inc. ESPP has a total reservation of shares of common stock of PAVmed Inc., with of which shares are available-for-issue remaining as of June 30, 2021.2022.
Lucid Diagnostics, Inc Employee Stock Purchase Plan (“ESPP”)
The Lucid Diagnostics Inc Employee Stock Purchase Plan (“Lucid Diagnostics Inc ESPP”), initial six-month stock purchase period is April 1, 2022 to September 30, 2022. The Lucid Diagnostics Inc. ESPP share purchase dates are March 31 and September 30. The Lucid Diagnostics Inc. ESPP has a total reservation of shares of common stock of Lucid Diagnostics Inc. for which all shares are available-for-issue as of June 30, 2022.
Note 913 — Preferred Stock
The Company is authorized to issueSeries B Convertible Preferred Stock dividends are 208.0 million shares of its preferred stock, par value of% per annum based on the $0.0013.00 per share stated value of the Series B Convertible Preferred Stock, with such designation, rights,dividends compounded quarterly, accumulate, and preferences as may be determinedare payable in arrears upon being declared by the Company’s board of directors. There were The Series B Convertible Preferred Stock dividends earned are included in the calculation of basic and diluted net loss attributable to PAVmed Inc. common stockholders for each of the respective corresponding periods presented in the accompanying unaudited condensed consolidated statement of operations, inclusive of dividends earned of $ as of the three months ended March 31, 2022 and $ 6870 as of the three months ended June 30, 2022; and dividends earned of $1,228,07575 as of the three months ended March 31, 2021 and $74 as of the three months ended June 30, 2021.
The Series B Convertible Preferred Stock dividends are recognized as a dividend payable only upon the dividend being declared payable by the Company’s board of directors. In this regard, in the six months ended June 30, 2022, the Company’s board-of-directors declared Series B Convertible Preferred Stock dividends of an aggregate of approximately $135, inclusive of approximately $67 earned as of December 31, 2021, and approximately $68 earned as of March 31, 2022, with each such dividends settled by the issue of an aggregate additional shares of Series B Convertible Preferred Stock, (classified in permanent equity)inclusive of shares issued and outstandingwith respect to the dividends earned as of June 30,December 31, 2021, and December shares issued with respect to the dividends earned as of March 31, 2020, respectively. The Series B Convertible Preferred Stock
2022. In the six months ended June 30, 2021, at each of the respective holders’ election, a total of shares ofCompany’s board-of-directors declared Series B Convertible Preferred Stock were converted into the same numberdividends of shares of common stock of PAVmed Inc. Subsequent to June 30, 2021, as of August 12, 2021, a total of shares of Series B Convertible Preferred Stock were converted into the same number of shares of common stock of the Company.
As of June 30, 2021, the Company’s board-of-directors declared an aggregate of approximately $148 of Series B Convertible Preferred Stock dividends,, inclusive of approximately $73 earned as of December 31, 2020, and approximately $75 earned as of March 31, 2021, which werewith each such dividends settled by the issue of an additional aggregate additional shares of Series B Convertible Preferred Stock. In the corresponding period of the prior year, the board of directors declared an aggregate of approximately $ of Series B Convertible Preferred Stock, dividends, inclusive of approximately $ shares issued with respect to the dividends earned as of December 31, 20192020, and $ shares issued with respect to the dividends earned as of March 31, 2020, which were settled by the issue of an additional aggregate shares of Series B Convertible Preferred Stock.2021.
Subsequent to June 30, 2021,2022, in July 2021,2022, the Company’s board-of-directors declared a Series B Convertible Preferred Stock dividend earned as of June 30, 20212022 and payable as of July 1, 2021,2022, of approximately $7470, which willto be settled by the issue of an additional shares of Series B Convertible Preferred Stock (with such dividend not recognized as a dividend payable as of June 30, 2021,2022, as the Company’s board of directors had not declared such dividends payable as of such date).
Note 1014 — Stockholders’ EquityCommon Stock and Common Stock Purchase Warrants
TheCommon Stock
In June 2022, the Company is authorizedreceived shareholder approval to issue up to million shares of its common stock, par valuean increase of $ per share. There were million shares.
82,576,816 andDuring the six months ended June 30, 2022, shares of common stock of the Company were issued upon exercise of stock options for cash of approximately $302; and outstanding as of. during the six months ended June 30, 20212022, a total of shares of common stock of the Company were issued under the PAVmed Inc. Employee Stock Purchase Plan (“ESPP”). See Note 12, Stock-Based Compensation, for a discussion of each of the PAVmed Inc. 2014 Equity Plan and December 31, 2020, respectively.the PAVmed Inc ESPP.
Three Months Ended June 30, 2021
Six Months Ended June 30, 2021
Note 10 — Stockholders’ Equity and Common Stock Purchase Warrants - continued
Common Stock Purchase Warrants
TheAs of June 30, 2022 and December 31, 2021, Series Z Warrants outstanding totaled 11,937,450 and 11,937,455, respectively. A Series Z Warrant is exercisable to purchase one share of common stock purchase warrants (classified in permanent equity) outstanding as of the dates indicated are as follows:
ScheduleCompany at an exercise price of Outstanding Warrants to Purchase Common Stock$1.60
Common Stock Purchase Warrants Issued and Outstanding at | ||||||||||||||||||
Weighted | Weighted | |||||||||||||||||
June 30, | Average Exercise | December 31, | Average Exercise | Expiration | ||||||||||||||
2021 | Price /Share | 2020 | Price/Share | Date | ||||||||||||||
Series Z Warrants | 15,074,281 | $ | 1.60 | 16,814,939 | $ | 1.60 | April 2024 | |||||||||||
UPO - Series Z Warrants | — | $ | — | 53,000 | $ | 1.60 | January 2021 | |||||||||||
Series W Warrants | 381,818 | $ | 5.00 | 381,818 | $ | 5.00 | January 2022 | |||||||||||
Total | 15,456,099 | $ | 1.68 | 17,249,757 | $ | 1.57 |
per share, and expire April 30, 2024
. During the three and six months ended June 30, 2021, and , respectively, Series Z Warrants were exercised for cash at their exercise price per share, resulting in the issue of a corresponding number of shares of common stock of the Company. Additionally, subsequent to June 30, 2021, as of August 12, 2021,2022, a total of 508,5485 Series Z Warrants were exercised for cash at the $1.60 per share, exercise price, resulting in the issue of the same number of shares of common stock of the Company.
As of December 31, 2021, Series W Warrants outstanding totaled 377,873. The Unit Purchase Options (UPO)remaining 377,873 Series W Warrants expired unexercised as of January 29, 2021.2022.
Note 1115 — Noncontrolling Interest
The noncontrolling interest (“NCI”) included as a component of consolidated total stockholders’ equity is with respect to each of the Company’s majority-owned subsidiaries: Lucid Diagnostics Inc., Solys Diagnostics Inc., and Veris Health Inc., with the NCI summarized for the periods indicated as follows:
Schedule of Noncontrolling Interest of Stockholders' Equity
Six Months Ended June 30, 2021 | Year Ended December 31, 2020 | June 30, 2022 | December 31, 2021 | |||||||||||||
NCI – equity (deficit) – beginning of period | $ | (2,369 | ) | $ | (814 | ) | $ | 17,752 | $ | (2,369 | ) | |||||
Investment in Veris Health Inc. | 6 | — | — | 6 | ||||||||||||
Net loss attributable to NCI – Lucid Diagnostics Inc. | (1,782 | ) | (1,503 | ) | ||||||||||||
Net loss attributable to NCI - Lucid Diagnostics Inc. | (5,711 | ) | (5,779 | ) | ||||||||||||
Net loss attributable to NCI – Solys Diagnostics Inc. | (22 | ) | (109 | ) | (6 | ) | — | |||||||||
Net loss attributable to NCI – Veris Health Inc. | (73 | ) | — | (620 | ) | — | ||||||||||
Impact of subsidiary equity transactions | 229 | 16,760 | ||||||||||||||
Lucid Diagnostics Inc. 2018 Equity Plan stock option exercise | — | 5 | 688 | — | ||||||||||||
Stock-based compensation expense - Lucid Diagnostics Inc. 2018 Equity Plan | 3,329 | 52 | 7,091 | 9,134 | ||||||||||||
Stock-based compensation expense - Veris Health Inc. 2021 Equity Plan | 3 | — | ||||||||||||||
NCI – equity (deficit) – end of period | $ | (911 | ) | $ | (2,369 | ) | $ | 19,426 | $ | 17,752 |
The consolidated NCI presented above is with respect to the Company’s consolidated majority-owned subsidiaries, inclusive of: Lucid Diagnostics Inc.
As of each of June 30, 2021,, Veris Health Inc. and December 31, 2020, there were shares of common stock of LucidSolys Diagnostics Inc. issued and outstanding; of which PAVmed Inc. holds shares, representing equity ownership interest of 81.85%, and PAVmed Inc. has a controlling financial interest. The minority equity ownership interest of the Lucid Diagnostics Inc. common stock includes: shares held by Case Western Reserve University (“CWRU”), shares held by each of the three individual physician inventors of the intellectual property underlying the CWRU License Agreement (“Physician Inventors”); and shares held by an unrelated third-party consultant upon the exercise the same number of stock options issued under the Lucid Diagnostics Inc. 2018 Equity Plan.
Accordingly, Lucid Diagnostics Inc. is a consolidated majority-owned subsidiary of the Company, for which a provision of a noncontrolling interest (NCI) is included as a separate component of consolidated total stockholders’ equity in the unaudited condensed consolidated balance sheet as of June 30, 20212022 and December 31, 2020, along with2021; and the recognition of a net loss attributable to the NCI in the unaudited condensed consolidated statement of operations with respect to Lucid Diagnostics Inc. and Solys Diagnostics Inc. for the three and six months ended June 30, 20212022 and 2020.
See Note 3, Related Party Transactions,2021; and with respect to CWRU andVeris Health Inc. for the three Physician Inventors; and Note 8, Stock-Based Compensation, with respectsix months ended June 30, 2022 and from the period of May 28, 2021 to June 30, 2021 (as the Lucid DiagnosticsVeris Health Inc. 2018 Equity Plan.inception date was May 28, 2021).
SolysLucid Diagnostics Inc.
As of each of June 30, 2021 and December 31, 2020,2022, there were shares of common stock of SolysLucid Diagnostics Inc. issued and outstanding, of which, PAVmed Inc. holds 27,927,190 shares, representing a 90.3235% majority-interestmajority ownership equity interest and PAVmed Inc. has a controlling financial interest with the remaining 9.6765% minority-interest ownership held by unrelated third parties. Accordingly, Solysin Lucid Diagnostics Inc., and accordingly, Lucid Diagnostics Inc. is a consolidated majority-owned subsidiary of PAVmed Inc.
On March 28, 2022, Lucid Diagnostics, Inc. entered into a committed equity facility with an affiliate of Cantor Fitzgerald (“Cantor”). Under the terms of the committed equity facility, Cantor has committed to purchase up to $50 million of Lucid Diagnostics Inc. common stock from time to time at the request of Lucid Diagnostics Inc. While there are distinct differences, the facility is structured similarly to a traditional at-the-market equity facility, insofar as it allows the Company for whichto raise primary equity capital on a provision of a noncontrolling interest (NCI) is included as a separate component of consolidated stockholders’ equity inperiodic basis at prices based on the unaudited condensed consolidated balance sheet asexisting market price. As of June 30, 2021 and December 31, 2020, along with2022, there were shares of common stock issued under the recognition of a net loss attributablecommitted equity facility. Subsequent to the NCI in the unaudited condensed consolidated statement of operations for the three and six months ended June 30, 2021 and 2020.2022, as of August 10, 2022, under the committed equity facility, a total of shares of common stock of Lucid Diagnostics Inc. were issued for proceeds of approximately $927.
Veris Health Inc.
As of June 30, 2021,2022, there were shares of common stock of Veris Health Inc. issued and outstanding, of which PAVmed Inc. holds an 80.44% majority-interest ownership and PAVmed Inc. has a controlling financial interest, with the remaining % minority-interest ownership held by an unrelated third-party. Accordingly, Veris Health Inc. is a consolidated majority-owned subsidiary of the Company, for which a provision of a noncontrolling interest (NCI) is included as a separate component of consolidated stockholders’ equity in the unaudited condensed consolidated balance sheet as of June 30, 20212022 along with the recognition of a net loss attributable to the NCI in the unaudited condensed consolidated statement of operations for the period of May 28, 2021 to June 30,December 31, 2021, upon its formation and contemporaneous acquisition of Oncodisc Inc., as such acquisition is discussed in Note 4,
Acquisition of OncodiscSolys Diagnostics Inc.
As of each of June30, 2022 and December 31, 2021, there were 90.3235% majority-interest ownership and PAVmed Inc. has a controlling financial interest, with the remaining % minority-interest ownership held by unrelated third parties. shares of common stock of Solys Diagnostics Inc. issued and outstanding, of which PAVmed Inc. holds a
Schedule of Comparison of Basic and Fully Diluted Net Loss Per Share
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
June 30, | June 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
Numerator | ||||||||||||||||||||||||||||||||
Net loss - before noncontrolling interest | $ | (12,670 | ) | $ | (5,844 | ) | $ | (22,779 | ) | $ | (20,755 | ) | $ | (29,101 | ) | $ | (12,670 | ) | $ | (48,734 | ) | $ | (22,779 | ) | ||||||||
Net loss attributable to noncontrolling interest | 1,199 | 266 | 1,877 | 702 | 3,576 | 1,199 | 6,337 | 1,877 | ||||||||||||||||||||||||
Net loss - as reported, attributable to PAVmed Inc. | $ | (11,471 | ) | $ | (5,578 | ) | $ | (20,902 | ) | $ | (20,053 | ) | $ | (25,525 | ) | $ | (11,471 | ) | $ | (42,397 | ) | $ | (20,902 | ) | ||||||||
Series B Convertible Preferred Stock dividends: | $ | (74 | ) | $ | (71 | ) | $ | (149 | ) | $ | (141 | ) | ||||||||||||||||||||
Series B Convertible Preferred Stock dividends – earned | $ | (70 | ) | $ | (74 | ) | $ | (138 | ) | $ | (149 | ) | ||||||||||||||||||||
Net loss attributable to PAVmed Inc. common stockholders | $ | (11,545 | ) | $ | (5,649 | ) | $ | (21,051 | ) | $ | (20,194 | ) | $ | (25,595 | ) | $ | (11,545 | ) | $ | (42,535 | ) | $ | (21,051 | ) | ||||||||
Denominator | ||||||||||||||||||||||||||||||||
Weighted average common shares outstanding, basic and diluted | 82,235,397 | 44,780,538 | 78,117,637 | 44,140,126 | 86,957,352 | 82,235,397 | 86,689,857 | 78,117,637 | ||||||||||||||||||||||||
Loss per share | ||||||||||||||||||||||||||||||||
Basic and diluted | ||||||||||||||||||||||||||||||||
Net loss - as reported, attributable to PAVmed Inc. | $ | (0.14 | ) | $ | (0.12 | ) | $ | (0.27 | ) | $ | (0.45 | ) | $ | (0.29 | ) | $ | (0.14 | ) | $ | (0.49 | ) | $ | (0.27 | ) | ||||||||
Net loss attributable to PAVmed Inc. common stockholders | $ | (0.14 | ) | $ | (0.13 | ) | $ | (0.27 | ) | $ | (0.46 | ) | $ | (0.29 | ) | $ | (0.14 | ) | $ | (0.49 | ) | $ | (0.27 | ) |
The common stock equivalents have been excluded from the computation of diluted weighted average shares outstanding as their inclusion would be anti-dilutive, are as follows:
The Series B Convertible Preferred Stock dividends earned as of the each of the respective periods noted, are included in the calculation of basic and diluted net loss attributable to PAVmed Inc. common stockholders for each respective period presented. Notwithstanding, the Series B Convertible Preferred Stock dividends are recognized as a dividend payable only upon the dividend being declared payable by the Company’s board of directors.
Basic weighted-average number of shares of common stock outstanding for the three and six monthsperiods ended June 30, 20212022 and 20202021 include the shares of the Company issued and outstanding during such periods, each on a weighted average basis. The basic weighted average number of shares of common stock outstanding excludes common stock equivalent incremental shares, while diluted weighted average number of shares outstanding includes such incremental shares. However, as the Company was in a loss position for all periods presented, basic and diluted weighted average shares outstanding are the same, as the inclusion of the incremental shares would be anti-dilutive. The common stock equivalents excluded from the computation of diluted weighted average shares outstanding are as follows:
June 30, | ||||||||
2021 | 2020 | |||||||
PAVmed Inc. 2014 Equity Plan stock options and unvested restricted stock awards | 10,573,530 | 7,965,195 | ||||||
Unit purchase options - as to shares of common stock | — | 53,000 | ||||||
Unit purchase options - as to shares underlying Series Z Warrants | — | 53,000 | ||||||
Series Z Warrants | 15,074,281 | 16,815,039 | ||||||
Series W Warrants | 381,818 | 381,818 | ||||||
Series B Convertible Preferred Stock(3) | 1,185,685 | 1,179,872 | ||||||
Total | 27,215,314 | 26,447,924 |
2022 | 2021 | |||||||
June 30, | ||||||||
2022 | 2021 | |||||||
Stock options and restricted stock awards | 12,177,406 | 10,573,530 | ||||||
Series Z Warrants | 11,937,450 | 15,074,281 | ||||||
Series W Warrants | — | 381,818 | ||||||
Series B Convertible Preferred Stock | 1,158,950 | 1,185,685 | ||||||
Total | 25,273,806 | 27,215,314 |
The total stock options and restricted stock awards are inclusive of stock options as of June 30, 2022 and 2021; and restricted stock awards as of June 30, 2022, granted outside the PAVmed Inc. 2014 Equity Plan.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our unaudited condensed consolidated financial condition and results of operations should be read together with our Annual Report on Form 10-K for the year ended December 31, 20202021 (the “Form 10-K”) as filed with the Securities and Exchange Commission (the “SEC”).
Unless the context otherwise requires, references herein to “we”, “us”, and “our”, and to the “Company” or “PAVmed” are to PAVmed Inc. and Subsidiaries, including each of the PAVmed Inc. and its wholly-owned subsidiary PAVmed Subsidiary Corp; and its majority-owned subsidiaries, of:including: Lucid Diagnostics Inc. (“Lucid Diagnostics” or “LUCID”), Veris Health Inc. (“Veris Health” or “VERIS”), and Solys Diagnostics, Inc. (“Solys Diagnostics” or “SOLYS”), and Veris Health Inc. (“Veris Health” or “VERIS”).
Forward-Looking StatementsFORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Form 10-Q”), including the following discussion and analysis of our (unaudited) condensed consolidated financial condition and results of operations, contains forward-looking statements that involve substantial risks and uncertainties.
All statements, other than statements of historical facts, contained in this Form 10-Q, including statements regarding our future consolidated results of operations and consolidated financial position, our estimates regarding expenses, future revenue, capital and operating expenditure requirements and needs for additional financing, our business strategy and plans and the objectives of management for future operations, are forward-looking statements. The words “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are not guarantees of future performance and ourthe Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Item 1A of Part I of the Form 10-K under the heading “Risk Factors.”
Important factors that may affect our actual results include:
● | our limited operating history; | |
● | our financial performance, including our ability to generate revenue; | |
● | our ability to obtain regulatory approval for the commercialization of our products; | |
● | the ability of our products to achieve market acceptance; | |
● | our success in retaining or recruiting, or changes required in, our officers, key employees or directors; | |
● | our potential ability to obtain additional financing when and if needed; | |
● | our ability to | |
● | our ability to | |
● | our ability to manage | |
● | the potential liquidity and trading of our securities; | |
● | our regulatory | |
● | cybersecurity risks; | |
● | risks related to SARS-CoV-2 /COVID-19 pandemic; | |
● | the | |
● | our estimates regarding expenses, future revenue, capital requirements and needs for additional | |
In addition, our forward-looking statements do not incorporatereflect the potential impact of any future financings, acquisitions, mergers, dispositions, joint ventures or investments we may make.
We may not actually achieve the plans, intentions, and /or expectations disclosed in our forward-looking statements, and you should not relyplace undue reliance on our forward-looking statements. You should read this Form 10-Q and the Form 10-K, and the documents we have filed as exhibits to this Form 10-Q and the Form 10-K, completely and with the understanding our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsOverview - continued
Overview
PAVmed Inc. and Subsidiaries (“PAVmed” or “the Company”)The Company is a highly differentiated, multi-product, commercial-stage technology medical devicetechnology company organized to advance a broad pipeline of innovative medical technologies from concept to commercialization, employing a business model focused on capital efficiency and speed to market. Since the Company’s inception on June 26, 2014, the Company’sits activities have focused on advancing its lead products towardsthrough regulatory approval, expanding commercial operations, and commercialization, protecting its intellectual property, andwhile building its corporate infrastructure and management team. The Company has ongoing operations conducted both through PAVmed Inc. and its majority-owned subsidiaries.
The Company operates in one segment as a medical technology company, with the following lines-of-business: “GI Health”“Diagnostics”, “Minimally Invasive Interventions”“Medical Devices”, “Infusion Therapy”,and “Digital Health”, and “Emerging Innovations”. The Company has ongoing operations conducted through PAVmed Inc. and its majority-owned subsidiaries of Lucid Diagnostics, Inc. (“Lucid Diagnostics” or “LUCID”), Solys Diagnostics, Inc. (“Solys Diagnostics” or “SOLYS”) and Veris Health Inc. (“Veris Health” or “VERIS”).
PAVmed Inc.Our products, services, and /or its subsidiariesopportunities, as discussed herein and in Item 1 of Part I of the Form 10-K under the heading Business Background and Overview, are as follows:
● | Diagnostics - EsoGuard Esophageal DNA Laboratory Developed Test- and EsoCheck Esophageal Cell Collection Device; | |
● | Medical Devices – CarpX Minimally Invasive Surgical Device for Carpal Tunnel Syndrome, – EsoCure Esophageal Ablation Device with Caldus Technology, and PortIO Implantable Intraosseous Vascular Access Device. | |
● | Digital Health – Veris Cancer Care Platform with implantable smart device, remote monitoring and data analytics. |
We are also pursuing a number of research and development project and product opportunities across these three segments, which have proprietary rightseither been developed internally or have been presented to the trademarks used herein, including, among others, PAVmed™, Lucid Diagnostics™, LUCID™, Veris Health™, VERIS™, Oncodisc™, Solys Diagnostics™, SOLYS™, Caldus™, CarpX®, DisappEAR™, EsoCheck®, EsoGuard®, EsoCheck Cell Collection Device®, EsoCure Esophageal Ablation Device™, NextCath™, NextFlo™, PortIO™,us by clinician innovators and “Innovating at the Speed of Life”™. Solely as a matter of convenience, trademarks and trade names referred to herein may or may not be accompanied with the requisite marks of “™” or “®”. However, the absence of such marks is not intended to indicate, in any way, PAVmed Inc. or its subsidiaries will not assert, to the fullest extent possible under applicable law, their respective rights to such trademarks and trade names.academic medical institutions for consideration.
Our multiple products and services are in various phases of development, regulatory clearances, approvals, and commercialization.
● | We believe that the EsoGuard Esophageal DNA Test, performed on samples collected with the EsoCheck Esophageal Cell Collection Device, constitutes the first and only commercially available diagnostic test capable of serving as a widespread screening tool to prevent esophageal adenocarcinoma (“EAC”) deaths, through early detection of esophageal precancer in at-risk gastroesophageal reflux disease (“GERD”) patients. The Company has advanced the proprietary technologies underlying EsoGuard and EsoCheck |
29 |
Overview - continued
● | In connection with our efforts to expand our presence in the diagnostic | |
● |
| |
● | In May 2021, we formed Veris Health, | |
● | PortIO is an implantable intraosseous vascular access device that is being developed as a means for infusing fluids, medications, and other substances directly into the bone marrow cavity and from there into the central venous circulation. We are pursuing an FDA clearance for use in patients with a need for longer-term vascular access under de novo classification of section 513(f)2 of the FDCA. The broader clearance is being pursued in discussion with FDA following our previous initial submission to the FDA for a 510(k) premarket notification for use in patients only requiring 24-hour emergency type vascular access. PortIO completed its first-in-human clinical study in Colombia, South America, and has recently successfully implanted seven additional patients. We are currently working with our partners to first pursue a European study to support EU CE Mark clearance followed by providing additional human data for U.S. approval. |
Recent Developments
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continuedBusiness
Overview Clinical Guideline Update – ACG and AGA
In April 2022, the American College of Gastroenterology (“ACG”) updated its clinical guideline to support esophageal precancer (“Barrett’s Esophagus”, “BE”) screening to prevent highly lethal esophageal cancer (“EAC”) utilizing Lucid Diagnostics’ EsoGuard® DNA Test on samples collected with our EsoCheck® Cell Collection Device. The clinical guideline reiterates the ACG’s long-standing recommendation for esophageal precancer screening in at-risk patients with gastroesophageal reflux disease (“GERD”), commonly known as chronic heartburn, acid reflux or simply reflux. In its Recommendation 5, the ACG suggests a single screening endoscopy in patients with chronic GERD symptoms and 3 or more additional risk factors for BE, including male sex, age >50 yr, White race, tobacco smoking, obesity, and family history of BE or EAC in a first-degree relative. Furthermore, and importantly for the first time, the clinical guideline also endorses nonendoscopic biomarker screening as an acceptable alternative to costly and invasive endoscopy by stating in its Recommendation 6 that the ACG suggests that a swallowable, nonendoscopic capsule device combined with a biomarker is an acceptable alternative to endoscopy for screening for BE. The clinical guideline specifically mentions EsoCheck, along with Lucid Diagnostics’ EsophaCap® device, as such swallowable, nonendoscopic esophageal cell collection devices, as well as methylated DNA biomarkers such as EsoGuard. The summary of evidence for this recommendation cites the seminal NIH-funded multicenter, case-control study published in 2018 in Science Translational Medicine, which demonstrated that EsoGuard is highly accurate at detecting esophageal precancer and cancer, including on samples collected with EsoCheck.
In July 2022, the American Gastroenterology Association (“AGA”) published updated clinical guidance that mirrors the same furnished by the ACG as described above, endorsing the use of non-invasive screening tools like our EsoCheck® Cell Collection Device, which is cited in its guideline, as an acceptable alternative to endoscopy to directly address the need for noninvasive screening tools that are easy to administer, patient friendly, and cost-effective for the detection of BE. The clinical practice update by the AGA also significantly expands the target population for esophageal precancer screening, including for EsoGuard and EsoCheck, by recommending, for the first time, screening in at-risk patients without symptoms of reflux. The AGA does so by adding a history of chronic GERD as merely an additional, seventh, risk factor to the six risk factors for BE and EAC that have traditionally identified at-risk symptomatic patients recommended for screening. As a result, chronic symptomatic GERD is no longer a mandatory prerequisite and asymptomatic patients with three of the other six risk factors (e.g., male sex, age >50 yr, White race, tobacco smoking, obesity, and family history of BE) are now considered appropriate for screening.
- continuedEsoGuard BE-1 and BE-2 Clinical Trials
As discussed herein below, our current lines-of-business are as follows:
| |
GI Health
EsoGuard, EsoCheck, and EsoCure
EsoGuard and EsoCheck are based on patented technology licensed from Case Western Reserve University (“CWRU”) through our majority-owned subsidiary, Lucid. EsoGuard and EsoCheck have been developed to provide an accurate, non-invasive, patient-friendly screening test for the early detection of adenocarcinoma of the esophagus (“EAC”) and Barrett’s Esophagus (“BE”), including dysplastic BE and related pre-cursors to EAC in patients with chronic gastroesophageal reflux (“GERD”).
EsoGuard is a bisulfite-converted next-generation sequencing (NGS) DNA assay performed on surface esophageal cells collected with EsoCheck. It quantifies methylation at 31 sites on two genes, Vimentin (VIM) and Cyclin A1 (CCNA1). The assay was evaluated in a 408-patient multicenter case-control study published in Science Translational Medicine, and showed greater than 90% sensitivity and specificity at detecting esophageal precancer and all conditions along the BE-EAC spectrum, including on samples collected with EsoCheck (Moinova, et al. Sci Transl Med. 2018 Jan 17;10(424): eaao5848). EsoGuard is commercially available in the U.S. as a Laboratory Developed Test (LDT) performed at our CLIA-certified laboratory partner, ResearchDx Inc. (“RDx”), which does business as “PacificDx”. Cell samples, including those collected with EsoCheck, as discussed below, are sent to RDx, for testing and analyses using our proprietary EsoGuard NGS DNA assay.
EsoCheck is an FDA 510(k) and CE Mark cleared noninvasive swallowable balloon capsule catheter device capable of sampling surface esophageal cells in a less than five-minute office. It consists of a vitamin pill-sized rigid plastic capsule tethered to a thin silicone catheter from which a soft silicone balloon with textured ridges emerges to gently swab surface esophageal cells. When vacuum suction is applied, the balloon and sampled cells are pulled into the capsule, protecting them from contamination and dilution by cells outside of the targeted region during device withdrawal. We believe this proprietary Collect+Protect™ technology makes EsoCheck the only noninvasive esophageal cell collection device capable of such anatomically targeted and protected sampling.
EsoCure is in development as an Esophageal Ablation Device, with the intent to allow a clinician to treat dysplastic BE before it can progress to EAC, a highly lethal esophageal cancer, and to do so without the need for complex and expensive capital equipment. We have successfully completed a pre-clinical feasibility animal study of EsoCure demonstrating excellent, controlled circumferential ablation of the esophageal mucosal lining. We have also completed an acute and survival animal study of EsoCure™ Esophageal Ablation Device, demonstrating successful direct thermal balloon catheter ablation of esophageal lining through working channel of standard endoscope. We plan to conduct additional development work and animal testing of EsoCure to support a future FDA 510(k) submission.
In December 2019, we secured “gapfill” determination for2021 the EsoGuard PLA code 0114U throughLucid Diagnostics Inc. began conducting two concurrent clinical trials, including each of: the United States Department of Health“EsoGuard screening study” (“BE-1”); and Human Servicesthe “EsoGuard case-control study” (“HHS”BE-2”) Centers for Medicare and Medicaid Services (“CMS”) Clinical Laboratory Fee Schedule (“CLFS”) process, which has allowed us to engage directly with Medicare contractor Palmetto GBA, LLC and its MolDx Program on CMS payment and coverage. In October 2020, CMS granted EsoGuard final Medicare payment determination of $1,938.01, effective January 1, 2021. We are still awaiting Medicare local coverage determination from MolDx, which we understand is working to clear a significant backlog of reviews.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued
Overview - continued
GI Health - continued
EsoGuard, EsoCheck, and EsoCure
We are also aggressively pursuing EsoGuard private payor payment and coverage in the United States. Our first advisor board meeting with medical directors of major insurers provided positive feedback and good alignment with our strategic approach. Although the claim cycle can be prolonged during the early commercialization of a new test, PacificDx is starting to receive out-of-network private insurance payments on our behalf.
Our initial EsoGuard commercialization efforts focused on gastroenterology (GI) physicians who have generally embraced our message that EsoGuard has the potential to expand the funnel of BE-EAC patients who will need long-term EGD surveillance and, potentially, treatment with endoscopic esophageal ablation. We have utilized a hybrid sales model with full-time sales management and approximately fifty independent sales representatives. We significantly expanded our full-time commercial team in 2021 and are actively recruiting full-time territory managers nationwide. EsoGuard testing has accelerated as pandemic-related healthcare facility limitations have eased.
We are now expanding EsoGuard commercialization to target primary care physicians (PCPs). The vast majority of at-risk GERD patients are cared for by PCPs and never see a gastroenterologist. To assure sufficient testing capacity and geographic coverage during this expansion, we are building our own network of Lucid Test Centers, where Lucid-employed clinical personnel will perform the EsoCheck procedure for EsoGuard testing. We have hired personnel and leased medical office space to launch three pilot Lucid Test Centers in the Phoenix metropolitan area. The next phase of this pilot program will be to establish an EsoGuard Telemedicine Program, in partnership with an independent third-party telemedicine provider, UpScriptHealth, that can accommodate EsoGuard self-referrals from direct-to-consumer marketing.
Our active clinical research and development program seeks, to expand the clinical evidence of our products’ efficacyfor the technologies and to support our ongoing regulatory, reimbursementa United States Food and commercial efforts. We are actively enrolling patients in two international multicenter clinical trials to support FDA PMADrug Administration (“FDA”) pre-market approval (“PMA”) of the use of EsoGuard used withand EsoCheck as an IVD indicatedin-vitro diagnostic medical device (“IVD”). However, in light of the recently published proposed Local Coverage Determination (“LCD”) DL39256, the recently updated AGA guidance, and the ACG update to detect NDBE. ESOGUARD-BE-1 is aits clinical guideline that supports screening study whichto prevent highly lethal esophageal cancer (“EAC”) utilizing our EsoGuard® DNA Test on samples collected with our EsoCheck® Cell Collection Device, the Company has determined to prioritize its clinical trial efforts and resources towards supporting studies that will enroll approximately 500help secure insurance reimbursement adoption by government and private insurers. Consequently, we have decided to 900 male GERD patients over 50 years of age with one other risk factor. ESOGUARD-BE-2 is a case control study which willdelay for the time being the BE-1 trial while continuing to enroll approximately 500 male GERD patients with a previous diagnosis of NDBE, LGD, HGD,nondysplastic BE, low grade dysplasia, high grade dysplasia,, or EAC alongin the BE-2 case-control study through Q2 2023.
Recent Developments - continued
Financing
Securities Purchase Agreement - March 31, 2022
- Senior Secured Convertible Note - April 4, 2022
We entered into a Securities Purchase Agreement (“SPA”) dated March 31, 2022, with normal controls.an accredited institutional investor (“Investor”, “Lender”, and /or “Holder”), wherein, we agreed to sell, and the Investor agreed to purchase an aggregate of $50.0 million face value principal of debt - comprised of: an initial issuance of $27.5 million face value principal; and up to an additional $22.5 million of face value principal (upon the satisfaction of certain conditions). The debt is being issued in a registered direct offering under our effective shelf registration statement.
See our accompanying unaudited condensed consolidated financial statements Note 11, Debt, for further discussion of the SPA dated March 31, 2022 and the April 2022 Senior Convertible Note, including a description of a recent waiver and amendment.
Lucid Diagnostics Inc. - Committed Equity Facility
In February 2020, we received FDA “Breakthrough Device Designation” for EsoGuard asMarch 2022, our majority-owned subsidiary Lucid Diagnostics, Inc. entered into a committed equity facility with an IVD device. The FDA Breakthrough Device Program was created to offer patients more timely access to breakthrough technologies which provide for more effective treatment or diagnosisaffiliate of life-threatening or irreversibly debilitating human disease or conditions by expediting their development, assessment and review through enhanced communications and more efficient and flexible clinical study design, including more favorable pre/post market data collection balance. Breakthrough Devices receive priority FDA review, and a bipartisan bill before Congress (H.R. 5333) seeks to require Medicare to temporarily cover all Breakthrough Devices for three years while determining permanent coverage.
We have received ISO 13485:2016 certification for Lucid’s quality management system and received CE Mark certification for EsoCheck in May 2021 which allows it to be marketed in CE Mark European countries, which includeCantor Fitzgerald (“Cantor”). Under the European Economic Area (the EU, Norway, Iceland, and Lichtenstein), Switzerland, and, until July 1, 2023, the United Kingdom. In June 2021, we completed the European Directive 98/79/EC for In-Vitro Diagnostic Medical Devices (“IVDD”) CE Mark certification for EsoGuard after Lucid and its European Union (“EU”) authorized representative completed the Commissionterms of the European Union (“EC”) declarationcommitted equity facility, Cantor has committed to purchase up to $50 million of conformity procedure, includingLucid Diagnostics Inc. common stock from time to time at the associated technical documentation, ensuring and declaring EsoGuard meetsrequest of Lucid Diagnostics Inc. While there are distinct differences, the essential requirements of the IVDD.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued
Overview - continued
Minimally Invasive Interventions
CarpX
CarpXfacility is structured similarly to a minimally invasive surgical device for use in the treatment of carpal tunnel syndrome which received FDA 510(k) marketing clearance in April 2020, with the first commercial procedure successfully performed in December 2020.
We believe CarpX is designedtraditional at-the-market equity facility, insofar as it allows Lucid Diagnostics Inc. to allow the physician to relieve the compressionraise primary capital on a periodic basis at prices based on the median nerve without an open incision or the need for endoscopic or other imaging equipment. To use CarpX, the operator first advances a guidewire through the carpal tunnelexisting market price. As of June 30, 2022, there were no shares of common stock of Lucid Diagnostics Inc. issued under the ligament, and then advanced overcommitted equity facility. Subsequent to June 30, 2022, as of August 10, 2022, under the wire and positioned in the carpal tunnel under ultrasonic and/or fluoroscopic guidance. When the CarpX balloon is inflated it creates tension in the ligament positioning the cutting electrodes underneath it and creates space within the tunnel, providing anatomic separation between the target ligament and critical structures such as the median nerve. Radiofrequency energy is briefly delivered to the electrodes, rapidly cutting the ligament, and relieving the pressure on the nerve. We believe CarpX will be significantly less invasive than existing treatments.
We are commercializing CarpX throughcommitted equity facility, a networktotal of independent U.S. sales representatives and/or inventory-stocking medical distributors together with our in-house sales management and marketing teams. Our focus on CarpX, and other high margin products and services, is particularly suitable to this mode308,152 shares of distribution. A high gross margin allows us to properly incentivize our distributors, which in turn allows us to attract the top distributors with the most robust networks in our targeted specialties. Independent distributors play an even larger role in many partscommon stock of Europe, mostLucid Diagnostics Inc. were issued for proceeds of Asia and emerging markets worldwide.
We may eventually choose to build (or obtain through a strategic acquisition) our own sales and marketing team to commercialize CarpX, along with some or all of our products, if it is in our long-term interests. We may also choose to enter into distribution agreements with larger strategic partners whereby we take full responsibility for the manufacturing of CarpX but outsource some or all of its distribution to a partner, particularly outside the United States, with its own robust distribution channels.
We have received ISO 13485:2016 certification for PAVmed’s quality management system and received CE Mark certification for CarpX in May 2021 which allows it to be marketed in CE Mark European countries, which include the European Economic Area (the EU, Norway, Iceland, and Lichtenstein), Switzerland, and, until July 1, 2023, the United Kingdom.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued
Overview - continued
Infusion Therapy
PortIO
PortIO is a novel, patented, implantable, intraosseous vascular access device which does not require accessing the central venous system and does not have an indwelling intravascular component. It is designed to be highly resistant to occlusion and may not require regular flushing. It features simplified, near-percutaneous insertion and removal, without the need for surgical dissection or radiographic confirmation. It provides a near limitless number of potential access sites and can be used in patients with chronic total occlusion of their central veins. The absence of an intravascular component will likely result in a very low infection rate.
Based on encouraging animal data, we are preparing to initiate a long-term (60-day implant duration) first-in-human clinical study in dialysis patients or those with poor venous access in Colombia, South America and intend to fulfill the likely FDA request for human clinical data with a clinical safety study in the U.S. following FDA clearance of our Investigational Device Exemption (“IDE”) submission to begin clinical testing in dialysis patients to support a future de novo regulatory submission.
NextFlo
NextFlo is a patented, disposable, and highly accurate infusion platform technology including intravenous (“IV”) infusion sets and disposable infusion pumps designed to eliminate the need for complex and expensive electronic infusion pumps for most of the estimated one million infusions of fluids, medications and other substances delivered each day in hospitals and outpatient settings in the U.S. NextFlo is designed to deliver highly accurate gravity-driven infusions independent of the height of the IV bag. It maintains constant flow by incorporating a proprietary, passive, pressure-dependent variable flow-resistor consisting entirely of inexpensive, easy-to-manufacture disposable mechanical parts. NextFlo testing has demonstrated constant flow rates across a wide range of IV bag heights, with accuracy rates comparable to electronic infusion pumps.
We are seeking a long-term strategic partnership or acquiror. We have been running a formal M&A process for NextFlo targeting strategic and financial partners. Discussions and technologic diligence engagement with large strategic partners to license NextFlo technology for disposable infusion pumps continue while PAVmed advances technology towards self-commercialization. We have initiated design freeze verification testing in preparation for final verification and validation testing of NextFlo IV Infusion Set, to support FDA 510(k) submission and clearance targeted for the first half of 2022.approximately $927.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued
Overview - continued
Digital Health
Veris Health Inc.
In May 2021, we formed Veris Health, which is our newest majority majority-owned subsidiary, focused on digital health technology. Also in May 2021, Veris Health acquired Oncodisc Inc. (“Oncodisc”), a digital health company with groundbreaking tools to improve personalized cancer care through remote patient monitoring.
Oncodisc was founded by experienced physician entrepreneurs, James Mitchell, M.D., who joins Veris Health as its full-time Chief Medical Officer, and Andrew Thoreson, M.D., who will serve as a Veris Health consultant. Oncodisc’s core technologies include the first intelligent implantable vascular access port with biologic sensors and wireless communication, combined with an oncologist-designed remote digital healthcare platform that provides patients and physicians with new tools to improve outcomes and optimize the delivery of cost-effective care through remote monitoring and data analytics.
Oncodisc was founded in 2018 by Mitchell, a radiation-oncologist, and Thoreson, an interventional radiologist, who previously co-founded Redsmith, Inc., an interventional catheter company whose technology was acquired by C.R. Bard Inc., now BD Inc. (NYSE: BDX), in 2017. Oncodisc received a National Science Foundation (“NSF”) Small Business Innovation Research (“SBIR”) grant award to support its early work and completed both the MedTech Innovator Accelerator and UCSF Rosenman Institute Accelerator programs.
Its groundbreaking vascular access port contains biologic sensors capable of generating continuous data on key physiologic parameters known to predict adverse outcomes in cancer patients undergoing treatment. Wireless communication to the patient’s smartphone and its cloud-based digital healthcare platform efficiently and effectively delivers actionable real time data to patients and physicians. The technologies are the subject of multiple patent applications and one allowed patent awaiting final issuance. Veris Health is targeting FDA 510(k) clearance of the intelligent implantable vascular access port and launch of the remote digital healthcare platform for the last six months of 2022.
The planned Veris Health business model seeks to generate 100% recurring revenue through oncology practice and hospital-based subscriptions. These entities would purchase seats on the platform and pay a monthly remote monitoring charge to drive revenues from remote patient monitoring and device implantation under existing CPT codes, as well as established CMS Oncology Care Model (OCM) bonuses and CMS Quality Reporting Program incentives. Veris Health also anticipates strong demand for its intelligent implantable vascular access port and remote monitoring platform from oncology biotherapeutic companies to support clinical trials of their novel immunotherapy and chemotherapy agents with continuous physiologic data and transformative analytics.
Emerging Innovations
Emerging Innovations include a diversified and expanding portfolio of innovative products designed to address unmet clinical needs across a broad range of clinical conditions. We are evaluating a number of these product opportunities and intellectual property covering a wide spectrum of clinical conditions, which have either been developed internally or have been presented to us by clinician innovators and academic medical institutions for consideration of a partnership to develop and commercialize these products. This collection of products includes, without limitation, initiatives in non-invasive laser-based glucose monitoring, mechanical circulatory support cannulas, single-use ventilators and resorbable pediatric ear tubes. In June 2020, we announced the execution of a letter of intent to consummate a series of agreements to develop and utilize Canon Virginia’s commercial grade and scalable aqueous silk fibroin molding process to manufacture PAVmed’s DisappEAR molded pediatric ear tubes for commercialization. Furthermore, we are exploring other opportunities to grow our business and enhance shareholder value through the acquisition of pre-commercial or commercial stage products and/or companies with potential strategic corporate and commercial synergies.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued
Impact of the COVID-19 Pandemic
Previously, in December 2019, an outbreak of a novel strain of a coronavirus occurred. The coronavirus spread on a global basis to other countries, including the United States. On March 11, 2020, the United Nations World Health Organization (“WHO”) declared a pandemic resulting from the spread of the coronavirus, with such pandemic commonly referred to by its resulting illness, “COVID-19”. The COVID-19 pandemic is ongoing, and we continue to monitor the ongoing impact of the COVID-19 pandemic on the United States national economy, the global economy, and our business.
The COVID-19 pandemic may have an adverse impact on our operations, supply chains, and distribution systems and /or those of our contractors of our laboratory partner, and increase our expenses, including as a result of impacts associated with preventive and precautionary measures being taken, restrictions on travel, quarantine polices, and social distancing. Such adverse impact may include, for example, the inability of our employees and /or those of our contractors or laboratory partner to perform their work or curtail their services provided to us.
We expect the significance of the COVID-19 pandemic, including the extent of its effect on our consolidated financial condition and consolidated operational results and cash flows, to be dictated by the success of United States and global efforts to mitigate the spread of and /or to contain the coronavirus and the impact of such efforts.
In addition, the spread of the coronavirus has disrupted the United States’ healthcare and healthcare regulatory systems which could divert healthcare resources away from, or materially delay FDA approval with respect to our products.
Furthermore, our clinical trials have been and may be further affected by the COVID-19 pandemic, as site initiation and patient enrollment may be delayed, for example, due to prioritization of hospital resources toward the virus and /or illness response, as well as travel restrictions imposed by governments, and the inability to access clinical test sites for initiation and monitoring.
The COVID-19 pandemic may have an adverse impact on the economies and financial markets of many countries, including the United States, resulting in an economic downturn that could adversely affect demand for our products and services and /or our product candidates.
Although we are continuing to monitor and assess the effects of the COVID-19 pandemic on our business, the ultimate impact of the COVID-19 pandemic (or a similar health epidemic) is highly uncertain and subject to change, and therefore, its impact on our consolidated financial condition, consolidated results of operations, and /or consolidated cash flows, the adverse impact could be material.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued
Results of Operations
Overview
Commercial operationsRevenue
Revenue was recognized with respect to the EsoGuard Commercialization Agreement, dated August 1, 2021, between the Company’s majority-owned subsidiary, Lucid Diagnostics Inc., and ResearchDx Inc. (“RDx”), a CLIA certified commercial laboratory service provider. On February 25, 2022, the EsoGuard Commercialization Agreement was terminated upon the execution of an Asset Purchase Agreement between LucidDx Labs Inc., a wholly-owned subsidiary of Lucid Diagnostics Inc. and RDx.
Cost of revenue
The cost of revenue recognized with respect to the revenue recognized under the EsoGuard Commercialization Agreement is inclusive of: a royalty fee incurred under the Amended CWRU License Agreement; employee related costs of employees engaged in the administration to patients of the EsoCheck cell sample collection procedure (principally at the LUCID Test Centers); the EsoCheck devices and EsoGuard mailers (cell sample shipping costs) distributed to medical practitioners locations and the LUCID Test Centers; and LUCID Test Centers operating expenses, including rent expense and supplies.
Sales and marketing expenses
Commercial operationsSales and marketing expenses consist primarily of salaries and related costs for employees engaged in sales sales operations,and marketing and payor reimbursement personnel, along withactivities, as well as advertising and promotion expenses. We anticipate our commercial operationssales and marketing expenses will increase in the future, as we anticipate an increase in payroll and related expenses related to the roll-out of our commercial sales and marketing operations as we execute on our business strategy.
General and administrative expenses
General and administrative expenses consist primarily of salaries and related costs for personnel, travel expenses, facility-related costs, professional fees, accounting and legal services, employees involved in third-party payor reimbursement contract negotiations and consultants and expenses associated with obtaining and maintaining patents within our intellectual property portfolio.
We anticipate our general and administrative expenses will increase in the future, as we anticipate an increase in payroll and related expenses related with the growth and expansion of our business operations objectives. We also anticipate continued expenses related to being a public company, including audit, legal, regulatory, and tax-related services associated with maintaining compliance as a public company, insurance premiums and investor relations costs.
Research and development expenses
Research and development expenses are recognized in the period they are incurred and consist principally of internal and external expenses incurred for the research and development of our products, including:
● | consulting costs charged to us by various external contract research organizations we contract with to conduct preclinical studies and engineering studies; | |
● | salary and benefit costs associated with our chief medical officer and engineering personnel; | |
● | costs associated with regulatory filings; | |
● | patent license fees; | |
● | cost of laboratory supplies and acquiring, developing, and manufacturing preclinical prototypes; | |
● | product design engineering studies; and | |
● | rental expense for facilities maintained solely for research and development purposes. |
We plan to incur research and development expenses for the foreseeable future as we continue the development of our existing products as well as new innovations. Our research and development activities are focused principally on obtaining FDA approvals and developing product improvements or extending the utility of the lead products in our pipeline, including CarpX, EsoCheck and EsoGuard and CarpX, along with advancing our DisappEAR,Veris Cancer Care Platform and EsoCure and PortIO NextFlo, non-invasive glucose monitoring and digital health products through their respective development phase.products.
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Results of Operations - continued
Overview - continued
Other Income and Expense, net
Other income and expense, net, consists principally of changes in fair value of our contingent consideration and our convertible notes and losses on extinguishment of debt upon repayment of such convertible notes; and interest expense with respect to one of our convertible notes.
Presentation of Dollar Amounts
All dollar amounts in this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations are presented in thousands of dollars, if not otherwise notedindicated as being presented as dollars in millions, except for the number of shares and per share amounts.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued
Results of Operations - continued
Three months ended June 30, 2021 versus2022 as compared to three months ended June 30, 20202021
The Company did not recognize revenue nor cost of revenue during the three months ended June 30, 2022 and June 30, 2021.
Commercial operations
Sales and marketing expenses
In the three months ended June 30, 2021, commercial operations2022, sales and marketing costs were approximately $2.0$4.9 million, as compared to $0.5$1.9 million for the corresponding period in the prior year, with the $1.5year. The net increase of $3.0 million increasewas principally resulting from: approximately $0.8 million with respect to increased staffing in commercial operations, including sales, marketing, and payor reimbursement personnel, along with higher stock-based compensation expense; and approximately $0.7 million with respect to increased consulting and professional services fees.
related to:
● | approximately $2.2 million increase in compensation related costs principally related to an increase in headcount; | |
● | approximately $0.3 million increase in stock based compensation from RSA grants to Lucid and PAVmed employees and non-employees, and an increase in stock options granted corresponding with the increase in the number of employees; and | |
● | approximately $0.5 million increase in outside professional services related to EsoCheck, EsoGuard and consulting and professional services fees. |
General and administrative expenses
In the three months ended June 30, 2021,2022, general and administrative costs were approximately $6.7$11.8 million, as compared to $2.4$6.8 million for the corresponding period in the prior year, with the $4.3year. The net increase of $5.0 million increasewas principally related to:
● | approximately | |
● | approximately $1.1 million decrease stock based compensation primarily due to the absence in the current year of stock-based compensation | |
● | approximately | |
● | approximately $0.6 million of amortization expense related to our intangible assets; | |
● | approximately |
Research and development expenses
In the three months ended June 30, 2021,2022, research and development costs were approximately $4.3$6.7 million as compared to $2.1$4.3 million for the corresponding period in the prior year, with the $2.2year. The net increase $2.5 million increasewas principally related to:
● | approximately | |
● | approximately |
Other Income and Expense
Debt forgiveness
In the three months ended June 30, 2021, our PPP loan related to the CARES Act of $0.3 million was forgiven by the Small Business Administration. No principal or interest payments were ever made and accordingly we recorded a gain of $0.3 million.
Change in fair value of convertible debt
In the three months ended June 30, 2020,2022, the non-cash income (expense)expense recognized for the change in the fair value of our convertible notes was approximately $2.1$2.0 million, related to the April 2022 Senior Convertible Note. The April 2022 Senior Convertible Note was initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value as of other income.the reporting period date. The Company initially recognized a $2.6 million fair value non-cash expense on the issue-date. This initial recognition was partially offset by a $0.6 million decrease in estimated fair value upon remeasurement as of June 30, 2022.
Loss from Extinguishment of Debton Issue and Offering Costs - Senior Secured Convertible Note
In the prior year period of three months ended June 30, 2020,2022, in connection with the issue of the April 2022 Senior Convertible Note, we recognized a loss from extinguishment of debttotal of approximately $2.7$3.1 million was recognized, with such loss resulting from the difference between: the face value principal repaymentsof other expense, inclusive of approximately $2.5 million of lender fee non-cash expense, and the corresponding paymentsapproximately $0.6 million of the interest thereon; as compared to the fair value of the shares of our common stock issued upon conversion of such convertible note, with such fair value measured as the respective issue date closing quoted price per share of our common stock.offering costs paid by us.
See Note 7, Debt, of our unaudited condensed consolidated financial statements Note 11, Debt, for additional information with respect to the convertible notes.April 2022 Senior Convertible Note.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued
Results of Operations - continued
Six months ended June 30, 2021 versus2022 as compared to six months ended June 30, 20202021
Commercial operations expensesRevenue
In the six months ended June 30, 2021, commercial operations were approximately $3.42022, revenue was $0.2 million as compared to $0.8no revenue in the corresponding period in the prior year. The $0.2 million relates to our EsoGuard Commercialization Agreement, dated August 1, 2021, which resulted in revenue recognition of $0.1 million per month commencing August 2021 and ending February 2022 upon the February 25, 2022 termination date of such agreement.
Cost of revenue
In the six months ended June 30, 2022, cost of revenue was approximately $0.4 million as compared to no cost of revenue in the corresponding period in the prior year. The $0.4 million increase principally relates to costs associated with the EsoGuard Commercialization Agreement noted above.
Sales and marketing expenses
In the six months ended June 30, 2022, sales and marketing costs were approximately $8.8 million, compared to $3.3 million for the corresponding period in the prior year, with the $1.8year. The net increase of $5.6 million increasewas principally resulting from: approximately $1.6 million with respect to increased staffing in commercial operations, including sales, marketing, and reimbursement personnel, along with higher stock-based compensation expense; and approximately $1.0 million with respect to increased consulting and professional services fees.
related to:
● | approximately $3.8 million increase in compensation related costs principally related to an increase in headcount; | |
● | approximately $0.7 million increase in stock based compensation from RSA grants to Lucid and PAVmed employees and non-employees, and an increase in stock options granted corresponding with the increase in the number of employees; and | |
● | approximately $1.1 million increase in outside professional services related to EsoCheck, EsoGuard and consulting and professional services fees. |
General and administrative expenses
In the six months ended June 30, 2021,2022, general and administrative costs were approximately $10.1$21.4 million, as compared to $4.7$10.2 million for the corresponding period in the prior year, with the $5.4year. The net increase of 11.2 million increase was principally related to:
● | approximately | |
● | approximately | |
● | approximately $5.7 million increase in consulting services related to patents, regulatory compliance, legal processes for contract review, transition of public relations and investor relations firms, and public company expenses; and | |
● | approximately $0.7 million of amortization expense related to our intangible assets; | |
● | approximately |
Research and development expenses
In the six months ended June 30, 2021,2022, research and development costs were approximately $7.6$12.7 million as compared to $4.7$7.6 million for the corresponding period in the prior year, with the $2.9year. The net increase $5.1 million increasewas principally related to:
● | approximately | |
● | approximately $1.0 million increase in compensation related costs | |
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Results of Operations - continued
Six months ended June 30, 2022 as compared to six months ended June 30, 2021 - continued
Other Income and Expense
Debt forgiveness
In the six months ended June 30, 2021, our PPP loan related to the CARES Act of $0.3 million was forgiven by the Small Business Administration. No principal or interest payments were ever made and accordingly we recorded a gain of $0.3 million.
Change in fair value of convertible debt
In the six months ended June 30, 2021,2022, the non-cash income (expense)expense recognized for the change in the fair value of our convertible notes was approximately $1.7$2.0 million, related to the April 2022 Senior Convertible Note. The April 2022 Senior Convertible Note was initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value as of other income, as compared to $5.9the reporting period date. The Company initially recognized a $2.6 million of otherfair value non-cash expense foron the issue-date. This initial recognition was partially offset by a $0.6 million decrease in fair value upon remeasurement June 30, 2022.
Loss on Issue and Offering Costs - Senior Secured Convertible Note
In the six months ended June 30, 2020. The change2022, in connection with the fair value adjustmentissue of the convertible notes is principally related to each of the convertible notes being repaid-in-full during the six months ended June 30, 2021, as discussed herein below under “Other Income and Expense - Loss from Extinguishment of Debt”.
See Note 6, Financial Instruments Fair Value Measurements, of our unaudited condensed consolidated financial statements for a further discussion of the change in fair value of our convertible notes, and Note 7, Debt, of our unaudited condensed consolidated financial statements for a further discussion the Series A and Series B November 2019April 2022 Senior Convertible Notes.
Item 2. Management’s DiscussionNote, we recognized a total of approximately $3.1 million of other expense, inclusive of approximately $2.5 million of lender fee non-cash expense, and Analysisapproximately $0.6 million of Financial Condition and Results of Operations - continued
offering costs paid by us.
Six months ended June 30, 2021 versus June 30, 2020 - continued
Loss from Extinguishment of Debt
In the prior year six months ended June 30, 2021, a debt extinguishment loss in the aggregate of approximately $3.7 million was recognized in connection with the (previous) convertible notes, as discussed below.
● | On January 5, 2021, the repayment of the remaining face value principal of the November 2019 Senior Convertible Note, | |
● | On January 30, 2021, we paid in cash a $350 partial principal repayment of the Senior Convertible Note dated April 30, 2020 (“April 2020 Senior Convertible Note”); and on March 2, 2021, we made a cash payment of approximately $14,466, resulting in the repayment-in-full on such date of both the April 2020 Senior Convertible Note and the Senior Secured Convertible Note dated August 6, 2021, resulting in the recognition of a loss from extinguishment of debt of approximately $2,955 in the six months ended June 30, 2021. |
In the prior year period of six months ended June 30, 2020, a loss from extinguishment of debt of approximately $3.9 million was recognized, with such loss resulting from the difference between: the face value principal repayments and the corresponding payments of the interest thereon; as compared to the fair value of the shares of our common stock issued upon conversion of such convertible note, with such fair value measured as the respective issue date closing quoted price per share of our common stock.
See Note 7, Debt, of our unaudited condensed consolidated financial statements Note 11, Debt, for additional information with respect to the convertible notes.April 2022 Senior Convertible Note.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued
Liquidity and Capital Resources
Our current operational activities are principally focused on the commercialization of EsoGuard and CarpX, and our development activities are focused on pursuing FDA approval and clearance of other lead products in our product portfolio pipeline. Our ability to generate revenue depends upon successfully advancing the commercialization of EsoGuard and CarpX while also completing the development and the necessary regulatory approvals of its other products and services. There are no assurances, however, the Company will be able to obtain an adequate level of financial resources required for the long-term commercialization and development of its products and services.
We have financed our operations principally through the public and private issuances of our common stock, preferred stock, common stock purchase warrants, and debt. We are subject to all of the risks and uncertainties typically faced by medical device and diagnostic and medical device companies that devote substantially all of their efforts to the commercialization of their initial product and services and ongoing R&D and clinical trials. We expect to continue to experience recurring losses from operations, and will continue to fund our operations with debt and/or equity financing transactions. Notwithstanding, however, together with the cash on-hand as of June 30, 2021the date hereof and other debt and equity committed sources of $43.2 million from the cash proceeds from the issue of shares of common stock of the Company. in January and February 2021, as discussed herein below, partially used to repay all of our remaining outstanding convertible debtfinancing, we expect to be able to fund our future operations for one year from the date of the issue of our unaudited condensed consolidated financial statements, as included here in ourthis Quarterly Report on Form 10-Q for the quarterperiod ended June 30, 2021.2022.
In the six months ended June 30, 2021 we issued sharesIssue of our common stock and received proceeds from the exerciseShares of our Series Z Warrants, as discussed herein below, which resulted in approximately $57.8 million of gross proceeds, before placement agent fees and expenses and additional offering costs incurred by us. Additionally, we repaid-in-full the outstanding principal balances of all our convertible notes.Our Common Stock
On January 5, 2021, we issued 6,000,000 shares of our common stock for gross proceeds of approximately $13,440, before a placement agent fee and expenses of approximately $951, and offering costs incurred by us of approximately $71; and, on February 23, 2021, we issued 9,782,609 shares of our common stock for proceeds of approximately $41,576, before offering costs incurred by us of approximately $290.
During the six months ended June 30, 2021, a total of 1,740,658 of our Series Z Warrants were exercised at their exercise price of $1.60 per share of our common stock, resulting in cash proceeds of approximately $2,785, and the issue of the same number of our shares of common stock. Subsequent to June 30, 2021, as of August 12, 2021, a total of 508,548 of our Series Z Warrants were exercised for cash at the $1.60 per share exercise price, resulting in the issue of the same number of shares of our common stock.2022
● | We issued 299,999 shares of our common stock for cash proceeds of approximately $0.3 million upon exercise of stock options granted under the PAVmed Inc 2014 Equity Plan, as such plan is discussed in Note 12, Stock-Based Compensation, of our unaudited condensed consolidated financial statements. | |
● | We issued 194,240 shares of our common stock for proceeds of approximately $0.2 million under the PAVmed Inc. Employee Stock Purchase Plan (“ESPP”), as such plan is discussed in Note 12, Stock-Based Compensation of our unaudited condensed consolidated financial statements. |
Securities Purchase Agreement - March 31, 2022
- Senior Secured Convertible Note - April 4, 2022
Additionally, inWe entered into a Securities Purchase Agreement (“SPA”) dated March 31, 2022, with an accredited institutional investor (“Investor”, “Lender”, and /or “Holder”), pursuant to which we agreed to sell, and the six months ended June 30, 2021, we repaid-in-full allInvestor agreed to purchase an aggregate of $50.0 million face value principal of debt - comprised of: an initial issuance of $27.5 million face value principal; and up to an additional $22.5 million of face value principal (upon the outstanding principal balancessatisfaction of our convertible notes, as discussed herein above under “Other Income and Expense - Loss from Extinguishment of Debt”certain conditions).
See our unaudited condensed consolidated financial statementsUnder the SPA dated March 31, 2022, we issued a Senior Secured Convertible Note 7, Debtdated April 4, 2022, referred to herein as the “April 2022 Senior Convertible Note”, forwith such note having a discussion$27.5 million face value principal, a 7.875% annual stated interest rate, a contractual conversion price of our convertible notes;$5.00 per share of the Company’s common stock (subject to standard adjustments in the event of any stock split, stock dividend, stock combination, recapitalization or other similar transaction), and a contractual maturity date of April 4, 2024. The April 2022 Senior Convertible Note 10, Stockholders Equity and Common Stock Purchase Warrants, for a further discussion of and the issuemay be converted into shares of our common stock.stock at the Holder’s election. During the period from April 4, 2022 to October 3, 2022, we are required to pay interest expense only (on the $27.5 million face value principal), at 7.875% per annum, computed on a 360 day year.
The April 2022 Senior Convertible Note proceeds were $25.0 million after deducting a $2.5 million lender fee; and additionally, we incurred total offering costs of approximately $601, inclusive of the payment of a total of $450 placement agent fees.
Subject to certain conditions being met or waived, from time to time, one or more additional closings may occur, for up to the remaining $22.5 million face value principal, upon five trading days’ notice given by us to the Investor. The Investor’s obligation to purchase the additional notes at each additional closing is subject to certain conditions set forth in the SPA dated March 31, 2022, including, among others, contractual closing requirements: minimum price and trading volume thresholds of our common stock; the maximum ratio of debt to market capitalization (as defined); and minimum market capitalization (as defined), with such requirements being waived by the Investor in its sole discretion.
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Liquidity and Capital Resources - continued
Securities Purchase Agreement - March 31, 2022
- Senior Secured Convertible Note - April 4, 2022 - continued
Under the April 2022 Senior Convertible Note and the SPA, we are subject to certain customary affirmative and negative covenants regarding the incurrence of indebtedness, the existence of liens, the repayment of indebtedness and the making of investments, the payment of cash in respect of dividends, distributions or redemptions, the transfer of assets, the maturity of other indebtedness, and transactions with affiliates, among other customary matters. We also are subject to financial covenants requiring that (i) the amount of our available cash equal or exceed $8,000,000 at all times, (ii) the ratio of (a) the outstanding principal amount of the notes issued under the SPA, accrued and unpaid interest thereon and accrued and unpaid late charges to (b) our average market capitalization over the prior ten trading days, not exceed 30% (the “Debt to Market Cap Ratio Test”), and (iii) that our market capitalization shall at no time be less than $75 million (the “Market Cap Test” and, together with the Debt to Market Cap Ratio Test, the “Financial Tests”). The Company is currently in compliance with these financial covenants, although from time to time since the date of issuance of the April 2022 Senior Convertible Note through August 10, 2022 (including, in the case of the Debt to Market Cap Ratio Test, as of June 30, 2022), the Company was not in compliance with the Financial Tests. As of August 9, 2022, the Investor agreed to waive any such non-compliance during such aforementioned time periods, under each of the SPA dated March 31, 2022 and the April 2022 Senior Convertible Note.
In connection with such waiver, the Company and the Investor also amended the April 2022 Senior Convertible to permit the Investor to convert up to $5,000,000 of the principal amount of the April 2022 Senior Convertible Note at the then current conversion price as if the date of conversion were an Installment Date, i.e. a price per share of common stock equal to the lower of (i) the fixed conversion price then in effect (currently $5.00) and (ii) 82.5% of the average VWAP of the Company’s common stock for each of the two trading days with the lowest VWAP of the Company’s common stock during the ten consecutive trading day period ending and including the trading day immediately prior to the applicable conversion date, but in the case of clause (ii), not less than $0.18 per share. As contemplated by such amendment, subsequent to June 30, 2022, on August 10, 2022, approximately $2,882 of principal repayments along with approximately $6 of interest expense thereon, were settled through the issuance of 3,000,867 shares of our common stock, with such shares having a fair value of approximately $5,462 (with such fair value measured as the respective conversion date quoted closing price of our common stock).
Lucid Diagnostics Inc. - Committed Equity Facility
In March 2022, our majority-owned subsidiary Lucid Diagnostics, Inc. entered into a committed equity facility with Cantor. Under the terms of the committed equity facility, Cantor has committed to purchase up to $50 million of Lucid Diagnostics Inc. common stock from time to time at the request of Lucid Diagnostics Inc. While there are distinct differences, the facility is structured similarly to a traditional at-the-market equity facility, insofar as it allows Lucid Diagnostics Inc. to raise primary capital on a periodic basis at prices based on the existing market price. As of June 30, 2022, there were no shares of common stock of Lucid Diagnostics Inc. issued under the committed equity facility. Subsequent to June 30, 2022, as of August 10, 2022, under the committed equity facility, a total of 308,152 shares of common stock of Lucid Diagnostics Inc. were issued for proceeds of approximately $927.
Critical Accounting Policies and Significant Judgments and Estimates
The discussion and analysis of our consolidated(unaudited) financial condition and consolidated results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, and equity, along with the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the corresponding periods. In accordance with U.S. GAAP, we base our estimates on historical experience and on various other assumptions we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Please seeOur critical accounting policies are as disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on April 6, 2022, except as otherwise noted in Note 2, Summary of Significant Accounting Policies and Recent Accounting Standards Updates, of our unaudited condensed consolidated financial statements included herein in this Form 10-Q, for a summary of significant accounting policies. In addition, reference is made to Part I, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in our previously filed Annual Report on Form 10-K for the year ended December 31, 2020 (“Form 10-K), for a summary of our critical accounting policies and significant judgments and estimates. There have been no other material changes to our critical accounting policies or significant judgments and estimates as discussed in our Form 10-K.10-Q.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2021, and based2022. Based on such evaluation, our principal executive officer and principal financial officer concluded our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) were effective as of such date to provide reasonable assurance the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes into Internal ControlControls Over Financial Reporting
There has been no change in our internal controlcontrols over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) under the Exchange Act) that occurred during our last fiscal periodquarter ended June 30, 20212022 that has materially affected, or is reasonably likely to materially affect, our internal controlcontrols over financial reporting.
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PART II. OTHER INFORMATIONPart II - Other Information
Item 1. Legal Proceedings
See Note 5,9, Commitment and Contingencies - Legal Proceedings, of the unaudited condensed consolidated financial statements included in this Quarterly Report, for a description of certain material legal proceedings involving the Company, which description is incorporated herein by reference.
In the ordinary course of our business, particularly as we beginit begins commercialization of ourits products, wethe 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, we dothe Company does not believe we areit 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 ourthe Company’s business, financial position, results of operations, and /or cash flows. Additionally, although we havethe Company has specific insurance for certain potential risks, wethe Company may in the future incur judgments or enter into settlements of claims which may have a material adverse impact on ourthe Company’s business, financial position, results of operations, and /or cash flows.
Item 5. Other Information
None
Under the April 2022 Senior Convertible Note and the SPA, we are subject to certain customary affirmative and negative covenants regarding the incurrence of indebtedness, the existence of liens, the repayment of indebtedness and the making of investments, the payment of cash in respect of dividends, distributions or redemptions, the transfer of assets, the maturity of other indebtedness, and transactions with affiliates, among other customary matters. We also are subject to financial covenants requiring that (i) the amount of our available cash equal or exceed $8,000,000 at all times, (ii) the ratio of (a) the outstanding principal amount of the notes issued under the SPA, accrued and unpaid interest thereon and accrued and unpaid late charges to (b) our average market capitalization over the prior ten trading days, not exceed 30% (the “Debt to Market Cap Ratio Test”), and (iii) that our market capitalization shall at no time be less than $75 million (the “Market Cap Test” and, together with the Debt to Market Cap Ratio Test, the “Financial Tests”). The Company is currently in compliance with these financial covenants, although from time to time since the date of issuance of the April 2022 Senior Convertible Note through August 10, 2022 (including, in the case of the Debt to Market Cap Ratio Test, as of June 30, 2022), the Company was not in compliance with the Financial Tests. As of August 9, 2022, the Investor agreed to waive any such non-compliance during such aforementioned time periods, under each of the SPA dated March 31, 2022 and the April 2022 Senior Convertible Note. In connection with such waiver, the Company and the Investor also amended the April 2022 Senior Convertible to permit the Investor to convert up to $5,000,000 of the principal amount of the April 2022 Senior Convertible Note at the then current conversion price as if the date of conversion were an Installment Date, i.e. a price per share of common stock equal to the lower of (i) the fixed conversion price then in effect (currently $5.00) and (ii) 82.5% of the average VWAP of the Company’s common stock for each of the two trading days with the lowest VWAP of the Company’s common stock during the ten consecutive trading day period ending and including the trading day immediately prior to the applicable conversion date, but in the case of clause (ii), not less than $0.18. As contemplated by the amendment discussed above, on August 10, 2022, the Investor converted $2,882,000 of the principal amount of the April 2022 Senior Convertible Note (plus interest accrued thereon), resulting in an issuance to the Investor of 3,000,867 shares of the Company’s common stock.
Item 6. Exhibits
The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth in the “Exhibit Index” below.
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SIGNATURESIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PAVmed Inc. | ||
By: | /s/ Dennis | |
Dennis | ||
President and Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
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EXHIBIT INDEX
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