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 June 30, 20222023

 

OR

 

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____ to _____

 

Commission File Number: 001-37685

 

PAVMED 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 Place360 Madison Avenue  
60 E. 42nd Street
Suite 460025th Floor  
New York, NY 10165 1016510017
(Address of Principal Executive OfficesOffices) (Zip Code)

 

(212) 949-4319

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered under Section 12(b) of the Exchange Act:

 

Title of each Class Trading Symbol(s) Name of each Exchange on which Registered
Common Stock, $0.001 par value per share PAVM The NASDAQ Stock Market LLC
Series Z Warrants, each to purchase one share of Common Stock PAVMZ The NASDAQ 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” , “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated filer☐Accelerated filed☐
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(c) of the Exchange 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 10, 20222023, there were 90,999,078111,418,679 shares of the registrant’s Common Stock, par value $0.001 per share, issued and outstanding (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

 

Page
 Part I - Financial InformationPage
   
Item 1.Financial Statements 
 Condensed Consolidated Balance Sheets (unaudited) as of June 30 20222023 and December 31, 202120221
 Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 20222023 and 202120222
 Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) for the three and six months ended June 30, 20222023 and 202120223
 Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 20222023 and 202120227
 Notes to Unaudited Condensed Consolidated Financial Statements8
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations28
Item 4.Controls and Procedures4037
   
 PARTPart II - Other Information 
   
Item 1.Legal Proceedings4138
Item 5.Other Information4138
Item 6.Exhibits4138
 Signature4239
 Exhibit Index4340

 

i

 

PART I.Part I - Financial Information

Item 1. Financial Statements

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands except number of shares and per share data - unaudited)

 

 June 30, 2022  December 31, 2021  June 30, 2023 December 31, 2022 
Assets:                
Current assets:                
Cash $65,153  $77,258  $37,163  $39,744 
Accounts receivable  —   200   41   17 
Prepaid expenses, deposits, and other current assets  5,662   5,179   5,923   4,165 
Total current assets  70,815   82,637   43,127   43,926 
Fixed assets, net  2,253   1,585   2,028   2,451 
Operating lease right-of-use assets  3,205   —   5,014   3,037 
Intangible assets, net  4,456   2,029   2,435   3,445 
Other assets  1,725   725   1,079   1,121 
Total assets $82,454  $86,976  $53,683  $53,980 
Liabilities, Preferred Stock and Stockholders’ Equity                
Current liabilities:                
Accounts payable $4,492  $3,299  $1,162  $2,704 
Accrued expenses and other current liabilities  2,932   4,259   4,946   3,705 
Operating lease liabilities, current portion  943   —   1,427   1,141 
Senior Secured Convertible Notes - at fair value  29,500   —   42,990   33,650 
Purchase consideration payable  1,000   — 
Derivative liability - at fair value  

260

   

—

 
Total current liabilities  38,867   7,558   50,785   41,200 
Long-term liabilities        
Operating lease liabilities, less current portion  2,183   —   3,728   1,846 
Total long-term liabilities  2,183   — 
Total liabilities  41,050   7,558   54,513   43,046 
Commitments and contingencies (Note 9)  -       -   - 
Stockholders’ Equity:                
Preferred stock, $0.001 par value. Authorized, 20,000,000 shares; Series B Convertible Preferred Stock, par value $0.001, issued and outstanding 1,158,950 at June 30, 2022 and 1,113,919 shares at December 31, 2021  2,554   2,419 
Common stock, $0.001 par value. Authorized, 250,000,000 shares; 87,023,211 and 86,367,845 shares outstanding as of June 30, 2022 and December 31, 2021, respectively  87   86 
Preferred stock, $0.001 par value. Authorized, 20,000,000 shares; Series B Convertible Preferred Stock, par value $0.001, issued and outstanding 1,254,497 at June 30, 2023 and 1,205,759 shares at December 31, 2022  2,841   2,695 
Common stock, $0.001 par value. Authorized, 250,000,000 shares; 108,537,994 and 94,510,537 shares outstanding as of June 30, 2023 and December 31, 2022, respectively  109   95 
Additional paid-in capital  201,327   198,071   226,321   216,106 
Accumulated deficit  (181,442)  (138,910)  (260,783)  (228,169)
Treasury stock  (548)  —   —   (408)
Total PAVmed Inc. Stockholders’ Equity  21,978   61,666   (31,512)  (9,681)
Noncontrolling interests  19,426   17,752   30,682   20,615 
Total Stockholders’ Equity  41,404   79,418   (830)  10,934 
Total Liabilities and Stockholders’ Equity $82,454  $86,976  $53,683  $53,980 

 

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 amountsdata - unaudited)

 

 2022 2021 2022 2021  2023  2022  2023  2022 
 Three Months Ended June 30, Six Months Ended June 30,  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

 
 2022 2021 2022 2021  2023  2022  2023  2022 
Revenue $—  $—  $189  $—  $166  $—  $612  $189 
Operating expenses:                
Cost of revenue  —   —   369   —   1,685   —   3,030   369 
Gross profit (loss)  —   —   (180)  — 
Operating expenses:                
Sales and marketing  4,898   1,875   8,823   3,262   4,339   4,898   8,877   8,823 
General and administrative  11,839   6,837   21,436   10,211   6,652   11,196   16,670   20,672 
Amortization of acquired intangible assets  505   650   1,010   773 
Research and development  6,740   4,258   12,671   7,573   3,469   6,740   7,909   12,671 
Total operating expenses  23,477   12,970   42,930   21,046   16,650   23,484   37,496   43,308 
Loss from operations  (23,477)  (12,970)  (43,110)  (21,046)
Operating loss  (16,484)  (23,484)  (36,884)  (43,119)
Other income (expense):                                
Interest income  163   7   283   9 
Interest expense  (523)  —   (523)  —   (228)  (523)  (411)  (523)
Change in fair value - Senior Secured Convertible Note  (2,000)  —   (2,000)  1,682 
Change in fair value - Senior Secured Convertible Notes  (340)  (2,000)  (1,380)  (2,000)
Loss on issue and offering costs - Senior Secured Convertible Note  (3,101)  —   (3,101)  —   —   (3,101)  (1,186)  (3,101)
Debt extinguishments loss - Senior Secured Convertible Notes  —   —   —   (3,715)  (743)  —   (1,268)  — 
Debt forgiveness  —   300   —   300 
Change in fair value - derivative liability  (260)  —   (260)  — 
Gain on sale of intellectual property  —   —   1,000   — 
Other income (expense), net  (5,624)  300   (5,624)  (1,733)  (1,408)  (5,617)  (3,222)  (5,615)
Loss before provision for income tax  (29,101)  (12,670)  (48,734)  (22,779)  (17,892)  (29,101)  (40,106)  (48,734)
Provision for income taxes  —   —   —   —   —   —   —   — 
Net loss before noncontrolling interests  (29,101)  (12,670)  (48,734)  (22,779)  (17,892)  (29,101)  (40,106)  (48,734)
Net loss attributable to the noncontrolling interests  3,576   1,199   6,337   1,877   3,355   3,576   7,638   6,337 
Net loss attributable to PAVmed Inc.  (25,525)  (11,471)  (42,397)  (20,902)  (14,537)  (25,525)  (32,468)  (42,397)
Less: Series B Convertible Preferred Stock dividends earned  (70)  (74)  (138)  (149)  (75)  (70)  (149)  (138)
Net loss attributable to PAVmed Inc. common stockholders $(25,595) $(11,545) $(42,535) $(21,051) $(14,612) $(25,595) $(32,617) $(42,535)
Per share information:                                
Net loss per share attributable to PAVmed Inc. - basic and diluted $(0.29) $(0.14) $(0.49) $(0.27) $(0.14) $(0.29) $(0.32) $(0.49)
Net loss per share attributable to PAVmed Inc. common stockholders – basic and diluted $(0.29) $(0.14) $(0.49) $(0.27) $(0.14) $(0.29) $(0.32) $(0.49)
Weighted average common shares outstanding, basic and diluted  86,957,352   82,235,397   86,689,857   78,117,637   104,349,822   86,957,352   100,742,530   86,689,857 

 

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, 2023

(in thousands except number of shares and per share data)

  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, 2023  1,229,887  $2,767   100,596,406  $101  $221,247  $(246,172) $—  $32,861  $10,804 
Dividends declared - Series B Convertible Preferred Stock  24,610   74   —   —   —   (74)  —   —   — 
Issue common stock - PAVM ATM Facility  —   —   1,248,750   1   608   —   —   —   609 
Conversions - Senior Secured Convertible Note  —   —   5,192,838   5   2,388   —   —   —   2,393 
Impact of subsidiary equity transactions  —   —   —   —   143   —   —   (143)  — 
Issuance - vendor service agreement  —   —   1,500,000   2   600   —   —   147   749 
Stock-based compensation - PAVmed Inc.  —   —   —   —   1,090   —   —   —   1,090 
Stock-based compensation - majority-owned subsidiary  —   —   —   —   245   —   —   1,172   1,417 
Net loss  —   —   —   —   —   (14,537)  —   (3,355)  (17,892)
Balance - June 30, 2023  1,254,497  $2,841   108,537,994  $109  $226,321  $(260,783) $—  $30,682  $(830)

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, 2023

(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, 2022  1,205,759  $2,695   94,510,537  $95  $216,106  $(228,169) $(408) $20,615  $10,934 
Dividends declared - Series B Convertible Preferred Stock  48,738   146   —   —   —   (146)  —   —   — 
Issue common stock - PAVM ATM Facility  —   —   2,330,747   2   1,164   —   —   —   1,166 
Vest - restricted stock awards  —   —   100,000   —   —   —   —   —   — 
Conversions - Senior Secured Convertible Note  —   —   9,523,481   10   4,411   —   —   —   4,421 
Purchase - Employee Stock Purchase Plan  —   —   384,383   —   122   —   60   —   182 
Purchase - majority-owned subsidiary common stock - Employee Stock Purchase Plan  —   —   —   —   —   —   —   276   276 
Issuance - majority-owned subsidiary common stock - At-The-Market Facility, net of financing charges  —   —   —   —   —   —   —   284   284 
Impact of subsidiary equity transactions  —   —   —   —   1,332   —   —   (1,332)  — 
Issuance - majority-owned subsidiary common stock - Settlement APA-RDx - Termination Payment  —   —   —   —   —   —   —   713   713 
Issuance - vendor service agreement  —   —   1,500,000   2   600   —   —   147   749 
Issuance - majority-owned subsidiary preferred stock  —   —   —   —   —   —   —   13,625   13,625 
Stock-based compensation - PAVmed Inc.  —   —   —   —   2,288   —   —   —   2,288 
Stock-based compensation - majority-owned subsidiaries  —   —   —   —   646   —   —   3,992   4,638 
Treasury stock  —   —   188,846   —   (348)  —   348   —   — 
Net loss  —   —   —   —   —   (32,468)  —   (7,638)  (40,106)
Balance - June 30, 2023  1,254,497  $2,841   108,537,994  $109  $226,321  $(260,783) $—  $30,682  $(830)

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, 2022

(in thousands, except number of shares and per share data -data- unaudited)

 Shares  Amount Shares Amount Capital Deficit Stock Interest Total 
 PAVmed Inc. Stockholders’ Equity (Deficit)       PAVmed Inc. Stockholders’ Equity (Deficit)      
 Series B Convertible Preferred Stock Common Stock  Additional Paid-In Accumulated Treasury  Non controlling     

Series B Convertible

Preferred Stock

 Common Stock Additional Paid-In Accumulated Treasury Non controlling    
 Shares  Amount Shares Amount Capital Deficit Stock Interest Total  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   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)  —   —   —   22,740   68   —   —   —   (68)  —   —   — 
Vest - restricted stock awards  —   —   75,000   —   (1)  —   —   —   (1)  —   —   75,000   —   (1)  —   —   —   (1)
Exercise - stock options  —   —   62,500   —   61   —   —   —   61   —   —   62,500   —   61   —   —   —   61 
Exercise - stock options of majority-owned subsidiary  —   —   —   —   —   —   —   501   501   —   —   —   —   —   —   —   501   501 
Impact of subsidiary equity transactions  —   —   —   —   99   —   —   142   241   —   —   —   —   99   —   —   142   241 
Stock-based compensation - PAVmed Inc.  —   —   —   —   1,449   —   —   —   1,449   —   —   —   —   1,449   —   —   —   1,449 
Stock-based compensation - majority-owned subsidiary  —   —   —   —   —   —   —   3,557   3,557   —   —   —   —   —   —   —   3,557   3,557 
Treasury stock  —   —   (25,935)  —   —   —   (36)  —   (36)  —   —   (25,935)  —   —   —   (36)  —   (36)
Net loss  —   —   —   —   —   (25,525)  —   

(3,576

)  

(29,101

)  —   —   —   —   —   (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

   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.

35
 

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)

                                 
  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 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)

  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 
  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 
Beginning balance  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)  —   —   — 
Vest - restricted stock awards  —   —   541,666   —   (1)  —   —   —   (1)
Exercise - Series Z warrants  —   —   5   —   —   —   —   —   — 
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 subsidiaries  —   —   —   —   —   —   —   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 
Ending balance  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.

 

6
 

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except number of shares and per share data - unaudited)

 

 2022 2021  2023  2022 
 Six Months Ended June 30,  Six Months Ended June 30, 
 2022 2021  2023 2022 
Cash flows from operating activities                
Net loss - before noncontrolling interest (“NCI”) $(48,734) $(22,779) $(40,106) $(48,734)
                
Adjustments to reconcile net loss - before NCI to net cash used in operating activities                
Depreciation and amortization expense  1,031   28   1,474   1,031 
        
Stock-based compensation  9,820   6,639   6,926   9,820 
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)
Gain on sale of intellectual property  (1,000)  — 
APA-RDx: Issue common stock of majority-owned subsidiary - settle termination payment  713   239 
Issue common stock - vendor service agreement  625   — 
Change in fair value - Senior Secured Convertible Notes  1,380   2,000 
Loss on issue - Senior Secured Convertible Note  1,111   2,500 
Debt extinguishment loss - Senior Secured Convertible Note  1,268   — 
Change in fair value - derivative liability  260   — 
Non-cash lease expense  57   —   192   57 
Changes in operating assets and liabilities:                
Accounts receivable  200   —   (24)  200 
Prepaid expenses and other current and non-current assets  (1,665)  (1,441)
Prepaid expenses, deposits and current and other assets  (1,592)  (1,665)
Accounts payable  1,057   650   (1,541)  1,057 
Accrued expenses and other current liabilities  (1,326)  (759)  1,241   (1,326)
Net cash flows used in operating activities  (34,821)  (15,796)  (29,073)  (34,821)
                
Cash flows from investing activities                
Purchase of equipment  (926)  (157)  (41)  (926)
Payments - Acquisitions, net of cash  (2,200)  (47)
Proceeds from sale of intellectual property  1,000   — 
Asset acquisitions  —   (2,200)
Net cash flows used in investing activities  (3,126)  (204)  959   (3,126)
                
Cash flows from financing activities                
Proceeds – issue of common stock – registered offerings  —   55,016 
Payment – offering costs – registered offerings  —   (1,312)
Proceeds – issue of preferred stock - majority-owned subsidiary  13,625   — 
Proceeds – issue of Senior Secured Convertible Note  25,000   —   10,000   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 – issue of common stock - At-The-Market Facility  1,166   — 
Proceeds – majority-owned subsidiary common stock - At-The-Market Facility  284   — 
Proceeds – exercise of stock options  303   131   —   303 
Proceeds – issue common stock – Employee Stock Purchase Plan  217   304   182   217 
Proceeds – majority-owned subsidiary common stock – Employee Stock Purchase Plan  276   — 
Proceeds – exercise of stock options issued under equity plan of majority owned subsidiary  688   —   —   688 
Purchase Treasury Stock – payment of employee payroll tax obligation in connection with stock-based compensation  (366)  —   —   (366)
Net cash flows provided by financing activities  25,842   41,954   25,533   25,842 
Net increase (decrease) in cash  (12,105)  25,954   (2,581)  (12,105)
Cash, beginning of period  77,258   17,256   39,744   77,258 
Cash, end of period $65,153  $43,210  $37,163  $65,153 

 

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 IncInc. and Subsidiaries, referred to herein as “PAVmed” or the “Company”“Company,” is comprised of PAVmed Inc. and its wholly-owned subsidiary and its majority-owned subsidiaries, inclusive of Lucid Diagnostics Inc. (“Lucid Diagnostics” or “LUCID”“Lucid”), and Veris Health Inc. (“Veris Health” or “VERIS”), and Solys Diagnostics Inc. (“Solys Diagnostics” or “SOLYS”“Veris”).

 

The CompanyPAVmed is organized to advance a broad pipeline of innovativediversified commercial-stage medical technologies from concept to commercialization, employingtechnology company operating in the medical device, diagnostics, and digital health sectors, including through Lucid Diagnostics, a business modelcommercial-stage cancer prevention diagnostics company, and Veris Health, a private digital health company 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.

enhanced personalized cancer care through remote patient monitoring using implantable biologic sensors with wireless communication along with a custom suite of connected external devices. The Company’s current operational activities are principally focusedcentral focus is on the commercialization of Lucid’s EsoGuard assay and CarpX, while its development activities are focused on pursuing FDA approvalVeris Health’s Veris Cancer Care Platform. As resources permit, we will continue to explore internal and clearance of other lead products inexternal innovations that fulfill our product portfolio pipeline, including EsoGuard IVD, PortIO, EsoCure and digital health technologies acquired by the Company’s majority-owned subsidiary Veris Health Inc.project selection criteria without limiting ourselves to any target specialty or condition.

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. 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.

The Company has financed its operations principally through 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 companies that devote substantially all of their efforts to the commercialization of their initial product and services and ongoing research 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, with the cash on-hand as of the date hereof and other debt and equity committed sources of financing, the Company expects to be able to fund its 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 thisthe Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2022.2023.

8

 

Note 2 — Summary of Significant Accounting Policies

 

Significant Accounting Policies

 

The Company’s significant accounting policies are as disclosed in the Company’s annual reportAnnual Report on Form 10-K for the year ended December 31, 20212022 as filed with the SEC on April 6, 2022,March 14, 2023, except as otherwise noted herein below.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements of PAVmed Inc. and Subsidiariesits subsidiaries 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”), and include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant 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.,and Veris Health, Inc., and Solys Diagnostics 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 operations of a net loss attributable to the noncontrolling interest based on the respective minority-interest equity ownership of each majority-owned subsidiary. See Note 15, Noncontrolling Interest, for a discussion of each of the majority-owned subsidiaries noted above. The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions.

 

As permitted under SEC rules, certain footnotes or other financial information normally required by U.S. GAAP have been condensed or omitted. The balance sheet as of December 31, 2022 has been derived from audited consolidated financial statements at such date. The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements, and in the opinion of management, include all adjustments, consisting only of routine recurring adjustments, necessary for a fair statement of the Company’s unaudited condensed consolidated financial information.

8

Note 2 — Summary of Significant Accounting Policies - continued

The consolidated results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the consolidated results to be expected for the year ending December 31, 2023 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 Company’s audited consolidated financial statements and related notes thereto as of and for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K as filed with the SEC on March 14, 2023.

All amounts in the accompanying unaudited condensed consolidated financial statements and thesethe notes thereto are presented in thousands of dollars, if not otherwise noted as being presented in millions of dollars, except for 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 losses, as of the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Significant estimates in these (unaudited)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 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.

Revenue Recognition

Revenues are recognized when the satisfaction of the performance obligation occurs, in an amount that reflects the consideration the Company expects to collect in exchange for those services. The Company’s revenue is primarily generated by its laboratory testing services utilizing its EsoGuard Esophageal DNA tests. The services are completed upon release of a patient’s test result to the ordering healthcare provider. Revenue recognized is inclusive of both variable consideration in connection with an individual patient’s third-party insurance coverage policy and fixed consideration in connection with a contracted services arrangement with an unrelated third party legal entity. To determine revenue recognition for the arrangements that the Company determines are within the scope of ASC 606, Revenue from Contracts with Customers, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

The key aspects considered by the Company include the following:

Contracts—The Company’s customer is primarily the patient, but the Company does not enter into a formal reimbursement contract with a patient. The Company establishes a contract with a patient in accordance with other customary business practices, which is the point in time an order is received from a provider and a patient specimen has been returned to the laboratory for testing. Payment terms are a function of a patient’s existing insurance benefits, including the impact of coverage decisions with Center for Medicare & Medicaid Services (“CMS”) and applicable reimbursement contracts established between the Company and payers. However, when a patient is considered self-pay, the Company requires payment from the patient prior to the commencement of the Company’s performance obligations. The Company’s consideration can be deemed variable or fixed depending on the structure of specific payer contracts, and the Company considers collection of such consideration to be probable to the extent that it is unconstrained.

Performance obligations—A performance obligation is a promise in a contract to transfer a distinct good or service (or a bundle of goods or services) to the customer. The Company’s contracts have a single performance obligation, which is satisfied upon rendering of services, which culminates in the release of a patient’s test result to the ordering healthcare provider. The Company elects the practical expedient related to the disclosure of unsatisfied performance obligations, as the duration of time between providing testing supplies, the receipt of a sample, and the release of a test result to the ordering healthcare provider is far less than one year.

9
 

 

Note 2 — Summary of Significant Accounting Policies - continued

 

Significant Accounting Policies - ContinuedTransaction price—The transaction price is the amount of consideration that the Company expects to collect in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration expected to be collected from a contract with a customer may include fixed amounts, variable amounts, or both.

 

LeasesIf the consideration derived from the contracts is deemed to be variable, the Company estimates the amount of consideration to which it will be entitled in exchange for the promised goods or services. The Company limits the amount of variable consideration included in the transaction price to the unconstrained portion of such consideration. In other words, the Company recognizes revenue up to the amount of variable consideration that is not subject to a significant reversal until additional information is obtained or the uncertainty associated with the additional payments or refunds is subsequently resolved.

 

TheWhen the Company adopted FASB ASC Topic 842, Leases, (“ASC 842”) effective December 31, 2021, withdoes not have significant historical experience or that experience has limited predictive value, the constraint over estimates of variable consideration may result in no revenue being recognized upon delivery of patient EsoGuard test results to the ordering healthcare provider. As such, adoption not having an effect on the Company’s consolidated financial statements.

All significant lease agreements and contractual agreements with embedded lease agreements are accounted for under the provisions of ASC 842, wherein, if the contractual arrangement: involves the use of a distinct identified asset; provides for the right to substantially all the economic benefits from the use of the asset throughout the contractual period; and provides for the right to direct the use of the asset. 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 asrevenue up to the amount of variable consideration not subject to a significant reversal until additional information is obtained or the uncertainty associated with additional payments or refunds, if any, is subsequently resolved. Differences between original estimates and subsequent revisions, including final settlements, represent changes in estimated expected variable consideration, with the change in estimate recognized in the period of such revised estimate. With respect to a contracted service arrangement, the fixed consideration revenue is recognized on an as-billed basis upon delivery of the lease commencement date a lease right-of-use (“ROU”) asset and a corresponding lease payment liability.laboratory test report with realization of such fixed consideration deemed probable based upon actual historical experience.

A lease ROU asset representsAllocate transaction price—The transaction price is allocated entirely to the Company’s right to use an underlying asset forperformance obligation contained within the lease term, andcontract with a customer on 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 valuebasis of the future lease payments plus initial direct costs incurred. The Company recognizes lease expenserelative standalone selling prices 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.each distinct good or service.

The lease liability is measured at the lease commencement date with the discount rate generally based on the Company’s 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. Practical Expedients—The Company does not assume renewals in determinationadjust the transaction price for the effects of a significant financing component, as at contract inception, the lease term unlessCompany expects the renewals are deemedcollection cycle 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 monthsone year 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.

10

Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued

Significant Accounting Policies - Continuedless.

 

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” -, and a Senior Secured Convertible Note dated September 8, 2022, referred to herein as the “September 2022 Senior Convertible Note”, which are accounted under the “fair value option election” as discussed below.

Under a Securities Purchase Agreement dated March 13, 2023, Lucid Diagnostics issued a Senior Secured Convertible Note dated March 21, 2023, referred to herein as the “Lucid March 2023 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 /orand/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, isthe September 2022 Senior Convertible Note and the Lucid March 2023 Senior Convertible Note are 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, the September 2022 Senior Convertible Note or the Lucid March 2023 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, the September 2022 Senior Convertible Note and the Lucid March 2023 Senior Convertible Note.

Reclassifications

Certain prior-year amounts have been reclassified to conform to the current year presentation, which includes presenting costs of revenue within operating expenses on the statements of operations, in the unaudited condensed consolidated financial statements and accompanying notes to the unaudited condensed consolidated financial statements. The impact of the reclassifications made to prior year amounts is not material and did not affect net loss.

 

1110
 

Note 2 — Summary of Significant Accounting Policies - continued

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The updated guidance requires companies to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade receivables. The guidance was adopted by the Company on January 1, 2023. The adoption of the ASU did not have an impact on the Company’s unaudited condensed consolidated financial statements.

 

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”) certifiedformer 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.)Diagnostics) and RDx, with such agreement further discussed in Note 5, Asset Purchase Agreement and Management Services AgreementAgreement.,.

Revenue Recognized

 

In the three and six months ended June 30, 2022,2023, the Company recognized total revenue of $166 and $612, respectively, primarily resulting from the delivery of patient EsoGuard test results. Revenue recognized from customer contracts deemed to include a variable consideration transaction price is limited to the unconstrained portion of the variable consideration. The Company’s revenue for the three and six months ended June 30, 2022 was $0 and $189, which solely reflects the revenue recognized under the EsoGuard Commercialization Agreement, which representsrepresented the minimum fixed monthly fee of $100 for the period January 1, 2022 to the February 25, 2022 termination date as discussed above,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 respectrevenues principally includes the costs related to the Company’s laboratory operations (excluding estimated costs associated with research activities), the costs related to the EsoCheck cell collection device, cell sample mailing kits and license royalties.

In the three and six months ended June 30, 2023, the cost of revenue recognizedwas $1,685 and $3,030, respectively, and was primarily related to costs for our laboratory operations and EsoCheck device supplies. The Company’s cost of revenue for the three and six months ended June 30, 2022 was $0and $369, which solely reflects the costs attributable to delivering the services under the EsoGuard Commercialization Agreement for the period January 1, 2022 tothru its termination on February 25, 2022. In the three months ended June 30, 2022, totaled $369, inclusive of employee relatedlaboratory operations costs of personnel engagedare included in operating expenses as general and administrative expenses in the deliveryaccompanying unaudited condensed consolidated statements 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.operations.

 

1211
 

 

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”), each hold a minority equity ownership interest 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

 2022  2021  2022  2021                 
 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

  Three Months Ended June 30, Six Months Ended June 30, 
 2022  2021  2022  2021  2023 2022 2023 2022 
Cost of Revenue                                
CWRU – Royalty Fee $—  $—  $9  $— 
CWRU – Royalty Fees $10  $—  $34  $9 
                                
General and Administrative Expense                                
Stock-based compensation expense – Physician Inventors’ restricted stock awards  272   273   544   364   —   272   180   544 
                                
Research and Development Expense                                
Amended CWRU License Agreement - reimbursement of patent legal fees  209   113   209   113 
Amended CWRU – License Agreement - reimbursement of patent legal fees  —   209   389   209 
Fees - Physician Inventors’ consulting agreements  10   1   18   14   9   10   10   18 
Sponsored research agreement  —   —   3   —   —   —   —   3 
Stock-based compensation expense – Physician Inventors’ stock options  52   52   99   58   52   52   105   99 
Total Related Party Expenses $543  $439  $882  $549  $71  $543  $718  $882 

 

See Note 12, Stock-Based Compensation, for information regarding each of the “PAVmed Inc. 2014 Long-Term Incentive Equity Plan” and the separate “Lucid Diagnostics Inc 2018 Long-Term Incentive Equity Plan”; and Note 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 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 general and administrative expense of $8 and $14 in the three and six months ended June 30, 2021 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.Health. Veris Health Inc. recognized general and administrative expense of $13 and $18 in the three and six months ended June 30, 2023, respectively, and $13 and $37 in the three and six months ended June 30, 2022, respectively, in connection with the consulting agreement.

 

1312
 

 

Note 5 — Asset Purchase Agreement and Management Services Agreement

 

Asset Purchase Agreement and Management Services Agreement - ResearchDx Inc.

 

LucidDx Labs, Inc., a wholly-owned subsidiary of Lucid Diagnostics, Inc., entered into an asset purchase agreement (“APA”) dated February 25, 2022, with ResearchDx, Inc. (“RDx”), an unrelated third-party - “APA-RDx”(“APA-RDx”). Under the APA-RDx, LucidDx Labs Inc. acquired certain assets from RDx which were combined with LucidDx Labs Inc. purchased and leased 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. In connection with the execution and delivery of the APA-RDx, LucidDx Labs and RDx entered into a separate management services agreement (“MSA-RDx”), dated and effective February 25, 2022, pursuant to which RDx provided certain testing and related services for the Laboratory.

 

The total purchase price consideration payable under the APA-RDx is a face value of $3,200 comprised of three contractually specified periodic payments. The APA-RDx is being accounted for as an asset acquisition, with the recognition of an intangible asset of approximately $3,200, which is included in “Intangible assets, net” on the accompanying unaudited condensed consolidated balance sheet, as further discussed in Note 8, Intangible Assets, netnet.. In the three and six months ended June 30, 2022, a total of $2,200 of cash was paid with respect to the periodic payments. Subsequent to June 30, 2022, in July 2022, $1,000 of cash was paid with respect to the remaining unpaid balance of the periodic payments. 

 

Additionally, the APA-RDx requires the Company to pay a totalTermination of $3,000 to be paid as twelve (12) equal installment payments commencing May 25, 2022Management Services Agreement and then on each three month anniversary thereof, inclusiveModification of a final installment payment onOther Payment Obligations - ResearchDx Inc

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 117,371 shares of common stock of14, 2023, Lucid Diagnostics Inc.,and LucidDx Labs entered into an agreement (the “MSA Termination Agreement”) with such shares having a fair valueRDx, pursuant to which the parties mutually agreed to terminate the MSA-RDx without cause. The termination was effective as February 10, 2023. Until the termination of $239 (with the fair value measured asmanagement service agreement with RDx, RDx had continued to provide certain testing and related services for the quoted closing price onLaboratory in accordance with the dateterms of 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.MSA-RDx.

 

The APA-RDx provides for each of an acceleration and a cancellationMSA Termination Agreement reduces the remaining amounts of the remaining unpaid installmentearnout payments summarized as follows:

●The payment of the remaining unpaid installment payments will be accelerated as immediatelyand management fees due under the APA-RDx 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 forto $713. The payment was satisfied through the issuance of 553,436 shares of Lucid Diagnostics’ common stock in February 2023. Lucid Diagnostics was not required to make any reason or no reason by either party thereto.

14

cash payments in connection with the termination.

 

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, 2023  December 31, 2022 
Advanced payments to service providers and suppliers $567  $599 
Prepaid insurance  799   300 
Deposits  4,314   3,005 
EsoCheck cell collection supplies  39   59 
EsoGuard mailer supplies  3   52 
Veris Box supplies  201   150 
Total prepaid expenses, deposits and other current assets $5,923  $4,165 

  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 
13

 

Note 7 — Leases

 

During the six months ended June 30, 2022,2023, 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 researchprincipal corporate offices and development facility; a commercial clinical laboratory; additional Lucid Test Centers; and for office space.Centers.

 

The Company’s future lease payments as of June 30, 2022,2023, 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 leasesFuture Lease Payments

        
2022 (remainder of year) $562 
2023  1,175 
2023 (remainder of year) $844 
2024  1,139   1,825 
2025  272   835 
2026  272   787 
2027  617 
Thereafter  132   1,319 
Total lease payments $3,552  $6,227 
Less: imputed interest  (426)  (1,072)
Present value of lease liabilities $3,126  $5,155 

 

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 SheetCash Flow Information Related to Cash and Non-cash Activities with Leases

 2022  2021         
 Six Months Ended June 30,  Six Months Ended June 30, 
 2022  2021  2023 2022 
Cash paid for amounts included in the measurement of lease liabilities                
Operating cash flows from operating leases $483  $—  $705  $483 
Non-cash investing and financing activities                
Right-of-use assets obtained in exchange for new operating lease liabilities $3,633  $—  $2,689  $3,633 
Weighted-average remaining lease term - operating leases (in years)  3.31   —   4.75   3.31 
Weighted-average discount rate - operating leases  7.875%  —%  7.875%  7.875%

 

As of June 30, 2023 and December 31, 2022, the Company’s right-of-use assets from operating leases arewere $3,2055,014 and $3,037, respectively, which are reportingreported in operating lease right-of-use assets - operating leases in the unaudited condensed consolidated balance sheets. As of June 30, 2023 and December 31, 2022, the Company hashad outstanding operating lease obligations of $3,1265,155 and $2,987, respectively, of which $9431,427 isand $1,141, respectively, are reported in operating lease liabilities, current portion and $2,1833,728 is reportingand $1,846, respectively, are reported 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.

 

In September 2022, the Company entered into a lease agreement for its principal corporate offices, in New York, New York. The lease agreement term is from the September 15, 2022 execution date to the date which is seven years and eight months from the lease commencement date, with the rent abated for the first eight months of the lease term. The lease commenced on February 1, 2023. The aggregate (undiscounted) rent payments are approximately $3.2 million over the lease term.

1514
 

 

Note 8 — Intangible Assets, net

 

Intangible assets, less accumulated amortization, consisted of the following as of:

Schedule of Intangible Assets, Less Accumulated Amortization

 

Estimated

Useful Life

 June 30, 2022  December 31, 2021  Estimated Useful Life June 30, 2023 December 31, 2022 
Defensive asset 60 months $2,105  $2,105  60 months $2,105  $2,105 
Laboratory licenses and certifications and laboratory information management software (“LIMSDx”) 24 months  3,200   --- 
Laboratory licenses and certifications and laboratory information management software 24 months  3,200   3,200 
Other 1 year  70   70  1 year  70   70 
Total Intangible assets  5,375   2,175     5,375   5,375 
Less Accumulated Amortization  (919)  (146)    (2,940)  (1,930)
Intangible Assets, net $4,456  $2,029    $2,435  $3,445 

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 $2.1million 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 60months 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 $650505 and $6650 for the three month periods ended June 30, 20222023 and 2021,2022, respectively, and $7731,010 and $6773 for the six month periods ended June 30, 20222023 and 2021,2022, respectively, and is included in general and administrative expensesamortization of acquired intangible assets in the accompanying unaudited condensed consolidated statements of operations. As of June 30, 2022,2023, 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 

16
     
2023 (remainder of year) $1,011 
2024  688 
2025  421 
2026  315 
Total $2,435 

 

Note 9 — Commitment and Contingencies

 

Legal Proceedings

Delaware 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 PAVmed Inc. Employee Stock Purchase Plan). The relief sought under the complaint includes certain corrective actions by the Company, but did not seek any specific monetary damages. The Company did not believe it was clear the prior approval of these matters was invalid or otherwise ineffective. However, to avoid any uncertainty and the expense of further litigation, on January 5, 2021, the Company’s board of directors determined it would be advisable and in the best interests of the Company and its stockholders to re-submit these proposals to the Company’s stockholders for ratification and/or approval. In this regard, the Company held a special meeting of stockholders on March 4, 2021, at which such matters were ratified and approved. The parties have reached agreement on a proposed Settlement 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. In 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 subject-to the approval of the Court. The settlement hearing before the Court is 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 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 Company has made a motion to dismiss this complaint for Benchmark Investments LLC’s lack of standing, which motion is pending. 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 ourPAVmed 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, theThe Company doesis not believe it is currently a party toaware of any othersuch pending legal proceedings.or other proceedings that are reasonably likely to have a material impact on the Company. 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.

 

1715
 

Note 10 — Financial Instruments Fair Value Measurements

 

Recurring Fair Value Measurements

 

The fair value hierarchy table for the reporting date notedperiods indicated is as follows:

Schedule of Financial Liabilities Measured at Fair Value on Recurring Basis

  Fair Value Measurement on a Recurring Basis at Reporting Date Using1 
  Level-1 Inputs  Level-2 Inputs  Level-3 Inputs  Total 
June 30, 2023                
Senior Secured Convertible Note - April 2022 $—  $—  $19,530  $19,530 
Senior Secured Convertible Note - September 2022  —   —   11,850   11,850 
Lucid Senior Secured Convertible Note - March 2023  —   —   11,610   11,610 
Derivative liability  —   —   260   260 
Totals $—  $—  $43,250  $43,250 

 

 Fair Value Measurement on a Recurring Basis at Reporting Date Using(1) Level-1 Inputs  Level-2 Inputs  Level-3 Inputs  Total 
 Level-1 Inputs Level-2 Inputs Level-3 Inputs Total
June 30, 2022        
December 31, 2022                
Senior Secured Convertible Note - April 2022 $ — $ — $ 29,500 $ 29,500 $—  $—  $22,000  $22,000 
Senior Secured Convertible Note - September 2022  —   —   11,650   11,650 
Totals $ — $ — $ 29,500 $ 29,500 $—  $—  $33,650  $33,650 

(1)1As 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, 2022.2023.

As discussed in Note 11, Debt, the Company issued a Senior Secured Convertible NoteNotes dated April 4, 2022 and September 8, 2022, with an initial $27.5 million face value principal (“April 2022 Senior Convertible Note”). The April and an initial $11.25 million face value principal (“September 2022 Senior Convertible Note isNote”), respectively. Both convertible notes are 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.

As discussed in Note 11, Debt, Lucid Diagnostics issued a Senior Secured Convertible Note dated March 21, 2023, with an initial $11.1 million face value principal (“Lucid March 2023 Senior Convertible Note”). This convertible note is also 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.

The estimated fair value of the financial instruments classified within the Level 3 category 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 Lucid March 2023 Senior Convertible Note as of each of March 21, 2023 and June 30, 2023, and the estimated fair value of the April 2022 Senior Convertible Note and the September 2022 Senior Convertible Note as of each of April 4, 2022 and June 30, 2022,2023, 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 Senior Convertible Note:
June 30, 2023		  September 2022 Senior Convertible Note:
June 30, 2023		  Lucid March 2023 Senior Convertible Note:
March 21, 2023		  Lucid March 2023 Senior Convertible Note:
June 30, 2023		 
Fair Value $19,530  $11,850  $11,900  $11,610 
Face value principal payable $18,554  $

11,250

  $11,111  $11,111 
Required rate of return  11.400%  11.300%  11.00%  11.00%
Conversion Price $5.00  $5.00  $5.00  $5.00 
Value of common stock $0.41  $0.41  $1.54  $1.39 
Expected term (years)  0.29   1.19   2.00   1.73 
Volatility  200.00%  200.00%  75.00%  70.00%
Risk free rate  5.29%  5.21%  4.09%  4.89%
Dividend yield  —%  —%  —%  —%

16

Note 10 — Financial Instruments Fair Value Measurements - continued

Derivative Liability - Written Protective Put

The Company, through its majority-owned subsidiary Veris Health, entered into a Research and Development Agreement, with an effective date of May 31, 2023, with an unrelated third-party technical services provider (the “May 31, 2023 R&D Agreement”). The principal service to be provided by the service provider under the May 31, 2023 R&D Agreement was the continued development of the electronics and firmware for the Veris Health implantable physiologic monitor.

As discussed in Note 14, Common Stock and Common Stock Purchase Warrants, 1.5 million shares of PAVmed common stock were issued to the service provider as the consideration for a $750 portion of the services to be rendered under the May 31, 2023 R&D Agreement. The issued shares of common stock are (contingently) settlement-in-full of the consideration obligations of the Company under the May 31, 2023 R&D Agreement, subject-to a contractual “minimum fair market value” as such amount is discussed below.

The resolution of the contingent settlement-in-full with respect to the issued shares of common stock of the Company is predicated on and subject-to such issued shares having a $750 minimum “fair market value” (as defined), with such derived fair market value computed using a contractual formula based on the PAVmed Inc. common stock volume weighted average price per share (“VWAP”) during the last ten days of the six month anniversary of the May 31, 2023 R&D Agreement.

If the fair market value, as such amount is computed as described above, is equal-to or greater than $750, then no further contractual consideration is required. However, if such fair market value is less than $750, then, the Company will incur an additional contractual consideration obligation in amount equal to the difference between the required minimum fair market value of $750 and the contractual formula based computed fair market value. At the election of the Company, the additional contractual consideration obligation, if any, may be paid in cash or settled with the issue of additional shares of PAVmed common stock.

The contingent additional contractual consideration obligation is deemed to be a separate unit-of-account, in the form of a written protective put, and recognized as a derivative liability measured at estimated fair value. The derivative liability had an initial May 31, 2023 estimated fair value of approximately $262 which was recognized as a current period charge classified in other income (expense) in the accompanying (unaudited) condensed consolidated statement of operations. Further, such recognized derivative liability is further remeasured at estimated fair value as of each quarterly reporting period date, with changes in the estimated fair value recognized as current period other income (expense), with such remeasurement recognized through the date of the final determination and settlement or extinguishment of the contingent additional contractual consideration obligation, if any. In this regard, as of June 30, 2023, the remeasured estimated fair value was approximately $260, with the change in the estimated fair value recognized as other income (expense).

The estimated fair value of the written protective put derivative liability, as such is discussed above, were computed using a Monte Carlo simulation to generate stock price paths (assuming geometric-Brownian motion) of the PAVmed Inc. common stock to compute the respective written protective put expected fair value, with the principal assumptions of such estimated fair value computation, for the respective measurement dates noted, as follows:

Schedule of Fair Value Assumption Used

  

April 2022

Senior
Convertible Note:
April 4, 2022		  

April 2022

Senior

Convertible Note:
June 30, 2022

 
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 $1.26  $0.94 
Expected term (years)  2.00   1.76 
Volatility  115.00%  130.00%
Risk free rate  2.40%  2.85%
Dividend yield  —%  —%
  As of:
May 31, 2023		  As of:
June 30, 2023		 
Fair Value $262  $260 
Contractual minimum effective conversion price $0.50  $0.50 
Price per share $0.40  $0.41 
Remaining expected term (years)  0.50   0.42 
Volatility  160.00%  200.00%
Risk free rate  5.30%  5.30%
Dividend yield  —%  —%

 

The estimated fair values reportedrecognized with respect to the senior secured convertible debt and the written protective put derivative liability, as each is discussed above, utilized the Company’sPAVmed and Lucid Diagnostics common stock priceprices, along with certain Level 3 inputs (as discussedpresented in the respective tables 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,and analyses, including the Company’srespective common stock price,prices, the Company’s dividend yield,yields, 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’srespective common stock price.prices. Changes in these assumptions can materially affect the recognized estimated fair values.

17

Note 11 — Debt

The fair value and face value principal outstanding of the Senior Convertible Notes as of the dates indicated are as follows:

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  $18,554  $19,530 
September 2022 Senior Convertible Note September 6, 2024  7.875% $5.00  $11,250  $11,850 
Lucid March 2023 Senior Convertible Note March 21, 2025  7.875% $5.00  $11,111  $11,610 
Balance as of June 30, 2023           $40,915  $42,990 

  

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  $21,497  $22,000 
September 2022 Senior Convertible Note September 6, 2024  7.875% $5.00  $11,250  $11,650 
Balance as of December 31, 2022           $32,747  $33,650 

The changes in the fair value of debt during the three and six months ended June 30, 2023 is as follows:

Schedule of Changes in Fair Value of Debt

  April 2022 Senior Convertible Note  September 2022 Senior Convertible Note  Lucid March 2023 Senior Convertible Note  Sum of Balance Sheet Fair Value Components  Other Income (expense) 
Fair Value - December 31, 2022 $22,000  $11,650  $—  $33,650  $— 
Face value principal – issue date  —   —   11,111   11,111   — 
Fair value adjustment – issue date  —   —   789   789   (789)
Installment repayments – common stock  (1,335)  —   —   (1,335)  — 
Non-installment payments – common stock  (166)  —   —   (166)  — 
Change in fair value  251   —   —   251��  (251)
Fair Value at March 31, 2023 $20,750  $11,650  $11,900  $44,300   — 
Fair Value, Beginning $20,750  $11,650  $11,900  $44,300   — 
Other Income (Expense) - Change in fair value – three months ended March 31, 2023                 $(1,040)
Installment repayments – common stock  (1,608)  —   —   (1,608)  — 
Non-installment payments – common stock  (42)  —   —   (42)  — 
Change in fair value  430   200   (290)  340   (340)
Fair Value at June 30, 2023 $19,530  $11,850  $11,610  $42,990   — 
Fair Value, Ending $19,530  $11,850  $11,610  $42,990   — 
Other Income (Expense) - Change in fair value – three months ended June 30, 2023                 $(340)
Other Income (Expense) - Change in fair value – six months ended June 30, 2023                 $(1,380)

 

18
 

 

Note 11 — Debt - continued

DebtPAVmed - Senior Secured Convertible Notes

 

The 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 beingwas issued in a registered direct offering under the Company’s effective shelf registration statement.

 

Under the SPA, 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”, 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, 2024.2024. The April 2022 Senior Convertible Note may be converted into shares of common stock of the Company at the Holder’s election,election.

Under the same SPA, the Company issued an additional Senior Secured Convertible Note dated September 8, 2022, referred to herein as discussed below.the “September 2022 Senior Convertible Note”, with such note having a $11.25 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 September 6, 2024. The September 2022 Senior Convertible Note may be converted into shares of common stock of the Company at the Holder’s election.

 

The AprilCompany 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 total senior convertible notes outstanding, 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% (except that such maximum percentage was 50% for the period from September 8, 2022 through March 5, 2023) (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”). From time to time from and after June 1, 2023 through August 14, 2023, the Company was not in compliance with the Financial Tests. As of August 14, 2023, the Investor agreed to waive any such non-compliance during such time period and thereafter through November 30, 2023.

In the six months ended June 30, 2023, approximately $3,151 of principal repayments along with approximately $57 of interest expense thereon, were settled through the issuance of 9,523,481 shares of common stock of the Company, with such shares having a fair value of approximately $4,419 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company). The conversions resulted in a debt extinguishment loss of $743 and $1,268 in the three and six months ended June 30, 2023. Subsequent to June 30, 2023, as of August 10, 2023, approximately $601 of principal repayments along with approximately $25 of interest expense thereon, were settled through the issuance of 2,005,685 shares of common stock of the Company, with such shares having a fair value of approximately $771 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company).

Lucid Diagnostics - Senior Secured Convertible Notes

Lucid Diagnostics entered into a Securities Purchase Agreement (“Lucid SPA”) dated March 13, 2023, with an accredited institutional investor (“Investor”, “Lender”, and /or “Holder”), wherein, Lucid agreed to sell, and the Investor agreed to purchase an aggregate of $11.1 million face value principal of debt. The debt was issued in a registered direct offering under the Lucid’s effective shelf registration statement.

Under the SPA dated March 13, 2023, Lucid issued a Senior Secured Convertible Note dated March 21, 2023, referred to herein as the “Lucid March 2023 Senior Convertible Note”, with such note having a $11.1 million face value principal, a 7.875% annual stated interest rate, a contractual conversion price of $5.00 per share of Lucid’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 March 21, 2025. The Lucid March 2023 Senior Convertible Note may be converted into shares of common stock of Lucid at the Holder’s election.

The Lucid March 2023 Senior Convertible Note proceeds were $25.09.925 million after deducting a $2.51.186 million lender fee;fee and additionally, the Company incurred total offering costs of approximately $601, inclusive of the payment of a total of $450 placement agent fees.costs. The lender fee and offering costs were recognized as of the April 4, 2022March 21, 2023 issue date as a current period expense in other income (expense) in the Company’s unaudited condensed consolidated statement of operations.

 

During the period from April 4, 2022March 21, 2023 to October 3, 2022, the CompanySeptember 20, 2023, Lucid is required to pay interest expense only (on the $27.511.1 million face value principal), at 7.875% per annum, computed on a 360 day year. The CompanyLucid paid in cash interest expense of approximately $523219 and $243 for the period April 4, 2022 tothree and six months ended June 30, 2022; and approximately $181 subsequent to June 30, 2022 as of August 10, 2022.2023.

 

Commencing October 4, 2022,September 21, 2023, and then on each of the successive first and tenth trading day of each month thereafter through to and including April 1, 2024March 14, 2025 (each referred to as an “Installment Date”); and on the April 4, 2024March 21, 2025 maturity date, the CompanyLucid will be required to make a principal repayment of $724292 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,Lucid, subject to customary equity conditions, including minimum share price and volume thresholds, or at the election of the Company,Lucid, in cash, in whole or in part.

19

Note 11 — Debt - continued

 

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 Notethis senior convertible note is guaranteed by the Company and its wholly-owned and majority-owned subsidiaries, except for Lucid Diagnostics Inc and its wholly-ownedLucid’s subsidiaries; and the obligations under the April 2022 Senior Convertible Notethis senior convertible note are secured by all of the assets of the CompanyLucid 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.its subsidiaries.

The CompanyLucid is subject to certain customary affirmative and negative covenants regarding the rank of the notes,note, 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 CompanyLucid is subject to financial covenants requiring: (i) a minimum of $8.0$5.0 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 additionaltotal senior convertible notes issued under the SPA dated March 31, 2022),outstanding, accrued and unpaid interest thereon and accrued and unpaid late charges to (b) the Company’sLucid’s average market capitalization over the prior ten trading days, as of the last day of any fiscal quarter commencing with September 30, 2023, to not exceed 30% (the “Debt to Market Cap Ratio Test”); and (iii) the Company’sLucid’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”)$30 million. 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 $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 common stock of the Company, 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 the common stock of the Company).

The fair value and face value principal of outstanding of the April 2022 Senior Convertible Note as of June 30, 2022 is as follows:

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 three and six month periodmonths ended June 30, 2021,2023, the Company recognized debt extinguishment losses of approximately $3,715743 and $1,268, in connection with repaying-in-full all remainingissuing common stock for principal repayments on convertible notes outstanding atdebt mentioned above. During the time.three and six months ended June 30, 2022, the Company did not recognize debt extinguishment losses.

 

The April 2022 Senior Convertible Note 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 10, Financial Instruments Fair Value Measurements, for a further discussion of fair value assumptions.

20

 

Note 12 — 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”) is designed to enable PAVmed Inc. to offer employees, officers, directors, and consultants, as defined, an opportunity to acquire shares of common stock of PAVmed Inc.PAVmed. The types of awards that may be granted under the PAVmed Inc. 2014 Equity Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the PAVmed Inc. board of directors.compensation committee.

 

A total of 16,352,80721,052,807 shares of common stock of PAVmed Inc. are reserved for issuance under the PAVmed Inc. 2014 Equity Plan, with 2,830,0921,310,092 shares available for grant as of June 30, 2022.2023. The share reservation is not diminished by a total of 600,854 PAVmed Inc. stock options and restricted stock awards granted outside the PAVmed Inc. 2014 Equity Plan as of June 30, 2022.2023. In January 2023, the number of shares available for grant was increased by 4,700,000 in accordance with the evergreen provisions of the plan.

 

PAVmed Inc. Stock Options

 

PAVmed Inc. stock options granted under the PAVmed Inc. Inc. 2014 Equity Plan and stock options granted outside such plan are summarized as follows:

 

Schedule of Summarizes Information About Stock Options

 Number of 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, 2021  8,720,198  $3.39   6.8  $3,516 
Outstanding stock options at December 31, 2022  11,568,655  $2.71   7.4  $— 
Granted(1)  4,219,350  $1.49           7,280,000  $0.48       - 
Exercised  (299,999) $1.01           —  $—         
Forfeited  (1,437,143) $3.04           (1,326,249) $1.87         
Outstanding stock options at June 30, 2022(3)  11,202,406  $2.79   7.9  $8 
Vested and exercisable stock options at June 30, 2022  5,994,046  $3.07   6.5  $1 
Outstanding stock options at June 30, 2023(3)  17,522,406  $1.85   7.9  $7 
Vested and exercisable stock options at June 30, 2023  7,998,032  $2.92   6.2  $— 

(1)Stock options granted under the PAVmed Inc. 2014 Equity Plan and those granted outside such plan generally vest one-third in one year then ratably over twelvethe next eight quarters, with the vesting commencing with the grant date quarter-end, and have a ten-year contractual term from date-of-grant.
(2)The intrinsic value is computed as the difference between the quoted price of the PAVmed Inc. common stock on each of June 30, 20222023 and December 31, 20212022 and the exercise price of the underlying PAVmed Inc. stock options, to the extent such quoted price is greater than the exercise price.
(3)The outstanding stock options presented in the table above, are inclusive of 500,854 stock options granted outside the PAVmed Inc. 2014 Equity Plan.Plan, as of June 30, 20222023 and December 31, 2021.2022.

20

Note 12 — Stock-Based Compensation - continued

 

PAVmed Inc. Restricted Stock Awards

 

PAVmed Inc. restricted stock awards granted under the PAVmed Inc. 2014 Equity Plan and restricted stock awards granted outside such plan are summarized as follows:

 

Schedule of Restricted Stock Award Activity

 Number of Restricted Stock Awards Weighted Average Grant Date Fair Value  

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 
Unvested restricted stock awards as of December 31, 2022(1)  975,000  $3.05 
Granted  —   —  —   — 
Vested  (541,666)  1.20  (100,000)  3.10 
Forfeited  (150,000)  2.04   —   — 
Unvested restricted stock awards as of June 30, 2022(1)  975,000  $3.05 
Unvested restricted stock awards as of June 30, 2023  875,000  $3.04 

(1)The unvested restricted stock awards presented in the table above, are inclusive of 100,000 restricted stock awards granted outside the PAVmed Inc. 2014 Equity Plan.Plan as of December 31, 2022. These 100,000 restricted stock awards were fully vested during the period ended June 30, 2023.

Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan

The Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan (“Lucid Diagnostics 2018 Equity Plan”) is separate and apart from the PAVmed 2014 Equity Plan discussed above. The Lucid Diagnostics 2018 Equity Plan is designed to enable Lucid Diagnostics to offer employees, officers, directors, and consultants, an opportunity to acquire shares of common stock of Lucid Diagnostics. The types of awards that may be granted under the Lucid Diagnostics 2018 Equity Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the Lucid Diagnostics compensation committee.

A total of 11,644,000 shares of common stock of Lucid Diagnostics are reserved for issuance under the Lucid Diagnostics 2018 Equity Plan, with 3,936,554 shares available for grant as of June 30, 2023. The share reservation is not diminished by a total of 423,300 stock options and 50,000 restricted stock awards granted outside the Lucid Diagnostics 2018 Equity Plan, as of June 30, 2023. In January 2023, the number of shares available for grant was increased by 2,500,000 in accordance with the evergreen provisions of the plan.

Lucid Diagnostics Stock Options

Lucid Diagnostics stock options granted under the Lucid Diagnostics 2018 Equity Plan and stock options granted outside such plan are summarized as follows:

Schedule of Summarizes Information About Stock Options

  

Number of

Stock Options

  

Weighted Average

Exercise Price

  

Remaining Contractual

Term (Years)

  

Intrinsic

Value(2)

 
Outstanding stock options at December 31, 2022  2,565,377  $3.14   8.3  $428 
Granted(1)  2,732,500  $1.31         
Exercised  —  $—         
Forfeited  (347,915) $2.57         
Outstanding stock options at June 30, 2023(3)  4,949,962  $2.17   8.7  $641 
Vested and exercisable stock options at June 30, 2023  1,374,179  $2.76   6.9  $440 

(1)Stock options granted under the Lucid Diagnostics 2018 Equity Plan and those granted outside such plan generally vest one-third in one year then ratably over the next eight quarters, and have a ten-year contractual term from date-of-grant.
(2)The intrinsic value is computed as the difference between the quoted price of the Lucid Diagnostics common stock on each of June 30, 2023 and December 31, 2022 and the exercise price of the underlying Lucid Diagnostics stock options, to the extent such quoted price is greater than the exercise price.
(3)The outstanding stock options presented in the table above, are inclusive of 423,300 stock options granted outside the Lucid Diagnostics 2018 Equity Plan, as of June 30, 20222023 and December 31, 2021.2022.

 

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 (“Lucid Diagnostics Inc. 2018 Equity Plan”) is separate and apart from the PAVmed Inc. 2014 Equity Plan discussed above. The Lucid Diagnostics Inc. 2018 Equity Plan is designed to enable 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. 2018 Equity Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the Lucid Diagnostics Inc. board of directors.

A total of 9,144,000 shares of common stock of Lucid Diagnostics Inc. are reserved for issuance under the Lucid Diagnostics Inc. 2018 Equity Plan, with 3,932,802 shares available for grant as of June 30, 2022, with the share reservation not diminished by a total of 473,300 Lucid Diagnostics Inc. stock options and restricted stock awards granted outside the Lucid Diagnostics Inc. 2018 Equity Plan.

Lucid Diagnostics Inc. Stock Options

Lucid Diagnostics Inc. stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan and stock options granted outside such plan are summarized as follows:

Schedule of Summarizes Information About Stock Options

  Number of Stock Options  Weighted Average Exercise Price  Remaining Contractual Term (Years) 
Outstanding stock options at December 31, 2021  1,419,242  $0.73   7.0 
Granted(1)  2,107,500  $3.82     
Exercised  (959,389) $0.72     
Forfeited  (107,687) $4.45     
Outstanding stock options at June 30, 2022(2)  2,459,666  $3.22   9.0 
Vested and exercisable stock options at June 30, 2022  741,869  $1.90   7.4 

(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 423,300 stock options granted outside the Lucid Diagnostics Inc. 2018 Equity Plan. as of June 30, 2022 and December 31, 2021.

Lucid Diagnostics Inc. Restricted Stock Awards

 

Lucid Diagnostics Inc. restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan and restricted stock awards granted outside such plan are summarized as follows:

 

Schedule of Restricted Stock Award Activity

 Number of Restricted Stock Awards Weighted Average Grant Date Fair Value  

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 
Unvested restricted stock awards as of December 31, 2022(1)  2,091,420  $11.44 
Granted  320,000   4.53  —   — 
Vested  —   —  (219,320)  11.27 
Forfeited  —   —   —   — 
Unvested restricted stock awards as of June 30, 2022(1)  2,260,740  $11.59 
Unvested restricted stock awards as of June 30, 2023  1,872,100  $11.46 

(1)The unvested restricted stock awards presented in the table above, are inclusive of 50,000 restricted stock awards granted outside the Lucid Diagnostics Inc. 2018 Equity Plan.Plan as of December 31, 2022. These 50,000 restricted stock awards were fully vested during the period ended June 30, 2022 and December 31, 2021.2023.

On January 7, 2022, 320,000 restricted stock awards were granted under the Lucid Diagnostics Inc 2018 Equity Plan, with such restricted stock awards having a single vesting date on January 7, 2025, and an aggregate grant date fair value of approximately $1.4 million, measured as 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.

22

Note 12 — Stock-Based Compensation - continued

 

Consolidated Stock-Based Compensation Expense

 

The consolidated stock-based compensation expense recognized by each of PAVmed Inc. and 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 Awards GrantedExpense

                                
 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

  Three Months Ended
June 30,		 Six Months Ended
June 30,		 
 2022  2021  2022  2021  2023 2022 2023 2022 
Cost of revenue $31  $—  $54  $— 
Sales and marketing expenses $591  $298  $1,216  $500   455   591   899   1,216 
General and administrative expenses  4,162   4,599   8,164   5,722   1,674   4,162   5,262   8,164 
Research and development expenses  254   306   440   417   347   254   711   440 
Total stock-based compensation expense $5,007  $5,203  $9,820  $6,639  $2,507  $5,007  $6,926  $9,820 

 

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 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 ExpensesRecognized by Lucid Diagnostics

                 
  

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 
                 
  Three Months Ended June 30,  Six Months Ended June 30, 
  2023  2022  2023  2022 
Lucid Diagnostics 2018 Equity Plan – cost of revenue $16  $—  $28  $— 
Lucid Diagnostics 2018 Equity Plan – sales and marketing  247   215   470   480 
Lucid Diagnostics 2018 Equity Plan – general and administrative  836   3,313   3,348   6,514 
Lucid Diagnostics 2018 Equity Plan – research and development  66   26   136   97 
PAVmed 2014 Equity Plan - cost of revenue  9   —   16   — 
PAVmed 2014 Equity Plan - sales and marketing  120   161   253   336 
PAVmed 2014 Equity Plan - general and administrative  8   77   164   145 
PAVmed 2014 Equity Plan - research and development  97   52   192   107 
Total stock-based compensation expense – recognized by Lucid Diagnostics $1,399  $3,844  $4,607  $7,679 
Total stock-based compensation expense $1,399  $3,844  $4,607  $7,679 

22

Note 12 — Stock-Based Compensation - continued

 

The consolidated unrecognized stock-based compensation expense and weighted average remaining requisite service period with respect to stock options and restricted stock awards issued under each of the PAVmed Inc. 2014 Equity Plan and the Lucid Diagnostics Inc. 2018 Equity Plan, as discussed above, is as follows:

 

Schedule of Unrecognized Compensation Expense

  Unrecognized Expense  Weighted Average Remaining Service Period (Years) 
PAVmed Inc. 2014 Equity Plan        
Stock Options $9,127   2.3 
Restricted Stock Awards $1,510   1.2 
         
Lucid Diagnostics Inc. 2018 Equity Plan        
Stock Options $4,030   2.6 
Restricted Stock Awards $10,873   1.0 

23

Note 12 — Stock-Based Compensation - continued

  

Unrecognized

Expense

  

Weighted Average

Remaining

Service Period

(Years)

 
PAVmed 2014 Equity Plan        
Stock Options $6,192   2.2 
Restricted Stock Awards $375   0.8 
         
Lucid Diagnostics 2018 Equity Plan        
Stock Options $4,129   2.3 
Restricted Stock Awards $1,141   1.1 

 

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 $0.74$0.35 per share and $3.32$0.74 per share during the periods ended June 30, 2023 and 2022, respectively, calculated using the following weighted average Black-Scholes valuation model assumptions:

Schedule of Fair Values of Stock Options Granted Using Black-scholes Valuation Model Assumptions

  Six Months Ended June 30, 
  2023  2022 
Expected term of stock options (in years)  5.7   5.8 
Expected stock price volatility  88%  84%
Risk free interest rate  3.7%  3.0%
Expected dividend yield  —%  —%

Stock-based compensation expense recognized with respect to stock options granted under the Lucid Diagnostics 2018 Equity Plan was based on a weighted average estimated fair value of such stock options of $0.87 per share and 2021,$1.48 per share during the periods ended June 30, 2023 and 2022, respectively, calculated using the following weighted average Black-Scholes valuation model assumptions:

 

Schedule of Fair Values of Stock Options Granted Using Black-scholes Valuation Model Assumptions

  

Six Months Ended

June 30,

 
  2022  2021 
Expected term of stock options (in years)  5.8   5.6 
Expected stock price volatility  84.0%  75.0%
Risk free interest rate  3.0%  1.0%
Expected dividend yield  —%  —%

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 $1.48 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:

Schedule of Fair Values of Stock Options Granted Using Black-scholes Valuation Model Assumptions

Six Months Ended

June 30,

2022
Expected term of stock options (in years)5.7
Expected stock price volatility71.0%
Risk free interest rate3.0%
Expected dividend yield—%
  Six Months Ended June 30, 
  2023  2022 
Expected term of stock options (in years)  5.6   5.7 
Expected stock price volatility  75%  71%
Risk free interest rate  3.7%  3.0%
Expected dividend yield  —%  —%

 

PAVmed Inc. Employee Stock Purchase Plan (“PAVmed ESPP”)

 

A total of 194,240573,229 shares and 203,480194,240 shares of common stock of the Company were purchased for proceeds of approximately $217182 and $304218, on March 31, 20222023 and 2021,2022, respectively under the PAVmed Inc Employee Stock Purchase Plan (“PAVmed Inc ESPP”).ESPP. The March 31, 2023 purchase was partially settled through the redeployment of 188,846 shares of treasury stock. The PAVmed Inc. ESPP has a total reservationreserve of 1,750,0002,000,000 shares of common stock of PAVmed Inc. of which 931,841416,914 shares are available for issue as of June 30, 2023. In January 2023, the number of shares available-for-issue was increased by 250,000 in accordance with the evergreen provisions of the plan.

Lucid Diagnostics Inc. Employee Stock Purchase Plan (“Lucid ESPP”)

A total of 231,987 shares of common stock of Lucid Diagnostics were purchased for proceeds of approximately $276 on March 31, 2023 under the Lucid ESPP. The Lucid ESPP has a total reserve of 1,000,000 shares of common stock of Lucid Diagnostics of which 683,983 shares are available-for-issue as of June 30, 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 reservation2023. In January 2023, the number of shares available for issue was increased by 500,000 sharesin accordance with the evergreen provisions of common stock of Lucid Diagnostics Inc. for which all shares are available-for-issue as of June 30, 2022.the plan.

 

2423
 

 

Note 13 — Preferred Stock

 

As of June 30, 2023 and December 31, 2022, there were 1,254,497 and 1,205,759 shares of PAVmed Series B Convertible Preferred Stock, classified in permanent equity, issued and outstanding, respectively.

Series B Convertible Preferred Stock Dividends

The PAVmed Inc. Series B Convertible Preferred Stock dividends are 8.0% per annum based on the $3.00 per share stated value of the Series B Convertible Preferred Stock, with such dividends compounded quarterly, accumulate, and are payable in arrears upon being declared by the Company’s board of directors. Such dividends may be settled, at the discretion of the board of directors, through any combination of the issue of additional shares of Series B Convertible Preferred Stock, the issue shares of common stock of the Company, and /or cash payment.

Series B Convertible Preferred Stock Dividends Earned

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 $75 and $149 of such dividends earned of $68 as ofin the three and six months ended March 31, 2022June 30, 2023, respectively; and $70 asand $138 of such dividends earned in the three and six months ended June 30, 2022; and dividends earned of $75 as of the three months ended March 31, 2021 and $74 as of the three months ended June 30, 2021.2022, respectively.

 

TheSeries B Convertible Preferred Stock Dividends Declared

In the six months ended June 30, 2023, the Company’s board-of-directors declared Series B Convertible Preferred Stock dividends are recognizedof an aggregate of $146, inclusive of $72 earned as a dividend payable only upon the dividend being declared payableof December 31, 2022; and $74 earned as of March 31, 2023; with such dividends settled by the Company’s boardissue of directors. an aggregate 48,738 additional shares of Series B Convertible Preferred Stock, inclusive of 24,128 shares issued with respect to the dividends earned as of December 31, 2022; and 24,610 shares issued with respect to the dividends earned as of March 31, 2023.

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 approximatelyof: $67 earned as of December 31, 2021,2021; and approximately $68 earned as of March 31, 2022,2022; with each such dividends settled by the issue of an aggregate 45,031 additional shares of Series B Convertible Preferred Stock, inclusive of 22,291 shares issued with respect to the dividends earned as of December 31, 2021,2021; and 22,740 shares issued with respect to the dividends earned as of March 31, 2022. In the six months ended June 30, 2021, the Company’s board-of-directors declared Series B Convertible Preferred Stock dividends of an aggregate of approximately $148, inclusive of approximately $73 earned as of December 31, 2020, and approximately $75 earned as of March 31, 2021, with each such dividends settled by the issue of an aggregate 49,244 additional shares of Series B Convertible Preferred Stock, inclusive of 24,198 shares issued with respect to the dividends earned as of December 31, 2020, and 25,046 shares issued with respect to the dividends earned as of March 31, 2021.

Subsequent to June 30, 2022,2023, in July 2022,August 2023, the Company’s board-of-directorsboard of directors declared a Series B Convertible Preferred Stock dividend, earned as of June 30, 2022 and payable as2023, of July 1, 2022, of approximately $7075, to be settled by the issue of an25,104 additional23,196 shares of Series B Convertible Preferred Stock.

The Series B Convertible Preferred Stock (with suchdividends are recognized as a dividend payable liability only upon the dividend being declared payable by the Company’s board of directors. Accordingly, the dividends declared payable subsequent to the date of the accompanying condensed consolidated balance sheet were not recognized as a dividend payable as of June 30, 2022,liability as the Company’s board of directors had not declared suchthe dividends payable as of each such date).date.

24

 

Note 14 — Common Stock and Common Stock Purchase Warrants

 

Common Stock

 

In JuneOn December 29, 2022, the Company received shareholder approvala notice from the Listing Qualifications Department of Nasdaq stating that, for the prior 30 consecutive business days (through December 28, 2022), the closing bid price of the Company’s common stock had been below the minimum of $1 per share required for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). The notification letter stated that the Company would be afforded 180 calendar days (until June 27, 2023) to regain compliance. On June 28, 2023, the Company received a second notice from the Listing Qualifications Department of Nasdaq granting the Company a 180-day extension (or until December 26, 2023) to regain compliance with the minimum bid price requirement. In order to regain compliance, the closing bid price of the Company’s common stock must be at least $1 for a minimum of ten consecutive business days. During the special meeting (“Special Meeting”) of shareholders held on March 31, 2023, the shareholders approved a proposal to amend the Company’s Certificate of Incorporation, to effect, at any time prior to the one-year anniversary date of the Special Meeting, (i) a reverse split of the Company’s outstanding shares of common stock at a specific ratio, ranging from 1-for-5 to 1-for-15, to be determined by the board of directors of the Company in its sole discretion, and (ii) an associated reduction in the number of shares of common stock the Company is authorized to issue, upfrom 250,000,000 shares to 50,000,000 shares. If the Company’s board of directors authorizes the Company to consummate the reverse stock split, the Company anticipates it will regain compliance with the Nasdaq requirements for continued listing through such transaction.

250 million

As discussed above in Note 10, Financial Instruments Fair Value Measurements, a total of 1,500,000 shares of itsPAVmed common stock an increasewas issued to a service provider as the consideration for the services rendered under the May 31, 2023 R&D Agreement. The issued shares of common stock had a fair value of approximately $100602 million shares.(with such fair value measured using the quoted closing price of the common stock of the Company on the effective date of the respective underlying agreement). The issued shares of common stock are nonrefundable. As the service provider has substantially rendered the services under the May 31, 2023 R&D Agreement as of June 30, 2023, the estimated fair value of the issued shares was recognized as a research and development expense in the accompanying (unaudited) condensed consolidated statement of operations for the three and six months ended June 30, 2023. See Note 10, Financial Instruments Fair Value Measurements, for a further discussion of the May 31, 2023 R&D Agreement, including the contingent additional contractual consideration obligation.

 

During the six months ended June 30, 2022, 299,999 shares of common stock of the Company were issued upon exercise of stock options for cash of approximately $302; and . during the six months ended June 30, 2022,2023 a total of 194,240573,229 shares of common stock of the Company were issued under the PAVmed Inc. Employee Stock Purchase Plan (“ESPP”).ESPP. See Note 12, Stock-Based Compensation, for a discussion of each of the PAVmed Inc. 2014 Equity Plan and the PAVmed Inc ESPP.

In the six months ended June 30, 2023, 9,523,481 shares of the Company’s common stock were issued upon conversion, at the election of the holder, of the April 2022 Senior Convertible Note, for 3,151 face value principal repayments, as discussed in Note 11, Debt.

In the six months ended June 30, 2023, the Company sold 2,330,747 shares through their at-the-market equity facility for net proceeds of approximately 1,165, after payment of 3% commissions.

Common Stock Purchase Warrants

 

As of June 30, 20222023 and December 31, 2021,2022, Series Z Warrants outstanding totaled 11,937,450 and 11,937,455, respectively. A. The Series Z Warrant isWarrants are exercisable to purchase one share of common stock of the Company at an exercise price of $1.60per share, and expire April 30, 2024. DuringThere were no Series Z Warrants exercised during the six months ended June 30, 2022, a total of 5 Series Z Warrants were exercised for cash at $1.60 per share, 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 remaining 377,873 Series W Warrants expired unexercised as of January 29, 2022.2023.

 

25
 

 

Note 15 — Noncontrolling Interest

 

The noncontrolling interest (“NCI”) included as a component of consolidated total stockholders’ equity is summarized for the periods indicated as follows:

 

Schedule of Noncontrolling Interest of Stockholders' Equity

  June 30, 2022  December 31, 2021 
NCI – equity (deficit) – beginning of period $17,752  $(2,369)
Investment in Veris Health Inc.  —   6 
Net loss attributable to NCI - Lucid Diagnostics Inc.  (5,711)  (5,779)
Net loss attributable to NCI – Solys Diagnostics Inc.  (6)  — 
Net loss attributable to NCI – Veris Health Inc.  (620)  — 
Impact of subsidiary equity transactions  229   16,760 
Lucid Diagnostics Inc. 2018 Equity Plan stock option exercise  688   — 
Stock-based compensation expense - Lucid Diagnostics Inc. 2018 Equity Plan  7,091   9,134 
Stock-based compensation expense - Veris Health Inc. 2021 Equity Plan  3   — 
NCI – equity (deficit) – end of period $19,426  $17,752 
  June 30, 2023 
NCI – equity – December 31, 2022 $20,615 
Net loss attributable to NCI  (7,638)
Impact of subsidiary equity transactions  (1,332)
Lucid Diagnostics Inc. proceeds from issuance of preferred stock  13,625 
Lucid Diagnostics Inc. proceeds from At-The-Market Facilities, net of deferred financing charges  284 
Lucid Diagnostics Inc. issuance of common stock for settlement of APA-RDx installment and termination payment  713 
Lucid Diagnostics Inc. issuance of common stock for settlement of vendor service agreement  147 
Lucid Diagnostics Inc. Employee Stock Purchase Plan Purchase  276 
Stock-based compensation expense - Lucid Diagnostics Inc. 2018 Equity Plan  3,982 
Stock-based compensation expense - Veris Health Inc. 2021 Equity Plan  10 
NCI – equity – June 30, 2023 $30,682 

 

The consolidated NCI presented above is with respect to the Company’s consolidated majority-owned subsidiaries inclusive of: Lucid Diagnostics Inc., Veris Health Inc. and Solys Diagnostics Inc., as a component of consolidated total stockholders’ equity as of June 30, 20222023 and December 31, 2021;2022; 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, 2022 and 2021; and with respect to Veris Health Inc. forperiods beginning on the three and six months ended June 30, 2022 and fromacquisition date of the period of May 28, 2021 to June 30, 2021 (as the Veris Health Inc. inception date was May 28, 2021).respective majority-owned subsidiaries.

 

Lucid Diagnostics Inc.

 

As of June 30, 2022,2023, there were 35,171,79641,853,603 shares of common stock of Lucid Diagnostics Inc. issued and outstanding, of which, PAVmed Inc. holds 27,927,19031,302,420 shares, representing a majority ownership equity interest and PAVmed Inc. has a controlling financial interest in Lucid Diagnostics, Inc., and accordingly, Lucid Diagnostics Inc. is a consolidated majority-owned subsidiary of PAVmed Inc.PAVmed.

 

On March 28,7, 2023, Lucid issued 13,625 shares of newly designated Lucid Series A Convertible Preferred Stock (the “Lucid Series A Preferred Stock”). Each share of the Lucid Series A Preferred Stock has a stated value of $1,000 and a conversion price of $1.394. The Lucid Series A Preferred Stock is convertible into shares of Lucid Diagnostics’ common stock at any time at the option of the holder from and after the six-month anniversary of its issuance, and automatically converts into shares of Lucid Diagnostics’ common stock on the second anniversary of its issuance. The terms of the Lucid Series A Preferred Stock also include a one times preference on liquidation and a right to receive dividends equal to 20% of the number of shares of Lucid common stock into which such Lucid Series A Preferred Stock is convertible, payable on the one-year and two-year anniversary of the issuance date. The Lucid Series A Preferred Stock is a non-voting security, other than with respect to limited matters related to changes in terms of the Lucid Series A Preferred Stock. The aggregate gross proceeds from the sale of shares in such offering were $13.625 million.

In November 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“at-the-market offering” for up to $506.5 million of its common stock that may be offered and sold under a Controlled Equity Offering Agreement between Lucid Diagnostics Inc. common stock from time to time atand Cantor Fitzgerald & Co. In the request ofsix months ended June 30, 2023, Lucid Diagnostics Inc. While there are distinct differences, the facility is structured similarly to a traditionalsold 230,068 shares through their at-the-market equity facility insofar as it allows the Company to raise primary equity capital on a periodic basis at prices based on the existing market price. As of June 30, 2022, there were 0 shares of common stock 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 net proceeds of approximately $9270.3. million, after payment of 3% commissions. No shares were sold through Lucid’s at-the-market equity facility during the three months ended June 30, 2023.

 

Veris Health Inc.

 

As of June 30, 2022,2023, there were 8,000,000 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 19.56% 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 accompanying unaudited condensed consolidated balance sheet as of June 30, 2022 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 December 31, 2021, upon its formation and contemporaneous acquisition of Oncodisc Inc.

sheets.

Solys Diagnostics Inc.

As of each of June30, 2022 and December 31, 2021, there were 9,189,190 shares of common stock of Solys Diagnostics Inc. issued and outstanding, of which PAVmed Inc. holds a 90.3235% majority-interest ownership and PAVmed Inc. has a controlling financial interest, with the remaining 9.6765% minority-interest ownership held by unrelated third parties.

26
 

 

Note 16 — Net Loss Per Share

 

The respective “NetNet loss per share - attributable to PAVmed Inc. - basic and diluted”diluted and “NetNet loss per share - attributable to PAVmed Inc. common stockholders - basic and diluted”diluted - for the respective periods indicated - is as follows:

 

Schedule of Comparison of Basic and Fully Diluted Net Loss Per Share

                                
 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

 
 2022  2021  2022  2021  2023  2022  2023  2022 
Numerator                                
Net loss - before noncontrolling interest $(29,101) $(12,670) $(48,734) $(22,779) $(17,892) $(29,101) $(40,106) $(48,734)
Net loss attributable to noncontrolling interest  3,576   1,199   6,337   1,877   3,355   3,576   7,638   6,337 
Net loss - as reported, attributable to PAVmed Inc. $(25,525) $(11,471) $(42,397) $(20,902) $(14,537) $(25,525) $(32,468) $(42,397)
                                
Series B Convertible Preferred Stock dividends – earned $(70) $(74) $(138) $(149) $(75) $(70) $(149) $(138)
                                
Net loss attributable to PAVmed Inc. common stockholders $(25,595) $(11,545) $(42,535) $(21,051) $(14,612) $(25,595) $(32,617) $(42,535)
                                
Denominator                                
Weighted average common shares outstanding, basic and diluted  86,957,352   82,235,397   86,689,857   78,117,637   104,349,822   86,957,352   100,742,530   86,689,857 
Weighted average common shares outstanding, basic  104,349,822   86,957,352   100,742,530   86,689,857 
                                
Loss per share                
Net loss per share                
Basic and diluted                                
Net loss - as reported, attributable to PAVmed Inc. $(0.29) $(0.14) $(0.49) $(0.27) $(0.14) $(0.29) $(0.32) $(0.49)
Net loss - as reported, attributable to PAVmed Inc, basic $(0.14) $(0.29) $(0.32) $(0.49)
Net loss attributable to PAVmed Inc. common stockholders $(0.29) $(0.14) $(0.49) $(0.27) $(0.14) $(0.29) $(0.32) $(0.49)
Net loss attributable to PAVmed Inc. common stockholders, basic $(0.14) $(0.29) $(0.32) $(0.49)

 

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 periods ended June 30, 20222023 and 20212022 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:

 

Schedule of Antidilutive Securities Excluded from Computation of Diluted Earnings Per Share

 2022  2021  2023  2022 
 June 30,  June 30, 
 2022  2021  2023  2022 
Stock options and restricted stock awards  12,177,406   10,573,530   18,397,406   12,177,406 
Series Z Warrants  11,937,450   15,074,281   11,937,450   11,937,450 
Series W Warrants  —   381,818 
Series B Convertible Preferred Stock  1,158,950   1,185,685   1,254,497   1,158,950 
Total  25,273,806   27,215,314   31,589,353   25,273,806 

 

The total stock options and restricted stock awards are inclusive of 500,854 stock options as of June 30, 20222023 and 2021;2022; and 100,000 restricted stock awards as of June 30, 2022 granted outside the PAVmed Inc. 2014 Equity Plan. These 100,000 restricted stock awards were fully vested during the period ended June 30, 2023.

 

27
 

 

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, 20212022 (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,its subsidiaries, including PAVmed Inc. and its wholly-owned subsidiary PAVmed Subsidiary Corp; and its majority-owned subsidiaries, including:subsidiary Lucid Diagnostics Inc. (“Lucid Diagnostics” or “LUCID”“Lucid”), and its majority-owned subsidiary Veris Health Inc. (“Veris Health” or “VERIS”), and Solys Diagnostics, Inc. (“Solys Diagnostics” or “SOLYS”“Veris”).

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (this “Form 10-Q”), including the following discussion and analysis of our (unaudited)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 results of operations and financial position, business strategy and plans and 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 the Company’s actual results may differ significantly from the results discussedthose expressed or implied 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 protect our intellectual property;
 ●our ability to complete strategic acquisitions;
 ●our ability to manage growth and integrate acquired operations;
 ●the potential liquidity and trading of our securities;
 ●our regulatory and operational risks;
 ●cybersecurity risks;
 ●risks related to SARS-CoV-2 /COVID-19 pandemic;
●the impact of the material weakness identified by our management;COVID-19 pandemic and other health-related emergencies; and
 ●our estimates regarding expenses, future revenue, capital requirements and needs for additional financing.

 

In addition, our forward-looking statements do not reflect 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 /orand/or expectations disclosed in our forward-looking statements, and you should not place 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.

 

Overview

PAVmed is a diversified commercial-stage medical technology operating in the medical device, diagnostics, and digital health sectors, including through its majority-owned subsidiaries Lucid Diagnostics, a publicly-traded commercial-stage cancer prevention diagnostics company, and Veris Health, a private digital health company focused on enhanced personalized cancer care through remote patient monitoring using implantable biologic sensors with wireless communication along with a custom suite of connected external devices. Our current central focus is on the commercialization of Lucid Diagnostics’s EsoGuard and Veris Health’s Veris Cancer Care Platform. As resources permit, we will continue to explore internal and external innovations that fulfill our project selection criteria without limiting ourselves to any target specialty or condition. More broadly, we strive to maintain balance within our pipeline with shorter-term, lower-risk projects with the prospect for rapid commercialization and revenue generation supporting development of longer-term projects. At the same time, we are continuously re-assessing each project’s long-term commercial potential relative to other projects in our pipeline, accelerating or decelerating the project and reallocating resources.

See Part I, Item 1, “Business,” in the Form 10-K for a more detailed summary of the medical device, diagnostics, and digital health sectors and our key products, including in particular EsoGuard and the Veris Cancer Care Platform, which are currently our two leading products.

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OverviewRecent Developments

The Company is a highly differentiated, multi-product, commercial-stage medical technology 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, its activities have focused on advancing its lead products through regulatory approval, expanding commercial operations, and protecting its intellectual property, while 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: “Diagnostics”, “Medical Devices”, and “Digital Health”.Business

 

Our products, services,PAVmed Strategic Business Update

In January 2023, PAVmed launched a strategic initiative designed to maximize cash runway and opportunities, as discussed hereinprotect long-term shareholder interests through adjustments in near-term strategic priorities and in Item 1associated resource allocation. The Company is currently focusing substantially all of Part Iits resources and near-term efforts on the commercialization of the Form 10-K under the heading Business BackgroundLucid’s and Overview, are as follows:Veris’ products.

 

●Diagnostics - EsoGuard Esophageal DNA Laboratory Developed Test- and EsoCheck Esophageal Cell Collection Device;

Status of Lucid Clinical Trials

 

Lucid is currently seeking to accelerate its collection of clinical utility data through a range of trials that can be efficiently executed. These efforts include a planned investigator-initiated, retrospective analysis of prospectively collected data on the 391 San Antonio fire fighters who underwent testing as part of a community-sponsored cancer awareness event described below (in respect of which we expect to publish results in the second half of 2023); a virtual-patient randomized controlled trial with intended recruitment of at least 100 physician participants (in respect of which we expect to publish results this year); a Lucid-sponsored multi-center, prospective, observational study with 500 patients; and a Lucid-sponsored registry at existing Lucid Test Centers, whereby all patients undergoing EsoCheck testing will be given the opportunity to provide informed consent and contribute data about their risk factors, EsoGuard results, and subsequent diagnostic and/or therapeutic journey. Both Lucid-sponsored observational/registry studies expect to have preliminary results and/or interim analysis submitted for peer review before the end of 2023.

LucidDx Labs Laboratory Operations Update

On February 14, 2023, Lucid and its subsidiary, LucidDx Labs, entered into an agreement (the “MSA Termination Agreement”) with RDx, pursuant to which the parties mutually agreed to terminate the management service agreement between them (the “MSA-RDx”) without cause. The termination was effective as of February 10, 2023. Until the termination of the MSA-RDx, RDx had provided certain testing and related services for our laboratory in accordance with the terms of the MSA-RDx. In anticipation of the termination of the MSA-RDx, however, Lucid accelerated the development of internal resources necessary to operate its laboratory entirely on its own. The termination of the MSA-RDx and our operating the laboratory on our own has improved the performance of the EsoGuard assay.

Among other things, the MSA Termination Agreement reduces the remaining amounts of the earnout payments and management fees due under the MSA-RDx and the related asset purchase agreement (the “APA-RDx”) to $0.7 million (from the $3.4 million that would otherwise have been payable under the MSA-RDx and APA-RDX, if the MSA-RDx had remained in effect through the balance of its stated term), resulting in a net savings to Lucid of $2.7 million. The payment was satisfied through the issuance of 553,436 shares of Lucid’s common stock on February 25, 2023. Lucid was not required to make any cash payments in connection with the termination.

#CheckYourFoodTube Events

In January 2023, Lucid completed its first #CheckYourFoodTube Precancer Testing Event, with the San Antonio Fire Department (the “SAFD”) during Firefighter Cancer Awareness Month as designated by the International Association of Fire Fighters (IAFF). A total of 391 members who were deemed to be at-risk for esophageal precancer, underwent a brief, on-site, noninvasive cell collection procedure, performed by our clinical personnel using EsoCheck. Firefighters with suspected esophageal precancer based on a positive EsoGuard result were identified, including some less than 40 years of age, and will undergo appropriate monitoring and treatment, as indicated by clinical practice guidelines, to prevent progression to esophageal cancer.

Since then, additional testing events have been hosted with the SAFD, and similar events have been held with fire departments throughout the country. These events are ongoing and are an extension of Lucid’s satellite Lucid Test Center (“sLTC”) program, which brings Lucid precancer testing directly to patients—at their physician’s office and now at large testing day events.

Launch of EsoGuard® #CheckYourFoodTube Mobile Testing Unit

In June 2023, Lucid launched its first EsoGuard #CheckYourFoodTube Mobile Test Unit (“mobile testing unit”), with the inaugural mobile testing unit event being held in Sarasota, Florida. The mobile testing unit is another channel by which the Company is bringing EsoGuard testing to at-risk patients.

Launch of Direct Contracting Strategic Initiative

In March 2023, Lucid launched a Direct Contracting Strategic Initiative (DCSI) to engage directly with large Administrative Services Only (ASO) self-insured employers, unions and other entities, seeking to replicate the successes of other diagnostic companies that have deployed similar strategies. In August 2023, the company announced it had contracted with the Ancira Automotive Group as a result of this initiative, providing access to esophageal precancer testing for its employees at all 12 San Antonio locations.

New Revenue Cycle Management Provider

In May 2023, Lucid began to transition claims submission responsibility to a new revenue cycle management provider that offered more robust capabilities for, among other things, claims processing and appeals. The provider upgrade has been completed and claim submissions resumed in June 2023. Since completing the transition, the upgrade has demonstrated an improvement in speed of collections, turnaround time to claim submission, percentage of claims paid, and actionable data for appeals.

Veris Health Commercialization Update

In December 2022 Veris Health, PAVmed’s digital health subsidiary, commercially launched its Veris Cancer Care Platform™ by executing its first commercial contract with New Jersey Cancer Care, PA (“NJCC”), an oncology practice and member of the prestigious Quality Cancer Care Alliance. In February 2023, the Veris Cancer Care Platform went live following successful onboarding of the first cohort of cancer patients and their clinicians at NJCC. Enrolled patients received a VerisBox™ and began connecting their Bluetooth-enabled health care devices to transmit real-time physiologic data to the cloud-based Veris Cancer Care Platform clinician portal. The patients also began reporting symptoms and quality-of-life parameters through the Veris Cancer Care Platform patient smartphone app, which is now available for patients on the Apple App Store and Google Play. The cloud-based clinician portal was concurrently integrated into the oncology practice and the cancer care team began using it to review physiologic and clinical data and other remote patient monitoring (“RPM”) services. Since the Veris Cancer Care Platform went “live” in February, Veris added two additional accounts, expanding utilization of the product to a total of six locations across three oncology practices while continuing to seek to build a pipeline of prospective customers.

●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 pursuingVeris continues to make progress toward regulatory submission of its implantable monitor which is targeted for commercial launch next year. The device, which is designed to be implanted in conjunction with a numberchemotherapy vascular access port, will further the power of researchthe Veris Cancer Care Platform by better assuring patient compliance with RPM data reporting requirements. It recently completed an animal study which demonstrated intended device performance, consistent with its design and development projectclinical specifications, over an extended implant period.

In April 2023, Gary Manning joined PAVmed to become the President of Veris Health. Mr. Manning has a track record spanning three decades, including leading companies in the medical device, wearable, and product opportunities across these three segments, which have either been developed internally or have been presented to us by clinician innovatorsdigital health sectors and academic medical institutions for consideration.commercializing products in the global market.

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 from the academic research laboratory to commercial diagnostics tests and devices with scalable manufacturing capacity. The Company is presently focused on expanding commercialization across multiple sales channels, including: the communication and education of medical practitioners and clinicians of EsoGuard; and establishing “Lucid Diagnostics Test Centers” for the collection of cell samples using EsoCheck. Previously the collected cell samples were sent to ResearchDx Inc. (“RDx”), an unrelated third-party CLIA-certified commercial laboratory service provider, for the performance of the EsoGuard LDT. On February 25, 2022, Lucid Diagnostics’ wholly owned subsidiary, LucidDx Labs Inc. (“LucidDx Labs”) acquired from RDx certain licenses and other related assets necessary for LucidDx Labs to operate its own new Clinical Laboratory Improvement Amendments (“CLIA”) certified, College of American Pathologists (“CAP”) accredited clinical laboratory located in Lake Forest, CA. RDx was previously responsible for submitting claims for EsoGuard tests performed and was receiving out-of-network private insurance payments. As part of the transition to our own lab, we also contracted with a revenue cycle management (“RCM”) provider to submit claims on our behalf. The RCM provider will have complete oversight of payer claims, appeals processes, patient billing, online payment collection, and claims tracking. With the appropriate licenses and certifications for billing and credentialing secured, and our recently having put in place the necessary back office systems, claims for more than 1,000 tests performed since the establishment of our own lab are now being processed, including 850 tests in the three months ended June 30, 2022 (although not having yet secured reimbursed rates from Medicare and Medicaid, the Company does not know the amount per claim it will receive from payors).  Refer to Note 3 of our Condensed Consolidated Financial Statements for more information on Revenue from Contracts with Customers.  Presently, recognized revenue for GAAP purposes is subject to actual amounts collected during the period.  Accordingly, since the RCM began submitting claims processed from our own lab subsequent to June 30, 2022, there were no collections during the three months ended June 30, 2022.

29
 

 

Overview - continued

●In connection with our efforts to expand our presence in the diagnostic market, we are developing EsoCure as an Esophageal Ablation Device, with the intent to allow a clinician to treat dysplastic Barrett’s Esophagus (“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, demonstrating successful direct thermal balloon catheter ablation of esophageal lining through the working channel of a standard endoscope. We plan to conduct additional development work and animal testing of EsoCure to support a future FDA 510(k) submission.
●CarpX is 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. Our limited-release commercialization efforts through 2022 are focused on engaging key opinion hand surgeons designed to solicit input for ergonomic improvements to the device, procedure development and surgical-time optimization, and ease of use.
●In May 2021, we formed Veris Health, and concurrently, acquired Oncodisc Inc (“Oncodisc”), a digital health company with ground breaking tools to improve personalized cancer care through remote patient monitoring which we now refer to as our Veris Cancer Care Platform. These core technologies include the first intelligent implantable vascular 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. Its 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. We plan to seek commercialization through a de novo process, and, as such, we’ll commercialize the digital health offering in three phases. The three phases are called Veris Solar, Veris Mercury, and Veris Venus which include software, device, and data. Recently, we had a favorable meeting with the FDA surrounding the Mercury phase.
●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

BusinessNASDAQ Notice

 

Clinical Guideline Update – ACGOn December 29, 2022, the Company received a notice from the Listing Qualifications Department of Nasdaq stating that, for the prior 30 consecutive business days (through December 28, 2022), the closing bid price of the Company’s common stock had been below the minimum of $1 per share required for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). The notification letter stated that the Company would be afforded 180 calendar days (until June 27, 2023) to regain compliance, and AGAthat the Company could be eligible for additional time. Although the Company did not regain compliance within the initial 180 calendar day period, Nasdaq determined that the Company was eligible for an additional 180 calendar day period to regain compliance (until December 26, 2023). In order to regain compliance, the closing bid price of the Company’s common stock must be at least $1 for a minimum of ten consecutive business days during the additional 180 calendar day period. The Company intends to consider all available options to regain compliance with the Nasdaq listing standards. On March 31, 2023, the Company’s stockholders approved an amendment to its certificate of incorporation, authorizing the Company to effect, at any time prior to March 31, 2024, (i) a reverse split of the Company’s outstanding shares of common stock at a specific ratio, ranging from 1-for-5 to 1-for-15, to be determined by the board of directors of the Company in its sole discretion, and (ii) an associated reduction in the number of shares of common stock the Company is authorized to issue, from 250,000,000 shares to 50,000,000 shares. The Company has not yet determined the specific ratio of the reverse split or the timing of the reverse split and authorized capital reduction, or whether the Company will effect the reverse split and authorized capital reduction at all. However, the Company may effectuate the reverse split, if necessary, as part of its effort to regain compliance with the Nasdaq minimum bid price requirement.

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.

EsoGuard BE-1 and BE-2 Clinical Trials

 

In 2021 the Lucid Diagnostics Inc. began conducting two concurrent clinical trials, including each of: the “EsoGuard screening study” (“BE-1”); and the “EsoGuard case-control study” (“BE-2”), to expand the clinical evidence for the technologies and to support a United States Food and Drug Administration (“FDA”) pre-market approval (“PMA”) of the use of EsoGuard and EsoCheck as an in-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 its clinical guideline that supports screening to 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 help secure insurance reimbursement adoption by government and private insurers. Consequently, we have decided to delay for the time being the BE-1 trial while continuing to enroll GERD patients with a previous diagnosis of nondysplastic BE, low grade dysplasia, high grade dysplasia,, or EAC in 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 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 EquityATM Facility

 

In MarchNovember 2022, our majority-owned subsidiary Lucid Diagnostics Inc.commenced an “at-the-market offering” of up to $6.5 million of its common stock pursuant to a Controlled Equity Offering Agreement between Lucid Diagnostics and Cantor Fitzgerald & Co. (“Cantor”). In the six months ended June 30, 2023, Lucid Diagnostics sold 230,068 shares in this “at-the-market” offering for net proceeds of approximately $0.3 million, after payment of 3% commissions. No shares were sold in this “at-the-market” offering during the three months ended June 30, 2023.

Lucid Diagnostics - Series A Preferred Stock Offering

On March 7, 2023, Lucid issued 13,625 shares of newly designated Lucid Series A Convertible Preferred Stock (the “Lucid Series A Preferred Stock”). Each share of the Lucid Series A Preferred Stock has a stated value of $1,000 and a conversion price of $1.394. The Lucid Series A Preferred Stock is convertible into shares of Lucid’s common stock at any time at the option of the holder from and after the six-month anniversary of its issuance (or, if later, the effective date of an increase in Lucid Diagnostics’ authorized share capital or the effective date of a registration statement covering the resale of the underlying shares), and automatically converts into shares of Lucid’s common stock on the second anniversary of its issuance. The terms of the Lucid Series A Preferred Stock also include a preference on liquidation and a right to receive dividends equal to 20% of the number of shares of Lucid common stock into which such Lucid Series A Preferred Stock is convertible, payable on each of the one-year and two-year anniversary of the issuance date. The Lucid Series A Preferred Stock is a non-voting security, other than with respect to limited matters related to changes in terms of the Lucid Series A Preferred Stock. The sale of the Lucid Series A Preferred Stock generated $13.625 million in aggregate gross proceeds.

Lucid Diagnostics - Securities Purchase Agreement - March 13, 2023 - Senior Secured Convertible Note - March 21, 2023

Effective as of March 13, 2023, Lucid Diagnostics entered into a committed equity facilitySecurities Purchase Agreement (“Lucid SPA”) with an affiliateaccredited institutional investor, pursuant to which Lucid Diagnostics agreed to sell, and the investor agreed to purchase a Senior Secured Convertible Note with a face value principal of Cantor Fitzgerald (“Cantor”$11.1 million (the “Lucid March 2023 Senior Convertible Note”). Lucid Diagnostics issued the Lucid March 2023 Senior Convertible Note on March 21, 2023 pursuant to the Lucid SPA. The sale of the Lucid March 2023 Senior Convertible Note generated $9.925 million in proceeds, after deducting a $1.186 million lender fee and offering costs.

The Lucid March 2023 Senior Secured Convertible Note has a 7.875% annual stated interest rate, a contractual conversion price of $5.00 per share of Lucid Diagnostics’ 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 the two-year anniversary of the date of issuance. The principal of the Lucid March 2023 Senior Convertible Note and the interest thereon is convertible into or otherwise payable in shares of Lucid Diagnostics’ common stock (subject to the satisfaction of certain customary equity conditions and except for interest payable prior to September 21, 2023).

Under the termsLucid March 2023 Senior Convertible Note, Lucid Diagnostics is 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. Under the Lucid March 2023 Senior Convertible Note, Lucid Diagnostics is also subject to financial covenants requiring that (i) the amount of its available cash shall equal or exceed $5.0 million at all times, (ii) the ratio of (a) the outstanding principal amount 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.notes issued under the committed equity facility. Subsequent to June 30, 2022,Lucid SPA, accrued and unpaid interest thereon and accrued and unpaid late charges as of August 10, 2022, under the committed equity facility, a totallast day of 308,152 shares of common stock ofany fiscal quarter commencing with September 30, 2023 to (b) Lucid Diagnostics Inc. were issued for proceeds of approximately $927.Diagnostics’ average market capitalization over the prior ten trading days, shall not exceed 30%, and (iii) that Lucid Diagnostics’ market capitalization shall at no time be less than $30 million.

 

3230
 

 

Results of Operations

 

Overview

 

Revenue

 

RevenueThe Company recognized revenue resulting from the delivery of patient EsoGuard test results when the Company considered the collection of such consideration to be probable to the extent that it is unconstrained. Additionally, in the three months ended March 31, 2022, 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.the APA-RDx.

 

Cost of revenue

Cost of revenues recognized from the delivery of patient EsoGuard test results includes costs related to EsoCheck device usage, shipment of test collection kits, royalties and the cost of services to process tests and provide results to physicians. We incur expenses for tests in the period in which the activities occur, therefore, gross margin as a percentage of revenue may vary from quarter to quarter due to costs being incurred in one period that relate to revenues recognized in a later period.

We expect that gross margin for our services will continue to fluctuate and be affected by EsoGuard test volume, our operating efficiencies, patient compliance rates, payor mix, the levels of reimbursement, and payment patterns of payors and patients.

 

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 engagedAgreement (as defined in the administrationNote 4, Related Party Transactions, to patients of the EsoCheck cell sample collection procedure (principally at the LUCID Test Centers)our accompanying unaudited condensed consolidated financial statements); the cost of EsoCheck devices and EsoGuard mailers (cell sample shipping costs) distributed to medical practitioners locations and the LUCIDLucid Test Centers; and LUCIDLucid Test Centers operating expenses, including rent expense and supplies.

 

Sales and marketing expenses

 

Sales and marketing expenses consist primarily of salaries and related costs for employees engaged in sales and marketing activities, as well as advertising and promotion expenses. We anticipate our sales and marketing expenses will increase in the future, as we anticipate an increase in payroll and related expenses related to the roll-out ofextent we expand our commercial sales and marketing operations as we execute on our business strategy.resources permit.

 

General and administrative expenses

 

General and administrative expenses consist primarily of salaries and related costs for personnel, travel expenses, facility-related costs, professional fees for accounting and legal services, salaries and related costs for employees involved in third-party payor reimbursement contract negotiations and consultantsconsulting and other 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 withto the growth and expansion ofextent our business operations objectives.grow. We also anticipate continued expenses related to being a public company, including fees and expenses for 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 studiesfor engineering design and engineering studies;development;
 ●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 current research and development activities, including our clinical trials, are focused principally on obtaining FDA approvalsthe acceleration of EsoGuard and developing product improvements or extending the utility of the leadVeris Cancer Care Platform commercialization. We will resume research and development activities with respect to other products in our pipeline including EsoCheck and EsoGuard and CarpX, along with advancing our Veris Cancer Care Platform and EsoCure and PortIO products.

33

Results of Operations - continued

Overview - continuedas well as applicable new technologies, as resources permit.

 

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.

31

Results of Operations - continued

 

Presentation of Dollar Amounts

 

All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are presented in thousands of dollars, if not otherwise indicated as being presented as dollars in millions, except for the number of sharesshare and per share amounts.

34

Results of Operations - continued

 

Three months ended June 30, 20222023 as compared to three months ended June 30, 20212022

 

The Company did not recognize revenue nor cost of revenue during the three months ended June 30, 2022 and June 30, 2021.

Revenue

Sales and marketing expenses

 

In the three months ended June 30, 2023, revenue was $0.2 million as compared to $0.0 million for the corresponding period in the prior year. The $0.2 million increase principally relates to the revenue for our EsoGuard Esophageal DNA Test performed in our own CLIA laboratory, as compared to revenue from the EsoGuard Commercialization Agreement with RDx, in the prior year period, which was terminated on February 25, 2022 when Lucid Diagnostics transitioned to its own laboratory operations.

Cost of revenue

In the three months ended June 30, 2023, cost of revenue was approximately $1.7 million as compared to $0.0 million for the corresponding period in the prior year. The $1.7 million increase principally related to:

●approximately $0.6 million increase in laboratory facility and operations costs;
●approximately $0.6 million increase in EsoCheck and EsoGuard supplies costs; and
●approximately $0.5 million increase in compensation related costs.

Sales and marketing expenses

In the three months ended June 30, 2023, sales and marketing costs were approximately $4.9$4.3 million as compared to $1.9$4.9 million for the corresponding period in the prior year. The net increasedecrease of $3.0$0.6 million was principally related to:

 

 ●approximately $2.2$0.7 million increase in compensation related costs principallydecrease 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 numbera reduction of employees;third party marketing expenses; and
 ●approximately $0.5$0.1 million increase in outside professional servicesfacility related to EsoCheck, EsoGuard and consulting and professional services fees.costs.

 

General and administrative expenses

 

In the three months ended June 30, 2022,2023, general and administrative costs were approximately $11.8$6.7 million as compared to $6.8$11.2 million for the corresponding period in the prior year. The net increasedecrease of $5.0$4.5 million was principally related to:

 

 ●approximately $1.3$2.5 million increasedecrease in stock based compensation related costs principally relatedfrom RSA and stock option grants to an increase in headcount;Lucid and PAVmed employees and non-employees;
 ●

approximately $1.1$1.6 million decrease stock based compensation primarily duein third-party professional fees and expenses related to the absence in the current year of stock-based compensation expense incurred in the prior year period resulting from the acceleration of vesting of stock options granted to former members of the Company’s board of directors in June 2021, partially offset by an increase in stock options granted corresponding with the increase in the number of employees;legal services, accounting and audit services, consulting fees and professional recruiting services; and

 ●

approximately $3.4$0.4 million increase in consulting servicesdecrease related to patents, regulatory compliance, legal processes for contract review, transitionthe termination of public relationsthe MSA-RDx and investor relations firms, and public company expenses; and

●approximately $0.6 million of amortization expenselower general business expenses primarily related to our intangible assets;
●approximately $0.8 million increase in general business expenses.reduced insurance premiums.

 

Research and development expenses

 

In the three months ended June 30, 2022,2023, research and development costs were approximately $6.7$3.5 million as compared to $4.3$6.7 million for the corresponding period in the prior year. The net increase $2.5decrease of $3.2 million was principally related to:

 

 ●

approximately $2.1$3.5 million increasedecrease in development costs, particularly in clinical trial activities and outside professional and consulting fees primarily with respect to EsoCheck,CarpX, EsoCure, CarpX, our Veris Cancer Care Platform and PortIO,NextFlo; and

 ●approximately $0.4$0.3 million increase in compensation related costs, and related to expanded clinical and engineering staff.including stock based compensation.

 

As mentioned above, above we have paused research and development with respect to CarpX, EsoCure, NextFlo and PortIO. Until such time as resources permit, we expect to devote substantially all of our research and development efforts to EsoGuard, EsoCheck and the Veris Cancer Care Platform.

Amortization of Acquired Intangible Assets

The amortization of acquired intangible assets remained relatively level in the three months ended June 30, 2023, as compared to the corresponding period in the prior year.

32

Results of Operations - continued

The three months ended June 30, 2023 as compared to the three months ended June 30, 2022 - continued

Other Income and Expense

 

Change in fair value of convertible debt

 

In the three months ended June 30, 2022, the non-cash expense recognized for2023, the change in the fair value of our convertible notes was approximately $2.0$0.3 million of expense, related to the April 2022 Senior Convertible Note (as defined in “Liquidity and Capital Resources” below), the September 2022 Senior Convertible Note (as defined in “Liquidity and Capital Resources” below), and the Lucid March 2023 Senior Convertible Note. The April 2022 Senior Convertible Note, wasthe September 2022 Senior Convertible Note, and the Lucid March 2023 Senior Convertible Note were initially measured at itstheir issue-date estimated fair value and subsequently remeasured at estimated fair value as of the reporting period date. The Company initially recognized a $2.6an aggregate of $4.3 million of 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.issue dates.

 

Loss on Issue and Offering Costs - Senior Secured Convertible NoteDebt Extinguishment

In the three months ended June 30, 2022,2023, a debt extinguishment loss in the aggregate of approximately $0.7 million was recognized in connection with the issue of theour April 2022 Senior Convertible Note 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 approximately $0.6 million of offering costs paid by us.as discussed below.

●In the three months ended June 30, 2023, approximately $1.7 million of principal repayments, along with less than $0.1 million of interest expense thereon, were settled through the issuance of 5,192,838 shares of common stock of the Company, with such shares having a fair value of approximately $2.4 million (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company). The conversions resulted in a debt extinguishment loss of $0.7 million in the three months ended June 30, 2023.

 

There were no similar debt extinguishment losses in the three months ended June 30, 2022.

See our unaudited condensed consolidated financial statements Note 11, Debt, to the Financial Statements, for additional information with respect to the April 2022 Senior Convertible Note, the September 2022 Senior Convertible Note, and the Lucid March 2023 Senior Convertible Note.

3533
 

Results of Operations - continued

Six months ended June 30, 20222023 as compared to six months ended June 30, 20212022

 

Revenue

 

In the six months ended June 30, 2022,2023, revenue was $0.2$0.6 million as compared to no 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 infor the corresponding period in the prior year. The $0.4 million increase principally relates to costs associated withthe revenue for our EsoGuard Esophageal DNA Test performed in our own CLIA laboratory, as compared to revenue from the EsoGuard Commercialization Agreement noted above.with RDx, in the prior year period, which was terminated on February 25, 2022 when Lucid Diagnostics transitioned to its own laboratory operations.

Cost of revenue

In the six months ended June 30, 2023, cost of revenue was approximately $3.0 million as compared to $0.4 million for the corresponding period in the prior year. The $2.6 million increase principally related to:

●approximately $1.0 million increase in laboratory facility and operations costs;
●approximately $0.9 million increase in EsoCheck and EsoGuard supplies costs; and
●approximately $0.7 million increase in compensation related costs.

 

Sales and marketing expenses

 

In the six months ended June 30, 2022,2023, sales and marketing costs were approximately $8.8$8.9 million as compared to $3.3$8.8 million for the corresponding period in the prior year. The net increase of $5.6$0.1 million was principally related to:

 

 ●approximately $3.8$1.3 million increase in compensation related costs principally related toas a result of an increase in headcount;
●approximately $0.2 million increase in facility related costs;
 ●approximately $0.7$1.1 million increasedecrease in third party marketing expenses; and
●approximately $0.3 million decrease in stock based compensation from RSA and stock option 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.employees.

 

General and administrative expenses

 

In the six months ended June 30, 2022,2023, general and administrative costs were approximately $21.4$16.7 million as compared to $10.2$20.7 million for the corresponding period in the prior year. The net increasedecrease of 11.2$4.0 million was principally related to:

 

 ●approximately $2.5$2.9 million increase in compensation related costs principally related to an increase in headcount;
●approximately $0.7 million increasedecrease in stock based compensation from RSA and stock option 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;non-employees;
 ●

approximately $5.7$2.0 million increasedecrease in consulting servicesthird-party professional fees and expenses related to patents, regulatory compliance, legal processes for contract review, transition of public relationsservices, consulting fees and investor relations firms,professional recruiting services; and public company expenses; and

●approximately $0.7 million of amortization expense related to our intangible assets;

 ●approximately $1.6$0.9 million increase in general business expenses.compensation related costs.

 

Research and development expenses

 

In the six months ended June 30, 2022,2023, research and development costs were approximately $12.7$7.9 million as compared to $7.6$12.7 million for the corresponding period in the prior year. The net increase $5.1decrease of $4.8 million was principally related to:

 

 ●approximately $4.1$5.5 million increasedecrease in development costs, particularly in clinical trial activities and outside professional and consulting fees primarily with respect to EsoCheck,CarpX, EsoCure, CarpX, our Veris Cancer Care Platform and PortIO, andNextFlo;
 ●approximately $1.0$0.4 million decrease in third-party professional consulting services related to regulatory and development activities; and
●approximately $1.1 million increase in compensation related costs, and related to expanded clinical and engineering staff.including stock based compensation.

As mentioned above, we have paused research and development with respect to CarpX, EsoCure, NextFlo and PortIO. Until such time as resources permit, we expect to devote substantially all of our research and development efforts to EsoGuard, EsoCheck and the Veris Cancer Care Platform.

Amortization of Acquired Intangible Assets

The amortization of acquired intangible assets remained relatively level in the six months ended June 30, 2023, as compared to the corresponding period in the prior year.

 

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Results of Operations - continued

SixThe six months ended June 30, 2023 as compared to the six months ended June 30, 2022 as compared to six months ended June 30, 2021 - continued

 

Other Income and Expense

Change in fair value of convertible debt

 

In the six months ended June 30, 2022, the non-cash expense recognized for2023, the change in the fair value of our convertible notes was approximately $2.0$1.4 million of expense, related to the April 2022 Senior Convertible Note, the September 2022 Senior Convertible Note, and the Lucid March 2023 Senior Convertible Note. The April 2022 Senior Convertible Note, wasthe September 2022 Senior Convertible Note, and the Lucid March 2023 Senior Convertible Note were initially measured at itstheir issue-date estimated fair value and subsequently remeasured at estimated fair value as of the reporting period date. The Company initially recognized a $2.6an aggregate of $4.3 million of fair value non-cash expense on the issue-date. This initial recognition was partially offset by a $0.6 million decrease in fair value upon remeasurement June 30, 2022.issue dates.

 

Loss on Issue and Offering Costs - Senior Secured Convertible Note

 

In the six months ended June 30, 2023, in connection with the issue of the Lucid March 2023 Senior Convertible Notes, we recognized a total of approximately $1.2 million of lender fees and offering costs paid by us. In the six months ended June 30, 2022, in connection with the issue of the April 2022 Senior Convertible Note,Notes, we recognized a total of approximately $3.1 million of other expense, inclusive of approximately $2.5 million of lender fee non-cash expense,fees and approximately $0.6 million of offering costs paid by us.costs.

Loss fromon Debt Extinguishment of Debt

 

In the prior year six months ended June 30, 2021,2023, a debt extinguishment loss in the aggregate of approximately $3.7$1.3 million was recognized in connection with the (previous) convertible notes,our April 2022 Senior Convertible Note as discussed below.

 

 ●On January 5, 2021,In the repaymentsix months ended June 30, 2023, approximately $3.2 million of the remaining face value principal of the November 2019 Senior Convertible Note,repayments along with the paymentless than $0.1 million of interest expense thereon, of approximately $1.0 million, were settled withthrough the issuance of 667,6689,523,481 shares of our common stock of the Company, with such shares having a fair value of approximately $1.7$4.4 million (with such fair value measured as the respective conversion date quoted closing price of ourthe common stock), resultingstock of the Company). The conversions resulted in the recognitiona debt extinguishment loss of a loss from extinguishment of debt of approximately $0.8$1.3 million in the six months ended June 30, 2021; and,
●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, 2021.2023.

There were no similar debt extinguishment losses in the six months ended June 30, 2022.

 

See our unaudited condensed consolidated financial statements Note 11, Debt, to the Financial Statements, for additional information with respect to the April 2022 Senior Convertible Note, the September 2022 Senior Convertible Note, and the Lucid March 2023 Senior Convertible Note.

37

Liquidity and Capital Resources

 

Our current operational activities are principally focused on the commercialization of EsoGuard and CarpX,the Veris Cancer Care Platform, and, as resources permit, our development activities arewould be 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 CarpXthe Veris Cancer Care Platform while, as resources permit, also completing the development and the necessary regulatory approvals of itsour other products and services. There are no assurances, however, the Companywe will be able to obtain an adequate level of financial resources required for the short-term or long-term commercialization and development of itsour 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 experienced a net loss before noncontrolling interests of approximately $40.1 million and used approximately $29.1 million of cash in operations for the six months ended June 30, 2023. Financing activities provided $25.5 million of cash during the six months ended June 30, 2023. We ended the quarter with cash on-hand of $37.2 million as of June 30, 2023. We expect to continue to experience recurring losses and negative cash flows from operations, and will continue to fund our operations with debt and/or equity financing transactions. Notwithstanding, however, with the cash on-hand as of the date hereof and the other debt and equity committed sources of financing described below, we expect to be able to fund our future operations for the one year period from the date of the issue of the our unaudited condensed consolidated financial statements,Financial Statements, as included inherein this Quarterly Report on Form 10-Q for the period ended June 30, 2022.10-Q.

 

Issue of Shares of Our Common Stock

 

During the six months ended June 30, 20222023

 ●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 194,240573,229 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, to the Financial Statements.
●We issued 2,330,747 shares of our unaudited condensed consolidated financial statements.common stock for net proceeds of approximately $1.2 million, after payment of 3% commissions, from the sale of shares through PAVmed’s at-the-market equity facility through Cantor. See below for more information.
●We issued 1,500,000 shares of our common stock to a service provider as the consideration for services rendered. The issued shares of common stock had a fair value of approximately $0.6 million. See Note 14, Common Stock and Common Stock Purchase Warrants for additional discussion. On the six-month anniversary of the issuance of the shares, the then-current market value of the shares will be determined based on the volume weighted average price per share of the common stock during the last ten trading days of such six-month period. If the aggregate market value of the shares as so determined is less than $750,000, the Company shall, at its election, either pay to the service provider an amount in cash equal to the shortfall or issue to the service provider a number of additional shares equal to the shortfall divided by the greater of the market value and $0.10. In no event will the number of shares issued exceed 9.99% of the Company’s outstanding common stock as of May 31, 2023.

Securities Purchase Agreement - March 31, 2022

- Senior Secured Convertible NoteNotes - April 4, 2022 and September 8, 2022

 

We entered into a Securities Purchase Agreement (“SPA”) datedEffective as of March 31, 2022, we entered into the SPA with an accredited institutional investor, (“Investor”, “Lender”, and /or “Holder”), pursuant to which we agreed to sell, and the Investorinvestor agreed to purchase an aggregate of $50.0 million face value principal of debt - comprised of: anSenior Secured Convertible Notes. The SPA provided for the sale of the 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).

Under the SPA dated March 31, 2022, we issued a Senior Secured Convertible Note datedwith a face value principal of $27.5 million, which closed on April 4, 2022 referred(referred to herein as the “April 2022 Senior Convertible Note”). The SPA also provided for sales of additional Senior Secured Convertible Notes in one or more additional closings (upon the satisfaction of certain conditions), with such note having a $27.5 millionan aggregate face value principal of up to an additional $22.5 million. The April 2022 Senior Secured Convertible Note has 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 or otherwise paid in shares of our common 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.

as described in Note 11, Debt. The April 2022 Senior Convertible Note proceeds were $25.0$24.4 million after deducting a $2.5 million lender fee;fee and additionally, we incurred totalthe Company’s offering costs of approximately $601,$0.6 million, inclusive primarily of the payment of a total of $450$0.5 million placement agent fees.

 

Subject to certain conditions being met or waived, from time to time, one or moreOn September 8, 2022, we completed an additional closings may occur, for upclosing under the SPA, in which we sold to the remaining $22.5 millioninvestor an additional Senior Secured Convertible Note with a face value principal upon five trading days’ notice given by usof $11.25 million (referred to as the Investor.“September 2022 Senior Convertible Note”). The Investor’s obligationSeptember 2022 Senior Secured Convertible Note has a 7.875% annual stated interest rate, a contractual conversion price of $5.00 per share of the Company’s common stock (subject to purchase the additional notes at each additional closing is subject to certain conditions set forthstandard adjustments in the SPA dated March 31,event of any stock split, stock dividend, stock combination, recapitalization or other similar transaction), and a contractual maturity date of September 6, 2024. The September 2022 including, among others, contractual closing requirements: minimum price and trading volume thresholdsSenior Convertible Note may be converted into or otherwise paid in shares of our common stock;stock as described in Note 11, Debt. The September 2022 Senior Convertible Note proceeds were $10.0 million after deducting a $1.0 million lender fee and the maximum ratioCompany’s total offering costs 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.approximately $0.2 million, inclusive primarily of placement agent fees.

 

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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, the September 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$8.0 million 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% (except that such maximum percentage was 50% for the period from September 8, 2022 through March 5, 2023) (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 fromFrom time to time since the date of issuance of the April 2022 Senior Convertible Notefrom and after June 1, 2023 through August 10, 2022 (including, in the case of the Debt to Market Cap Ratio Test, as of June 30, 2022),14, 2023, the Company was not in compliance with the Financial Tests. As of August 9, 2022,14, 2023, the Investorinvestor agreed to waive any such non-compliance during such aforementioned time periods, under each of the SPA dated March 31, 2022period and the April 2022 Senior Convertible Note.thereafter through November 30, 2023.

 

In connection with such waiver,See Note 11, Debt, to the Company andFinancial Statements for additional information about the Investor also amended the April 2022 Senior Convertible to permit the Investor to convert up to $5,000,000 of the principal amount ofSPA, the April 2022 Senior Convertible Note, and the September 2022 Senior Convertible Note.

Lucid Diagnostics - Series A Preferred Stock Offering

On March 7, 2023, Lucid Diagnostics entered into subscription agreements for the sale of 13,625 shares of the Lucid Series A Preferred Stock. Each share of the Lucid Series A Preferred Stock has a stated value of $1,000 and a conversion price of $1.394. The Lucid Series A Preferred Stock is convertible into shares of Lucid Diagnostics’ common stock at any time at the then currentoption of the holder from and after the six-month anniversary of its issuance (or, if later, the effective date of an increase in Lucid Diagnostics’ authorized share capital or the effective date of a registration statement covering the resale of the underlying shares), and automatically converts into shares of Lucid Diagnostics’ common stock on the second anniversary of its issuance. The terms of the Lucid Series A Preferred Stock also include a preference on liquidation and a right to receive dividends equal to 20% of the number of shares of Lucid common stock into which such Lucid Series A Preferred Stock is convertible, payable on each of the one-year and two-year anniversary of the issuance date. The Lucid Series A Preferred Stock is a non-voting security, other than with respect to limited matters related to changes in terms of the Lucid Series A Preferred Stock. The aggregate gross proceeds from the sale of shares in such offering were $13.625 million.

Lucid Diagnostics - Securities Purchase Agreement - March 13, 2023 - Senior Secured Convertible Note - March 21, 2023

Effective as of March 13, 2023, Lucid Diagnostics entered into the Lucid SPA with an accredited institutional investor, pursuant to which Lucid Diagnostics agreed to sell, and the investor agreed to purchase the Lucid March 2023 Senior Convertible Note with a face value principal of $11.1 million. Lucid Diagnostics issued the Lucid March 2023 Senior Convertible Note on March 21, 2023 pursuant to the Lucid SPA. The Lucid March 2023 Senior Convertible Note proceeds were $9.925 million after deducting a $1.186 million lender fee and offering costs.

The Lucid March 2023 Senior Convertible Note has a 7.875% annual stated interest rate, a contractual conversion price as if the date of conversion were an Installment Date, i.e. a price$5.00 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(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 the twotwo-year anniversary of the date of issuance. The principal and interest on the Lucid March 2023 Senior Convertible Note is convertible into or otherwise payable in shares of Lucid Diagnostics’ common stock (subject to the satisfaction of certain customary equity conditions and except for interest payable prior to September 21, 2023).

Under the Lucid March 2023 Senior Convertible Note, Lucid Diagnostics is 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. Under the Lucid March 2023 Senior Convertible Note, Lucid Diagnostics is also subject to financial covenants requiring that (i) the amount of its available cash equal or exceed $5.0 million at all times, (ii) the ratio of (a) the outstanding principal amount of the notes issued under the Lucid SPA, accrued and unpaid interest thereon and accrued and unpaid late charges, as of the last day of any fiscal quarter commencing with September 30, 2023, to (b) Lucid Diagnostics’ average market capitalization over the prior ten trading days, not exceed 30%, and (iii) that Lucid Diagnostics’ market capitalization shall at no time be less than $30 million (the “Lucid Financial Tests”). As of June 30, 2023, Lucid Diagnostics was in compliance with the lowest VWAP ofLucid Financial Tests. In addition, Lucid Diagnostics presently is in compliance with the Company’s common stock during the ten consecutive trading day period endingLucid Financial Tests.

36

Liquidity and including the trading day immediately priorCapital Resources - continued

PAVmed Inc. ATM Facility

In December 2021, we entered into an “at-the-market offering” for up 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$50 million of our common stock with such shares havingthat may be offered and sold under a fairControlled Equity Offering Agreement between us and Cantor. In March 2023, the “at-the-market offering” became subject to General Instruction I.B.6 of Form S-3, which limits sales of our securities under this instruction in any 12-month period to one-third of the aggregate market value of approximately $5,462 (with such fair value measured asour public float (unless our public float rises to $75 million or more, in which case the respective conversion date quoted closing priceinstruction will cease to apply). As a result of this limitation and our then-current public float, in May 2023, we amended our “at-the-market offering” to cover up to an additional $18 million of our common stock).stock. In the six months ended June 30, 2023, the Company sold 2,330,747 shares through its at-the-market equity facility for net proceeds of approximately $1.2 million, after payment of 3% commissions.

Lucid Diagnostics Inc. - Committed Equity Facility and ATM Facility

 

In March 2022, our majority-owned subsidiary Lucid Diagnostics Inc. entered into a committed equity facility with Cantor.a Cantor affiliate. Under the terms of the committed equity facility, the Cantor affiliate has committed to purchase up to $50 million of Lucid Diagnostics Inc.Diagnostics’ common stock from time to time at the request of Lucid Diagnostics Inc.Diagnostics’ request. While there are distinct differences, the committed equity facility is structured similarly to a traditional at-the-market equity facility, insofar as it allows Lucid Diagnostics Inc. to raise primary equity capital on a periodic basis at prices based on the existing market price. AsCumulatively a total of 680,263 shares of Lucid Diagnostics’ common stock were issued for net proceeds of approximately $1.8 million, after a 4% discount, as of June 30, 2023.

In November 2022, there were no sharesLucid Diagnostics also entered into an “at-the-market offering” for up to $6.5 million of its common stock ofthat may be offered and sold under a Controlled Equity Offering Agreement between Lucid Diagnostics Inc. issued underand Cantor. In the committed equity facility. Subsequent tosix months ended June 30, 2022, as of August 10, 2022, under the committed2023, Lucid Diagnostics sold 230,068 shares through its at-the-market equity facility a total of 308,152 shares of common stock of Lucid Diagnostics Inc. were issued for net proceeds of approximately $927.$0.3 million, after payment of 3% commissions. No shares were sold through Lucid’s at-the-market equity facility during the three months ended June 30, 2023.

 

Critical Accounting Policies and Significant Judgments and Estimates

 

The discussion and analysis of our (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 affectingthat affect the reported amounts of assets, liabilities, and equity, along with the disclosure of contingent assets and liabilities at the date of thereporting in our unaudited condensed consolidated financial statements and the reported amounts of expenses during the corresponding periods.accompanying notes. On an ongoing basis, we evaluate our estimates and judgements. In accordance with U.S. GAAP, we base our estimates on historical experience and on various other assumptions we believefactors that are reasonablebelieved to be appropriate under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies are as disclosed in the Company’s annual reportAnnual Report on Form 10-K for the year ended December 31, 20212022 as filed with the SEC on April 6, 2022, except as otherwise notedMarch 14, 2023. There have been no material changes to our critical accounting policies and estimates 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.the six months ended June 30, 2023.

39

 

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, 2022.2023. 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 to Internal Controls Over Financial Reporting

 

There has been no change in internal controlscontrol over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our fiscal quarter ended June 30, 20222023 that has materially affected, or is reasonably likely to materially affect, our internal controlscontrol over financial reporting.

 

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Part II - Other Information

 

Item 1. Legal Proceedings

 

See Note 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 ourPAVmed 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, theThe Company doesis not believe it is currently a party toaware of any othersuch pending legal proceedings.or other proceedings that are reasonably likely to have a material impact on the Company. 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.

Item 3. Defaults Upon Senior Securities

The information set forth in Part I, Item 2 under the caption “Liquidity and Capital Resources — Securities Purchase Agreement - March 31, 2022 - Senior Secured Convertible Notes - April 4, 2022 and September 8, 2022” is incorporated herein by reference.

 

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.

 

4138
 

 

SIGNATURES

 

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.
  
August 15, 202214, 2023By:/s/ Dennis M McGrath
  Dennis M McGrath
  President and Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

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EXHIBIT INDEX

 

Incorporation by Reference
Exhibit No. Description
2.1Form Asset Purchase Agreement, dated as of February 25, 2022, by and among LucidDx Labs Inc., Lucid Diagnostics Inc. and ResearchDx, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Lucid on March 3, 2022).
3.1No.Certificate of Amendment to Certificate of Incorporation dated June 21, 2022 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the Company on June 22, 2022).
4.1Form of Senior Secured Convertible Note (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by the Company on April 4, 2022).
10.1Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on April 4, 2022).
10.2Form of Security Agreement (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Company on April 4, 2022).
10.3Form of Voting Agreement (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by the Company on April 4, 2022).Date
31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.†*
31.2 Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †*
32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. †2002*
32.2 Certification of Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. †*
101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema*
101.CAL Inline XBRL Taxonomy Extension Calculation LinkbaseSchema*
101.DEF Inline XBRL Taxonomy Extension DefinitionCalculation Linkbase*
101.LAB InlineXBRL Taxonomy Extension Label Linkbase*
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase*
104Cover Page Interactive Data File (embedded within the Inline XBRL document)
*   
†Filed herewith

 

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