| Stockholders' Equity and Warrants | Note 14 — Stockholders’
Equity and Warrants Common Stock The Company is authorized
to issue 50,000,000 shares of common stock with a par value of $0.001 per share. As of June 30, 2018 and December 31, 2017, there
were 26,509,654 and 14,551,234 shares of common stock issued and outstanding, respectively, summarized as follows:
Shares of
Common Stock
Issued and outstanding as of December 31, 2017 14,551,234
Issue - equity subscription rights offering 9,000,000
Issue - underwritten public offering 2,649,818
Exercises of Series W Warrants 34,345
Exercises of Series S Warrants 274,257
Conversion of Series B Convertible Preferred Stock —
Issued and outstanding as of June 30, 2018 26,509,654
Issued and outstanding as of December 31, 2016 13,330,811
Exercises of Series W Warrants 12,250
Exercises of Series S Warrants 1,186,080
Conversion of Series A Convertible Preferred Stock 22,093
Issued and outstanding as of December 31, 2017 14,551,234
● The Company completed its previously announced equity subscription rights offering on the June 7, 2018 expiration date of the equity subscription period, with such transaction having a June 12, 2018 close date - referred to herein as the “June 12, 2018 Equity Subscription Rights Offering”. The June 12, 2018 Equity Subscription Rights Offering was completed under a registration statement on Form S-1 (File No. 333-222581), declared effective by the SEC on May 23, 2018.
● The June 12, 2018 Equity Subscription Rights Offering involved the Company distributing one non-transferable equity subscription for each of the 17,509,654 issued and outstanding shares of common stock of the Company, as of the record date of May 21, 2018, subject-to the acceptance by the Company of a maximum of 9,000,000 fully-paid equity subscriptions tendered as of the June 7, 2018 expiration date of the equity subscription period. The equity subscription provided for the purchase of a common stock unit at a $1.15 per unit, with each such unit comprised of one share of common stock of the Company and one Series Z Warrant, with such common stock unit immediately separated upon issue into its underlying components.
● The June 12, 2018 Equity Subscription Rights Offering resulted in approximately $10.4 million of gross cash proceeds, before approximately $1.0 million of commissions and fees to the dealer-managers, and approximately $0.2 million of offering costs incurred by the Company, upon the issue on June 12, 2018 of 9.0 million common stock units, comprised of one share of common stock of the Company and one Series Z Warrant, as noted above. The June 12, 2018 proceeds after the dealer-manager commissions and fees and the Company incurred offering costs were allocated based on relative fair value of approximately $7.1 to the shares of common stock par value and additional paid-in capital and approximately $2.1 million to additional paid-in capital with respect to the Series Z Warrants.
● In January 2018, the Company conducted an underwritten public offering resulting in the issue of a total of 2,649,818 shares of common stock of the Company pursuant to its previously filed and effective shelf registration statement on SEC Form S-3 (File No. 333-220549), declared effective October 6, 2017, along with a corresponding prospectus supplement dated January 19, 2018. On January 19, 2018, the Company entered into an underwriting agreement with Dawson James Securities, Inc., as sole underwriter, under which the company agreed to issue to the underwriter at $1.80 per share, 2,415,278 shares of common stock on a firm commitment basis and up to an additional 362,292 shares solely to cover underwriter over-allotments, if any, at the option of the underwriter, exercisable within 45 calendar days from January 19, 2018. The Company issued the 2,415,278 shares on January 23, 2018, and on January 25, 2018, issued 234,540 shares of common stock, under the underwriter’s over-allotment, resulting in cash proceeds, net of the underwriter’s discount of $4,388,099, before offering costs of $113,438.
● On February 8, 2018, the Company issued at total 34,345 shares of common stock from the exercise of a corresponding number of Series W Warrants, at temporary exercise price of $2.00 per share, resulting in $68,690 of cash proceeds, before offering costs of $50,520. See herein below for a discussion of the “Series W Warrants Offer-to-Exercise”.
● In March 2018, 274,257 shares of common stock were issued, resulting from a corresponding number of Series S Warrants exercised for $2,743 of cash proceeds.
● Subsequently, in July 2018, 33,325 shares of common stock were issued upon the conversion of a corresponding number of shares of Series B Convertible Preferred Stock.
● In October 2017, 532,000 shares of common stock were issued, resulting from a corresponding number of Series S Warrants exercised for $5,320 of cash proceeds; in November 2017, 122,080 shares of common stock were issued, resulting from the cashless exercise of 122,360 Series S Warrants; and, in November 2017, 532,000 shares of common stock were issued, resulting from a corresponding number of Series S Warrants exercised for $5,320 of cash proceeds.
● In March and September 2017, 400 shares and 11,850 shares of common stock were issued, resulting from a corresponding number of Series W Warrants exercised for $2,000 and $59,250 of cash proceeds, respectively.
● In November and December 2017, 10,021 and 12,072 shares of common stock were issued upon the conversion of 8,334 and 10,000 shares of Series A Convertible Preferred Stock, respectively. Noncontrolling Interest The noncontrolling
interest (“NCI”) included as a component of consolidated total stockholders’ equity for the periods indicated
is as follows:
Three & Six
Months Ended
June 30, 2018
NCI - equity (deficit) - beginning of period $ —
Investment in majority-owned subsidiary 1,812
Share subscription receivable (943 )
Net loss attributable to NCI (81,200 )
Increase in additional paid-in capital of Lucid Diagnostics Inc. resulting from stock-based compensation recognized under the Lucid Diagnostics Inc 2018 Stock Plan 8,277
NCI - equity (deficit) - end of period $ (72,054) The noncontrolling
interest as of June 30, 2018 is with respect to Lucid Diagnostics Inc., a majority-owned subsidiary of the Company (i.e. PAVmed
Inc.). Lucid Diagnostics Inc. was incorporated in the State of Delaware on May 8, 2018, and on May 12, 2018, under a Share Subscription
Agreement between Lucid Diagnostics Inc. and each of the respective common stock purchasers, Lucid Diagnostics Inc. issued a total
of 10 million shares of its common stock for a purchase price of $0.001 per share, including: 8,187,499 shares to the Company (i.e.
PAVmed Inc); 943,464 shares to Case Western Reserve University (“CWRU”); and, 289,679 shares to each of the three individual
physician inventors of the “EsoCheck™ Technology”. As of June 30, 2018, Lucid Diagnostics Inc. has received from
each of the three physician inventors payment-in-full of such shares under their respective Subscription Agreement. See Note 7, Agreements
Related to Acquired Intellectual Property Rights As of June 30, 2018,
there were 10 million shares of common stock of Lucid Diagnostics Inc. issued and outstanding, of which, the Company holds a 81.875%
majority-ownership interest of such shares and has a controlling financial interest in Lucid Diagnostics Inc., resulting in Lucid
Diagnostics Inc. being a fully-consolidated majority-owned subsidiary of the Company with a NCI of 18.125% ownership interest of
the issued and outstanding shares of common stock of Lucid Diagnostics Inc. held by the aforementioned unrelated third-party purchasers
of the shares of common stock of Lucid Diagnostics Inc. The stock-based compensation
expense recognized in the unaudited condensed consolidated financial statements includes: $3,633 recognized by Lucid Diagnostics
Inc. with respect to stock options granted under the PAVmed Inc. 2014 Stock Plan to non-employees providing services to Lucid Diagnostics
Inc., and $8,277 recognized by Lucid Diagnostics Inc. with respect to stock options granted under the Lucid Diagnostics Inc. 2018
Stock Plan to non-employees providing services to Lucid Diagnostics Inc. - with each such stock based compensation expense classified
in research and development expense in the three and six months ended June 30, 2018. There was no such Lucid Diagnostics Inc. recognized
stock-based compensation expense for the prior year periods. See Note 10, Stock-Based Compensation Warrants The following table
summarizes outstanding warrants to purchase common stock at the dates indicated:
Warrants Issued and Outstanding at
Weighted Weighted
Average Average
June 30, Exercise December 31, Exercise Expiration
2018 Price /Share 2017 Price Date
Equity classified warrants
Series Z Warrants 16,815,039 $ 1.60 — $ — April 2024
Series W Warrants 381,818 $ 5.00 10,567,845 $ 5.00 January 2022
UPO - Series W Warrants 53,000 $ 5.00 53,000 $ 5.00 January 2022
Series S Warrants 1,199,383 $ 0.01 1,473,640 $ 0.01 June 2032
Series A-1 Warrants — $ — 279,837 $ 6.67 April 2024
Liability classified warrants
Series A Warrants — $ — 268,001 $ 6.61 April 2024
Total 18,449,240 $ 1.58 12,642,323 $ 4.49 Series Z Warrants There were 16,815,039
Series Z Warrants issued and outstanding as of June 30, 2018, including: 2,739,190 Series Z Warrants initially issued on the March
15, 2018 Exchange Date of the Series A and Series A-1 Exchange Offer discussed herein above; 5,075,849 Series Z Warrants issued
on the April 5, 2018 Exchange Date of the “Series W Warrants Exchange Offer” discussed herein below; and 9,000,000
Series Z Warrants issued in the June 12, 2018 Equity Subscription Rights Offering as discussed herein above. Upon their respective
issue, a Series Z Warrant enabled the holder to immediately purchase one share of PAVM common stock at an exercise price of $1.60
per share, effective June 1, 2018. The Series Z Warrant exercise price was initially $3.00 per share through May 31, 2018, and
then $1.60 per share effective June 1, 2018, wherein, on May 15, 2018, the Company’s board of directors approved a reduction
to the Series Z Warrant exercise price to $1.60 per share, effective June 1, 2018, upon completion of the period-of-notice to the
then-current Series Z Warrant holders. See herein below for further information with respect to the modification expense recognized
in connection with the Series Z Warrant exercise price adjustment. The Series Z Warrant $1.60 exercise price is not subject-to
further adjustment, unless by action of the PAVmed Inc board of directors, or the effect of stock dividends, stock splits or similar
events affecting the common stock. Under no circumstances will the Company be required to net cash settle the Series Z Warrants,
nor to pay any liquidated damages in lieu of delivery of shares of common stock of the Company resulting from a failure to satisfy
any obligations under the Series Z Warrant, and, the Series Z Warrants expire after the close of business on April 30, 2024, if
not earlier redeemed by the Company, as discussed below. Commencing on May
1, 2019, the Company may redeem the outstanding Series Z Warrants, at the Company’s option, in whole or in part, at a price
of $0.01 per Series Z Warrant at any time while the Series Z Warrants are exercisable, upon a minimum of 30 days’ prior written
notice of redemption, if, and only if, the volume weighted average closing price of the Common Stock equals or exceeds $9.00 (subject
to adjustment) for any 20 out of 30 consecutive trading days ending three business days before the Company issues its notice of
redemption, and provided the average daily trading volume in the Common Stock during such 30-day period is at least 20,000 shares
per day; and if, and only if, there is a current registration statement in effect with respect to the shares of Common Stock underlying
such Series Z Warrants. As noted above, a
total of 5,075,849 Series Z Warrants were issued-upon-exchange of 10,151,682 Series W Warrants, in an exchange offer transaction
referred to as the “Series W Warrants Exchange Offer” and the “April 5, 2018 Exchange Date”. In this regard,
pursuant to an offer-to-exchange letter dated February 20, 2018, as included in a Tender Offer Statement on Schedule TO filed with
the SEC on February 20, 2018, wherein, the Company offered to issue one Series Z Warrant in exchange for two Series W Warrants.
Such Series W Warrants Exchange Offer commenced on February 20, 2018 and had April 2, 2018 expiration date. The Series W Warrants
Offer-to-Exchange was completed after expiration of the guaranteed delivery period on April 5, 2018. The Series Z Warrants
issued-upon-exchange of the Series W Warrants on the April 5, 2018 Exchange Date, upon their issuance, enabled the holder to immediately
purchase one share of PAVM common stock at an exercise price of $1.60 per share, effective June 1, 2018, with an expiry of April
30, 2024. The Series Z Warrant exercise price was initially $3.00 per share through May 31, 2018, and then $1.60 per share effective
June 1, 2018. See herein below for further information with respect to the Series Z Warrant exercise price adjustment and the resulting
modification expense recognized on June 1, 2018. The Series Z Warrant $1.60 exercise price is not subject-to further adjustment,
unless by action of the PAVmed Inc board of directors, or the effect of stock dividends, stock splits or similar events affecting
the common stock. The Series Z Warrants are redeemable by the Company under certain conditions, as discussed above. On the April 5, 2018
Exchange Date, the Series W Warrants Exchange Offer resulted in the recognition of a modification expense under the analogous guidance
of FASB ASC Topic 718, Stock-Based Compensation
Fair Value Assumptions Series Z Series W
April 5, 2018 Exchange Date Warrants Warrants
Calculated aggregate estimated fair value $ 3,304,377 $ 2,537,921
Series Z Warrants issued /Series W Warrants extinguished 5,075,849 10,151,682
Value of common stock $ 1.66 $ 1.66
Exercise price per share $ 3.00 $ 5.00
Expected term (years) 2.7 3.8
Volatility 55 % 55 %
Risk free rate 2.7 % 2.5 %
Dividend yield 0 % 0 % As noted above, the
Series Z Warrant exercise price was initially $3.00 per share through May 31, 2018, and then $1.60 per share effective June 1,
2018, wherein, on May 15, 2018, the Company’s board of directors approved a reduction to the Series Z Warrant exercise price
to $1.60 per share, effective June 1, 2018, upon completion of the period-of-notice to the then-current Series Z Warrant holders.
The Series Z Warrant exercise price adjustment resulted in the recognition of a modification expense under the analogous guidance
of FASB ASC 718 with respect to stock option modification, as described herein above with respect to the Series W Warrant Exchange
Offer. In this regard, on the June 1, 2018 effective date of the Series Z Warrant adjusted exercise price, a modification expense
of $1,140,995 was recognized, with a corresponding increase to addition paid-in capital. Such incremental fair value was estimated
using a Black-Scholes valuation model, using the following assumptions:
Immediately Immediately
Fair Value Assumptions - June 1, 2018 After Before
Series Z Warrant Exercise Price Adjustment Modification Modification
Calculated aggregate estimated fair value $ 3,477,692 $ 2,336,697
Series Z Warrants - issued and outstanding - June 1, 2018 7,815,039 7,815,039
Value of common stock per share $ 1.00 $ 1.00
Exercise price per share - Series Z Warrant $ 1.60 $ 3.00
Expected term - years 5.9 5.9
Volatility 58 % 58 %
Risk free interest rate 2.8 % 2.8 %
Dividend yield 0 % 0 % Additionally, the
Series Z Warrants issued in both the Series A and Series A-1 Exchange Offer (March 15, 2018) and the Series W Warrants Exchange
Offer (April 5, 2018), each as discussed herein above, were issued under the (original) “Series Z Warrant Agreement”.
The Company’s board of directors approved Amendment No. 1 to such original Series Z Warrant Agreement, resulting in the “Amended
and Restated Series Z Warrant Agreement”, dated June 8, 2018, referred to as the Amended Series Z Warrant Agreement. The
principal provisions of such Amendment No. 1, include among other items: to provide for a “late delivery fee” for shares
issued outside of the “standard delivery period”, including delivery of shares upon Series Z Warrant exercise for open
market or other purchase transactions - i.e. “buy-in fee”, with each such payment, if any, in addition to and not in
lieu of delivery of shares, and, to provide for a standard provision (“plain vanilla”) in the event the Company engages
in a “Fundamental Transaction”, as defined, wherein the Series Z Warrant may participate pari passu with common stockholders
in the consideration paid by an acquiror for the Company’s shares, with such payment, if any, made by the acquiring entity
and not paid by the Company as issuer. The Series Z Warrant Agreement No. 1, was evaluated under the analogous guidance of FASB
ASC 718 with respect to stock option modification, as discussed above, but did not result in the recognition of a modification
expense as there was no incremental increase in the estimated fair value as described above. Series W Warrants There were 381,818
and 10,567,845 Series W Warrants issued and outstanding as of June 30, 2018 and December 31, 2017, respectively. The Series W Warrants
have an exercise price of $5.00 per share, with such exercise price not subject to further adjustment, except in the event of stock
dividends, stock splits or similar events affecting the common stock, and became exercisable on October 28, 2016 and expire on
January 29, 2022, or earlier upon redemption by the Company, as discussed below. Under no circumstances will the Company be required
to net cash settle the Series W Warrants, nor to pay any liquidated damages resulting from a failure to satisfy any obligations
under the Series W Warrant. Previously, a total
of 1,060,000 Series W Warrants were issued on the April 28, 2016 closing date of the Company’s IPO, and on the same April
28, 2016 IPO closing date, there were 9,560,295 remaining unexercised warrants previously issued in private placements before the
IPO, with such warrants automatically converted into identical Series W Warrants issued in the IPO, and are therefore aggregated
with the Series W Warrants issued in the IPO, and together are collectively referred to as “Series W Warrants”. As noted above, on
the April 5, 2018 Exchange Date of the Series W Warrant Exchange Offer, a total of 10,151,682 Series W Warrants were extinguished
upon being exchanged for the issue of a total of 5,075,849 Series Z Warrants. On January 11, 2018,
the Company filed with the SEC a Tender Offer Statement on Schedule TO offering Series W Warrants holders a temporary exercise
price of $2.00 per share, with such offer having an expiry of February 8, 2018 (“Series W Warrants Offer-to-Exercise”).
As of the February 8, 2018 expiry date, a total of 34,345 Series W Warrants were exercised at the temporary exercise of $2.00 per
share, resulting in $68,690 of cash proceeds, before offering costs of $50,520. In March 2017 and
September 2017, 400 and 11,850 Series W Warrants were exercised for cash proceeds of $2,000 and $59,250, respectively, resulting
in the issuances of a corresponding number of shares of common stock of the Company. Commencing April 28,
2017, the Company may redeem the outstanding Series W Warrants (other than those outstanding prior to the IPO held by the Company’s
management, founders, and members thereof, but including the warrants held by the initial investors), at the Company’s option,
in whole or in part, at a price of $0.01 per warrant: at any time while the warrants are exercisable; upon a minimum of 30 days’
prior written notice of redemption; if, and only if, the volume weighted average price of the Company’s common stock equals
or exceeds $10.00 (subject-to adjustment) for any 20 consecutive trading days ending three business days before the Company issues
its notice of redemption, and provided the average daily trading volume in the stock is at least 20,000 shares per day; and, if,
and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants.
The right to exercise will be forfeited unless the IPO Warrants are exercised prior to the date specified in the notice of redemption.
On and after the redemption date, a record holder of an IPO Warrant will have no further rights except to receive the redemption
price for such holder’s IPO Warrant upon surrender of such warrant. Series S Warrants Previously, under
the Note and Security Purchase Agreement with Scopia, the Company issued 2,660,000 Series S Warrants to Scopia and its designees,
which were immediately exercisable upon issuance and each may be exercised for one share of common stock of the Company at an exercise
price of $0.01 per share, with such exercise price not subject to further adjustment, except for the effect of stock dividends,
stock splits or similar events affecting the common stock, and may be exercised for cash or on a cashless basis. Under no circumstances
will the Company be required to net cash settle the Series S Warrants, nor to pay any liquidated damages resulting from a failure
to satisfy any obligations under the Series S Warrant. Any Series S Warrants outstanding on the June 30, 2032 expiration date will
be automatically exercised on a cashless basis. There were 1,199,383
and 1,473,640 Series S Warrants issued and outstanding as of June 30, 2018 and December 31, 2017, respectively. In March 2018,
a total of 274,257 Series S Warrants exercised for $2,743 of cash proceeds, resulting in the issue of a corresponding number of
a shares of common stock of the Company. In each of October 2017 and November 2017, 532,000 (or a total of 1,064,000) Series S
Warrants were exercised for total cash proceeds of $10,640, resulting in the issuance of a corresponding number of shares of common
stock of the Company, and in November 2017, a total of 122,360 Series S Warrants were exercised on a cashless basis, resulting
in the issuance of a total of 122,080 shares of common stock of the Company. The Senior Secured
Note and the Series S Warrants are freestanding financial instruments, as the Series S Warrants were immediately legally detachable
from the Senior Secured Note and were immediately exercisable. The Series-S Warrants are classified as equity in the unaudited
condensed consolidated balance sheet. The Senior Secured Note net cash proceeds were allocated to the Senior Secured Note and the
Series S Warrants based on their respective relative fair value, resulting in an allocation of $1,408,125 to the Senior Secured
Note and $3,434,452 to the Series S-Warrants. See Note 12, Note and Securities Purchase Agreement, Senior Secured Note,
and Series S Warrants The Company filed
a registration statement on Form S-3 (File No. 333-221406), declared effective January 8, 2018, to register the issuance of a total
of 2,810,654 shares of common stock of the Company, including 1,473,640 shares issuable, and 1,186,080 shares previously issued,
upon the exercise of Series S Warrants; and, the registration of (i) the issuance of 150,934 shares of the Company’s common
stock upon the exercise of 150,934 certain Series W Warrants issued prior to the Company’s IPO, but only in the event such
certain Series W Warrants are publicly transferred pursuant to Rule 144 prior to their exercise, or (ii) the resale of such 150,934
shares of common stock, but only in the event such certain Series W Warrants are exercised prior to being publicly transferred
pursuant to Rule 144. Series A-1 Warrants As of June 30, 2018
and December 31, 2017, there were zero and 279,837 Series A-1 Warrants issued and outstanding, respectively. Previously, 125,000
Series A-1 Warrants were issued on August 4, 2017 in the “Series A-1 Preferred Stock Units private placement”, as discussed
herein above. The November 17, 2017 Series A Exchange Offer, as discussed herein above, resulted in 154,837 Series A-1 Warrants
issued upon exchange of 154,837 Series A Warrants. Accordingly, as of December 31, 2017, 279,837 Series A-1 Warrants were issued
and outstanding. The March 15, 2018 Series A and Series A-1 Exchange Offer, as discussed herein above, resulted in 279,837 Series
A-1 Warrants exchanged for the issue of 1,399,185 Series Z Warrants. Accordingly, as of the March 15, 2018 Exchange Date of the
Series A and Series A-1 Exchange Offer, there we no Series A-1 Warrants issued and outstanding. See herein above for further information
regarding the Series Z Warrant. See Note 11, Financial Instruments Fair Value Measurements The Series A-1 Warrants
were immediately exercisable upon issuance and expire after the close of business on April 30, 2024, and each may be exercised
for one share of common stock of the Company at an exercise price of $6.67 per share, with such exercise price not subject to further
adjustment, except for the effect of stock dividends, stock splits or similar events affecting the common stock. Additionally,
through April 30, 2024, each Series A-1 Warrant, at the option of the holder, may be exchanged into either five Series W Warrants
of four Series X-1 Warrants. The Series W Warrants or Series X-1 Warrants issued upon the exchange of a Series A-1 Warrant are
discussed below. No Series A-1 Warrants had been exchanged for Series W Warrants nor Series X-1 Warrants as of the Series A and
Series A-1 Exchange Offer March 15, 2018 Exchange Date and December 31, 2017. The Series A-1 Warrants
were not subject to redemption, and under no circumstances will the Company be required to net cash settle the Series A-1 Warrants.
The Series A-1 Warrants have been accounted for as equity-classified warrants, with an issue-date allocated fair value of $310,450,
as discussed above. During the time the Series A-1 Warrants are outstanding, the holders will be entitled to participate in dividends
or other distributions on a pro rata basis based upon the equivalent number of common shares that would have been outstanding had
the warrants been fully exercised. As noted above, the
Series A-1 Amendment No.1 provided for a Series A-1 Warrant to be exchanged for four Series X-1 Warrants, or additionally, exchanged
for five Series W Warrants. The Series X-1 Warrants replaced the previous election to exchange one Series A-1 Warrant for four
Series X Warrants. Notwithstanding, the Series X-1 Warrants are substantively equivalent to the Series X Warrants with respect
to material contractual terms and conditions, including the same $6.00 per share exercise price, and dates of exercisability and
expiry. The Series A-1 Amendment
No.1 modification to the Series A-1 Warrants’ exchange elections was accounted for under the analogous guidance of FASB ASC
718, wherein, the incremental fair value is measured as the difference between the fair value immediately after the modification
as compared to the fair value immediately before the modification, with such incremental fair value, to the extent an increase,
recognized as a modification expense. On the October 18, 2017 date of the Series A-1 Amendment No.1 the Company recognized a current
period expense related to the Series A-1 Warrants’ modification of $222,000, with such expense included in other income (expense)
in the unaudited condensed consolidated statement of operations, with a corresponding increase in additional paid-in capital in
the unaudited condensed consolidated balance sheet, as the Series A-1 Warrants are equity classified. Such incremental fair value
was estimated using a Black-Scholes valuation model, assuming the exchange of one Series A-1 Warrant for five Series W Warrants
after the Series A-1 Warrant modification, as compared to an exchange of one Series A-1 Warrant for four Series X Warrants before
such modification, using the following assumptions:
Series A-1 Amendment No. 1
Series A-1 Warrants Modification
Fair Value - October 18, 2017
Immediately Immediately
Fair Value Assumptions - October 18, 2017 After Before
Series A-1 Warrant Agreement - Amendment No. 1 Modification Modification
Calculated aggregate estimated fair value $ 1,531,000 $ 1,309,000
Series A-1 Warrants - issued and outstanding - October 18, 2017 125,000 125,000
Value of common stock per share $ 5.40 $ 5.40
Exercise price per share - Series W Warrant $ 5.00 $ —
Exercise price per share - Series X Warrant $ — $ 6.00
Expected term - years 4.3 6.5
Volatility 55 % 52 %
Risk free interest rate 1.9 % 2.1 %
Dividend yield 0 % 0 % Series A Warrants As of June 30, 2018
and December 31, 2017, there were zero and 268,001 Series A Warrants issued and outstanding, respectively. Previously, a total
of 422,838 Series A Warrants were issued in the Series A Preferred Stock private placement, as discussed herein above. The November
17, 2017 Series A Exchange Offer, as discussed herein above, resulted in 154,837 Series A Warrants exchanged for the issue of 154,837
Series A-1 Warrants. Accordingly, as of December 31, 2017, 268,001 Series A Warrants were issued and outstanding. The March 15,
2018 Series A and Series A-1 Exchange Offer, as discussed herein above, resulted in 268,001 Series A Warrants exchanged for the
issue of 1,340,005 Series Z Warrants. Accordingly, as of the March 15, 2018 Exchange Date of the Series A and Series A-1 Exchange
Offer, there were no Series A Warrants issued and outstanding. See herein above for further information regarding the Series Z
Warrant. See Note 11, Financial Instruments Fair Value Measurements The Series A Warrants
may be exercised for one share of common stock at an exercise price of $6.61 per share. Previously, upon issuance, the Series A
Warrant exercise was initially $8.00 per share. In this regard, the Series A Warrant exercise price was subject to further reduction
by a prescribed formula on a weighted average basis in the event the Company issues common stock, options, or convertible securities
at a price lower than the exercise price of Series A Warrants immediately prior to such securities issuance. Additionally, through
April 30, 2024, each Series A Warrant, at the election of the holder, may be exchanged for four Series X Warrants, with such warrants
exercisable for one share of common stock at $6.00 per share, with such exercise price not subject to further adjustment, except
in the event of stock dividends, stock splits or similar events affecting the common stock. The Series X Warrants were exercisable
commencing on the first trading day following October 31, 2018 and would have expired April 30, 2024. As noted above, the
Series A Warrants are accounted for as a derivative liability under FASB ASC 815, as, along with other provisions, the conversion
price is subject to potential adjustment resulting from future financing transactions, under certain conditions. The Series A Warrant
was classified as a current liability in the unaudited condensed consolidated balance sheet, initially measured at its issue-date
fair value, with such fair value subsequently remeasured at each reporting period, with the resulting fair value adjustment recognized
as other income or expense in the unaudited condensed consolidated statement of operations. See Note 11, Financial Instruments
Fair Value Measurements Unit Purchase Options In connection with
the IPO, on April 28, 2016 53,000 unit purchase options (“UPO”) were issued to the IPO selling agents. The holders
of the UPO may purchase a unit identical to the unit issued in the Company’s IPO, as discussed above, at an exercise price
of $5.50 per unit. The UPO was recognized as an offering cost of the Company’s IPO, with an estimated the fair value of
$105,100, determined using a Black-Scholes option pricing model with the following assumptions: fair value of the underlying unit
of $5.00, expected volatility of 50%, risk free rate of 1.28%, remaining contractual term of 4.6 years, and a dividend yield of
0%. |
