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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 March 31, 2022

 

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 Place    
60 E. 42nd Street    
Suite 4600    
New York, NY 10165   10165
(Address of Principal Executive Offices   (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 May 12, 2022 there were 87,974,146 shares of the registrant’s Common Stock, par value $0.001 per share, issued (with such number of shares inclusive of shares of common stock underlying granted but unvested restricted stock awards granted under the PAVmed Inc. 2014 Long-Term Incentive Equity Plan as of such date).

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
  Part I - Financial Information
     
Item 1. Financial Statements  
  Condensed Consolidated Balance Sheets (unaudited) as of March 31, 2022 and December 31, 2021 1
  Condensed Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2022 and 2021 2
  Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) for the three months ended March 31, 2022 and 2021 3
  Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2022 and 2021 5
  Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25
Item 4. Controls and Procedures 35
     
  PART II - Other Information  
     
Item 1. Legal Proceedings 36
Item 5. Other Information 36
Item 6. Exhibits 36
  Signature 37
  Exhibit Index 38

 

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)

 

   March 31, 2022   December 31, 2021 
Assets:          
Current assets:          
Cash  $64,737   $77,258 
Accounts receivable   89    200 
Prepaid expenses, deposits, and other current assets   6,176    5,179 
Total current assets   71,002    82,637 
Fixed assets, net   2,066    1,585 
Operating lease right-of-use assets   2,951     
Intangible assets, net   7,620    2,029 
Other assets   695    725 
Total assets  $84,334   $86,976 
Liabilities, Preferred Stock and Stockholders’ Equity          
Current liabilities:          
Accounts payable  $8,235   $3,299 
Accrued expenses and other current liabilities   3,498    4,259 
Operating lease liabilities, current portion   873     
Contingent purchase consideration payable   4,887     
Total current liabilities   17,493    7,558 
Long-term liabilities          
Operating lease liabilities, less current portion   2,108     
Total long-term liabilities   2,108     
Total liabilities   19,601    7,558 
Commitments and contingencies (Note 10)   -     -  
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 1,136,210 at March 31, 2022 and 1,113,919 shares at December 31, 2021   2,486    2,419 
Common stock, $0.001 par value. Authorized, 150,000,000 shares; 86,911,646 and 86,367,845 shares outstanding as of March 31, 2022 and December 31, 2021, respectively   87    86 
Additional paid-in capital   199,719    198,071 
Accumulated deficit   (155,849)   (138,910)
Treasury stock   (512)    
Total PAVmed Inc. Stockholders’ Equity   45,931    61,666 
Noncontrolling interests   18,802    17,752 
Total Stockholders’ Equity   64,733    79,418 
Total Liabilities and Stockholders’ Equity  $84,334   $86,976 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

1

 

 

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

 

         
   Three Months Ended March 31, 
   2022   2021 
Revenue  $189   $ 
Cost of revenue   369     
Gross profit (loss)   (180)    
Operating expenses:          
Sales and marketing   3,925    1,387 
General and administrative   9,423    3,375 
Research and development   5,932    3,315 
Total operating expenses   19,280    8,077 
Loss from operations   (19,460)   (8,077)
Other income (expense):          
Change in fair value - contingent consideration payable   (173)    
Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note       1,682 
Debt extinguishments loss - Senior Secured Convertible Notes       (3,715)
Other income (expense), net   (173)   (2,033)
Loss before provision for income tax   (19,633)   (10,110)
Provision for income taxes        
Net loss before noncontrolling interests   (19,633)   (10,110)
Net loss attributable to the noncontrolling interests   2,761    679 
Net loss attributable to PAVmed Inc.   (16,872)   (9,431)
Less: Series B Convertible Preferred Stock dividends earned   

(68

)   (75)
Net loss attributable to PAVmed Inc. common stockholders  $(16,940)  $(9,506)
Per share information:          
Net loss per share attributable to PAVmed Inc. - basic and diluted  $(0.20)  $(0.13)
Net loss per share attributable to PAVmed Inc. common stockholders – basic and diluted  $(0.20)  $(0.13)
Weighted average common shares outstanding, basic and diluted   86,336,427    73,954,126 

 

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 March 31, 2022

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

 

   Shares   Amount   Shares   Amount   Capital   Deficit   Stock   Interest   Total 
   PAVmed Inc. Stockholders’ Equity (Deficit)         
   Series B      

             
   Convertible       Additional           Non      
   Preferred Stock   Common Stock   Paid-In   Accumulated   Treasury   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   22,291    67                (67)            
Restricted stock awards vestings           466,666                         
Exercise - Series Z warrants           5                         
Exercise - stock options           237,499    1    241                242 
Exercise - stock options of majority-owned subsidiary                               187    187 
Purchase - Employee Stock Purchase Plan           194,240        217                217 
Impact of subsidiary equity transactions                   (87)           87     
Stock-based compensation - PAVmed Inc.                   1,277                1,277 
Stock-based compensation - majority-owned subsidiary                               3,537    3,537 
Treasury stock           (354,609)               (512)       (512)
Net loss                       (16,872)       (2,761)   (19,633)
Balance - March 31, 2022   1,136,210   $2,486    86,911,646   $87   $199,719   $(155,849)  $(512)  $18,802   $64,733 

 

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 THREE MONTHS ENDED March 31, 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       Additional       Non     
   Preferred Stock   Common Stock   Paid-In   Accumulated   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        1,723            1,723 
Issue common stock – exercise Series Z warrants           860,217    1    1,375            1,376 
Issue common stock – conversion Series B Convertible Preferred Stock   (10,835)   (22)   10,835        22             
Series B Convertible Preferred Stock dividends declared   24,198    72                (72)        
Issue common stock - Employee Stock Purchase Plan           203,480        304            304 
Exercise - stock options           80,000        80            80 
Stock-based compensation - PAVmed Inc. 2014 Equity Plan                   631            631 
Stock-based compensation - majority-owned subsidiary                   3        802    805 
Net Loss                       (9,431)   (679)   (10,110)
Balance - March 31, 2021   1,241,438   $2,587    81,424,744   $81   $145,396   $(97,778)  $(2,246)  $48,040 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

4

 

 

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

 

   2022   2021 
   Three Months Ended March 31, 
   2022   2021 
Cash flows from operating activities          
Net loss - before noncontrolling interest (“NCI”)  $(19,633)  $(10,110)
           
Adjustments to reconcile net loss - before NCI to net cash used in operating activities          
Depreciation expense   93    12 
Amortization expense   123     
Stock-based compensation   4,814    1,436 
Fair value adjustment to contingent consideration payable   173     
Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note       (1,682)
Debt extinguishment loss - Senior Secured Convertible Notes and Senior Convertible Note       3,715 
Non-cash lease expense   29     
Changes in operating assets and liabilities:          
Accounts receivable   111     
Prepaid expenses and other current assets   (134)   (277)
Accounts payable   3,922    (1,070)
Accrued expenses and other current liabilities   (1,761)   (1,192)
Net cash flows used in operating activities   (12,263)   (9,168)
           
Cash flows from investing activities          
Purchase of equipment   (574)   (36)
Acquisitions, net of cash acquired        
Net cash flows used in investing activities   (574)   (36)
           
Cash flows from financing activities          
Proceeds – issue of common stock – registered offerings       55,016 
Payment – offering costs – registered offerings       (1,312)
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       1,376 
Proceeds – exercise of stock options   241    80 
Proceeds – issue common stock – Employee Stock Purchase Plan   217    304 
Proceeds – exercise of stock options issued under equity plan of majority owned subsidiary   187     
Purchase Treasury Stock – payment of employee payroll tax obligation in connection with stock-based compensation   (329)    
Net cash flows provided by financing activities   316    40,494 
Net increase (decrease) in cash   (12,521)   31,290 
Cash, beginning of period   77,258    17,256 
Cash, end of period  $64,737   $48,546 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

5

 

 

PAVMED INC.

and SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(amounts in these accompanying notes are presented in thousands, except number of shares and per-share amounts.)

 

Note 1 — The Company

 

Description of the Business

 

PAVmed Inc and Subsidiaries, referred to herein as “PAVmed” or the “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”), Veris Health Inc. (“Veris Health” or “VERIS”), and Solys Diagnostics Inc. (“Solys Diagnostics” or “SOLYS”).

 

The Company is organized to advance a broad pipeline of innovative medical technologies from concept to commercialization, employing a business model focused on capital efficiency and speed to market. The Company’s activities have focused on advancing the lead products towards regulatory approval and commercialization, protecting its intellectual property, and building its corporate infrastructure and management team.

 

The 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.

 

Although the Company’s current operational activities are principally focused on the commercialization of EsoGuard and CarpX its development activities are focused on pursuing FDA approval and clearance of other lead products in our product portfolio pipeline, including EsoGuard IVD, PortIO, NextFlo, EsoCure and digital health technologies acquired by the Company’s majority-owned subsidiary Veris Health Inc.

 

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 for one year from the date of the issue of the Company’s unaudited condensed consolidated financial statements, as included herein in this Quarterly Report on Form 10-Q for the period ended March 31, 2022.

 

6

 

 

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

 

Significant Accounting Policies

 

The Company’s significant accounting policies are as disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on April 6, 2022, except as otherwise noted herein below.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements 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., 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 16, 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.

 

All amounts in the accompanying consolidated financial statements and these notes thereto are presented in thousands of dollars, if not otherwise noted as being presented in millions of dollars, except for shares and per share amounts.

 

Contingent Consideration

 

Contingent Consideration relates to the potential payment for an acquisition that is contingent upon the achievement of the acquired business meeting certain milestones. The Company records contingent consideration at fair value at the date of acquisition based on the consideration expected to be transferred. For potential payments related to milestone achievements, the Company estimated the fair value based on the probability of achievement of such milestones. The assumptions utilized in the calculation of the acquisition date fair value include probability of success and the discount rates. Contingent consideration involves certain assumptions requiring significant judgment and actual results may differ from assumed and estimated amounts. Contingent consideration is remeasured each reporting period, and subsequent changes in fair value, including accretion for the passage of time, are recognized within other income (expense), net in the Company’s unaudited condensed consolidated statements of operations.

 

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, inclusive of acquired intangible 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 consolidated financial statements include those related to the estimated fair value of stock-based equity awards, contingent consideration and common stock purchase warrants. Other significant estimates include 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.

 

Recent Accounting Standards Updates Adopted

 

Effective December 31, 2021, the Company adopted FASB ASC Topic 842, Leases, (“ASC 842”). ASC 842 established a right-of-use (“ROU”) model requiring a lessee to recognize a ROU asset and a lease liability for all leases with terms greater-than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company’s adoption of ASC 842 did not have an effect on the Company’s consolidated financial statements. See Note 8, Leases.

 

7

 

 

Note 3 — Patent License Agreement - Case Western Reserve University

 

The Company has a patent license agreement with Case Western Reserve University (“CWRU”) which provides for each of patent fees reimbursement payments, milestone payments and royalty payments - each as discussed below. For further details of this agreement, see Note 3 of the Company’s Consolidated Financial Statements in the Company’s Form 10-K for the year ended December 31, 2021.

 

Lucid Diagnostics Inc. is responsible for reimbursement of certain CWRU billed patent fees. See Note 5, Related Party Transactions, for patent fee reimbursement payments paid to CWRU in the periods ended March 31, 2022 and 2021.

 

The CWRU License Agreement contained milestones for which a $75 research and development expense was recognized and paid with respect to the achievement of the regulatory milestone related to FDA clearance of EsoCheck. The CWRU License Agreement was amended effective February 12, 2021 such that a regulatory milestone related to FDA PMA submission of a licensed product (“PMA Milestone”) is included in the Amended CWRU License Agreement, and is the sole remaining unachieved milestone, for which a $200 milestone payment would be payable to CWRU upon its achievement.

 

Under the Amended CWRU License Agreement, the Company is required to pay a royalty fee to CWRU with respect to the “Licensed Products” (as defined in the CWRU License Agreement) of a percentage of “Net Sales”, as defined in the Amended CWRU License Agreement, as follows: 5.0% of Net Sales up to $100.0 million per year; and 8.0% of Net Sales of $100.0 million or greater per year, with such amounts subject-to a minimum annual royalty fee. The Company recorded a royalty expense of $10 for the three months ended March 31, 2022

 

Note 4 — 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 March 31, 2022, the Company recognized revenue under the EsoGuard Commercialization Agreement, dated August 1, 2021, as discussed below.

 

EsoGuard Commercialization Agreement

 

The Company, through its majority-owned subsidiary, Lucid Diagnostics Inc., entered into the EsoGuard Commercialization Agreement, dated August 1, 2021, with its Commercial Laboratory Improvements Act (“CLIA”) certified commercial laboratory service provider, ResearchDx Inc. (“RDx”), an unrelated third-party. The EsoGuard Commercialization Agreement is on a month-to-month basis, and may be terminated by either party thereto, with or without cause, upon forty-five (45) days prior written notice.

 

On February 25, 2022, the EsoGuard Commercialization Agreement was terminated in conjunction with the execution of an Asset Purchase Agreement between LucidDx Labs Inc., a wholly-owned subsidiary of Lucid Diagnostics Inc. and RDx, as such agreement is further discussed in Note 6, Acquisitions.

 

Revenue Recognized

 

In the period ended March 31, 2022, the Company recognized total revenue of $189, which represents the minimum fixed monthly fee of $100 to be paid by RDx for the delivery of services under the EsoGuard Commercialization Agreement for the period from the agreement inception date of August 1, 2021 and prorated to February 25, 2022. The monthly fee was deemed to be collectible for such period as RDx has timely paid the applicable respective monthly fee.

 

Cost of Revenue

 

The cost of revenue recognized with respect to the revenue recognized under the EsoGuard Commercialization Agreement for the period ended March 31, 2022 totaled $369, inclusive of employee related costs of employees engaged in the delivery of the administration to patients of the EsoCheck cell sample collection procedure, EsoCheck devices and EsoGuard mailers (cell sample shipping costs) distributed to medical practitioners’ locations and the Lucid Test Centers; Lucid Test Centers operating expenses, including rent expense and supplies; and royalty fees incurred under the Amended CWRU License Agreement.

 

8

 

 

Note 5 — Related Party Transactions

 

Case Western Reserve University and Physician Inventors - CWRU License Agreement

 

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

 

   2022   2021 
   Three Months Ended March 31, 
   2022   2021 
Cost of Revenue        
CWRU – Royalty Fee  $9   $ 
           
General and Administrative Expense          
Stock-based compensation expense – Physician Inventors’ restricted stock awards   272    91 
           
Research and Development Expense          
CWRU License Agreement - reimbursement of patent legal fees        
Fees - Physician Inventors’ consulting agreements   8    13 
Sponsored research agreement   3     
Stock-based compensation expense – Physician Inventors’ stock options   46    6 
Total Related Party Expenses  $338   $110 

 

Lucid Diagnostics Inc. entered into consulting agreements with each of the three Physician Inventors, with each such consulting agreement providing for compensation on a contractual rate per hour for consulting services provided, and an expiration date of May 12, 2024, upon the agreements’ renewal effective May 12, 2021. Additionally, as discussed below, each of the Physician Inventors have been granted stock options under the PAVmed Inc. 2014 Long-Term Incentive Equity Plan, and stock options and restricted stock awards under the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan.

 

Under each of their respective (initial) consulting agreements with Lucid Diagnostics Inc., the three Physician Inventors were each granted 25,000 stock options under the PAVmed Inc. 2014 Equity Plan, with a grant date of May 12, 2018, an exercise price of $1.59 per share of common stock of PAVmed Inc., vesting ratably on a quarterly basis commencing June 30, 2018 and ending March 31, 2021, and a contractual period of ten years from the date of grant. As of March 31, 2021, such stock options were fully vested and exercisable. Each of the Physician Inventors were granted 50,000 stock options under the PAVmed Inc. 2014 Equity Plan, with a grant date of June 21, 2021, an exercise price of $6.41 per share of common stock of PAVmed Inc., vesting ratably on a quarterly basis commencing June 30, 2021 and ending March 31, 2024, and a contractual period of ten years from the date of grant.

 

On March 1, 2021, restricted stock awards were granted under the Lucid Diagnostics Inc. 2018 Equity Plan to each of the three Physician Inventors, with such restricted stock awards having a single vesting date of March 1, 2023, with the fair value of such restricted stock awards recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed.

 

See Note 13, 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 16, Noncontrolling Interest, for a discussion of Lucid Diagnostics Inc. and the corresponding noncontrolling interests.

 

9

 

 

Note 5 — Related Party Transactions - continued

 

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 $6 in the period ended March 31, 2021 in connection with the consulting agreement.

 

Veris Health Inc. entered into a consulting agreement with Andrew Thoreson, M.D. effective June 2021 with such consulting agreement providing for compensation on a contractual rate per hour for consulting services provided. Veris Health Inc. recognized general and administrative expense of $25 in the period ended March 31, 2022 in connection with the consulting agreement.

 

10

 

 

Note 6 — Acquisitions

 

Asset Purchase Agreement - ResearchDx Inc.

 

On February 25, 2022, LucidDx Labs, Inc., entered into an asset purchase agreement (“APA”) with ResearchDx, Inc. (“RDx”), an unrelated third-party - “RDx APA”. Under the RDx APA, LucidDx Labs Inc. acquired certain assets from RDx to be combined with LucidDx Labs Inc. purchased and leased property and equipment to establish a Company-owned CLIA certified, 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 consummation of the RDx APA, RDx provided such laboratory services at its owned CLIA-certified, CAP-accredited laboratory.

 

As of March 31, 2022, the Company’s preliminary analysis is that the RDx APA transaction is a business combination, resulting in the recognition and measurement of a preliminary purchase consideration in accordance with the valuation methodology described in Note 2, Summary of Significant Accounting Policies and Recent Accounting Standards Updates.

 

Under the terms of the RDx APA, LucidDx Labs Inc. will pay RDx an aggregate purchase price of up to $6.2 million for the acquired assets. The total of $6.2 million is comprised of non-contingent purchase consideration of $1.0 million (included in “Accrued expenses and other liabilities” on the accompanying unaudited condensed consolidated balance sheets, as of March 31, 2022), and contingent purchase consideration of a total of $5.2 million face value, with such contingent purchase consideration having a preliminary $4,714 initial estimated fair value as of the transaction date. The preliminary $5,714 purchase consideration (inclusive of both the non-contingent and contingent purchase consideration discussed above) is unallocated as of March 31, 2022, and as such is included in intangible assets in the accompanying unaudited consolidated balance sheet. The preliminary estimated fair value of the contingent purchase price consideration and the identification and estimated fair value of acquired assets are subject-to further revision.

 

Concurrent with the RDx APA, LucidDx Labs Inc. and RDx also entered into a management services agreement (“RDx MSA”), with a term of three years, and a total of approximately $1.8 million payable in equal quarterly payments.

 

Pro Forma Information

 

The RDx acquisition impact for purposes of pro forma financial disclosures would have primarily impacted the Company’s EsoGuard Commercialization Agreement with RDx. The impact is reflected in the table below:

 

           
   Three Months Ended March 31, 
   2022   2021 
Revenue        
As reported  $189   $ 
Pro forma  $   $ 
Net Loss          
As reported  $(16,940)  $(9,506)
Pro forma  $(17,129)  $(9,506)
Basic and diluted net loss per share          
As reported  $(0.20)  $(0.13)
Pro forma  $(0.20)  $(0.13)

 

11

 

 

Note 7 — Prepaid Expenses, Deposits, and Other Current Assets

 

Current Assets

 

Prepaid expenses and other current assets consisted of the following as of:

 

   March 31, 2022   December 31, 2021 
Advanced payments to service providers and suppliers  $651   $808 
Prepaid insurance   1,174    1,856 
Deposits   2,973    1,989 
Deferred financing charges   1,014     
EsoCheck cell collection supplies   266    434 
EsoGuard mailer supplies   65    59 
CarpX devices   33    33 
Total prepaid expenses, deposits and other current assets  $6,176   $5,179 

 

Note 8 — Leases

 

Supplemental disclosure of cash flow information related to the Company’s cash and non-cash activities with its leases are as follows:

 

   2022   2021 
   Three Months Ended March 31, 
   2022   2021 
Cash paid for amounts included in the measurement of lease liabilities        
Operating cash flows from operating leases  $224   $ 
Non-cash investing and financing activities          
Right-of-use assets obtained in exchange for new operating lease liabilities   $3,151   $ 
Weighted-average remaining lease term - operating leases (in years)   3.32     
Weighted-average discount rate - operating leases   7.875%   %

 

As of March 31, 2022, the Company’s right-of-use assets from operating leases are $2,951, which are reporting in right-of-use assets - operating leases in the unaudited condensed consolidated balance sheets. As of March 31, 2022, the Company has outstanding operating lease obligations of $2,981, of which $873 is reported in operating lease liabilities, current portion and $2,108 is reporting in operating lease liabilities less current portion in the Company’s unaudited condensed consolidated balance sheets. The Company did not have operating leases as of December 31, 2021. The Company calculates its incremental borrowing rates for specific lease terms, used to discount future lease payments, as a function of the financing terms the Company would likely receive on the open market.

 

The Company executed lease agreements for: office space in Horsham, Pennsylvania, which commenced May 1, 2022; and a new light manufacturing facility in Riverton, Utah, with expected commencement of October 2022.

 

12

 

 

Note 9 — Intangible Assets

 

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

 

   Estimated Useful Life  March 31, 2022   December 31, 2021 
Defensive asset  5 years  $2,105   $2,105 
Other  1 year   70    70 
Identified finite intangible assets      

2,175

    

2,175

 
Unallocated purchase consideration1      

5,714

     
Total Intangible asset      7,889    2,175
Less Accumulated Amortization      (269)   (146)
Total Intangible Assets, net     $7,620   $2,029 

 

(1)See Note 6, Acquisitions - Asset Purchase Agreement - Research Dx Inc., for a discussion of the “unallocated purchase consideration” recognized as an intangible asset as of March 31, 2022, as presented in the table above.

 

Amortization expense of the acquired intangible assets discussed above was $123 for the period ended March 31, 2022 (there was no such amortization expense for the prior period ended March 31, 2021), and is included in general and administrative expenses in the accompanying consolidated statements of operations. As of March 31, 2022, the estimated future amortization expense associated with the Company’s identified finite-lived intangible assets (except for the unallocated purchase consideration included in total intangible asset presented above) for each of the five succeeding fiscal years is as follows:

 

      
2022 (remainder of year)  $327 
2023   421 
2024   421 
2025   421 
2026   

316

 
Thereafter    
Total  $1,906 

 

13

 

 

Note 10 — Commitment and Contingencies

 

Legal Proceedings

 

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 2014 Equity Plan and the ESPP). 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. The settlement of the complaint is pending approval by the Court. The settlement hearing before the Court is scheduled for November 3, 2022.

 

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 affiliated with 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 disagrees with the allegations set forth in the complaint and intends to vigorously contest the complaint.

 

In the ordinary course of our business, particularly as it begins commercialization of its products, the Company may be subject to certain other legal actions and claims, including product liability, consumer, commercial, tax and governmental matters, which may arise from time to time. Except as otherwise noted herein, the Company does not believe it is currently a party to any other pending legal proceedings. Notwithstanding, legal proceedings are subject-to inherent uncertainties, and an unfavorable outcome could include monetary damages, and excessive verdicts can result from litigation, and as such, could result in a material adverse impact on the Company’s business, financial position, results of operations, and /or cash flows. Additionally, although the Company has specific insurance for certain potential risks, the Company may in the future incur judgments or enter into settlements of claims which may have a material adverse impact on the Company’s business, financial position, results of operations, and /or cash flows.

 

14

 

 

Note 11 — Financial Instruments Fair Value Measurements

 

Recurring Fair Value Measurements

 

The fair value hierarchy table for the reporting dates noted is as follows:

 

    

Fair Value Measurement on a Recurring Basis at Reporting

Date  Using(1)

    Level-1 Inputs    Level-2 Inputs    Level-3 Inputs    Total 
March 31, 2022                    
Contingent consideration payable  $   $   $4,887   $4,887 
Totals  $   $   $4,887   $4,887 

 

(1) As noted above, as presented in the fair value hierarchy table, Level-1 represents quoted prices in active markets for identical items, Level-2 represents significant other observable inputs, and Level-3 represents significant unobservable inputs. There were no transfers between the respective Levels during the period ended March 31, 2022.

 

Fair value measurements of contingent consideration

 

The Company recorded $4.9 million, which is the fair value, of contingent consideration related to the RDx acquisition. The Company is required to make contingent consideration payments of up to $5.2 million related to the RDx APA agreement. The contingent agreement is based on achieving milestones to obtain certain certifications and licensing rights. The Company estimated the fair value on a probability based model that assessed achievement of such milestones. The model used present value factors, that applied probability ranges of 94-99%, a discount rate of 7.875% and achievement times ranging from one month to six months to achieve the respective milestones.

 

The final settlement of contingent consideration liabilities for the acquisition could vary from current estimates based on the actual results of the financial measures described above. This liability is considered to be a Level 3 financial liability that is re-measured each reporting period. The change in fair value of contingent consideration for these acquisitions is included in other income (expense), net.

 

The following table presents a reconciliation of the liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

 

   March 31, 2022 
Fair value of contingent consideration at the date of acquisition  $4,714 
Payments    
Change in fair value of contingent consideration   173 
Contingent consideration payable  $4,887 

 

As of December 31, 2021 there were no fair value measurements.

 

See Note 12, Debt for convertible notes the Company has entered into subsequent to March 31, 2022.

 

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Note 12 — Debt

 

Subsequent to March 31, 2022, on April 4, 2022, the Company entered into a Senior Secured Convertible Note in the amount of $27.5 million, pursuant to a Securities Purchase Agreement (“SPA”) with an accredited institutional investor. Under the SPA, the Company agreed to sell, and the investor agreed to purchase, up to an additional $22.5 in additional initial principal amount of Senior Secured Convertible Notes (for an aggregate of $50.0 million in initial principal amount of Secured Promissory Notes) upon the satisfaction of certain conditions (as more fully described below). The notes are being offered and sold in a registered direct offering under the Company’s effective shelf registration statement (the “Offering”). The purchase price of the Secured Promissory Notes is $1,000 for each $1,100 in principal amount of the notes, representing an original issue discount of $100 per $1,100 in principal amount of the notes. We herein refer to the Senior Secured Convertible Notes issued from time to time under the SPA as March 2022 Notes.

 

Pursuant to the SPA we completed an initial closing for the sale of $27.5 million in principal amount of March 2022 Notes, of which the investor funded and the Company received cash proceeds of $24.9 million on April 5, 2022, after deduction of lender fees. Subject to certain conditions being met or waived, from time to time after such time that stockholder approval for an increase in our authorized shares from 150 million to 250 million is obtained, but before March 31, 2024, one or more additional closings for up to the remaining principal amount of March 2022 Notes may occur, upon five trading days’ notice by us to the investor. The aggregate principal amount of March 2022 Notes that may be offered in the additional closings may not be more than $22.5 million. The investor’s obligation to purchase the notes at each additional closing is subject to certain conditions set forth in the March 2022 SPA (including minimum price and volume thresholds, maximum ratio of debt to market capitalization, and minimum market capitalization), which may be waived by the Required Holders (as defined in the March 2022 SPA). Under the March 2022 SPA, the investor will be required to purchase March 2022 Notes in the additional closings if such conditions are met or waived. In addition, from and after March 31, 2023, the investor may by written notice to us elect to require us to issue up to $22.5 million in initial principal amount of March 2022 Notes, so long as in doing so it would not cause the ratio of (a) the outstanding principal amount of the March 2022 Notes (including the additional March 2022 Notes), 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 we fail to complete the sale of the additional March 2022 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 we will be obligated to pay a break-up fee to the investor at such time in an aggregate amount equal to $1.35 million.

 

The March 2022 Notes have a voluntary fixed conversion price of $5.00 per share, a stated interest rate of 7.875% per annum, and a maturity of 24 months (subject to extension in certain circumstances). The March 2022 Notes will be secured by all our existing and future assets (including those of our significant subsidiaries, other than Lucid and its subsidiaries), but including only 9.99% of Lucid’s outstanding common stock held by us, pursuant to a security agreement by and between the Company and the investor.

 

We will be subject to certain customary affirmative and negative covenants regarding the rank of the March 2022 Notes, 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 will be subject to financial covenants requiring that (i) the amount of our available cash equal or exceed $8.0 million at all times, (ii) the ratio of (a) the outstanding principal amount of the March 2022 Notes, 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%, and (iii) that our market capitalization shall at no time be less than $75 million. The March 2022 Notes include certain customary events of default.

 

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Note 13 — 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. 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.

 

A total of 16,352,807 shares of common stock of PAVmed Inc. are reserved for issuance under the PAVmed Inc. 2014 Equity Plan, with 2,776,706 shares available for grant as of March 31, 2022. 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 March 31, 2022.

 

PAVmed Inc. 2014 Equity Plan - Stock Options

 

Stock options issued and outstanding under the PAVmed Inc. 2014 Equity Plan and including PAVmed stock options granted outside the plan is as follows:

   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 
Granted(1)   3,109,350   $1.67           
Exercised   (237,499)  $1.02           
Forfeited   (273,757)  $2.94           
Outstanding stock options at March 31, 2022   11,318,292   $2.98    7.1   $439 
Vested and exercisable stock options at March 31, 2022   6,519,615   $3.08    5.4   $428 

 

(1)Stock options granted under the PAVmed Inc. 2014 Equity 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 intrinsic value is computed as the difference between the quoted price of the PAVmed Inc. common stock on each of March 31, 2022 and December 31, 2021 and the exercise price of the underlying PAVmed Inc. stock options, to the extent such quoted price is greater than the exercise price.

 

PAVmed Inc. 2014 Equity Plan - Restricted Stock Awards

 

A summary of PAVmed Inc. 2014 Equity Plan restricted stock award activity is as follows:

   Number of Stock Options   Weighted Average Grant Date Fair Value 
Unvested restricted stock awards as of December 31, 2021   1,566,666   $2.31 
Granted        
Vested   (466,666)   1.06 
Forfeited   (150,000)   2.04 
Unvested restricted stock awards as of March 31, 2022   950,000   $2.97 

 

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Note 13 — 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 5,644,000 shares of common stock of Lucid Diagnostics Inc. are reserved for issuance under the Lucid Diagnostics Inc. 2018 Equity Plan, with 733,541 shares available for grant as of March 31, 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. 2018 Equity Plan - Stock Options

 

Stock options issued and outstanding under the Lucid Diagnostics Inc. 2018 Equity Plan and including Lucid Diagnostics options granted outside the plan is as follows:

   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)   1,760,000   $4.16      
Exercised   (253,889)  $0.74      
Forfeited   (60,926)  $4.61      
Outstanding stock options at March 31, 2022   2,864,427   $2.75    6.9 
Vested and exercisable stock options at March 31, 2022   1,277,026   $0.99    3.3 

 

(1)

 

Stock options granted under the Lucid Diagnostics Inc. 2018 Equity 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.

 

Lucid Diagnostics Inc. 2018 Equity Plan – Restricted Stock Awards

 

A summary of Lucid Diagnostics Inc. 2018 Equity Plan restricted stock award activity is as follows:

   Number of Restricted Stock Awards   Weighted Average Grant Date Fair Value 
Unvested restricted stock awards as of December 31, 2021   1,890,740   $12.94 
Granted   320,000    4.53 
Vested        
Forfeited        
Unvested restricted stock awards as of March 31, 2022   2,210,740   $11.07 

 

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.

 

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Note 13 — 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:

 

   Three Months Ended March 31, 
   2022   2021 
Sales and marketing expenses  $625   $202 
General and administrative expenses   4,002    1,124 
Research and development expenses   187    110 
Total stock-based compensation expense  $4,814   $1,436 

 

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 5, 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:

 

   Three Months Ended March 31, 
   2022   2021 
Lucid Diagnostics Inc 2018 Equity Plan – sales and marketing expenses  $265   $ 
Lucid Diagnostics Inc 2018 Equity Plan – general and administrative expenses   3,201    789 
Lucid Diagnostics Inc 2018 Equity Plan – research and development expenses   71    13 
PAVmed Inc 2014 Equity Plan - sales and marketing expenses   175     
PAVmed Inc 2014 Equity Plan - general and administrative expenses   68     
PAVmed Inc 2014 Equity Plan - research and development expenses   55    3 
Total stock-based compensation expense – recognized by Lucid Diagnostics Inc  $3,835   $