UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
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:
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of | (IRS Employer | |
| Incorporation or Organization) | Identification No.) | |
| (Address of Principal Executive Offices | (Zip Code) |
(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 | ||
| The Stock Market LLC | ||||
Securities registered under Section 12(g) of the Exchange Act: None
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
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).
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 | ☐ |
| ☒ | 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 ☐
As of May 12, 2022 there were 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
| 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 | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses, deposits, and other current assets | ||||||||
| Total current assets | ||||||||
| Fixed assets, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities, Preferred Stock and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Operating lease liabilities, current portion | ||||||||
| Contingent purchase consideration payable | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Operating lease liabilities, less current portion | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 10) | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ par value. Authorized, shares; Series B Convertible Preferred Stock, par value $, issued and outstanding at March 31, 2022 and shares at December 31, 2021 | ||||||||
| Common stock, $ par value. Authorized, shares; and shares outstanding as of March 31, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Treasury stock | ( | ) | ||||||
| Total PAVmed Inc. Stockholders’ Equity | ||||||||
| Noncontrolling interests | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
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 | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit (loss) | ( | ) | ||||||
| Operating expenses: | ||||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Change in fair value - contingent consideration payable | ( | ) | ||||||
| Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note | ||||||||
| Debt extinguishments loss - Senior Secured Convertible Notes | ( | ) | ||||||
| Other income (expense), net | ( | ) | ( | ) | ||||
| Loss before provision for income tax | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net loss before noncontrolling interests | ( | ) | ( | ) | ||||
| Net loss attributable to the noncontrolling interests | ||||||||
| Net loss attributable to PAVmed Inc. | ( | ) | ( | ) | ||||
| Less: Series B Convertible Preferred Stock dividends earned | ( | ) | ( | ) | ||||
| Net loss attributable to PAVmed Inc. common stockholders | $ | ( | ) | $ | ( | ) | ||
| Per share information: | ||||||||
| Net loss per share attributable to PAVmed Inc. - basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Net loss per share attributable to PAVmed Inc. common stockholders – basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding, basic and diluted | ||||||||
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)
| 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 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Dividends declared - Series B Convertible Preferred Stock | — | ( | ) | |||||||||||||||||||||||||||||||||
| Restricted stock awards vestings | — | |||||||||||||||||||||||||||||||||||
| Exercise - Series Z warrants | — | |||||||||||||||||||||||||||||||||||
| Exercise - stock options | — | |||||||||||||||||||||||||||||||||||
| Exercise - stock options of majority-owned subsidiary | — | — | ||||||||||||||||||||||||||||||||||
| Purchase - Employee Stock Purchase Plan | — | |||||||||||||||||||||||||||||||||||
| Impact of subsidiary equity transactions | — | — | ( | ) | ||||||||||||||||||||||||||||||||
| Stock-based compensation - PAVmed Inc. | — | — | ||||||||||||||||||||||||||||||||||
| Stock-based compensation - majority-owned subsidiary | — | — | ||||||||||||||||||||||||||||||||||
| Treasury stock | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance - March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
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)
| 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 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Issue common stock – registered offerings, net | — | |||||||||||||||||||||||||||||||
| Issue common stock upon partial conversions of Senior Secured Convertible Note | — | |||||||||||||||||||||||||||||||
| Issue common stock – exercise Series Z warrants | — | |||||||||||||||||||||||||||||||
| Issue common stock – conversion Series B Convertible Preferred Stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Series B Convertible Preferred Stock dividends declared | — | ( | ) | |||||||||||||||||||||||||||||
| Issue common stock - Employee Stock Purchase Plan | — | |||||||||||||||||||||||||||||||
| Exercise - stock options | — | |||||||||||||||||||||||||||||||
| Stock-based compensation - PAVmed Inc. 2014 Equity Plan | — | — | ||||||||||||||||||||||||||||||
| Stock-based compensation - majority-owned subsidiary | — | — | ||||||||||||||||||||||||||||||
| Net Loss | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance - March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
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)
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss - before noncontrolling interest (“NCI”) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss - before NCI to net cash used in operating activities | ||||||||
| Depreciation expense | ||||||||
| Amortization expense | ||||||||
| Stock-based compensation | ||||||||
| Fair value adjustment to contingent consideration payable | ||||||||
| Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note | ( | ) | ||||||
| Debt extinguishment loss - Senior Secured Convertible Notes and Senior Convertible Note | ||||||||
| Non-cash lease expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses and other current liabilities | ( | ) | ( | ) | ||||
| Net cash flows used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of equipment | ( | ) | ( | ) | ||||
| Acquisitions, net of cash acquired | ||||||||
| Net cash flows used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds – issue of common stock – registered offerings | ||||||||
| Payment – offering costs – registered offerings | ( | ) | ||||||
| Payment – repayment of Senior Convertible Note and Senior Secured Convertible Note | ( | ) | ||||||
| Payment – Senior Convertible Note and Senior Secured Convertible Note – non-installment payments | ( | ) | ||||||
| Proceeds – exercise of Series Z warrants | ||||||||
| Proceeds – exercise of stock options | ||||||||
| Proceeds – issue common stock – Employee Stock Purchase Plan | ||||||||
| Proceeds – exercise of stock options issued under equity plan of majority owned subsidiary | ||||||||
| Purchase Treasury Stock – payment of employee payroll tax obligation in connection with stock-based compensation | ( | ) | ||||||
| Net cash flows provided by financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
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 $
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:
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 $
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 $
| 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:
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Cost of Revenue | ||||||||
| CWRU – Royalty Fee | $ | $ | ||||||
| General and Administrative Expense | ||||||||
| Stock-based compensation expense – Physician Inventors’ restricted stock awards | ||||||||
| Research and Development Expense | ||||||||
| CWRU License Agreement - reimbursement of patent legal fees | ||||||||
| Fees - Physician Inventors’ consulting agreements | ||||||||
| Sponsored research agreement | ||||||||
| Stock-based compensation expense – Physician Inventors’ stock options | ||||||||
| Total Related Party Expenses | $ | $ | ||||||
Lucid Diagnostics Inc. entered into consulting agreements with each of the three Physician Inventors, with each such consulting agreement providing for compensation on a contractual rate per hour for consulting services provided, and an expiration date of May 12, 2024, upon the agreements’ renewal effective May 12, 2021. Additionally, as discussed below, each of the Physician Inventors have been granted stock options under the PAVmed Inc. 2014 Long-Term Incentive Equity Plan, and stock options and restricted stock awards under the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan.
Under each of their respective (initial) consulting agreements with Lucid Diagnostics Inc., the three Physician Inventors were each granted stock options under the PAVmed Inc. 2014 Equity Plan, with a grant date of May 12, 2018, an exercise price of $ per share of common stock of PAVmed Inc., vesting ratably on a quarterly basis commencing June 30, 2018 and ending March 31, 2021, and a contractual period of 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 stock options under the PAVmed Inc. 2014 Equity Plan, with a grant date of June 21, 2021, an exercise price of $ per share of common stock of PAVmed Inc., vesting ratably on a quarterly basis commencing June 30, 2021 and ending March 31, 2024, and a contractual period of 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 $
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 $
| 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 $
Concurrent with the RDx APA,
LucidDx Labs Inc. and RDx also entered into a management services agreement (“RDx MSA”), with a term of
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 | $ | $ | ||||||
| Pro forma | $ | $ | ||||||
| Net Loss | ||||||||
| As reported | $ | ( | ) | $ | ( | ) | ||
| Pro forma | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per share | ||||||||
| As reported | $ | ( | ) | $ | ( | ) | ||
| Pro forma | $ | ( | ) | $ | ( | ) | ||
| 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 | $ | $ | ||||||
| Prepaid insurance | ||||||||
| Deposits | ||||||||
| Deferred financing charges | ||||||||
| EsoCheck cell collection supplies | ||||||||
| EsoGuard mailer supplies | ||||||||
| CarpX devices | ||||||||
| Total prepaid expenses, deposits and other current assets | $ | $ | ||||||
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:
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||
| Operating cash flows from operating leases | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | $ | ||||||
| Weighted-average remaining lease term - operating leases (in years) | — | |||||||
| Weighted-average discount rate - operating leases | % | % | ||||||
As
of March 31, 2022, the Company’s right-of-use assets from operating leases are $
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 | $ | $ | ||||||||
| Other | ||||||||||
| Identified finite intangible assets | ||||||||||
| Unallocated purchase consideration1 | ||||||||||
| Total Intangible asset | ||||||||||
| Less Accumulated Amortization | ( | ) | ( | ) | ||||||
| Total Intangible Assets, net | $ | $ | ||||||||
| (1) |
Amortization
expense of the acquired intangible assets discussed above was $
| 2022 (remainder of year) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total | $ |
| 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 | $ | $ | $ | $ | ||||||||||||
| Totals | $ | $ | $ | $ | ||||||||||||
| (1) |
Fair value measurements of contingent consideration
The
Company recorded $
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 | $ | |||
| Payments | ||||
| Change in fair value of contingent consideration | ||||
| Contingent consideration payable | $ | |||
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.
| 15 |
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 $
Pursuant
to the SPA we completed an initial closing for the sale of $
The
March 2022 Notes have a voluntary fixed conversion price of $
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
| 16 |
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 shares of common stock of PAVmed Inc. are reserved for issuance under the PAVmed Inc. 2014 Equity Plan, with shares available for grant as of March 31, 2022. The share reservation is not diminished by a total of 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
| Number of Stock Options | Weighted Average Exercise Price | Remaining Contractual Term (Years) | Intrinsic Value(2) | |||||||||||||
| Outstanding stock options at December 31, 2021 | $ | $ | ||||||||||||||
| Granted(1) | $ | |||||||||||||||
| Exercised | ( | ) | $ | |||||||||||||
| Forfeited | ( | ) | $ | |||||||||||||
| Outstanding stock options at March 31, 2022 | $ | $ | ||||||||||||||
| Vested and exercisable stock options at March 31, 2022 | $ | $ | ||||||||||||||
| (1) | |
| (2) |
PAVmed Inc. 2014 Equity Plan - Restricted Stock Awards
| Number of Stock Options | Weighted Average Grant Date Fair Value | |||||||
| Unvested restricted stock awards as of December 31, 2021 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Unvested restricted stock awards as of March 31, 2022 | $ | |||||||
| 17 |
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 shares of common stock of Lucid Diagnostics Inc. are reserved for issuance under the Lucid Diagnostics Inc. 2018 Equity Plan, with shares available for grant as of March 31, 2022, with the share reservation not diminished by a total of Lucid Diagnostics Inc. stock options and restricted stock awards granted outside the Lucid Diagnostics Inc. 2018 Equity Plan.
Lucid Diagnostics Inc. 2018 Equity Plan - Stock Options
| Number of Stock Options | Weighted Average Exercise Price | Remaining Contractual Term (Years) | ||||||||||
| Outstanding stock options at December 31, 2021 | $ | |||||||||||
| Granted(1) | $ | |||||||||||
| Exercised | ( | ) | $ | |||||||||
| Forfeited | ( | ) | $ | |||||||||
| Outstanding stock options at March 31, 2022 | $ | |||||||||||
| Vested and exercisable stock options at March 31, 2022 | $ | |||||||||||
(1)
|
Lucid Diagnostics Inc. 2018 Equity Plan – Restricted Stock Awards
| Number of Restricted Stock Awards | Weighted Average Grant Date Fair Value | |||||||
| Unvested restricted stock awards as of December 31, 2021 | $ | |||||||
| Granted | ||||||||
| Vested | ||||||||
| Forfeited | ||||||||
| Unvested restricted stock awards as of March 31, 2022 | $ | |||||||
On January 7, 2022, 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 $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.
| 18 |
Note 13 — Stock-Based Compensation - continued
Consolidated Stock-Based Compensation Expense
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Sales and marketing expenses | $ | $ | ||||||
| General and administrative expenses | ||||||||
| Research and development expenses | ||||||||
| Total stock-based compensation expense | $ | $ | ||||||
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 | $ | $ | ||||||
| Lucid Diagnostics Inc 2018 Equity Plan – general and administrative expenses | ||||||||
| Lucid Diagnostics Inc 2018 Equity Plan – research and development expenses | ||||||||
| PAVmed Inc 2014 Equity Plan - sales and marketing expenses | ||||||||
| PAVmed Inc 2014 Equity Plan - general and administrative expenses | ||||||||
| PAVmed Inc 2014 Equity Plan - research and development expenses | ||||||||
| Total stock-based compensation expense – recognized by Lucid Diagnostics Inc | $ | $ | ||||||