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 | ||||
| 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 August 10, 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)
| June 30, 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 | ||||||||
| Senior Secured Convertible Notes - at fair value | ||||||||
| 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 9) | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ par value. Authorized, shares; Series B Convertible Preferred Stock, par value $, issued and outstanding at June 30, 2022 and shares at December 31, 2021 | ||||||||
| Common stock, $ par value. Authorized, shares; and shares outstanding as of June 30, 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 June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 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): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||
| Change in fair value - Senior Secured Convertible Note | ( | ) | ( | ) | ||||||||||||
| Loss on issue and offering costs - Senior Secured Convertible Note | ( | ) | ( | ) | ||||||||||||
| Debt extinguishments loss - Senior Secured Convertible Notes | ( | ) | ||||||||||||||
| Debt forgiveness | ||||||||||||||||
| 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 June 30, 2022
(in thousands except number of shares and per share data - unaudited)
| PAVmed Inc. Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||||||
| Series B Convertible Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Treasury | Non controlling | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Stock | Interest | Total | ||||||||||||||||||||||||||||
| Balance - March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Dividends declared - Series B Convertible Preferred Stock | — | ( | ) | |||||||||||||||||||||||||||||||||
| Vest - restricted stock awards | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Exercise - stock options | — | |||||||||||||||||||||||||||||||||||
| Exercise - stock options of majority-owned subsidiary | — | — | ||||||||||||||||||||||||||||||||||
| Impact of subsidiary equity transactions | — | — | ||||||||||||||||||||||||||||||||||
| Stock-based compensation - PAVmed Inc. | — | — | ||||||||||||||||||||||||||||||||||
| Stock-based compensation - majority-owned subsidiary | — | — | ||||||||||||||||||||||||||||||||||
| Treasury stock | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance - June 30, 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 SIX MONTHS ENDED June 30, 2022
(in thousands except number of shares and per share data - unaudited)
| PAVmed Inc. Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||||||
| Series B Convertible Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Treasury | Non controlling | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Stock | Interest | Total | ||||||||||||||||||||||||||||
| Balance - December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Dividends declared - Series B Convertible Preferred Stock | — | ( | ) | |||||||||||||||||||||||||||||||||
| Exercise - Series Z Warrants | — | |||||||||||||||||||||||||||||||||||
| Vest - restricted stock awards | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| 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 - June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 4 |
PAVMED INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)
for the THREE MONTHS ENDED June 30, 2021
(in thousands, except number of shares and per share data - unaudited)
| PAVmed Inc. Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||
| Series B Convertible Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Non controlling | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Total | |||||||||||||||||||||||||
| Balance - March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Dividends declared - Series B Convertible Preferred Stock | — | ( | ) | |||||||||||||||||||||||||||||
| Conversions - Series B Convertible Preferred Stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Vest - restricted stock awards | — | |||||||||||||||||||||||||||||||
| Exercise - Series Z warrants | — | |||||||||||||||||||||||||||||||
| Exercise - stock options | — | |||||||||||||||||||||||||||||||
| Stock-based compensation - PAVmed Inc. | — | — | ||||||||||||||||||||||||||||||
| Stock-based compensation - majority-owned subsidiary | — | — | ||||||||||||||||||||||||||||||
| Investment in Veris Health Inc. subsidiary | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance - June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 5 |
PAVMED INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)
for the SIX MONTHS ENDED June 30, 2021
(in thousands, except number of shares and per share data - unaudited)
| PAVmed Inc. Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||
| Series B Convertible Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Non controlling | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Total | |||||||||||||||||||||||||
| Balance - December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| 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 | — | |||||||||||||||||||||||||||||||
| Vest - restricted stock awards | — | |||||||||||||||||||||||||||||||
| Stock-based compensation - PAVmed Inc. | — | — | ||||||||||||||||||||||||||||||
| Stock-based compensation - majority-owned subsidiary | — | — | ||||||||||||||||||||||||||||||
| Investment in Veris Health Inc. subsidiary | — | — | ||||||||||||||||||||||||||||||
| Net Loss | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance - June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 6 |
PAVMED INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except number of shares and per share data - unaudited)
| Six Months Ended June 30, | ||||||||
| 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 and amortization expense | ||||||||
| Stock-based compensation | ||||||||
| In-process R&D charge | ||||||||
| APA-RDx: Issue common stock of majority-owned subsidiary - settle installment payment | ||||||||
| Change in fair value - Senior Secured Convertible Note | ( | ) | ||||||
| Loss upon Issuance - Senior Secured Convertible Note | ||||||||
| Debt extinguishment loss - Senior Secured Convertible Notes and Senior Convertible Note | ||||||||
| Debt forgiveness | ( | ) | ||||||
| Non-cash lease expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current and non-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 | ( | ) | ( | ) | ||||
| Payments - Acquisitions, net of cash | ( | ) | ( | ) | ||||
| Net cash flows used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds – issue of common stock – registered offerings | ||||||||
| Payment – offering costs – registered offerings | ( | ) | ||||||
| Proceeds – issue of Senior Secured Convertible Note | ||||||||
| 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.
| 7 |
PAVMED INC.
and SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in these accompanying notes are presented in thousands, except number of shares and per-share amounts.)
Note 1 — The Company
Description of the Business
PAVmed Inc 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 Company’s current operational activities are principally focused on the commercialization of EsoGuard and CarpX, while its development activities are focused on pursuing FDA approval and clearance of other lead products in our product portfolio pipeline, including EsoGuard IVD, PortIO, EsoCure and digital health technologies acquired by the Company’s majority-owned subsidiary Veris Health Inc.
The ability of the Company to generate revenue depends upon the Company’s ability to successfully advance the commercialization of EsoGuard and CarpX while also completing the development and the necessary regulatory approvals of its other products and services. There are no assurances, however, the Company will be able to obtain an adequate level of financial resources required for the long-term commercialization and development of its products and services.
The Company has financed its operations principally through public and private issuances of its common stock, preferred stock, common stock purchase warrants, and debt. The Company is subject to all of the risks and uncertainties typically faced by medical device and diagnostic companies that devote substantially all of their efforts to the commercialization of their initial product and services and ongoing research and development activities and conducting clinical trials. The Company expects to continue to experience recurring losses from operations and will continue to fund its operations with debt and equity financing transactions. Notwithstanding, however, with the cash on-hand as of the date hereof and other debt and equity committed sources of financing, the Company expects to be able to fund its operations and meet its financial obligations as they become due for the one year period from the date of the issue of the Company’s unaudited condensed consolidated financial statements, as included herein in this Quarterly Report on Form 10-Q for the period ended June 30, 2022.
| 8 |
Note 2 — Summary of Significant Accounting Policies
Significant Accounting Policies
The Company’s significant accounting policies are as disclosed in the Company’s annual 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 of PAVmed Inc. and Subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and applicable rules and regulations of the United States Securities and Exchange Commission (“SEC”), and include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The Company holds a majority-ownership interest and has controlling financial interest in each of: Lucid Diagnostics Inc., Veris Health Inc., and Solys Diagnostics Inc., with the corresponding noncontrolling interest included as a separate component of consolidated stockholders’ equity (deficit), including the recognition in the unaudited condensed consolidated statement of operations of a net loss attributable to the noncontrolling interest based on the respective minority-interest equity ownership of each majority-owned subsidiary. See Note 15, Noncontrolling Interest, for a discussion of each of the majority-owned subsidiaries noted above. The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions.
All amounts in the accompanying unaudited condensed consolidated financial statements and these notes thereto are presented in thousands of dollars, if not otherwise noted as being presented in millions of dollars, except for shares and per share amounts.
Use of Estimates
In preparing the unaudited condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and the determination of corresponding carrying value reserve, if any, and liabilities and the disclosure of contingent losses, as of the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Significant estimates in these (unaudited) condensed consolidated financial statements include those related to the estimated fair value of debt obligations, stock-based equity awards, intangible assets, and common stock purchase warrants. Other significant estimates include the estimated incremental borrowing rate, the provision or benefit for income taxes and the corresponding valuation allowance on deferred tax assets. Additionally, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows. On an ongoing basis, the Company evaluates its estimates and assumptions. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates.
| 9 |
Note 2 — Summary of Significant Accounting Policies - continued
Significant Accounting Policies - Continued
Leases
The Company adopted FASB ASC Topic 842, Leases, (“ASC 842”) effective December 31, 2021, with such adoption not having an effect on the Company’s consolidated financial statements.
All significant lease agreements and contractual agreements with embedded lease agreements are accounted for under the provisions of ASC 842, wherein, if the contractual arrangement: involves the use of a distinct identified asset; provides for the right to substantially all the economic benefits from the use of the asset throughout the contractual period; and provides for the right to direct the use of the asset. A lease agreement is accounted for as either a finance lease (generally with respect real estate) or an operating lease (generally with respect to equipment). Under both a finance lease and an operating lease, the Company recognizes as of the lease commencement date a lease right-of-use (“ROU”) asset and a corresponding lease payment liability.
A lease ROU asset represents the Company’s right to use an underlying asset for the lease term, and the lease liability represents its contractual obligation to make lease payments. The lease ROU asset is measured at the lease commencement date as the present value of the future lease payments plus initial direct costs incurred. The Company recognizes lease expense of the amortization of the lease ROU asset for an operating lease on a straight-line basis over the lease term; and for financing leases on a straight-line basis unless another basis is more representative of the pattern of economic benefit. The operating ROU asset also includes any lease incentives received for improvements to leased property, when the improvements are lessee-owned. Improvements to leased property that are lessor-owned, the Company includes amounts the Company incurred for the improvements as ROU assets which are amortized on a straight-line basis over the life of the lease.
The lease liability is measured at the lease commencement date with the discount rate generally based on the Company’s incremental borrowing rate (to the extent the lease implicit rate is not known nor determinable), with interest expense recognized using the interest method for financing leases.
Certain leases may include options to extend or terminate the agreement. The Company does not assume renewals in determination of the lease term unless the renewals are deemed to be reasonably certain at lease commencement. As well, an option to terminate is considered unless it is reasonably certain the Company will not exercise the option. The Company elected the practical expedient to not recognize a lease ROU asset and lease payment liability for leases with a term of twelve months or less (“short-term leases”), resulting in the aggregate lease payments being recognized on a straight line basis over the lease term. The Company’s leases with a commencement date prior to January 1, 2022 were short-term leases and therefore did not require recording a ROU asset or lease liability at December 31, 2021. Additionally, the Company elected the practical expedient to not separate lease and non-lease components.
| 10 |
Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued
Significant Accounting Policies - Continued
Fair Value Option (“FVO”) Election
Under a Securities Purchase Agreement dated March 31, 2022, the Company issued a Senior Secured Convertible Note dated April 4, 2022 - referred to herein as the “April 2022 Senior Convertible Note” - which is accounted under the “fair value option election” as discussed below.
Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivative and Hedging, (“ASC 815”), a financial instrument containing embedded features and /or options may be required to be bifurcated from the financial instrument host and recognized as separate derivative asset or liability, with the bifurcated derivative asset or liability initially measured at estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair value as of each reporting period balance sheet date.
Alternatively, FASB ASC Topic 825, Financial Instruments, (“ASC 825”) provides for the “fair value option” (“FVO”) election. In this regard, ASC 825-10-15-4 provides for the FVO election (to the extent not otherwise prohibited by ASC 825-10-15-5) to be afforded to financial instruments, wherein the financial instrument is initially measured at estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair value as of each reporting period balance sheet date, with changes in the estimated fair value recognized as other income (expense) in the statement of operations. The estimated fair value adjustment of the April 2022 Senior Convertible Note is presented in a single line item within other income (expense) in the accompanying unaudited condensed consolidated statement of operations (as provided for by ASC 825-10-50-30(b)). Further, as required by ASC 825-10-45-5, to the extent a portion of the fair value adjustment is attributed to a change in the instrument-specific credit risk, such portion would be recognized as a component of other comprehensive income (“OCI”) (for which there was no such adjustment with respect to the April 2022 Senior Convertible Note).
See Note 10, Financial Instruments Fair Value Measurements, with respect to the FVO election; and Note 11, Debt, for a discussion of the April 2022 Senior Convertible Note.
| 11 |
Note 3 — Revenue from Contracts with Customers
Revenue is recognized when the satisfaction of the performance obligation occurs, which is when the delivery of product and /or the provision of service is rendered, and is measured as the amount of estimated consideration expected to be realized. In the period ended June 30, 2022, the Company recognized revenue under the EsoGuard Commercialization Agreement, dated August 1, 2021, as discussed below.
EsoGuard Commercialization Agreement
The Company, through its majority-owned subsidiary, Lucid Diagnostics Inc., entered into the EsoGuard Commercialization Agreement, dated August 1, 2021, with its Commercial Laboratory Improvements Act (“CLIA”) certified commercial laboratory service provider, ResearchDx Inc. (“RDx”), an unrelated third-party. The EsoGuard Commercialization Agreement was on a month-to-month basis, and was terminated on February 25, 2022 upon the execution of an asset purchase agreement (“APA”) dated February 25, 2022, between LucidDx Labs Inc. (a wholly-owned subsidiary of Lucid Diagnostics Inc.) and RDx, with such agreement further discussed in Note 5, Asset Purchase Agreement and Management Services Agreement,.
Revenue Recognized
In
the six months ended June 30, 2022, the Company recognized total revenue of $
Cost of Revenue
The
cost of revenue recognized with respect to the revenue recognized under the EsoGuard Commercialization Agreement for the period January
1, 2022 to February 25, 2022 totaled $
| 12 |
Note 4 — Related Party Transactions
Case Western Reserve University and Physician Inventors - Amended CWRU License Agreement
Case Western Reserve University (“CWRU”) and each of the three physician inventors (“Physician Inventors”) of the intellectual property licensed under the amended and restated patent license agreement with CWRU, dated August 23, 2021 (the “Amended CWRU License Agreement”), each hold a minority equity ownership interest in Lucid Diagnostics Inc. The expenses incurred with respect to the Amended CWRU License Agreement and the three Physician Inventors, as classified in the accompanying consolidated statement of operations for the periods indicated are summarized as follows:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 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 | ||||||||||||||||
| Amended 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 | $ | $ | $ | $ | ||||||||||||
See Note 12, Stock-Based Compensation, for information regarding each of the “PAVmed Inc. 2014 Long-Term Incentive Equity Plan” and the separate “Lucid Diagnostics Inc 2018 Long-Term Incentive Equity Plan”; and Note 15, Noncontrolling Interest, for a discussion of Lucid Diagnostics Inc. and the corresponding noncontrolling interests.
Other Related Party Transactions
Lucid
Diagnostics Inc. previously entered into a consulting agreement with Stanley N. Lapidus, effective June 2020 with such consulting agreement
providing for compensation on a contractual rate per hour for consulting services provided. In July 2021, Mr. Lapidus was appointed as
Vice Chairman of the Board of Directors of Lucid Diagnostics Inc. Lucid Diagnostics Inc. recognized general and administrative expense
of $
Effective
June 2021, Veris Health Inc. entered into a consulting agreement with Andrew Thoreson, M.D. which provides for compensation on a contractual rate per hour for consulting services provided. Dr. Thoreson holds a partial ownership interest in the legal entity which holds a minority interest in Veris Health
Inc. Veris Health Inc. recognized
general and administrative expense of $
| 13 |
Note 5 — Asset Purchase Agreement and Management Services Agreement
Asset Purchase Agreement - ResearchDx Inc.
LucidDx Labs Inc., a wholly-owned subsidiary of Lucid Diagnostics Inc., entered into an asset purchase agreement (“APA”) dated February 25, 2022, with ResearchDx, Inc. (“RDx”), an unrelated third-party - “APA-RDx”. Under the APA-RDx, LucidDx Labs Inc. acquired certain assets from RDx which were combined with LucidDx Labs Inc. purchased and leased property and equipment to establish a Company-owned Commercial Lab Improvements Act (“CLIA”) certified, College of American Pathologists (“CAP”) accredited commercial clinical laboratory capable of performing the EsoGuard® Esophageal DNA assay, inclusive of DNA extraction, next generation sequencing (“NGS”) and specimen storage. Prior to February 25, 2022, RDx provided such laboratory services at its owned CLIA-certified, CAP-accredited clinical laboratory.
The total purchase price consideration payable under the APA-RDx is a face
value of $
Additionally,
the APA-RDx requires the Company to pay a total of $
The APA-RDx provides for each of an acceleration and a cancellation of the remaining unpaid installment payments, summarized as follows:
| ● | The payment of the remaining unpaid installment payments will be accelerated as immediately due and payable as of the date the “MSA-RDx” (as such agreement is discussed below) is either terminated by LucidDx Labs Inc. or if it is terminated by mutual agreement between LucidDx Labs Inc. and RDx. | |
| ● | The payment of the remaining unpaid installment payments will be cancelled if the MSA-RDx is terminated by LucidDx Labs Inc. for cause, defined as the occurrence of any one of: (i) a material breach by RDx which is not cured within thirty days of LucidDx Labs Inc. written notice; (ii) RDx becomes insolvent and /or bankrupt; or (ii) RDx fails to comply with applicable statutes, is barred from participating in federal health care programs, or by action of changes in law or regulation, or by action of judicial interpretation of law, or by judicial civil proceedings decisions. |
Management Services Agreement - Research Dx Inc
LucidDx
Labs Inc. and RDx entered into a separate management services agreement (“MSA-RDx”), dated and effective February 25, 2022,
with such agreement having a term of
| 14 |
Note 6 — Prepaid Expenses, Deposits, and Other Current Assets
Prepaid expenses and other current assets consisted of the following as of:
| June 30, 2022 | December 31, 2021 | |||||||
| Advanced payments to service providers and suppliers | $ | $ | ||||||
| Prepaid insurance | ||||||||
| Deposits | ||||||||
| EsoCheck cell collection supplies | ||||||||
| EsoGuard mailer supplies | ||||||||
| CarpX devices | ||||||||
| Total prepaid expenses, deposits and other current assets | $ | $ | ||||||
Note 7 — Leases
During the six months ended June 30, 2022, the Company entered into additional lease agreements that have commenced and are classified as operating leases and short-term leases, including for each of: a research and development facility; a commercial clinical laboratory; additional Lucid Test Centers; and for office space.
The Company’s future lease payments as of June 30, 2022, which are presented as operating lease liabilities, current portion and operating lease liabilities, less current portion on the Company’s unaudited condensed consolidated balance sheets are as follows:
| 2022 (remainder of year) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total lease payments | $ | |||
| Less: imputed interest | ( | ) | ||
| Present value of lease liabilities | $ |
Supplemental disclosure of cash flow information related to the Company’s cash and non-cash activities with its leases are as follows:
| Six Months Ended June 30, | ||||||||
| 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 June 30, 2022, the Company’s right-of-use assets from operating leases are $
| 15 |
Note 8 — Intangible Assets, net
Intangible assets, less accumulated amortization, consisted of the following as of:
Estimated Useful Life | June 30, 2022 | December 31, 2021 | ||||||||
| Defensive asset | $ | $ | ||||||||
| Laboratory licenses and certifications and laboratory information management software (“LIMSDx”) | ||||||||||
| Other | ||||||||||
| Total Intangible assets | ||||||||||
| Less Accumulated Amortization | ( | ) | ( | ) | ||||||
| Intangible Assets, net | $ | $ | ||||||||
The
defensive technology intangible asset was recognized by PAVmed Subsidiary Corp upon its acquisition of CapNostics, LLC, an unrelated
third-party, for total purchase consideration paid on the October 5, 2021 acquisition date of approximately $
As noted in Note 5, Asset Purchase Agreement and Management Services Agreement, the asset purchase agreement between the Company and ResearchDx Inc. (“APA-RDx”), is being accounted as asset acquisition. The intangible assets recognized under the APA-RDx are the laboratory licenses and certifications, inclusive of inclusive of a CLIA certification, CAP accreditation, and clinical laboratory licenses for five (5) U.S. States transfer to the Company from RDx, and a laboratory information management software (“LIMSDx”) perpetual-use royalty-free license granted under the APA-RDx, with such intangible asset having a useful life of twenty-four months commencing on the APA-RDx February 25, 2022 transaction date.
Amortization
expense of the intangible assets discussed above was $
| 2022 (remainder of year) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total | $ |
| 16 |
Note 9 — Commitment and Contingencies
Legal Proceedings
Delaware Court of Chancery Complaint
On
November 2, 2020, a stockholder of the Company, on behalf of himself and other similarly situated stockholders, filed a complaint in
the Delaware Court of Chancery alleging broker non-votes were not properly counted in accordance with the Company’s bylaws at the
Company’s Annual Meeting of Stockholders on July 24, 2020, and, as a result, asserted certain matters deemed to have been approved
were not so approved (including matters relating to the increase in the size of the PAVmed Inc. 2014 Long-Term Incentive Equity Plan
and the PAVmed Inc. Employee Stock Purchase Plan). The relief sought under the complaint includes certain corrective actions by the Company,
but did not seek any specific monetary damages. The Company did not believe it was clear the prior approval of these matters was invalid
or otherwise ineffective. However, to avoid any uncertainty and the expense of further litigation, on January 5, 2021, the Company’s
board of directors determined it would be advisable and in the best interests of the Company and its stockholders to re-submit these
proposals to the Company’s stockholders for ratification and/or approval. In this regard, the Company held a special meeting of
stockholders on March 4, 2021, at which such matters were ratified and approved. The parties have reached agreement on a proposed Settlement
Term Sheet Agreement, dated January 28, 2021, to settle the complaint, the terms of which do not contemplate payment of monetary damages
to the putative class in the proceeding. In connection with the foregoing, on August 3, 2022, the parties agreed that plaintiff’s
counsel would not seek an award from the Court in excess of $
Benchmark Investments, Inc. / Benchmark Investments LLC
On December 23, 2020, Benchmark Investments, Inc. filed a complaint against the Company in the U.S. District Court of the Southern District of New York alleging the registered direct offerings of shares of common stock of the Company completed in December 2020 were in violation of provisions set forth in an engagement letter between the Company and Kingswood Capital Markets, a “division” of Benchmark Investments, Inc. On December 16, 2021, the court granted PAVmed’s motion to dismiss the case for lack of subject matter jurisdiction. On February 7, 2022, Benchmark Investments LLC, which claimed to be a successor to Benchmark Investments, Inc., filed a new complaint in the Supreme Court of the State of New York, New York County, asserting claims similar to those in the federal action, and adding to its allegations that financings conducted by the Company in January 2021 and February 2021 also violated the Company’s engagement letter with Kingswood Capital Markets. The Company has made a motion to dismiss this complaint for Benchmark Investments LLC’s lack of standing, which motion is pending. In any event, the Company disagrees with the allegations set forth in the complaint and intends to vigorously contest the complaint.
Other Matters
In the ordinary course of 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.
| 17 |
Note 10 — Financial Instruments Fair Value Measurements
Recurring Fair Value Measurements
The fair value hierarchy table for the reporting date 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 | |||||
| June 30, 2022 | ||||||||
| Senior Secured Convertible Note - April 2022 | $ | $ | $
|
$
| ||||
| Totals | $ | $ | $
|
$
| ||||
| (1) |
As
discussed in Note 11, Debt, the Company issued a Senior Secured Convertible Note dated April 4, 2022, with an initial $
The estimated fair value of the financial instruments classified within the Level 3 category was determined using both observable inputs and unobservable inputs. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs.
The estimated fair value of the April 2022 Senior Convertible Note as of each of April 4, 2022 and June 30, 2022, were computed using a Monte Carlo simulation of the present value of its cash flows using a synthetic credit rating analysis and a required rate-of-return, using the following assumptions:
April 2022 SeniorConvertible Note: April 4, 2022 | April 2022 Senior Convertible Note: | |||||||
| Fair Value | $ | $ | ||||||
| Face value principal payable | $ | $ | ||||||
| Required rate of return | % | % | ||||||
| Conversion Price | $ | $ | ||||||
| Value of common stock | $ | $ | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Risk free rate | % | % | ||||||
| Dividend yield | % | % | ||||||
The estimated fair values reported utilized the Company’s common stock price along with certain Level 3 inputs (as discussed above), in the development of Monte Carlo simulation models, discounted cash flow analyses, and /or Black-Scholes valuation models. The estimated fair values are subjective and are affected by changes in inputs to the valuation models /analyses, including the Company’s common stock price, the Company’s dividend yield, the risk-free rates based on U.S. Treasury security yields, and certain other Level-3 inputs including, assumptions regarding the estimated volatility in the value of the Company’s common stock price. Changes in these assumptions can materially affect the estimated fair values.
| 18 |
Note 11 — Debt
The Company entered into a Securities Purchase Agreement (“SPA”) dated March 31, 2022, with an accredited institutional
investor (“Investor”, “Lender”, and /or “Holder”), wherein, the Company agreed to sell, and the Investor
agreed to purchase an aggregate of $
Under
the SPA dated March 31, 2022, the Company issued a Senior Secured Convertible Note dated April 4, 2022, referred to herein as the “April
2022 Senior Convertible Note”, with such note having a $
The
April 2022 Senior Convertible Note proceeds were $
During
the period from April 4, 2022 to October 3, 2022, the Company is required to pay interest expense only (on the $
Commencing
October 4, 2022, and then on each of the successive first and tenth trading day of each month thereafter through to and including
April 1, 2024 (each referred to as an “Installment Date”); and on the
In addition to the Installment Amount repayments, the Holder may elect to accelerate the conversion of future Installment Amount repayments, and interest thereon, subject to certain restrictions, as defined, utilizing the then current conversion price of the most recent Installment Date conversion price.
Subject
to certain conditions being met or waived, from time to time, one or more additional closings may occur, for up to the remaining $
Additionally,
effective March 31, 2023, the Investor may by written notice elect to require the Company to issue additional notes of up to $
| 19 |
Note 11 — Debt - continued
The payment of all amounts due and payable under the April 2022 Senior Convertible Note is guaranteed by the Company and its wholly-owned and majority-owned subsidiaries, except for Lucid Diagnostics Inc and its wholly-owned subsidiaries; and the obligations under the April 2022 Senior Convertible Note are secured by all of the assets of the Company and each guarantor, except only up to 9.99% of the shares of common stock of Lucid Diagnostics Inc. held by PAVmed Inc. are pledged to secure the indebtedness under the April 2022 Senior Convertible Note.
The Company is subject to certain customary affirmative and negative covenants regarding the rank of the notes, along with the incurrence of further indebtedness, the existence of liens, the repayment of indebtedness and the making of investments, the payment of cash in respect of dividends, distributions or redemptions, the transfer of assets, the maturity of other indebtedness, and transactions with affiliates, among other customary matters.
In
connection with the waiver dated August 9, 2022, the Company and the Investor also amended the April 2022 Senior Convertible Note to
permit the Investor to convert up to $
The fair value and face value principal of outstanding of the April 2022 Senior Convertible Note as of June 30, 2022 is as follows:
| Contractual Maturity Date | Stated Interest Rate | Conversion Price per Share | Face Value Principal Outstanding | Fair Value | ||||||||||||||
| April 2022 Senior Convertible Note | % | $ | | $ | $ | |||||||||||||
| Balance as of June 30, 2022 | $ | $ | ||||||||||||||||
The
Company did not have convertible debt outstanding at December 31, 2021. During the six month period ended June 30, 2021, the Company
recognized debt extinguishment losses of approximately $
The April 2022 Senior Convertible Note is accounted for under the ASC 825-10-15-4 fair value option (“FVO”) election, wherein, the financial instrument is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date with the resulting fair value adjustment recognized as other income (expense) in the (unaudited) condensed consolidated statement of operations. In this regard, as provided for by ASC 825-10-50-30(b), the estimated fair value adjustment is presented as a single line item within other income (expense) in the accompanying consolidated statement of operations. See Note 10, Financial Instruments Fair Value Measurements, for a further discussion of fair value assumptions.
| 20 |
Note 12 — Stock-Based Compensation
PAVmed Inc. 2014 Long-Term Incentive Equity Plan
The PAVmed Inc. 2014 Long-Term Incentive Equity Plan (the “PAVmed Inc. 2014 Equity Plan”) is designed to enable PAVmed Inc. to offer employees, officers, directors, and consultants, as defined, an opportunity to acquire shares of common stock of PAVmed Inc. 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 June 30, 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 June 30, 2022.
PAVmed Inc. 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 June 30, 2022(3) | $ | $ | ||||||||||||||
| Vested and exercisable stock options at June 30, 2022 | $ | $ | ||||||||||||||
| (1) | |
| (2) | |
| (3) |
PAVmed Inc. 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 June 30, 2022(1) | $ | |||||||
| (1) |
| 21 |
Note 12 — Stock-Based Compensation - continued
Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan
The Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan (“Lucid Diagnostics Inc. 2018 Equity Plan”) is separate and apart from the PAVmed Inc. 2014 Equity Plan discussed above. The Lucid Diagnostics Inc. 2018 Equity Plan is designed to enable Lucid Diagnostics Inc. to offer employees, officers, directors, and consultants, as defined, an opportunity to acquire shares of common stock of Lucid Diagnostics Inc. The types of awards that may be granted under the Lucid Diagnostics Inc. 2018 Equity Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the Lucid Diagnostics Inc. board of directors.
A total of 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 June 30, 2022, with the share reservation not diminished by a total of Lucid Diagnostics Inc. stock options and restricted stock awards granted outside the Lucid Diagnostics Inc. 2018 Equity Plan.
Lucid Diagnostics Inc. 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 June 30, 2022(2) | $ | |||||||||||
| Vested and exercisable stock options at June 30, 2022 | $ | |||||||||||
| (1) | |
| (2) |
Lucid Diagnostics Inc. 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 June 30, 2022(1) | $ | |||||||
| (1) |
On January 7, 2022, restricted stock awards were granted under the Lucid Diagnostics Inc 2018 Equity Plan, with such , 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.
| 22 |
Note 12 — Stock-Based Compensation - continued
Consolidated Stock-Based Compensation Expense
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 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 4, Related Party Transactions); and stock options and restricted stock awards granted to employees of PAVmed Inc. and non-employee consultants under the Lucid Diagnostics Inc. 2018 Equity Plan. The stock-based compensation expense recognized by Lucid Diagnostics Inc. for both the PAVmed Inc. 2014 Equity Plan and the Lucid Diagnostics Inc. 2018 Equity Plan, with respect to stock options and restricted stock awards as discussed above, for the periods indicated, was as follows:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 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 | $ | $ | $ | $ | ||||||||||||
| Unrecognized Expense | Weighted Average Remaining Service Period (Years) | |||||||
| PAVmed Inc. 2014 Equity Plan | ||||||||
| Stock Options | $ | |||||||
| Restricted Stock Awards | $ | |||||||
| Lucid Diagnostics Inc. 2018 Equity Plan | ||||||||
| Stock Options | $ | |||||||
| Restricted Stock Awards | $ | |||||||
| 23 |
Note 12 — Stock-Based Compensation - continued
Stock-based compensation expense recognized with respect to stock options granted under the PAVmed Inc. 2014 Equity Plan was based on a weighted average estimated fair value of such stock options of $0.74 per share and $3.32 per share during the periods ended June 30, 2022 and 2021, respectively, calculated using the following weighted average Black-Scholes valuation model assumptions:
Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Expected term of stock options (in years) | ||||||||
| Expected stock price volatility | % | % | ||||||
| Risk free interest rate | % | % | ||||||
| Expected dividend yield | % | % | ||||||
Stock-based compensation expense recognized with respect to stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan was based on a weighted average estimated fair value of such stock options of $ per share during the year ended June 30, 2022. There were no stock-based awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan during the period ended June 30, 2021. The stock-based compensation was calculated using the following weighted average Black-Scholes valuation model assumptions:
Six Months Ended June 30, | ||||
| 2022 | ||||
| Expected term of stock options (in years) | ||||
| Expected stock price volatility | % | |||
| Risk free interest rate | % | |||
| Expected dividend yield | % | |||
PAVmed Inc. Employee Stock Purchase Plan (“ESPP”)
A
total of shares and shares of common stock of the Company were purchased for proceeds of approximately $
Lucid Diagnostics, Inc Employee Stock Purchase Plan (“ESPP”)
The Lucid Diagnostics Inc Employee Stock Purchase Plan (“Lucid Diagnostics Inc ESPP”), initial six-month stock purchase period is April 1, 2022 to September 30, 2022. The Lucid Diagnostics Inc. ESPP share purchase dates are March 31 and September 30. The Lucid Diagnostics Inc. ESPP has a total reservation of shares of common stock of Lucid Diagnostics Inc. for which all shares are available-for-issue as of June 30, 2022.
| 24 |
Note 13 — Preferred Stock
The
Series B Convertible Preferred Stock dividends are
The
Series B Convertible Preferred Stock dividends are recognized as a dividend payable only upon the dividend being declared payable by
the Company’s board of directors. In this regard, in the six months ended June 30, 2022, the Company’s board-of-directors
declared Series B Convertible Preferred Stock dividends of an aggregate of approximately $
Subsequent
to June 30, 2022, in July 2022, the Company’s board-of-directors declared a Series B Convertible Preferred Stock dividend earned
as of June 30, 2022 and payable as of July 1, 2022, of approximately $
Note 14 — Common Stock and Common Stock Purchase Warrants
Common Stock
In June 2022, the Company received shareholder approval to issue up to million shares of its common stock, an increase of million shares.
During
the six months ended June 30, 2022, shares of common stock of the
Company were issued upon exercise of stock options for cash of approximately $
Common Stock Purchase Warrants
As
of June 30, 2022 and December 31, 2021, Series Z Warrants outstanding totaled
As
of December 31, 2021, Series W Warrants outstanding totaled
| 25 |
Note 15 — Noncontrolling Interest
The noncontrolling interest (“NCI”) included as a component of consolidated total stockholders’ equity is summarized for the periods indicated as follows:
| June 30, 2022 | December 31, 2021 | |||||||
| NCI – equity (deficit) – beginning of period | $ | $ | ( | ) | ||||
| Investment in Veris Health Inc. | ||||||||
| Net loss attributable to NCI - Lucid Diagnostics Inc. | ( | ) | ( | ) | ||||
| Net loss attributable to NCI – Solys Diagnostics Inc. | ( | ) | ||||||
| Net loss attributable to NCI – Veris Health Inc. | ( | ) | ||||||
| Impact of subsidiary equity transactions | ||||||||
| Lucid Diagnostics Inc. 2018 Equity Plan stock option exercise | ||||||||
| Stock-based compensation expense - Lucid Diagnostics Inc. 2018 Equity Plan | ||||||||
| Stock-based compensation expense - Veris Health Inc. 2021 Equity Plan | ||||||||
| NCI – equity (deficit) – end of period | $ | $ | ||||||
The consolidated NCI presented above is with respect to the Company’s consolidated majority-owned subsidiaries, inclusive of: Lucid Diagnostics Inc., Veris Health Inc. and Solys Diagnostics Inc., as a component of consolidated total stockholders’ equity as of June 30, 2022 and December 31, 2021; and the recognition of a net loss attributable to the NCI in the unaudited condensed consolidated statement of operations with respect to Lucid Diagnostics Inc. and Solys Diagnostics Inc. for the three and six months ended June 30, 2022 and 2021; and with respect to Veris Health Inc. for the three and six months ended June 30, 2022 and from the period of May 28, 2021 to June 30, 2021 (as the Veris Health Inc. inception date was May 28, 2021).
Lucid Diagnostics Inc.
As
of June 30, 2022, there were shares of common stock of Lucid Diagnostics Inc. issued and outstanding, of which, PAVmed Inc.
holds
On
March 28, 2022, Lucid Diagnostics, Inc. entered into a committed equity facility with an affiliate of Cantor Fitzgerald (“Cantor”).
Under the terms of the committed equity facility, Cantor has committed to purchase up to $
Veris Health Inc.
As
of June 30, 2022, there were shares of common stock of Veris Health Inc. issued and outstanding, of which PAVmed Inc. holds
an
Solys Diagnostics Inc.
As
of each of June30, 2022 and December 31, 2021, there were shares of common stock of Solys Diagnostics Inc. issued and outstanding,
of which PAVmed Inc. holds a
| 26 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Numerator | ||||||||||||||||
| Net loss - before noncontrolling interest | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss attributable to noncontrolling interest | ||||||||||||||||
| Net loss - as reported, attributable to PAVmed Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Series B Convertible Preferred Stock dividends – earned | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss attributable to PAVmed Inc. common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator | ||||||||||||||||
| Weighted average common shares outstanding, basic and diluted | ||||||||||||||||
| Loss per share | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
| Net loss - as reported, attributable to PAVmed Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss attributable to PAVmed Inc. common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The common stock equivalents have been excluded from the computation of diluted weighted average shares outstanding as their inclusion would be anti-dilutive, are as follows:
The Series B Convertible Preferred Stock dividends earned as of the each of the respective periods noted, are included in the calculation of basic and diluted net loss attributable to PAVmed Inc. common stockholders for each respective period presented. Notwithstanding, the Series B Convertible Preferred Stock dividends are recognized as a dividend payable only upon the dividend being declared payable by the Company’s board of directors.
Basic weighted-average number of shares of common stock outstanding for the periods ended June 30, 2022 and 2021 include the shares of the Company issued and outstanding during such periods, each on a weighted average basis. The basic weighted average number of shares of common stock outstanding excludes common stock equivalent incremental shares, while diluted weighted average number of shares outstanding includes such incremental shares. However, as the Company was in a loss position for all periods presented, basic and diluted weighted average shares outstanding are the same, as the inclusion of the incremental shares would be anti-dilutive. The common stock equivalents excluded from the computation of diluted weighted average shares outstanding are as follows:
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| Stock options and restricted stock awards | ||||||||