|9 Months Ended|
Sep. 30, 2019
|Subsequent Events [Abstract]|
Note 10 — Subsequent Events
Senior Secured Convertible Note - November 2019
On November 3, 2019, PAVmed Inc. entered into a Securities Purchase Agreement (“SPA”) with two institutional investors, and pursuant to the SPA, on November 4, 2019 the Company consummated the sale of two series of Senior Secured Convertible Notes in a private placement with a $14.0 million aggregate face value principal referred to herein as the “November 2019 Senior Convertible Notes”. As discussed below, the November 2019 Senior Convertible Notes were further divided in a Series A and Series B, each with a face value principal of $7.0 million. The Series A and Series B Senior Convertible Notes were issued with an original issue discount “OID” aggregate total of $700,000 for each note series. With respect to the Series A Senior Convertible Note, the investors delivered to the Company cash proceeds of $6.3 million at closing. Additionally, the Company paid an advisory fee of $409,500 to the placement agent, representing 6.5% of the closing cash proceeds.
The SPA contains certain representations and warranties, covenants, and indemnities customary for similar transactions. The Notes are senior secured obligations of the company secured by a lien on all assets. One of the aforementioned institutional investor is also party to a previous Securities Purchase Agreement with the Company dated December 27, 2018, pursuant to which, among other things the Company issued to the existing investor the Senior Secured Convertible Note issued December 27, 2018 as discussed above in Note 6, Debt.
With respect to the Series B Senior Convertible Note, the investors delivered to the Company secured promissory notes with a total principal amount of $6.3 million, with such promissory notes referred to herein as the “Investor Notes”. Until such time that the Investor Notes are paid in cash to the Company, they will be considered restricted and are prohibited from being converted into common shares of the Company. The Series B Investor Notes are subject to optional prepayment by each investor at any time at the option of the investor, and mandatory prepayment, at the Company’s option, subject to certain equity conditions including, among other conditions, the effectiveness of a resale registration statement. If the respective Series B Investor Notes are each subsequently satisfied by payment in cash, the Company will incur additional financial advisory fees of $409,500.
A bi-monthly principal repayment and corresponding interest payment will be due commencing March 30, 2020, and then on each of the successive 15th day of the month and the last trading day of the month, and on the maturity date (each, an “Installment Date”). On each bi-monthly Installment Date, the Company will be required to settle a principal repayment totaling $189,190 for the Series A notes, and to the extent the company has received full cash payment for the Investor Notes, $189,190 for the Series B notes, together with interest thereon, referred to herein as the “Installment Amount”, which shall be satisfied in shares of common stock of the Company, subject to customary equity conditions (including minimum price and volume thresholds), at 100% of the Installment Amount (an “Installment Conversion”), or otherwise (or at our option, in whole or in part) in cash at 115% of the Installment Amount (an “Installment Redemption”). Generally, an Installment Amount will be automatically deferred to the extent due in respect of restricted principal under the Series B Notes until the corresponding portion of the Investor Note has been prepaid to the Company in cash Under certain conditions, the Investor or the Company, may offset the Series B notes against the Investor notes.
The Series A Convertible Note and the Series B Convertible Note each have a stated interest rate of 7.875% per annum, except the restricted amounts under each Series B Convertible Note have an interest rate of 3.0% per annum until becoming unrestricted as describe above, then such interest rate is 7.875%.
The Series A Convertible Note and the unrestricted amount of the Series B Convertible Note is convertible, at the option of the noteholder, into shares of common stock of the Company at a conversion price of $1.60 per share, with such conversion price subject to standard adjustments in the event of any stock split, stock dividend, stock combination, recapitalization or other similar transaction.
Solys Diagnostics Inc.
On October 7, 2019, PAVmed Inc. formed Solys Diagnostics Inc. (DE) with authorization to issue 50 million shares of its common stock, par value $0.001 per share and 20 million shares of its preferred stock, par value $0.001 per share. Concurrent with its formation, Solys Diagnostics Inc. issued 8.5 million shares of its common stock to PAVmed, Inc. and also immediately acquired a license agreement from Liquid Sensing, Inc., a subsidiary of Airware, Inc., each an unrelated-third-party, in exchange for 1.5 million shares of Solys Diagnostics Inc. common stock issued to Airware, Inc., and 200,000 shares of Solys Diagnostics Inc. common shares issued to a unrelated-third-party consultant. Airware Inc. equity interests have certain anti-dilution rights under limited circumstances and 810,810 shares of Solys Diagnostics Inc. common stock issued to Airware Inc. are subject to certain milestone vesting restrictions. PAVmed Inc. and Airware Inc. have entered into a shareholder’s agreement which, among other customary terms, limits certain transfers of their respective ownership interests in Solys Diagnostics Inc.
The exclusive worldwide licensing agreement acquired from Liquid Sensing, Inc. is for its six issued and one pending U.S. patents covering a nondispersive infrared (NDIR) laser proprietary technology for the non-invasive detection of glucose and other substances such as electrolytes in tissue within the inpatient (e.g. hospital) field of use. Pursuant to the licensing agreement, Solys Diagnostics Inc. will immediately advance the technology toward an established accuracy milestone for blood glucose monitoring within the licensed field of use. Upon achievement of the accuracy milestone, it is expected Solys Diagnostics Inc. will then pursue a full regulatory and development plan while also seeking to maximize the value of this proprietary technology with potential strategic partners or acquirers in the blood glucose monitoring market. If commercialized by Solys Diagnostics Inc., Liquid Sensing Inc. has the right to collect future royalties on revenues related to the product developed for commercial use. Liquid Sensing Inc. has granted a 15 percent equity interest in its company to PAVmed, Inc. with a portion of the shares issued being subject to certain performance vesting restrictions.
Except as otherwise noted herein, the Company has evaluated subsequent events through the date of filing of this Quarterly Report on Form 10-Q and determined there to be no further events requiring adjustments to the unaudited condensed unaudited condensed consolidated financial statements and /or disclosures therein.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef