Annual report pursuant to Section 13 and 15(d)

Preferred Stock

v3.19.1
Preferred Stock
12 Months Ended
Dec. 31, 2018
Equity [Abstract]  
Preferred Stock

Note 13 — Preferred Stock

 

The Company is authorized to issue 20 million shares of its preferred stock, par value of $0.001 per share, with such designation, rights, and preferences as may be determined from time-to-time by the Company’s board of directors.

 

As discussed below, as of December 31, 2018 and 2017, the following shares of preferred stock were issued and outstanding: 1,069,941 and 0 shares of Series B Convertible Preferred Stock (classified in permanent equity), respectively, 0 and 249,667 shares of Series A Convertible Preferred Stock (classified in temporary equity), respectively, and 0 and 357,259 shares of Series A-1 Convertible Preferred Stock (classified in permanent equity), respectively.

 

Previously, a total of 422,838 shares of Series A Convertible Preferred Stock and 422,838 Series A Warrants were issued in the “Series A Preferred Stock Units private placement” on the three separate closing dates in the three months ended March 31, 2017; and, 125,000 shares of Series A-1 Convertible Preferred Stock and 125,000 Series A-1 Warrants were issued in the “Series A-1 Preferred Stock Units private placement” on the August 4, 2017 close date - as each such Preferred Stock Units private placement transaction is discussed below.

 

On November 17, 2017, the “Series A Exchange Offer” was completed, wherein, 1.5 shares of Series A-1 Convertible Preferred Stock were issued-upon-exchange of one share of Series A Convertible Preferred Stock, and one Series A-1 Warrant was issued-upon-exchange of one Series A Warrant, with such exchanges referred to as the “Series A Exchange Offer” and the “November 17, 2017 Exchange Date”. The Series A Exchange Offer was offered to all 28 holders and accepted by 13 holders of the Series A Convertible Preferred Stock and Warrants. See Note 11, Financial Instruments Fair Value Measurements, for further detail regarding the November 17, 2017 Series A Exchange Offer.

 

On the November 17, 2017 Exchange Date, a total of 232,259 shares of Series A-1 Convertible Preferred Stock were issued-upon-exchange of 154,837 shares of Series A Convertible Preferred Stock and a total of 154,837 Series A-1 Warrants were issued-upon-exchange of 154,837 Series A Warrants. Additionally, in November and December 2017, a total of 18,334 shares of Series A Convertible Preferred Stock were converted into a total of 22,093 shares of common stock of the Company.

 

As of December 31, 2017, there were 249,667 shares of Series A Convertible Preferred Stock (classified in temporary equity), 357,259 shares of Series A-1 Convertible Preferred Stock (classified in permanent equity), 268,001 Series A Warrants, and 279,837 Series A-1 Warrants, each issued and outstanding.

 

On March 15, 2018, the “Series A and Series A-1 Exchange Offer” was completed, wherein, two shares of Series B Convertible Preferred Stock were issued-upon-exchange of one share of Series A Convertible Preferred Stock, and five Series Z Warrants were issued-upon-exchange of one Series A Warrant; and, 1.33 shares of Series B Convertible Preferred Stock were issued-upon-exchange of one share of Series A-1 Convertible Preferred Stock, and five Series Z Warrants were issued-upon-exchange of one Series A-1 Warrant. Collectively, such exchanges are referred to as the “Series A and Series A-1 Exchange Offer” and the “March 15, 2018 Exchange Date”. The Series A and Series A-1 Exchange Offer was offered to and accepted by all holders of the Series A Convertible Preferred Stock and Series A Warrants and the Series A-1 Convertible Preferred Stock and Series A-1 Warrants. See Note 11, Financial Instruments Fair Value Measurements, for further detail regarding the March 15, 2018 Series A and Series A-1 Exchange Offer.

 

On the March 15, 2018 Exchange Date: (i) a total of 975,568 shares of Series B Convertible Preferred Stock were issued-upon-exchange, including 499,334 shares of Series B Convertible Preferred Stock issued-upon-exchange of 249,667 shares of Series A Convertible Preferred Stock and 476,234 shares of Series B Convertible Preferred Stock issued-upon-exchange of 357,259 shares of Series A-1 Convertible Preferred Stock; and, (ii) a total of 2,739,190 Series Z Warrants were issued-upon-exchange, including 1,340,005 Series Z Warrants issued-upon-exchange of 268,001 Series A Warrants and 1,399,185 Series Z Warrants issued-upon-exchange of 279,837 Series A-1 Warrants.

 

As a result of the Series A and Series A-1 Exchange Offer, as of the March 15, 2018 Exchange Date, there were no issued and outstanding shares of Series A Convertible Preferred Stock and Series A Warrants, nor shares of Series A-1 Convertible Preferred Stock and Series A-1 Warrants, as each were fully exchanged-upon-issue of shares of Series B Convertible Preferred Stock and Series Z Warrants, respectively. Additionally, each of the corresponding Series A Warrants derivative liability and the Series A Convertible Preferred Stock conversion option derivative liability were each fully extinguished-upon-exchange as of the March 15, 2018 Exchange Date of the Series A and Series A-1 Exchange Offer. See Note 11, Financial Instruments Fair Value Measurements, for further detail regarding each such derivative liability.

 

Series B Convertible Preferred Stock

 

As discussed above, as of December 31, 2018, 1,069,941 shares of Series B Convertible Preferred Stock (classified in permanent equity) were issued and outstanding, including: 975,568 shares issued-upon-exchange in the March 15, 2018 Exchange Offer, as such exchange offer is discussed above, 33,325 shares of Series B Convertible Preferred Stock converted into a corresponding number of shares of common stock of the Company in July 2018, at the holders election, and a total of 127,698 shares issued in settlement of the aggregate Series B Convertible Preferred Stock dividend payouts, as discussed below.

 

The Series B Convertible Preferred Stock has a par value of $0.001 per share, no voting rights, a stated value of $3.00 per share, and is immediately convertible upon its issuance. At the holders’ election, a share of Series B Convertible Preferred Stock is convertible into a number of shares of common stock of the Company at a common stock conversion exchange factor equal to a numerator and denominator of $3.00, with each such numerator and denominator not subject to further adjustment, except for the effect of stock dividends, stock splits or similar events affecting the Company’s common stock. The Series B Convertible Preferred Stock shall not be redeemed for cash and under no circumstances shall the Company be required to net cash settle the Series B Convertible Preferred Stock. The Series B Convertible Preferred Stock is equity-classified and the initial 975,568 shares issued-upon-exchange were measured at estimated fair value on the March 15, 2018 Exchange Date. See Note 11, Financial Instruments Fair Value Measurements, for a discussion of the issue date estimated fair value of the Series B Convertible Preferred Stock.

 

The Series B Convertible Preferred Stock provides for dividends at a rate of 8% per annum based on the $3.00 per share stated value of the Series B Convertible Preferred Stock, with such dividends compounded quarterly, accumulate, and are payable in arrears upon being declared by the Company’s board of directors. The Series B Convertible Preferred Stock dividends from April 1, 2018 through October 1, 2021 are payable-in-kind (“PIK”) in additional shares of Series B Convertible Preferred Stock. The dividends may be settled after October 1, 2021, at the option of the Company, through any combination of the issuance of additional Series B Convertible Preferred Stock, shares of common stock, and /or cash payment. The Series B Convertible Preferred Stock dividends are included in the calculation of basic and diluted net loss attributable to PAVmed Inc. common stockholders as applicable for each of the periods presented.

 

To-date through December 31, 2018, the Company’s board of directors have declared Series B Convertible Preferred Stock dividend payment of earned but unpaid dividends as of September 30, 2018, payable as of October 1, 2018, of an aggregate of $382,920, with such dividend payment settled by the issue of an additional 127,698 shares of Series B Convertible Preferred Stock in accordance with the PAVmed Inc. Certificate of Designation of Preferences, Rights, and Limitations of Series B Convertible Preferred Stock (“Series B Convertible Preferred Stock Certificate of Designation”).

 

The previous Series B Convertible Preferred Stock dividend payable as of July 1, 2018 of earned but unpaid dividends as of June 30, 2018, was inclusive of $243,994 of total dividends related to the previously held and exchanged respective shares of Series A and Series A-1 Convertible Preferred Stock, each earned through the March 15, 2018 Exchange Date, and, upon-exchange, such dividend balance was transferred to the respective holders’ Series B Convertible Preferred Stock dividend balances.

 

As of December 31, 2018, Series B Convertible Preferred Stock dividends of $64,196 were cumulatively earned, unpaid, accumulated, and in arrears, as the Company’s board of directors had not declared such dividends payable as of December 31, 2018, and, therefore, were not recognized as a dividend payable liability in the accompanying consolidated balance sheet. Subsequently, in January 2019, the Company’s board-of-directors declared a Series B Convertible Preferred Stock dividend payment of earned but unpaid dividends as of December 31, 2018, payable as of January 1, 2019, of $64,196, with such dividend payment settled by the issue of an additional 21,413 shares of Series B Convertible Preferred Stock in accordance with the Series B Convertible Preferred Stock Certificate of Designation.

 

Series A Preferred Stock Units Private Placement

 

On January 26, 2017, the Company entered into a Securities Purchase Agreement, wherein an aggregate of $3,000,000 of Series A Preferred Stock Units may be issued at a price of $6.00 per unit in a private placement transaction (“Series A Preferred Stock Units private placement”). At the Series A Preferred Stock Units private placement initial closing on January 26, 2017, and at subsequent closings on January 31, 2017 and March 8, 2017, a total of 422,838 Series A Preferred Stock Units were issued for aggregate gross proceeds of approximately $2.5 million and net proceeds of approximately $2.2 million, after payment of placement agent fees and closing costs.

 

The Series A Preferred Stock Unit was comprised of one share of Series A Convertible Preferred Stock and one Series A Warrant. The Series A Convertible Preferred Stock and Series A Warrants were immediately separable upon their issuance, and became convertible and exercisable, respectively, on May 21, 2017 upon stockholder approval of the Series A Preferred Stock Units private placement, with such approval obtained in accordance with Nasdaq Stock Market Rule 5635(d).

 

At the election of their respective holder, a share of Series A Convertible Preferred Stock was convertible into a number of shares of common stock of the Company at a prescribed common stock exchange factor, and, a Series A Warrant was exercisable for one share of common stock of the Company, or could have been exchanged for four Series X Warrants, with each such Series X Warrant exercisable for one share of common stock of the Company. See Note 14, Stockholders Equity and Common Stock Purchase Warrants, for further information with respect to the Series A Warrants, and the Series X Warrants.

 

The Series A Warrant and the Series A Convertible Preferred Stock conversion option were each determined to be a derivative liability under FASB ASC 815, as discussed below. The issuance of the Series A Preferred Stock Units resulted in the recognition of a loss of $3,124,285, resulting from the aggregate initial fair value of each of the Series A Warrant and the Series A Convertible Preferred Stock conversion option derivative liability, being in excess of the gross proceeds of the Series A Preferred Stock Units private placement, with such excess amounting to $2,735,657, recognized as a current period expense, along with offering costs of $388,628, which were also recognized as a current period expense, as follows:

 

   

Series A

Preferred

Stock Units
Issue Dates
(Aggregate)

 
Series A Preferred Stock Units issuance gross proceeds   $ 2,537,012  
Less: Series A Warrants derivative liability initial fair value     (4,050,706 )
Less: Series A Convertible Preferred Stock conversion option derivative liability initial fair value     (1,221,963 )
Excess of initial fair value of derivative liabilities over gross proceeds     (2,735,657 )
Offering costs of the issuance of the Series A Preferred Stock Units     (388,628 )
Loss on issuance of Series A Preferred Stock Units   $ (3,124,285 )

 

See Note 11, Financial Instruments Fair Value Measurements, for information with respect to the initial issue date estimated fair value of each of the Series A Warrants derivative liability and the Series A Convertible Preferred Stock conversion option derivative liability.

 

Series A Convertible Preferred Stock

 

As discussed above, as of December 31, 2017, there were 249,667 shares of Series A Convertible Preferred Stock issued and outstanding, and, as of the March 15, 2018 Exchange Date of the Series A and Series A-1 Exchange Offer, there were no issued and outstanding shares of Series A Convertible Preferred Stock, and the corresponding Series A Convertible Preferred Stock conversion option derivative liability was fully extinguished-upon-exchange for the Series B Convertible Preferred Stock. See above for further information regarding the Series B Convertible Preferred Stock issued-upon-exchange of the Series A Convertible Preferred Stock, and, see Note 11, Financial Instruments Fair Value Measurements, for further detail regarding both the March 15, 2018 Series A and Series A-1 Exchange Offer and the November 17, 2017 Series A Exchange Offer.

 

The Series A Convertible Preferred Stock, classified in temporary equity in the consolidated balance sheet, had a par value of $0.001 per share, no voting rights, a stated value of $6.00 per share, and became convertible on May 21, 2017 upon stockholder approval of the Series A Preferred Stock Units private placement, with such approval obtained in accordance with Nasdaq Stock Market Rule 5635(d). The Series A Convertible Preferred Stock has a carrying value of $0 resulting from the issuance date initial fair values of the Series A Warrant derivative liability and the Series A Convertible Preferred Stock conversion option derivative liability being in excess of the Series A Preferred Stock Units private placement issuance gross proceeds, with such excess recognized as a current period loss in the consolidated statement of operations, as discussed above.

 

At the holders’ election, a share of Series A Convertible Preferred Stock was convertible into a number of shares of common stock of the Company at a common stock conversion exchange factor equal to a (fixed) numerator of $6.00 and a denominator subject to further adjustment by a prescribed formula should any subsequent issuances by the Company of common stock, or securities convertible into common stock, be at a price lower than such denominator immediately prior to such new issuance. Previously, at issuance, the Series A Convertible Preferred Stock common stock conversion exchange factor denominator was initially $6.00, and was subsequently adjusted to $5.00 upon the issuance of the Series S Warrants on July 3, 2017, then to $4.99 upon the issuance of the Series A-1 Preferred Stock Units on August 4, 2017, and then to $4.97 upon the issuance of Series A-1 Convertible Preferred Stock and Series A-1 Warrants on the November 17, 2017 Exchange Date of the Series A Exchange Offer.

 

Conversion of Series A Convertible Preferred Stock

 

At the election of their respective holders, in November 2017, 8,334 shares of Series A Convertible Preferred Stock were converted into 10,021 shares of common stock of the Company, and in December 2017, 10,000 shares of Series A Convertible Preferred Stock were converted into 12,072 shares of common stock of the Company. The Series A Convertible Preferred Stock conversion option derivative liability fair value was adjusted as of each respective conversion date, with the resulting change in fair value recognized as other income or expense in the consolidated statement of operations, and immediately thereafter, the corresponding Series A Convertible Preferred Stock conversion option derivative liability was derecognized, with a corresponding recognition of common stock par value and additional paid-in capital with respect to the resulting issue of shares of common stock of the Company, summarized as follows:

 

Series A Convertible Preferred Stock Converted to Shares of Common Stock of the Company November and December 2017   Conversion
Dates Aggregated
 
Shares of Series A Convertible Preferred Stock converted to common stock of the Company     18,334  
Shares of common stock issued upon conversion of Series A Convertible Preferred Stock     22,093  
Fair Value - Series A Convertible Preferred Stock conversion option derivative liability derecognized   $ 27,335  
Common stock issued - par value   $ 22  
Common stock issued - additional paid-in capital   $ 27,313  

 

On each of the respective conversion dates, the Series A Convertible Preferred Stock conversion option derivative liability fair value was estimated using a Monte Carlo simulation valuation model using 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 to take into account the probabilities of certain events occurring over their respective life, including, assumptions regarding the estimated volatility in the value of the Company’s common stock price and the likelihood and timing of future dilutive transactions, as applicable.

 

In August 2018, the Company’s board of directors declared a Series A Convertible Preferred Stock dividend payment dated July 1, 2018 of earned but unpaid dividends totaling $7,099 with respect to the shares of Series A Convertible Preferred Stock previously converted in November and December 2017, as discussed above. The Series A Convertible Preferred Stock dividends were settled with cash payments. See below for a further discussion of the Series A Convertible Preferred Stock dividends.

 

Series A Convertible Preferred Stock

 

The Series A Convertible Preferred Stock conversion option is accounted for as a bifurcated derivative liability under FASB ASC 815, as along with other provisions, the Series A Convertible Preferred Stock common stock exchange factor denominator, as discussed above, is subject to potential adjustment resulting from future financing transactions, under certain conditions. The Series A Convertible Preferred Stock conversion option derivative liability is classified as a current liability on the balance sheet, initially measured at fair value at the time of issuance, and subsequently remeasured at fair value at each reporting period, with changes in its fair value recognized as other income or expense in the statement of operations. Upon the occurrence of an event resulting in the Series A Convertible Preferred Stock conversion option derivative liability to be subsequently derecognized, its fair value will first be adjusted on such date, with the fair value adjustment recognized as other income or expense, and then such derivative liability will be derecognized. See Note 11, Financial Instruments Fair Value Measurements, for further detail regarding the fair value of the Series A Convertible Preferred Stock conversion option derivative liability.

 

The Series A Convertible Preferred Stock provided for dividends at a rate of 8% per annum based on the $6.00 per share stated value of the Series A Convertible Preferred Stock, with such dividends compounded quarterly, accumulate, and are payable in arrears upon being declared by the Company’s board of directors. The Series A Convertible Preferred Stock dividends from April 1, 2017 through April 1, 2021 were payable-in-kind (“PIK”) in additional shares of Series A Convertible Preferred Stock. Upon the closing of the Series A and Series A-1 Exchange Offer on the March 15, 2018 Exchange Date, cumulative aggregate earned, unpaid, and undeclared Series A Convertible Preferred Stock dividends of $139,058 were transferred to the respective holders’ Series B Convertible Preferred Stock dividend balances, with such balance transferred inclusive of $26,487 earned for the period January 1, 2018 through the March 15, 2018 Exchange Date. In the prior year period, Series A Convertible Preferred Stock dividends of $119,669 for the year ended December 31, 2017 were earned and undeclared. The Series A Convertible Preferred Stock dividends for each respective period were earned, unpaid, accumulated, and in arrears, as the Company’s board of directors had not declared such dividends payable, and, therefore, such dividends are were recognized as a dividend payable liability in the consolidated balance sheet until declared by the Company’s board of directors. Notwithstanding, the Series A Convertible Preferred Stock dividends earned and undeclared for the year ended December 31, 2018 and 2017 are included in the calculation of basic and diluted net loss attributable to PAVmed Inc. common stockholders for each respective period.

 

In the event of a Deemed Liquidation Event, as defined in the Certificate of Designation of Preferences, Rights, and Limitations of the Series A Convertible Preferred Stock, the Series A Convertible Preferred Stock can become redeemable at the election of at least two-thirds of holders of the then number of issued and outstanding Series A Convertible Preferred Stock, if the Company fails to effect a dissolution of the Company under the Delaware General Corporation Law within ninety (90) days after such Deemed Liquidation Event. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company or a Deemed Liquidation Event, as defined, the holders of the Series A Convertible Preferred Stock then outstanding are entitled to be paid out the assets of the Company available for distribution to its stockholders before any payment shall be made to the holders of the common stock of the Company, an amount per share equal to the greater of (i) the stated value, plus any dividends accrued but unpaid, or (ii) such amount per share as would have been payable had all the shares of Series A Convertible Preferred Stock been converted into shares of common stock of the Company prior to such liquidation, dissolution, winding up, or Deemed Liquidation Event, as defined. As the Deemed Liquidation Event, as defined, is a contingent event, the Series A Convertible Preferred Stock is classified outside of stockholders’ equity in temporary (“mezzanine”) equity. Further, as the Series A Convertible Preferred Stock is not currently redeemable and redemption is not probable, as a Deemed Liquidation Event, as defined, has not occurred and is not probable, the Series A Convertible Preferred Stock will not be measured at fair value until such time as a redemption trigger occurs which causes redemption to be probable.

 

Series A-1 Preferred Stock Units Private Placement

 

On August 4, 2017, the Company entered into a Securities Purchase Agreement pursuant to which the Company may issue up to an aggregate of $600,000 (subject to increase) of Series A-1 Preferred Stock Units at a price of $4.00 per unit, in a private placement transaction (Series A-1 Preferred Stock Units private placement). On the August 4, 2017 closing date of the Series A-1 Preferred Stock Units private placement, a total of 125,000 Series A-1 Preferred Stock Units were issued for cash proceeds of $500,000 - the Company did not incur placement agent fees in connection with the Series A-1 Preferred Stock Units private placement. The Series A-1 Preferred Stock Unit was comprised of one share of Series A-1 Convertible Preferred Stock and one Series A-1 Warrant, and at their issuance were immediately separable, and each was immediately convertible and exercisable, respectively.

 

At the election of their respective holder, a share of Series A-1 Convertible Preferred Stock was convertible into one share of common stock of the Company at a prescribed common stock exchange factor, and, a Series A-1 Warrant was exercisable for one share of common stock of the Company or could have been exchanged for four Series X-1 Warrants or five Series W Warrants, with each such warrant exercisable for one share of common stock of the Company - each as more fully described herein below.

 

On October 18, 2017, the Series A-1 Convertible Preferred Stock holders unanimously approved Amendment No. 1 to Series A-1 Preferred Stock Units private placement transaction documents (“Series A-1 Amendment No. 1), wherein, a Series A-1 Warrant may be exchanged for four Series X-1 Warrants or exchanged for five Series W Warrants. See herein below for a discussion of the expense recognized resulting from the Series A-1 Amendment No. 1 modification to provide for the additional exchange of one Series A-1 Warrant for five Series W Warrants. The Series X-1 Warrants replaced the previous election to exchange one Series A-1 Warrant for four Series X Warrants. The Series X-1 Warrants are substantively equivalent to the Series X Warrants with respect to material contractual terms and conditions, including the same $6.00 per share exercise price, and dates of exercisability and expiry. The Series X-1 Warrant also confirms such warrants are not subject to redemption, and under no circumstances will the Company be required to net cash settle the Series X-1 Warrants, for any reason, nor to pay any liquidated damages or other payments, resulting from a failure to satisfy any obligations under the Series X-1 Warrant, notwithstanding such provisions were applicable to the Series X Warrant through the operation of the Securities Purchase Agreement of the Series A-1 Preferred Stock Units private placement.

 

Additionally, the Series A-1 Amendment No. 1 removed the requirement for the Company to file an initial registration statement within sixty days of the Series A-1 Close Date. Further, on December 29, 2017, the Series A-1 Convertible Preferred Stock holders unanimously approved Amendment No.2 to Series A-1 Preferred Stock Units private placement transaction documents (“Series A-1 Amendment No. 2), wherein, the due date for an effective registration statement was changed to 210 days from 150 days of the August 4, 2017 close date of the Series A-1 Preferred Stock Units private placement. See Note 14, Stockholders’ Equity and Common Stock Purchase Warrants, for further information with respect to the modification expense recognized in connection with the Series A-1 Warrant Agreement Amendment No.1 and for a discussion of the Series X-1 Warrants or Series W Warrants issued upon exchange of a Series A-1 Warrant.

 

The Series A-1 Preferred Stock Units private placement cash proceeds of $500,000 were allocated as $189,550 to the Series A-1 Convertible Preferred Stock and $310,450 to the Series A-1 Warrants, based on their respective relative fair value. The issue-date fair value of the Series A-1 Convertible Preferred Stock was estimated using a combination of the Series A-1 Convertible Preferred Stock’s present value of its cash flows using a required rate of return determined through a synthetic credit rating analysis and the Black-Scholes valuation model; and the fair value of the Series A-1 Warrants was estimated using a Black-Scholes valuation model and assuming the exchange of one Series A-1 Warrant for four Series X Warrants, using the following assumptions:

 

Fair Value Assumptions - Issue Date   Series A-1
Convertible
Preferred Stock
    Series A-1
Warrants
 
Allocated fair value   $ 189,550     $ 310,450  
Series A-1 Convertible Preferred Stock /Series A-1 Warrants     125,000       125,000  
Value of common stock   $ 2.98       2.98  
Common stock conversion factor numerator   $ 4.00       N/A  
Common stock conversion factor denominator   $ 4.00       N/A  
Exercise price per share - Series X Warrants     N/A     $ 6.00  
Required rate of return     27.0 %     N/A  
Expected term (years)     6.74       6.74  
Volatility     52 %     52 %
Risk free rate     2.0 %     2.0 %
Dividend yield     0 %     0 %

 

Series A-1 Convertible Preferred Stock

 

As discussed above, as of December 31, 2017, there were 357,259 shares of Series A-1 Convertible Preferred Stock issued and outstanding, and, as of the March 15, 2018 Exchange Date of the Series A and Series A-1 Exchange Offer, there were no issued and outstanding shares of Series A-1 Convertible Preferred Stock. See above for further information regarding the Series B Convertible Preferred Stock issued-upon-exchange of the Series A-1 Convertible Preferred Stock, and, see Note 11, Financial Instruments Fair Value Measurements, for further detail regarding both the March 15, 2018 Series A and Series A-1 Exchange Offer and the November 17, 2017 Series A Exchange Offer.

 

The Series A-1 Convertible Preferred Stock was classified in permanent equity in the consolidated balance sheet, had a par value of $0.001 per share, no voting rights, a stated value of $4.00 per share, and was immediately convertible upon its issuance. At the holders’ election, a share of Series A Convertible Preferred Stock was convertible into one share of common stock of the Company at a common stock conversion exchange factor equal to a (fixed) numerator of $4.00 and a denominator of $4.00, with such denominator not subject to further adjustment, except for the effect of stock dividends, stock splits or similar events affecting the Company’s common stock. The Series A-1 Convertible Preferred Stock was not be redeemed for cash and under no circumstances shall the Company be required to net cash settle the Series A-1 Convertible Preferred Stock.

 

As discussed above, the Series A-1 Preferred Stock Units private placement cash proceeds allocated to the Series A-1 Convertible Preferred Stock of $189,550 resulted in an effective conversion price below the issue-date fair value of the underlying shares of common stock of the Company, resulting in a $182,500 beneficial conversion feature, which was accounted for as an implied discount on the Series A-1 Convertible Preferred Stock. The Series A-1 Convertible Preferred Stock does not have a stated redemption date and was immediately convertible upon issuance, resulting in the full accretion of the beneficial conversion feature as a deemed dividend paid to the Series A-1 Convertible Preferred Stock on the August 4, 2017 issue date, with such deemed dividend included as a component of net loss attributable to attributable to common stockholders.

 

The Series A-1 Convertible Preferred Stock provided for dividends at a rate of 8% per annum on the $4.00 per share stated value of the Series A-1 Convertible Preferred Stock, with such dividends compounded quarterly, accumulate, and are payable in arrears upon being declared by the Company’s board of directors. The Series A-1 Convertible Preferred Stock dividends from October 1, 2017 through October 1, 2021 were payable-in-kind (“PIK”) in additional shares of Series A-1 Convertible Preferred Stock. Upon the closing of the Series A and Series A-1 Exchange Offer on the March 15, 2018 Exchange Date, cumulative aggregate earned, unpaid, and undeclared Series A-1 Convertible Preferred Stock dividends of $104,936 were transferred to the respective holders’ Series B Convertible Preferred Stock dividend balances, with such balance transferred inclusive of $25,148 earned for the period January 1, 2018 through the March 15, 2018 Exchange Date. In the prior year period, Series A-1 Convertible Preferred Stock dividends of $79,788 for the year ended December 31, 2017 were earned and undeclared. The Series A-1 Convertible Preferred Stock dividends for each respective period were earned, unpaid, accumulated, and in arrears, as the Company’s board of directors had not declared such dividends payable, and, therefore, such dividends were not recognized as a dividend payable liability in the consolidated balance sheet until declared by the Company’s board of directors. Notwithstanding, the Series A-1 Convertible Preferred Stock dividends earned and undeclared for the year ended December 31, 2018 and 2017 are included in the calculation of basic and diluted net loss attributable to PAVmed Inc. common stockholders for each respective period.