UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

 

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended JUNE 30, 2020MARCH 31, 2021

 

OR

 

[  ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from______ to______

 

Commission File Number: 001-37685

 

 

PAVmed Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware 47-1214177

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification No.)

 

One Grand Central Place

Suite 4600

New York, NY

 10165
(Address of Principal Executive Offices) (Zip Code)

 

(212) 949-4319

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class Trading Symbols Name of each exchange on which registered
Common Stock, $0.001 par value per share PAVM The NASDAQ Stock Market LLC
Series Z Warrants, each to purchase one share of Common Stock PAVMZ The NASDAQ Stock Market LLC
Series W Warrants, each to purchase one share of Common Stock PAVMW The NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer[  ] Accelerated filer[  ]
Non-accelerated filer[X] Smaller reporting company[X]
   Emerging growth company[X]

 

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(a) of the Exchange Act. [ ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

 

As of August 11, 2020,May 14, 2021, there were 49,638,69083,869,061 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

  Page
   
PART IFINANCIAL INFORMATION1
   
Item 1Unaudited Condensed Consolidated Financial Statements1
   
 Condensed Consolidated Balance Sheets as of June 30, 2020March 31, 2021 and December 31, 201920201
   
 Condensed Consolidated Statements of Operations for the three and six months ended June 30,March 31, 2021 and 2020 and 20192
   
 Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and six months ended June 30,March 31, 2021 and 2020 and 20193
   
 Condensed Consolidated Statements of Cash Flows for the sixthree months ended June 30,March 31, 2021 and 2020 and 201975
   
 Notes to Unaudited Condensed Consolidated Financial Statements86
   
Item 2Management’s Discussion and Analysis of Financial Condition and Results of Operations2223
   
Item 4Controls and Procedures3233
   
PART IIOTHER INFORMATION
Item 1Legal Proceedings34
Item 5Other Information3334
   
Item 6Exhibits3334
   
SIGNATURE3435
  
EXHIBIT INDEX3536

 

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, 2020  December 31, 2019 
Assets        
Current assets        
Cash $7,080  $6,219 
Prepaid expenses and other current assets  1,074   328 
Total current assets  8,154   6,547 
Other assets  728   693 
Total assets $8,882  $7,240 
         
Liabilities, Preferred Stock, and Stockholders’ Deficit        
Current liabilities        
Accounts payable $3,646  $2,353 
Accrued expenses and other current liabilities  1,541   1,386 
Current portion - Cares Act Paycheck Protection Program note payable  150   — 
Senior Secured Convertible Notes - at fair value  12,300   8,139 
Senior Convertible Note - at fair value  3,900   — 
Total current liabilities  21,537   11,878 
Cares Act Paycheck Protection Program note payable  150   — 
Total liabilities  21,687   11,878 
         
COMMITMENTS AND CONTINGENCIES (NOTE 7)  -   - 
         
Stockholders’ Equity (Deficit)        
Preferred stock, par value $0.001, 20,000 shares authorized;        
Series B Convertible Preferred Stock, par value $0.001, 1,180 and 1,158 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively  2,393   2,296 
         
Common stock, par value $0.001; 150,000 shares authorized;        
47,919 and 40,479 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively  48   41 
         
Additional paid-in capital  60,147   47,554 
         
Accumulated deficit  (73,908)  (53,715)
Total PAVmed Inc. Stockholders’ Deficit  (11,320)  (3,824)
         
Noncontrolling interest  (1,485)  (814)
         
Total Stockholders’ Deficit  (12,805)  (4,638)
         
Total Liabilities and Equity (Deficit) $8,882  $7,240 

See accompanying notes to the unaudited condensed consolidated financial statements.

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share amounts)

(unaudited)

  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2020  2019  2020  2019 
Revenue $—  $—  $—  $— 
                 
General and administrative expense  2,881   1,914   5,566   3,607 
Research and development expense  2,133   1,405   4,702   2,856 
Total operating expenses  5,014   3,319   10,268   6,463 
                 
Loss from operations  (5,014)  (3,319)  (10,268)  (6,463)
                 
Other income (expense)                
Interest expense  —   —   (52)  — 
Change in fair value - Senior
Secured Convertible Notes and
Senior Convertible Note		  2,120   (161)  (5,888)  (720)
Offering costs - Senior Secured Convertible
Note and Senior Convertible Note		  (200)  —   (610)  — 
Debt extinguishments loss - Senior Secured Convertible Notes  (2,750)  (259)  (3,937)  (260)
                 
Other income (expense), net  (830)  (420)  (10,487)  (980)
                 
Loss before provision for income tax  (5,844)  (3,739)  (20,755)  (7,443)
Provision for income taxes  —   —   —   — 
Net loss - before noncontrolling interest  (5,844)  (3,739)  (20,755)  (7,443)
                 
Net loss attributable to noncontrolling interest  266   145   702   314 
                 
Net loss - attributable to PAVmed Inc.  (5,578)  (3,594)  (20,053)  (7,129)
                 
Less: Series B Convertible Preferred Stock dividends earned  (71)  (66)  (141)  (132)
                 
Net loss attributable to PAVmed Inc. common stockholders $(5,649) $(3,660) $(20,194) $(7,261)
                 
Net loss per share - attributable to PAVmed Inc. - basic and diluted $(0.12) $(0.13) $(0.45) $(0.26)
Net loss per share - attributable to PAVmed Inc. common stockholders - basic and diluted $(0.13) $(0.13) $(0.46) $(0.27)
Weighted average common shares outstanding - basic and diluted  44,781   27,606   44,140   27,344 
  March 31, 2021  December 31, 2020 
Assets:        
Current assets:        
Cash $48,546  $17,256 
Prepaid expenses, deposits, and other current assets  1,962   1,685 
Total current assets  50,508   18,941 
Other assets  861   837 
Total assets $51,369  $19,778 
Liabilities, Preferred Stock and Stockholders’ Deficit        
Current liabilities:        
Accounts payable $1,896  $2,966 
Accrued expenses and other current liabilities  1,133   2,325 
CARES Act Paycheck Protection Program note payable  300   300 
Senior Secured Convertible Notes - at fair value  —   10,060 
Senior Convertible Note - at fair value  —   4,600 
Total liabilities  3,329   20,251 
Commitments and contingencies (Note 4)  —   — 
Stockholders’ Equity (Deficit):        
Preferred stock, $0.001 par value. Authorized, 20,000,000 shares; Series B Convertible Preferred Stock, par value $0.001, issued and outstanding 1,241,438 at March 31, 2021 and 1,228,075 shares at December 31, 2020  2,587   2,537 
Common stock, $0.001 par value. Authorized, 150,000,000 shares; issued and outstanding, 81,424,744 shares at March 31, 2021 and 63,819,935 shares at December 31, 2020  81   64 
Additional paid-in capital  145,396   87,570 
Accumulated deficit  (97,778)  (88,275)
Total PAVmed Inc. Stockholders’ Equity (Deficit)  50,286   1,896 
Noncontrolling interests  (2,246)  (2,369)
Total Stockholders’ Equity (Deficit)  48,040   (473)
Total Liabilities and Stockholders’ Equity (Deficit) $51,369  $19,778 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

2

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(unaudited)

 

  Three Months Ended March 31, 
  2021  2020 
Revenue $—  $— 
Operating expenses:        
Sales and marketing  1,387   385 
General and administrative  3,375   2,240 
Research and development  3,315   2,628 
Total operating expenses  8,077   5,253 
Loss from operations  (8,077)  (5,253)
Other income (expense):        
Interest expense  —   (52)
Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note  1,682   (8,008)
Offering costs - Senior Secured Convertible Note and Senior Convertible Note  —   (410)
Debt extinguishments loss - Senior Secured Convertible Notes  (3,715)  (1,188)
Other income (expense), net  (2,033)  (9,658)
Loss before provision for income tax  (10,110)  (14,911)
Provision for income taxes  —   — 
Net loss before noncontrolling interests  (10,110)  (14,911)
Net loss attributable to the noncontrolling interests  679   436 
Net loss attributable to PAVmed Inc.  (9,431)  (14,475)
         
Less: Series B Convertible Preferred Stock dividends earned  (75)  (70)
         
Net loss attributable to PAVmed Inc. common stockholders $(9,506) $(14,545)
Per share information:        
         
Net loss per share attributable to PAVmed Inc. - basic and diluted $(0.13) $(0.33)
Net loss per share attributable to PAVmed Inc. common stockholders – basic and diluted $(0.13) $(0.33)
         
Weighted average common shares outstanding, basic and diluted  73,954,126   43,499,714 

See accompanying notes to the unaudited condensed consolidated financial statements.

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)

for the THREE MONTHS ENDED March 31, 2021

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

(unaudited)

  PAVmed Inc. Stockholders’ Deficit       
  Series B                   
  Convertible        Additional     Non    
  Preferred Stock  Common Stock  Paid-In  Accumulated  controlling    
  Shares  Amount  Shares  Amount  Capital  Deficit  Interest  Total 
                         
Balance at December 31, 2020  1,228,075  $2,537   63,819,935  $64  $87,570  $(88,275) $(2,369) $(473)
Series B Convertible Preferred Stock dividends declared  24,198   72   —   —   —   (72)  —   — 
Issue common stock – conversion Series B Convertible Preferred Stock  (10,835)  (22)  10,835   —   22   —   —   — 
Issue common stock – registered offerings, net  —   —   15,782,609   16   53,688   —   —   53,704 
Issue common stock – exercise Series Z warrants  —   —   860,217   1   1,375   —   —   1,376 
Issue common stock upon partial conversions of Senior Secured Convertible Note  —   —   667,668   —   1,723   —   —   1,723 
Issue common stock – PAVmed Inc. 2014 Equity Plan stock option exercises  —   —   80,000   —   80   —   —   80 
Issue common stock - Employee Stock Purchase Plan  —   —   203,480   —   304   —   —   304 
Stock-based compensation - PAVmed Inc. 2014 Equity Plan  —   —   —   —   631   —   —   631 
Stock-based compensation - majority-owned subsidiary  —   —   —   —   3   —   802   805 
Loss  —   —   —   —   —   (9,431)  (679)  (10,110)
Balance at March 31, 2021  1,241,438  $2,587   81,424,744  $81  $145,396  $(97,778) $(2,246) $48,040 

See accompanying notes to the unaudited condensed consolidated financial statements.

PAVMED INC.INC .

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)

for the THREE MONTHS ENDED June 30,March 31, 2020

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

(unaudited)

 

  PAVmed Inc. Stockholders’ Deficit       
  Series B                   
  Convertible        Additional          
  Preferred Stock  Common Stock  Paid-In  Accumulated  Noncontrolling    
  Shares  Amount  Shares  Amount  Capital  Deficit  Interest  Total 
                         
Balance at March 31, 2020  1,156  $2,322   44,134  $44  $50,896  $(68,259) $(1,232) $(16,229)
Issue common stock upon partial
conversions of Senior Secured
Convertible Note		  —   —   3,785   4   8,735   —   —   8,739 
                                 

Series B Convertible Preferred

Stock dividends declared

  24   71   —   —   —   (71)  —   — 
                                 
Stock-based compensation  —   —   —   —   513   —   —   513 
Stock-based compensation -
majority-owned subsidiary		  —   —   —   —   3   —   13   16 
                                 
Loss  —   —   —   —   —   (5,578)  (266)  (5,844)
Balance as of June 30, 2020  1,180  $2,393   47,919  $48  $60,147  $(73,908) $(1,485) $(12,805)
  PAVmed Inc. Stockholders’ Deficit       
  Series B                   
  Convertible        Additional     Non    
  Preferred Stock  Common Stock  Paid-In  Accumulated  controlling    
  Shares  Amount  Shares  Amount  Capital  Deficit  Interest  Total 
                         
Balance at December 31, 2019  1,158,209  $2,296   40,478,861  $41  $47,554  $(53,715) $(814) $(4,638)
Issue common stock – upon partial conversions of Senior Secured Convertible Note  —   —   2,042,901   2   2,831   —   —   2,833 
Issue common stock – Employee Stock Purchase Plan  —   —   154,266   —   126   —   —   126 
Issue common stock – exercise Series S warrants  —   —   1,199,383   1   11   —   —   12 
Issue common stock – conversion Series B Convertible Preferred Stock  (25,000)  (43)  25,000   —   43   —   —   — 
Series B Convertible Preferred Stock dividends declared  23,182   69   —   —   —   (69)  —   — 
Vesting of restricted stock awards  —   —   233,334   —   —   —   —   — 
Stock-based compensation - PAVmed Inc. 2014 Equity Plan  —   —   —   —   328   —   —   328 
Issue common stock – majority-owned subsidiary exercise of stock options  —   —   —   —   —   —   5   5 
Stock-based compensation - majority-owned subsidiary  —   —   —   —   3   —   13   16 
Loss  —   —   —   —   —   (14,475)  (436)  (14,911)
                                 
Balance at March 31, 2020  1,156,391  $2,322   44,133,745  $44  $50,896  $(68,259) $(1,232) $(16,229)

See accompanying notes to the unaudited condensed consolidated financial statements. 

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

(unaudited)

  Three Months Ended March 31, 
  2021  2020 
Cash flows from operating activities        
Net loss - before noncontrolling interest (“NCI”) $(10,110) $(14,911)
         
Adjustments to reconcile net loss - before NCI to net cash used in operating activities        
Depreciation expense  12   3 
Stock-based compensation  1,436   344 
Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note  (1,682)  8,008 
Debt extinguishment loss - Senior Secured Convertible Notes and Senior Convertible Note  3,715   1,188 
         
Changes in operating assets and liabilities:        
Prepaid expenses and other current assets  (277)  (364)
Accounts payable  (1,070)  1,804 
Accrued expenses and other current liabilities  (1,192)  137 
Net cash flows used in operating activities  (9,168)  (3,791)
         
Cash flows from investing activities        
Purchase of equipment  (36)  (2)
Net cash flows used in investing activities  (36)  (2)
         
Cash flows from financing activities        
Proceeds – issue of common stock – registered offerings  55,016   — 
Payment – offering costs – registered offerings  (1,312)  — 
Proceeds – issue of Senior Convertible Note  —   6,300 
Payment – repayment of Senior Convertible Note and Senior Secured Convertible Note  (14,816)  — 
Payment – Senior Convertible Note and Senior Secured Convertible Note –
non-installment payments		  (154)  (138)
Proceeds – exercise of Series Z warrants  1,376   — 
Proceeds – exercise of Series S Warrants  —   12 
Proceeds – issue common stock – Employee Stock Purchase Plan  304   126 
Proceeds – exercise of stock options  80   — 
Proceeds – exercise of stock options issued under equity incentive plan of majority owned subsidiary  —   5 
Net cash flows provided by financing activities  40,494   6,305 
Net increase (decrease) in cash  31,290   2,512 
Cash, beginning of period  17,256   6,219 
Cash, end of period $48,546  $8,731 

 

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, 2020

(in thousands except per share data)

(unaudited)

  PAVmed Inc. Stockholders’ Deficit       
  Series B                   
  Convertible        Additional          
  Preferred Stock  Common Stock  Paid-In  Accumulated  Noncontrolling    
  Shares  Amount  Shares  Amount  Capital  Deficit  Interest  Total 
                         
Balance at December 31, 2019  1,158  $2,296   40,479  $41  $47,554  $(53,715) $(814) $(4,638)
Issue common stock upon partial
conversions of Senior Secured
Convertible Note		  —   —   5,828   6   11,567   —   —   11,573 
                                 
Issue common stock - Employee Stock Purchase Plan  —   —   154   —   126   —   —   126 
                                 
Issue common stock – exercise
Series S warrants		  —   —   1,199   1   11   —   —   12 
                                 
Issue common stock – conversion
Series B Convertible Preferred Stock		  (25)  (43)  25   —   43   —   —   — 
                                 

Series B Convertible Preferred

Stock dividends declared

  47   140   —   —   —   (140)  —   — 
                                 
Vesting of restricted stock awards  —   —   234   —   —   —   —   — 
                                 
Stock-based compensation  —   —   —   —   840   —   —   840 
                                 
                                 
Stock-based compensation -
majority-owned subsidiary		  —   —   —   —   6   —   26   32 

Issue common stock of majority-

owned subsidiary exercise

of stock options

  —   —   —   —   —   —   5   5 
Loss  —   —   —   —   —   (20,053)  (702)  (20,755)
Balance as of June 30, 2020  1,180  $2,393   47,919  $48  $60,147  $(73,908) $(1,485) $(12,805)

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, 2019

(in thousands except per share data)

(unaudited)

  PAVmed Inc. Stockholders’ Deficit       
  Series B                
  Convertible     Additional     Non    
  Preferred Stock  Common Stock  Paid-In  Accumulated  controlling    
  Shares  Amount  Shares  Amount  Capital  Deficit  Interest  Total 
                         
Balance at March 31, 2019  1,091  $2,096   27,193  $28  $33,025  $(40,591) $(226) $(5,668)
                                 
Issuance of common stock – registered offerings, net  —   —   5,480   5   5,374   —   —   5,379 
                                 
Issuance common stock upon partial conversions of Senior Secured Convertible debt  —   —   1,466   1   1,760   —   —   1,761 
                                 
Series B Convertible Preferred Stock dividends declared  22   66   —   —   —   (66)  —   — 
                                 
Stock-based compensation  —   —   —   —   356   —   —   356 
                                 
Stock-based compensation -
majority-owned subsidiary		  —   —   —   —   4   —   28   32 
                                 
Loss  —   —   —   —   —   (3,594)  (145)  (3,739)
                                 
Balance as of June 30, 2019  1,113  $2,162   34,139  $34  $40,519  $(44,251) $(343) $(1,879)

See accompanying notes to the unaudited condensed consolidated financial statements.

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)

for the SIX MONTHS ENDED June 30, 2019

(in thousands except per share data)

(unaudited)

  PAVmed Inc. Stockholders’ Deficit       
  Series B                
  Convertible     Additional     Non    
  Preferred Stock  Common Stock  Paid-In  Accumulated  controlling    
  Shares  Amount  Shares  Amount  Capital  Deficit  Interest  Total 
                         
Balance at December 31, 2018  1,070  $2,032   27,143  $27  $32,619  $(36,993) $(161) $(2,476)
                                 
Issuance of common stock – registered offerings, net  —   —   5,480   5   5,374   —   —   5,379 
                                 
Issuance common stock upon partial conversions of Senior Secured Convertible debt  —   —   1,516   2   1,812   —   —   1,814 
                                 
Series B Convertible Preferred Stock dividends declared  43   130   —   —   —   (130)  —   — 
                                 
Stock-based compensation  —   —   —   —   706   —   —   706 
                                 
Stock-based compensation -
majority-owned subsidiary		  —   —   —   —   8   —   133   141 
                                 
Loss  —   —   —   —   —   (7,129)  (315)  (7,443)
                                 
Balance as of June 30, 2019  1,113  $2,162   34,139  $34  $40,519  $(44,251) $(343) $(1,879)

See accompanying notes to the unaudited condensed consolidated financial statements.

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands except per share data)

(unaudited)

  Six Months Ended June 30, 
  2020  2019 
Cash flows from operating activities        
Net loss - before noncontrolling interest (“NCI”) $(20,755) $(7,443)
         
Adjustments to reconcile net loss - before NCI to net cash used in operating activities        
Depreciation expense  9   7 
Stock-based compensation  872   847 
Change in fair value - Senior Secured Convertible Notes
and Senior Convertible Note		  5,888   720 
Debt extinguishment loss - Senior Secured Convertible Notes  3,937   260 
         
Changes in operating assets and liabilities:        
Prepaid expenses and other current assets  (747)  140 
Accounts payable  1,294   (312)
Accrued expenses and other current liabilities  155   (608)
Net cash flows used in operating activities  (9,346)  (6,389)
         
Cash flows from investing activities        
Purchase of equipment  (44)  (25)
Net cash flows used in investing activities  (44)  (25)
         
Cash flows from financing activities        
Proceeds – issue of Senior Secured Convertible Notes  6,300   — 
Proceeds – issue of Senior Convertible Note  3,700   — 
Proceeds – Cares Act Paycheck Protection Program Loan  300   — 
Proceeds – issue of common stock – registered offerings  —   5,480 
Payment – offering costs – registered offerings  —   (101)
Payment – Senior Secured Convertible Notes – non-installment  (192)  (279)
Proceeds – issue common stock – Employee Stock Purchase Plan  126   — 
Proceeds – exercise of Series S Warrants  12   — 
Proceeds – exercise of stock options issued under equity incentive plan
of majority owned subsidiary		  5   — 
Net cash flows provided by financing activities  10,251   5,100 
         
Net increase (decrease) in cash  861   (1,314)
Cash, beginning of period  6,219   8,222 
Cash, end of period $7,080  $6,908 

See accompanying notes to the unaudited condensed consolidated financial statements.

PAVMED INC.

and SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in these accompanying notes are reflectedpresented in thousands, except fornumber of shares and per-share dollar amounts.)

 

Note 1 — The Company and Description of the Business

 

PAVmed Inc. (“PAVmed” or the “Company”) together with its majority owned subsidiaries, Lucid Diagnostics, IncInc. (“Lucid Diagnostics” or “LUCID”) and Solys Diagnostics, Inc. (“Solys Diagnostics” or “SOLYS”) were 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 operates in one segment as a medical device company.

 

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. In this regard:

 

 ●EsoCheck has received 510(k) marketing clearance from the FDA as an esophageal cell collection device in June 2019;
   
 ●EsoGuard completed the certification required by the Clinical Laboratory Improvement Amendment (“CLIA”) and accreditation of the College of American Pathologists (“CAP”) making it commercially available as a Laboratory Developed Test (“LDT”) at LUCID’s contract diagnostic laboratory service provider in California in December 2019; and,
   
 ●CarpX, developed as a patented, single-use, disposable, minimally invasive device designed as a precision cutting tool to treat carpal tunnel syndrome while reducing recovery times, received 510(k) marketing clearance from the FDA in April 2020 with the first commercial procedure successfully performed in December 2020.

 

Although the Company’s current operational activities are principally focused on the commercialization of EsoGuard and CarpX its development activities are focused on pursuing FDA approval and clearance of other lead products in our product portfolio pipeline, including EsoGuard IVD, PortIO, DisappEAR, NextFlo, and EsoCure.

 

The Company has financed its operations principally through the public and private issuances of its common stock, preferred stock, warrants, and debt.

 

All amounts in these accompanying notes to unaudited condensed consolidated financial statements are presented in thousands, if not otherwise noted as being presented in millions, except for per share amounts.

Note 2 — Financial Condition Going Concern and Management Plans

 

The Company has financed its operations principally through the 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 and medical device companies that devote substantially all of their efforts to the commercialization of their initial product and services and ongoing R&D and clinical trials. The Company expects to continue incurringto experience recurring losses for the foreseeable future. The Company’s existing liquidity is not sufficientfrom operations, and will continue to fund its operations anticipated capital expenditureswith debt and working capital funding untilequity financing transactions. Notwithstanding, however, together with the cash on-hand as of March 31, 2021, the Company reaches significant revenues. As such, the Company intendsexpects to rely on capital marketsbe able to obtain additional equity or debt financing, especially if the Company experiences downturns infund its business that are more severe or longer than anticipated, or if the Company experiences significant increases in expense levels resulting from being a publicly-traded company or from expansion of operations. If the Company attempts to obtain additional equity or debt financing, the Company cannot assume that such financing will be available to the Company on favorable terms, or at all.

As a result of recurring operating losses and net operating cash flow deficits there is substantial doubt about the Company’s ability to continue as a going concern withinfuture operations for one year from the date of this filing. Thethe issue of the Company’s unaudited condensed consolidated financial statements, have been prepared assuming thatas included in the Company will continue as a going concern, and do not include any adjustments to reflectCompany’s Quarterly Report on Form 10-Q for the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result from the outcome of this uncertainty.three months ended March 31, 2021.

8

 

Note 32 — Summary of Significant Accounting Policies

 

Significant Accounting Policies

 

Other than as described below, there have been no material changes in theThe Company’s significant accounting policies to those previouslyare as disclosed in the Company’s annual report on Form 10-K which wasfor the year ended December 31, 2020 as filed with the SEC on April 14, 2020.March 15, 2021, except as otherwise noted herein below.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company holds a majority ownership interest and has controlling financial interest in Lucid Diagnostics 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 consolidated statement of the net loss attributable to the noncontrolling interest based on the respective minority ownership interest of each respective entity.

 

The condensed consolidated balance sheet as of DecemberMarch 31, 2019,2021, which has been derived from audited consolidated financial statements, and the unaudited condensed consolidated financial statements, have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and applicable rules and regulations of the United States Securities and Exchange Commission (“SEC”) regarding interim financial reporting. As permitted under SEC rules, certain footnotes or other financial information normally required by U.S. GAAP have been condensed or omitted, and accordingly the balance sheet as of December 31, 20192020 has been derived from audited consolidated financial statements at such date but does not include all of the information required by U.S. GAAP for complete consolidated financial statements. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements, and in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s consolidated financial information.

 

The results of operations for the three and six months ended June 30, 2020March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 20202021 or for any other interim period or for any other future periods. The accompanying unaudited condensed consolidated financial statements and related consolidated financial information should be read in conjunction with the audited consolidated financial statements and related notes thereto as of and for the year ended December 31, 20192020 included in the Company’s Annual Report on Form 10-K filed with the SEC on April 14, 2020.March 15, 2021.

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

 

Use of Estimates

 

In preparing 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 liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of expenses during the reporting period. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions. These estimates and assumptions include valuing equity securities in share-based payment arrangements and estimating the fair value of financial instruments recorded as liabilities. In addition, 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.

Note 32 — Summary of Significant Accounting Policies - continued

 

RecentRecently Adopted Accounting Standards

 

Adoption of new accounting Standard

On January 1, 2020, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standard Update (“ASU”) 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, (“ASU 2018-07”), which aligns the accounting for share-based payments to nonemployees for goods and services with the requirements for accounting for share-based payments to employees under ASC 718 Compensation – Stock Compensation. ASU 2018-07 provides that nonemployee share-based payments are measured at the grant date at the fair value of the equity instruments to be provided to the nonemployee when the goods or services have been delivered. Prior to ASU 2018-07 nonemployee share-based payments were measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever could be more reliably measured. The adoption of ASU 2018-07 had no effect on the Company’s consolidated financial statements.

On January 1, 2020, the Company adopted ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurement. The adoption of ASU 2018-07 had no effect on the Company’s consolidated financial statements.

In November 2018, the FASB issued ASU No. 2018-18, “Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606”, which requires transactions in collaborative arrangements to be accounted for under ASC 606 if the counterparty is a customer for a good or service (or bundle of goods and services) that is a distinct unit of account. Additionally, ASU No. 2018-18 precludes entities from presenting consideration from transactions with a collaborator that is not a customer together with revenue recognized from contracts with customers. The adoption of ASU 2018-18 on January 1, 2020 had no effect on the Company’s consolidated financial statements.

In August 2020, the FASB issued its Accounting Standards Update (“ASU”) 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40), (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU2020-06 amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is evaluatingCompany’s adoption of the impactASU 2020-06 guidance as of this guidanceJanuary 1, 2021, had no effect on its unaudited condensed consolidated financial statements.

 

In December 2019, the FASB issued ASU No. 2019-12,“Income Taxes: Simplifying the Accounting for Income Taxes”, (“ASU 2019-12”). The guidance of ASU 2019-12 removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation, and calculating income taxes in interim periods, and adds revised guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. Adoption of the guidance of ASU 2019-12 is required for annual and interim financial statements beginning after December 15, 2020. The Company’s adoption of the ASU 2019-12 guidance as of January 1, 2021 had no effect on the Company’s unaudited condensed consolidated financial statements.

Note 3 — Related Party Transactions

The Company’s majority-owned subsidiary Lucid Diagnostics entered into a patent license agreement with Case Western Reserve University (“CWRU” and “CWRU License Agreement”) in May 2018. In connection with the CWRU License Agreement, CWRU and each of the three physician inventors of the intellectual property licensed under the CWRU License Agreement hold minority equity ownership interests in Lucid Diagnostics Inc. During the three months ended March 31, 2021 and 2020, the Company incurred expenses with respect to CWRU and the three physician inventors, summarized as follows:

  

For the three months ended

March 31,

 
  2021  2020 
CWRU License Agreement – reimbursement of patent legal fees $—  $32 
EsoCheck devices provided to CWRU  —   15 
Fees - Physician Inventors’ consulting agreements  13   38 
Stock-based compensation expense - Physician Inventors’ stock options and restricted stock awards  97   6 
Total Related Party Expenses $110  $91 

Lucid Diagnostics Inc. entered into consulting agreements with each of the three physician inventors of the intellectual property licensed under the CWRU License Agreement, providing for compensation on a contractual rate per hour for consulting services provided. The consulting agreements have a thirty-six month term ending May 12, 2021. Additionally, each of the three physician inventors were granted stock options under the PAVmed Inc. 2014 Long-Term Incentive Equity Plan and were granted stock options and restricted stock awards under the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan.

As of March 31, 2021, the Company has payables of $27 for such related party transactions.

See Note 7, 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 10, Noncontrolling Interest, for a discussion of Lucid Diagnostics Inc. and the corresponding noncontrolling interests.

Note 4 — Prepaid ExpensesCommitment and Other Current AssetsContingencies

 

Prepaid expensesLegal Proceedings

In November 2020, a stockholder of the Company, on behalf of himself and other current assets consistedsimilarly 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 following as of:2014 Equity Plan and the ESPP). The relief sought under the complaint includes certain corrective actions by the Company, but does not seek any specific monetary damages. The Company does not believe it is clear the prior approval of these matters is 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 term sheet to settle the complaint, the terms of which do not contemplate payment of monetary damages to the putative class in the proceeding. The settlement of the complaint is pending and is subject to court approval.

 

  June 30, 2020  December 31, 2019 
Advanced payments to service providers and suppliers $465  $294 
EsoCheck cell collection supplies  375   — 
Deposits  234   34 
Total prepaid expenses and other current assets $1,074  $328 

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 the plaintiff. The plaintiff is seeking monetary damages of up to $1.3 million. The Company disagrees with the allegations set forth in the complaint and intends to vigorously contest the complaint.

 

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

Patent License Agreement – Case Western Reserve University

The CWRU License Agreement requires Lucid Diagnostics Inc. to achieve certain milestones with respect to regulatory filings and clearances and commercialization of products and services. If Lucid Diagnostics Inc. does not meet the remaining commercialization and regulatory clearance milestones listed in the CWRU License Agreement, then CWRU has the right, in its sole discretion, to require PAVmed Inc. to transfer to CWRU 80% of the shares of common stock of Lucid Diagnostics Inc. then held by PAVmed Inc. Additionally, Lucid Diagnostics Inc. is required to pay a minimum annual royalty of a percentage of recognized net sales revenue resulting from the commercialization of the products and /or services developed using the CWRU License Agreement intellectual property, with the minimum amount of royalty payments based on net sales of such products and services, if any.

Note 5 — Accrued Expenses and Other Current LiabilitiesFinancial Instruments Fair Value Measurements

 

Accrued expensesRecurring Fair Value Measurements

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

  Fair Value Measurement on a Recurring Basis at
Reporting Date Using(1)		 
  Level-1  Level-2  Level-3    
  Inputs  Inputs  Inputs  Total 
March 31, 2021                
Senior Secured Convertible Note - November 2019 $—  $—  $—  $— 
Senior Convertible Note - April 2020 $—  $—  $—  $— 
Senior Secured Convertible Note – August 2020 $—  $—  $—  $— 
Totals $—  $—  $—  $— 
                 
December 31, 2020                
Senior Secured Convertible Note - November 2019 $—  $—  $1,270  $1,270 
Senior Convertible Note - April 2020 $—  $—  $4,600  $4,600 
Senior Secured Convertible Note – August 2020 $—  $—  $8,790  $8,790 
Totals $—  $—  $14,660  $14,660 

(1)As noted above, as presented in the fair value hierarchy table, Level-1 represents quoted prices in active markets for identical items, Level-2 represents significant other observable inputs, and Level-3 represents significant unobservable inputs.

The Senior Secured Convertible Note dated August 6, 2020, the Senior Convertible Note dated April 30, 2020, the Senior Secured Convertible Note (Series-A and other current liabilities consistedSeries-B), dated November 19, 2019, and the Senior Secured Convertible Note dated December 27, 2018, were each accounted for under the fair value option (“FVO”) election, wherein, each of the followingconvertible notes were initially measured at their respective 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 of:other income (expense) in the unaudited condensed consolidated statement of operations.

  June 30, 2020  December 31, 2019 
Compensation related expenses $1,088  $1,075 
EsoGuard License Agreement fee  223   223 
Operating Expenses  230   88 
Total accrued expenses and other current liabilities $1,541  $1,386 

There were no fair value measurements as of March 31, 2021 as each of the convertible notes were repaid-in-full as of March 31, 2020 (as discussed herein below in Note 6, Debt). The estimated fair value of each of the convertible notes as of December 31, 2020, 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, and were therefore classified within the Level 3 category, as the fair value 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 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.

Note 6 — Debt

Convertible Notes

The fair value and face value principal of outstanding convertible notes as of March 31, 2021 and December 31, 2020 was as follows:

  Contractual
Maturity Date		 Stated Interest Rate  Conversion Price per Share  Face Value Principal Outstanding  Fair Value 
November 2019 Senior Secured Convertible Note September 30, 2021  7.875% $1.60  $—  $— 
April 2020 Senior Convertible Note April 30, 2022  7.875% $5.00  $—  $— 
August 2020 Senior Secured
Convertible Note		 August 6, 2022  7.875% $5.00  $—  $— 
Balance - March 31, 2021(1)           $—  $— 
November 2019 Senior Secured Convertible Note September 30, 2021  7.875% $1.60  $956  $1,270 
April 2020 Senior Convertible Note April 30, 2022  7.875% $5.00  $4,111  $4,600 
August 2020 Senior Secured
Convertible Note		 August 6, 2022  7.875% $5.00  $7,750  $8,790 
Balance - December 31, 2020           $12,817  $14,660 

(1)As discussed below, during the three months ended March 31, 2021 all remaining convertible notes were repaid, including: the November 2019 Senior Convertible Note being repaid-in-full as of January 5, 2021; and both the April 2020 Senior Convertible Note and the August 2020 Senior Convertible Note were repaid-in-full as of March 2, 2021.

Senior Secured Convertible Note issued November 4, 2019 - Series A and Series B -

(“November 2019 Senior Convertible Notes”)

With respect to the November 2019 Senior Convertible Notes, in the year ended December 31, 2020, approximately $13,044 of installment principal repayments and the payment of interest thereon of approximately $465, were settled through the issuance of 8,854,004 shares of common stock of the Company, with a fair value of approximately $18,802 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company). As of December 31, 2020, the November 2019 Senior Convertible Notes remaining unpaid outstanding face value principal was approximately $956.

The November 2019 Senior Convertible Note was repaid-in-full as of January 5, 2021, with the remaining principal balance of approximately $956, along with the payment of interest thereon of approximately $7, were settled with the issuance of 667,668 shares common stock of the Company, with a fair value of approximately $1,723 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company).

Note 6 — Debt - continued

Convertible Notes - continued

Senior Convertible Note issued April 30, 2020 - (“April 2020 Senior Convertible Note”)

The Company issued a Senior Convertible Note dated April 30, 2020, with a face value principal of approximately $4,111, a stated interest rate of 7.875% per annum, and, at the election of the holder, was convertible into shares of common stock of the Company at a contractual conversion price of $5.00 per share - the “April 2020 Senior Convertible Note”. In the three months ended March 31, 2021, approximately $52 of non-installment payments were paid in cash. There were no such payments in the corresponding period of the prior year. The outstanding face value principal of the April 2020 Senior Convertible Note was repaid-in-full in March 2021, as discussed herein below.

Senior Secured Convertible Note issued August 6, 2020 - (“August 2020 Senior Convertible Note”)

The Company issued a Senior Secured Convertible Note dated August 6, 2020, with a face value principal of approximately $7,750, a stated interest rate of 7.875% per annum, and, at the election of the holder, was convertible into shares of common stock of the Company at a contractual conversion price of $5.00 per share - the “August 2020 Senior Convertible Note”. In the three months ended March 31, 2021, approximately $102 of non-installment payments were paid in cash. There were no such payments in the corresponding period of the prior year. The outstanding face value principal of the April 2020 Senior Convertible Note was repaid-in-full in March 2021, as discussed herein below.

 

Principal Repayments - April 2020 Senior Convertible Note and August 2020 Senior Convertible Note

On January 30, 2021, the Company paid in cash a $350 partial principal repayment of the April 2020 Senior Convertible Note; and on March 2, 2021, the Company paid in cash a total of $14,466 of principal repayments, resulting in both the April 2020 Senior Convertible Note and the August 2020 Senior Convertible Note being repaid-in-full as of such date. The Company recognized a debt extinguishment loss of approximately $2,955 in the three months ended March 31, 2021 in connection with the repayments of the April 2020 Senior Convertible Note and the August 2020 Senior Convertible Note.

Senior Secured Convertible Note issued December 27, 2018 - (“December 2018 Senior Convertible Note”)

The Company previously issued a Senior Secured Convertible Note dated December 27, 2018, with a $7.75 million face value principal, a stated interest rate of 7.875% per annum, and, at the election of the holder, was convertible into shares of common stock of the Company at a contractual conversion price of $1.60 per share (“December 2018 Senior Convertible Note”). In the three months ended March 31, 2020, with respect to the December 2018 Senior Convertible Notes, approximately $1,642 of installment principal repayments and the payment of interest thereon of approximately $4, were settled through the issue of 2,042,901 shares of common stock of the Company, with a fair value of approximately $2,834 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company). Further, the December 2018 Senior Convertible Note was paid-in-full as of June 4, 2020, with the remaining principal balance of approximately $50 and the payment of interest thereon of approximately $2, settled by the issue of 32,297 shares of common stock of the Company, with a fair value of approximately $68, with such fair value measured as noted above.

Note 6 — Debt - continued

A reconciliation in the fair value of debt during each of the three months ended March 31, 2021 and 2020 is as follows:

  December 2018 Senior Secured Convertible Note  November 2019 Senior Secured Convertible Notes  April 2020 Senior Convertible Note  August 2020 Senior Secured Convertible Note  Sum of Balance Sheet Fair Value Components  Other Income (Expense) 
Fair Value - December 31, 2020 $—  $1,270  $4,600  $8,790  $14,660     
Installment repayments – common stock  —   (956)  —   —   (956)    
Non-installment payments – common stock  —   (7)  —   —   (7)    
Non-installment payments – cash  —   —   (52)  (102)  (154)    
Change in fair value  —   (307)  (437)  (938)  (1,682)  1,682 
Principal repayments - cash  —   —   (4,111)  (7,750)  (11,861)    
Fair Value at March 31, 2021 $—  $—   —  $—  $—     
Other Income (Expense) - Change in fair value - three months ended March 31, 2021                     $1,682 
                         
Fair Value – December 31, 2019 $1,700  $6,439  $—  $—  $8,139     
                         
Face value principal – issue date  —   7,000   —   —   7,000     
Fair value adjustment – issue date  —   2,600   —   —   2,600  $(2,600)
Installment repayments – common stock  (1,642)  —   —   —   (1,642)    
Non-installment payments – common stock  (4)  —   —   —   (4)    
Non-installment payments – cash  —   (138)  —   —   (138)    
Change in fair value  9   4,699   —   —   4,708   (4,708)
Lender Fee - November 2019 Senior Secured Convertible Note - Series B  —   —   —   —   —   (700)
Fair Value at March 31, 2020 $63  $20,600   —  $—  $20,663     
Other Income (Expense) - Change in fair value - three months ended March 31, 2020                     $(8,008)

The Senior Convertible Notes presented above were each 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 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 5, Financial Instruments Fair Value Measurements, for a further discussion of fair value assumptions.

Cares Act Paycheck Protection Program Loan

On April 8, 2020 the Company entered into a loan agreement with JP Morgan Chase, N.A., and received approximately $300 of proceeds, pursuant to the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) Paycheck Protection Program (“PPP”) - the “PPP Loan”. As of March 31, 2021, and to date, no principal or interest payments have been made. Additionally, the Company has submitted its PPP Loan forgiveness application on April 21, 2021 and is currently awaiting a final determination of the forgiveness application.

1014
 

 

Note 6 — Related Party Transactions

During the three and six months ended June 30, 2020 and 2019 the Company incurred the following expenses with the minority shareholders of Lucid Diagnostics Inc.:

  

For the three months ended

June 30,

  

For the six months ended  

June 30,

 
  2020  2019  2020  2019 
CWRU patent related fees $27  $47  $59  $78 
Clinical supplies – EsoCheck  —   —   15   — 
EsoGuard Physician Inventors’ consulting agreements  15   36   53   74 
Stock based compensation expense  6   24   12   48 
Total $48  $107  $139  $200 

Note 7 — Commitment and ContingenciesStock-Based Compensation

 

Office LeasesPAVmed Inc. 2014 Long-Term Incentive Equity Plan

 

Total rent expense incurred under office rental agreements was $49 and $33,The PAVmed Inc. 2014 Long-Term Incentive Equity Plan (the “PAVmed Inc. 2014 Equity Plan”), provides for the three months ended June 30, 2020granting, subject to approval by the compensation committee of the PAVmed Inc. board of directors, of stock options, stock appreciation rights, restricted stock, and 2019, respectively, and $98 and $65, for the six months ended June 30, 2020 and 2019, respectively.other stock-based awards subject to limitations under applicable law. As of June 30, 2020,March 31, 2021, the Company’s future minimum lease paymentsPAVmed Inc. 2014 Equity Plan has 1,679,239 shares available-for-grant of stock-based awards, with such shares available for such office rental agreements are estimated to be a total of approximately $135 forgrant, not diminished by 500,854 PAVmed Inc. stock options previously granted outside the period July 1, 2020 to June 30, 2021.

Note 8 — Stock-Based CompensationPAVmed Inc. 2014 Equity Plan.

 

PAVmed Inc. 2014 Long-Term Incentive Equity Plan - Stock Options

 

Stock options issued and outstanding under the PAVmed Inc 2014 Long-Term Incentive Equity Plan (PAVmed Inc. 2014 Equity Plan”) for the period notedPlan is as follows:

  Number
Stock
Options		  Weighted
Average
Exercise
Price		  Remaining
Contractual
Term
(Years)		 
Outstanding stock options at December 31, 2019  5,204  $2.68   8.1 
Granted  1,345  $2.18   9.8 
Exercised  —  $—     
Forfeited  —  $—     
Outstanding stock options at June 30, 2020  6,549  $2.58   7.7 
Vested and exercisable stock options at June 30, 2020  4,016  $3.13   7.3 

 

  Number
Stock
Options		  Weighted
Average
Exercise
Price		  Remaining
Contractual
Term
(Years)		  Intrinsic Value(2) 
Outstanding stock options at December 31, 2020  6,798,529  $2.55         
Granted(1)  350,000  $2.96         
Exercised  (80,000) $1.00         
Forfeited  (25,833) $2.44         
Outstanding stock options at March 31, 2021  7,042,696  $2.59   7.2  $14,425 
Vested and exercisable stock options at March 31, 2021  5,216,860  $2.80   6.6  $9,938 

The aggregate intrinsic value of stock options granted under the PAVmed Inc. 2014 Equity as of June 30, 2020 was $2,468 with respect to stock options outstanding and $1,263 with respect to such stock options vested and exercisable. The intrinsic value is computed as the difference between the quoted price of the PAVmed Inc. common stock on June 30,

(1)Stock options granted under the PAVmed Inc. 2014 Equity Plan generally vest ratably over twelve quarters, with the vesting commencing with the grant date quarter, and have a ten-year contractual term from date-of-grant.

(2)The intrinsic value is computed as the difference between the quoted price of the PAVmed Inc. common stock on each of March 31, 2021 and December 31, 2020 and the exercise price of the underlying PAVmed Inc. stock options, to the extent such quoted price is greater than the exercise price.

Subsequent to March 31, 2021, as of May 14, 2021, a total of 1,170,000 stock options with a weighted average exercise price of $4.49 per share of common stock of the underlying PAVmed Inc. stock options, to the extent such quoted price is greater than the exercise price.

In the six months ended June 30, 2020, a total of 1,345 stock optionsCompany were granted under the PAVmed Inc. 2014 Equity Plan, with each such stock option grantvesting and having a ten year contractual term from date-of-grant, vesting ratably over twelve quarters commencing with the grant date quarter, with a weighted average exercise price of $2.18 per share of common stock of PAVmed Inc.

Subsequent to June 30, 2020, in July 2020, the Company issued 100 common stock options, with each such stock option grant having a ten year contractual term from date-of-grant, vesting ratably over twelve quarters commencing with the grant date quarter, with a weighted average exercise price of $2.04 per share of common stock of PAVmed Inc.as described above.

 

Note 87 — Stock-Based Compensation- continued

 

PAVmed IncInc. 2014 Long-Term Incentive Equity Plan - Restricted Stock Awards

 

On March 15, 2019,May 1, 2020, a total of 700950,000 restricted stock awards were granted to employees under the PAVmed Inc. 2014 Equity Plan, with such restricted stock awards vesting ratably on an annual basis over a three year period with an initial annual vesting date of March 15, 2020. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. On March 15, 2020, approximately 234 of such restricted stock awards vested.

On May 1, 2020, a total of 950 restricted stock awards were granted to employees under the PAVmed Inc. 2014 Equity Plan, with suchas follows: 450,000 restricted stock awards vesting ratably on an annual basis over a three year period with an initial annual vesting date of May 1, 2021.2021; and 500,000 restricted stock awards vesting on May 1, 2023. The fair value of the restricted stock awards of approximately $1,938, measured using the grant date quoted closing price per share of PAVmed Inc. common stock, is being 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.

On March 15, 2019, a total of 700,000 restricted stock awards were granted under the PAVmed Inc. 2014 Equity Plan, vesting as follows: 233,334 restricted stock awards vested on March 15, 2020; and 466,666 restricted awards vesting on March 15, 2022. The fair value of the restricted stock awards of approximately $742, measured using the grant date quoted closing price per share of PAVmed Inc. common stock, is being 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.

 

Subsequent to June 30, 2020, at the Company’s annual meetingMarch 31, 2021, on April 1, 2021, a total of stockholders on July 24, 2020, the Company’s stockholders approved an increase300,000 restricted stock awards were granted to the share reservation ofemployees under the PAVmed IncInc. 2014 Equity Plan, with such restricted stock awards having a single vesting date of an additional 2,000April 1, 2024. The restricted stock awards are subject to forfeiture if the requisite service period is not completed.

Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan

The Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan (the “Lucid Diagnostics Inc. 2018 Equity Plan”), provides for the granting, subject to approval by the Lucid Diagnostics Inc. board of directors, of stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. As of March 31, 2021, the Lucid Diagnostics Inc. 2018 Equity Plan has 2,265,000 shares of common stock of Lucid Diagnostics Inc. available-for-grant of stock-based awards.

Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan - Stock Options

Stock options issued and outstanding under the Company, from 8,000Lucid Diagnostics Inc. 2018 Equity Plan is as follows:

  Number
Stock
Options		  Weighted
Average
Exercise
Price		  Remaining
Contractual
Term
(Years)		 
Outstanding stock options at December 31, 2020  991,667  $0.86   8.0 
Granted(1)  —  $—     
Exercised  —  $—     
Forfeited  —  $—     
Outstanding stock options at March 31, 2021  991,667  $0.86   7.7 
Vested and exercisable stock options at March 31, 2021  838,749  $0.83   7.7 

(1)Stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan generally vest ratably over twelve quarters, with the vesting commencing with the grant date quarter, and have a ten-year contractual term from date-of-grant.

During the three months ended March 31, 2020, 3,333 stock options issued under the Lucid Diagnostics Inc. 2018 Equity Plan were exercised for cash proceeds of $5, resulting in the issue of a corresponding number of shares of common stock of Lucid Diagnostics Inc.

Note 7 — Stock-Based Compensation - continued

Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan – Restricted Stock Awards

On March 1, 2021, a total of 1,040,000 restricted stock awards were granted under the Lucid Diagnostics Inc. 2018 Equity Plan to 10,000 shares.employees of PAVmed Inc., a member of the board of directors of Lucid Diagnostics Inc. (who is also a member of the board of directors of PAVmed Inc.), and to each of the three physician inventors of the intellectual property licensed under the CWRU License Agreement, with such restricted stock awards having a single vesting date of March 1, 2023, and an aggregate grant date fair value of approximately $18.9 million, measured as discussed below, 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. Subsequent to March 31, 2021, as of May 14, 2021, a total of 65,000 restricted stock awards were granted under the Lucid Diagnostics Inc 2018 Equity Plan.

The estimated fair value of the restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan, as discussed above, was determined using a probability-weighted average expected return methodology (“PWERM”), which involves the determination of equity value under various exit scenarios and an estimation of the return to the common stockholders under each scenario. In this regard, the Lucid Diagnostics Inc. common stock grant-date estimated fair value was based upon an analysis of future values, assuming various outcomes, based upon the probability-weighted present value of expected future investment returns, considering each of the possible future outcomes available to Lucid Diagnostics Inc.

The PWERM principally involved (i) the identification of scenarios and related probabilities; (ii) determine the equity value under each scenario; and (iii) determine the common stock shareholders’ return in each scenario. The two scenarios identified were an initial public offering (“IPO”) of Lucid Diagnostics Inc. common stock (“IPO scenario”); and, to continue on as a private company (“stay private scenario”). With respect to the IPO scenario, the valuation of the Lucid Diagnostics Inc. common stock was computed using assumptions, including dates of the IPO, to calculate an estimated pre-money valuation; and, with respect to the stay private scenario, an income approach was used, wherein a risk-adjusted discount rate is applied to projected future cash flows. A relative weighting of 75% was applied to the IPO scenario and 25% was assigned to the stay private scenario.

Stock-Based Compensation Expense

The consolidated stock-based compensation expense recognized 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:

  For the Three Months Ended
March 31,		 
  2021  2020 
Sales and marketing expenses $202  $34 
General and administrative expenses  1,124   243 
Research and development expenses  110   67 
Total $1,436  $344 

The consolidated stock-based compensation expense presented above includes $805 and $16 in the three months ended March 31, 2021 and 2020, respectively, recognized by Lucid Diagnostics Inc., with respect to each of: stock options and restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan to employees of PAVmed Inc. and to non-employee consultants, with each providing services to Lucid Diagnostics Inc.; and, stock options granted under the PAVmed Inc. 2014 Equity Plan to non-employee consultants providing services to Lucid Diagnostics Inc., summarized as follows for the periods noted:

  Three Months Ended 
  March 31, 
  2021  2020 
Lucid Diagnostics Inc 2018 Equity Plan – general and administrative expense $789  $— 
Lucid Diagnostics Inc 2018 Equity Plan – research and development expenses $13  $13 
PAVmed Inc 2014 Equity Plan - research and development expenses  3   3 

Total stock-based compensation expense –

recognized by Lucid Diagnostics Inc

 $805  $16 

Note 7 — Stock-Based Compensation - continued

Stock-Based Compensation Expense - continued

As of March 31, 2021, unrecognized stock-based compensation expense and weighted average remaining requisite service period with respect to stock options and restricted stock awards issued under each of the PAVmed Inc. 2014 Equity Plan and the Lucid Diagnostics Inc. 2018 Equity Plan, as discussed above, is as follows:

  Unrecognized
Expense		  Weighted Average
Remaining
Service Period		 
PAVmed Inc. 2014 Equity Plan        
Stock Options $2,419   0.8 years 
Restricted Stock Awards $1,573   1.9 years 
         
Lucid Diagnostics Inc. 2018 Equity Plan        
Stock Options $36   0.7 years 
Restricted Stock Awards $18,139   1.9 years 

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 $2.79 per share and $1.34 per share during the three months ended March 31, 2021 and 2020, respectively, calculated using the following weighted average Black-Scholes valuation model assumptions:

  Three Months Ended March 31, 
  2021  2020 
Expected term of stock options (in years)  5.7   5.8 
Expected stock price volatility  75%  59%
Risk free interest rate  0.96%  1.3%
Expected dividend yield  0%  0%

The restricted stock awards granted under the PAVmed Inc. 2014 Equity Plan resulted in stock-based compensation expense recognized of $185 and $62 in general and administrative expense, in the three months ended March 31, 2021 and 2020, respectively, and $38 in research and development expense in the three months ended March 31, 2021 (there was no such research and development expense in the corresponding period of the prior year).

 

PAVmed IncInc. Employee Stock Purchase Plan (“ESPP”)

 

The PAVmed Inc. Employee Stock Purchase Plan (“PAVmed Inc. ESPP”), adopted by the Company’s board of directors effective April 1, 2019, provides eligible employees the opportunity to purchase shares of PAVmed Inc. common stock through payroll deductions during six month periods, wherein the purchase price per share of common stock is the lower of 85% of the quoted closing price per share of PAVmed Inc. common stock at the beginning or end of each six month share purchase period.

The PAVmed Inc. ESPP share purchase dates are March 31 and September 30. On the March 31, 2020 ESPP purchase date, 154 sharesA total of PAVmed Inc. common stock were issued for proceeds of approximately $0.1 million.

Subsequent to June 30, 2020, at the Company’s annual meeting of stockholders on July 24, 2020, the Company’s stockholders approved an increase to the share reservation of the PAVmed Inc ESPP of an additional 500203,480 and 154,266 shares of common stock of the Company from 250 shares to 750 shares.were purchased for proceeds of approximately $304 and $126, on the ESPP purchase dates of March 31, 2021 and 2020, respectively.

 

Lucid DiagnosticsAs of March 31, 2021, the PAVmed Inc. 2018 Long-Term Incentive Equity Plan -ESPP has a total reservation of 750,000 shares of common stock of PAVmed Inc., with 157,153 shares available-for-issue remaining after the March 31, 2021 ESPP purchase noted above.

Note 8 — Preferred Stock Options

 

The Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan (“Lucid Diagnostics Inc. 2018 Equity Plan”)Company is separateauthorized to issue 20 million shares of its preferred stock, par value of $0.001 per share, with such designation, rights, and apart frompreferences as may be determined by the PAVmed Inc. 2014 Equity Plan discussed above.Company’s board of directors. There were 1,241,438 and 1,228,075 shares of Series B Convertible Preferred Stock options(classified in permanent equity) issued and outstanding underas of March 31, 2021 and December 31, 2020.

In the Lucid Diagnostics Inc. 2018three months ended March 31, 2021, the Company’s board-of-directors declared approximately $72 of Series B Convertible Preferred Stock dividends, earned as of December 31, 2020, which were settled by the issue of an additional 24,198 shares of Series B Convertible Preferred Stock. In the corresponding period of the prior year, the board of directors declared approximately $69 of such dividends, earned as of each of December 31, 2019, which were settled by the issue of an additional 23,182 shares of Series B Convertible Preferred Stock.

Subsequent to March 31, 2021, in April 2021, the Company’s board-of-directors declared a Series B Convertible Preferred Stock dividend earned as of March 31, 2021 and payable as of April 1, 2021, of approximately $75 to be settled by the issue of an additional 25,046 shares of Series B Convertible Preferred Stock (with such dividend not recognized as a dividend payable as the Company’s board of directors had not declared such dividends payable as of March 31, 2021).

Note 9 — Stockholders’ Equity Planand Common Stock Purchase Warrants

The Company is authorized to issue up to 150 million shares of its common stock, par value of $0.001 per share. There were 81,424,744 and 63,819,935 shares of common stock issued and outstanding as of March 31, 2021 and December 31, 2020, respectively.

Three Months Ended March 31, 2021

●On January 5, 2021, a total of 6,000,000 shares of common stock of the Company were issued for gross proceeds of approximately $13,434, before a placement agent fee and expenses of approximately $951, and offering costs incurred by the Company of approximately $71. The shares of common stock were issued in a registered direct offering pursuant to a Prospectus Supplement dated January 5, 2021 with respect to the Company’s effective shelf registration statement on Form S-3 (File No. 333-248709).
●On February 23, 2021, a total of 9,782,609 shares of common stock of the Company were issued for proceeds of approximately $41,566, before offering costs incurred by the Company of approximately $290. The shares of common stock were issued in an underwritten registered offering pursuant to a final Prospectus Supplement dated February 23, 2021, with respect to the Company’s effective shelf registration statement on Form S-3 (File No. 333-248709 and File No. 333-253384).
●During the three months ended March 31, 2021, a total of 860,217 shares of common stock of the Company were issued resulting from a corresponding number of Series Z Warrants exercised for cash of $1.60 per share. Subsequent to March 31, 2021, as of May 14, 2021, a total of 672,954 Series Z Warrants were exercised for cash at a $1.60 per share, resulting in the issue of a corresponding number of shares of common stock of the Company.
●In January 2021, 667,668 shares of the Company’s common stock were issued upon conversion, at the election of the holder, of the November 2019 Senior Convertible Note remaining face value principal of approximately $956 along with approximately $7 of interest thereon, as discussed in Note 6, Debt.
●During the three months ended March 31, 2021, 10,835 shares of common stock of the Company were issued upon conversion of a corresponding number of shares of Series B Convertible Preferred Stock. See Note 8, Preferred Stock, for a discussion of the Series B Convertible Preferred Stock.
●During the three months ended March 31, 2021, 80,000 shares of common stock of the Company were issued upon exercise of stock options for cash of approximately $80. See Note 7, Stock-Based Compensation, for a discussion of the PAVmed Inc. 2014 Equity Plan.
●On March 31, 2021, 203,480 shares of common stock were purchased by employees through participation in the PAVmed Inc. Employee Stock Purchase Plan, as discussed in Note 7, Stock-Based Compensation.

Note 9 — Stockholders’ Equity and Common Stock Purchase Warrants - continued

Common Stock Purchase Warrants

The common stock purchase warrants (classified in permanent equity) outstanding as of the period noted isdates indicated are as follows:

 

  Number
Stock
Options		  Weighted
Average
Exercise
Price		  Remaining
Contractual
Term
(Years)		 
Outstanding stock options at December 31, 2019  995  $0.86   9.0 
Granted  —  $—     
Exercised  3  $1.50     
Forfeited  —  $—     
Outstanding stock options at June 30, 2020  992  $0.86   8.5 
Vested and exercisable stock options at June 30, 2020  574  $0.83   8.4 

Stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan, have a ten year contractual term from date of grant, and vest ratably over twelve successive calendar quarters, with first vesting date in the quarter of the date of grant.

  Common Stock Purchase Warrants Issued and Outstanding at 
     Weighted     Weighted    
  March 31,  Average
Exercise		  December 31,  Average
Exercise		  Expiration 
  2021  Price /Share  2020  Price/Share  Date 
Series Z Warrants  15,954,722  $1.60   16,814,939  $1.60   April 2024 
UPO - Series Z Warrants  ---  $---   53,000  $1.60   January 2021 
Series W Warrants  381,818  $5.00   381,818  $5.00   January 2022 
Total  16,336,540  $1.68   17,249,757  $1.57     

 

During the sixthree months ended June 30, 2020, 3 stock options issued under the Lucid Diagnostics Inc. 2018 Equity PlanMarch 31, 2021, 860,217 Series Z Warrants were exercised for cash proceeds of $5,at their exercise price per share, resulting in the issue of a corresponding number of shares of common stock of Lucid Diagnostics Inc.

Note 8 — Stock-Based Compensation - continued

Stock-Based Compensation Expense

Consolidated stock-based compensation expense recognizedthe Company. Additionally, subsequent to March 31, 2021, as of May 14, 2021, a total of 672,954 Series Z Warrants were exercised 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  Six Months Ended 
  June 30,  June 30, 
  2020  2019  2020  2019 
General and administrative expenses $407  $299  $684  $584 
Research and development expenses  122   89   188   263 
Total $529  $388  $872  $847 

As of June 30, 2020, unrecognized stock-based compensation expense and weighted average remaining requisite service period with respect to stock options and restricted stock awards issued under each of the PAVmed Inc. 2014 Equity Plan and the Lucid Diagnostics Inc 2018 Equity Plan, as discussed above, is as follows:

  

Unrecognized

Expense

  Weighted Average
Remaining
Service
Period		 
PAVmed Inc. 2014 Equity Plan        
Stock Options $2,269    1.2 years 
Restricted Stock Awards $2,243   2.6 years 
         
Lucid Diagnostics Inc. 2018 Equity Plan        
Stock Options $75   1.3 years 

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 $0.92 per share and $0.93 per share during the six months ended June 30, 2020 and 2019, respectively, calculated using the following weighted average Black-Scholes valuation model assumptions:

  Six Months Ended June 30, 
  2020  2019 
       
Expected term of stock options (in years)  5.7   5.7 
Expected stock price volatility  56%  50%
Risk free interest rate  2.0%  2.3%
Expected dividend yield  0%  0%

Stock-based compensation expense recognized with respect to stock options granted under the PAVmed Inc. 2014 Equity Plan to non-employees under the previous provisions FASB ASC 505-50 in the prior year six months ended June 30, 2019, was based on a weighted average estimated fair value of such stock options of $1.90 per share, calculated using Black-Scholes valuation model weighted-average assumptions of 8.7 year contractual term, a 60% expected stock price volatility, a 2.3% risk free interest rate, and a 0% expected dividend rate.

The restricted stock awards granted to employees under the PAVmed Inc. 2014 Equity Plan are measuredcash at their grant date estimated fair value based on the date-of-grant quotedexercise price per share, of PAVmed Inc. common stock. The 700 restricted stock awards granted on March 15, 2019 had an aggregate fair value of approximately $742 with such stock-based compensation expense recognized ratably over the requisite service period, which is the three year vesting period as discussed above. The 950 restricted stock awards granted on May 1, 2020 had an aggregate fair value of approximately $1,938 with such stock-based compensation expense recognized ratably over the requisite service period, which is the three year vesting period as discussed above. The stock-based compensation expense recognized with respect to these restricted stock awards was approximately $144 and $62 in the three months ended June 30, 2020 and 2019, respectively, and $206 and $82 in the six months ended June 30, 2020 and 2019, respectively, classified in general and administrative expenses; and $25 in the three and six months ended June 30, 2020 classified in research and development expenses, as presented above.

Note 8 — Stock-Based Compensation - continued

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 $0.30 per share and $0.39 per share during the six months ended June 30, 2020 and 2019, respectively, and was calculated using the following weighted average Black-Scholes valuation model assumptions:

  Six Months Ended June 30, 
  2020  2019 
       
Expected term of stock options (in years)  5.2   5.7 
Expected stock price volatility  60%  63%
Risk free interest rate  1.9%  2.5%
Expected dividend yield  0%  0%

Stock-based compensation expense recognized with respect to stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan to non-employees under the previous provisions FASB ASC 505-50 in the prior year three and six months ended June 30, 2019, was based on a weighted average estimated fair value of such stock options of $0.61 per share, calculated using Black-Scholes valuation model weighted-average assumptions of 9.1 year contractual term, a 62% expected stock price volatility, a 2.2% risk free interest rate, and a 0% expected dividend rate.

The Company uses the Black-Scholes valuation model to estimate the fair value of stock options granted under both the PAVmed Inc. 2014 Equity Plan and the Lucid Diagnostics Inc. 2018 Equity Plan, which requires the Company to make certain estimates and assumptions, with the weighted-average valuation assumptions for stock-based awards, principally as follows:

●The expected term of stock options represents the period of time stock options are expected to be outstanding, which is the expected term derived using the simplified method and, through December 31, 2019 for non-employees (under the previous provisions FASB ASC 505-50), was the remaining contractual term;
●With respect to stock options granted under the PAVmed Inc. 2014 Equity Plan, the expected stock price volatility is based on the historical stock price volatility of PAVmed Inc. common stock (“PAVM”) and the volatilities of similar entities within the medical device industry over the period commensurate with the expected term, and through December 31, 2019 for non-employees (under the previous provisions FASB ASC 505-50), was the remaining contractual term of the respective stock option; and, with respect to stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan, the expected stock price volatility is based on the historical stock price volatilities of similar entities within the medical device industry over the period commensurate with the expected term, and through December 31, 2019 for non-employees (under the previous provisions FASB ASC 505-50), was the remaining contractual term of the respective stock option;
●The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period commensurate with the expected term of the stock option; and,
●The expected dividend yield is based on annual dividends of $0.00 as there has not been a dividend paid to-date, and there is no plan to pay dividends for the foreseeable future.

The price per share of PAVmed Inc. common stock used in the computation of estimated fair value of stock options granted under the PAVmed Inc. 2014 Equity Plan is its quoted closing price per share. The price per share of Lucid Diagnostics Inc. common stock used in the computation of estimated fair value of stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan was estimated using a discounted cash flow method applied to a multi-year forecast of its future cash flows.

14

Note 9 — Financial Instruments Fair Value Measurements

Recurring Fair Value Measurements

The fair value hierarchy table for the periods indicated is as follows:

  Fair Value Measurement on a Recurring Basis at Reporting Date Using(1)
  Level-1  Level-2  Level-3    
  Inputs  Inputs  Inputs  Total 
June 30, 2020                
Senior Secured Convertible Note - November 2019         $12,300  $12,300 
Senior Secured Convertible Note - April 2020 $—  $—  $3,900  $3,900 
Totals $—  $—  $16,200  $16,200 
                 
December 31, 2019                
Senior Secured Convertible Note - December 2018         $1,700  $1,700 
Senior Secured Convertible Note - November 2019 $—  $—  $6,439  $6,439 
Totals $—  $—  $8,139  $8,139 

(1)As noted above, as presented in the fair value hierarchy table, Level-1 represents quoted prices in active markets for identical items, Level-2 represents significant other observable inputs, and Level-3 represents significant unobservable inputs. There were no transfers between the respective Levels during the six-month period ended June 30, 2020.

The April 2020 Senior Convertible Note, the November 2019 Senior Secured Convertible Notes and the December 2018 Senior Secured Convertible Note are each accounted for under the ASC 825-10-15-4 fair value option (“FVO”) election. Under the FVO election 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. 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 unaudited condensed consolidated statement of operations.

The following table presents changes in Level 3 liabilities measured at fair value for the six-month period ended June 30, 2020 and 2019. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. 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:

Note 9 — Financial Instruments Fair Value Measurements - continued

Fair Value Assumptions – June 30, 2020:

  

November 2019

Senior Secured

Convertible Note

Series A & Series B

  

April 2020

Senior

Convertible Note

 
Required rate of return  29%  68%
Conversion Price $1.60  $5.00 
Expected term (years)  1.25   1.83 
Volatility  79%  65%
Risk free rate  0.16%  0.16%
Dividend yield  0%  0%

Fair Value Assumptions – June 30, 2019:

  

December 2018

Senior Secured

Convertible Note 

 
Required rate of return  11.1%
Conversion Price $1.60 
Expected term (years)  1.51 
Volatility  53%
Risk free rate  1.8%
Dividend yield  0%

Note 10 — Outstanding Debt

The fair value and face value principal of outstanding debt as of the dates indicated is as follows:

    Contractual
Maturity Date		 Stated Interest Rate  Conversion Price
per Share		  Face Value
Principal
Outstanding		  Fair Value 
December 2018 Senior Secured Convertible Note (1) December 31, 2020  7.875% $1.60  $—  $— 
November 2019 Senior Secured Convertible Note(2)(3) September 30, 2021  7.875% $1.60  $8,305  $12,300 
April 2020 Senior Convertible Note (4) April 30, 2022  7.875% $5.00   4,111   3,900 
Balance as of June 30, 2020             $12,416  $16,200 
                     
December 2018 Senior Secured Convertible Note (1) December 31, 2020  7.875% $1.60  $1,692  $1,700 
November 2019 Senior Secured Convertible Note (2) September 30, 2021  7.875% $1.60   7,000  $6,439 
Balance as of December 31, 2019             $8,692  $8,139 

Note 10 — Outstanding Debt - continued

The changes in the fair value of debt during the three and six months ended June 30, 2020 is as follows:

  December 2018 Senior Secured
Convertible Note		  November 2019
Senior Secured Convertible Note
Series A
& Series B		  April 2020 Senior Convertible Note  Sum of Balance Sheet
Fair Value Components		  Other Income (Expense) 
Fair Value - December 31, 2019 $1,700  $6,439  $—  $8,139     
                     
Face value principal – issue date  —   7,000   —   7,000     
Fair value adjustment – issue date  —   2,600   —   2,600   (2,600)
Installment repayments – common stock  (1,642)  —   —   (1,642)    
Non-installment payments – common stock  (4)  —    —   (4)    
Non-installment payments – cash  —   (138)  —   (138)    
Change in fair value  9   4,699   —   4,708   (4,708)
Lender Fee - November 2019 Senior Secured Convertible Note - Series B  —   —   —   —   (700)
Fair Value at March 31, 2020 $63  $20,600  $—  $20,663     
Other Income (Expense) - Change in fair value - three months ended March 31, 2020                 $(8,008)
                     
Face value principal – issue date  —   —   4,111   4,111     
Fair value adjustment – issue date  —   —   (411)  (411)  411 
Installment repayments – common stock  (50)  (5,695)  —   (5,745)    
Non-installment payments – common stock  (2)  (242)  —   (244)    
Non-installment payments – cash  —   —   (54)  (54)     
Change in fair value  (11)  (2,363)  254   (2,120)   2,120 
Lender Fee - April 2020 Senior Convertible Note  —   —   —   —   (411)
Fair Value at June 30, 2020 $—  $12,300  $3,900  $16,200     
Other Income (Expense) - Change in fair value - three months ended June 30, 2020                 $2,120 
Other Income (Expense) - Change in fair value - six months ended June 30, 2020                 $(5,888)

Note 10 — Outstanding Debt - continued

The changes in the fair value of debt during the three six months ended June 30, 2019 is as follows:

  December 2018 Senior Secured Convertible Note  Other Income (Expense) 
Fair Value - December 31, 2018 $7,903  $  
Installment repayments - common stock  (52)    
Non-installment payments - common stock        
Non-installment payments - cash  (159)    
Change in fair value  559   (559)
Fair Value - March 31, 2019  8,251     
Other Income (Expense) - Change in fair value
 - three months ended March 31, 2019		      (559)
Installment repayments - common stock  (1,480)    
Non-installment payments - common stock  (22)    
Non-installment payments - cash  (120)    
Change in fair value  161   (161)
Fair Value - June 30, 2019 $6,790     
Other Income (Expense) - Change in fair value
 - three months ended June 30, 2020		      (161)
Other Income (Expense) - Change in fair value
 - six months ended June 30, 2020		     $(720)

Note 10 — Outstanding Debt - continued

(1)With respect to the December 2018 Senior Secured Convertible Note, in the six months ended June 30, 2020, approximately $1,692 of principal repayments and approximately $6 of non-installment payments were settled through the issuance of approximately 2,075 shares of common stock of the Company with a fair value of approximately $2,901 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company). As of June 30, 2020, the December 2018 Senior Secured Debt balance was paid in full.
(2)

With respect to the November 2019 Senior Secured Convertible Note - Series A and Series B - in the six months ended June 30, 2020, approximately $5,695 of Accelerated and Bi-Monthly Installment principal repayments and approximately $242 of non-installment payments were settled through the issuance of approximately 3,753 shares of common stock of the Company with a fair value of approximately $8,671 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company). Additionally, non-installment payments of approximately $138 were paid in cash in the same period. There were no such installment repayments nor non-installment payments in the corresponding prior year period. Subsequent to June 30, 2020, through August 11, 2020, approximately $480 of Accelerated and Bi-Monthly Installment principal repayments and approximately $4 of non-installment payments were settled through the issuance of approximately 303 shares of common stock of the Company with a fair value of approximately $618 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company).

(3)

The November 2019 Senior Secured Convertible Note - Series B has a face value principal of approximately $7,000 and lender fees of approximately $700 (recognized as a current period other expense), resulting in cash proceeds of approximately $6,300 received by the Company, with such cash proceeds delivered to the Company by the investors on March 30, 2020, at their election under the prepayment provisions of the Series B note of the November 2019 Senior Secured Convertible Note. Additionally, under a separate agreement, the Company incurred an expense of approximately $410 with respect to the placement agent advisory fee. The November 2019 Senior Secured Convertible Note - Series B has a contractual maturity date of September 30, 2021 and a stated interest rate of 7.875% per annum.

The November 2019 Senior Secured Convertible Notes - Series A and Series B - have a stated interest rate of 7.875% per annum to the extent the investor has funded the cash proceeds of each such respective Series A and Series B. During the period November 4, 2019 to March 29, 2020, during which period the Series B was not funded by the investor, the Company incurred interest expense of 3.0% per annum on the Series B $7.0 million face value principal. The (cash) payment of such 3.0% interest on the $7.0 million face value principal resulted in the recognition of approximately $53 of interest expense during the period January 1, 2020 through March 29, 2020, with such interest expense included in other income (expense) in the accompanying (unaudited) condensed consolidated statement of operations. There was no such interest expense in the corresponding prior year period.

(4)On April 30, 2020, the Company entered into a Security Purchase Agreement for the issue of a Senior Convertible Note with a face value principal of approximately $4,111 and lender fees of approximately $411 (recognized as a current period other expense), resulting in $3,700 cash proceeds received by the Company. - referred to as the April 2020 Senior Convertible Note. Additionally, under a separate agreement, the Company incurred a current period expense of approximately $120 with respect to the placement agent advisory fee. The April 2020 Senior Convertible Note has a 24 month maturity, a 7.875% interest rate per annum, and a conversion price of $5.00 per share of the Company’s common stock. On the maturity date, the Company will pay the holder in cash all remaining outstanding principal and unpaid interest thereon. In the six months ended June 30, 2020 non-installment payments in cash at the stated interest rate were made in the amount of approximately $54.

Subsequent to June 30, 2020, on August 5, 2020, the Company entered into a Securities Purchase Agreement (“SPA”) with an institutional investor (the “Investor”), and pursuant to the SPA, on August 6, 2020, the Company issued to the Investor a Senior Secured Convertible Note (the “August 2020 Senior Secured Convertible Note”) with a face value principal amount of $7,750 and $750 lender fee (recognized as a current period other expense), resulting in $7,000 cash proceeds received by the Company. The August 2020 Senior Secured Convertible Note has a 24 month maturity, a 7.875% interest rate per annum, and a conversion price of $5.00 per share of the Company’s common stock. On the maturity date, the Company will pay the holder in cash all remaining outstanding principal and unpaid interest thereon.

The August 2020 Senior Secured Convertible Note investor and its affiliates also hold the Company’s November 2019 Senior Secured Convertible Notes the April 2020 Senior Convertible Note. The August 2020 Senior Secured Convertible Note contains certain representations and warranties, covenants and indemnities for similar transactions as well as the past transactions entered into with the investor. The August 2020 Senior Secured Convertible Note contains certain redemption rights similar to the April 2020 Senior Convertible Note and security interest with a first priority line in all of our assets, including all of the Company’ current and future significant subsidiaries, similar to the November 2019 Senior Secured Convertible Notes.

Note 11 — Cares Act Paycheck Protection Program Loan

On April 8, 2020 the Company entered into a loan agreement with JP Morgan Chase, N.A., and received approximately $300 of proceeds, pursuant to the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) Paycheck Protection Program (“PPP”) - the “PPP Loan”. The PPP Loan matures on April 8, 2022 and bears interest at a rate of approximately 1.0% per annum. Monthly amortized principle and interest payments are deferred for six months after the PPP Loan date-of-disbursement after which time each month following the deferral period, the Company will make equal monthly payments on principal and interest balances to fully amortize the loan balances by the maturity date. As such, $150 is presented as a current liability and $150 is presented as a non-current liability in the accompanying unaudited condensed consolidated balance sheet as of June 30, 2020. The PPP Loan funds were received on April 8, 2020. The PPP Loan contains events of default and other provisions customary for a loan of this type. The Paycheck Protection Program provides that (1) the use of PPP Loan amount shall be limited to certain qualifying expenses, (2) 100 per cent of the principal amount of the loan is guaranteed by the Small Business Administration and (3) an amount up to the full principal amount may qualify for loan forgiveness in accordance with the terms of CARES Act. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during either, at our discretion, the eight-week period or twenty-four week period beginning on the date of disbursement of proceeds from the PPP loan. In the event the PPP loan, or any portion thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal. The Company is not yet able to determine the amount potentially to be forgiven, if any. As of June 30, 2020 and the date of this filing, the Company was in full compliance with the provisions of the PPP Loan.

Note 12 — Preferred Stock

During the six months ended June 30, 2020, the Company’s board-of-directors declared the payment of Series B Convertible Preferred Stock dividends, earned as of December 31, 2019 and March 31, 2020, totaling approximately $140, which have been settled by the issue of an additional 47a corresponding number of shares of Series B Convertible Preferred Stock. Subsequent to June 30, 2020, in July 2020, the Company’s board-of-directors declared the payment of Series B Convertible Preferred Stock dividend payment earned as of June 30, 2020, payable as of July 1, 2020 of approximately $71 to be settled by the issue of an additional 24 shares of Series B Convertible Preferred Stock. The Series B Convertible Preferred Stock dividend payment earned as of June 30, 2020 and payable July 1, 2020, was not recognized as a dividend payable liability in the accompanying unaudited condensed consolidated balance sheet as the Company’s board of directors had not declared such dividends payable as of June 30, 2020.

Note 13 — Stockholders’ Equity, Common Stock Purchase Warrants, and Noncontrolling Interest

As of June 30, 2020, a total of 17,250 common stock purchase warrants were issued and outstanding, with a weighted average exercise price of $1.68 per share of common stock of the Company; and,Company.

The Unit Purchase Options (UPO) expired unexercised as of June 30, 2019, a total of 18,449 common stock purchase warrants were issued and outstanding with a weighted average exercise price of $1.57 per share of common stock of the Company. January 29, 2021.

During the sixthree months ended June 30,March 31, 2020, 1,199the remaining 1,199,383 Series S Warrants were exercised for cash proceedsat their exercise price of $12,$0.01 per share, resulting in the issuanceissue of a corresponding number of shares of the Company’s common stock.

Subsequent to June 30, 2020, at the annual meeting of stockholders held on July 24, 2020the Company’s stockholders approved an increase of authorized shares of common stock of the Company by 50,000 shares, from 100,000 shares to 150,000 shares.Company.

Note 10 — Noncontrolling Interest

 

The noncontrolling interest (“NCI”) included as a component of consolidated total stockholders’ equity is with respect to the Company’s majority-owned subsidiaries Lucid Diagnostics Inc. and Solys Diagnostics Inc., summarized for the periods indicated is as follows:

 

 Six Months
Ended
June 30, 2020		 Year Ended
December 31, 2019		  Three Months Ended
March 31, 2021		 Year Ended
December 31, 2020		 
NCI - equity (deficit) - beginning of period $(814) $(162) $(2,369) $(814)
Minority Interest investment in Solys Diagnostics Inc  —   889 
Minority Interest share subscription receivable - Solys Diagnostics Inc.  —   (889)
Minority Interest Lucid Diagnostics Inc. 2018 Equity Plan stock option exercise  5   — 
Lucid Diagnostics Inc. 2018 Equity Plan stock option exercise  —   5 
Net loss attributable to NCI - Lucid Diagnostics Inc.  (640)  (801)  (663)  (1,503)
Net loss attributable to NCI - Solys Diagnostics Inc.  (62)  (10)  (16)  (109)
Stock-based compensation expense - Lucid Diagnostics Inc. 2018 Equity Plan  26   159   802   52 
NCI - equity (deficit) - end of period $(1,485) $(814) $(2,246) $(2,369)

Lucid Diagnostics Inc.

As of each of March 31, 2021, and December 31, 2020, there were 10,003,333 shares of common stock of Lucid Diagnostics Inc. issued and outstanding; of which PAVmed Inc. holds 8,187,499 shares, representing equity ownership interest of 81.85%, and PAVmed Inc. has a controlling financial interest, as of March 31, 2021 and December 31, 2020, respectively. Accordingly, Lucid Diagnostics Inc. is a consolidated majority-owned subsidiary of the Company, for which a provision of a noncontrolling interest (NCI) is included as a separate component of consolidated stockholders’ equity in the unaudited condensed consolidated balance sheet as of March 31, 2021 and December 31, 2020, along with the recognition of a net loss attributable to the NCI in the unaudited condensed consolidated statement of operations for the three months ended March 31, 2021 and 2020.

Solys Diagnostics Inc.

As of March 31, 2021 and December 31, 2020, there were 9,189,190 shares of common stock of Solys Diagnostics Inc. issued and outstanding, of which PAVmed Inc. holds a 90.3235% majority-interest ownership and has a controlling financial interest, with the remaining 9.6765% minority-interest ownership held by unrelated third parties. Accordingly, Solys Diagnostics Inc. is a consolidated majority-owned subsidiary of the Company, for which a provision of a noncontrolling interest (NCI) is included as a separate component of consolidated stockholders’ equity in the unaudited condensed consolidated balance sheet as of March 31, 2021 and December 31, 2020, along with the recognition of a net loss attributable to the NCI in the unaudited condensed consolidated statement of operations for the three months ended March 31, 2021 and 2020.

Note 14 —Loss11 — Loss Per Share

 

Basic earnings (loss)The “Net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per common share is computed similar to basic earnings (loss) per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. Diluted weighted average common shares include common stock potentially issuable under the Company’s convertible notes, preferred stock, warrants and vested and unvested stock options.

The following table sets forth the computation of earnings (loss) per share- attributable to PAVmed Inc. - basic and diluted” and “Net loss per share - attributable to PAVmed Inc. common stockholders - basic and diluted” - for the respective periods indicated:indicated - is as follows:

 

 Three Months Ended Six Months Ended  Three Months Ended 
 June 30, June 30,  March 31, 
 2020 2019 2020 2019  2021 2020 
Numerator                 
Net loss - before noncontrolling interest $(5,844) $(3,739) $(20,755) $(7,443) $(10,110) $(14,911)
Net loss attributable to noncontrolling interest  266   145   702   314   679   436 
Net loss - as reported, attributable to PAVmed Inc. $(5,578) $(3,594) $(20,053) $(7,129) $(9,431) $(14,475)
                        
Series B Convertible Preferred Stock dividends: $(71) $(66) $(141) $(132)
Series B Convertible Preferred Stock dividends - earned(1): $(75) $(70)
                        
Net loss attributable to PAVmed Inc. common stockholders $(5,649) $(3,660) $(20,194) $(7,261) $(9,506) $(14,545)
                        
Denominator                        
Weighted average common shares outstanding, basic and diluted(2)  44,781   27,606   44,140   27,344   73,954,126   43,499,714 
                        
Loss per share                        
Basic and diluted                        
Net loss - as reported, attributable to PAVmed Inc. $(0.12) $(0.13) $(0.45) $(0.26) $(0.13) $(0.33)
Net loss attributable to PAVmed Inc. common stockholders $(0.13) $(0.13) $(0.46) $(0.27) $(0.13) $(0.33)

 

The following common stock equivalents have been excluded from the computation of diluted weighted average shares outstanding as their inclusion would be anti-dilutive:anti-dilutive, are as follows:

 

 June 30,  March 31, 
 2020 2019  2021 2020 
PAVmed Inc. 2014 Equity Plan stock options and restricted stock awards  7,965   5,804   8,539,362   5,795,195 
Unit purchase options - as to shares of common stock  53   53   ---   53,000 
Unit purchase options - as to shares underlying Series Z Warrants  53   53   ---   53,000 
Series Z Warrants  16,815   16,815   15,954,722   16,815,039 
Series W Warrants  382   382   381,818   381,818 
Series B Convertible Preferred Stock(3)  1,180   1,113   1,241,438   1,156,391 
Total  26,448   24,220   26,117,340   24,254,443 

(1)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.
(2)Basic weighted-average number of shares of common stock outstanding for the three months ended March 31, 2021 and 2020 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 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.
(3)If converted, at the election of the holder, the shares of Series B Convertible Preferred Stock issued and outstanding would result in the issue of the same number of additional shares of common stock of the Company.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis of our unaudited condensed consolidated financial condition and results of operations should be read together with our Annual Report on Form 10-K for the year ended December 31, 20192020 (the “Form 10-K”) as filed with the Securities and Exchange Commission (the “SEC”). Unless the context otherwise requires, references herein to “we”, “us”, and “our”, and to the “Company” or “PAVmed” are to PAVmed Inc. and its subsidiaries,Subsidiaries, including itseach of the PAVmed Inc. majority-owned subsidiary, Lucid Diagnostics Inc. (“Lucid Diagnostics” or “LUCID”) and Solys Diagnostics, Inc. (“Solys Diagnostics” or “SOLYS”).

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q (this “Form 10-Q”), including the following discussion and analysis of our (unaudited) condensed consolidated financial condition and results of operations, contains forward-looking statements that involve substantial risks and uncertainties.

 

All statements, other than statements of historical facts, contained in this Form 10-Q, including statements regarding our future consolidated results of operations and consolidated financial position, our estimates regarding expenses, future revenue, capital and operating expenditure requirements and needs for additional financing, our business strategy and plans and the objectives of management for future operations, are forward-looking statements. The words “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Item 1A of Part I of the Form 10-K under the heading “Risk Factors.”

 

Important factors that may affect our actual results include:

 

 ●our limited operating history;
 ●our financial performance, including our ability to generate revenue;
 ●our ability to obtain regulatory approval for commercialization of our products;
 ●the ability of our products to achieve market acceptance;
 ●our success in retaining or recruiting, or changes required in, our officers, key employees, or directors;
 ●our potential ability to obtain additional financing when and if needed;
 ●our ability to sustain status as a going concern;
 ●our ability to protect our intellectual property;
 ●our ability to complete strategic acquisitions;
 ●our ability to manage growth and integrate acquired operations;
 ●the liquidity and trading of our securities;
 ●our regulatory or operational risks;
 ●cybersecurity risks;
 ●risks related to the COVID-19 pandemic;
 ●the impact of the material weakness identified by our management;
●our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing; and
 ●our status as an “emerging growth company” under the JOBS Act.

 

In addition, our forward-looking statements do not reflectincorporate the potential impact of any future financings, acquisitions, mergers, dispositions, joint ventures, or investments we may make.

 

We may not actually achieve the plans, intentions, and /or expectations disclosed in our forward-looking statements, and you should not rely on our forward-looking statements. You should read this Form 10-Q and the Form 10-K, and the documents we have filed as exhibits to this Form 10-Q and the Form 10-K, completely and with the understanding our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

22

 

Overview

 

PAVmed Inc. and Subsidiaries (“PAVmed” or “the Company”) is a highly-differentiatedhighly differentiated, multi-product, commercial-stage technology medical device company 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. Since inception on June 26, 2014, ourthe Company’s activities have focused on advancing ourits lead products towards regulatory approval and commercialization, protecting ourits intellectual property, and building ourits corporate infrastructure and management team. We operate

The Company operates in one segment as a medical device company, with four operating divisions, which include GI Health, Minimallythe following lines-of-business: “GI Health”, “Minimally Invasive Interventions, Infusion Therapy,Interventions”, “Infusion Therapy”, and Emerging Innovations. As resources permit, we will continue to explore internal and external innovations that fulfill our project selection criteria without limiting ourselves to any target specialty or condition. We have“Emerging Innovations”. The Company has ongoing operations conducted in two active majority owned subsidiaries:through PAVmed Inc. and its majority-owned subsidiaries of Lucid Diagnostics, Inc. (“Lucid Diagnostics” or “LUCID”), which was incorporated in May 2018, and Solys Diagnostics, Inc. (“Solys Diagnostics” or “SOLYS”), which was incorporated in October 2019..

 

PAVmed Inc. and /or its subsidiaries have proprietary rights to the trademarks used herein, including, among others, PAVmed™, Lucid Diagnostics™, Caldus™, CarpX™CarpX®, DisappEAR™, EsoCheck™EsoCheck®, EsoGuard™EsoGuard®, EsoCheck Cell Collection Device™Device®, EsoCure Esophageal Ablation Device™, NextCath™, NextFlo™, PortIO™, and “Innovating at the Speed of Life”™. Solely as a matter of convenience, trademarks and trade names referred to herein may or may not be accompanied with the requisite marks of “™” or “®”;, however, the absence of such marks is not intended to indicate, in any way, PAVmed Inc. or its subsidiaries will not assert, to the fullest extent possible under applicable law, their respective rights to such trademarks and trade names.

 

Our multiple products and services are in various phases of development, regulatory clearances, approvals, and commercialization.

 

●The EsoCheck hasdevice received 510(k) marketing clearance from the U.S. Food and Drug Administration (“FDA”), in June 2019 as an esophageal cell collection device.device; and, EsoGuard has been established as a Laboratory Developed Test (“LDT”), and was launched commercially in December 2019 after Clinical Laboratory Improvement Amendment (“CLIA”) and College of American Pathologists (“CAP”) accreditation of the test at LUCID’sLucid Diagnostics commercial diagnostic laboratory partner ResearchDx Inc. (“ResearchDx”), headquartered in Irvine, CA.California.
  
●Our CarpX device is a patented, single-use, disposable, minimally invasiveminimally-invasive surgical device designed as a precision cutting tool to treat carpal tunnel syndrome while reducing recovery times that was cleared by the FDA under section 510(k) onin April 20,2020, with the first commercial procedure successfully performed in December 2020.
  
●Our other products in development have not yet received clearance or approval to be marketed or sold in the U.S. or elsewhere. We have been granted patents by the U.S.United States Patent and Trademark Office (“USPTO”) for CarpX, PortIO, and CaldusCaldus; and have acquired licenses to certain patents and intellectual property forfor: DisappEAR from Tufts University and a group of academic centers, for EsoGuard and EsoCheckcenters; the intellectual property licensed from Case Western Reserve University (“CWRU”) underlying the technology developed for the EsoGuard diagnostic LDT and more recently for patents covering infrared technology to non-invasively detect glucose in tissue within the in-patient field of use from Liquid Sensing, Inc.EsoCheck cell sample collection device.

 

A brief descriptionAs discussed herein below, our current lines-of-business are as follows:

●GI Health - EsoGuard Esophageal DNA Laboratory Developed Test, EsoCheck Esophageal Cell Collection Device, and EsoCure Esophageal Ablation Device with Caldus Technology;
●Minimally Invasive Interventions - CarpX Minimally Invasive Surgical Device for Carpal Tunnel Syndrome;
●Infusion Therapy - PortIO Implantable Intraosseous Vascular Access Device and NextFlo Highly Accurate Disposable Intravenous Infusion Platform Technology; and,
●Emerging Innovations - Non-invasive laser-based glucose monitoring, single-use ventilators, resorbable pediatric ear tubes and mechanical circulatory support cannulas.

Item 2. Management’s Discussion and Analysis of our key divisionsFinancial Condition and products is as follows:Results of Operations - continued

Overview - continued

 

GI Health

 

EsoGuard, EsoCheck, and EsoCure

 

This product family consists of aEsoGuard and EsoCheck are based on patented platform technology (EsoGuard and EsoCheck) licensed from CWRU toCase Western Reserve University (“CWRU”) through our majority-owned subsidiary Lucid Diagnostics that wasInc. EsoGuard and EsoCheck have been developed to provide an accurate, non-invasive, patient-friendly screening test for the early detection of adenocarcinoma of the esophagus (“EAC”) and of Barrett’s Esophagus (“BE”), including dysplasia and related pre-cursors to EAC in patients with chronic gastroesophageal reflux (“GERD”). This product family also consists of a technology (EsoCure)EsoCure is based on our patented Caldus Technology and is being developed by PAVmedus to treat BE.

EsoGuard is a molecular diagnostic esophageal DNA test shown in a published human study to be highly accurate at detecting BE, as well as EAC. EsoCheck is a non-invasive cell collection device designed to sample cells from a targeted region of the esophagus in a five-minute office-based procedure, without the need for endoscopy. Both EsoGuard and EsoCheck are commercially available, as separately marketed products, for physicians to prescribe for U.S. patients.

EsoCure is in development to provideas an Esophageal“Esophageal Ablation Device using Caldus TechnologyDevice” with the intent to allow a clinician to treat dysplastic BE before it can progress to EAC, a highly lethal esophageal cancer, and to do so without the need for complex and expensive capital equipment. We have successfully completed a pre-clinical feasibility animal study of EsoCure demonstrating excellent, controlled circumferential ablation of the esophageal mucosal lining. We plan to conduct additional development work and animal testing of EsoCure to support a planned FDA 510(k) submission in early 2022.

Our near-term strategy, as gastroenterology clinics resume doing elective procedures post COVID-19 related shutdowns, is to marketWe are currently marketing the EsoGuard diagnostic LDT through a network of independent representatives working with our in-house sales management. On June 9, 2020, theThe U.S. Center for Medicare and MedicareMedicaid Services (“CMS”) published its preliminary gapfill payment recommendationsfinalized the Clinical Laboratory Fee Schedule determination for the current review cycle. Medicare Administrative Contractor (“MAC”) Palmetto GBA recommended for EsoGuard a paymentEsophageal DNA Test (CPT code 0114U) in the amount of $1,938.01 in 38 states and $2,690.00 in 12 states (including Florida, New Jersey and Pennsylvania) and two U.S. territories. This preliminary payment determination will$1,938.10, with such reimbursement expected to be subject to public comments until August 10, 2020, after which the final MAC-specific gapfill payment determination will be posted. CMS will accept reconsideration requests for 30 days before finalizing the payment amount, which will apply for the periodapplicable from January 1, 2021 throughto December 31, 2023. In addition, we have entered into a manufacturing agreement with medical device contract manufacturer Coastline International Inc. to serve as a high-volume, lower-cost manufacturer of the EsoCheck device.

 

Our longer-term strategy is to secure a specific indication, based on published guidelines, for BE screening in certain at-risk populations using EsoGuard on samples collected with EsoCheck. This use of EsoGuard together with EsoCheck as a screening system must be cleared or approved by the FDA as an IVD devicein vitro diagnostic (“EsoGuard IVD”)., device. In September 2019, we entered into an agreement with a clinical research organization (“CRO”) in connection with EsoGuard IVD clinical trials. The CRO willto assist us with conducting two concurrentongoing clinical trials for EsoGuard as an EsoGuard IVD device, which are actively enrolling patients and consist of a screening study (ESOGUARD-BE-1) and an EsoGuard IVDa case control study. Although we enrolled our first patients in the trial, the COVID-19 outbreak curtailed all elective clinic procedures until the clinics are cleared to resume activities.study (ESOGUARD-BE-2).

 

In February 2020, we received Breakthrougha FDA “Breakthrough Device designationDesignation” for the EsoGuard IVD.as an IVD device. The FDA Breakthrough Device Program was created to offer patients more timely access to breakthrough technologies which provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions by expediting their development, assessment and review through enhanced communications and more efficient and flexible clinical study design, including more favorable pre/post market data collection balance. Breakthrough Devices receive priority FDA review, and a bipartisan bill before Congress (H.R. 5333) seeks to require Medicare to temporarily cover all Breakthrough Devices for three years while determining permanent coverage.

 

We have received ISO 13485:2016 certification for Lucid Diagnostics quality management system and filed a European Union CE Mark regulatory submission for EsoCheck in November 2020, having confirmed that EsoGuard falls under the self-declaration category of the European Union regulatory requirements

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Overview - continued

Minimally Invasive Interventions

 

CarpX

 

We received FDA market clearance under section 510(k) in April 2020 for our CarpX is a minimally invasive surgical device for use in the treatment of carpal tunnel syndrome. syndrome which received FDA 510(k) marketing clearance in April 2020, with the first commercial procedure successfully performed in December 2020.

We believe CarpX willis designed to allow the physician to relieve the compression on the median nerve without an open incision or the need for endoscopic or other imaging equipment. To use CarpX, the operator first advances a guidewire through the carpal tunnel under the ligament, and then advanced over the wire and positioned in the carpal tunnel under ultrasonic and/or fluoroscopic guidance. When the CarpX balloon is inflated it creates tension in the ligament positioning the cutting electrodes underneath it and creates space within the tunnel, providing anatomic separation between the target ligament and critical structures such as the median nerve. Radiofrequency energy is briefly delivered to the electrodes, rapidly cutting the ligament, and relieving the pressure on the nerve. We believe CarpX will be significantly less invasive than existing treatments.

 

We plan to commercialize our productsare commercializing CarpX through a network of independent U.S. sales representatives and/or inventory-stocking medical distributors together with our in-house sales management and marketing teams, including a national sales manager with over 20 years of commercial experience in orthopedics.teams. Our focus on CarpX, and other high margin products and services, is particularly suitable to this mode of distribution. A high gross margin allows us to properly incentivize our distributors, which in turn allows us to attract the top distributors with the most robust networks in our targeted specialties. Independent distributors play an even larger role in many parts of Europe, most of Asia and emerging markets worldwide.

 

We may eventually choose to build (or obtain through a strategic acquisition) our own sales and marketing team to commercialize CarpX, along with some or all of our products, if it is in our long-term interests. We may also choose to enter into distribution agreements with larger strategic partners whereby we take full responsibility for the manufacturing of CarpX but outsource some or all of its distribution to a partner, particularly outside the United States, with its own robust distribution channels.

 

We have received ISO 13485:2016 certification for PAVmed’s quality management system and filed a European Union CE Mark regulatory submission for CarpX in December 2020.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Overview - continued

Infusion Therapy

 

PortIO

 

This productPortIO is a novel, patented, implantable, intraosseous vascular medicalaccess device which does not require accessing the central venous system and does not have an indwelling intravascular component. It is designed to be highly resistant to occlusion and may not require regular flushing. It features simplified, near-percutaneous insertion and removal, without the need for surgical dissection or radiographic confirmation. It provides a near limitless number of potential access sites and can be used in patients with chronic total occlusion of their central veins. We believe theThe absence of an intravascular component will likely result in a very low infection rate.

 

Based on encouraging animal data, once the COVID-19 outbreak allows for resumption of clinical trial activities, we are planningpreparing to initiate a long-term (60-day implant duration) first-in-human clinical study in dialysis patients or those with poor venous access in Colombia, South America and intend to fulfill the likely FDA request for human clinical data with a clinical safety study in the United StatesU.S. following FDA clearance of our Investigational Device Exemption (IDE)(“IDE”) submission to begin clinical testing. In addition, we plantesting in dialysis patients to file for FDA Breakthrough Device Designation for PortIO.support a future de novo regulatory submission.

NextFlo

 

This productNextFlo is a patented, disposable, and highly accurate infusion platform technology including intravenous (“IV”) infusion sets and disposable infusion pumps (DIP) designed to eliminate the need for complex and expensive electronic infusion pumps for most of the estimated one million infusions of fluids, medications and other substances delivered each day in hospitals and outpatient settings in the United States.U.S. NextFlo is designed to deliver highly accurate gravity-driven infusions independent of the height of the IV bag. It maintains constant flow by incorporating a proprietary, passive, pressure-dependent variable flow-resistor consisting entirely of inexpensive, easy-to-manufacture disposable mechanical parts. NextFlo testing has demonstrated constant flow rates across a wide range of IV bag heights, with accuracy rates comparable to electronic infusion pumps.

 

We are seeking a long-term strategic partnership or acquiror. We have been running a formal M&A process for NextFlo targeting strategic and financial partners. The process is active with ongoing discussion with multiple parties and we are simultaneously progressing toward an initial FDA 510(k) submission.submission for the NextFlo IV Infusion System planned for later in 2021.

 

Emerging Innovations

 

Emerging innovations refers toInnovations include a diversified and expanding portfolio of innovative products designed to address unmet clinical needs across a broad range of clinical conditions. We are evaluating a number of these product opportunities and intellectual property covering a wide spectrum of clinical conditions, which have either been developed internally or have been presented to us by clinician innovators and academic medical centersinstitutions for consideration of a partnership to develop and commercialize these products. This collection of products includes, without limitation, initiatives in noninvasivenon-invasive laser-based glucose monitoring, mechanical circulatory support cannulas, single-use ventilators and resorbable pediatric ear tubes. In June 2020, we announced the execution of a letter of intent to consummate a series of agreements to develop and utilize Canon Virginia’s commercial grade and scalable aqueous silk fibroin molding process to manufacture PAVmed’s DisappEAR molded pediatric ear tubes for commercialization. Furthermore, we are exploring other opportunities to grow our business and enhance shareholder value through the acquisition of pre-commercial or commercial stage products and/or companies with potential strategic corporate and commercial synergies.synergies.

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Impact of SARS-CoV-2 -the COVID-19 Pandemic

 

We continue

Previously, in December 2019, an outbreak of a novel strain of a coronavirus occurred. The coronavirus spread on a global basis to monitorother countries, including the ongoing impact onUnited States. On March 11, 2020, the national economy and our business of theUnited Nations World Health Organization (“WHO”) declared a pandemic resulting from “SARS-CoV-2” (severe acute respiratory syndromethe spread of the coronavirus, 2),with such pandemic commonly referred to by its resulting illness, “COVID-19”. The COVID-19 pandemic is ongoing, and we continue to monitor the ongoing impact of the COVID-19 pandemic on the United States national economy, the global economy, and our business.

The COVID-19 pandemic may have an adverse impact on our operations, supply chains, and distribution systems and /or those of our contractors of our laboratory partner, and increase our expenses, including as “COVID-19” (coronavirus disease-2019). a result of impacts associated with preventive and precautionary measures being taken, restrictions on travel, quarantine polices, and social distancing. Such adverse impact may include, for example, the inability of our employees and /or those of our contractors or laboratory partner to perform their work or curtail their services provided to us.

We expect the significance of the COVID-19 pandemic, including the extent of its effect on our consolidated financial condition and consolidated operational results and cash flows, to be dictated by the success of United States and global efforts to mitigate the spread or containment of and /or to contain the viruscoronavirus and the impact of actions taken in response. The SARS-CoV-2 virus (and resulting COVID-19 illness) and the corresponding mitigation and containment efforts may have an adverse impact on our operations, supply chains and distribution systems and /or those of our contractors and laboratory partner and increase our and their operating expenses. In this regard, the ability of our employees or our contractors, laboratory partner, and other service providers, to perform their work may be adversely affected. such efforts.

In addition, the spread of the SARS-CoV-2 viruscoronavirus has disrupted the United States’ healthcare and healthcare regulatory systems which could divert healthcare resources away from, or materially delay FDA approval with respect to our products.

Furthermore, our clinical trials have been and may be further affected by the COVID-19 pandemic, as site initiation and patient enrollment may be delayed, for example, due to prioritization of hospital resources toward the virus /illnessand /or illness response, as well as travel restrictions imposed by governments, and the inability to access clinical test sites for initiation and monitoring.

The COVID-19 pandemic may have an adverse impact on the economies and financial markets of many countries, including the United States, of America, resulting in an economic downturn that could adversely affect demand for our products and services and /or our product candidates. While

Although we are not able at this timecontinuing to estimatemonitor and assess the effects of the COVID-19 pandemic on our business, the ultimate impact of the COVID-19 pandemic (or a similar health epidemic) is highly uncertain and subject to change, and therefore, its impact on our consolidated financial condition, consolidated results of operations, and /or consolidated cash flows, the adverse impact could be material.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Results of Operations

 

Overview

Sales and marketing expenses

Sales and marketing expenses consist primarily of salaries and related costs for sales operations and marketing personnel, travel expenses, and marketing supplies expenses.

We anticipate our sales and marketing expenses will increase in the future, as we anticipate an increase in payroll and related expenses related to the roll-out of our commercial sales and marketing operations as we execute on our business strategy.

 

General and administrative expenses

 

General and administrative expenses consist primarily of salaries and related costs for personnel, including travel expenses, for our employees in executive functions, facility-related costs, professional fees, accounting and legal services, consultants and expenses associated with obtaining and maintaining patents within our intellectual property portfolio.

 

We anticipate our general and administrative expenses will increase in the future, as we anticipate an increase in payroll and related expenses related towith the roll-outgrowth and expansion of our commercial sales and marketing operations.business operations objectives. We also anticipate continued expenses related to being a public company, including audit, legal, regulatory, and tax-related services associated with maintaining compliance as a public company, director and officer insurance premiums and investor relations costs.

 

Research and development expenses

 

Research and development expenses are recognized in the period they are incurred and consist principally of internal and external expenses incurred for the research and development of our products, including:

 

 ●consulting costs charged to us by various external contract research organizations we contract with to conduct preclinical studies and engineering studies;
 ●salary and benefit costs associated with our chief medical officer and engineering personnel;
 ●costs associated with regulatory filings;
 ●patent license fees;
 ●cost of laboratory supplies and acquiring, developing, and manufacturing preclinical prototypes;
 ●product design engineering studies; and
 ●rental expense for facilities maintained solely for research and development purposes.

 

We plan to incur research and development expenses for the foreseeable future as we continue the development of our products.existing products as well as new innovations. Our research and development activities are focused principally on obtaining FDA approvals and developing product improvements or extending the utility of the lead products in our pipeline, including CarpX, EsoCheck and EsoGuard, along with advancing our DisappEAR, PortIO, NextFlo, and noninvasivenon-invasive glucose monitoring products through their respective development phase.phase.

 

Other Income and Expense, net

 

Other income and expense, net, consists principally of changes in fair value of our senior secured convertible notes, and our senior convertible note; losses on extinguishment of debt upon repayment of such convertible notes; and interest expense recognized in connection with respect to one of our senior secured convertible notes.

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Three months ended June 30,March 31, 2021 versus March 31, 2020 versus June 30, 2019

 

GeneralSales and administrativemarketing expenses

 

In the three months ended June 30, 2020,March 31, 2021, sales and marketing costs were approximately $1.4 million, compared to $0.4 million for the corresponding prior year period, with a $0.8 million increase principally relating to increased headcount in sales and marketing personnel and a $0.2 million increase principally related to consulting and professional services with respect to increased commercial activities.

General and administrative expenses

In the three months ended March 31, 2021, general and administrative costs were approximately $2.9$3.4 million, compared to $1.9$2.2 million for the three months ended June 30, 2019.March 31, 2020. The net increase of $1.0$1.2 million was principally related to:

 

 ●

approximately $0.5$0.8 million increase in compensation related costs principally related to sales staffing levels and other costs related to the growth of our commercial launch of EsoGuard;business;

 ●

approximately $0.4$0.3 million in consulting services related to patents, regulatory compliance, legal processes for contract review and public company expenses; and

 ●approximately $0.1 million in general business expenses.

 

Research and development expenses

 

In the three months ended June 30, 2020,March 31, 2021, research and development costs were approximately $2.1$3.3 million, compared to $1.4$2.6 million for the corresponding period in the prior year, with the $0.7 million increase principally resulting from increased clinical trialdevelopment costs and consulting fees with respect to CarpX, NextFlo, Port IO, EsoCure, EsoGuard and a glucose monitoring project at SOLYS.

 

Other Income and Expense

 

Change in fair value of convertible debt

 

In the three months ended June 30, 2020,March 31, 2021, the non-cash expenseincome (expense) recognized for the change in the fair value of our senior secured convertible notes and our senior convertible note was approximately $2.1$1.7 million of other income, as compared to $8.4 million of other income for the three months ended March 31, 2020 inclusive of the recognition of current period other expense of approximately $0.4$0.7 million of lender fees and offering costs incurred with respect to the funding in the prior year on March 30, 2020 of the Series B component of the Senior Secured Convertible Note dated November 19, 2019 (“November 2019 Senior Convertible Notes”). The change in the fair value adjustment of the convertible notes as discussed below, as comparedis principally related to $0.2 millioneach of other expense forthe convertible notes being repaid-in-full during the three months ended June 30, 2019, resulting in an increaseMarch 31, 2021, as discussed herein below under “Other Income and Expense - Loss from Extinguishment of approximately $2.3 million principally related to:Debt”.

●an increase in the face principal amount of our senior secured convertible notes of approximately $4.1 million, inclusive of $0.4 million in lender fees; and
●among other fair value input assumptions, a substantive increase in the Company’s common stock price between the periods resulting in a higher estimated fair value of the senior secured convertible notes and the senior convertible note.
●approximately $0.4 million of lender fees recognized as other expense with respect to our Senior Convertible Note issued April 30, 2020. There were no such fees incurred in the corresponding prior year period.

 

See Note 9 and Note 105, Financial Instruments Fair Value Measurements, of our unaudited condensed consolidated financial statements for a further discussion of the change in fair value of our convertible debt,notes, and “—Going Concern, Liquidity,Note 6, Debt, of our unaudited condensed consolidated financial statements for a further discussion the Series A and Capital Resources”, Series B November 2019 Senior Convertible Notes.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Three months ended March 31, 2021 versus March 31, 2020below. - continued

 

Loss from Extinguishment of Debt

 

In the three months ended June 30, 2020, we recognizedMarch 31, 2021, a debt extinguishment loss in the aggregate of approximately $2.8$3,715 was recognized in connection with the convertible notes, as discussed below.

●On January 5, 2021, the repayment of the remaining face value principal of the November 2019 Senior Convertible Note of approximately $956, along with the payment of interest thereon of approximately $7, were settled with the issuance of 667,668 shares of our common stock, with a fair value of approximately $1,723 (with such fair value measured as the respective conversion date quoted closing price of our common stock), resulting in the recognition of a loss from extinguishment of debt of approximately $760 in the three months ended March 31, 2021; and,
●On January 30, 2021, we paid in cash a $350 partial principal repayment of the Senior Convertible Note dated April 30, 2020 (“April 2020 Senior Convertible Note”); and on March 2, 2021, we made a cash payment of approximately $14,466, resulting in the repayment-in-full on such date of both the April 2020 Senior Convertible Note and the Senior Secured Convertible Note dated August 6, 2021, resulting in the recognition of a loss from extinguishment of debt of approximately $2,955 in the three months ended March 31, 2021.

In the prior year period of three months ended March 31, 2020, a loss from extinguishment of debt of approximately $1.2 million was recognized, with such loss resulting from the difference betweenbetween: the face value principal repayments and the corresponding non-installment payments of the interest thereon, of the respective convertible notes, and the fair value of the shares of our common stock issued upon conversion of such convertible notes, with such fair value measuredthereon; as the respective issue date closing quoted price per share of our common stock. In the corresponding prior year period, during the three months ended June 30, 2019, we recognized a debt extinguishment loss of approximately $0.3 million, resulting from the difference between the face value principal repayments and corresponding non-installment payments of the interest thereon, with respectcompared to our Senior Secured Convertible Note issued December 27, 2018, and the fair value of the shares of our common stock issued upon conversion of such convertible note, with such fair value measured as the respective issue date closing quoted price per share of our common stock. See Note 10 of our unaudited condensed consolidated financial statements for a further discussion of our convertible notes.

 

Six months ended June 30, 2020 versus June 30, 2019

General and administrative expenses

In the six months ended June 30, 2020, general and administrative costs were approximately $5.6 million, compared to $3.6 million for the six months ended June 30, 2019. The net increase of $2.0 million was principally related to:

●approximately $0.7 million increase in compensation related costs principally related to sales staffing levels and other costs related to our commercial launch of EsoGuard;
●approximately $1.1 million in consulting services related to patents, regulatory compliance, legal processes for contract review, and public company expenses; and
●approximately $0.2 million in general business expenses.

Research and development expenses

In the six months ended June 30, 2020, research and development costs were approximately $4.7 million as compared to $2.9 million for the corresponding period in the prior year, with the $1.8 increase principally resulting from increased clinical trial costs with respect to CarpX, NextFlo, Port IO, EsoGuard and a glucose monitoring project at SOLYS.

Other Income and Expense

Change in fair value of convertible debt

In the six months ended June 30, 2020, the (non-cash) expense recognized for the change in the fair value of our senior secured convertible notes and our senior convertible note was approximately $5.9 million, inclusive of the recognition of current period other expense of approximately $1.1 million of lender fees incurred with respect to convertible notes as discussed below, as compared to $0.7 million for the six months ended June 30, 2019, resulting in an increase of approximately $5.2 million principally related to:

●an increase in the face principal amount of our senior secured convertible notes and our senior convertible note of approximately $11.1 million, inclusive of $1.1 million in lender fees; and
●among other fair value input assumptions, an increase in the Company’s common stock price between the periods resulting in a higher estimated fair value of the senior secured convertible notes and the senior convertible note.
●

a total of approximately $1.1 million of lender fees recognized as other expense, inclusive of approximately $0.7 million with respect to our Senior Secured Convertible Note - Series B issued March 30, 2020; and approximately $0.4 million with respect to our Senior Convertible Note issued April 30, 2020. There were no such fees incurred in the corresponding prior year period.

See Note 9 and Note 106, Debt, of our unaudited condensed consolidated financial statements for a further discussion of the change in fair value of our convertible debt, and “—Going Concern, Liquidity, and Capital Resources”, below.notes.

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Loss from ExtinguishmentItem 2. Management’s Discussion and Analysis of Debt

In the six months ended June 30, 2020, we recognized a debt extinguishment lossFinancial Condition and Results of approximately $3.9 million resulting from the difference between the face value principal repayments and corresponding non-installment payments of the interest thereon, of the respective convertible notes, and the fair value of the shares of our common stock issued upon conversion of such convertible notes, with such fair value measured as the respective issue date closing quoted price per share of our common stock. In the corresponding prior year period, during the six months ended June 30, 2019, we recognized a debt extinguishment loss of approximately $0.3 million, resulting from the difference between the face value principal repayments and corresponding non-installment payments of the interest thereon, with respect to our Senior Secured Convertible Note issued December 27, 2018, and the fair value of the shares of our common stock issued upon conversion of such convertible note, with such fair value measured as the respective issue date closing quoted price per share of our common stock. See Note 10 of our unaudited condensed consolidated financial statements for a further discussion of our convertible notes.

Interest ExpenseOperations - continued

 

In the six months ended June 30, 2020, interest expense of approximately $0.1 million is with respect to the November 2019 Senior Secured Convertible Notes - Series B, when such convertible note was unfunded through March 29, 2020. There was no such interest expense incurred during the corresponding period in the prior year. See Note 10 of our unaudited condensed consolidated financial statements for a further discussion of the November 2019 Senior Secured Convertible Notes - Series B interest expense; and “—Going Concern, Liquidity, and Capital Resources” below.

Going Concern, Liquidity and Capital Resources

 

We have experiencedfinanced our operations principally through the public and private issuances of our common stock, preferred stock, common stock purchase warrants, and debt. We are subject to all of the risks and uncertainties typically faced by medical device and diagnostic and medical device companies that devote substantially all of their efforts to the commercialization of their initial product and services and ongoing R&D and clinical trials. We expect to continue to experience recurring losses from operations since inception. We have not yet established an ongoing source of revenues and must fund our operating expenses through debt and equity financings to allow us to continue as a going concern. Our ability to continue as a going concern depends on the ability to obtain adequate capital to fund operating losses until we generate adequate cash flows from operations to fund our operating costs and obligations. If we are unable to obtain adequate capital, we could be forced to cease operations.

We depend upon our ability, and will continue to attempt, to securefund our operations with debt and/or equity and/or debt financing. We cannot be certain that additional funding will be available on acceptable terms, or at all. Our management determined that there was substantial doubt about our ability to continuefinancing transactions. Notwithstanding, however, together with the cash on-hand as a going concern within one year after the unaudited condensed consolidated financial statements were issued, and management’s concerns about our ability to continue as a going concern within the year following this report persist.

As at June 30, 2020 and Decemberof March 31, 2019, we had cash in the aggregate amount2021 of $7.1$48.5 million and $6.2 million, respectively.

In November 2019, we issued Senior Secured Convertible Notes with a total face value principal amount of $14.0 million (the “November 2019 Senior Secured Convertible Notes”) to certain accredited investors in a private placement, generating cash proceeds of approximately $12.6 million. The November 2019 Senior Secured Convertible Notes were sold in two series, Series A (for whichfrom the cash proceeds were delivered byfrom the investors at the closing in November 2019) and Series B (for which the cash proceeds were delivered in March 2020). The November 2019 Senior Secured Convertible Notes mature on September 30, 2021, subject to extension, and accrue interest at 7.875% per annum, upon the respective Series A and Series B being funded by the investor. During the period from November 2019 to its funding in March 2020, the November 2019 Senior Secured Convertible Notes - Series B incurred interest expense at 3.0% per annum based on its $7.0 million face value principal. At the electionissue of the holder, the November 2019 Senior Secured Convertible Notes may be converted into shares of common stock of the Company at a contractual conversion priceCompany. in January and February 2021, as discussed herein below, partially used to repay all of $1.60 per share. Installment repaymentsour remaining outstanding convertible debt we expect to be able to fund our future operations for one year from the date of principal totaling approximately $0.4 million, along with any accrued and unpaid interest and any late charges, were initially duethe issue of our unaudited condensed consolidated financial statements as included here in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and then, thereafter, on2021.

In the 15th day of each month and the last trading day of each month, and on the maturity date. We may settle the installment repayment of principal and interest expense thereon, upon the conversion of the holder, through the issue ofthree months ended we issued shares of our common stock subject to customary equity conditions (including minimum price and volume thresholds), at 100% ofreceived proceeds from the installment principal repayment and corresponding non-installment interest expense, or otherwise (or at our election, in whole or in part) in cash at 115% of the installment principal repayment and corresponding non-installment interest expense. The November 2019 Senior Secured Convertible Notes are secured by substantially allexercise of our assets.Series Z Warrants, as discussed herein below, which resulted in approximately $56.4 million of gross proceeds, before placement agent fees and expenses and additional offering costs incurred by us. Additionally, we repaid-in-full the outstanding principal balances of all our convertible notes.

 

In April 2020, inOn January 5, 2021, 6,000,000 shares of our common stock were issued for gross proceeds of approximately $13,440, before a private placement with an accredited investor, weagent fee and expenses of approximately $951, and offering costs incurred by us of approximately $71; and, on February 23, 2021, 9,782,609 shares of our common stock were issued for proceeds of approximately $41,576, before offering costs incurred by us of approximately $290.

During the three months ended March 31, 2021, a Senior Convertible Note with a face value principaltotal of $4.1 million,860,217 of our Series Z Warrants were exercised at their exercise price of $1.60 per share of our common stock, resulting in cash proceeds of approximately $3.7 million, after a lender fee of approximately $0.4 million. - (the “April 2020 Senior Convertible Note”). The April 2020 Senior Convertible Note has a contractual maturity date of April 30, 2022,$1,376, and an annual interest rate of 7.875%, payable in cash on a monthly basis. At the electionissue of the holder,same number of our shares of common stock. Subsequent to March 31, 2021, as of May 14, 2021, a total of 672,954 of our Series Z Warrants were exercised for cash at a $1.60 per share of our common stock, resulting in the April 2020 Senior Convertible Note may be converted intoissue of the same number of shares of our common stock at a contractual conversion price of $5.00 per share.stock.

 

Subsequent to June 30, 2020,Additionally, in August 2020, in a private placement with an accredited investor,the three months ended March 31, 2021, we issued a Senior Secured Convertible Note with a face value principal of $7.75 million, resulting in cash proceeds of approximately $7.0 million, after a lender fee of approximately $0.750 million. - (the “August 2020 Senior Secured Convertible Note”). The August 2020 Senior Secured Convertible Note has a contractual maturity date of August 5, 2022, and an annual interest rate of 7.875%, payable in cash on a monthly basis. At the electionrepaid-in-full all of the holder,outstanding principal balances of our convertible notes, as discussed herein above under “Other Income and Expense - Loss from Extinguishment of Debt”.

See our unaudited condensed consolidated financial statements Note 9, Debt, for a discussion of our convertible notes; and Note 10, Stockholders Equity and Common Stock Purchase Warrants, for a further discussion of and the April 2020 Senior Convertible Note may be converted into sharesissue of our common stock at a contractual conversion price of $5.00 per share. The August 2020 Senior Secured Convertible Notes are secured by substantially all of our assets.stock.

Under the November 2019 Senior Secured Convertible Notes and the April 2020 Senior Convertible Note, we are subject to certain customary affirmative and negative covenants regarding the incurrence of indebtedness, the existence of liens, the repayment of indebtedness, the payment of cash in respect of dividends, distributions or redemptions, and the transfer of assets, among other matters as well as a financial covenant requiring us to maintain available cash in the amount of approximately $1.8 million at the end of each fiscal quarter. As of June 30, 2020, we were in compliance with this financial covenant. The August 2020Senior Secured Convertible Note contains substantively similar customary affirmative and negative covenants as those described above, as well as increasing to $2.0 million the minimum available cash at the end of each quarter.

30

 

Critical Accounting Policies and Significant Judgments and Estimates

 

The discussion and analysis of our consolidated financial condition and consolidated results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, and equity, along with the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the corresponding periods. In accordance with U.S. GAAP, we base our estimates on historical experience and on various other assumptions we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Please see Note 3,2, Summary of Significant Accounting Policies, of our unaudited condensed consolidated financial statements included in this Form 10-Q, for a summary of significant accounting policies. In addition, reference is made to Part I, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in theour previously filed Annual Report on Form 10-K for the year ended December 31, 2020 (“Form 10-K), for a summary of our critical accounting policies and significant judgments and estimates. There have been no other material changes to our critical accounting policies or significant judgments and estimates since theas discussed in our Form 10-K.

 

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Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2020. BasedMarch 31, 2021, and based on such evaluation, due to the material weakness in internal control over financial reporting described below, our principal executive officer and principal financial officer concluded our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) were not effective as of such date to provide reasonable assurance thatthe information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

Material Weakness

Our management’s conclusion that our disclosure controls and procedures were ineffective was due to the identification of a material weakness in our internal control over financial reporting in connection with the preparation of the Form 10-K. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis. Our management identified the following material weakness in our internal control over financial reporting:

●We did not maintain a properly designed control environment that identified key control risk areas with an appropriate level of precision in order to conclude on the operating effectiveness of our disclosure controls and procedures.

Management intends to implement changes to strengthen our internal control over financial reporting. These changes are intended to address the identified material weakness and enhance our overall control environment and are expected to include the activities described below.

●We hired a consulting firm to assist us in revising our internal control documentation so that it identifies key control risk areas with sufficient precision for us to properly test the operating effectiveness of our disclosure controls and procedures.

While we believe the above activities will ultimately remediate the material weakness, we intend to continue to refine those controls and monitor their effectiveness for a sufficient period of time prior to reaching any determination as to whether the material weakness has been remediated.

Notwithstanding the identified material weakness, management believes that the unaudited condensed consolidated financial statements included in this Form 10-Q present fairly, in all material respects, our consolidated financial position, consolidated results of operations, and consolidated cash flows as of and for the periods presented in accordance with U.S. GAAP.

 

Changes in Internal Control Over Financial Reporting

 

There has been no change in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, we expect to make changes to our internal control over financial reporting in the future to remediate the material weakness identified above.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See Note 4, Commitment and Contingencies - Legal Proceedings, of the unaudited condensed consolidated financial statements included in this Quarterly Report, for a description of certain material legal proceedings involving the Company, which description is incorporated herein by reference.

In the ordinary course of our business, particularly as we begin commercialization of our products, we 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, we do not believe we are 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 our business, financial position, results of operations, and /or cash flows. Additionally, although we have specific insurance for certain potential risks, we may in the future incur judgments or enter into settlements of claims which may have a material adverse impact on our business, financial position, results of operations, and /or cash flows.

Item 5. Other Information

None

 

Item 6. Exhibits

 

The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth in the “Exhibit Index” below.

33

SIGNATURE

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 PAVmed Inc.
   
Date: August 14, 2020May 17, 2021By:/s/ Dennis M. McGrath
  Dennis M. McGrath
  

President and Chief Financial Officer

(Principal Financial and Accounting Officer)

EXHIBIT INDEXINDEX]

 

Exhibit No. Description
3.1 Certificate of Incorporation (1)
10.13.2Certificate of Amendment to Certificate of Incorporation (1)
3.3Certificate of Amendment to Certificate of Incorporation, dated October 1, 2018 (6)
3.4Certificate of Amendment to Certificate of Incorporation, dated June 26, 2019 (7)
3.5Certificate of Amendment to Certificate of Incorporation, dated July 24, 2020 (10)
3.6 Form of Securities Purchase Agreement dated April 30, 2020.Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (8)
3.7Certificate of Elimination - Series A Convertible Preferred Stock and Series A-1 Convertible Preferred Stock (4)
3.8PAVmed Inc. Amended and Restated Bylaws (9)
4.1Specimen PAVmed Inc. Common Stock Certificate (1)
10.24.2 Form of Senior Convertible Note dated April 30, 2020.Specimen PAVmed Inc. Series W Warrant Certificate (1)
10.34.3 Form of VotingSeries W Warrant Agreement, dated April 30, 2020.28, 2016, between Continental Stock Transfer & Trust Company and the Registrant (1)(2)
4.4Specimen PAVmed Inc. Series Z Warrant Certificate (3)
4.5Amended and Restated Series Z Warrant Agreement, dated as of June 8, 2018, by and between PAVmed Inc. and Continental Stock Transfer & Trust Company, as Warrant Agent (5)
   
31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.†
31.2 Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.†
32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.†
32.2 Certification of Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.†
   
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
101.CAL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase

†Filed herewith

(1)

(1)Incorporated by reference to the Registrant’s Registration Statement on Form S-1 - SEC File No. 333-203569
(2)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed May 3, 2016.
(3)Incorporated by reference to the CompanyRegistrant’s Current Report on May 1, 2020.

Form 8-K filed April 5, 2018.
(4)Incorporated by reference to the Registrant’s Current Report on Form 8-K/A filed April 20, 2018.
(5)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed June 8, 2018.
(6)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed October 2, 2018.
(7)Incorporated by reference to the Registrant’s Definitive Proxy Statement on Schedule 14A filed April 30, 2019
(8)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed June 27, 2019.
(9)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed January 15, 2021.
(10)Incorporated by reference to the Registrant’s Definitive Proxy Statement on Schedule 14A filed June 11, 2020

 

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