Pavmed Inc. current report, 03 November 2019

Vollständiges Dokument

Business Context and Reporting Period

Company: Pavmed Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: November 3, 2019
Event: Entry into a Material Definitive Agreement and consummation of a Private Placement of Senior Secured Convertible Notes.

Key Financial Metrics and Transaction Details

The Company entered into a Securities Purchase Agreement with two institutional investors to sell two series of Senior Secured Convertible Notes.

  • Total Principal Amount: $14,000,000 aggregate ($7,000,000 Series A Notes; $7,000,000 Series B Notes).
  • Immediate Cash Proceeds: $6,300,000 (paid for Series A Notes).
  • Deferred Proceeds: $6,300,000 (paid via Investor Notes for Series B Notes, receivable upon repayment of Investor Notes).
  • Original Issue Discount (OID): $350,000 per note ($1,400,000 total).
  • Transaction Fees: $409,500 advisory fee paid to Maxim Group LLC (6.5% of gross cash proceeds).
  • Net Cash Proceeds (Immediate): Approximately $5,890,500 after fees and expenses.
  • Net Cash Proceeds (Potential Total): Approximately $11,781,000 if Investor Notes are fully satisfied in cash.
  • Interest Rate: 7.875% per annum (3.0% on restricted Series B principal until unrestricted).
  • Conversion Price: $1.60 per share (subject to adjustments and floor price).
  • Security: First priority security interest in all Company assets and assets of subsidiary Lucid Diagnostics, Inc.

Material Changes and Covenants

The filing details significant new debt obligations and restrictive covenants not present in prior periods:

  • Debt Structure: Introduction of amortizing convertible notes with maturity generally on September 30, 2021. Installment payments of $94,595 per note are due monthly, payable in stock or cash (at 115% of amount).
  • Financial Covenants:
    • Maintain available cash of $2,000,000 at the end of each fiscal quarter.
    • Complete a non-dilutive capital raise of at least $9,000,000 by June 30, 2020 (via asset sale, direct financing, or merger, not equity issuance).
  • Equity Issuance Restrictions: Prohibited from issuing equity or equity-linked securities below $1.60 per share through March 30, 2020.
  • Stockholder Approval: Required to hold a stockholder meeting by June 30, 2020 to increase authorized shares from 100 million to 150 million and approve issuance under the Notes for Nasdaq compliance.
  • Existing Debt: An Existing Convertible Note with an outstanding principal balance of $4,369,000 remains outstanding.

Outlook, Risks, and Contingencies

Management Commentary and Outlook: The transaction is designed to provide immediate liquidity while deferring a portion of proceeds contingent on the repayment of Investor Notes. The Company anticipates potential total net proceeds of approximately $11.8 million if all conditions are met.

Risks and Contingencies:

  • Default Penalties: Interest rate increases to 18.0% per annum upon an Event of Default. Redemption price upon default is 132.5% of outstanding principal plus accrued interest.
  • Change of Control: Noteholders may require redemption at 115% of principal or market value, whichever is greater.
  • Registration Obligations: Company must file a registration statement by December 19, 2019, and have it effective by February 2, 2020, or pay Registration Delay Payments.
  • Key Person Risk: Events of Default include the failure of the CEO (Lishan Aklog, M.D.) and CFO (Dennis McGrath) to serve as officers.
  • Liquidity Constraints: Series B Note principal is "restricted" until the corresponding Investor Note is repaid; no shares will be issued for restricted principal.

Investor Verification Checklist

  • Verify the Company's ability to meet the $2,000,000 quarterly cash covenant given current liquidity.
  • Confirm the status of the required non-dilutive $9,000,000 capital raise deadline (June 30, 2020).
  • Monitor the filing and effectiveness of the registration statement for resale of shares (Deadline: Feb 2, 2020).
  • Assess the risk of dilution from monthly installment conversions and potential acceleration of conversions.
  • Review the terms of the "Investor Notes" to understand the conditions under which the deferred $6.3 million proceeds will be realized.