Business Context and Reporting Period
This Form 8-K Current Report covers events occurring on June 30, 2017, for PAVmed Inc., a Delaware corporation and emerging growth company. The filing details the entry into a material definitive agreement to secure financing for the development and commercialization of its implantable intraosseous vascular access device, the "PortIO Product."
Key Financial Metrics and Transaction Details
- Debt Financing: The Company entered into a Note and Securities Purchase Agreement with Scopia Holdings LLC.
- Principal Amount: $5,000,000 senior secured promissory note.
- Net Proceeds: $4.8 million received on July 3, 2017, net of estimated lender costs.
- Interest Rate: 15.0% per annum, payable semiannually in arrears starting December 30, 2017.
- Maturity Date: June 30, 2019.
- Equity Component: Issuance of 2,660,000 Series S warrants with an exercise price of $0.01 per share, exercisable until June 30, 2032.
- Security: Obligations are secured by all assets of the Company and its wholly-owned subsidiaries.
Material Changes and Covenants
The filing represents a significant change in the Company's capital structure and operational obligations:
- Sales Obligation: Commencing four months after obtaining FDA 510(k) clearance, the Company must use reasonable best efforts to sell the PortIO Product for at least $10,000,000.
- Executive Compensation Deferral: CEO Lishan Aklog, M.D., and the Company agreed to defer certain future salary payments until the earlier of FDA clearance or full repayment of the Note.
- Registration Rights: The Company must use commercially reasonable best efforts to have an effective registration statement for the resale of warrant shares by November 27, 2017.
- Restrictions: Negative covenants restrict incurring additional indebtedness, creating liens, or paying dividends while the Note is outstanding.
- Board Representation: The Lender has the right to nominate one member to the Board of Directors (initially David S. Battleman) as long as it holds at least 50% of the aggregate principal balance of outstanding notes.
Outlook, Risks, and Redemption Terms
- Redemption Option: Upon the sale of the PortIO Product, the Lender may require the Company to redeem the Note (in whole or in part) from the net proceeds of the sale.
- Prepayment: The Note may be repaid at any time without penalty or premium.
- Interest Capitalization: The Company may elect to pay up to 50% of interest due by increasing the principal balance.
- Risk Factors: The Company faces liquidity constraints and operational risks tied to obtaining FDA clearance and meeting the $10 million sales target to satisfy covenants. Failure to meet these could trigger default.
Investor Verification Checklist
- Verify the exact date of FDA 510(k) clearance for the PortIO Product to determine the start of the sales covenant period.
- Confirm the status of the registration statement for the resale of warrant shares by the November 27, 2017 deadline.
- Monitor the Company's cash burn rate against the $4.8 million net proceeds to assess runway before the June 2019 maturity.
- Review the specific terms of the salary deferral agreement for the CEO to understand potential future cash flow impacts.
- Check for any subsequent filings regarding the appointment of the Lender's nominee to the Board of Directors.