Debt

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Debt

Note 11 — Debt

The Company entered into a Securities Purchase Agreement (“SPA”) dated March 31, 2022, with an accredited institutional investor (“Investor”, “Lender”, and /or “Holder”), wherein, the Company agreed to sell, and the Investor agreed to purchase an aggregate of $50.0 million face value principal of debt - comprised of: an initial issuance of $27.5 million face value principal; and up to an additional $22.5 million of face value principal (upon the satisfaction of certain conditions). The debt was issued in a registered direct offering under the Company’s effective shelf registration statement.

Under the SPA dated March 31, 2022, the Company issued a Senior Secured Convertible Note dated April 4, 2022, referred to herein as the “April 2022 Senior Convertible Note”, with such note having a $27.5 million face value principal, a 7.875% annual stated interest rate, a contractual conversion price of $5.00 per share of the Company’s common stock (subject to standard adjustments in the event of any stock split, stock dividend, stock combination, recapitalization or other similar transaction), and a contractual maturity date of April 4, 2024. The April 2022 Senior Convertible Note may be converted into shares of common stock of the Company at the Holder’s election.

Under the same SPA, the Company issued an additional Senior Secured Convertible Note dated September 8, 2022, referred to herein as the “September 2022 Senior Convertible Note”, with such note having a $11.25 million face value principal, a 7.875% annual stated interest rate, a contractual conversion price of $5.00 per share of the Company’s common stock (subject to standard adjustments in the event of any stock split, stock dividend, stock combination, recapitalization or other similar transaction), and a contractual maturity date of September 6, 2024. The September 2022 Senior Convertible Note may be converted into shares of common stock of the Company at the Holder’s election.

Note 11 — Debt - continued

The April 2022 Senior Convertible Note proceeds were $25.0 million after deducting a $2.5 million lender fee; and additionally, the Company incurred total offering costs of approximately $601, inclusive of the payment of a total of $450 placement agent fees. The lender fee and offering costs were recognized as of the April 4, 2022 issue date as a current period expense in other income (expense) in the consolidated statement of operations.

The September 2022 Senior Convertible Note proceeds were $10.2 million after deducting a $1.0 million lender fee; and additionally, the Company incurred total offering costs of approximately $209, inclusive of the payment of a total of $184 placement agent fees. The lender fee and offering costs were recognized as of the September 8, 2022 issue date as a current period expense in other income (expense) in the consolidated statement of operations.

During the period from April 4, 2022 to October 3, 2022, the Company is required to pay interest expense only (on the $27.5 million face value principal), at 7.875% per annum, computed on a 360 day year. The Company paid in cash interest expense of approximately $481 and $1,005 for the three and nine month periods ended September 30, 2022, respectively; and approximately $153 subsequent to September 30, 2022 as of November 10, 2022.

During the period from September 8, 2022 to March 6, 2023, the Company is required to pay interest expense only (on the $11.25 million face value principal), at 7.875% per annum, computed on a 360 day year. The Company paid in cash interest expense of approximately $54 for both the three and nine month periods ended September 30, 2022; and approximately $76 subsequent to September 30, 2022 as of November 10, 2022.

Commencing October 4, 2022, and then on each of the successive first and tenth trading day of each month thereafter through to and including April 1, 2024 (each referred to as an “Installment Date”); and on the April 4, 2024 maturity date, the Company will be required to make a principal repayment of $724 together with accrued interest thereon, with such 38 payments referred to herein as the “Installment Amount”, settled in shares of common stock of the Company, subject to customary equity conditions, including minimum share price and volume thresholds, or at the election of the Company, in cash, in whole or in part.

Commencing March 6, 2023, and then on each of the successive first and tenth trading day of each month thereafter through to and including September 1, 2024 (each referred to as an “Installment Date”); and on the September 6, 2024 maturity date, the Company will be required to make a principal repayment of $296 together with accrued interest thereon, with such 38 payments referred to herein as the “Installment Amount”, settled in shares of common stock of the Company, subject to customary equity conditions, including minimum share price and volume thresholds, or at the election of the Company, in cash, in whole or in part.

In addition to the Installment Amount repayments, the Holder may elect to accelerate the conversion of future Installment Amount repayments, and interest thereon, subject to certain restrictions, as defined, utilizing the then current conversion price of the most recent Installment Date conversion price.

Subject to certain conditions being met or waived, from time to time, one or more additional closings may occur, for up to the remaining $11.25 million face value principal, upon five trading days’ notice given by the Company to the Investor. The Investor’s obligation to purchase the additional notes at each additional closing is subject to certain conditions set forth in the SPA dated March 31, 2022, including, among others, contractual closing requirements: minimum price and trading volume thresholds of the Company’s common stock; the maximum ratio of debt to market capitalization (as defined); and minimum market capitalization (as defined), with such requirements being waived by the Investor in its sole discretion.

Additionally, effective March 31, 2023, the Investor may by written notice elect to require the Company to issue additional notes of up to $11.25 million in face value principal, so long as in doing so it would not cause the ratio of (a) the outstanding principal amount of the April 2022 Senior Convertible Note and the September 2022 Senior Convertible Note (and any additional notes issued under the SPA dated March 31, 2022), accrued and unpaid interest thereon and accrued and unpaid late charges to (b) our average market capitalization over the prior ten trading days, to exceed 25%. If the Company does not issue the additional notes contemplated by any such written notice, or if the Investor is unable to deliver any such notice prior to March 31, 2024 as a result of the limitation described in the preceding sentence, then the Company will be obligated to pay up to a maximum of a $1.35 million a break-up fee.

The payment of all amounts due and payable under both senior convertible notes are guaranteed by the Company and its subsidiaries, except for Lucid Diagnostics Inc and its subsidiaries; and the obligations under both senior convertible notes are secured by all of the assets of the Company and each guarantor, except in the case of the Lucid Diagnostics Inc. common stock held by PAVmed Inc. only 9.99% of Lucid Diagnostics Inc.’s issued and outstanding common stock is pledged to secure the indebtedness of the convertible notes.

The Company is subject to certain customary affirmative and negative covenants regarding the rank of the notes, along with the incurrence of further indebtedness, the existence of liens, the repayment of indebtedness and the making of investments, the payment of cash in respect of dividends, distributions or redemptions, the transfer of assets, the maturity of other indebtedness, and transactions with affiliates, among other customary matters.

Note 11 — Debt - continued

The Company is subject to financial covenants requiring: (i) a minimum of $8.0 million of available cash at all times; (ii) the ratio of (a) the outstanding principal amount of the total senior convertible notes outstanding, accrued and unpaid interest thereon and accrued and unpaid late charges to (b) the Company’s average market capitalization over the prior ten trading days, to not exceed 30% (except that such maximum percentage is 50% for the period from September 8, 2022 through March 5, 2023) (the “Debt to Market Cap Ratio Test”); and (iii) the Company’s market capitalization to at no time be less than $75 million. (the “Market Cap Test” and, together with the Debt to Market Cap Ratio Test, the “Financial Tests”). The Company is in compliance with the above covenants.

The Company and the investor entered into a waiver dated August 9, 2022 whereby the April 2022 Senior Convertible Note was amended to permit the Investor to convert up to $5.0 million of the face value principal of the April 2022 Senior Convertible Note at the then current conversion price as if the date of conversion were an Installment Date, i.e. a price per share of common stock equal to the lower of (i) the fixed conversion price then in effect (currently $5.00) and (ii) 82.5% of the average VWAP of the Company’s common stock for each of the two trading days with the lowest VWAP of the Company’s common stock during the ten consecutive trading day period ending and including the trading day immediately prior to the applicable conversion date, but in the case of clause (ii), not less than $0.18 per share. As contemplated by such amendment, in August 2022, approximately $4,989 of principal repayments along with approximately $11 of interest expense thereon, were settled through the issuance of 5,013,908 shares of common stock of the Company, with such shares having a fair value of approximately $10,112 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company). The conversions resulted in a debt extinguishment loss of $5.1 million in the three months ended September 30, 2022. Subsequent to September 30, 2022, as of November 10, 2022, approximately $424 of principal repayments along with approximately $4 of interest expense thereon, were settled through the issuance of 500,857 shares of common stock of the Company, with such shares having a fair value of approximately $536 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company).

The fair value and face value principal outstanding of the Senior Convertible Notes as of September 30, 2022 are as follows:

	Contractual Maturity Date	Stated Interest Rate			Conversion Price per Share		Face Value Principal Outstanding		Fair Value
April 2022 Senior Convertible Note	April 4, 2024		7.875	%	$	5.00	$	22,511	$	23,500
September 2022 Senior Convertible Note	September 6, 2024		7.875	%	$	5.00	$	11,250	$	12,000
Balance as of September 30, 2022							$	33,761	$	35,500

The Company did not have convertible debt outstanding at December 31, 2021. During the nine month period ended September 30, 2021, the Company recognized debt extinguishment losses of approximately $3,715, in connection with repaying-in-full all remaining convertible notes outstanding at the time.

See Note 10, Financial Instruments Fair Value Measurements, for a further discussion of fair value assumptions.