PAVmed Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES - continued Remediation - Material Weakness As of December 31, 2019, our management concluded our system of internal control over financial reporting was not effective, due to the identification of a material weakness in our internal control over financial reporting, namely, 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. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis. Management implemented changes during 2020 to strengthen our internal control over financial reporting. These changes addressed the identified material weakness and enhanced our overall internal control over financial reporting environment. The changes included the hiring of 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 identify and test the operating effectiveness of our disclosure controls and procedures. The consulting firm assisted us with the design, documentation, evaluation of design adequacy, and testing the operational effectiveness of a revised system of internal control over financial reporting. We believe these actions remediated the material weakness, and we intend to continue to refine those internal controls over financial reporting and monitor their effectiveness on an ongoing basis. Changes to Internal Controls Over Financial Reporting Except for the remediation and enhancements as described herein above, there has been no change in internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the year ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. 98 PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this Item 10 is incorporated by reference to our Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020. Item 11. Executive Compensation The information required by this Item 11 is incorporated by reference to our Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item 12 is incorporated by reference to our Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item 13 is incorporated by reference to our Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020. Item 14. Principal Accounting Fees and Services The information required by this Item 14 is incorporated by reference to our Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020. 99 PART IV Item 15. Exhibits and Financial Statement Schedules (a) The following documents filed as a part of the report: (1) The following financial statements: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Changes in Series A Convertible Preferred Stock and Equity (Deficit) Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements (2) The financial statement schedules: Schedules other than those listed above are omitted for the reason they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. Columns omitted from schedules filed have been omitted because the information is not applicable. (3) The following exhibits: Exhibit No. Description 3.1 Certificate of Incorporation (1) 3.2 Certificate of Amendment to Certificate of Incorporation (1) 3.3 Certificate of Amendment to Certificate of Incorporation, dated October 1, 2018 (8) 3.4 Certificate of Amendment to Certificate of Incorporation, dated June 26, 2019 (10) 3.5 Certificate of Amendment to Certificate of Incorporation, dated July 24, 2020 (14) 3.6 Form of Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (11) 3.7 Certificate of Elimination - Series A Convertible Preferred Stock and Series A-1 Convertible Preferred Stock (6) 3.8 PAVmed Inc. Amended and Restated Bylaws (13) 4.1 Description of Registrant’s Securities † 4.2 Specimen PAVmed Inc. Common Stock Certificate (1) 4.3 Specimen PAVmed Inc. Series W Warrant Certificate (1) 4.4 Series W Warrant Agreement, dated April 28, 2016, between Continental Stock Transfer & Trust Company and the Registrant (3) 4.5 Form of Unit Purchase Option (1) 4.6 Specimen PAVmed Inc. Series Z Warrant Certificate (5) 4.7 Amended 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 (7) 10.1 Patent Option Agreement (1) 10.2.1 Form of Letter Agreement with HCFP Capital Partners III LLC (1) 10.2.2 Form of Letter Agreement with Pavilion Venture Partners LLC (1) 10.3.1 Letter agreement regarding corporate opportunities executed by Dr. Lishan Aklog, M.D. (1) 10.3.2 Letter agreement regarding corporate opportunities executed by Michael Glennon (1) 10.3.3 Letter agreement regarding corporate opportunities executed by Dr. Brian deGuzman, M.D. (1) 10.4.1 Securities Purchase Agreement between PAVmed Inc. and the purchasers of the Series A Preferred Stock Units (2) 10.4.2 Registration Rights Agreement between PAVmed Inc. and the purchasers of the Series A Preferred Stock Units (2) 10.5* Amended and Restated Employment Agreement between PAVmed Inc. and Lishan Aklog, M.D. (9) 10.6* Amended and Restated Employment Agreement between PAVmed Inc. and Dennis M. McGrath (9) 10.7* Employment Agreement between PAVmed Inc. and Brian J. deGuzman, M.D. (4) 100 Item 15. Exhibits and Financial Statement Schedules - continued Exhibit No. Description 10.8 PAVmed Inc. Fourth Amended and Restated 2014 Long-Term Incentive Equity Plan (10)(12) 10.9 PAVmed Inc. Employee Stock Purchase Plan (10)(12) 14.1 Form of Code of Ethics (1) 21.1 List of Subsidiaries † 23.1 Consent of Marcum LLP † 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 XBRL 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 (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 February 1, 2017. (3) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed May 3, 2016. (4) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed July 19, 2016. (5) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed April 5, 2018. (6) Incorporated by reference to the Registrant’s Current Report on Form 8-K/A filed April 20, 2018. (7) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed June 8, 2018. (8) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed October 2, 2018. (9) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed March 20, 2019. (10) Incorporated by reference to the Registrant’s Definitive Proxy Statement on Schedule 14A filed June 11, 2020 (11) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed June 27, 2019. (12) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed July 27, 2020. (13) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed January 15, 2021. * Management contract or compensatory plan or arrangement. † Filed herewith Item 16. Form 10-K Summary None 101 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PAVmed Inc. March 15, 2021 By: /s/ Dennis M McGrath. Dennis M McGrath President Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Each person whose signature appears below hereby authorizes both Lishan Aklog, M.D. and Dennis M. McGrath or either of them acting in the absence of the others, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the United States Securities and Exchange Commission. Signature Title Date /s/ Lishan Aklog, M.D. Chairman of the Board of Directors March 15, 2021 Lishan Aklog, M.D. Chief Executive Officer ( Principal Executive Officer ) /s/ Dennis M. McGrath President March 15, 2021 Dennis M. McGrath Chief Financial Officer ( Principal Financial and Accounting Officer ) /s/ Michael J. Glennon Vice Chairman March 15, 2021 Michael J. Glennon Director /s/ David S. Battleman M.D. Director March 15, 2021 David S. Battleman M.D. /s/ James L. Cox, M.D. Director March 15, 2021 James L. Cox, M.D. /s/ Ronald M. Sparks Director March 15, 2021 Ronald M. Sparks /s/ David Weild IV Director March 15, 2021 David Weild IV 102 PAVMED INC. and SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Consolidated Financial Statements Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of December 31, 2020 and December 31, 2019 F-3 Consolidated Statements of Operations for the years ended December 31, 2020 and 2019 F-4 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the year ended December 31, 2020 F-5 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the year ended December 31, 2019 F-6 Consolidated Statements of Cash Flows for the year ended December 31, 2020 and 2019 F-7 Notes to Consolidated Financial Statements F-8 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of PAVmed Inc. and Subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of PAVmed Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, changes in equity (deficit) and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provides a reasonable basis for our opinion. /s/ Marcum llp Marcum llp We have served as the Company’s auditor since 2019. New York, NY March 15, 2021 F- 2 PAVMED INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (amounts in thousands except shares and per share data) December 31, 2020 December 31, 2019 Assets: Current assets: Cash $ 17,256 $ 6,219 Prepaid expenses, deposits, and other current assets 1,685 328 Total current assets 18,941 6,547 Other assets 837 693 Total assets $ 19,778 $ 7,240 Liabilities, Preferred Stock and Stockholders’ Deficit Current liabilities: Accounts payable $ 2,966 $ 2,353 Accrued expenses and other current liabilities 2,325 1,386 CARES Act Paycheck Protection Program note payable 300 — Senior Secured Convertible Notes - at fair value 10,060 8,139 Senior Convertible Note - at fair value 4,600 — Total liabilities 20,251 11,878 Commitments and contingencies (Note 7) — — 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 1,228,075 at December 31, 2020 and 1,158,209 shares at December 31, 2019 2,537 2,296 Common stock, $0.001 par value. Authorized, 150,000,000 shares; issued and outstanding, 63,819,935 shares at December 31, 2020 and 40,478,861 shares at December 31, 2019 64 41 Additional paid-in capital 87,570 47,554 Accumulated deficit (88,275 ) (53,715 ) Total PAVmed Inc. Stockholders’ Equity (Deficit) 1,896 (3,824 ) Noncontrolling interests (2,369 ) (814 ) Total Stockholders’ Equity (Deficit) (473 ) (4,638 ) Total Liabilities and Stockholders’ Equity (Deficit) $ 19,778 $ 7,240 See accompanying notes to the consolidated financial statements. F- 3 PAVMED INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except share and per share data) Year Ended December 31, 2020 2019 Revenue $ — $ — Operating expenses: General and administrative 12,388 7,665 Research and development 10,963 6,630 Total operating expenses 23,351 14,295 Loss from operations (23,351 ) (14,295 ) Other income (expense): Interest expense (53 ) (33 ) Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note (5,327 ) (559 ) Offering costs - Senior Secured Convertible Note and Senior Convertible Note (660 ) (550 ) Debt extinguishments loss - Senior Secured Convertible Notes (6,497 ) (1,831 ) Other income (expense), net (12,537 ) (2,973 ) Loss before provision for income tax (35,888 ) (17,268 ) Provision for income taxes — — Net loss before noncontrolling interests (35,888 ) (17,268 ) Net loss attributable to the noncontrolling interests 1,612 811 Net loss attributable to PAVmed Inc. (34,276 ) (16,457 ) Less: Series B Convertible Preferred Stock dividends earned (287 ) (270 ) Net loss attributable to PAVmed Inc. common stockholders $ (34,563 ) $ (16,727 ) Per share information: Net loss per share attributable to PAVmed Inc. - basic and diluted $ (0.72 ) $ (0.54 ) Net loss per share attributable to PAVmed Inc. common stockholders – basic and diluted $ (0.73 ) $ (0.55 ) Weighted average common shares outstanding, basic and diluted 47,432,115 30,197,458 See accompanying notes to the consolidated financial statements. F- 4 PAVMED INC. and SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT) for the YEAR ENDED December 31, 2020 (in thousands except shares and per share data) 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 – registered offerings, net — — 10,647,500 11 15,921 — — 15,932 Issue common stock upon partial conversions of Senior Secured Convertible Note — — 10,929,202 11 21,692 — — 21,703 Issue common stock – exercise Series S warrants — — 1,199,383 1 11 — — 12 Issue common stock – exercise Series Z warrants — — 100 — — — — — Issue common stock – conversion Series B Convertible Preferred Stock (25,000 ) (43 ) 25,000 — 43 — — — Series B Convertible Preferred Stock dividends declared 94,866 284 — — — (284 ) — — Issue common stock - Employee Stock Purchase Plan — — 306,555 — 357 — — 357 Vesting of restricted stock awards — — 233,334 — — — — — Stock-based compensation - PAVmed Inc. 2014 Equity Plan — — — — 1,979 — — 1,979 Stock-based compensation - majority-owned subsidiary — — — — 13 — 52 65 Issue common stock of majority- owned subsidiary exercise of stock options — — — — — — 5 5 Loss — — — — — (34,276 ) (1,612 ) (35,888 ) Balance at December 31, 2020 1,228,075 $ 2,537 63,819,935 $ 64 $ 87,570 $ (88,275 ) $ (2,369 ) $ (473 ) See accompanying notes to the consolidated financial statements. F- 5 PAVMED INC. and SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT) for the YEAR ENDED December 31, 2019 (in thousands except shares and per share data) 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 1,069,941 $ 2,031 27,142,979 $ 28 $ 32,619 $ (36,993 ) $ (161 ) $ (2,476 ) Issue common stock – registered offerings, net — — 5,480,000 5 5,374 — — 5,379 Issue common stock – upon partial conversions of Senior Secured Convertible Note — — 7,773,110 8 8,081 — — 8,089 Series B Convertible Preferred Stock dividends declared 88,268 265 — — — (265 ) — — Issue common stock – Employee Stock Purchase Plan — — 82,772 — 67 — — 67 Stock-based compensation - PAVmed Inc. 2014 Equity Plan — — — — 1,397 — — 1,397 Stock-based compensation - majority-owned subsidiary — — — — 16 — 158 174 Loss — — — — — (16,457 ) (811 ) (17,268 ) Balance at December 31, 2019 1,158,209 $ 2,296 40,478,861 $ 41 $ 47,554 $ (53,715 ) $ (814 ) $ (4,638 ) See accompanying notes to the consolidated financial statements. F- 6 PAVMED INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands except shares and per share data) Year Ended December 31, 2020 2019 Cash flows from operating activities Net loss - before noncontrolling interest (“NCI”) $ (35,888 ) $ (17,268 ) Adjustments to reconcile net loss - before NCI to net cash used in operating activities Depreciation expense 23 14 Stock-based compensation 2,044 1,571 Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note 5,327 559 Debt extinguishment loss - Senior Secured Convertible Notes 6,497 1,831 Changes in operating assets and liabilities: Prepaid expenses and other current assets (1,336 ) (90 ) Accounts payable 501 613 Accrued expenses and other current liabilities 918 56 Deposits – Long Term — (643 ) Net cash flows used in operating activities (21,914 ) (13,357 ) Cash flows from investing activities Purchase of equipment (55 ) (27 ) Net cash flows used in investing activities (55 ) (27 ) Cash flows from financing activities Proceeds – issue of Senior Secured Convertible Notes 13,300 — Proceeds – issue of Senior Convertible Note 3,700 6,300 Proceeds – Cares Act Paycheck Protection Program Loan 300 — Proceeds – issue of common stock – registered offerings 16,032 5,413 Payment – offering costs – registered offerings (100 ) (34 ) Payment –Senior Secured Convertible Note — (86 ) Payment – Senior Secured Convertible Notes – non-installment payments (600 ) (279 ) Proceeds – issue common stock – Employee Stock Purchase Plan 357 67 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 33,006 11,381 Net increase (decrease) in cash 11,037 (2,003 ) Cash, beginning of period 6,219 8,222 Cash, end of period $ 17,256 $ 6,219 See accompanying notes to the consolidated financial statements. F- 7 PAVMED INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (All amounts in these accompanying notes are presented in thousands, except number of shares and per-share amounts.) Note 1 — The Company Description of the Business PAVmed Inc. (“PAVmed” or the “Company”) together with its majority owned subsidiaries, Lucid Diagnostics, Inc. (“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: ● The EsoCheck device 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. 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. Financial Condition 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 to experience recurring losses from operations, and will continue to fund its operations with debt and equity financing transactions. Notwithstanding, however, together with the cash on-hand as of December 31, 2020, and the cash proceeds from the issue of shares of common stock of the Company subsequent to December 31, 2020 in January and February 2021, the Company expects to be able to fund its future operations for one year from the date of the issue of the Company’s consolidated financial statements, as included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. See Note 12, Stockholders’ Equity, Common Stock Purchase Warrants, and Noncontrolling Interest , for a discussion of the issue of shares of common stock of the Company subsequent to December 31, 2020, in each of January 2021 and February 2021; and Note 9, Outstanding Debt , for a discussion of the principal repaid-in-full of each of the convertible notes subsequent to December 31, 2020, in each of January 2021 and March 2021. F- 8 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company holds a majority ownership interest and has a controlling financial interest in Lucid Diagnostics Inc. and Solys Diagnostics Inc., with the corresponding noncontrolling interest included as a separate component of consolidated equity (deficit), including the recognition in the consolidated statement of operations of the net loss attributable to the noncontrolling interest based on the respective minority interest ownership of each respective entity. See Note 12, Stockholders’ Equity and Common Stock Purchase Warrants , for a discussion of the Company’s majority-owned subsidiaries and the corresponding noncontrolling interest. All amounts in these accompanying notes to the accompanying 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 The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates in these consolidated financial statements include those related to the fair value of debt obligations and common stock purchase warrants. Additional significant estimates include the provision or benefit for income taxes and the corresponding valuation allowance on deferred tax assets. On an ongoing basis, the Company evaluates its estimates, judgements, and methodologies. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable. Due to the inherent uncertainty involved in making such judgements, assumptions, and accounting estimates, the actual financial statement results could differ materially from such accounting estimates and assumptions. Segment Data The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions. No revenue has been generated since inception, and all tangible assets are held in the United States. Cash The Company maintains its cash at a major financial institution with high credit quality. At times, the balance of its cash deposits may exceed federally insured limits. The Company has not experienced and does not anticipate any losses on deposits with commercial banks and financial institutions which exceed federally insured limits. Offering Costs Offering costs consist of certain legal, accounting, and other advisory fees incurred related to the Company’s efforts to raise debt and equity capital. Offering costs in connection with equity financing are recognized as either an offset against the financing proceeds to extent the underlying security is equity classified or a current period expense to extent the underlying security is liability classified or for which the fair value option is elected. Offering costs, lender fees, and warrants issued in connection with debt financing, to the extent the fair value option is not elected, are recognized as debt discount, which reduces the reported carrying value of the debt, with the debt discount amortized as interest expense, generally over the contractual term of the debt agreement, to result in a constant rate of interest. Offering costs associated with in-process capital financing are accounted for as deferred offering costs. F- 9 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued Significant Accounting Policies - continued Research and Development Expenses Research and development expenses are recognized as incurred and include the salary and stock-based compensation of employees engaged in product research and development activities, and the costs related to the Company’s various contract research service providers, suppliers, engineering studies, supplies, and outsourced testing and consulting fees, as well as depreciation expense and rental costs for equipment used in research and development activities, and fees incurred for access to certain facilities of contract research service providers. Patent Costs and Purchased Patent License Rights Patent related costs in connection with filing and prosecuting patent applications and patents filed by the Company are expensed as incurred and are included in the line item captioned “general and administrative expenses” in the accompanying consolidated statements of operations. Patent fee reimbursement expense incurred under the patent license agreement agreements are included in the line item captioned “research and development expenses” in the accompanying consolidated statements of operations. The Company has entered into agreements with third parties to acquire technologies for potential commercial development. Such agreements generally require an initial payment by the Company when the contract is executed. The purchase of patent license rights for use in research and development activities, including product development, are expensed as incurred and are classified as research and development expense. Additionally, the Company may be obligated to make future royalty payments in the event the Company commercializes the technology and achieves a certain sales volume. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 730, “ Research and Development ”, (“ASC 730”), expenditures for research and development, including upfront licensing fees and milestone payments associated with products not yet been approved by the United States Food and Drug Administration (“FDA”), are charged to research and development expense as incurred. Future contract milestone and /or royalty payments will be recognized as expense when achievement of the milestone is determined to be probable and the amount of the corresponding milestone can be objectively estimated. Stock-Based Compensation Stock-based awards are made to members of the board of directors of the Company, the Company’s employees and non-employees, under each of the PAVmed Inc. 2014 Long-Term Incentive Equity Plan (“PAVmed Inc. 2014 Equity Plan”) and the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan (“Lucid Diagnostics Inc. 2018 Equity Plan”). In the year ended December 31, 2020, stock-based compensation is recognized in accordance with the provisions of FASB ASC Topic 718, Stock Compensation (“ASC 718”), as amended by FASB Accounting Standard Update (“ASU”) 2018-07 (“ASU 2018-07”). The provisions of ASU 2018-07 amended ASC 718 to align the accounting for stock-based awards granted to nonemployees with the requirements for accounting for stock-based awards to employees; and to supersede the previous guidance of FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”). The adoption as of January 1, 2020 of the updated provisions of ASC 718, as amended by ASU 2018-07, had no effect on the Company’s consolidated financial statements. In the year ended December 31, 2020, with respect to stock-based awards granted to the board of directors, employees, and non-employees, the Company recognizes stock-based compensation in accordance with the provisions of ASC 718, as amended by ASU 2018-07, wherein the grant-date estimated fair value of the stock-based award is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective stock-based award, with such straight-line recognition adjusted, as applicable, so the cumulative expense recognized is at-least equal-to-or-greater-than the estimated fair value of the vested portion of the respective stock-based award as of the reporting date. F- 10 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued Significant Accounting Policies - continued Stock-Based Compensation - continued In the previous year ended December 31, 2019, with respect to stock-based awards granted to the board of directors and employees, the Company recognized stock-based compensation in accordance with ASC 718, as described above; and with respect to non-employees, the Company recognized stock-based compensation in accordance with previous provisions of ASC 505-50, wherein, the expense of stock-based awards granted to non-employees was recognized on a vesting date basis by fixing the fair value of vested non-employee stock options as of their respective vesting date. The fair value of vested non-employee stock options was not subject-to further remeasurement at subsequent reporting dates. The estimated fair value of the unvested non-employee stock options was remeasured to then current fair value at each subsequent reporting date, until such time when the stock options vest, at which time the fair value is fixed, as noted above. The estimated fair value of stock-based awards granted to non-employees was recognized on a straight-line basis over the requisite service period, which was generally the vesting period of the respective non-employee stock-based award, with such straight-line recognition adjusted so the cumulative expense recognized was at-least equal-to-or-greater-than the estimated fair value of the vested portion of the respective stock-based award. 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 weighted-average valuation estimates and 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 was the remaining contractual term (under the previous provisions of ASC 505-50); ● With respect to the PAVmed Inc. 2014 Equity Plan, the expected stock price volatility is based on the historical stock price volatility of PAVmed Inc. common stock and the volatilities of similar entities within the medical device industry over the period commensurate with the expected term with respect to stock options granted to the board of directors and employees in the years ended December 31, 2020 and 2019; and for stock options granted to non-employees in the year ended December 31, 2019, the period of volatility was commensurate with the remaining contractual term of the respective stock option (under the previous provisions ASC 505-50). With respect to stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan, the expected stock price volatility was based on the historical stock price volatility of similar entities within the medical device industry over the period commensurate with the expected term with respect to stock options granted to employees in the year ended December 31, 2019; and for stock options granted to non-employees in the year ended December 31, 2019, the period of volatility was commensurate with the remaining contractual term of the respective stock option (under the previous provisions ASC 505-50). There were no stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan in the year ended December 31, 2020; ● 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 either the expected term or the remaining contractual term, as applicable, of the stock option; and, ● The expected dividend yield is based on annual dividends of $0.00 as there have not been dividends 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. F- 11 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued Significant Accounting Policies - continued Financial Instruments Fair Value Measurements FASB ASC Topic 820, Fair Value Measurement, (ASC 820) defines fair value as the price which would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a transaction measurement date. The ASC 820 three-tier fair value hierarchy prioritizes the inputs used in the valuation methodologies, as follows: Level 1 Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2 Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets which are not active, or other inputs observable or can be corroborated by observable market data. Level 3 Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. The Company evaluates its financial instruments to determine if those instruments or any embedded components of those instruments potentially qualify as derivatives required to be separately accounted for in accordance with FASB ASC Topic 815, Derivatives and Hedging (ASC 815). The accounting for warrants issued to purchase shares of common stock of the Company is based on the specific terms of the respective warrant agreement, and are generally classified as equity, but may be classified as a derivative liability if the warrant agreement provides required or potential full or partial cash settlement. A warrant classified as a derivative liability, or a bifurcated embedded conversion or settlement option classified as a derivative liability, is initially measured at its issue-date fair value, with such fair value subsequently adjusted at each reporting period, with the resulting fair value adjustment recognized as other income or expense. If upon the occurrence of an event resulting in the warrant liability or the embedded derivative liability being subsequently classified as equity, or the exercise of the warrant or the conversion option, the fair value of the derivative liability will be adjusted on such date-of-occurrence, with such date-of-occurrence fair value adjustment recognized as other income or expense, and then the derivative liability will be derecognized at such date-of-occurrence fair value. The recurring and non-recurring estimated fair value measurements are subjective and are affected by changes in inputs to the valuation models, including the Company’s common stock price, and certain Level 3 inputs, including, the assumptions regarding the estimated volatility in the value of the Company’s common stock price; the Company’s dividend yield; the likelihood and timing of future dilutive transactions, as applicable, along with the risk-free rates based on U.S. Treasury security yields. Changes in these assumptions can materially affect the estimated fair values. As of December 31, 2020, and December 31, 2019, the carrying values of cash, and accounts payable, approximate their respective fair value due to the short-term nature of these financial instruments. Fair Value Option (“FVO”) Election The Senior Secured Convertible Notes and Senior Convertible Note are each a debt host financial instrument containing embedded features and /or options which would otherwise be required to be bifurcated from the debt-host and recognized as separate derivative liabilities subject to initial and subsequent periodic estimated fair value measurements under ASC 815. Notwithstanding, FASB ASC Topic 825, Financial Instruments, (“ASC 825”) provides for the “fair value option” (“FVO”) election. In this regard, ASC 825-10-15-4 provides for the FVO election (to the extent not otherwise prohibited by ASC 825-10-15-5) to be afforded to financial instruments, wherein the financial instrument is initially measured at its issue-date estimated fair value and then subsequently remeasured at estimated fair value on a recurring basis at each reporting period date, with changes in the estimated fair value recognized as other income (expense) in the accompanying consolidated statement of operations. In this regard, as provided for by ASC 825-10-50-30(b), the estimated fair value adjustment is presented in a single line item within other income (expense) in the accompanying consolidated statement of operations. Further, as required by ASC 825-10-45-5, to the extent a portion of the fair value adjustment is attributed to a change in the instrument-specific credit risk, such portion would be recognized as a component of other comprehensive income (“OCI”). Notwithstanding, there was no such portion of the fair value adjustment attributed to a change in the instrument-specific credit risk in the years ended December 31, 2020 and 2019. F- 12 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards - continued Significant Accounting Policies - continued Income Taxes The Company accounts for income taxes using the asset and liability method, as required by FASB ASC Topic 740, Income Taxes , (ASC 740). Current tax liabilities or receivables are recognized for estimated income tax payable and/or refundable for the current year. Deferred tax assets and deferred tax liabilities are recognized for estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, along with net operating loss and tax credit carryforwards. Deferred tax assets and deferred tax liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Changes in deferred tax assets and deferred tax liabilities are recorded in the provision for income taxes. Under ASC 740, a “more-likely-than-not” criterion is applied when assessing the estimated realization of deferred tax assets through their utilization to reduce future taxable income, or with respect to a deferred tax asset for tax credit carryforward, to reduce future tax expense. A valuation allowance is established, when necessary, to reduce deferred tax assets, net of deferred tax liabilities, when the assessment indicates it is more-likely-than-not, the full or partial amount of the net deferred tax asset will not be realized. As a result of the evaluation of the positive and negative evidence bearing upon the estimated realizability of net deferred tax assets, and based on a history of operating losses, it is more-likely-than-not the deferred tax assets will not be realized, and therefore a valuation allowance reserve equal to the full amount of the deferred tax assets, net of deferred tax liabilities, has been recognized as a charge to income tax expense as of December 31, 2020 and 2019. The Company recognizes the benefit of an uncertain tax position it has taken or expects to take on its income tax return if such a position is more-likely-than-not to be sustained upon examination by the taxing authorities, with the tax benefit recognized being the largest amount having a greater than 50% likelihood of being realized upon ultimate settlement. As of December 31, 2020, the Company does not have any unrecognized tax benefits resulting from uncertain tax positions. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. There were no amounts accrued for penalties or interest as of December 31, 2020 and December 31, 2019 or recognized during the years ended December 31, 2020 and 2019. The Company is not aware of any issues under review to potentially result in significant payments, accruals, or material deviations from its position. Net Loss Per Share The net loss per share is computed by dividing each of the respective net loss by the number of “basic weighted average common shares outstanding” and diluted weighted average shares outstanding” for the reporting period indicated. The basic weighted-average shares common shares outstanding are computed on a weighted average based on the number of days the shares of common stock of the Company are issued and outstanding during the respective reporting period indicated. The diluted weighted average common shares outstanding are the sum of the basic weighted-average common shares outstanding plus the number of common stock equivalents’ incremental shares on an if-converted basis, computed using the treasury stock method, computed on a weighted average based on the number of days the incremental shares would potentially be issued and outstanding during the periods indicated, if dilutive. The Company’s common stock equivalents include convertible preferred stock, common stock purchase warrants, unit purchase options, and stock options. Notwithstanding, as the Company has a net loss for each reporting period presented, only the basic weighted average common shares outstanding are used to compute the basic and diluted net loss per share attributable to PAVmed Inc. and the basic and diluted net loss per share attributable to PAVmed Inc. common stockholders, for each reporting period presented. The Series B Convertible Preferred Stock dividends earned as of the each of the respective periods are included in the calculation of basic and diluted net loss attributable to PAVmed Inc. common stockholders for each respective period presented. Further, the Series B Convertible Preferred Stock has the right to receive common stock dividends. As such, the Series B Convertible Preferred Stock would potentially be considered participating securities under the two-class method of calculating net loss per share. However, the Company has incurred net losses to-date, and as such holders are not contractually obligated to share in the losses, there is no impact on the Company’s net loss per share calculation for the periods presented. F- 13 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued Significant Accounting Policies - continued JOBS Act EGC Accounting Election The Company is an “emerging growth company” or “EGC”, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, an EGC can delay adopting new or revised accounting standards issued after the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has irrevocably elected to avail itself of this exemption from new or revised accounting standards, and, therefore, will not be subject to the same new or revised accounting standards as public companies who are not an EGC. Recent Accounting Standards Updates As noted herein above, as of January 1, 2020, the Company adopted the amended guidance of ASC 718 with respect to stock-based awards granted to non-employees, as amended by ASU 2018-07, which aligned the accounting for stock-based payments to nonemployees for goods and services with the requirements for accounting for stock-based awards to employees under ASC 718. In this regard, ASU 2018-07 provides for stock-based payments to non-employees to be measured at the grant date fair value of the equity instruments to be provided to the nonemployee when the goods or services have been delivered. Prior to the ASU 2018-07 amendment, nonemployee stock-based payments were accounted for under the superseded provisions of ASC 505-50. The adoption of such amended guidance did not have an effect on the Company’s consolidated financial statements. As of 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 2018-13 did not have an effect on the Company’s consolidated financial statements. As of January 1, 2020, the Company adopted the guidance of ASU 2017-11, issued by the FASB in July 2017, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) - Part I - Accounting for Certain Financial Instruments with Down-Round Features, and Part II - Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Principally, ASU 2017-11 amendments simplify the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. Companies that provide earnings per share data will adjust their basic earnings per share calculation for the effect of the down-round feature when triggered (i.e., when the exercise price of the related equity-linked financial instrument is adjusted downward because of the down-round feature) and will also recognize the effect of the trigger within equity. Additionally, ASU 2017-11 also addresses “navigational concerns” within the FASB ASC related to an indefinite deferral available to private companies with mandatorily redeemable financial instruments and certain noncontrolling interests, which has resulted in the existence of significant “pending content” in the ASC. The FASB decided to reclassify the indefinite deferral as a scope exception, which does not have an accounting effect. The guidance of ASU 2017-11 is effective for public business entities, as defined in the ASC Master Glossary, for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. With respect to all other entities, including the Company under its JOBS Act EGC Accounting Election, as discussed above, the guidance of ASU 2017-11 was effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The adoption of the ASU 2017-11 guidance as of January 1, 2020 did not have an effect on the Company’s consolidated financial statements. F- 14 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued Significant Accounting Policies - continued Recent Accounting Standards Updates - continued In August 2020, the FASB issued 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 ASU 2020-06 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’s adoption of the ASU 2020-06 guidance as of January 1, 2021 is not expected to have an effect on the Company’s 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 is not expected to have an effect on the Company’s consolidated financial statements. FASB ASC Topic 842, Leases , (“ASC 842”) (ASU No. 2016-02, Leases , February-2016 - “ASU 2016-02” ) which established a right-of-use (“ROU”) model requiring a lessee to recognize a ROU asset and a lease liability for all leases with terms greater-than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The ASC 842 effective date for the Company is December 31, 2022 for its annual consolidated financial statements, and for interim quarterly financial statements commencing March 31, 2023. F- 15 Note 3 — Agreements Related to Acquired Intellectual Property Rights Patent License Agreement – Case Western Reserve University On May 12, 2018, Lucid Diagnostics Inc., a majority-owned subsidiary of the Company, entered into a patent license agreement with Case Western Reserve University (“CWRU”), referred to as the “CWRU License Agreement”. The CWRU License Agreement provides for the exclusive worldwide license of the intellectual property rights for the proprietary technologies of two distinct technology components - the “EsoCheck Cell Collection Device” referred to as the “EsoCheck™”; and a panel of proprietary methylated DNA biomarkers, a laboratory developed test (“LDT”), referred to as “EsoGuard™”; and together are collectively referred to as the “EsoGuard Technology”. 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. In this regard, in , 2019, the Company recognized a $75 research and development expense in connection with a regulatory clearance milestone, which was paid in 2019. The CWRU License Agreement was amended to: change the achievement date of commercialization milestone from November 2020 to August 2021; to eliminate the payment with respect to the commercialization milestone; and to add a non-refundable payment to CWRU in consideration for the aforementioned changes to the commercialization milestone (“CWRU License Agreement Amendment”). In connection with such CWRU License Agreement Amendment, the Company recognized $100 of general and administrative expense, with such expense included in accrued expenses as of December 31, 2020. If the Company 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. Such contingent milestone payments will be recognized in the period in which such payment obligations are incurred. 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. Such contingent royalty payments will be recognized in the period in which such payment obligations are incurred. As provided for under the CWRU License Agreement, reimbursement of CWRU billed patent fees of $250 and $200 were recognized as research and development expense in the years ended December 31, 2020 and 2019, respectively. The CWRU License Agreement terminates upon the expiration of certain related patents, or on May 12, 2038 in countries where no such patents exist, or upon expiration of any exclusive marketing rights granted by the FDA or other U.S. government agency, whichever comes later. F- 16 Note 3 — Agreements Related to Acquired Intellectual Property Rights - continued License Agreement with Liquid Sensing Inc. Upon its formation in October 2019, Solys Diagnostics Inc., a majority-owned subsidiary of PAVmed Inc. entered into a licensing agreement with Liquid Sensing, Inc., a subsidiary formed by Airware Inc., each an unrelated third-party, (“Liquid Sensing License Agreement”). Under the Liquid Sensing License Agreement, Solys Diagnostics Inc. was granted an exclusive worldwide license for six issued and one pending U.S. patents covering a proprietary nondispersive infrared laser technology to develop and commercialize such proprietary technology to non-invasively monitor tissue concentrations of glucose and other substances within the inpatient ( e.g. , hospital) field of use. Solys Diagnostics Inc. advanced the research and development plan and completed a milestone consistent with the parameters and by the date under the Liquid Sensing License Agreement. Notwithstanding, PAVmed Inc. determined it would be in the best interests of the shareholders of PAVmed Inc. to terminate the Liquid Sensing License Agreement. In this regard, subsequent to December 31, 2020, PAVmed Inc. on behalf of itself and Solys Diagnostics Inc., delivered to Airware Inc. and Liquid Sensing Inc. a written notice of termination of the Liquid Sensing License Agreement, dated February 12, 2021 (“Liquid Sensing License Agreement Termination Notice”). The Liquid Sensing License Agreement Termination Notice proposes the development of a negotiated mutually agreeable final settlement between PAVmed Inc., Solys Diagnostics Inc., Airware Inc., and Liquid Sensing Inc. A discussion of each of the Company’s majority-owned subsidiaries and the corresponding noncontrolling interest is presented in Note 12, Stockholders’ Equity and Common Stock Purchase Warrants . Patent License Agreement - Tufts University - Antimicrobial Resorbable Ear Tubes The Company previously executed a Patent License Agreement (the “Tufts Patent License Agreement”) with Tufts University and its co-owners, the Massachusetts Eye and Ear Infirmary and Massachusetts General Hospital (the “Licensors”). Pursuant to the Tufts Patent License Agreement, the Licensors granted the Company the exclusive right and license to certain patents in connection with the development and commercialization of antimicrobial resorbable ear tubes based on a proprietary aqueous silk technology conceived and developed by the Licensors. The Tufts Patent License Agreement also provides for potential payments from the Company to the Licensors upon the achievement of certain product development and regulatory clearance milestones as well as royalty payments on net sales upon the commercialization of products developed utilizing the licensed patents. The Company will recognize as a current period expense for contingent milestone payments or royalties in the period in which such payment obligations are incurred, if any. F- 17 Note 4 — Related Party Transactions 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., a majority-owned subsidiary of PAVmed Inc. During the years ended December 31, 2020 and 2019 the Company incurred the following expenses with respect to the minority shareholders of Lucid Diagnostics Inc.: For the year ended December 31, 2020 2019 CWRU License Agreement – reimbursement of patent legal fees $ 250 $ 200 CWRU License Agreement Amendment fee 100 75 EsoCheck devices provided to CWRU 15 — Fees - Physician Inventors’ consulting agreements 83 110 Stock-based compensation expense - Physician Inventors’ stock option grants 23 57 Total $ 471 $ 442 Lucid Diagnostics Inc. entered into consulting agreements with each of the three physician inventors of the CWRU License Agreement intellectual property, 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 the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan. See Note 3, Agreements Related to Acquired Intellectual Property Rights - Patent License Agreement - CWRU, for a discussion of the “CWRU License Agreement”; Note 10, 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 12, Stockholders’ Equity, Common Stock Purchase Warrants, and Noncontrolling Interest , for a discussion of each of the Company’s majority-owned subsidiaries and the corresponding noncontrolling interests. Note 5 — Prepaid Expenses, Deposits and Other Current and Non-Current Assets Prepaid expenses and other current assets consisted of the following as of: December 31, 2020 December 31, 2019 Advanced payments to service providers and suppliers $ 568 $ 294 Deposits 262 34 EsoCheck cell collection supplies 779 — EsoGuard mailer supplies 55 — CarpX devices 21 — Total prepaid expenses, deposits and other current assets $ 1,685 $ 328 Non-Current Assets The Company, through its majority-owned subsidiary Lucid Diagnostics Inc., entered into an agreement with a clinical research organization (“CRO”) in connection with EsoGuard clinical trials, referred to as the EsoGuard CRO Agreement. Under the CRO agreement, the Company incurred an on-account deposit of $755 and $643 as of December 31, 2020 and 2019, respectively, of which $643 has been paid as of December 31, 2020, with the deposit classified as a non-current asset in the line item captioned “Other assets” on the accompanying consolidated balance sheet as of December 31, 2020 and 2019. See Note 7, Commitments and Contingencies , for a discussion of the EsoGuard CRO Agreement. F- 18 Note 6 — Accrued Expenses and Other Current Liabilities Accrued expenses and Other Current Liabilities consist of the following items as of December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Compensation and Employee Benefits $ 1,777 $ 1,074 CWRU License Agreement fee 223 223 CWRU License Agreement Amendment fee 100 — Operating expenses 171 89 EsoGuard supplies 22 — CarpX devices 32 — Total accrued expenses and other current liabilities $ 2,325 $ 1,386 The “Compensation and Employee Benefits” includes: the guaranteed bonus payment under the Company’s Chief Executive Officer (“CEO”) Employment Agreement; discretionary bonus payments to other employees; unused employee vacation time; and employee payroll deductions related to the PAVmed Inc. Employee Stock Purchase Plan (“PAVmed Inc. ESPP”). See Note 11, Stock-Based Compensation , for additional information on the PAVmed Inc. ESPP. The CWRU License Agreement license fee was approximately $273, of which $50 was previously paid. The remaining balance of the license fee is to be paid in quarterly installments of $50, until the license fee is paid-in-full, provided, however, the commencement of the quarterly payments is subject to Lucid Diagnostics Inc. consummation of a bona fide financing with an unrelated third-party in excess of $0.5 million. See Note 3, Agreements Related to Acquired Intellectual Property Rights - Patent License Agreement - CWRU , for a discussion of the CWRU License Agreement. The amounts for operating expenses, EsoGuard supplies, and CarpX devices relate to respective amounts incurred by the Company but not yet invoiced by the respective vendors. F- 19 Note 7 — Commitment and Contingencies Rental Agreements - Office Space The Company’s corporate office rental agreement is on a month-to-month basis, with a 5% per annum increase in the monthly lease payment effective February 1 of each year, and the lease agreement may be cancelled with two months written notice. Additionally, the Company additionally has a short-term (one year or less) and a month-to-month office space rental agreements, which may be cancelled with two months written notice. Total rent expense incurred under short-term and /or month-to-month rental agreements for office space was $189 and $143, for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, the Company’s minimum lease payments for such office space rental agreements are estimated to be a total of approximately $157 for the period January 1, 2021 to December 31, 2021. Clinical Trials - Agreement with Clinical Research Organization In September 2019, the Company, through its majority-owned subsidiary Lucid Diagnostics Inc., entered into an agreement with a clinical research organization (“CRO”) in connection with EsoGuard clinical trials, referred to as the EsoGuard CRO Agreement. The CRO will assist the Company with conducting two concurrent clinical trials referred to as the “EsoGuard screening study” and the “EsoGuard case control study”. The term of the EsoGuard CRO Agreement is from the September 2019 effective date to the conclusion of the respective clinical trials, but not to exceed 60 months from the effective date of the EsoGuard™ CRO Agreement. The CRO agreement may be cancelled with sixty days written notice, without an early termination fee. Legal Proceedings In November 2020, a stockholder of the Company, on behalf of himself and other similarly 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 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, in order to avoid any uncertainty and to avoid 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. 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. F- 20 Note 8 — 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 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 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 years ended December 31, 2020 and 2019. The August 2020 Senior Secured Convertible Note, the April 2020 Senior Convertible Note, the November 2019 Senior Secured Convertible Note (Series-A and Series-B), 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 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. The estimated fair value of financial instruments classified within the Level 3 category 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. Additional information with respect to the changes in Level 3 liabilities measured at fair value for the years ended December 31, 2020 and 2019, is presented in Note 9 – “ Outstanding Debt .” F- 21 Note 8 — Financial Instruments Fair Value Measurement s - continued The estimated fair value of each of the convertible notes as of December 31, 2020 and 2019, 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, using the following assumptions: Senior Secured Convertible Notes and Senior Convertible Note - Fair Value and Fair Value Assumptions – December 31, 2020: November 2019 Senior Secured Convertible Notes April 2020 Senior Convertible Note August 2020 Senior Secured Convertible Note Fair Value $ 1,270 $ 4,600 $ 8,790 Face value principal payable $ 956 $ 4,111 $ 7,750 Required rate of return 0.09 % 50.2 % 27.2 % Conversion Price $ 1.60 $ 5.00 $ 5.00 Value of common stock $ 2.12 $ 2.12 $ 2.12 Expected term (years) 0.25 1.33 1.59 Volatility 70 % 70 % 70 % Risk free rate 0.09 % 0.11 % 0.12 % Dividend yield 0 % 0 % 0 % Senior Secured Convertible Notes Fair Value and Fair Value Assumptions – December 31, 2019: December 2018 Senior Secured Convertible Note November 2019 Senior Secured Convertible Note Fair Value $ 1,700 $ 6,439 Face value principal payable $ 1,692 $ 7,000 Required rate of return 11.4 % 11.5 % Conversion Price $ 1.60 $ 1.60 Value of common stock $ 1.20 $ 1.20 Expected term (years) 0.21 1.78 Volatility 49 % 55 % Risk free rate 1.52 % 1.58 % Dividend yield 0 % 0 % The estimated fair values reported utilize the Company’s common stock price along with certain Level 3 inputs, as discussed below, 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. F- 22 Note 9 — Outstanding Debt Convertible Notes The fair value and face value principal of outstanding convertible notes as of December 31, 2020 and 2019 are 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 $ 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 as of December 31, 2020 $ 12,817 $ 14,660 December 2018 Senior Secured Convertible Note December 31, 2020 7.875 % $ 1.60 $ 1,692 $ 1,700 November 2019 Senior Secured Convertible Note September 30, 2021 7.875 % $ 1.60 $ 7,000 $ 6,439 Balance as of December 31, 2019 $ 8,692 $ 8,139 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 - the “December 2018 Senior Convertible Note”. In the year ended December 31, 2020, with respect to the December 2018 Senior Convertible Notes, approximately $1,692 of installment principal repayments and the payment of interest thereon of approximately $6, were settled through the issuance of 2,075,198 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). In the previous year ended December 31, 2019, with respect to the December 2018 Senior Convertible Notes, approximately $6,058 of installment principal repayments and the payment of interest thereon of approximately $200, were settled through the issuance of 7,773,110 shares of common stock of the Company, with a fair value of approximately $8,089 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company). Additionally, approximately $279 of interest non-installment payments were paid in cash during the year ended December 31, 2019. The December 2018 Senior Convertible Note was paid-in-full was paid in full as of June 4, 2020. F- 23 Note 9 — Outstanding Debt - continued Convertible Notes - continued Senior Secured Convertible Note issued November 4, 2019 - Series A and Series B - (“November 2019 Senior Convertible Notes”) The Company previously issued a Senior Secured Convertible Note dated November 4, 2019, with a $14.0 million aggregate face value principal, a stated interest rate of 7.875% per annum (to the extent the investor has funded the cash proceeds), and, at the election of the holder, is convertible into shares of common stock of the Company at a contractual conversion price of $1.60 per share - the “November 2019 Senior Convertible Notes”. The November 2019 Senior Convertible Notes were comprised of a Series A and Series B, each with a $7.0 million face value principal, and each having a $0.7 million lender fee deducted from the cash proceeds when funded. The November 2019 Senior Convertible Note - Series A was issued on November 4, 2019, with a face value principal of approximately $7,000 and a lender fee of approximately $700 (with such lender fee recognized as a current period other expense), resulting in approximately $6,300 of cash proceeds received by the Company on the issue date. Additionally, the Company incurred a current period expense of approximately $550, inclusive of a $410 placement agent advisory fee, along with legal fees. The November 2019 Senior Convertible Note - Series B was issued on March 30, 2020, with a face value principal of approximately $7,000 and a lender fee of approximately $700 (with such lender fee recognized as a current period other expense), resulting in approximately $6,300 of cash proceeds received by the Company on the issue date. Additionally, the Company incurred a current period expense of approximately $410 with respect to a placement agent advisory fee. The Company incurred interest expense of 3.0% per annum on the $7.0 million face value principal of the (unfunded) Series B during the period from November 4, 2019 to March 29, 2020 when the Series B was not funded. The (cash) payment of such 3.0% interest on the $7.0 million face value principal resulted in the recognition of approximately $53 and $33 of interest expense during the year ended December 31, 2020 and 2019, respectively, with such interest expense included in other income (expense). 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. Subsequent to December 31, 2020, 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 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), with such final conversion resulting in the November 2019 Senior Convertible Note being paid-in-full as of January 5, 2021. F- 24 Note 9 — Outstanding 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, is 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”. The April 2020 Senior Convertible Note resulted in approximately $3,700 of cash proceeds received by the Company on the issue date, after a lender fee of approximately $411 (with such lender fee recognized as a current period other expense). Additionally, the Company incurred a current period expense of approximately $200, inclusive of a $120 placement agent advisory fee, along with legal fees. The Company was required to pay the holder in cash all remaining outstanding unpaid face value principal at 115% of such principal amount plus unpaid interest thereon, on the April 30, 2022 maturity date. In the year ended December 31, 2020, approximately $215 of interest non-installment payments were paid in cash. The unpaid outstanding face value principal of the April 2020 Senior Convertible Note is approximately $4,111 as of December 31, 2020, of which such principal was repaid-in-full subsequent to December 31, 2020, 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, is 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”. The August 2020 Senior Convertible Note resulted in approximately $7,000 of cash proceeds received by the Company on the issue date, after a lender fee of approximately $750 (with such lender fee recognized as a current period other expense). Additionally, the Company incurred a current period expense of approximately $50 with respect to legal fees. The Company was required to pay the holder in cash all remaining outstanding unpaid face value principal at 115% of such principal amount plus unpaid interest thereon on the August 5, 2022 maturity date. In the year ended December 31, 2020, approximately $246 of interest non-installment payments were paid in cash. The unpaid outstanding face value principal of the April 2020 Senior Convertible Note is approximately $7,750 as of December 31, 2020, of which such principal was repaid-in-full subsequent to December 31, 2020, as discussed herein below. Principal Repayments - April 2020 Senior Convertible Note and August 2020 Senior Convertible Note Subsequent to December 31, 2020: 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. F- 25 Note 9 — Outstanding Debt - continued Convertible Notes - continued Covenants - Sr Secured Convertible Notes and Senior Convertible Note As of December 31, 2020, each of the November 2019 Senior Convertible Note, April 2020 Senior Convertible Note, and the August 2020 Senior Convertible Note were each held by the same investor and its affiliates. Under the November 2019 Senior Convertible Notes and the April 2020 Senior Convertible Note, as such convertible notes are discussed above, the Company was 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. Additionally, the April 2020 Senior Convertible Note contained a financial covenant requiring the Company to maintain available cash in the amount of approximately $1.8 million at the end of each quarter, with such amount increased to $2.0 million under the August 2020 Senior Convertible Note. As of December 31, 2020, the Company was in compliance with this financial covenant. The August 2020 Senior Convertible Note contained substantively similar customary affirmative and negative covenants as those described above, as well as the past transactions entered into with the investor, including the November 2019 Senior Convertible Notes. The August 2020 Senior Secured Convertible Note contained security interest with a first priority in all of our assets, including all of the Company’s current and future significant subsidiaries, similar to the November 2019 Senior Secured Convertible Notes. Notwithstanding, as noted above, subsequent to December 31, 2020: the November 2019 Senior Convertible Note was 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. F- 26 Note 9 — Outstanding Debt - continued Convertible Notes - continued A reconciliation of the fair value of the convertible notes for the years ended December 31, 2020 and 2019 is as follows: December 2018 Senior Secured Convertible Note November 2019 Senior Secured Convertible Notes (1)(2) 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, 2019 $ 1,700 $ 6,439 $ — $ — $ 8,139 Face value principal – issue date — 7,000 4,111 7,750 18,861 Fair value adjustment – issue date — 2,600 (411 ) (750 ) 1,439 $ (1,439 ) Installment repayments – common stock (1,692 ) (13,044 ) — — (14,736 ) Non-installment payments – common stock (6 ) (464 ) — — (470 ) Non-installment payments – cash — (138 ) (216 ) (246 ) (600 ) Change in fair value (2 ) (1,123 ) 1,116 2,036 2,027 (2,027 ) Lender Fees: - November 2019 Senior Secured Convertible Note - Series B; (700 ) - April 2020 Senior Convertible Note; and (411 ) - August 2020 Senior Secured Convertible Note — — — — — (750 ) Fair Value at December 31, 2020 $ — $ 1,270 $ 4,600 $ 8,790 $ 14,660 Other Income (Expense) - Change in fair value – year ended December 31, 2020 $ (5,327 ) Fair Value - December 31, 2018 $ 7,903 $ — $ — $ — $ 7,903 Face value principal – issue date — 7,000 — — 7,000 Fair value adjustment – issue date — (648 ) — — (648 ) $ 648 Installment repayments – common stock (6,059 ) — — — (6,059 ) Non-installment payments – common stock (199 ) — — — (199 ) Non-installment payments – cash (279 ) (86 ) — — (365 ) Change in fair value 334 173 — — 507 (507 ) Lender Fees: - November 2019 Senior Secured Convertible Note - Series A — — — — — (700 ) Fair Value at December 31, 2019 $ 1,700 $ 6,439 $ — $ — $ 8,139 Other Income (Expense) - Change in fair value – year ended December 31, 2019 $ (559 ) The Senior Convertible Notes presented above are 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 8, Financial Instruments Fair Value Measurements , for a further discussion of fair value assumptions. F- 27 Note 9 — Outstanding Debt - continued 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 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 with the Company being obligated to make equal monthly payments on the unforgiven principal and interest balances to fully amortize the loan balance by the maturity date. 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 in accordance with The Paycheck Protection Flexibility Act of 2020 which extended the deferral period for loan payments to either (1) the date that U.S. Small Business Administration remits the borrower’s loan forgiveness amount to the lender or (2) if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period. As such, as of December 31, 2020, and to date, no principal or interest payments have been made. F- 28 Note 10 — Stock-Based Compensation PAVmed Inc. 2014 Long-Term Incentive Equity Plan The PAVmed Inc. 2014 Long-Term Incentive Equity Plan (the “PAVmed Inc. 2014 Equity Plan”), adopted by the Company’s board of directors and stockholders in November 2014, is designed to enable the Company to offer employees, officers, directors, and consultants, as defined, an opportunity to acquire a proprietary interest in the Company. The types of awards that may be granted under the PAVmed Inc. 2014 Equity Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the compensation committee of the Company’s board of directors. As of December 31, 2020, the PAVmed Inc. 2014 Equity Plan has 2,003,406 shares available-for-grant of stock-based awards, inclusive of the supplemental share reservation increase of an additional 2,000,000 shares, approved by the PAVmed Inc. board of directors on March 12, 2020, and approved at the PAVmed Inc. 2020 annual meeting of stockholders on July 24, 2020, and re-approved at a special meeting of stockholders of PAVmed Inc. on March 4, 2021. A discussion of the PAVmed Inc. special meeting of stockholders is presented in Note 7, Commitments and Contingencies - Legal Proceedings . The shares available-for-grant exclude a total of 500,854 PAVmed Inc. stock options previously granted outside the PAVmed Inc. 2014 Equity Plan. PAVmed Inc. 2014 Equity Plan - Stock Options Stock options issued and outstanding under the PAVmed Inc. 2014 Equity Plan are as follows: Number Stock Options Weighted Average Exercise Price Remaining Contractual Term (Years) Intrinsic Value (2) Outstanding stock options at December 31, 2018 3,327,140 $ 3.68 8.3 Granted (1) 1,925,000 $ 1.00 Exercised — $ — Forfeited (48,611 ) $ 5.00 Outstanding stock options at December 31, 2019 5,203,529 2.58 8.1 $ 394 Vested and exercisable stock options at December 31, 2019 3,270,487 $ 3.45 7.5 $ 126 Outstanding stock options at December 31, 2019 5,203,529 $ 2.58 Granted (1) 1,595,000 $ 2.13 Exercised — $ — Forfeited — $ — Outstanding stock options at December 31, 2020 6,798,529 $ 2.55 7.3 $ 2,558 Vested and exercisable stock options at December 31, 2020 4,861,433 $ 2.88 6.7 $ 1,707 (1) Stock options granted under the PAVmed Inc. 2014 Equity Plan vest ratably over twelve quarters generally 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 December 31, 2020 and 2019 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 December 31, 2020, as approved at the March 4, 2021 special meeting of stockholders, a total of 225,000 stock options were granted with a weighted average exercise price of $2.03 per share of common stock of the Company. A discussion of the PAVmed Inc. special meeting of stockholders is presented in Note 7, Commitments and Contingencies - Legal Proceedings. F- 29 Note 10 — Stock-Based Compensation – continued PAVmed Inc. 2014 Equity Plan - Restricted Stock Awards On May 1, 2020, a total of 950,000 restricted stock awards were granted under the PAVmed Inc. 2014 Equity Plan, vesting as 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; and 500,000 restricted stock awards vesting on May 1, 2023. 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 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 (“Lucid Diagnostics Inc. 2018 Equity Plan”) is separate and apart from the PAVmed Inc. 2014 Equity Plan discussed above. The Lucid Diagnostics Inc. 2018 Equity Plan is designed to enable Lucid Diagnostics Inc. to offer employees, officers, directors, and consultants, as defined, an opportunity to acquire shares of common stock of Lucid Diagnostics Inc. The types of awards that may be granted under the Lucid Diagnostics Inc. 2018 Equity Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the Lucid Diagnostics Inc. board of directors. A total of 2,000,000 shares of common stock of Lucid Diagnostics Inc. are reserved for issuance under the Lucid Diagnostics Inc. 2018 Equity Plan, with 1,305,000 shares available for grant as of December 31, 2020, exclusive of 300,000 Lucid Diagnostics Inc. stock options previously granted outside the Lucid Diagnostics Inc. 2018 Equity Plan. Lucid Diagnostics Inc. 2018 Equity Plan - Stock Options Stock options issued and outstanding under the Lucid Diagnostics Inc. 2018 Equity Plan for the period noted is as follows: Number Stock Options Weighted Average Exercise Price Remaining Contractual Term (Years) Outstanding stock options at December 31, 2018 375,000 $ 0.60 9.4 Granted 620,000 $ 1.02 Exercised — $ — Forfeited — $ — Outstanding stock options at December 31, 2019 995,000 $ 0.86 9.0 Granted — $ — Exercised (3,333 ) $ 1.50 Forfeited — $ — Outstanding stock options at December 31, 2020 991,667 $ 0.86 8.0 Vested and exercisable stock options at December 31, 2020 772,491 $ 0.83 7.9 (1) 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. During the year ended December 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. F- 30 Note 10 — Stock-Based Compensation – continued Lucid Diagnostics Inc. 2018 Equity Plan - Restricted Stock Awards Subsequent to December 31, 2020, on March 1, 2021, a total of 1,040,000 restricted stock awards were granted under the Lucid Diagnostics Inc. 2018 Equity Plan, with a single vesting date of March 1, 2023. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. 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: Year Ended December 31, 2020 2019 General and administrative expenses $ 1,582 $ 1,163 Research and development expenses 462 408 Total $ 2,044 $ 1,571 The consolidated stock-based compensation expense classified in research and development expenses, as presented above, includes $65 and $174 in the years ended December 31, 2020 and 2019, respectively, recognized by Lucid Diagnostics Inc., with stock-based compensation expense recognized by Lucid Diagnostics Inc. inclusive of each of: stock options 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: Year Ended December 31, 2020 2019 Lucid Diagnostics Inc 2018 Equity Plan – research and development expenses $ 52 $ 158 PAVmed Inc 2014 Equity Plan - research and development expenses 13 16 Total stock-based compensation expense – recognized by Lucid Diagnostics Inc $ 65 $ 174 As of December 31, 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 $ 1,866 0.9 years Restricted Stock Awards $ 1,796 2.1 years Lucid Diagnostics Inc. 2018 Equity Plan Stock Options $ 49 0.8 years F- 31 Note 10 — Stock-Based Compensation - continued Stock-Based Compensation Expense - continued The stock options granted under the PAVmed Inc. 2014 Equity Plan during the years ended December 31, 2020 and 2019, had a weighted average estimated fair value of $1.27 per share and $0.48 per share, respectively, calculated using the following weighted average Black-Scholes valuation model assumptions: Year Ended December 31, 2020 2019 Expected term of stock options (in years) 5.8 5.7 Expected stock price volatility 73 % 50 % Risk free interest rate 0.5 % 2.4 % 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 in the prior year ended December 31, 2019, which was recognized under the previous provisions of ASC 505-50, was based on a weighted average estimated fair value of such stock options of $1.97 per share, calculated using Black-Scholes valuation model weighted-average assumptions of an 8.5 year contractual term, a 59% 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 measured at their grant date estimated fair value based on the date-of-grant quoted price per share of PAVmed Inc. common stock. The 700,000 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 950,000 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 in general and administrative expense related to restricted stock awards was approximately $576 and $206 in the years ended December 31, 2020 and 2019, respectively. The stock-based compensation expense recognized in research and development expense related to restricted stock awards was $102 in the year ended December 31, 2020 (there was no stock-based compensation expense recognized in research and development expense with respect to restricted stock awards in the previous year ended December 31, 2019). As noted above, in the year ended December 31, 2020, there were no stock-based awards granted under the Lucid Diagnostics Inc 2018 Equity Plan. In the previous year ended December 31, 2019, 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 $0.32 per share, and was calculated using the following weighted average Black-Scholes valuation model assumptions: Expected term of stock options (in years) 5.8 Expected stock price volatility 63 % Risk free interest rate 2.1 % Expected dividend yield 0 % Stock-based compensation expense recognized with respect to stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan to non-employees in the prior year ended December 31, 2019, which was recognized under the previous provisions of ASC 505-50, was based on a weighted average estimated fair value of such stock options of $0.29 per share, calculated using Black-Scholes valuation model weighted-average assumptions of a 8.8 year contractual term, a 57% expected stock price volatility, a 2.1% risk free interest rate, and a 0% expected dividend rate. F- 32 Note 10 — Stock-Based Compensation - continued PAVmed Inc. 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 each of the March 31, 2020 and September 30, 2020 ESPP purchase dates, 154,266 and 152,289 shares of PAVmed Inc. common stock were issued for proceeds of approximately $126 and $231, respectively; and in the previous year, on the initial September 30, 2019 ESPP purchase date, 82,772 shares of PAVmed Inc. common stock were issued for proceeds of approximately $67. As of December 31, 2020, the PAVmed Inc. ESPP has a total reservation of 750,000 shares of common stock of PAVmed Inc., with 360,673 shares available-for-issue, inclusive of the supplemental share reservation increase of an additional 500,000 shares, approved by the PAVmed Inc. board of directors on March 12, 2020, and approved at the PAVmed Inc. 2020 annual meeting of stockholders on July 24, 2020, and re-approved at a PAVmed Inc. special meeting of stockholders on March 4, 2021. A discussion of the PAVmed Inc. special meeting of stockholders is presented in Note 7, Commitments and Contingencies - Legal Proceedings . F- 33 Note 11 - Preferred Stock The Company is authorized to issue 20 million shares of its preferred stock, par value of $0.001 per share, with such designation, rights, and preferences as may be determined by the Company’s board of directors. Series B Convertible Preferred Stock As of December 31, 2020 and 2019, there were 1,228,075 and 1,158,209 shares of Series B Convertible Preferred Stock (classified in permanent equity) issued and outstanding, respectively. During the year ended December 31, 2020 and 2019, a total of 94,866 and 88,268 shares, respectively, were issued in settlement of Series B Convertible Preferred Stock dividends declared in the respective year ended December 31, 2020 and 2019, as such dividends are discussed below. Additionally, in March 2020, at the election of the holder, 25,000 shares of Series B Convertible Preferred Stock were converted into a corresponding number of shares of common stock of the Company. The Series B Convertible Preferred Stock is issued pursuant to the PAVmed Inc. Certificate of Designation of Preferences, Rights, and Limitations of Series B Convertible Preferred Stock (“Series B Convertible Preferred Stock Certificate of Designation”), has a par value of $0.001 per share, no voting rights, a stated value of $3.00 per share, and is immediately convertible upon its issuance. At the holders’ election, a share of Series B Convertible Preferred Stock is convertible into a share of common stock of the Company at a common stock conversion exchange factor equal to a numerator and denominator of $3.00, with each such numerator and denominator not subject to further adjustment, except for the effect of stock dividends, stock splits or similar events affecting the Company’s common stock. The Series B Convertible Preferred Stock shall not be redeemed for cash and under no circumstances shall the Company be required to net cash settle the Series B Convertible Preferred Stock. The Series B Convertible Preferred Stock Certificate of Designation provides for dividends at a rate of 8% per annum based on the $3.00 per share stated value of the Series B Convertible Preferred Stock, with such dividends compounded quarterly, accumulate, and are payable in arrears upon being declared by the Company’s board of directors, with the dividends earned from April 1, 2018 through October 1, 2021 payable-in-kind (“PIK”) by the issue of additional shares of Series B Convertible Preferred Stock. The dividends may be settled after October 1, 2021, at the option of the Company, through any combination of the issue of shares of Series B Convertible Preferred Stock, the issue shares of common stock of the Company, and /or cash payment. The Series B Convertible Preferred Stock dividends earned are included in the calculation of basic and diluted net loss attributable to PAVmed Inc. common stockholders for each of the corresponding periods 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. During the year ended December 31, 2020, the Company’s board-of-directors declared an aggregate of approximately $284 of Series B Convertible Preferred Stock dividends, earned as of each of December 31, 2019, March 31, 2020, June 30, 2020, and September 30, 2020, which have been settled by the issue of an additional aggregate 94,866 shares of Series B Convertible Preferred Stock. During the prior year ended December 31, 2019, the Company’s board-of-directors declared an aggregate of approximately $265 of Series B Convertible Preferred Stock dividends, earned as of December 31, 2018, March 31, 2019, June 30, 2019, and September 30, 2019, which were settled by the issue of an additional aggregate 88,268 shares of Series B Convertible Preferred Stock. Subsequent to December 31, 2020, in January 2021, the Company’s board-of-directors declared a Series B Convertible Preferred Stock dividend earned as of December 31, 2020 and payable as of January 1, 2021, of approximately $73 to be settled by the issue of an additional 24,198 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 December 31, 2020). F- 34 Note 12 — Stockholders’ Equity, Common Stock Purchase Warrants, and Noncontrolling Interest Common Stock The Company is authorized to issue up to 150 million shares of its common stock, par value of $0.001 per share, inclusive of an increase of 50 million shares approved by the Company’s stockholders at their July 24, 2020 annual meeting. There were 63,819,935 and 40,478,861 shares of common stock issued and outstanding as of December 31, 2020 and December 31, 2019, respectively. Year Ended December 31, 2020 ● During 2020, a total of 10,647,500 shares of common stock of the Company were issued for gross proceeds of approximately $17,036, before a total placement agent fee and expenses of approximately $1,004, and total offering costs of approximately $100. The shares of common stock were issued in two registered direct offerings pursuant to a respective Prospectus Supplement dated December 11, 2020 and December 18, 2020, each with respect to the Company’s effective shelf registration statement on Form S-3 (File No. 333-248709). ● In 2020, a total of 10,929,202 shares of common stock of the Company were issued upon partial conversions of each of the December 2018 Senior Convertible Note and the November 2019 Senior Convertible Notes, as discussed in Note 9, Outstanding Debt . ● In 2020, 306,555 shares of common stock were purchased by employees through participation in the PAVmed Inc. Employee Stock Purchase Plan, as discussed in Note 10, Stock-Based Compensation . Subsequent to December 31, 2020, 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 9, Outstanding Debt . Subsequent to December 31, 2020, on January 5, 2021, a total of 6,000,000 shares of common stock of the Company were issued for gross proceeds of approximately $13,440, before a placement agent fee and expenses of approximately $951, and offering costs incurred by the Company of approximately $70. 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). Subsequent to December 31, 2020, on February 23, 2021, a total of 9,782,609 shares of common stock of the Company were issued for proceeds of approximately $41,626, before underwriter expenses of approximately $50, and offering costs incurred by the Company of approximately $360. 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). Subsequent to December 31, 2020, as of March 12, 2021, a total of 773,842 Series Z Warrants were exercised for cash at a $1.60 per share of common stock of the Company, resulting in the issue of a corresponding number of shares of common stock of the Company. The Series Z Warrants are discussed herein below. Year Ended December 31, 2019 ● During 2019, a total of 5,480,000 shares of common stock of the Company were issued for gross proceeds of approximately $5,480, before placement agent fees and expenses of approximately $67, and total offering costs of $34. The shares of common stock were issued in three registered direct offerings pursuant to respective Prospectus Supplement dated April 12, 2019, May 8, 2019, and June 25, 2019, each with respect to the Company’s effective shelf registration statement on Form S-3 (File No. 333-220549). ● In 2019, a total of 7,773,110 shares of common stock of the Company were issued upon conversions of the December 2018 Senior Convertible Note, as discussed in Note 9, Outstanding Debt . ● In 2019, 82,772 shares of common stock were purchase by employees through participation in the PAVmed Inc. Employee Stock Purchase Plan, as discussed in Note 10, Stock-Based Compensation. F- 35 Note 12 — Stockholders’ Equity, Common Stock Purchase Warrants, and Noncontrolling Interest Common Stock Purchase Warrants The common stock purchase warrants (classified in permanent equity) outstanding as of the dates indicated are as follows: Common Stock Purchase Warrants Issued and Outstanding at Weighted Weighted December 31, Average Exercise December 31, Average Exercise Expiration 2020 Price /Share 2019 Price/Share Date Series Z Warrants 16,814,939 $ 1.60 16,815,039 $ 1.60 April 2024 UPO - Series Z Warrants 53,000 $ 1.60 53,000 $ 1.60 January 2022 Series W Warrants 381,818 $ 5.00 381,818 $ 5.00 January 2022 Series S Warrants — $ — 1,199,383 $ 0.01 June 2032 Total 17,249,757 $ 1.68 18,449,240 $ 1.57 In the year ended December 31, 2020, 1,199,383 Series S Warrants and 100 Series Z Warrants were exercised for cash at their respective exercise price per share, resulting in the issue of a corresponding number of shares of common stock of the Company. Additionally, subsequent to December 31, 2020, as of March 12, 2021, a total of 773,842 Series Z Warrants were exercised for cash at their exercise price per share, resulting in the issue of a corresponding number of shares of common stock of the Company. Series Z Warrants A Series Z Warrant is exercisable to purchase one share of common stock of the Company at an exercise price of $1.60 per share, and expire after the close of business on April 30, 2024, if not earlier redeemed by the Company, as discussed below. The Series Z Warrant exercise price is not subject-to adjustment, unless by action of the PAVmed Inc. board of directors, or the effect of stock dividends, stock splits or similar events affecting the common stock of the Company. Under no circumstances will the Company be required to net cash settle the Series Z Warrants, nor to pay any liquidated damages in lieu of delivery of shares of common stock of the Company resulting from a failure to satisfy any obligations under the Series Z Warrant. The Company may redeem the Series Z Warrants, at the Company’s option, in whole or in part, at a price of $0.01 per Series Z Warrant at any time while the Series Z Warrants are exercisable, upon a minimum of 30 days’ prior written notice of redemption, if, and only if, the volume weighted average closing price of the common stock of the Company equals or exceeds $9.00 (subject to adjustment) for any 20 out of 30 consecutive trading days ending three business days before the Company issues its notice of redemption, and provided the average daily trading volume in the common stock of the Company during such 30-day period is at least 20,000 shares per day; and if, and only if, there is a current registration statement in effect with respect to the shares of Common Stock underlying such Series Z Warrants. Series W Warrants A Series W Warrant is exercisable to purchase one share of common stock of the Company at an exercise price of $5.00 per share, and expire after the close of business on January 29, 2022, if not earlier redeemed by the Company, as discussed below. The Series W Warrant exercise price is not subject-to adjustment, unless by action of the PAVmed Inc. board of directors, or the effect of stock dividends, stock splits or similar events affecting the common stock of the Company. Under no circumstances will the Company be required to net cash settle the Series W Warrants, nor to pay any liquidated damages in lieu of delivery of shares of common stock of the Company resulting from a failure to satisfy any obligations under the Series W Warrant. The Company may redeem the Series W Warrants (other than those outstanding prior to the Company’s initial public offering (“IPO”) held by the Company’s management, founders, and members thereof, but including the warrants held by the initial investors), at the Company’s option, in whole or in part, at a price of $0.01 per warrant, at any time while the warrants are exercisable; upon a minimum of 30 days’ prior written notice of redemption; if, and only if, the volume weighted average price of the Company’s common stock equals or exceeds $10.00 (subject-to adjustment) for any 20 consecutive trading days ending three business days before the Company issues its notice of redemption, and provided the average daily trading volume in the stock is at least 20,000 shares per day; and, if, and only if, there is a current registration statement in effect with respect to the shares of common stock of the Company underlying such warrants. The right to exercise will be forfeited unless the Series W Warrants are exercised prior to the date specified in the notice of redemption. On and after the redemption date, a record holder of an Series W Warrant will have no further rights except to receive the redemption price for such holder’s Series W Warrant upon its surrender. F- 36 Note 12 — Stockholders’ Equity, Common Stock Purchase Warrants, and Noncontrolling Interest - continued Noncontrolling Interest (“NCI”) 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 as follows: Year Ended December 31, 2020 Year Ended December 31, 2019 NCI - equity (deficit) - beginning of period $ (814 ) $ (161 ) Minority Interest investment -Solys Diagnostics Inc. — 889 Minority Interest share subscription receivable - Solys Diagnostics Inc. — (889 ) Lucid Diagnostics Inc. 2018 Equity Plan stock option exercise 5 — Net loss attributable to NCI - Lucid Diagnostics Inc. (1,503 ) (801 ) Net loss attributable to NCI - Solys Diagnostics Inc. (109 ) (10 ) Stock-based compensation expense - Lucid Diagnostics Inc. 2018 Equity Plan 52 158 NCI - equity (deficit) - end of period $ (2,369 ) $ (814 ) Lucid Diagnostics Inc. As of December 31, 2020 and 2019, there were 10,003,333 and 10,000,000 shares of common stock of Lucid Diagnostics Inc. issued and outstanding, respectively. PAVmed Inc. holds 8,187,499 shares of the common stock of Lucid Diagnostics Inc., as of December 31, 2020 and 2019, representing a majority equity ownership interest of 81.85% and 81.875%, respectively, and has a controlling financial interest. The minority equity ownership interest of the Lucid Diagnostics Inc. common stock includes: 943,464 shares held by CWRU, 289,679 shares held by each of the three individual physician inventors of the intellectual property underlying the CWRU License Agreement (as such license agreement is discussed in Note 3, Agreements Related to Acquired Intellectual Property Rights ), as of December 31, 2020 and 2019; and 3,333 shares held by an unrelated third-party consultant as of December 31, 2020, upon the exercise for cash at $1.50 per share of a corresponding number of stock options issued under the Lucid Diagnostics Inc. 2018 Equity Plan in January 2020 (as such equity plan is discussed in Note 10, Stock-Based Compensation ). As of December 31, 2020 and 2019, Lucid Diagnostics Inc. is a consolidated majority-owned subsidiary of the Company, and a corresponding noncontrolling interest (NCI) is included as a separate component of consolidated stockholders’ equity in the consolidated balance sheet as of December 31, 2020 and 2019, along with the recognition of a net loss attributable to the NCI in the consolidated statement of operations in the year ended December 31, 2020 and 2019. Solys Diagnostics Inc. As of December 31, 2020 and 2019, 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 consolidated balance sheet as of December 31, 2020 and 2019, along with the recognition of a net loss attributable to the NCI in the consolidated statement of operations in the years ended December 31, 2020 and 2019. F- 37 Note 13 — Income Taxes Income tax (benefit) expense for respective periods noted is as follows: Year Ended December 31, 2020 2019 Current Federal, State and Local $ — $ — Deferred Federal (4,571 ) (3,342 ) State and Local (4,147 ) (4,808 ) (8,718 ) (8,150 ) Less: Valuation allowance reserve 8,718 8,150 $ — $ — The reconciliation of the federal statutory income tax rate to the effective income tax rate for the respective period noted is as follows: Year Ended December 31, 2020 2019 U.S. federal statutory rate 21.0 % 21.0 % U.S. state and local income taxes, net of federal benefit 9.9 % 14.2 % Permanent differences (5.8 )% (3.5 )% Other (0.8 )% 15.5 % Valuation allowance (24.3 )% (47.2 )% Effective tax rate — % — % The tax effects of temporary differences which give rise to the net deferred tax assets for the respective period noted is as follows: Year Ended December 31, 2020 2019 Deferred Tax Assets Net operating loss $ 21,836 $ 14,060 Non-deductible interest expense 517 357 Debt issue costs 205 285 Stock-based compensation expense 1,901 1,213 Patent licenses 14 14 Research and development tax credit carryforwards 396 396 Accrued expenses 552 371 Section 195 deferred start-up costs 24 28 Deferred tax assets $ 25,445 $ 16,724 Deferred Tax Liabilities Depreciation (19 ) (16 ) Deferred Tax Liabilities $ (19 ) $ (16 ) Deferred tax assets, net of deferred tax liabilities 25,426 16,708 Less: valuation allowance (25,426 ) (16,708 ) Deferred tax assets, net after valuation allowance $ — $ — Deferred tax assets and deferred tax liabilities resulting from temporary differences are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of the change in the tax rate is recognized as income or expense in the period the change in tax rate is enacted. F- 38 Note 13 — Income Taxes - continued As required by FASB ASC Topic 740, Income Taxes, (“ASC 740), a “more-likely-than-not” criterion is applied when assessing the estimated realization of deferred tax assets through their utilization to reduce future taxable income, or with respect to a deferred tax asset for tax credit carryforward, to reduce future tax expense. A valuation allowance is established, when necessary, to reduce deferred tax assets, net of deferred tax liabilities, when the assessment indicates it is more-likely-than-not, the full or partial amount of the net deferred tax asset will not be realized. Accordingly, the Company evaluated the positive and negative evidence bearing upon the estimated realizability of the net deferred tax assets, and based on the Company’s history of operating losses, concluded it is more-likely-than-not the deferred tax assets will not be realized, and therefore recognized a valuation allowance reserve equal to the full amount of the deferred tax assets, net of deferred tax liabilities, as of December 31, 2020 and 2019. The Company has total estimated federal and state net operating loss (“NOL”) carryforward of approximately $63 million and $40.0 million as of December 31, 2020 and 2019, respectively, which is available to reduce future taxable income, of which approximately $13.8 million have statutory expiration dates commencing in 2035, and approximately $49.2 million which do not have a statutory expiration date. The Company has not yet conducted a formal analysis and the NOL carryforward may be subject-to limitation under U.S. Internal Revenue Code (“IRC”) Section 382 (provided there was a greater than 50% ownership change, as computed under such IRC Section 382). The State and Local NOL carryforwards of approximately $63.0 million have statutory expiration dates commencing in 2035. The Company has total estimated research and development (“R&D”) tax credit carryforward of approximately $0.4 million as of December 31, 2020 which are available to reduce future tax expense and have statutory expiration dates commencing in 2035. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the pandemic resulting from the outbreak of a novel strain of a coronavirus designated as the “Severe Acute Respiratory Syndrome Coronavirus 2” - or “SARS-CoV-2”. The pandemic resulting from SARS-CoV-2 is commonly referred to by its resulting illness of “coronavirus disease-2019” (“COVID-19”), and is referred to herein as the COVID-19 pandemic. Among other provisions, the CARES Act increases the limitation on the allowed business interest expense deduction from 30 percent to 50 percent of adjusted taxable income for tax years beginning January 1, 2019 and 2020 and allows businesses to immediately expense the full cost of Qualified Improvement Property, retroactive to tax years beginning on or after January 1, 2018. Additionally, the CARES Act permits net operating loss carryovers (“NOLs”) and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. While the Company is currently evaluating the impact of these CARES Act provisions, it is not expected, at this time, to have a material impact on the consolidated income tax provision. The Company files income tax returns in the United States in federal and applicable state and local jurisdictions. The Company’s tax filings for the years 2017 and thereafter each remain subject to examination by taxing authorities. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. The Company has not recognized any penalties or interest related to its income tax provision. F- 39 Note 14 — Loss Per Share The “Net 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 - is as follows: Year Ended December 31, 2020 2019 Numerator Net loss - before noncontrolling interest $ (35,888 ) $ (17,268 ) Net loss attributable to noncontrolling interest 1,612 811 Net loss - as reported, attributable to PAVmed Inc. $ (34,276 ) $ (16,457 ) Series B Convertible Preferred Stock dividends – earned (1) $ (287 ) $ (270 ) Net loss attributable to PAVmed Inc. common stockholders $ (34,563 ) $ (16,727 ) Denominator Weighted average common shares outstanding, basic and diluted (2) 47,432,115 30,197,458 Loss per share Basic and diluted Net loss - as reported, attributable to PAVmed Inc. $ (0.72 ) $ (0.54 ) Net loss attributable to PAVmed Inc. common stockholders $ (0.73 ) $ (0.55 ) The common stock equivalents have been excluded from the computation of diluted weighted average shares outstanding as their inclusion would be anti-dilutive, are as follows: December 31, 2020 2019 PAVmed Inc. 2014 Equity Plan stock options and restricted stock awards 8,215,195 5,903,529 Unit purchase options - as to shares of common stock 53,000 53,000 Unit purchase options - as to shares underlying Series Z Warrants 53,000 53,000 Series Z Warrants 16,814,939 16,815,039 Series W Warrants 381,818 381,818 Series B Convertible Preferred Stock (3) 1,228,075 1,158,209 Total 26,746,027 24,364,595 (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. (2) Basic weighted-average number of shares of common stock outstanding for the years ended December 31, 2020 and 2019 include the shares of the Company issued and outstanding during the years ended December 31, 2020 and December 31, 2019, 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 a corresponding number of additional outstanding shares of common stock of the Company. F- 40