PAVmed Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. Based on such evaluation, our principal executive officer and principal financial officer concluded our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) were effective as of such date to provide reasonable assurance the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as such term is defined in Exchange Act Rules 13(a)-15(f). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the U.S. Our internal control over financial reporting includes those policies and procedures that: ● pertain to the maintenance of records, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; ● provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with accounting principles generally accepted in the U.S., and our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and; ● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets could have a material effect on the financial statements. Due to its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect all misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time. Our system contains self-monitoring mechanisms, so actions will be taken to correct deficiencies as they are identified. Our management conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded our system of internal control over financial reporting was effective as of December 31, 2021. This Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the SEC to permit us to provide only management’s report in this Form 10-K. Changes to Internal Controls Over Financial Reporting There have 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, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 82 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 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2021. Item 11. Executive Compensation The information required by this Item 11 is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2021. 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 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2021. 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 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2021. Item 14. Principal Accounting Fees and Services The information required by this Item 14 is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2021. 83 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 (PCAOB ID#688) Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Changes in 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 Z Warrant Certificate (5) 4.4 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) 4.5 Form of Senior Secured Convertible Note (15) 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) 84 Exhibit No. Description 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) 10.8 Employment Agreement between PAVmed Inc. and Shaun O’Neil (18) 10.9 PAVmed Inc. Fourth Amended and Restated 2014 Long-Term Incentive Equity Plan (10)(12) 10.10 PAVmed Inc. Employee Stock Purchase Plan (10)(12) 10.10.1 Common Stock Purchase Agreement, dated as of March 28, 2022, by and between CF Principal Investments LLC and Lucid Diagnostics Inc.(14) 10.10.2 Registration Rights Agreement, dated as of March 28, 2022, by and between CF Principal Investments LLC and Lucid Diagnostics Inc.(14) 10.11.1 Asset Purchase Agreement, dated as of February 25, 2022, by and among LucidDx Labs Inc., Lucid Diagnostics Inc. and ResearchDx, Inc. (17) 10.11.2 Management Services Agreement, dated as of February 25, 2022, by and among LucidDx Labs Inc. and ResearchDx, Inc. (17) 10.11.3 Form of Securities Purchase Agreement (15) 10.11.4 Form of Security Agreement (15) 10.11.5 Form of Voting Agreement (15) 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 Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase 101.LAB Inline XBRL Taxonomy Extension Label Linkbase 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) (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. (14) Incorporated by reference to Lucid Diagnostic Inc.’s Current Report on Form 8-K filed on April 1, 2022. (15) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed April 4, 2022 (16) Incorporated by reference to the Registrant’s Definitive Proxy Statement on Schedule 14A filed April 30, 2021 (17) Incorporated by reference to Lucid Diagnostic Inc.’s Current Report on Form 8-K filed on March 3, 2022). (18) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed February 24, 2022. * Management contract or compensatory plan or arrangement. † Filed herewith Item 16. Form 10-K Summary None 85 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. April 5, 2022 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 April 5, 2022 Lishan Aklog, M.D. Chief Executive Officer (Principal Executive Officer) /s/ Dennis M. McGrath President April 5, 2022 Dennis M. McGrath Chief Financial Officer (Principal Financial and Accounting Officer) /s/ Michael J. Glennon Vice Chairman April 5, 2022 Michael J. Glennon Director /s/ Debra J. White Director April 5, 2022 Debra J. White /s/ James L. Cox, M.D. Director April 5, 2022 James L. Cox, M.D. /s/ Ronald M. Sparks Director April 5, 2022 Ronald M. Sparks /s/ Timothy Baxter Director April 5, 2022 Timothy Baxter /s/ Joan B. Harvey Director April 5, 2022 Joan B. Harvey 86 PAVMED INC. and SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 688 ) F-2 Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020 F-4 Consolidated Statements of Operations for the years ended December 31, 2021 and 2020 F-5 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the year ended December 31, 2021 F-6 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the year ended December 31, 2020 F-7 Consolidated Statements of Cash Flows for the year ended December 31, 2021 and 2020 F-8 Notes to Consolidated Financial Statements F-9 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of PAVmed Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of PAVmed Inc. and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, 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 provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. F- 2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued) Valuation of Lucid Diagnostics Inc. (LUCD) common stock prior to its IPO Critical Audit Matter Description The Company estimates the fair value of LUCD common stock for purpose of share based compensation utilizing valuation models with unobservable inputs. Unlike Level 1 and 2 inputs, Level 3 inputs are unobservable, supported by little or no market activity and are significant to the conclusion of fair value of LUCD common stock. Subjective and challenging judgment is required by management to determine the assumptions and valuation methodology to conclude on material Level 3 inputs that result in the conclusion of fair value of LUCD common stock. Auditing management’s models to determine the fair value was complex and required judgment, particularly when evaluating inputs such as discount rates, probability of event occurring, estimated IPO value, number of common equivalent shares, projections, guideline companies, weighting of the income approach and market approach, public company multiples, and multiples of revenue. These assumptions are affected by potential future outcomes, market and industry factors as well as estimates of the LUCD’s future growth. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures to address this critical audit matter included the following: ● We obtained an understanding of the design of controls associated with the Company’s process to establish a valuation methodology and determine assumptions used in valuation models to conclude on fair value. For example, we gained an understanding of management’s review controls over the significant assumptions described above as well as over the data used in the valuation models. ● With assistance from our valuation specialists, we evaluated the reasonableness of the valuation methodology and significant assumptions; tested inputs for reasonableness, including discount rates, guideline companies, weighting of the income approach and market approach, public company multiples and multiples of revenue; and corroborated with audit evidence from external sources or comparisons to other companies in the industry. ● We gained an understanding of the Company’s process used to develop projections and tested inputs including probability of event occurring, estimated IPO value, and number of common equivalent shares for reasonableness. Further, we evaluated audit evidence from events or transactions occurring after the measurement date for comparison to management’s estimate. /s/ Marcum LLP Marcum llp We have served as the Company’s auditor since 2019. New York, NY April 5, 2022 F- 3 PAVMED INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands except number of shares and per share data) December 31, 2021 December 31, 2020 Assets: Current assets: Cash $ 77,258 $ 17,256 Accounts receivable 200 — Prepaid expenses, deposits, and other current assets 5,179 1,685 Total current assets 82,637 18,941 Fixed assets, net 1,585 82 Intangible assets, net 2,029 — Other assets 725 755 Total assets $ 86,976 $ 19,778 Liabilities, Preferred Stock and Stockholders’ Deficit Current liabilities: Accounts payable $ 3,299 $ 2,966 Accrued expenses and other current liabilities 4,259 2,325 CARES Act Paycheck Protection Program note payable — 300 Senior Secured Convertible Notes - at fair value — 10,060 Senior Convertible Note - at fair value — 4,600 Total liabilities 7,558 20,251 Commitments and contingencies (Note 11) - - 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 1,113,919 at December 31, 2021 and 1,228,075 shares at December 31, 2020 2,419 2,537 Common stock, $ 0.001 par value. Authorized, 150,000,000 shares; 86,367,845 and 63,819,935 shares outstanding as of December 31, 2021 and December 31, 2020, respectively 86 64 Additional paid-in capital 198,071 87,570 Accumulated deficit ( 138,910 ) ( 88,275 ) Total PAVmed Inc. Stockholders’ Equity 61,666 1,896 Noncontrolling interests 17,752 ( 2,369 ) Total Stockholders’ Equity (Deficit) 79,418 ( 473 ) Total Liabilities and Stockholders’ Equity $ 86,976 $ 19,778 See accompanying notes to the consolidated financial statements. F- 4 PAVMED INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except number of shares and per share amounts) 2021 2020 Year Ended December 31, 2021 2020 Revenue $ 500 $ — Cost of revenue 585 — Gross profit (loss) ( 85 ) — Operating expenses: Sales and marketing 8,895 2,789 General and administrative 25,566 9,599 Research and development 19,847 10,963 Total operating expenses 54,308 23,351 Loss from operations ( 54,393 ) ( 23,351 ) Other income (expense): Interest expense — ( 53 ) Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note 1,682 ( 5,327 ) Offering costs - Senior Secured Convertible Note and Senior Convertible Note — ( 660 ) Debt extinguishments loss - Senior Secured Convertible Notes ( 3,715 ) ( 6,497 ) Debt forgiveness 300 — Other income (expense), net ( 1,733 ) ( 12,537 ) Loss before provision for income tax ( 56,126 ) ( 35,888 ) Provision for income taxes — — Net loss before noncontrolling interests ( 56,126 ) ( 35,888 ) Net loss attributable to the noncontrolling interests 5,779 1,612 Net loss attributable to PAVmed Inc. ( 50,347 ) ( 34,276 ) Less: Series B Convertible Preferred Stock dividends earned ( 283 ) ( 287 ) Net loss attributable to PAVmed Inc. common stockholders $ ( 50,630 ) $ ( 34,563 ) Per share information: Net loss per share attributable to PAVmed Inc. - basic and diluted $ ( 0.65 ) $ ( 0.72 ) Net loss per share attributable to PAVmed Inc. common stockholders – basic and diluted $ ( 0.65 ) $ ( 0.73 ) Weighted average common shares outstanding, basic and diluted 77,515,767 47,432,115 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, 2021 (in thousands except number of shares and per share data) Shares Amount Shares Amount Capital Deficit Interest Total PAVmed Inc. Stockholders’ Equity (Deficit) Series B Convertible Additional Non Preferred Stock Common Stock Paid-In Accumulated controlling Shares Amount Shares Amount Capital Deficit Interest Total Balance - December 31, 2020 1,228,075 $ 2,537 63,819,935 $ 64 $ 87,570 $ ( 88,275 ) $ ( 2,369 ) $ ( 473 ) Dividends declared - Series B Convertible Preferred Stock 96,292 288 — — — ( 288 ) — — Conversions - Series B Convertible Preferred Stock ( 210,448 ) ( 406 ) 210,448 — 406 — — — Issue common stock - registered offerings, net — — 15,782,609 16 53,688 — — 53,704 Issue common stock – exercise Series S warrants Issue common stock – exercise Series S warrants, shares Vest - restricted stock awards vests — — 150,000 — — — — — Exercise - Series Z warrants — — 4,877,484 5 7,799 — — 7,804 Exercise - Series W warrants — — 3,945 — 20 — — 20 Conversions - Senior Secured Convertible Note — — 667,668 1 1,722 — — 1,723 Exercise - stock options — — 621,164 — 979 — — 979 Purchase - Employee Stock Purchase Plan — — 234,592 — 436 — — 436 Issue common stock of majority-owned subsidiary — — — — — — — — Impact of subsidiary equity transactions (1) — — — — 39,576 — 16,760 56,336 Issue of common stock of majority-owned subsidiary — — — — — — 6 6 Stock-based compensation - PAVmed Inc. — — — — 5,410 — — 5,410 Stock-based compensation - majority-owned subsidiary — — — — 465 — 9,134 9,599 Issue common stock of majority- owned subsidiary exercise of stock options Net loss — — — — — ( 50,347 ) ( 5,779 ) ( 56,126 ) Balance - December 31, 2021 1,113,919 $ 2,419 86,367,845 $ 86 $ 198,071 $ ( 138,910 ) $ 17,752 $ 79,418 (1) Primarily represents the impact of the Lucid Diagnostics Inc. IPO. See Note 17, Noncontrolling Interest for further information. See accompanying notes to the consolidated financial statements. F- 6 PAVMED INC. and SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT) for the YEAR ENDED December 31, 2020 (in thousands, except number of 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 - December 31, 2019 1,158,209 $ 2,296 40,478,861 $ 41 $ 47,554 $ ( 53,715 ) $ ( 814 ) $ ( 4,638 ) Balance 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 Conversions - 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 — — — Conversions - Series B Convertible Preferred Stock ( 25,000 ) ( 43 ) 25,000 — 43 — — — Series B Convertible Preferred Stock dividends declared 94,866 284 — — — ( 284 ) — — Dividends declared - Series B Convertible Preferred Stock 94,866 284 — — — ( 284 ) — — Issue common stock - Employee Stock Purchase Plan — — 306,555 — 357 — — 357 Purchase - 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 Net Loss — — — — — ( 34,276 ) ( 1,612 ) ( 35,888 ) Balance - December 31, 2020 1,228,075 $ 2,537 63,819,935 $ 64 $ 87,570 $ ( 88,275 ) $ ( 2,369 ) $ ( 473 ) Balance 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- 7 PAVMED INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except number of shares and per share data) 2021 2020 Year Ended December 31, 2021 2020 Cash flows from operating activities Net loss - before noncontrolling interest (“NCI”) $ ( 56,126 ) $ ( 35,888 ) Adjustments to reconcile net loss - before NCI to net cash used in operating activities Depreciation expense 80 23 Amortization expense 146 — Stock-based compensation 15,009 2,044 In-process R&D charge 133 — Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note ( 1,682 ) 5,327 Debt extinguishment loss - Senior Secured Convertible Notes and Senior Convertible Note 3,715 6,497 Debt forgiveness ( 300 ) — Changes in operating assets and liabilities: Accounts receivable ( 200 ) — Prepaid expenses and other current assets ( 3,458 ) ( 1,336 ) Accounts payable 174 501 Accrued expenses and other current liabilities 1,918 918 Net cash flows used in operating activities ( 40,591 ) ( 21,914 ) Cash flows from investing activities Purchase of equipment ( 1,469 ) ( 55 ) Acquisitions, net of cash acquired ( 2,247 ) — Net cash flows used in investing activities ( 3,716 ) ( 55 ) Cash flows from financing activities Proceeds - issue of common stock - initial public offering - majority-owned subsidiary common stock 62,000 — Payment - offering costs - initial public offering - majority-owned subsidiary common stock ( 5,665 ) — Proceeds – issue of common stock – registered offerings 55,016 16,032 Payment – offering costs – registered offerings ( 1,312 ) ( 100 ) Proceeds – issue of Senior Secured Convertible Notes — 13,300 Proceeds – issue of Senior Convertible Note — 3,700 Proceeds – Cares Act Paycheck Protection Program Loan — 300 Payment – repayment of Senior Convertible Note and Senior Secured Convertible Note ( 14,816 ) — Payment – Senior Convertible Note and Senior Secured Convertible Note – non-installment payments ( 154 ) ( 600 ) Proceeds – exercise of Series Z warrants 7,804 — Proceeds – exercise of Series W warrants 20 — Proceeds – exercise of Series S warrants — 12 Proceeds – exercise of stock options 980 — Proceeds – issue common stock – Employee Stock Purchase Plan 436 357 Proceeds – exercise of stock options issued under equity incentive plan of majority owned subsidiary — 5 Net cash flows provided by financing activities 104,309 33,006 Net increase (decrease) in cash 60,002 11,037 Cash, beginning of period 17,256 6,219 Cash, end of period $ 77,258 $ 17,256 See accompanying notes to the consolidated financial statements. F- 8 PAVMED INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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 and Subsidiaries, referred to herein as “PAVmed” or the “Company” is comprised of PAVmed Inc. and its wholly-owned subsidiary and its majority-owned subsidiaries, inclusive of Lucid Diagnostics, Inc. (“Lucid Diagnostics” or “LUCID”), Veris Health, Inc. (“Veris Health” or “VERIS”), and Solys Diagnostics, Inc. (“Solys Diagnostics” or “SOLYS”). The Company is 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 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: 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, NextFlo, EsoCure and digital health technologies acquired by the Company’s majority-owned subsidiary Veris Health Inc. F- 9 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and applicable rules and regulations of the United States Securities and Exchange Commission (“SEC”), and include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The Company holds a majority-ownership interest and has controlling financial interest in each of: Lucid Diagnostics Inc., Veris Health Inc., and Solys Diagnostics Inc., with the corresponding noncontrolling interest included as a separate component of consolidated stockholders’ equity (deficit), including the recognition in the consolidated statement of operations of a net loss attributable to the noncontrolling interest based on the respective minority-interest equity ownership of each majority-owned subsidiary. See Note 17, Noncontrolling Interest , for a discussion of each of the majority-owned subsidiaries noted above. The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions. All amounts in the accompanying consolidated financial statements and these notes thereto are presented in thousands of dollars, if not otherwise noted as being presented in millions of dollars, except for shares and per share amounts. Use of Estimates In preparing the consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets, inclusive of acquired intangible assets and the determination of corresponding carrying value reserve, if any, and liabilities and the disclosure of contingent losses, as of the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Significant estimates in these consolidated financial statements include those related to the estimated fair value of stock-based equity awards, financial instruments recognized as liabilities, debt obligations, and common stock purchase warrants. Other significant estimates include the provision or benefit for income taxes and the corresponding valuation allowance on deferred tax assets. Additionally, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows. On an ongoing basis, the Company evaluates its estimates and assumptions. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. Financial Condition The provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern (“ASC 205-40”) requires management to assess an entity’s ability to continue as a going concern within one year of the date of the financial statements are issued. In each reporting period, including interim periods, an entity is required to assess conditions known and reasonably knowable as of the financial statement issuance date to determine whether it is probable an entity will not meet its financial obligations within one year from the financial statement issuance date. Substantial doubt about an entity’s ability to continue as a going concern exists when conditions and events, considered in the aggregate, indicate it is probable the entity will be unable to meet its financial obligations as they become due within one year after the date the financial statements are issued. The Company has financed its operations principally through 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 companies that devote substantially all of their efforts to the commercialization of their initial product and services and ongoing research and development activities and conducting 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, with the cash on-hand as of the date hereof and other debt and equity committed sources of financing, the Company expects to be able to fund its operations for one year from the date of the issue of the Company’s consolidated financial statements included herein in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. See Note 20, Subsequent Events , for a discussion of the committed sources of financing noted above. F- 10 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued Significant Accounting Policies - continued 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 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. Revenue Recognition The Company recognizes revenue under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers , (“ASC 606”). At its inception, an arrangement is accounted for under the provisions of ASC 606 as a contract with a customer when there is: a legally enforceable contract between the parties; the rights of the parties are identified; the arrangement has commercial substance; and collectability of the contract consideration is deemed probable. To determine revenue recognition for arrangements determined to be within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. See Note 4, Revenue from Contracts with Customers , for further information regarding revenue recognition. F- 11 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued Significant Accounting Policies - continued Fixed Assets Fixed assets are stated at cost and depreciated using the straight-line method over the assets’ estimated useful lives. Additions and improvements are capitalized, including direct and indirect costs incurred to validate equipment and bring to working conditions. The costs for maintenance and repairs are expensed as incurred. Leases The Company adopted FASB ASC Topic 842, Leases , (“ASC 842”) effective December 31, 2021, with such adoption not having an effect on the Company’s consolidated financial statements. All significant lease agreements and contractual agreements with embedded lease agreements are accounted for under the provisions of ASC 842, wherein, if the contractual arrangement: involves the use of a distinct identified asset; provides for the right to substantially all the economic benefits from the use of the asset throughout the contractual period; and, provides for the right to direct the use of the asset. A lease agreement is accounted for as either a finance lease (generally with respect real estate) or an operating lease (generally with respect to equipment). Under both a finance lease and an operating lease, the Company recognizes as of the lease commencement date a lease right-of-use (“ROU”) asset and a corresponding lease payment liability. A lease ROU asset represents the Company’s right to use an underlying asset for the lease term, and the lease liability represents its contractual obligation to make lease payments. The lease ROU asset is measured at the lease commencement date as the present value of the future lease payments plus initial direct costs incurred. The Company recognizes lease expense of the amortization of the lease ROU asset for an operating lease on a straight-line basis over the lease term; and for financing leases on a straight-line basis unless another basis is more representative of the pattern of economic benefit. The lease liability is measured at the lease commencement date with the discount rate generally based on the Company’s incremental borrowing rate (to the extent the lease implicit rate is not known nor determinable), with interest expense recognized using the interest method for financing leases. Certain leases may include options to extend or terminate the agreement. The Company does not assume renewals in determination of the lease term unless the renewals are deemed to be reasonably certain at lease commencement. As well, an option to terminate is considered unless it is reasonably certain the Company will not exercise the option. The Company elected the practical expedient to not recognize a lease ROU asset and lease payment liability for leases with a term of twelve months or less (“short-term leases”), resulting in the aggregate lease payments being recognized on a straight line basis over the lease term. The Company’s leases with a commencement date prior to January 1, 2022 were short-term leases and therefore did not require recording a ROU asset or lease liability at December 31, 2021. Additionally, the Company elected the practical expedient to not separate lease and non-lease components. See Note 9, Leases . Intangible Assets Purchased intangible assets are recorded at cost and depreciated using the straight-line method over the assets’ estimated useful life. See Note 6, Acquisitions, for further information with respect to purchased intangible assets. Impairment - Long Lived Assets The Company reviews its long-lived assets, including intangible assets with finite lives, for recoverability whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable. The Company evaluates assets for potential impairment by comparing estimated future undiscounted net cash flows to the carrying amount of the asset. If the carrying amount of the assets exceeds the estimated future undiscounted cash flows, impairment is measured based on the difference between the carrying amount of the assets and fair value which is generally an expected present value cash flow technique. The assessment and determination of the existence of an impairment indicator comprises measurable operating performance criteria as well as qualitative factors deemed relevant and appropriate to such evaluation. F- 12 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued Significant Accounting Policies - continued 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”). The Company accounts for stock-based compensation in accordance with the provisions of FASB ASC Topic 718, Stock Compensation (“ASC 718”). 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. 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: ● 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, 2021 and 2020; ● 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, 2021; 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 and restricted stock awards granted under the PAVmed Inc. 2014 Equity Plan is its quoted closing price per share. On October 14, 2021, Lucid Diagnostics Inc. completed an initial public offering (“IPO”) of its common stock under an effective registration statement on Form S-1 (SEC File No. 333-259721), wherein a total of 5.0 million IPO shares of common stock of Lucid Diagnostics Inc. were issued, with such total IPO shares inclusive of 571,428 shares issued to PAVmed Inc . The price per share of Lucid Diagnostics Inc. common stock used in the computation of estimated fair value of stock options and restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan is as follows: (i) for the period October 14, 2021 to December 31, 2021 it is its quoted closing price per share; and (ii) for the period January 1, 2021 to October 14, 2021, it was estimated using a probability-weighted average expected return methodology (“PWERM”), which involves the determination of equity value under various exit scenarios and an estimation of the return to the common stockholders under each scenario; and (iii) as of December 31, 2020, it was estimated using a discounted cash flow analysis applied to a multi-year forecast of its future cash flows. F- 13 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 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, 2021 and December 31, 2020, 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, 2021 and 2020. F- 14 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued Significant Accounting Policies - continued Financial Instruments - Derivatives The Company evaluates its financial instruments to determine if the financial instrument itself or if any embedded components of a financial instrument 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. 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. F- 15 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - 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, 2021 and 2020. 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, 2021, the Company does no t 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, 2021 and December 31, 2020 or recognized during the years ended December 31, 2021 and 2020. 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- 16 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued Significant Accounting Policies - continued JOBS Act EGC Accounting Election The Company’s designation as an “emerging growth company” or “EGC” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), expired during 2021. As an EGC, the company had irrevocably elected to adopt new or revised accounting standards using the effective date applicable to private companies. With the expiry of its EGC designation, effective December 31, 2021, the Company adopted the previously deferred accounting standards in accordance with the effective date applicable to non-EGC public companies, as such effective dates are applicable to SEC smaller reporting company requirements. Recent Accounting Standards Updates Adopted 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, by eliminating the beneficial conversion and cash conversion accounting models previously contained in ASC 470-20 that required separate accounting for embedded conversion features. ASU 2020-06 also simplified the assessment of a financial instrument settlement to determine whether a contract is an entity’s own equity qualifies for equity classification by removing certain conditions from ASC 815-4-25. 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 did not 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 did not have an effect on the Company’s consolidated financial statements. Effective December 31, 2021, the Company adopted FASB ASC Topic 842, Leases, (“ASC 842”). ASC 842 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 Company’s adoption of ASC 842 did not have an effect on the Company’s consolidated financial statements. See Note 9, Leases . F- 17 Note 3 — Patent License Agreement – Case Western Reserve University Overview The Company, through its majority-owned subsidiary Lucid Diagnostics Inc., entered into a patent license agreement with Case Western Reserve University (“CWRU”), captioned the Amended and Restated License Agreement and dated August 23, 2021 (“Amended CWRU License Agreement”). The Amended CWRU License Agreement is a successor to and replaced in its entirety the previous CWRU License Agreement, dated May 12, 2018, between Lucid Diagnostics Inc. and CWRU. The Amended 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. The Amended CWRU License Agreement (as did the predecessor 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 “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 Fee was $ 273 . On the August 23, 2021 effective date of the Amended CWRU License Agreement, the remaining balance of $ 223 became payable, and such amount was paid in September 2021. Additionally, also in September 2021, the Company paid a $ 10 amendment fee in connection with the Amended CWRU License Agreement. Additionally, the Amended CWRU License Agreement provides for each of patent fees reimbursement payments; milestone payments; and royalty payments - each as discussed below. Patent Fees Reimbursement Lucid Diagnostics Inc. is responsible for reimbursement of certain CWRU billed patent fees. See Note 5, Related Party Transactions , for patent fee reimbursement payments paid to CWRU in the years ended December 31, 2021 and 2020. Milestones The (predecessor) CWRU License Agreement contained milestones, including regulatory milestones with respect to the FDA 501(k) submission of EsoCheck and the FDA clearance of EsoCheck, respectively regulatory submissions and clearances; which were achieved in accordance with the requisite contractual due dates, for which a $ 75 research and development expense was recognized and paid with respect to the achievement of the regulatory milestone related to FDA clearance of EsoCheck. The CWRU License Agreement was amended effective February 12, 2021, 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 $ 100 payment to CWRU in consideration for such changes to the commercialization milestone (“CWRU License Agreement Amendment Fee”), with such fee recognized as general and administrative expense as of December 31, 2020 and paid in February 2021. The regulatory milestone related to FDA PMA submission of a licensed product (“PMA Milestone”) is included in the Amended CWRU License Agreement, and is the sole remaining unachieved milestone, for which a $ 200 milestone payment would be payable to CWRU upon its achievement. F- 18 Note 3 — Patent License Agreement – Case Western Reserve University - continued Royalty Fee Under the Amended CWRU License Agreement, the Company is required to pay a royalty fee to CWRU with respect to the “Licensed Products” (as defined in the CWRU License Agreement) of a percentage of “Net Sales”, as defined in the Amended CWRU License Agreement, as follows: 5.0 % of Net Sales up to $ 100.0 million per year; and 8.0 % of Net Sales of $ 100.0 million or greater per year, with such amounts subject-to a minimum annual royalty fee. The base minimum annual royalty fee is $ 50 commencing January 1 following the first anniversary of the “First Commercial Sale” of a “Licensed Product” (as such terms are defined in the Amended CWRU License Agreement). The minimum annual royalty fee increases to each of: $ 150 if the annual “Net Sales” (as defined in the Amended CWRU License Agreement) exceed $ 25.0 million up to $ 50.0 million; $ 300 if annual Net Sales exceed $ 50.0 million up to $ 100.0 million; and $ 600 if annual Net Sales exceed $ 100.0 million. The Company recognized a 5.0 % royalty fee payment liability as of December 31, 2021 with respect to the revenue recognized under the EsoGuard Commercialization Agreement, dated August 1, 2021, between Lucid Diagnostics Inc. and Research Dx Inc. Additionally, the Company is required to pay a royalty fee on (sub-license) “Other Proceeds” (as defined in the Amended CWRU License Agreement) of: 30 % of sub-license proceeds to extent the sub-license proceeds are realized prior to the first commercial Sale of a Licensed Product; or 15 % of sub-license proceeds to extent the sub-license proceeds are realized after the first commercial Sale of a Licensed Product. Consulting Agreements with Physician Inventors - Intellectual Property - CWRU License Agreement Lucid Diagnostics Inc. entered into consulting agreements with each of the three physician inventors of the intellectual property licensed under the Amended CWRU License Agreement (“Physician Inventors”), with each such consulting agreement providing for compensation on a contractual rate per hour for consulting services provided, and an expiration date of May 12, 2024, upon each of the respective the agreements’ renewal effective May 12, 2021. Additionally, each of the Physician Inventors have been granted stock options and restricted stock awards under the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan; and stock options under the PAVmed Inc. 2014 Long-Term Incentive Equity Plan. See Note 5, Related Party Transactions , with respect to the consulting fee expense and stock based compensation expense recognized with respect to the Physician Inventors consulting agreements and stock options and restricted awards discussed above; and Note 14, Stock-Based Compensation , for information regarding each of the “Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan” and the separate “PAVmed Inc. 2014 Long-Term Incentive Equity Plan”. F- 19 Note 4 - Revenue from Contracts with Customers Revenue is recognized when the satisfaction of the performance obligation occurs, which is when the delivery of product and /or the provision of service is rendered, and is measured as the amount of estimated consideration expected to be realized. In the year ended December 31, 2021, the Company recognized revenue under the EsoGuard Commercialization Agreement, dated August 1, 2021, as discussed below. EsoGuard Commercialization Agreement The Company, through its majority-owned subsidiary, Lucid Diagnostics Inc., entered into the EsoGuard Commercialization Agreement, dated August 1, 2021, with its Commercial Laboratory Improvements Act (“CLIA”) certified commercial laboratory service provider, ResearchDX Inc. (“RDx”), an unrelated third-party. The EsoGuard Commercialization Agreement is on a month-to-month basis, and may be terminated by either party thereto, with or without cause, upon forty-five (45) days prior written notice. On February 25, 2022, the EsoGuard Commercialization Agreement was terminated in conjunction with the execution of an Asset Purchase Agreement between Lucid Dx Labs Inc., a wholly-owned subsidiary of Lucid Diagnostics Inc. and RDx, as such agreement is further discussed in Note 20, Subsequent Events . Revenue Recognized In the year ended December 31, 2021, the Company recognized total revenue of $ 500 , which represents the minimum fixed monthly fee of $ 100 to be paid by RDx for the delivery of services under the EsoGuard Commercialization Agreement for the period from the agreement inception date of August 1, 2021 to December 31, 2021. The monthly fee was deemed to be collectible for such period as RDx has timely paid the applicable respective monthly fee. Cost of Revenue The cost of revenue recognized with respect to the revenue recognized under the EsoGuard Commercialization Agreement for the year ended December 31, 2021 totaled $ 585 , inclusive of employee related costs of employees engaged in the delivery of the administration to patients of the EsoCheck cell sample collection procedure; EsoCheck devices and EsoGuard mailers (cell sample shipping costs) distributed to medical practitioners’ locations and the Lucid Test Centers; Lucid Test Centers operating expenses, including rent expense and supplies; and royalty fees incurred under the Amended CWRU License Agreement. F- 20 Note 5 — Related Party Transactions Case Western Reserve University and Physician Inventors - CWRU License Agreement Case Western Reserve University (“CWRU”) and each of the three physician inventors of the intellectual property licensed under the CWRU License Agreement (“Physician Inventors”) each hold equity ownership minority interests in Lucid Diagnostics Inc. The expenses incurred with respect to the CWRU License Agreement and the three Physician Inventors, as classified in the accompanying consolidated statement of operations for the periods indicated are summarized as follows: Schedule of Incurred Expenses of Minority Shareholders 2021 2020 For the year ended December 31, 2021 2020 Cost of Revenue CWRU – Royalty Fee $ 25 $ — General and Administrative Expense CWRU – License Agreement - Amendment Fee - Milestone III 10 100 Stock-based compensation expense – Physician Inventors’ restricted stock awards 910 — Research and Development Expense CWRU License Agreement - reimbursement of patent legal fees 195 250 EsoCheck devices provided to CWRU — 15 Fees - Physician Inventors’ consulting agreements 29 83 Stock-based compensation expense – Physician Inventors’ stock options 169 23 Total Related Party Expenses $ 1,338 $ 471 Lucid Diagnostics Inc. entered into consulting agreements with each of the three Physician Inventors, with each such consulting agreement providing for compensation on a contractual rate per hour for consulting services provided, and an expiration date of May 12, 2024, upon the agreements’ renewal effective May 12, 2021. Additionally, as discussed below, each of the Physician Inventors have been granted stock options under the PAVmed Inc. 2014 Long-Term Incentive Equity Plan, and stock options and restricted stock awards under the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan. Under each of their respective (initial) consulting agreements with Lucid Diagnostics Inc., the three Physician Inventors were each granted 25,000 stock options under the PAVmed Inc. 2014 Equity Plan, with a grant date of May 12, 2018, an exercise price of $ 1.59 per share of common stock of PAVmed Inc., vesting ratably on a quarterly basis commencing June 30, 2018 and ending March 31, 2021, and a contractual period of ten years from the date of grant. As of March 31, 2021, such stock options were fully vested and exercisable. Each of the Physician Inventors were granted 50,000 stock options under the PAVmed Inc. 2014 Equity Plan, with a grant date of June 21, 2021, an exercise price of $ 6.41 per share of common stock of PAVmed Inc., vesting ratably on a quarterly basis commencing June 30, 2021 and ending March 31, 2024, and a contractual period of ten years from the date of grant. On March 1, 2021, restricted stock awards were granted under the Lucid Diagnostics Inc. 2018 Equity Plan to each of the three Physician Inventors, with such restricted stock awards having a single vesting date of March 1, 2023, with the fair value of such restricted stock awards recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. See Note 14, 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 17, Noncontrolling Interest , for a discussion of Lucid Diagnostics Inc. and the corresponding noncontrolling interests. F- 21 Note 5 —Related Party Transactions - continued Other Related Party Transactions Lucid Diagnostics Inc. previously entered into a consulting agreement with Stanley N. Lapidus, effective June 2020 with such consulting agreement providing for compensation on a contractual rate per hour for consulting services provided. In July 2021, Mr. Lapidus was appointed as Vice Chairman of the Board of Directors of Lucid Diagnostics Inc. Lucid Diagnostics Inc. recognized as general and administrative expense of $ 21 and $ 7 in the years ended December 31, 2021 and 2020, respectively, in connection with the consulting agreement. Veris Health Inc. entered into a consulting agreement with Andrew Thoreson, M.D. effective June 2021 with such consulting agreement providing for compensation on a contractual rate per hour for consulting services provided. Veris Health Inc. recognized general and administrative expense of $ 54 in the year ended December 31, 2021 in connection with the consulting agreement. F- 22 Note 6 — Acquisitions Oncodisc Inc. On May 28, 2021, Veris Health Inc., a majority-owned subsidiary of PAVmed Inc., acquired all of the outstanding common stock of Oncodisc Inc. (“Oncodisc”) for total purchase consideration of approximately $ 261 , consisting of: the issue of 1,564,514 shares of common stock of Veris Health Inc., with such shares having an estimated fair value of approximately $ 6 ; and cash paid of approximately $ 255 . Additionally, the cash acquired was approximately $ 108 and liabilities assumed were approximately $ 50 . The acquisition of Oncodisc was accounted for by Veris Health Inc as an asset acquisition. Veris Health Inc. has allocated the preliminary purchase price based upon the respective fair values as of the date of acquisition as follows: Schedule of Assets Acquired and Liabilities Assumed Acquisition - Oncodisc Inc. Amount Cash Acquired $ 108 Intangible asset - in process R&D 133 Other current assets Intangible asset - assembled workforce 70 Liabilities assumed ( 50 ) Total net assets acquired $ 261 The intangible asset recognized for the in-process research and development (“IPRD”) of $ 133 was determined to have no alternative future use and was recognized as a current period research and development expense. The intangible asset recognized for the assembled workforce of approximately $ 70 , which is included in “Intangible assets, net” on the accompanying consolidated balance sheet, has an expected useful life of one year, and is being recognized on a ratable basis over such period, which commenced in June 2021. See Note 17, Noncontrolling Interest , for a discussion of Veris Health Inc. and the corresponding noncontrolling interests. CapNostics, LLC. On October 5, 2021, PAVmed Subsidiary Corporation, a majority-owned subsidiary of PAVmed Inc., acquired the membership interest of CapNostics, LLC (“CapNostics”) for total (gross) purchase consideration of approximately $ 2.1 million of cash paid at the closing of the transaction. The acquisition of CapNostics was accounted for as an asset acquisition. The intangible asset recognized for the defensive technology of approximately $ 2.1 million, which is included in “Intangible assets, net” on the accompanying consolidated balance sheet, has an expected useful life of five years , and is being recognized on a ratable basis over such period, which commenced in October 2021. The Company has allocated the preliminary purchase price based upon the respective fair values as of the date of acquisition as follows: Schedule of Assets Acquired and Liabilities Assumed Acquisition - CapNostics, LLC Amount Cash Acquired $ 5 Other current assets 6 Intangible asset - defensive technology 2,104 Liabilities assumed ( 10 ) Total net assets acquired $ 2,105 Amortization - Acquired Intangible Assets Amortization expense of the acquired intangible assets discussed above was $ 146 for the year ended December 31, 2021 (there was no such amortization expense for the prior year ended December 31, 2020), and is included in general and administrative expenses in the accompanying consolidated statements of operations. The scheduled future amortization expense of such acquired intangible assets is as follows: $ 449 for the year 2022; $ 420 for each of the years 2023, 2024, and 2025; and $ 319 for the year 2026. F- 23 Note 7 — Prepaid Expenses, Deposits, and Other Current and Non-Current Assets Current Assets Prepaid expenses and other current assets consisted of the following as of: Schedule of Prepaid Expenses and Other Current Assets December 31, 2021 December 31, 2020 Advanced payments to service providers and suppliers $ 2,084 $ 507 Prepaid insurance 1,856 61 Deposits 713 262 EsoCheck cell collection supplies 434 779 EsoGuard mailer supplies 59 55 CarpX devices 33 21 Total prepaid expenses, deposits and other current assets $ 5,179 $ 1,685 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 (the “EsoGuard CRO Agreement”). 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. The Company incurred an on-account deposit of $ 725 and $ 755 as of December 31, 2021 and 2020, respectively, with the deposit classified as a non-current asset in the line item captioned “Other assets” on the accompanying consolidated balance sheets as of December 31, 2021 and 2020. See Note 11, Commitment and Contingencies , for a discussion of the EsoGuard CRO Agreement. Note 8 — Fixed Assets Fixed assets, less accumulated depreciation, consisted of the following as of: Schedule of Fixed Assets Estimated Useful Life December 31, 2021 December 31, 2020 Computer and office equipment 2 - 5 years $ 426 $ 51 Laboratory equipment 3 - 7 years 1,161 88 Furniture and fixtures 3 - 5 years 96 — Leasehold improvements - (1) 2 — Assets under construction n/a 38 — Total Fixed Assets 1,723 139 Less Accumulated Depreciation ( 138 ) ( 57 ) Total Fixed Assets, net $ 1,585 $ 82 (1) Lesser of remaining lease term or estimated useful life. The assets under construction presented above are with respect to the establishment of a Company-owned CLIA-certified, CAP-accredited commercial clinical laboratory. The total fixed assets is inclusive of $ 99 of accounts payable and $ 16 of accrued expenses and other current liabilities in the accompanying consolidated balance sheet as of December 31, 2021. Depreciation expense of $ 80 and $ 23 for the years ended December 31, 2021 and 2020, respectively, is included in general and administrative expenses in the accompanying consolidated statements of operations. F- 24 Note 9 — Leases As of December 31, 2021, the Company only had short-term leases, inclusive of: an 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, with such rental agreement able to be cancelled with two months written notice; and two other month-to-month office space rental agreements, each of which have an April 30, 2022 termination date. The total rent expense incurred under month-to-month rental agreements was $ 191 and $ 189 , for the years ended December 31, 2021 and 2020, respectively. In addition to the short-term leases as of December 31, 2021 noted above, the Company entered into additional lease agreements, each with commencement dates subsequent to December 31, 2021, classified as operating leases and short-term leases, including for each of: a research and development facility; a commercial clinical laboratory; a light manufacturing facility; additional Lucid Test Centers; and for office space. As of December 31, 2021, with respect to short-term leases: the total future lease payments of both the (existing) short-term leases effective as of December 31, 2021 plus the (new) short-term leases (i.e. the new short-term leases with commencement dates subsequent to December 31, 2021), are $ 178 in 2022 and $ 9 in 2023. As of December 31, 2021, with respect to operating leases: the total future lease payments of the (new) operating leases (i.e. the new operating leases with commencement dates subsequent to December 31, 2021), are as follows: Schedule of future minimum lease payments for capital leases 2022 $ 1,359 2023 1,592 2024 1,560 2025 696 2026 712 Thereafter 277 Total lease payments 6,196 Note 10 — Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following items as of : Schedule of Accrued Expenses and Other Current Liabilities December 31, 2021 December 31, 2020 Compensation and Employee Benefits $ 3,151 $ 1,777 CWRU License Agreement fee — 223 CWRU License Agreement Amendment fee — 100 CWRU Amended License Agreement - Royalty fee 25 — Operating expenses 1,083 171 EsoGuard mailer supplies — 22 CarpX devices — 32 Total accrued expenses and other current liabilities $ 4,259 $ 2,325 The “Compensation and Employee Benefits” includes: discretionary bonus payments to employees; unused employee vacation time; and employee payroll deductions related to the PAVmed Inc. Employee Stock Purchase Plan (“PAVmed Inc. ESPP”). See Note 14, Stock-Based Compensation , for additional information on the PAVmed Inc. ESPP. See Note 3, Patent License Agreement - Case Western Reserve University , for a discussion of the CWRU License Agreement. The amounts for operating expenses and EsoGuard supplies presented above relate to respective amounts incurred by the Company but not yet invoiced by the respective vendors. F- 25 Note 11 — Commitment and Contingencies Clinical Trials - Agreement with Clinical Research Organization 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 On November 2, 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 did not seek any specific monetary damages. The Company did not believe it was clear the prior approval of these matters was invalid or otherwise ineffective. However, to avoid any uncertainty and the expense of further litigation, on January 5, 2021, the Company’s Board of Directors determined it would be advisable and in the best interests of the Company and its stockholders to re-submit these proposals to the Company’s stockholders for ratification and/or approval. In this regard, the Company held a special meeting of stockholders on March 4, 2021, at which such matters were ratified and approved. The parties have reached agreement on a proposed Settlement Term Sheet Agreement, dated January 28, 2021, 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 approval by the Court. 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 Kingswood Capital Markets, a “division” of Benchmark Investments, Inc. On December 16, 2021, the court granted PAVmed’s motion to dismiss the case for lack of subject matter jurisdiction. On February 7, 2022, Benchmark Investments LLC, which claimed to be affiliated with Benchmark Investments, Inc., filed a new complaint in the Supreme Court of the State of New York, New York County, asserting claims similar to those in the federal action, and adding to its allegations that financings conducted by the Company in January 2021 and February 2021 also violated the Company’s engagement letter with Kingswood Capital Markets. 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- 26 Note 12 — Financial Instruments Fair Value Measurements Recurring Fair Value Measurements The fair value hierarchy table for the reporting dates noted is as follows: Schedule of Financial Liabilities Measured at Fair Value on Recurring Basis Fair Value Measurement on a Recurring Basis at Reporting Date Using (1) Level-1 Inputs Level-2 Inputs Level-3 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 (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 year ended December 31, 2020. Convertible notes are accounted for under the fair value option (“FVO”) election, wherein, each of the convertible notes were initially measured at their respective issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date, with the resulting fair value adjustment recognized as other income (expense) in the consolidated statement of operations. There were no fair value measurements as of December 31, 2021 as each of the convertible notes were previously repaid-in-full in the three months ended March 31, 2021, as discussed herein below in Note 13, Debt . The estimated fair value of each of the convertible notes as of December 31, 2020, were computed using a Monte Carlo simulation of the present value of its cash flows using a synthetic credit rating analysis and a required rate-of-return, and were therefore classified within the Level 3 category, as the fair value was determined using both observable inputs and unobservable inputs. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs. The estimated fair value of each of the convertible notes as of December 31, 2020, were computed using a Monte Carlo simulation of the present value of its cash flows using a synthetic credit rating analysis and a required rate-of-return, using the following assumptions: Senior Secured Convertible Notes and Senior Convertible Note - Fair Value and Fair Value Assumptions – December 31, 2020: Schedule of Fair Value Assumption Used 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 % 50.20 % 27.20 % 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 70.00 % 70.00 % 70.00 % Risk free rate 0.09 % 0.11 % 0.12 % Dividend yield — % — % — % The estimated fair values reported utilized the Company’s common stock price along with certain Level 3 inputs, as discussed above, in the development of Monte Carlo simulation models, discounted cash flow analyses, and /or Black-Scholes valuation models. The estimated fair values are subjective and are affected by changes in inputs to the valuation models /analyses, including the Company’s common stock price, the Company’s dividend yield, the risk-free rates based on U.S. Treasury security yields, and certain other Level-3 inputs including, assumptions regarding the estimated volatility in the value of the Company’s common stock price. Changes in these assumptions can materially affect the estimated fair values. F- 27 Note 13 — Debt Convertible Notes All of the convertible notes, as such convertible notes are discussed below, were repaid-in-full during the three months ended March 31, 2021. The fair value and face value principal of outstanding convertible notes at December 31, 2020 were as follows: Summary of Outstanding Debt 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 Senior Secured Convertible Note issued November 4, 2019 - Series A and Series B - (“November 2019 Senior Convertible Notes”) The “November 2019 Senior Convertible Notes” remaining unpaid outstanding face value principal of approximately $ 956 as of December 31, 2020 was repaid-in-full as of January 5, 2021, with the remaining principal balance, along with the payment of interest thereon of approximately $ 7 , 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), resulting in the recognition of a loss from extinguishment of debt of approximately $ 760 . Senior Convertible Note issued April 30, 2020 - (“April 2020 Senior Convertible Note”) The “April 2020 Senior Convertible Note” unpaid outstanding face value principal of approximately $ 4,111 as of December 31, 2020 was repaid-in-full in March 2021, as discussed herein below. In the years ended December 31, 2021 and 2020, approximately $ 52 and $ 215 , respectively, of non-installment payments were paid in cash. Senior Secured Convertible Note issued August 6, 2020 - (“August 2020 Senior Convertible Note”) The “August Senior Convertible Note” unpaid outstanding face value principal of approximately $ 7,750 as of December 31, 2020 was repaid-in-full in March 2021, as discussed herein below. In the years ended December 31, 2021 and 2020, approximately $ 102 and $ 246 , respectively, of non-installment payments were paid in cash. Principal Repayments - April 2020 Senior Convertible Note and August 2020 Senior Convertible Note On January 30, 2021, the Company paid in cash a $ 350 partial principal repayment of the April 2020 Senior Convertible Note; and on March 2, 2021, the Company paid in cash a total of $ 14,466 of principal repayments, resulting in both the April 2020 Senior Convertible Note and the August 2020 Senior Convertible Note being repaid-in-full as of such date. The Company recognized a debt extinguishment loss of approximately $ 2,955 in the year ended December 31, 2021 in connection with the repayments of the April 2020 Senior Convertible Note and the August 2020 Senior Convertible Note. F- 28 Note 13 — Debt - continued Convertible Notes - continued A reconciliation of the fair value of the convertible notes for the year ended December 31, 2021 is as follows: Schedule of Senior Convertible Note Estimated Fair Value November 2019 Senior Secured Convertible Notes April 2020 Senior Convertible Note August 2020 Senior Secured Convertible Note Sum of Balance Sheet Fair Value Components Other Income (Expense) Fair Value - December 31, 2020 $ 1,270 $ 4,600 $ 8,790 $ 14,660 $ — Installment repayments – common stock ( 956 ) — — ( 956 ) — Non-installment payments – common stock ( 7 ) — — ( 7 ) — Non-installment payments – cash — ( 52 ) ( 102 ) ( 154 ) — Change in fair value ( 307 ) ( 437 ) ( 938 ) ( 1,682 ) 1,682 Principal repayments - cash — ( 4,111 ) ( 7,750 ) ( 11,861 ) — Fair Value at December 31, 2021 (1) $ — $ — $ — $ — - Other Income (Expense) - Change in fair value – year ended December 31, 2021 (1) $ 1,682 (1) As discussed above, all remaining convertible notes were previously repaid during the three months ended March 31, 2021. A reconciliation of the fair value of the convertible notes for the year ended December 31, 2020 is as follows: December 2018 Senior Secured Convertible Note November 2019 Senior Secured Convertible Notes April 2020 Senior Convertible Note August 2020 Senior Secured Convertible Note Sum of Balance Sheet Fair Value Components Other Income (Expense) Fair Value - December 31, 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 ) The Senior Convertible Notes presented above were each accounted for under the ASC 825-10-15-4 fair value option (“FVO”) election, wherein, the financial instrument is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date, with the resulting fair value adjustment recognized as other income (expense) in the consolidated statement of operations. In this regard, as provided for by ASC 825-10-50-30(b), the estimated fair value adjustment is presented as a single line item within other income (expense) in the accompanying consolidated statement of operations. See Note 12, Financial Instruments Fair Value Measurements, for a further discussion of fair value assumptions. F- 29 Note 13 — 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”. Through the life of the PPP Loan, the Company made no principal or interest payments. The Company submitted its PPP Loan forgiveness application on April 21, 2021 and the forgiveness application was approved on June 9, 2021. Upon PPP Loan forgiveness, the Company recognized a gain of $ 300 in its consolidated statements of operations in the year ended December 31, 2021. Note 14 — 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”) is designed to enable PAVmed Inc. to offer employees, officers, directors, and consultants, as defined, an opportunity to acquire shares of common stock of PAVmed Inc. 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 PAVmed Inc. board of directors. A total of 11,951,081 shares of common stock of PAVmed Inc. are reserved for issuance under the PAVmed Inc. 2014 Equity Plan, with 1,160,573 shares available for grant as of December 31, 2021. The share reservation is not diminished by a total of 600,854 PAVmed Inc. stock options and restricted stock awards granted outside the PAVmed Inc. 2014 Equity Plan as of December 31, 2021. PAVmed Inc. 2014 Equity Plan - Stock Options Stock options issued and outstanding under the PAVmed Inc. 2014 Equity Plan and including PAVmed stock options granted outside the plan is as follows: Schedule of Summarizes Information About Stock Options Number of Stock Options Weighted Average Exercise Price Remaining Contractual Term (Years) Intrinsic Value (2) Outstanding stock options at December 31, 2019 5,203,529 $ 2.58 8.1 $ 394 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 Outstanding stock options at December 31, 2020 6,798,529 $ 2.55 7.3 $ 2,558 Granted (1) 2,900,000 $ 4.90 Exercised ( 621,164 ) $ 1.58 Forfeited ( 357,167 ) $ 2.82 Outstanding stock options at December 31, 2021 8,720,198 $ 3.39 6.8 $ 3,516 Vested and exercisable stock options at December 31, 2021 6,228,106 $ 2.88 5.7 $ 3,245 (1) Stock options granted under the PAVmed Inc. 2014 Equity Plan generally vest ratably over twelve quarters, with the vesting commencing with the grant date quarter, and have a ten-year contractual term from date-of-grant. (2) The intrinsic value is computed as the difference between the quoted price of the PAVmed Inc. common stock on each of December 31, 2021 and 2020 and the exercise price of the underlying PAVmed Inc. stock options, to the extent such quoted price is greater than the exercise price. F- 30 Note 14 — Stock-Based Compensation - continued PAVmed Inc. 2014 Long-Term Incentive Equity Plan - continued PAVmed Inc. 2014 Equity Plan - Restricted Stock Awards On April 1, 2021, a total of 300,000 restricted stock awards were granted to employees under the PAVmed Inc. 2014 Equity Plan, with such restricted stock awards having a single vesting date of April 1, 2024 . The (April 1, 2021) restricted stock awards fair value of approximately $ 1.5 million, which was measured using the grant date quoted closing price per share of PAVmed Inc. common stock, is recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. On December 15, 2021, a total of 100,000 restricted stock awards were granted to consultants outside of the PAVmed Inc. 2014 Equity Plan, with such restricted stock awards having a single vesting date of December 15, 2023 . The (December 15, 2021) restricted stock awards fair value of approximately $ 0.3 million, which was measured using the grant date quoted closing price per share of PAVmed Inc. common stock, is recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. A total of 1,650,000 restricted stock awards were previously granted under the PAVmed Inc. 2014 Equity Plan, with such restricted stock awards having an aggregate fair value of approximately $ 2.7 million, which was measured using the respective grant date quoted closing price per share of PAVmed Inc. common stock, with the fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The vesting of the previously granted restricted stock awards is as follows: 233,334 vested on March 15, 2020; 466,666 vesting on March 15, 2022; 450,000 vesting ratably on an annual basis over a three year period with the initial annual vesting date on May 1, 2021; and 500,000 restricted stock awards having a single vesting date of May 1, 2023 . The restricted stock awards are subject to forfeiture if the requisite service period is not completed. Subsequent to December 31, 2021, as of March 29, 2022, additional stock-based equity grants of 3.1 million stock options with a weighted average exercise price of $ 1.67 were granted under the PAVmed Inc 2014 Equity Plan. 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 5,644,000 shares of common stock of Lucid Diagnostics Inc. are reserved for issuance under the Lucid Diagnostics Inc. 2018 Equity Plan, with 2,752,615 shares available for grant as of December 31, 2021, with the share reservation not diminished by a total of 473,300 Lucid Diagnostics Inc. stock options and restricted stock awards granted outside the Lucid Diagnostics Inc. 2018 Equity Plan. F- 31 Note 14 — Stock-Based Compensation - continued Lucid Diagnostics Inc. 2018 Equity Plan - Stock Options Stock options issued and outstanding under the Lucid Diagnostics Inc. 2018 Equity Plan and including Lucid Diagnostics options granted outside the plan is as follows: Schedule of Summarizes Information About Stock Options Number of Stock Options Weighted Average Exercise Price Remaining Contractual Term (Years) Outstanding stock options at December 31, 2019 1,403,945 $ 0.61 9.0 Granted (1) — $ — Exercised ( 4,703 ) $ 1.06 Forfeited — $ — Outstanding stock options at December 31, 2020 1,399,242 $ 0.61 8.0 Vested and exercisable stock options at December 31, 2020 1,085,288 $ 0.58 7.9 Outstanding stock options at December 31, 2020 1,399,242 $ 0.61 8.0 Granted (1) 20,000 $ 9.08 Exercised — $ — Forfeited — $ — Outstanding stock options at December 31, 2021 1,419,242 $ 0.60 7.0 Vested and exercisable stock options at December 31, 2021 1,337,417 $ 0.61 7.0 (1) Stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan generally vest ratably over twelve quarters, with the vesting commencing with the grant date quarter, and have a ten-year contractual term from date-of-grant. Lucid Diagnostics Inc. 2018 Equity Plan – Restricted Stock Awards As of December 31, 2021, a total of 1,897,795 restricted stock awards were granted under the Lucid Diagnostics Inc. 2018 Equity Plan, summarized as follows: On March 1, 2021, a total of 1,467,440 restricted stock awards were granted under the Lucid Diagnostics Inc. 2018 Equity Plan to employees of PAVmed Inc., a member of the board of directors of Lucid Diagnostics Inc. (who is also a member of the board of directors of PAVmed Inc.), and to each of the three physician inventors of the intellectual property licensed under the CWRU License Agreement, with such restricted stock awards having a single vesting date of March 1, 2023, and an aggregate grant date fair value of approximately $ 18.9 million, measured as discussed below, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. In April 2021, a total of 91,715 restricted stock awards were granted under the Lucid Diagnostics Inc 2018 Equity Plan, inclusive of such restricted stock awards granted to an employee of PAVmed Inc. and a consultant, with such restricted stock awards having a single vesting date in April 2023, and an aggregate grant date fair value of approximately $ 1.2 million, measured as discussed below, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. As of December 31, 2021, a total of 7,055 restricted stock awards have been forfeited. In July 2021, a total of 84,660 restricted stock awards were granted under the Lucid Diagnostics Inc 2018 Equity Plan, inclusive of such restricted stock awards granted to member of the board of directors of Lucid Diagnostics Inc. with such restricted stock awards having a single vesting date in July 2023, and an aggregate grant date fair value of approximately $ 1.1 million, measured as discussed below, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. F- 32 Note 14 — Stock-Based Compensation - continued Lucid Diagnostics Inc. 2018 Equity Plan – Restricted Stock Awards - continued In September 2021, 169,320 restricted stock awards were granted under the Lucid Diagnostics Inc 2018 Equity Plan to a member of the board of directors of Lucid Diagnostics Inc., with such restricted stock award vesting ratably over a two year period with vesting dates of each of September 15, 2022 and 2023, and an aggregate grant date fair value of approximately $ 2.3 million, measured as discussed below, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. On October 14, 2021, 84,660 restricted stock awards were granted under the Lucid Diagnostics Inc 2018 Equity Plan, to a member of the board of directors of Lucid Diagnostics Inc., with such restricted stock awards having a single vesting date of October 14, 2023 , and an aggregate grant date fair value of approximately $ 1.0 million, measured as the grant date closing price of Lucid Diagnostics Inc common stock, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. On December 15, 2021, 50,000 restricted stock awards were granted outside of the Lucid Diagnostics Inc 2018 Equity Plan, with such restricted stock award having a single vesting date on December 15, 2023 , and an aggregate grant date fair value of approximately $ 0.3 million, measured as the grant date closing price of Lucid Diagnostics Inc common stock, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. Subsequent to December 31, 2021, as of March 29, 2022, additional stock-based equity grants under the Lucid Diagnostics Inc. 2018 Equity Plan included each of: 1.8 million stock options with a weighted average exercise price of approximately $ 4.16 per share and the same vesting and contractual term as discussed above; and a total of 320,000 restricted stock awards with a weighted average grant date fair value of $ 4.52 per share of Lucid Diagnostics Inc. common stock, with single vesting date of three years from date of grant. The price per share of Lucid Diagnostics Inc. common stock used in the computation of estimated fair value of stock options and restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan is as follows: (i) from October 14, 2021 to December 31, 2021 it is its quoted closing price per share on date of grant; and (ii) for the period January 1, 2021 to October 13, 2021, it was estimated using a probability-weighted average expected return methodology (“PWERM”), which involves the determination of equity value under various exit scenarios and an estimation of the return to the common stockholders under each scenario, wherein, the estimated fair value was based upon an analysis of future values, assuming various outcomes, based upon the probability-weighted present value of expected future investment returns, considering each of the possible future outcomes available to Lucid Diagnostics Inc.; and (iii) as of December 31, 2020, it was estimated using a discounted cash flow analysis applied to a multi-year forecast of its future cash flows. The PWERM principally involved (i) the identification of scenarios and related probabilities; (ii) determine the equity value under each scenario; and (iii) determine the common stock shareholders’ return in each scenario. The two scenarios identified were an initial public offering (“IPO”) of Lucid Diagnostics Inc. common stock (“IPO scenario”); and, to continue on as a private company (“stay private scenario”). With respect to the IPO scenario, the valuation of the Lucid Diagnostics Inc. common stock was computed using assumptions, including dates of the IPO, to calculate an estimated pre-money valuation; and, with respect to the stay private scenario, an income approach was used, wherein a risk-adjusted discount rate is applied to projected future cash flows. For the awards during 2021, a relative weighting ranged from 75%-97.5% for to the IPO scenario and the relative weighting ranged from 2.5%-25% for the stay private scenario . F- 33 Note 14 — Stock-Based Compensation - continued Consolidated Stock-Based Compensation Expense The consolidated stock-based compensation expense recognized by each of PAVmed Inc. and Lucid Diagnostics Inc. 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: Schedule of Stock-Based Compensation Awards Granted Year Ended December 31, 2021 2020 Sales and marketing expenses $ 1,177 $ 278 General and administrative expenses 12,799 1,304 Research and development expenses 1,033 462 Total stock-based compensation expense $ 15,009 $ 2,044 Stock-Based Compensation Expense Recognized by Lucid Diagnostics Inc. As noted, the consolidated stock-based compensation expense presented above is inclusive of stock-based compensation expense recognized by Lucid Diagnostics Inc., inclusive of each of: stock options granted under the PAVmed Inc. 2014 Equity Plan to the three physician inventors of the intellectual property underlying the CWRU License Agreement (“Physician Inventors”) (as discussed above in Note 5, Related Party Transactions ); and stock options and restricted stock awards granted to employees of PAVmed Inc. and non-employee consultants under the Lucid Diagnostics Inc. 2018 Equity Plan. The stock-based compensation expense recognized by Lucid Diagnostics Inc. 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: Schedule of Stock-Based Compensation Expense Classified in Research and Development Expenses Year Ended December 31, 2021 2020 Lucid Diagnostics Inc 2018 Equity Plan – sales and marketing expenses $ 8 $ — Lucid Diagnostics Inc 2018 Equity Plan – general and administrative expenses 9,073 — Lucid Diagnostics Inc 2018 Equity Plan – research and development expenses 66 52 PAVmed Inc 2014 Equity Plan - sales and marketing expenses 202 — PAVmed Inc 2014 Equity Plan - general and administrative expenses 38 — PAVmed Inc 2014 Equity Plan - research and development expenses 212 13 Total stock-based compensation expense – recognized by Lucid Diagnostics Inc $ 9,599 $ 65 The consolidated 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: Schedule of Unrecognized Compensation Expense Unrecognized Expense Weighted Average Remaining Service Period (Years) PAVmed Inc. 2014 Equity Plan Stock Options $ 7,559 1.8 Restricted Stock Awards $ 2,021 1.2 Lucid Diagnostics Inc. 2018 Equity Plan Stock Options $ 100 0.6 Restricted Stock Awards $ 16,000 1.3 F- 34 Note 14 — Stock-Based Compensation - continued Stock-based compensation expense recognized with respect to stock options granted under the PAVmed Inc. 2014 Equity Plan was based on a weighted average estimated fair value of such stock options of $ 3.46 per share and $ 1.27 per share during the years ended December 31, 2021 and 2020, respectively, calculated using the following weighted average Black-Scholes valuation model assumptions: Schedule of Fair Values of Stock Options Granted Using Black-scholes Valuation Model Assumptions Year Ended December 31, 2021 2020 Expected term of stock options (in years) 5.6 5.8 Expected stock price volatility 76.0 % 73.0 % Risk free interest rate 1.0 % 0.5 % Expected dividend yield — % — % 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 $ 5.13 per share during the year ended December 31, 2021. There were no stock-based awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan during the year ended December 31, 2020. The stock-based compensation was calculated using the following weighted average Black-Scholes valuation model assumptions: Schedule of Fair Values of Stock Options Granted Using Black-scholes Valuation Model Assumptions Year Ended December 31, 2021 2020 Expected term of stock options (in years) 5.7 0.0 Expected stock price volatility 70.0 % — % Risk free interest rate 1.3 % — % Expected dividend yield — % — % 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. A total of 203,480 shares and 154,266 shares of common stock of the Company were purchased for proceeds of approximately $ 304 and $ 126 , on the ESPP purchase dates of March 31, 2021 and 2020, respectively. A total of 31,112 shares and 152,289 shares of common stock of the Company were purchased for proceeds of approximately $ 131 and $ 231 , on the ESPP purchase dates of September 30, 2021 and 2020, respectively. The PAVmed Inc. ESPP has a total reservation of 1,250,000 shares of common stock of PAVmed Inc. of which 626,081 shares are available-for-issue remaining as of December 31, 2021. Lucid Diagnostics, Inc Employee Stock Purchase Plan (“ESPP”) The Lucid Diagnostics Inc. Employee Stock Purchase Plan (“Lucid Diagnostics Inc. ESPP”), adopted by the Company’s board of directors effective November 9. 2021, provides eligible employees the opportunity to purchase shares of Lucid Diagnostics 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 Lucid Diagnostics Inc. common stock at the beginning or end of each six month share purchase period. The Lucid Diagnostics Inc. ESPP share purchase dates are March 31 and September 30. The initial ESPP purchase date will be September 30, 2022. The Lucid Diagnostics Inc. ESPP has a total reservation of 500,000 shares of common stock of PAVmed Inc. of which 500,000 shares are available-for-issue remaining as of December 31, 2021. F- 35 Note 15 — Preferred Stock The Company is authorized to issue 20 million shares of its Series B Convertible 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, 2021 and 2020, there were 1,113,919 and 1,228,075 shares of Series B Convertible Preferred Stock (classified in permanent equity) issued and outstanding, respectively. 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, 2021, the Company’s board-of-directors declared an aggregate of approximately $ 288 of Series B Convertible Preferred Stock dividends, earned as of December 31, 2020, March 31, 2021, June 30, 2021, and September 30, 2021, which have been settled by the issue of an additional aggregate 96,292 shares of Series B Convertible Preferred Stock. 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 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. Subsequent to December 31, 2021, in January 2022, the Company’s board-of-directors declared a Series B Convertible Preferred Stock dividend earned as of December 31, 2021 and payable as of January 1, 2022, of approximately $ 67 , which will be settled by the issue of an additional 22,291 shares of Series B Convertible Preferred Stock (with such dividend not recognized as a dividend payable as of December 31, 2021, as the Company’s board of directors had not declared such dividends payable as of such date). In the year ended December 31, 2021 and 2020, at the election of the holders, a total of 210,448 and 25,000 shares of Series B Convertible Preferred Stock, respectively, were converted into the same number of shares of common stock of the Company. F- 36 Note 16 — Common Stock and Common Stock Purchase Warrants Common Stock The Company is authorized to issue up to 150 million shares of its common stock, par value of $ 0.001 per share. There were 86,367,845 and 63,819,935 shares of common stock issued and outstanding as of December 31, 2021 and December 31, 2020, respectively. Year Ended December 31, 2021 ● On January 5, 2021, a total of 6,000,000 shares of common stock of the Company were issued for gross proceeds of approximately $ 13,434 , before a placement agent fee and expenses of approximately $ 951 , and offering costs incurred by the Company of approximately $ 71 . The shares of common stock were issued in a registered direct offering pursuant to a Prospectus Supplement dated January 5, 2021 with respect to the Company’s effective shelf registration statement on Form S-3 (File No. 333-248709). ● On February 23, 2021, a total of 9,782,609 shares of common stock of the Company were issued for proceeds of approximately $ 41,566 , before offering costs incurred by the Company of approximately $ 290 . The shares of common stock were issued in an underwritten registered offering pursuant to a final Prospectus Supplement dated February 23, 2021, with respect to the Company’s effective shelf registration statement on Form S-3 (File No. 333-248709 and File No. 333-253384). ● 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 13, Debt . ● During the year ended December 31, 2021, 210,448 shares of common stock of the Company were issued upon conversion of the same number of shares of Series B Convertible Preferred Stock. See Note 15, Preferred Stock , for a discussion of the Series B Convertible Preferred Stock. ● During the year ended December 31, 2021, an aggregate of 4,881,429 shares of common stock of the Company were issued upon exercise of common stock purchase warrants, including 4,877,484 with respect to Series Z Warrants; and 3,945 with respect to Series W Warrants. ● During the year ended December 31, 2021, 621,164 shares of common stock of the Company were issued upon exercise of stock options for cash of approximately $ 980 . See Note 14, Stock-Based Compensation , for a discussion of the PAVmed Inc. 2014 Equity Plan. ● During the year ended, the PAVmed Inc. Employee Stock Purchase Plan purchased 234,592 shares of common stock of the Company. See Note 14, Stock-Based Compensation , for a discussion of the PAVmed Inc. Employee Stock Purchase Plan. 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 12, 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 14, Stock-Based Compensation . F- 37 Note 16 — Common Stock and Common Stock Purchase Warrants - continued Common Stock Purchase Warrants The common stock purchase warrants (classified in permanent equity) outstanding as of the dates indicated are as follows: Schedule of Outstanding Warrants to Purchase Common Stock Common Stock Purchase Warrants Issued and Outstanding December 31, 2021 Weighted Average Exercise Price / Share December 31, 2020 Weighted Average Exercise Price / Share Expiration Date Series Z Warrants 11,937,455 $ 1.60 16,814,939 $ 1.60 April 2024 UPO - Series Z Warrants — $ — 53,000 $ 1.60 January 2021 Series W Warrants 377,873 $ 5.00 381,818 $ 5.00 January 2022 Total 12,315,328 $ 1.70 17,249,757 $ 1.68 During the year ended December 31, 2021, a total of 4,877,484 Series Z Warrants were exercised for cash at $ 1.60 per share, resulting in the issue of the same number of shares of common stock of the Company. During the year ended December 31, 2021, a total of 3,945 Series W Warrants were exercised for cash at $ 5.00 per share, resulting in the issue of the same number of shares of common stock of the Company. Subsequent to December 31, 2021, the 377,873 Series W Warrants issued and outstanding as of December 31, 2021, expired unexercised as of January 29, 2022. The Unit Purchase Options (UPO) expired unexercised as of January 29, 2021. 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. F- 38 Note 17 — Noncontrolling Interest The noncontrolling interest (“NCI”) included as a component of consolidated total stockholders’ equity is summarized for the periods indicated as follows: Schedule of Noncontrolling Interest of Stockholders' Equity 2021 2020 Year Ended December 31, 2021 2020 NCI – equity (deficit) – beginning of period $ ( 2,369 ) $ ( 814 ) Investment in Veris Health Inc. 6 — Net loss attributable to NCI – Lucid Diagnostics Inc. ( 5,280 ) ( 1,503 ) Net loss attributable to NCI – Solys Diagnostics Inc. ( 34 ) ( 109 ) Net loss attributable to NCI – Veris Health Inc. ( 465 ) — Impact of subsidiary equity transactions 16,760 — Lucid Diagnostics Inc. 2018 Equity Plan stock option exercise — 5 Stock-based compensation expense - Lucid Diagnostics Inc. 2018 Equity Plan 9,134 52 NCI – equity (deficit) – end of period $ 17,752 $ ( 2,369 ) The consolidated NCI presented above is with respect to the Company’s consolidated majority-owned subsidiaries, inclusive of: Lucid Diagnostics Inc. and Solys Diagnostics Inc., as a component of consolidated total stockholders’ equity as of December 31, 2021 and December 31, 2020, and the recognition of a net loss attributable to the NCI in the consolidated statement of operations for the years ended December 31, 2021 and 2020; and Veris Health Inc. as a component of consolidated total stockholders’ equity as of December 31, 2021, and the recognition of a net loss attributable to the NCI in the consolidated statement of operations for the period May 28, 2021 (inception date) to December 31, 2021. Lucid Diagnostics Inc. As of December 31, 2021 there were 34,917,907 shares of common stock of Lucid Diagnostics Inc. issued and outstanding, of which, PAVmed Inc. holds 27,927,190 shares, representing a majority ownership equity interest and a controlling financial interest in Lucid Diagnostics Inc., and accordingly, Lucid Diagnostics Inc. is a consolidated majority-owned subsidiary of PAVmed Inc. Effective October 6, 2021, the Lucid Diagnostics Inc. board of directors declared a 1.411-to-1.0 common stock-split. The number of shares of common stock of Lucid Diagnostics Inc. and the stock options and restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan, and the respective exercise and /or conversion price per share, for all periods presented, as applicable, have been adjusted for such common stock-split. On October 13, 2021, Lucid Diagnostics Inc. issued 15,803,200 shares of its common stock to PAVmed Inc. upon the election by PAVmed Inc. to convert the $ 22.4 million face value principal under the terms of a Senior Unsecured Promissory Note, dated June 1, 2021. The Senior Unsecured Promissory Note was issued by Lucid Diagnostics Inc. to PAVmed Inc. with a face value principal of $ 22,400,000 , an annual interest rate of 7.875 %, and a maturity date of May 18, 2028 . The Senior Unsecured Promissory Note replaced the $ 22.4 million aggregate outstanding and payable balance of the intercompany Due To: PAVmed Inc. as of June 1, 2021. The Senior Unsecured Promissory Note provided for the partial or full repayment of the face value principal and accrued but unpaid interest thereon by the issue of shares of Lucid Diagnostics Inc. common stock, at the election of PAVmed Inc., at a conversion price of $ 1.42 per share of Lucid Diagnostics Inc. common stock (with such number of such shares and the conversion price adjusted for the Lucid Diagnostics Inc. 1.411-to-1.0 common stock split effective October 6, 2021 as discussed above). On October 14, 2021, Lucid Diagnostics Inc. completed an initial public offering (“IPO”) of its common stock under an effective registration statement on Form S-1 (SEC File No. 333-259721), wherein a total of 5.0 million shares of common stock were issued, inclusive of 571,428 issued to PAVmed Inc., at an IPO offering price of $ 14.00 per share, resulting gross proceeds to Lucid Diagnostics Inc. of $ 70.0 million, before underwriting fees of $ 4.9 million, and approximately $ 0.7 million of offering costs incurred by Lucid Diagnostics Inc. F- 39 Note 17 — Noncontrolling Interest - continued Veris Health Inc. As of December 31, 2021, there were 8,000,000 shares of common stock of Veris Health Inc. issued and outstanding, of which PAVmed Inc. holds an 80.44 % majority-interest ownership and has a controlling financial interest, with the remaining 19.56 % minority-interest ownership held by an unrelated third-party. Accordingly, Veris Health 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, 2021 along with the recognition of a net loss attributable to the NCI in the consolidated statement of operations for the period of May 28, 2021 to December 31, 2021, upon its formation and contemporaneous acquisition of Oncodisc Inc., as such the acquisition is discussed in Note 6, Acquisitions, subsection: Oncodisc Inc. Solys Diagnostics Inc. As of each of December 31, 2021 and December 31, 2020, there were 9,189,190 shares of common stock of Solys Diagnostics Inc. issued and outstanding, of which PAVmed Inc. holds a 90.3235 % majority-interest ownership and has a controlling financial interest, with the remaining 9.6765 % minority-interest ownership held by unrelated third parties. Accordingly, Solys Diagnostics Inc. is a consolidated majority-owned subsidiary of the Company, for which a provision of a noncontrolling interest (NCI) is included as a separate component of consolidated stockholders’ equity in the consolidated balance sheet as of December 31, 2021 and December 31, 2020, along with the recognition of a net loss attributable to the NCI in the consolidated statement of operations for the years ended December 31, 2021 and 2020. F- 40 Note 18 — Income Taxes Income tax (benefit) expense for respective periods noted is as follows: Schedule of Income Tax (Benefit) Expense 2021 2020 Year Ended December 31, 2021 2020 Current Federal, State and Local $ — $ — Deferred Federal ( 9,528 ) ( 4,571 ) State and Local ( 9,409 ) ( 4,147 ) Deferred Federal, State and Local ( 18,937 ) ( 8,718 ) Less: Valuation allowance reserve 18,937 8,718 Income tax expense (Benefit) $ — $ — The reconciliation of the federal statutory income tax rate to the effective income tax rate for the respective period noted is as follows: Schedule of Effective Income Tax Rate Reconciliation 2021 2020 Year Ended December 31, 2021 2020 U.S. federal statutory rate 21.0 % 21.0 % U.S. state and local income taxes, net of federal benefit 13.2 % 9.9 % Permanent differences ( 0.6 ) % ( 5.8 )% Other 0.1 % ( 0.8 )% Valuation allowance ( 33.7 ) % ( 24.3 )% 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: Schedule of Deferred Tax Assets and Liabilities 2021 2020 Year Ended December 31, 2021 2020 Deferred Tax Assets Net operating loss $ 35,989 $ 21,836 Non-deductible interest expense — 517 Debt issue costs — 205 Stock-based compensation expense 7,091 1,901 Patent licenses — 14 Research and development tax credit carryforwards 428 396 Accrued expenses 897 552 Section 195 deferred start-up costs 16 24 Deferred tax assets $ 44,421 $ 25,445 Deferred Tax Liabilities Depreciation ( 22 ) ( 19 ) Patent licenses ( 36 ) — Deferred Tax Liabilities $ ( 58 ) $ ( 19 ) Deferred tax assets, net of deferred tax liabilities 44,363 25,426 Less: valuation allowance ( 44,363 ) ( 25,426 ) Deferred tax assets, net after valuation allowance $ — $ — F- 41 Note 18 — Income Taxes - continued 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. 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, 2021 and 2020. As of December 31, 2021 and 2020, the deferred tax asset valuation allowance increased by $ 18,937 and $ 8,718 , respectively. The Company has total estimated federal net operating loss (“NOL”) carryforward of approximately $ 104.1 million and $ 63.0 million as of December 31, 2021 and 2020, respectively, which is available to reduce future taxable income, of which approximately $ 13.8 million have statutory expiration dates commencing in 2036 , and approximately $ 90.3 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 $ 103.9 million have statutory expiration dates commencing in 2036. The Company has total estimated research and development (“R&D”) tax credit carryforward of approximately $ 0.4 million as of December 31, 2021 which are available to reduce future tax expense and have statutory expiration dates commencing in 2036. 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. The Company evaluated the impact of these CARES Act provisions and determined they did not 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- 42 Note 19 — Net Loss Per Share The respective “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 periods indicated - is as follows: Schedule of Comparison of Basic and Fully Diluted Net Loss Per Share 2021 2020 Year Ended December 31, 2021 2020 Numerator Net loss - before noncontrolling interest $ ( 56,126 ) $ ( 35,888 ) Net loss attributable to noncontrolling interest 5,779 1,612 Net loss - as reported, attributable to PAVmed Inc. $ ( 50,347 ) $ ( 34,276 ) Series B Convertible Preferred Stock dividends – earned (1) $ ( 283 ) $ ( 287 ) Net loss attributable to PAVmed Inc. common stockholders $ ( 50,630 ) $ ( 34,563 ) Denominator Weighted average common shares outstanding, basic and diluted (2) 77,515,767 47,432,115 Loss per share Basic and diluted Net loss - as reported, attributable to PAVmed Inc. $ ( 0.65 ) $ ( 0.72 ) Net loss attributable to PAVmed Inc. common stockholders $ ( 0.65 ) $ ( 0.73 ) 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: The Series B Convertible Preferred Stock dividends earned as of the each of the respective periods noted, are included in the calculation of basic and diluted net loss attributable to PAVmed Inc. common stockholders for each respective period presented. Notwithstanding, the Series B Convertible Preferred Stock dividends are recognized as a dividend payable only upon the dividend being declared payable by the Company’s board of directors. Basic weighted-average number of shares of common stock outstanding for the years ended December 31, 2021 and 2020 include the shares of the Company issued and outstanding during such periods, each on a weighted average basis. The basic weighted average number of shares common stock 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. The common stock equivalents excluded from the computation of diluted weighted average shares outstanding are as follows: Schedule of Antidilutive Securities Excluded from Computation of Diluted Earnings Per Share 2021 2020 Year Ended December 31, 2021 2020 PAVmed Inc. 2014 Equity Plan stock options and restricted stock awards 10,386,864 8,215,195 Unit purchase options - as to shares of common stock — 53,000 Unit purchase options - as to shares underlying Series Z Warrants — 53,000 Series Z Warrants 11,937,455 16,814,939 Series W Warrants 377,873 381,818 Series B Convertible Preferred Stock 1,113,919 1,228,075 Total 23,816,111 26,746,027 Antidilutive securities excluded from computation of diluted weighted shares outstanding 23,816,111 26,746,027 F- 43 Note 20 - Subsequent Events PAVmed Inc - Private Placement - Securities Purchase Agreement Subsequent to December 31, 2021, on March 31, 2022, we entered into the March 2022 SPA with an accredited institutional investor , for the sale of up to $ 50,000,000 in initial principal amount of March 2022 Notes, in a registered direct offering (which we refer to as the Offering), for a purchase price equal to $1,000 for each $1,100 in principal amount of March 2022 Notes Pursuant to the SPA we executed the agreements for an initial closing for the sale of $ 27.5 million in principal amount of March 2022 Notes, of which the Investor funded and the Company received cash proceeds of $ 24.9 million on April 5, 2022, after deduction of lender fees. Subject to certain conditions being met or waived, from time to time after such time that stockholder approval for an increase in our authorized shares from 150 million to 250 million is obtained, but before March 31, 2024, one or more additional closings for up to the remaining principal amount of March 2022 Notes may occur, upon five trading days’ notice by us to the investor. The aggregate principal amount of March 2022 Notes that may be offered in the additional closings may not be more than $22.5 million. The investor’s obligation to purchase the notes at each additional closing is subject to certain conditions set forth in the March 2022 SPA (including minimum price and volume thresholds, maximum ratio of debt to market capitalization, and minimum market capitalization), which may be waived by the Required Holders (as defined in the March 2022 SPA). Under the March 2022 SPA, the investor will be required to purchase March 2022 Notes in the additional closings if such conditions are met or waived. In addition, from and after March 31, 2023, the investor may by written notice to us elect to require us to issue up to $ 22.5 million in initial principal amount of March 2022 Notes, so long as in doing so it would not cause the ratio of (a) the outstanding principal amount of the March 2022 Notes (including the additional March 2022 Notes), accrued and unpaid interest thereon and accrued and unpaid late charges to (b) our average market capitalization over the prior ten trading days, to exceed 25%. If we fail to complete the sale of the additional Notes contemplated by any such written notice, or if the investor is unable to deliver any such notice prior to March 31, 2024 as a result of the limitation described in the preceding sentence, then we will be obligated to pay a break-up fee to the investor at such time in an aggregate amount equal to $ 1.35 million. The March 2022 Notes have a voluntary fixed conversion price of $ 5.00 per share, a stated interest rate of 7.875 % per annum, and a maturity of 24 months (subject to extension in certain circumstances). The March 2022 Notes will be secured by all our existing and future assets (including those of our significant subsidiaries, other than Lucid and its subsidiaries), but including only 9.99 % of Lucid’s outstanding common stock held by us, pursuant to a security agreement by and between the Company and the Investor. We will be subject to certain customary affirmative and negative covenants regarding the rank of the March 2022 Notes, the incurrence of indebtedness, the existence of liens, the repayment of indebtedness and the making of investments, the payment of cash in respect of dividends, distributions or redemptions, the transfer of assets, the maturity of other indebtedness, and transactions with affiliates, among other customary matters. We also will be subject to financial covenants requiring that (i) the amount of our available cash equal or exceed $ 8.0 million at all times, (ii) the ratio of (a) the outstanding principal amount of the March 2022 Notes, accrued and unpaid interest thereon and accrued and unpaid late charges to (b) our average market capitalization over the prior ten trading days, not exceed 30 % , and (iii) that our market capitalization shall at no time be less than $ 75 million. The March 2022 Notes include certain customary events of default. F- 44 Note 20 - Subsequent Events - continued Lucid Diagnostics Inc - Committed Equity Facility Subsequent to December 31, 2021, on March 28, 2022, Lucid Diagnostics, Inc. entered into a committed equity facility with an affiliate of Cantor Fitzgerald (“Cantor”). Under the terms of the committed equity facility, Cantor has committed to purchase up to $ 50 million of Lucid Diagnostics Inc. common stock from time to time at the request of Lucid Diagnostics Inc. While there are distinct differences, the facility is structured similarly to a traditional at-the-market equity facility, insofar as it allows Lucid Diagnostics Inc. to raise primary equity capital on a periodic basis at prices based on the existing market price. In connection with the execution of the agreement for the committed equity facility, Lucid Diagnostics Inc. agreed to pay Cantor $ 1.0 million as consideration for its irrevocable commitment to purchase the shares upon the terms and subject to the satisfaction of the conditions set forth in such agreement. In addition, pursuant to the agreement, e agreed to reimburse Cantor for certain of its expenses. Lucid Diagnostics Inc. also entered into a registration rights agreement with Cantor. Lucid Diagnostics Inc. has the right to terminate the agreement at any time after initial satisfaction of the conditions to Cantor’s obligation to purchase shares under the facility, at no cost or penalty, upon three trading days’ prior written notice. Asset Purchase Agreement - ResearchDx Inc. Subsequent to December 31, 2021, on February 25, 2022, Lucid Diagnostics, Inc., through its wholly-owned subsidiary LucidDx Labs, Inc., entered into an asset purchase agreement (“RDx APA”) with ResearchDx, Inc. (“RDx”), an unrelated third-party. Under the RDx APA, LucidDx Labs Inc. acquired certain licenses and other related assets necessary to operate a CLIA-certified, CAP-accredited commercial clinical laboratory. The RDx APA acquired assets, along with other LucidDx Labs Inc. purchased and leased property and equipment, are being used to commence laboratory operations to perform the EsoGuard® Esophageal DNA assay, inclusive of DNA extraction, next generation sequencing (“NGS”) and specimen storage. Prior to consummation of the RDx APA, RDx provided such laboratory services at its owned CLIA-certified, CAP-accredited laboratory. Under the RDx APA, LucidDx Labs Inc. will pay RDx an aggregate purchase price of up to $ 6.2 million for the acquired assets. Concurrent with the RDx APA, LucidDx Labs Inc. and RDx also entered into a management services agreement (“RDx MSA”), with a term of three years , and a total of approximately $ 1.8 million of quarterly payments. F- 45