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, 2022. 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, 2022. 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 has been no change in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 47 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 our 2023 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2022. Item 11. Executive Compensation The information required by this Item 11 is incorporated by reference to our Proxy Statement for the 2023 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2022. 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 2023 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2022. 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 2023 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2022. Item 14. Principal Accounting Fees and Services The information required by this Item 14 is incorporated by reference to our Proxy Statement for the 2023 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2022. 48 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 Stockholders’ 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: Incorporation by Reference Exhibit No. Description Form Exhibit No. Date 2.1 Asset Purchase Agreement, dated as of February 25, 2022, by and among LucidDx Labs Inc., Lucid Diagnostics Inc. and ResearchDx, Inc. 8-K (LUCD) 2.1 3/3/22 3.1.1 Certificate of Incorporation S-1 3.1 4/22/15 3.1.2 Certificate of Amendment to Certificate of Incorporation S-1 3.2 4/22/15 3.1.3 Certificate of Amendment to Certificate of Incorporation, dated October 1, 2018 8-K 3.1 10/2/18 3.1.4 Certificate of Amendment to Certificate of Incorporation, dated June 26, 2019 8-K 3.1 6/27/19 3.1.5 Certificate of Amendment to Certificate of Incorporation, dated July 24, 2020 8-K 3.1 7/27/20 3.1.6 Certificate of Amendment to Certificate of Incorporation, dated June 21, 2022 8-K 3.1 6/22/22 3.1.7 Form of Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock 8-K/A 3.1 4/20/18 3.2 Amended and Restated Bylaws 8-K 3.1 1/15/21 4.1 Description of Registrant’s Securities † 4.2 Specimen Common Stock Certificate S-1/A 4.2 9/29/15 4.6 Specimen Series Z Warrant Certificate 8-K 4.1 4/5/18 4.7 Amended and Restated Series Z Warrant Agreement, dated as of June 8, 2018, by and between PAVmed Inc. and Continental Stock Transfer & Trust Company, as Warrant Agent 8-K 10.1 6/8/18 4.8 Form of PAVmed Inc. Senior Secured Convertible Note 8-K 4.1 4/4/22 10.1 Patent Option Agreement S-1 10.1 4/22/15 10.2.1 Form of Letter Agreement with HCFP Capital Partners III LLC S-1 10.4.1 4/22/15 10.2.2 Form of Letter Agreement with Pavilion Venture Partners LLC S-1 10.4.2 4/22/15 10.3.1 Letter agreement regarding corporate opportunities executed by Lishan Aklog, M.D. S-1 10.5.1 4/22/15 10.3.2 Letter agreement regarding corporate opportunities executed by Michael Glennon S-1 10.5.2 4/22/15 10.3.3 Letter agreement regarding corporate opportunities executed by Brian deGuzman, M.D. S-1 10.5.3 4/22/15 49 10.4* Amended and Restated Employment Agreement between PAVmed Inc. and Lishan Aklog, M.D. 8-K 10.1 3/20/19 10.5* Amended and Restated Employment Agreement between PAVmed Inc. and Dennis M. McGrath 8-K 10.2 3/20/19 10.6* Employment Agreement between PAVmed Inc. and Brian J. deGuzman, M.D. 8-K 10.1 7/19/16 10.7 PAVmed Inc. Fifth Amended and Restated 2014 Long-Term Incentive Equity Plan DEF 14A Annex A 4/30/21 10.8 PAVmed Inc. Employee Stock Purchase Plan DEF 14A Annex B 4/30/21 10.9* Employment Agreement between PAVmed Inc. and Michael A. Gordon † 10.10* Employment Agreement between PAVmed Inc. and Shaun M. O’Neil 8-K 10.1 2/24/22 10.11 Amended and Restated License Agreement, dated as of August 23, 2021, by and between Case Western Reserve University and Lucid Diagnostics Inc. S-1/A (LUCD) 10.2 10/1/21 10.12 Form of Stock Option Agreement † 10.13 Form of Indemnification Agreement † 10.14.1 Management Services Agreement, dated as of February 25, 2022, by and between LucidDx Labs Inc. and ResearchDx, Inc. 8-K (LUCD) 10.1 3/3/22 10.14.2 Termination Agreement, dated as of February 10, 2023, by and among Lucid Diagnostics Inc., LucidDx Labs Inc. and ResearchDx, Inc. † 10.15 Controlled Equity Offering SM , dated as of December 21, 2021, by and between Cantor Fitzgerald & Co. and PAVmed Inc. S-3 1.2 12/21/21 10.16.1 Form of Securities Purchase Agreement 8-K 10.1 4/4/22 10.16.2 Form of Security Agreement 8-K 10.2 4/4/22 10.16.3 Form of Voting Agreement 8-K 10.3 4/4/22 10.17.1 Common Stock Purchase Agreement, dated as of March 28, 2022, by and between CF Principal Investments LLC and Lucid Diagnostics Inc. 8-K (LUCD) 10.1 4/1/22 10.17.2 Registration Rights Agreement, dated as of March 28, 2022, by and between CF Principal Investments LLC and Lucid Diagnostics Inc. 8-K (LUCD) 10.2 4/1/22 10.18 Controlled Equity Offering SM , dated as of November 23, 2022, by and between Cantor Fitzgerald & Co. and Lucid Diagnostics Inc. 8-K (LUCD) 1.2 11/25/22 14.1 Form of Code of Ethics † 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) * Management contract or compensatory plan or arrangement. † Filed herewith LUCD Lucid Diagnostics Inc. Item 16. Form 10-K Summary None 50 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PAVmed Inc. March 13, 2023 By: /s/ Dennis M McGrath Dennis M McGrath President Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Each person whose signature appears below hereby authorizes both Lishan Aklog, M.D. and Dennis M. McGrath or either of them acting in the absence of the others, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the United States Securities and Exchange Commission. Signature Title Date /s/ Lishan Aklog, M.D. Chairman of the Board of Directors March 13, 2023 Lishan Aklog, M.D. Chief Executive Officer (Principal Executive Officer) /s/ Dennis M. McGrath President March 13, 2023 Dennis M. McGrath Chief Financial Officer (Principal Financial and Accounting Officer) /s/ Michael J. Glennon Vice Chairman March 13, 2023 Michael J. Glennon Director /s/ Debra J. White Director March 13, 2023 Debra J. White /s/ James L. Cox, M.D. Director March 13, 2023 James L. Cox, M.D. /s/ Ronald M. Sparks Director March 13, 2023 Ronald M. Sparks /s/ Timothy Baxter Director March 13, 2023 Timothy Baxter /s/ Joan Harvey Director March 13, 2023 Joan Harvey 51 PAVMED INC. and SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID 688 ) F-2 Consolidated Balance Sheets as of December 31, 2022 and 2021 F-4 Consolidated Statements of Operations for the years ended December 31, 2022 and 2021 F-5 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the year ended December 31, 2022 F-6 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the year ended December 31, 2021 F-7 Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021 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, 2022 and 2021, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, 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) relate 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 separate opinions 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 Convertible Notes Critical Audit Matter Description As described in Note 14 to the consolidated financial statements, the Company issued $38.75 million in aggregate principal of Senior Secured Convertible Notes pursuant to a Securities Purchase Agreement dated March 31, 2022. The Senior Secured Convertible Notes contain conversion and redemption features. The Company elected to account for the Senior Secured Convertible Notes under the fair value option in accordance with ASC 825. The fair value of the Senior Secured Convertible Notes was $33.65 million as of December 31, 2022. We identified the valuation of convertible notes as a critical audit matter as auditing the Company’s fair value of the Senior Secured Convertible Notes was complex and involved a high degree of subjectivity because the Company used a complex valuation methodology that incorporated significant management assumptions including debt yield and implied volatility. Also, this matter caused us to use increased effort including involvement of professionals with specialized skill and knowledge. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the valuation of convertible notes included the following, among others: ● We obtained an understanding of the design of the Company’s controls over the valuation of the convertible notes, including controls over management’s review of the valuation model and the significant assumptions used in determining the fair value of the convertible notes. ● With assistance of our valuation specialists, we audited the fair value of the Senior Secured Convertible Notes, valuation methodology and key assumptions used in determining the fair value of the Senior Secured Convertible Notes by: a . Evaluating the appropriateness of the valuation model and techniques used in determining the fair value; b. Assessing whether significant valuation assumption inputs, including debt yield and implied volatility are consistent with those that would be used by market participants through the testing of source information, checking the mathematical accuracy of the calculation, and developing independent estimates and comparing to those selected by management, where applicable; and c. Recalculating the fair value that management arrived to verify it was reasonable. ● We tested the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. /s/ Marcum LLP Marcum LLP We have served as the Company’s auditor since 2019. New York, NY March 13, 2023 F- 3 PAVMED INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands except number of shares and per share data) December 31, 2022 December 31, 2021 Assets: Current assets: Cash $ 39,744 $ 77,258 Accounts receivable 17 200 Prepaid expenses, deposits, and other current assets 4,165 5,179 Total current assets 43,926 82,637 Fixed assets, net 2,451 1,585 Operating lease right-of-use assets 3,037 — Intangible assets, net 3,445 2,029 Other assets 1,121 725 Total assets $ 53,980 $ 86,976 Liabilities, Preferred Stock and Stockholders’ Equity Current liabilities: Accounts payable $ 2,704 $ 3,299 Accrued expenses and other current liabilities 3,705 4,259 Operating lease liabilities, current portion 1,141 — Senior Secured Convertible Notes - at fair value 33,650 — Total current liabilities 41,200 7,558 Operating lease liabilities, less current portion 1,846 — Total liabilities 43,046 7,558 Commitments and contingencies (Note 12) - - Stockholders’ Equity: Preferred stock, $ 0.001 par value. Authorized, 20,000,000 shares; Series B Convertible Preferred Stock, par value $ 0.001 , issued and outstanding 1,205,759 at December 31, 2022 and 1,113,919 shares at December 31, 2021 2,695 2,419 Common stock, $ 0.001 par value. Authorized, 250,000,000 shares; 94,510,537 and 86,367,845 shares outstanding as of December 31, 2022 and December 31, 2021, respectively 95 86 Additional paid-in capital 216,106 198,071 Accumulated deficit ( 228,169 ) ( 138,910 ) Treasury stock ( 408 ) — Total PAVmed Inc. Stockholders’ Equity ( 9,681 ) 61,666 Noncontrolling interests 20,615 17,752 Total Stockholders’ Equity 10,934 79,418 Total Liabilities and Stockholders’ Equity $ 53,980 $ 86,976 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 data) 2022 2021 Years Ended December 31, 2022 2021 Revenue $ 377 $ 500 Operating expenses: Cost of revenue 3,614 585 Sales and marketing 19,318 8,895 General and administrative 41,041 25,420 Amortization of acquired intangible assets 1,784 146 Research and development 25,547 19,847 Total operating expenses 91,304 54,893 Net loss from operations ( 90,927 ) ( 54,393 ) Other income (expense): Interest expense ( 1,272 ) — Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note ( 1,273 ) 1,682 Loss on issue and offering costs - Senior Secured Convertible Note ( 4,332 ) — Debt extinguishments loss - Senior Secured Convertible Notes ( 5,434 ) ( 3,715 ) Debt forgiveness — 300 Other income (expense), net ( 12,311 ) ( 1,733 ) Loss before provision for income tax ( 103,238 ) ( 56,126 ) Provision for income taxes — — Net loss before noncontrolling interests ( 103,238 ) ( 56,126 ) Net loss attributable to the noncontrolling interests 14,255 5,779 Net loss attributable to PAVmed Inc. ( 88,983 ) ( 50,347 ) Less: Series B Convertible Preferred Stock dividends earned ( 281 ) ( 283 ) Net loss attributable to PAVmed Inc. common stockholders $ ( 89,264 ) $ ( 50,630 ) Per share information: Net loss per share attributable to PAVmed Inc. - basic and diluted $ ( 1.00 ) $ ( 0.65 ) Net loss per share attributable to PAVmed Inc. common stockholders – basic and diluted $ ( 1.00 ) $ ( 0.65 ) Weighted average common shares outstanding, basic and diluted 89,076,078 77,515,767 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, 2022 (in thousands, except number of shares and per share data) PAVmed Inc. Stockholders’ Equity (Deficit) Series B Convertible Preferred Stock Common Stock Additional Paid-In Accumulated Treasury Non controlling Shares Amount Shares Amount Capital Deficit Stock Interest Total Balance - December 31, 2021 1,113,919 $ 2,419 86,367,845 $ 86 $ 198,071 $ ( 138,910 ) $ — $ 17,752 $ 79,418 Dividends declared - Series B Convertible Preferred Stock 91,885 276 — — — ( 276 ) — — — Conversions - Series B Convertible Preferred Stock ( 45 ) — 45 — — — — — — Issue common stock - PAVM ATM Facility — — 106,225 1 78 — — — 79 Vest - restricted stock awards — — 541,666 1 ( 1 ) — — — — Exercise - Series Z warrants — — 5 — — — — — — Conversions - Senior Secured Convertible Note — — 7,189,358 7 11,800 — — — 11,807 Exercise - stock options — — 299,999 — 302 — — — 302 Exercise - stock options of majority-owned subsidiary — — — — — — — 695 695 Purchase - Employee Stock Purchase Plan — — 194,240 — 218 — 140 — 358 Purchase - majority-owned subsidiary common stock - Employee Stock Purchase Plan — — — — — — — 109 109 Issuance - majority-owned subsidiary common stock - Committed Equity Facility, net of financing charges — — — — — — — 1,767 1,767 Impact of subsidiary equity transactions — — — — ( 28 ) — — 28 — Issuance - majority-owned subsidiary common stock - Settlement APA-RDx - Installment Payment — — — — — — — 653 653 Stock-based compensation - PAVmed Inc. — — — — 5,666 — — — 5,666 Stock-based compensation - majority-owned subsidiaries — — — — — — — 13,866 13,866 Treasury stock — — ( 188,846 ) — — — ( 548 ) — ( 548 ) Net loss — — — — — ( 88,983 ) — ( 14,255 ) ( 103,238 ) Balance - December 31, 2022 1,205,759 $ 2,695 94,510,537 $ 95 $ 216,106 $ ( 228,169 ) $ ( 408 ) $ 20,615 $ 10,934 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, 2021 (in thousands, except number of shares and per share data) PAVmed Inc. Stockholders’ Equity (Deficit) Series B Convertible Preferred Stock Common Stock Additional Paid-In Accumulated Non 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 ) Beginning balance 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 Vest - restricted stock awards — — 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 Impact of subsidiary equity transactions — — — — 39,576 — 16,760 56,336 Stock-based compensation - PAVmed Inc. — — — — 5,410 — — 5,410 Stock-based compensation - majority-owned subsidiary — — — — 465 — 9,134 9,599 Investment in Veris Health Inc. subsidiary — — — — — — 6 6 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 Ending balance 1,113,919 $ 2,419 86,367,845 $ 86 $ 198,071 $ ( 138,910 ) $ 17,752 $ 79,418 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) 2022 2021 Year Ended December 31, 2022 2021 Cash flows from operating activities Net loss - before noncontrolling interest (“NCI”) $ ( 103,238 ) $ ( 56,126 ) Adjustments to reconcile net loss - before NCI to net cash used in operating activities Depreciation and amortization expense 2,457 226 Stock-based compensation 19,532 15,009 In-process R&D charge — 133 APA-RDx: Issue common stock of majority-owned subsidiary - settle installment payment 653 — Change in fair value - Senior Secured Convertible Note 1,273 ( 1,682 ) Loss upon Issuance - Senior Secured Convertible Note 3,523 — Debt extinguishment loss - Senior Secured Convertible Notes and Senior Convertible Note 5,434 3,715 Debt forgiveness — ( 300 ) Non-cash lease expense 97 — Changes in operating assets and liabilities: Accounts receivable 183 ( 200 ) Prepaid expenses, deposits and current and other assets 397 ( 3,458 ) Accounts payable ( 742 ) 174 Accrued expenses and other current liabilities ( 554 ) 1,918 Net cash flows used in operating activities ( 70,985 ) ( 40,591 ) Cash flows from investing activities Purchase of equipment ( 1,540 ) ( 1,469 ) Asset acquisitions, net of cash ( 3,200 ) ( 2,247 ) Net cash flows used in investing activities ( 4,740 ) ( 3,716 ) Cash flows from financing activities Proceeds – issue of common stock - initial public offering - majority-owned subsidiary — 62,000 Payment – offering costs - initial public offering - majority-owned subsidiary common stock — ( 5,665 ) Proceeds – issue of common stock – registered offerings — 55,016 Payment – offering costs – registered offerings — ( 1,312 ) Proceeds – issue of Senior Secured Convertible Note, net of offering costs 35,227 — 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 ) Proceeds – issue of common stock - At-The-Market Facility 79 — Proceeds – majority-owned subsidiary common stock - Committed Equity Facility 1,807 — Proceeds – exercise of Series Z warrants — 7,804 Proceeds – exercise of Series W warrants — 20 Proceeds – exercise of stock options 302 980 Proceeds – issue common stock – Employee Stock Purchase Plan 358 436 Proceeds – majority-owned subsidiary common stock – Employee Stock Purchase Plan 109 — Proceeds – exercise of stock options issued under equity plan of majority owned subsidiary 695 — Purchase Treasury Stock – payment of employee payroll tax obligation in connection with stock-based compensation ( 366 ) — Net cash flows provided by financing activities 38,211 104,309 Net increase (decrease) in cash ( 37,514 ) 60,002 Cash, beginning of period 77,258 17,256 Cash, end of period $ 39,744 $ 77,258 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”) and Veris Health Inc. (“Veris Health” or “VERIS”). PAVmed is a highly differentiated, multi-product, commercial-stage medical technology company 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. Our current central focus is predominantly on commercial expansion and execution including the acceleration of EsoGuard and Veris Cancer Care Platform commercialization. As resources permit, we will continue to explore internal and external innovations that fulfill our project selection criteria without limiting ourselves to any target specialty or condition. More broadly, we strive to maintain balance within our pipeline with shorter-term, lower-risk projects with the prospect for rapid commercialization and revenue generation supporting development of longer-term projects. At the same time, we are continuously re-assessing each project’s long-term commercial potential relative to other projects in our pipeline, accelerating or decelerating the project and reallocating resources accordingly. The Company operates in one segment as a medical technology company, with the following lines of business: Diagnostics, Medical Devices and Digital Health. Above in Part I, Item 1 - Business is a summary of each of our key products within these sectors, including in particular EsoGuard and the Veris Cancer Care Platform, currently our two leading products. We are also pursuing a number of research and development project and product opportunities across these three lines of business, which have either been developed internally or have been presented to us by clinician innovators and academic medical institutions for consideration. Note 2 — Summary of Significant Accounting Policies 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. and Veris Health 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 18, 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, intangible assets, financial instruments recognized as liabilities, debt obligations, and common stock purchase warrants. Other significant estimates include the estimated incremental borrowing rate, 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. F- 9 Note 2 — Summary of Significant Accounting Policies - continued 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, 2022. 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 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 Revenues are recognized when the satisfaction of the performance obligation occurs, in an amount that reflects the consideration the Company expects to collect in exchange for those services. The Company’s revenue is primarily generated by its laboratory testing services utilizing its EsoGuard Esophageal DNA tests. The services are completed upon release of a patient’s test result to the ordering healthcare provider. Revenue recognized is inclusive of both variable consideration in connection with an individual patient’s third-party insurance coverage policy and fixed consideration in connection with a contracted services arrangement with an unrelated third party legal entity. To determine revenue recognition for the arrangements that the Company determines are within the scope of ASC 606, Revenue from Contracts with Customers, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The key aspects considered by the Company include the following: Contracts —The Company’s customer is primarily the patient, but the Company does not enter into a formal reimbursement contract with a patient. The Company establishes a contract with a patient in accordance with other customary business practices, which is the point in time an order is received from a provider and a patient specimen has been returned to the laboratory for testing. Payment terms are a function of a patient’s existing insurance benefits, including the impact of coverage decisions with Center for Medicare & Medicaid Services (“CMS”) and applicable reimbursement contracts established between the Company and payers. However, when a patient is considered self-pay, the Company requires payment from the patient prior to the commencement of the Company’s performance obligations. The Company’s consideration can be deemed variable or fixed depending on the structure of specific payer contracts, and the Company considers collection of such consideration to be probable to the extent that it is unconstrained. Performance obligations —A performance obligation is a promise in a contract to transfer a distinct good or service (or a bundle of goods or services) to the customer. The Company’s contracts have a single performance obligation, which is satisfied upon rendering of services, which culminates in the release of a patient’s test result to the ordering healthcare provider. The Company elects the practical expedient related to the disclosure of unsatisfied performance obligations, as the duration of time between providing testing supplies, the receipt of a sample, and the release of a test result to the ordering healthcare provider is far less than one year. Transaction price —The transaction price is the amount of consideration that the Company expects to collect in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration expected to be collected from a contract with a customer may include fixed amounts, variable amounts, or both. If the consideration derived from the contracts is deemed to be variable, the Company estimates the amount of consideration to which it will be entitled in exchange for the promised goods or services. The Company limits the amount of variable consideration included in the transaction price to the unconstrained portion of such consideration. In other words, the Company recognizes revenue up to the amount of variable consideration that is not subject to a significant reversal until additional information is obtained or the uncertainty associated with the additional payments or refunds is subsequently resolved. F- 10 Note 2 — Summary of Significant Accounting Policies - continued When the Company does not have significant historical experience or that experience has limited predictive value, the constraint over estimates of variable consideration may result in no revenue being recognized upon delivery of patient EsoGuard test results to the ordering healthcare provider. As such, the Company recognizes revenue up to the amount of variable consideration not subject to a significant reversal until additional information is obtained or the uncertainty associated with additional payments or refunds, if any, is subsequently resolved. Differences between original estimates and subsequent revisions, including final settlements, represent changes in estimated expected variable consideration, with the change in estimate recognized in the period of such revised estimate. With respect to a contracted service arrangement, the fixed consideration revenue is recognized on an as-billed basis upon delivery of the laboratory test report with realization of such fixed consideration deemed probable based upon actual historical experience. Allocate transaction price —The transaction price is allocated entirely to the performance obligation contained within the contract with a customer on the basis of the relative standalone selling prices of each distinct good or service. Practical Expedients —The Company does not adjust the transaction price for the effects of a significant financing component, as at contract inception, the Company expects the collection cycle to be one year or less. 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. 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 operating ROU asset also includes any lease incentives received for improvements to leased property, when the improvements are lessee-owned. For improvements to leased property that are lessor-owned, the Company includes amounts the Company incurred for the improvements as ROU assets which are amortized on a straight-line basis over the life of the lease. 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. Intangible Assets Purchased intangible assets are recorded at cost and depreciated using the straight-line method over the assets’ estimated useful life. See Note 10, Intangible Assets, net , 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- 11 Note 2 — Summary of 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 Equity Plan and the 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, 2022 and 2021; ● 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 years ended December 31, 2022 and 2021; ● 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, 2022 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. Financial Instruments Fair Value Measurements FASB ASC Topic 820, Fair Value Measurement, (ASC 820) defines fair value as the price which would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a transaction measurement date. The ASC 820 three-tier fair value hierarchy prioritizes the inputs used in the valuation methodologies, as follows: Level 1 Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2 Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets which are not active, or other inputs observable or can be corroborated by observable market data. Level 3 Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. The Company evaluates its financial instruments to determine if those instruments or any embedded components of those instruments potentially qualify as derivatives required to be separately accounted for in accordance with FASB ASC Topic 815, Derivatives and Hedging (ASC 815). The accounting for warrants issued to purchase shares of common stock of the Company is based on the specific terms of the respective warrant agreement, and are generally classified as equity, but may be classified as a derivative liability if the warrant agreement provides required or potential full or partial cash settlement. A warrant classified as a derivative liability, or a bifurcated embedded conversion or settlement option classified as a derivative liability, is initially measured at its issue-date fair value, with such fair value subsequently adjusted at each reporting period, with the resulting fair value adjustment recognized as other income or expense. If upon the occurrence of an event resulting in the warrant liability or the embedded derivative liability being subsequently classified as equity, or the exercise of the warrant or the conversion option, the fair value of the derivative liability will be adjusted on such date-of-occurrence, with such date-of-occurrence fair value adjustment recognized as other income or expense, and then the derivative liability will be derecognized at such date-of-occurrence fair value. F- 12 Note 2 — Summary of Significant Accounting Policies - continued 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, 2022 and December 31, 2021, 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 Under a Securities Purchase Agreement dated March 31, 2022, the Company issued a Senior Secured Convertible Note dated April 4, 2022, referred to herein as the “April 2022 Senior Convertible Note”, and a Senior Secured Convertible Note dated September 8, 2022, referred to herein as the “September 2022 Senior Convertible Note”, which are accounted under the “fair value option election” as discussed below. Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivative and Hedging , (“ASC 815”), a financial instrument containing embedded features and /or options may be required to be bifurcated from the financial instrument host and recognized as separate derivative asset or liability, with the bifurcated derivative asset or liability initially measured at estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair value as of each reporting period balance sheet date. Alternatively, 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 estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair value as of each reporting period balance sheet date, with changes in the estimated fair value recognized as other income (expense) in the statement of operations. The estimated fair value adjustment of the April 2022 Senior Convertible Note is presented in a single line item within other income (expense) in the accompanying consolidated statement of operations (as provided for by ASC 825-10-50-30(b)). 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”) (for which there was no such adjustment with respect to the April 2022 Senior Convertible Note or the September 2022 Senior Convertible Note). See Note 13, Financial Instruments Fair Value Measurements , with respect to the FVO election; and Note 14, Debt , for a discussion of the April 2022 Senior Convertible Note and the September 2022 Senior Convertible Note. 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. F- 13 Note 2 — Summary of Significant Accounting Policies - continued 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. 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, 2022 and 2021. 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, 2022, 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, 2022 and December 31, 2021 or recognized during the years ended December 31, 2022 and 2021. 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, 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- 14 Note 2 — Summary of 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. Reclassifications Certain prior-year amounts have been reclassified to conform to the current year presentation, which includes presenting costs of revenue within operating expenses on the statements of operations, in the consolidated financial statements and accompanying notes to the consolidated financial statements. The impact of the reclassifications made to prior year amounts is not material and did not affect net loss. 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- 15 Note 3 — Revenue from Contracts with Customers 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 former commercial laboratory service provider, ResearchDx Inc. (“RDx”), an unrelated third-party. The EsoGuard Commercialization Agreement was on a month-to-month basis, and was terminated on February 25, 2022 upon the execution of an asset purchase agreement (“APA”) dated February 25, 2022, between LucidDx Labs Inc. (a wholly-owned subsidiary of Lucid Diagnostics Inc.) and RDx, with such agreement further discussed in Note 6 , Asset Purchase Agreement and Management Services Agreement. Revenue Recognized In the years ended December 31, 2022 and December 31, 2021, the Company recognized total revenue of $ 377 and $ 500 , respectively. The Company recognized revenue of $ 188 resulting from the delivery of patient EsoGuard test results. Revenue recognized from customer contracts deemed to include a variable consideration transaction price is limited to the unconstrained portion of the variable consideration. In addition, the Company’s revenue for the year ended December 31, 2022 includes $ 189 of revenue recognized under the EsoGuard Commercialization Agreement, which represented the minimum fixed monthly fee of $ 100 for the period January 1, 2022 to the February 25, 2022 termination date as discussed above. The monthly fee was deemed to be collectible for such period as RDx has timely paid the applicable respective monthly fee. In the year ended December 31, 2021, the Company recognized total revenue of $ 500 under the EsoGuard Commercialization Agreement. Cost of Revenue The cost of revenues principally includes the costs related to the Company’s laboratory operations (excluding estimated costs associated with research activities), the costs related to the EsoCheck cell collection device, cell sample mailing kits and license royalties. In the year ended December 31, 2022, the cost of revenue was $ 3,614 and was primarily related to costs for our laboratory operations and EsoCheck device supplies, however also includes $ 369 reflecting costs attributable to delivering the services under the EsoGuard Commercialization Agreement for the period January 1, 2022 to February 25, 2022. In the year ended December 31, 2021, the cost of revenue was $ 585 , which solely related to the EsoGuard Commercialization Agreement. F- 16 Note 4 — 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, 2022 and 2021. 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. 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, 2022 and 2021 with respect to the revenue recognized under the EsoGuard Commercialization Agreement, dated August 1, 2021, between Lucid Diagnostics Inc. and Research Dx Inc. The Company recorded a royalty expense of $ 23 and $ 25 for the years ended December 31, 2022 and 2021, respectively. 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 15, 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- 17 Note 5 — Related Party Transactions Case Western Reserve University and Physician Inventors - Amended CWRU License Agreement Case Western Reserve University (“CWRU”) and each of the three physician inventors (“Physician Inventors”) of the intellectual property licensed under the amended and restated patent license agreement with CWRU, dated August 23, 2021 (the “Amended CWRU License Agreement”), each hold a minority equity ownership interest in Lucid Diagnostics Inc. The expenses incurred with respect to the Amended 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 2022 2021 Years Ended December 31, 2022 2021 Cost of Revenue CWRU – Royalty Fees $ 23 $ 25 General and Administrative Expense Amended CWRU – License Agreement - reimbursement of patent legal fees 69 10 Stock-based compensation expense – Physician Inventors’ restricted stock awards 1,095 910 Research and Development Expense Amended CWRU – License Agreement - reimbursement of patent legal fees 209 195 Fees - Physician Inventors’ consulting agreements 44 29 Sponsored research agreement 6 — Stock-based compensation expense – Physician Inventors’ stock options 203 169 Total Related Party Expenses $ 1,649 $ 1,338 See Note 15, 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 18, Noncontrolling Interest , for a discussion of Lucid Diagnostics Inc. and the corresponding noncontrolling interests. 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 general and administrative expense of $ 21 in the year ended December 31, 2021 in connection with the consulting agreement. Effective June 2021, Veris Health Inc. entered into a consulting agreement with Andrew Thoreson, M.D. which provides for compensation on a contractual rate per hour for consulting services provided. Dr. Thoreson holds a partial ownership interest in the legal entity which holds a minority interest in Veris Health Inc. Veris Health Inc. recognized general and administrative expense of $ 56 and $ 54 in the years ended December 31, 2022 and 2021, respectively, in connection with the consulting agreement. F- 18 Note 6 — Asset Purchase Agreement and Management Services Agreement Asset Purchase Agreement - ResearchDx Inc. LucidDx Labs Inc., a wholly-owned subsidiary of Lucid Diagnostics Inc., entered into an asset purchase agreement (“APA”) dated February 25, 2022, with ResearchDx, Inc. (“RDx”), an unrelated third-party - (“APA-RDx”). Under the APA-RDx, LucidDx Labs Inc. acquired certain assets from RDx which were combined with LucidDx Labs Inc. purchased and leased property and equipment to establish a Company-owned Commercial Lab Improvements Act (“CLIA”) certified, College of American Pathologists (“CAP”) accredited commercial clinical laboratory capable of performing the EsoGuard® Esophageal DNA assay, inclusive of DNA extraction, next generation sequencing (“NGS”) and specimen storage. Prior to February 25, 2022, RDx provided such laboratory services at its owned CLIA-certified, CAP-accredited clinical laboratory. The total purchase price consideration payable under the APA-RDx is a face value of $ 3,200 comprised of three contractually specified periodic payments. The APA-RDx is being accounted for as an asset acquisition, with the recognition of an intangible asset of approximately $ 3,200 , which is included in “Intangible assets, net” on the accompanying consolidated balance sheet, as further discussed in Note 10, Intangible Assets, net. In the year ended December 31, 2022, a total of $ 3,200 , of cash was paid with respect to the periodic payments. Additionally, the APA-RDx requires the Company to pay a total of $ 3,000 to be paid as twelve (12) equal installment payments commencing May 25, 2022 and then on each three month anniversary thereof, inclusive of a final installment payment on February 25, 2025, with such installment payments recognized as current period expense as incurred. In the year ended December 31, 2022, as provided for in the APA-RDx, installment payments were settled with the issuances of 326,701 shares of common stock of Lucid Diagnostics Inc., with such shares having fair values of $ 653 (with the fair value measured as the quoted closing price on the dates the shares were issued), which was recognized as a current period expense included in general and administrative expenses in the accompanying consolidated statement of operations. The APA-RDx provides for each of an acceleration and a cancellation of the remaining unpaid installment payments, summarized as follows: ● The payment of the remaining unpaid installment payments will be accelerated as immediately due and payable as of the date the “MSA-RDx” (as such agreement is discussed below) is either terminated by LucidDx Labs Inc. without cause or if it is terminated by mutual agreement between LucidDx Labs Inc. and RDx. ● The payment of the remaining unpaid installment payments will be cancelled if the MSA-RDx is terminated by LucidDx Labs Inc. for cause, defined as the occurrence of any one of: (i) a material breach by RDx which is not cured within thirty days of LucidDx Labs Inc. written notice; (ii) RDx becomes insolvent and /or bankrupt; or (ii) RDx fails to comply with applicable statutes, is barred from participating in federal health care programs, or by action of changes in law or regulation, or by action of judicial interpretation of law, or by judicial civil proceedings decisions. Management Services Agreement - ResearchDx Inc LucidDx Labs Inc. and RDx entered into a separate management services agreement (“MSA-RDx”), dated and effective February 25, 2022, with such agreement having a term of three years commencing on the agreement’s effective date, and an initial fee of $ 150 per quarter. The MSA-RDx provides for the cancellation of the remaining unpaid installment payments upon termination of the MSA-RDx for any reason or no reason by either party thereto. Termination of Management Services Agreement and Modification of Other Payment Obligations - ResearchDx Inc On February 14, 2023, Lucid Diagnostics and LucidDx Labs Inc. entered into an agreement (the “MSA Termination Agreement”) with RDx, pursuant to which the parties mutually agreed to terminate the MSA-RDx without cause. The termination was effective as February 10, 2023. Until the termination of the MSA-RDx, RDx had continued to provide certain testing and related services for the Laboratory in accordance with the terms of the MSA-RDx. The MSA Termination Agreement reduces the remaining amounts of the earnout payments and management fees due under the APA-RDx and the MSA-RDx to $ 725 . The payment was satisfied through the issuance of 553,436 shares of Lucid Diagnostics’ common stock in February 2023. Lucid Diagnostics was not required to make any cash payments in connection with the termination. F- 19 Note 7 — Prepaid Expenses, Deposits, and Other Current Assets Prepaid expenses and other current assets consisted of the following as of: Schedule of Prepaid Expenses and Other Current Assets December 31, 2022 December 31, 2021 Advanced payments to service providers and suppliers $ 599 $ 808 Prepaid insurance 300 1,856 Deposits 3,005 1,989 EsoCheck cell collection supplies 59 434 EsoGuard mailer supplies 52 59 Veris Box supplies 150 — CarpX devices — 33 Total prepaid expenses, deposits and other current assets $ 4,165 $ 5,179 Note 8 — Fixed Assets Fixed assets, less accumulated depreciation, consisted of the following as of: Schedule of Fixed Assets Estimated Useful Life December 31, 2022 December 31, 2021 Computer and office equipment 2 - 5 years $ 784 $ 426 Laboratory equipment 3 - 7 years 2,064 1,161 Furniture and fixtures 3 - 5 years 379 96 Leasehold improvements - (1) 2 2 Assets under construction n/a 30 38 Total Fixed Assets 3,259 1,723 Less Accumulated Depreciation ( 808 ) ( 138 ) Total Fixed Assets, net $ 2,451 $ 1,585 (1) Lesser of remaining lease term or estimated useful life. Depreciation expense of $ 673 and $ 80 for the years ended December 31, 2022 and 2021, respectively, is included in general and administrative expenses in the accompanying consolidated statements of operations. F- 20 Note 9 — Leases During the year ended December 31, 2022, the Company entered into additional lease agreements that have commenced and are classified as operating leases and short-term leases, including for each of: a research and development facility; a commercial clinical laboratory; additional Lucid Test Centers; and for office space. The components of lease expense were as follows: Schedule of Lease Expense 2022 2021 Year Ended December 31, 2022 2021 Operating lease cost $ 1,174 $ — Short-term lease cost 191 191 Variable lease cost 52 — Total lease cost $ 1,417 $ 191 The Company’s future lease payments as of December 31, 2022, which are presented as operating lease liabilities, current portion and operating lease liabilities, less current portion on the Company’s consolidated balance sheets are as follows: Schedule of Future Minimum Lease Payments for Operating Leases 2023 $ 1,327 2024 1,275 2025 323 2026 272 2027 132 Thereafter — Total lease payments $ 3,329 Less: imputed interest ( 342 ) Present value of lease liabilities $ 2,987 Supplemental disclosure of cash flow information related to the Company’s cash and non-cash activities with its leases are as follows: Schedule of Supplemental Balance Sheet Information Related to Cash and Non-cash Activities with Leases 2022 2021 Year Ended December 31, 2022 2021 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 1,078 $ — Non-cash investing and financing activities Right-of-use assets obtained in exchange for new operating lease liabilities $ 3,949 $ — Weighted-average remaining lease term - operating leases (in years) 2.84 — Weighted-average discount rate - operating leases 7.875 % — % As of December 31, 2022, the Company’s right-of-use assets from operating leases are $ 3,037 , which are reporting in right-of-use assets - operating leases in the consolidated balance sheets. As of December 31, 2022, the Company has outstanding operating lease obligations of $ 2,987 , of which $ 1,141 is reported in operating lease liabilities, current portion and $ 1,846 is reporting in operating lease liabilities less current portion in the Company’s consolidated balance sheets. The Company did not have operating leases as of December 31, 2021. The Company calculates its incremental borrowing rates for specific lease terms, used to discount future lease payments, as a function of the financing terms the Company would likely receive on the open market. In September 2022, the Company entered into a lease agreement for its principal corporate offices, in New York, New York. The lease agreement term is from the September 15, 2022 execution date to the date which is seven years and eight months from the lease commencement date, with the rent abated for the first eight months of the lease term . The lease commenced on February 1, 2023. The aggregate (undiscounted) rent payments are approximately $ 3.2 million over the lease term. F- 21 Note 10 — Intangible Assets, net Intangible assets, less accumulated amortization, consisted of the following as of: Schedule of Intangible Assets Accumulated Amortization Estimated Useful Life December 31, 2022 December 31, 2021 Defensive asset 60 months $ 2,105 $ 2,105 Laboratory licenses and certifications and laboratory information management software 24 months 3,200 — Other 1 year 70 70 Total Intangible assets 5,375 2,175 Less Accumulated Amortization ( 1,930 ) ( 146 ) Intangible Assets, net $ 3,445 $ 2,029 The defensive technology intangible asset was recognized upon its acquisition of CapNostics, LLC, an unrelated third-party, for total purchase consideration paid on the October 5, 2021 acquisition date of approximately $ 2.1 million in cash. The CapNostics LLC transaction was accounted for as an asset acquisition, resulting in the recognition of the defensive technology intangible asset. The defensive technology intangible asset is being amortized on a straight-line basis over an expected useful life 60 months commencing on the acquisition date. The intangible assets recognized under the APA-RDx are the laboratory licenses and certifications, inclusive of a CLIA certification, CAP accreditation, and clinical laboratory licenses for five (5) U.S. States transfer to the Company from RDx, and a laboratory information management software perpetual-use royalty-free license granted under the APA-RDx, with such intangible asset having a useful life of twenty-four months commencing on the APA-RDx February 25, 2022 transaction date. Amortization expense of the intangible assets discussed above was $ 1,784 and $ 146 for the years ended December 31, 2022 and 2021, respectively, and is included in amortization of acquired intangible assets in the accompanying consolidated statements of operations. As of December 31, 2022, the estimated future amortization expense associated with the Company’s finite-lived intangible assets for each of the five succeeding fiscal years is as follows: Schedule of Estimated Amortization Expense for Intangible Assets 2023 $ 2,021 2024 688 2025 421 2026 315 Total $ 3,445 F- 22 Note 11 — 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, 2022 December 31, 2021 Compensation and Employee Benefits $ 1,947 $ 3,151 CWRU Amended License Agreement - Royalty fee 10 25 Operating expenses 1,748 1,083 Total accrued expenses and other current liabilities $ 3,705 $ 4,259 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 15, Stock-Based Compensation , for additional information on the PAVmed Inc. ESPP. Note 12 — Commitment and Contingencies Legal Proceedings Delaware Court of Chancery Complaint 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 PAVmed Inc. 2014 Long-Term Incentive Equity Plan and the PAVmed Inc. Employee Stock Purchase Plan). The relief sought under the complaint included 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 reached agreement on a Settlement Term Sheet Agreement, dated January 28, 2021, to settle the complaint, the terms of which did not contemplate payment of monetary damages to the putative class in the proceeding. In connection with the foregoing, on August 3, 2022, the parties agreed that plaintiff’s counsel would not seek an award from the Court in excess of $ 450 , to be paid by the Company, upon Court approval, as compensation for the benefits conferred by the settlement, and the Company would not object to an award of up to such maximum amount. The settlement and a plaintiff’s fee award of $ 450 were approved by the Court on November 3, 2022, with such award having been subsequently paid by the Company in December 2022. Benchmark Investments, Inc. / Benchmark Investments LLC 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 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 a successor to 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. On February 13, 2023, the Company entered into a settlement agreement (the “Settlement Agreement”) with EF Hutton, a division of Benchmark Investments, LLC (f/k/a Kingswood Capital Markets, a division of Benchmark Investments, Inc.) (“EF Hutton”) and Benchmark Investments, LLC (f/k/a Benchmark Investments, Inc.). Pursuant to the Settlement Agreement, the Company has paid EF Hutton $ 450 in full and final satisfaction of all claims and disputes the parties made or could have made against one another arising out of or relating in any way to the above described actions. The Settlement Agreement also included a mutual release and certain other covenants that are customary for agreements of this nature. As of December 31, 2022, the Company has fully accrued for this settlement, which is included in accrued expenses and other current liabilities on the Company’s consolidated balance sheets. Other Matters 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- 23 Note 13 — Financial Instruments Fair Value Measurements Recurring Fair Value Measurements The fair value hierarchy table for the reporting date 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, 2022 Senior Secured Convertible Note - April 2022 $ — $ — $ 22,000 $ 22,000 Senior Secured Convertible Note - September 2022 $ — $ — $ 11,650 $ 11,650 Totals $ — $ — $ 33,650 $ 33,650 (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, 2022. As discussed in Note 14, Debt , the Company issued Senior Secured Convertible Notes dated April 4, 2022 and September 8, 2022, with an initial $ 27.5 million face value principal (“April 2022 Senior Convertible Note”) and an initial $ 11.25 million face value principal (“September 2022 Senior Convertible Note”), respectively. Both convertible notes are 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. The estimated fair value of the financial instruments classified within the Level 3 category was determined using both observable inputs and unobservable inputs. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs. The estimated fair value of the April 2022 Senior Convertible Note as of each of April 4, 2022 and December 31, 2022, and the estimated fair value of the September 2022 Senior Convertible Note as of each of September 8, 2022 and December 31, 2022 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: Schedule of Fair Value Assumption Used April 2022 Senior Convertible Note: April 4, 2022 September 2022 Senior Convertible Note: September 8, 2022 April 2022 Senior Convertible Note: December 31, 2022 September 2022 Senior Convertible Note: December 31, 2022 Fair Value $ 30,100 $ 12,200 $ 22,000 $ 11,650 Face value principal payable $ 27,500 $ 11,250 $ 21,497 $ 11,250 Required rate of return 7.875 % 7.875 % 11.55 % 11.35 % Conversion Price $ 5.00 $ 5.00 $ 5.00 $ 5.00 Value of common stock $ 1.26 $ 1.21 $ 0.48 $ 0.48 Expected term (years) 2.00 2.00 0.95 1.68 Volatility 115.00 % 120.00 % 165.00 % 165.00 % Risk free rate 2.40 % 3.42 % 4.62 % 4.41 % 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 and 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- 24 Note 14 — Debt PAVmed - Senior Secured Convertible Notes The Company entered into a Securities Purchase Agreement (“SPA”) dated March 31, 2022, with an accredited institutional investor (“Investor”, “Lender”, and /or “Holder”), wherein, the Company agreed to sell, and the Investor agreed to purchase an aggregate of $ 50.0 million face value principal of debt - comprised of: an initial issuance of $ 27.5 million face value principal; and up to an additional $ 22.5 million of face value principal (upon the satisfaction of certain conditions). The debt was issued in a registered direct offering under the Company’s effective shelf registration statement. Under the SPA dated March 31, 2022, the Company issued a Senior Secured Convertible Note dated April 4, 2022, referred to herein as the “April 2022 Senior Convertible Note”, with such note having a $ 27.5 million face value principal, a 7.875 % annual stated interest rate, a contractual conversion price of $ 5.00 per share of the Company’s common stock (subject to standard adjustments in the event of any stock split, stock dividend, stock combination, recapitalization or other similar transaction), and a contractual maturity date of April 4, 2024. The April 2022 Senior Convertible Note may be converted into shares of common stock of the Company at the Holder’s election. Under the same SPA, the Company issued an additional Senior Secured Convertible Note dated September 8, 2022, referred to herein as the “September 2022 Senior Convertible Note”, with such note having a $ 11.25 million face value principal, a 7.875 % annual stated interest rate, a contractual conversion price of $ 5.00 per share of the Company’s common stock (subject to standard adjustments in the event of any stock split, stock dividend, stock combination, recapitalization or other similar transaction), and a contractual maturity date of September 6, 2024. The September 2022 Senior Convertible Note may be converted into shares of common stock of the Company at the Holder’s election. The April 2022 Senior Convertible Note proceeds were $ 25.0 million after deducting a $ 2.5 million lender fee; and additionally, the Company incurred total offering costs of approximately $ 601 , inclusive of the payment of a total of $ 450 placement agent fees. The lender fee and offering costs were recognized as of the April 4, 2022 issue date as a current period expense in other income (expense) in the Company’s consolidated statement of operations. The September 2022 Senior Convertible Note proceeds were $ 10.2 million after deducting a $ 1.0 million lender fee; and additionally, the Company incurred total offering costs of approximately $ 209 , inclusive of the payment of a total of $ 184 placement agent fees. The lender fee and offering costs were recognized as of the September 8, 2022 issue date as a current period expense in other income (expense) in the Company’s consolidated statement of operations. During the period from April 4, 2022 to October 3, 2022, the Company is required to pay interest expense only (on the $ 27.5 million face value principal), at 7.875 % per annum, computed on a 360 day year. The Company paid in cash interest expense of approximately $ 994 for the year ended December 31, 2022. During the period from September 8, 2022 to March 6, 2023, the Company is required to pay interest expense only (on the $ 11.25 million face value principal), at 7.875 % per annum, computed on a 360 day year. The Company paid in cash interest expense of approximately $ 278 for the year ended December 31, 2022; and approximately $ 150 subsequent to December 31, 2022 as of March 9, 2023. In the year ended December 31, 2022, the non-cash expense recognized for the change in the fair value of our convertible notes was approximately $ 1,273 , related to both the April 2022 and September 2022 Senior Convertible Notes, which are presented in Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note in the Company’s consolidated statements of operations. The April 2022 and September 2022 Senior Convertible Notes were initially measured at their issue-date estimated fair value and subsequently remeasured at estimated fair value as of the reporting period date. The Company initially recognized a $ 3,550 fair value non-cash expense on the issue-dates. This initial recognition was partially offset by $ 2,277 of decreases in fair value upon remeasurements through December 31, 2022. In the year ended December 31, 2021, the non-cash income recognized for the change in the fair value of our convertible notes was approximately $ 1,682 , which are presented in Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note in the Company’s consolidated statements of operations. The change in the fair value adjustment of the convertible notes is principally related to the then outstanding convertible notes being repaid-in-full during the year ended December 31, 2021. Commencing October 4, 2022, and then on each of the successive first and tenth trading day of each month thereafter through to and including April 1, 2024 (each referred to as an “Installment Date”); and on the April 4, 2024 maturity date, the Company will be required to make a principal repayment of $ 724 together with accrued interest thereon, with such 38 payments referred to herein as the “Installment Amount”, settled in shares of common stock of the Company, subject to customary equity conditions, including minimum share price and volume thresholds, or at the election of the Company, in cash, in whole or in part. Commencing March 6, 2023, and then on each of the successive first and tenth trading day of each month thereafter through to and including September 1, 2024 (each referred to as an “Installment Date”); and on the September 6, 2024 maturity date, the Company will be required to make a principal repayment of $ 296 together with accrued interest thereon, with such 38 payments referred to herein as the “Installment Amount”, settled in shares of common stock of the Company, subject to customary equity conditions, including minimum share price and volume thresholds, or at the election of the Company, in cash, in whole or in part. In addition to the Installment Amount repayments, the Holder may elect to accelerate the conversion of future Installment Amount repayments, and interest thereon, subject to certain restrictions, as defined, utilizing the then current conversion price of the most recent Installment Date conversion price. F- 25 Note 14 — Debt - continued Subject to certain conditions being met or waived, from time to time, one or more additional closings may occur, for up to the remaining $ 11.25 million face value principal, upon five trading days’ notice given by the Company to the Investor. The Investor’s obligation to purchase the additional notes at each additional closing is subject to certain conditions set forth in the SPA dated March 31, 2022, including, among others, contractual closing requirements: minimum price and trading volume thresholds of the Company’s common stock; the maximum ratio of debt to market capitalization (as defined); and minimum market capitalization (as defined), with such requirements being waived by the Investor in its sole discretion. Additionally, effective March 31, 2023, the Investor may by written notice elect to require the Company to issue additional notes of up to $ 11.25 million in face value principal, so long as in doing so it would not cause the ratio of (a) the outstanding principal amount of the April 2022 Senior Convertible Note and the September 2022 Senior Convertible Note (and any additional notes issued under the SPA dated March 31, 2022), accrued and unpaid interest thereon and accrued and unpaid late charges to (b) our average market capitalization over the prior ten trading days, to exceed 25%. If the Company does not issue the additional notes contemplated by any such written notice, or if the Investor is unable to deliver any such notice prior to March 31, 2024 as a result of the limitation described in the preceding sentence, then the Company will be obligated to pay up to a maximum of a $1.35 million a break-up fee . The payment of all amounts due and payable under both senior convertible notes are guaranteed by the Company and its subsidiaries, except for Lucid Diagnostics Inc and its subsidiaries; and the obligations under both senior convertible notes are secured by all of the assets of the Company and each guarantor, except in the case of the Lucid Diagnostics Inc. common stock held by PAVmed Inc. only 9.99 % of Lucid Diagnostics Inc.’s issued and outstanding common stock is pledged to secure the indebtedness of the convertible notes. The Company is subject to certain customary affirmative and negative covenants regarding the rank of the notes, along with the incurrence of further indebtedness, the existence of liens, the repayment of indebtedness and the making of investments, the payment of cash in respect of dividends, distributions or redemptions, the transfer of assets, the maturity of other indebtedness, and transactions with affiliates, among other customary matters. The Company is subject to financial covenants requiring: (i) a minimum of $8.0 million of available cash at all times; (ii) the ratio of (a) the outstanding principal amount of the total senior convertible notes outstanding, accrued and unpaid interest thereon and accrued and unpaid late charges to (b) the Company’s average market capitalization over the prior ten trading days, to not exceed 30% (except that such maximum percentage is 50% for the period from September 8, 2022 through March 5, 2023) (the “Debt to Market Cap Ratio Test”); and (iii) the Company’s market capitalization to at no time be less than $75 million. (the “Market Cap Test” and, together with the Debt to Market Cap Ratio Test, the “Financial Tests”). From time to time from and after September 8, 2022, including as of December 31, 2022, the Company was not in compliance with the Financial Tests . As of March 12, 2023, the investor agreed to waive any such non-compliance during such aforementioned time periods, under the Senior Convertible Notes and the SPA. The Company and the investor also entered into a waiver dated August 9, 2022 whereby the April 2022 Senior Convertible Note was amended to permit the Investor to convert up to $ 5.0 million of the face value principal of the April 2022 Senior Convertible Note at the then current conversion price as if the date of conversion were an Installment Date, i.e. a price per share of common stock equal to the lower of (i) the fixed conversion price then in effect (currently $ 5.00 ) and (ii) 82.5 % of the average VWAP of the Company’s common stock for each of the two trading days with the lowest VWAP of the Company’s common stock during the ten consecutive trading day period ending and including the trading day immediately prior to the applicable conversion date, but in the case of clause (ii), not less than $ 0.18 per share. As contemplated by such amendment, in the year ended December 31, 2022, approximately $ 6,003 of principal repayments along with approximately $ 370 of interest expense thereon, were settled through the issuance of 7,189,358 shares of common stock of the Company, with such shares having a fair value of approximately $ 11,807 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company). The conversions resulted in a debt extinguishment loss of $ 5.4 million in the year ended December 31, 2022. Subsequent to December 31, 2022, as of March 9, 2023, approximately $ 522 of principal repayments along with approximately $ 155 of interest expense thereon, were settled through the issuance of 1,852,261 shares of common stock of the Company, with such shares having a fair value of approximately $ 1,102 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company). The fair value and face value principal outstanding of the Senior Convertible Notes as of December 31, 2022 are as follows: Summary of Outstanding Debt Contractual Maturity Date Stated Interest Rate Conversion Price per Share Face Value Principal Outstanding Fair Value April 2022 Senior Convertible Note April 4, 2024 7.875 % $ 5.00 $ 21,497 $ 22,000 September 2022 Senior Convertible Note September 6, 2024 7.875 % $ 5.00 $ 11,250 $ 11,650 Balance as of December 31, 2022 $ 32,747 $ 33,650 The Company did not have convertible debt outstanding at December 31, 2021. During the year ended December 31, 2021, the Company recognized debt extinguishment losses of approximately $ 3,715 , in connection with repaying-in-full all remaining convertible notes outstanding at the time. See Note 13, Financial Instruments Fair Value Measurements , for a further discussion of fair value assumptions. F- 26 Note 14 — Debt - continued Lucid Diagnostics - Private Placement - Securities Purchase Agreement Effective as of March 13, 2023, Lucid entered into a Securities Purchase Agreement (“Lucid SPA”) with an accredited institutional investor (“Lucid Investor”, “Lucid Lender”, and /or “Lucid Holder”), pursuant to which Lucid agreed to sell, and the Lucid Investor agreed to purchase a Senior Secured Convertible Note with a face value principal of $ 11.1 million (the “March 2023 Lucid Senior Convertible Note”). The issuance of the March 2023 Lucid Senior Convertible Note is subject to customary closing conditions. As of the date hereof, the March 2023 Lucid Senior Convertible Note has not yet been issued. Note 15 — 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 16,352,807 shares of common stock of PAVmed Inc. are reserved for issuance under the PAVmed Inc. 2014 Equity Plan, with 2,563,843 shares available for grant as of December 31, 2022. 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, 2022. In January 2023, the number of shares available for grant was increased by 4,700,000 in accordance with the evergreen provisions of the plan. PAVmed Inc. Stock Options PAVmed Inc. stock options granted under the PAVmed Inc. 2014 Equity Plan and stock options granted outside such plan are summarized 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, 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 Outstanding stock options at December 31, 2021 8,720,198 $ 3.39 6.8 $ 3,516 Granted (1) 4,804,350 $ 1.53 Exercised ( 299,999 ) $ 1.01 Forfeited ( 1,655,894 ) $ 3.14 Outstanding stock options at December 31, 2022 (3) 11,568,655 $ 2.71 7.4 $ — Vested and exercisable stock options at December 31, 2022 7,233,965 $ 2.97 6.5 $ — (1) Stock options granted under the PAVmed Inc. 2014 Equity Plan and those granted outside such plan generally vest ratably over twelve quarters, with the vesting commencing with the grant date quarter-end, 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, 2022 and December 31, 2021 and the exercise price of the underlying PAVmed Inc. stock options, to the extent such quoted price is greater than the exercise price. (3) The outstanding stock options presented in the table above, are inclusive of 500,854 stock options granted outside the PAVmed Inc. 2014 Equity Plan, as of December 31, 2022 and December 31, 2021. F- 27 Note 15 — Stock-Based Compensation - continued Subsequent to December 31, 2022, in January 2023, the company granted 7,070,000 stock options with a weighted average exercise price of $ 0.48 for which will generally vest one-third after one year then ratably over the next eight quarters. PAVmed Inc. Restricted Stock Awards PAVmed Inc. restricted stock awards granted under the PAVmed Inc. 2014 Equity Plan and restricted stock awards granted outside such plan are summarized as follows: Schedule of Restricted Stock Award Activity Number of Restricted Stock Awards Weighted Average Grant Date Fair Value Outstanding restricted stock awards as of December 31, 2020 1,416,666 $ 1.72 Granted 400,000 $ 4.50 Vested ( 150,000 ) $ 2.04 Forfeited — $ — Unvested restricted stock awards as of December 31, 2021 (1) 1,666,666 $ 2.36 Unvested restricted stock awards as of December 31, 2021 1,666,666 $ 2.36 Granted — — Vested ( 541,666 ) 1.20 Forfeited ( 150,000 ) 2.04 Unvested restricted stock awards as of December 31, 2022 (1) 975,000 $ 3.05 (1) The unvested restricted stock awards presented in the table above, are inclusive of 100,000 restricted stock awards granted outside the PAVmed Inc. 2014 Equity Plan as of December 31, 2022 and December 31, 2021. 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 9,144,000 shares of common stock of Lucid Diagnostics Inc. are reserved for issuance under the Lucid Diagnostics Inc. 2018 Equity Plan, with 3,821,139 shares available for grant as of December 31, 2022. The share reservation is not diminished by a total of 423,300 stock options and 50,000 restricted stock awards granted outside the Lucid Diagnostics Inc. 2018 Equity Plan, as of December 31, 2022. In January 2023, the number of shares available for grant was increased by 2,500,000 in accordance with the evergreen provisions of the plan. F- 28 Note 15 — Stock-Based Compensation - continued Lucid Diagnostics Inc. Stock Options Lucid Diagnostics Inc. stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan and stock options granted outside such plan are summarized 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, 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 $ 0.73 7.0 $ 6,665 Vested and exercisable stock options at December 31, 2021 1,337,417 $ 0.61 7.0 $ 6,370 Outstanding stock options at December 31, 2021 1,419,242 $ 0.73 7.0 $ 6,665 Granted (1) 2,365,000 $ 3.68 Exercised ( 965,341 ) $ 0.72 Forfeited ( 253,524 ) $ 3.83 Outstanding stock options at December 31, 2022 (3) 2,565,377 $ 3.14 8.3 $ 428 Vested and exercisable stock options at December 31, 2022 1,119,006 $ 2.53 7.1 $ 428 (1) Stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan and those granted outside such plan generally vest ratably over twelve quarters, with the vesting commencing with the grant date quarter-end, 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 Lucid Diagnostics Inc. common stock on each of December 31, 2022 and December 31, 2021 and the exercise price of the underlying Lucid Diagnostics Inc. stock options, to the extent such quoted price is greater than the exercise price. (3) The outstanding stock options presented in the table above, are inclusive of 423,300 stock options granted outside the Lucid Diagnostics Inc. 2018 Equity Plan, as of December 31, 2022 and December 31, 2021. Subsequent to December 31, 2022, in January and February 2023, the company granted 2,672,500 stock options with a weighted average exercise price of $ 1.31 for which will generally vest one-third after one year then ratably over the next eight quarters. F- 29 Note 15 — Stock-Based Compensation - continued Lucid Diagnostics Inc. Restricted Stock Awards Lucid Diagnostics Inc. restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan and restricted stock awards granted outside such plan are summarized as follows: Schedule of Restricted Stock Award Activity Number of Restricted Stock Awards Weighted Average Grant Date Fair Value Unvested restricted stock awards as of December 31, 2020 — $ — Granted 1,947,795 12.76 Vested — — Forfeited ( 7,055 ) 13.11 Unvested restricted stock awards as of December 31, 2021 (1) 1,940,740 $ 12.76 Unvested restricted stock awards as of December 31, 2021 1,940,740 $ 12.76 Granted 320,000 4.53 Vested ( 169,320 ) 13.48 Forfeited — — Unvested restricted stock awards as of December 31, 2022 (1) 2,091,420 $ 11.44 (1) The unvested restricted stock awards presented in the table above, are inclusive of 50,000 restricted stock awards granted outside the Lucid Diagnostics Inc. 2018 Equity Plan as of December 31, 2022 and December 31, 2021. On January 7, 2022, 320,000 restricted stock awards were granted under the Lucid Diagnostics Inc 2018 Equity Plan, with such restricted stock awards having a single vesting date on January 7, 2025 , and an aggregate grant date fair value of approximately $ 1.4 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. 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 Expense 2022 2021 Years Ended December 31, 2022 2021 Cost of revenue $ 16 $ — Sales and marketing expenses 2,464 1,177 General and administrative expenses 16,001 12,799 Research and development expenses 1,051 1,033 Total stock-based compensation expense $ 19,532 $ 15,009 F- 30 Note 15 — Stock-Based Compensation - continued 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 Recognized by Lucid Diagnostics 2022 2021 Years Ended December 31, 2022 2021 Lucid Diagnostics Inc 2018 Equity Plan – cost of revenue $ 13 $ — Lucid Diagnostics Inc 2018 Equity Plan – sales and marketing expenses 968 8 Lucid Diagnostics Inc 2018 Equity Plan – general and administrative expenses 12,691 9,073 Lucid Diagnostics Inc 2018 Equity Plan – research and development expenses 187 66 PAVmed Inc 2014 Equity Plan - cost of revenue 3 — PAVmed Inc 2014 Equity Plan - sales and marketing expenses 654 202 PAVmed Inc 2014 Equity Plan - general and administrative expenses 262 38 PAVmed Inc 2014 Equity Plan - research and development expenses 213 212 Total stock-based compensation expense – recognized by Lucid Diagnostics Inc $ 14,991 $ 9,599 Total stock-based compensation expense $ 14,991 $ 9,599 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 $ 7,136 1.9 Restricted Stock Awards $ 933 0.7 Lucid Diagnostics Inc. 2018 Equity Plan Stock Options $ 3,248 2.1 Restricted Stock Awards $ 4,064 0.5 F- 31 Note 15 — 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 $ 1.10 per share and $ 3.46 per share during the periods ended December 31, 2022 and 2021, 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 Years Ended December 31, 2022 2021 Expected term of stock options (in years) 5.8 5.6 Expected stock price volatility 88.0 % 76.0 % Risk free interest rate 2.2 % 1.0 % 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 $ 2.30 per share and $ 5.13 per share during the periods ended December 31, 2022 and 2021, 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 Years Ended December 31, 2022 2021 Expected term of stock options (in years) 5.6 5.7 Expected stock price volatility 71.0 % 70.0 % Risk free interest rate 2.1 % 1.3 % Expected dividend yield — % — % PAVmed Inc. Employee Stock Purchase Plan (“ESPP”) A total of 194,240 shares and 203,480 shares of common stock of the Company were purchased for proceeds of approximately $ 218 and $ 304 , on March 31, 2022 and 2021, respectively under the PAVmed Inc Employee Stock Purchase Plan (“PAVmed Inc ESPP”). A total of 191,698 shares and 31,112 shares of common stock of the Company were purchased for proceeds of approximately $ 140 and $ 131 , on September 30, 2022 and 2021, respectively under the PAVmed Inc ESPP. The September 30, 2022 purchase was settled through the redeployment of treasury stock, and did not reduce the number of shares available-for-issue under the PAVmed Inc ESPP. The PAVmed Inc. ESPP has a total reservation of 1,750,000 shares of common stock of PAVmed Inc. of which 931,841 shares are available-for-issue as of December 31, 2022. In January 2023, the number of shares available-for-issue was increased by 250,000 in accordance with the evergreen provisions of the plan. Lucid Diagnostics, Inc Employee Stock Purchase Plan (“ESPP”) The Lucid Diagnostics Inc Employee Stock Purchase Plan (“Lucid Diagnostics Inc ESPP”), initial six-month stock purchase period was April 1, 2022 to September 30, 2022. A total of 84,030 shares of common stock of Lucid Diagnostics Inc were purchased for proceeds of approximately $ 109 on September 30, 2022 under the Lucid Diagnostics Inc. ESPP. The Lucid Diagnostics Inc. ESPP has a total reservation of 500,000 shares of common stock of Lucid Diagnostics Inc. of which 415,970 shares are available-for-issue as of December 31, 2022. In January 2023, the number of shares available-for-issue was increased by 500,000 in accordance with the evergreen provisions of the plan. F- 32 Note 16 — Preferred Stock As of December 31, 2022 and December 31, 2021, there were 1,205,759 and 1,113,919 shares of Series B Convertible Preferred Stock (classified in permanent equity) issued and outstanding, respectively. Series B Convertible Preferred Stock Dividends 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 dividends are 8.0 % 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; and after October 1, 2021, dividends may be settled, at the election of the discretion of the board of directors, 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. During the year ended December 31, 2022, the Company’s board-of-directors declared an aggregate of approximately $ 276 of Series B Convertible Preferred Stock dividends, earned as of December 31, 2021, March 31, 2022, June 30, 2022, and September 30, 2022, which have been settled by the issue of an additional aggregate 91,885 shares of Series B Convertible Preferred Stock. 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 96,262 shares of Series B Convertible Preferred Stock. Subsequent to December 31, 2022, in January 2023, the Company’s board-of-directors declared a Series B Convertible Preferred Stock dividend earned as of December 31, 2022 and payable as of January 1, 2023, of approximately $ 72 , to be settled by the issue of an additional 24,128 shares of Series B Convertible Preferred Stock (with such dividend not recognized as a dividend payable as of December 31, 2022, as the Company’s board of directors had not declared such dividends payable as of such date). Lucid Diagnostics - Series A Preferred Stock Offering On March 7, 2023, Lucid entered into subscription agreements for the sale of 13,625 shares (the “ Lucid Series A Preferred Stock”). Each share of the Lucid Series A Preferred Stock has a stated value of $ 1,000 and a conversion price of $1.394. The terms of the Lucid Series A Preferred Stock also include a one times preference on liquidation and a right to receive dividends equal to 20 % of the number of shares of Lucid common stock into which such Lucid Series A Preferred Stock is convertible, payable on the one-year and two-year anniversary of the issuance date. The Lucid Series A Preferred Stock is a non-voting security, other than with respect to limited matters related to changes in terms of the Lucid Series A Preferred Stock. The aggregate gross proceeds from the sale of shares in such offering were $ 13.625 million. F- 33 Note 17 — Common Stock and Common Stock Purchase Warrants Common Stock In June 2022, the Company received shareholder approval to issue up to 250 million shares of its common stock, an increase of 100 million shares. In February 2023, the Company distributed a proxy statement for a special meeting of shareholders to be held on March 31, 2023 (the “Special Meeting”), at which the Company will be seeking approval of an amendment to the Company’s Certificate of Incorporation, to effect, at any time prior to the one-year anniversary date of the Special Meeting, (i) a reverse split of the Company’s outstanding shares of common stock at a specific ratio, ranging from 1-for-5 to 1-for-15 , to be determined by the board of directors of the Company in its sole discretion, and (ii) an associated reduction in the number of shares of common stock the Company is authorized to issue, from 250,000,000 shares to 50,000,000 shares. During the year ended December 31, 2022, 299,999 shares of common stock of the Company were issued upon exercise of stock options for cash of approximately $ 302 ; and during the year ended December 31, 2022 a total of 385,938 shares of common stock of the Company were issued under the PAVmed Inc. Employee Stock Purchase Plan (“ESPP”). See Note 15, Stock-Based Compensation , for a discussion of each of the PAVmed Inc. 2014 Equity Plan and the PAVmed Inc. ESPP. In the year ended December 31, 2022, 7,189,358 share of the Company’s common stock were issued upon conversion, at the election of the holder, of the April 2022 Senior Convertible Note and the September 2022 Senior Convertible Note, for $ 6,003 face value principal repayments, along with approximately $ 370 of interest thereon, as discussed in Note 14, Debt . In the year ended December 31, 2022, the Company sold 106,225 shares through their at-the-market equity facility for approximately $ 79 . Subsequent to December 31, 2022, through March 9, 2023, we sold 1,081,997 shares through the at-the-market equity facility for approximately $0.6 million . Common Stock Purchase Warrants As of December 31, 2022 and December 31, 2021, Series Z Warrants outstanding totaled 11,937,450 and 11,937,455 , respectively. 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 April 30, 2024 . During the year ended December 31, 2022, a total of 5 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. As of December 31, 2021, Series W Warrants outstanding totaled 377,873 . The remaining 377,873 Series W Warrants expired unexercised as of January 29, 2022 . F- 34 Note 18 — 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 December 31, 2022 December 31, 2021 NCI – equity (deficit) – beginning of period $ 17,752 $ ( 2,369 ) Investment in Veris Health Inc. — 6 Net loss attributable to NCI ( 14,255 ) ( 5,779 ) Impact of subsidiary equity transactions 28 16,760 Lucid Diagnostics Inc. proceeds from Committed Equity Facility, net of deferred financing charges 1,767 — Lucid Diagnostics Inc. issuance of common stock for settlement of APA-RDx installment payment 653 — Lucid Diagnostics Inc. 2018 Equity Plan stock option exercise 695 — Lucid Diagnostics Inc. Employee Stock Purchase Plan Purchase 109 — Stock-based compensation expense - Lucid Diagnostics Inc. 2018 Equity Plan 13,859 9,134 Stock-based compensation expense - Veris Health Inc. 2021 Equity Plan 7 — NCI – equity (deficit) – end of period $ 20,615 $ 17,752 The consolidated NCI presented above is with respect to the Company’s consolidated majority-owned subsidiaries as a component of consolidated total stockholders’ equity as of December 31, 2022 and December 31, 2021; and the recognition of a net loss attributable to the NCI in the consolidated statement of operations for the periods beginning on the acquisition date of the respective majority-owned subsidiaries. Lucid Diagnostics Inc. As of December 31, 2022, there were 40,518,792 shares of common stock of Lucid Diagnostics Inc. issued and outstanding, of which, PAVmed Inc. holds 31,302,420 shares, representing a majority ownership equity interest and PAVmed Inc. has a controlling financial interest in Lucid Diagnostics Inc., and accordingly, Lucid Diagnostics Inc. is a consolidated majority-owned subsidiary of PAVmed Inc. 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 the Company to raise primary equity capital on a periodic basis at prices based on the existing market price. As of December 31, 2022, under the committed equity facility, a total of 680,263 shares of common stock of Lucid Diagnostics Inc. were issued for proceeds of approximately $ 1,807 . In November 2022, Lucid Diagnostics also entered into an “at-the-market offering” for up to $6.5 million of its common stock that may be offered and sold under a Controlled Equity Offering Agreement between Lucid Diagnostics and Cantor Fitzgerald & Co. In the year ended December 31, 2022, there were no Lucid Diagnostics shares sold through their at-the-market equity facility. Subsequent to December 31, 2022, through March 9, 2023, Lucid Diagnostics sold 230,068 shares through its at-the-market equity facility for approximately $0.3 million. Veris Health Inc. As of December 31, 2022, 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 PAVmed Inc. 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, 2022 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. F- 35 Note 19 — Income Taxes Income tax (benefit) expense for respective periods noted is as follows: Schedule of Income Tax (Benefit) Expense Year Ended December 31, 2022 2021 Current Federal, State and Local $ — $ — Deferred Federal ( 24,265 ) ( 9,528 ) State and Local 11,124 ( 9,409 ) Current and Deferred tax (benefit) expense ( 13,141 ) ( 18,937 ) Less: Valuation allowance reserve 13,141 18,937 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 Year Ended December 31, 2022 2021 U.S. federal statutory rate 21.0 % 21.0 % U.S. state and local income taxes, net of federal benefit 6.6 % 13.2 % Permanent differences ( 1.0 )% ( 0.6 )% Tax credits 1.3 % — % Revaluation of state deferred taxes ( 15.2 ) % 0.1 % Valuation allowance ( 12.7 )% ( 33.7 )% 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 Year Ended December 31, 2022 2021 Deferred Tax Assets Net operating loss $ 37,032 $ 35,989 Debt issue costs 922 — Stock-based compensation expense 11,105 7,091 Lease liabilities 836 — Research and development expenditures 6,193 — Research and development tax credit carryforwards 1,719 428 Accrued expenses 311 897 Section 195 deferred start-up costs 15 16 Depreciation & amortization $ 221 $ — Deferred tax assets $ 58,354 $ 44,421 Deferred Tax Liabilities Operating lease right-of-use assets ( 850 ) — Depreciation — ( 22 ) Patent licenses — ( 36 ) Deferred Tax Liabilities $ ( 850 ) $ ( 58 ) Deferred tax assets, net of deferred tax liabilities 57,504 44,363 Less: valuation allowance ( 57,504 ) ( 44,363 ) Deferred tax assets, net after valuation allowance $ — $ — F- 36 Note 19 — 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, 2022 and 2021. As of December 31, 2022 and 2021, the deferred tax asset valuation allowance increased by $ 13,141 and $ 18,937 , respectively. The Company has total estimated federal net operating loss (“NOL”) carryforward of approximately $ 158.4 million and $ 104.1 million as of December 31, 2022 and 2021, respectively, which is available to reduce future taxable income, of which approximately $ 13.8 million have statutory expiration dates commencing in 2037 , and approximately $ 144.6 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 $ 157.8 million have statutory expiration dates commencing in 2037. The Company has total estimated research and development (“R&D”) tax credit carryforward of approximately $ 1.7 million as of December 31, 2022 which are available to reduce future tax expense and have statutory expiration dates commencing in 2037. 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. In August 2022, the U.S. Congress passed the Inflation Reduction Act, which included a corporate minimum tax on book earnings of 15%, an excise tax on corporate share repurchases of 1%, and certain climate change and energy tax credit incentives. The adoption of a corporate minimum tax of 15% is not expected to impact PAVmed’s effective tax rate. The excise tax of 1% on corporate share buybacks will not have an impact on the Company’s effective tax rate. F- 37 Note 20 — Net Loss Per Share The “Net loss per share - attributable to PAVmed Inc. - basic and diluted” and “Net loss per share - attributable to PAVmed Inc. common stockholders - basic and diluted” - for the respective periods indicated - is as follows: Schedule of Comparison of Basic and Fully Diluted Net Loss Per Share Years Ended December 31, 2022 2021 Numerator Net loss - before noncontrolling interest $ ( 103,238 ) $ ( 56,126 ) Net loss attributable to noncontrolling interest 14,255 5,779 Net loss - as reported, attributable to PAVmed Inc. $ ( 88,983 ) $ ( 50,347 ) Series B Convertible Preferred Stock dividends – earned $ ( 281 ) $ ( 283 ) Net loss attributable to PAVmed Inc. common stockholders $ ( 89,264 ) $ ( 50,630 ) Denominator Weighted average common shares outstanding, basic and diluted 89,076,078 77,515,767 Net loss per share Basic and diluted Net loss - as reported, attributable to PAVmed Inc. $ ( 1.00 ) $ ( 0.65 ) Net loss attributable to PAVmed Inc. common stockholders $ ( 1.00 ) $ ( 0.65 ) 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 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, 2022 and 2021 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 of 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 December 31, 2022 2021 Stock options and restricted stock awards 12,543,655 10,386,864 Series Z Warrants 11,937,450 11,937,455 Series W Warrants — 377,873 Series B Convertible Preferred Stock 1,205,759 1,113,919 Total 25,686,864 23,816,111 The total stock options and restricted stock awards are inclusive of 500,854 stock options as of December 31, 2022 and 2021; and 100,000 restricted stock awards as of December 31, 2022 and 2021, granted outside the PAVmed Inc. 2014 Equity Plan. F- 38