PAVmed Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our unaudited condensed consolidated financial condition and results of operations should be read together with our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”), as filed with the Securities and Exchange Commission (the “SEC”). Unless the context otherwise requires, (i) “we”, “us”, and “our”, and the “Company” and “PAVmed” refer to PAVmed Inc. and its subsidiaries, including its majority-owned subsidiary Lucid Diagnostics Inc. (“Lucid Diagnostics” or “Lucid”) and its majority-owned subsidiary Veris Health Inc. (“Veris Health” or “Veris”), (ii) “FDA” refers to the Food and Drug Administration, (iii) “510(k)” refers to a premarket notification, submitted to the FDA by a manufacturer pursuant to § 510(k) of the Food, Drug and Cosmetic Act and 21 CFR § 807 subpart E, (iv) “CLIA” refers to the Clinical Laboratory Improvement Amendments of 1988 and associated regulations set forth in 42 CFR § 493, and (v) “LDT” refers to a diagnostic test, defined by the FDA as “an IVD that is intended for clinical use and designed, manufactured and used within a single laboratory,” which is generally subject only to self-certification of analytical validity under the CMS CLIA program. FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q (this “Form 10-Q”), including the following discussion and analysis of our unaudited condensed consolidated financial condition and results of operations, contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from those expressed or implied in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Item 1A of Part I of the Form 10-K under the heading “Risk Factors.” Important factors that may affect our actual results include: ● our limited operating history; ● our financial performance, including our ability to generate revenue; ● our ability to obtain regulatory approval for the commercialization of our products; ● the risk that the FDA will cease to exercise enforcement discretion with respect to LDTs, like EsoGuard; ● the ability of our products to achieve market acceptance; ● our success in retaining or recruiting, or changes required in, our officers, key employees or directors; ● our potential ability to obtain additional financing when and if needed; ● our ability to protect our intellectual property; ● our ability to complete strategic acquisitions; ● our ability to manage growth and integrate acquired operations; ● the potential liquidity and trading of our securities; ● our regulatory and operational risks; ● cybersecurity risks; ● risks related to the COVID-19 pandemic and other health-related emergencies; and ● our estimates regarding expenses, future revenue, capital requirements and needs for additional financing. In addition, our forward-looking statements do not reflect the potential impact of any future financings, acquisitions, mergers, dispositions, joint ventures or investments we may make. We may not actually achieve the results, plans, and/or objectives disclosed in our forward-looking statements, and the intended or expected developments and/or other events disclosed in our forward-looking statements may not actually occur, and accordingly you should not place undue reliance on our forward-looking statements. You should read this Form 10-Q and the documents we have filed as exhibits to this Form 10-Q and the Form 10-K completely and with the understanding our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Overview PAVmed is structured to be a multi-product life sciences company organized to advance a pipeline of innovative healthcare technologies. Led by a team of highly skilled personnel with a track record of bringing innovative products to market, PAVmed is focused on innovating, developing, acquiring, and commercializing novel products that target unmet needs with large addressable market opportunities. Leveraging our corporate structure—a parent company that will establish distinct subsidiaries for each financed asset—we have the flexibility to raise capital at the PAVmed level to fund product development, or to structure financing directly into each subsidiary in a manner tailored to the applicable product, the latter of which is our current strategy given prevailing market conditions. 28 Our current focus is multi-fold. We continue to pursue commercial expansion and execution of EsoGuard, which is the flagship product of our majority-owned subsidiary Lucid Diagnostics Inc. (Nasdaq: LUCD) (“Lucid” or “Lucid Diagnostics”). In addition, through a separate majority-owned subsidiary, Veris Health Inc. (“Veris” or “Veris Health”), we are focused on entering into strategic partnership opportunities with leading academic oncology systems to expand access to the Veris Platform. In terms of other existing products and technologies, we have created an incubator-type platform where we are looking to obtain financing on a product-by-product basis as necessary to advance each asset to a meaningful inflection point along its path to commercialization. Finally, as resources permit, we will continue to explore external innovations that fulfill our project selection criteria without limiting ourselves to any target sector, specialty or condition. See Part I, Item 1, “Business”, in the Form 10-K for a more detailed summary of the medical device, diagnostics, and digital health sectors and our key products, including in particular EsoGuard and the Veris Platform, which are currently our two leading products. Recent Developments Business Management Services Agreement/Payroll Benefits and Expense Reimbursement Agreement with Lucid Diagnostics On March 22, 2024, PAVmed and Lucid entered into an eighth amendment to the the management services agreement between PAVmed and Lucid (“MSA”) to increase the monthly fee thereunder from $0.75 million per month to $0.83 million per month, effective as of January 1, 2024. The amendment also reset the maximum number of shares issuable under the agreement to 19.99% of the shares outstanding as of the date of the amendment. On January 26, 2024, in accordance with the MSA and the payroll, benefits and expense reimbursement agreement between PAVmed and Lucid (“PBERA”), PAVmed elected to receive payment of approximately $4.7 million of fees and reimbursements accrued under the MSA and the PBERA through the issuance of 3,331,771 shares of Lucid’s common stock. PAVmed Distribution of Lucid Diagnostics Common Stock to Shareholders On February 15, 2024, the Company distributed by special dividend to the Company stockholders 3,331,747 shares of Lucid Diagnostics common stock held by the Company. On such date, each PAVmed shareholder as of the January 15, 2024 record date received a stock dividend of approximately 38 shares of Lucid common stock for every 100 shares of PAVmed common stock they held as of such date. The shares distributed were approximately equal to the number of shares of common stock that Lucid issued to PAVmed on or about January 26, 2024 in satisfaction of certain intercompany obligations due to Lucid from PAVmed, as discussed above. This distribution constituted an “Extraordinary Dividend” as defined in the warrant agreement that governs the Company’s Series Z Warrants. As a result, pursuant to the warrant agreement, the exercise price under the Series Z Warrants per full share of PAVmed common stock was automatically decreased by $0.52 (the fair market value of 0.37709668 of a share of Lucid Diagnostics’ common stock as of the date of the distribution) to $23.48 per share. Nasdaq Notice On March 7, 2024, the Company received a notice from the Nasdaq Listing Qualifications Department stating that, for the preceding 30 consecutive business days (through March 6, 2024), the market value of the Company’s listed securities (“MVLS”) had been below the minimum of $35 million required for continued inclusion on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(2). The notification letter stated that the Company would be afforded 180 calendar days (until September 3, 2024) to regain compliance. In order to regain compliance, the Company’s MVLS must close at $35 million or more for a minimum of ten consecutive business days. The notification letter also states that in the event the Company does not regain compliance prior to the expiration of the 180-day period, the Company will receive written notification that its securities are subject to delisting. The Nasdaq notification has no effect at this time on the listing of the Company’s common stock or Series Z warrants, and the stock and warrants will continue to trade uninterrupted under the symbol “PAVM” and “PAVMZ”, respectively. 29 Business - continued Incubator Program On March 21, 2024, the Company announced that it has launched a wholly owned incubator, PMX, to complete development and commercialization of existing portfolio technologies, including PortIO, EsoCure and CarpX. PMX and Hatch Medical, L.L.C. (“Hatch Medical”), a medical device incubator and technology brokerage firm, have executed a joint venture agreement to advance the technologies. Pursuant to the joint venture agreement, PAVmed will assign PortIO, EsoCure and CarpX to its wholly owned incubator, PMX. Starting with PortIO, the Company will seek to independently finance a separate subsidiary of the incubator to develop and commercialize each technology. Hatch Medical will provide strategic advisory and brokerage services to the subsidiary to advance the technology through key milestones and, subsequently, seek to engage a strategic partner to acquire, license or distribute the commercial product. Veris Cancer Care Platform On April 30, 2024, we announced that Veris and a National Cancer Institute-Designated Comprehensive Cancer Center had executed a memorandum of understanding to implement a pilot program where cancer patients would be enrolled on the Veris Cancer Care Platform. FDA Enforcement Discretion In April 2024, FDA published the final rule under which FDA intends to phase out its general enforcement discretion approach for LDTs so that IVDs manufactured by a laboratory would generally fall under the same enforcement approach as other IVDs (the proposed rule was published in October 2023). In the final rule, FDA has expanded the categories of LDTs that will be eligible for continued enforcement discretion, which categories include LDTs first marketed prior to May 6, 2024 and LDTs approved by New York State’s Clinical Laboratory Evaluation Program (NYS CLEP). As EsoGuard was marketed prior to the cutoff date, and is also NYS CLEP-approved, EsoGuard will remain under continued enforcement discretion from FDA’s premarket review requirements and quality systems requirements (except for record-keeping). As such, there is no immediate impact from the final rule on Lucid’s regulatory strategy. Financing Extension of Senior Convertible Notes Effective as of March 12, 2024, the Company entered into an amendment and waiver (the “Note Amendment and Waiver”) with the holder of the April 2022 Senior Convertible Note and the September 2022 Senior Convertible Note (each such term as defined below). Pursuant to the Note Amendment and Waiver, the maturity date of the April 2022 Senior Convertible Note was extended to April 4, 2025 and the maturity date of the September 2022 Senior Convertible Note was extended to September 8, 2025, in each case subject to further extension in certain circumstances. The holder of the such note also waived, for the period commencing on December 1, 2023 and ending on August 31, 2024, the financial covenant contained in such notes requiring that the ratio of (a) the outstanding principal amount of the notes, 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, not exceed 30%, and that the Company’s market capitalization not be less than $75 million. In consideration of the Note Amendment and Waiver, the Company agreed to pay the holder of the notes $2.0 million in cash (or in such other form as may be mutually agreed in writing) by April 25, 2024, which has been extended to June 15, 2024. See our accompanying unaudited condensed consolidated financial statements Note 10, Debt , for further discussion of the senior convertible notes. 30 Financing - continued Lucid Diagnostics - Preferred Stock Offerings On March 13, 2024, Lucid entered into subscription agreements (each, a “Lucid Series B Subscription Agreement”) and exchange agreements (each, a “Lucid Series B Exchange Agreement”) with certain accredited investors (collectively, the “Lucid Series B Investors”), which agreements provided for (i) the sale to the Series B Investors of 12,495 shares of Lucid’s newly designated Series B Convertible Preferred Stock, par value $0.001 per share (the “Lucid Series B Preferred Stock”), at a purchase price of $1,000 per share, and (ii) the exchange by the Lucid Series B Investors of 13,625 shares of Lucid’s Series A Convertible Preferred Stock, par value $0.001 per share (the “Lucid Series A Preferred Stock”), and 10,670 shares of Lucid’s Series A-1 Convertible Preferred Stock, par value $0.001 per share (the “Lucid Series A-1 Preferred Stock”), held by them for 31,790 shares of Lucid Series B Preferred Stock (collectively, the “Lucid Series B Offering and Exchange”). Prior to the execution of the Lucid Series B Subscription Agreements and the Lucid Series B Exchange Agreements, Lucid entered into subscription agreements with certain of the Lucid Series B Investors providing for the sale to such investors of 5,670 shares of Lucid Series A-1 Preferred Stock, at a purchase price of $1,000 per share, which shares the investors immediately agreed to exchange for shares of Lucid Series B Preferred Stock pursuant to the Lucid Series B Exchange Agreements (and are included in the 10,670 shares of Lucid Series A-1 Preferred Stock set forth above). Each share of the Lucid Series B Preferred Stock has a stated value of $1,000 and a conversion price of $1.2444. The terms of the Lucid Series B 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 B Preferred Stock is convertible, payable on the one-year and two-year anniversary of the issuance date. The holders of the Lucid Series B Preferred Stock also will be entitled to dividends equal, on an as-if-converted to shares of Lucid common stock basis, to and in the same form as dividends actually paid on shares of Lucid common stock when, as, and if such dividends are paid on shares of Lucid common stock. The Lucid Series B Preferred Stock is a voting security. The aggregate gross proceeds to Lucid of these transactions was $18.16 million (inclusive of $5.67 million of aggregate gross proceeds from the sale of the Lucid Series A-1 Preferred Stock that was immediately exchanged for Lucid Series B Preferred Stock in the transactions). As a result of 100% of the then-outstanding shares of Lucid Series A Preferred Stock and Lucid Series A-1 Preferred Stock being exchanged for shares of Lucid Series B Preferred Stock in the Lucid Series B Offering and Exchange, no shares of Lucid Series A Preferred Stock or Lucid Series A-1 Preferred Stock remain outstanding. On May 6, 2024, Lucid issued approximately 11,634 shares of newly designated Lucid Series B-1 Convertible Preferred Stock (the “Lucid Series B-1 Preferred Stock”). The terms of the Lucid Series B-1 Preferred Stock are substantially identical to the terms of the Lucid Series B Preferred Stock, except that the Lucid Series B-1 Preferred Stock has a conversion price of $0.7228. The aggregate gross proceeds from the sale of shares in such offering were $11.6 million. PAVmed - ATM Facility In December 2021, we entered into an “at-the-market offering” for up to $50 million of our common stock that may be offered and sold under a Controlled Equity Offering Agreement between us and Cantor Fitzgerald & Co. (“Cantor”). In March 2023, the “at-the-market offering” became subject to General Instruction I.B.6 of Form S-3, which limits sales of our securities under this instruction in any 12-month period to one-third of the aggregate market value of our public float (unless our public float rises to $75 million or more, in which case the instruction will cease to apply). As a result of this limitation and our then-current public float, in May 2023, we amended our “at-the-market offering” to cover up to $18 million of our common stock. In the three month period ended March 31, 2024, the Company sold 133,299 shares through its at-the-market equity facility for net proceeds of approximately $0.5 million, after payment of 3% commissions. Lucid Diagnostics - Committed Equity Facility and ATM Facility In March 2022, Lucid Diagnostics entered into a committed equity facility with a Cantor affiliate. Under the terms of the committed equity facility, the Cantor affiliate has committed to purchase up to $50 million of Lucid Diagnostics’ common stock from time to time at Lucid Diagnostics’ request. While there are distinct differences, the committed equity facility is structured similarly to a traditional at-the-market equity facility, insofar as it allows Lucid Diagnostics to raise primary equity capital on a periodic basis at prices based on the existing market price. Cumulatively, a total of 680,263 shares of Lucid Diagnostics’ common stock were issued for net proceeds of approximately $1.8 million, after a 4% discount, as of March 31, 2024. 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. Cumulatively, a total of 230,068 shares of Lucid Diagnostics’ common stock were issued through its at-the-market equity facility for net proceeds of approximately $0.3 million, after payment of 3% commissions, as of March 31, 2024. 31 Results of Operations Overview Revenue The Company recognized revenue resulting from the delivery of patient EsoGuard test results when the Company considered the collection of such consideration to be probable to the extent that it is unconstrained. Cost of revenue Cost of revenues recognized from the delivery of patient EsoGuard test results includes costs related to EsoCheck device usage, shipment of test collection kits, royalties and the cost of services to process tests and provide results to physicians. We incur expenses for tests in the period in which the activities occur, therefore, gross margin as a percentage of revenue may vary from quarter to quarter due to costs being incurred in one period that relate to revenues recognized in a later period. We expect that gross margin for our services will continue to fluctuate and be affected by EsoGuard test volume, our operating efficiencies, patient compliance rates, payer mix, the levels of reimbursement, and payment patterns of payers and patients. Sales and marketing expenses Sales and marketing expenses consist primarily of salaries and related costs for employees engaged in sales, sales support and marketing activities, as well as advertising and promotion expenses. We anticipate our sales and marketing expenses will increase in the future, to the extent we expand our commercial sales and marketing operations as resources permit and insurance reimbursement coverage for our EsoGuard test expands. General and administrative expenses General and administrative expenses consist primarily of salaries and related costs for personnel, travel expenses, facility-related costs, professional fees for accounting, tax, audit and legal services, salaries and related costs for employees involved in third-party payor reimbursement contract negotiations and consulting fees and other expenses associated with obtaining and maintaining patents within our intellectual property portfolio. We anticipate our general and administrative expenses will increase in the future to the extent our business operations grow. Furthermore, we anticipate continued expenses related to being a public company, including fees and expenses for audit, legal, regulatory, tax-related services, insurance premiums and investor relations costs associated with maintaining compliance as a public company. Research and development expenses Research and development expenses are recognized in the period they are incurred and consist principally of internal and external expenses incurred for the development of our products, including: ● consulting costs for engineering design and development; ● salary and benefit costs associated with our medical research personnel and engineering personnel; ● costs associated with regulatory filings; ● patent license fees; ● cost of laboratory supplies and acquiring, developing, and manufacturing preclinical prototypes; ● product design engineering studies; and ● expenses for facilities maintained solely for research and development purposes. Our current research and development activities, including our clinical trials, are focused principally on the acceleration of EsoGuard and Veris Cancer Care Platform commercialization. We will resume research and development activities with respect to other products in our pipeline as well as applicable new technologies, as resources permit. Other Income and Expense, net Other income and expense, net, consists principally of changes in fair value of our convertible notes and losses on extinguishment of debt upon repayment of such convertible notes. Presentation of Dollar Amounts All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are presented as dollars in millions, except for share and per share amounts. 32 Results of Operations - continued The three months ended March 31, 2024 as compared to three months ended March 31, 2023 Revenue In the three months ended March 31, 2024, revenue was $1.0 million as compared to $0.4 million for the corresponding period in the prior year. The $0.6 million increase principally relates to the revenue for our EsoGuard Esophageal DNA Test performed in our own CLIA laboratory. Cost of revenue In the three months ended March 31, 2024, cost of revenue was approximately $1.7 million as compared to $1.3 million for the corresponding period in the prior year. The $0.4 million increase was principally related to: ● approximately $0.2 million increase in EsoCheck and EsoGuard supplies costs; and ● approximately $0.2 million increase in compensation related costs, including stock-based compensation. Sales and marketing expenses In the three months ended March 31, 2024, sales and marketing costs were approximately $4.3 million as compared to $4.5 million for the corresponding period in the prior year. The net decrease of $0.2 million was principally related to: ● approximately $0.1 million decrease in compensation related costs; and ● approximately $0.1 million increase in third party marketing costs. General and administrative expenses In the three months ended March 31, 2024, general and administrative costs were approximately $6.7 million as compared to $10.4 million for the corresponding period in the prior year. The net decrease of $3.7 million was principally related to: ● approximately $2.5 million decrease in stock-based compensation, related to decreases at both PAVmed and Lucid; and ● approximately $1.2 million decrease in third-party professional fees and expenses related to legal services and consulting fees. Research and development expenses In the three months ended March 31, 2024, research and development costs were approximately $1.9 million as compared to $4.1 million for the corresponding period in the prior year. The net decrease of $2.2 million was principally related to: ● approximately $1.5 million decrease in development costs, particularly in clinical trials activities and outside professional and consulting fees; and ● approximately $0.5 million decrease in compensation related costs. Amortization of Acquired Intangible Assets The amortization of acquired intangible assets was approximately $0.4 million in the three months ended March 31, 2024, as compared to $0.5 million for the corresponding period in the prior year. The decrease of $0.1 million in the current period was due to certain acquired intangible assets being fully amortized in February 2024. 33 Results of Operations - continued The three months ended March 31, 2024 as compared to three months ended March 31, 2023 - continued Other Income and Expense Change in fair value of convertible debt In the three months ended March 31, 2024 and March 31, 2023, the change in the fair value of our convertible notes was approximately $2.2 million and $1.0 million of expense, respectively, related to the April 2022 Senior Convertible Note, the September 2022 Senior Convertible Note, and the Lucid March 2023 Senior Convertible Note (as defined in Note 10, Debt , to our accompanying unaudited condensed consolidated financial statements). The April 2022 Senior Convertible Note, the September 2022 Senior Convertible Note, and the Lucid March 2023 Senior Convertible Note were initially measured at their issue-date estimated fair value and subsequently remeasured at estimated fair value as of each reporting period date. The Company initially recognized an aggregate of $4.3 million of fair value non-cash expense on the issue dates. Loss on Issue and Offering Costs - Senior Secured Convertible Note In the three months ended March 31, 2023, in connection with the issue of the Lucid March 2023 Senior Convertible Note, we recognized a total of approximately $1.2 million of lender fees and offering costs. The Company did not incur lender fees and offering costs in the three months ended March 31, 2024. Loss on Debt Extinguishment In the three months ended March 31, 2024, a debt extinguishment loss in the aggregate of approximately $0.4 million was recognized in connection with our April 2022 Senior Convertible Note and September 2022 Senior Convertible Note as discussed below. ● In the three months ended March 31, 2024, approximately $0.3 million of principal repayments along with less than $0.1 million of interest expense thereon, were settled through the issuance of 112,461 shares of common stock of the Company, with such shares having a fair value of approximately $0.3 million (with such fair value measured as the quoted closing price of the common stock of the Company on the respective conversion date). In addition, the Company paid $0.2 million in cash related to acceleration floor payments on these notes related to the conversion price being below $2.70, recorded as debt extinguishment loss. The conversions and cash paid resulted in a debt extinguishment loss of $0.2 million in the three months ended March 31, 2024. In comparison, in the three months ended March 31, 2023, a debt extinguishment loss in the aggregate of approximately $0.5 million was recognized in connection with our April 2022 Senior Convertible Note as discussed below. ● In the three months ended March 31, 2023, approximately $1.5 million of principal repayments along with less than $0.1 million of interest expense thereon, were settled through the issuance of 288,709 shares of common stock of the Company, with such shares having a fair value of approximately $2.0 million (with such fair value measured as the quoted closing price of the common stock of the Company on the respective conversion date). The conversions resulted in a debt extinguishment loss of $0.5 million in the three months ended March 31, 2023. See Note 10 , Debt , to the Financial Statements, for additional information with respect to the April 2022 Senior Convertible Note, the September 2022 Senior Convertible Note, and the Lucid March 2023 Senior Convertible Note. Deemed Dividend on Series A and Series A-1 Convertible Preferred Stock Exchange Offer The fair value of the consideration given in the form of the issue of 44,285 shares of Lucid Series B Preferred Stock, with such fair value recognized as the carrying value of such issued shares of Lucid Series B Preferred Stock, as compared to both the newly issued Lucid Series B Preferred Stock (fair value of $12.5 million) and the carrying value of the extinguished Lucid Series A and Series A-1 Preferred Stock (carrying value of $24.3 million), resulting in an excess of fair value of $7.5 million recognized as a deemed dividend charged to accumulated deficit in the unaudited condensed consolidated balance sheet on March 13, 2024, with such deemed dividend included as a component of net loss attributable to common stockholders, summarized as follows: Series B Convertible Preferred Stock Issuance and Series A/A-1 Exchange Offer March 13, 2024 Fair Value - 44,285 shares of Series B Preferred Stock issued $ 44,285 Less: Fair value related to newly issued Series B Preferred Stock (of 12,495 shares) (12,495 ) Less: Carrying value related to Series A and Series A-1 Preferred Stock Exchanged for Series B Preferred Stock (of 24,295 shares) (24,295 ) Deemed Dividend Charged to Accumulated Deficit $ 7,495 34 Liquidity and Capital Resources Our current financing strategy is to obtain capital directly into Lucid, Veris and other subsidiaries to fund any product development or other related activities. There are no assurances, however, we will be able to obtain an adequate level of financial resources required for the short-term or long-term commercialization and development of our products and services. We have financed our operations principally through the public and private issuances of our common stock, preferred stock, common stock purchase warrants, and debt. We are subject to all of the risks and uncertainties typically faced by medical device and diagnostic and medical device companies that devote substantially all of their efforts to the commercialization of their initial product and services and ongoing R&D and clinical trials. We experienced a net loss before noncontrolling interests of approximately $18.5 million and used approximately $13.1 million of cash in operations for the three months ended March 31, 2024. Financing activities provided $19.0 million of cash during the three months ended March 31, 2024. We ended the quarter with cash on-hand of $25.5 million as of March 31, 2024. We expect to continue to experience recurring losses and negative cash flows from operations, and will continue to fund our operations with debt and/or equity financing transactions, including current obligations on the Company’s existing convertible debt which in accordance with management’s plans may include conversions to equity and refinancing our existing debt obligations to extend the maturity date. The Company’s ability to continue operations 12 months beyond the issuance of the financial statements will depend upon generating substantial revenue that is conditioned on obtaining positive third-party reimbursement coverage for its EsoGuard Esophageal DNA Test from both government and private health insurance providers, increasing revenue through contracting directly with self-insured employers, and on its ability to raise additional capital through various potential sources including equity and/or debt financings or refinancing existing debt obligations. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the accompanying unaudited condensed consolidated financial statements are issued. Issue of Shares of Our Common Stock During the three months ended March 31, 2024 ● We issued 34,332 shares of our common stock for proceeds of approximately $0.1 million under the PAVmed Employee Stock Purchase Plan (“ESPP”), as such plan is discussed in Note 11, Stock-Based Compensation, to the Financial Statements. ● We issued 133,299 shares of our common stock for net proceeds of approximately $0.5 million, after payment of 3% commissions, from the sale of shares through PAVmed’s at-the-market equity facility through Cantor. See below for more information. ● We issued 112,461 shares of our common stock in satisfaction of approximately $0.3 million of principal repayments along with less than $0.1 million of interest expense thereon under the April 2022 Senior Convertible Note and September 2022 Senior Convertible Note. Securities Purchase Agreement - March 31, 2022 - Senior Secured Convertible Notes - April 4, 2022 and September 8, 2022 Effective as of March 31, 2022, we entered into the SPA with an accredited investor, pursuant to which we agreed to sell, and the investor agreed to purchase an aggregate of $50.0 million face value principal of Senior Secured Convertible Notes. The SPA provided for the sale of the initial Senior Secured Convertible Note with a face value principal of $27.5 million, which closed on April 4, 2022 (referred to as the “April 2022 Senior Convertible Note”). The April 2022 Senior Secured Convertible Note had an initial contractual maturity date of April 4, 2024, which maturity date the investor agreed to extend by one year, to April 4, 2025. The April 2022 Senior Convertible Note may be converted into or otherwise paid in shares of our common stock as described in Note 10 , Debt . On September 8, 2022, we completed an additional closing under the SPA, in which we sold to the investor an additional Senior Secured Convertible Note with a face value principal of $11.25 million (referred to as the “September 2022 Senior Convertible Note”). The September 2022 Senior Secured Convertible Note had an initial contractual maturity date of September 6, 2024, which maturity date the investor agreed to extend by one year, to September 8, 2025. The September 2022 Senior Convertible Note may be converted into or otherwise paid in shares of our common stock as described in Note 10 , Debt . Under the April 2022 Senior Convertible Note, the September 2022 Senior Convertible Note and the SPA, we are subject to certain customary affirmative and negative covenants regarding the incurrence of indebtedness, the existence of liens, the repayment of indebtedness and the making of investments, the payment of cash in respect of dividends, distributions or redemptions, the transfer of assets, the maturity of other indebtedness, and transactions with affiliates, among other customary matters. We also are subject to financial covenants requiring that (i) the amount of our available cash equal or exceed $8.0 million at all times, (ii) the ratio of (a) the outstanding principal amount of the notes issued under the SPA, accrued and unpaid interest thereon and accrued and unpaid late charges to (b) our average market capitalization over the prior ten trading days, not exceed 30% (the “Debt to Market Cap Ratio Test”), and (iii) that our market capitalization shall 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 December 1, 2023 through March 12, 2024, the Company was not in compliance with the Financial Tests. As of March 12, 2024, the investor agreed to waive any such non-compliance during such time period and thereafter through August 31, 2024. Based on the waiver, as of March 31, 2024, the Company was in compliance with the Financial Tests. In addition, based on the waiver, the Company presently is in compliance with the Financial Tests. In consideration of the covenant waiver and maturity extensions discussed above, the Company agreed to pay the holder of the notes $2.0 million in cash (or in such other form as may be mutually agreed in writing) by April 25, 2024, which has been extended to June 15, 2024. See Note 10 , Debt , to the Financial Statements for additional information about the SPA, the April 2022 Senior Convertible Note, and the September 2022 Senior Convertible Note. 35 Liquidity and Capital Resources - continued Lucid Diagnostics - Preferred Stock Offerings On March 13, 2024, Lucid entered into Lucid Series B Subscription Agreements and Lucid Series B Exchange Agreements with teh Lucid Series B Investors, which agreements provided for (i) the sale to the Lucid Series B Investors of 12,495 shares of newly designated Lucid Series B Preferred Stock, at a purchase price of $1,000 per share, and (ii) the exchange by the Lucid Series B Investors of 13,625 shares of Lucid Series A Preferred Stock, and 10,670 shares of Lucid Series A-1 Preferred Stock held by them for 31,790 shares of Lucid Series B Preferred Stock. Prior to the execution of the Lucid Series B Subscription Agreements and the Lucid Series B Exchange Agreements, Lucid entered into subscription agreements with certain of the Lucid Series B Investors providing for the sale to such investors of 5,670 shares of Lucid Series A-1 Preferred Stock, at a purchase price of $1,000 per share, which shares the investors immediately agreed to exchange for shares of Lucid Series B Preferred Stock pursuant to the Lucid Series B Exchange Agreements (and are included in the 10,670 shares of Lucid Series A-1 Preferred Stock set forth above). Each share of the Lucid Series B Preferred Stock has a stated value of $1,000 and a conversion price of $1.2444. The terms of the Lucid Series B 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 B Preferred Stock is convertible, payable on the one-year and two-year anniversary of the issuance date. The holders of the Lucid Series B Preferred Stock also will be entitled to dividends equal, on an as-if-converted to shares of Lucid common stock basis, to and in the same form as dividends actually paid on shares of the Lucid common stock when, as, and if such dividends are paid on shares of the Lucid common stock. The Lucid Series B Preferred Stock is a voting security. The aggregate gross proceeds to Lucid of these transactions was $18.16 million (inclusive of $5.67 million of aggregate gross proceeds from the sale of the Lucid Series A-1 Preferred Stock that was immediately exchanged for Lucid Series B Preferred Stock in the transactions). As a result of 100% of the then-outstanding shares of Lucid Series A Preferred Stock and Lucid Series A-1 Preferred Stock being exchanged for shares of Lucid Series B Preferred Stock in the Lucid Series B Offering and Exchange, no shares of Lucid Series A Preferred Stock or Lucid Series A-1 Preferred Stock remain outstanding. On May 6, 2024, Lucid issued approximately 11,634 shares of newly designated Lucid Series B-1 Preferred Stock. The terms of the Lucid Series B-1 Preferred Stock are substantially identical to the terms of the Lucid Series B Preferred Stock, except that the Lucid Series B-1 Preferred Stock has a conversion price of $0.7228. The aggregate gross proceeds from the sale of shares in such offering were $11.6 million. Lucid Diagnostics - Securities Purchase Agreement - March 13, 2023 - Senior Secured Convertible Note - March 21, 2023 Effective as of March 13, 2023, Lucid Diagnostics entered into the Lucid SPA with an accredited institutional investor, pursuant to which Lucid Diagnostics agreed to sell, and the investor agreed to purchase the Lucid March 2023 Senior Convertible Note with a face value principal of $11.1 million. Lucid Diagnostics issued the Lucid March 2023 Senior Convertible Note on March 21, 2023 pursuant to the Lucid SPA. Under the Lucid March 2023 Senior Convertible Note, Lucid Diagnostics is subject to certain customary affirmative and negative covenants regarding the incurrence of indebtedness, the existence of liens, the repayment of indebtedness and the making of investments, the payment of cash in respect of dividends, distributions or redemptions, the transfer of assets, the maturity of other indebtedness, and transactions with affiliates, among other customary matters. Under the Lucid March 2023 Senior Convertible Note, Lucid Diagnostics is also subject to financial covenants requiring that (i) the amount of its available cash equal or exceed $5.0 million at all times, (ii) the ratio of (a) the outstanding principal amount of the notes issued under the Lucid SPA, accrued and unpaid interest thereon and accrued and unpaid late charges, as of the last day of any fiscal quarter commencing with September 30, 2023, to (b) Lucid Diagnostics’ average market capitalization over the prior ten trading days, not exceed 30%, and (iii) that Lucid Diagnostics’ market capitalization shall at no time be less than $30 million (the “Lucid Financial Tests”). As of March 31, 2024, Lucid Diagnostics was in compliance with the Lucid Financial Tests. In addition, Lucid Diagnostics presently is in compliance with the Lucid Financial Tests. PAVmed Inc. ATM Facility In December 2021, we entered into an “at-the-market offering” for up to $50 million of our common stock that may be offered and sold under a Controlled Equity Offering Agreement between us and Cantor. In the three month period ended March 31, 2024, the Company sold 133,299 shares through its at-the-market equity facility for net proceeds of approximately $0.5 million, after payment of 3% commissions. Lucid Diagnostics Inc. - Committed Equity Facility and ATM Facility In March 2022, Lucid Diagnostics entered into a committed equity facility with a Cantor affiliate. Cumulatively, a total of 680,263 shares of Lucid Diagnostics’ common stock were issued for net proceeds of approximately $1.8 million, after a 4% discount, as of March 31, 2024. 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. Cumulatively, a total of 230,068 shares of Lucid Diagnostics’ common stock were issued through its at-the-market equity facility for net proceeds of approximately $0.3 million, after payment of 3% commissions, as of March 31, 2024. 36 Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the amounts reporting in our unaudited condensed consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and judgements. In accordance with U.S. GAAP, we base our estimates on historical experience and on various other factors that are believed to be appropriate under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies are as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on March 25, 2024. There have been no material changes to our critical accounting policies and estimates in the three months ended March 31, 2024.