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, 2024 (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 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 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 results, 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 Quarterly Report on 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. 32 Overview PAVmed is 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. Our current focus is multi-fold. We continue to support commercial expansion and execution of EsoGuard, which is the flagship product of our subsidiary, Lucid Diagnostics, of which we remain the shareholder with the largest voting interest. In addition, through a separate majority-owned subsidiary, Veris Health, we offer the Veris Cancer Care Platform. We are focused in the immediate term on entering into strategic partnership opportunities with leading academic oncology systems to expand access to the Veris Cancer Care Platform, while concurrently developing an implantable physiological monitor, designed to be implanted alongside a chemotherapy port, which will interface with the Veris Cancer Care Platform. In terms of other existing products and technologies, we have adopted an incubator-type platform, PMX, 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. Recent Developments Business EsoGuard Medicare Coverage In November 2024, Lucid submitted to MolDx its complete clinical evidence package in support of a request for reconsideration of the non-coverage language in the LCD to secure Medicare coverage for EsoGuard. The EsoGuard clinical evidence package included six new peer-reviewed publications: three clinical validation studies (two in the intended use population, one case control), two clinical utility studies, and one analytical validation study. The current LCD provides clear coverage criteria consistent with the American College of Gastroenterology (ACG) guidelines for esophageal precancer testing. The package was submitted as part of a request for reconsideration of the non-coverage language in the LCD to secure Medicare coverage for EsoGuard. As part of the LCD reconsideration process, MolDX-participating Medicare Administrative Contractors are scheduled to convene a Contractor Advisory Committee (CAC) Meeting regarding the LCD on September 4, 2025. Russell 2000® and 3000® Indexes On June 27, 2025, Lucid was added to the Russell 2000® Index and the Russell 3000® Index, following the 2025 annual reconstitution by FTSE Russell. 33 Recent Developments - continued Business - continued Hoag Comprehensive Esophageal Precancer Testing Program Using EsoGuard On June 18, 2025, Lucid announced that Hoag, a nationally recognized regional healthcare delivery network, launched a comprehensive, integrated esophageal precancer testing program using Lucid’s EsoGuard® Esophageal DNA Test. Lucid will partner with Hoag to offer EsoGuard testing across its digestive health, primary care, and concierge medicine programs. NCCN Clinical Practice Guidelines Update In March 2025, Lucid announced that a recent update to the National Comprehensive Cancer Network® (NCCN) Clinical Practice Guidelines in Oncology (NCCN Guidelines®) focused on Esophageal and Esophagogastric Junction Cancers (Version 1.2025) has added a new section on BE screening. The NCCN Guidelines® now reference professional society guidelines on BE screening, including the most recent ACG clinical guideline discussed above, which recommends non-endoscopic biomarker testing, such as EsoGuard performed on samples collected with EsoCheck, as an acceptable alternative to invasive upper endoscopy to detect esophageal precancer. Clinical Study Publications In April 2025, Lucid’s fifth peer-reviewed clinical utility manuscript, “ Enhancing the Diagnostic Yield of EGD for Diagnosis of Barrett’s Esophagus Through Methylated DNA Biomarker Triage ,” was published in Gastroenterology & Hepatology . This manuscript presents clinical utility data from the ENVET-BE study, which is the second to assess the clinical utility of EsoGuard in a real-world screening population. The ENVET-BE study analyzed 209 EsoGuard-positive patients who underwent biomarker triage and confirmatory EGD in the 2023 calendar year, to test the hypothesis that EGDs performed on patients who first triage positive on EsoGuard have higher diagnostic yield than screening EGDs alone. The yield of screening EGDs was estimated by literature-established disease prevalence (10.6%). A 2.4-fold increase in BE detection compared with the performance goal was observed for the full study population. In the cohort meeting American College of Gastroenterology (ACG) criteria for BE screening, the diagnostic yield was increased by 2.7-fold. On August 1, 2025, the American Journal of Gastroenterology e-published (ahead of printing) the manuscript “Nonendoscopic Detection of Barrett’s Esophagus in Patients Without GERD Symptoms.” This investigator-initiated pilot study evaluated EsoGuard in 120 patients without GERD symptoms, but meeting American Gastroenterological Association (AGA) BE screening criteria. Of 34 EsoGuard-positive patients, 27 underwent EGD, confirming BE in 9 cases (PPV: 33%). Of 86 EsoGuard-negative patients, 22 volunteered for EGD, with zero BE cases (NPV: 100%). This is the first study to assess EsoGuard in this expanded risk group and informed the design of a larger, ongoing NIH R01-funded study. Highmark Reimbursement Approval On March 13, 2025, Lucid announced that Highmark Blue Cross Blue Shield, an independent licensee of the Blue Cross and Blue Shield Association, has issued a positive coverage policy for non-invasive screening of esophageal precancer and cancer in New York state. The new policy, which became effective as of May 26, 2025, will cover EsoGuard in patients who meet established criteria for esophageal precancer testing consistent with professional society guidelines. CWRU NIH Grant Related to EsoGuard and EsoCheck On February 27, 2025, Lucid announced that principal investigators from CWRU and University Hospitals (“UH”), were awarded an $8 million National Institutes of Health (NIH) R01 grant to conduct a five-year clinical study designed to evaluate esophageal precancer detection using EsoCheck and EsoGuard among at-risk individuals without symptoms of chronic gastroesophageal reflux disease (“GERD”). The study, “A Clinical Trial of Cancer Prevention by Biomarker Based Detections of Barrett’s Esophagus and Its Progression,” aims to evaluate the effectiveness of EsoCheck and EsoGuard in detecting esophageal precancer (Barrett’s Esophagus or BE) to prevent esophageal cancer (EAC) within a non-GERD at-risk population. To accomplish this aim, 800 patients without GERD symptoms who meet the American Gastroenterological Association’s (AGA) risk criteria for screening will be recruited across five participating research centers: University Hospitals, University of Colorado, Johns Hopkins University, University of North Carolina, and Cleveland Clinic. 34 Recent Developments - continued Financing Veris Financing (June 2025) On June 23, 2025, Veris entered into subscription agreements (each, a “Veris June 2025 Subscription Agreement”) with certain accredited investors (collectively, the “June 2025 Investors”), pursuant to which Veris agreed to sell and the June 2025 Investors agreed to purchase (the “June 2025 Offering”) 1,800,000 shares of common stock, par value $0.001 per share, of Veris (“Veris Common Stock”) and warrants to purchase 1,800,000 shares of Veris Common Stock (“Veris Warrants”), at a purchase price of $1.40 per share of Veris Common Stock. On the same day, Veris consummated the June 2025 Offering, generating gross proceeds to Veris of approximately $2.5 million. The proceeds of the offering will be used to continue development activities related to Veris’ implantable physiological monitor and for general working capital purposes. The Veris Warrants become exercisable six months after issuance and expire on the earlier of (i) the five-year anniversary of the initial exercise date and (ii) the 60th day following receipt by Veris of FDA approval of its implantable physiological monitor. The Veris Warrants have an exercise price of $1.40 per share, subject to adjustment under certain circumstances. PAVmed/Veris Financing (February 2025) On February 18, 2025, the Company and Veris, entered into subscription agreements (each, a “Subscription Agreement”) with certain accredited investors (collectively, the “Investors”), pursuant to which the Company agreed to sell and the Investors agreed to purchase (the “Offering”) 2,574,350 shares of the Company’s common stock and pre-funded warrants to purchase 756,734 shares of the Company’s common stock (the “Pre-Funded Warrants”), at a purchase price of $0.7115 per share or warrant share (as applicable). In addition, Veris agreed to issue to each Investor approximately 0.2033 shares of Veris’ common stock for each share or warrant share (as applicable) purchased by such Investor, for an aggregate of 677,143 shares of Veris’ common stock. On February 21, 2025, the Company consummated the Offering, generating gross proceeds to the Company of $2.37 million. The proceeds of the offering will be used to resume development activities related to Veris’ implantable physiological monitor and for general working capital purposes. The Pre-Funded Warrants became exercisable upon the receipt of the stockholder approval described above on June 18, 2025, and were exercised as of June 19, 2025. PAVmed ATM On April 17, 2025, the Company entered into a Sales Agreement (the “Sales Agreement”) with Maxim Group LLC, as sales agent (“Maxim”), pursuant to which the Company may offer and sell, from time to time through or to Maxim, shares of its common stock. Under the Sales Agreement, the Company may not issue or sell through Maxim a dollar amount of shares that would exceed $2.88 million of shares. The Company will pay Maxim a commission of 3.0% of the aggregate gross sales prices of the shares. The Company intends to use the net proceeds from any such sales for working capital and general corporate purposes. This facility replaces the “at the market” facility PAVmed previously maintained with Cantor (which facility was on substantially similar terms). Lucid ATM Facility On May 30, 2025, Lucid entered into an “at-the-market offering” (“ATM”) for up to $25.0 million of its common stock that may be offered and sold under a Controlled Equity Offering Agreement between Lucid and Maxim Group LLC. In the six months ended June 30, 2025, Lucid sold 215,421 shares through its at-the-market equity facility for net proceeds of approximately $0.3 million, after payment of 3% commissions. Lucid Diagnostics — Confidentially Marketed Public Offering On April 11, 2025, Lucid closed on the sale of 14,375,000 shares of its common stock, pursuant to its previously announced offering of shares of common stock at a price of $1.20 per share (the “Lucid CMPO”). The net proceeds from the Lucid CMPO, after deducting the underwriting discount and other expenses of the Lucid CMPO, were approximately $16.2 million. Lucid intends to use the net proceeds from the Lucid CMPO for working capital and general corporate purposes. Lucid Diagnostics — Registered Direct Offering On March 5, 2025, Lucid closed on the sale of 13,939,330 shares of its common stock, pursuant to its previously announced offering of shares of common stock at a price of $1.10 per share (the “Lucid RDO”). The net proceeds of the Lucid RDO, after deducting the estimated placement agent’s fees and other expenses of the Lucid RDO, were approximately $14.9 million. Lucid intends to use the net proceeds from the Lucid RDO for working capital and other general corporate purposes. 35 Results of Operations Overview Revenue The Company recognized revenue from subscription revenue derived from its Veris Health Cancer Care Platform. Until September 10, 2024, the date of deconsolidation of Lucid Diagnostics from PAVmed’s consolidated results , t he Company recognized revenue primarily 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 The Company’s cost of revenue from subscription revenue was derived from its Veris Health Cancer Care Platform. Until September 10, 2024, the date of deconsolidation of Lucid Diagnostics from PAVmed’s consolidated results, the cost of revenues recognized was primarily from the delivery of patient EsoGuard test results and included 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 have incurred expenses for tests in the period in which the activities occur, therefore, gross margin as a percentage of revenue has varied 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 fluctuate based on the commercialization efforts of our subsidiaries. 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 to decrease in the future compared to historical periods ending on or prior to September 30, 2024 due to the deconsolidation of Lucid as of September 10, 2024, as going forward, the expenses associated with the sales and marketing operations for the Lucid EsoGuard test will no longer be recorded within the Company’s operating results. 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 decrease in the future compared to historical periods ending on or prior to September 30, 2024 due to the deconsolidation of Lucid as of September 10, 2024, as going forward, the general and administrative expenses, including third-party payor reimbursement costs, incurred by Lucid will no longer be recorded within the Company’s operating results. In the future, general and administrative expenses will include those 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 for PAVmed and its majority-owned subsidiaries. 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 submission of regulatory filings; ● cost of laboratory supplies and acquiring, developing, and manufacturing preclinical prototypes; and ● product design engineering studies. The expenses of our research and development activities, including our clinical trials, for historical periods ending on or prior to September 30, 2024 were principally related to EsoGuard and the Veris Cancer Care Platform. Due to the deconsolidation of Lucid on September 10, 2024, the expenses in respect of the Company’s research and development activities for subsequent historical periods and future periods will include those associated with research and development activities related to the Veris Cancer Care Platform, the PMX incubator program and 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 management fee income received from Lucid, 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. 36 The three months ended June 30, 2025 as compared to three months ended June 30, 2024 Revenue In the three months ended June 30, 2025, revenue was less than $0.1 million as compared to $1.0 million for the corresponding period in the prior year. The $1.0 million decrease principally relates to the revenue from Lucid’s EsoGuard Esophageal DNA Tests not being included in our operating results for the three months ended June 30, 2025 as compared to the prior year, during which all three months of Lucid’s operating results were so included. Cost of revenue In the three months ended June 30, 2025, cost of revenue costs were less than $0.1 million, as compared to $1.7 million for the corresponding period in the prior year. The net decrease of $1.6 million principally related to Lucid’s results not being included in our operating results for the three months ended June 30, 2025 as compared to the prior year, during which all three months of Lucid’s operating results were so included. Sales and marketing expenses In the three months ended June 30, 2025, sales and marketing costs were approximately $0.2 million as compared to $4.2 million for the corresponding period in the prior year. The net decrease of $4.0 million principally related to Lucid’s results not being included in our operating results for the three months ended June 30, 2025 as compared to the prior year, during which all three months of Lucid’s operating results were so included. General and administrative expenses In the three months ended June 30, 2025, general and administrative costs were approximately $3.7 million as compared to $7.0 million for the corresponding period in the prior year. The net decrease of $3.3 million principally related to Lucid’s results not being included in our operating results for the three months ended June 30, 2025 as compared to the prior year, during which all three months of Lucid’s operating results were so included. Research and development expenses In the three months ended June 30, 2025, research and development costs were approximately $0.8 million as compared to $1.6 million for the corresponding period in the prior year. The net decrease of $0.8 million principally related to Lucid’s results not being included in our operating results for the three months ended June 30, 2025 as compared to the prior year, during which all three months of Lucid’s operating results were so included. Amortization of Acquired Intangible Assets The amortization of acquired intangible assets was zero in the three months ended June 30, 2025, as compared to $0.1 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. Other Income and Expense Change in fair value of convertible debt In the three months ended June 30, 2025 and 2024, the change in the fair value of our convertible notes was approximately $0.2 million and $0.6 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. 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. Change in management fee income In the three months ended June 30, 2025, management fee income was approximately $3.2 million as compared to zero for the corresponding period in the prior year. The increase of $3.2 million principally related to Lucid’s results ceasing to be consolidated in our operating results as of September 10, 2024. 37 Results of Operations - continued The three months ended June 30, 2025 as compared to the three months ended June 30, 2024 - continued Other Income and Expense - continued Loss on Debt Extinguishment The Company did not incur debt extinguishment loss in the three months ended June 30, 2025. In the three months ended June 30, 2024, a debt extinguishment loss in the aggregate of approximately $0.8 million was recognized in connection with our April 2022 Senior Convertible Note, September 2022 Senior Convertible Note and the Lucid March 2023 Senior Convertible Note as discussed below. ● In the three months ended June 30, 2024, approximately $0.7 million of principal repayments, along with less than $0.1 million of interest expense thereon, were settled through the issuance of 461,963 shares of common stock of the Company, with such shares having a fair value of approximately $0.8 million (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company). In addition, the Company agreed to pay $0.2 million in cash related to acceleration floor payments on these notes related to the conversion price being below the floor, recorded as debt extinguishment loss. The conversions and floor acceleration payments resulted in a debt extinguishment loss of $0.3 million in the three months ended June 30, 2024. ● In the three months ended June 30, 2024, approximately $1.1 million of principal repayments along with approximately $0.2 million of interest expense thereon, were settled through the issuance of 2,117,883 shares of Lucid common stock, with such shares having a fair value of approximately $1.9 million (with such fair value measured as the quoted closing price of the common stock of Lucid on the respective conversion date). The conversions resulted in a debt extinguishment loss of $0.5 million in the three months ended June 30, 2024. 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. Change in fair value of Equity Method Investment At June 30, 2025, the fair value of the Company’s investment in Lucid was $36.0 million, with the company recognizing an unrealized loss on its investment in Lucid of $10.6 million in the accompanying unaudited condensed consolidated statements of operations for the three months ended June 30, 2025. The fair value of common shares of Lucid held by the Company was determined using the $1.15 closing price per share of Lucid’s common stock as of June 30, 2025, as compared to Lucid’s common stock price per share of $1.49 at March 31, 2025. 38 Results of Operations - continued The six months ended June 30, 2025 as compared to six months ended June 30, 2024 Revenue In the six months ended June 30, 2025, revenue was less than $0.1 million as compared to $2.0 million for the corresponding period in the prior year. The $2.0 million decrease was principally related to the revenue from Lucid’s EsoGuard Esophageal DNA Tests not being included in our operating results for the six months ended June 30, 2025 as compared to the prior year, during which all six months of Lucid’s operating results were so included. Cost of revenue In the six months ended June 30, 2025, cost of revenue was less than $0.1 million as compared $3.4 million for the corresponding period in the prior year. The net decrease of $3.3 million was principally related to Lucid’s results not being included in our operating results for the six months ended June 30, 2025 as compared to the prior year, during which all six months of Lucid’s operating results were so included. Sales and marketing expenses In the six months ended June 30, 2025, sales and marketing costs were approximately $0.5 million as compared to $8.6 million for the corresponding period in the prior year. The net decrease of $8.1 million was principally related to Lucid’s results not being included in our operating results for the six months ended June 30, 2025 as compared to the prior year, during which all six months of Lucid’s operating results were so included. General and administrative expenses In the six months ended June 30, 2025, general and administrative costs were approximately $8.1 million as compared to $13.7 million for the corresponding period in the prior year. The net decrease of $5.6 million was principally related to Lucid’s results not being included in our operating results for the six months ended June 30, 2025 as compared to the prior year, during which all six months of Lucid’s operating results were so included. Research and development expenses In the six months ended June 30, 2025, research and development costs were approximately $1.6 million as compared to $3.6 million for the corresponding period in the prior year. The net decrease of $2.0 million was principally related to Lucid’s results not being included in our operating results for the six months ended June 30, 2025 as compared to the prior year, during which all six months of Lucid’s operating results were so included. Amortization of Acquired Intangible Assets The amortization of acquired intangible assets was zero in the six months ended June 30, 2025, as compared to $0.5 million for the corresponding period in the prior year. The decrease of $0.5 million in the current period was due to certain acquired intangible assets being fully amortized in February 2024. Other Income and Expense Change in fair value of convertible debt In the six months ended June 30, 2025 and June 30, 2024, the change in the fair value of our convertible notes was approximately $0.3 million and $2.7 million of expense, respectively, related to the April 2022 Senior Convertible Note, the September 2022 Senior Convertible Note, and (for the six months ended June 30, 2024 only) the Lucid March 2023 Senior Convertible Note. 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 applicable reporting period date. The Company initially recognized an aggregate of $4.3 million of fair value non-cash expense on the issue dates. Change in management fee income In the six months ended June 30, 2025, management fee income was approximately $6.3 million as compared to zero for the corresponding period in the prior year. The increase of $6.3 million principally related to Lucid’s results ceasing to be consolidated in our operating results as of September 10, 2024. 39 Results of Operations - continued The six months ended June 30, 2025 as compared to six months ended June 30, 2024 - continued Other Income and Expense - continued Loss on Debt Extinguishment In the six months ended June 30, 2025, a debt extinguishment loss in the aggregate of less than $0.1 million was recognized in connection with our April 2022 Senior Convertible Note and September 2022 Senior Convertible Note as discussed below. ● In the six months ended June 30, 2025, approximately $0.2 million of principal repayments along with less than $0.1 million of interest expense thereon, were settled through the issuance of 401,303 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). The conversions resulted in a debt extinguishment loss of less than $0.1 million in the six months ended June 30, 2025. In comparison, in the six months ended June 30, 2024, a debt extinguishment loss in the aggregate of approximately $1.1 million was recognized in connection with our April 2022 Senior Convertible Note, September 2022 Senior Convertible Note and the Lucid March 2023 Senior Convertible Note as discussed below. ● In the six months ended June 30, 2024, approximately $1.0 million of principal repayments along with less than $0.1 million of interest expense thereon, were settled through the issuance of 574,424 shares of common stock of the Company, with such shares having a fair value of approximately $1.1 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 agreed to pay $0.4 million in cash related to acceleration floor payments on these notes related to the conversion price being below the conversion floor price specified in the notes, recorded as debt extinguishment loss. The conversions and cash paid resulted in a debt extinguishment loss of $0.4 million in the six months ended June 30, 2024. ● In the six months ended June 30, 2024, approximately $1.2 million of principal repayments along with approximately $0.7 million of interest expense thereon, were settled through the issuance of 2,661,181 shares of Lucid common stock, with such shares having a fair value of approximately $2.5 million (with such fair value measured as the quoted closing price of the common stock of Lucid on the respective conversion date). The conversions resulted in a debt extinguishment loss of $0.7 million in the six months ended June 30, 2024. 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. Change in fair value of Equity Method Investment At June 30, 2025, the fair value of the Company’s investment in Lucid was $36.0 million, with the company recognizing an unrealized gain on its investment in Lucid of $10.4 million in the accompanying unaudited condensed consolidated statements of operations for the six months ended June 30, 2025. The fair value of common shares of Lucid held by the Company was determined using the $1.15 closing price per share of Lucid’s common stock as of June 30, 2025, as compared to Lucid’s common stock price per share of $0.819 at December 31, 2024. Deemed Dividend on Lucid 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 31,790 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 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 $7.5 million recognized as a deemed dividend charged to accumulated deficit in the unaudited condensed consolidated balance sheet on March 13, 2024, with such deemed dividend included as a component of net loss attributable to common stockholders, summarized as follows: Lucid Series B Convertible Preferred Stock Issuance and Lucid Series A/A-1 Exchange Offer ($ in thousands) March 13, 2024 Fair Value - 31,790 shares of Lucid Series B Preferred Stock issued in exchange for Lucid Series A and Lucid Series A-1 Preferred Stock $ 31,790 Less: Carrying value related to Lucid Series A and Series A-1 Preferred Stock Exchanged for Lucid Series B Preferred Stock (of 24,295 shares) (24,294 ) Deemed Dividend Charged to Accumulated Deficit $ 7,496 40 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, although we retain the flexibility to raise capital at the PAVmed level. 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, both at the PAVmed level and, in the case of Lucid and Veris, at the subsidiary level, as well as through management fees under our management service contract with Lucid. 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 products and services and ongoing R&D and clinical trials. We experienced net income before noncontrolling interests of approximately $6.3 million and used approximately $2.8 million of cash in operations for the six months ended June 30, 2025. Financing activities provided $5.6 million of cash during the six months ended June 30, 2025. We ended the quarter with cash on-hand of $4.0 million as of June 30, 2025. 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. The Company’s ability to continue operations 12 months beyond the issuance of the financial statements, will depend upon its ability to control its operating costs within the limits of the amounts collected from its management service contracts with its non-consolidated subsidiaries, to substantially increase its revenues from the Veris Cancer Care platform, and to raise additional capital through various potential sources including equity or debt financings or refinancing or restructuring 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 six months ended June 30, 2025 ● We issued 1,216,565 shares of our common stock for net proceeds of approximately $0.8 million, after payment of 3% commissions, through our at-the-market equity facility with Cantor (which has since been replaced by a similar facility with Maxim Group LLC). See below for more information. ● We issued 401,303 shares of our common stock in satisfaction of approximately $0.2 million of principal repayments along with less than $0.1 million of interest expense thereon under the September 2022 Senior Convertible Note. ● We issued 3,840,094 shares of our common stock as a result of conversions of $1.5 million of our Series C Preferred Stock. ● We issued 2,574,350 shares of our common stock and pre-funded warrants to purchase 756,734 shares of our common stock, in combination with the issuance of 677,143 shares of Veris, for gross proceeds of approximately $2.37 million. ● We issued 152,408 shares of our common stock to vendors in exchange for approximately $0.1 million of agreed upon services, which is included in general and administrative operating expenses on the Company’s unaudited condensed consolidated statement of operations. Senior Convertible Notes On April 4, 2022 we sold to an investor a Senior Secured Convertible Note with a face value principal of $27.5 million (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 was satisfied in full in connection with the Exchange. On September 8, 2022 we sold to the same investor an additional Senior Secured Convertible Note with a face value principal of $11.25 million (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 has been now extended to December 31, 2025. The September 2022 Senior Convertible Note is more fully described in Note 10, Debt . 41 Liquidity and Capital Resources - continued Under the 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”). The holder of the September 2022 Senior Convertible Note agreed to waive any non-compliance with the Financial Tests through December 31, 2025. See Note 10 , Debt , to the Financial Statements for additional information about the September 2022 Senior Convertible Note. See also Note 4, Equity Method Investment , to the Financial Statements for additional information about the September 2022 Senior Convertible Note as it relates to the MSA. PAVmed Inc. ATM Facility In the six months ended June 30, 2025, the Company sold 1,216,565 shares through its at-the-market equity facility for net proceeds of approximately $0.8 million, after payment of 3% commissions. On April 17, 2025, the Company entered into a Sales Agreement (the “Sales Agreement”) with Maxim Group LLC, as sales agent (“Maxim”), pursuant to which the Company may offer and sell, from time to time through or to Maxim, shares of its common stock. Under the Sales Agreement, the Company may not issue or sell through Maxim a dollar amount of shares that would exceed $2,880,000 of shares. The Company will pay Maxim a commission of 3.0% of the aggregate gross sales prices of the shares. The Company intends to use the net proceeds from any such sales for working capital and general corporate purposes. This facility replaces the “at the market” facility PAVmed previously maintained with Cantor (which facility was on substantially similar terms). Series C Convertible Preferred Stock On November 15, 2024, the Company entered into an Exchange Agreement (the “Debt Exchange Agreement”) with the holder (the “Holder”) of the April 2022 Senior Convertible Note and the September 2022 Senior Convertible Note. The Debt Exchange Agreement provided for the exchange (the “Exchange”) of $22.3 million in principal amount of the April 2022 Senior Convertible Note and the September 2022 Senior Convertible Note and interest thereon for 22,347 shares of Series C Preferred Stock. On January 17, 2025, after satisfaction of all conditions to closing, the parties consummated the Exchange. On November 20, 2024, the Company entered into a Securities Purchase Agreement (the “Series C Securities Purchase Agreement”) with the Holder. The Series C Securities Purchase Agreement provided for the purchase of 2,653 shares of Series C Preferred Stock at a price of $1,000 per share, with the purchase price to be satisfied through the cancellation of $2.6 million of certain unsecured debt obligations owed by the Company to the Holder (the “Purchase”). On January 24, 2025, after satisfaction of all conditions to closing, the parties consummated the Purchase. The Series C Preferred Stock was issued pursuant to the PAVmed Inc. Certificate of Designation of Preferences, Rights, and Limitations of Series C Convertible Preferred Stock (“Series C Convertible Preferred Stock Certificate of Designation”) and has a par value of $0.001 per share. Each share of Series C Preferred Stock has a stated value of $1,000 (plus the amount of any dividends thereon that are capitalized), and entitles the holder thereof to a preferred dividend at a rate of 7.875% per annum, payable quarterly in arrears. The Series C Preferred Stock is entitled to vote with the holders of shares of Common Stock, voting together as one class, on all matters in which the holders of the preferred shares are permitted to vote with the class of shares of Common Stock pursuant to applicable law, on an as-converted basis (subject to certain limitations, including the beneficial ownership limitation described below). The Series C Preferred Stock is pari passu with the Series B Convertible Preferred Stock, and is senior to all of the Company’s other equity securities. Upon liquidation, a holder of Series C Preferred Stock will be entitled to receive in cash out of the assets of the Company, before any amount would be paid to the holders of any of shares of the Company’s common stock, but pari passu with the holders of any Series B Preferred Stock then outstanding, an amount per share equal to the greater of (A) the sum of (i) 110% of the stated value (plus any accrued and unpaid dividends or other amounts then payable thereon) of such share of Series C Preferred Stock then outstanding and (ii) a ratable portion of 100% of the stated value (plus any accrued and unpaid dividends or other amounts then payable thereon) of the Series B Preferred Stock then outstanding and (B) the amount per share such holder would receive if such holder converted such share of Series C Preferred Stock into the Company’s common stock immediately prior to the date of such payment. 42 Liquidity and Capital Resources - continued Each share of Series C Preferred Stock, plus accrued and unpaid dividends thereon, is convertible at any time, in whole or in part, at the holder’s option, into shares of the Company’s common stock at an initial fixed conversion price of $1.068 per share, subject to certain adjustments. On February 18, 2025, the Company agreed to reduce temporarily, and the holder of the Series C Preferred Stock consented to reducing temporarily, the contractual conversion price under the Series C Preferred Stock to $0.40, during the period through March 31, 2025; provided that the aggregate amount of conversions under the Series C Preferred Stock at such conversion price during such period does not exceed 1 million shares. Such reduction was agreed to in connection with certain waivers granted by the holder of the Series C Preferred Stock, including waivers necessary to permit the Company and Veris to consummate the Offering (as described in Note 13, Common Stock and Common Stock Purchase Warrants ). At any time following the occurrence of a Triggering Event (as defined below), a holder of shares of the Series C Preferred Stock has the right to elect to convert shares of Series C Preferred Stock into the Company’s common stock at an alternate conversion price equal to the lower of: (i) the fixed conversion price then in effect, and (ii) the lowest of (A) 80% of the VWAP of the Company’s common stock as of the trading day immediately preceding the delivery or deemed delivery of the applicable notice of conversion, (B) 80% of the VWAP of the Company’s common stock as of the trading day of the delivery or deemed delivery of the applicable notice of conversion, and (C) 80% 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 delivery or deemed delivery of the applicable notice of conversion, but in the case of clause (ii), not less than $0.2136 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events) (such price, the “Alternate Conversion Price”). The term “Triggering Event” includes events that would constitute an event of default under the September 2022 Senior Convertible Note, in addition to the failure of the Company to complete a Qualified Company Optional Redemption (as defined below) by March 31, 2025 (the “QCOR Triggering Event”). The principal consequence of a Triggering Event (other than a bankruptcy-related Triggering Event) is to give the holder the right to elect an alternate conversion as described above. In addition, the occurrence of a Triggering Event (other than a QCOR Triggering Event) will result in an increase to the dividend rate and limit the Company’s right to redeem the Series C Preferred Stock. A Triggering Event (other than a bankruptcy-related Triggering Event) will not otherwise accelerate any financial or other obligation on the part of the Company in respect of the Series C Preferred Stock. If the Company grants, issues or sells (or enters into any agreement to grant, issue or sell) or is deemed to have granted, issued or sold, any shares of common stock, for consideration per share less than the fixed conversion price then in effect, then immediately after such issuance, the fixed conversion price shall be reduced to an amount equal to such lower price. The Company has the right to redeem all, but not less than all, of the shares of Series C Preferred Stock at a redemption price equal to 132.5% of the aggregate stated value of the Series C Preferred Stock plus all accrued and unpaid dividends and other amounts then payable thereon. The Company also has an additional one-time right to redeem a portion of the shares of Series C Preferred Stock with an aggregate stated value of at least $5 million at the same redemption price (a “Qualified Company Optional Redemption”). Upon a Change of Control (as defined in the Series C Convertible Preferred Stock Certificate of Designation), a holder of the Series C Preferred Stock has the right to require the Company to redeem all, or any portion, of the holder’s shares of Series C Preferred Stock at a price equal to 132.5% of the stated value of the Series C Preferred Stock (plus any accrued and unpaid dividends or other amounts then payable thereon) or, if greater, an amount determined pursuant to the Series C Convertible Preferred Stock Certificate of Designation based on the then-current market price or the consideration payable in the Change of Control transaction, whichever is higher. A holder may not convert any of the shares of Series C Preferred Stock, to the extent that, after giving effect to such conversion, such holder (together with certain of its affiliates and other related parties) would beneficially own in excess of 9.99% of the shares of the Company’s common stock outstanding immediately after giving effect to such conversion (the “Maximum Percentage”). The Holder may from time to time increase or decrease the Maximum Percentage; provided that in no event could the Maximum Percentage exceed 9.99%, provided, further, that any such increase would not be effective until the 61st day after delivery of a notice to the Company of such increase. The Company and its subsidiaries (other than Lucid) are subject to certain customary affirmative and negative covenants regarding the rank of the Series C Preferred Stock, 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, transactions with affiliates and the ability to complete stock splits, among other customary matters. The Company also is subject to a financial covenant requiring that it maintain its cash flow on a break-even basis. See Note 12, Preferred Stock , to the Financial Statements for additional information about the Series C Preferred Stock. 43 Liquidity and Capital Resources - continued PAVmed/Veris Financing (February 2025) On February 18, 2025, the Company and Veris, entered into subscription agreements (each, a “Subscription Agreement”) with certain accredited investors (collectively, the “Investors”), pursuant to which the Company agreed to sell and the Investors agreed to purchase (the “Offering”) 2,574,350 shares of the Company’s common stock and pre-funded warrants to purchase 756,734 shares of the Company’s common stock (the “Pre-Funded Warrants”), at a purchase price of $0.7115 per share or warrant share (as applicable). In addition, Veris agreed to issue to each Investor approximately 0.2033 shares of Veris’ common stock for each share or warrant share (as applicable) purchased by such Investor, for an aggregate of 677,143 shares of Veris’ common stock. On February 21, 2025, the Company consummated the Offering, generating gross proceeds to the Company of $2.37 million. The proceeds of the offering will be used to resume development activities related to Veris’ implantable physiological monitor and for general working capital purposes. The Subscription Agreement contains customary representations, warranties, covenants and indemnities of the Company and the Investors, as well as a covenant by the Company to provide the Investors with protection against subsequent equity raises by the Company or Veris at a lower purchase price (solely to the extent the Investors continue to hold the shares issued in the Offering), with such protection to be effected through the issuance of additional shares of Veris’ common stock. In addition, the Company (i) agreed to solicit the affirmative vote of its stockholders by no later than its next meeting of stockholders, which will be held no later than June 30, 2025, for approval, for the purposes of the rules of The Nasdaq Stock Market LLC, of the issuance of all of the shares underlying the Pre-Funded Warrants, and to hold additional meetings quarterly thereafter to the extent such approval is not obtained, (ii) granted the Investors a 100% participation right in future offerings of equity securities of the Company or its majority-owned subsidiaries, subject to existing participation rights of the Company’s debt holder, and (iii) agreed not to incur, and not to permit its majority-owned subsidiaries to incur, any indebtedness until August 18, 2026, subject to certain exceptions. In accordance with the Subscription Agreement, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with the Investors, pursuant to which the Company agreed to file a registration statement covering the resale of the shares of the Company’s common stock issued in the Offering, including the shares underlying the Pre-Funded Warrants. This registration statement was filed and became effective as of April 15, 2025. On June 18, 2025, the Pre-Funded Warrants became exercisable upon the receipt of the stockholder approval described above, and were exercised as of June 19, 2025. Veris Financing (June 2025) On June 23, 2025, Veris entered into subscription agreements (each, a “Veris June 2025 Subscription Agreement”) with certain accredited investors (collectively, the “June 2025 Investors”), pursuant to which Veris agreed to sell and the June 2025 Investors agreed to purchase (the “June 2025 Offering”) 1,785,714 shares of common stock, par value $0.001 per share, of Veris (“Veris Common Stock”) and warrants to purchase 1,785,714 shares of Veris Common Stock (“Veris Warrants”), at a purchase price of $1.40 per share of Veris Common Stock. On the same day, Veris consummated the June 2025 Offering, generating gross proceeds to Veris of approximately $2.5 million. The proceeds of the offering will be used to continue development activities related to Veris’ implantable physiological monitor and for general working capital purposes. The Veris June 2025 Subscription Agreements contain customary representations, warranties, covenants and indemnities of Veris and the June 2025 Investors, as well as a covenant by Veris to provide the June 2025 Investors with protection against subsequent equity raises by Veris at a lower valuation (solely to the extent the June 2025 Investors continue to hold the shares issued in the June 2025 Offering), with such protection to be effected through the issuance of additional shares of Veris Common Stock. In addition, Veris granted certain of the June 2025 Investors a 100% participation right in future offerings of equity securities by Veris, subject to existing participation rights of the Company’s debt holder, and agreed not to incur any indebtedness until December 23, 2026, subject to certain exceptions. In accordance with the Veris June 2025 Subscription Agreement, Veris also entered into a registration rights agreement (the “Registration Rights Agreement”) with the June 2025 Investors, pursuant to which Veris granted the June 2025 Investors customary demand and piggyback registration rights. The June 2025 Investors may exercise the demand registration rights only if Veris consummates a going public transaction. The Veris Warrants become exercisable six months after issuance and expire on the earlier of (i) the five-year anniversary of the initial exercise date and (ii) the 60th day following receipt by Veris of FDA approval of its implantable physiological monitor. The Veris Warrants have an exercise price of $1.40 per share, subject to adjustment as described below. The Veris Warrants may be exercised only for cash. The exercise price and number and type of securities or other property issuable on exercise of the Veris Warrants may be adjusted in certain circumstances, including in the event of a stock split or combination, stock dividend, or a recapitalization, reorganization, merger or similar transaction. In addition, if Veris completes a subsequent equity raise at a lower valuation, the exercise price of the Veris Warrants will be reduced to such lower valuation and the number of shares issuable on exercise of the Veris Warrants will be increased so that the aggregate exercise price remains the same. In addition, a holder of the Veris Warrants will be entitled to participate in rights offerings or pro rata distributions by Veris. 44 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 judgments. 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 estimates are as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the SEC on March 24, 2025. There have been no material changes to our critical accounting estimates in the three months ended June 30, 2025.