UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SEPTEMBER 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from______ to______

Commission File Number: 001-37685

PAVmed Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

47-1214177

(State or Other Jurisdiction of

Incorporation or Organization)

(IRS Employer

Identification No.)

One Grand Central Place

Suite 4600

New York, NY

10165

(Address of Principal Executive Offices)

(Zip Code)

(212) 949-4319

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock, $0.001 par value per share	PAVM	The NASDAQ Stock Market LLC
Series Z Warrants, each to purchase one share of Common Stock	PAVMZ	The NASDAQ Stock Market LLC
Series W Warrants, each to purchase one share of Common Stock	PAVMW	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of ”large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 18, 2021, there were 87,930,411 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION	1

Item 1	Unaudited Condensed Consolidated Financial Statements	1

	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	1

	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020	2

	Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the three months ended September 30, 2021	3

	Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the three months ended September 30, 2020	4

	Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the nine months ended September 30, 2021	5

	Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the nine months ended September 30, 2020	6

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	7

	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 4	Controls and Procedures	49

PART II	OTHER INFORMATION	50

Item 1	Legal Proceedings	50

Item 5	Other Information	50

Item 6	Exhibits	50

SIGNATURE		51

EXHIBIT INDEX		52

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands except number of shares and per share data)

(unaudited)

	September 30, 2021			December 31, 2020
Assets:
Current assets:
Cash	$	37,341		$	17,256
Accounts receivable		200			—
Inventory		50			—
Prepaid expenses, deposits, and other current assets		4,141			1,685
Total current assets		41,732			18,941
Fixed assets, net		451			82
Intangible assets, net		47			—
Other assets		755			755
Total assets	$	42,985		$	19,778
Liabilities, Preferred Stock and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	6,080		$	2,966
Accrued expenses and other current liabilities		1,671			2,325
CARES Act Paycheck Protection Program note payable		—			300
Senior Secured Convertible Notes - at fair value		—			10,060
Senior Convertible Note - at fair value		—			4,600
Total liabilities		7,751			20,251
Commitments and contingencies (Note 6)		—			—
Stockholders’ Equity (Deficit):
Preferred stock, $0.001 par value. Authorized, 20,000,000 shares; Series B Convertible Preferred Stock, par value $0.001, issued and outstanding 1,091,448 at September 30, 2021 and 1,228,075 shares at December 31, 2020		2,352			2,537
Common stock, $0.001 par value. Authorized, 150,000,000 shares; 84,400,822 and 63,819,935 shares outstanding as of September 30, 2021 and December 31, 2020, respectively		84			64
Additional paid-in capital		154,059			87,570
Accumulated deficit		(121,625	)		(88,275	)
Total PAVmed Inc. Stockholders’ Equity		34,870			1,896
Noncontrolling interests		364			(2,369	)
Total Stockholders’ Equity (Deficit)		35,234			(473	)
Total Liabilities and Stockholders’ Equity	$	42,985		$	19,778

See accompanying notes to the unaudited condensed consolidated financial statements.

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except number of shares and per share amounts)

(unaudited)

	2021			2020			2021			2020
	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenue	$	200		$	—		$	200		$	—
Cost of revenue		144			—			144			—
Gross profit		56			—			56			—
Operating expenses:
Commercial operations		2,432			687			5,792			1,532
General and administrative		5,987			2,222			16,100			6,942
Research and development		5,305			2,619			12,878			7,321
Total operating expenses		13,724			5,528			34,770			15,795
Loss from operations		(13,668	)		(5,528	)		(34,714	)		(15,795	)
Other income (expense):
Interest expense		—			—			—			(53	)
Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note		—			367			1,682			(5,521	)
Offering costs - Senior Secured Convertible Note and Senior Convertible Note		—			(50	)		—			(660	)
Debt extinguishments loss - Senior Secured Convertible Notes		—			(663	)		(3,715	)		(4,600	)
Debt forgiveness		—			—			300			—
Other income (expense), net		—			(346	)		(1,733	)		(10,834	)
Loss before provision for income tax		(13,668	)		(5,874	)		(36,447	)		(26,629	)
Provision for income taxes		—			—			—			—
Net loss before noncontrolling interests		(13,668	)		(5,874	)		(36,447	)		(26,629	)
Net loss attributable to the noncontrolling interests		1,441			391			3,318			1,093
Net loss attributable to PAVmed Inc.		(12,227	)		(5,483	)		(33,129	)		(25,536	)
Less: Series B Convertible Preferred Stock dividends earned		(67	)		(74	)		(216	)		(215	)
Net loss attributable to PAVmed Inc. common stockholders	$	(12,294	)	$	(5,557	)	$	(33,345	)	$	(25,751	)
Per share information:
Net loss per share attributable to PAVmed Inc. - basic and diluted	$	(0.15	)	$	(0.11	)	$	(0.41	)	$	(0.56	)
Net loss per share attributable to PAVmed Inc. common stockholders – basic and diluted	$	(0.15	)	$	(0.11	)	$	(0.42	)	$	(0.57	)
Weighted average common shares outstanding, basic and diluted		83,307,170			48,380,677			79,873,583			45,563,961

See accompanying notes to the unaudited condensed consolidated financial statements.

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)

for the THREE MONTHS ENDED September 30, 2021

(in thousands except number of shares and per share data)

(unaudited)


	PAVmed Inc. Stockholders’ Deficit
	Series B
	Convertible										Additional					Non
	Preferred Stock						Common Stock				Paid-In		Accumulated			controlling
	Shares			Amount			Shares		Amount		Capital		Deficit			Interest			Total

Balance - June 30, 2021		1,185,685		$	2,499			82,576,816	$	83	$	149,694	$	(109,325	)	$	(911	)	$	42,040
Dividends declared - Series B Convertible Preferred Stock		24,577			73			—		—		—		(73	)		—			—
Conversions - Series B Convertible Preferred Stock		(118,814	)		(220	)		118,814		—		220		—			—			—
Exercise - Series Z Warrants		—			—			1,186,467		1		1,897		—			—			1,898
Exercise - Series W Warrants		—			—			3,945		—		20		—			—			20
Exercise - stock options		—			—			483,668		—		823		—			—			823
Purchase - Employee Stock Purchase Plan		—			—			31,112		—		131		—			—			131
Stock-based compensation – PAVmed Inc.		—			—			—		—		1,218		—			—			1,218
Stock-based compensation – majority-owned subsidiary		—			—			—		—		56		—			2,716			2,772
Conversions - Senior Secured Convertible Note
Conversions - Senior Secured Convertible Note, shares
Registered offerings, net
Registered offerings, net, shares
Vest - restricted stock awards vests
Vest - restricted stock awards vests, shares
Issue common stock of majority-owned subsidiary
Exercise - Series S warrants
Exercise - Series S warrants, shares
Exercise - stock options - majority-owned subsidiary
Net loss		—			—			—		—		—		(12,227	)		(1,441	)		(13,668	)
Balance - September 30, 2021		1,091,448		$	2,352			84,400,822	$	84	$	154,059	$	(121,625	)	$	364		$	35,234

See accompanying notes to the unaudited condensed consolidated financial statements.

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)

for the THREE MONTHS ENDED September 30, 2020

(in thousands except number of shares and per share data)

(unaudited)

	PAVmed Inc. Stockholders’ Deficit
	Series B
	Convertible								Additional					Non
	Preferred Stock				Common Stock				Paid-In		Accumulated			controlling
	Shares		Amount		Shares		Amount		Capital		Deficit			Interest			Total

Balance - June 30, 2020		1,179,872	$	2,393		47,919,386	$	48	$	60,147	$	(73,908	)	$	(1,485	)	$	(12,805	)
Dividends declared - Series B Convertible Preferred Stock		23,616		70		—		—		—		(70	)		—			—
Conversions - Senior Secured Convertible Note		—		—		1,584,140		2		3,100		—			—			3,102
Exercise - Series Z warrants		—		—		100		—		—		—			—			—
Purchase - Employee Stock Purchase Plan		—		—		152,289		—		230		—			—			230
Stock-based compensation - PAVmed Inc.		—		—		—		—		570		—			—			570
Stock-based compensation – majority-owned subsidiary		—		—		—		—		3		—			13			16
Net loss		—		—		—		—		—		(5,483	)		(391	)		(5,874	)
Balance - September 30, 2020		1,203,488	$	2,463		49,655,915	$	50	$	64,050	$	(79,461	)	$	(1,863	)	$	(14,761	)

See accompanying notes to the unaudited condensed consolidated financial statements.

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)

for the NINE MONTHS ENDED September 30, 2021

(in thousands except number of shares and per share data)

(unaudited)

	PAVmed Inc. Stockholders’ Deficit
	Series B
	Convertible										Additional					Non
	Preferred Stock						Common Stock				Paid-In		Accumulated			controlling
	Shares			Amount			Shares		Amount		Capital		Deficit			Interest			Total

Balance - December 31, 2020		1,228,075		$	2,537			63,819,935	$	64	$	87,570	$	(88,275	)	$	(2,369	)	$	(473	)
Dividends declared - Series B Convertible Preferred Stock		73,821			221			—		—		—		(221	)		—			—
Conversions - Series B Convertible Preferred Stock		(210,448	)		(406	)		210,448		—		406		—			—			—
Registered offerings, net		—			—			15,782,609		16		53,688		—			—			53,704
Vest - restricted stock awards vests		—			—			150,000		—		—		—			—			—
Exercise - Series Z warrants		—			—			2,927,125		3		4,680		—			—			4,683
Exercise - Series W warrants		—			—			3,945		—		20		—			—			20
Conversions - Senior Secured Convertible Note		—			—			667,668		1		1,722		—			—			1,723
Exercise - stock options		—			—			604,500		—		953		—			—			953
Purchase - Employee Stock Purchase Plan		—			—			234,592		—		436		—			—			436
Issue common stock of majority-owned subsidiary		—			—			—		—		—		—			6			6
Stock-based compensation - PAVmed Inc.		—			—			—		—		4,473		—			—			4,473
Stock-based compensation - majority-owned subsidiary		—			—			—		—		111		—			6,045			6,156
Net loss		—			—			—		—		—		(33,129	)		(3,318	)		(36,447	)
Balance - September 30, 2021		1,091,448		$	2,352			84,400,822	$	84		154,059		(121,625	)		364			35,234

See accompanying notes to the unaudited condensed consolidated financial statements.

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)

for the NINE MONTHS ENDED September 30, 2020

(in thousands except number of shares and per share data)

(unaudited)

	PAVmed Inc. Stockholders’ Deficit
	Series B
	Convertible										Additional					Non
	Preferred Stock						Common Stock				Paid-In		Accumulated			controlling
	Shares			Amount			Shares		Amount		Capital		Deficit			Interest			Total

Balance - December 31, 2019		1,158,209		$	2,296			40,478,861	$	41	$	47,554	$	(53,715	)	$	(814	)	$	(4,638	)
Dividends declared - Series B Convertible Preferred Stock		70,279			210			—		—		—		(210	)		—			—
Conversion - Series B Convertible Preferred Stock		(25,000	)		(43	)		25,000		—		43		—			—			—
Conversions - Senior Secured Convertible Note		—			—			7,412,682		8		14,667		—			—			14,675
Exercise - Series S warrants		—			—			1,199,383		1		11		—			—			12
Exercise - Series Z warrants		—			—			100		—		—		—			—			—
Purchase - Employee Stock Purchase Plan		—			—			306,555		—		356		—			—			356
Vest - restricted stock awards		—			—			233,334		—		—		—			—			—
Vest - restricted stock awards vests		—			—			233,334		—		—		—			—			—
Exercise - stock options - majority-owned subsidiary		—			—			—		—		—		—			5			5
Stock-based compensation - PAVmed Inc.		—			—			—		—		1,409		—			—			1,409
Stock-based compensation - majority-owned subsidiary		—			—			—		—		10		—			39			49
Net loss		—			—			—		—		—		(25,536	)		(1,093	)		(26,629	)
Balance at September 30, 2020		1,203,488		$	2,463			49,655,915	$	50	$	64,050	$	(79,461	)	$	(1,863	)	$	(14,761	)

See accompanying notes to the unaudited condensed consolidated financial statements.

PAVMED INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands except number of shares and per share data)

(unaudited)

	2021			2020
	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities
Net loss - before non controlling interest (“NCI”)	$	(36,447	)	$	(26,629	)

Adjustments to reconcile net loss - before NCI to net cash used in operating activities
Depreciation and amortization expense		60			17
Stock-based compensation		10,629			1,458
In-process R&D charge		133			—
Change in fair value - Senior Secured Convertible Notes and Senior Convertible Note		(1,682	)		5,521
Debt extinguishment loss - Senior Secured Convertible Notes and Senior Convertible Note		3,715			4,600
Debt forgiveness		(300	)		—
Changes in operating assets and liabilities:
Accounts receivable		(200	)		—
Prepaid expenses and other current assets		(1,918	)		(1,159	)
Accounts payable		2,911			854
Accrued expenses and other current liabilities		(715	)		152
Net cash flows used in operating activities		(23,814	)		(15,186	)

Cash flows from investing activities
Purchase of equipment		(192	)		(47	)
Acquisition, net of cash acquired		(147	)		—
Net cash flows used in investing activities		(339	)		(47	)

Cash flows from financing activities
Proceeds – issue of common stock – registered offerings		55,016			—
Payment – offering costs – registered offerings		(1,312	)		—
Proceeds – issue of Senior Secured Convertible Notes		—			13,300
Proceeds – issue of Senior Convertible Note		—			3,700
Proceeds – Cares Act Paycheck Protection Program Loan		—			300
Payment – repayment of Senior Convertible Note and Senior Secured Convertible Note		(14,816	)		—
Payment – Senior Convertible Note and Senior Secured Convertible Note – non-installment payments		(154	)		(366	)
Proceeds – exercise of Series Z warrants		4,115			—
Proceeds – exercise of Series S warrants		—			12
Proceeds – exercise of stock options		953			—
Proceeds – issue common stock – Employee Stock Purchase Plan		436			356
Proceeds – exercise of stock options issued under equity incentive plan of majority owned subsidiary		—			5
Net cash flows provided by financing activities		44,238			17,307
Net increase (decrease) in cash		20,085			2,074
Cash, beginning of period		17,256			6,219
Cash, end of period	$	37,341		$	8,293

See accompanying notes to the unaudited condensed consolidated financial statements.

PAVMED INC.

and SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(amounts in these accompanying notes are presented in thousands, except number of shares and per-share amounts.)

Note 1 — The Company

PAVmed Inc. (“PAVmed” or the “Company”) together with its majority owned subsidiaries, Lucid Diagnostics, Inc. (“Lucid Diagnostics” or “LUCID”), Veris Health, Inc. (“Veris Health” or “VERIS”), and Solys Diagnostics, Inc. (“Solys Diagnostics” or “SOLYS”), were organized to advance a broad pipeline of innovative medical technologies from concept to commercialization, employing a business model focused on capital efficiency and speed to market. The Company’s activities have focused on advancing the lead products towards regulatory approval and commercialization, protecting its intellectual property, and building its corporate infrastructure and management team. The Company operates in one segment as a medical technology company.

The ability of the Company to generate revenue depends upon the Company’s ability to successfully advance the commercialization of EsoGuard and CarpX while also completing the development and the necessary regulatory approvals of its other products and services. In this regard:

	●	EsoCheck has received 510(k) marketing clearance from the FDA as an esophageal cell collection device in June 2019;

	●	EsoGuard completed the certification required by the Clinical Laboratory Improvement Amendment (“CLIA”) and accreditation of the College of American Pathologists (“CAP”) making it commercially available as a Laboratory Developed Test (“LDT”) at LUCID’s contract diagnostic laboratory service provider in California in December 2019; and,

	●	CarpX, developed as a patented, single-use, disposable, minimally invasive device designed as a precision cutting tool to treat carpal tunnel syndrome while reducing recovery times, received 510(k) marketing clearance from the FDA in April 2020 with the first commercial procedure successfully performed in December 2020.

Although the Company’s current operational activities are principally focused on the commercialization of EsoGuard and CarpX its development activities are focused on pursuing FDA approval and clearance of other lead products in our product portfolio pipeline, including EsoGuard IVD, PortIO, DisappEAR, NextFlo, EsoCure and digital health technologies acquired by the Company’s majority-owned subsidiary Veris Health Inc.

Lucid Diagnostics Inc. Initial Public Offering - October 14, 2021

Subsequent to September 30, 2021, on October 14, 2021, Lucid Diagnostics Inc. completed an initial public offering (“IPO”) of its common stock under an effective registration statement on Form S-1 (SEC File No. 333-259721), wherein a total of 5.0 million IPO shares of common stock of Lucid Diagnostics Inc. were issued, with such total IPO shares inclusive of 571,428 shares issued to PAVmed Inc., at an IPO offering price of $14.00 per share, resulting gross proceeds of $70.0 million, before underwriting fees of $4.9 million, and approximately $0.7 million of offering costs incurred by Lucid Diagnostics Inc. See Note 12, Noncontrolling Interest, with respect to Lucid Diagnostics Inc.

Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates

Significant Accounting Policies

The Company’s significant accounting policies are as disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 2020 as filed with the SEC on March 15, 2021, except as otherwise noted herein below.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company holds a majority ownership interest and has controlling financial interest in each of: Lucid Diagnostics Inc., Veris Health Inc., and Solys Diagnostics Inc. with the corresponding noncontrolling interest included as a separate component of consolidated stockholders’ equity (deficit), including the recognition in the unaudited condensed consolidated statement of the net loss attributable to the noncontrolling interest based on the respective minority interest equity ownership of each majority-owned subsidiary. See Note 12, Noncontrolling Interest, for a discussion of each of the majority-owned subsidiaries noted above.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and applicable rules and regulations of the United States Securities and Exchange Commission (“SEC”) regarding interim financial reporting. As permitted under SEC rules, certain footnotes or other financial information normally required by U.S. GAAP have been condensed or omitted. The balance sheet as of December 31, 2020 has been derived from audited consolidated financial statements at such date. The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements, and in the opinion of management, include all adjustments, consisting only of routine recurring adjustments, necessary for a fair presentation of the Company’s unaudited condensed consolidated financial information.

The consolidated results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the consolidated results to be expected for the year ending December 31, 2021 or for any other interim period or for any other future periods. The accompanying unaudited condensed consolidated financial statements and related unaudited condensed consolidated financial information should be read in conjunction with the PAVmed Inc and Subsidiaries audited consolidated financial statements and related notes thereto as of and for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K as filed with the SEC on March 15, 2021.

Subsequent to September 30, 2021, effective October 6, 2021, the Lucid Diagnostics Inc. board of directors: increased the authorized shares of common stock of Lucid Diagnostics Inc. to 100.0 million shares; and declared a 1.411-to-1.0 common stock-split with respect to Lucid Diagnostics Inc. common stock (with no adjustment to the par value per share). All shares of Lucid Diagnostics Inc. common stock, stock options, and restricted stock awards, and per share amounts, have been adjusted for the common stock-split and are presented for all periods on a retrospective basis.

All amounts in the accompanying unaudited notes to the unaudited condensed consolidated financial statements are presented in thousands, if not otherwise noted as being presented in millions, except for the number of shares and per share amounts.

Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued

Significant Accounting Policies - continued

Use of Estimates

In preparing unaudited condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, as well as the reported amounts of expenses during the reporting period. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions. These estimates and assumptions include the estimated fair value of stock-based equity awards, and the estimated fair value of financial instruments recognized as liabilities. In addition, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows.

Revenue Recognition

The Company recognizes revenue under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, (“ASC 606”). At its inception, an arrangement is accounted for under the provisions of ASC 606 as a contract with a customer when there is: a legally enforceable contract between the parties; the rights of the parties are identified; the arrangement has commercial substance; and collectability of the contract consideration is deemed probable. To determine revenue recognition for arrangements determined to be within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

Statement of Cash Flows - Supplemental Information

The unaudited condensed consolidated statement of cash flows supplemental information as of September 30, 2021 is as follows: cash flows used in investing activities with respect to the purchase of fixed assets of $192 is net of $153 included in accounts payable and $60 included in accrued expenses and other current liabilities in the accompanying unaudited condensed consolidated balance sheet as of September 30, 2021; and cash flows from financing activities with respect to proceeds from exercise of warrants of $4,115 is net of each of $568 of exercise proceeds from the exercise of 354,996 Series Z Warrants, and $20 from the exercise of 3,945 Series W Warrants, with such exercise proceeds received from the Company’s transfer agent subsequent to September 30, 2021 on October 4, 2021, with such amounts due from the transfer agent included prepaid expenses, deposits, and other current assets, in the accompanying unaudited condensed consolidated balance sheet as of September 30, 2021.

Financial Condition

The Company has financed its operations principally through the public and private issuances of its common stock, preferred stock, common stock purchase warrants, and debt. The Company is subject to all of the risks and uncertainties typically faced by medical device and diagnostic and medical device companies that devote substantially all of their efforts to the commercialization of their initial product and services and ongoing R&D and clinical trials. The Company expects to continue to experience recurring losses from operations and will continue to fund its operations with debt and equity financing transactions. Notwithstanding, however, with the cash on-hand as of the date hereof, the Company expects to be able to fund its future operations for one year from the date of the issue of the Company’s unaudited condensed consolidated financial statements, as included herein in this Quarterly Report on Form 10-Q for the period ended September 30, 2021.

Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued

Recent Accounting Standards Updates

Accounting Standards Updates Adopted

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40), (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, by eliminating the beneficial conversion and cash conversion accounting models previously contained in ASC 470-20 that required separate accounting for embedded conversion features. ASU 2020-06 also simplified the assessment of a financial instruments settlement to determine whether a contract is an entity’s own equity qualifies for equity classification by removing certain conditions from ASC 815-4-25. The ASU 2020-06 amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company’s adoption of the ASU 2020-06 guidance as of January 1, 2021 did not have an effect on the Company’s financial statements.

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes: Simplifying the Accounting for Income Taxes”, (“ASU 2019-12”). The guidance of ASU 2019-12 removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation, and calculating income taxes in interim periods, and adds revised guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. Adoption of the guidance of ASU 2019-12 is required for annual and interim financial statements beginning after December 15, 2020. The Company’s adoption of the ASU 2019-12 guidance as of January 1, 2021 did not have an effect on the Company’s financial statements.

Accounting Standards Updates Not Yet Adopted

FASB ASC Topic 842, Leases, (“ASC 842”) (ASU No. 2016-02, Leases, February-2016 - “ASU 2016-02”) which established a right-of-use (“ROU”) model requiring a lessee to recognize a ROU asset and a lease liability for all leases with terms greater-than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The ASC 842 effective date for the Company is December 31, 2022 for its annual financial statements, and for interim quarterly financial statements commencing March 31, 2023.

Note 3 — Patent License Agreement – Case Western Reserve University

Overview

The Company, through its majority-owned subsidiary Lucid Diagnostics Inc., entered into a patent license agreement with Case Western Reserve University (“CWRU”), captioned the Amended and Restated License Agreement and dated August 23, 2021 (“Amended CWRU License Agreement”). The Amended CWRU License Agreement is a successor to and replaced in its entirety the previous CWRU License Agreement, dated May 12, 2018, between Lucid Diagnostics Inc. and CWRU. The Amended CWRU License Agreement terminates upon the expiration of certain related patents, or on May 12, 2038 in countries where no such patents exist, or upon expiration of any exclusive marketing rights granted by the FDA or other U.S. government agency, whichever comes later.

The Amended CWRU License Agreement (as did the predecessor CWRU License Agreement) provides for the exclusive worldwide license of the intellectual property rights for the proprietary technologies of two distinct technology components - the “EsoCheck Cell Collection Device” referred to as “EsoCheck®”; and a panel of proprietary methylated DNA biomarkers, a laboratory developed test (“LDT”), referred to as “EsoGuard®”; and together are collectively referred to as the “EsoGuard Technology”.

The CWRU License Agreement Fee was $273, of which $50 was previously paid in 2018. On the August 23, 2021 effective date of the Amended CWRU License Agreement, the remaining balance of $223 became payable, and such amount was paid in September 2021. Additionally, also in September 2021, the Company paid a $10 amendment fee in connection with the Amended CWRU License Agreement. Additionally, the Amended CWRU License Agreement provides for each of patent fees reimbursement payments; milestone payments; and royalty payments - each as discussed below.

Patent Fees Reimbursement

Lucid Diagnostics Inc. is responsible for reimbursement of certain CWRU billed patent fees. See Note 4, Related Party Transactions, for patent fee reimbursement payments paid to CWRU in the three and nine months ended September 30, 2021 and 2020.

Milestones

The (predecessor) CWRU License Agreement contained milestones, including regulatory milestones with respect to the FDA 501(k) submission of EsoCheck and the FDA clearance of EsoCheck, respectively regulatory submissions and clearances; which were achieved in accordance with the requisite contractual due dates, for which a $75 research and development expense was recognized and paid with respect to the achievement of the regulatory milestone related to FDA clearance of EsoCheck. The CWRU License Agreement was amended effective February 12, 2021, to: change the achievement date of commercialization milestone from November 2020 to August 2021; to eliminate the payment with respect to the commercialization milestone; and to add a non-refundable $100 payment to CWRU in consideration for such changes to the commercialization milestone (“CWRU License Agreement Amendment Fee”), with such fee recognized as general and administrative expense as of December 31, 2020 and paid in February 2021. The regulatory milestone related to FDA PMA submission of a licensed product (“PMA Milestone”) is included in the Amended CWRU License Agreement, and is the sole remaining unachieved milestone, for which a $200 milestone payment would be payable to CWRU upon its achievement.

Note 3 — Patent License Agreement – Case Western Reserve University - continued

Royalty Fee

Under the Amended CWRU License Agreement. the Company is required to pay a royalty fee to CWRU with respect to the “Licensed Products” (as defined in the CWRU License Agreement) of a percentage of “Net Sales”, as defined in the Amended CWRU License Agreement, as follows: 5.0% of Net Sales up to $100.0 million per year; and 8.0% of Net Sales of $100.0 million or greater per year, with such amounts subject-to a minimum annual royalty fee.

The base minimum annual royalty fee is $50 commencing January 1 following the first anniversary of the “First Commercial Sale” of a “Licensed Product” (as such terms are defined in the Amended CWRU License Agreement). The minimum annual royalty fee increases to each of: $150 if the annual “Net Sales” (as defined in the Amended CWRU License Agreement) exceed $25.0 million up to $50.0 million; $300 if annual Net Sales exceed $50.0 million up to $100.0 million; and $600 if annual Net Sales exceed $100.0 million. The Company recognized a 5.0% royalty fee payment liability as of September 30, 2021 with respect to the revenue recognized under the EsoGuard Commercialization Agreement, dated August 1, 2021, between Lucid Diagnostics Inc. and Research Dx Inc. Prior to September 30, 2021, no royalty fee has been incurred under the CWRU license agreements.

Additionally, the Company is required to pay a royalty fee on (sub-license) “Other Proceeds” (as defined in the Amended CWRU License Agreement) of: 30% of sub-license proceeds to extent the sub-license proceeds are realized prior to the first commercial Sale of a Licensed Product; or 15% of sub-license proceeds to extent the sub-license proceeds are realized after the first commercial Sale of a Licensed Product.

Consulting Agreements with Physician Inventors - Intellectual Property - CWRU License Agreement

Lucid Diagnostics Inc. entered into consulting agreements with each of the three physician inventors of the intellectual property licensed under the Amended CWRU License Agreement (“Physician Inventors”), with each such consulting agreement providing for compensation on a contractual rate per hour for consulting services provided, and an expiration date of May 12, 2024, upon each of the respective the agreements’ renewal effective May 12, 2021. Additionally, each of the Physician Inventors have been granted stock options and restricted stock awards under the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan; and stock options under the PAVmed Inc. 2014 Long-Term Incentive Equity Plan. See Note 4, Related Party Transactions, with respect to the consulting fee expense and stock based compensation expense recognized with respect to the Physician Inventors consulting agreements and stock options and restricted awards discussed above; and Note 9, Stock-Based Compensation, for information regarding each of the “Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan” and the separate “PAVmed Inc. 2014 Long-Term Incentive Equity Plan”.

Note 4 —Related Party Transaction