PAVmed Inc. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2018. This is an annual report, not a standalone fourth-quarter report. PAVmed is a development-stage medical-device company with no product revenue to date.
Financial results and liquidity
| Metric | 2018 | 2017 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $10.56 million | $8.03 million |
| Operating loss | $10.56 million | $8.03 million |
| Net loss attributable to PAVmed | $17.97 million | $9.52 million |
| Net loss attributable to common stockholders | $18.75 million | $10.40 million |
| Net cash used in operating activities | $8.79 million | $6.61 million |
| Cash at year-end | $8.22 million | $1.54 million |
- Research and development expense rose 62% to $4.25 million; general and administrative expense rose 17% to $6.31 million. No gross margin is reported because the company had no product sales.
- Cash provided by financing activities was $15.50 million, versus $7.56 million in 2017. Investing cash outflow was $26,609.
- At December 31, 2018, current assets were $8.46 million and current liabilities were $10.97 million, including the convertible note at a reported fair value of $7.90 million. Working capital was negative approximately $2.5 million; total stockholders’ deficit was $2.48 million.
- The 2017 Scopia senior secured note, which carried 15% interest, was repaid in December 2018 with $5.0 million cash and 600,000 common shares. PAVmed recorded a $1.41 million extinguishment loss.
Changes versus prior year
- Operating expenses increased $2.53 million, reflecting expanded product-development work, staffing and related costs.
- Common-stockholder net loss increased $8.35 million. Beyond higher operating costs, 2018 included substantial financing and warrant-related charges, including note interest, a debt-extinguishment loss, convertible-note fair-value expense and warrant-exchange/modification expenses.
- Cash increased by $6.69 million, primarily from 2018 equity offerings and new debt financing, while operating cash use also increased.
- Common shares outstanding rose from 14.55 million to 27.14 million during 2018. The company also had 16.82 million Series Z Warrants outstanding at year-end, among other potentially dilutive securities.
Financing, outlook and key risks
- 2018 financing included approximately $4.3 million net from a January stock offering, $9.2 million net from a June rights offering, and approximately $7.0 million net proceeds from a $7.75 million face-value secured convertible note. The note bears 7.875% stated interest, matures December 31, 2020, and is convertible initially at $1.60 per share; it has scheduled twice-monthly payments, adjustment provisions and restrictive covenants. The debt is secured by assets of PAVmed and Lucid Diagnostics.
- Management and the auditor both identified substantial doubt about PAVmed’s ability to continue as a going concern. The company reported recurring losses, no revenue, negative working capital and reliance on additional financing. Management’s plans include raising capital, refinancing debt, obtaining regulatory approvals, commercializing products and controlling expenses; success is not assured.
- Pipeline progress: CarpX’s FDA review did not reach consensus; following discussions, the FDA recommended human safety testing. A 20-patient, 90-day first-in-human study was being prepared, with procedures expected after patient assessments. EsoCheck’s cell-collection device received an FDA request for additional effectiveness and technical information; the related biomarker test was pursuing laboratory-developed-test status. PortIO was pursuing a de novo pathway and had completed requested animal testing, with analysis and regulatory submission pending. DisappEAR and NextFlo remained in development; NextCath work was subject to available resources and Caldus development was paused.
- Management described plans to advance lead products and pursue commercialization partnerships, but provided no quantified revenue, profitability or cash-flow guidance. Regulatory timing, clinical outcomes, reimbursement, market acceptance and further financing remain uncertain.
- Unusual items include the $136,606 settlement of a former financial adviser’s lawsuit and significant noncash charges from debt and warrant accounting. The 10-K reports effective disclosure controls and management-assessed effective internal control over financial reporting; the auditor did not attest to internal controls.
Important facts for investors to verify
- Cash runway, near-term payment obligations and compliance with the convertible note’s cash covenant, scheduled payments and other covenants.
- Potential dilution from note conversions, warrants, preferred shares, options and any required increase in authorized common shares.
- Actual FDA requirements, study enrollment and results, and clearance timelines for CarpX, EsoCheck, PortIO and other candidates.
- Whether PAVmed can obtain additional financing on viable terms and sustain operations without product revenue.
- Whether the disclosed pipeline market opportunities, reimbursement assumptions and commercialization plans are supported by independent evidence.