PAVmed Inc. — FY2017 Form 10-K
Reporting period: Fiscal year ended December 31, 2017. This is an annual report, not a standalone fourth-quarter filing. PAVmed is a pre-commercial, multi-product medical-device developer; it reported no product revenue. The audited financial statements received an unqualified opinion, with the auditor emphasizing substantial doubt about the Company’s ability to continue as a going concern.
Financial performance and liquidity
| Metric | FY2017 | FY2016 |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expense | $5.42 million | $3.93 million |
| Research and development expense | $2.62 million | $1.72 million |
| Total operating expense / operating loss | $8.03 million | $5.65 million |
| Net loss | $9.52 million | $5.65 million |
| Net loss attributable to common stockholders | $10.40 million | $5.65 million |
| Net cash used in operating activities | $6.61 million | $4.45 million |
| Cash at year-end | $1.54 million | $0.59 million |
Margins are not meaningful because the Company had no revenue. FY2017 operating expenses rose 42% year over year, with G&A up 38% and R&D up 52%. Net loss attributable to common stockholders increased 84%; it includes preferred-stock dividends and deemed dividends in addition to the reported net loss.
At December 31, 2017, total assets were $1.64 million and total liabilities were $4.49 million. The Scopia senior secured note had gross principal of $5.19 million, including $188,542 of deferred interest; it bears 15% annual interest and is due June 30, 2019. Its balance-sheet carrying value was $1.94 million, net of a $3.24 million unamortized debt discount. The note is secured by Company and subsidiary assets and includes covenants restricting, among other things, additional debt and liens.
Reported current assets of $1.62 million were below current liabilities of $2.54 million. Management separately cited working capital of $53,060 after excluding $973,340 of Series A warrant and preferred-conversion derivative liabilities. The Company raised $7.56 million net from financing activities in 2017. After year-end, the January 2018 common-stock offering provided approximately $4.26 million net proceeds.
Business developments and material changes
- CarpX: The minimally invasive carpal-tunnel device was submitted to FDA through the 510(k) pathway on November 27, 2017. The Company reported promising initial FDA feedback but said it needed to provide additional non-clinical support.
- PortIO: After initially pursuing 510(k) clearance for emergency use, the Company shifted to a de novo pathway for a broader indication of vascular access up to seven days. Following an FDA meeting in January 2018, it planned a seven-day animal study and anticipated a human safety trial; it was pursuing strategic partnerships.
- DisappEAR: Development focused on sourcing commercially ready aqueous silk and refining manufacturing processes for antimicrobial, resorbable ear tubes licensed from Tufts and affiliated institutions.
- Other pipeline products: NextCath and NextFlo remained in development, with further work dependent on available capital. Caldus development was paused pending resources.
Financing included a $5.0 million initial-principal secured note from Scopia, $2.5 million gross proceeds from Series A preferred-stock units, and $500,000 from Series A-1 units. The Series A unit issuance generated a $3.12 million reported loss, largely reflecting the initial fair value of derivative liabilities and offering costs. Fair-value changes on those derivatives produced $2.59 million of other income; these non-cash valuation items materially affected reported results.
Outlook, risks, and contingencies
Management expects operating losses and negative operating cash flows for the foreseeable future, plans to increase R&D spending, and depends on additional financing, regulatory progress, commercialization, and expense control. The filing provides no specific revenue, earnings, or cash-flow guidance. Management and the auditor both disclosed substantial doubt about the Company’s ability to continue as a going concern; additional capital was not assured.
- Products remained pre-commercial and subject to uncertain FDA and international review, possible animal or human studies, and market-acceptance and reimbursement risks.
- Liquidity depends on repeated capital raises. The note’s 15% interest, asset security, covenants, and 2019 maturity add financing and default risk; securities issuances and outstanding warrants or convertible instruments may dilute shareholders.
- Nasdaq notified the Company on March 5, 2018 that market value of listed securities was below the $35 million continued-listing threshold. The Company had until September 4, 2018 to regain compliance or risk delisting.
- A proposed rights offering and several preferred-stock and warrant exchange offers were pending after year-end; terms and completion were not certain. The January 2018 public offering and other post-year-end transactions are subsequent events, not FY2017 operating results.
- The filing reported no pending legal actions and no off-balance-sheet arrangements. Management concluded disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not attest to internal controls.
Important facts for investors to verify
- Current cash, operating burn, funding runway, and whether subsequent or planned financing is sufficient to meet obligations.
- Gross and carrying value of the Scopia note, interest accrual, covenant compliance, and repayment or refinancing plans before its June 2019 maturity.
- FDA status, study requirements, timing, and expected costs for CarpX and PortIO, including whether PortIO’s de novo route requires human clinical testing.
- Actual completion and dilution effects of the proposed rights offering and preferred-stock or warrant exchanges, alongside the full potential dilution from outstanding securities.
- Nasdaq listing compliance status and any updated going-concern assessment.