PAVmed Inc. Income Taxes Disclosure

Note 18 — Income Taxes

 

Income tax (benefit) expense for respective periods noted is as follows:

 Schedule of Income Tax (Benefit) Expense

		Years Ended December 31,
		2024				2023
Current
Federal, State and Local		$	—			$	—
Deferred
Federal			(6,965	)			(16,789	)
State and Local			(3,725	)			(19,323	)
Current and Deferred tax (benefit) expense			(10,690	)			(36,112	)
Less: Valuation allowance reserve			10,690				36,112
Income tax expense (benefit)		$	—			$	—

 

The reconciliation of the federal statutory income tax rate to the effective income tax rate for the respective period noted is as follows:

 

 Schedule of Effective Income Tax Rate Reconciliation

		Years Ended December 31,
		2024				2023
U.S. federal statutory rate			21.0	%			21.0	%
U.S. state and local income taxes, net of federal benefit			(8.4	)%			6.1	%
Permanent differences			4.8	%			(2.7	)%
Gain on deconsolidation of subsidiary			(53.4	)%			—	%
Tax credits			(2.2	)%			2.2	%
Revaluation of state deferred taxes			(1.9	)%			—	%
Federal deferred true-up			2.4	%			5.8	%
State deferred true-up			0.1	%			13.2	%
Valuation allowance			37.6	%			(45.6	)%
Effective tax rate			—	%			—	%

 

  

Note 18 — Income Taxes - continued

 

The tax effects of temporary differences which give rise to the net deferred tax assets for the respective period noted is as follows:

 

 Schedule of Deferred Tax Assets and Liabilities

		Years Ended December 31,
		2024				2023
Deferred Tax Assets
Net operating loss		$	30,439			$	67,786
Debt issue costs			—				537
Stock-based compensation expense			4,131				12,304
Lease liabilities			741				1,266
Research and development expenditures			4,434				8,234
Research and development tax credit carryforwards			2,883				3,481
Accrued expenses			249				385
Section 195 deferred start-up costs			19				17
Depreciation & amortization		$	—			$	800
Deferred tax assets		$	42,896			$	94,810
Deferred Tax Liabilities
Operating lease right-of-use assets			(671	)			(1,194	)
Depreciation			(59	)			—
Unrealized Gains on Equity Method Investments			(143	)			—
Deferred Tax Liabilities		$	(873	)		$	(1,194	)
Deferred tax assets, net of deferred tax liabilities			42,023				93,616
Less: valuation allowance			(42,023	)			(93,616	)
Deferred tax assets, net after valuation allowance		$	—			$	—

 

Deferred tax assets and deferred tax liabilities resulting from temporary differences are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of the change in the tax rate is recognized as income or expense in the period the change in tax rate is enacted.

 

As mentioned in Note 4, Equity Method Investment, on September 10, 2024, PAVmed ceased to have a controlling financial interest in Lucid Diagnostics and therefore PAVmed’s consolidated results of operations include Lucid Diagnostics’ results of operations only through that date. Pursuant to ASC 810-10-40-5, the tax effects of the deconsolidation of Lucid Diagnostics’ are included in the gain on deconsolidation resulting in deferred tax expense of $62.3 million offset by a full valuation allowance of ($62.3) million, netting to zero. Lucid Diagnostics no longer qualifies to be included in PAVmed’s combined unitary state tax returns.

 

As required by FASB ASC Topic 740, Income Taxes, (ASC 740), a “more-likely-than-not” criterion is applied when assessing the estimated realization of deferred tax assets through their utilization to reduce future taxable income, or with respect to a deferred tax asset for tax credit carryforward, to reduce future tax expense. A valuation allowance is established, when necessary, to reduce deferred tax assets, net of deferred tax liabilities, when the assessment indicates it is more-likely-than-not, the full or partial amount of the net deferred tax asset will not be realized. Accordingly, the Company evaluated the positive and negative evidence bearing upon the estimated realizability of the net deferred tax assets, and based on the Company’s history of operating losses, concluded it is more-likely-than-not the deferred tax assets will not be realized, and therefore recognized a valuation allowance reserve equal to the full amount of the deferred tax assets, net of deferred tax liabilities, as of December 31, 2024 and 2023. As of December 31, 2024 and 2023, the deferred tax asset valuation allowance decreased by $51.6 million and increased by $36.1 million, respectively. For the year ended December 31, 2024, due to the deconsolidation of Lucid on September 10, 2024, changes to the valuation allowance reported a decrease of $62.3 million in the gain on deconsolidation of Lucid and an increase of ($10.7) million through current year operations, netting to a total change of $51.6 million.

 

The Company has total estimated federal net operating loss (“NOL”) carryforward of approximately $144.9 million and $236.3 million as of December 31, 2024 and 2023, respectively, which is available to reduce future taxable income, of which approximately $13.8 million have statutory expiration dates commencing in 2037, and approximately $131.1 million which do not have a statutory expiration date. The Company has not yet conducted a formal analysis and the NOL carryforward and general business credits may be subject-to limitation under U.S. Internal Revenue Code (“IRC”) Section 382 (provided there was a greater than 50% ownership change, as computed under such IRC Section 382). The State and Local NOL carryforwards of approximately $213.6 million have statutory expiration dates commencing in 2037. The Company has total estimated research and development (“R&D”) tax credit carryforward of approximately $2.9 million as of December 31, 2024 which are available to reduce future tax expense and have statutory expiration dates commencing in 2037.

 

 

Note 18 — Income Taxes - continued

 

The Company files income tax returns in the United States in federal and applicable state and local jurisdictions. The Company’s tax filings for the years 2017 and thereafter each remain subject to examination by taxing authorities. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. The Company has not recognized any penalties or interest related to its income tax provision.