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    PAVM   US70387R1068

PAVMED INC.

(PAVM)
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PAVMED INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/22/2021 | 05:30pm EST

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, 2020 (the "Form 10-K") as filed with the Securities and Exchange Commission (the "SEC"). Unless the context otherwise requires, references herein to "we", "us", and "our", and to the "Company" or "PAVmed" are to PAVmed Inc. and Subsidiaries, including each of the PAVmed Inc. and its majority-owned subsidiaries, including: Lucid Diagnostics Inc. ("Lucid Diagnostics" or "LUCID"), Veris Health Inc. ("Veris Health" or "VERIS"), and Solys Diagnostics, Inc. ("Solys Diagnostics" or "SOLYS").




Forward-Looking Statements



This Quarterly Report on Form 10-Q (this "Form 10-Q"), including the following 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 without limitation statements regarding our future consolidated results of operations and consolidated financial position, our estimates regarding expenses, future revenue, capital and operating expenditure requirements and needs for additional financing, our business strategy and plans and the 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 our actual results may differ significantly from the results discussed 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 commercialization of our
    products;
  ? 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 sustain status as a going concern;
  ? our ability to protect our intellectual property;
  ? our ability to identify and complete strategic acquisitions and integrate the
    acquired operations;
  ? our ability to manage growth;
  ? the liquidity and trading of our securities;
  ? our regulatory or operational risks;
  ? cybersecurity risks;
  ? risks related to the COVID-19 pandemic;
  ? our estimates regarding expenses, future revenue, capital requirements, and
    needs for additional financing; and
  ? our status as an "emerging growth company" under the JOBS Act.



In addition, our forward-looking statements do not incorporate the potential impact of any future financings, acquisitions, mergers, dispositions, joint ventures, or investments we may make.

We may not actually achieve the plans, intentions, and /or expectations disclosed in our forward-looking statements, and you should not rely on our forward-looking statements. You should read this Form 10-Q, together with the Form 10-K, 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.



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued



Overview


PAVmed is a highly differentiated, multi-product, commercial-stage technology medical device company 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. Since inception on June 26, 2014, the Company's activities have focused on advancing its 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, with the following lines-of-business: "GI Health", "Minimally Invasive Interventions", "Infusion Therapy", "Digital Health", and "Emerging Innovations". The Company has ongoing operations conducted through PAVmed Inc. and its majority-owned subsidiaries of Lucid Diagnostics, Veris Health, and Solys Diagnostics.

PAVmed Inc. and /or its subsidiaries have proprietary rights to the trademarks used herein, including, among others, PAVmed™, Lucid Diagnostics™, LUCID™, Veris Health™, VERIS™, Oncodisc™, Solys Diagnostics™, SOLYS™, Caldus™, CarpX®, DisappEAR™, EsoCheck®, EsoGuard®, EsoCheck Cell Collection Device®, EsoCure Esophageal Ablation Device™, NextCath™, NextFlo™, PortIO™, and "Innovating at the Speed of Life"™. Solely as a matter of convenience, trademarks and trade names referred to herein may or may not be accompanied with the requisite marks of "™" or "®". However, the absence of such marks is not intended to indicate, in any way, PAVmed Inc. or its subsidiaries will not assert, to the fullest extent possible under applicable law, their respective rights to such trademarks and trade names.

Our multiple products and services are in various phases of development, regulatory clearances, approvals, and commercialization.

? The EsoCheck device received 510(k) marketing clearance from the U.S. Food and

Drug Administration ("FDA"), in June 2019 and European CE Mark Certification in

May 2021 as an esophageal cell collection device; and, EsoGuard has been

established as a Laboratory Developed Test ("LDT"), completed European CE Mark

Certification in June 2021, and was launched commercially in December 2019

after Clinical Laboratory Improvement Amendment ("CLIA") and College of

American Pathologists accreditation of the test at Lucid Diagnostics commercial

diagnostic laboratory partner ResearchDx Inc. ("RDx"), headquartered in Irvine,

California. In August 2021, Lucid Diagnostics launched a strategic partnership

with direct-to-consumer telemedicine company UpScriptHealth to support our

commercialization efforts. Also in August 2021, we tested our first patients

referred by primary care physicians ("PCPs") in three Lucid Test Centers opened

in the Phoenix metropolitan area.

? Our CarpX device is a patented, single-use, disposable, minimally-invasive

surgical device designed as a precision cutting tool to treat carpal tunnel

syndrome while reducing recovery times that was cleared by the FDA under

section 510(k) in April 2020, with the first commercial procedure successfully

performed in December 2020. In May 2021 European CE Mark Certification was

received for CarpX.

? In May 2021, we formed Veris Health, which is our newest majority-owned

subsidiary. In connection with it formation, Veris Health acquired Oncodisc Inc

("Oncodisc"), a digital health company with ground breaking tools to improve

personalized cancer care through remote patient monitoring. Oncodisc's core

technologies include the first intelligent implantable vascular healthcare

platform that provides patients and physicians with new tools to improve

outcomes and optimize the delivery of cost-effective care through remote

monitoring and data analytics. Its vascular access port contains biologic

sensors capable of generating continuous data on key physiologic parameters

known to predict adverse outcomes in cancer patients undergoing treatment.

Wireless communication to the patient's smartphone and its cloud-based digital

healthcare platform efficiently and effectively delivers actionable real time

data to patients and physicians. The technologies are the subject of multiple

patent applications and one allowed patent awaiting final issuance.




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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued



Overview - continued


As discussed herein below, our current lines-of-business are as follows:



  ? GI Health - EsoGuard Esophageal DNA Test, EsoCheck Esophageal Cell Collection
    Device, and EsoCure Esophageal Ablation Device with Caldus Technology;




  ? Minimally Invasive Interventions - CarpX Minimally Invasive Surgical Device
    for Carpal Tunnel Syndrome;




  ? Infusion Therapy - PortIO Implantable Intraosseous Vascular Access Device and
    NextFlo Highly Accurate Disposable Intravenous Infusion Platform Technology;




  ? Digital Health - implantable vascular healthcare platform through remote
    monitoring and data analytics; and




  ? Emerging Innovations - Non-invasive laser-based glucose monitoring, single-use
    ventilators, resorbable pediatric ear tubes and mechanical circulatory support
    cannulas.




GI Health



EsoGuard, EsoCheck, and EsoCure

EsoGuard and EsoCheck are based on patented technology licensed from Case Western Reserve University ("CWRU") through our majority-owned subsidiary, Lucid. EsoGuard and EsoCheck have been developed to provide an accurate, non-invasive, patient-friendly screening test for the early detection of adenocarcinoma of the esophagus ("EAC") and Barrett's Esophagus ("BE"), including dysplastic BE and related pre-cursors to EAC in patients with chronic gastroesophageal reflux ("GERD").

EsoGuard is a bisulfite-converted next-generation sequencing (NGS) DNA assay performed on surface esophageal cells collected with EsoCheck. It quantifies methylation at 31 sites on two genes, Vimentin (VIM) and Cyclin A1 (CCNA1). The assay was evaluated in a 408-patient multicenter case-control study published in Science Translational Medicine, and showed greater than 90% sensitivity and specificity at detecting esophageal precancer and all conditions along the BE-EAC spectrum, including on samples collected with EsoCheck (Moinova, et al. Sci Transl Med. 2018 Jan 17;10(424): eaao5848). EsoGuard is commercially available in the U.S. as a Laboratory Developed Test (LDT) performed at our CLIA-certified laboratory partner, ResearchDx Inc. ("RDx"), which does business as "PacificDx". Cell samples, including those collected with EsoCheck, as discussed below, are sent to RDx, for testing and analyses using our proprietary EsoGuard NGS DNA assay.

EsoCheck is an FDA 510(k) and CE Mark cleared noninvasive swallowable balloon capsule catheter device capable of sampling surface esophageal cells in a less than five-minute office. It consists of a vitamin pill-sized rigid plastic capsule tethered to a thin silicone catheter from which a soft silicone balloon with textured ridges emerges to gently swab surface esophageal cells. When vacuum suction is applied, the balloon and sampled cells are pulled into the capsule, protecting them from contamination and dilution by cells outside of the targeted region during device withdrawal. We believe this proprietary Collect+Protect™ technology makes EsoCheck the only noninvasive esophageal cell collection device capable of such anatomically targeted and protected sampling.

EsoCure is in development as an Esophageal Ablation Device, with the intent to allow a clinician to treat dysplastic BE before it can progress to EAC, a highly lethal esophageal cancer, and to do so without the need for complex and expensive capital equipment. We have successfully completed a pre-clinical feasibility animal study of EsoCure demonstrating excellent, controlled circumferential ablation of the esophageal mucosal lining. We have also completed an acute and survival animal study of EsoCure™ Esophageal Ablation Device, demonstrating successful direct thermal balloon catheter ablation of esophageal lining through working channel of standard endoscope. We plan to conduct additional development work and animal testing of EsoCure to support a future FDA 510(k) submission.

In December 2019, we secured "gapfill" determination for the EsoGuard PLA code 0114U through the United States Department of Health and Human Services ("HHS") Centers for Medicare and Medicaid Services ("CMS") Clinical Laboratory Fee Schedule ("CLFS") process, which has allowed us to engage directly with Medicare contractor Palmetto GBA, LLC and its MolDx Program on CMS payment and coverage. In October 2020, CMS granted EsoGuard final Medicare payment determination of $1,938.01, effective January 1, 2021. We are still awaiting Medicare local coverage determination from MolDx, which we understand is working to clear a significant backlog of reviews.



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued



Overview - continued



GI Health - continued


EsoGuard, EsoCheck, and EsoCure

We are also aggressively pursuing EsoGuard U.S. private payor payment and coverage. We recently held our initial advisory board meetings with medical directors of major insurers to obtain feedback and guidance on the type of clinical data that will be helpful in securing payment and coverage. Although the claim cycle can be prolonged during the early commercialization of a new test, PacificDx is starting to receive out-of-network private insurance payments on our behalf.

Our initial EsoGuard commercialization efforts focused on gastroenterology (GI) physicians who have generally embraced our message that EsoGuard has the potential to expand the funnel of BE-EAC patients who will need long-term EGD surveillance and, potentially, treatment with endoscopic esophageal ablation. We have previously relied upon a hybrid sales model with full-time sales management and approximately fifty independent sales representatives. We significantly expanded our full-time commercial team in 2021 and are actively recruiting full-time territory managers and sales representatives nationwide. EsoGuard testing has accelerated as pandemic-related healthcare facility limitations have eased.

We are now expanding EsoGuard commercialization to target primary care physicians (PCPs). The vast majority of at-risk GERD patients are cared for by PCPs and never see a gastroenterologist. To assure sufficient testing capacity and geographic coverage during this expansion, we are building our own network of Lucid Test Centers, where Company employed clinical personnel will perform the EsoCheck procedure for EsoGuard testing. We have launched three pilot Lucid Test Centers in the Phoenix metropolitan area and have recently announced new test centers in Utah, Colorado, and Nevada. We are currently preparing for the launch an EsoGuard Telemedicine Program, in partnership with an independent third-party telemedicine provider, UpScriptHealth, that can accommodate EsoGuard self-referrals from direct-to-consumer marketing.

Our active clinical research and development program seeks to expand the clinical evidence of our products' efficacy to support our ongoing regulatory, reimbursement and commercial efforts, including a FDA PMA submission for approval of EsoGuard and EsoCheck as an in vitro device ("IVD"), as currently, EsoGuard and EsoCheck are permitted to be marketed separately, but not in combination. We are actively enrolling patients in two international multicenter clinical trials to support FDA PMA approval of EsoGuard, used with EsoCheck, as an IVD indicated to detect NDBE. ESOGUARD-BE-1 is a screening study which will enroll approximately 500 to 900 male GERD patients over 50 years of age with one other risk factor. ESOGUARD-BE-2 is a case control study which will enroll approximately 500 male GERD patients with a previous diagnosis of NDBE, LGD, HGD, or EAC, along with normal controls.

In February 2020, we received FDA "Breakthrough Device Designation" for EsoGuard as an IVD. The FDA Breakthrough Device Program was created to offer patients more timely access to breakthrough technologies which provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions by expediting their development, assessment and review through enhanced communications and more efficient and flexible clinical study design, including more favorable pre/post market data collection balance. Breakthrough Devices receive priority FDA review, and a bipartisan bill before Congress (H.R. 5333) seeks to require Medicare to temporarily cover all Breakthrough Devices for three years while determining permanent coverage.

We have received ISO 13485:2016 certification for Lucid's quality management system and received CE Mark certification for EsoCheck in May 2021 which allows it to be marketed in CE Mark European countries, which include the European Economic Area (the EU, Norway, Iceland, and Lichtenstein), Switzerland, and, until July 1, 2023, the United Kingdom. In June 2021, we completed the European Directive 98/79/EC for In-Vitro Diagnostic Medical Devices ("IVDD") CE Mark certification for EsoGuard after Lucid and its European Union ("EU") authorized representative completed the Commission of the European Union ("EC") declaration of conformity procedure, including the associated technical documentation, ensuring and declaring EsoGuard meets the essential requirements of the IVDD.



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued



Overview - continued


Minimally Invasive Interventions



CarpX


CarpX is a minimally invasive surgical device for use in the treatment of carpal tunnel syndrome which received FDA 510(k) marketing clearance in April 2020, with the first commercial procedure successfully performed in December 2020. After an initial slowdown in commercialization related to COVID, more recently we have recruited new sales leadership and have recently trained seven new surgeons to perform the CarpX procedure with five more scheduled to undergo training.

We believe CarpX is designed to allow the physician to relieve the compression on the median nerve without an open incision or the need for endoscopic or other imaging equipment. To use CarpX, the operator first advances a guidewire through the carpal tunnel under the ligament, and then advanced over the wire and positioned in the carpal tunnel under ultrasonic and/or fluoroscopic guidance. When the CarpX balloon is inflated it creates tension in the ligament positioning the cutting electrodes underneath it and creates space within the tunnel, providing anatomic separation between the target ligament and critical structures such as the median nerve. Radiofrequency energy is briefly delivered to the electrodes, rapidly cutting the ligament, and relieving the pressure on the nerve. We believe CarpX will be significantly less invasive than existing treatments.

We are commercializing CarpX through a network of independent U.S. sales representatives and/or inventory-stocking medical distributors together with our in-house sales management and marketing teams. Our focus on CarpX, and other high margin products and services, is particularly suitable to this mode of distribution. A high gross margin allows us to properly incentivize our distributors, which in turn allows us to attract the top distributors with the most robust networks in our targeted specialties. Independent distributors play an even larger role in many parts of Europe, most of Asia and emerging markets worldwide.

We may eventually choose to build (or obtain through a strategic acquisition) our own sales and marketing team to commercialize CarpX, along with some or all of our products, if it is in our long-term interests. We may also choose to enter into distribution agreements with larger strategic partners whereby we take full responsibility for the manufacturing of CarpX but outsource some or all of its distribution to a partner, particularly outside the United States, with its own robust distribution channels.

We have received ISO 13485:2016 certification for PAVmed's quality management system and received CE Mark certification for CarpX in May 2021 which allows it to be marketed in CE Mark European countries, which include the European Economic Area (the EU, Norway, Iceland, and Lichtenstein), Switzerland, and, until July 1, 2023, the United Kingdom.



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued



Overview - continued



Infusion Therapy



PortIO


PortIO is a novel, patented, implantable, intraosseous vascular access device which does not require accessing the central venous system and does not have an indwelling intravascular component. It is designed to be highly resistant to occlusion and may not require regular flushing. It features simplified, near-percutaneous insertion and removal, without the need for surgical dissection or radiographic confirmation. It provides a near limitless number of potential access sites and can be used in patients with chronic total occlusion of their central veins. The absence of an intravascular component will likely result in a very low infection rate.

Based on encouraging animal data, we are preparing to initiate a long-term (60-day implant duration) first-in-human clinical study in dialysis patients or those with poor venous access in Colombia, South America and intend to fulfill the likely FDA request for human clinical data with a clinical safety study in the U.S. following FDA clearance of our Investigational Device Exemption ("IDE") submission to begin clinical testing in dialysis patients to support a future de novo regulatory submission.



NextFlo


NextFlo is a patented, disposable, and highly accurate infusion platform technology including intravenous ("IV") infusion sets and disposable infusion pumps designed to eliminate the need for complex and expensive electronic infusion pumps for most of the estimated one million infusions of fluids, medications and other substances delivered each day in hospitals and outpatient settings in the U.S. NextFlo is designed to deliver highly accurate gravity-driven infusions independent of the height of the IV bag. It maintains constant flow by incorporating a proprietary, passive, pressure-dependent variable flow-resistor consisting entirely of inexpensive, easy-to-manufacture disposable mechanical parts. NextFlo testing has demonstrated constant flow rates across a wide range of IV bag heights, with accuracy rates comparable to electronic infusion pumps.

We may seek a long-term strategic partnership or acquiror with respect to NextFlo, as we continue to have periodic discussions continue with large strategic partners to license the NextFlo technology for disposable infusion pumps. Notwithstanding, we continue to advance the technology towards self-commercialization. We have initiated design freeze verification testing in preparation for final verification and validation testing of NextFlo IV Infusion Set, to support FDA 510(k) submission and clearance targeted for the first half of 2022.



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued



Overview - continued



Digital Health



Veris Health Inc.


In May 2021, we formed Veris Health, which is our newest majority majority-owned subsidiary, focused on digital health technology. In connection with its formation, Veris Health acquired Oncodisc, a digital health company with groundbreaking tools to improve personalized cancer care through remote patient monitoring.

Oncodisc was founded by experienced physician entrepreneurs, James Mitchell, M.D., who joins Veris Health as its full-time Chief Medical Officer, and Andrew Thoreson, M.D., who will serve as a Veris Health consultant. Oncodisc's core technologies include the first intelligent implantable vascular access port with biologic sensors and wireless communication, combined with an oncologist-designed remote digital healthcare platform that provides patients and physicians with new tools to improve outcomes and optimize the delivery of cost-effective care through remote monitoring and data analytics.

Oncodisc was founded in 2018 by Mitchell, a radiation-oncologist, and Thoreson, an interventional radiologist, who previously co-founded Redsmith, Inc., an interventional catheter company whose technology was acquired by C.R. Bard Inc., now BD Inc. (NYSE: BDX), in 2017. Oncodisc received a National Science Foundation ("NSF") Small Business Innovation Research ("SBIR") grant award to support its early work and completed both the MedTech Innovator Accelerator and UCSF Rosenman Institute Accelerator programs.

Its groundbreaking vascular access port contains biologic sensors capable of generating continuous data on key physiologic parameters known to predict adverse outcomes in cancer patients undergoing treatment. Wireless communication to the patient's smartphone and its cloud-based digital healthcare platform efficiently and effectively delivers actionable real time data to patients and physicians. The technologies are the subject of multiple patent applications and one allowed patent awaiting final issuance. Veris Health is targeting FDA 510(k) clearance of the intelligent implantable vascular access port and launch of the remote digital healthcare platform for the last six months of 2022.

The planned Veris Health business model seeks to generate 100% recurring revenue through oncology practice and hospital-based subscriptions. These entities would purchase seats on the platform and pay a monthly remote monitoring charge to drive revenues from remote patient monitoring and device implantation under existing CPT codes, as well as established CMS Oncology Care Model (OCM) bonuses and CMS Quality Reporting Program incentives. Veris Health also anticipates strong demand for its intelligent implantable vascular access port and remote monitoring platform from oncology biotherapeutic companies to support clinical trials of their novel immunotherapy and chemotherapy agents with continuous physiologic data and transformative analytics.



Emerging Innovations


Emerging Innovations include a diversified and expanding portfolio of innovative products designed to address unmet clinical needs across a broad range of clinical conditions. We are evaluating a number of these product opportunities and intellectual property covering a wide spectrum of clinical conditions, which have either been developed internally or have been presented to us by clinician innovators and academic medical institutions for consideration of a partnership to develop and commercialize these products. This collection of products includes, without limitation, initiatives in non-invasive laser-based glucose monitoring, mechanical circulatory support cannulas, single-use ventilators and resorbable pediatric ear tubes. In June 2020, we announced the execution of a letter of intent to consummate a series of agreements to develop and utilize Canon Virginia's commercial grade and scalable aqueous silk fibroin molding process to manufacture PAVmed's DisappEAR molded pediatric ear tubes for commercialization. Furthermore, we are exploring other opportunities to grow our business and enhance shareholder value through the acquisition of pre-commercial or commercial stage products and/or companies with potential strategic corporate and commercial synergies.



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued

Impact of the COVID-19 Pandemic

Previously, in December 2019, an outbreak of a novel strain of a coronavirus occurred. The coronavirus spread on a global basis to other countries, including the United States. On March 11, 2020, the United Nations World Health Organization ("WHO") declared a pandemic resulting from the spread of the coronavirus, with such pandemic commonly referred to by its resulting illness, "COVID-19". The COVID-19 pandemic is ongoing, and we continue to monitor the ongoing impact of the COVID-19 pandemic on the United States national economy, the global economy, and our business.

The COVID-19 pandemic may have an adverse impact on our operations, supply chains, and distribution systems and /or those of our contractors of our laboratory partner, and increase our expenses, including as a result of impacts associated with preventive and precautionary measures being taken, restrictions on travel, quarantine polices, and social distancing. Such adverse impact may include, for example, the inability of our employees and /or those of our contractors or laboratory partner to perform their work or curtail their services provided to us.

We expect the significance of the COVID-19 pandemic, including the extent of its effect on our consolidated financial condition and consolidated operational results and cash flows, to be dictated by the success of United States and global efforts to mitigate the spread of and /or to contain the coronavirus and the impact of such efforts.

In addition, the spread of the coronavirus has disrupted the United States' healthcare and healthcare regulatory systems which could divert healthcare resources away from, or materially delay FDA approval with respect to our products.

Furthermore, our clinical trials have been and may be further affected by the COVID-19 pandemic, as site initiation and patient enrollment may be delayed, for example, due to prioritization of hospital resources toward the virus and /or illness response, as well as travel restrictions imposed by governments, and the inability to access clinical test sites for initiation and monitoring.

The COVID-19 pandemic may have an adverse impact on the economies and financial markets of many countries, including the United States, resulting in an economic downturn that could adversely affect demand for our products and services and /or our product candidates.

Although we are continuing to monitor and assess the effects of the COVID-19 pandemic on our business, the ultimate impact of the COVID-19 pandemic (or a similar health epidemic) is highly uncertain and subject to change. Any such effect could have a materially adverse impact on our consolidated financial condition, consolidated results of operations, and /or consolidated cash flows.



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued



Results of Operations



Overview



Revenue


Revenue is recognized with respect to the EsoGuard Commercialization Agreement, dated August 1, 2021, between the Company's majority-owned subsidiary, Lucid Diagnostics Inc., and ResearchDX Inc. ("RDx"), CLIA certified commercial laboratory service provider.



Cost of revenue


The cost of revenue recognized with respect to the revenue recognized under the EsoGuard Commercialization Agreement is inclusive of: a royalty fee incurred under the Amended CWRU License Agreement; employee related costs of employees engaged in the administration to patients of the EsoCheck cell sample collection procedure (principally at the LUCID Test Centers); the EsoCheck devices and EsoGuard mailers (cell sample shipping costs) distributed to medical practitioners locations and the LUCID Test Centers; and LUCID Test Centers operating expenses, including rent expense and supplies.

Commercial operations expenses

Commercial operations expenses consist primarily of salaries and related costs for employees engaged in sales and marketing activities and employees engaged with third-party payor reimbursement contract negotiation and management, as well as advertising and promotion expenses. We anticipate our commercial operations expenses will increase in the future, as we anticipate an increase in payroll and related expenses related to the roll-out of our commercial sales and marketing operations as we execute on our business strategy.

General and administrative expenses

General and administrative expenses consist primarily of salaries and related costs for personnel, travel expenses, facility-related costs, professional fees, accounting and legal services, consultants and expenses associated with obtaining and maintaining patents within our intellectual property portfolio.

We anticipate our general and administrative expenses will increase in the future, as we anticipate an increase in payroll and related expenses related with the growth and expansion of our business operations objectives. We also anticipate continued expenses related to being a public company, including audit, legal, regulatory, and tax-related services associated with maintaining compliance as a public company, insurance premiums and investor relations costs.



41






Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued

Results of Operations - continued

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 research and development of our products, including:



  ? consulting costs charged to us by various external contract research
    organizations we contract with to conduct preclinical studies and engineering
    studies;
  ? salary and benefit costs associated with our chief medical officer and
    engineering personnel;
  ? costs associated with regulatory filings;
  ? patent license fees;
  ? cost of laboratory supplies and acquiring, developing, and manufacturing
    preclinical prototypes;
  ? product design engineering studies; and
  ? rental expense for facilities maintained solely for research and development
    purposes.



We plan to incur research and development expenses for the foreseeable future as we continue the development of our existing products as well as new innovations. Our research and development activities are focused principally on obtaining FDA approvals and developing product improvements or extending the utility of the lead products in our pipeline, including CarpX, EsoCheck and EsoGuard, along with advancing our DisappEAR, PortIO, NextFlo, non-invasive glucose monitoring and digital health products through their respective development phase.

Other Income and Expense, net

Other income and expense, net, consists principally of changes in fair value of our convertible notes, losses on extinguishment of debt upon repayment of such convertible notes; and interest expense with respect to one of our convertible notes.

Presentation of Dollar Amounts

All dollar amounts in this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations are presented in thousands, if not otherwise noted as being presented in millions, except for the number of shares and per share amounts.



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued

Results of Operations - continued

Three months ended September 30, 2021 versus September 30, 2020



Revenue


In the three months ended September 30, 2021, revenue was $0.2 million as compared to no revenue in the corresponding period in the prior year. The $0.2 million increase principally relates to our EsoGuard Commercialization Agreement, dated August 1, 2021, which resulted in revenue recognition of $0.1 million per month in each of August and September 2021.



Cost of revenue


In the three months ended September 30, 2021, cost of revenue was approximately $0.1 million as compared to no cost of revenue for the corresponding period in the prior year. The $0.1 million increase principally relates to costs associated with our commercialization agreement that started in August 2021.

Commercial operations expenses

In the three months ended September 30, 2021, commercial operations costs were approximately $2.4 million as compared to $0.7 million for the corresponding period in the prior year, with the $1.7 million increase principally resulting from approximately $1.1 million with respect to increased staffing in commercial operations, including sales, marketing, and payor reimbursement personnel, higher stock-based compensation expense of $0.3 million; and approximately $0.3 million with respect to increased consulting and professional services fees.

General and administrative expenses

In the three months ended September 30, 2021, general and administrative costs were approximately $6.0 million as compared to $2.2 million for the corresponding period in the prior year, with the $3.8 million increase principally related to:



  ? approximately $2.3 million increase in compensation related costs principally
    related to higher stock-based compensation expense and increased staffing
    levels; and
  ? approximately $1.4 million in consulting services related to patents,
    regulatory compliance, legal processes for contract review and public company
    expenses; and
  ? approximately $0.1 million in general business expenses.




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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued

Results of Operations - continued

Three months ended September 30, 2021 versus September 30, 2020 - continued

Research and development expenses

In the three months ended September 30, 2021, research and development costs were approximately $5.3 million, compared to $2.6 million for the corresponding period in the prior year, with the $2.7 million increase principally related to:



  ? approximately $0.5 million increase in compensation related costs principally
    related to increased staffing levels, higher stock-based compensation expense;
    and
  ? approximately $2.2 million in increased development costs, particularly
    increased clinical trial activities, and consulting fees with respect to
    CarpX, NextFlo, Port IO, EsoCure, EsoGuard, a glucose monitoring project, and
    a digital health project.




Other Income and Expense



Change in fair value of convertible debt

In the three months ended September 30, 2020, non-cash income (expense) recognized for the change in the fair value of our convertible notes was approximately $0.4 million of other income. There was no such change in fair value during the three months ended September 30, 2021, as the convertible notes were repaid-in-full as of March 31, 2021.

Loss from Extinguishment of Debt

In the three months ended September 30, 2020, a loss from extinguishment of debt of approximately $0.7 million was recognized, with such loss resulting from the difference between: the face value principal repayments and the corresponding payments of the interest thereon; as compared to the fair value of the shares of our common stock issued upon conversion of such convertible note, with such fair value measured as the respective issue date closing quoted price per share of our common stock. There was no such loss from extinguishment of debt during the three months ended September 30, 2021, as the convertible notes were repaid-in-full as of March 31, 2021.

See our unaudited condensed consolidated financial statements Note 8, Debt, for additional information with respect to the convertible notes.



44






Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued

Results of Operations - continued

Nine months ended September 30, 2021 versus September 30, 2020



Revenue


In the nine months ended September 30, 2021, revenue was $0.2 million as compared to no revenue in the corresponding period in the prior year. The $0.2 million increase principally relates to our EsoGuard Commercialization Agreement, dated August 1, 2021, which resulted in revenue recognition of $0.1 million per month in each of August and September 2021.



Cost of revenue


In the nine months ended September 30, 2021, cost of revenue was approximately $0.1 million as compared to no cost of revenue for the corresponding period in the prior year. The $0.1 million increase principally relates to costs associated with our commercialization agreement that started in August 2021.

Commercial operations expenses

In the nine months ended September 30, 2021, commercial operations were approximately $5.8 million as compared to $1.5 million for the corresponding period in the prior year, with the $4.3 million increase principally resulting from approximately $2.3 million with respect to increased staffing in commercial operations, including sales, marketing, and reimbursement personnel, higher stock-based compensation expense of $0.7 million and approximately $1.3 million with respect to increased consulting and professional services fees.

General and administrative expenses

In the nine months ended September 30, 2021, general and administrative costs were approximately $16.1 million as compared to $6.9 million for the corresponding period in the prior year, with the $9.2 million increase was principally related to:



  ? approximately $7.0 million increase in compensation related costs principally
    related to higher stock-based compensation expense and increased staffing
    levels, and
  ? approximately $2.0 million in consulting services related to patents,
    regulatory compliance, legal processes for contract review and public company
    expenses; and
  ? approximately $0.2 million in general business expenses.



Research and development expenses

In the nine months ended September 30, 2021, research and development costs were approximately $12.9 million as compared to $7.3 million for the corresponding period in the prior year, with the $5.6 million increase principally related to:



  ? approximately $0.8 million increase in compensation related costs principally
    related to increased staffing levels, higher stock-based compensation expense;
    and
  ? approximately $4.8 million in increased development costs, particularly
    increased clinical trial activities, and consulting fees with respect to
    CarpX, NextFlo, Port IO, EsoCure, EsoGuard, a glucose monitoring project and a
    digital health project.




45

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued

Results of Operations - continued

Nine months ended September 30, 2021 versus September 30, 2020 - continued



Other Income and Expense



Debt forgiveness


In the nine months ended September 30, 2021, our PPP loan related to the CARES Act of $0.3 million was forgiven by the Small Business Administration. No principal or interest payments were ever made and accordingly we recorded a gain of $0.3 million.

Change in fair value of convertible debt

In the nine months ended September 30, 2021, the non-cash income (expense) recognized for the change in the fair value of our convertible notes was approximately $1.7 million of other income, as compared to $5.5 million of other expense for the nine months ended September 30, 2020. The change in the fair value adjustment of the convertible notes is principally related to each of the convertible notes being repaid-in-full during the nine months ended September 30, 2021, as discussed herein below under "Other Income and Expense - Loss from Extinguishment of Debt".

See Note 7, Financial Instruments Fair Value Measurements, of our unaudited condensed consolidated financial statements for a further discussion of the change in fair value of our convertible notes, and Note 8, Debt, of our unaudited condensed consolidated financial statements for a further discussion the Series A and Series B November 2019 Senior Convertible Notes.

Loss from Extinguishment of Debt

In the nine months ended September 30, 2021, a debt extinguishment loss in the aggregate of approximately $3.7 million was recognized in connection with the convertible notes, as discussed below.



  ? On January 5, 2021, the repayment of the remaining face value principal of the
    November 2019 Senior Convertible Note of approximately $956, along with the
    payment of interest thereon of approximately $7, were settled with the
    issuance of 667,668 shares of our common stock, with a fair value of
    approximately $1,723 (with such fair value measured as the respective
    conversion date quoted closing price of our common stock), resulting in the
    recognition of a loss from extinguishment of debt of approximately $760 in the
    six months ended June 30, 2021; and,

  ? On January 30, 2021, we paid in cash a $350 partial principal repayment of the
    Senior Convertible Note dated April 30, 2020 ("April 2020 Senior Convertible
    Note"); and on March 2, 2021, we made a cash payment of approximately $14,466,
    resulting in the repayment-in-full on such date of both the April 2020 Senior
    Convertible Note and the Senior Secured Convertible Note dated August 6, 2021,
    resulting in the recognition of a loss from extinguishment of debt of
    approximately $2,955 in the six months ended June 30, 2021.



In the prior year period of nine months ended September 30, 2020, a loss from extinguishment of debt of approximately $4.6 million was recognized, with such loss resulting from the difference between: the face value principal repayments and the corresponding payments of the interest thereon; as compared to the fair value of the shares of our common stock issued upon conversion of such convertible note, with such fair value measured as the respective issue date closing quoted price per share of our common stock.

See our unaudited condensed consolidated financial statements Note 8, Debt, for additional information with respect to the convertible notes.



46






Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued

Liquidity and Capital Resources

We have financed our operations principally through the public and private issuances of our common stock, preferred stock, common stock purchase warrants, and debt.

In the nine months ended September 30, 2021 we issued shares of our common stock and received proceeds from the exercise of our Series Z Warrants, as discussed herein below, which resulted in approximately $59.7 million of gross proceeds, before placement agent fees and expenses and additional offering costs incurred by us. Additionally, we repaid-in-full the outstanding principal balances of all our convertible notes.

On January 5, 2021, we issued 6,000,000 shares of our common stock for gross proceeds of approximately $13,440, before a placement agent fee and expenses of approximately $951, and offering costs incurred by us of approximately $71; and, on February 23, 2021, we issued 9,782,609 shares of our common stock for proceeds of approximately $41,576, before offering costs incurred by us of approximately $290.

During the nine months ended September 30, 2021, a total of 2,927,125 of our Series Z Warrants were exercised at their exercise price of $1.60 per share of our common stock, resulting in the issue of the same number of our shares of common stock, with cash proceeds of approximately $4,115 received as of September 30, 2021, and $568 received subsequent to September 30, 2021 on October 4, 2021. Subsequent to September 30, 2021, as of November 18, 2021, a total of 1,946,259 of our Series Z Warrants were exercised for cash at the $1.60 per share exercise price, resulting in the issue of the same number of shares of our common stock.

Additionally, in the nine months ended September 30, 2021, we repaid-in-full all of the outstanding principal balances of our convertible notes, as discussed herein above under "Other Income and Expense - Loss from Extinguishment of Debt".

Subsequent to September 30, 2021, on October 14, 2021, Lucid Diagnostics, a majority-owned subsidiary of PAVmed, 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.

See our unaudited condensed consolidated financial statements Note 8, Debt, for a discussion of our convertible notes; and Note 11, Common Stock and Common Stock Purchase Warrants, for a further discussion of and the issue of our common stock.

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 product and services and ongoing research and development and clinical trials. We expect to continue to experience recurring losses from operations and will continue to fund our operations with debt and/or equity financing transactions. Notwithstanding, however, with the cash on-hand as of the date hereof, we expect to be able to fund our future operations for one year from the date of the issue of our unaudited condensed consolidated financial statements as included herein in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2021.



47






Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued

Critical Accounting Policies and Significant Judgments and Estimates

The discussion and analysis of our (unaudited) consolidated financial condition and consolidated 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 affecting the reported amounts of assets, liabilities, and equity, along with the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the corresponding periods. In accordance with U.S. GAAP, we base our estimates on historical experience and on various other assumptions we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Please see Note 2, Summary of Significant Accounting Policies and Recent Accounting Standards Updates, of our unaudited condensed consolidated financial statements included in this Form 10-Q, for a summary of significant accounting policies. In addition, reference is made to Part I, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operation" in our previously filed Annual Report on Form 10-K for the year ended December 31, 2020 ("Form 10-K), for a summary of our critical accounting policies and significant judgments and estimates. There have been no other material changes to our critical accounting policies or significant judgments and estimates as discussed in our Form 10-K, except as discussed in Note 2, Summary of Significant Accounting Policies and Recent Accounting Standards Updates, of our unaudited condensed consolidated financial statements included in this Form 10-Q.

48

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Financials (USD)
Sales 2021 0,68 M - -
Net income 2021 -47,3 M - -
Net cash 2021 49,0 M - -
P/E ratio 2021 -3,03x
Yield 2021 -
Capitalization 156 M 156 M -
EV / Sales 2021 156x
EV / Sales 2022 13,1x
Nbr of Employees 25
Free-Float 89,5%
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Brian J. deGuzman Chief Medical Officer & Executive Vice President
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