Lucid Diagnostics Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. Based on such evaluation, our principal executive officer and principal financial officer concluded our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) were effective as of such date to provide reasonable assurance the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management’s Report on Internal Control Over Financial Reporting This Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. Changes to Internal Controls Over Financial Reporting There have been no change in internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the year ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 77 PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this Item 10 is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2021. Item 11. Executive Compensation The information required by this Item 11 is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2021. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item 12 is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2021. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item 13 is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2021. Item 14. Principal Accounting Fees and Services The information required by this Item 14 is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2021. 78 PART IV Item 15. Exhibits and Financial Statement Schedules (a) The following documents filed as a part of the report: (1) The following financial statements: Report of Independent Registered Public Accounting Firm (PCAOB ID #688) Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Changes in Equity (Deficit) Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements (2) The financial statement schedules: Schedules other than those listed above are omitted for the reason they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. Columns omitted from schedules filed have been omitted because the information is not applicable. (3) The following exhibits: 79 Item 15. Exhibits and Financial Statement Schedules - continued (3) The following exhibits: Incorporation by Reference Exhibit No. Description Form Exhibit No. Date 2.1‡ Asset Purchase Agreement, dated as of February 25, 2022, by and among LucidDx Labs Inc., Lucid Diagnostics Inc. and ResearchDx, Inc. 8-K 2.1 3/3/22 3.1 Amended and Restated Certificate of Incorporation S-1/A 3.1 10/7/21 3.2 Amended and Restated Bylaws S-1/A 3.2 10/7/21 4.1 Description of Registrant’s Securities * 4.2 Common Stock Certificate S-1/A 4.1 10/7/21 10.1# Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan. S-1/A 10.1 10/8/21 10.2† Amended and Restated License Agreement, dated as of August 23, 2021, by and between Case Western Reserve University and Lucid Diagnostics Inc.+ S-1/A 10.2 10/1/21 10.3 License Agreement, dated as of May 20, 2019, by and between PAVmed Inc. and Lucid Diagnostics Inc.+ S-1/A 10.3 10/1/21 10.4.1 Management Services Agreement, dated as of May 12, 2018, by and between PAVmed Inc. and Lucid Diagnostics Inc.+ S-1/A 10.4.1 10/7/21 10.4.2 Amendment to Management Services Agreement, dated as of March 1, 2019, by and between PAVmed Inc. and Lucid Diagnostics Inc.+ S-1/A 10.4.2 10/7/21 10.4.3 Second Amendment to Management Services Agreement, dated as of June 5, 2019, by and between PAVmed Inc. and Lucid Diagnostics Inc.+ S-1/A 10.4.3 10/7/21 10.4.4 Third Amendment to Management Services Agreement, dated as of July 20, 2020, by and between PAVmed Inc. and Lucid Diagnostics Inc.+ S-1/A 10.4.4 10/7/21 10.4.5 Fourth Amendment to Management Services Agreement, dated as of February 1, 2021, by and between PAVmed Inc. and Lucid Diagnostics Inc.+ S-1/A 10.4.5 10/7/21 10.5.1 Consulting Agreement, dated as of May 12, 2018, by and between Lucid Diagnostics Inc. and Sanford Markowitz, M.D.+ S-1/A 10.5.1 10/7/21 10.5.2 Renewed Consulting Agreement, dated as of May 12, 2021, by and between Lucid Diagnostics Inc. and Sanford Markowitz, M.D.+ S-1/A 10.5.2 10/7/21 10.6.1 Consulting Agreement, dated as of May 12, 2018, by and between Lucid Diagnostics Inc. and Amitabh Chak, M.D.+ S-1/A 10.6.1 10/7/21 10.6.2 Renewed Consulting Agreement, dated as of May 12, 2021, by and between Lucid Diagnostics Inc. and Amitabh Chak, M.D.+ S-1/A 10.6.2 10/7/21 10.7.1 Consulting Agreement, dated as of May 12, 2018, by and between Lucid Diagnostics Inc. and Joseph Willis, M.D.+ S-1/A 10.7.1 10/7/21 10.7.2 Renewed Consulting Agreement, dated as of May 12, 2021, by and between Lucid Diagnostics Inc. and Joseph Willis, M.D.+ S-1/A 10.7.2 10/7/21 10.8# Form of Stock Option Agreement. S-1/A 10.8 10/8/21 10.9# Form of Indemnification Agreement. S-1/A 10.9 10/8/21 10.10 Form of Lock-Up Agreement.+ S-1/A 10.10 10.11 Quality & Manufacturing Master Services Agreement, dated as of September 1, 2021, by and between Coastline International, Inc. and Lucid Diagnostics Inc.+ S-1/A 10.11 10/1/21 10.12# Form of Restricted Stock Agreement. S-1/A 10.12# 10/8/21 10.13# Employment Agreement with Lishan Aklog, M.D. 8-K 10.1 1/20/22 10.14# Employment Agreement with Dennis M. McGrath 8-K 10.2 1/20/22 10.15# Employment Agreement with Shaun O’Neil. 8-K 10.1 3/23/22 10.16 Management Services Agreement, dated as of February 25, 2022, by and among LucidDx Labs Inc. and ResearchDx, Inc. 8-K 10.1 3/3/22 10.17.1‡ Common Stock Purchase Agreement, dated as of March 28, 2022, by and between CF Principal Investments LLC and Lucid Diagnostics Inc. 8-K 10.1 4/1/22 10.17.2‡ Registration Rights Agreement, dated as of March 28, 2022, by and between CF Principal Investments LLC and Lucid Diagnostics Inc. 8-K 10.2 4/1/22 10.18# Lucid Diagnostics Inc. Employee Stock Purchase Plan S-8 10.1 3/15/22 80 Item 15. Exhibits and Financial Statement Schedules - continued (3) The following exhibits - continued: Incorporation by Reference Exhibit No. Description Form Exhibit No. Date 14.1 Code of Ethics * 21.1 List of Subsidiaries * 23.1 Consent of Marcum LLP * 31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 31.2 Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 * 32.2 Certification of Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * 101 Inline XBRL Document Set for the consolidated financial statements and accompanying notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. * 104 Inline XBRL for the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline XBRL Document Set. * * Filed herewith. # Indicates management contract or compensatory plan. † Certain confidential portions of this exhibit were omitted by means of marking such portions with asterisks because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed. ‡ Certain exhibits and schedules have been omitted pursuant to Item 601(b)(10) of Regulation S-K. The registrant hereby undertakes to furnish supplementally a copy of any omitted exhibit or schedule upon request by the Securities and Exchange Commission. Item 16. Form 10-K Summary None 81 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Lucid Diagnostics Inc. April 5, 2022 By: /s/ Dennis M McGrath Dennis M McGrath President and Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Each person whose signature appears below hereby authorizes both Lishan Aklog, M.D. and Dennis M. McGrath or either of them acting in the absence of the others, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the United States Securities and Exchange Commission. Signature Title Date /s/ Lishan Aklog, M.D. Chairman of the Board of Directors April 5, 2022 Lishan Aklog, M.D. Chief Executive Officer (Principal Executive Officer) /s/ Dennis M. McGrath President April 5, 2022 Dennis M. McGrath Chief Financial Officer (Principal Financial and Accounting Officer) /s/ Stanley N. Lapidus Vice Chairman April 5, 2022 Stanley N. Lapidus Director /s/ Aster Angagaw Director April 5, 2022 Aster Angagaw /s/ James L. Cox, M.D. Director April 5, 2022 James L. Cox, M.D. /s/ Sanford Markowitz, M.D. Director April 5, 2022 Sanford Markowitz, M.D. /s/ Jacque J. Sokolov, M.D. Director April 5, 2022 Jacque J. Sokolov, M.D. /s/ Ronald M. Sparks Director April 5, 2022 Ronald M. Sparks 82 LUCID DIAGNOSTICS INC. and SUBSIDIARY (a majority-owned subsidiary of PAVmed Inc.) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID 688 ) F-2 Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020 F-3 Consolidated Statements of Operations for the years ended December 31, 2021 and 2020 F-4 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2021 and 2020 F-5 Consolidated Statements of Cash Flows for the year ended December 31, 2021 and 2020 F-6 Notes to Consolidated Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Lucid Diagnostics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Lucid Diagnostics Inc. and Subsidiary (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Marcum LLP Marcum LLP We have served as the Company’s auditor since 2019. New York, NY April 5, 2022 F- 2 LUCID DIAGNOSTICS INC. and SUBSIDIARY (a majority-owned subsidiary of PAVmed Inc.) CONSOLIDATED BALANCE SHEETS (in thousands except number of shares and per share data) December 31, 2021 December 31, 2020 Assets: Current assets: Cash $ 53,656 $ 111 Accounts receivable 200 — Prepaid expenses, deposits, and other current assets 3,447 1,329 Total current assets 57,303 1,440 Fixed assets, net 971 — Other assets 725 755 Total assets $ 58,999 $ 2,195 Liabilities, Preferred Stock and Stockholders’ Equity (Deficit) Current liabilities: Accounts payable $ 1,490 $ 2,058 Accrued expenses and other current liabilities 1,113 394 Due To: PAVmed Inc. - MSA Fee, operating expenses, and interest expense 1,657 13,261 Total liabilities 4,260 15,713 Commitments and contingencies (Note 11) – – Stockholders’ Equity (Deficit): Preferred stock, $ 0.001 par value, 20,000,000 shares authorized; no shares issued and outstanding as of December 31, 2021 and December 31, 2020 — — Common stock, $ 0.001 par value, 100,000,000 shares authorized; 34,917,907 and 14,114,707 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively 35 14 Additional paid-in capital 96,608 294 Accumulated deficit ( 41,904 ) ( 13,826 ) Total Stockholders’ Equity (Deficit) 54,739 ( 13,518 ) Total Liabilities and Stockholders’ Equity (Deficit) $ 58,999 $ 2,195 See accompanying notes to the financial statements. F- 3 LUCID DIAGNOSTICS INC. and SUBSIDIARY (a majority-owned subsidiary of PAVmed Inc.) CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except number of shares and per share data) 2021 2020 Year Ended December 31, 2021 2020 Revenue $ 500 $ — Cost of revenue 585 — Gross profit (loss) ( 85 ) — Operating expenses: Sales and marketing 5,260 1,305 General and administrative 12,778 1,532 Research and development 9,296 5,443 Total operating expenses 27,334 8,280 Loss from operations ( 27,419 ) ( 8,280 ) Interest expense - Senior Unsecured Promissory Note ( 659 ) — Loss before provision for income tax ( 28,078 ) ( 8,280 ) Provision for income taxes — — Net loss $ ( 28,078 ) $ ( 8,280 ) Net loss per share - basic and diluted $ ( 1.51 ) $ ( 0.59 ) Weighted average common shares outstanding, basic and diluted 18,603,619 14,114,437 See accompanying notes to the financial statements. F- 4 LUCID DIAGNOSTICS INC. and SUBSIDIARY (a majority-owned subsidiary of PAVmed Inc.) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) for the YEARS ENDED DECEMBER 31, 2021 and 2020 (in thousands except number of shares and per share data) Shares Amount Capital Deficit Total Common Stock Additional Paid-In Accumulated Shares Amount Capital Deficit Total Balance as of December 31, 2019 14,110,004 $ 14 $ 223 $ ( 5,546 ) $ ( 5,309 ) Exercise - stock options - Lucid Diagnostics Inc. 2018 Equity Plan 4,703 — 5 — 5 Stock-based compensation - Lucid Diagnostics Inc. 2018 Equity Plan — — 53 — 53 Issue of common stock - conversion of Senior Unsecured Promissory Note Issue of common stock - conversion of Senior Unsecured Promissory Note, shares Issuance of common stock - IPO, net of fees Issuance of common stock - IPO, net of fees, shares Stock-based compensation - PAVmed Inc. 2014 Equity Plan — — 13 — 13 Net Loss — — — ( 8,280 ) ( 8,280 ) Balance as of December 31, 2020 14,114,707 $ 14 $ 294 $ ( 13,826 ) $ ( 13,518 ) Issue of common stock - conversion of Senior Unsecured Promissory Note 15,803,200 16 22,384 — 22,400 Issuance of common stock - IPO, net of fees 5,000,000 5 64,331 — 64,336 Stock-based compensation - Lucid Diagnostics Inc. 2018 Equity Plan — — 9,134 — 9,134 Stock-based compensation - PAVmed Inc. 2014 Equity Plan — — 465 — 465 Net loss — — — ( 28,078 ) ( 28,078 ) Balance as of December 31, 2021 34,917,907 $ 35 $ 96,608 $ ( 41,904 ) $ 54,739 See accompanying notes to the financial statements. F- 5 LUCID DIAGNOSTICS INC. and SUBSIDIARY (a majority-owned subsidiary of PAVmed Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2021 and 2020 (in thousands except number of shares and per share data) 2021 2020 Year Ended December 31, 2021 2020 Cash flows from operating activities Net loss $ ( 28,078 ) $ ( 8,280 ) Adjustments to reconcile net loss to net cash used in operating activities Depreciation expense 4 — Stock-based compensation - Lucid Diagnostics Inc. 2018 Equity Plan 9,134 52 Stock-based compensation - PAVmed Inc. 2014 Equity Plan 465 13 Changes in operating assets and liabilities: Accounts receivable ( 200 ) — Prepaid expenses and other current assets ( 2,088 ) ( 1,094 ) Accounts payable ( 665 ) 1,146 Accrued expenses and other current liabilities 926 171 Accrued CWRU License Agreement Fee ( 223 ) — Due To: PAVmed Inc. - operating expenses paid on-behalf-of Lucid Diagnostics Inc. 984 683 Due To: PAVmed Inc. - Management Services Agreement Fee 1,350 1,680 Due To: PAVmed Inc. - Operating expenses ( 314 ) — Due To: PAVmed Inc. - Employee Related Costs 1,037 — Net cash flows used in operating activities ( 17,668 ) ( 5,629 ) Cash flows from investing activities Purchase of equipment ( 862 ) — Net cash flows used in investing activities ( 862 ) — Cash flows from financing activities Proceeds – issue of common stock – initial public offering 70,000 — Payment – offering costs – initial public offering ( 5,664 ) — Proceeds – exercise of stock options — 5 Proceeds – issue common stock – Employee Stock Purchase Plan — — Proceeds – Due To: PAVmed Inc. - working capital cash advances 7,739 5,579 Net cash flows provided by financing activities 72,075 5,584 Net increase (decrease) in cash 53,545 ( 45 ) Cash, beginning of period 111 156 Cash, end of period $ 53,656 $ 111 See accompanying notes to the financial statements. F- 6 LUCID DIAGNOSTICS INC. and SUBSIDIARY (a majority-owned subsidiary of PAVmed Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in these accompanying notes are presented in thousands, except number of shares and per-share amounts.) Note 1 — Summary Description of the Company The accompanying consolidated financial statements are those of Lucid Diagnostics Inc. (“Lucid Diagnostics” or “the Company”), which was incorporated in the State of Delaware on May 8, 2018. Lucid Diagnostics Inc. is a majority-owned subsidiary of PAVmed Inc., as discussed below. The Company operates in one segment as a commercial-stage medical diagnostics technology company focused on the millions of patients with gastroesophageal reflux disease - “GERD” - which is also known as chronic heartburn, acid reflux or simply reflux, who are at risk for developing esophageal precancer and cancer, specifically highly lethal esophageal adenocarcinoma (EAC). Lucid Diagnostics Inc. entered into a patent license agreement with Case Western Reserve University (“CWRU”), captioned the Amended and Restated License Agreement, 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. 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”. See Note 3, Patent License Agreement – Case Western Reserve University, for a discussion of the Amended CWRU License Agreement. Since its inception, the Company has advanced the proprietary technologies underlying EsoGuard and EsoCheck from the academic research laboratory to commercial diagnostics tests and devices with scalable manufacturing capacity. The Company is presently focused on expanding commercialization across multiple sales channels, including: the communication and education of medical practitioners and clinicians of the EsoGuard LDT; and establishing “Lucid Diagnostics Test Centers” for the collection of cell samples using EsoCheck and delivery of the collected cell samples to ResearchDX Inc. (“RDx”), a CLIA certified commercial laboratory service provider, for the performance of the EsoGuard LDT. Additionally, the Company is conducting two concurrent clinical trials, including each of: the “EsoGuard screening study” (“ESOGUARD-BE-1”); and the “EsoGuard case control study” (“ESOGUARD-BE-2”), to support a United States Food and Drug Administration (“FDA”) pre-market approval (“PMA”) of the use of EsoGuard and EsoCheck as an in-vitro diagnostic medical device (“IVD”). Further, the Company is developing expanded clinical evidence to support recommendation of our products in professional society guidelines. Lucid Diagnostics Inc. Initial Public Offering - October 14, 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 were issued, with such total IPO shares inclusive of 571,428 IPO shares issued to PAVmed Inc., at an IPO 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 the Company. F- 7 Note 1 — Summary Description of the Company - continued Formation of Wholly-Owned Subsidiary LucidDx Labs Inc. - December 2021 In December 2021, Lucid Diagnostics, Inc. formed a new wholly owned subsidiary, LucidDx Labs Inc., principally to construct and operate the Company’s new owned Commercial Lab Improvements Act (“CLIA”) certified, College of American Pathologists (“CAP”) accredited commercial clinical laboratory. The Company is in the process of completing the operational capacity of its commercial clinical laboratory. Asset Purchase Agreement - “RDx APA” - February 2022 Subsequent to December 31, 2021, on February 25, 2022, LucidDx Labs, Inc., entered into an asset purchase agreement (“RDx APA”) with ResearchDx, Inc. (“RDx”), an unrelated third-party. Under the RDx APA, LucidDx Labs Inc. acquired certain licenses and other related assets necessary to operate the CLIA-certified, CAP-accredited commercial clinical laboratory. The RDx APA acquired assets, along with other LucidDx Labs Inc. purchased and leased property and equipment, are being used to commence commercial clinical laboratory operations to perform the EsoGuard® Esophageal DNA assay, inclusive of DNA extraction, next generation sequencing (“NGS”) and specimen storage. Prior to consummation of the RDx APA, RDx provided such laboratory services at its owned CLIA-certified, CAP-accredited laboratory. Under the RDx APA, LucidDx Labs Inc. will pay RDx an aggregate purchase price of up to $ 6.2 million for the acquired assets. Concurrent with the RDx APA, LucidDx Labs Inc. and RDx also entered into a management services agreement (“RDx MSA”), with a term of three years , and a total of approximately $ 1.8 million of quarterly payments. F- 8 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates Significant Accounting Policies Basis of Presentation The accompanying 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”), and include the accounts of the Company and its wholly-owned subsidiary, LucidDx Labs Inc. All intercompany transactions and balances have been eliminated in consolidation. Lucid Diagnostics Inc. (“the Company”) is a majority-owned consolidated subsidiary of PAVmed Inc., which has a majority equity ownership interest and has financial control of Lucid Diagnostics Inc. The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions. All amounts in the accompanying consolidated financial statements and these notes thereto are presented in thousands of dollars, if not otherwise noted as being presented in millions of dollars, except for shares and per share amounts. Effective October 6, 2021, the Lucid Diagnostics Inc. board of directors: increased the authorized shares of common stock to 100.0 million shares; and declared a 1.411-to-1.0 common stock-split. All shares of common stock of the Company and per share amounts, for all periods presented, have been adjusted for the common stock-split, with such adjustment rounded-up to the next whole share in lieu of a fractional share, with no adjustment to the par value per share, inclusive of: the number of shares of common stock issued and outstanding (and the corresponding increase to common stock par value and decrease to additional paid in capital), along with the conversion price per share of the Senior Unsecured Promissory Note; basic and diluted weighted-average shares outstanding and the corresponding loss per share; and applicable notes to the financial statements, including: stock options granted, stock option exercise prices, and the number of restricted stock awards, and the respective fair value per share of the stock options and restricted stock awards, along with all other share and per share amounts for all periods presented as applicable. Use of Estimates In preparing the 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 the disclosure of contingent losses, as of the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Significant estimates in these consolidated financial statements include those related to the estimated fair value of stock-based equity awards. Other significant estimates include the provision or benefit for income taxes and the corresponding valuation allowance on deferred tax assets. Additionally, 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. On an ongoing basis, the Company evaluates its estimates and assumptions. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. F- 9 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued Significant Accounting Policies - continued Financial Condition The provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern (“ASC 205-40”) requires management to assess an entity’s ability to continue as a going concern within one year of the date of the financial statements are issued. In each reporting period (including interim periods), an entity is required to assess conditions known and reasonably knowable as of the financial statement issuance date to determine whether it is probable an entity will not meet its financial obligations within one year from the financial statement issuance date. Under the provisions of ASC 205-40, substantial doubt about an entity’s ability to continue as a going concern exists when conditions and events, considered in the aggregate, indicate it is probable the entity will be unable to meet its financial obligations as they become due within one year after the date the financial statements are issued. Since its inception to the date of the Company’s IPO on October 14, 2021, the operations of Lucid Diagnostics Inc. have been funded by PAVmed Inc. providing working capital cash advances and the payment by PAVmed Inc. of certain operating expenses on-behalf-of Lucid Diagnostics Inc. Additionally, the daily operations of Lucid Diagnostics Inc. continue to be managed by personnel employed by PAVmed Inc., for which Lucid Diagnostics Inc. incurs expense according to the provisions of a Management Services Agreement between Lucid Diagnostics Inc. and PAVmed Inc. See Note 4, Related Party Transactions, for information with respect to the Management Services Agreement; and Note 6, Due To PAVmed Inc. , for further information with respect to amounts owed to PAVmed Inc. by Lucid Diagnostics Inc. 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 research and development activities and conducting 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 and other debt and equity committed sources of capital with Lucid and its parent company, PAVmed, the Company expects to be able to fund its future operations for one year from the date of the issue of the Company’s financial statements, as included herein in this Annual Report on Form 10-K for the period ended December 31, 2021. Cash The Company maintains its cash at a major financial institution with high credit quality. At times, the balance of its cash deposits may exceed federally insured limits. The Company has not experienced losses on deposits with commercial banks and financial institutions which exceed federally insured limits. Fixed Assets Fixed assets are stated at cost and depreciated using the straight-line method over the assets’ estimated useful lives. Additions and improvements are capitalized, including direct and indirect costs incurred to validate equipment and bring to working conditions. The costs for maintenance and repairs are expensed as incurred. F- 10 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued Significant Accounting Policies - continued Leases The Company adopted FASB ASC Topic 842, Leases , (“ASC 842”) effective December 31, 2021, with such adoption not having an effect on the Company’s consolidated financial statements. All significant lease agreements and contractual agreements with embedded lease agreements are accounted for under the provisions of ASC 842, wherein, if the contractual arrangement: involves the use of a distinct identified asset; provides for the right to substantially all the economic benefits from the use of the asset throughout the contractual period; and, provides for the right to direct the use of the asset. A lease agreement is accounted for as either a finance lease (generally with respect real estate) or an operating lease (generally with respect to equipment). Under both a finance lease and an operating lease, the Company recognizes as of the lease commencement date a lease right-of-use (“ROU”) asset and a corresponding lease payment liability. A lease ROU asset represents the Company’s right to use an underlying asset for the lease term, and the lease liability represents its contractual obligation to make lease payments. The lease ROU asset is measured at the lease commencement date as the present value of the future lease payments plus initial direct costs incurred. The Company recognizes lease expense of the amortization of the lease ROU asset for an operating lease on a straight-line basis over the lease term; and for financing leases on a straight-line basis unless another basis is more representative of the pattern of economic benefit. The lease liability is measured at the lease commencement date with the discount rate generally based on the Company’s incremental borrowing rate (to the extent the lease implicit rate is not known nor determinable), with interest expense recognized using the interest method for financing leases. Certain leases may include options to extend or terminate the agreement. The Company does not assume renewals in determination of the lease term unless the renewals are deemed to be reasonably certain at lease commencement. As well, an option to terminate is considered unless it is reasonably certain the Company will not exercise the option. The Company elected the practical expedient to not recognize a lease ROU asset and lease payment liability for leases with a term of twelve months or less (“short-term leases”), resulting in the aggregate lease payments being recognized on a straight line basis over the lease term. The Company’s leases with a commencement date prior to January 1, 2022 were short-term leases and therefore did not require recording a ROU asset or lease liability at December 31, 2021. Additionally, the Company elected the practical expedient to not separate lease and non-lease components. See Note 9, Leases . F- 11 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued Significant Accounting Policies - continued 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. See Note 4, Revenue from Contracts with Customers , for further information regarding revenue recognition. Offering Costs Offering costs consist of certain legal, accounting, and other advisory fees incurred related to the Company’s efforts to raise debt and equity capital. Offering costs in connection with equity financing are recognized as either an offset against the financing proceeds to extent the underlying security is equity classified or a current period expense to extent the underlying security is liability classified or for which the fair value option is elected. Offering costs, lender fees, and warrants issued in connection with debt financing, to the extent the fair value option is not elected, are recognized as debt discount, which reduces the reported carrying value of the debt, with the debt discount amortized as interest expense, generally over the contractual term of the debt agreement, to result in a constant rate of interest. Offering costs associated with in-process capital financing are accounted for as deferred offering costs. As of December 31, 2021 and December 31, 2020, there were no deferred offering costs. Research and Development Expenses Research and development expenses are recognized as incurred and include the salary and stock-based compensation of employees engaged in product research and development activities, and the costs related to the Company’s various contract research service providers, suppliers, engineering studies, supplies, and outsourced testing and consulting fees, as well as depreciation expense and rental costs for equipment used in research and development activities, and fees incurred for access to certain facilities of contract research service providers. Patent Costs and Purchased Patent License Rights Patent related costs in connection with filing and prosecuting patent applications and patents filed by the Company are expensed as incurred and are included in the line item captioned “general and administrative expenses” in the accompanying consolidated statements of operations. Patent fee reimbursement expense incurred under the patent license agreement agreements are included in the line item captioned “research and development expenses” in the accompanying consolidated statements of operations. The Company has entered into agreements with third parties to acquire technologies for potential commercial development. Such agreements generally require an initial payment by the Company when the contract is executed. The purchase of patent license rights for use in research and development activities, including product development, are expensed as incurred and are classified as research and development expense. Additionally, the Company may be obligated to make future royalty payments in the event the Company commercializes the technology and achieves a certain sales volume. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 730, “Research and Development”, (“ASC 730”), expenditures for research and development, including upfront licensing fees and milestone payments associated with products not yet been approved by the United States Food and Drug Administration (“FDA”), are charged to research and development expense as incurred. Future contract milestone and /or royalty payments will be recognized as expense when achievement of the milestone is determined to be probable and the amount of the corresponding milestone can be objectively estimated. F- 12 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued Significant Accounting Policies - continued Stock-Based Compensation Stock-based awards are made to members of the board of directors of the Company, the Company’s employees and non-employees, under each of the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan (“Lucid Diagnostics Inc. 2018 Equity Plan”) and the PAVmed Inc. 2014 Long-Term Incentive Equity Plan (“PAVmed Inc. 2014 Equity Plan”). The grant-date estimated fair value of the stock-based award is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective stock-based award, with such straight-line recognition adjusted, as applicable, so the cumulative expense recognized is at-least equal-to-or-greater-than the estimated fair value of the vested portion of the respective stock-based award as of the reporting date. The Company uses the Black-Scholes valuation model to estimate the fair value of stock options granted under both the PAVmed Inc. 2014 Equity Plan and the Lucid Diagnostics Inc. 2018 Equity Plan, which requires the Company to make certain weighted-average valuation estimates and assumptions for stock-based awards, principally as follows: ● With respect to the PAVmed Inc. 2014 Equity Plan, the expected stock price volatility is based on the historical stock price volatility of PAVmed Inc. common stock and the volatilities of similar entities within the medical device industry over the period commensurate with the expected term with respect to stock options granted to the board of directors and employees in the years ended December 31, 2021 and 2020; ● With respect to stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan, the expected stock price volatility was based on the historical stock price volatility of similar entities within the medical device industry over the period commensurate with the expected term with respect to stock options granted to employees in the year ended December 31, 2021; There were no stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan in the year ended December 31, 2020; ● The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period commensurate with either the expected term or the remaining contractual term, as applicable, of the stock option; and, ● The expected dividend yield is based on annual dividends of $ 0.00 as there have not been dividends paid to-date, and there is no plan to pay dividends for the foreseeable future. The price per share of Lucid Diagnostics Inc. common stock used in the computation of estimated fair value of stock options and restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan is as follows: (i) for the period October 14, 2021 to December 31, 2021 it is its quoted closing price per share; and (ii) for the period January 1, 2021 to October 14, 2021, it was estimated using a probability-weighted average expected return methodology (“PWERM”), which involves the determination of equity value under various exit scenarios and an estimation of the return to the common stockholders under each scenario; and (iii) as of December 31, 2020, it was estimated using a discounted cash flow analysis applied to a multi-year forecast of its future cash flows. The price per share of PAVmed Inc. common stock used in the computation of estimated fair value of stock options and restricted stock awards granted under the PAVmed Inc. 2014 Equity Plan is its quoted closing price per share. F- 13 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued Significant Accounting Policies - continued Financial Instruments Fair Value Measurements FASB ASC Topic 820, Fair Value Measurement, (ASC 820) defines fair value as the price which would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a transaction measurement date. The ASC 820 three-tier fair value hierarchy prioritizes the inputs used in the valuation methodologies, as follows: Level 1 Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2 Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets which are not active, or other inputs observable or can be corroborated by observable market data. Level 3 Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. As of December 31, 2021 and December 31, 2020, the carrying values of cash, and accounts payable, approximate their respective fair value due to the short-term nature of these financial instruments. Income Taxes The Company accounts for income taxes using the asset and liability method, as required by FASB ASC Topic 740, Income Taxes, (ASC 740). Current tax liabilities or receivables are recognized for estimated income tax payable and/or refundable for the current year. Deferred tax assets and deferred tax liabilities are recognized for estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, along with net operating loss and tax credit carryforwards. Deferred tax assets and deferred tax liabilities 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. Changes in deferred tax assets and deferred tax liabilities are recorded in the provision for income taxes. Under 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. As a result of the evaluation of the positive and negative evidence bearing upon the estimated realizability of net deferred tax assets, and based on a history of operating losses, it is more-likely-than-not the deferred tax assets will not be realized, and therefore a valuation allowance reserve equal to the full amount of the deferred tax assets, net of deferred tax liabilities, has been recognized as a charge to income tax expense as of December 31, 2021 and December 31, 2020. The Company recognizes the benefit of an uncertain tax position it has taken or expects to take on its income tax return if such a position is more-likely-than-not to be sustained upon examination by the taxing authorities, with the tax benefit recognized being the largest amount having a greater than 50% likelihood of being realized upon ultimate settlement. As of December 31, 2021, the Company does no t have any unrecognized tax benefits resulting from uncertain tax positions. F- 14 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued Significant Accounting Policies - continued The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. There were no amounts accrued for penalties or interest as of December 31, 2021 and December 31, 2020 or recognized during the year ended December 31, 2021 and December 31, 2020. The Company is not aware of any issues under review to potentially result in significant payments, accruals, or material deviations from its position. On October 14, 2021, Lucid Diagnostics Inc. completed its initial public offering (“IPO”) of its common stock. While PAVmed Inc. holds a majority-interest equity ownership and has a controlling financial interest, its ownership interest was reduced to below 80% after the IPO. Accordingly, Lucid Diagnostics Inc. is included in the PAVmed Inc and Subsidiaries consolidated income tax returns through October 13, 2021, and effective October 14, 2021, Lucid Diagnostics Inc. will file its income tax returns on a stand-alone legal entity basis. The Lucid Diagnostics Inc. stand-alone legal entity estimated income tax provision was computed on an assumed separate income tax return for the periods presented through October 13, 2021, wherein, the estimated income tax provision of Lucid Diagnostics Inc. is computed as if its income tax returns were filed by Lucid Diagnostics Inc. on a stand-alone legal entity basis. Notwithstanding the absence of a formal tax sharing agreement between PAVmed Inc. and Lucid Diagnostics Inc., the Lucid Diagnostics Inc. stand-alone legal entity current tax expense and /or tax refund, if any, would be settled with PAVmed Inc. (as opposed with the respective tax authority) through October 13, 2021. The deferred tax asset and /or deferred tax liability; a valuation allowance on the deferred tax asset, net; and /or an uncertain tax position, if any; each as discussed above, is determined based on Lucid Diagnostics Inc. stand-alone legal entity assumed filing of separate income tax returns. Net Loss Per Share The net loss per share is computed by dividing each of the respective net loss by the number of “basic weighted average common shares outstanding” and diluted weighted average shares outstanding” for the reporting period indicated. The basic weighted-average shares common shares outstanding are computed on a weighted average based on the number of days the shares of common stock of the Company are issued and outstanding during the respective reporting period indicated. The diluted weighted average common shares outstanding are the sum of the basic weighted-average common shares outstanding plus the number of common stock equivalents’ incremental shares on an if-converted basis, computed using the treasury stock method, computed on a weighted average based on the number of days the incremental shares would potentially be issued and outstanding during the periods indicated, if dilutive. The Company’s common stock equivalents include stock options and unvested restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan. Notwithstanding, as the Company has a net loss for each reporting period presented, only the basic weighted average common shares outstanding are used to compute the basic and diluted net loss per share for each reporting period presented. F- 15 Note 2 — Summary of Significant Accounting Policies and Recent Accounting Standards Updates - continued JOBS Act EGC Accounting Election The Company is an “emerging growth company” or “EGC”, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, an EGC can delay adopting new or revised accounting standards issued after the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has irrevocably elected to avail itself of this exemption from new or revised accounting standards, and, therefore, will not be subject to the same new or revised accounting standards as public companies who are not an EGC. Recent 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 instrument 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 consolidated 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 consolidated financial statements. F- 16 Note 3 — Patent License Agreement – Case Western Reserve University Overview 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 . 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 5, Related Party Transactions , for patent fee reimbursement payments paid to CWRU in the years ended December 31, 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. 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 December 31, 2021 with respect to the revenue recognized under the EsoGuard Commercialization Agreement, dated August 1, 2021, between Lucid Diagnostics Inc. and Research Dx Inc. 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. F- 17 Note 3 — Patent License Agreement – Case Western Reserve University - continued 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 5, 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 12, 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 - Revenue from Contracts with Customers Revenue is recognized when the satisfaction of the performance obligation occurs, which is when the delivery of product and /or the provision of service is rendered, and is measured as the amount of estimated consideration expected to be realized. In the year ended December 31, 2021, the Company recognized revenue under the EsoGuard Commercialization Agreement, dated August 1, 2021, as discussed below. EsoGuard Commercialization Agreement The Company entered into the EsoGuard Commercialization Agreement, dated August 1, 2021, with its Commercial Laboratory Improvements Act (“CLIA”) certified commercial laboratory service provider, ResearchDX Inc. (“RDx”), an unrelated third-party. The EsoGuard Commercialization Agreement initial term is on a month-to-month basis, and may be terminated by either party thereto, with or without cause, upon forty-five (45) days prior written notice. On February 25, 2022, the EsoGuard Commercialization Agreement was terminated in conjunction with the execution of an Asset Purchase Agreement between LucidDx Labs Inc., a wholly-owned subsidiary of Lucid Diagnostics Inc., and RDx, as such agreement is further discussed above in Note 1, Summary Description of the Company. Revenue Recognized In the year ended December 31, 2021, the Company recognized total revenue of $ 500 , which represents the minimum fixed monthly fee of $ 100 to be paid by RDx for the delivery of services under the EsoGuard Commercialization Agreement for the period from the agreement inception date of August 1, 2021 to December 31, 2021. The monthly fee was deemed to be collectible for such period as RDx has timely paid the applicable respective monthly fee. Cost of Revenue The cost of revenue recognized with respect to the revenue recognized under the EsoGuard Commercialization Agreement for the year ended December 31, 2021 totaled $ 585 , inclusive of employee related costs of employees engaged in the delivery of the administration to patients of the EsoCheck cell sample collection procedure, EsoCheck devices and EsoGuard mailers (cell sample shipping costs) distributed to medical practitioners’ locations and the Lucid Test Centers; Lucid Test Centers operating expenses, including rent expense and supplies and royalty fee incurred under the Amended CWRU License Agreement.. F- 18 Note 5 — Related Party Transactions Case Western Reserve University and Physician Inventors - CWRU License Agreement Case Western Reserve University (“CWRU”) and each of the three physician inventors of the intellectual property licensed under the CWRU License Agreement (“Physician Inventors”) each hold equity ownership minority interests in Lucid Diagnostics Inc. The expenses incurred with respect to the CWRU License Agreement and the three Physician Inventors, as classified in the accompanying consolidated statement of operations for the periods indicated are summarized as follows: Schedule of Incurred Expenses of Minority Shareholders 2021 2020 For the year ended December 31, 2021 2020 Cost of Revenue CWRU – Royalty Fee $ 25 $ — Cost of Revenue $ 25 $ — General and Administrative Expense CWRU – License Agreement - Amendment Fee - Milestone III 10 100 Stock-based compensation expense – Physician Inventors’ restricted stock awards 910 — General and Administrative Expense 910 — Research and Development Expense CWRU License Agreement - reimbursement of patent legal fees 195 250 EsoCheck devices provided to CWRU — 15 Fees - Physician Inventors’ consulting agreements 29 83 Stock-based compensation expense – Physician Inventors’ stock options 169 23 Research and Development Expense 169 23 Total Related Party Expenses $ 1,338 $ 471 Lucid Diagnostics Inc. entered into consulting agreements with each of the three 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 the agreements’ renewal effective May 12, 2021. Additionally, as discussed below, each of the Physician Inventors have been granted stock options under the PAVmed Inc. 2014 Long-Term Incentive Equity Plan, and stock options and restricted stock awards under the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan. Under each of their respective (initial) consulting agreements with Lucid Diagnostics Inc., the three Physician Inventors were each granted 25,000 stock options under the PAVmed Inc. 2014 Equity Plan, with a grant date of May 12, 2018, an exercise price of $ 1.59 per share of common stock of PAVmed Inc., vesting ratably on a quarterly basis commencing June 30, 2018 and ending March 31, 2021, and a contractual period of ten years from the date of grant. As of March 31, 2021, such stock options were fully vested and exercisable. Subsequent to March 31, 2021, each of the Physician Inventors were granted 50,000 stock options under the PAVmed Inc. 2014 Equity Plan, with a grant date of June 21, 2021, an exercise price of $ 6.41 per share of common stock of PAVmed Inc., vesting ratably on a quarterly basis commencing June 30, 2021 and ending March 31, 2024, and a contractual period of ten years from the date of grant. On March 1, 2021, restricted stock awards were granted under the Lucid Diagnostics Inc. 2018 Equity Plan to each of the three Physician Inventors, with such restricted stock awards having a single vesting date of March 1, 2023, with the fair value of such restricted stock awards recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. See Note 3, Patent License Agreement - Case Western Reserve University, for a discussion of: the Amended CWRU License Agreement; and the consulting agreements with the Physician Inventors; and Note 12, 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, including the stock-based equity awards granted to the Physician Inventors. F- 19 Note 5 — Related Party Transactions - continued PAVmed Inc. - Management Services Agreement The daily operations of Lucid Diagnostics Inc. are managed by personnel employed by PAVmed Inc., for which Lucid Diagnostics Inc. incurs a service fee, referred to as the “MSA Fee”, according to the provisions of a Management Services Agreement (“MSA”) with PAVmed Inc. The MSA does not have a termination date, but may be terminated by the Lucid Diagnostics Inc. board of directors. The MSA Fee is charged on a quarterly basis and is subject-to periodic adjustment corresponding with changes in the number of PAVmed Inc. employees providing services to Lucid Diagnostics Inc., with the change in the MSA Fee approved by each of the Lucid Diagnostics Inc. and PAVmed Inc. board of directors. Lucid Diagnostics Inc. recognized MSA Fee expense of $ 3,630 and $ 1,680 in the years ended December 31, 2021 and 2020, respectively. The MSA Fee expense classification in the consolidated statement of operations for the periods noted is as follows: Schedule of MSA Fee Expense Classification in Unaudited Condensed Statement of Operations December 31, 2021 December 31, 2020 Cost of Revenues $ 61 $ — Sales & Marketing 1,406 482 General & Administrative 1,255 659 Research & Development 908 539 Total MSA Fee $ 3,630 $ 1,680 The classification of the MSA Fee as presented above is based on the PAVmed Inc. classification of employee salary expense. In this regard, PAVmed Inc. classifies employee salary expense as cost-of-revenue for employees engaged in service delivery under the EsoGuard Commercialization Agreement, and sales and marketing expenses for employees performing sales, marketing, and reimbursement activities and functions, general and administrative, and research and development except for those employees who are engaged in product and services engineering development and design and /or clinical trials activities, for which such employee salary is classified as research and development expense. Other Related Party Transactions Lucid Diagnostics Inc. previously entered into a consulting agreement with Stanley N. Lapidus, effective June 2020 with such consulting agreement providing for compensation on a contractual rate per hour for consulting services provided. In July 2021, Mr. Lapidus was appointed as Vice Chairman of the Board of Directors of Lucid Diagnostics Inc. Lucid Diagnostics Inc. recognized as general and administrative expense of $ 21 and $ 7 in the years ended December 31, 2021 and 2020, respectively, in connection with the consulting agreement. F- 20 Note 6 — Due To PAVmed Inc. The aggregate Due To: PAVmed Inc., inclusive of the Senior Unsecured Promissory Note, for the periods indicated is summarized as follows: Schedule of Senior Unsecured Promissory Note Note Note Advances Payments Benefits Fees Total Principal Senior Unsecured Promissory Note Interest Unsecured Senior Promissory Note Working Capital Cash Advances PAVmed Inc. OBO Payments ERC Payroll Benefits MSA Fees Total Balance - December 31, 2020 $ — $ — $ 8,200 $ 2,361 $ — $ 2,700 $ 13,261 MSA fees — — — — — 3,630 3,630 On Behalf Of (OBO) activities — — 7,739 984 — — 8,723 ERC - Payroll & Benefits — — — — 1,037 — 1,037 Promissory Note Issuance 22,400 — ( 15,939 ) ( 2,411 ) — ( 4,050 ) — Conversion of Promissory Note to LUCD Common Stock ( 22,400 ) — — — — — ( 22,400 ) Interest on Promissory Note — 659 — — — — 659 Cash payments to PAVmed Inc. — ( 659 ) — ( 314 ) — ( 2,280 ) ( 3,253 ) Net Activity during 2020 Balance - December 31, 2021 $ — $ — $ — $ 620 $ 1,037 $ — $ 1,657 Principal Senior Unsecured Promissory Note Interest Unsecured Senior Promissory Note Working Capital Cash Advances PAVmed Inc. OBO Payments MSA Fees Total Balance as of December 31, 2019 $ — $ — $ 2,622 $ 1,679 $ 1,020 $ 5,321 Balance $ — $ — $ 2,622 $ 1,679 $ 1,020 $ 5,321 Net Activity during 2020 — — 5,578 682 1,680 7,940 Balance as of December 31, 2020 $ — $ — $ 8,200 $ 2,361 $ 2,700 $ 13,261 Balance $ — $ — $ 8,200 $ 2,361 $ 2,700 $ 13,261 Lucid Diagnostics Inc. has principally financed its operations through working capital cash advances from PAVmed Inc. and the periodic payment of certain operating expenses by PAVmed Inc. on-behalf-of Lucid Diagnostics Inc. (the “PAVmed Inc. OBO Payments”). Additionally, the daily operations of Lucid Diagnostics Inc. are managed by personnel employed by PAVmed Inc., for which the Company incurs expense according to the provisions of a Management Services Agreement (MSA) between the Company and PAVmed Inc (the “MSA Fee”). See Note 5, Related Party Transactions , for further information regarding the MSA. Senior Unsecured Promissory Note On October 13, 2021, Lucid Diagnostics Inc. issued 15,803,200 shares of its common stock to PAVmed Inc. upon the election by PAVmed Inc. to convert the $ 22.4 million face value principal under the terms of a Senior Unsecured Promissory Note, dated June 1, 2021. The Senior Unsecured Promissory Note was issued by Lucid Diagnostics Inc. to PAVmed Inc. with a face value principal of $ 22.4 million, which replaced the aggregate outstanding and payable balance of the Due To: PAVmed Inc. as of June 1, 2021, had an annual interest rate of 7.875 %, a contractual maturity date of May 18, 2028 , and, at the election of PAVmed Inc., provided for the partial or full repayment of the face value principal and accrued but unpaid interest thereon by the issue of shares of Lucid Diagnostics Inc. common stock at a conversion price of $ 1.42 per share of Lucid Diagnostics Inc. common stock. F- 21 Note 7 — Prepaid Expenses, Deposits, and Other Current and Non-Current Assets Prepaid expenses and other current assets consisted of the following as of: Schedule of Prepaid Expenses and Other Current Assets December 31, 2021 December 31, 2020 Advanced payments to service providers and suppliers $ 1,138 $ 377 Prepaid insurance 1,578 0 Deposits 238 118 EsoCheck cell collection supplies 434 779 EsoGuard mailer supplies 59 55 Total prepaid expenses, deposits and other current assets $ 3,447 $ 1,329 Non-Current Assets The Company entered into an agreement with a clinical research organization (“CRO”) in connection with EsoGuard clinical trials (the “EsoGuard CRO Agreement”). The term of the EsoGuard CRO Agreement is from the September 2019 effective date to the conclusion of the respective clinical trials, but not to exceed 60 months from the effective date of the EsoGuard CRO Agreement. The CRO agreement may be cancelled with sixty days written notice, without an early termination fee. The Company incurred an on-account deposit of $ 725 and $ 755 as of December 31, 2021 and 2020, respectively, with the deposit classified as a non-current asset in the line item captioned “Other assets” on the accompanying consolidated balance sheets as of December 31, 2021 and 2020. See Note 11 , Commitment and Contingencies , for a discussion of the EsoGuard CRO Agreement. Note 8 — Fixed Assets Fixed assets, less accumulated depreciation, consisted of the following as of: Schedule of Fixed Assets Estimated Useful Life December 31, 2021 December 31, 2020 Computer and office equipment 2 - 5 years $ 88 $ — Laboratory equipment 3 - 7 years 845 — Furniture and fixtures 3 - 5 years 21 — Leasehold improvements - (1) 1 — Assets under construction n/a 20 — Total Fixed Assets 975 — Less Accumulated Depreciation ( 4 ) — Total Fixed Assets, net $ 971 $ — (1) Lesser of remaining lease term or estimated useful life. The assets under construction presented above are with respect to the establishment of a Company owned and operated CLIA-certified, CAP-accredited clinical laboratory. Depreciation expense of $ 4 for the year ended December 31, 2021 is included in general and administrative expenses in the accompanying consolidated statements of operations. The total fixed assets is inclusive of $ 98 of accounts payable and $ 16 of accrued expenses and other current liabilities in the accompanying consolidated balance sheet as of December 31, 2021. F- 22 Note 9 — Leases As of December 31, 2021, the Company only had short-term leases for its Lucid Test Centers, resulting in rent expense of $ 24 for the year ended December 31, 2021 (there was no such rent expense for the prior year ended December 31, 2020). In addition to the short-term leases as of December 31, 2021 noted above, the Company entered into additional lease agreements, each with commencement dates subsequent to December 31, 2021, classified as operating leases and short-term leases, including for a commercial clinical laboratory and additional Lucid Test Centers. The total future lease payments of both the (existing) short-term leases as of December 31, 2021 and the (new) short-term leases with commencement dates subsequent to December 31, 2021, are $ 75 in 2022 and $ 9 in 2023, as of December 31, 2021. The total future lease payments of the (new) operating leases with commencement dates subsequent to December 31, 2021, as of December 31, 2021, are as follows: Schedule of future minimum lease payments for capital leases 2022 $ 912 2023 932 2024 883 2025 — 2026 — Thereafter — Total lease payments 2,727 Note 10 — Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities for the periods indicated consist of the following: Schedule of Accrued Expenses and Other Current Liabilities December 31, 2021 December 31, 2020 Compensation and Employee Benefits $ 557 $ — CWRU License Agreement fee — 223 CWRU License Agreement Amendment fee — 100 CWRU Amended License Agreement - Royalty fee 25 — Operating expenses 531 49 EsoGuard mailer supplies — 22 Total accrued expenses and other current liabilities $ 1,113 $ 394 See Note 3, Patent License Agreement - Case Western Reserve University , for a discussion of the CWRU License Agreement. The amounts for operating expenses presented above relate to respective amounts incurred by the Company but not yet invoiced by the respective vendors. F- 23 Note 11 — Commitment and Contingencies Legal Proceedings In the ordinary course of our business, particularly as it begins commercialization of its products, the Company may be subject to certain other legal actions and claims, including product liability, consumer, commercial, tax and governmental matters, which may arise from time to time. Except as otherwise noted herein, the Company does not believe it is currently a party to any other pending legal proceedings. Notwithstanding, legal proceedings are subject-to inherent uncertainties, and an unfavorable outcome could include monetary damages, and excessive verdicts can result from litigation, and as such, could result in a material adverse impact on the Company’s business, financial position, results of operations, and /or cash flows. Additionally, although the Company has specific insurance for certain potential risks, the Company may in the future incur judgments or enter into settlements of claims which may have a material adverse impact on the Company’s business, financial position, results of operations, and /or cash flows. Clinical Trials - Agreement with Clinical Research Organization The Company entered into an agreement with a clinical research organization (“CRO”) in connection with EsoGuard clinical trials, referred to as the EsoGuard CRO Agreement. The CRO will assist the Company with conducting two concurrent clinical trials referred to as the “EsoGuard screening study” and the “EsoGuard case control study”. The term of the EsoGuard CRO Agreement is from the September 2019 effective date to the conclusion of the respective clinical trials, but not to exceed 60 months from the effective date of the EsoGuard™ CRO Agreement. The CRO agreement may be cancelled with sixty days written notice, without an early termination fee. F- 24 Note 12 — Stock-Based Compensation Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan The Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan (“Lucid Diagnostics Inc. 2018 Equity Plan”) is separate and apart from the PAVmed Inc. 2014 Equity Plan discussed below. The Lucid Diagnostics Inc. 2018 Equity Plan is designed to enable Lucid Diagnostics Inc. to offer employees, officers, directors, and consultants, as defined, an opportunity to acquire shares of common stock of Lucid Diagnostics Inc. The types of awards that may be granted under the Lucid Diagnostics Inc. 2018 Equity Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the Lucid Diagnostics Inc. board of directors. A total of 5,644,000 shares of common stock of Lucid Diagnostics Inc. are reserved for issuance under the Lucid Diagnostics Inc. 2018 Equity Plan, with 2,752,615 shares available for grant as of December 31, 2021. The share reservation is not diminished by a total of 473,300 Lucid Diagnostics Inc. stock options and restricted stock awards granted outside the Lucid Diagnostics Inc. 2018 Equity Plan as of December 31, 2021. Lucid Diagnostics Inc. 2018 Equity Plan - Stock Options Stock options issued and outstanding under the Lucid Diagnostics Inc. 2018 Equity Plan and including Lucid Diagnostics stock options granted outside the plan is as follows: Schedule of Stock Options Issued and Outstanding Activities Number of Stock Options Weighted Average Exercise Price Remaining Contractual Term (Years) Outstanding stock options at December 31, 2019 1,403,945 $ 0.61 9.0 Granted (1) — $ — Exercised ( 4,703 ) $ 1.06 Forfeited — $ — Outstanding stock options at December 31, 2020 1,399,242 $ 0.61 8.0 Granted (1) 20,000 $ 9.08 Exercised — $ — Forfeited — $ — Outstanding stock options at December 31, 2021 1,419,242 $ 0.60 7.0 Vested and exercisable stock options at December 31, 2021 1,337,417 $ 0.61 7.0 (1) Stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan generally vest ratably over twelve quarters, with the vesting commencing with the grant date quarter, and have a ten-year contractual term from date-of-grant. Previously, in January 2020, 4,703 stock options issued under the Lucid Diagnostics Inc. 2018 Equity Plan were exercised for cash proceeds of $ 4,999 , resulting in the issue of the same number of shares of common stock of Lucid Diagnostics Inc. The three Physician Inventors were each granted 141,100 stock options outside of the Lucid Diagnostics Inc. 2018 Equity Plan, with a grant date of May 12, 2018, an exercise price of $ 0.35 per share of common stock of Lucid Diagnostics Inc., vesting ratably on a quarterly basis commencing June 30, 2018 and ending March 31, 2021 , and a contractual period of ten years from the date of grant. See Note 5, Related Party Transactions , for a summary of the stock-based compensation expense recognized with respect to the stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan to the Physician Inventors. F- 25 Note 12 — Stock-Based Compensation - continued Lucid Diagnostics Inc. 2018 Equity Plan – Restricted Stock Awards As of December 31, 2021, a total of 1,897,795 restricted stock awards were granted under the Lucid Diagnostics Inc. 2018 Equity Plan, summarized as follows: On March 1, 2021, a total of 1,467,440 restricted stock awards were granted under the Lucid Diagnostics Inc. 2018 Equity Plan to employees of PAVmed Inc., a member of the board of directors of Lucid Diagnostics Inc. (who is also a member of the board of directors of PAVmed Inc.), and to each of the three physician inventors of the intellectual property licensed under the CWRU License Agreement, with such restricted stock awards having a single vesting date of March 1, 2023, and an aggregate grant date fair value of approximately $ 18.9 million, measured as discussed below, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. See Note 5 , Related Party Transactions , for a summary of the stock-based compensation expense recognized with respect to the restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan to the Physician Inventors. In April 2021, a total of 91,715 restricted stock awards were granted under the Lucid Diagnostics Inc 2018 Equity Plan, inclusive of such restricted stock awards granted to an employee of PAVmed Inc. and a consultant, with such restricted stock awards having a single vesting date in April 2023, and an aggregate grant date fair value of approximately $ 1.2 million, measured as discussed below, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. As of December 31, 2021, a total of 7,055 restricted stock awards have been forfeited. In July 2021, a total of 84,660 restricted stock awards were granted under the Lucid Diagnostics Inc 2018 Equity Plan, inclusive of such restricted stock awards granted to member of the board of directors of Lucid Diagnostics Inc. with such restricted stock awards having a single vesting date in July 2023, and an aggregate grant date fair value of approximately $ 1.1 million, measured as discussed below, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. In September 2021, 169,320 restricted stock awards were granted under the Lucid Diagnostics Inc 2018 Equity Plan, to a member of the board of directors of Lucid Diagnostics Inc. with such restricted stock awards vesting ratably over a two year period with a vesting dates of each of September 15, 2022 and 2023, and an aggregate grant date fair value of approximately $ 2.3 million, measured as discussed below, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. On October 14, 2021, 84,660 restricted stock awards were granted under the Lucid Diagnostics Inc 2018 Equity Plan, to a member of the board of directors of Lucid Diagnostics Inc. with such restricted stock awards having a single vesting date of October 14, 2023, and an aggregate grant date fair value of approximately $ 1.0 million, measured as the grant date closing price of Lucid Diagnostics Inc. common stock, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. On December 15, 2021, 50,000 restricted stock awards were granted outside of the Lucid Diagnostics Inc 2018 Equity Plan, with such restricted stock awards having a single vesting date on December 15, 2023, and an aggregate grant date fair value of approximately $ 0.3 million, measured as the grant date closing price of Lucid Diagnostics Inc common stock, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. Subsequent to December 31, 2021, as of March 29, 2022, additional stock-based equity grants under the Lucid Diagnostics Inc. 2018 Equity Plan included each of: 1.8 million stock options with a weighted average exercise price of approximately $ 4.16 per share and the same vesting and contractual term as discussed above; and a total of 320,000 restricted stock awards with a weighted average grant date fair value of $ 4.52 per share of Lucid Diagnostics Inc. common stock, with single vesting date of three years from date of grant. F- 26 Note 12 — Stock-Based Compensation - continued Lucid Diagnostics Inc. 2018 Equity Plan – Restricted Stock Awards - continued The price per share of Lucid Diagnostics Inc. common stock used in the computation of estimated fair value of stock options and restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan is as follows: (i) from October 14, 2021 to December 31, 2021 it is its quoted closing price per share on date of grant; and (ii) for the period January 1, 2021 to October 13, 2021, it was estimated using a probability-weighted average expected return methodology (“PWERM”), which involves the determination of equity value under various exit scenarios and an estimation of the return to the common stockholders under each scenario, wherein, the estimated fair value was based upon an analysis of future values, assuming various outcomes, based upon the probability-weighted present value of expected future investment returns, considering each of the possible future outcomes available to Lucid Diagnostics Inc .; and (iii) as of December 31, 2020, it was estimated using a discounted cash flow analysis applied to a multi-year forecast of its future cash flows. The PWERM principally involved (i) the identification of scenarios and related probabilities; (ii) determine the equity value under each scenario; and (iii) determine the common stock shareholders’ return in each scenario. The two scenarios identified were an initial public offering (“IPO”) of Lucid Diagnostics Inc. common stock (“IPO scenario”); and, to continue on as a private company (“stay private scenario”). With respect to the IPO scenario, the valuation of the Lucid Diagnostics Inc. common stock was computed using assumptions, including dates of the IPO, to calculate an estimated pre-money valuation; and, with respect to the stay private scenario, an income approach was used, wherein a risk-adjusted discount rate is applied to projected future cash flows. For the awards during 2021, a relative weighting ranged from 75%-97.5% for to the IPO scenario and the relative weighting ranged from 2.5%-25% for the stay private scenario . PAVmed Inc. 2014 Equity Plan The PAVmed Inc. 2014 Long-Term Incentive Equity Plan (the “PAVmed Inc. 2014 Equity Plan”), is separate and apart from the Lucid Diagnostics Inc. 2018 Equity Plan (as such equity plan is discussed above). The PAVmed Inc. 2014 Equity Plan is designed to enable PAVmed Inc. to offer employees, officers, directors, and consultants, as defined, an opportunity to acquire a proprietary interest in PAVmed Inc. The types of awards that may be granted under the PAVmed Inc. 2014 Equity Plan include stock options, stock appreciation rights, restricted stock awards, and other stock-based awards subject to limitations under applicable law. The PAVmed Inc. 2014 Equity Plan grants are subject-to approval of the PAVmed Inc. board of directors compensation committee. The three Physician Inventors were each granted 25,000 stock options under the PAVmed Inc. 2014 Equity Plan, with a grant date of May 12, 2018, an exercise price of $ 1.59 per share of common stock of PAVmed Inc., vesting ratably on a quarterly basis commencing June 30, 2018 and ending March 31, 2021, and a contractual period of ten years from the date of grant. Additionally, the three Physician Inventors were each granted 50,000 stock options under the PAVmed Inc. 2014 Equity Plan, with a grant date of June 21, 2021, an exercise price of $ 6.41 per share of common stock of PAVmed Inc., vesting ratably on a quarterly basis commencing June 30, 2021 and ending March 31, 2024, and a contractual period of ten years from the date of grant. See Note 5, Related Party Transactions , for a summary of the stock-based compensation expense recognized with respect to the stock options granted under the PAVmed Inc. 2014 Equity Plan to the Physician Inventors. F- 27 Note 12 — Stock-Based Compensation - continued Stock-Based Compensation Expense The stock-based compensation expense recognized by the Company for both the Lucid Diagnostics Inc. 2018 Equity Plan and the PAVmed Inc. 2014 Equity Plan, for the periods indicated, was as follows: Schedule of Stock-Based Compensation Expense 2021 2020 Year Ended December 31, 2021 2020 Lucid Diagnostics Inc 2018 Equity Plan – sales and marketing expenses $ 8 $ — Lucid Diagnostics Inc 2018 Equity Plan - general and administrative expense 9,073 — Lucid Diagnostics Inc 2018 Equity Plan - research and development expenses 66 52 PAVmed Inc 2014 Equity Plan - sales and marketing expenses 202 — PAVmed Inc 2014 Equity Plan - general and administrative expenses 38 — PAVmed Inc 2014 Equity Plan - research and development expenses 212 13 Total stock-based compensation expense $ 9,599 $ 65 The stock-based compensation expense, as presented above, is inclusive of: stock options and restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan to employees of PAVmed Inc., the Physician Inventors (as discussed above), and members of the board of directors of Lucid Diagnostics Inc., as well as the stock options granted under the PAVmed Inc. 2014 Equity Plan to the Physician Inventors (as discussed above). As of December 31, 2021, unrecognized stock-based compensation expense and weighted average remaining requisite service period with respect to stock options and restricted stock awards issued under each of the Lucid Diagnostics Inc. 2018 Equity Plan and the PAVmed Inc. 2014 Equity Plan, as discussed above, is as follows: Schedule of Unrecognized Compensation Expense and Weighted Average Remaining Service Period Unrecognized Expense Weighted Average Remaining Service Period (Years) Lucid Diagnostics Inc. 2018 Equity Plan Stock Options $ 100 0.6 Restricted Stock Awards $ 16,000 1.3 PAVmed Inc. 2014 Equity Plan Stock Options $ 465 2.2 Restricted Stock Awards $ — 0.0 Stock-based compensation expense recognized with respect to stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan was based on a weighted average estimated fair value of such stock options of $ 5.13 per share during the year ended December 31, 2021. There were no stock-based awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan during the year ended December 31, 2020. The stock-based compensation was calculated using the following weighted average Black-Scholes valuation model assumptions: Schedule of Stock-based Compensation Valuation Assumptions 2021 2020 Year Ended December 31, 2021 2020 Expected term of stock options (in years) 5.7 0 Expected stock price volatility 70 % — % Risk free interest rate 1.3 % — % Expected dividend yield — % — % Lucid Diagnostics, Inc Employee Stock Purchase Plan (“ESPP”) The Lucid Diagnostics Inc. Employee Stock Purchase Plan (“Lucid Diagnostics Inc. ESPP”), adopted by the Company’s board of directors effective November 9, 2021, provides eligible employees to purchase shares of Lucid Diagnostics Inc. common stock through payroll deductions during six month periods ending March 31 and September 30, wherein the purchase price per share of common stock is 85% of the lower quoted closing price per at either the beginning or end of each six month share purchase period. The Lucid Diagnostics Inc. ESPP has a total reservation of 500,000 shares of common stock of Lucid Diagnostics Inc. of which 500,000 shares are available-for-issue remaining as of December 31, 2021. F- 28 Note 13 — Stockholders’ Equity Preferred Stock The Company is authorized to issue 20 million shares of its preferred stock, par value of $ 0.001 per share, with such designation, rights, and preferences as may be determined from time-to-time by the Company’s board of directors. There were no shares of preferred stock issued and outstanding as of December 31, 2021 and December 31, 2020. Lucid Diagnostics Inc. Common Stock 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, par value $ 0.001 ; and declared a 1.411-to-1.0 common stock-split with respect to Lucid Diagnostics Inc. common stock, as discussed below. There were 34,917,907 and 14,114,707 shares of common stock issued and outstanding as of December 31, 2021 and December 31, 2020, respectively. As of December 31, 2021, PAVmed Inc. holds 27,927,190 shares, representing a majority-interest equity ownership and has a controlling financial interest in Lucid Diagnostics Inc. Year Ended December 31, 2021 PAVmed Inc Conversion of the Senior Unsecured Promissory Note Principal - October 13, 2021 On October 13, 2021, 15,803,200 shares of common stock of Lucid Diagnostics Inc. were issued to PAVmed Inc. upon the election by PAVmed Inc. to convert the $ 22.4 million face value principal of a Senior Unsecured Promissory Note, dated June 1, 2021, under the terms of such note, which was issued to PAVmed Inc. by Lucid Diagnostics Inc. Lucid Diagnostics Inc. Initial Public Offering - October 14, 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 were issued, with such total IPO shares inclusive of 571,428 IPO 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 the Company. Year Ended December 31, 2020 During the year ended December 31, 2020, 4,703 shares of common stock of the Company were issued upon exercise of stock options for cash of approximately $ 5 . See Note 12, Stock-Based Compensation , for a discussion of the Lucid Diagnostics Inc. 2018 Equity Plan. Committed Equity Facility - March 28, 2022 Subsequent to December 31, 2021, on March 28, 2022, Lucid Diagnostics, Inc. entered into a committed equity facility with an affiliate of Cantor Fitzgerald (“Cantor”). Under the terms of the committed equity facility, Cantor has committed to purchase up to $50 million of Lucid Diagnostics Inc. common stock from time to time at the request of the Company. While there are distinct differences, the facility is structured similarly to a traditional at-the-market equity facility, insofar as it allows the Company to raise primary equity capital on a periodic basis at prices based on the existing market price. In connection with the execution of the agreement for the committed equity facility, the Company agreed to pay Cantor $1.0 million as consideration for its irrevocable commitment to purchase the shares upon the terms and subject to the satisfaction of the conditions set forth in such agreement. In addition, pursuant to the agreement, e agreed to reimburse Cantor for certain of its expenses. the Company also entered into a registration rights agreement with Cantor. the Company has the right to terminate the agreement at any time after initial satisfaction of the conditions to Cantor’s obligation to purchase shares under the facility, at no cost or penalty, upon three trading days’ prior written notice. F- 29 Note 14 — Income Taxes Income tax (benefit) expense for respective periods noted is as follows: Schedule of Income Tax (Benefit) Expense 2021 2020 Year Ended December 31, 2021 2020 Current Federal, State and Local $ — $ — Deferred — — Federal ( 4,862 ) ( 1,447 ) State and Local ( 4,833 ) ( 1,389 ) Current and Deferred tax (benefit) expense ( 9,695 ) ( 2,836 ) Less: Valuation allowance reserve 9,695 2,836 Income tax (benefit) expense $ — $ — 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 Reconciliation of Federal Statutory Income Tax Rate 2021 2020 Year Ended December 31, 2021 2020 U.S. federal statutory rate 21.0 % 21.0 % U.S. state and local income taxes, net of federal benefit 13.6 % 13.6 % Permanent differences — % — % Valuation allowance ( 34.6 )% ( 34.6 )% Effective tax rate — % — % 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 Net Deferred Tax Assets 2021 2020 Year Ended December 31, 2021 2020 Deferred Tax Assets Net operating loss $ 11,023 $ 4,687 Stock-based compensation expense 3,422 101 Accrued expenses 56 — Research and development tax credit carryforwards — 15 Deferred tax assets $ 14,501 $ 4,803 Deferred Tax Liabilities Depreciation ( 3 ) — Deferred Tax Liabilities $ ( 3 ) $ — Deferred tax assets, net of deferred tax liabilities 14,498 4,803 Less: valuation allowance ( 14,498 ) ( 4,803 ) 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. F- 30 Note 14 — Income Taxes - continued 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, 2021 and 2020. Lucid Diagnostics Inc. has federal and state net operating loss (“NOL”) carryforwards, available to reduce future taxable income, if any, as of December 31, 2021 and 2020, as follows: federal NOL carryforward of approximately $ 31.9 million and $ 13.5 million , respectively, with such federal NOL carryforward not having a statutory expiration date; and state NOL carryforward of approximately $ 31.9 million and $ 13.5 million , respectively, with such state NOL carryforward having statutory expiration dates commencing in 2036 . The Company has not yet conducted a formal analysis and the NOL carryforward 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 Company did not have research and development (“R&D”) tax credit carryforward as of December 31, 2021. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the pandemic resulting from the outbreak of a novel strain of a coronavirus designated as the “Severe Acute Respiratory Syndrome Coronavirus 2” - or “SARS-CoV-2”. The pandemic resulting from SARS-CoV-2 is commonly referred to by its resulting illness of “COVID-19” (“coronavirus disease-2019”) and is referred to herein as the COVID-19 pandemic. Among other provisions, the CARES Act increases the limitation on the allowed business interest expense deduction from 30 percent to 50 percent of adjusted taxable income for tax years beginning January 1, 2019 and 2020 and allows businesses to immediately expense the full cost of Qualified Improvement Property, retroactive to tax years beginning on or after January 1, 2018. Additionally, the CARES Act permits net operating loss carryovers (“NOLs”) and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company evaluated the impact of these CARES Act provisions and determined they did not have a material impact on the consolidated income tax provision. As discussed herein, on October 14, 2021, Lucid Diagnostics Inc. completed its initial public offering (“IPO”) of its common stock. While PAVmed Inc. holds a majority-interest equity ownership and has a controlling financial interest, its ownership interest was reduced from 81.8477% before the IPO to 79.9796% after the IPO. Accordingly, Lucid Diagnostics Inc. is included in the PAVmed Inc and Subsidiaries consolidated income tax returns through October 13, 2021, and effective October 14, 2021, Lucid Diagnostics Inc. will file its income tax returns on a stand-alone legal entity basis. The Lucid Diagnostics Inc. stand-alone legal entity estimated income tax provision was computed on an assumed separate income tax return for the periods presented through October 13, 2021, wherein, the estimated income tax provision of Lucid Diagnostics Inc. is computed as if its income tax returns were filed by Lucid Diagnostics Inc. on a stand-alone legal entity basis. Notwithstanding the absence of a formal tax sharing agreement between PAVmed Inc. and Lucid Diagnostics Inc., the Lucid Diagnostics Inc. stand-alone legal entity current tax expense and /or tax refund, if any, would be settled with PAVmed Inc. (as opposed with the respective tax authority) through October 13, 2021. The deferred tax asset and /or deferred tax liability; a valuation allowance on the deferred tax asset, net; and /or an uncertain tax position, if any; each as discussed above, is determined based on Lucid Diagnostics Inc. stand-alone legal entity assumed filing of separate income tax returns. 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 2018 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. F- 31 Note 15 — Net Loss Per Share The “Net loss per share basic and diluted” for the respective periods indicated - is as follows: Schedule of Basic and Fully Diluted Net Loss Per Share 2021 2020 Year Ended December 31, 2021 2020 Numerator Net loss $ ( 28,078 ) $ ( 8,280 ) Denominator Weighted average common shares outstanding, basic and diluted 18,603,619 14,114,437 Loss per share Net loss per share - basic and diluted $ ( 1.51 ) $ ( 0.59 ) Basic weighted-average number of shares of common stock outstanding for the years ended December 31, 2021 and 2020 include the shares of the Company issued and outstanding during such periods, each on a weighted average basis. The basic weighted average number of shares common stock outstanding excludes common stock equivalent incremental shares, while diluted weighted average number of shares outstanding includes such incremental shares. However, as the Company was in a loss position for all periods presented, basic and diluted weighted average shares outstanding are the same, as the inclusion of the incremental shares would be anti-dilutive. The common stock equivalents excluded from the computation of diluted weighted average shares outstanding are as follows: Schedule of Anti-dilutive Securities Excluded from Computation of Diluted Earnings Per Share 2021 2020 Year Ended December 31, 2021 2020 Lucid Diagnostics Inc. 2018 Equity Plan: Stock options 995,942 975,942 Unvested restricted stock awards (“RSAs”) 1,890,740 — Stock options and unvested RSAs not granted under a plan 473,300 423,300 Total 3,359,982 1,399,242 Antidilutive securities excluded from computation of diluted weighted shares outstanding 3,359,982 1,399,242 Note 15 - Subsequent Events CapNostics, LLC On October 5, 2021, PAVmed Subsidiary Corporation, a wholly-owned subsidiary of PAVmed Inc., acquired all of the outstanding common stock of CapNostics, LLC (“CapNostics”) for total (gross) purchase consideration of approximately $ 2.1 million of cash, paid at the closing of the transaction. In March 2022, both the PAVmed and Lucid board of directors approved entering into a purchase and sale of the CapNostics, LLC assets from PAVmed to Lucid as well as transferring the consulting agreement with the previous principal owner of CapNostics, LLC. The transfer price is $ 2.1 million for the assets. EsoCure EsoCure has been in development as an Esophageal Ablation Device by PAVmed, 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. In March 2022, both the PAVmed and Lucid board of directors have approved entering into an intercompany license between PAVmed and Lucid such that Lucid will be granted the rights to commercialize EsoCure for the treating dysplastic Barrett’s Esophagus, including a royalty arrangement whereby Lucid will pay PAVmed a 5 % royalty on all EsoCure sales up to $ 100 million per calendar year, and 8% above that threshold. Lucid will obligated to fund ongoing development costs and cumulative patent expenses. EsoCure will become part of an integrated suite of Lucid products addressing BE-EAC. F- 32