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, 2022. 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 Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as such term is defined in Exchange Act Rules 13(a)-15(f). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the U.S. Our internal control over financial reporting includes those policies and procedures that: ● pertain to the maintenance of records, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; ● provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with accounting principles generally accepted in the U.S., and our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and; ● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets could have a material effect on the financial statements. Due to its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect all misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time. Our system contains self-monitoring mechanisms, so actions will be taken to correct deficiencies as they are identified. Our management conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded our system of internal control over financial reporting was effective as of December 31, 2022. This Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the SEC to permit us to provide only management’s report in this Form 10-K. Changes to Internal Controls Over Financial Reporting There has been no change in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 54 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 2023 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2022. Item 11. Executive Compensation The information required by this Item 11 is incorporated by reference to our Proxy Statement for the 2023 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2022. 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 2023 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2022. 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 2023 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2022. Item 14. Principal Accounting Fees and Services The information required by this Item 14 is incorporated by reference to our Proxy Statement for the 2023 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2022. 55 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 Stockholders’ 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: 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 3/3/2022 3.1.1 Amended and Restated Certificate of Incorporation S-1/A 3.1 10/7/2021 3.1.2 Form of Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock 8-K (Preferred Offering) 3.1 3/13/2023 3.2 Amended and Restated Bylaws S-1/A 3.2 10/7/2021 4.1 Description of Registrant’s Securities * 4.2 Common Stock Certificate S-1/A 4.1 10/7/2021 10.1# Lucid Diagnostics Inc. Amended and Restated 2018 Long-Term Incentive Equity Plan. S-8 2/10/2023 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 10/1/2021 10.3 License Agreement, dated as of May 20, 2019, by and between PAVmed Inc. and Lucid Diagnostics Inc. S-1/A 10.3 10/1/2021 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 10/7/2021 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 10/7/2021 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 10/7/2021 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 10/7/2021 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 10/7/2021 10.4.6 Fifth Amendment to Management Services Agreement, dated as of November 10, 2021, by and between PAVmed Inc. and Lucid Diagnostics Inc. * 10.4.7 Sixth Amendment to Management Services Agreement, dated as of August 11, 2022, by and between PAVmed Inc. and Lucid Diagnostics Inc. 8-K 10.1 12/2/2022 10.5 Payroll and Benefit Expense Reimbursement Agreement, dated as of November 30, 2022, by and between PAVmed Inc. and Lucid Diagnostics Inc. * 10.6 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 10/7/2021 56 Incorporation by Reference Exhibit No. Description Form Exhibit No. Date 10.7 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 10/7/2021 10.8 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 10/7/2021 10.9# Form of Stock Option Agreement. * 10.10# Form of Indemnification Agreement. S-1/A 10.9 10/8/2021 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 10/1/2021 10.12# Form of Restricted Stock Agreement. S-1/A 10.12# 10/8/2021 10.13# Employment Agreement with Lishan Aklog, M.D. 8-K 10.1 1/20/2022 10.14# Employment Agreement with Dennis M. McGrath 8-K 10.2 1/20/2022 10.15# Employment Agreement with Shaun O’Neil 8-K 10.1 3/23/2022 10.16# Employment Agreement with Michael Gordon * 10.17 Management Services Agreement, dated as of February 25, 2022, by and between LucidDx Labs Inc. and ResearchDx, Inc. 8-K 10.1 3/3/2022 10.18 Termination Agreement, dated as of February 10, 2023, by and among Lucid Diagnostics Inc., LucidDx Labs Inc. and ResearchDx, Inc. * 10.19.1‡ 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 4/1/2022 10.19.2‡ Registration Rights Agreement, dated as of March 28, 2022, by and between CF Principal Investments LLC and Lucid Diagnostics Inc. 8-K 10.2 4/1/2022 10.20 Controlled Equity Offering SM , dated as of November 23, 2022, by and between Cantor Fitzgerald & Co. and Lucid Diagnostics Inc. S-3 1.2 11/23/2022 10.21 Registration Rights Agreement, dated as of March 7, 2023, by and between Lucid Diagnostics Inc. and the purchasers of Series A Preferred Stock party thereto 8-K (Preferred Offering) 10.1 3/13/2023 10.22# Lucid Diagnostics Inc. Employee Stock Purchase Plan S-8 10.1 3/15/2022 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 a copy of any omitted exhibit or schedule upon request by the Securities and Exchange Commission. Item 16. Form 10-K Summary None 57 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. March 13, 2023 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 March 13, 2023 Lishan Aklog, M.D. Chief Executive Officer (Principal Executive Officer) /s/ Dennis M. McGrath President March 13, 2023 Dennis M. McGrath Chief Financial Officer (Principal Financial and Accounting Officer) /s/ Stanley N. Lapidus Vice Chairman March 13, 2023 Stanley N. Lapidus Director /s/ Debra J. White Director March 13, 2023 Debra J. White /s/ James L. Cox, M.D. Director March 13, 2023 James L. Cox, M.D. /s/ Jacque J. Sokolov, M.D. Director March 13, 2023 Jacque J. Sokolov, M.D. /s/ Ronald M. Sparks Director March 13, 2023 Ronald M. Sparks 58 LUCID DIAGNOSTICS INC. and SUBSIDIARIES (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, 2022 and 2021 F-3 Consolidated Statements of Operations for the years ended December 31, 2022 and 2021 F-4 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2022 and 2021 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021 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 Subsidiaries (the “Company”) as of December 31, 2022 and 2021, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, 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 March 13, 2023 F- 2 LUCID DIAGNOSTICS INC. and SUBSIDIARIES (a majority-owned subsidiary of PAVmed Inc.) CONSOLIDATED BALANCE SHEETS (in thousands except number of shares and per share data) December 31, 2022 December 31, 2021 Assets: Current assets: Cash $ 22,474 $ 53,656 Accounts receivable 17 200 Prepaid expenses, deposits, and other current assets 1,865 3,447 Total current assets 24,356 57,303 Fixed assets, net 1,592 971 Operating lease right-of-use assets 2,008 — Intangible assets, net 3,445 — Other assets 1,108 725 Total assets $ 32,509 $ 58,999 Liabilities, Preferred Stock and Stockholders’ Equity Current liabilities: Accounts payable $ 1,056 $ 1,490 Accrued expenses and other current liabilities 1,447 1,113 Operating lease liabilities, current portion 962 — Due To: PAVmed Inc. - MSA Fee and operating expenses 4,960 1,657 Total current liabilities 8,425 4,260 Operating lease liabilities, less current portion 1,037 — Total liabilities 9,462 4,260 Commitments and contingencies - Stockholders’ Equity: Preferred stock, $ 0.001 par value, 20,000,000 shares authorized; no shares issued and outstanding as of December 31, 2022 and December 31, 2021 — — Common stock, $ 0.001 par value, 100,000,000 shares authorized; 40,518,792 and 34,917,907 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively 41 35 Additional paid-in capital 121,081 96,608 Accumulated deficit ( 98,075 ) ( 41,904 ) Total Stockholders’ Equity 23,047 54,739 Total Liabilities and Stockholders’ Equity $ 32,509 $ 58,999 See accompanying notes to the consolidated financial statements. F- 3 LUCID DIAGNOSTICS INC. and SUBSIDIARIES (a majority-owned subsidiary of PAVmed Inc.) CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except number of shares and per share data) 2022 2021 Year Ended December 31, 2022 2021 Revenue $ 377 $ 500 Operating expenses: Cost of revenue 3,614 585 Sales and marketing 16,134 5,260 General and administrative 23,685 12,778 Amortization of acquired intangible assets 1,649 — Research and development 11,466 9,296 Total operating expenses 56,548 27,919 Net loss from operations ( 56,171 ) ( 27,419 ) Other income (expense): Interest expense - Senior Unsecured Promissory Note — ( 659 ) Other income (expense), net — ( 659 ) Loss before provision for income tax ( 56,171 ) ( 28,078 ) Provision for income taxes — — Net loss $ ( 56,171 ) $ ( 28,078 ) Net loss per share - basic and diluted $ ( 1.55 ) $ ( 1.51 ) Weighted average common shares outstanding, basic and diluted 36,172,421 18,603,619 See accompanying notes to the consolidated financial statements. F- 4 LUCID DIAGNOSTICS INC. and SUBSIDIARIES (a majority-owned subsidiary of PAVmed Inc.) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) for the YEARS ENDED December 31, 2022 and 2021 (in thousands except number of shares and per share data) Shares Amount Additional Paid-In Capital Accumulated Deficit Total Common Stock Shares Amount Additional Paid-In Capital Accumulated Deficit Total 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 Exercise - stock options - Lucid Diagnostics Inc. 2018 Equity Plan 965,341 1 694 — 695 Stock-based compensation - Lucid Diagnostics Inc. 2018 Equity Plan — — 13,859 — 13,859 Stock-based compensation - PAVmed Inc. 2014 Equity Plan — — 1,132 — 1,132 Vest - restricted stock awards 169,320 — — — — CapNostics, LLC transfer — — ( 211 ) — ( 211 ) APA-RDx - Installment Payment 326,701 — 653 — 653 Issuance - Committed Equity Facility, net of financing charges 680,263 1 1,766 — 1,767 Purchase - Employee Stock Purchase Plan 84,030 — 109 — 109 Issuance - Due To: PAVmed Inc. Settlement in Common Stock 3,375,230 4 6,471 — 6,475 Net loss — — — ( 56,171 ) ( 56,171 ) Balance as of December 31, 2022 40,518,792 $ 41 $ 121,081 $ ( 98,075 ) $ 23,047 See accompanying notes to the consolidated financial statements. F- 5 LUCID DIAGNOSTICS INC. and SUBSIDIARIES (a majority-owned subsidiary of PAVmed Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands except number of shares and per share data) 2022 2021 Year Ended December 31, 2022 2021 Cash flows from operating activities Net loss $ ( 56,171 ) $ ( 28,078 ) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization expense 1,936 4 Stock-based compensation - Lucid Diagnostics Inc. 2018 Equity Plan 13,859 9,134 Stock-based compensation - PAVmed Inc. 2014 Equity Plan 1,132 465 APA-RDx: Issue common stock - settle installment payment 653 — Changes in operating assets and liabilities: Accounts receivable 183 ( 200 ) Prepaid expenses and other current assets 1,163 ( 2,088 ) Accounts payable ( 445 ) ( 665 ) Accrued expenses and other current liabilities 333 926 Accrued CWRU License Agreement Fee — ( 223 ) Due To: PAVmed Inc. - operating expenses, employee related costs, MSA Fee 7,672 3,057 Net cash flows used in operating activities ( 29,685 ) ( 17,668 ) Cash flows from investing activities Purchase of equipment ( 908 ) ( 862 ) Asset acquisition ( 3,200 ) — Net cash flows used in investing activities ( 4,108 ) ( 862 ) Cash flows from financing activities Proceeds – issue of common stock – initial public offering — 70,000 Proceeds – issue of common stock – Committed Equity Facility 1,807 — Payment – offering costs – initial public offering — ( 5,664 ) Proceeds – exercise of stock options 695 — Proceeds – issue common stock – Employee Stock Purchase Plan 109 — Proceeds – Due To: PAVmed Inc. - working capital cash advances — 7,739 Net cash flows provided by financing activities 2,611 72,075 Net increase (decrease) in cash ( 31,182 ) 53,545 Cash, beginning of period 53,656 111 Cash, end of period $ 22,474 $ 53,656 See accompanying notes to the consolidated financial statements. F- 6 LUCID DIAGNOSTICS INC. and SUBSIDIARIES (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 Lucid Diagnostics Inc. and Subsidiaries, referred to herein as “Lucid Diagnostics” or the “Company” is comprised of Lucid Diagnostics Inc. and its wholly-owned subsidiaries, inclusive of LucidDx Labs, Inc. and CapNostics LLC. 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”), also known as chronic heartburn, acid reflux or simply reflux, who are at risk of 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 4, Patent License Agreement - Case Western Reserve University, for a further discussion of the Amended CWRU License Agreement. The EsoGuard Esophageal DNA Test, performed on samples collected with the EsoCheck Esophageal Cell Collection Device, constitutes the first and only commercially available diagnostic test capable of serving as a widespread screening tool to prevent esophageal adenocarcinoma (“EAC”) deaths, through early detection of esophageal precancer in at-risk gastroesophageal reflux disease (“GERD,” also commonly known as chronic heartburn, acid reflux or simply reflux) patients. Since its inception, the Company has advanced the proprietary technologies underlying EsoGuard and EsoCheck from the academic research laboratory to commercial diagnostic 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 EsoGuard; and establishing “Lucid Diagnostics Test Centers” for the collection of cell samples using EsoCheck. Recently, the American Gastroenterological Association (“AGA”) and the American College of Gastroenterology (“ACG”) updated its clinical practice guidelines to now support Lucid’s EsoCheck Cell Collection Device and EsoGuard Esophageal DNA Test as an acceptable alternative to endoscopy.Both guidelines expand the addressable market opportunity for these products to now affirmatively include screening women. The AGA updated guideline further expands the target population for the first time to include asymptomatic patients who otherwise present with the certain risk factors. Additionally, the Company is developing expanded clinical evidence to support insurance reimbursement adoption by government and private insurers. Further, as resources permit, the Company also intends to pursue development of other products and services, including EsoCure™, an esophageal ablation device. F- 7 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. Note 2 — Summary of Significant Accounting Policies 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 subsidiaries, LucidDx Labs Inc and CapNostics LLC. 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. 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 and intangible assets. Other significant estimates include the estimated incremental borrowing rate, 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. 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. 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. Prior to its initial public offering (“IPO”) of its common stock, the operations of the Company were funded by PAVmed Inc., inclusive of providing working capital cash advances and the payment of certain operating expenses on-behalf-of the Company. Additionally, certain operations of Lucid Diagnostics Inc. continue to be managed by personnel of 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 5, 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 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 committed equity sources of financing, the Company expects to be able to fund its operations and meet its financial obligations as they become due for the one year period from the date of the issue of the Company’s consolidated financial statements, as included herein in this Annual Report on Form 10-K for the period ended December 31, 2022. See Note 18, Subsequent Events , for a discussion of the certain financing activities following December 31, 2022. F- 8 Note 2 — Summary of Significant Accounting Policies - continued 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. 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. Revenue Recognition Revenues are recognized when the satisfaction of the performance obligation occurs, in an amount that reflects the consideration the Company expects to collect in exchange for those services. The Company’s revenue is primarily generated by its laboratory testing services utilizing its EsoGuard Esophageal DNA tests. The services are completed upon release of a patient’s test result to the ordering healthcare provider. Revenue recognized is inclusive of both variable consideration in connection with an individual patient’s third-party insurance coverage policy and fixed consideration in connection with a contracted services arrangement with an unrelated third party legal entity. To determine revenue recognition for the arrangements that the Company determines are within the scope of ASC 606, Revenue from Contracts with Customers, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The key aspects considered by the Company include the following: Contracts —The Company’s customer is primarily the patient, but the Company does not enter into a formal reimbursement contract with a patient. The Company establishes a contract with a patient in accordance with other customary business practices, which is the point in time an order is received from a provider and a patient specimen has been returned to the laboratory for testing. Payment terms are a function of a patient’s existing insurance benefits, including the impact of coverage decisions with Center for Medicare & Medicaid Services (“CMS”) and applicable reimbursement contracts established between the Company and payers. However, when a patient is considered self-pay, the Company requires payment from the patient prior to the commencement of the Company’s performance obligations. The Company’s consideration can be deemed variable or fixed depending on the structure of specific payer contracts, and the Company considers collection of such consideration to be probable to the extent that it is unconstrained. Performance obligations —A performance obligation is a promise in a contract to transfer a distinct good or service (or a bundle of goods or services) to the customer. The Company’s contracts have a single performance obligation, which is satisfied upon rendering of services, which culminates in the release of a patient’s test result to the ordering healthcare provider. The Company elects the practical expedient related to the disclosure of unsatisfied performance obligations, as the duration of time between providing testing supplies, the receipt of a sample, and the release of a test result to the ordering healthcare provider is far less than one year. Transaction price —The transaction price is the amount of consideration that the Company expects to collect in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration expected to be collected from a contract with a customer may include fixed amounts, variable amounts, or both. If the consideration derived from the contracts is deemed to be variable, the Company estimates the amount of consideration to which it will be entitled in exchange for the promised goods or services. The Company limits the amount of variable consideration included in the transaction price to the unconstrained portion of such consideration. In other words, the Company recognizes revenue up to the amount of variable consideration that is not subject to a significant reversal until additional information is obtained or the uncertainty associated with the additional payments or refunds is subsequently resolved. When the Company does not have significant historical experience or that experience has limited predictive value, the constraint over estimates of variable consideration may result in no revenue being recognized upon delivery of patient EsoGuard test results to the ordering healthcare provider. As such, the Company recognizes revenue up to the amount of variable consideration not subject to a significant reversal until additional information is obtained or the uncertainty associated with additional payments or refunds, if any, is subsequently resolved. Differences between original estimates and subsequent revisions, including final settlements, represent changes in estimated expected variable consideration, with the change in estimate recognized in the period of such revised estimate. With respect to a contracted service arrangement, the fixed consideration revenue is recognized on an as-billed basis upon delivery of the laboratory test report with realization of such fixed consideration deemed probable based upon actual historical experience. Allocate transaction price —The transaction price is allocated entirely to the performance obligation contained within the contract with a customer on the basis of the relative standalone selling prices of each distinct good or service. Practical Expedients —The Company does not adjust the transaction price for the effects of a significant financing component, as at contract inception, the Company expects the collection cycle to be one year or less. F- 9 Note 2 — Summary of Significant Accounting Policies - continued 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. Leases The Company adopted FASB ASC Topic 842, Leases , (“ASC 842”) effective December 31, 2021. 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 operating ROU asset also includes any lease incentives received for improvements to leased property, when the improvements are lessee-owned. For improvements to leased property that are lessor-owned, the Company includes amounts the Company incurred for the improvements as ROU assets which are amortized on a straight-line basis over the life of the lease. 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. Intangible Assets Purchased intangible assets are recorded at cost and depreciated using the straight-line method over the assets’ estimated useful life. See Note 11, Intangible Assets, net , for further information with respect to purchased intangible assets. Impairment - Long Lived Assets The Company reviews its long-lived assets, including intangible assets with finite lives, for recoverability whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable. The Company evaluates assets for potential impairment by comparing estimated future undiscounted net cash flows to the carrying amount of the asset. If the carrying amount of the assets exceeds the estimated future undiscounted cash flows, impairment is measured based on the difference between the carrying amount of the assets and fair value which is generally an expected present value cash flow technique. The assessment and determination of the existence of an impairment indicator comprises measurable operating performance criteria as well as qualitative factors deemed relevant and appropriate to such evaluation. 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 Equity Plan and the 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, 2022 and 2021; F- 10 Note 2 — Summary of Significant Accounting Policies - continued ● 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 years ended December 31, 2022 and 2021; ● 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, 2022 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. 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. 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, 2022 and December 31, 2021, the carrying values of cash, and accounts payable, approximate their respective fair value due to the short-term nature of these financial instruments. 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- 11 Note 2 — Summary of Significant Accounting Policies - continued 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, 2022 and 2021. 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, 2022, the Company does no t have any unrecognized tax benefits resulting from uncertain tax positions. 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, 2022 and December 31, 2021 or recognized during the years ended December 31, 2022 and 2021. 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. 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. F- 12 Note 2 — Summary of Significant Accounting Policies - continued Reclassifications Certain prior-year amounts have been reclassified to conform to the current year presentation, which includes presenting costs of revenue within operating expenses on the statements of operations, in the consolidated financial statements and accompanying notes to the consolidated financial statements. The impact of the reclassifications made to prior year amounts is not material and did not affect net loss. 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. Effective December 31, 2021, the Company adopted FASB ASC Topic 842, Leases, (“ASC 842”). ASC 842 established a right-of-use (“ROU”) model requiring a lessee to recognize a ROU asset and a lease liability for all leases with terms greater-than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company’s adoption of ASC 842 did not have an effect on the Company’s consolidated financial statements. See Note 10, Leases. Note 3 — Revenue from Contracts with Customers EsoGuard Commercialization Agreement The Company entered into the EsoGuard Commercialization Agreement, dated August 1, 2021, with its former commercial laboratory service provider, ResearchDx Inc. (“RDx”), an unrelated third-party. The EsoGuard Commercialization Agreement was on a month-to-month basis and was terminated on February 25, 2022 upon the execution of an asset purchase agreement (“APA”) dated February 25, 2022, between LucidDx Labs Inc., a wholly-owned subsidiary of Lucid Diagnostics Inc., and RDx, with such agreement further discussed in Note 7, Asset Purchase Agreement and Management Services Agreement . Revenue Recognized In the years ended December 31, 2022 and December 31, 2021, the Company recognized total revenue of $ 377 and $ 500 , respectively. The Company recognized revenue of $ 188 resulting from the delivery of patient EsoGuard test results. Revenue recognized from customer contracts deemed to include a variable consideration transaction price is limited to the unconstrained portion of the variable consideration. In addition, the Company’s revenue for the year ended December 31, 2022, includes $ 189 of revenue recognized under the EsoGuard Commercialization Agreement, which represented the minimum fixed monthly fee of $ 100 for the period January 1, 2022 to the February 25, 2022 termination date as discussed above. The monthly fee was deemed to be collectible for such period as RDx has timely paid the applicable respective monthly fee. In the year ended December 31, 2021, the Company recognized total revenue of $ 500 under the EsoGuard Commercialization Agreement. Cost of Revenue The cost of revenues principally includes the costs related to the Company’s laboratory operations (excluding estimated costs associated with research activities), the costs related to the EsoCheck cell collection device, cell sample mailing kits and license royalties. In the year ended December 31, 2022, the cost of revenue was $ 3,614 and was primarily related to costs for our laboratory operations and EsoCheck device supplies, however also includes $ 369 reflecting costs attributable to delivering the services under the EsoGuard Commercialization Agreement for the period January 1, 2022 to February 25, 2022. In the year ended December 31, 2021, the cost of revenue was $ 585 , which solely related to the EsoGuard Commercialization Agreement. F- 13 Note 4 — 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, 2022 and 2021. 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, 2022 and 2021 with respect to the revenue recognized under the EsoGuard Commercialization Agreement, dated August 1, 2021, between Lucid Diagnostics Inc. and Research Dx Inc. The Company recorded a royalty expense of $ 23 and $ 25 for the years ended December 31, 2022 and 2021, respectively. 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. 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 14, 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”. F- 14 Note 5 — Related Party Transactions Case Western Reserve University and Physician Inventors - Amended CWRU License Agreement Case Western Reserve University (“CWRU”) and each of the three physician inventors (“Physician Inventors”) of the intellectual property licensed under the amended and restated patent license agreement with CWRU, dated August 23, 2021 (the “Amended CWRU License Agreement”), each hold a minority equity ownership interest in Lucid Diagnostics Inc. The expenses incurred with respect to the Amended 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 2022 2021 Years Ended December 31, 2022 2021 Cost of Revenue CWRU – Royalty Fees $ 23 $ 25 General and Administrative Expense Amended CWRU – License Agreement - reimbursement of patent legal fees 69 10 Stock-based compensation expense – Physician Inventors’ restricted stock awards 1,095 910 Research and Development Expense Amended CWRU – License Agreement - reimbursement of patent legal fees 209 195 Fees - Physician Inventors’ consulting agreements 44 29 Sponsored research agreement 6 — Stock-based compensation expense – Physician Inventors’ stock options 203 169 Total Related Party Expenses $ 1,649 $ 1,338 PAVmed Inc. - Management Services Agreement The Company’s daily operations 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 monthly basis and is subject-to periodic adjustment corresponding with changes in the services provided by PAVmed Inc. personnel to the Company, with any such change in the MSA Fee being subject to approval of the boards of directors of each of Lucid Diagnostics Inc. and PAVmed Inc. On August 11, 2022, the respective Company’s boards of directors approved a sixth amendment to the MSA to increase the MSA Fee to $ 550 per month from $ 390 per month, with such increase effective on a prospective basis that commenced July 1, 2022. Pursuant to the sixth amendment, the parties agreed PAVmed Inc. may elect to receive payment of the monthly MSA Fee in cash or in shares of common stock of the Company, with such shares valued at the volume weighted average price (“VWAP”) during the final ten trading days of the applicable month (subject to a floor price of $ 0.70 per share). However, in no event will PAVmed Inc. be entitled to receive under the MSA, as amended, more than 7,709,836 shares of common stock the Company (representing 19.99% of our outstanding shares of common stock as of immediately prior to the execution of the sixth amendment). The shares that may be issued under the MSA, as amended, are being offered and sold in transactions exempt from registration under the Securities Act of 1933, as amended, in reliance on the exemption afforded under Section 4(a)(2) thereof. In accordance with the MSA, on November 30, 2022 PAVmed elected to receive payment of $ 1,650 in aggregate monthly fees under the MSA through the issuance of 750,818 shares of Lucid Diagnostics Inc. Common Stock. F- 15 Note 5 — Related Party Transactions - continued 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 Statements of Operations 2022 2021 Years Ended December 31, 2022 2021 Cost of Revenues $ — $ 61 Sales & Marketing 1,043 1,406 General & Administrative 3,066 1,255 Research & Development 1,531 908 Total MSA Fee $ 5,640 $ 3,630 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 general and administrative expense of $ 21 in the year ended December 31, 2021 in connection with the consulting agreement. F- 16 Note 6 — Due To PAVmed Inc. The aggregate Due To: PAVmed Inc. for the periods indicated is summarized as follows: Schedule of Senior Unsecured Promissory Note Principal Senior Unsecured Promissory Note Interest Unsecured Senior Promissory Note Working Capital Cash Advances PAVmed Inc. OBO Payments Employee- Related Costs 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 CapNostics, LLC transfer 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 ) Payment to PAVmed Inc. settled in LUCD stock Balance - December 31, 2021 $ — $ — $ — $ 620 $ 1,037 $ — $ 1,657 CapNostics, LLC Transfer PAVmed Inc. OBO Payments Employee- Related Costs MSA Fees Total Balance - December 31, 2021 $ — $ 620 $ 1,037 $ — $ 1,657 MSA fees — — — 5,640 5,640 On Behalf Of (OBO) activities — 1,263 — — 1,263 ERC - Payroll & Benefits — — 10,204 — 10,204 CapNostics, LLC transfer 2,105 — — — 2,105 Cash payments to PAVmed Inc. — ( 1,599 ) ( 5,495 ) ( 2,340 ) ( 9,434 ) Payment to PAVmed Inc. settled in LUCD stock $ ( 2,105 ) $ — $ ( 2,720 ) $ ( 1,650 ) ( 6,475 ) Balance - December 31, 2022 $ — $ 284 $ 3,026 $ 1,650 $ 4,960 CapNostics, LLC On October 5, 2021, PAVmed Subsidiary Corp, a wholly-owned subsidiary of PAVmed Inc., acquired 100 % of the outstanding membership interest of CapNostics, LLC (“CapNostics”), an unrelated third-party, for total (gross) purchase consideration of approximately $ 2.1 million in cash, paid at the closing of the transaction. Subsequently, effective April 1, 2022, PAVmed Subsidiary Corp and the Company entered into an agreement pursuant to which PAVmed Subsidiary Corp assigned to Lucid Diagnostics Inc. 100 % of the membership interest in CapNostics, LLC, resulting in the recognition by the Company principally of an acquired defensive technology intangible asset, and a $ 2.1 million payment obligation Due To: PAVmed Inc. Additionally, Lucid Diagnostics Inc. was also assigned on a prospective basis effective April 1, 2022, the consulting agreement with the previous principal owner of CapNostics, LLC. The transfer was accounted for as entities under common control. See Note 11, Intangible Assets, net, with respect to the transferred intangible asset. On November 30, 2022, pursuant to a supplement to the CapNostics Assignment Agreement, the Company, PAVmed Sub and PAVmed agreed that the Company would pay the price for the interests through the issuance to PAVmed of 1,145,086 shares of the Company’s common stock. Payroll and Benefit Expense Reimbursement Agreement (“PBERA”) On November 30, 2022, the Company and PAVmed entered into a payroll and benefit expense reimbursement agreement (the “PBERA”). Historically, PAVmed has paid for certain payroll and benefit-related expenses in respect of the Company’s personnel on behalf of the Company, and the Company has reimbursed PAVmed for the same. Pursuant to the PBERA, PAVmed will continue to pay such expenses, and the Company will continue to reimburse PAVmed for the same. The PBERA now provides that the expenses will be reimbursed on a quarterly basis or at such other frequency as the parties may determine, in cash or, subject to approval by the board of directors of each of PAVmed and the Company, in shares of the Company’s common stock, with such shares valued at the volume weighted average price of such stock during the final ten trading days preceding the later of the two dates on which such stock issuance is approved by the board of directors of each of PAVmed and the Company (subject to a floor price of $ 0.40 per share), or in a combination of cash and shares. However, in no event shall the Company issue any shares of its common stock to PAVmed in satisfaction of all or any portion of the expenses if the issuance of such shares of its common stock would exceed the maximum number of shares of common stock that the Issuer may issue under the rules or regulations of The Nasdaq Stock Market LLC (“Nasdaq”), unless the Company obtains the approval of its stockholders as required by the applicable rules of the Nasdaq for issuances of shares of its common stock in excess of such amount. In accordance with the PBERA, on November 30, 2022, PAVmed elected for the Company to reimburse PAVmed for $ 2,719 in accrued and unreimbursed payroll and benefit-related expenses paid by PAVmed on behalf of the Company through the third quarter of 2022 through the issuance of 1,479,326 shares of the Company’s common stock. F- 17 Note 6 — Due To PAVmed Inc. - continued Management Services Agreement In accordance with the MSA, on November 30, 2022 PAVmed has elected to receive payment of $ 1,650 in monthly fees under the MSA through the issuance of 750,818 shares of Lucid Diagnostics Inc. Common Stock. For further information about the MSA, see Note 5, Related Party Transactions. EsoCure License Agreement with PAVmed Inc. EsoCure has been in development as an esophageal ablation device by PAVmed Inc., 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 April 2022, following the approval from both the Company’s and PAVmed Inc.’s boards of directors, the companies entered into an intercompany license agreement (“EsoCure License Agreement”), pursuant to which the Company was granted the rights to commercialize EsoCure, a technology under development intended for the treatment of dysplastic Barrett’s Esophagus. The EsoCure License Agreement, includes a royalty arrangement whereby the Company will pay PAVmed Inc. a 5 % royalty on all EsoCure sales up to $ 100 million per calendar year, and an 8.0 % royalty on annual sales in excess of $ 100 million per calendar year. The Company is obligated to reimburse PAVmed Inc. for any ongoing development costs and cumulative patent expenses associated with the licensed technology. 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. Note 7 — Asset Purchase Agreement and Management Services Agreement Asset Purchase Agreement - ResearchDx Inc. Through its wholly-owned subsidiary, LucidDx Labs Inc., the Company entered into an asset purchase agreement (“APA”) dated February 25, 2022, with ResearchDx, Inc. (“RDx”), an unrelated third-party - “APA-RDx”. Under the APA-RDx, LucidDx Labs Inc. acquired certain assets from RDx which were combined with LucidDx Labs Inc. purchased and leased property and equipment to establish a Company-owned CLIA certified, CAP accredited commercial clinical laboratory capable of performing the EsoGuard® Esophageal DNA assay, inclusive of DNA extraction, next generation sequencing (“NGS”) and specimen storage. Prior to February 25, 2022, RDx provided such laboratory services at its owned CLIA-certified, CAP-accredited clinical laboratory. The total purchase price consideration payable under the APA-RDx is a face value of $ 3,200 comprised of three contractually specified periodic payments. The APA-RDx is being accounted for as an asset acquisition, with the recognition of an intangible asset of approximately $ 3,200 , which is included in “Intangible assets, net” on the accompanying consolidated balance sheet, as further discussed in Note 11, Intangible Assets, net. In the year ended December 31, 2022, a total of $ 3,200 of cash was paid with respect to the periodic payments. Additionally, the APA-RDx requires the Company to pay a total of $ 3,000 to be paid as twelve (12) equal installment payments commencing May 25, 2022 and then on each three month anniversary thereof, inclusive of a final installment payment on February 25, 2025, with such installment payments recognized as current period expense as incurred. In the year ended December 31, 2022, as provided for in the APA-RDx, installment payments were settled with the issuances of 326,701 shares of common stock of Lucid Diagnostics Inc., with such shares having fair values of $ 653 (with the fair value measured as the quoted closing price on the dates the shares were issued), which was recognized as a current period expense included in general and administrative expenses in the accompanying consolidated statement of operations. The APA-RDx provides for each of an acceleration and a cancellation of the remaining unpaid installment payments, summarized as follows: ● The payment of the remaining unpaid installment payments will be accelerated as immediately due and payable as of the date the “MSA-RDx” (as such agreement is discussed below) is either terminated by LucidDx Labs Inc. without cause or if it is terminated by mutual agreement between the Company and RDx. ● The payment of the remaining unpaid installment payments will be cancelled if the MSA-RDx is terminated by LucidDx Labs Inc. for cause, defined as the occurrence of any one of: (i) a material breach by RDx which is not cured within thirty days of LucidDx Labs Inc. written notice; (ii) RDx becomes insolvent and /or bankrupt; or (ii) RDx fails to comply with applicable statutes, is barred from participating in federal health care programs, or by action of changes in law or regulation, or by action of judicial interpretation of law, or by judicial civil proceedings decisions. F- 18 Note 7 — Asset Purchase Agreement and Management Services Agreement - continued Management Services Agreement - Research Dx Inc LucidDx Labs Inc. and RDx entered into a separate management services agreement (“MSA-RDx”), dated and effective February 25, 2022, with such agreement having a term of three years commencing on the agreement’s effective date, and an initial fee of $ 150 per quarter. The MSA-RDx provides for the cancellation of the remaining unpaid installment payments upon termination of the MSA-RDx for any reason or no reason by either party thereto. Termination of Management Services Agreement and Modification of Other Payment Obligations - ResearchDx Inc On February 14, 2023, through LucidDx Labs Inc, the Company entered into an agreement (the “MSA Termination Agreement”) with RDx, pursuant to which the parties mutually agreed to terminate the MSA-RDx without cause. The termination was effective as February 10, 2023. Until the termination of the MSA-RDx, RDx had continued to provide certain testing and related services for the Laboratory in accordance with the terms of the MSA-RDx. The MSA Termination Agreement reduces the remaining amounts of the earnout payments and management fees due under the APA-RDx and the MSA-RDx to $ 725 . The payment was satisfied through the issuance of 553,436 shares of the Company’s common stock in February 2023. The Company was not required to make any cash payments in connection with the termination. Note 8 — Prepaid Expenses, Deposits, and Other Current Assets Prepaid expenses and other current assets consisted of the following as of: Schedule of Prepaid Expenses and Other Current Assets December 31, 2022 December 31, 2021 Advanced payments to service providers and suppliers $ 371 $ 260 Prepaid insurance 52 1,578 Deposits 1,331 1,116 EsoCheck cell collection supplies 59 434 EsoGuard mailer supplies 52 59 Total prepaid expenses, deposits and other current assets $ 1,865 $ 3,447 Note 9 — Fixed Assets Fixed assets, less accumulated depreciation, consisted of the following as of: Schedule of Fixed Assets Estimated Useful Life December 31, 2022 December 31, 2021 Computer and office equipment 2 - 5 years $ 223 $ 88 Laboratory equipment 3 - 7 years 1,526 845 Furniture and fixtures 3 - 5 years 131 21 Leasehold improvements - (1) 1 1 Assets under construction n/a — 20 Total Fixed Assets 1,881 975 Less Accumulated Depreciation ( 289 ) ( 4 ) Total Fixed Assets, net $ 1,592 $ 971 (1) Lesser of remaining lease term or estimated useful life. Depreciation expense of $ 287 and $ 4 for the years ended December 31, 2022 and 2021, respectively, is included in general and administrative expenses in the accompanying consolidated statements of operations. F- 19 Note 10 — Leases During the year ended December 31, 2022, the Company entered into additional lease agreements that have commenced and are classified as operating leases and short-term leases, including for each of: a commercial clinical laboratory and additional Lucid Test Centers. The components of lease expense were as follows: Schedule of Components of Lease Expense 2022 2021 Years Ended December 31, 2022 2021 Operating lease cost $ 951 $ — Short-term lease cost 95 32 Variable lease cost 20 — Total lease cost $ 1,066 $ 32 The Company’s future lease payments as of December 31, 2022, which are presented as operating lease liabilities, current portion and operating lease liabilities, less current portion on the Company’s consolidated balance sheets are as follows: Schedule of Future Lease Payments of Operating Lease Liabilities 2023 $ 1,078 2023 $ 1,078 2024 1,019 2025 60 Total lease payments $ 2,157 Less: imputed interest ( 158 ) Present value of lease liabilities $ 1,999 Supplemental disclosure of cash flow information related to the Company’s cash and non-cash activities with its leases are as follows: Schedule of Cash Flow Supplemental Information Year Ended December 31, 2022 2021 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 949 $ — Non-cash investing and financing activities Right-of-use assets obtained in exchange for new operating lease liabilities $ 2,763 $ — Weighted-average remaining lease term - operating leases (in years) 2.03 — Weighted-average discount rate - operating leases 7.875 % — % As of December 31, 2022, the Company’s right-of-use assets from operating leases are $ 2,008 , which are reporting in right-of-use assets - operating leases in the consolidated balance sheets. As of December 31, 2022, the Company has outstanding operating lease obligations of $ 1,999 , of which $ 962 is reported in operating lease liabilities, current portion and $ 1,037 is reporting in operating lease liabilities less current portion in the Company’s consolidated balance sheets. The Company did not have operating leases as of December 31, 2021. The Company calculates its incremental borrowing rates for specific lease terms, used to discount future lease payments, as a function of the financing terms the Company would likely receive on the open market. F- 20 Note 11 — Intangible Assets, net Intangible assets, less accumulated amortization, consisted of the following as of: Schedule of Intangible Assets Accumulated Amortization Estimated Useful Life December 31, 2022 Defensive technology 60 months $ 2,105 Laboratory licenses and certifications and laboratory information management software 24 months 3,200 Total Intangible assets 5,305 Less Accumulated Amortization ( 1,860 ) Intangible Assets, net $ 3,445 The defensive technology intangible asset of $ 2.1 million (and approximately $ 0.2 million of accumulated amortization) was recognized by the Company as of the April 1, 2022 effective date of the transfer of CapNostics, LLC to the Company from PAVmed Subsidiary Corp (a wholly-owned subsidiary of PAVmed Inc.). The transfer was accounted for as entities under common control. The defensive technology intangible asset was recognized by PAVmed Subsidiary Corp upon its acquisition of CapNostics, LLC, an unrelated third-party, for total purchase consideration paid on the October 5, 2021 acquisition date of approximately $ 2.1 million in cash. The CapNostics LLC transaction was accounted for as an asset acquisition, resulting in the recognition of the defensive technology intangible asset. The defensive technology intangible asset is being amortized on a straight-line basis over an expected useful life 60 months commencing on the acquisition date. As noted in Note 7, Asset Purchase Agreement and Management Services Agreement , the asset purchase agreement between the Company and ResearchDx Inc. (“APA-RDx”), is being accounted for as an asset acquisition. The intangible assets recognized under the APA-RDx are the laboratory licenses and certifications (inclusive of a CLIA certification, CAP accreditation, and clinical laboratory licenses for five (5) U.S. States transferred to the Company from RDx), and a laboratory information management software perpetual-use royalty-free license granted under the APA-RDx, with such intangible asset having a useful life of twenty-four months commencing on the APA-RDx February 25, 2022 transaction date. Amortization expense of the intangible assets discussed above was $ 1,649 and $ 0 for the years ended December 31, 2022 and 2021, respectively, and is included in amortization of acquired intangible assets in the accompanying consolidated statements of operations. As of December 31, 2022, the estimated future amortization expense associated with the Company’s finite-lived intangible assets for each of the five succeeding fiscal years is as follows: Schedule of Future Amortization Expense 2023 $ 2,021 2024 688 2025 421 2026 315 Total $ 3,445 Note 12 — Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following items as of: Schedule of Accrued Expenses and Other Current Liabilities December 31, 2022 December 31, 2021 Compensation and Employee Benefits $ 879 $ 557 CWRU Amended License Agreement - Royalty fee 10 25 Operating expenses 558 531 Total accrued expenses and other current liabilities $ 1,447 $ 1,113 See Note 4, Patent License Agreement - Case Western Reserve University , for a discussion of the CWRU License Agreement. F- 21 Note 13 — 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. Note 14 — 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 9,144,000 shares of common stock of Lucid Diagnostics Inc. are reserved for issuance under the Lucid Diagnostics Inc. 2018 Equity Plan, with 3,821,139 shares available for grant as of December 31, 2022. The share reservation is not diminished by a total of 423,300 stock options and 50,000 restricted stock awards granted outside the Lucid Diagnostics Inc. 2018 Equity Plan, as of December 31, 2022. In January 2023, the number of shares available for grant was increased by 2,500,000 in accordance with the evergreen provisions of the plan. Lucid Diagnostics Inc. Stock Options Lucid Diagnostics Inc. stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan and stock options granted outside such plan are summarized as follows: Schedule of Stock Options Issued and Outstanding Activities Number of Stock Options Weighted Average Exercise Price Remaining Contractual Term (Years) Intrinsic Value (2) 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 $ 0.73 7.0 $ 6,665 Granted (1) 2,365,000 $ 3.68 Exercised ( 965,341 ) $ 0.72 Forfeited ( 253,524 ) $ 3.83 Outstanding stock options at December 31, 2022 (3) 2,565,377 $ 3.14 8.3 $ 428 Vested and exercisable stock options at December 31, 2022 1,119,006 $ 2.53 7.1 $ 428 (1) Stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan and those granted outside such plan generally vest ratably over twelve quarters, with the vesting commencing with the grant date quarter-end, and have a ten-year contractual term from date-of-grant. (2) The intrinsic value is computed as the difference between the quoted price of the Lucid Diagnostics Inc. common stock on each of December 31, 2022 and December 31, 2021 and the exercise price of the underlying Lucid Diagnostics Inc. stock options, to the extent such quoted price is greater than the exercise price. (3) The outstanding stock options presented in the table above, are inclusive of 423,300 stock options granted outside the Lucid Diagnostics Inc. 2018 Equity Plan, as of December 31, 2022 and December 31, 2021. 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. Subsequent to December 31, 2022, in January and February 2023, the company granted 2,672,500 stock options with a weighted average exercise price of $ 1.31 which will generally vest one-third after one year then ratably over the next eight quarters. F- 22 Note 14 — Stock-Based Compensation - continued Lucid Diagnostics Inc. Restricted Stock Awards Lucid Diagnostics Inc. restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan and restricted stock awards granted outside such plan are summarized as follows: Schedule of Restricted Stock Award Activity Number of Restricted Stock Awards Weighted Average Grant Date Fair Value Unvested restricted stock awards as of December 31, 2020 — $ — Granted 1,947,795 12.76 Vested — — Forfeited ( 7,055 ) 13.11 Unvested restricted stock awards as of December 31, 2021 (1) 1,940,740 $ 12.76 Unvested restricted stock awards as of December 31, 2021 1,940,740 $ 12.76 Granted 320,000 4.53 Vested ( 169,320 ) 13.48 Forfeited — — Unvested restricted stock awards as of December 31, 2022 (1) 2,091,420 $ 11.44 (1) The unvested restricted stock awards presented in the table above, are inclusive of 50,000 restricted stock awards granted outside the Lucid Diagnostics Inc. 2018 Equity Plan as of December 31, 2022 and December 31, 2021. On January 7, 2022, 320,000 restricted stock awards were granted under the Lucid Diagnostics Inc 2018 Equity Plan, with such restricted stock awards having a single vesting date on January 7, 2025, and an aggregate grant date fair value of approximately $ 1.4 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. 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). F- 23 Note 14 — 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 2022 2021 Years Ended December 31, 2022 2021 Lucid Diagnostics Inc 2018 Equity Plan – cost of revenue $ 13 $ — Lucid Diagnostics Inc 2018 Equity Plan – sales and marketing expenses 968 8 Lucid Diagnostics Inc 2018 Equity Plan - general and administrative expenses 12,691 9,073 Lucid Diagnostics Inc 2018 Equity Plan - research and development expenses 187 66 PAVmed Inc 2014 Equity Plan - cost of revenue 3 — PAVmed Inc 2014 Equity Plan - sales and marketing expenses 654 202 PAVmed Inc 2014 Equity Plan - general and administrative expenses 262 38 PAVmed Inc 2014 Equity Plan - research and development expenses 213 212 Total stock-based compensation expense $ 14,991 $ 9,599 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, 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 of December 31, 2022, 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 $ 3,248 2.1 Restricted Stock Awards $ 4,064 0.5 PAVmed Inc. 2014 Equity Plan Stock Options $ 1,139 1.4 Restricted Stock Awards $ 148 1.0 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 $ 2.30 per share and $ 5.13 per share during the periods ended December 31, 2022 and 2021, respectively, calculated using the following weighted average Black-Scholes valuation model assumptions: Schedule of Stock-based Compensation Valuation Assumptions 2022 2021 Years Ended December 31, 2022 2021 Expected term of stock options (in years) 5.6 5.7 Expected stock price volatility 71 % 70 % Risk free interest rate 2.1 % 1.3 % Expected dividend yield — % — % F- 24 Note 14 — Stock-Based Compensation - continued Lucid Diagnostics, Inc Employee Stock Purchase Plan (“ESPP”) The Lucid Diagnostics Inc Employee Stock Purchase Plan (“Lucid Diagnostics Inc ESPP”), initial six-month stock purchase period was April 1, 2022 to September 30, 2022. A total of 84,030 shares of common stock of Lucid Diagnostics Inc were purchased for proceeds of approximately $ 109 on September 30, 2022 under the Lucid Diagnostics Inc. ESPP. The Lucid Diagnostics Inc. ESPP has a total reservation of 500,000 shares of common stock of which 415,970 shares are available-for-issue as of December 31, 2022. In January 2023, the number of shares available-for-issue was increased by 500,000 in accordance with the evergreen provisions of the plan. Note 15 — Stockholders’ Equity Lucid Diagnostics Inc. Common Stock As of December 31, 2022 and December 31, 2021 there were 40,518,792 and 34,917,907 shares of common stock issued and outstanding, respectively. As of December 31, 2022, PAVmed Inc. holds 31,302,420 shares, representing a majority-interest equity ownership and PAVmed Inc. has a controlling financial interest in Lucid Diagnostics Inc. Committed Equity Facility and ATM Facility 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. As of December 31, 2022, under the committed equity facility, a total of 680,263 shares of common stock of the Company were issued for proceeds of approximately $ 1,807 . In connection with the execution of the agreement for the committed equity facility, the Company paid 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, we 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. In November 2022, the Company entered into an “at-the-market offering” for up to $ 6.5 million of its common stock that may be offered and sold under a Controlled Equity Offering Agreement between the Company and Cantor Fitzgerald & Co. In the year ended December 31, 2022, there were no shares sold through the at-the-market equity facility. Subsequent to December 31, 2022, through March 9, 2023, we sold 230,068 shares through its at-the-market equity facility for approximately $ 0.3 million. F- 25 Note 16 — Income Taxes Income tax (benefit) expense for respective periods noted is as follows: Schedule of Income Tax (Benefit) Expense 2022 2021 Year Ended December 31, 2022 2021 Current Federal, State and Local $ — $ — Deferred Federal ( 12,703 ) ( 4,862 ) State and Local 1,209 ( 4,833 ) Current and Deferred tax (benefit) expense ( 11,494 ) ( 9,695 ) Less: Valuation allowance reserve 11,494 9,695 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 2022 2021 Year Ended December 31, 2022 2021 U.S. federal statutory rate 21.0 % 21.0 % U.S. state and local income taxes, net of federal benefit 7.2 % 13.6 % Permanent differences 0.6 % — % Tax credits 0.5 % — % Revaluation of state deferred taxes ( 8.8 )% — % Valuation allowance ( 20.5 )% ( 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 2022 2021 Year Ended December 31, 2022 2021 Deferred Tax Assets Net operating loss $ 16,015 $ 11,023 Stock-based compensation expense 6,920 3,422 Accrued expenses 80 56 Depreciation & amortization 240 — Research and development expenditures 2,442 — Research and development tax credit carryforwards 295 — Deferred tax assets $ 25,992 $ 14,501 Deferred Tax Liabilities Depreciation — ( 3 ) Deferred Tax Liabilities $ — $ ( 3 ) Deferred tax assets, net of deferred tax liabilities 25,992 14,498 Less: valuation allowance ( 25,992 ) ( 14,498 ) Deferred tax assets, net after valuation allowance $ — $ — F- 26 Note 16 — Income Taxes - continued Deferred tax assets and deferred tax liabilities resulting from temporary differences are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of the change in the tax rate is recognized as income or expense in the period the change in tax rate is enacted. As 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, 2022 and 2021. Lucid Diagnostics Inc. has federal and state net operating loss (“NOL”) carryforwards, available to reduce future taxable income, if any, as of December 31, 2022 and 2021, as follows: federal NOL carryforward of approximately $ 65.1 million and $ 31.9 million, respectively, with such federal NOL carryforward not having a statutory expiration date; and state NOL carryforward of approximately $ 65.1 million and $ 31.9 million, respectively, with such state NOL carryforward having statutory expiration dates commencing in 2037 . 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). 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. In August 2022, the U.S. Congress passed the Inflation Reduction Act, which included a corporate minimum tax on book earnings of 15%, an excise tax on corporate share repurchases of 1%, and certain climate change and energy tax credit incentives. The adoption of a corporate minimum tax of 15% is not expected to impact Lucid’s effective tax rate. The excise tax of 1% on corporate share buybacks will not have an impact on the Company’s effective tax rate. F- 27 Note 17 — 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 2022 2021 Years Ended December 31, 2022 2021 Numerator Net loss $ ( 56,171 ) $ ( 28,078 ) Denominator Weighted average common shares outstanding, basic and diluted 36,172,421 18,603,619 Net loss per share Net loss per share - basic and diluted $ ( 1.55 ) $ ( 1.51 ) Basic weighted-average number of shares of common stock outstanding for the years ended December 31, 2022 and 2021 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 2022 2021 December 31, 2022 2021 Stock options 2,565,377 1,419,242 Unvested restricted stock awards 2,091,420 1,940,740 Total 4,656,797 3,359,982 F- 28 Note 18 — Subsequent Events Series A Preferred Stock Offering On March 7, 2023, we entered into subscription agreements for the sale of 13,625 shares of Series A preferred stock (the “ Series A Preferred Stock ”). Each share of the Series A Preferred Stock has a stated value of $ 1,000 and a conversion price of $ 1.394 . The terms of the Series A Preferred Stock also include a one times preference on liquidation and a right to receive dividends equal to 20% of the number of shares into which such Series A Preferred Stock is convertible, payable on the one-year and two-year anniversary of the issuance date . The Series A Preferred Stock is a non-voting security, other than with respect to limited matters related to changes in terms of the Series A Preferred Stock. The aggregate gross proceeds from the sale of shares in such offering were $ 13.625 million. Private Placement - Securities Purchase Agreement Effective as of March 13, 2023, we entered into a Securities Purchase Agreement (“SPA”) with an accredited institutional investor (“Investor”, “Lender”, and /or “Holder”), pursuant to which we agreed to sell, and the Investor agreed to purchase a Senior Secured Convertible Note with a face value principal of $ 11.1 million (the “March 2023 Senior Convertible Note”). The issuance of the March 2023 Senior Convertible Note is subject to customary closing conditions. As of the date hereof, the March 2023 Senior Convertible Note has not yet been issued. F- 29