What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-15 compared with 2022-11-14 · 370 added, 398 removed, 91 unchanged (89% of the section changed)

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following discussion and analysis of our unaudited condensed consolidated financial condition and results of operations should be read

together with our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Form 10-K”), as filed with the Securities

and Exchange Commission (the “SEC”).

We are a majority-owned consolidated subsidiary of PAVmed Inc.

the context otherwise requires, references herein to “we”, “us”, and “our”, and to the “Company”

or “Lucid Diagnostics” are to Lucid Diagnostics Inc and its subsidiaries LucidDx Labs Inc.

(“LucidDx Labs”) and

CapNostics, LLC (“CapNostics”).

together with our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Form 10-K”), as filed with the

Securities and Exchange Commission (the “SEC”).

the context otherwise requires, references herein to (i) “we”, “us”, and “our”, and to the “Company”,

“Lucid” or “Lucid Diagnostics” are to the Company and its subsidiaries LucidDx Labs Inc.

(“LucidDx Labs”)

and CapNostics, LLC (“CapNostics”), (ii) “FDA” are to the Food and Drug Administration, (iii) “510(k)”

are to a premarket notification, submitted to the FDA by a manufacturer pursuant to § 510(k) of the Food, Drug and Cosmetic Act

and 21 CFR § 807 subpart E, (iv) “CLIA” are to the Clinical Laboratory Improvement Amendments of 1988 and associated

regulations set forth in 42 CFR § 493, and (v) “CE Mark” are to a “Conformité Européenne”

Mark, a mark indicating that a product such as a medical device conforms to the essential requirements of the relevant European directive.

FORWARD-LOOKING

17 unchanged sentences

ability of our products to achieve market acceptance;

success in retaining or recruiting, or changes required in, our officers, key employees or directors;

success in retaining or recruiting, or changes required in, our officers, key employees or

potential ability to obtain additional financing when and if needed;

6 unchanged sentences

related to the COVID-19 pandemic;

risks related to our relationship with PAVmed;

estimates regarding expenses, future revenue, capital requirements and needs for additional financing.

related to our relationship with PAVmed;

estimates regarding expenses, future revenue, capital requirements and needs for additional

addition, our forward-looking statements do not reflect the potential impact of any future financings, acquisitions, mergers, dispositions,

joint ventures or investments we may make.

may not actually achieve the plans, intentions, and/or expectations disclosed in our forward-looking statements, and you should not

place undue reliance on our forward-looking statements.

You should read this Form 10-Q and the Form 10-K, and the documents we have filed

as exhibits to this Form 10-Q and the Form 10-K, completely and with the understanding our actual future results may be materially different

from what we expect.

We do not assume any obligation to update any forward-looking statements, whether as a result of new information,

future events or otherwise, except as required by applicable law.

are a commercial-stage, cancer prevention, medical diagnostics technology company focused on the millions of patients with long-standing

gastroesophageal reflux disease (“GERD”) who are at risk of developing esophageal precancer and cancer, specifically highly

lethal esophageal adenocarcinoma (“EAC”), which is expected to lead to approximately 16,000 U.S.

deaths per year.

believe that our lead products, the EsoGuard Esophageal DNA Test performed on samples collected with the EsoCheck Esophageal Cell Collection

Device, constitute the first and only commercially available diagnostic test capable of serving as a widespread screening tool to prevent

EAC deaths, through early detection of esophageal precancer in at-risk GERD patients.

is a DNA test performed on surface esophageal cells collected with EsoCheck in a brief noninvasive office procedure which has been

shown to be over 90% sensitive and specific at detecting Barrett’s Esophagus (“BE”), a precancerous condition of

the esophagus and all conditions along the BE-EAC spectrum.

(Moinova, et al.

may not actually achieve the plans, intentions, and/or expectations disclosed in our forward-looking statements, and you should not place

undue reliance on our forward-looking statements.

You should read this Form 10-Q, the documents we have filed as exhibits to this Form

10-Q, and the Form 10-K completely and with the understanding our actual future results may be materially different from what we expect.

We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise,

except as required by applicable law.

are 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”).

believe that our flagship product, 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 EAC deaths, through early detection of esophageal precancer in at-risk GERD patients.

is a bisulfite-converted next-generation sequencing (NGS) DNA assay performed on surface esophageal cells collected with EsoCheck.

quantifies methylation at 31 sites on two genes, Vimentin (VIM) and Cyclin A1 (CCNA1).

The assay was evaluated in a 408-patient multicenter

case-control study published in Science Translational Medicine and showed greater than 90% sensitivity and specificity at detecting esophageal

precancer and all conditions along the BE-EAC spectrum, including on samples collected with EsoCheck (Moinova, et al.

Sci Transl Med.

2018 Jan 17;10(424):

is a swallowable balloon capsule catheter capable

of sampling surface esophageal cells in a less-than -five-minute, noninvasive office procedure.

We believe EsoCheck’s Collect+Protect™

technology makes it the only noninvasive esophageal cell collection device capable of anatomically targeted and protected sampling

to prevent dilution and contamination during device withdrawal.

We are party to an amended and restated

patent license agreement with CWRU, dated August 23, 2021 (the “Amended CWRU License Agreement”), which provides for the exclusive

worldwide license of the intellectual property rights for the proprietary technologies underlying EsoCheck and EsoGuard.

is commercialized in the U.S.

as a laboratory developed test (“LDT”).

It was previously performed by our unrelated

third-party commercial clinical laboratory service partner ResearchDx Inc.

(“RDx”), at their Clinical Laboratory

Improvement Amendments (“CLIA”) certified commercial clinical laboratory, located in Irvine, CA.

Beginning in March

2022, EsoGuard has been performed at our own CLIA-certified commercial clinical laboratory, located in Lake Forest, CA.

currently manufactures our EsoGuard specimen kits.

EsoCheck is commercialized in the U.S.

as a 510(k) cleared esophageal cell

collection device currently manufactured for us by our contract manufacturing partner, Sage Product Development Inc., located in

Foxborough, MA.

As discussed below, we are in the process of transferring EsoCheck manufacturing to Coastline International Inc., a

high-volume manufacturer headquartered in San Diego, CA.

EsoCheck has completed the CE Mark certification

EsoGuard, used with EsoCheck, was granted Food and Drug Administration (“FDA”) Breakthrough Device designation and requires the completion of an

international multicenter pre-market approval (“PMA”) clinical trial to be able to submit EsoGuard to the FDA for

approval as an in vitro diagnostic device (“IVD”).

EsoGuard secured a final Medicare payment determination of $1,938.01, effective January 1, 2021.

We are awaiting a Medicare local

coverage determination (“LCD”), as discussed in more detail below.

We are also aggressively pursuing U.S.

private payor payment and coverage, as well as payment in Europe.

are working to expand EsoGuard commercialization across multiple channels by building a direct sales and marketing team targeting primary

care physicians, specialists, institutions and consumers.

To assure sufficient testing capacity and geographic coverage, as part of this

expansion, we are building our own network of Lucid Test Centers, staffed by Lucid-employed clinical personnel, where patients can undergo

the EsoCheck procedure and have the sample sent for EsoGuard testing.

We have also established an EsoGuard Telemedicine Program, in partnership

with UpScript, LLC, an independent third-party telemedicine provider, that can accommodate EsoGuard self-referrals from direct-to-consumer

Updated Clinical Guidelines and Guidance

April 2022, the American College of Gastroenterology (“ACG”) updated its

clinical guideline to support esophageal precancer (including BE) screening to prevent highly lethal EAC utilizing EsoGuard on samples

collected with EsoCheck.

The clinical guideline reiterates the ACG’s long-standing recommendation for esophageal precancer screening

in at-risk patients with GERD, commonly known as chronic heartburn, acid reflux or simply reflux.

In its Recommendation 5, the ACG suggests

a single screening endoscopy in patients with chronic GERD symptoms and 3 or more additional risk factors for BE, including male sex,

age greater than 50 years, White race, tobacco smoking, obesity, and family history of BE or EAC in a first-degree relative.

and importantly for the first time, the clinical guideline also endorses nonendoscopic biomarker screening as an acceptable alternative

to costly and invasive endoscopy by stating in its Recommendation 6 that the ACG suggests that a swallowable, nonendoscopic capsule device

combined with a biomarker is an acceptable alternative to endoscopy for screening for BE.

The clinical guideline specifically mentions

EsoCheck, along with our EsophaCap device, as such swallowable, nonendoscopic esophageal cell collection devices.

The clinical guideline

also mentions methylated DNA markers (like those detected by the EsoGuard test) as such a biomarker.

The summary of evidence for this

recommendation includes a reference to the seminal NIH-funded multicenter, case-control study published in 2018 in Science Translational

Medicine, which demonstrated that EsoGuard is highly accurate at detecting esophageal precancer and cancer, including on samples collected

with EsoCheck.

July 2022, the American Gastroenterology Association (“AGA”) published updated clinical guidance that mirrors the same

furnished by the ACG as described above , endorsing the use of non-invasive screening

tools like EsoCheck, which is cited in its guideline, as an acceptable alternative to endoscopy to directly address the need for

noninvasive screening tools that are easy to administer, patient friendly, and cost-effective for the detection of BE.

practice update by the AGA also significantly expands the target population for esophageal precancer screening, including for

EsoGuard and EsoCheck, by recommending, for the first time, screening in at-risk patients without symptoms of reflux.

so by adding a history of chronic GERD as merely an additional, seventh risk factor to the six risk factors for BE and EAC that have

traditionally identified at-risk symptomatic patients recommended for screening.

As a result, chronic symptomatic GERD is no longer

a mandatory prerequisite and asymptomatic patients with three of the other six risk factors (e.g., male sex, age greater than 50

years, White race, tobacco smoking, obesity, and family history of BE) are now considered at-risk patients

recommended for screening.

Local Coverage Determination

In April 2022, a

proposed LCD DL39256, entitled “Molecular Testing for Detection of Upper Gastrointestinal Metaplasia, Dysplasia, and

Neoplasia” was published on the Center for Medicare and Medicaid Services (“CMS”) website by the Medicare Administrative Contractor (“MAC”) Palmetto GBA.

proposed LCD is a further step in our efforts to secure Medicare coverage and payment for EsoGuard.

proposed LCD, which the CMS website explicitly characterizes as a “work in progress” for “public review,” outlines

criteria that MAC Palmetto GBA’s Molecular Diagnostic Services Program (“MolDX”) expects upper gastrointestinal precancer and cancer molecular diagnostic tests to meet.

These criteria include active

GERD with at least two risk factors, as well as evidence of analytic validity, clinical validity, and clinical utility.

Although it found

that no currently existing test has fulfilled all these criteria, it indicated that it will “monitor the evidence and will provide

coverage based on the pertinent literature and society recommendations.” Notably, the proposed LCD pre-dated, and therefore does

not include consideration of, the most recent ACG clinical guideline update endorsing swallowable, nonendoscopic capsule devices combined

with a biomarker, such as EsoCheck and EsoGuard.

The publication of the proposed LCD included a written comment period that extended

through May 14, 2022.

MolDX held an open meeting on May 10, 2022, during which stakeholders and other interested parties had the opportunity

to address the proposed LCD.

have used the written comment process and the open meeting to bring to MolDX essential information that was not incorporated into the

proposed LCD.

These include:

the updated ACG clinical guideline;

the fact that EsoGuard’s published performance is at or above

accepted performance criteria for detection of lower gastrointestinal cancers in approved and currently effective Medicare coverage determinations;

and data from ongoing clinical utility studies Lucid and clinical investigators are performing.

A final LCD will not be issued until

the MAC has had the opportunity to assess and consider the comments and input from the written comment period and the open meeting.

the MAC Palmetto GBA release of a proposed LCD, the MAC Noridian Healthcare Solutions published a proposed LCD entitled Molecular

Testing for Detection of Upper Gastrointestinal Metaplasia, Dysplasia, and Neoplasia DL39262.

The proposed LCD mirrors the MAC

Palmetto GBA proposed LCD.

We have used the MAC Noridian Healthcare Solutions open meeting held on May 26, 2022, and the written

comment period that ended on June 11, 2022 to bring the same essential information that we provided to the MAC Palmetto GBA to

maintain consistency in our approach and advocate appropriately.

Status of Clinical Trials

2021, we began conducting two concurrent clinical trials, the “EsoGuard

screening study” (“BE-1”) and the “EsoGuard case-control study” (“BE-2”), to expand the clinical

evidence for the technologies and to support FDA pre-market approval (“PMA”) of the use of EsoGuard and EsoCheck as an in-vitro

diagnostic medical device (“IVD”).

However, in light of the MAC Palmetto GBA’s recently published proposed LCD DL39256,

the recently updated AGA guidance, and the ACG update to its clinical guideline that supports screening to prevent highly lethal EAC utilizing

a biomarker test like EsoGuard on samples collected with a swallowable, nonendoscopic capsule device like EsoCheck, we have determined

to prioritize our clinical trial efforts and resources towards supporting studies that will help secure insurance reimbursement adoption

for EsoGuard by government and private insurers.

Consequently, we have decided to delay for the time being the BE-1 trial

while continuing to enroll GERD patients with a previous diagnosis of nondysplastic BE, low grade dysplasia, high grade dysplasia, or

EAC in the BE-2 case-control study through Q2 2023.

EsoCure Esophageal Ablation Device

connection with our efforts to expand our presence in the diagnostic market, we are also developing a third product, the EsoCure Esophageal

Ablation Device, with the intent to allow a clinician to treat dysplastic BE before it can progress to EAC, a highly lethal esophageal

cancer, and to do so without the need for complex and expensive capital equipment.

As described in Note 5, Due To PAVmed Inc.

we entered into a license agreement with our parent company, PAVmed, pursuant to which we were granted the rights to commercialize EsoCure.

A successful pre-clinical feasibility animal study of EsoCure has been completed, demonstrating excellent, controlled circumferential

ablation of the esophageal mucosal lining.

An acute and survival animal study of EsoCure has also been completed, demonstrating successful

direct thermal balloon catheter ablation of esophageal lining through the working channel of a standard endoscope.

We plan to conduct

additional development work and animal testing of EsoCure to support a future FDA 510(k) submission.

Reimbursement

– Private Payer

part of the transition to our own CLIA-certified commercial clinical laboratory, we contracted with a revenue cycle management (“RCM”)

service provider to submit third-party reimbursement claims on our behalf.

The RCM service provider has joint oversight of payer claims,

appeals processes, patient billing, online payment collection, and claims tracking.

On August 1, 2022, our new RCM company began submitting

claims to third-party payers.

At the point when submission by the RCM began, more than 2,000 claims had accumulated since the commencement

of our laboratory operations on February 25, 2022.

These claims and other claims that were subsequently generated

are now being processed, including 1,088 tests in the three months ended September 30, 2022.

to Note 3 of our Condensed Consolidated Financial Statements for more information on Revenue from Contracts with Customers.

Cell Collection Device Update

October 2022, the FDA announced they completed their review of the EsoCheck 510(k) (#K222366) premarket notification of intent to market

the device and granted the use of the EsoCheck Cell Collection Device for the collection and retrieval of surface cells of the esophagus

in the general population of adults and adolescents, 12 years of age and older.

This action by the FDA now expands the targeted US patient

population to include adolescents not previously covered by the Company’s initial EsoCheck 510(k) clearance.

Manufacturing Update

October 4, 2022, we completed our first full day of manufacturing of EsoCheck at Coastline International Inc., a high-volume medical

device manufacturer.

By mid-2023, we expect to transition from our current manufacturer, Sage Product Development Inc., to Coastline

International Inc., as the manufacturing process is further optimized.

March 2022, we entered into a committed equity facility with an affiliate of Cantor Fitzgerald (“Cantor”).

terms of the facility, Cantor has committed to purchase up to $50 million of our common stock from time to time upon our request.

While there are distinct differences, the facility is structured similarly to a traditional at-the-market

equity facility, insofar as it allows us to raise primary capital on a periodic basis at prices based on the existing market price.

Through September 30, 2022, 680,263 shares of our common stock were issued under this facility for total

proceeds of $1.8 million.

EsoGuard is commercially available in the U.S.

as a Laboratory Developed Test (LDT) performed at our

CLIA-certified laboratory.

Cell samples, including those collected with EsoCheck, as discussed below, are sent to our laboratory, for

testing and analyses using our proprietary EsoGuard NGS DNA assay.

is an FDA 510(k) and CE Mark cleared noninvasive swallowable balloon capsule catheter device capable of sampling surface esophageal cells

in a less than five-minute office.

It consists of a vitamin pill-sized rigid plastic capsule tethered to a thin silicone catheter from

which a soft silicone balloon with textured ridges emerges to gently swab surface esophageal cells.

When vacuum suction is applied, the

balloon and sampled cells are pulled into the capsule, protecting them from contamination and dilution by cells outside of the targeted

region during device withdrawal.

We believe this proprietary Collect+Protect™ technology makes EsoCheck the only noninvasive esophageal

cell collection device capable of such anatomically targeted and protected sampling.

and EsoCheck are based on patented technology licensed by Lucid from Case Western Reserve University (“CWRU”).

EsoCheck have been developed to provide an accurate, non-invasive, patient-friendly screening test for the early detection of EAC and

Barrett’s Esophagus (“BE”), including dysplastic BE and related precursors to EAC in patients with chronic GERD.

of Clinical Trials

is currently seeking to accelerate its collection of clinical utility data through a range of trials that can be efficiently executed.

These efforts include a planned investigator-initiated, retrospective analysis of prospectively collected data on the approximately 400

San Antonio fire fighters who underwent testing as part of a community-sponsored cancer awareness event (in respect of which we expect

to publish results in the first half of 2023);

a virtual-patient randomized controlled trial with intended recruitment of at least 100

physician participants (in respect of which we expect to publish results this year);

a Lucid-sponsored multi-center, prospective, observational

study with 500 patients;

and a Lucid-sponsored registry at existing Lucid Test Centers, whereby all patients undergoing EsoCheck testing

will be given the opportunity to provide informed consent and contribute data about their risk factors, EsoGuard results, and subsequent

diagnostic and/or therapeutic journey.

Both Lucid-sponsored observational/registry studies expect to have preliminary results and/or

interim analysis before the end of 2023.

Labs Laboratory Operations Update

February 14, 2023, Lucid and its subsidiary, LucidDx Labs, entered into an agreement (the “MSA Termination Agreement”) with

RDx, pursuant to which the parties mutually agreed to terminate the management service agreement between them (the “MSA-RDx”)

without cause.

The termination was effective as of February 10, 2023.

Until the termination of the MSA-RDx, RDx had provided certain

testing and related services for our laboratory in accordance with the terms of the MSA-RDx.

In anticipation of the termination of the

MSA-RDx, however, Lucid accelerated the development of internal resources necessary to operate its laboratory entirely on its own.

we believe that termination of the MSA-RDx will improve the efficiency of the performance of the EsoGuard assay.

other things, the MSA Termination Agreement reduces the remaining amounts of the earnout payments and management fees due under the MSA-RDx

and the related asset purchase agreement (the “APA-RDx”) to $0.7 million (from the $3.4 million that would otherwise have

been payable under the MSA-RDx and APA-RDX, if the MSA-RDx had remained in effect through the balance of its stated term), resulting

in a net savings to Lucid of $2.7 million.

The payment was satisfied through the issuance of 553,436 shares of Lucid’s common stock

on February 25, 2023.

Lucid was not required to make any cash payments in connection with the termination.

#CheckYourFoodTube

January 2023, we completed our first #CheckYourFoodTube Precancer Testing Event, with the San Antonio Fire Department (the “SAFD”)

during Firefighter Cancer Awareness Month as designated by the International Association of Fire Fighters (IAFF).

A total of 391 members

who were deemed to be at-risk for esophageal precancer, underwent a brief, on-site, noninvasive cell collection procedure, performed

by our clinical personnel using EsoCheck.

Firefighters with suspected esophageal precancer based on a positive EsoGuard result were identified,

including some less than 40 years of age, and will undergo appropriate monitoring and treatment, as indicated by clinical practice guidelines,

to prevent progression to esophageal cancer.

then, an additional screening event was hosted with the SAFD and four similar events have been held with fire departments in Athens,

GA, Barnstable, MA, Gainesville, FL, and Orange County, CA.

These events, which Lucid continues to expand across the country, are an

extension of Lucid’s expanding satellite Lucid Test Center (“sLTC”) program, which brings Lucid precancer testing

directly to patients—at their physician’s office and now at large testing day events.

of Direct Contracting Strategic Initiative

March 2023, we launched a Direct Contracting Strategic Initiative (DCSI) to engage directly with large Administrative Services Only (ASO)

self-insured employers, unions and other entities, seeking to replicate the successes of other cancer screening diagnostic companies

that have deployed similar strategies.

Seventh Amendment to Management Services Agreement

As discussed, above, the Company’s

daily operations are also managed in part by personnel employed by PAVmed, for which the Company incurs a service fee, referred to as

the “MSA Fee”, according to the provisions of a Management Services Agreement (“MSA”) with PAVmed.

2023, the Company and PAVmed entered into a seventh amendment to the MSA to increase the MSA Fee to $0.75 million per month, effective

January 1, 2023.

A Preferred Stock Offering

March 7, 2023, we entered into subscription agreements for the sale of 13,625 shares of Series A convertible preferred stock, par value

$0.001 per share (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 Series A Preferred Stock is convertible into shares of our common stock at any time at the option

of the holder from and after the six-month anniversary of its issuance, and automatically converts into shares of our common stock on

the second anniversary of its issuance.

The terms of the Series A Preferred Stock also include a 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 each of

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.

Placement - Securities Purchase Agreement

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 March 2023 Senior Convertible Note on March 21, 2023 pursuant to the SPA.

The March 2023 Senior Convertible Note proceeds were $9.925

million after deducting a $1.186 million lender fee and offering costs.

March 2023 Senior Secured Convertible Note has a 7.875% annual stated interest rate, a contractual conversion price of $5.00 per share

of the Company’s common stock (subject to standard adjustments in the event of any stock split, stock dividend, stock combination,

recapitalization or other similar transaction), and a contractual maturity date of the two-year anniversary of the date of issuance.

The principal and interest on the March 2023 Senior Convertible Note is convertible into or otherwise payable in shares of the Company’s

common stock (subject to the satisfaction of certain customary equity conditions and except for interest payable prior to September 21,

the March 2023 Senior Convertible Note, the Company is subject to certain customary affirmative and negative covenants regarding the

incurrence of indebtedness, the existence of liens, the repayment of indebtedness and the making of investments, the payment of cash

in respect of dividends, distributions or redemptions, the transfer of assets, the maturity of other indebtedness, and transactions

with affiliates, among other customary matters.

Under the March 2023 Senior Convertible Note, the Company is also subject to

financial covenants requiring that (i) the amount of our available cash equal or exceed $5.0 million at all times, (ii) the ratio of

(a) the outstanding principal amount of the notes issued under the SPA, accrued and unpaid interest thereon and accrued and unpaid

late charges as of the last day of any fiscal quarter commencing with September 30, 2023 to (b) the Company’s average market

capitalization over the prior ten trading days, not exceed 30%, and (iii) that the Company’s market capitalization shall at no

time be less than $30 million.

November 2022, Lucid Diagnostics also 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 Lucid Diagnostics and Cantor Fitzgerald

In the three months ended March 31, 2023, we sold 230,068 shares through our at-the-market

equity facility for net proceeds of approximately $0.3 million, after payment of 3% commissions.

of Operations

Company recognized revenue resulting from the delivery of patient EsoGuard test results for which cash collections have occurred or payment

was reasonably assured.

Additionally, revenue was recognized with respect to the EsoGuard Commercialization Agreement, dated August 1,

2021, between the Company and RDx, a CLIA certified commercial laboratory service provider.

25, 2022, the EsoGuard Commercialization Agreement was terminated upon the execution of an Asset Purchase Agreement between the Company’s

wholly-owned subsidiary of LucidDx Labs Inc.

of revenues recognized from the delivery of patient EsoGuard test results includes costs related to EsoCheck device usage, shipment of test collection kits, royalties and the cost of services to

process tests and provide results to physicians.

We incur expenses for tests in the period in which the activities occur, therefore,

gross margin as a percentage of revenue may vary from quarter to quarter due to costs being incurred in one period that relate to revenues

recognized in a later period.

Company recognized revenue resulting from the delivery of patient EsoGuard test results when the Company considered the collection of

such consideration to be probable to the extent that it is unconstrained.

Additionally, in the three months ended March 31, 2022, revenue

was recognized with respect to the EsoGuard Commercialization Agreement, dated August 1, 2021, between the Company and RDx, a CLIA certified

commercial laboratory service provider.

On February 25, 2022, the EsoGuard Commercialization Agreement was terminated upon the execution

of the APA-RDx.

of revenues recognized from the delivery of patient EsoGuard test results includes costs related to EsoCheck device usage, shipment of

test collection kits, royalties and the cost of services to process tests and provide results to physicians.

We incur expenses for tests

in the period in which the activities occur, therefore, gross margin as a percentage of revenue may vary from quarter to quarter due

to costs being incurred in one period that relate to revenues recognized in a later period.

expect that gross margin for our services will continue to fluctuate and be affected by EsoGuard test volume, our operating efficiencies,

1 unchanged sentence

cost of revenue recognized with respect to the revenue recognized under the EsoGuard Commercialization Agreement is inclusive of:

fee incurred under the Amended CWRU License Agreement;

the MSA Fee (as defined and discussed herein below) allocated to cost of revenue,

which is principally employee related costs of PAVmed employees engaged in the administration to patients of the EsoCheck cell sample

collection procedure (principally at the Lucid Test Centers);

the EsoCheck devices and EsoGuard mailers (cell sample shipping costs)

distributed to medical practitioners locations and the Lucid Test Centers;

and Lucid Test Centers operating expenses, including rent

expense and supplies.

fee incurred under the Amended CWRU License Agreement (as defined in Note 4, Related Party Transactions , to our accompanying unaudited

condensed consolidated financial statements);

the cost of EsoCheck devices and EsoGuard mailers (cell sample shipping costs) distributed

to medical practitioners locations and the Lucid Test Centers;

and Lucid Test Centers operating expenses, including rent expense and

and marketing expenses

and marketing expenses consist primarily of salaries and related costs for employees engaged in sales and marketing activities, as well

as the portion of the MSA Fee allocated to sales and marketing expenses, which are principally employee related costs of PAVmed employees.

We anticipate our sales and marketing expenses will increase in the future, as we anticipate an increase in payroll and related expenses

related to the roll-out of our commercial sales and marketing operations as we execute on our business strategy.

as the portion of the MSA Fee allocated to sales and marketing expenses, which are principally costs related to PAVmed employees who

are performing services for the Company.

We anticipate our sales and marketing expenses will increase in the future, as we anticipate

an increase in payroll and related expenses related to our commercial sales and marketing operations as we execute on our business strategy.

and administrative expenses

and administrative expenses consist primarily of professional fees, accounting and legal services, consultants and expenses associated

with obtaining and maintaining patents within our intellectual property portfolio, along with the portion of the MSA Fee allocated to

with obtaining and maintaining patents within our intellectual property portfolio, along with the portion of the MSA Fee (as defined

in Note 4, Related Party Transactions , to our accompanying unaudited condensed consolidated financial statements) allocated to

general and administrative expenses.

16 unchanged sentences

well as new innovations.

Our research and development activities, including our clinical trials, are focused principally on obtaining FDA approvals, facilitating insurer reimbursement, encouraging physician adoption and developing product

improvements or extending the utility of the lead products in our pipeline, including EsoCheck and EsoGuard.

Our research and development activities, including our clinical trials, are focused principally on obtaining

FDA approvals, facilitating insurer reimbursement, encouraging physician adoption and developing product improvements or extending the

utility of the lead products in our pipeline, including EsoCheck and EsoGuard.

of Operations - continued

of Dollar Amounts

dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are presented as dollars in millions, except for per share amounts.

months ended September 30, 2022 as compared to three months ended September 30, 2021

the three months ended September 30, 2022, revenue was $0.1 million as compared to $0.2 million in the corresponding period in the prior

The $0.1 million decrease principally relates to the termination of the EsoGuard Commercialization Agreement with RDx, as the Company

transitioned to its own laboratory operations effective February 25, 2022.

The decrease was offset by revenue for our EsoGuard Esophageal

DNA Test performed in our own CLIA laboratory for the three months ended September 30, 2022.

the three months ended September 30, 2022, cost of revenue was approximately $1.6 million as compared to $0.1 million for the corresponding

dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are presented as dollars

in millions, except for per share amounts.

months ended March 31, 2023 as compared to three months ended March 31, 2022

the three months ended March 31, 2023, revenue was $0.4 million as compared to $0.2 million for the corresponding period in the

The $0.2 million increase principally relates to the revenue for our EsoGuard Esophageal DNA Test performed in our own CLIA

laboratory, as compared to revenue from the EsoGuard Commercialization Agreement with RDx, in the prior year period, which was terminated

on February 25, 2022 as the Company transitioned to its own laboratory operations.

the three months ended March 31, 2023, cost of revenue was approximately $1.3 million as compared to $0.4 million for the corresponding

period in the prior year.

1 unchanged sentence

approximately

$0.2 million increase in compensation related costs as a result of an increase in headcount;

$0.4 million increase in laboratory facility and operations costs;

approximately

1 unchanged sentence

approximately

$0.9 million increase in laboratory operations costs.

and marketing expenses

the three months ended September 30, 2022, sales and marketing costs were approximately $3.9 million, compared to $0.9 million for the

corresponding period in the prior year.

The net increase of $3.0 million was principally related to:

approximately

$2.9 million increase in compensation related costs, including stock-based compensation of approximately $0.4 million with respect

to restricted stock awards (“RSA”) grants under the Lucid Diagnostics Inc.

2018 Equity Plan to Lucid Diagnostics and

PAVmed employees and non-employees, and an increase in stock options granted corresponding with the increase in headcount;

approximately

$0.1 million increase in consulting and outside professional services fees.

and administrative expenses

the three months ended September 30, 2022, general and administrative costs were approximately $5.7 million, compared to $3.5 million

for the corresponding period in the prior year.

The net increase of $2.2 million was principally related to:

approximately

$0.7 million increase in compensation related costs, including stock-based

compensation of approximately $0.2 million with respect to RSA grants under the Lucid Diagnostics Inc.

2018 Equity Plan to Lucid Diagnostics

and PAVmed employees and non-employees, and an increase in stock options granted corresponding with the increase in headcount;

approximately

$0.5 million increase in consulting services related to patents, regulatory compliance, legal processes for contract review, transition

of public relations and investor relations firms, and public company expenses;

approximately

$0.6 million increase in the MSA fee allocation from PAVmed related to the growth and expansion of our business and the services

incurred through PAVmed;

approximately

$0.4 million increase in general business expenses.

of Operations - continued

months ended September 30, 2022 as compared to three months ended September 30, 2021 - continued

and development expenses

the three months ended September 30, 2022, research and development costs were approximately $2.7 million, compared to $2.2 million for

the corresponding period in the prior year.

The net increase of $0.5 million was principally related to:

approximately

$0.3 million increase in development costs, particularly in clinical trial activities and outside professional and consulting fees

with respect to EsoCheck, EsoCure and EsoGuard;

approximately

$0.2 million increase in the MSA fee allocation from PAVmed related to the growth and expansion of our business and the services

incurred through PAVmed.

our accompanying unaudited condensed consolidated financial statements for each of:

Note 4 , Related Party Transactions, for a

discussion of the consulting fee expense and stock based compensation expense recognized with respect to the Physician Inventors

consulting agreements and stock options and restricted stock awards and for a discussion of the MSA between Lucid Diagnostics and

and Note 10 , Stock-Based Compensation , for information regarding each of the Lucid Diagnostics 2018 Equity Plan and

the PAVmed Inc.

2014 Equity Plan.

months ended September 30, 2022 as compared to nine months ended September 30, 2021

the nine months ended September 30, 2022, revenue was $0.3 million as compared to $0.2 million in the corresponding period in the prior

The $0.1 million increase principally relates to revenue for laboratory services rendered for our EsoGuard Esophageal DNA

Test performed in our own CLIA laboratory.

The increase was partially offset by the termination of the EsoGuard Commercialization Agreement,

with RDx as the Company transitioned to its own laboratory operations effective February 25, 2022.

the nine months ended September 30, 2022, cost of revenue was approximately $2.0 million as compared to $0.1 million for the corresponding

period in the prior year.

The $1.9 million increase principally related to:

approximately

$0.2 million increase in compensation related costs as a result of an increase in headcount.

approximately

$0.6 million increase in EsoCheck and EsoGuard supplies usage costs;

approximately

$0.9 million increase in laboratory operations costs.

and marketing expenses

the nine months ended September 30, 2022, sales and marketing costs were approximately $11.1 million, compared to $2.6 million for the

corresponding period in the prior year.

the three months ended March 31, 2023, sales and marketing costs were approximately $4.1 million as compared to $3.3 million for

the corresponding period in the prior year.

The net increase of $0.8 million was principally related to:

approximately

$7.7 million increase in compensation related costs, including stock-based compensation of approximately $1.2 million with respect

to restricted stock awards (“RSA”) grants under the Lucid Diagnostics Inc.

2018 Equity Plan to Lucid Diagnostics and

PAVmed employees and non-employees, and an increase in stock options granted corresponding with the increase in headcount;

approximately

$1.0 million increase in consulting and outside professional services fees and for EsoCheck and EsoGuard;

$1.4 million increase in compensation related costs principally as a result of an increase in headcount;

approximately

$0.2 million decrease in the MSA fee allocation from PAVmed related to the growth and expansion of our business and the services

incurred through PAVmed.

$0.6 million decrease in consulting and outside professional services fees.

and administrative expenses

the nine months ended September 30, 2022, general and administrative costs were approximately $18.2 million, compared to $7.8 million

the three months ended March 31, 2023, general and administrative costs were approximately $6.5 million as compared to $5.9 million

for the corresponding period in the prior year.

1 unchanged sentence

approximately

$2.7 million increase in compensation related costs, including stock-based

compensation of approximately $1.8 million with respect to RSA grants under the Lucid Diagnostics Inc.

2018 Equity Plan to Lucid Diagnostics

and PAVmed employees and non-employees, and an increase in stock options granted corresponding with the increase in headcount;

$0.9 million increase related to the updated MSA Fee allocation from PAVmed due to the growth and expansion of our business and the

services incurred through PAVmed;

approximately

$4.8 million increase in consulting services related to patents, regulatory compliance, legal processes for contract review, transition

of public relations and investor relations firms, and public company expenses;

$0.6 million increase in third-party professional services related to legal services, accounting and audit services, outsourced information

technology services, investor relations expenses, and public company expenses;

approximately

$1.3 million increase in the MSA fee allocation from PAVmed related to the growth and expansion of our business and the services

incurred through PAVmed;

$0.6 million decrease in stock-based compensation from RSA and stock option grants to Lucid employees and non-employees;

approximately

$1.6 million increase general business expenses.

$0.3 million decrease in general business expenses related to favorable renewal of corporate insurance policies.

of Operations - continued

months ended September 30, 2022 as compared to nine months ended September 30, 2021 - continued

months ended March 31, 2023 as compared to three months ended March 31, 2022 - continued

and development expenses

the nine months ended September 30, 2022, research and development costs were approximately $9.0 million, compared to $5.8 million for

the corresponding period in the prior year.

The net increase of $3.2 million was principally related to:

the three months ended March 31, 2023, research and development costs were approximately $2.3 million, compared to $2.9 million

for the corresponding period in the prior year.

The net decrease of $0.6 million was principally related to:

approximately

$2.5 million increase in development costs, particularly in clinical trial activities and outside professional and consulting fees

with respect to EsoCheck, EsoCure and EsoGuard;

$1.2 million decrease in development costs, particularly in clinical trial activities and outside professional and consulting fees

with respect to EsoCure;

approximately

$0.2 million increase in compensation related costs and related to expanded clinical and engineering staff;

$0.4 million increase related to clinical activities performed by CWRU;

approximately

$0.5 million increase in the MSA fee allocation from PAVmed related to the growth and expansion of our business and the services

incurred through PAVmed.

$0.2 million increase related to the updated MSA Fee allocation from PAVmed related to the growth and expansion of our business and

the services incurred through PAVmed.

our accompanying unaudited condensed consolidated financial statements for each of:

Note 4 , Related Party Transactions, for a

discussion of the consulting fee expense and stock based compensation expense recognized with respect to the Physician Inventors

consulting agreements and stock options and restricted stock awards and for a discussion of the MSA between Lucid Diagnostics and

and Note 10 , Stock-Based Compensation , for information regarding each of the Lucid Diagnostics 2018 Equity Plan and

the PAVmed Inc.

2014 Equity Plan.

discussion of the consulting fee expense and stock based compensation expense recognized with respect to the Physician Inventors consulting

agreements and stock options and restricted stock awards and for a discussion of the MSA between Lucid Diagnostics and PAVmed;

12 , Stock-Based Compensation , for information regarding each of the Lucid Diagnostics 2018 Equity Plan and the PAVmed 2014 Equity

of Acquired Intangible Assets

the three months ended March 31, 2023, the amortization of acquired intangible assets was approximately $0.5 million as compared

to no intangible asset amortization in the corresponding period in the prior year.

The increase was principally related to the purchase

of laboratory licenses and certifications and laboratory information management software in Q1 2022 and the amortization of a defensive

Income and Expense

in fair value of convertible debt

the three months ended March 31, 2023, the non-cash expense recognized for the change in the fair value of our convertible notes

was approximately $0.8 million, related to the March 2023 Senior Convertible Note.

The March 2023 Convertible Note was initially measured

at it’s issue-date estimated fair value and subsequently remeasured at estimated fair value as of the reporting period date.

Company initially recognized a $0.8 million fair value non-cash expense on the issue-dates.

There was no change in fair value upon remeasurement

through March 31, 2023.

on Issue and Offering Costs - Senior Secured Convertible Note

the three months ended March 31, 2023, in connection with the issue of the March 2023 Senior Convertible Notes, we recognized a

total of approximately $1.2 million of lender fee and offering costs paid by us.

Note 11 , Debt, to our accompanying unaudited condensed consolidated financial statements, for additional information with respect

to the March 2023 Senior Convertible Note.

and Capital Resources

current operational activities are principally focused on the commercialization

We are expanding commercialization across multiple sales channels, including:

the communication to and education of medical

practitioners and clinicians regarding EsoGuard;

and the establishment of Lucid Diagnostics Test Centers for the collection of cell samples

using EsoCheck.

Additionally, we are developing expanded clinical evidence to support insurance reimbursement adoption by government and

private insurers.

Further, the Company is also pursuing development of other products and services, including EsoCure, an Esophageal Ablation

ability to generate revenue depends upon our ability to successfully advance

the commercialization of EsoGuard, while also completing the clinical studies, product and service development, and necessary regulatory

approval thereof.

There are no assurances, however, we will be able to obtain an adequate level of financial resources required for the

long-term commercialization and development of our products and services.

to our initial public offering (“IPO”) of our common stock

in October 2021, our operations were funded by PAVmed, inclusive of providing working capital cash advances and the payment of certain

operating expenses on our behalf.

Additionally, certain of our operations continue to be managed by PAVmed personnel, for which we incur

expense according to the provisions of a MSA between us and PAVmed.

See Note 4 , Related Party Transactions, for a discussion of

are 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.

We expect to continue to experience recurring losses from

operations and will continue to fund our operations with debt and equity financing transactions.

Notwithstanding, however, with our 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 unaudited condensed

consolidated financial statements, as included herein in this Form 10-Q.

Equity Facility - March 28, 2022

On March 28, 2022, we entered into a committed equity facility with Cantor.

Under the terms of the committed equity facility, Cantor has committed to purchase up to $50 million of our common stock from time to

time at our request.

While there are distinct differences, the committed equity facility is structured similarly to a traditional at-the-market

equity facility, insofar as it allows us to raise primary equity capital on a periodic basis at prices based on the existing market price.

As of September 30, 2022, under the committed equity facility, a total of 680,263 shares of common stock of the Company were issued

for proceeds of approximately $1.8 million.

Since our inception in May 2018

through our IPO in October 2021, our operations were funded by PAVmed providing working capital cash advances and the payment by PAVmed

of certain operating expenses on our behalf.

Additionally, our daily operations have been and continue to be principally managed by personnel

employed by PAVmed, for which we incur a MSA Fee expense.

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 Lucid Diagnostics Inc.

current operational activities are principally focused on the commercialization of EsoGuard.

We are expanding commercialization across

multiple sales channels, including:

the communication to and education of medical practitioners and clinicians regarding EsoGuard;

the establishment of Lucid Diagnostics Test Centers for the collection of cell samples using EsoCheck.

Additionally, we are 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.

ability to generate revenue depends upon our ability to successfully advance the commercialization of EsoGuard, while also completing

the clinical studies, product and service development, and necessary regulatory approval thereof.

There are no assurances, however, we

will be able to obtain an adequate level of financial resources required for the long-term commercialization and development of our products

and services.

to our initial public offering (“IPO”) of our common stock in October 2021, our operations were funded by PAVmed, inclusive

of providing working capital cash advances and the payment of certain operating expenses on our behalf.

Additionally, certain of our

operations continue to be managed by PAVmed personnel, for which we incur expense according to the provisions of a MSA between us and

See Note 4 , Related Party Transactions, to our accompanying unaudited condensed consolidated financial statements, for

a discussion of the MSA.

are 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.

We experienced a net loss of approximately $16.2 million and used

approximately $7.0 million of cash in operations for the three months ended March 31, 2023.

Financing activities provided $24.1

million of cash during the three months ended March 31, 2023.

We ended the quarter with cash on-hand of $39.5 million as of March

We expect to continue to experience recurring losses and negative cash flow from operations and will continue to fund our

operations with debt and equity financing transactions.

Notwithstanding, however, with our cash on-hand as of the date

hereof and the committed equity sources of financing described below, 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 unaudited

condensed consolidated financial statements, as included herein in this Form 10-Q.

A Preferred Stock Offering

March 7, 2023, we entered into subscription agreements for the sale of 13,625 shares of 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 Series A Preferred Stock is convertible into shares

of our common stock at any time at the option of the holder from and after the six-month anniversary of its issuance, and automatically

converts into shares of our common stock on the second anniversary of its issuance.

The terms of the Series A Preferred Stock also include

a 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 each of 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.

Placement - Securities Purchase Agreement

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 March 2023 Senior Convertible Note on March 21, 2023 pursuant to the SPA.

The Lucid March 2023 Senior Convertible Note proceeds were

$9.925 million after deducting a $1.186 million lender fee and offering costs.

March 2023 Senior Secured Convertible Note has a 7.875% annual stated interest rate, a contractual conversion price of $5.00 per share

of the Company’s common stock (subject to standard adjustments in the event of any stock split, stock dividend, stock combination,

recapitalization or other similar transaction), and a contractual maturity date of the two-year anniversary of the date of issuance.

The principal and interest on the March 2023 Senior Convertible Note is convertible into or otherwise payable in shares of the Company’s

common stock (subject to the satisfaction of certain customary equity conditions and except for interest payable prior to September 21,

the March 2023 Senior Convertible Note, the Company is subject to certain customary affirmative and negative covenants regarding the

incurrence of indebtedness, the existence of liens, the repayment of indebtedness and the making of investments, the payment of cash

in respect of dividends, distributions or redemptions, the transfer of assets, the maturity of other indebtedness, and transactions with

affiliates, among other customary matters.

Under the March 2023 Senior Convertible Note, the Company is also subject to financial covenants

requiring that (i) the amount of our available cash equal or exceed $5.0 million at all times, (ii) the ratio of (a) the outstanding

principal amount of the notes issued under the SPA, accrued and unpaid interest thereon and accrued and unpaid late charges, as of the last day of any fiscal quarter commencing with September 30, 2023 to (b) the

Company’s average market capitalization over the prior ten trading days, not exceed 30%, and (iii) that the Company’s market

capitalization shall at no time be less than $30 million (the "Financial Tests").

As of March 31, 2023, the Company was in compliance with the Financial Tests.

In addition, the Company presently is in compliance with the Financial Tests.

Equity Facility and ATM Facility

March 2022, we entered into a committed equity facility with a Cantor affiliate.

Under the terms of the committed equity facility, the

Cantor affiliate has committed to purchase up to $50 million of our common stock from time to time at our request.

While there are distinct

differences, the committed equity facility is structured similarly to a traditional at-the-market equity facility, insofar as it allows

us to raise primary equity capital on a periodic basis at prices based on the existing market price.

Cumulatively a total of 680,263

shares of common stock of the Company were issued for net proceeds of approximately $1.8 million, after payment of 4% commissions, as

of March 31, 2023.

November 2022, Lucid Diagnostics also 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 Lucid Diagnostics and Cantor.

months ended March 31, 2023, we sold 230,068 shares through our at-the-market equity facility for net proceeds of approximately

$0.3 million, after payment of 3% commissions.

our inception in May 2018 through our IPO in October 2021, our operations were funded by PAVmed providing working capital cash advances

and the payment by PAVmed of certain operating expenses on our behalf.

Additionally, our daily operations have been and continue to be

principally managed by personnel employed by PAVmed, for which we incur a MSA Fee expense.

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 Lucid Diagnostics Inc.

and PAVmed Inc.

boards of directors.

In this regard, in August 2022, the boards of directors

of Lucid Diagnostics Inc.

and PAVmed Inc.

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 commencing July 1, 2022.

Pursuant to the sixth amendment, the parties agreed

may elect to receive payment of the monthly MSA Fee in cash or in shares of our common stock, 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 our common stock (representing 19.99% of our outstanding shares of common stock as of immediately prior to the execution of the sixth

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.

As of September 30, 2022,

we had a Due To:

payment obligation liability of an aggregate of approximately $6.6 million payable for the transfer of CapNostics,

LLC, and for reimbursement of employee related costs and certain operating expenses paid by PAVmed on our behalf.

See our accompanying

unaudited condensed consolidated financial statements Note 5 , Due To PAVmed Inc.

In this regard,

in May 2023, the respective companies’ boards of directors approved a seventh amendment to the MSA to increase the MSA Fee to $750

per month, effective January 1, 2023.

Pursuant to the MSA, as amended by the seventh amendment, the parties agreed PAVmed may elect to

receive payment of the monthly MSA Fee in cash or in shares of our common stock, 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).

in no event will PAVmed be entitled to receive under the MSA, as amended, more than 7,709,836 shares of our common stock (representing

19.99% of our outstanding shares of common stock as of immediately prior to the execution of the sixth amendment).

addition, on November 30, 2022, PAVmed and we 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 our personnel on our behalf, and we have

reimbursed PAVmed for the same.

Pursuant to the PBERA, PAVmed will continue to pay such expenses, and we will continue to reimburse PAVmed

for the same.

The PBERA 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 PAVmed’s and our boards of directors, in shares of our 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 PAVmed’s and our boards of directors (subject to a floor price of $0.40 per share),

or in a combination of cash and shares.

However, in no event will we issue any shares of our common stock to PAVmed in satisfaction of

all or any portion of the expenses if the issuance of such shares of our common stock would exceed the maximum number of shares of common

stock that we may issue under the rules or regulations of Nasdaq, unless we obtain the approval of our stockholders as required by the

applicable rules of the Nasdaq for issuances of shares of our common stock in excess of such amount.

of March 31, 2023, we had a Due To:

payment obligation liability of an aggregate of approximately $7.6 million payable

for the reimbursement of employee related costs and certain payroll, benefit and other operating expenses paid by PAVmed on our behalf.

See our accompanying unaudited condensed consolidated financial statements Note 5 , Due To PAVmed Inc.

Accounting Policies and Significant Judgments and Estimates

discussion and analysis of our (unaudited) financial condition and consolidated results of operations is based on our unaudited condensed

consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United

States of America (“U.S.

The preparation of these unaudited condensed consolidated financial statements requires

us to make estimates and assumptions affecting the reported amounts of assets, liabilities, and equity, along with the disclosure of

contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of

expenses during the corresponding periods.

discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated

financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of

America (“U.S.

The preparation of these unaudited condensed consolidated financial statements requires us to

make estimates and assumptions that affect the amounts reporting in our unaudited condensed consolidated financial statements and

accompanying notes.

On an ongoing basis, we evaluate our estimates and judgements.

In accordance with U.S.

GAAP, we base our estimates on historical experience and on various

other assumptions we believe are reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions

or conditions.

Our critical accounting policies are as disclosed in the Company’s annual report on Form 10-K for the year ended

December 31, 2021 as filed with the SEC on April 6, 2022, except as otherwise noted in Note 2, Summary of Significant Accounting Policies

and Recent Accounting Standards Updates , of our unaudited condensed consolidated financial statements included herein in this Form

GAAP, we base our

estimates on historical experience and on various other factors that are believed to be appropriate under the circumstances.

results may differ from these estimates under different assumptions or conditions.

Our critical accounting policies are as disclosed

in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC on March 14, 2023,

except as otherwise noted in “Fair Value Option (“FVO”) Election” subsection of Note 2, Summary of

Significant Accounting Policies , to our unaudited condensed consolidated financial statements included herein in this Form 10-Q

with respect to our Senior Convertible Notes issued in March 2023.

We determined upon the issuance of our March 2023 Senior

Convertible Note to elect the fair value option.

At issuance, the carrying value of the March 2023 Senior Convertible Note was

recorded at estimated fair value.

The estimated fair values reported utilized Lucid’s common stock price along with certain

Level 3 inputs, in the development of Monte Carlo simulation models, discounted cash flow analyses, and /or Black-Scholes valuation

The estimated fair values are subjective and are affected by changes in inputs to the valuation models and analyses,

including the Company’s common stock price, the Company’s dividend yield, the risk-free rates based on U.S.

security yields, and certain other Level-3 inputs including, assumptions regarding the estimated volatility in the value of the

Company’s common stock price.

We remeasure the March 2023 Senior Convertible Note to its estimated fair value at each

reporting period using valuation techniques similar to those applied at issuance.

The change in the fair value is recognized as

other income (expense) in the statement of operations.

A significant change in the volatility could

have a material impact to the carrying value of the Senior Convertible Note as well as the amount of change recognized during the

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis