What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-25 compared with 2023-03-14 · 455 added, 443 removed, 94 unchanged (91% of the section changed)

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following discussion and analysis of our consolidated financial condition and results of operations should be read together with our

consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.

Some of the information contained

in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our

plans and strategy for our business and related financing, includes forward-looking statements involving risks and uncertainties and

should be read together with the “Forward-Looking Statements” and “Risk Factors” sections of this Annual Report

on Form 10-K for a discussion of important factors which could cause actual results to differ materially from the results described in

or implied by the forward-looking statements contained in the following discussion and analysis.

Unless the context otherwise requires,

references herein to “we”, “us”, and “our”, and to the “Company” or “Lucid”

are to Lucid Diagnostics Inc.

consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K (the “Financial Statements”).

Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including

information with respect to our plans and strategy for our business and related financing, includes forward-looking statements involving

risks and uncertainties and should be read together with the “Forward-Looking Statements” and “Risk Factors”

sections of this Annual Report on Form 10-K for a discussion of important factors which could cause actual results to differ materially

from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

the context otherwise requires, (i) “we”, “us”, and “our”, and the “Company”, “Lucid”

and “Lucid Diagnostics” refer to Lucid Diagnostics Inc.

and its subsidiaries LucidDx Labs Inc.

(“LucidDx Labs”) and CapNostics, LLC (“CapNostics”).

Diagnostics Inc.

(“Lucid”) is 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”).

in this Form 10-K to “we,” “us” and “our” are to Lucid and, unless the context otherwise requires,

its subsidiaries.

(“LucidDx Labs”)

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

refers 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” refers to the Clinical Laboratory Improvement Amendments of 1988 and associated

regulations set forth in 42 CFR § 493, (v) “CE Mark” refers 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,

and (vi) “LDT” refers to a diagnostic test, defined by the FDA as “an IVD that is intended for clinical use and designed,

manufactured and used within a single laboratory,” which is generally subject only to self-certification of analytical validity

under the CMS CLIA program.

are a commercial-stage medical diagnostics technology company focused on the millions of patients who are at risk of developing esophageal

precancer and cancer, specifically highly lethal 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 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.

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):

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.

Collection Device, constitutes the first and only commercially available diagnostic test capable of serving as a widespread tool for

the early detection of esophageal precancer, including Barrett’s Esophagus (“BE”), in at-risk patients.

Early detection

of esophageal precancer allows patients to undergo appropriate monitoring and treatment, as indicated by clinical practice guidelines,

in an effort to prevent progression to esophageal cancer.

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

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

Analytical validation tests of EsoGuard demonstrated

approximately 97% analytical sensitivity, 95% analytical specificity, approximately 98% analytical accuracy, and 100% inter-assay and

intra-assay precision.

Two independent clinical validation case control studies funded by the National Institute of Health utilized were

performed using upper endoscopy with biopsies as the diagnostic comparator and confirmed EsoGuard accurately identifies BE.

analysis of both studies demonstrated 84% sensitivity (95% confidence interval [CI] 76-90%), for detection of BE, and 86% specificity

(95% CI 81-91%).

Positive predictive value (PPV) and negative predictive value (NPV) were calculated using a BE prevalence of 10.6% published

in a meta-analysis of U.S patients with GERD.

This resulted in a PPV of approximately 42% and NPV of around 98% .

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

in a less than five-minute office procedure.

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.

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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 adenocarcinoma

of the esophagus (“EAC”) and Barrett’s Esophagus (“BE”), including dysplastic BE and related pre-cursors

to EAC in patients with chronic gastroesophageal reflux (“GERD”).

of Clinical Trials

are currently seeking to accelerate our 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) ;

an ongoing investigator-initiated, retrospective, single-center,

study with 500 patients (in respect of which we expect to publish results mid-2023), a virtual-patient randomized controlled trial with

intended recruitment of 100-200 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.

previously disclosed, consequently, we have decided to delay for the time being the two previously commenced clinical trials, the “EsoGuard

screening study” (“BE-1”) and the “EsoGuard case-control study” (“BE-2”), as we are devoting

our clinical resources to the studies cited above, which we expect will more efficiently generate the clinical data we are currently

prioritzing to drive EsoGuard commercialization.

Labs Laboratory Operations Update

February 14, 2023, we and our subsidiary, LucidDx Labs Inc., 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

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.

Recently, however, we accelerated the development of internal resources necessary to operate

the Laboratory entirely on its own.

Accordingly, 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 APA-RDx

and the MSA-RDx to $725,000 (from the $3,450,000 that would otherwise have been payable under the APA and MSA if the MSA had remained

in effect through the balance of its stated term), resulting in a net savings to us of $2,725,000.

The payment was satisfied through

the issuance of 553,436 shares of Lucid Diagnostics’ common stock on February 25, 2023.

we were not required to make any cash payments

in connection with the termination.

#CheckYourFoodTube

January 2023, we successfully completed our first #CheckYourFoodTube Precancer Testing Event, in partnership with Rachelle Hamblin, M.D.,

M.P.H., and the San Antonio Fire Department (SAFD), to detect esophageal precancer in at-risk members of the department.

The SAFD testing

event was held over two weekends in January, which has been designated as Firefighter Cancer Awareness Month by the International Association

of Fire Fighters (IAFF).

A total of 391 members, nearly one-quarter of the department, who were deemed by Dr.

Hamblin 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 forty

years of age, and will undergo appropriate monitoring and treatment, as indicated by clinical practice guidelines, to prevent progression

to esophageal cancer.

These events, which we look to expand across the country, are an extension of our expanding satellite Lucid Test

Center (sLTC) program, which brings our precancer testing directly to patients—at their physician’s office and now at large

testing day events.

We demonstrated that our nurse practitioners can each perform up to fifty EsoCheck procedures in a day, and our laboratory

team handled over two hundred incoming samples in a day, while maintaining turnaround times at target.

These successes provide an excellent

foundation for future testing events as we continue to drive EsoGuard commercialization using all the tools at our disposal.

and Benefit Expense Reimbursement Agreement

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 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 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 shall 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 The Nasdaq Stock Market LLC (“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.

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

Each share of the Series A Preferred Stock has a stated value of $1,000 and a conversion price of $1.394.

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”).

issuance of the March 2023 Senior Convertible Note is subject to customary closing conditions.

The March 2023 Senior Secured Convertible Note would have 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 March 2023 Senior Convertible Note would be convertible into or

otherwise paid in shares of the Company’s common stock.

Under the March 2023

Senior Convertible Note, the Company would be 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 would also be 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 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 an amount to be agreed upon.

Committed Equity Facility and ATM Facility

In March 2022, we entered into a

committed equity facility with an affiliate of Cantor Fitzgerald (“Cantor”).

Under the 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 December 31, 2022, 680,263 shares of our common stock were issued under this

facility for total proceeds of $1.8 million.

In 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 & Co.

In the year ended December 31, 2022, there were no Lucid Diagnostics shares sold through

their at-the-market equity facility.

Subsequent to December 31, 2022, through March 9, 2023, Lucid Diagnostics sold 230,068 shares through

its at-the-market equity facility for approximately $0.3 million.

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

dysplastic BE and related precursors to EAC in patients with GERD, commonly known

as chronic heart burn, acid reflux, or just reflux.

Agreements with PAVmed

January 2024, in accordance with the MSA and the PBERA, PAVmed elected to receive payment of $4.7 million of fees and reimbursements accrued

under the MSA and the PBERA through the issuance of 3,331,771 shares

of the Company’s common stock.

March 2024, the Company entered into an eighth amendment to the MSA with PAVmed, increasing the monthly fee due thereunder from $0.75 million

to $0.83 million, effective as of January 1, 2024.

Stock Offerings

March 13, 2024, we entered into subscription agreements (each, a “Series B Subscription Agreement”) and exchange

agreements (each, an “Exchange Agreement”) with certain accredited investors (collectively, the “Series B

Investors”), which agreements provided for (i) the sale to the Series B Investors of 12,495 shares of our newly designated

Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), at a purchase price

of $1,000 per share, and (ii) the exchange by the Series B Investors of 13,625 shares of our Series A Convertible Preferred Stock,

par value $0.001 per share (the “Series A Preferred Stock”), and 10,670 shares of our Series A-1 Convertible Preferred

Stock, par value $0.001 per share (the “Series A-1 Preferred Stock”), held by them for 31,790 shares of Series B

Preferred Stock (collectively, the “Series B Offering and Exchange”).

Prior to the execution of the Series B

Subscription Agreements and the Exchange Agreements, we entered into subscription agreements with certain of the Series B Investors

providing for the sale to such investors of 5,670 shares of Series A-1 Preferred Stock, at a purchase price of $1,000 per share,

which shares the investors immediately agreed to exchange for shares of Series B Preferred Stock pursuant to the Exchange Agreements

(and are included in the 10,670 shares of Series A-1 Preferred Stock set forth above).

Each share of the Series B Preferred Stock

has a stated value of $1,000 and a conversion price of $1.2444.

The terms of the Series B Preferred Stock also include a one times

preference on liquidation and a right to receive dividends equal to 20% of the number of shares of our common stock into which such

Series B Preferred Stock is convertible, payable on the one-year and two-year anniversary of the issuance date.

Preferred Stock is a voting security.

The aggregate gross proceeds of these transactions was $18.16 million (inclusive of $5.67

million of aggregate gross proceeds from the sale of the Series A-1 Preferred Stock that was immediately exchanged for Series B

Preferred Stock in the transactions).

As a result of 100% of the then-outstanding

shares of Series A Preferred Stock and Series A-1 Preferred Stock being exchanged for shares of Series B Preferred Stock in the Series

B Offering and Exchange, no shares of Series A Preferred Stock or Series A-1 Preferred Stock remain outstanding.

On October 17, 2023, we sold 5,000 shares of Series A-1 Preferred Stock, solely to accredited investors (all of which

were included in the 10,670 shares of Series A-1 Preferred exchanged for Series B Preferred Stock in the Series B Offering and Exchange).

The aggregate gross proceeds to Lucid of this offering was $5.0 million.

of Operations

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

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.

On February 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.

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 our acquisition,

pursuant to the APA-RDx, of certain assets necessary to operate our own CLIA certified laboratory.

For a fuller description of the APA-RDx,

see Note 6, Asset Purchase Agreement and Management Services Agreement , to our accompanying consolidated financial statements.

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

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patient compliance rates, payer mix, the levels of reimbursement, and payment patterns of payers and patients.

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.

the previously terminated EsoGuard Commercialization Agreement in February 2022, the cost of revenue recognized is inclusive of:

fee incurred under our license agreement with CWRU;

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

Lucid Test Centers operating expenses, including rent expense and supplies.

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

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

as well as the portion of the MSA Fee (as defined in Note 5, Related Party Transactions , to our accompanying consolidated financial

statements) 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, to the extent we expand our commercial sales

and marketing operations as resources permit and insurance reimbursement coverage for our EsoGuard test expands.

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

general and administrative expenses.

anticipate our general and administrative expenses will increase in the future related to continued expansion of our overall business

We also anticipate expenses related to being a public company, including professional services fees for legal, accounting,

tax, audit, employees involved in third-party payor reimbursement contract negotiations and regulatory services associated with maintaining

compliance as a public company, along with insurance premiums, investor relations, and other corporate expenses.

and administrative expenses consist primarily of professional fees for accounting, tax, audit and legal services (including those fees

incurred as a result of our being a public company), consulting fees, expenses associated with obtaining and maintaining patents within

our intellectual property portfolio, and certain employee costs, along with the portion of the MSA Fee allocated to general and administrative

anticipate our general and administrative expenses will increase in the future to the extent our business operations grow.

we anticipate continued expenses related to being a public company, including fees and expenses for audit, legal, regulatory, tax-related

services, insurance premiums and investor relations costs associated with maintaining compliance as a public company.

and development expenses

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for the development of our technologies and conducting clinical trials, including:

costs charged to us by various external contract research organizations we contract with

to conduct clinical and preclinical studies and engineering design and development;

associated with regulatory filings;

1 unchanged sentence

of laboratory supplies and acquiring, developing, and manufacturing preclinical prototypes;

design engineering studies;

associated with conducting clinical trials for our EsoGuard diagnostic assay;

Fee allocated to research and development, as such MSA Fee are discussed below.

Fee allocated to research and development.

plan to incur research and development expenses for the foreseeable future as we continue the development of our existing products as

well as new innovations.

Our research and development activities, 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

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

year ended December 31, 2022 as compared to the year ended December 31, 2021

in millions, except for share and per share amounts.

of Operations - continued

year ended December 31, 2023 as compared to year ended December 31, 2022

the year ended December 31, 2023, revenue was $2.4 million as compared to $0.4 million in the prior year.

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 partially offset by revenue for our EsoGuard Esophageal DNA Test performed in our own CLIA

laboratory for the year ended December 31, 2022.

The $2.0 million increase principally

relates to the revenue for our EsoGuard Esophageal DNA Test performed in our own CLIA laboratory.

During the year ended December 31,

2022, there was revenue from the EsoGuard Commercialization Agreement with RDx, recognized in first two months of the prior year period,

which was terminated on February 25, 2022 when Lucid Diagnostics transitioned to its own laboratory operations.

the year ended December 31, 2023, cost of revenue was approximately $6.0 million as compared to $3.6 million in the prior year.

million increase principally related to:

● approximately

$0.6 million increase in compensation related costs as a result of an increase in headcount;

million increase was principally related to:

approximately

$0.7 million increase in EsoCheck and EsoGuard supplies usage costs;

$1.6 million increase in EsoCheck and EsoGuard supplies costs;

approximately

$1.7 million increase in laboratory operations costs.

$0.8 million increase in compensation related costs, including stock-based compensation.

and marketing expenses

the year ended December 31, 2022, sales and marketing costs were approximately $16.1 million, compared to $5.3 million in the prior year.

the year ended December 31, 2023, sales and marketing costs were approximately $16.4 million as compared to $16.1 million in the prior

The net increase of $0.3 million was principally related to:

approximately

$8.1 million increase in compensation related costs principally as a result of an increase

in headcount;

● approximately

$1.4 million increase in stock-based compensation from RSA grants to Lucid and PAVmed employees

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

in headcount;

● approximately

$1.5 million increase in consulting and outside professional services fees and for EsoCheck

and EsoGuard;

● approximately

$0.2 million increase general business expenses;

$2.0 million increase in compensation related costs principally as a result of an increase in headcount, including stock-based compensation;

approximately

$0.4 million decrease in the MSA fee allocation from PAVmed due to less sales and marketing

related activities incurred through PAVmed.

$1.7 million decrease in third party marketing expenses.

and administrative expenses

the year ended December 31, 2022, general and administrative costs were approximately $23.7 million, compared to $12.8 million in the

The net increase of $10.9 million was principally related to:

● approximately

$0.6 million increase in compensation related costs principally as a result of an increase

in headcount;

● approximately

$2.0 million increase in stock-based compensation from RSA grants to Lucid and PAVmed employees

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

in headcount;

the year ended December 31, 2023, general and administrative costs were approximately $19.3 million as compared to $24.0 million in the

The net decrease of $4.7 million was principally related to:

approximately

$5.0 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;

$8.3 million decrease in stock-based compensation;

approximately

$1.8 million increase in the MSA fee allocation from PAVmed related to the growth and expansion

of our business and the services incurred through PAVmed;

$3.3 million increase related to the amended MSA with PAVmed due to the growth and expansion of our business and the services

incurred through PAVmed;

approximately

$1.5 million increase in general business expenses.

of Operations - continued

year ended December 31, 2022 as compared to the year ended December 31, 2021 - continued

$0.3 million increase related to outside professional services and facility related costs.

and development expenses

the year ended December 31, 2023, research and development costs were approximately $7.3 million, compared to $11.3 million in the prior

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

The net decrease of $4.0 million was principally related to:

approximately

$1.4 million increase in development costs, particularly in clinical trial activities and

outside professional and consulting fees with respect to EsoCheck, EsoCure and EsoGuard;

$5.5 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;

$0.7 million increase related to the amended MSA with PAVmed due to the growth and expansion of our business and the services incurred

through PAVmed;

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.

our accompanying consolidated financial statements for each of:

Note 5 , 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 PAVmed;

and Note 14 , Stock-Based Compensation ,

for information regarding each of the Lucid Diagnostics 2018 Equity Plan and the PAVmed Inc.

2014 Equity Plan.

$0.8 million increase in compensation related costs, including stock-based compensation.

of Acquired Intangible Assets

the year ended December 31, 2022, the amortization of acquired intangible assets was approximately $1.6 million as compared to no intangible

asset amortization 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 asset.

amortization of acquired intangible assets increased to $2.0 million in the year ended December 31, 2023, as compared to $1.6 million

in the prior year.

The increase of $0.4 million in the current period was due to the timing of the acquired intangible assets in 2022.

Income and Expense

in fair value of convertible debt

the year ended December 31, 2023, the change in the fair value of our convertible note was approximately $3.0 million of expense,

related to the March 2023 Senior Convertible Note.

The March 2023 Senior Convertible Note was initially measured at its issue date

estimated fair value and subsequently remeasured at estimated fair value as of each reporting period date.

The Company initially

recognized a $0.8 million fair value non-cash expense on the issue date.

of Operations - continued

year ended December 31, 2023 as compared to year ended December 31, 2022 - continued

on Issue and Offering Costs - Senior Secured Convertible Note

the year ended December 31, 2023, in connection with the issue of the March 2023 Senior Convertible Note, we recognized a total of

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

Note 13 , Debt, to our accompanying 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 of EsoGuard.

We are expanding commercialization across

We are pursuing 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 5 , Related Party Transactions, 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 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 consolidated financial statements, as included herein in this Form

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

Each share of the Series A Preferred Stock has a stated value of $1,000 and a conversion price of $1.394.

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”).

issuance of the March 2023 Senior Convertible Note is subject to customary closing conditions.

The March 2023 Senior Secured

Convertible Note would have 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 March 2023 Senior

Convertible Note would be convertible into or otherwise paid in shares of the Company’s common stock.

Under the March 2023 Senior Convertible Note, the Company

would be 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

would also be 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 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 an amount to be agreed upon.

Committed Equity Facility and ATM Facility

In March 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 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 $1.8 million.

In 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 & Co.

In the year ended December 31, 2022, there were no shares sold through their at-the-market

equity facility.

Subsequent to December 31, 2022, through March 9, 2023, Lucid Diagnostics sold 230,068 shares through its at-the-market

equity facility for approximately $0.3 million.

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.

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 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 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.

accordance with the MSA, on November 30, 2022 PAVmed has elected to receive payment of $1.65 million in aggregated monthly fees under

the MSA through the issuance of 750,818 shares of Lucid Diagnostics Inc.

Common Stock.

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.

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 $2.7 million 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.

previously disclosed, on October 5, 2021, PAVmed Subsidiary Corp., a wholly owned subsidiary of PAVmed (“PAVmed Sub”), acquired

100% of the outstanding membership interest of CapNostics, LLC from a third party, for a purchase price of approximately $2.1 million.

Also as previously disclosed, effective as of April 1, 2022, pursuant to an assignment agreement (as amended and supplemented to date,

the “CapNostics Assignment Agreement”) between PAVmed Sub and the Company, PAVmed Sub assigned the interests to the Company

and, in consideration for the interests, the Company agreed to pay to PAVmed Sub an amount in cash equal to the purchase price paid by

PAVmed Sub to the third party.

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.

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

the launch of the mobile testing unit;

#CheckYourFoodTube testing days;

and our direct contracting strategic initiative.

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.

ability to generate revenue depends upon our ability to successfully advance the commercialization of EsoGuard, including significantly

expanding insurance reimbursement coverage, 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.

We 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

$52.7 million and used approximately $32.8 million of cash in operations during the year ended December 31, 2023.

Financing activities

provided $29.5 million of cash during the year ended December 31, 2023.

We ended the year with cash on-hand of $18.9 million as of

December 31, 2023.

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

to fund our operations with debt and/or equity financing transactions, including current obligations on our existing convertible debt

which in accordance with management’s plans may include conversions to equity and refinancing our existing debt obligations to extend

the maturity date.

The Company’s ability to continue operations beyond March 2025 will depend upon generating substantial

revenue that is conditioned on obtaining positive third-party reimbursement coverage for its EsoGuard Esophageal DNA Test from both government

and private health insurance providers, increasing revenue through contracting directly with self-insured employers, and on its ability

to raise additional capital through various potential sources including equity and/or debt financings or refinancing existing debt obligations.

These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date

the accompanying consolidated financial statements are issued.