Lucid Diagnostics Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023. Based on such evaluation, our principal executive officer and principal financial officer concluded our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) were effective as of such date to provide reasonable assurance the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as such term is defined in Exchange Act Rules 13(a)-15(f). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the U.S. Our internal control over financial reporting includes those policies and procedures that: ● pertain to the maintenance of records, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; ● provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with accounting principles generally accepted in the U.S., and our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and ● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets could have a material effect on the financial statements. Due to its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect all misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time. Our system contains self-monitoring mechanisms, so actions will be taken to correct deficiencies as they are identified. Our management conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded our system of internal control over financial reporting was effective as of December 31, 2023. This Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the SEC to permit us to provide only management’s report in this Form 10-K. Changes to Internal Controls Over Financial Reporting There has been no change in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. Item 9B. Other Information Rule 10b5-1 Trading Plans During the fiscal quarter ended December 31, 2023, none of our directors or officers (as defined in Rule 16a-1 under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as those terms are defined in Item 408 of Regulation S-K). Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 51 PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this Item 10 is incorporated by reference to our Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2023. Item 11. Executive Compensation The information required by this Item 11 is incorporated by reference to our Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2023. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item 12 is incorporated by reference to our Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2023. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item 13 is incorporated by reference to our Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2023. Item 14. Principal Accounting Fees and Services The information required by this Item 14 is incorporated by reference to our Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2023. 52 PART IV Item 15. Exhibits and Financial Statement Schedules (a) The following documents filed as a part of the report: (1) The following financial statements: Report of Independent Registered Public Accounting Firm (PCAOB ID #688) Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Changes in Stockholders’ Equity (Deficit) Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements (2) The financial statement schedules: Schedules other than those listed above are omitted for the reason they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. Columns omitted from schedules filed have been omitted because the information is not applicable. (3) The following exhibits: 53 Incorporation by Reference Exhibit No. Description Form Exhibit No. Date 2.1‡ Asset Purchase Agreement, dated as of February 25, 2022, by and among LucidDx Labs Inc., Lucid Diagnostics Inc. and ResearchDx, Inc. 8-K 2.1 3/3/2022 3.1.1 Amended and Restated Certificate of Incorporation S-1/A 3.1 10/7/2021 3.1.2 Amendment to Amended and Restated Certificate of Incorporation 8-K 3.1 6/21/2023 3.1.3 Form of Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock 8-K 3.1 3/14/2024 3.2 Amended and Restated Bylaws S-1/A 3.2 10/7/2021 4.1 Description of Registrant’s Securities * 4.2 Common Stock Certificate S-1/A 4.1 10/7/2021 4.3 Form of Senior Secured Convertible Note 8-K 4.1 3/14/23 10.1# Lucid Diagnostics Inc. Amended and Restated 2018 Long-Term Incentive Equity Plan. S-8 2/10/2023 10.2† Amended and Restated License Agreement, dated as of August 23, 2021, by and between Case Western Reserve University and Lucid Diagnostics Inc. S-1/A 10.2 10/1/2021 10.3 License Agreement, dated as of May 20, 2019, by and between PAVmed Inc. and Lucid Diagnostics Inc. S-1/A 10.3 10/1/2021 10.4.1 Management Services Agreement, dated as of May 12, 2018, by and between PAVmed Inc. and Lucid Diagnostics Inc. S-1/A 10.4.1 10/7/2021 10.4.2 Amendment to Management Services Agreement, dated as of March 1, 2019, by and between PAVmed Inc. and Lucid Diagnostics Inc. S-1/A 10.4.2 10/7/2021 10.4.3 Second Amendment to Management Services Agreement, dated as of June 5, 2019, by and between PAVmed Inc. and Lucid Diagnostics Inc. S-1/A 10.4.3 10/7/2021 10.4.4 Third Amendment to Management Services Agreement, dated as of July 20, 2020, by and between PAVmed Inc. and Lucid Diagnostics Inc. S-1/A 10.4.4 10/7/2021 10.4.5 Fourth Amendment to Management Services Agreement, dated as of February 1, 2021, by and between PAVmed Inc. and Lucid Diagnostics Inc. S-1/A 10.4.5 10/7/2021 10.4.6 Fifth Amendment to Management Services Agreement, dated as of November 10, 2021, by and between PAVmed Inc. and Lucid Diagnostics Inc. 10-K 10.4.6 3/14/2023 10.4.7 Sixth Amendment to Management Services Agreement, dated as of August 11, 2022, by and between PAVmed Inc. and Lucid Diagnostics Inc. 8-K 10.1 12/2/2022 10.4.8 Seventh Amendment to Management Services Agreement, dated as of May 9, 2023, by and between PAVmed Inc. and Lucid Diagnostics Inc. 10-Q 10.7 5/15/2023 10.4.9 Eighth Amendment to Management Services Agreement, dated as of March 22, 2024, by and between PAVmed Inc. and Lucid Diagnostics Inc. * 10.5 Payroll and Benefit Expense Reimbursement Agreement, dated as of November 30, 2022, by and between PAVmed Inc. and Lucid Diagnostics Inc. 8-K 10.2 12/2/2022 54 Incorporation by Reference Exhibit No. Description Form Exhibit No. Date 10.6# Form of Stock Option Agreement. 10-K 10.9 3/14/2023 10.7# Form of Indemnification Agreement. S-1/A 10.9 10/8/2021 10.8 Quality & Manufacturing Master Services Agreement, dated as of September 1, 2021, by and between Coastline International, Inc. and Lucid Diagnostics Inc. S-1/A 10.11 10/1/2021 10.9# Form of Restricted Stock Agreement. S-1/A 10.12# 10/8/2021 10.10# Employment Agreement with Lishan Aklog, M.D. 8-K 10.1 1/20/2022 10.11# Employment Agreement with Dennis M. McGrath 8-K 10.2 1/20/2022 10.12.1# Employment Agreement with Shaun O’Neil 8-K 10.1 3/23/2022 10.12.2# Amendment to Employment Agreement with Shaun O’Neil * 10.13# Employment Agreement with Michael Gordon 10-K 10.16 3/14/2023 10.14.1‡ Common Stock Purchase Agreement, dated as of March 28, 2022, by and between CF Principal Investments LLC and Lucid Diagnostics Inc. 8-K 10.1 4/1/2022 10.14.2‡ Registration Rights Agreement, dated as of March 28, 2022, by and between CF Principal Investments LLC and Lucid Diagnostics Inc. 8-K 10.2 4/1/2022 10.15 Controlled Equity Offering SM , dated as of November 23, 2022, by and between Cantor Fitzgerald & Co. and Lucid Diagnostics Inc. S-3 1.2 11/23/2022 10.16.1 Form of Securities Purchase Agreement 8-K 10.2 3/14/23 10.16.2 Form of Guaranty 8-K 10.3 3/14/23 10.16.3 Form of Registration Rights Agreement 8-K 10.1 3/24/23 10.17.1 Exchange Agreement, dated as of March 13, 2023, by and between Lucid Diagnostics Inc. and the purchasers of Series B Preferred Stock party thereto 8-K 10.1 3/14/2024 10.17.2 Registration Rights Agreement Agreement, dated as of March 13, 2023, by and between Lucid Diagnostics Inc. and the purchasers of Series B Preferred Stock party thereto 8-K 10.2 3/14/2024 10.18# Lucid Diagnostics Inc. Employee Stock Purchase Plan S-8 10.1 3/15/2022 14.1 Code of Ethics 1 0-K 14.1 3/14/2023 21.1 List of Subsidiaries * 23.1 Consent of Marcum LLP * 31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 31.2 Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 * 32.2 Certification of Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * 97.1 Form of Compensation Clawback Policy * 101 Inline XBRL Document Set for the consolidated financial statements and accompanying notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. * 104 Inline XBRL for the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline XBRL Document Set. * * Filed herewith. # Indicates management contract or compensatory plan. † Certain confidential portions of this exhibit were omitted by means of marking such portions with asterisks because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed. ‡ Certain exhibits and schedules have been omitted pursuant to Item 601(b)(10) of Regulation S-K. The registrant hereby undertakes to furnish a copy of any omitted exhibit or schedule upon request by the Securities and Exchange Commission. Item 16. Form 10-K Summary None 55 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Lucid Diagnostics Inc. March 25, 2024 By: /s/ Dennis M. McGrath Dennis M. McGrath Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Each person whose signature appears below hereby authorizes both Lishan Aklog, M.D. and Dennis M. McGrath or either of them acting in the absence of the others, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the United States Securities and Exchange Commission. Signature Title Date /s/ Lishan Aklog, M.D. Chairman of the Board of Directors March 25, 2024 Lishan Aklog, M.D. Chief Executive Officer (Principal Executive Officer) /s/ Dennis M. McGrath Chief Financial Officer March 25, 2024 Dennis M. McGrath (Principal Financial and Accounting Officer) /s/ Stanley N. Lapidus Vice Chairman March 25, 2024 Stanley N. Lapidus Director /s/ Debra J. White Director March 25, 2024 Debra J. White /s/ James L. Cox, M.D. Director March 25, 2024 James L. Cox, M.D. /s/ Jacque J. Sokolov, M.D. Director March 25, 2024 Jacque J. Sokolov, M.D. /s/ Ronald M. Sparks Director March 25, 2024 Ronald M. Sparks 56 LUCID DIAGNOSTICS INC. and SUBSIDIARIES (a majority-owned subsidiary of PAVmed Inc.) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID # 688 ) F-2 Consolidated Balance Sheets as of December 31, 2023 and 2022 F-3 Consolidated Statements of Operations for the years ended December 31, 2023 and 2022 F-4 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2023 and 2022 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022 F-6 Notes to Consolidated Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Lucid Diagnostics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Lucid Diagnostics Inc. and Subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Explanatory Paragraph – Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Marcum LLP Marcum LLP We have served as the Company’s auditor since 2019. New York, NY March 25, 2024 F- 2 LUCID DIAGNOSTICS INC. and SUBSIDIARIES (a majority-owned subsidiary of PAVmed Inc.) CONSOLIDATED BALANCE SHEETS (in thousands except number of shares and per share data) December 31, 2023 December 31, 2022 Assets: Current assets: Cash $ 18,896 $ 22,474 Accounts receivable 45 17 Inventory 278 111 Prepaid expenses, deposits, and other current assets 2,854 1,754 Total current assets 22,073 24,356 Fixed assets, net 1,334 1,592 Operating lease right-of-use assets 1,307 2,008 Intangible assets, net 1,424 3,445 Other assets 1,132 1,108 Total assets $ 27,270 $ 32,509 Liabilities, Preferred Stock and Stockholders’ Equity (Deficit) Current liabilities: Accounts payable $ 1,146 $ 1,056 Accrued expenses and other current liabilities 3,841 1,447 Operating lease liabilities, current portion 1,106 962 Senior Secured Convertible Note - at fair value 13,950 — Due To: PAVmed Inc. - MSA Fee and operating expenses 9,339 4,960 Total current liabilities 29,382 8,425 Operating lease liabilities, less current portion 199 1,037 Total liabilities 29,581 9,462 Commitments and contingencies - - Stockholders’ Equity: Preferred stock, $ 0.001 par value, 20,000,000 shares authorized; Series A and Series A-1 Convertible Preferred Stock, issued and outstanding 18,625 at December 31, 2023 and no shares issued and outstanding at December 31, 2022 18,625 — Common stock, $ 0.001 par value, 200,000,000 shares authorized; 42,329,864 and 40,518,792 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively 42 41 Additional paid-in capital 129,763 121,081 Accumulated deficit ( 150,741 ) ( 98,075 ) Total Stockholders’ Equity (Deficit) ( 2,311 ) 23,047 Total Liabilities and Stockholders’ Equity (Deficit) $ 27,270 $ 32,509 See accompanying notes to the consolidated financial statements. F- 3 LUCID DIAGNOSTICS INC. and SUBSIDIARIES (a majority-owned subsidiary of PAVmed Inc.) CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except number of shares and per share data) 2023 2022 Years Ended December 31, 2023 2022 Revenue $ 2,428 $ 377 Operating expenses: Cost of revenue 5,979 3,614 Sales and marketing 16,404 16,134 General and administrative 19,254 23,974 Amortization of acquired intangible assets 2,021 1,649 Research and development 7,252 11,257 Total operating expenses 50,910 56,628 Operating loss ( 48,482 ) ( 56,251 ) Other income (expense): Interest income 424 88 Interest expense ( 416 ) ( 8 ) Change in fair value - Senior Secured Convertible Note ( 2,980 ) — Loss on issue and offering costs - Senior Secured Convertible Note ( 1,186 ) — Debt extinguishments loss - Senior Secured Convertible Note ( 26 ) — Other income (expense), net ( 4,184 ) 80 Loss before provision for income tax ( 52,666 ) ( 56,171 ) Provision for income taxes — — Net loss $ ( 52,666 ) $ ( 56,171 ) Net loss per share - basic and diluted $ ( 1.26 ) $ ( 1.55 ) Weighted average common shares outstanding, basic and diluted 41,756,129 36,172,421 See accompanying notes to the consolidated financial statements. F- 4 LUCID DIAGNOSTICS INC. and SUBSIDIARIES (a majority-owned subsidiary of PAVmed Inc.) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) for the YEARS ENDED December 31, 2023 and 2022 (in thousands except number of shares and per share data) Shares Amount Shares Amount Capital Deficit Total Preferred Stock Common Stock Additional Paid-In Accumulated Shares Amount Shares Amount Capital Deficit Total Balance as of December 31, 2021 — $ — 34,917,907 $ 35 $ 96,608 $ ( 41,904 ) $ 54,739 Exercise - stock options - Lucid Diagnostics Inc. 2018 Equity Plan — — 965,341 1 694 — 695 Stock-based compensation - Lucid Diagnostics Inc. 2018 Equity Plan — — — — 13,859 — 13,859 Stock-based compensation - PAVmed Inc. 2014 Equity Plan — — — — 1,132 — 1,132 Vest - restricted stock awards — — 169,320 — — — — CapNostics, LLC transfer — — — — ( 211 ) — ( 211 ) Issuance common stock - APA-RDx - Termination payment — — 326,701 — 653 — 653 Issuance - Committed Equity Facility, net of financing charges — — 680,263 1 1,766 — 1,767 Purchase - Employee Stock Purchase Plan — — 84,030 — 109 — 109 Issuance - Due To: PAVmed Inc. Settlement in Common Stock — — 3,375,230 4 6,471 — 6,475 Net loss — — — — — ( 56,171 ) ( 56,171 ) Balance as of December 31, 2022 — $ — 40,518,792 $ 41 $ 121,081 $ ( 98,075 ) $ 23,047 Balance — $ — 40,518,792 $ 41 $ 121,081 $ ( 98,075 ) $ 23,047 Stock-based compensation - Lucid Diagnostics Inc. 2018 Equity Plan — — — — 5,762 — 5,762 Stock-based compensation - PAVmed Inc. 2014 Equity Plan — — — — 1,060 — 1,060 Vest - restricted stock awards — — 303,980 — — — — Conversions - Senior Secured Convertible Note — — 115,388 — 166 — 166 Issuance common stock - APA-RDx - Termination payment — — 553,436 — 713 — 713 Issuance - At-The-Market Facility, net of financing charges — — 230,068 1 283 — 284 Purchase - Employee Stock Purchase Plan — — 508,200 — 551 — 551 Issuance - Series A and Series A-1 Preferred Stock 18,625 18,625 — — — — 18,625 Issue common stock - vendor service agreement — — 100,000 — 147 — 147 Net loss — — — — — ( 52,666 ) ( 52,666 ) Balance as of December 31, 2023 18,625 $ 18,625 42,329,864 $ 42 $ 129,763 $ ( 150,741 ) $ ( 2,311 ) Balance 18,625 $ 18,625 42,329,864 $ 42 $ 129,763 $ ( 150,741 ) $ ( 2,311 ) See accompanying notes to the consolidated financial statements. F- 5 LUCID DIAGNOSTICS INC. and SUBSIDIARIES (a majority-owned subsidiary of PAVmed Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands except number of shares and per share data) 2023 2022 Years Ended December 31, 2023 2022 Cash flows from operating activities Net loss $ ( 52,666 ) $ ( 56,171 ) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization expense 2,499 1,936 Stock-based compensation - Lucid Diagnostics Inc. 2018 Equity Plan 5,762 13,859 Stock-based compensation - PAVmed Inc. 2014 Equity Plan 1,060 1,132 Change in fair value - Senior Secured Convertible Note 2,980 — Loss on issue - Senior Secured Convertible Note 1,111 — Debt extinguishment loss - Senior Secured Convertible Note 26 — APA-RDx: Issue common stock - termination payment 713 653 Issue common stock - vendor service agreement 23 — Changes in operating assets and liabilities: Accounts receivable ( 28 ) 183 Prepaid expenses and other current assets ( 1,160 ) 1,163 Accounts payable 89 ( 445 ) Accrued expenses and other current liabilities 2,394 333 Due To: PAVmed Inc. - operating expenses, employee related costs, MSA Fee 4,380 7,672 Net cash flows used in operating activities ( 32,817 ) ( 29,685 ) Cash flows from investing activities Purchase of equipment ( 221 ) ( 908 ) Asset acquisition — ( 3,200 ) Net cash flows used in investing activities ( 221 ) ( 4,108 ) Cash flows from financing activities Proceeds – issue of preferred stock 18,625 — Proceeds – issue of Senior Convertible Note 10,000 — Proceeds – issue of common stock – Committed Equity Facility — 1,807 Proceeds – issue of common stock – At-The-Market Facility 284 — Proceeds – exercise of stock options — 695 Proceeds – issue common stock – Employee Stock Purchase Plan 551 109 Net cash flows provided by financing activities 29,460 2,611 Net increase (decrease) in cash ( 3,578 ) ( 31,182 ) Cash, beginning of period 22,474 53,656 Cash, end of period $ 18,896 $ 22,474 See accompanying notes to the consolidated financial statements. F- 6 LUCID DIAGNOSTICS INC. and SUBSIDIARIES (a majority-owned subsidiary of PAVmed Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in these accompanying notes are presented in thousands, except number of shares and per-share amounts.) Note 1 — The Company Description of the Business Lucid Diagnostics Inc. (“Lucid”, “Lucid Diagnostics” or the “Company”) 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”). Lucid is a majority-owned subsidiary of PAVmed Inc. (“PAVmed”). The Company believes that its 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 tool for the early detection of esophageal precancer in at-risk GERD 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. EsoGuard is a bisulfite-converted next-generation sequencing (NGS) DNA assay performed on surface esophageal cells collected with EsoCheck. 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. EsoCheck is a FDA 510(k) and CE Mark cleared noninvasive swallowable balloon capsule catheter device capable of sampling surface esophageal cells in a less than a 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, when inflated, 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. The Company believes that this proprietary Collect+Protect™ technology makes EsoCheck the only noninvasive esophageal cell collection device capable of such anatomically targeted and protected sampling. EsoGuard and EsoCheck are based on patented technology licensed by Lucid from Case Western Reserve University (“CWRU”). EsoGuard and EsoCheck have been developed to provide an accurate, non-invasive, patient-friendly test for the early detection of EAC and Barrett’s Esophagus (“BE”), including dysplastic BE and related pre-cursors to EAC in patients with chronic GERD. F- 7 Note 2 — Liquidity and Going Concern The Company’s management is required to assess an entity’s ability to continue as a going concern within one year of the date of the financial statements being issued. In each reporting period, including interim periods, an entity is required to assess conditions known and reasonably knowable as of the financial statement issuance date to determine whether it is probable an entity will not meet its financial obligations within one year from the financial statement issuance date. Substantial doubt about an entity’s ability to continue as a going concern exists when conditions and events, considered in the aggregate, indicate it is probable the entity will be unable to meet its financial obligations as they become due within one year after the date the financial statements are issued. The Company has financed its operations principally through public and private issuances of its common stock, preferred stock, and debt. The Company is subject to all of the risks and uncertainties typically faced by medical device and diagnostic companies that devote substantially all of their efforts to the commercialization of their initial product and services and ongoing research and development activities and conducting clinical trials. The Company generated $ 2.4 million of revenues for the year ended December 31, 2023, however the Company does not expect to generate positive cash flows from operating activities in the near future. The Company incurred a net loss of approximately $ 52.7 million and had net cash flows used in operating activities of approximately $ 32.8 million for the year ended December 31, 2023. As of December 31, 2023, the Company had negative working capital of approximately $ 7.3 million, with such working capital inclusive of the Senior Secured Convertible Note classified as a current liability of an aggregate of approximately $ 14.0 million and approximately $ 18.9 million of cash. The Company’s ability to continue operations beyond March 2025, will depend upon generating substantial revenue that is conditioned upon 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. Note 3 — Summary of Significant Accounting Policies Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and applicable rules and regulations of the United States Securities and Exchange Commission (“SEC”), and include the accounts of the Company and its wholly-owned subsidiaries, LucidDx Labs Inc and CapNostics LLC. All intercompany transactions and balances have been eliminated in consolidation. The Company is a majority-owned consolidated subsidiary of PAVmed, which has a majority equity ownership interest and has financial control of the Company. The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions. All amounts in the accompanying consolidated financial statements and these notes thereto are presented in thousands of dollars, if not otherwise noted as being presented in millions of dollars, except for shares and per share amounts. Use of Estimates In preparing the consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent losses, as of the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Significant estimates in these consolidated financial statements include those related to the estimated fair value of stock-based equity awards, intangible assets and estimate of fair value of debt obligations. Other significant estimates include the estimated incremental borrowing rate, the provision or benefit for income taxes and the corresponding valuation allowance on deferred tax assets. Additionally, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows. On an ongoing basis, the Company evaluates its estimates and assumptions. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. Cash The Company maintains its cash at a major financial institution with high credit quality. At times, the balance of its cash deposits may exceed federally insured limits. The Company has not experienced losses on deposits with commercial banks and financial institutions which exceed federally insured limits. F- 8 Note 3 — Summary of Significant Accounting Policies - continued Offering Costs Offering costs consist of certain legal, accounting, and other advisory fees incurred related to the Company’s efforts to raise debt and equity capital. Offering costs in connection with equity financing are recognized as either an offset against the financing proceeds to extent the underlying security is equity classified or a current period expense to extent the underlying security is liability classified or for which the fair value option is elected. Offering costs, lender fees, and warrants issued in connection with debt financing, to the extent the fair value option is not elected, are recognized as debt discount, which reduces the reported carrying value of the debt, with the debt discount amortized as interest expense, generally over the contractual term of the debt agreement, to result in a constant rate of interest. Offering costs associated with in-process capital financing are accounted for as deferred offering costs. Revenue Recognition Revenues are recognized when the satisfaction of the performance obligation occurs, in an amount that reflects the consideration the Company expects to collect in exchange for those services. The Company’s revenue is primarily generated by its laboratory testing services utilizing its EsoGuard Esophageal DNA tests. The services are completed upon release of a patient’s test result to the ordering healthcare provider. Revenue recognized is inclusive of both variable consideration in connection with an individual patient’s third-party insurance coverage policy and fixed consideration in connection with a contracted services arrangement with an unrelated third party legal entity. To determine revenue recognition for the arrangements that the Company determines are within the scope of ASC 606, Revenue from Contracts with Customers, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The key aspects considered by the Company include the following: Contracts —The Company’s customer is primarily the patient, but the Company does not enter into a formal reimbursement contract with a patient. The Company establishes a contract with a patient in accordance with other customary business practices, which is the point in time an order is received from a provider and a patient specimen has been returned to the laboratory for testing. Payment terms are a function of a patient’s existing insurance benefits, including the impact of coverage decisions with Center for Medicare & Medicaid Services (“CMS”) and applicable reimbursement contracts established between the Company and payers. However, when a patient is considered self-pay, the Company requires payment from the patient prior to the commencement of the Company’s performance obligations. The Company’s consideration can be deemed variable or fixed depending on the structure of specific payer contracts, and the Company considers collection of such consideration to be probable to the extent that it is unconstrained. Performance obligations —A performance obligation is a promise in a contract to transfer a distinct good or service (or a bundle of goods or services) to the customer. The Company’s contracts have a single performance obligation, which is satisfied upon rendering of services, which culminates in the release of a patient’s test result to the ordering healthcare provider. The Company elects the practical expedient related to the disclosure of unsatisfied performance obligations, as the duration of time between providing testing supplies, the receipt of a sample, and the release of a test result to the ordering healthcare provider is far less than one year. Transaction price —The transaction price is the amount of consideration that the Company expects to collect in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration expected to be collected from a contract with a customer may include fixed amounts, variable amounts, or both. If the consideration derived from the contracts is deemed to be variable, the Company estimates the amount of consideration to which it will be entitled in exchange for the promised goods or services. The Company limits the amount of variable consideration included in the transaction price to the unconstrained portion of such consideration. In other words, the Company recognizes revenue up to the amount of variable consideration that is not subject to a significant reversal until additional information is obtained or the uncertainty associated with the additional payments or refunds is subsequently resolved. When the Company does not have significant historical experience or that experience has limited predictive value, the constraint over estimates of variable consideration may result in no revenue being recognized upon delivery of patient EsoGuard test results to the ordering healthcare provider. As such, the Company recognizes revenue up to the amount of variable consideration not subject to a significant reversal until additional information is obtained or the uncertainty associated with additional payments or refunds, if any, is subsequently resolved. Differences between original estimates and subsequent revisions, including final settlements, represent changes in estimated expected variable consideration, with the change in estimate recognized in the period of such revised estimate. With respect to a contracted service arrangement, the fixed consideration revenue is recognized on an as-billed basis upon delivery of the laboratory test report with realization of such fixed consideration deemed probable based upon actual historical experience. Allocate transaction price —The transaction price is allocated entirely to the performance obligation contained within the contract with a customer on the basis of the relative standalone selling prices of each distinct good or service. Practical Expedients —The Company does not adjust the transaction price for the effects of a significant financing component, as at contract inception, the Company expects the collection cycle to be one year or less. F- 9 Note 3 — Summary of Significant Accounting Policies - continued Inventory The Company carries test supply inventories to support our laboratory activities. The inventories are carried at the lower of weighted average cost and net realizable value and expensed through cost of sales as the supplies are used. Fixed Assets Fixed assets are stated at cost and depreciated using the straight-line method over the assets’ estimated useful lives. Additions and improvements are capitalized, including direct and indirect costs incurred to validate equipment and bring to working conditions. The costs for maintenance and repairs are expensed as incurred. Leases The Company adopted FASB ASC Topic 842, Leases , (“ASC 842”) effective December 31, 2021. All significant lease agreements and contractual agreements with embedded lease agreements are accounted for under the provisions of ASC 842, wherein, if the contractual arrangement: involves the use of a distinct identified asset; provides for the right to substantially all the economic benefits from the use of the asset throughout the contractual period; and provides for the right to direct the use of the asset. A lease agreement is accounted for as either a finance lease or an operating lease. Under both a finance lease and an operating lease, the Company recognizes as of the lease commencement date a lease right-of-use (“ROU”) asset and a corresponding lease payment liability. A lease ROU asset represents the Company’s right to use an underlying asset for the lease term, and the lease liability represents its contractual obligation to make lease payments. The lease ROU asset is measured at the lease commencement date as the present value of the future lease payments plus initial direct costs incurred. The Company recognizes lease expense of the amortization of the lease ROU asset for an operating lease on a straight-line basis over the lease term; and for financing leases on a straight-line basis unless another basis is more representative of the pattern of economic benefit. The operating ROU asset also includes any lease incentives received for improvements to leased property, when the improvements are lessee-owned. For improvements to leased property that are lessor-owned, the Company includes amounts the Company incurred for the improvements as ROU assets which are amortized on a straight-line basis over the life of the lease. The lease liability is measured at the lease commencement date with the discount rate generally based on the Company’s incremental borrowing rate (to the extent the lease implicit rate is not known nor determinable), with interest expense recognized using the interest method for financing leases. Certain leases may include options to extend or terminate the agreement. The Company does not assume renewals in determination of the lease term unless the renewals are deemed to be reasonably certain at lease commencement. As well, an option to terminate is considered unless it is reasonably certain the Company will not exercise the option. The Company elected the practical expedient to not recognize a lease ROU asset and lease payment liability for leases with a term of twelve months or less (“short-term leases”), resulting in the aggregate lease payments being recognized on a straight line basis over the lease term. The Company’s leases with a commencement date prior to January 1, 2022 were short-term leases and therefore did not require recording a ROU asset or lease liability at December 31, 2021. Additionally, the Company elected the practical expedient to not separate lease and non-lease components. Intangible Assets Purchased intangible assets are recorded at cost and depreciated using the straight-line method over the assets’ estimated useful life. See Note 10, Intangible Assets, net , for further information with respect to purchased intangible assets. Impairment - Long Lived Assets The Company reviews its long-lived assets, including intangible assets with finite lives, for recoverability whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable. The Company evaluates assets for potential impairment by comparing estimated future undiscounted net cash flows to the carrying amount of the asset. If the carrying amount of the assets exceeds the estimated future undiscounted cash flows, impairment is measured based on the difference between the carrying amount of the assets and fair value which is generally an expected present value cash flow technique. The assessment and determination of the existence of an impairment indicator comprises measurable operating performance criteria as well as qualitative factors deemed relevant and appropriate to such evaluation. F- 10 Note 3 — Summary of Significant Accounting Policies - continued Stock-Based Compensation Stock-based awards are made to members of the board of directors of the Company, the Company’s employees and non-employees, under each of the Lucid Diagnostics 2018 Equity Plan and the PAVmed 2014 Equity Plan. The Company accounts for stock-based compensation in accordance with the provisions of FASB ASC Topic 718, Stock Compensation (“ASC 718”). The grant-date estimated fair value of the stock-based award is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective stock-based award, with such straight-line recognition adjusted, as applicable, so the cumulative expense recognized is at-least equal-to-or-greater-than the estimated fair value of the vested portion of the respective stock-based award as of the reporting date. The Company uses the Black-Scholes valuation model to estimate the fair value of stock options granted under both the PAVmed 2014 Equity Plan and the Lucid Diagnostics 2018 Equity Plan, which requires the Company to make certain weighted-average valuation estimates and assumptions for stock-based awards, principally as follows: ● With respect to the PAVmed 2014 Equity Plan, the expected stock price volatility is based on the historical stock price volatility of PAVmed common stock over the period commensurate with the expected term with respect to stock options granted to the board of directors and employees in the years ended December 31, 2023 and 2022; ● With respect to stock options granted under the Lucid Diagnostics 2018 Equity Plan, the expected stock price volatility is based on the historical stock price volatility of Lucid Diagnostics common stock and the volatilities of similar entities within the medical device industry over the period commensurate with the expected term with respect to stock options granted to employees in the years ended December 31, 2023 and 2022; ● The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period commensurate with either the expected term or the remaining contractual term, as applicable, of the stock option; and, ● The expected dividend yield is based on annual dividends of $ 0.00 as there have not been dividends paid to-date, and there is no plan to pay dividends for the foreseeable future. The price per share of Lucid Diagnostics common stock used in the computation of estimated fair value of stock options and restricted stock awards granted under the Lucid Diagnostics 2018 Equity Plan is its quoted closing price per share. The price per share of PAVmed common stock used in the computation of estimated fair value of stock options and restricted stock awards granted under the PAVmed 2014 Equity Plan is its quoted closing price per share. Financial Instruments Fair Value Measurements FASB ASC Topic 820, Fair Value Measurement , (ASC 820) defines fair value as the price which would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a transaction measurement date. The ASC 820 three-tier fair value hierarchy prioritizes the inputs used in the valuation methodologies, as follows: Level 1 Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2 Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets which are not active, or other inputs observable or can be corroborated by observable market data. Level 3 Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. As of December 31, 2023 and 2022, the carrying values of cash, and accounts payable, approximate their respective fair value due to the short-term nature of these financial instruments. F- 11 Note 3 — Summary of Significant Accounting Policies - continued Fair Value Option (“FVO”) Election Under a Securities Purchase Agreement dated March 13, 2023, the Company issued a Senior Secured Convertible Note dated March 21, 2023, referred to herein as the “March 2023 Senior Convertible Note”, which is accounted under the “fair value option election” as discussed below. Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivative and Hedging , (“ASC 815”), a financial instrument containing embedded features and/or options may be required to be bifurcated from the financial instrument host and recognized as separate derivative asset or liability, with the bifurcated derivative asset or liability initially measured at estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair value as of each reporting period balance sheet date. Alternatively, FASB ASC Topic 825, Financial Instruments , (“ASC 825”) provides for the “fair value option” (“FVO”) election. In this regard, ASC 825-10-15-4 provides for the FVO election (to the extent not otherwise prohibited by ASC 825-10-15-5) to be afforded to financial instruments, wherein the financial instrument is initially measured at estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair value as of each reporting period balance sheet date, with changes in the estimated fair value recognized as other income (expense) in the statement of operations. The estimated fair value adjustment of the March 2023 Senior Convertible Note is presented in a single line item within other income (expense) in the accompanying consolidated statement of operations (as provided for by ASC 825-10-50-30(b)). Further, as required by ASC 825-10-45-5, to the extent a portion of the fair value adjustment is attributed to a change in the instrument-specific credit risk, such portion would be recognized as a component of other comprehensive income (“OCI”) (for which there was no such adjustment with respect to the March 2023 Senior Convertible Note). See Note 12, Financial Instruments Fair Value Measurements , with respect to the FVO election; and Note 13, Debt , for a discussion of the March 2023 Senior Convertible Note. Research and Development Expenses Research and development expenses are recognized as incurred and include the salary and stock-based compensation of employees engaged in product research and development activities, and the costs related to the Company’s various contract research service providers, suppliers, engineering studies, supplies, and outsourced testing and consulting fees, as well as depreciation expense and rental costs for equipment used in research and development activities, and fees incurred for access to certain facilities of contract research service providers. Patent Costs and Purchased Patent License Rights Patent related costs in connection with filing and prosecuting patent applications and patents filed by the Company are expensed as incurred and are included in the line item captioned “general and administrative expenses” in the accompanying consolidated statements of operations. Patent fee reimbursement expense incurred under the patent license agreement agreements are included in the line item captioned “research and development expenses” in the accompanying consolidated statements of operations. The Company has entered into agreements with third parties to acquire technologies for potential commercial development. Such agreements generally require an initial payment by the Company when the contract is executed. The purchase of patent license rights for use in research and development activities, including product development, are expensed as incurred and are classified as research and development expense. Additionally, the Company may be obligated to make future royalty payments in the event the Company commercializes the technology and achieves a certain sales volume. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 730, “Research and Development”, (“ASC 730”), expenditures for research and development, including upfront licensing fees and milestone payments associated with products not yet been approved by the United States Food and Drug Administration (“FDA”), are charged to research and development expense as incurred. Future contract milestone and /or royalty payments will be recognized as expense when achievement of the milestone is determined to be probable and the amount of the corresponding milestone can be objectively estimated. F- 12 Note 3 — Summary of Significant Accounting Policies - continued Income Taxes The Company accounts for income taxes using the asset and liability method, as required by FASB ASC Topic 740, Income Taxes, (ASC 740). Current tax liabilities or receivables are recognized for estimated income tax payable and/or refundable for the current year. Deferred tax assets and deferred tax liabilities are recognized for estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, along with net operating loss and tax credit carryforwards. Deferred tax assets and deferred tax liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Changes in deferred tax assets and deferred tax liabilities are recorded in the provision for income taxes. Under ASC 740, a “more-likely-than-not” criterion is applied when assessing the estimated realization of deferred tax assets through their utilization to reduce future taxable income, or with respect to a deferred tax asset for tax credit carryforward, to reduce future tax expense. A valuation allowance is established, when necessary, to reduce deferred tax assets, net of deferred tax liabilities, when the assessment indicates it is more-likely-than-not, the full or partial amount of the net deferred tax asset will not be realized. As a result of the evaluation of the positive and negative evidence bearing upon the estimated realizability of net deferred tax assets, and based on a history of operating losses, it is more-likely-than-not the deferred tax assets will not be realized, and therefore a valuation allowance reserve equal to the full amount of the deferred tax assets, net of deferred tax liabilities, has been recognized as a charge to income tax expense as of December 31, 2023 and 2022. The Company recognizes the benefit of an uncertain tax position it has taken or expects to take on its income tax return if such a position is more-likely-than-not to be sustained upon examination by the taxing authorities, with the tax benefit recognized being the largest amount having a greater than 50% likelihood of being realized upon ultimate settlement. As of December 31, 2023, the Company does no t have any unrecognized tax benefits resulting from uncertain tax positions. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. There were no amounts accrued for penalties or interest as of December 31, 2023 and December 31, 2022 or recognized during the years ended December 31, 2023 and 2022. The Company is not aware of any issues under review to potentially result in significant payments, accruals, or material deviations from its position. Net Loss Per Share The net loss per share is computed by dividing each of the respective net loss by the number of “basic weighted average common shares outstanding” and diluted weighted average shares outstanding” for the reporting period indicated. The basic weighted-average shares common shares outstanding are computed on a weighted average based on the number of days the shares of common stock of the Company are issued and outstanding during the respective reporting period indicated. The diluted weighted average common shares outstanding are the sum of the basic weighted-average common shares outstanding plus the number of common stock equivalents’ incremental shares on an if-converted basis, computed using the treasury stock method, computed on a weighted average based on the number of days the incremental shares would potentially be issued and outstanding during the periods indicated, if dilutive. The Company’s common stock equivalents include convertible preferred stock, stock options and unvested restricted stock awards granted under the Lucid Diagnostics 2018 Long-Term Incentive Equity Plan. Notwithstanding, as the Company has a net loss for each reporting period presented, only the basic weighted average common shares outstanding are used to compute the basic and diluted net loss per share for each reporting period presented. JOBS Act EGC Accounting Election The Company is an “emerging growth company” or “EGC”, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, an EGC can delay adopting new or revised accounting standards issued after the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has irrevocably elected to avail itself of this exemption from new or revised accounting standards, and, therefore, will not be subject to the same new or revised accounting standards as public companies who are not an EGC. F- 13 Note 3 — Summary of Significant Accounting Policies - continued Reclassifications Certain prior-year amounts have been reclassified to conform to the current year presentation, which includes presenting interest income and classification of certain general and administrative expenses and research and development expenses within operating expenses on the statements of operations, in the consolidated financial statements and accompanying notes to the consolidated financial statements. The impact of the reclassifications made to prior year amounts is not material and did not affect net loss. Recently Adopted Accounting Pronouncements In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The updated guidance requires companies to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade receivables. The guidance was adopted by the Company on January 1, 2023. The adoption of the ASU did not have an impact on the Company’s consolidated financial statements. Recent Accounting Standards Updates Not Yet Adopted In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”), which is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 provide for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for the Company prospectively to all annual periods beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact this update will have on our consolidated financial statements and disclosures. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which require public companies disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. The guidance is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is applied retrospectively to all periods presented in the financial statements, unless it is impracticable. We are currently evaluating the impact this update will have on our consolidated financial statements and disclosures. In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This update modifies the disclosure or presentation requirements of a variety of topics in the Accounting Standards Codification to conform with certain SEC amendments in Release No. 33-10532, Disclosure Update and Simplification. The amendments in this update should be applied prospectively, and the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or S-K becomes effective. However, if the SEC has not removed the related disclosure from its regulations by June 30, 2027, the amendments will be removed from the Codification and not become effective. Early adoption is prohibited. The Company is currently evaluating the potential impact of this guidance on its consolidated financial statements. F- 14 Note 4 — Revenue from Contracts with Customers EsoGuard Commercialization Agreement The Company entered into the EsoGuard Commercialization Agreement, dated August 1, 2021, with its former commercial laboratory service provider, ResearchDx Inc. (“RDx”), an unrelated third-party. The EsoGuard Commercialization Agreement was on a month-to-month basis and was terminated on February 25, 2022 upon the execution of an asset purchase agreement (“APA”) dated February 25, 2022, between LucidDx Labs, a wholly-owned subsidiary of the Company, and RDx, with such agreement further discussed in Note 6, Asset Purchase Agreement and Management Services Agreement . Revenue Recognized In the year ended December 31, 2023, the Company recognized revenue of $ 2,428 , resulting from the delivery of patient EsoGuard test results. Revenue recognized from customer contracts deemed to include a variable consideration transaction price is limited to the unconstrained portion of the variable consideration. The Company’s revenue for the year ended December 31, 2022 was $ 377 , resulting from the delivery of patient EsoGuard test results, along with the revenue recognized under the EsoGuard Commercialization Agreement, which represented the minimum fixed monthly fee of $ 100 for the period January 1, 2022 to the February 25, 2022 termination date as discussed above. The monthly fee was deemed to be collectible for such period as RDx has timely paid the applicable respective monthly fee. Cost of Revenue The cost of revenues principally includes the costs related to the Company’s laboratory operations (excluding estimated costs associated with research activities), the costs related to the EsoCheck cell collection device, cell sample mailing kits and license royalties. In the year ended December 31, 2023, the cost of revenue was $ 5,979 , primarily related to costs for our laboratory operations and EsoCheck device supplies. The Company’s cost of revenue for the year ended December 31, 2022 was $ 3,614 , primarily related to costs for our laboratory operations and EsoCheck device supplies, along with the costs attributable to delivering the services under the EsoGuard Commercialization Agreement for the period January 1, 2022 through its termination on February 25, 2022. Note 5 — Related Party Transactions The aggregate Due To: PAVmed Inc. for the periods indicated is summarized as follows: Schedule of Due To: PA Vmed Inc MSA Fees Employee-Related Costs PAVmed Inc. OBO Payments Total Balance - December 31, 2022 $ 1,650 $ 3,026 $ 284 $ 4,960 MSA fees 9,000 — — 9,000 ERC - Benefits — 1,828 — 1,828 On Behalf Of (OBO) activities — — 1,035 1,035 Cash payments to PAVmed Inc. ( 4,500 ) ( 1,691 ) ( 1,293 ) ( 7,484 ) Balance - December 31, 2023 $ 6,150 $ 3,163 $ 26 $ 9,339 F- 15 Note 5 — Related Party Transactions - continued PAVmed - Management Services Agreement 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. The MSA does not have a termination date, but may be terminated by the Company’s board of directors. The MSA Fee is charged on a monthly basis and is subject-to periodic adjustment corresponding with changes in the services provided by PAVmed personnel to the Company, with any such change in the MSA Fee being subject to approval of the boards of directors of each of the Company and PAVmed. The respective companies’ boards of directors approved an amendment to the MSA to increase the MSA Fee to $ 750 per month, effective January 1, 2023, which was entered into by PAVmed and the Company on May 9, 2023. During the six months ended December 31, 2022, MSA fees were $ 550 per month. During the six months ended June 30, 2022, MSA Fees were $ 390 per month. Subsequent to December 31, 2023, in March 2024, we entered into an eighth amendment to the MSA. Under the amendment, the monthly fee due from the Company to PAVmed was increased from $ 750 to $ 833 . Subsequent to December 31, 2023, on January 26, 2024, PAVmed elected to receive payment of $ 4,675 of fees and reimbursements due from Lucid, through the issuance of 3,331,771 shares of Lucid Diagnostics common stock. The MSA Fee expense classification in the consolidated statement of operations for the periods noted is as follows: Schedule of MSA Fee Expense Classification in Statements of Operations 2023 2022 Years Ended December 31, 2023 2022 Sales & Marketing $ 436 $ 1,043 General & Administrative 6,350 3,066 Research & Development 2,214 1,531 Total MSA Fee $ 9,000 $ 5,640 The classification of the MSA Fee as presented above is based on the PAVmed classification of employee salary expense and other operating expenses. In this regard, PAVmed classifies employee salary expense as sales and marketing expenses for employees performing sales, sales support and marketing activities, research and development expenses for those employees who are engaged in product and services engineering development and design and /or clinical trials activities, and other employees and activities classified as general and administrative. F- 16 Note 6 — Asset Purchase Agreement and Management Services Agreement Asset Purchase Agreement and Management Services Agreement - ResearchDx Inc. Through its wholly-owned subsidiary, LucidDx Labs Inc. (“LucidDx Labs”), the Company entered into an asset purchase agreement (“APA”) dated February 25, 2022, with ResearchDx, Inc. (“RDx”), an unrelated third-party - “APA-RDx”. Under the APA-RDx, LucidDx Labs acquired certain assets from RDx which were combined with other property and equipment to establish a Company-owned CLIA certified, CAP accredited commercial clinical laboratory capable of performing the EsoGuard® Esophageal DNA assay, inclusive of DNA extraction, next generation sequencing (“NGS”) and specimen storage. Prior to February 25, 2022, RDx provided such laboratory services at its owned CLIA-certified, CAP-accredited clinical laboratory. In connection with the execution and delivery of the APA-RDx, LucidDx Labs Inc. and RDx entered into a separate management services agreement (“MSA-RDx”), dated and effective February 25, 2022, pursuant to which RDx provided certain testing and related services for the Laboratory. The total purchase price consideration payable under the APA-RDx is a face value of $ 3,200 comprised of three contractually specified periodic payments. The APA-RDx is being accounted for as an asset acquisition, with the recognition of an intangible asset of approximately $ 3,200 , which is included in “Intangible assets, net” on the accompanying consolidated balance sheet, as further discussed in Note 10, Intangible Assets, net. Termination of Management Services Agreement and Modification of Other Payment Obligations - ResearchDx Inc. On February 14, 2023, through LucidDx Labs Inc, the Company entered into an agreement (the “MSA Termination Agreement”) with RDx, pursuant to which the parties mutually agreed to terminate the MSA-RDx without cause. The termination was effective as February 10, 2023. Until the termination of the management service agreement with RDx, RDx had continued to provide certain testing and related services for the Laboratory in accordance with the terms of the MSA-RDx. The MSA Termination Agreement reduces the remaining amounts of the earnout payments and management fees due under the APA-RDx and the MSA-RDx to $ 713 . The payment was satisfied through the issuance of 553,436 shares of the Company’s common stock in February 2023. The Company was not required to make any cash payments in connection with the termination. Note 7 — Prepaid Expenses, Deposits, and Other Current Assets Prepaid expenses and other current assets consisted of the following as of: Schedule of Prepaid Expenses and Other Current Assets December 31, 2023 December 31, 2022 Advanced payments to service providers and suppliers $ 266 $ 371 Prepaid insurance 607 52 Deposits 1,981 1,331 Total prepaid expenses, deposits and other current assets $ 2,854 $ 1,754 Note 8 — Fixed Assets Fixed assets, less accumulated depreciation, consisted of the following as of: Schedule of Fixed Assets Estimated Useful Life December 31, 2023 December 31, 2022 Computer and office equipment 2 - 5 years $ 252 $ 223 Laboratory equipment 3 - 7 years 1,702 1,526 Furniture and fixtures 3 - 5 years 146 131 Leasehold improvements - (1) 1 1 Total Fixed Assets 2,101 1,881 Less Accumulated Depreciation ( 767 ) ( 289 ) Total Fixed Assets, net $ 1,334 $ 1,592 (1) Lesser of remaining lease term or estimated useful life. Depreciation expense of $ 478 and $ 287 for the years ended December 31, 2023 and 2022, respectively, is included in general and administrative expenses in the accompanying consolidated statements of operations. F- 17 Note 9 — Leases During the year ended December 31, 2023, the Company entered into additional lease agreements that have commenced and are classified as operating leases and short-term leases for additional Lucid Test Centers. The components of lease expense were as follows: Schedule of Components of Lease Expense 2023 2022 Years Ended December 31, 2023 2022 Operating lease cost $ 1,214 $ 951 Short-term lease cost 87 95 Variable lease cost 58 20 Total lease cost $ 1,359 $ 1,066 The Company’s future lease payments as of December 31, 2023, which are presented as operating lease liabilities, current portion and operating lease liabilities, less current portion on the Company’s consolidated balance sheets are as follows: Schedule of Future Lease Payments of Operating Lease Liabilities 2024 $ 1,161 2025 127 2026 63 2027 24 Total lease payments $ 1,375 Less: imputed interest ( 70 ) Present value of lease liabilities $ 1,305 Supplemental disclosure of cash flow information related to the Company’s cash and non-cash activities with its leases are as follows: Schedule of Cash Flow Supplemental Information Years Ended December 31, 2023 2022 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 1,207 $ 949 Non-cash investing and financing activities Right-of-use assets obtained in exchange for new operating lease liabilities $ 380 $ 2,763 Weighted-average remaining lease term - operating leases (in years) 1.39 2.03 Weighted-average discount rate - operating leases 7.875 % 7.875 % As of December 31, 2023 and 2022, the Company’s right-of-use assets from operating leases were $ 1,307 and $ 2,008 , respectively, which are reported in operating lease right-of-use assets in the consolidated balance sheets. As of December 31, 2023 and 2022, the Company had outstanding operating lease obligations of $ 1,305 and $ 1,999 , respectively, of which $ 1,106 and $ 962 , respectively, are reported in operating lease liabilities, current portion and $ 199 and $ 1,037 , respectively, are reported in operating lease liabilities less current portion in the Company’s consolidated balance sheets. The Company calculates its incremental borrowing rates for specific lease terms, used to discount future lease payments, as a function of the financing terms the Company would likely receive on the open market. F- 18 Note 10 — Intangible Assets, net Intangible assets, less accumulated amortization, consisted of the following as of: Schedule of Intangible Assets Estimated Useful Life December 31, 2023 December 31, 2022 Defensive technology 60 months $ 2,105 $ 2,105 Laboratory licenses and certifications and laboratory information management software 24 months 3,200 $ 3,200 Total Intangible assets 5,305 5,305 Less Accumulated Amortization ( 3,881 ) ( 1,860 ) Intangible Assets, net $ 1,424 $ 3,445 The defensive technology intangible asset of $ 2.1 million (and approximately $ 0.2 million of accumulated amortization) was recognized by the Company as of the April 1, 2022 effective date of the transfer of CapNostics, LLC (“CapNostics”) to the Company from PAVmed Subsidiary Corp (a wholly-owned subsidiary of PAVmed). The transfer was accounted for as entities under common control. The defensive technology intangible asset was recognized by PAVmed Subsidiary Corp upon its acquisition of CapNostics, an unrelated third-party, for total purchase consideration paid on the October 5, 2021 acquisition date of approximately $ 2.1 million in cash. The CapNostics transaction was accounted for as an asset acquisition, resulting in the recognition of the defensive technology intangible asset. The defensive technology intangible asset is being amortized on a straight-line basis over an expected useful life 60 months commencing on the acquisition date. As noted in Note 6, Asset Purchase Agreement and Management Services Agreement , the asset purchase agreement between the Company and ResearchDx Inc. (“APA-RDx”), is being accounted for as an asset acquisition. The intangible assets recognized under the APA-RDx are the laboratory licenses and certifications (inclusive of a CLIA certification, CAP accreditation, and clinical laboratory licenses for five (5) U.S. States transferred to the Company from RDx), and a laboratory information management software perpetual-use royalty-free license granted under the APA-RDx, with such intangible asset having a useful life of twenty-four months commencing on the APA-RDx February 25, 2022 transaction date. Amortization expense of the intangible assets discussed above was $ 2,021 and $ 1,649 for the years ended December 31, 2023 and 2022, respectively, and is included in amortization of acquired intangible assets in the accompanying consolidated statements of operations. As of December 31, 2023, the estimated future amortization expense associated with the Company’s finite-lived intangible assets for each of the five succeeding fiscal years is as follows: Schedule of Future Amortization Expense 2024 $ 688 2025 421 2026 315 Total $ 1,424 Note 11 — Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following items as of: Schedule of Accrued Expenses and Other Current Liabilities December 31, 2023 December 31, 2022 Compensation and Employee Benefits $ 1,178 $ 879 CWRU Amended License Agreement - Royalty fee 96 10 Operating expenses 2,018 558 Other 549 — Total accrued expenses and other current liabilities $ 3,841 $ 1,447 F- 19 Note 12 — Financial Instruments Fair Value Measurements Recurring Fair Value Measurements The fair value hierarchy table for the reporting date noted is as follows: Schedule of Financial Liabilities Measured at Fair Value on Recurring Basis Fair Value Measurement on a Recurring Basis at Reporting Date Using 1 Level-1 Inputs Level-2 Inputs Level-3 Inputs Total December 31, 2023 March 2023 Senior Convertible Note $ — $ — $ 13,950 $ 13,950 Totals $ — $ — $ 13,950 $ 13,950 1 There were no transfers between the respective Levels during the year ended December 31, 2023. As discussed in Note 13, Debt , the Company issued a Senior Secured Convertible Note dated March 21, 2023 with a $ 11.1 million face value principal (“March 2023 Senior Convertible Note”). The convertible note is accounted for under the ASC 825-10-15-4 fair value option (“FVO”) election, wherein, the financial instrument is initially measured at its issue date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The estimated fair value of the financial instruments classified within the Level 3 category was determined using both observable inputs and unobservable inputs. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs. The estimated fair value of the March 2023 Senior Convertible Note as of each of March 21, 2023 (date of issuance) and December 31, 2023 were computed using a Monte Carlo simulation of the present value of its cash flows using a synthetic credit rating analysis and a required rate-of-return, using the following assumptions: Schedule of Fair Value Assumption Used March 2023 Senior Convertible Note: March 21, 2023 March 2023 Senior Convertible Note: December 31, 2023 Fair Value $ 11,900 $ 13,950 Face value principal payable $ 11,111 $ 11,019 Required rate of return 11.00 % 10.00 % Conversion Price $ 5.00 $ 5.00 Value of common stock $ 1.54 $ 1.41 Expected term (years) 2.00 1.22 Volatility 75.00 % 60.00 % Risk free rate 4.09 % 4.56 % Dividend yield — % — % The estimated fair values reported utilized the Company’s common stock price along with certain Level 3 inputs (as discussed in the table above), in the development of Monte Carlo simulation models, discounted cash flow analyses, and /or Black-Scholes valuation models. 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. Treasury security yields, and certain other Level-3 inputs including, assumptions regarding the estimated volatility in the value of the Company’s common stock price and the volatility of similar entities within the medical device industry. Changes in these assumptions can materially affect the estimated fair values. F- 20 Note 13 — Debt The fair value and face value principal outstanding of the March 2023 Senior Convertible Note as of the dates indicated are as follows: Summary of Outstanding Debt Contractual Maturity Date Stated Interest Rate Conversion Price per Share Face Value Principal Outstanding Fair Value March 2023 Senior Convertible Note March 21, 2025 7.875 % $ 5.00 $ 11,019 $ 13,950 Balance as of December 31, 2023 $ 11,019 $ 13,950 The changes in the fair value of debt during the year ended December 31, 2023 is as follows: Schedule of Changes in Fair Value of Debt March 2023 Senior Convertible Note Other Income (expense) Fair Value - December 31, 2022 $ — $ — Face value principal – issue date 11,111 $ — Fair value adjustment – issue date 789 ( 789 ) Installment repayments – common stock ( 92 ) — Non-installment payments – common stock ( 49 ) — Change in fair value 2,191 ( 2,191 ) Fair Value at December 31, 2023 $ 13,950 - Other Income (Expense) - Change in fair value – year ended December 31, 2023 $ ( 2,980 ) March 2023 Senior Secured Convertible Note Lucid Diagnostics entered into a Securities Purchase Agreement (“SPA”) dated March 13, 2023, with an accredited institutional investor (“Investor”, “Lender”, and /or “Holder”), wherein Lucid agreed to sell, and the Investor agreed to purchase, an aggregate of $ 11.1 million face value principal of debt. Under the SPA, Lucid issued in a registered direct offering under its effective shelf registration statement a Senior Secured Convertible Note dated March 21, 2023, referred to herein as the “March 2023 Senior Convertible Note”, with such note having a $ 11.1 million face value principal, 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 March 21, 2025. The March 2023 Senior Convertible Note may be converted into shares of common stock of the Company at the Holder’s election. The March 2023 Senior Convertible Note proceeds were $ 9.925 million after deducting a $ 1.186 million lender fee and offering costs. The lender fee and offering costs were recognized as of the March 21, 2023 issue date as a current period expense in other income (expense) in the Company’s consolidated statement of operations. During the period from March 21, 2023 to September 20, 2023, the Company was required to pay interest expense only (on the $11.1 million face value principal), at 7.875 % per annum, computed on a 360 day year. The Company paid in cash interest expense of $ 391 for the year ended December 31, 2023. F- 21 Note 13 — Debt - continued Commencing September 21, 2023, and then on each of the successive first and tenth trading day of each month thereafter through to and including March 14, 2025 (each referred to as an “Installment Date”); and on the March 21, 2025 maturity date, the Company will be required to make a principal repayment of $ 292 together with accrued interest thereon, with such 38 payments referred to herein as the “Installment Amount”, settled in shares of common stock of the Company, subject to customary equity conditions, including minimum share price and volume thresholds, or at the election of the Company, in cash, in whole or in part. In addition to the Installment Amount repayments, the Holder may elect to accelerate the conversion of future Installment Amount repayments, and interest thereon, subject to certain restrictions, as defined, utilizing the then current conversion price of the most recent Installment Date conversion price. The payment of all amounts due and payable under this senior convertible note is guaranteed by all of Lucid Diagnostics’ subsidiaries; and the obligations under this senior convertible note are secured by all of the assets of Lucid Diagnostics and its subsidiaries. Lucid is subject to certain customary affirmative and negative covenants regarding the rank of the note, along with the incurrence of further 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. Lucid is subject to financial covenants requiring: (i) a minimum of $5.0 million of available cash at all times; (ii) the ratio of (a) the outstanding principal amount of the total senior convertible notes outstanding, 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, as of the last day of any fiscal quarter commencing with September 30, 2023, to not exceed 30%; and (iii) the Company’s market capitalization to at no time be less than $30 million. As of December 31, 2023, the Company was in compliance, and as of the date hereof, the Company is in compliance, with the Financial Tests. The March 2023 Senior Convertible Note installment payments may be made in shares of Lucid Diagnostics common stock at a conversion price that is the lower of the contractual conversion price and 82.5 % of the two lowest VWAPs during the last 10 trading days preceding the date of conversion, subject to a conversion price floor of $ 0.30 . The notes are also subject to certain provisions that may require redemption upon the occurrence of an event of default, a change of control, or certain equity issuances. In the year ended December 31, 2023, approximately $ 92 of principal repayments along with approximately $ 48 of interest expense thereon, were settled through the issuance of 115,388 shares of common stock of the Company, with such shares having a fair value of approximately $ 166 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company). The conversions resulted in a debt extinguishment loss of $ 26 in the year ended December 31, 2023. Subsequent to December 31, 2023, as of March 21, 2024, approximately $ 260 of interest expense thereon, was settled through the issuance of 242,390 shares of common stock of the Company, with such shares having a fair value of approximately $ 359 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company). Note 14 — Stock-Based Compensation Lucid Diagnostics 2018 Long-Term Incentive Equity Plan The Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan (“Lucid Diagnostics 2018 Equity Plan”) is separate and apart from the PAVmed 2014 Equity Plan discussed below. The Lucid Diagnostics 2018 Equity Plan is designed to enable Lucid Diagnostics to offer employees, officers, directors, and consultants, an opportunity to acquire shares of common stock of Lucid Diagnostics. The types of awards that may be granted under the Lucid Diagnostics 2018 Equity Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the Lucid Diagnostics compensation committee. A total of 11,644,000 shares of common stock of Lucid Diagnostics are reserved for issuance under the Lucid Diagnostics 2018 Equity Plan, with 2,832,133 shares available for grant as of December 31, 2023. The share reservation is not diminished by a total of 423,300 stock options and 50,000 restricted stock awards granted outside the Lucid Diagnostics 2018 Equity Plan, as of December 31, 2023. In January 2024, the number of shares available for grant was increased by 2,680,038 in accordance with the evergreen provisions of the plan. F- 22 Note 14 — Stock-Based Compensation - continued Lucid Diagnostics Stock Options Lucid Diagnostics stock options granted under the Lucid Diagnostics 2018 Equity Plan and stock options granted outside such plan are summarized as follows: Schedule of Stock Options Issued and Outstanding Activities Number of Stock Options Weighted Average Exercise Price Remaining Contractual Term (Years) Intrinsic Value (2) Outstanding stock options at December 31, 2021 1,419,242 $ 0.73 7.0 Granted (1) 2,365,000 $ 3.68 Exercised ( 965,342 ) $ 0.72 Forfeited ( 253,523 ) $ 3.83 Outstanding stock options at December 31, 2022 2,565,377 $ 3.14 8.3 $ 428 Granted (1) 3,618,000 $ 1.32 Exercised — $ — Forfeited ( 678,994 ) $ 2.75 Outstanding stock options at December 31, 2023 (3) 5,504,383 $ 2.00 8.5 $ 765 Vested and exercisable stock options at December 31, 2023 2,339,527 $ 2.30 7.8 $ 529 (1) Stock options granted under the Lucid Diagnostics 2018 Equity Plan and those granted outside such plan generally vest one-third in one year then ratably over the next eight quarters, and have a ten-year contractual term from date-of-grant. (2) The intrinsic value is computed as the difference between the quoted price of the Lucid Diagnostics common stock on each of December 31, 2023 and December 31, 2022 and the exercise price of the underlying Lucid Diagnostics stock options, to the extent such quoted price is greater than the exercise price. (3) The outstanding stock options presented in the table above, are inclusive of 423,300 stock options granted outside the Lucid Diagnostics 2018 Equity Plan, as of December 31, 2023 and December 31, 2022. Subsequent to December 31, 2023 , on February 22, 2024, the company granted 2,895,000 stock options to employees and directors under the Lucid Diagnostics Inc 2018 Equity Plan with a weighted average exercise price of $ 1.25 for which will generally vest one-third after one year then ratably over the next eight quarters. Lucid Diagnostics Restricted Stock Awards Lucid Diagnostics restricted stock awards granted under the Lucid Diagnostics 2018 Equity Plan and restricted stock awards granted outside such plan are summarized as follows: Schedule of Restricted Stock Award Activity Number of Restricted Stock Awards Weighted Average Grant Date Fair Value Unvested restricted stock awards as of December 31, 2021 1,940,740 $ 12.76 Granted 320,000 4.53 Vested ( 169,320 ) 13.48 Forfeited — — Unvested restricted stock awards as of December 31, 2022 (1) 2,091,420 $ 11.44 Granted 550,000 1.29 Vested ( 303,980 ) 11.95 Forfeited — — Unvested restricted stock awards as of December 31, 2023 2,337,440 $ 8.99 (1) The unvested restricted stock awards presented in the table above, are inclusive of 50,000 restricted stock awards granted outside the Lucid Diagnostics 2018 Equity Plan as of December 31, 2022. These 50,000 restricted stock awards were fully vested during the year ended December 31, 2023. PAVmed Inc. 2014 Equity Plan The PAVmed 2014 Long-Term Incentive Equity Plan (the “PAVmed 2014 Equity Plan”), is separate and apart from the Lucid Diagnostics 2018 Equity Plan (as such equity plan is discussed above). F- 23 Note 14 — Stock-Based Compensation - continued Stock-Based Compensation Expense The stock-based compensation expense recognized by the Company for both the Lucid Diagnostics 2018 Equity Plan and the PAVmed 2014 Equity Plan, for the periods indicated, was as follows: Schedule of Stock-Based Compensation Expense 2023 2022 Years Ended December 31, 2023 2022 Lucid Diagnostics 2018 Equity Plan – cost of revenue $ 63 $ 13 Lucid Diagnostics 2018 Equity Plan – sales and marketing 948 968 Lucid Diagnostics 2018 Equity Plan - general and administrative 4,455 12,691 Lucid Diagnostics 2018 Equity Plan - research and development 296 187 PAVmed 2014 Equity Plan - cost of revenue 37 3 PAVmed 2014 Equity Plan - sales and marketing 463 654 PAVmed 2014 Equity Plan - general and administrative 173 262 PAVmed 2014 Equity Plan - research and development 387 213 Total stock-based compensation expense $ 6,822 $ 14,991 The stock-based compensation expense, as presented above, is inclusive of: stock options and restricted stock awards granted under the Lucid Diagnostics 2018 Equity Plan to employees of PAVmed, the physician inventors of the technology licensed under the Amended CWRU License Agreement, and members of the board of directors of Lucid Diagnostics, as well as the stock options granted under the PAVmed 2014 Equity Plan to the physician inventors. As of December 31, 2023, unrecognized stock-based compensation expense and weighted average remaining requisite service period with respect to stock options and restricted stock awards issued under each of the Lucid Diagnostics 2018 Equity Plan and the PAVmed 2014 Equity Plan, as discussed above, is as follows: Schedule of Unrecognized Compensation Expense and Weighted Average Remaining Service Period Unrecognized Expense Weighted Average Remaining Service Period (Years) Lucid Diagnostics 2018 Equity Plan Stock Options $ 3,566 2.0 Restricted Stock Awards $ 1,167 2.2 PAVmed 2014 Equity Plan Stock Options $ 432 2.1 Stock-based compensation expense recognized with respect to stock options granted under the Lucid Diagnostics 2018 Equity Plan was based on a weighted average estimated fair value of such stock options of $ 0.88 per share and $ 2.30 per share during the years ended December 31, 2023 and 2022, respectively, calculated using the following weighted average Black-Scholes valuation model assumptions: Schedule of Stock-based Compensation Valuation Assumptions 2023 2022 Years Ended December 31, 2023 2022 Expected term of stock options (in years) 5.6 5.6 Expected stock price volatility 74 % 71 % Risk free interest rate 3.9 % 2.1 % Expected dividend yield — % — % Lucid Diagnostics Inc Employee Stock Purchase Plan (“Lucid ESPP”) A total of 231,987 shares of common stock of Lucid Diagnostics were purchased for proceeds of approximately $ 276 on March 31, 2023 under the Lucid ESPP. A total of 276,213 and 84,030 shares of common stock of Lucid Diagnostics were purchased for proceeds of approximately $ 275 and $ 109 on September 30, 2023 and 2022, respectively, under the Lucid ESPP. The Lucid ESPP has a total reservation of 1,000,000 shares of common stock of which 407,770 shares are available for issue as of December 31, 2023. In January 2024, our board authorized an increase in the number of shares available for issue by 500,000 . F- 24 Note 15 — Stockholders’ Equity Series A Preferred Stock Offering On March 7, 2023, the Company issued 13,625 shares of newly designated Series A Convertible Preferred Stock, par value $ 0.001 per share (the “Series A Preferred Stock”), to accredited investors at a purchase price of $ 1,000 per share, for aggregate gross proceeds to the Company of $ 13.625 million. In connection with the issuance the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series A Preferred Stock with the Secretary of State of the State of Delaware (the “Certificate of Designation”). The key terms of the Series A Preferred Stock are as follows: Each share of Series A Preferred Stock is convertible at the option of the holder, subject to certain beneficial ownership limitations into such number of shares of the Company’s common stock, equal to the number of Series A Preferred Shares to be converted, multiplied by the stated value of $ 1,000 (the “Stated Value”), divided by the conversion price in effect at the time of the conversion. The initial conversion price is $ 1.394 , subject to adjustment in the event of stock splits, stock dividends, and similar transactions. 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 March 7, 2025, the second anniversary of its issuance. The Series A Preferred Stock will be senior to the Common Stock and any other class of the Company’s capital stock that is not by its terms senior to or pari passu with the Series A Preferred Stock. The holders of Series A Preferred Stock will be entitled to dividends payable as follows: (i) a number of shares of Common Stock equal to 20% of the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock then held by such Holder on March 7, 2024, and (ii) a number of shares of Common Stock equal to 20% of the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock then held by such Holder on March 7, 2025. A holder that converts its Series A Preferred Stock prior to March 7, 2024 or March 7, 2025, as the case may be, will not receive the dividend that accrues on such date with respect to such converted Series A Preferred Stock. The holders of the Series A Preferred Stock also will be entitled to dividends equal, on an as-if-converted to shares of Common Stock basis, to and in the same form as dividends actually paid on shares of the Common Stock when, as, and if such dividends are paid on shares of the Common Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company (or any Deemed Liquidation Event as defined in the Certificate of Designation), the holders of shares of Series A Preferred Stock then outstanding will be entitled to be paid out of the assets of the Company available for distribution to its stockholders, before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Stated Value, plus any dividends accrued but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Common Stock immediately prior to such event. 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 Company will not effect any conversion of the Series A Preferred Stock, and a holder will not have the right to receive dividends or convert any portion of the Series A Preferred Stock, to the extent that, after giving effect to the receipt of dividends or the conversion, the holder (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of the holder’s affiliates) would beneficially own in excess of 4.99% of the Company’s outstanding common stock (or, upon election of the holder, 9.99% of the Company’s outstanding common stock). The Company and the investors in the offering also executed a registration rights agreement (the “Series A Registration Rights Agreement”), pursuant to which the Company agreed to file a registration statement covering the resale of the shares of Common Stock issuable pursuant to the Series A Preferred Stock. Series A-1 Preferred Stock Offering On October 17, 2023, the Company issued 5,000 shares of newly designated Series A-1 Convertible Preferred Stock (the “Series A-1 Preferred Stock”). The terms of the Series A-1 Preferred Stock are substantially identical to the terms of the Series A Preferred Stock, except that the Series A-1 Preferred Stock has a conversion price of $ 1.2592 . The aggregate gross proceeds from the sale of shares in such offering were $ 5.0 million. The Company and the investors in the offering also executed a registration rights agreement (the “Series A-1 Registration Rights Agreement”), pursuant to which the Company agreed to file a registration statement covering the resale of the shares of Common Stock issuable pursuant to the Series A-1 Preferred Stock. Subsequent to December 31, 2023, on March 13, 2024, the Company issued an additional 5,670 shares of Series A-1 Preferred Stock, all of which was subsequently exchanged for Series B Preferred Stock (as described below). Series B Preferred Stock Offering and Exchange Subsequent to December 31, 2023, on March 13, 2024, the Company issued 44,285 shares of newly designated Series B Convertible Preferred Stock (the “Series B Preferred Stock”). The terms of the Series B Preferred Stock are substantially identical to the terms of the Series A Preferred Stock, except that the Series B Preferred Stock has a conversion price of $ 1.2444 , and the Series B Preferred Stock is a voting security (subject to applicable ownership limitations). In addition, the Series B Preferred Stock issued in exchange for Series A Preferred Stock and Series A-1 Preferred Stock may be converted, at the election of the Company at any time after the six-month anniversary of the issuance of such shares of Series B Preferred Stock, upon written notice given to the holders of such shares, if the volume weight average price of our common stock has been at least $ 8.00 per share (subject to adjustment in the event of stock splits, stock dividends, and similar transactions) on 20 out of 30 consecutive trading days ending within 15 trading days prior to the date on which such notice is given (subject to certain limited exceptions). The aggregate gross proceeds from the sale of shares in such offering were $ 18.1 million. 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 Preferred Stock Offering and Exchange, no shares of Series A Preferred Stock or Series A-1 Preferred Stock remain outstanding. Lucid Diagnostics Common Stock In June 2023, the Company received shareholder approval to issue up to 200 million shares of its common stock, an increase of 100 million shares. As of December 31, 2023 and 2022 there were 42,329,864 and 40,518,792 shares of common stock issued and outstanding, respectively. As of December 31, 2023, PAVmed holds 31,302,420 shares, representing a majority-interest equity ownership and PAVmed has a controlling financial interest in the Company. F- 25 Note 15 — Stockholders’ Equity - continued Subsequent to December 31, 2023, on January 26, 2024 PAVmed elected to receive payment of $ 4,675 of fees and reimbursements due from Lucid, through the issuance of 3,331,771 shares of Lucid Diagnostics common stock. Substantially all of such shares were distributed by PAVmed to its shareholders on February 15, 2024. Following such distribution PAVmed holds 31,302,444 shares of Lucid Diagnostics common stock. Committed Equity Facility and ATM Facility On March 28, 2022, the Company entered into a committed equity facility with an affiliate of Cantor Fitzgerald (“Cantor”). Under the terms of the committed equity facility, Cantor has committed to purchase up to $ 50 million of the Company’s common stock from time to time at the request of the Company. While there are distinct differences, the facility is structured similarly to a traditional at-the-market equity facility, insofar as it allows the Company to raise primary equity capital on a periodic basis at prices based on the existing market price. Cumulatively a total of 680,263 shares of Lucid Diagnostics’ common stock were issued for net proceeds of approximately $ 1.8 million, after a 4 % discount, as of December 31, 2023. In November 2022, the Company entered into an “at-the-market offering” (“ATM”) for up to $ 6.5 million of its common stock that may be offered and sold under a Controlled Equity Offering Agreement between the Company and Cantor. In the year ended December 31, 2023, the Company sold 230,068 shares through the at-the-market equity facility for net proceeds of approximately $ 0.3 million, after payments of 3 % commissions. Note 16 — Income Taxes Income tax (benefit) expense for respective periods noted is as follows: Schedule of Income Tax (Benefit) Expense 2023 2022 Years Ended December 31, 2023 2022 Current Federal, State and Local $ — $ — Deferred Federal ( 9,281 ) ( 12,703 ) State and Local ( 6,897 ) 1,209 Current and Deferred tax (benefit) expense ( 16,178 ) ( 11,494 ) Less: Valuation allowance reserve 16,178 11,494 Income tax (benefit) expense $ — $ — The reconciliation of the federal statutory income tax rate to the effective income tax rate for the respective period noted is as follows: Schedule of Reconciliation of Federal Statutory Income Tax Rate 2023 2022 Years Ended December 31, 2023 2022 U.S. federal statutory rate 21.0 % 21.0 % U.S. state and local income taxes, net of federal benefit 6.4 % 7.2 % Permanent differences ( 1.3 )% 0.6 % Tax credits 1.5 % 0.5 % Revaluation of state deferred taxes — % ( 8.8 )% Federal deferred true-up ( 0.7 )% — % State deferred true-up 3.8 % — % Valuation allowance ( 30.7 )% ( 20.5 )% Effective tax rate — % — % The tax effects of temporary differences which give rise to the net deferred tax assets for the respective period noted is as follows: Schedule of Net Deferred Tax Assets 2023 2022 Years Ended December 31, 2023 2022 Deferred Tax Assets Net operating loss $ 29,059 $ 16,015 Debt issue costs 55 — Stock-based compensation expense 7,984 6,920 Accrued expenses 111 80 Depreciation & amortization 790 240 Research and development expenditures 3,109 2,442 Research and development tax credit carryforwards 1,062 295 Deferred tax assets $ 42,170 $ 25,992 Deferred Tax Liabilities Depreciation — — Deferred Tax Liabilities $ — $ — Deferred tax assets, net of deferred tax liabilities 42,170 25,992 Less: valuation allowance ( 42,170 ) ( 25,992 ) Deferred tax assets, net after valuation allowance $ — $ — F- 26 Note 16 — Income Taxes - continued Deferred tax assets and deferred tax liabilities resulting from temporary differences are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of the change in the tax rate is recognized as income or expense in the period the change in tax rate is enacted. As required by FASB ASC Topic 740, Income Taxes, (“ASC 740”), a “more-likely-than-not” criterion is applied when assessing the estimated realization of deferred tax assets through their utilization to reduce future taxable income, or with respect to a deferred tax asset for tax credit carryforward, to reduce future tax expense. A valuation allowance is established, when necessary, to reduce deferred tax assets, net of deferred tax liabilities, when the assessment indicates it is more-likely-than-not, the full or partial amount of the net deferred tax asset will not be realized. Accordingly, the Company evaluated the positive and negative evidence bearing upon the estimated realizability of the net deferred tax assets, and based on the Company’s history of operating losses, concluded it is more-likely-than-not the deferred tax assets will not be realized, and therefore recognized a valuation allowance reserve equal to the full amount of the deferred tax assets, net of deferred tax liabilities, as of December 31, 2023 and 2022. Lucid Diagnostics has federal and state net operating loss (“NOL”) carryforwards, available to reduce future taxable income, if any, as of December 31, 2023 and 2022, as follows: federal NOL carryforward of approximately $ 103.5 million and $ 65.1 million, respectively, with such federal NOL carryforward not having a statutory expiration date; and state NOL carryforward of approximately $ 103.5 million and $ 65.1 million, respectively, with such state NOL carryforward having statutory expiration dates commencing in 2037 . The Company has not yet conducted a formal analysis and the NOL carryforward may be subject-to limitation under U.S. Internal Revenue Code (“IRC”) Section 382 (provided there was a greater than 50% ownership change, as computed under such IRC Section 382). As discussed herein, on October 14, 2021, Lucid Diagnostics completed its initial public offering (“IPO”) of its common stock. While PAVmed Inc. holds a majority-interest equity ownership and has a controlling financial interest, its ownership interest was reduced from 81.8477% before the IPO to 79.9796% after the IPO. Accordingly, Lucid Diagnostics is included in the PAVmed consolidated income tax returns through October 13, 2021, and effective October 14, 2021, Lucid Diagnostics will file its income tax returns on a stand-alone legal entity basis. The Lucid Diagnostics stand-alone legal entity estimated income tax provision was computed on an assumed separate income tax return for the periods presented through October 13, 2021, wherein, the estimated income tax provision of Lucid Diagnostics is computed as if its income tax returns were filed by Lucid Diagnostics on a stand-alone legal entity basis. Notwithstanding the absence of a formal tax sharing agreement between PAVmed and Lucid Diagnostics, the Lucid Diagnostics stand-alone legal entity current tax expense and /or tax refund, if any, would be settled with PAVmed(as opposed with the respective tax authority) through October 13, 2021. The deferred tax asset and /or deferred tax liability; a valuation allowance on the deferred tax asset, net; and /or an uncertain tax position, if any; each as discussed above, is determined based on Lucid Diagnostics stand-alone legal entity assumed filing of separate income tax returns. The Company files income tax returns in the United States in federal and applicable state and local jurisdictions. The Company’s tax filings for the years 2018 and thereafter each remain subject to examination by taxing authorities. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. The Company has not recognized any penalties or interest related to its income tax provision. In August 2022, the U.S. Congress passed the Inflation Reduction Act, which included a corporate minimum tax on book earnings of 15%, an excise tax on corporate share repurchases of 1%, and certain climate change and energy tax credit incentives. The adoption of a corporate minimum tax of 15% is not expected to impact Lucid’s effective tax rate. The excise tax of 1% on corporate share buybacks will not have an impact on the Company’s effective tax rate. F- 27 Note 17 — Net Loss Per Share The Net loss per share basic and diluted for the respective periods indicated is as follows: Schedule of Net Loss Per Share Basic and Diluted 2023 2022 Years Ended December 31, 2023 2022 Numerator Net loss $ ( 52,666 ) $ ( 56,171 ) Denominator Weighted average common shares outstanding, basic and diluted 41,756,129 36,172,421 Net loss per share (1) Net loss per share - basic and diluted $ ( 1.26 ) $ ( 1.55 ) (1) - Convertible Preferred Stock would potentially be considered a participating security under the two-class method of calculating net loss per share. However, the Company has incurred net losses to-date, and as such holders are not contractually obligated to share in the losses, there is no impact on the Company’s net loss per share calculation for the periods indicated. Basic weighted-average number of shares of common stock outstanding for the years ended December 31, 2023 and 2022 include the shares of the Company issued and outstanding during such periods, each on a weighted average basis. The basic weighted average number of shares common stock outstanding excludes common stock equivalent incremental shares, while diluted weighted average number of shares outstanding includes such incremental shares. However, as the Company was in a loss position for all years presented, basic and diluted weighted average shares outstanding are the same, as the inclusion of the incremental shares would be anti-dilutive. The common stock equivalents excluded from the computation of diluted weighted average shares outstanding are as follows: Schedule of Common Stock Equivalents Excluded from Computation of Diluted Earnings Per Share 2023 2022 December 31, 2023 2022 Stock options 5,504,383 2,565,377 Unvested restricted stock awards 2,337,440 2,091,420 Preferred stock 13,744,812 — Total 21,586,635 4,656,797 F- 28