What changed in this filing

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Item 1. Business

2025-03-24 compared with 2024-03-25 · 1041 added, 864 removed, 26 unchanged (99% of the section changed)

Diagnostics Inc.

(“Lucid”) is a commercial-stage medical diagnostics technology company focused on the millions of patients

with gastroesophageal reflux disease (“GERD”), also known as chronic heartburn, acid reflux or simply reflux, who are at

risk of developing esophageal precancer and cancer, specifically highly lethal esophageal adenocarcinoma (“EAC”).

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

its subsidiaries.

believe that our flagship product, the EsoGuard Esophageal DNA Test, performed on samples collected with the EsoCheck Esophageal Cell

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

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

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

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

Analytical validation tests of EsoGuard demonstrated

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

intra-assay precision.

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

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

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

(95% CI 81-91%).

Positive predictive value ( PPV) and negative predictive value (NPV) were calculated

using a BE prevalence of 10.6% published in a meta-analysis of U.S patients with GERD.

This resulted in a PPV of approximately

42% and NPV of around 98% .

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

in a less than five-minute office procedure.

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

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

When vacuum suction is applied,

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

region during device withdrawal.

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

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

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

EsoCheck have been developed to provide accurate, non-invasive, patient-friendly testing 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.

2023, approximately 20,000 U.S.

GERD patients are projected to be diagnosed with EAC and approximately 16,000 will die from it.

80% of EAC patients will die within five years of diagnosis, making it the second most lethal cancer in the U.S.

EAC has increased 500% over the past four decades, while the incidences of other common cancers have declined or remained flat.

all cases, EAC silently progresses until it manifests itself with new symptoms of advanced disease.

EAC is nearly always invasive at

diagnosis, and, unlike other common cancers, mortality rates are high even in its earlier stages.

discussed below under the heading “Clinical Guidelines for At-Risk Population”, in July 2022, the American Gastroenterology

Association (“AGA”) significantly expanded the target population for esophageal precancer screening, recommending screening

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

and “Lucid Diagnostics” refer to Lucid Diagnostics Inc.

and its subsidiaries LucidDx Labs Inc.

(“LucidDx Labs”)

and CapNostics, LLC (“CapNostics”).

Background and Overview

Lucid Diagnostics 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”).

We believe that our flagship

product, the EsoGuard Esophageal DNA Test, performed on samples collected with the EsoCheck Esophageal Cell Collection Device, constitutes

the first and only commercially available diagnostic test capable of serving as a widespread testing tool with the goal of preventing

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

EsoGuard is a bisulfite-converted

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

It quantifies methylation

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

Analytical validation tests of EsoGuard demonstrated approximately 97%

analytical sensitivity, 95% analytical specificity, approximately 98% analytical accuracy, and 100% inter-assay and intra-assay precision.

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

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

A pooled analysis of both studies

demonstrated 84% sensitivity (95% confidence interval (“CI”) 76-90%), for detection of BE, and 86% specificity (95% CI 81-91%).

predictive value (PPV) and negative predictive value (NPV) were calculated using a BE prevalence of 10.6% published in a meta-analysis

of U.S patients with GERD.

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

EsoCheck is an FDA 510(k) and

CE Mark cleared noninvasive swallowable balloon capsule catheter device capable of sampling surface esophageal cells in a less than five-minute

office procedure.

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

balloon with textured ridges emerges to gently swab surface esophageal cells.

When vacuum suction is applied, the balloon and sampled

cells are pulled into the capsule, protecting them from contamination and dilution by cells outside of the targeted region during device

We believe 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 accurate, non-invasive, patient-friendly testing 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.

Market Opportunity

In 2024, approximately 22,000

GERD patients were diagnosed with EAC and approximately 16,000 will die from it.

Over 80% of EAC patients will die within five years

of diagnosis, making it the second most lethal cancer in the U.S.

incidence of EAC has increased 500% over the past four decades,

while the incidences of other common cancers have declined or remained flat.

In nearly all cases, EAC silently progresses until it manifests

itself with new symptoms of advanced disease.

EAC is nearly always invasive at diagnosis, and, unlike other common cancers, mortality

rates are high even in its earlier stages.

As discussed below under the

heading “Clinical Guidelines for At-Risk Population”, in July 2022, the American Gastroenterology Association (“AGA”)

significantly expanded the target population for esophageal precancer screening, recommending screening in at-risk patients without symptoms

Based on this revision, we believe the cohort recommended for screening consists of an estimated 30 million U.S.

with at least 3 established risk factors for BE.

Accordingly, we believe EsoGuard’s total addressable U.S.

market opportunity approximates

$60 billion based on an effective Medicare payment of $1,938 and the estimated 30 million U.S.

patients recommended for screening by

clinical practice guidelines.

(In December 2019, we secured “gapfill” determination for EsoGuard’s PLA code 0114U through

the CMS CLFS process.

This allowed us to engage directly with Medicare contractor Palmetto GBA and its MolDx Program on CMS payment and

As discussed below under the heading “Reimbursement and Market Access”, in October 2020, CMS granted EsoGuard final

Medicare payment determination of $1,938.01, effective January 1, 2021.)

Unfortunately, for a variety

of reasons, less than 10% of at-risk patients who are recommended for screening undergo traditional invasive upper gastrointestinal endoscopy

We believe that the profound tragedy of an EAC diagnosis is that likely death could have been prevented if the at-risk patient

had been screened and then undergone surveillance and curative endoscopic esophageal ablation of dysplastic BE.

Since mortality rates are high

even in early stage EAC, preventing EAC deaths requires detection and intervention at the precancer stage.

Most of the necessary elements

for such an early detection program are already well established—an at-risk population (at-risk GERD patients), a precancer (BE),

and an intervention which can halt progression to EAC (endoscopic esophageal ablation).

Until recently, the only missing element for

such an early detection program is a widespread screening tool that can detect BE prior to EAC.

We believe EsoGuard, used with

EsoCheck, constitutes that missing element—the first and only commercially available diagnostic test capable of serving as a widespread

testing tool with the goal of preventing EAC deaths through early detection of esophageal precancer and cancer in patients with 3 or

more risk factors.

Clinical Guidelines for At-Risk Population

The subgroup of long-standing

or severe GERD patients at-risk for BE and progression to EAC is well defined in clinical practice guidelines, including the American

College of Gastroenterology (“ACG”) BE Guidelines.

In its Recommendation 5, the ACG suggests a single screening endoscopy

in patients with chronic GERD symptoms and 3 or more additional risk factors for BE, including male sex, age greater than 50 years, White

race, tobacco smoking, obesity, and family history of BE or EAC in a first-degree relative.

An ACG clinical guideline entitled

“ Diagnosis and Management of Barrett’s Esophagus:

An Updated ACG Guideline ,” the first such update since 2016,

was published online in April 2022 in the American Journal of Gastroenterology.

The clinical guideline reiterates the ACG’s long-standing

recommendation for esophageal precancer screening in at-risk patients with GERD.

For the first time, however, the clinical guideline

also endorses non-endoscopic biomarker screening as an acceptable alternative to costly and invasive endoscopy stating that “a

swallowable non-endoscopic capsule device combined with a biomarker is an acceptable alternative to endoscopy for BE.” The clinical

guideline specifically mentions EsoCheck as such a swallowable, non-endoscopic esophageal cell collection device, as well as methylated

DNA biomarkers such as EsoGuard.

The summary of evidence for this recommendation includes a reference to the seminal NIH-funded, multicenter,

case-control study published in 2018 in Science Translational Medicine , which demonstrated that EsoGuard is highly accurate at

detecting esophageal precancer and cancer, including on samples collected with EsoCheck.

In July 2022, the American Gastroenterology

Association (“AGA”) published in their “Clinical Practice Update on New Technology and Innovation for Surveillance

and Screening in Barrett’s Esophagus” updated clinical guidance that mirrors the same furnished by the ACG as described above,

endorsing the use of non-endoscopic cell collection tools to screen for BE like our EsoCheck Cell Collection Device, which is cited in

the update, as an acceptable alternative to endoscopy to directly address the need for noninvasive screening tools that are easy to administer,

patient friendly, and cost-effective for the detection of BE.

The clinical practice update by the AGA also significantly expands the

target population for esophageal precancer screening, including for EsoGuard and EsoCheck, by recommending, for the first time, screening

in at-risk patients without symptoms of GERD.

Based on this revision, we believe the cohort recommended for screening consists of an

estimated 30 million U.S.

individuals with at least 3 established risk factors for BE.

Accordingly, we believe EsoGuard’s total

addressable U.S.

market opportunity approximates $60 billion based on an effective Medicare payment of $1,938 and the estimated 30 million

patients recommended for screening by clinical practice guidelines.

(In December 2019, we secured “gapfill” determination

for EsoGuard’s PLA code 0114U through the CMS CLFS process.

This allowed us to engage directly with Medicare contractor Palmetto

GBA and its MolDx Program on CMS payment and coverage.

As discussed below under the heading “Reimbursement and Market Access”,

in October 2020, CMS granted EsoGuard final Medicare payment determination of $1,938.01, effective January 1, 2021.)

Unfortunately,

for a variety of reasons, less than 10% of at-risk patients who are recommended for screening undergo traditional invasive upper gastrointestinal

endoscopy (EGD).

We believe that the profound tragedy of an EAC diagnosis is that likely death could have been prevented if the at-risk

patient had been screened and then undergone surveillance and curative endoscopic esophageal ablation of dysplastic BE.

mortality rates are high even in early stage EAC, preventing EAC deaths requires detection and intervention at the precancer stage.

of the necessary elements for such an early detection program are already well established—an at-risk population (at-risk GERD

patients), a precancer (BE), and an intervention which can halt progression to EAC (endoscopic esophageal ablation).

Until recently,

the only missing element for such an early detection program is a widespread screening tool that can detect BE prior to EAC.

believe EsoGuard, used with EsoCheck, constitutes that missing element—the first and only commercially available diagnostic test

capable of serving as a widespread testing tool with the goal of preventing EAC deaths through early detection of esophageal precancer

and cancer in patients with 3 or more risk factors.

Guidelines for At-Risk Population

subgroup of long-standing or severe GERD patients at-risk for BE and progression to EAC is well defined in clinical practice guidelines,

including the American College of Gastroenterology (“ACG”) BE Guidelines.

In its Recommendation 5, the ACG suggests a single screening

endoscopy in patients with chronic GERD symptoms and 3 or more additional risk factors for BE, including male sex, age greater than 50

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

ACG clinical guideline entitled “ Diagnosis and Management of Barrett’s Esophagus:

An Updated ACG Guideline ,”

the first such update since 2016, was published online in April 2022 in the American Journal of Gastroenterology.

The clinical guideline

reiterates the ACG’s long-standing recommendation for esophageal precancer screening in at-risk patients with GERD.

For the first

time, however, the clinical guideline also endorses nonendoscopic biomarker screening as an acceptable alternative to costly and invasive

endoscopy stating that “a swallowable nonendoscopic capsule device combined with a biomarker is an acceptable alternative to endoscopy

for BE.” The clinical guideline specifically mentions EsoCheck, along with our EsophaCap® device, as such swallowable, nonendoscopic

esophageal cell collection devices, as well as methylated DNA biomarkers such as EsoGuard.

The summary of evidence for this recommendation

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

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

July 2022, the American Gastroenterology Association (“AGA”) published in their “Clinical Practice Update on New Technology

and Innovation for Surveillance and Screening in Barrett’s Esophagus” updated clinical guidance that mirrors the same furnished

by the ACG as described above, endorsing the use of non-endoscopic cell collection tools to screen for BE like our EsoCheck Cell Collection

Device, which is cited in the update, as an acceptable alternative to endoscopy to directly address the need for noninvasive screening

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

The clinical practice update by the

AGA also significantly expands the target population for esophageal precancer screening, including for EsoGuard and EsoCheck, by recommending,

for the first time, screening in at-risk patients without symptoms of GERD.

The AGA does so by adding a history of chronic GERD as merely

an additional, seventh risk factor to the six risk factors for BE and EAC that have traditionally identified at-risk symptomatic patients

recommended for screening.

The AGA does so by adding a history of chronic GERD as merely an additional, seventh risk

factor to the six risk factors for BE and EAC that have traditionally identified at-risk symptomatic patients recommended for screening.

March 2025, we announced that a recent update to the National Comprehensive Cancer Network® (NCCN) Clinical Practice Guidelines in

Oncology (NCCN Guidelines®) focused on Esophageal and Esophagogastric Junction Cancers (Version 1.2025) has added a new section on

BE screening.

The NCCN Guidelines® now reference professional society guidelines on BE screening, including the most recent ACG clinical

guideline discussed above, which recommends non-endoscopic biomarker testing, such as EsoGuard performed on samples collected with EsoCheck,

as an acceptable alternative to invasive upper endoscopy to detect esophageal precancer.

Commercialization

EsoGuard commercialization efforts span multiple channels including targeting primary care and GI physicians, who have generally embraced

our message that EsoGuard has the potential to expand the funnel of BE-EAC patients who will need long term EGD surveillance and, potentially,

treatment with endoscopic esophageal ablation.

assure sufficient testing capacity and geographic coverage, we have undertaken multiple ways for patients have access to our test.

Initially, we built a limited network of our own physical Lucid Test Centers, staffed by Lucid-employed clinical personnel, where

patients can undergo the EsoCheck procedure and have the sample sent for EsoGuard testing at our CLIA-certified laboratory.

current test center network currently includes locations in metropolitan areas in Arizona, California, Colorado, Florida, Idaho,

Illinois, Nevada, Ohio, Oregon, Texas and Utah.

addition to our own test center locations, we have broadened patient access to our test by establishing a satellite test center program,

whereby we are making our personnel available to perform cell collection services inside physician offices or in certain geographies,

closely nearby physician offices by way of our Lucid Mobile Testing Unit.

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

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

A total of 391 members

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

by our clinical personnel using EsoCheck.

Since then, additional testing events have been hosted with the SAFD, and similar events

have been held with fire departments throughout the country.

These events are ongoing and are an extension of Lucid’s satellite

test center program, which brings our precancer testing directly to patients—at their physician’s office and now at testing

March 2023, we launched a Direct Contracting Strategic Initiative (“DCSI”) to engage directly with large Administrative

Services Only (“ASO”) self-insured employers, unions and other entities, seeking to replicate the successes of other

cancer screening diagnostic companies that have deployed similar strategies.

In August 2023, we contracted with the

Ancira Automotive Group as a result of this initiative, providing access to esophageal precancer testing for its employees at all 12

San Antonio locations.

have also established an EsoGuard Telemedicine Program, in partnership with UpScript, LLC, an independent third-party telemedicine provider,

that accommodates EsoGuard self-referrals from direct-to-consumer marketing.

Reimbursement

and Market Access

noted above, in December 2019, we secured “gapfill” determination for EsoGuard’s PLA code 0114U through the CMS CLFS

This allowed us to engage directly with Medicare contractor Palmetto GBA and its MolDx Program on CMS payment and coverage.

In October 2020, CMS granted EsoGuard final Medicare payment determination of $1,938.01, effective January 1, 2021.

final Local Coverage Determination (“LCD”) L39256, entitled “ Molecular Testing for Detection of Upper

Gastrointestinal Metaplasia, Dysplasia, and Neoplasia ” became effective in May 2023 on the Center for Medicare and

Medicaid Services (“CMS”) website by MAC Palmetto GBA.

(A substantially identical LCD was published by Noridian

Healthcare Solutions, the MAC whose geographic jurisdiction covers our CLIA laboratory in Lake Forest, CA.) The LCD outlines

criteria for future coverage that MolDX expects upper gastrointestinal precancer and cancer molecular diagnostic tests to meet.

These criteria include active GERD with at least two risk factors, as well as evidence of analytic validity, clinical validity, and

clinical utility.

Although the LCD indicated that it found that no currently existing test has fulfilled all these criteria, it

indicated that it will “monitor the evidence and may revise this determination based on the pertinent literature and society

recommendations.” We expect to submit EsoGuard for Technical Assessment under this foundational LCD later this

parallel with preparing to submit EsoGuard for Technical Assessment with MolDX, we are aggressively pursuing EsoGuard commercial insurer

payment and coverage.

Although the claim adjudication cycle can be prolonged during the early commercialization of a new test, we have

received and are continuing to receive out-of-network commercial insurance payments for the EsoGuard test, which accounts for the vast

majority of our revenue to date.

Additionally, the legislatures in a number of states have passed laws mandating coverage of comprehensive biomarker

testing over the past several years.

We believe that EsoGuard falls within the definition of a biomarker test and thus we are reviewing

how to leverage legislation in those states to expand access to EsoGuard.

Utility and Clinical Trials

Demonstrating

EsoGuard’s clinical utility, which requires providing evidence that the test has a meaningful impact on clinical practice, is very

important for a variety of purposes, including, importantly, for Medicare and private payor payment and coverage.

It has been established

that one of the most important factors to private payors in deciding whether to grant payment and coverage will be demonstration that

the EsoGuard test, when ordered by physicians, provides information that can be used to

identify or exclude patients who would benefit from additional management and/or treatment.

Clinical utility studies are also important

for general EsoGuard commercialization by facilitating physician understanding of test indications and potential benefit to the patients.

continue to expand the EsoGuard and EsoCheck evidence portfolio with additional clinical utility, clinical validity, and analytical validity

data from a range of ongoing studies and those that have recently completed or will be completed in the upcoming year.

These efforts

include planned publication of the results from the previously discussed “Multi-center, Single-arm EsoGuard clinical validation

study” (“BE-1”) which will also be presented at Digestive Disease Week (DDW) 2024;

this third clinical validation study

evaluates EsoGuard performance in the intended-use population.

Publication of real-world experience of EsoCheck as a nonendoscopic cell

collection device is also planned (previously presented as a poster at DDW 2023), in addition to results from EsoGuard analytical validation

studies performed by LucidDx Labs, and a summary of real-world outcomes from several hundred patients who tested positive with EsoGuard

and underwent confirmatory endoscopic evaluation.

These four manuscripts will be submitted for peer review in the first half of 2024.

Additionally,

the Lucid-sponsored multi-center, prospective, observational CL inical U tility of E soGuard study ( CLUE ) with

>500 subjects completed enrollment in late 2023, and full results are expected to be published in mid-2024;

results from an additional

data snapshot of the Lucid-sponsored PREVENT and PREVENT - F ire f ighter ( FF ) registries with a combined

enrollment of >1,000 subjects are expected to be published in a similar timeframe.

Combined interim results from the PREVENT and PREVENT-FF

registries focusing on provider decision impact have previously been accepted for peer review publication in Journal of Gastroenterology

& Digestive Systems (ISSN:

Both studies capture information on the diagnostic and/or therapeutic journey of subjects

following EsoGuard testing, and in addition to provider decision impact, will contribute differing levels of clinical outcomes data to

the Lucid evidence portfolio.

results for the Lucid-sponsored virtual-patient study are expected to be ready for analysis in mid-2024.

the “EsoGuard case-control study” (“BE-2”), a Lucid-sponsored clinical validation study, resumed enrollment in

2023 and is expected to continue through 2024.

This data will further supplement what has previously been produced by the two NCI-funded

studies (Moinova, et al.

Sci Transl Med.

Our EsoGuard commercialization

efforts span multiple channels including targeting primary care and GI physicians, who have generally embraced our message that EsoGuard

has the potential to expand the funnel of BE-EAC patients who will need long term EGD surveillance and, potentially, treatment with endoscopic

esophageal ablation.

To assure sufficient testing

capacity and geographic coverage, we have undertaken multiple ways for patients have access to our test.

Initially, we built a limited

network of our own physical Lucid Test Centers, staffed by Lucid-employed clinical personnel, where patients can undergo the EsoCheck

procedure and have the sample sent for EsoGuard testing at our CLIA-certified laboratory.

Our current test center network currently includes

locations in metropolitan areas in Arizona, California, Colorado, Florida, Georgia, Idaho, Michigan, Nevada, Texas and Utah.

In addition to our own test center

locations, we have broadened patient access to our test by establishing a satellite test center program, whereby we are making our personnel

available to perform cell collection services inside physician offices or in certain geographies, closely nearby physician offices by

way of our Lucid Mobile Testing Unit.

Also, in January 2023, we completed

our first #CheckYourFoodTube Precancer Testing Event, with the San Antonio Fire Department (the “SAFD”) during Firefighter

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

A total of 391 members who were deemed

to be at-risk for esophageal precancer, underwent a brief, on-site, noninvasive cell collection procedure, performed by our clinical

personnel using EsoCheck.

Since then, additional testing events have been hosted with the SAFD, and similar events have been held with

fire departments throughout the country.

These events are ongoing and are an extension of Lucid’s satellite test center program,

which brings our precancer testing directly to patients—at their physician’s office and now at testing day events.

In March 2023, we launched a

direct contracting strategic initiative to engage directly with large Administrative Services Only (“ASO”) self-insured employers,

unions and other entities, seeking to replicate the successes of other cancer screening diagnostic companies that have deployed similar

In January 2025, we expanded

on our direct contracting initiative by launching a cash-pay program targeting concierge medicine, as an important component of our

strategic efforts to expand our contractually-guaranteed revenue.

We have already contracted with concierge medicine

practices across the country under this initiative.

We have also established an EsoGuard

Telemedicine Program, in partnership with UpScript, LLC, an independent third-party telemedicine provider, that accommodates EsoGuard

self-referrals from direct-to-consumer marketing.

Reimbursement and Market Access

As noted above, in December 2019,

we secured “gapfill” determination for EsoGuard’s PLA code 0114U through the CMS CLFS process.

This allowed us to engage

directly with Medicare contractor Palmetto GBA and its MolDx Program on CMS payment and coverage.

In October 2020, CMS granted EsoGuard

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

A final Local Coverage Determination

(“LCD”) L39256, entitled “ Molecular Testing for Detection of Upper Gastrointestinal Metaplasia, Dysplasia, and Neoplasia ”

became effective in May 2023 on the Center for Medicare and Medicaid Services (“CMS”) website by MAC Palmetto GBA.

(A substantially

identical LCD was published by Noridian Healthcare Solutions, the MAC whose geographic jurisdiction covers our CLIA laboratory in Lake

Forest, CA.) The LCD outlines criteria for future coverage that MolDX expects upper gastrointestinal precancer and cancer molecular diagnostic

tests to meet.

These criteria include active GERD with at least three risk factors, as well as evidence of analytic validity, clinical

validity, and clinical utility.

Although the LCD indicated that it found that no currently existing test has fulfilled all these criteria,

it indicated that it will “monitor the evidence and may revise this determination based on the pertinent literature and society

recommendations.” In November 2024, we submitted to MolDx our complete clinical evidence package in support of a request for reconsideration

of the non-coverage language in the LCD to secure Medicare coverage for EsoGuard.

In parallel with our request

for reconsideration of the LCD, we are aggressively pursuing EsoGuard commercial insurer coverage and payment.

Although the claim adjudication

cycle can be prolonged during the early commercialization of a new test, we have received and are continuing to receive out-of-network

commercial insurance payments for the EsoGuard test, which accounts for the vast majority of our revenue to date.

Additionally, the legislatures

in a number of states have passed laws mandating coverage of comprehensive biomarker testing over the past several years.

We are reviewing

how to leverage legislation in those states to expand access to and reimbursement of EsoGuard.

Clinical Utility and Clinical Trials

Demonstrating EsoGuard’s

clinical utility, which requires providing evidence that the test has a meaningful impact on clinical practice, is very important for

a variety of purposes, including, importantly, for Medicare and private payor payment and coverage.

It has been established that one

of the most important factors to private payors in deciding whether to grant payment and coverage will be demonstration that the EsoGuard

test, when ordered by physicians, provides information that can be used to identify or exclude patients who would benefit from additional

management and/or treatment.

Clinical utility studies are also important for general EsoGuard commercialization by facilitating physician

understanding of test indications and potential benefit to the patients.

We continue to expand the EsoGuard

and EsoCheck evidence portfolio with additional clinical utility and clinical validity data from a range of ongoing studies and those

that will be completed in the upcoming year.

These efforts include completion of the ESOGUARD-BE2 study, a large multi-center case control

study recruiting patients from large academic institutions in the Netherlands and across the U.S., in the first half of the year and

submission for peer review of a publication of the results in the second half of 2025.

This data will further supplement what has previously

been published from the four earlier clinical validation studies from Moinova et.

(2018), Moinova et.

(2024), Greer et.

(2024), and Shaheen et.

A large, nearly 12,000 patient real-world experience of EsoCheck and EsoGuard from 18 months of commercial

data is expected to be submitted for peer review publication in the first half of the year.

Finally, data accrual from the PREVENT and

PREVENT-FF registries remains ongoing.

Both registries capture information on the diagnostic and/or therapeutic journey of subjects following

EsoGuard testing, and in addition to provider decision impact, will contribute differing levels of clinical outcomes data to the Lucid

evidence portfolio.

Manufacturing

is currently manufactured for us by our partners Coastline International (“Coastline”), a high-volume device manufacturer,

and Sage Product Development.

EsoCheck is currently manufactured

for us by our partners Coastline International (“Coastline”), a high-volume device manufacturer, and Sage Product Development.

Our current line at Coastline can produce up to 25,000 units per year.

With Coastline’s improvement

and expansion, there is capacity to scale exponentially.

Our EsoGuard Specimen Kits are currently manufactured for us by our partner

The warehousing, logistics, fulfillment and customer support of our products is managed for us by our partners HealthLink International

(a leading third-party logistics company) and Path-Tec.

the terms of our license agreement with CWRU (as amended to date, the “Amended CWRU License Agreement”), we acquired an

exclusive worldwide right to use the intellectual property rights to the EsoGuard and EsoCheck technology for the detection of

changes in the esophagus and on sample preservation.

We are required to pay CWRU royalties on net sales of licensed products as

5% of net sales of less than $100 million per year;

With Coastline’s improvement and expansion, there is capacity

to scale exponentially.

Our EsoGuard Specimen Kits are currently manufactured for us by our partner Path-Tec.

Path-Tec also manages warehousing,

logistics, fulfillment and customer support of our products.

License Agreement

Under the terms of our license

agreement with CWRU (as amended to date, the “Amended CWRU License Agreement”), we acquired an exclusive worldwide right

to use the intellectual property rights to the EsoGuard and EsoCheck technology for the detection of changes in the esophagus and on

sample preservation.

We are required to pay CWRU royalties on net sales of licensed products as follows:

5% of net sales of less than

$100 million per year;

and 8% of net sales greater than $100 million per year.

required to pay CWRU minimum annual royalty payments as follows:

$50,000 per year, beginning January 1 following the first

anniversary of a commercial sale of a licensed product;

$150,000 per year, if net sales of a licensed product exceed $25 million in

We are also required to pay CWRU minimum annual royalty

payments as follows:

$50,000 per year, beginning January 1 following the first anniversary of a commercial sale of a licensed product;

$150,000 per year, if net sales of a licensed product exceed $25 million in a year;

and $600,000 per year, if net sales of a

licensed product exceed $100 million in a year.

Minimum yearly royalty amounts are subject to increase based on the percentage

change in the CPI-W Consumer Price Index and are credited against the royalties otherwise due.

The license agreement was subject to

four regulatory and commercialization milestones, of which one remains unachieved and unpaid.

The remaining milestone is the FDA PMA

submission of a licensed product, upon the achievement of which we will pay CWRU a milestone payment of $200,000.

agreement terminates upon the expiration of the last-to-expire licensed patent, or on May 12, 2038, in countries where no such

patents exist, or upon expiration of any exclusive marketing rights for a licensed product that have been granted by FDA or other

$300,000 per year, if net sales of a licensed product

exceed $50 million in a year;

and $600,000 per year, if net sales of a licensed product exceed $100 million in a year.

Minimum yearly

royalty amounts are subject to increase based on the percentage change in the CPI-W Consumer Price Index and are credited against the

royalties otherwise due.

The license agreement was subject to four regulatory and commercialization milestones, of which one remains

unachieved and unpaid.

The remaining milestone is the FDA PMA submission of a licensed product, upon the achievement of which we will

pay CWRU a milestone payment of $200,000.

The license agreement terminates upon the expiration of the last-to-expire licensed patent,

or on May 12, 2038, in countries where no such patents exist, or upon expiration of any exclusive marketing rights for a licensed product

that have been granted by FDA or other U.S.

government agency, whichever comes later.

June 2019, we received FDA 510(k) clearance to market EsoCheck in the U.S.

as a device indicated for use in the collection and retrieval

of surface cells of the esophagus in adults followed by FDA 510(k) clearance in 2022, expanding the use of EsoCheck in adults and pediatric

populations in the U.S.

In December 2019, our CLIA-certified then-laboratory partner, completed documentation of EsoGuard analytical

validity allowing us to commercialize it as a LDT.

February 2020, we received FDA “Breakthrough Device Designation” for EsoGuard as an in-vitro diagnostic (“IVD”)

medical device.

The FDA Breakthrough Device Program was created to offer patients more timely access to breakthrough technologies which

provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions by expediting

their development, assessment and review through enhanced communications and more efficient and flexible clinical study design, including

more favorable pre/post market data collection balance.

The Centers for Medicare and Medicaid Services and the United States Congress

continue to work to provide an expedited coverage pathway for emerging technologies.

May 2021, we received CE Mark certification for EsoCheck (under the Medical Devices Directive 93/42/EEC), and in June 2021, we completed

CE Mark self-certification for EsoGuard (under the European In-Vitro Diagnostic Devices Directive (IVDD 98/79/EC)), indicating both may

be marketed in CE Mark European countries.

October 2023, FDA proposed a policy under which FDA intends to phase out its general enforcement discretion approach for LDTs so that

IVDs manufactured by a laboratory would generally fall under the same enforcement approach as other IVDs.

If finalized, FDA believes

that this phaseout may also foster the manufacturing of innovative IVDs for which FDA has determined there is a reasonable assurance

of safety and effectiveness.

As such, FDA has structured the proposed phaseout policy to contain five key stages:

End the general enforcement discretion approach with respect to Medical Device Regulation (MDR) requirements and correction and

removal reporting requirements 1 year after FDA publishes a final phaseout policy, which FDA intends to issue in the preamble of

the final rule.

End the general enforcement discretion approach with respect to requirements other than MDR, correction and removal reporting,

Quality System (QS), and premarket review requirements 2 years after FDA publishes a final phaseout policy.

End the general enforcement discretion approach with respect to QS requirements 3 years after FDA publishes a final phaseout policy.

End the general enforcement discretion approach with respect to premarket review requirements for high-risk IVDs 3.5 years after

FDA publishes a final phaseout policy, but not before October 1, 2027.

End the general enforcement discretion approach with respect to premarket review requirements for moderate risk and low risk IVDs

(that require premarket submissions) 4 years after FDA publishes a final phaseout policy, but not before April 1, 2028.

is currently anticipated that FDA will finalize the proposed policy by April 2024.

Once the final policy is released, we will implement

the QS requirements in the recommended staged approach and conduct pre-submission meetings with FDA to seek agreement on regulatory pathway

for EsoGuard premarket submission.

As required by the final policy, we will submit the regulatory premarket submission to the FDA as

per the timeframe defined in the final policy.

We are confident that the proposed policy will not have a commercial impact as the Company

already has a robust QS management platform for medical devices and EsoGuard will be able to transition to the platform to fulfill the

QS requirements, if and when required by the FDA.

longer-term strategy is to secure a specific indication, based on published guidelines, for BE testing in certain at-risk populations

using EsoGuard on samples collected with EsoCheck.

This use of EsoGuard together with EsoCheck as a testing system must be cleared or

approved by the FDA as an IVD device.

February 25, 2022, our new, wholly owned subsidiary, LucidDx Labs Inc.

In June 2019, we received FDA

510(k) clearance to market EsoCheck in the U.S.

as a device indicated for use in the collection and retrieval of surface cells of the

esophagus in adults followed by FDA 510(k) clearance in 2022, expanding the use of EsoCheck in adults and pediatric populations in the

In December 2019, our CLIA-certified then-laboratory partner, completed documentation of EsoGuard analytical validity allowing us

to commercialize it as a LDT.

In February 2020, we received

FDA “Breakthrough Device Designation” for EsoGuard as an in-vitro diagnostic (“IVD”) medical device.

Breakthrough Device Program was created to offer patients more timely access to breakthrough technologies which provide for more effective

treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions by expediting their development,

assessment and review through enhanced communications and more efficient and flexible clinical study design, including more favorable

pre/post market data collection balance.

In May 2021, we received CE Mark

certification for EsoCheck (under the Medical Devices Directive 93/42/EEC), and in June 2021, we completed CE Mark self-certification

for EsoGuard (under the European In-Vitro Diagnostic Devices Directive (IVDD 98/79/EC)), indicating both may be marketed in CE Mark European

In October 2023, FDA proposed

a policy under which FDA intends to phase out its general enforcement discretion approach for LDTs so that IVDs manufactured by a laboratory

would generally fall under the same enforcement approach as other IVDs.

On May 6, 2024, the FDA issued a final rule aimed at helping

to ensure the safety and effectiveness of LDTs.

The rule amends the FDA’s regulations to make explicit that IVDs are devices under the

Federal Food, Drug, and Cosmetic Act (FD&C Act) including when the manufacturer of the IVD is a laboratory.

Along with this amendment,

the FDA is finalizing a policy under which the FDA will provide greater oversight of IVDs offered as LDTs through a phaseout of its general

enforcement discretion approach for LDTs over the course of four years, as well as targeted enforcement discretion policies for certain

categories of IVDs manufactured by laboratories.

The phaseout policy contains

the following five stages:

Beginning on May 6, 2025,

which is one year after the publication date of the final LDT rule, FDA will expect compliance

with medical device reporting (MDR) requirements, correction and removal reporting requirements,

and quality system (QS) requirements regarding complaint files.

Beginning on May 6, 2026,

which is 2 years after the publication date of the final LDT rule, FDA will expect compliance

with requirements not covered during other stages of the phaseout policy, including registration

and listing requirements, labeling requirements, and investigational use requirements.

Beginning on May 6, 2027,

which is 3 years after the publication date of the final LDT rule, FDA will expect compliance

with QS requirements (other than requirements regarding complaint files which are already

addressed in stage 1).

Beginning on November 6,

2027, which is 3½ years after the publication date of the final LDT rule, FDA will

expect compliance with premarket review requirements for high-risk IVDs offered as LDTs (IVDs

that may be classified into class III or that are subject to licensure under section 351

of the Public Health Service Act), unless a premarket submission has been received by the

beginning of this stage in which case FDA intends to continue to exercise enforcement discretion

for the pendency of its review.

Beginning on May 6, 2028,

which is 4 years after the publication date of the final LDT rule, FDA will expect compliance

with premarket review requirements for moderate-risk and low-risk IVDs offered as LDTs (that

require premarket submissions), unless a premarket submission has been received by the beginning

of this stage in which case FDA intends to continue to exercise enforcement discretion for

the pendency of its review.

The FDA also intends to exercise enforcement discretion

and generally not enforce some or all applicable requirements for certain categories of IVDs manufactured by a laboratory.

The categories

of enforcement discretion that are applicable to EsoGuard are summarized in the table below.

4 & 5 (Premarket Review)

Currently marketed IVDs offered as LDTs first marketed prior to rule publication date and not

modified beyond scope described in preamble Section V.B.3 of preamble

Compliance generally expected beginning May 6, 2025

Compliance generally expected beginning May 6, 2026

Compliance with 21 CFR 820.180-820.186 generally expected beginning

Compliance generally not expected with other QS requirements (except

for complaint files)

Compliance generally not expected

LDTs approved by NYS CLEP Section V.B.2 of preamble

Compliance generally expected beginning May 6, 2025

Compliance generally expected beginning May 6, 2026

Compliance generally expected beginning May 6, 2027

Compliance generally not expected

As EsoGuard was marketed

prior to rule publication and is also NYS CLEP approved, hence, enforcement discretion is applicable for compliance with Stages 4

We will be implementing compliance with MDR requirements, correction and removal reporting requirements, and quality system

(QS) requirements regarding complaint files by March 31, 2025, well before the deadline of May 6, 2025.

Gap analysis has been

completed and we are expecting our compliance activities to be completed for Stages 2 and 3 before the FDA’s expected timeframes in 2026 and 2027, respectively.

We are confident that the proposed

final rule will not have a commercial impact as the Company already has a robust QS management platform for medical devices and

EsoGuard will be able to easily transition to the platform to fulfill the QS requirements, as required by the FDA.

Our longer-term strategy is to

secure a specific indication, based on published guidelines, for BE testing in certain at-risk populations using EsoGuard on samples

collected with EsoCheck.

This use of EsoGuard together with EsoCheck as a testing system must be cleared or approved by the FDA as an

Laboratory Operations

On February 25, 2022, our new,

wholly owned subsidiary, LucidDx Labs Inc.

(“LucidDx Labs”), acquired from ResearchDX Inc.

(“RDx”), certain licenses and other related assets necessary for LucidDx Labs to operate its own new CLIA-certified,

CAP-accredited clinical laboratory located in Lake Forest, CA.

Since March 2022, we have conducted EsoGuard testing at our own

laboratory with, until February 10, 2023, the assistance of RDx, which had continued to provide certain testing and related services

for the laboratory in accordance with the terms of a management services agreement (“MSA RDx”).

Our subsidiary LucidDx

Labs and RDx agreed to terminate the MSA RDx effective as of February 10, 2023, such that LucidDx Labs from and after such date has

operated the laboratory itself, which the Company believes has improved the efficiency of the performance of the EsoGuard

November 2023, LucidDx Labs launched EsoGuard 2.0, which uses multiplexing thereby allowing both genes to be interrogated on a single

The next-generation assay underwent rigorous analytical and clinical validation studies, including head-to-head comparisons

of multiplexed triplicate consensus versus singleplex techniques, consistent with CLIA standards.

Clinical validation analysis demonstrated

improved sensitivity and specificity for the detection of esophageal precancer, having demonstrated enhanced assay performance and lower

costs in extensive validation studies.

market for esophageal cancer (i.e., EAC) and pre-cancer (i.e., BE, with or without dysplasia) testing is large, consisting of more

than 30 million at-risk individuals over the age of 50.

Given the large market for pre-cancer testing, we likely will face numerous competitors,

some of which possess significantly greater financial and other resources and development capabilities than us.

Our EsoGuard test faces

competition from procedure-based detection technologies such as upper endoscopy, and other testing technologies such as multi-cancer

early detection products.

Our EsoCheck device faces competition from other manufactures with devices designed to collect cell samples

from targeted regions of the esophagus.

For example, EndoSign, commercialized by Cyted, and much like Cytosponge and our own EsophaCap

before it, is a small mesh sponge within a soluble gelatin capsule that needs to reside in the stomach for some time until it fully dissolves

and then is pulled thru the targeted region brushing the lining of the esophagus and then later retrieved, although, unlike EsoCheck,

it is unprotected from sample contamination as the brush later passes regions of the upper esophagus and mouth.

Our competitors may also

be developing additional methods of detecting esophageal cancer and pre-cancer that have not yet been announced.

will also compete in the marketplace to recruit and retain qualified scientific, management and sales personnel, as well as in acquiring

technologies and licenses complementary to our products or advantageous to our business.

We are aware of several companies that compete

or are developing technologies in our current and future products areas.

In order to compete effectively, our products will have to achieve

market acceptance, receive adequate insurance coverage and reimbursement, be cost effective and be simultaneously safe and effective.

(“RDx”), certain licenses

and other related assets necessary for LucidDx Labs to operate its own new CLIA-certified, CAP-accredited clinical laboratory located

in Lake Forest, CA.

Since March 2022, we have conducted EsoGuard testing at our own laboratory with, until February 10, 2023, the assistance

of RDx, which had continued to provide certain testing and related services for the laboratory in accordance with the terms of a management

services agreement (“MSA RDx”).

Our subsidiary LucidDx Labs and RDx agreed to terminate the MSA RDx effective as of February

10, 2023, such that LucidDx Labs from and after such date has operated the laboratory itself, which the Company believes has improved

the efficiency of the performance of the EsoGuard assay.

In November 2023, LucidDx Labs

launched EsoGuard 2.0, which uses multiplexing thereby allowing both genes to be interrogated on a single DNA sample.

The next-generation

assay underwent rigorous analytical and clinical validation studies, including head-to-head comparisons of multiplexed triplicate consensus

versus singleplex techniques, consistent with CLIA standards.

Clinical validation analysis demonstrated improved sensitivity and specificity

for the detection of esophageal precancer, having demonstrated enhanced assay performance and lower costs in extensive validation studies.

market for esophageal

cancer (i.e., EAC) and pre-cancer (i.e., BE, with or without dysplasia) testing is large, consisting of more than 30 million at-risk

individuals over the age of 50.

Given the large market for pre-cancer testing, we likely will face numerous competitors, some of which

possess significantly greater financial and other resources and development capabilities than us.

Our EsoGuard test faces competition

from procedure-based detection technologies such as upper endoscopy, and other testing technologies such as multi-cancer early detection

Our EsoCheck device faces competition from other manufacturers with devices designed to collect cell samples from targeted

regions of the esophagus.

For example, EndoSign, commercialized by Cyted, and much like Cytosponge, is a small mesh sponge within a soluble

gelatin capsule that needs to reside in the stomach for some time until it fully dissolves and then is pulled thru the targeted region

brushing the lining of the esophagus and then later retrieved, although, unlike EsoCheck, it is unprotected from sample contamination

as the brush later passes regions of the upper esophagus and mouth.

Our competitors may also be developing additional methods of detecting

esophageal cancer and pre-cancer that have not yet been announced.

We will also compete in the marketplace

to recruit and retain qualified scientific, management and sales personnel, as well as in acquiring technologies and licenses complementary

to our products or advantageous to our business.

We are aware of several companies that compete or are developing technologies in our

current and future products areas.

In order to compete effectively, our products will have to achieve market acceptance, receive adequate

insurance coverage and reimbursement, be cost effective and be simultaneously safe and effective.

The EsoCure Esophageal Ablation

1 unchanged sentence

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

In connection with our efforts to

expand our presence in the EAC diagnostic market, in March 2022, PAVmed and Lucid entered into an intercompany license agreement whereby

In connection with our efforts

to expand our presence in the EAC diagnostic market, in March 2022, PAVmed and Lucid entered into an intercompany license agreement whereby

Lucid was granted the rights to commercialize EsoCure for the treating dysplastic BE.

Under the intercompany license, Lucid will pay PAVmed

a 5% royalty on all EsoCure sales up to $100 million per calendar year, and 8% above that threshold.

PAVmed has successfully completed a pre-clinical feasibility animal study of EsoCure demonstrating excellent, controlled

circumferential ablation of the esophageal mucosal lining.

An acute and survival animal study of EsoCure Esophageal Ablation Device has

also been completed, demonstrating successful direct thermal balloon catheter ablation of esophageal lining through the working channel

of a standard endoscope.

When resources permit, PAVmed may conduct additional development work and animal testing of EsoCure to support

a future FDA 510(k) submission.

Relationship with PAVmed

are a majority-owned subsidiary of PAVmed, and PAVmed has a controlling financial interest.

We continue to depend on PAVmed to provide

us various management, technical, research and development, legal, accounting, and administrative services.

PAVmed owns approximately 70.1% as of December 31, 2023 and 64.9% as of

March 21, 2024 of the combined voting power of our outstanding common stock (with such percentage inclusive of shares of our common

stock underlying granted but unvested restricted stock awards), but excluding the voting power of any convertible securities.

PAVmed controls more than 50% of the combined voting power of our common stock and our convertible securities.

However, PAVmed’s

percentage of the combined voting power may decrease when dividends are paid on our convertible securities and to the extent our convertible

securities are converted into shares of our common stock.

For as long as PAVmed continues to control more than 50% of our voting securities,

PAVmed will be able to direct the election of all the members of our board of directors.

Similarly, PAVmed will have the power to determine

matters submitted to a vote of our stockholders without the consent of our other stockholders, to prevent a change in control of us, and

to take other actions that might be favorable to PAVmed, without prior notice to other stockholders.

Even if PAVmed’s ownership

falls below 50%, PAVmed may retain substantial influence on such matters and may remain our controlling stockholder.

PAVmed’s controlling

interest may discourage a change of control that other holders of our common stock may favor.

are party to a management services agreement with PAVmed (the “MSA”), as well as a payroll benefits and expense reimbursement

agreement (the “PBERA”).

Under the MSA, PAVmed provides management, technical and administrative services to us, including

without limitation services related to research and development, regulatory clearance, manufacture, and commercialization of our products,

as well as services related to corporate financial, accounting and legal matters.

The terms of this agreement are intended to be consistent

with the terms that we could have negotiated with unaffiliated third parties;

Under the intercompany license, Lucid will pay

PAVmed a 5% royalty on all EsoCure sales up to $100 million per calendar year, and 8% above that threshold.

PAVmed has successfully completed

a pre-clinical feasibility animal study of EsoCure demonstrating excellent, controlled circumferential ablation of the esophageal mucosal

An acute and survival animal study of EsoCure Esophageal Ablation Device has also been completed, demonstrating successful direct

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

When resources permit, PAVmed

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

Our Relationship with PAVmed

We are currently a subsidiary of PAVmed.

On September 10, 2024, following preferred equity transactions completed by the Company earlier

in 2024 and the termination of voting proxies entered into between PAVmed and certain shareholders of the Company, PAVmed’s

voting interest in the Company was reduced to less than 50.0%, resulting in the loss of a controlling financial interest.

the completion of such transactions on such date, we were a majority-owned subsidiary of PAVmed.) However, PAVmed remains our

largest shareholder based on voting power, and therefore retains the ability to exercise significant influence over Lucid.

we continue to depend on PAVmed to provide us various management, technical, research and development, legal, accounting, and

administrative services.

PAVmed owns approximately 46%

as of December 31, 2024 and 34% as of March 20, 2025 of the combined voting power of our outstanding common stock (with

such percentage inclusive of shares of our common stock underlying granted but unvested restricted stock awards), but excluding the voting

power of any convertible securities.

Presently, PAVmed controls less than 50% of the combined voting power of our common stock and our

convertible securities.

In addition, PAVmed’s percentage of the combined voting power may decrease when dividends are paid on our

convertible securities and to the extent our convertible securities are converted into shares of our common stock.

PAVmed’s ownership interests may also decrease if the holder of its convertible debt exercises its right to

exchange some or all of such debt for shares of our common stock held by PAVmed.

Even though PAVmed’s

ownership has fallen below 50%, it remains our largest shareholder based on voting power, and accordingly PAVmed retains substantial

influence on the election of all the members of our board of directors and any other matters submitted to a vote of our stockholders.

PAVmed’s substantial voting interest may discourage a change of control that other holders of our common stock may favor.

We are party to a management

services agreement with PAVmed (the “MSA”), as well as a payroll benefits and expense reimbursement agreement (the “PBERA”).

Under the MSA, PAVmed provides management, technical and administrative services to us, including without limitation services related

to research and development, regulatory clearance, manufacture, and commercialization of our products, as well as services related to

corporate financial, accounting and legal matters.

The terms of this agreement are intended to be consistent with the terms that we could

have negotiated with unaffiliated third parties;

however, they may actually be more or less favorable.

the PBERA, PAVmed has agreed to pay certain payroll and benefit-related expenses in respect of our personnel

on our behalf, and we reimburse PAVmed for the same.

PAVmed may elect that our obligations under each of the MSA and the PBERA are settled

by the issuance of our stock (instead of cash), subject to applicable restrictions under securities laws (and, in the case of the PBERA,

subject also to approval by our board).

The MSA does not have a termination date, but may be terminated by our board of directors

The PBERA likewise does not have a termination date, but may be terminated by PAVmed or Lucid at any time.

Agreements with PAVmed

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

accrued under the MSA and the PBERA through the issuance of 3,331,771 shares of the Company’s common stock.

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

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

The eighth amendment to the MSA was executed on March 22, 2024.

the MSA, as amended by the eighth amendment, the parties agreed PAVmed may elect to receive payment of the monthly MSA Fee in cash or

in shares of our common stock, with such shares valued at the volume weighted average price (“VWAP”) during the final ten

trading days of the applicable month (subject to a floor price of $0.70 per share).

However, in no event will PAVmed be entitled to receive

under the MSA, as amended, from and after the effective date of the eighth amendment to the MSA, more than 9,644,135 shares of our common

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

Stock Offerings

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

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

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

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

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

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

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

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

Prior to the execution of the Series B

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

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

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

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

Each share of the Series B Preferred Stock

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

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

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

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

Preferred Stock votes with our common stock on an as converted basis (subject to certain beneficial ownership and Nasdaq limitations

described elsewhere in this Form 10-K).

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

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

Preferred Stock in the transactions).

All the shares of Series A Preferred

Stock and Series A-1 Preferred Stock were exchanged for shares of Series B Preferred Stock in the Series B Offering and Exchange and,

as a result, no shares of Series A Preferred Stock or Series A-1 Preferred Stock remain outstanding.

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

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

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

business will depend on proprietary medical device and diagnostic technologies, including the EsoCheck and EsoGuard technology licensed

We intend to vigorously protect our proprietary technologies’ intellectual property rights in patents, trademarks and copyrights,

as available through registration in the United States and internationally.

Patent protection and other proprietary rights are thus essential

to our business.

We currently have applied for, license or own 20 domestic and foreign patents covering the EsoGuard and EsoCheck products

and related technology.

Each of the technologies noted below is protected by multiple families, and only the earliest expiration for

the first of the families is listed.

The date the patents protecting certain of our owned and licensed technology will first begin to

expire is as set forth in the table below (although currently pending patent applications, both foreign and domestic, are positioned

to provide protection beyond such date in each instance).

For EsoGuard, families are pending that, when granted, will offer additional

protections until at least 2037.

EsoCheck and EsoGuard technology is protected by patents in the United States and internationally, and our policy is to continue to aggressively

file patent applications, both independently and in collaboration with CWRU, as appropriate, to protect this technology and other of

our proprietary technologies relating to our business, including inventions and improvements to inventions.

Under the CWRU License Agreement,

CWRU has agreed to apply for patent coverage, at our expense, in any country requested by us, to the extent such protection is reasonably

We seek patent protection, as appropriate, on:

product itself including all embodiments with future commercial potential;

methods of using the product;

methods of manufacturing the product.

addition to filing and prosecuting patent applications in the United States, we intend to file counterpart patent applications in other

countries where there is a value in doing so.

Foreign filings can be cumbersome and expensive, and we will pursue such filings when we

believe they are warranted as we try to balance our international commercialization plans with our desire to protect the global value

of the technology.

term of individual patents depends upon the legal term of the patents in the countries in which they are obtained.

In most countries

in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application.

In the United States,

a patent’s term may be shortened if a patent is terminally disclaimed over another patent or as a result of delays in patent prosecution

by the patentee, and a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative

delays by the U.S.

Patent and Trademark Office (“USPTO”) in granting a patent, or patent term extension, which restores time

lost due to regulatory delays.

intend to continuously reassess and fine-tune our intellectual property strategy in order to fortify the position of our business in

the United States and internationally.

Prior to acquiring or licensing a technology from a third party, we will evaluate the existing

proprietary rights, our ability to adequately obtain and protect these rights and the likelihood or possibility of infringement upon

competing rights of others.

also rely upon trade secrets, know-how, continuing technological innovation, and may rely upon licensing opportunities, to develop and

maintain our competitive position.

We protect our proprietary rights through a variety of methods, including confidentiality agreements

and/or proprietary information agreements with suppliers, employees, consultants, independent contractors and other entities who may

have access to proprietary information.

We will generally require employees to assign patents and other intellectual property to us as

a condition of employment with us.

Under the PBERA, PAVmed has agreed

to pay certain payroll and benefit-related expenses in respect of our personnel on our behalf, and we reimburse PAVmed for the same.

PAVmed may elect that our obligations under each of the MSA and the PBERA are settled by the issuance of our stock (instead of cash),

subject to applicable restrictions under securities laws (and, in the case of the PBERA, subject also to approval by our board), although

under the terms of PAVmed’s convertible debt, PAVmed is required to elect that these payments be made in cash.

The MSA does not

have a termination date, but may be terminated by our board of directors at any time.

The PBERA likewise does not have a termination

date, but may be terminated by PAVmed or Lucid at any time.

Recent Events

Medicare Coverage

In November 2024, we submitted

to MolDx our complete clinical evidence package in support of a request for reconsideration of the non-coverage language in the LCD to

secure Medicare coverage for EsoGuard.

The EsoGuard clinical evidence package included six new peer-reviewed publications:

three clinical

validation studies (two in the intended use population, one case control), two clinical utility studies, and one analytical validation

The current LCD provides clear coverage criteria consistent with the ACG guidelines for

esophageal precancer testing.

The package was submitted as part of a request for reconsideration of the non-coverage language in the

LCD to secure Medicare coverage for EsoGuard.

NCCN Clinical Practice Guidelines Update

March 2025, we announced that a recent update to the National Comprehensive Cancer Network® (NCCN) Clinical Practice Guidelines in

Oncology (NCCN Guidelines®) focused on Esophageal and Esophagogastric Junction Cancers (Version 1.2025) has added a new section on

BE screening.

The NCCN Guidelines® now reference professional society guidelines on BE screening, including the most recent ACG clinical

guideline discussed above, which recommends non-endoscopic biomarker testing, such as EsoGuard performed on samples collected with EsoCheck,

as an acceptable alternative to invasive upper endoscopy to detect esophageal precancer.

Clinical Study Publications

March 18, 2025, the Company announced that its ENVET-BE clinical utility study has been accepted for publication in Gastroenterology

& Hepatology—the fifth peer-reviewed publication of clinical utility data for Lucid’s EsoGuard® Esophageal DNA Test, and

the second to present findings from a real-world screening population.

The manuscript, entitled “Enhancing the Diagnostic Yield

of EGD for Diagnosis of Barrett’s Esophagus Through Methylated DNA Biomarker Triage,” demonstrates that confirmatory upper endoscopy

(EGD) performed in EsoGuard-positive patients had a substantially higher diagnostic yield for detecting esophageal precancer (Barrett’s

Esophagus or BE) than the expected yield of screening EGD alone in at-risk patients.

The ENVET-BE study reviewed real-world data from

a cohort of 199 EsoGuard-positive patients who completed confirmatory EGD.

The overall positive diagnostic yield for BE was 2.4-fold

higher than the expected yield of screening EGD alone, based on disease prevalence within an at-risk population.

The yield was nearly

three-fold higher in patients meeting ACG screening criteria.

November 7, 2024, the Company announced that its manuscript for its multi-center ESOGUARD BE-1 study has been accepted for publication

in The American Journal of Gastroenterology, the official journal of the ACG.

This is the fourth publication presenting clinical validation

data for the Company’s EsoGuard® Esophageal DNA Test, and the second to demonstrate its performance in an intended-use screening

Consistent with previous studies, EsoGuard showed high sensitivity and negative predictive value in detecting esophageal

precancer (Barrett’s Esophagus or BE).

The prospective, multi-center study presented data from a cohort of patients who met ACG guideline

criteria for esophageal precancer screening and underwent non-endoscopic EsoGuard testing followed by traditional upper endoscopy.

sensitivity and negative predictive value for detecting BE were approximately 88% and 99%, respectively.

Specificity and positive predictive

value were approximately 81% and 30%, respectively.

No serious adverse events were reported.

Highmark Reimbursement Approval

On March 13, 2025, the Company announced that Highmark Blue Cross Blue Shield, an independent licensee of the Blue

Cross and Blue Shield Association, has issued a positive coverage policy for non-invasive screening of esophageal precancer and cancer

in New York state.

The new policy will cover EsoGuard in patients who meet established criteria for esophageal precancer testing consistent

with professional society guidelines.

CWRU NIH Grant Related to EsoGuard and EsoCheck

On February 27, 2025, the

Company announced that principal investigators from CWRU and University Hospitals (“UH”), were awarded an $8 million

National Institutes of Health (NIH) R01 grant to conduct a five-year clinical study designed to evaluate esophageal precancer

detection using EsoCheck and EsoGuard among at-risk individuals without symptoms of chronic gastroesophageal reflux disease (GERD).

The study, “A Clinical Trial of Cancer Prevention by Biomarker Based Detections of Barrett’s Esophagus and Its

Progression,” aims to evaluate the effectiveness of EsoCheck and EsoGuard in detecting esophageal precancer (Barrett’s

Esophagus or BE) to prevent esophageal cancer (EAC) within a non-GERD at-risk population.

To accomplish this aim, 800 patients

without GERD symptoms who meet the AGA’s risk criteria for screening will be

recruited across five participating research centers:

University Hospitals, University of Colorado, Johns Hopkins University,

University of North Carolina, and Cleveland Clinic.

On October 15, 2024, the Company

announced that it received a Notice of Allowance from the United States Patent and Trademark Office (USPTO) for a patent application covering

its proprietary method of using methylation of the cyclin-A1 (CCNA1) gene to help detect esophageal precancer and cancer, a key component

of its EsoGuard® Esophageal DNA Test.

EsoGuard utilizes next-generation

sequencing (NGS) to assess DNA methylation at 31 sites on two genes, vimentin (VIM) and cyclin-A1 (CCNA1).

Such methylation has been shown

to be strongly associated with conditions along the spectrum from early esophageal precancer (non-dysplastic Barrett’s Esophagus or BE),

to late precancer (dysplastic BE), to cancer (esophageal adenocarcinoma).

Although VIM methylation had been previously associated with

gastrointestinal neoplasias, the association of CCNA1 methylation with esophageal neoplasia is novel and appears to be more specific.

Intercompany Agreements with PAVmed

On August 6, 2024, PAVmed and

the Company entered into a ninth amendment to the management services agreement between PAVmed and Lucid (“MSA”) to increase

the monthly fee thereunder from $0.83 million per month to $1.05 million per month, effective as of July 1, 2024.

In addition, under

the terms of PAVmed’s convertible debt, PAVmed is required to elect that these payments be made in cash.

of Dennis Matheis to Board of Directors

May 6, 2024, the board of directors of the Company appointed Dennis Matheis as a Class C director of the Company (and he was subsequently

re-elected to the board, together with the incumbent Class C directors of the Company, at the Company’s annual shareholders meeting

held on July 23, 2024).

Registered Direct Offering

On March 5, 2025, the Company closed

on the sale of 13,939,331 shares of its common stock at a price of $1.10 per share (the “Offering”).

net proceeds of the Offering, after deducting the estimated placement agent’s fees and other expenses of the Offering, was approximately

$14.5 million.

The Company intends to use the net proceeds from the Offering for working capital and other general corporate purposes.

Termination of ATM Prospectus Supplement

In November 2022, the Company

entered into a Controlled Equity Offering℠ Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.

Pursuant to the Sales Agreement, from time to time, the Company may offer and sell shares of its common stock

to or through Cantor, acting as sales agent or principal.

Sales of the Company’s common stock by Cantor, if any, under the Sales

Agreement may be made by any method permitted by law and deemed to be an “at the market offering” as defined in Rule 415(a)(4)

promulgated under the Securities Act (the “ATM Offering”).

The Company filed a prospectus supplement dated December 6, 2022

(the “ATM Prospectus Supplement”), for the offer and sale of shares of its common stock having an aggregate offering price

of up to $6,500,000 in the ATM Offering.

Effective as of March 4, 2025, the Company terminated

the ATM Prospectus Supplement.

The Company will not make any sales of common stock in the ATM Offering unless and until a new prospectus

or prospectus supplement is filed.

Other than the termination of the Prospectus Supplement,

the Sales Agreement remains in full force and effect.

Debt Refinancing

On November 22, 2024, the Company

closed on the sale of $21.975 million in principal amount of 12.0% Senior Secured Convertible Notes due 2029 (collectively, the “2024

Convertible Notes”), in a private placement, to certain accredited investors (the “2024 Note Investors”).

of the 2024 Convertible Notes were completed pursuant to the terms of that certain Securities Purchase Agreement, dated as of November

12, 2024 (the “2024 SPA”), between the Company and the 2024 Note Investors.

The Company realized gross proceeds of $21.975

million and, after giving effect to the repayment in full of the March 2023 Senior Convertible Note, net proceeds of $18.3 million from

the sale of the 2024 Convertible Notes.

The Company used a portion of

the proceeds from the sale of the 2024 Convertible Notes to redeem the March 2023 Senior Convertible Note, by paying the contractual

redemption price of approximately $3.6 million.

NASDAQ Compliance

On February 24, 2025, the Company received a notice from the Listing Qualifications Department of The Nasdaq Stock

Market (“Nasdaq”) stating that the closing bid price of the Company’s common stock had been above the minimum of $1 per share

f or continued listing on the Nasdaq Capital Market under Nasdaq

Listing Rule 5550(a)(2) for ten consecutive trading days (through February 21, 2025) and accordingly, the Company had regained compliance

with this listing requirement.

June 21, 2024, the Company received a notice from the Listing Qualifications Department of Nasdaq stating that, for the prior 30 consecutive

business days (through June 20, 2024), the closing bid price of the Company’s common stock had been below the minimum of $1 per

share required for continued listing.

The notification letter stated that the Company would be afforded 180 calendar days (until December

18, 2024) to regain compliance, which grace period was extended by an additional 180 calendar days (until June 16, 2025) .

Intellectual Property

Our business will depend on proprietary

medical device and diagnostic technologies, including the EsoCheck and EsoGuard technology licensed by us.

We intend to vigorously protect

our proprietary technologies’ intellectual property rights in patents, trademarks and copyrights, as available through registration

in the United States and internationally.

Patent protection and other proprietary rights are thus essential to our business.

have applied for, license or own 20 domestic and foreign patents covering the EsoGuard and EsoCheck products and related technology.

Each of the technologies noted below is protected by multiple families.

The date the patents protecting certain of our owned and licensed

technology will first begin to expire is as set forth in the table below (although currently pending patent applications, both foreign

and domestic, provide protection beyond such date in each instance).

For EsoGuard, additional patents have been issued that offer protection

until at least 2037.

The EsoCheck and EsoGuard technology

is protected by patents in the United States and internationally, and our policy is to continue to aggressively file patent applications,

both independently and in collaboration with CWRU, as appropriate, to protect this technology and other of our proprietary technologies

relating to our business, including inventions and improvements to inventions.

Under the CWRU License Agreement, CWRU has agreed to apply

for patent coverage, at our expense, in any country requested by us, to the extent such protection is reasonably attainable.

patent protection, as appropriate, on:

● the product itself

including all embodiments with future commercial potential;

● the methods of

using the product;

● the methods of

manufacturing the product.

In addition to filing and prosecuting

patent applications in the United States, we intend to file counterpart patent applications in other countries where there is a value

Foreign filings can be cumbersome and expensive, and we will pursue such filings when we believe they are warranted as we

try to balance our international commercialization plans with our desire to protect the global value of the technology.

The term of individual patents

depends upon the legal term of the patents in the countries in which they are obtained.

In most countries in which we file, the patent

term is 20 years from the earliest date of filing a non-provisional patent application.

In the United States, a patent’s term may

be shortened if a patent is terminally disclaimed over another patent or as a result of delays in patent prosecution by the patentee,

and a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the

Patent and Trademark Office (“USPTO”) in granting a patent, or patent term extension, which restores time lost due to

regulatory delays.

We intend to continuously reassess

and fine-tune our intellectual property strategy in order to fortify the position of our business in the United States and internationally.

Prior to acquiring or licensing a technology from a third party, we will evaluate the existing proprietary rights, our ability to adequately

obtain and protect these rights and the likelihood or possibility of infringement upon competing rights of others.

We also rely upon trade

secrets, know-how, and continuing technological innovation, and may rely upon licensing opportunities, to develop and maintain our

competitive position.

We protect our proprietary rights through a variety of methods, including confidentiality agreements and/or

proprietary information agreements with suppliers, employees, consultants, independent contractors and other entities who may have

access to proprietary information.

We will generally require employees to assign patents and other intellectual property to us as a

condition of employment with us.

All of our consulting agreements assign to us all new and improved intellectual property that arise

during the term of the agreement.

also has proprietary rights to a range of trademarks, including, among others, Lucid Diagnostics™, LUCID™, EsoCheck®,

EsoGuard®, Collect + Protect®, and EsoCheck Cell Collection Device®.

(Solely as a matter of convenience, trademarks and trade

names referred to herein may or may not be accompanied with the requisite marks of “™” or “®”.

the absence of such marks is not intended to indicate, in any way, Lucid or its subsidiaries will not assert, to the fullest extent possible

under applicable law, their respective rights to such trademarks and trade names.)

Insurance Coverage and Reimbursement

ability to successfully commercialize our products will depend in part on the extent to which governmental authorities, private health

insurers and other third-party payors provide coverage for and establish adequate reimbursement levels for the procedures during which

our products are used.

the United States, third-party payors continue to implement initiatives that restrict the use of certain technologies to those that meet

certain clinical evidentiary requirements.

In addition to uncertainties surrounding coverage policies, there are periodic changes to

reimbursement.

Third-party payors regularly update reimbursement amounts and also from time to time revise the methodologies used to

determine reimbursement amounts.

This includes annual updates to payments to physicians, hospitals and ambulatory surgery centers for

procedures during which our products are used.

An example of payment updates is the Medicare program’s updates to hospital and

physician payments, which are done on an annual basis using a prescribed statutory formula.

In the past, when the application of the

formula resulted in lower payment, Congress has passed interim legislation to prevent the reductions.

“ Reimbursement and Market Access ” above for a fuller discussion of the reimbursement status for EsoCheck and EsoGuard.

the purposes of FDA regulation a “medical device” is broadly defined in section 201(h) of the FDCA as “an instrument,

apparatus, implement, machine, contrivance, implant, in-vitro reagent, or other similar or related article, which is intended for use

in humans for the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, or intended

to affect the structure or any function of the body, and which does not achieve its primary intended purposes through chemical action

and which is not dependent upon being metabolized for the achievement of its primary intended purposes.” Medical devices subject

to FDA regulation include “in-vitro diagnostic medical devices” or IVD devices, defined in the same FDCA section as “reagents,

instruments, and systems intended for use in the diagnosis of disease or other conditions, including a determination of the state of

health, in order to cure, mitigate, treat, or prevent disease or its sequelae, which are intended for use in the collection, preparation,

and examination of specimens taken from the human body”.

marketing of any medical device product we may develop, license, or acquire, including traditional medical devices such as EsoCheck,

and IVD products such as EsoGuard, is subject to FDA regulation.

June 2019, we received FDA 510(k) clearance for EsoCheck, permitting us to market it in the U.S.

as a cell collection device indicated

for use in the collection and retrieval of surface cells of the esophagus in the general population of adults, 22 years of age and

In 2022, we received FDA clearance to expand EsoCheck’s indications for use to include adults and adolescents, 12 years

Lucid also has proprietary rights

to a range of trademarks, including, among others, Lucid Diagnostics™, LUCID™, EsoCheck®, EsoGuard®, Collect + Protect®,

and EsoCheck Cell Collection Device®.

(Solely as a matter of convenience, trademarks and trade names referred to herein may or may

not be accompanied with the requisite marks of “™” or “®”.

However, the absence of such marks is not

intended to indicate, in any way, Lucid or its subsidiaries will not assert, to the fullest extent possible under applicable law, their

respective rights to such trademarks and trade names.)

Health Insurance Coverage and Reimbursement

Our ability to successfully commercialize

our products will depend in part on the extent to which governmental authorities, private health insurers and other third-party payors

provide coverage for and establish adequate reimbursement levels for the procedures during which our products are used.

In the United States, third-party

payors continue to implement initiatives that restrict the use of certain technologies to those that meet certain clinical evidentiary

requirements.

In addition to uncertainties surrounding coverage policies, there are periodic changes to reimbursement.

Third-party payors

regularly update reimbursement amounts and also from time to time revise the methodologies used to determine reimbursement amounts.

includes annual updates to payments to physicians, hospitals and ambulatory surgery centers for procedures during which our products

An example of payment updates is the Medicare program’s updates to hospital and physician payments, which are done on

an annual basis using a prescribed statutory formula.

In the past, when the application of the formula resulted in lower payment, Congress

has passed interim legislation to prevent the reductions.

See “ Reimbursement and

Market Access ” above for a fuller discussion of the reimbursement status for EsoCheck and EsoGuard.

Government Regulation

FDA Regulation

For the purposes of FDA regulation

a “medical device” is broadly defined in section 201(h) of the Food, Drug, and Cosmetic Act (“FDCA”) as “an instrument, apparatus, implement, machine,

contrivance, implant, in-vitro reagent, or other similar or related article, which is intended for use in humans for the diagnosis of

disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, or intended to affect the structure or

any function of the body, and which does not achieve its primary intended purposes through chemical action and which is not dependent

upon being metabolized for the achievement of its primary intended purposes.” Medical devices subject to FDA regulation include

“in-vitro diagnostic medical devices” or IVD devices, defined in the same FDCA section as “reagents, instruments, and

systems intended for use in the diagnosis of disease or other conditions, including a determination of the state of health, in order

to cure, mitigate, treat, or prevent disease or its sequelae, which are intended for use in the collection, preparation, and examination

of specimens taken from the human body”.

Our marketing of any medical

device product we may develop, license, or acquire, including traditional medical devices such as EsoCheck, and IVD products such as

EsoGuard, is subject to FDA regulation.

● In June 2019, we received FDA 510(k)

clearance for EsoCheck, permitting us to market it in the U.S.

as a cell collection device

indicated for use in the collection and retrieval of surface cells of the esophagus in the

general population of adults, 22 years of age and older.

In 2022, we received FDA clearance

to expand EsoCheck’s indications for use to include adults and adolescents, 12 years

of age and older.

In 2023, we further received FDA clearance to permit us to market EsoCheck as non-sterile.

December 2019, RDx, our then-CLIA-certified laboratory partner completed documentation of EsoGuard analytical validity allowing us

to commercialize it as an LDT.

In March 2022, we transferred EsoGuard testing to our own CLIA-certified laboratory, upon our acquisition

of certain assets from RDx as described elsewhere in this report.

defines an LDT as “an IVD product that is intended for clinical use and designed, manufactured and used within a single laboratory.”

FDA has long maintained that it has clear regulatory authority over LDTs and has chosen to fully exercise its authority for certain classes

of “single laboratory” IVD products which would satisfy its definition of an LDT, such as direct-to-consumer tests that do

not involve a health care provider.

FDA, however, has generally not enforced these regulatory requirements for most LDTs not in one of

these classes and has generally not required these LDTs to undergo FDA premarket review of analytical validity and clinical validity,

as all other IVD products must.